Foreign Military Sales: DoD's Stabilized Rate Can Recover Full Cost
GENERAL ACCOUNTING OFFICE WASHINGTON DC ACCOUNTING AND INFORMATION MANAGEMENT DIV
Pagination or Media Count:
Foreign military sales are made on a case by case basis. The cases are initiated by a foreign country sending a letter of request to DOD asking for various information, such as precise price data. After the country obtains and reviews this information and decides that it wants to do business with the U.S. government, DOD prepares a Letter of Offer and Acceptance LOA stating the terms of the sale for the goods and services being provided. If accepted by the country, the LOA becomes the formal sales agreement by which the U.S. government contracts with the country to sell it defense articles or services. Once the L0A is accepted, the foreign country is generally required to pay, in advance, amounts necessary to cover costs associated with the sales agreement. DOD then uses these funds, held in trust by the Department of the Treasury, to pay private contractors and to reimburse DOD activities for the cost of executing and administering the FMS agreement. As payments are made, the military services report detailed disbursing and accounting data to a central activity the Defense Finance and Accounting Service, Denver Center which maintains the records of each countrys trust fund balance and issues quarterly statements to foreign customers summarizing amounts charged to their cases.
- Economics and Cost Analysis