Defense Inventory

This is one in a series of GAO reports discussing the vulnerability of the military's inventories to waste, fraud, and abuse. Because of long-standing weaknesses in controls over inventory shipments, the Defense Department's inventories are at high-risk for undetected loss and theft. These weaknesses also increase the risk that millions of dollars will be spent unnecessarily. This report reviews the Army's procedures for tracking and controlling spare parts and other inventory items that have been shipped from one location to another. GAO discusses (1) the extent to which the Army can identify inventory lost during shipment and (2) the Army's adherence to procedures for controlling shipped inventory.

GAO noted that: (1) the Army does not know the extent to which shipped inventory is lost or stolen because of weaknesses in inventory controls and financial management practices; (2) the Army reported inventory shipment losses of $297,000 for fiscal year (FY) 1998; (3) however, GAO's analysis of available logistics and accounting records indicated that the Army could not account for about $900 million in shipped inventory in FY 1998; (4) GAO found that many of the shipments it reviewed had in fact been received, but had not been documented in the required manner; (5) this unaccounted for inventory included classified and sensitive items, such as guided missile components and night vision equipment; (6) GAO's review of shipments made during FY 1998 indicates that Army personnel did not consistently follow required internal control procedures for shipped inventory; (7) Army units receiving inventory items have not always properly entered the receipt of shipments on inventory records, sent receipt acknowledgements to the inventory control point, or reported shipment discrepancies; (8) issuing units also have not consistently sent notifications of shipment cancellations; (9) no dominant cause for failure to follow internal control procedures emerged in GAO's discussions with Army officials; (10) poorly integrated accounting and logistics systems have led to inaccuracies regarding the status of shipped material; (11) in addition, personnel at the Army's largest inventory control point have not adequately monitored receipts of items it reportedly purchased, and they have not adhered to federal policies and procedures for documenting follow up on material shipped to warehouses that have not been acknowledged as received; and (12) moreover, from a broader perspective, the Army has not routinely assessed shipping discrepancies to maintain adequate oversight of shipped inventory.

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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