Financial Management

DOD Faces Implementation Problems in Stock Funding Repairable Inventory Items Gao ID: AFMD-92-15 December 26, 1991

A "repairable" is an item that, if damaged or worn, can be fixed or overhauled for less than the cost of a new item. Under the Department of Defense's (DOD) initiative to finance repairable items through the military services' stock funds, customers--military units or organizations--will be provided money to buy repairable items from the respective services' stock funds, rather than receiving them free from centrally funded supply operations. DOD values its repairables inventory at $73 billion. In June 1991, GAO reported that DOD needed to standardize its policies on the pricing and valuation of repairable items. (See GAO/AFMD-91-40.) This report discusses (1) implementation problems that the Navy has experienced since it began financing aviation repairables through its stock fund in 1985 and steps it has taken to solve those problems; (2) current Army and Air Force efforts to begin financing repairables through their stock funds; (3) the impact that repairables financing had on the Army's and Air Force's development of their fiscal year 1992 budget requests; and (4) the presentation of repairables data in DOD's fiscal year 1992 budget justification.

GAO found that: (1) since the Navy began financing aviation repairables through its stock fund in FY 1985, it has reduced its demand for repairable items by 20 percent; (2) the Navy has experienced continuing problems in accurately accounting for aviation repairable items that customers returned to the stock fund and billing customers for repairable items; (3) from FY 1987 through FY 1990, the Navy's inventory tracking system reported discrepancies totalling $4.4 billion, primarily due to accounting errors; (4) the Navy took such actions to correct tracking and billing system problems as holding activities financially responsible for items reported as lost and providing customers with training and guidance on the stock fund process; (5) neither the Army nor the Air Force have the systems in place to accurately account and bill for repairable items; (6) the Army and Air Force lack the historical data necessary to formulate their FY 1992 budget requests based on individual customer needs for repairable items, and estimate that it will take 2 to 4 years before they will have sufficient data; and (7) the DOD FY 1992 budget request did not include detailed data to support the total amount of appropriated funds requested for repairable items or reconcile customers' anticipated repairable item purchases with the stock funds' anticipated sales.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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