Foreign Currency Exchange Rate Fluctuation Funds.

We reviewed the contingency funds approved by the Congress to cover shortages in Defenses overseas programs caused by foreign currency exchange rate fluctuations. The objective of this review was to evaluate the effectiveness of procedures for using and accounting for these funds, which total 1.1 billion. We found the procedures to be generally effective, but noted inconsistencies among the Military Services in handling exchange rate fluctuations for some programs and activities and a few relatively minor operating deficiencies. Therefore, we recommend that the Secretary of Defense a Issue guidelines to ensure that the Services uniformly account for gains and losses due to foreign currency exchange rate fluctuations in military construction and family housing programs. As long as this contingency funding approach is continued, this accounting should be made whether or not funds had been made available in the current year. b Determine whether gains and losses from foreign currency fluctuations for travel expenses are significant, and then establish a uniform policy for handling these transactions.