Defense Inventory

The Defense Department's (DOD) Supply System Inventory Reports show that the nominal value of the secondary item inventory--stocks of spare and repair parts, clothing, medical supplies, and other items--fell nearly $30 billion during fiscal years 1989-92, from $109.4 billion to $80.2 billion. The inventory values reported by DOD, however, are not comparable due to accounting changes that have taken place since 1989. GAO estimates that the total inventory actually decreased by $7.6 billion during this period. GAO also estimates that the inventory DOD placed in the potential reutilization/disposal category rose by $7 billion. If the latest acquisition value of DOD's inventory is revalued to reflect needed repair costs and scrap values of potential reutilization/disposal stock, inventory values fell by $12.3 billion during fiscal years 1989-92 and potential reutilization/disposal stock increased by less than $200 million. Congress approved funding of $26.7 billion in fiscal year 1992 and $26 billion in fiscal year 1993 for secondary inventory items. These amounts were effectively reduced to $25.2 billion and $20 billion as a result of congressionally directed fund transfers from the Defense Business Operations Fund and other accounts. DOD requested $26.2 billion for secondary inventory items in fiscal year 1994.

GAO found that: (1) the nominal value of DOD secondary inventory items and disposal stock decreased by $29.2 billion and $9.8 billion, respectively, between fiscal years 1989 and 1992; (2) the inventory values reported by DOD are not comparable because the services use different methods for valuing inventories; (3) DOD has established an uniform system for valuing all inventory at the latest acquisition cost and adjusting the latest acquisition value of disposal stock and items needing repair; (4) in 1992, DOD total inventory decreased by $20.2 billion because of revaluations; (5) Congress appropriated $26.7 billion in FY 1992 and $26 billion in FY 1993 for DOD secondary inventory items, but reduced the amount appropriated as a result of congressionally-directed fund transfers; and (6) DOD has requested $26.2 billion in FY 1994 for secondary inventory items.