Summary

GAO reviewed the practices and procedures the Navy and the Office of the Secretary of Defense (OSD) used to disburse fiscal year (FY) 1988 funds provided for North Atlantic Treaty Organization (NATO) cooperative research and development projects, focusing on whether the Navy disbursed funds in accordance with the Department of Defense Authorization Act of 1986 and subsequent authorizations and appropriations acts.

GAO found that the Navy: (1) did not disburse the funds as authorized and used some of them inappropriately for administrative support services; (2) did not report to OSD on how it used FY 1988 funds until April 1990; (3) made misleading statements-of-purpose on contracts and work orders to show that funds were used for authorized projects; (4) used multiple agents to disburse funds, which made it difficult to account for the funds; and (5) approved projects without first obtaining memorandums of understanding. GAO believes that the Department of Defense (DOD) initiated corrective actions to establish appropriate controls and framework for handling future NATO cooperative research and development funds.