THE MANAGEMENT, MONITORING, AND CONTROL OF DOD'S OVERSEAS CASH MANAGEMENT PROGRAM WERE REVIEWED. DOD REGULATIONS, CASH RECORDS, AND DOCUMENTS WERE ANALYZED, AND OFFICIALS OF DOD, THE TREASURY DEPARTMENT, AND VARIOUS BANKS WERE INTERVIEWED. A CASH EXCESS OF $6 MILLION WAS FOUND IN THE FAR EAST BECAUSE CASH REPLENISHMENT TECHNIQUES ARE CUMBERSOME AND INEFFICIENT. IN EUROPE, THE ARMY DID NOT KNOW THE DAILY AMOUNT OF DOLLARS AVAILABLE TO MEET PAYDAY AND OTHER DISBURSEMENT NEEDS. IT IS ESTIMATED THAT DOD CASH MANAGEMENT IMPROVEMENTS COULD REDUCE GOVERNMENT INTEREST COSTS BY ABOUT $1 MILLION ANNUALLY. BETTER CONTROLS AND MONITORING ARE NEEDED, AND CLEAR CRITERIA FOR DETERMINING REALISTIC CASH LEVELS SHOULD BE DEVELOPED. QUARTERLY INSPECTION REGULATIONS SHOULD BE OBSERVED, AND UNUSABLE CURRENCY SHOULD BE PROMPTLY RETURNED TO THE FEDERAL RESERVE. DOD NEEDS A SYSTEM OF INCENTIVES TO ENCOURAGE EFFECTIVE AND EFFICIENT CASH MANAGEMENT. (MRK)