Summary: As part of our continuing audit of selected activities of the Mutual Security Program, we have examined certain matters of administration relative to the Special Defense Financing Program for France, authorized in section 102 of the Mutual Security Act of 1951, as amended (67 Stat. 153). Our examination included reviews and discussions in Washington, D.C., and in Paris, France, (1) at the International Cooperation Administration (ICA) of the Department of State, which is the agency responsible for the administration of the program, and (2) with officials of the Department of Defense, in view of the military nature of the items financed under the program. Our review in France consisted of visits to the ICA Mission (Mission) and the Military Advisory Assistance Group (MAAG).
To implement the special 85 million dollar aid program, France and the United States executed a Memorandum of Understanding dated June 28, 1954, setting forth the terms and conditions of financing by the United States. Annex A to this Memorandum contained the description and quantities of the specific military end items which France would procure and for which the United States, upon the presentation of French expenditure vouchers, would reimburse the French Government. The latter affirmed that all items in Annex A were required in the quantities indicated for the support of French NATO forces. The United States retained the right to enter into consultations with France for the deletion of any items in Annex A which appear to be of diminished importance for the equipment of French NATO forces. The program was slow in getting under way, and the French Government did not request reimbursements under this program until fiscal year 1956. At June 30, 1957, ICA expenditures totaled 76.5 million dollars, leaving an unliquidated balance of 8.5 million dollars. This unexpended balance represents 10 percent of the total program 'funds which ICA is withholding pending determination that there has been no duplication in equipment requirements as presented by the French Government with respect to forces operating in North Africa.
