District of Columbia Opportunity Scholarship Program: Additional 
Policies and Procedures Would Improve Internal Controls and	 
Program Operations (01-NOV-07, GAO-08-9).			 
                                                                 
The D.C. School Choice Incentive Act created the first private	 
kindergarten-through-grade-12 school-choice program supported by 
federal funds. The program was named the D.C. Opportunity	 
Scholarship Program (OSP). GAO was asked to assess the (1)	 
accountability mechanisms governing the use of funds, (2) results
of the grantee's efforts to meet the program's recruiting	 
priorities and eligibility requirements and inform parents of	 
their choices, and (3) extent that the evaluation of OSP reflects
statutory requirements and the implementation of the program	 
supported the detection of useful and generalizable findings. To 
assess the program, GAO analyzed financial, program, and	 
evaluation data. GAO did not assess the performance of		 
participating private schools nor did GAO evaluate the impact of 
the program.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-9						        
    ACCNO:   A77909						        
  TITLE:     District of Columbia Opportunity Scholarship Program:    
Additional Policies and Procedures Would Improve Internal	 
Controls and Program Operations 				 
     DATE:   11/01/2007 
  SUBJECT:   Accountability					 
	     Accounting procedures				 
	     Accounting standards				 
	     Audits						 
	     Education program evaluation			 
	     Educational grants 				 
	     Eligibility criteria				 
	     Federal funds					 
	     Financial management				 
	     Internal controls					 
	     Private schools					 
	     Program evaluation 				 
	     Program management 				 
	     Risk assessment					 
	     Scholarship programs				 
	     Schools						 
	     Student financial aid				 
	     Policies and procedures				 
	     Program implementation				 
	     DC Opportunity Scholarship Program 		 
	     Washington Scholarship Fund			 

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GAO-08-9

   

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Report to the Committee on Foreign Affairs, House of Representatives: 

United States Government Accountability Office: 

GAO: 

November 2007: 

Defense Trade: 

State Department Needs to Conduct Assessments to Identify and Address 
Inefficiencies and Challenges in the Arms Export Process: 

Defense Trade: 

GAO-08-89: 

GAO Highlights: 

Highlights of GAO-08-89, a report to the Committee on Foreign Affairs, 
House of Representatives. 

Why GAO Did This Study: 

To regulate the export of billions of dollars worth of arms to foreign 
governments and companies, the Department of Stateï¿½s (State) 
Directorate of Defense Trade Controls (DDTC) reviews and authorizes 
export licenses and other arms export cases. While such reviews require 
time to consider national security and foreign policy interests, the 
U.S. defense industry and some foreign government purchasers have 
expressed concern that the U.S. export control process is unnecessarily 
time-consuming. 

In 2005, GAO reported that processing times for arms export cases had 
increased despite State efforts to streamline its process. GAO was 
asked to (1) describe recent trends in the processing of arms export 
cases and (2) identify factors that have contributed to these trends. 

To conduct its work, GAO obtained and analyzed State arms export case 
data for fiscal year 2003 through April 30, 2007; reviewed relevant 
laws, regulations, and guidelines, as well as DDTC funding and staffing 
information; and interviewed State and Department of Defense officials 
and selected arms exporters. 

What GAO Found: 

Three key trends indicate that DDTCï¿½s arms export licensing process is 
under stress. First, the number of arms export cases processed by DDTC 
increased 20 percent between fiscal years 2003 and 2006. Most of this 
increase was for licenses for permanent export. Second, during the same 
period, median processing times almost doubled. Third, the number of 
open arms export cases increased 50 percent from about 5,000 in October 
2002 to about 7,500 in April 2007, with a high of more than 10,000 
cases in September 2006. At the beginning of fiscal year 2007, DDTC 
launched a campaign to reduce the growing number of open cases. Through 
extraordinary measuresï¿½such as canceling staff training, meetings, and 
industry outreach, and pulling available staff from other duties to 
process casesï¿½DDTC was able to cut the number of open cases by 40 
percent in 3 months. However, such measures are not sustainable in the 
long term, do not address underlying inefficiencies and problems, and 
may have negative unintended consequences for the mission. 

Figure: Open Arms Export Cases, Fiscal Year 2003 through April 30, 
2007: 

This figure is a line graph showing open arms export cases, between 
fiscal year 2003 and April 30, 2007. The X axis represents the month 
and year, while the Y axis represents the open cases. 

[See PDF for image] 

Source: GAO analysis of DDTC data. 

[End of figure] 

While some blips in the trends can be attributed to onetime events or 
effortsï¿½such as DDTCï¿½s campaign to reduce open casesï¿½procedural 
inefficiencies, electronic processing system shortcomings, and human 
capital challenges underlie the overall trends. For example, GAOï¿½s 
analysis shows that DDTC is taking increasingly longer to refer cases 
to other agencies or State bureaus for additional reviewï¿½from 7 days in 
fiscal year 2003 to 20 days during the first 7 months of fiscal year 
2007. In addition, implementation of DDTCï¿½s electronic system for 
submitting applications has been problematic, and electronic processing 
has not been the promised panacea for improving processing times. DDTC 
does not perform systematic assessments to identify root causes of 
increased workload, processing times, and open cases and, in turn, 
develop sustainable solutions. 

What GAO Recommends: 

GAO is recommending that State conduct systematic analyses to help 
achieve efficiencies in the processing of arms export cases. State 
concurred with GAOï¿½s recommendation. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-89]. For more information, contact Ann 
Calvaresi-Barr at (202) 512-4841 or [email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Trends Indicate DDTC's Licensing Process Is Under Stress: 

Systemic Inefficiencies Underlie Overall Trends in the Licensing 
Process: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Additional Analyses Related to Arms Export Case 
Processing: 

Appendix III: Comments from the Department of State: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Median Days Processing Time by Steps in the Referral Process, 
Fiscal Year 2003 through April 2007: 

Table 2: Cases Closed and Licensing Officer Positions Filled, Fiscal 
Year 2003 through April 30, 2007: 

Table 3: DDTC Cases Closed by Case Type from Fiscal Year 2003 through 
April 30, 2007: 

Table 4: Median Days Processing Time by Case Type from Fiscal Year 2003 
through April 30, 2007: 

Table 5: Permanent Export Cases Processed and Processing Times by 
Commodity Group, Fiscal Year 2003 through April 30, 2007: 

Table 6: Percentage of Cases Closed and Median Processing Time for Top 
10 Countries of Destination, Fiscal Year 2006: 

Table 7: Number of Cases and Processing Times for OEF/OIF Cases, Fiscal 
Years 2003 through 2006: 

Table 8: Number of Exporters by Cases Submitted, Fiscal Years 2003 
through 2006: 

Table 9: Percentage of Cases Received from the Top 10 Exporters, Fiscal 
Years 2003 through 2006: 

Table 10: Cases Closed by Final Action, Fiscal Year 2003 through April 
30, 2007: 

Figures: 

Figure 1: DDTC's Licensing Review Process: 

Figure 2: Processing Time Frames for Nonreferred Permanent Export 
Licenses and Agreements, Fiscal Year 2003 through April 30, 2007: 

Figure 3: Processing Time Frames for Referred Permanent Export Licenses 
and Agreements, Fiscal Year 2003 through April 30, 2007: 

Figure 4: Open Arms Export Cases, Fiscal Year 2003 through April 30, 
2007: 

Abbreviations: 

DDTC: Directorate of Defense Trade Controls: 

DOD: Department of Defense: 

DTSA: Defense Technology Security Administration: 

OEF: Operation Enduring Freedom: 

OIF: Operation Iraqi Freedom: 

United States Government Accountability Office: 

Washington, DC 20548: 

November 30, 2007: 

The Honorable Tom Lantos: 
Chairman: 
The Honorable Ileana Ros-Lehtinen: 
Ranking Member: 
Committee on Foreign Affairs: 
House of Representatives: 

The State Department (State), through the Directorate of Defense Trade 
Controls (DDTC), regulates the export of billions of dollars worth of 
arms[Footnote 1] by U.S. companies to foreign governments and companies 
and has responsibility for reviewing and authorizing export license 
applications and other arms export cases.[Footnote 2] Reviews of arms 
export cases require time to deliberate because U.S. national security 
and foreign policy interests must be considered. However, the U.S. 
defense industry and some foreign government purchasers have expressed 
concern that the U.S. export control process is unnecessarily 
burdensome because of the time needed to complete these deliberations. 
To facilitate defense cooperation, State announced in 2000 several 
efforts to reduce arms export processing times, and began the 
development of a new automated system for submitting and reviewing 
cases. Despite efforts to streamline the process, we reported that 
processing times for arms export cases began to increase in 
2003.[Footnote 3] 

Over the past decade, we have reported on various problems in the U.S. 
export control system. Vulnerabilities in the U.S. export control 
system, along with related government programs,[Footnote 4] prompted 
GAO to designate the effective protection of technologies critical to 
U.S. national security interests as a new high-risk area in 
2007.[Footnote 5] This report looks at a key component of the arms 
export control system--the licensing review process for arms export 
cases. Because of concerns about increasing processing times and a DDTC 
announcement of a significant number of open cases, you requested we 
evaluate the processing of arms export control cases. Specifically, 
this report (1) describes recent trends in the processing of arms 
export cases, including processing times and open cases, and (2) 
identifies factors that have contributed to the trends in processing 
these cases. 

To conduct our work, we obtained and analyzed State arms export case 
data for fiscal year 2003 through April 30, 2007, to identify 
processing trends. We assessed the reliability of the data and 
determined them to be sufficiently reliable for our purposes. We also 
examined DDTC and Department of Defense (DOD) case processing 
guidelines, DDTC funding and staffing information, and applicable laws 
and regulations. In addition, we interviewed officials from DDTC, 
State's bureaus to which cases are referred, DOD's Defense Technology 
Security Administration (DTSA), and selected arms exporters to identify 
factors affecting processing trends. For more on our scope and 
methodology, see appendix I. We performed our review from February 
through September 2007 in accordance with generally accepted government 
auditing standards. 

Results in Brief: 

Our analysis pointed to three key trends in the processing of arms 
export cases in recent years. First, DDTC's caseload increased 20 
percent, from about 55,000 to 65,000 between fiscal years 2003 and 
2006. Second, median processing times almost doubled in the same time 
period, from 14 days to 26 days. Third, the number of open arms export 
cases increased 50 percent, from about 5,000 in October 2002 to about 
7,500 in April 2007, reaching a high of more than 10,000 cases in 
September 2006. At the beginning of fiscal year 2007, DDTC launched a 
campaign to reduce the number of open cases. While DDTC was able to cut 
the number of open cases by over 40 percent over 3 months, it did so by 
extending work hours and canceling staff training and meetings and 
other activities to focus on the mounting number of open cases. 
However, such measures are not sustainable in the long term, do not 
address underlying inefficiencies and problems, and may adversely 
affect the mission. 

Inefficiencies and problems in the license review process are largely 
affected by procedural weaknesses, shortfalls with the electronic 
processing system, and human capital challenges. Lack of screening 
procedures for referring arms export cases outside DDTC have resulted 
in cases languishing for weeks before any action is taken. While DDTC's 
new electronic processing system, D-Trade, was intended to improve 
processing times, the system has not been the panacea the agency 
expected. Our analysis shows that processing times for like types of 
cases are virtually the same, regardless of whether the case was 
submitted through D-Trade or on paper. The system also lacks tools to 
aid the licensing officer to process cases more efficiently. DDTC also 
faces human capital challenges in establishing and retaining a 
sufficient workforce with the experience and skills needed to 
efficiently and effectively process arms export cases. These factors 
have largely gone unaddressed because DDTC management does not 
systematically analyze licensing data to identify inefficiencies and 
develop solutions to manage its processes and more effectively 
structure the workforce. 

To improve the efficiency of processing arms export cases, we are 
recommending that State conduct systematic analyses of licensing data 
to identify potential causes of inefficiencies and develop solutions to 
better manage its workload, processes, and workforce structure. In 
commenting on a draft of this report, State concurred with our 
recommendation and indicated that it has initiated efforts to improve 
its processes and organizational alignment. Defense had no comments on 
the draft report. 

Background: 

Under the authority of the Arms Export Control Act, State regulates and 
controls arms exports by U.S. companies to help ensure that those 
exports are consistent with national security and foreign policy 
interests.[Footnote 6] This function has been delegated to DDTC within 
the Bureau of Political-Military Affairs. DDTC's staffing levels are 
allocated and funded by State. Funding for other DDTC activities and 
operations comes from two main sources: (1) appropriated funds that 
State then allocates to DDTC through the Bureau of Political-Military 
Affairs, and (2) registration fees, which DDTC is authorized to retain 
to help fund certain activities related to licensing, enforcement, and 
compliance.[Footnote 7] 

Exporters submit arms export cases via paper or electronically through 
D-Trade, DDTC's Web-based electronic processing system.[Footnote 8] 
Cases include permanent arms export licenses, temporary arms exports or 
imports, agreements between U.S. industry and foreign entities to 
provide technical assistance or manufacturing capability, requests for 
amendments to existing licenses or agreements, and requests to 
determine commodity jurisdiction.[Footnote 9] Cases vary in terms of 
complexity and time to process. For example, agreements generally take 
longer than other cases because they are complex, require substantial 
work by licensing officers, and often require interagency review. 

Once cases are received, DDTC assigns them to one of five teams, based 
on commodity categories: firearms, aircraft, missile and spacecraft, 
military electronics, and military vehicles and naval vessels. Team 
leaders, in turn, assign cases to a licensing officer, who conducts an 
initial review to determine whether the case needs a referral to an 
agency, such as DOD's DTSA, and/or another State bureau for additional 
review--or whether the case can be reviewed and analyzed internally. 
Either way, the licensing officer conducts the final review and 
determines the final action. Final action on cases can only be taken by 
licensing officers with designated signature authority, which DDTC 
officials stated takes an average of 18 months of training and 
experience to obtain. Prior to approving cases that involve exports 
meeting statutory dollar thresholds and involving selected countries, 
State must notify Congress.[Footnote 10] Figure 1 depicts DDTC's 
licensing review process. 

Figure 1: DDTC's Licensing Review Process: 

This figure is a flowchart showing DDTC's licensing review process. 

[See PDF for image] 

Source: GAO analysis of licensing process. 

[A] Some cases require congressional notification prior to final 
action. 

[B] Provisos are conditions that limit the use of exported items and 
technologies. 

[C] DDTC returns applications without action when it determines the 
application does not meet regulatory requirements or does not provide 
adequate documentation and details. 

[End of figure] 

In addition to reviewing arms export cases, DDTC conducts outreach to 
educate industry about export controls and promote compliance with laws 
and regulations. 

Trends Indicate DDTC's Licensing Process Is Under Stress: 

Our analysis shows several trends have emerged in the processing of 
arms export cases, which indicate the system is under stress. First, 
the number of arms export cases processed by DDTC has increased since 
fiscal year 2003. Most of the increase was for licenses for permanent 
export. Second, processing times almost doubled from fiscal year 2003 
to 2006. Third, the number of open arms cases has increased since 
fiscal year 2003. While extraordinary actions taken by DDTC to address 
the mounting number of open cases achieved short-term gains, these 
actions are not sustainable because they strained personnel and 
involved deferring other mission-related activities. 

Arms Export Caseload, Processing Times, and Open Cases Have 
Significantly Increased: 

Between fiscal years 2003 and 2006, the arms export caseload processed 
by DDTC has increased 20 percent, from about 55,000 to 65,000. DDTC 
officials attributed this growth to several possible factors, including 
increased globalization of the defense industry and an overall increase 
in arms exports. In addition, our analysis of the cases processed by 
DDTC shows that permanent export licenses constituted about two-thirds 
of all cases, thereby accounting for the major part of DDTC's caseload 
activity. For these cases, the greatest increase occurred in aircraft 
and related components among the various types of controlled 
commodities. Our analysis also showed a high concentration of cases by 
country of destination--almost half consisted of seven countries, with 
25 percent involving Japan and the United Kingdom. In contrast, we 
found cases are not concentrated by major defense arms exporting 
companies. In fiscal year 2006, only 21 percent of cases processed 
involved the top 10 arms exporting firms. (For additional analyses of 
cases, including type of case, commodities, countries, and expedited 
cases, see app. II.) 

Overall, processing times for all types of cases have increased. 
Between fiscal years 2003 and 2006, median processing times nearly 
doubled, from 14 days to 26 days. Some types of cases take longer to 
process than others, in part because of their complexity. For example, 
in fiscal year 2006, technical assistance agreements took a median of 
94 days to process. However, these agreements made up less than 9 
percent of the cases processed for that year, and therefore may not be 
a significant driver of overall increased processing times. Permanent 
exports, which constituted the majority of cases, took a median of 25 
days to process in fiscal year 2006. 

For nonreferred cases, which made up about two-thirds of all cases, 
DDTC's in-house processing times increased significantly. For example, 
between fiscal years 2003 and 2006, median processing times for 
nonreferred cases increased from 8 to 19 days. For the first 7 months 
of fiscal year 2007, the median processing time was 17 days. Moreover, 
the number of nonreferred permanent export license cases taking longer 
than 2 weeks to process increased from 26 percent in fiscal year 2003 
to 72 percent in fiscal year 2006. The increase in the percentage of 
nonreferred agreements taking longer than 2 weeks was even more 
dramatic--increasing from about 13 percent to 87 percent (see fig. 2). 

Figure 2: Processing Time Frames for Nonreferred Permanent Export 
Licenses and Agreements, Fiscal Year 2003 through April 30, 2007: 

This figure is combination of shaded bar graphs showing processing time 
frames for nonreferred permanent export licenses and agreements, 
between fiscal year 2003 and April 30, 2007. The X axis in both graphs 
represent percent, while the Y axis represents the year. 

[See PDF for image] 

Source: GAO analysis of DDTC DATA. 

[A] Agreements include technical assistance, manufacturing, brokering, 
distribution, and generic agreements. 

[End of figure] 

Processing times for cases referred outside of DDTC for review, which 
made up about one-third of all cases, have also increased. For example, 
between fiscal years 2003 and 2006, median processing times increased 
from 49 to 61 days. For the first 7 months of fiscal year 2007, the 
median processing time was 50 days. Moreover, in fiscal year 2006, 70 
percent of referred agreement cases, which tend to take longer to 
process than other cases, took longer than 12 weeks to process, 
compared to 11 percent in fiscal year 2003. In contrast, processing 
times for permanent export license cases referred outside of DDTC have 
held relatively steady for the past several years (see fig. 3). 

Figure 3: Processing Time Frames for Referred Permanent Export Licenses 
and Agreements, Fiscal Year 2003 through April 30, 2007: 

This figure is a combination of two shaded bar graphs showing 
processing time frames for referred permanent export licenses and 
agreements, between fiscal year 2003 and April 30, 2007. The X axis in 
both graphs represent percent, while the Y axis represents the year. 

[See PDF for image] 

Source: GAO analysis of DDTC data. 

[A] Agreements include technical assistance, manufacturing, brokering, 
distribution, and generic agreements. 

[End of figure] 

The number of open arms export cases has also increased because DDTC 
has received cases at a higher rate than it processed them. Open cases 
increased from about 5,000 in October 2002 to about 7,500 in April 
2007, reaching a high of more than 10,000 open cases in September 2006 
(see fig. 4). 

Figure 4: Open Arms Export Cases, Fiscal Year 2003 through April 30, 
2007: 

This figure is a line graph showing open arms export cases, between 
fiscal year 2003 and April 30, 2007. The X axis represents the month 
and year, while the Y axis represents the open cases. 

[See PDF for image] 

Source: GAO analysis of DDTC data. 

[End of figure]

Actions Taken by DDTC to Achieve Short-Term Gains Are Unsustainable: 

At the beginning of fiscal year 2007, DDTC launched its "winter 
offensive," a campaign to reduce the growing number of open cases. 
Through extraordinary measures--such as extending work hours; canceling 
staff training, meetings, and industry outreach; and pulling available 
staff from other duties to process cases--DDTC was able to reduce the 
number of open cases by 40 percent in 3 months. However, DDTC officials 
told us that these measures were not sustainable for the long term 
because they put a strain on personnel and deferred mission-related 
activities. 

Not only are these short-term measures unsustainable, they may have 
unintended adverse consequences. A DDTC official stated the short-term 
emphasis during the winter offensive was necessary to reduce the number 
of open cases but may have the unanticipated effect of shifting the 
focus from the mission of protecting U.S. national security and 
promoting foreign policy interests to simply closing cases to reduce 
the queue of open cases. 

Systemic Inefficiencies Underlie Overall Trends in the Licensing 
Process: 

While some blips in the trends can be attributed to onetime events or 
efforts, such as the winter offensive, the overall trends of increased 
processing times and open cases are affected by several factors, 
including procedural inefficiencies, electronic processing system 
shortcomings, and human capital challenges. DDTC does not perform 
systematic assessments to identify overall trends and root causes, 
which could lead to sustainable solutions. 

Case Processing Encumbered by DDTC Procedural Inefficiencies: 

While DDTC has established a time frame goal in its guidelines for 
referring cases outside of DDTC, it has not met this goal.[Footnote 11] 
Specifically, the guidelines indicate that DDTC licensing officers 
should refer cases to other agencies or State bureaus within 10 days of 
receipt by the licensing officer.[Footnote 12] Our analysis shows that 
DDTC has taken increasingly longer to refer cases. As shown in table 1, 
the median days from when the case was received to outside referral 
increased from 7 days in fiscal year 2003 to 20 days during the first 7 
months of fiscal year 2007. In contrast, the median number of days 
cases spent outside of DDTC for referral has decreased over the same 
period from 31 to 18 days.[Footnote 13] 

Table 1: Median Days Processing Time by Steps in the Referral Process, 
Fiscal Year 2003 through April 2007: 

Fiscal year: 2003; 
Days DDTC takes to refer a case: 7; 
Days at an agency or bureau: 31; 
Days from receipt of agency or bureau position to final action: 7; 
Days to complete referred cases: 49. 

Fiscal year: 2004; 
Days DDTC takes to refer a case: 10; 
Days at an agency or bureau: 29; 
Days from receipt of agency or bureau position to final action: 7; 
Days to complete referred cases: 51. 

Fiscal year: 2005; 
Days DDTC takes to refer a case: 12; 
Days at an agency or bureau: 28; 
Days from receipt of agency or bureau position to final action: 8; 
Days to complete referred cases: 52. 

Fiscal year: 2006; 
Days DDTC takes to refer a case: 18; 
Days at an agency or bureau: 27; 
Days from receipt of agency or bureau position to final action: 9; 
Days to complete referred cases: 61. 

Fiscal year: 2007[A]; 
Days DDTC takes to refer a case: 20; 
Days at an agency or bureau: 18; 
Days from receipt of agency or bureau position to final action: 4; 
Days to complete referred cases: 50. 

Source: GAO analysis of DDTC data. 

[A] Data are for the first 7 months of fiscal year 2007. 

[End of table] 

DDTC has not established procedures to promptly screen most cases to 
identify those that need outside referral. As a result, cases often 
languish in a team leader's or licensing officer's queue awaiting 
assignment or initial review. In contrast, DOD's DTSA--which receives 
the majority of cases referred by DDTC--uses a team to screen cases 
daily to determine if cases should be reviewed solely at DTSA or 
whether they should be referred to military services or other DOD 
components for further review. In making the decision to refer cases, 
the team considers such factors as the existence of precedent cases, 
the level of technology, and the circumstances of the transaction. 
According to DTSA officials, this process allows them to expedite 
certain cases and to focus efforts on more complicated cases involving 
commodities or capabilities not previously exported or presenting 
special concerns. For referred cases, DTSA officials told us the daily 
screening process allows them to make the referral in less than 2 days 
on average. According to DDTC officials, they have recently established 
a process for promptly referring technical assistance agreements 
outside DDTC but have not done so for other types of cases. 

Until recently, DDTC lacked procedures for expediting certain cases. 
Specifically, the Ronald W. Reagan National Defense Authorization Act 
for Fiscal Year 2005, enacted in 2004, requires the expeditious 
processing of arms export cases for the United Kingdom and Australia by 
State, in consultation with DOD.[Footnote 14] Although the legislation 
does not specify a processing time frame goal, in fiscal year 2006, the 
processing times for United Kingdom and Australia cases was 21 days, 
which did not differ significantly from the processing times for other 
allied countries. (For additional analysis of processing times by 
country, see app. II.) DDTC officials told us they have been working 
with DOD on developing procedures to expedite processing for United 
Kingdom and Australia cases, and recently established a process for 
doing so.[Footnote 15] 

D-Trade Has Yet to Achieve Case Processing Efficiencies: 

The establishment of a new automated system for processing cases had 
been cited by State officials as its most significant effort to improve 
efficiency. However, the anticipated efficiencies have not been 
realized. Our analysis of processing times shows no significant 
difference between like types of cases submitted electronically versus 
paper submissions. For example, in fiscal year 2006, median processing 
time for permanent export cases submitted through D-Trade was 23 days 
versus 25 for paper submissions. Although 77 percent of cases are now 
received electronically through D-Trade,[Footnote 16] its 
implementation has been problematic and electronic processing has not 
been the promised panacea for improving processing times. 

According to DDTC officials, poorly defined system requirements and a 
rush to production led to technical glitches and performance problems. 
For example, in January 2007, DDTC released a new version of D-Trade, 
but because of software problems, cases received could not be 
processed. As a result, the new version was shut down after 3 days, 
requiring DDTC to revert to the previous version. The 1,300 cases 
received during the 3-day period had to be resubmitted by exporters, 
resulting in some rework and an increase in the number of open cases. 

DDTC has relied on an information technology solution without 
reengineering the underlying processes or without developing tools to 
facilitate the licensing officer's job. In 2001, we reported 
information systems that simply use technology to do the same work, the 
same way, but only faster typically fail or reach only a fraction of 
their potential.[Footnote 17] While defense industry officials told us 
that D-Trade simplifies the process for submitting cases and receiving 
final authorizations, the system lacks tools to aid licensing officers 
to process cases more efficiently. For example, the system has limited 
capabilities to reference precedent cases that would allow licensing 
officers to leverage work previously done on similar cases. The system 
also lacks other tools, such as automated access to regulations, 
guidance, or other information that may facilitate processing. DDTC 
officials said they expect future versions of D-Trade will incorporate 
tools to help licensing officers process cases more efficiently. 

DDTC Faces Staffing Instabilities: 

The fundamental work of reviewing and analyzing arms export cases 
requires an adequate number of personnel with the right skills and 
knowledge--especially given the continued rise in caseload. However, 
ensuring a sufficient workforce with the needed skills and knowledge 
has been a challenge for DDTC because of staffing instabilities. For 
example, the number of licensing officers on board has fluctuated over 
recent years and was at the same level in fiscal years 2003 and 2006, 
yet the number of cases processed increased about 20 percent during the 
same period (see table 2). 

Table 2: Cases Closed and Licensing Officer Positions Filled, Fiscal 
Year 2003 through April 30, 2007: 

Cases closed; 
Fiscal year: 2003: 54,576; 
Fiscal year: 2004: 57,885; 
Fiscal year: 2005: 62,954; 
Fiscal year: 2006: 65,274; 
Fiscal year: 2007[A]: 43,642. 

Licensing officer positions filled[B]; 
Fiscal year: 2003: 35; 
Fiscal year: 2004: 31; 
Fiscal year: 2005: 31; 
Fiscal year: 2006: 35; 
Fiscal year: 2007[A]: 34. 

Source: GAO analysis of DDTC data. 

[A] Data are for the first 7 months of fiscal year 2007. 

[B] Licensing officer positions include civil service licensing 
officers and team leaders. 

[End of table] 

DDTC officials have acknowledged that more work is falling on fewer 
experienced staff. According to these officials, in the summer of 2006, 
about one-half of licensing officers had less than 1 year of 
experience, and many did not have the signature authority needed to 
take final action on cases. For example, early in 2007, one team had 
three licensing officers but only the team leader had the authority to 
approve or deny cases. Although the staff could perform research, the 
team leader had to review all cases before final action could be taken. 

Staffing instabilities have also been affected by fluctuating levels of 
military officers detailed to DDTC from DOD, who are generally assigned 
to review agreements. The Foreign Relations Authorization Act for 
Fiscal Year 2003 states the Secretary of Defense should ensure that 10 
military officers are continuously detailed to DDTC.[Footnote 18] 
However, the number of officers DOD detailed to DDTC has fluctuated 
over recent years. In fiscal year 2006, the number of military officers 
detailed to DDTC ranged from 3 to 7. From fiscal year 2005 to 2006, 
processing times for agreements nearly doubled from 48 days to 94 days. 
In fiscal year 2007, the number of military officers increased to 8, 
and by April 2007, processing times for agreements was 72 days. To help 
address the potential adverse effect of insufficient numbers of 
military officers, DDTC began assigning additional civilian licensing 
officers to process agreements in 2006. 

DDTC Does Not Conduct Systematic Assessments to Identify Root Causes of 
Problems and to Develop Sustainable Solutions: 

DDTC management does not systematically assess licensing data to 
identify inefficiencies. Analysis of these data could allow DDTC to 
more effectively structure its workforce and manage workload. Instead, 
DDTC management reviews reports consisting of aggregate information on 
received, processed, and open cases to determine the status of cases 
and licensing officer productivity. However, DDTC cannot identify the 
drivers of the workload or bottlenecks in the process from these status 
reports. Using DDTC's data, we conducted analyses of factors that can 
drive workload, such as type of cases, commodities, countries, and 
profiles of the exporter base (see app. II). Such analyses could 
provide insights to managers on ways to reduce workload, structure the 
workforce, target outreach with industry, and reengineer processes. For 
example: 

* By examining caseload by type of commodity, DDTC could assess the 
impact on workload of potential changes to licensing requirements such 
as application of or modification to exemptions--if such changes are 
warranted given the national security risk and foreign policy 
interests. 

* Given DDTC's current organizational structure of teams associated 
with particular commodities, DDTC could examine its licensing data to 
determine if there is a concentration of cases by factors other than 
commodity, such as country. Such analyses could permit DDTC to consider 
possible efficiencies related to aligning its workforce to where its 
workload is concentrated. Also, by monitoring processing times for 
factors driving the workload, DDTC could take corrective actions and 
reallocate resources before processing times for some types of cases 
become a problem. 

* By assessing the volume and type of case submissions by exporters, 
DDTC could better target its industry education and outreach activities 
to help ensure the quality of submissions and compliance with export 
control law and regulations. 

* DDTC could analyze the processing times associated with steps in the 
licensing process--such as time it takes to refer cases--to assess the 
flow of cases through the review process and identify possible 
bottlenecks or inefficiencies in the process. 

While DDTC has taken actions to achieve some short-term gains to 
growing problems in its processing of cases, DDTC managers lack 
systematic analyses to identify root causes and develop sustainable 
solutions. Federal managers, including those at DDTC, need to monitor 
and assess their systems to ensure that they are well designed and 
efficiently operated, are appropriately updated to meet changing 
conditions, and provide reasonable assurance that the objectives of the 
agency are being achieved.[Footnote 19] 

Conclusions: 

The licensing of arms exports is a key component of the U.S. export 
control system to help ensure arms do not fall into the wrong hands. 
Licensing officers are challenged to weigh national security and 
foreign policy interests on thousands of cases a year while allowing 
legitimate defense trade to occur in an efficient manner. However, 
systemic inefficiencies in arms export licensing are straining the 
system and may be diminishing licensing officers' capacity to process 
cases efficiently and effectively. To date, DDTC has not 
comprehensively analyzed its export processing system to identify 
causes of inefficiencies and needed actions to address them. Unless 
DDTC systematically analyzes its licensing data in terms of drivers of 
workload and steps in the process, it will continue to ineffectively 
and inefficiently manage its processes, workload, and resources. 

Recommendation for Executive Action: 

To improve the efficiency of processing arms export cases, we recommend 
that the Secretary of State direct the Deputy Assistant Secretary of 
the Directorate of Defense Trade Controls to conduct systematic 
analyses of licensing data to assess root causes of inefficiencies and 
to identify and implement actions to better manage workload, reexamine 
its processes, determine the most effective workforce structure, and 
target industry outreach. 

Agency Comments: 

We provided a draft of this report to the Departments of State and 
Defense and for their review and comment. DOD did not comment on our 
draft. State provided written comments that are reprinted in appendix 
III. In commenting on the draft, State concurred with our 
recommendation and recognized the need for additional systematic 
analyses of data to achieve greater efficiencies. State noted that the 
report does not reflect the impact of three recent initiatives, which 
according to State resulted in a 30 percent reduction of open cases 
from April to October 2007. Because our analysis was through April 
2007, we are not able to verify what effects--both short-and long-term-
-the initiatives have had on the number of open cases. Until State 
engages in a continual process of systematically analyzing its 
licensing data, it will have no assurance that current or future 
initiatives will address the underlying causes and achieve sustainable 
improvements to the processing of arms export cases. 

As agreed with your office, unless you publicly release its contents 
earlier, we plan no further distribution of this report until 30 days 
from the date of this letter. At that time, we will send copies of this 
report to interested congressional committees, as well as the 
Secretaries of State and Defense; the Director, Office of Management 
and Budget; and the Assistant to the President for National Security 
Affairs. In addition, this report will be made available at no charge 
on the GAO Web site at [hyperlink, http://www.gao.gov]. 

Please contact me at (202) 512-4841 or [email protected] if you or 
your staff have any questions concerning this report. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. Others making key contributions 
to this report are listed in appendix IV. 

Sincerely yours, 

Signed by: 

Ann Calvaresi-Barr: 
Director Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine trends in arms export case processing by State's 
Directorate of Defense Trade Controls (DDTC), we obtained State's arms 
export case data for fiscal year 2003 through April 30, 2007. We 
obtained data from State's paper-based "legacy" system and its D-Trade 
system--a Web-based electronic processing system. We merged the data 
from these two systems and created a single Microsoft Access database 
to determine trends in caseload, cases processed, open cases, and 
processing times. Our analysis did not include cases that were approved 
and then subsequently suspended or revoked because this action takes 
place after the original cases were closed, and including these cases 
would thus skew the results. Processing time represents the median 
number of calendar days between receipt of a case and the final action. 
Open cases are those cases that were received by DDTC but on which no 
final action has been taken. To obtain an overview of the data systems 
used to accept and process license cases at DDTC, we interviewed State 
officials responsible for information technology management. We 
assessed data reliability by obtaining and reviewing system 
documentation and performing electronic testing of data, and determined 
the data to be sufficiently reliable for our intended purposes. We also 
analyzed the data by type of license, commodities, countries, cases 
referred, cases in support of ongoing war efforts, exporters, and case 
final actions. 

To identify factors contributing to trends in processing times and open 
cases, we interviewed officials from DDTC, State bureaus to which cases 
are most frequently referred, the Department of Defense's (DOD) Defense 
Technology Security Administration (DTSA), and selected arms exporters. 
To understand the process of reviewing arms export cases referred from 
DDTC, we obtained and reviewed DDTC case review guidelines, applicable 
regulations, and laws. We compared DDTC procedures with DTSA case 
processing procedures. To determine the status of D-Trade, we obtained 
briefings and systems documentation and discussed problems with 
implementing the electronic processing system and future development 
plans with cognizant officials. We also compared processing times for D-
Trade and paper processing by calculating processing times for 
permanent exports, which are processed through both systems. We 
obtained and analyzed data on DDTC funding and staffing levels. We also 
obtained and reviewed DDTC status reports used to monitor workload, 
processing times, and open cases. 

[End of section] 

Appendix II: Additional Analyses Related to Arms Export Case 
Processing: 

This appendix provides additional analyses of licensing data related to 
the composition of cases closed and case outcomes. Specifically, we 
analyzed the data in terms of types of cases, commodities, countries of 
destination, cases in support of ongoing war efforts, exporters, and 
case final actions. 

Of the 14 case types processed by DDTC, licenses for permanent exports 
made up the majority of cases. From fiscal year 2003 to 2006, the 
percentage of licenses for permanent exports increased from about 62 
percent to over 66 percent of all cases, as shown in table 3. 

Table 3: DDTC Cases Closed by Case Type from Fiscal Year 2003 through 
April 30, 2007: 

Case type: Amendments; 
Fiscal year: 2003: 8,725; 
Fiscal year: percent: 16.0%; 
Fiscal year: 2004: 6,364; 
Fiscal year: percent: 11.0%; 
Fiscal year: 2005: 9,603; 
Fiscal year: percent: 15.3%; 
Fiscal year: 2006: 9,001; 
Fiscal year: percent: 13.8%; 
Fiscal year: 2007[A]: 4,547; 
Fiscal year: percent: 10.4%. 

Case type: Brokering agreements; 
Fiscal year: 2003: 34; 
Fiscal year: percent: 0.1%; 
Fiscal year: 2004: 66; 
Fiscal year: percent: 0.1%; 
Fiscal year: 2005: 74; 
Fiscal year: percent: 0.1%; 
Fiscal year: 2006: 47; 
Fiscal year: percent: 0.1%; 
Fiscal year: 2007[A]: 31; 
Fiscal year: percent: 0.1%. 

Case type: Classified export/import; 
Fiscal year: 2003: 244; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2004: 307; 
Fiscal year: percent: 0.5%; 
Fiscal year: 2005: 310; 
Fiscal year: percent: 0.5%; 
Fiscal year: 2006: 292; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2007[A]: 199; 
Fiscal year: percent: 0.5%. 

Case type: Commodity jurisdictions; 
Fiscal year: 2003: 199; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2004: 173; 
Fiscal year: percent: 0.3%; 
Fiscal year: 2005: 181; 
Fiscal year: percent: 0.3%; 
Fiscal year: 2006: 266; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2007[A]: 225; 
Fiscal year: percent: 0.5%. 

Case type: Distribution agreements; 
Fiscal year: 2003: 75; 
Fiscal year: percent: 0.1%; 
Fiscal year: 2004: 68; 
Fiscal year: percent: 0.1%; 
Fiscal year: 2005: 112; 
Fiscal year: percent: 0.2%; 
Fiscal year: 2006: 111; 
Fiscal year: percent: 0.2%; 
Fiscal year: 2007[A]: 76; 
Fiscal year: percent: 0.2%. 

Case type: General correspondence; 
Fiscal year: 2003: 1,035; 
Fiscal year: percent: 1.9%; 
Fiscal year: 2004: 1,335; 
Fiscal year: percent: 2.3%; 
Fiscal year: 2005: 1,288; 
Fiscal year: percent: 2.0%; 
Fiscal year: 2006: 1,217; 
Fiscal year: percent: 1.9%; 
Fiscal year: 2007[A]: 990; 
Fiscal year: percent: 2.3%. 

Case type: Generic agreements; 
Fiscal year: 2003: 519; 
Fiscal year: percent: 1.0%; 
Fiscal year: 2004: 406; 
Fiscal year: percent: 0.7%; 
Fiscal year: 2005: 294; 
Fiscal year: percent: 0.5%; 
Fiscal year: 2006: 293; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2007[A]: 275; 
Fiscal year: percent: 0.6%. 

Case type: Government jurisdictions; 
Fiscal year: 2003: 2; 
Fiscal year: percent: 0.0%; 
Fiscal year: 2004: 1; 
Fiscal year: percent: 0.0%; 
Fiscal year: 2005: 2; 
Fiscal year: percent: 0.0%; 
Fiscal year: 2006: 0; 
Fiscal year: percent: 0.0%; 
Fiscal year: 2007[A]: 3; 
Fiscal year: percent: 0.0%. 

Case type: International import certificates; 
Fiscal year: 2003: 225; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2004: 278; 
Fiscal year: percent: 0.5%; 
Fiscal year: 2005: 210; 
Fiscal year: percent: 0.3%; 
Fiscal year: 2006: 250; 
Fiscal year: percent: 0.4%; 
Fiscal year: 2007[A]: 150; 
Fiscal year: percent: 0.3%. 

Case type: Manufacturing agreements; 
Fiscal year: 2003: 764; 
Fiscal year: percent: 1.4%; 
Fiscal year: 2004: 566; 
Fiscal year: percent: 1.0%; 
Fiscal year: 2005: 598; 
Fiscal year: percent: 0.9%; 
Fiscal year: 2006: 613; 
Fiscal year: percent: 0.9%; 
Fiscal year: 2007[A]: 565; 
Fiscal year: percent: 1.3%. 

Case type: Permanent exports; 
Fiscal year: 2003: 33,718; 
Fiscal year: percent: 61.8%; 
Fiscal year: 2004: 38,682; 
Fiscal year: percent: 66.8%; 
Fiscal year: 2005: 41,093; 
Fiscal year: percent: 65.3%; 
Fiscal year: 2006: 43,167; 
Fiscal year: percent: 66.1%; 
Fiscal year: 2007[A]: 28,871; 
Fiscal year: percent: 66.2%. 

Case type: Technical assistance agreements; 
Fiscal year: 2003: 5,249; 
Fiscal year: percent: 9.6%; 
Fiscal year: 2004: 5,401; 
Fiscal year: percent: 9.3%; 
Fiscal year: 2005: 4,847; 
Fiscal year: percent: 7.7%; 
Fiscal year: 2006: 5,536; 
Fiscal year: percent: 8.5%; 
Fiscal year: 2007[A]: 5,231; 
Fiscal year: percent: 12.0%. 

Case type: Temporary exports; 
Fiscal year: 2003: 2,634; 
Fiscal year: percent: 4.8%; 
Fiscal year: 2004: 3,012; 
Fiscal year: percent: 5.2%; 
Fiscal year: 2005: 3,076; 
Fiscal year: percent: 4.9%; 
Fiscal year: 2006: 3,451; 
Fiscal year: percent: 5.3%; 
Fiscal year: 2007[A]: 1,895; 
Fiscal year: percent: 4.3%. 

Case type: Temporary imports; 
Fiscal year: 2003: 1,153; 
Fiscal year: percent: 2.1%; 
Fiscal year: 2004: 1,226; 
Fiscal year: percent: 2.1%; 
Fiscal year: 2005: 1,266; 
Fiscal year: percent: 2.0%; 
Fiscal year: 2006: 1,030; 
Fiscal year: percent: 1.6%; 
Fiscal year: 2007[A]: 584; 
Fiscal year: percent: 1.3%. 

Total cases closed; 
Fiscal year: 2003: 54,576; 
Fiscal year: percent: [Empty]; 
Fiscal year: 2004: 57,885; 
Fiscal year: percent: [Empty]; 
Fiscal year: 2005: 62,954; 
Fiscal year: percent: [Empty]; 
Fiscal year: 2006: 65,274; 
Fiscal year: percent: [Empty]; 
Fiscal year: 2007[A]: 43,642; 
Fiscal year: percent: [Empty]. 

Source: GAO analysis of DDTC data. 

[A] Data are for the first 7 months of fiscal year 2007. 

[End of table] 

Processing times varied by type of case, as shown in table 4. For 
example, in fiscal year 2006, technical assistance agreements took a 
median of 94 days to process, while licenses for permanent exports, the 
most common case type, took 25 days, and amendments to existing 
licenses took 13 days to process. 

Table 4: Median Days Processing Time by Case Type from Fiscal Year 2003 
through April 30, 2007: 

Case type: Amendments; 
Fiscal year: 2003: 8; 
Fiscal year: 2004: 8; 
Fiscal year: 2005: 10; 
Fiscal year: 2006: 13; 
Fiscal year: 2007[A]: 8. 

Case type: Brokering agreements; 
Fiscal year: 2003: 43.5; 
Fiscal year: 2004: 41.5; 
Fiscal year: 2005: 34.5; 
Fiscal year: 2006: 64; 
Fiscal year: 2007[A]: 95. 

Case type: Classified export/import; 
Fiscal year: 2003: 31.5; 
Fiscal year: 2004: 35; 
Fiscal year: 2005: 36; 
Fiscal year: 2006: 42; 
Fiscal year: 2007[A]: 30. 

Case type: Commodity jurisdictions; 
Fiscal year: 2003: 105; 
Fiscal year: 2004: 107; 
Fiscal year: 2005: 111; 
Fiscal year: 2006: 157.5; 
Fiscal year: 2007[A]: 126. 

Case type: Distribution agreements; 
Fiscal year: 2003: 75; 
Fiscal year: 2004: 84.5; 
Fiscal year: 2005: 64.5; 
Fiscal year: 2006: 84; 
Fiscal year: 2007[A]: 90.5. 

Case type: General correspondence; 
Fiscal year: 2003: 57; 
Fiscal year: 2004: 62; 
Fiscal year: 2005: 52; 
Fiscal year: 2006: 65; 
Fiscal year: 2007[A]: 86. 

Case type: Generic agreements; 
Fiscal year: 2003: 22; 
Fiscal year: 2004: 14; 
Fiscal year: 2005: 30.5; 
Fiscal year: 2006: 91; 
Fiscal year: 2007[A]: 68. 

Case type: Government jurisdictions; 
Fiscal year: 2003: 787.5; 
Fiscal year: 2004: 98; 
Fiscal year: 2005: 1,171.5; 
Fiscal year: 2006: [B] ; 
Fiscal year: 2007[A]: 171. 

Case type: International import certificates; 
Fiscal year: 2003: 5; 
Fiscal year: 2004: 5; 
Fiscal year: 2005: 7; 
Fiscal year: 2006: 8.5; 
Fiscal year: 2007[A]: 6. 

Case type: Manufacturing agreements; 
Fiscal year: 2003: 37; 
Fiscal year: 2004: 37.5; 
Fiscal year: 2005: 45; 
Fiscal year: 2006: 99; 
Fiscal year: 2007[A]: 83. 

Case type: Permanent exports; 
Fiscal year: 2003: 13; 
Fiscal year: 2004: 17; 
Fiscal year: 2005: 20; 
Fiscal year: 2006: 25; 
Fiscal year: 2007[A]: 25. 

Case type: Technical assistance agreements; 
Fiscal year: 2003: 39; 
Fiscal year: 2004: 41; 
Fiscal year: 2005: 48; 
Fiscal year: 2006: 94; 
Fiscal year: 2007[A]: 71. 

Case type: Temporary exports; 
Fiscal year: 2003: 37; 
Fiscal year: 2004: 36; 
Fiscal year: 2005: 36; 
Fiscal year: 2006: 38; 
Fiscal year: 2007[A]: 33. 

Case type: Temporary imports; 
Fiscal year: 2003: 13; 
Fiscal year: 2004: 14; 
Fiscal year: 2005: 16; 
Fiscal year: 2006: 22; 
Fiscal year: 2007[A]: 16.5. 

All cases; 
Fiscal year: 2003: 14; 
Fiscal year: 2004: 18; 
Fiscal year: 2005: 19; 
Fiscal year: 2006: 26; 
Fiscal year: 2007[A]: 27. 

Source: GAO analysis of DDTC data. 

[A] Data are for the first 7 months of fiscal year 2007. 

[B] No government jurisdiction cases were closed in fiscal year 2006. 

[End of table] 

For cases involving permanent export licenses, aircraft and related 
components were the primary driver of increased cases, increasing about 
44 percent, from about 9,800 in fiscal year 2003 to over 14,000 in 
fiscal year 2006, as shown in table 5. Processing times for permanent 
export licenses also varied by type of commodity group and were 
increasing for most commodities from fiscal years 2003 through 2006, 
with missile and spacecraft taking the longest to process. Several 
commodity groups saw reductions in processing times during the first 7 
months of fiscal year 2007, including a significant reduction in 
missile and spacecraft. Processing times for aircraft increased during 
each period. 

Table 5: Permanent Export Cases Processed and Processing Times by 
Commodity Group, Fiscal Year 2003 through April 30, 2007: 

Commodity group: Aircraft; 
Fiscal year: 2003: Cases closed: 9,822; 
Fiscal year: 2003: Median days processing: 10; 
Fiscal year: 2004: Cases closed: 12,385; 
Fiscal year: 2004: Median days processing: 14; 
Fiscal year: 2005: Cases closed: 13,224; 
Fiscal year: 2005: Median days processing: 18; 
Fiscal year: 2006: Cases closed: 14,099; 
Fiscal year: 2006: Median days processing: 24; 
Fiscal year: 2007[A]: Cases closed: 9,701; 
Fiscal year: 2007[A]: Median days processing: 29. 

Commodity group: Firearms; 
Fiscal year: 2003: Cases closed: 6,984; 
Fiscal year: 2003: Median days processing: 8; 
Fiscal year: 2004: Cases closed: 7,145; 
Fiscal year: 2004: Median days processing: 10; 
Fiscal year: 2005: Cases closed: 7,464; 
Fiscal year: 2005: Median days processing: 15; 
Fiscal year: 2006: Cases closed: 7,429; 
Fiscal year: 2006: Median days processing: 20; 
Fiscal year: 2007[A]: Cases closed: 4,381; 
Fiscal year: 2007[A]: Median days processing: 16. 

Commodity group: Military electronics; 
Fiscal year: 2003: Cases closed: 6,614; 
Fiscal year: 2003: Median days processing: 18.5; 
Fiscal year: 2004: Cases closed: 7,748; 
Fiscal year: 2004: Median days processing: 23; 
Fiscal year: 2005: Cases closed: 8,699; 
Fiscal year: 2005: Median days processing: 23; 
Fiscal year: 2006: Cases closed: 9,417; 
Fiscal year: 2006: Median days processing: 31; 
Fiscal year: 2007[A]: Cases closed: 6,536; 
Fiscal year: 2007[A]: Median days processing: 28. 

Commodity group: Military vehicle and naval vessel; 
Fiscal year: 2003: Cases closed: 5,992; 
Fiscal year: 2003: Median days processing: 21; 
Fiscal year: 2004: Cases closed: 7,107; 
Fiscal year: 2004: Median days processing: 26; 
Fiscal year: 2005: Cases closed: 7,612; 
Fiscal year: 2005: Median days processing: 21; 
Fiscal year: 2006: Cases closed: 7,777; 
Fiscal year: 2006: Median days processing: 22; 
Fiscal year: 2007[A]: Cases closed: 4,376; 
Fiscal year: 2007[A]: Median days processing: 31. 

Commodity group: Missile and spacecraft; 
Fiscal year: 2003: Cases closed: 4,221; 
Fiscal year: 2003: Median days processing: 32; 
Fiscal year: 2004: Cases closed: 4,229; 
Fiscal year: 2004: Median days processing: 29; 
Fiscal year: 2005: Cases closed: 3,807; 
Fiscal year: 2005: Median days processing: 36; 
Fiscal year: 2006: Cases closed: 4,092; 
Fiscal year: 2006: Median days processing: 39; 
Fiscal year: 2007[A]: Cases closed: 3,151; 
Fiscal year: 2007[A]: Median days processing: 17. 

Source: GAO analysis of DDTC data. 

[A] Data are for the first 7 months of fiscal year 2007. 

[End of table] 

Arms export cases are relatively concentrated by country of 
destination. As shown in table 6, in fiscal year 2006, cases 
identifying Japan and the United Kingdom as destination countries 
represented about 25 percent of all cases. Processing times, with the 
exception of those for Israel, are similar for the top countries of 
destination. 

Table 6: Percentage of Cases Closed and Median Processing Time for Top 
10 Countries of Destination, Fiscal Year 2006: 

Rank: 1; 
Country: Japan; 
Percentage of all cases closed: 12.7%; 
Median days processing: 22. 

Rank: 2; 
Country: United Kingdom; 
Percentage of all cases closed: 12.0%; 
Median days processing: 21. 

Rank: 3; 
Country: Canada; 
Percentage of all cases closed: 6.9%; 
Median days processing: 22. 

Rank: 4; 
Country: Germany; 
Percentage of all cases closed: 5.4%; 
Median days processing: 24. 

Rank: 5; 
Country: Australia; 
Percentage of all cases closed: 4.5%; 
Median days processing: 21. 

Rank: 6; 
Country: Israel; 
Percentage of all cases closed: 4.3%; 
Median days processing: 36. 

Rank: 7; 
Country: South Korea; 
Percentage of all cases closed: 4.0%; 
Median days processing: 24. 

Rank: 8; 
Country: Italy; 
Percentage of all cases closed: 3.9%; 
Median days processing: 25. 

Rank: 9; 
Country: France; 
Percentage of all cases closed: 3.2%; 
Median days processing: 29. 

Rank: 10; 
Country: Spain; 
Percentage of all cases closed: 2.4%; 
Median days processing: 26. 

Source: GAO analysis of DDTC data. 

[End of table] 

DDTC has procedures to expedite cases submitted in support of ongoing 
war efforts including Operation Enduring Freedom (OEF) or Operation 
Iraqi Freedom (OIF). These cases did not represent a significant 
caseload---ranging from 0.8 percent to 1.5 percent from fiscal year 
2003 through 2006. Median processing times for these cases ranged from 
8 to 11 days, as shown in table 7. 

Table 7: Number of Cases and Processing Times for OEF/OIF Cases, Fiscal 
Years 2003 through 2006: 

Fiscal year: 2003; 
All cases closed: 54,576; 
Cases expedited: 444; 
Percentage of all cases closed: 0.8%; 
Median days for processing: 8. 

Fiscal year: 2004; 
All cases closed: 57,885; 
Cases expedited: 477; 
Percentage of all cases closed: 0.8%; 
Median days for processing: 11. 

Fiscal year: 2005; 
All cases closed: 62,954; 
Cases expedited: 958; 
Percentage of all cases closed: 1.5%; 
Median days for processing: 9. 

Fiscal year: 2006; 
All cases closed: 65,274; 
Cases expedited: 773; 
Percentage of all cases closed: 1.2%; 
Median days for processing: 9. 

Source: GAO analysis of DDTC data. 

[End of table] 

The number of exporters registered with DDTC that submitted cases 
increased about 13 percent, from almost 2,500 in fiscal year 2003 to 
almost 2,800 in fiscal year 2006. However, most exporters submitted 
relatively few applications, as shown in table 8. 

Table 8: Number of Exporters by Cases Submitted, Fiscal Years 2003 
through 2006: 

Fiscal year: 2003; 
Total exporters submitting cases: 2,470; 
Exporters who submitted: Ten or fewer cases: 1,826; 
Exporters who submitted: Percent: 74%; 
Exporters who submitted: Five or fewer cases: 1,480; 
Exporters who submitted: Percent: 60%; 
Exporters who submitted: One case: 684; 
Exporters who submitted: Percent: 28%. 

Fiscal year: 2004; 
Total exporters submitting cases: 2,651; 
Exporters who submitted: Ten or fewer cases: 1,911; 
Exporters who submitted: Percent: 72%; 
Exporters who submitted: Five or fewer cases: 1,582; 
Exporters who submitted: Percent: 60%; 
Exporters who submitted: One case: 683; 
Exporters who submitted: Percent: 26%. 

Fiscal year: 2005; 
Total exporters submitting cases: 2,759; 
Exporters who submitted: Ten or fewer cases: 2,000; 
Exporters who submitted: Percent: 72%; 
Exporters who submitted: Five or fewer cases: 1,634; 
Exporters who submitted: Percent: 59%; 
Exporters who submitted: One case: 687; 
Exporters who submitted: Percent: 25%. 

Fiscal year: 2006; 
Total exporters submitting cases: 2,781; 
Exporters who submitted: Ten or fewer cases: 1,978; 
Exporters who submitted: Percent: 71%; 
Exporters who submitted: Five or fewer cases: 1,609; 
Exporters who submitted: Percent: 58%; 
Exporters who submitted: One case: 737; 
Exporters who submitted: Percent: 27%. 

Source: GAO analysis of DDTC data. 

[End of table] 

In contrast, some exporters submit thousands of applications in a given 
year. In terms of all cases received, the percentage of cases received 
from the top 10 exporters in terms of cases submitted ranged from about 
19 to 26 percent, as shown in table 9. 

Table 9: Percentage of Cases Received from the Top 10 Exporters, Fiscal 
Years 2003 through 2006: 

Fiscal year: 2003; 
Total cases received: 55,073; 
Cases received by top 10 exporters: 14,240; 
Percent: 25.9%. 

Fiscal year: 2004; 
Total cases received: 58,404; 
Cases received by top 10 exporters: 10,896; 
Percent: 18.7%. 

Fiscal year: 2005; 
Total cases received: 65,150; 
Cases received by top 10 exporters: 14,508; 
Percent: 22.3%. 

Fiscal year: 2006; 
Total cases received: 67,785; 
Cases received by top 10 exporters: 14,263; 
Percent: 21.0%. 

Source: GAO analysis of DDTC data. 

[End of table] 

As shown in table 10, most cases processed by DDTC are approved or 
approved with condition, known as a proviso. Very few cases are denied. 
The number of cases returned without action increased from about 13 
percent in fiscal year 2003 to over 17 percent in the first 7 months of 
fiscal year 2007. 

Table 10: Cases Closed by Final Action, Fiscal Year 2003 through April 
30, 2007: 

Final action: Approved; 
Fiscal year: 2003: 27,916; 
Fiscal year: Percent: 51.2%; 
Fiscal year: 2004: 29,914; 
Fiscal year: Percent: 51.7%; 
Fiscal year: 2005: 34,638; 
Fiscal year: Percent: 55.0%; 
Fiscal year: 2006: 35,046; 
Fiscal year: Percent: 53.7%; 
Fiscal year: 2007[A]: 19,961; 
Fiscal year: Percent: 45.7%. 

Final action: Approved with proviso; 
Fiscal year: 2003: 18,918; 
Fiscal year: Percent: 34.7%; 
Fiscal year: 2004: 19,054; 
Fiscal year: Percent: 32.9%; 
Fiscal year: 2005: 18,586; 
Fiscal year: Percent: 29.5%; 
Fiscal year: 2006: 20,183; 
Fiscal year: Percent: 30.9%; 
Fiscal year: 2007[A]: 15,507; 
Fiscal year: Percent: 35.5%. 

Final action: Denied; 
Fiscal year: 2003: 395; 
Fiscal year: Percent: 0.7%; 
Fiscal year: 2004: 426; 
Fiscal year: Percent: 0.7%; 
Fiscal year: 2005: 394; 
Fiscal year: Percent: 0.6%; 
Fiscal year: 2006: 433; 
Fiscal year: Percent: 0.7%; 
Fiscal year: 2007[A]: 229; 
Fiscal year: Percent: 0.5%. 

Final action: Returned without action; 
Fiscal year: 2003: 6,992; 
Fiscal year: Percent: 12.8%; 
Fiscal year: 2004: 8,237; 
Fiscal year: Percent: 14.2%; 
Fiscal year: 2005: 8,990; 
Fiscal year: Percent: 14.3%; 
Fiscal year: 2006: 9,171; 
Fiscal year: Percent: 14.1%; 
Fiscal year: 2007[A]: 7,450; 
Fiscal year: Percent: 17.1%. 

Source: GAO analysis of DDTC data. 

[A] Data are for the 7 months of fiscal year 2007. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of State: 

United States Department of State: 
Assistant Secretary for Resource Management and Chief Financial 
Officer: 
Washington, D.C. 20520: 

November 8, 2007: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade Government: 
Accountability Office: 
441 G Street, N.W.: 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, "Defense 
Trade: State Department Needs to Conduct Assessments to Identify and 
Address Inefficiencies and Challenges in the Arms Export Process," GAO 
Job Code 120629. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Laurell Brault, Deputy Director, Bureau of Political and Military 
Affairs, Office of Directorate of Defense Trade Controls at (202) 663-
2736. 

Sincerely, 

Signed by: 

Bradford R. Higgins: 

cc: GAO ï¿½ Anne-Marie Lasowski: PM ï¿½ Frank Ruggiero: 
State/OIG ï¿½ Mark Duda: 

Department of State Comments on GAO Draft Report: 

Defense Trade: State Department Needs to Conduct Assessments to 
Identify and Address Inefficiencies and Challenges in the Arms Export 
Process, (GAO-08-89, GAO Code 120629): 

Thank you for allowing the Department of State the opportunity to 
comment on the draft Defense Trade: State Department Needs to Conduct 
Assessments to Identify and Address Inefficiencies and Challenges in 
the Arms Export Process. 

The GAO recommended that the Secretary of State direct the Deputy 
Assistant Secretary of the Directorate of Defense Trade Controls (DDTC) 
to conduct systematic analyses of licensing data to assess root causes 
of inefficiencies and to identify and implement actions to better 
manage workload, reexamine its processes, determine the most effective 
workforce structure, and target industry outreach. 

State concurs with the overall GAO recommendations; however, it should 
be noted that the GAO review does not include licensing data collected 
after April 2007, and thus does not capture the full impact of the 
licensing guidance and procedural changes that were implemented after 
March 2007. Although, the recommendations have merit, they are more 
historical in nature. The draft report identified three key trends in 
the processing of arms export cases: 

(1) A 20% increase in the number of export cases received by DDTC 
between fiscal years 2003 and 2006; 
(2) Processing times almost doubled from fiscal year 2003 to 2006; 
(3) Increase in the number of open arms cases since fiscal year 2003; 

Our remarks will focus on the last two trends identified in the draft 
report. 

In September 2006 the number of open arms export cases reached a high 
of 10,200 cases. The timeframe in which this occurred came when DDTC 
was severely resource constrained in terms of total number of 
personnel, experienced licensing officers with full signature 
authority, and the post-911 environment and support of the Global War 
on Terror (OIF/OEF). Simultaneously, we were implementing a D-Trade 
system which we continue to believe will have major long term 
benefits-- particularly D-Trade II--but which in the short run has 
experienced some challenges and delays.

As stated in the draft report, DDTC undertook extraordinary measures 
over the course of three months to reduce the number of open cases by 
almost 50 percent. We recognized that the measures were not sustainable 
and conducted a critical review of our internal procedures to identify 
and address deficiencies in the analysis and case review process. Since 
that time frame, several initiatives were implemented that are 
highlighted below, resulting in a reduction of the number of open cases 
from 7,500 in April 2007 to 5,300 as of 31 October 2007 (a 30 percent 
reduction). 

(1) Management Case Review Guidance-addresses the decision-making 
process for pending cases and identifies required timelines for 
specific actions by licensing personnel.

(2) Expedited License Processing Guidelines and revised staffing 
requirements. The guidelines address the expedited review process for 
priority cases such as OIF/OEF, Defense Capabilities Initiative, and 
UK/Australia cases. We also revised the staffing requirements to 
eliminate the staffing of spare parts to NATO countries, and routine 
staffing to other Bureaus and Agencies, based on the level of 
technology and geographical region. 

(3) Deputy Assistant Secretary (DAS) level review for cases over 75 
days. In the three months since the review was implemented we have 
continued to see a significant reduction in the number of "old" D-Trade 
cases. We are confident that the improvements noted are long-term, 
given the disciplined approach and increased accountability instituted 
through the case review process.

We recognize that additional systematic analyses of the data collected 
by our internal staff, along with the data provided by the GAO, is 
needed to achieve even greater efficiencies in the arms export analysis 
and review process. We have initiated a review of our organizational 
alignment to better structure the workforce, and have made initial 
staffing changes to two of the licensing teams, as a result of the 
imbalance in the caseload. We are also committed to pursuing 
technological solutions to optimize the ability of licensing officers 
to access case related material, and reducing the administrative burden 
on the licensing staff and the arms export community.

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Ann Calvaresi-Barr (202) 512-4841 or [email protected]: 

Acknowledgments: 

In addition to the contact named above, Anne-Marie Lasowski, Assistant 
Director; Bradley Terry; Peter Zwanzig; Jacqueline Wade; Arthur James, 
Jr; Julia Kennon; Karen Sloan; and Alyssa Weir made key contributions 
to this report. 

[End of section] 

Related GAO Products: 

Export Controls: Vulnerabilities and Inefficiencies Undermine System's 
Ability to Protect U.S. Interests. GAO-07-1135T. Washington, D.C.: July 
26, 2007. 

High Risk Series: An Update. GAO-07-310. Washington, D.C.: January, 
2007. 

Export Controls: Challenges Exist in Enforcement of an Inherently 
Complex System. GAO-07-265. Washington, D.C.: December 20, 2006. 

Defense Technologies: DOD's Critical Technologies Lists Rarely Inform 
Export Control and Other Policy Decisions. GAO-06-793. Washington, 
D.C.: July 28, 2006. 

Export Controls: Improvements to Commerce's Dual-Use System Needed to 
Ensure Protection of U.S. Interests in the Post-9/11 Environment. GAO- 
06-638. Washington, D.C.: June 26, 2006. 

Defense Trade: Arms Export Control Vulnerabilities and Inefficiencies 
in the Post-9/11 Security Environment. GAO-05-468R. Washington, D.C.: 
April 7, 2005. 

Defense Trade: Arms Export Control System in the Post-9/11 Environment. 
GAO-05-234. Washington, D.C.: February 16, 2005. 

Export Controls: Processes for Determining Proper Control of Defense- 
Related Items Need Improvement. GAO-02-996. Washington, D.C.: September 
20, 2002. 

Export Controls: Department of Commerce Controls over Transfers of 
Technology to Foreign Nationals Need Improvement. GAO-02-972. 
Washington, D.C.: September 6, 2002. 

Export Controls: More Thorough Analysis Needed to Justify Changes in 
High Performance Computer Controls. GAO-02-892. Washington, D.C.: 
August 2, 2002. 

Defense Trade: Lessons to Be Learned from the Country Export Exemption. 
GAO-02-63. Washington, D.C.: March 29, 2002. 

Export Controls: Issues to Consider in Authorizing a New Export 
Administration Act. GAO-02-468T. Washington, D.C.: February 28, 2002. 

Export Controls: State and Commerce Department License Review Times Are 
Similar. GAO-01-528. Washington, D.C.: June 1, 2001. 

Export Controls: Reengineering Business Processes Can Improve 
Efficiency of State Department License Reviews. GAO-02-203. Washington, 
D.C.: December 31, 2001. 

Export Controls: System for Controlling Exports of High Performance 
Computing Is Ineffective. GAO-01-10. Washington, D.C.: December 18, 
2000. 

Defense Trade: Analysis of Support for Recent Initiatives. GAO/NSIAD- 
00-191. Washington, D.C.: August 31, 2000. 

Defense Trade: Status of the Department of Defense's Initiatives on 
Defense Cooperation. GAO/NSIAD-00-190R. Washington, D.C.: July 19, 
2000. 

Export Controls: Better Interagency Coordination Needed on Satellite 
Exports. GAO/NSIAD-99-182. Washington, D.C.: September 17, 1999. 

Export Controls: Some Controls over Missile-Related Technology Exports 
to China Are Weak. GAO/NSIAD-95-82. Washington, D.C.: April 17, 1995. 

[End of section] 

Footnotes: 

[1] For the purposes of this report, "arms" refers to defense articles 
and services as specified in the United States Munitions List. 22 
C.F.R. ï¿½ 121.1 (2007). 

[2] Arms export cases processed by DDTC include applications for the 
export of arms and agreements between U.S. industry and foreign 
entities to provide technical assistance or manufacturing capability. 

[3] GAO, Defense Trade: Arms Export Control System in the Post 9/11 
Environment. GAO-05-234 (Washington D.C.: Feb. 16, 2005). 

[4] Related programs include the Foreign Military Sales program, the 
Committee on Foreign Investment in the United States, and the 
Department of Defense's program for identifying militarily critical 
technologies. 

[5] GAO, High Risk Series: An Update, GAO-07-310 (Washington, D.C.: 
January 2007). 

[6] The Arms Export Control Act authorizes the President to control the 
export and import of defense articles and services. 22 U.S.C. ï¿½ 2778. 
The statutory authority of the President to promulgate regulations with 
respect to defense exports and imports was delegated to the Secretary 
of State by Executive Order 11958, as amended. This authority is 
implemented through the International Traffic in Arms Regulations. 22 
C.F.R. ï¿½ï¿½ 120-130 (2007). 

[7] Registration fees are paid by manufacturers and exporters who must 
register with State as required by the Arms Export Control Act. 22 
U.S.C. ï¿½ 2778. State can use these funds only for expenses related to 
such activities as contract personnel assisting in the evaluation of 
license applications, automation of trade control functions, or 
enhancement of compliance and enforcement activities. 22 U.S.C. ï¿½ 2717. 

[8] At the time of our review, only certain types of cases could be 
submitted electronically through D-Trade, including licenses for 
permanent export, temporary export, and temporary import. 

[9] Exporters can request a jurisdiction determination when they are 
uncertain if an export item is subject to State controls or want an 
item removed from State's jurisdiction. 

[10] For example, the Arms Export Control Act requires that Congress be 
given at least 15 days written notification of State's intent to 
approve licenses for defense articles and services valued at $100 
million or more, or for major defense equipment valued at $25 million 
or more, to North Atlantic Treaty Organization (NATO) member countries, 
Japan, Australia, and New Zealand. 22 U.S.C. ï¿½ 2776(c). 

[11] In 2007, DDTC established guidelines that cover the export 
licensing review process, including review and referral of cases. 

[12] According to DDTC officials, DDTC has an informal rule that team 
leaders are supposed to assign cases to licensing officers within 2 
days, thereby increasing the overall time frame goal to 12 days. 

[13] In 2007, DDTC established a policy limiting review to 15 days of 
cases referred to State bureaus and other agencies, except for DOD and 
the Missile Technology Export Committee. DDTC can grant extensions if 
additional time is needed. 

[14] Pub. L. No. 108-375 ï¿½ 1225 (2004). 

[15] In June 2007, the United States and the United Kingdom signed a 
defense trade cooperation treaty that would exempt some arms exports to 
the United Kingdom from export license requirements. In September 2007, 
the United States and Australia signed a similar treaty. Until these 
treaties have been ratified by the United States Senate, they will not 
have the force of law. 

[16] The current version of D-Trade accepts 3 of the 14 types of case 
processed by DDTC, including applications for permanent export, the 
most common case type. 

[17] GAO, Export Controls: Reengineering Business Processes Can Improve 
Efficiency of State Department License Reviews, GAO-02-203 (Washington, 
D.C.: Dec. 31, 2001). 

[18] Pub. L. No. 107-228 ï¿½ 1401(c) (2002). 

[19] GAO, Internal Control Management and Evaluation Tool: Exposure 
Draft, GAO-01-131G (Washington, D.C.: February 2001). See also GAO, 
Export Controls: Vulnerabilities and Inefficiencies Undermine System's 
Ability to Protect U.S. Interests, GAO-07-1135T (Washington, D.C.: July 
26, 2007). 

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