Navy Supply

Excess Inventory Held at the Naval Aviation Depots Gao ID: NSIAD-92-216 July 22, 1992

To provide materials for depot maintenance, the six Naval Aviation Supply Depots run retail supply stores. At the end of fiscal year 1991, the supply stores held $144 million in inventory, $40 million of which was considered excess. This report examines depot material management practices to: (1) evaluate depot efforts to minimize excess inventories and (2) determine whether the depots have complied with instructions prohibiting the accumulation of off-record, or unrecorded, inventory. Contrary to Navy guidance, the depots have generated and retained large inventories of excess material for many years. At times these excess inventory balances topped $53 million, despite the write-off of $138 million of excess material. Unrecorded material is also a long-standing depot problem, and GAO recommends that the Navy take steps to ensure that unrecorded material is identified, returned to inventory control, and not allowed to accumulate.

GAO found that: (1) from 1987 to 1991, depots maintained large excess materiel inventories totalling $138 million; (2) in 1991, $64 million in excess inventory was eliminated, but the remaining excess inventory totalled $40 million; (3) excess materiel is returned to the wholesale supply system, but $22 million was sent for disposal; (4) reasons for the accumulation of excess inventories include imprecise forecasting, equipment configuration changes, forecasting and ordering errors, untimely packaging and return of materiel to wholesale level or disposal, low value of unused parts, a lack of recoverable credit for unneeded parts, and undisciplined management practices; (5) Navy efforts to control excess inventories center upon extraordinary expense writeoffs and implementation of an automated system to limit ordering and increase managers' access to excess materiel; (6) unrecorded materiel that was ready to use totalled $3 million, and materiel that could have filled outstanding orders totalled $392,000; (7) unrecorded inventory weakens inventory management and internal controls, distorts demand and accounting data, and results in waste; and (8) unrecorded inventories continue despite instructions, memoranda, discussions, and unannounced inspections.

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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