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B-165731 1 (1971-07-14)

handle is hein.gao/gaobaafhg0001 and id is 1 raw text is: UNITED STATES GENERAL ACCO G OFFI WASHINGTON, D.C. 20548 INTERNATIONAL DIVIStON J 1 B-165731 ' JUL 14 1971 Dear Mr. Secretary: The General Accounting Office has made a review of selected activities relating to the liquidation of the Foreign Military Sales Fund. Our review was performed principally at the Office of the Kssistant Secretary of Defense for International Security Affairs and, to a limited extent, at the Treasury Department and the Export- Import Bank of the United States. The Foreign Military Sales Fund was authorized as a revolving loan fund by the 1965 amendment to the Foreign Assistance Act of 1961 which had the effect of expanding the loan activities authorized by prior foreign assistance legislation. Initial capitalization of the fund on July 1, 1965, was $153,252,001 which had increased to $381,175,080 as of June 30, 1968, when the fund was terminated. During this period, direct loans and guarantees of private and Export-Import loans with a 25 percent reserve were authorized under the Foreign Assistance Act. Principal and interest proceeds from loan repayments were authorized to be used to make additional loans and guarantees on a revolving basis. Pursuant to this and prior authorizations extending back to 1955, DOD had, by June 30, 1968, financed direct loans and guaranteed loans totaling about $1.5 billion. Authority for the revolving fund to make new loans was terminated as of June 30, 1968, by the 1967 amendment to the Foreign Assistance Act of 1961. At that point the fund entered an estimated 10-year liquidation period. Unnecessary Retention of Money Excess to Fund Needs Our review showed that money, which could otherwise have been returned to the general fund of the Treasury during the period of fund liquidation, was being retained because of a questionable anticipation of defaults on repayments by foreign countries. As of June 30, 1970, about $181.6 million of funds was being held in reserve to cover con- tingency defaults on outstanding loans and commitments amounting to about $526.2 million, even though DOD has never experienced a default on 50TH ANNIVERSARY 1921-1971

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