Navy Financial Management

Improved Management of Operating Materials and Supplies Could Yield Significant Savings Gao ID: AIMD-96-94 August 16, 1996

In March 1996, GAO reported that the Navy's fiscal year 1994 consolidated financial statements did not include $14 billion worth of operating materials and supplies, $5.7 billion of which are located on vessels and at 17 distribution sites throughout the Atlantic and Pacific fleets. (See consumables that were bought from the Defense Business Operations Fund (DBOF), a revolving fund that finances the purchase of inventory items for the military. This report provides a detailed assessment of the Navy's financial reporting on, and management of, operating materials and supplies that are not part of DBOF inventories. GAO discusses (1) the adequacy of the Navy's accountability and visibility over its $5.7 billion in operating materials and supplies on board vessels and at distribution sites, (2) the Navy's management of excess items of this type, and (3) the accuracy of operating unit records for operating materials and supplies that GAO tested.

GAO found that: (1) 261 Navy vessels and 17 redistribution sites are storing a total of about $883 million in excess items; (2) the inventory systems on ships and at redistribution sites do not provide Navy item managers with complete and accurate data on excess items at the operating level; (3) because item managers are not aware of excess items that may be available for redistribution free of charge, their operations and maintenance (O&M) budget requests are overstated; (4) initiatives for improving management and reporting of operating materials and supplies do not represent a coordinated, integrated approach for ensuring that item managers are provided with all of the information they need to perform all of their responsibilities; (5) the Navy could achieve cost savings and increase visibility of its excess items by closing its 17 redistribution sites and returning excess items to the wholesale supply system; and (6) while most of the activities tested met the Navy's minimum goal of 95-percent inventory record accuracy, all of the units should attempt to exceed the minimum goal.

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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