Defense Supply

Inventories Contain Nonessential and Excessive Insurance Stocks Gao ID: NSIAD-95-1 January 20, 1995

The Department of Defense (DOD) is stocking hundreds of millions of dollars of what are known as insurance items---mission-essential spare parts and supplies, such as aircraft doors, rudders, and ejection seats, that are not expected to fail during normal use--that are not mission essential and in quantities that violate DOD regulations. The unnecessary inventories occurred because inventory officials do not periodically review insurance items to ensure that they are mission-essential and stocked in appropriate quantities. It costs DOD millions of dollars each year to manage and maintain its unnecessary inventories.

GAO found that: (1) the Navy and DLA stock millions of dollars of unnecessary insurance items that are not mission-essential; (2) the Navy and DLA frequently exceed their authorized maximum stock levels, contrary to DOD regulations; (3) the Navy and DLA do not periodically review insurance items to ensure that they are mission-essential and stocked in appropriate quantities because they lack the internal controls necessary to prevent excessive stock buildup; (4) DOD downsizing, weapon system obsolescence and retirement, and stock retention policies have also contributed to excessive inventories; and (5) the excessive inventories cost DOD millions of dollars to procure, manage, and maintain.

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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