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Foreign Military Sales: DOD's Stabilized Rate Can Recover Full Cost (Oral Presen., 09/18/97, GAO/AIMD-97-134).

Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) use of stabilized rates for charging foreign military
sales (FMS) customers for goods and services sold through DOD's Defense
Business Operations Fund (DBOF), focusing on whether: (1) there is a
dollar difference in pricing goods and services at full cost compared to
the stabilized rate; and (2) DOD's current practice of billing foreign
customers at the stabilized rate is consistent with the full cost
requirements of the Arms Export Control Act of 1976.

GAO noted that: (1) DOD's stabilized rate generally is designed to
recover full costs from DOD and FMS customers over the long term; (2)
the concept of applying the stabilized rate is a viable method to
recover the cost of goods and services from these customers; (3) GAO's
analysis of cost elements in the stabilized rates showed that generally,
the stabilized rate included the cost elements necessary to recover full
cost; (4) however, GAO did identify two cost elements--pension and
postretirement health benefits--related to retirement benefit costs of
civilian personnel working on FMS cases, that were not included in the
stabilized rates; (5) GAO estimates that Working Capital Fund (WCF)
supply activities undercharged FMS customers at least $40.5 million
during fiscal years (FY) 1992 through 1996 and will undercharge millions
more in FY 1997; (5) GAO discussed this matter with DOD officials and
they agreed that not all civilian retirement benefit labor costs were
included in the rates that activities were charging FMS customers; and
(6) they now plan to revise their policy to require that this cost be
included in the prices charged FMS customers.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-97-134
     TITLE:  Foreign Military Sales: DOD's Stabilized Rate Can Recover 
             Full Cost
      DATE:  09/18/97
   SUBJECT:  Foreign military sales
             Cost accounting
             Cost analysis
             Labor costs
             Funds management
             Fringe benefit costs
             Price adjustments
IDENTIFIER:  Defense Business Operations Fund
             Air Force Working Capital Fund
             Army Working Capital Fund
             Navy Working Capital Fund
             DOD Working Capital Fund
             
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Cover
================================================================ COVER


Report to the Honorable
Charles E.  Grassley, U.S.  Senate

September 1997

FOREIGN MILITARY SALES - DOD'S
STABILIZED RATE CAN RECOVER FULL
COST

GAO/AIMD-97-134

Foreign Military Sales

(511613)


Abbreviations
=============================================================== ABBREV

  DBOF - Defense Business Operations Fund
  DOD - Department of Defense
  DSAA - Defense Security Assistance Agency
  FMS - Foreign Military Sales
  LOA - Letter of Offer and Acceptance
  OMB - Office of Management and Budget
  OPM - Office of Personnel Management
  WCF - Working Capital Fund

Letter
=============================================================== LETTER


B-275670

September 18, 1997

The Honorable Charles E.  Grassley
United States Senate

Dear Senator Grassley: 

This report responds to your request that we review the Department of
Defense's (DOD) use of stabilized rates for charging foreign military
sales (FMS) customers for goods and services sold through DOD's
Defense Business Operations Fund (DBOF).\1 You expressed concern that
stabilized rates may not represent the full cost of the goods and
services sold to FMS customers as required by the Arms Export Control
Act of 1976.  You specifically asked that we determine (1) if there
is a dollar difference in pricing goods and services at full cost
compared to the stabilized rate and, if so, (2) whether DOD's current
practice of billing foreign customers at the stabilized rate is
consistent with the full cost requirements of the act. 

The Arms Export Control Act gives the President authority to sell
defense articles and services to eligible foreign countries,
generally at no cost to the U.S.  government.  While the Defense
Security Assistance Agency (DSAA) has overall responsibility for
administering the FMS program, the Army, Navy, and Air Force normally
execute the sales agreements--commonly referred to as sales cases. 
As of September 30, 1996, there were over 90 foreign countries
participating in the FMS program, about 75 percent of which had been
in the program for at least 10 years.  During fiscal years 1995 and
1996, annual DOD sales to FMS customers totaled about $10 billion, $2
billion of which were made by the Defense Working Capital Funds
(WCF).\2 Of the $2 billion in annual WCF sales, $1.5 billion or 75
percent were related to the sale of inventory items from Army, Navy,
Air Force, and Defense Logistics Agency supply activities.  Supply
activities' inventories consist of over 5 million different items
ranging from food and clothing to new or rebuilt spare parts for
various military weapon systems.  The remaining $500 million of sales
were made by the nonsupply WCF activities such as Army, Navy, and Air
Force maintenance depots which perform maintenance and repair work on
various weapon systems, including ships, tanks, and aircraft. 


--------------------
\1 On December 11, 1996, the Under Secretary of Defense (Comptroller)
reorganized DBOF and created four working capital funds:  Army, Navy,
Air Force, and Defense-wide.  The four working capital funds will
continue to operate under the revolving fund concept and charge
customers the full cost of providing goods and services to them. 
Therefore, our findings and recommendations are applicable under the
new working capital fund structure. 

\2 The other $8 billion of annual sales is generally for major
weapons systems, such as aircraft and ships.  These sales are made by
non-WCF activities. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

DOD's stabilized rate generally is designed to recover full costs
from DOD and FMS customers over the long term.  The concept of
applying the stabilized rate is a viable method to recover the cost
of goods and services from these customers.  Our analysis of cost
elements in the stabilized rates showed that generally, the
stabilized rate included the cost elements necessary to recover full
cost.  However, we did identify two cost elements--pension and
postretirement health benefits--related to retirement benefit costs
of civilian personnel working on FMS cases, that were not included in
the stabilized rates.  We estimate that WCF supply activities
undercharged FMS customers at least $40.5 million during fiscal years
1992 through 1996 and will undercharge millions more in fiscal year
1997.  We discussed this matter with DOD officials and they agreed
that not all civilian retirement benefit labor costs were included in
the rates that activities were charging FMS customers.  They now plan
to revise their policy to require that this cost be included in the
prices charged FMS customers. 


   BACKGROUND
------------------------------------------------------------ Letter :2

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 LOA 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 country's trust fund
balance and issues quarterly statements to foreign customers
summarizing amounts charged to their cases. 

In October 1991, DOD established DBOF, which consolidated into one
revolving fund, nine existing industrial and stock funds that had
operated within DOD for about 45 years, as well as the Defense
Finance and Accounting Service, Defense Industrial Plant Equipment
Service, Defense Commissary Agency, Defense Reutilization and
Marketing Service, and Defense Technical Information Service.  In
establishing DBOF, one of DOD's primary goals was to identify the
total cost of operations and to highlight the cost implications of
management decisions.  DOD's Financial Management Regulation
7000.14-R, Volumes 11B and 15 prescribe the financial management
requirements, systems, and functions that WCF activities are to
follow when establishing prices and billing FMS customers.\3
Generally, billings to these customers shall reimburse the WCF for
the full cost incurred by the U.S.  government for providing the
goods or services.  According to the regulation, full cost is
determined by the application of the stabilized rates or unit prices
which are set to achieve a break-even operating result in the budget
year--that is, neither to make a profit nor incur a loss. 

Since the concept of DBOF was first put forth in February 1991, we
have monitored and evaluated its implementation and operation.  We
have issued numerous reports discussing various problems with
fragmented cost accounting systems and inaccurate financial
reporting.\4 More specifically, one problem we found was that not all
costs were being captured in the price-setting process, thus,
resulting in less than full cost recovery.  However, in our May 1997
testimony before the Subcommittee on Defense, Senate Committee on
Appropriations, we noted that DOD has progressed significantly in
identifying the cost of doing business and including those costs in
the prices DBOF charged its customers.\5


--------------------
\3 Financial Management Regulation, Volume 11B, Reimbursable
Operations, Policy and Procedures--Defense Business Operations Fund
and Financial Management Regulation, Volume 15, Security Assistance
Policy and Procedures. 

\4 See Related GAO Products list in the back of this report. 

\5 Defense Depot Maintenance:  Challenges Facing DOD in Managing
Working Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7, 1997). 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To determine regulatory requirements for billing FMS customers using
stabilized rates and prices, we obtained and analyzed laws, policies,
procedures, regulations, and guidance from DOD, Army, Navy, and Air
Force officials.  During our visits to DOD locations, we gathered and
analyzed budget and accounting reports to identify cost elements in
the prices of goods and services sold to FMS customers.  We compared
these cost elements with other cost data in various databases and met
with responsible agency officials to discuss and clarify any
differences in (1) cost elements used for FMS and DOD customers and
(2) the amounts charged. 

To determine the amount of civilian pension and postretirement health
benefit costs that should have been collected from FMS customers by
WCF supply activities, we obtained and analyzed financial reports
that showed sales and expense data for Army, Navy, Air Force, and
Defense Logistics Agency supply activities for fiscal years 1992
through 1996.  Because these activities generally did not maintain
data to identify how much time personnel spent providing services to
FMS customers, we estimated the amounts of civilian pension and
postretirement health benefit costs related to FMS using certain
assumptions.  To do this, we first calculated the dollar value of FMS
sales as a percentage of total dollar sales for each of the
activities for each fiscal year.  For example, if a supply activity
showed that its annual sales were $1 billion of which $100 million
were to FMS customers, we calculated sales to FMS customers to be 10
percent ($100 million divided by $1 billion). 

To calculate the pension benefit costs, we multiplied the percent of
each year's FMS sales by the total amount of civilian personnel
salaries reported as paid during the year to determine a pro rata
dollar amount for FMS civilian personnel salaries.  Finally, to
determine the estimated amount of civilian pension benefit costs to
be collected from FMS customers, we multiplied the pro rata dollar
amount of FMS personnel salaries times the civilian pension benefit
cost factor of 14.7 percent for each activity for fiscal years 1992
through 1996.\6 According to the Office of Management and Budget
(OMB) and DOD officials, the 14.7 percent rate represents the
"unfunded" portion of the pension benefit cost which is derived by
subtracting DOD's 7 percent contribution to the pension costs of its
employees (21.7 percent less 7 percent).  The 7 percent DOD
contribution is already included in the stabilized rate as a funded
fringe benefit cost. 

To determine the amount of civilian postretirement health benefit
cost, we multiplied the percentage of FMS sales to total sales times
the civilian end strength for each supply activity for fiscal years
1992 through 1996.\7 For example, if the pro rata amount of FMS sales
to total sales was 10 percent for fiscal year 1996 and an activity
reported civilian end strength at 5,000 employees for the same
period, our calculated FMS civilian end strength would be 500 full
time employees involved with FMS activities (10 percent times 5,000
employees).  Using these numbers, we multiplied the pro rata amount
by $2,166 which was the Office of Personnel Management (OPM)
calculated amount of average postretirement health benefit cost per
employee for fiscal year 1996.\8 To determine the postretirement
health benefit cost per employee for fiscal year 1995 and earlier, we
contacted officials in OPM's Office of Actuaries, including the
Deputy Director of the Office of Actuaries.  According to the OPM
officials, prior to fiscal year 1996, OPM had not published any
formal amounts for agencies to use in calculating pension or
postretirement health benefit costs.  However, OPM officials told us
that postretirement health benefit costs have increased by about 7
percent each fiscal year.  Therefore, according to OPM officials, we
could determine the fiscal year 1995 postretirement health benefit
cost by dividing the fiscal year 1996 cost of $2,166 by 107 percent. 
Fiscal year 1994 could then be determined by dividing the fiscal year
1995 postretirement health benefit cost by 107 percent and so on for
each preceding fiscal year.  The OPM officials generally agreed with
our methodologies for calculating estimated pension and
postretirement health benefit costs. 

We did not calculate pension benefit cost for nonsupply activities
because the nonsupply activities were generally including these costs
in their prices for FMS customers.  They did not, however, include
the postretirement health benefit cost in their prices.  Since they
were recovering the largest segment of the retirement benefit cost,
we did not attempt to estimate undercharges for postretirement health
benefit cost for the nonsupply activities.  To do so would have
required us to analyze numerous detailed accounting and budget
reports of over 100 additional WCF activities.  Over the years, both
we and the DOD Inspector General have reported that the DOD's
financial systems used to collect and report data are not capable of
producing accurate and reliable information.  Our estimates were
based on financial information provided by DOD which we did not
independently verify. 

We performed our work at the headquarters, Departments of the Army,
Navy, Air Force; Defense Security Assistance Agency; and Office of
the Under Secretary of Defense (Comptroller) in Washington, D.C.  We
also performed audit work at the Army Materiel Command, Alexandria,
Virginia; Air Force Materiel Command, Wright Patterson Air Force
Base, Dayton, Ohio; Naval Inventory Control Point, Mechanicsburg,
Pennsylvania; Naval Air Warfare Center, Patuxent River, Maryland;
Naval Surface Warfare Center, Indian Head, Maryland; Defense
Logistics Agency, Fort Belvoir, Virginia; and Letterkenney Army
Depot, Chambersburg, Pennsylvania.  We conducted our review from
November 1996 through July 1997 in accordance with generally accepted
government auditing standards. 

We requested written comments on a draft of the report from the
Secretary of Defense or his designee.  The Acting Under Secretary of
Defense (Comptroller) provided written comments, which are discussed
in the "Agency Comments" section and reprinted in appendix I. 


--------------------
\6 The Office of Management and Budget provided DOD, based on Office
of Personnel Management data, composite percentage factors to use in
calculating the government's cost of civilian retirement benefits. 
For fiscal years 1992 through 1996, the composite factor for the
civil service and federal employee retirement systems for the
government's portion of the pension benefit costs was 21.7 percent. 

\7 Civilian personnel end strength (actual number of people employed
at the end of the fiscal year) was generally lower than full time
equivalent personnel (average full time usage of authorized positions
during the fiscal year).  We used the more conservative civilian end
strength numbers for our calculations. 

\8 According to OPM's Deputy Director of the Office of Actuaries, it
was later determined that the $2,166 was overstated by about $55. 
However, at the time of our audit, OPM had not provided agencies with
a revised number for personnel costs.  Therefore, we used $2,166 for
our calculations. 


   STABILIZED RATES SHOULD ALLOW
   RECOVERY OF COSTS OVER THE LONG
   TERM
------------------------------------------------------------ Letter :4

The concept of a stabilized rate is a viable method to use for
pricing goods and services sold to FMS customers.  If this rate is
applied consistently and contains all known cost elements, it should
recover the full cost of operations over the long term.  In analyzing
the cost elements in the stabilized rate, we identified additional
elements--pension and postretirement health benefit costs which are
part of the civilian labor costs--that should have been included in
developing the stabilized rate and charged to FMS customers. 
Omission of these costs resulted in estimated underbillings of more
than $40.5 million since fiscal year 1992. 


      STABILIZED PRICE-SETTING
      PROCESS
---------------------------------------------------------- Letter :4.1

Present DOD policy requires the WCF activities to establish prices
that allow them to recover from their customers the expected costs,
including any prior years' losses.  WCF activities are to establish
prices prior to the start of each fiscal year and apply these
predetermined (stabilized or standard) prices to most orders and
requisitions received during the year.  Because sales prices are
based on expected costs and workload, higher-than-expected costs or
lower-than-expected customer demand for goods and services can cause
the WCF activities to incur losses.  Conversely, lower-than-expected
costs or higher-than-expected customer demand for goods and services
can result in profits. 

The process for establishing stabilized prices for WCFs generally
begins about 2 years before the prices go into effect, with managers
from each WCF developing workload projections for the budget year. 
After WCF managers estimate their workloads based on customer input,
they (1) use productivity projections to estimate how many people
they will need to accomplish the work, (2) prepare a budget that
identifies the labor, material, and other expected costs, and (3)
develop prices that, when applied to the projected workload, should
allow them to recover operating costs from their customers.  Not all
cost elements are applicable to all WCF activities.  For example, the
cost element of inventory losses/obsolescence generally applies only
to WCF supply activities that maintain inventories.  Below is a list
of major cost elements used to develop stabilized rates: 

  -- direct and indirect labor,

  -- direct material,

  -- general and administrative expenses,

  -- inventory losses/obsolescence,

  -- inventory maintenance,

  -- condemnation of inventory items,

  -- inflation,

  -- accumulated operating results gains or losses,

  -- depreciation, and

  -- joint logistics systems center (JLSC) surcharge. 

Major commands responsible for the overall management of the WCFs
review the budget estimates and consolidate individual business area
activities' budget estimates.  The military services' and DOD
components' headquarters and the Office of the Secretary of Defense
also review the budget estimates before they are submitted to the
Congress as part of the annual budget.  Any changes made during the
DOD budget review process are incorporated into the WCFs' prices
before the beginning of the fiscal year.  With the exception of
retirement benefit costs for civilian employees, which is discussed
below, we found that all of the key cost elements to recover full
cost from FMS customers are now included in the stabilized price. 


      CIVILIAN PENSION AND
      POSTRETIREMENT HEALTH
      BENEFIT COSTS WERE NOT
      INCLUDED IN SUPPLY PRICES
---------------------------------------------------------- Letter :4.2

The costs not charged by the WCF supply activities, which were
responsible for about $1.5 billion (75 percent) of the WCFs annual
sales to FMS customers, consisted of a portion of the government's
share of the full cost for pension and postretirement health benefit
costs for civilian personnel who worked on FMS cases.  The employee
and the employing agency both contribute annually toward the cost of
the future pension benefits.  While the contributions made by DOD are
now part of the stabilized rate, the employee and agency
contributions are less than the full cost of providing the pension
benefits.  Therefore, the federal government must, in effect, make up
the funding shortfall.  In addition, neither the agency nor the
employee pays the federal government's portion of postretirement
health benefit costs.  Both the pension and postretirement health
benefit costs will eventually be paid out of the general funds in the
Treasury--not by DOD.  Since the pension and postretirement health
benefits are costs to the government, they should be added to the
stabilized rate and recovered from FMS customers.\9 In this regard,
we found that the nonsupply activities we visited recognized this and
modified the stabilized rate to include the full pension costs in the
prices they charged FMS customers.  However, they did not include the
postretirement health benefit cost.  As noted earlier, we did not
attempt to estimate the postretirement health benefit cost for
nonsupply activities. 

Including retirement benefit costs is consistent with the Statement
of Federal Financial Accounting Standards Number 4, which states that
federal agencies should measure and report direct and indirect costs
that contribute to output, regardless of funding sources.  It is also
consistent with OMB Circular No.  A-25, which established the
guidelines for federal agencies to assess fees for government
services.  The guidance notes that user charges will be sufficient to
recover the full cost to the federal government of providing the
service, resource, or goods.  The circular points out that "full
cost" is to include all direct and indirect costs to any part of the
federal government of providing a good, resource, or service.  Under
the circular, these costs include, but are not limited to, an
appropriate share of direct and indirect personnel costs, such as
accrued retirement cost not covered by employee contributions. 

Because WCF supply activities did not maintain data to identify the
time personnel spent providing services to FMS customers, our
estimates for civilian pension and postretirement health benefit
costs were calculated based on assumptions discussed in our scope and
methodology.  Table 1 shows the results of our calculations for each
of the WCF supply activities for fiscal years 1992 through 1996. 



                                Table 1
                
                   Estimated Undercharges Related to
                  Civilian Pension and Postretirement
                 Health Benefits for Fiscal Years 1992
                              Through 1996

                         (Dollars in millions)

                                            Postretireme
                                   Pension     nt health         Total
                                   benefit       benefit       benefit
WCF supply activity           undercharges  undercharges  undercharges
----------------------------  ------------  ------------  ------------
Defense Logistics Agency            $ 12.4         $ 5.5        $ 17.9
Navy                                   6.2           2.2           8.4
Army                                   5.5           1.7           7.2
Air Force                              5.3           1.7           7.0
======================================================================
Total                               $ 29.4        $ 11.1        $ 40.5
----------------------------------------------------------------------
In discussing this matter with DOD Comptroller officials, they
acknowledged that civilian retirement benefits were a cost to the
government which should be included in the stabilized rate and
charged to FMS customers.  They told us they are planning to revise
their policy so that this cost will be included in the prices charged
FMS customers beginning no later than fiscal year 1998. 

With regard to the $40.5 million of undercharges shown in table 1 and
any additional undercharges that were made during fiscal year 1997,
DOD policy requires that all proper charges be recorded against the
applicable FMS case.  According to the policy, case closure does not
stop the billing process.  Further, the standard FMS sales contract
provides that the FMS customer is to pay the U.  S.  government the
total cost of the items even if that cost exceeds the amounts
estimated in the LOA.  Also, we have issued numerous reports over the
years that have (1) identified tens of millions of dollars of
undercharges related to the costs for goods and services provided to
FMS customers and (2) recommended that DOD retroactively collect the
underbillings.  Generally, DOD agreed with our earlier findings and
recommendations and has rebilled and collected undercharges in the
past.  Therefore, since DOD policy and the contractual terms provide
for adjustments to an FMS case, even if it has been closed, and DOD
has collected undercharges in the past, DOD should make every
reasonable attempt to recover the past undercharges for civilian
pension and postretirement health benefit costs.  In this regard, DOD
should first consider the cost effectiveness of determining how much
each FMS customer was undercharged. 


--------------------
\9 DOD policy requires WCF activities to return collections of these
costs to the Department of the Treasury. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

DOD's stabilized rate policy, if applied properly, should allow WCF
activities to recover the full cost of their operations over the long
term.  However, the stabilized rate should be adjusted to include all
pension and postretirement health benefit costs to the U.S. 
government for items sold or services provided to FMS customers.  DOD
recognizes that these additional retirement benefit costs, whose
omission has resulted in millions of dollars of undercharges, should
be charged to FMS customers, and is in the process of revising its
policy to require that these costs be included in future rates. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :6

We recommend that the Secretary of Defense direct the Under Secretary
of Defense (Comptroller) to

  -- implement the stabilized rate policies and procedures as soon as
     possible to require WCF activities to include pension and
     postretirement health benefit costs in the prices they charge
     FMS customers, and

  -- make every reasonable attempt to bill for and collect the
     undercharges for pension and postretirement health benefit costs
     identified in this report.  Such action should be taken only if
     cost effective to do so. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

DOD concurred with our findings and recommendations.  The Acting
Under Secretary of Defense (Comptroller) agreed that DOD should have
been charging FMS customers for civilian retirement and
postretirement health benefits and issued guidance on August 27,
1997, instructing that these charges be added to DOD's prices
effective immediately.  The Acting Under Secretary also requested
that DSAA and the military services review FMS cases, going back
through fiscal year 1992, and bill the FMS customers for the costs of
civilian retirement and postretirement health benefits where cost
effective. 

We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Armed Services, the
Senate Committee on Governmental Affairs, the House Committee on
National Security, the House Committee on Government Reform and
Oversight, and the House and Senate Committees on Appropriations; the
Secretary of Defense; the Director of the Office of Management and
Budget; and other interested parties.  We will make copies available
to others upon request. 

Please contact me at (202) 512-6240 if you or your staff have any
questions concerning this report.  Other major contributors to this
report are listed in appendix II. 

Sincerely yours,

Jack L.  Brock, Jr.
Director, Defense Information and
Financial Management Systems




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================== Letter 



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II


   ACCOUNTING AND INFORMATION
   MANAGEMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

Larry W.  Logsdon, Assistant Director
Harold P.  Santarelli, Senior Auditor-in-Charge
Cristina T.  Chaplain, Communications Analyst


   OFFICE OF GENERAL COUNSEL
-------------------------------------------------------- Appendix II:2

Frank Maguire, Senior Attorney


RELATED GAO PRODUCTS
============================================================ Chapter 0

Navy Ordnance:  Analysis of Business Area Price Increases and
Financial Losses (GAO/AIMD/NSIAD-97-74, March 14, 1997). 

Defense Business Operations Fund:  Management Issues Challenge Fund
Implementation (GAO/AIMD-95-79, March 1, 1995). 

Defense Budget:  Capital Asset Projects Undergo Significant Change
Between Approval and Execution (GAO/NSIAD-95-20, December 28, 1994). 

Letter to the Principal Deputy Comptroller on the proposed DBOF 1307
Management Report (GAO/AIMD-94-159R, July 26, 1994). 

Defense Business Operations Fund:  Improved Pricing Practices and
Financial Reports Are Needed to Set Accurate Prices (GAO/AIMD-94-132,
June 22, 1994). 

Financial Management:  DOD's Efforts to Improve Operations of the
Defense Business Operations Fund (GAO/T-AIMD/NSIAD-94-170, April 28,
1994). 

Defense Management Initiatives:  Limited Progress in Implementing
Management Improvement Initiatives (GAO/T-AIMD-94-105, April 14,
1994). 

Financial Management:  DOD's Efforts to Improve Operations of the
Defense Business Operations Fund (GAO/T-AIMD/NSIAD-94-146, March 25,
1994). 

Financial Management:  Status of the Defense Business Operations Fund
(GAO/AIMD-94-80, March 9, 1994). 

Letter to the Deputy Secretary of Defense on the results of the
DOD-wide review and suggestions for improving the implementation of
DBOF (GAO/AIMD-94-7R, October 12, 1993). 

Financial Management:  Opportunities to Strengthen Management of the
Defense Business Operations Fund (GAO/T-AFMD-93-6, June 16, 1993). 

Financial Management:  Opportunities to Strengthen Management of the
Defense Business Operations Fund (GAO/T-AFMD-93-4, May 13, 1993). 

Letter to Congressional Committees on DOD's progress in implementing
DBOF and GAO suggestions for improvement (GAO/AFMD-93-52R, March 1,
1993). 

Financial Management:  Status of the Defense Business Operations Fund
(GAO/AFMD-92-79, June 15, 1992). 

Financial Management:  Defense Business Operations Fund
Implementation Status (GAO/T-AFMD-92-8, April 30, 1992). 

Defense's Planned Implementation of the $77 Billion Defense Business
Operations Fund (GAO/T-AFMD-91-5, April 30, 1991). 

*** End of document. ***