Defense Inventory Management

Many GAO audit reports have spotlighted the effect of management failures in the federal government--waste, inefficiency, and even scandal. Political leaders have been forced to spend too much time reacting to surprises like the Department of Housing and Urban Development debacle rather than doing the work the agencies were created to do. GAO began its high-risk program to identify those high-dollar government programs most vulnerable to fraud, waste, abuse, and mismanagement. This report is part of the program's high-risk series of reports, which examine the federal government's efforts to identify and correct problems in 17 especially vulnerable areas, fall into three main categories: lending and insuring, contracting, and accountability. Many of the root causes of the problems afflicting these government programs are traceable to the absence of fundamental processes and systems. GAO urges that future congressional oversight focus on the agency reports and audited financial statements required by the Chief Financial Officers Act, agency management's progress in correcting material weaknesses in program internal control and accounting systems, and federal agency efforts to develop and implement performance standards. The Comptroller General summarized the high-risk series in testimony before Congress; see: Government Management--Report on 17 High-Risk Areas, by Charles A. Bowsher, Comptroller General of the United States, before the Senate Committee on Governmental Affairs. GAO/T-OCG-93-2, Jan. 8, 1993 (22 pages).

GAO found that: (1) each military service and the Defense Logistics Agency (DLA) individually maintained inventories of spare and repair parts in accordance with their own projected needs; (2) DOD estimated that its excess inventory costs over $30 billion; (3) the services' excess inventories increased during the 1980s by 150 to 240 percent; (4) DOD oversight and inventory information and control systems were inadequate and ineffective and led to the overstatement of supply requirements; (5) DOD must undergo an organizational culture change, such as adopting commercial practices, to reduce the costs of inventory procurement and maintenance; and (6) DOD is increasing cost awareness in its business practices by such means as charging the full cost of items and services to the military units that use them.