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NSIAD-94-102R 1 (1994-02-08)

handle is hein.gao/gaobackmg0001 and id is 1 raw text is: United Stte Oi GAO General Accounting Office Washington, D.C. 20548 National Security and international Affairs Division B-256183 February 8, 1994 The Honorable Lee Hamilton Chairman, Committee on Foreign Affairs House of Representatives Dear Mr. Chairman: In response to your request, we reviewed cash flow financing for foreign military sales, a method of financing weapons sales to allied countries with U.S. appropriated grant or loan monies. Our specific objectives were to determine (1) why the United States provides cash flow financing to certain countries, (2) what the policy implications of such financing are, and (3) whether such financing commits the United States to future military assistance. Normally, countries using U.S. grant or loan aid for military sales are required to use full commitment financing and reserve the total amount of the purchase at the time of the agreement. With cash flow financing, countries set aside only the amount of money needed to meet the current fiscal year's cash requirement. RESULTS IN BRIEF The United States uses cash flow financing as a means to demonstrate its strong political commitment to certain allied governments. It has no impact on the administration of weapons sales, but allows a country to order more U.S. defense goods and services than it normally could. Defense Security Assistance Agency (DSAA) and State Department officials stated that only Israel and Egypt will be able to use cash flow financing in the future. Three other countries currently use cash flow financing--Greece and Portugal are expected to pay off their cash flow balances in fiscal year 1994, and Turkey expects to pay its balance by fiscal year 1996. (See encl. I for trends in the use of cash flow financing.) 1 GAO/NSIAD-94-102R Military Sales' Cash Flow Financing

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