Funds Appropriated for Afghanistan and Iraq Processed Through the Foreign Military Sales Trust Fund

We determined whether the Defense Security Cooperation Agency DSCA properly transferred appropriated funds from the Army s accounts into the Foreign Military Sales FMS Trust Fund, and whether DSCA was authorized to collect administrative fees on these funds. The transfer by DSCA of 6.5 billion of appropriated funds for the support of Afghanistan and Iraq military and security forces into the FMS Trust Fund did not meet the requirements of the Economy Act. It was not in the best interest of the Government, was not the most economical use of the funds, and was not in accordance the requirements in the DoD Financial Management Regulation FMR. The FMS Trust Fund is a single Treasury account designed to manage funds received from the FMS Program and was not designed to manage expiring funds. DSCA improperly collected administrative fees on Iraq and Afghanistan cases funding contingency operations. From FYs 2005 through 2007, DSCA collected more than 155 million in administrative fees to manage non-FMS cases for the Iraq Security Forces Fund ISFF and the Afghanistan Security Forces Fund ASFF processed in the FMS Trust Fund. It is DSCA policy, based on the DoD FMR, not to collect administrative expenses on funds placed in the FMS Trust Fund for contingency operations. Because ISFF and ASFF are funding contingency operations, DSCA should not collect administrative fees on these cases.