Weapons of Mass Destruction: DOD Reporting on Cooperative Threat
Reduction Assistance Has Improved (Letter Report, 02/27/97,
GAO/NSIAD-97-84).

Pursuant to a legislative requirement, GAO reviewed the Department of
Defense's (DOD) annual report on Cooperative Threat Reduction (CTR)
assistance provided to the newly independent states to determine whether
it: (1) contained current and complete data on CTR assistance
deliveries, including their location and condition; (2) presented the
best available sources of information to show what assistance was
accounted for and how it was used; (3) provided an overall determination
of assistance use; and (4) listed planned audit and examination
activities for the coming year.

GAO found that: (1) DOD's recent report is an improvement over its May
1995 report and provides an overview of how DOD accounted for
CTR-provided assistance through December 1995; and (2) unlike its
predecessor, this report: (a) contains comprehensive listings of
equipment deliveries, including the location, dollar value, and delivery
dates of the items provided, and comments on the condition of the
assistance; (b) integrates a variety of information sources in
accounting for CTR assistance; (c) makes a determination on whether the
assistance has been appropriately used; and (d) lists future audit and
examination activities.

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

 REPORTNUM:  NSIAD-97-84
     TITLE:  Weapons of Mass Destruction: DOD Reporting on Cooperative 
             Threat Reduction Assistance Has Improved
      DATE:  02/27/97
   SUBJECT:  Federal aid to foreign countries
             Nuclear proliferation
             Nuclear weapons
             Audits
             International cooperation
             International relations
             Logistics
             Military materiel
IDENTIFIER:  Belarus
             Kazakhstan
             Russia
             Ukraine
             DOD Cooperative Threat Reduction Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

February 1997

WEAPONS OF MASS DESTRUCTION - DOD
REPORTING ON COOPERATIVE THREAT
REDUCTION ASSISTANCE HAS IMPROVED

GAO/NSIAD-97-84

Weapons of Mass Destruction

(711237)


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

  CTR - Cooperative Threat Reduction
  DCAA - Defense Contract Audit Agency
  DOD - Department of Defense
  MPC&A - nuclear material protection, control and accountability
  NIS - new independent states

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


B-276146

February 27, 1997

The Honorable Strom Thurmond
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ronald Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

Section 1206 of the National Defense Authorization Act for Fiscal
Year 1996 requires the Department of Defense (DOD) to report annually
on Cooperative Threat Reduction (CTR) assistance provided to the
newly independent states (NIS).\1 According to the legislation, DOD's
report is to include (1) a list of CTR assistance that has been
provided, (2) a description of the current location and condition of
the material and equipment provided, (3) a determination of whether
the assistance has been used for the purposes intended, and (4) a
description of CTR audit and examination activities to be carried out
during the next fiscal year.  DOD submitted its annual report for the
year 1995 on December 31, 1996--nearly a year after its due date.\2

The legislation also requires that we provide Congress an assessment
of DOD's report within 30 days of the date that DOD issues its
report.  Accordingly, we reviewed DOD's report to determine whether
it (1) contained current and complete data on CTR assistance
deliveries, including their location and condition; (2) presented the
best available sources of information to show what assistance was
accounted for and how it was used; (3) provided an overall
determination of assistance use; and (4) listed planned audit and
examination activities for the coming year.  We also followed DOD's
implementation of the recommendation we had previously made for DOD
to improve its annual reports.\3


--------------------
\1 The NIS states of Belarus, Kazakstan, Russia, and Ukraine
inherited the former Soviet Union's weapons of mass destruction. 

\2 The legislation specifies that DOD report on CTR assistance
deliveries no later than January 31 of each year until the program
ends. 

\3 Weapons of Mass Destruction:  DOD Reporting on Cooperative Threat
Reduction Assistance Can Be Improved (GAO/NSIAD-95-191, Sept.  29,
1995). 


   BACKGROUND
------------------------------------------------------------ Letter :1

In 1991, Congress authorized DOD to provide assistance to NIS.  As of
February 1997, the CTR program has obligated over $1 billion to help
the states of Belarus, Kazakstan, Russia, and Ukraine (1) destroy
their weapons of mass destruction, (2) safely store and transport the
weapons in connection with their destruction, and (3) reduce the risk
of weapons proliferation.  CTR assistance deliveries include
materials, equipment, and training.  Specifically, the types of
equipment being provided vary widely and include railcar conversion
kits, computers, various cutting tools used for the destruction of
nuclear delivery vehicles, fissile material containers, cranes, and
manuals.  DOD officials plan to discuss CTR assistance deliveries
made during 1996 in their forthcoming annual report.\4

In May 1995, DOD issued its first annual report on CTR assistance.\5
In our assessment of that report, we identified several DOD
deficiencies in meeting the legislative requirements, and we
recommended several corrective actions to DOD.\6 Specifically, we
recommended that DOD reports (1) contain current and complete data on
CTR deliveries, (2) integrate available sources of information on CTR
assistance to show how it is used, (3) link such information to the
determination that assistance is being used for the purposes
intended, and (4) detail planned audit and examination activities for
the coming year. 


--------------------
\4 As required by the legislation, DOD was to have submitted its next
report accounting for CTR assistance by January 31, 1997.  DOD
officials hope to issue this report in March. 

\5 Although DOD's first report on accounting for CTR assistance was
dated January 5, 1995, it was not issued until May 1995. 

\6 Weapons of Mass Destruction (GAO/NSIAD-95-191, Sept.  29, 1995). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

DOD's recent report is an improvement over its May 1995 report and
provides an overview of how DOD accounted for CTR-provided assistance
through December 1995.  Unlike its predecessor, this report

  -- contains comprehensive listings of equipment deliveries,
     including the location, dollar value, and delivery dates of the
     items provided, and comments on the condition of the assistance;

  -- integrates a variety of information sources in accounting for
     CTR assistance;

  -- makes a determination on whether the assistance has been
     appropriately used; and

  -- lists future audit and examination activities. 


   CTR ASSISTANCE DELIVERIES
------------------------------------------------------------ Letter :3

Compared with the information in DOD's May 1995 report, the December
1996 DOD report includes more current and comprehensive data on CTR
equipment deliveries.  As of December 1995, DOD had delivered over
$165 million worth of CTR equipment to the recipient countries. 
Program officials stated that due to improvements in their computer
database, they can more readily track assistance deliveries.  As
required, the report also contains information on the
serviceability-- that is, the condition--of the CTR-provided
assistance.  In those instances where equipment was inoperable or not
being used, the report indicated what measures were being undertaken
to correct the problems. 


   SOURCES OF INFORMATION
------------------------------------------------------------ Letter :4

DOD has improved its means of collecting and reporting information on
CTR-provided assistance.  DOD tracks CTR assistance through several
means, including the use of audit and examination teams, observations
by contractor logistics support teams and project managers,
information collected from other government agencies, and
intelligence sources. 


      AUDIT AND EXAMINATION TEAMS
---------------------------------------------------------- Letter :4.1

By the end of 1995, audit and examination teams had conducted 12
audits and examinations among the four recipient countries.  The
teams audited a variety of CTR-provided assistance, including rail
car conversion kits, strategic nuclear arms elimination equipment,
and environmental restoration equipment.  With one exception, the
audit teams found that the recipients were using the equipment for
the purposes intended.  Personnel from DOD's On-Site Inspection
Agency, who lead the audit and examination teams,\7 have developed
flexible procedures for conducting the audits.  Also, the Defense
Special Weapons Agency has appointed a liaison to coordinate all
audit and examination activities.  The audit and examination teams
provide briefings to the CTR program office on audit results and
issue written reports summarizing the audits to the Deputy Assistant
Secretary of Defense for Threat Reduction Policy. 


--------------------
\7 DOD technical and policy experts may also serve on audit and
examination teams. 


      LOGISTICS SUPPORT TEAMS AND
      PROJECT MANAGERS
---------------------------------------------------------- Letter :4.2

DOD also collected information on how assistance is being used
through contractor logistics support teams observations.  These
contractor personnel witness the transfer of CTR-provided equipment
to the recipient countries, conduct inventories of the equipment, and
provide technical assistance for installation and training to
facilitate the proper use of the equipment.  For example, during
1995, logistics support teams observed 9 CTR projects in 21 locations
throughout Russia.  In Ukraine, teams observed equipment provided for
seven CTR projects at four different locations. 

In addition, CTR project managers often travel to the recipient
countries to monitor the status of their projects and observe how CTR
assistance is being used.  For example, in 1995, project managers and
contract officials visited 10 sites across the 4 recipient countries
to review defense conversion projects and 3 sites for housing
projects in Belarus and Ukraine. 


      INFORMATION OBTAINED FROM
      OTHER GOVERNMENT AGENCIES
---------------------------------------------------------- Letter :4.3

In late 1995, DOD transferred management and oversight
responsibilities for the CTR effort involving the International
Science and Technology Center\8 to the Department of State and the
nuclear material protection, control, and accountability (MPC&A)
projects to the Department of Energy.  Nonetheless, DOD obtained
information on how the use of this CTR assistance was monitored from
the Departments of State and Energy and included it in its report. 
Moreover, the Defense Contract Audit Agency (DCAA)\9 audited projects
at the 2 Russian institutions--Arzamas-16 and Chelyabinsk-70--that
were managing most Science and Technology Center projects and
reviewed 10 additional projects through its annual financial audit. 

DOD's report also states that the Energy Department is developing
internal procedures for conducting audits of MPC&A projects.  Because
the Department of Energy has not yet implemented these procedures,
the report cites the results of "preliminary measures," which
indicate that MPC&A assistance provided to the four recipient
countries is being used for the purposes intended. 


--------------------
\8 In 1992, the United States, European Community, Japan, and Russia,
established the International Science and Technology Center to
provide peaceful employment opportunities to weapons scientists and
engineers, especially those experts involved with producing weapons
of mass destruction. 

\9 U.S.  officials stated that the State Department used DCAA because
DOD funded the U.S.  contribution to the Center through fiscal year
1995.  Through a reimbursable arrangement, State has continued to
request that DCAA perform audits. 


      INTELLIGENCE SOURCES
---------------------------------------------------------- Letter :4.4

In developing its report, DOD indicated that it also used
intelligence sources to help it account for CTR-provided assistance. 
According to these sources, CTR assistance was not diverted during
1995.  However, because the detailed information is classified, we
cannot discuss it in this report. 


   DETERMINATION OF ASSISTANCE USE
------------------------------------------------------------ Letter :5

DOD acknowledges in the report that it did not have sufficient
resources to routinely examine all of the assistance provided since
the CTR program began deliveries in 1993.  Instead, DOD stated that
it based its determination on a random sampling from a variety of
sources, across the spectrum of CTR projects.  Through December 1995,
DOD had provided assistance in support of 27 CTR projects.  The
report cites information on 88 percent of these projects to support
its determination that assistance provided under the CTR program had
been properly accounted for and was being used for the purposes
intended. 

DOD officials believe that the working relationships they have
developed with recipient countries' officials reinforce their
assessment that CTR assistance is being used for the purposes
intended.  Even if significant diversions of CTR assistance were to
occur, DOD is reasonably confident that such diversions would be
readily detected, given its sources of information. 


   FUTURE AUDIT AND EXAMINATION
   ACTIVITIES
------------------------------------------------------------ Letter :6

As required by the legislation, DOD's report lists 16 planned audit
and examination activities for 1996.  Although not required, DOD also
lists its
17 planned activities for 1997.  These lists provide a breakdown of
how many audits and examinations DOD will conduct per month for the
entire year.  Our work shows that during 1996, DOD completed all of
its planned audits and examinations. 

DOD reports that its efforts to account for CTR assistance have
increased in intensity since December 1995.  For example, DOD
conducted more audits and examinations in 1996 than during 1995. 
According to DOD officials, as more CTR equipment is delivered, they
intend to increase the use of input from technical teams, project
managers, and intelligence sources to determine how CTR assistance is
being used in the recipient countries. 



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

DOD concurred with a draft of this report. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To accomplish our review objectives, we reviewed DOD's December 1996
report accounting for CTR-provided assistance, DOD's audit and
examination reports, and other DOD documents to determine whether DOD
had met the legislative requirements and implemented our previous
recommendation.  We also reviewed DCAA audit reports and the 1995
International Science and Technology Center's annual report.  We met
with officials from the Office of the Secretary of Defense, the
Defense Special Weapons Agency, the On-Site Inspection Agency, and
the State Department.  In addition, we reviewed DOD's classified
annex to its report.  Due to the limited time allowed for us to
assess DOD's report, we could not travel to the CTR recipient
countries of Belarus, Kazakstan, Russia, and Ukraine and meet with
recipient countries' officials to corroborate information contained
in DOD's report. 

We conducted our review during January 1997 in accordance with
generally accepted government auditing standards. 


---------------------------------------------------------- Letter :8.1

We plan to send copies of this report to the Secretary of Defense and
other interested congressional committees.  We will also make copies
available to others upon request. 

Please contact me on (202) 512-4128 if you or your staff have any
questions concerning this report.  The major contributors were
F.  James Shafer, Beth Hoffman Leï¿½n, and Jo Ann Geoghan. 

Harold J.  Johnson
Associate Director, International Relations
 and Trade Issues


*** End of document. ***