Financial Management

The Army, despite having spent more than $1 billion in fiscal year 1991 to overhaul weapons and equipment, may be wasting millions of dollars because of poor internal controls and inadequate systems that fail to protect weapons and equipment from deterioration and theft during shipments to Army depots and during routine maintenance. Because repairables at the four depots GAO visited were stored, often for years, with inadequate protection, many items rusted or corroded to the point where they were fit only for scrap. In fiscal year 1991, personnel at the four depots did only 30 percent of the required physical inventories for receivables. Improper stacking and other inadequate storage practices also made it hard to account for and control items at two of the depots. GAO discovered many discrepancies between what was on hand and what was recorded in the system accounting for repairables, suggesting that the Army may be making decisions about equipment on the basis of unreliable data. In addition, the depots' cost accounting system did not accurately record and report maintenance costs for specific job orders. Because of ineffective maintenance shop processes and weak accounting controls, costs were not always charged to the proper job order or inappropriate nonmaintenance costs were sometimes included.

GAO found that: (1) depot storage of materiel awaiting repair and overhaul often failed to meet Army storage requirements; (2) the lack of adequate protection increased scrappage rates, maintenance costs, and losses attributed to theft; (3) many repairable items had inadequate protection from corrosion and physical deterioration, physical security, hazardous materials storage, and improper packaging; (4) the Army's Standard Depot System (SDS) failed to produce reliable information for maintaining accountability and controls over repairables; (5) the depots failed to accurately report the number of repairables, performed only 30 percent of the required physical inventories, and failed to reconcile physical inventories with Army-wide repairable inventories; (6) inaccurate inventory balances affected budgetary and procurement decisions; and (7) ineffective maintenance procedures and weak accounting controls caused inflated overhaul costs or costs charged to the wrong job.

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.

Director: Team: Phone: