Defense Inventory

The Defense Department's inventory consists of billions of dollars in supplies stored at, or in transit to, supply depots and other locations. The inventory's size, makeup, and dispersion make it especially challenging to protect it from theft. In fiscal year 1989, Congress began requiring DOD to submit annual reports for three years on control and security of supplies. DOD reported that, in fiscal years 1989 and 1990, criminal investigations detected losses of about $65 million; about $51 million of this was recovered. According to summary analyses of the nearly 2,000 cases investigated annually, theft was not a major inventory problem. Rather, investigators and logistics officials said that most physical inventory losses appeared to result from paperwork problems. Recent FBI and DOD criminal investigations, along with GAO reports, suggest that weaknesses in the implementation of DOD's physical inventory control programs, in-transit controls, and physical security programs have created opportunities for theft.

GAO found that: (1) during fiscal years 1989 and 1990, DOD reported that law enforcement agencies detected losses totalling $65.8 million in DOD inventories; (2) $51.6 million in losses were recovered, and during that period losses disclosed during physical inventories at supply depots totalled about $2.5 billion and gains totalled $1.8 billion; (3) because needed information was not readily available, DOD could not provide narrative information for each of the nearly 2,000 cases investigated annually, but provided a summary analysis of the cases; (4) theft losses disclosed during criminal investigations were relatively small and the large value of inventory gains indicated that paperwork problems, rather than thefts, caused most physical inventory losses; (5) recent criminal investigations show that weaknesses in the implementation of DOD physical inventory control programs, in-transit controls, and physical security programs have created opportunities for theft; (6) DOD requires managers to analyze inventory adjustments and in-transit discrepancies to identify and correct their causes and to determine whether losses were due to criminal or negligent activity; and (7) its analysis of physical inventory adjustment information showed that DOD could use such information to help identify those depots that were most vulnerable to theft.

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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