Defense Inventory

GAO reported recently that the military lacked receipts for about 60 percent of its 21 million shipments to end users in fiscal year 1997 (See GAO/NSIAD-98-80R, Feb. 1998.) The Navy accounted for nearly half of the Defense Department's (DOD) 12.4 million unacknowledged receipts. This report, one in a series on inventory management problems at DOD, reviews the Navy's management procedures for controlling items in transit. GAO (1) identifies the reported value and types of inventory in transit within and between storage and repair activities, vendors, and end users that were unaccounted for or lost and (2) assesses the Navy's adherence to procedures for controlling such in-transit inventory.

GAO noted that: (1) the Navy has not effectively controlled its in-transit inventory and places enormous amounts of inventory at risk of undetected theft or misplacement; (2) for fiscal years 1996-1998, the Navy reported that it had lost over $3 billion in in-transit inventory, including some classified and sensitive items such as aircraft guided-missile launchers, military night vision devices, and communications equipment; (3) the Navy's Inventory Control Point (NAVICP) at Philadelphia, which manages the largest portion of the Navy's inventory, reported the largest losses--$2.5 billion, or 84 percent of the Navy's in-transit losses; (4) however, GAO's work showed that a few of the items reported as lost by NAVICP Philadelphia had in fact been accounted for in inventory records; (5) Navy activities involved in issuing and receiving inventory items have not always followed the Navy's control procedures to ensure that in-transit items are accounted for; (6) Navy units have not always reported to NAVICP Philadelphia that they received requested items; (7) ineffective accounting systems have been used to monitor receipts of items redistributed between storage activities, shipped to and from repair facilities, and shipped from end users; (8) NAVICP Philadelphia and its shipping and receiving activities have not adequately investigated unreported receipts of items redistributed between storage activities, shipped to and from repair facilities, and shipped from end users; (9) NAVICP Philadelphia has not monitored receipts of items it purchased from commercial sources; (10) as early as 1990, GAO reported that there were indications of inadequate internal controls over procured assets; (11) Naval Supply Systems Command and NAVICP Philadelphia oversight of in-transit inventory has not been adequate; (12) although Navy officials have initiated actions intended to correct the problems GAO cited, the Navy has not established any performance measures, milestones, or timetable for reducing the vulnerability of in-transit inventory to theft or loss; and (13) the Navy has not identified management of in-transit inventory as a significant weakness in its assessments of internal controls, as provided in the Federal Managers' Financial Integrity Act of 1982.

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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