DOD Excess Property
Management Control Breakdowns Result in Substantial Waste and Inefficiency Gao ID: GAO-05-729T June 7, 2005GAO was asked to assess the overall economy and efficiency of the Department of Defense (DOD) program for excess property reutilization (reuse). Specifically, GAO was asked to determine (1) whether and to what extent the program included waste and inefficiency and (2) root causes of any waste and inefficiency. GAO was also asked to provide detailed examples of waste and inefficiency and the related causes. GAO's methodology included an assessment of controls, analysis of DOD excess inventory data, statistical sampling at selected sites, and detailed case studies of many items.
DOD does not have management controls in place to assure that excess inventory is reutilized to the maximum extent possible. Of $33 billion in excess commodity disposals in fiscal years 2002 through 2004, $4 billion were reported to be in new, unused, and excellent condition. DOD units reutilized only $495 million (12 percent) of these items. The remaining $3.5 billion (88 percent) includes significant waste and inefficiency because new, unused, and excellent condition items were transferred and donated outside of DOD, sold for pennies on the dollar, or destroyed. DOD units continued to buy many of these same items. GAO identified at least $400 million of fiscal year 2002 and 2003 commodity purchases when identical new, unused, and excellent condition items were available for reutilization. GAO also identified hundreds of millions of dollars in reported lost, damaged, or stolen excess property, including sensitive military technology items, which contributed to reutilization program waste and inefficiency. Further, excess property improperly stored outdoors for several months was damaged by wind, rain, and hurricanes. GAO ordered and purchased at little or no cost several new and unused excess commodities that DOD continued to buy and utilize, including tents, boots, power supplies, circuit cards, and medical supplies. GAO paid a total of $2,898, including tax and shipping cost, for these items, which had an original DOD acquisition cost of $79,649. Root causes for reutilization program waste and inefficiency included (1) unreliable excess property inventory data; (2) inadequate oversight and physical inventory control; and (3) outdated, nonintegrated excess inventory and supply management systems. Procurement of inventory in excess of requirements also was a significant contributing factor. Improved management of DOD's excess property could save taxpayers at least hundreds of millions of dollars annually.
GAO-05-729T, DOD Excess Property: Management Control Breakdowns Result in Substantial Waste and Inefficiency
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Testimony:
Before the Subcommittee on National Security, Emerging Threats and
International Relations, Committee on Government Reform, House of
Representatives:
For Release on Delivery Expected at 2:00 p.m. Tuesday, June 7, 2005:
DOD Excess Property:
Management Control Breakdowns Result in Substantial Waste and
Inefficiency:
Statement of Gregory D. Kutz, Managing Director, Forensic Audits and
Special Investigations:
GAO-05-729T:
GAO Highlights:
Highlights of GAO-05-729T, a testimony before the Subcommittee on
National Security, Emerging Threats and International Relations,
Committee on Government Reform, House of Representatives:
Why GAO Did This Study:
GAO was asked to assess the overall economy and efficiency of the
Department of Defense (DOD) program for excess property reutilization
(reuse). Specifically, GAO was asked to determine (1) whether and to
what extent the program included waste and inefficiency and (2) root
causes of any waste and inefficiency. GAO was also asked to provide
detailed examples of waste and inefficiency and the related causes.
GAO‘s methodology included an assessment of controls, analysis of DOD
excess inventory data, statistical sampling at selected sites, and
detailed case studies of many items.
What GAO Found:
DOD does not have management controls in place to assure that excess
inventory is reutilized to the maximum extent possible. Of $33 billion
in excess commodity disposals in fiscal years 2002 through 2004, $4
billion were reported to be in new, unused, and excellent condition.
DOD units reutilized only $495 million (12 percent) of these items. The
remaining $3.5 billion (88 percent) includes significant waste and
inefficiency because new, unused, and excellent condition items were
transferred and donated outside of DOD, sold for pennies on the dollar,
or destroyed. DOD units continued to buy many of these same items. GAO
identified at least $400 million of fiscal year 2002 and 2003 commodity
purchases when identical new, unused, and excellent condition items
were available for reutilization. GAO also identified hundreds of
millions of dollars in reported lost, damaged, or stolen excess
property, including sensitive military technology items, which
contributed to reutilization program waste and inefficiency. Further,
excess property improperly stored outdoors for several months was
damaged by wind, rain, and hurricanes.
Waste and Inefficiency Related to $3.5 Billion in Fiscal Year 2002-2004
Disposals of Excess DOD Commodities Reported To Be in New, Unused, and
Excellent Condition:
[See Figure 1 below]
[End of figure]
GAO ordered and purchased at little or no cost several new and unused
excess commodities that DOD continued to buy and utilize, including
tents, boots, power supplies, circuit cards, and medical supplies. GAO
paid a total of $2,898, including tax and shipping cost, for these
items, which had an original DOD acquisition cost of $79,649.
Root causes for reutilization program waste and inefficiency included
(1) unreliable excess property inventory data; (2) inadequate oversight
and physical inventory control; and (3) outdated, nonintegrated excess
inventory and supply management systems. Procurement of inventory in
excess of requirements also was a significant contributing factor.
Improved management of DOD‘s excess property could save taxpayers at
least hundreds of millions of dollars annually.
What GAO Recommends:
Today, GAO is issuing a report (GAO-05-277) with 13 recommendations to
improve the economy and efficiency of DOD‘s reutilization program for
excess commodities in the areas of (1) data reliability; (2) oversight,
accountability, and physical inventory control; and (3) the functional
design of DOD‘s future commodity inventory systems. In commenting on
GAO‘s report, DOD concurred that actions are needed to improve the
reutilization program and noted a number of improvement initiatives
that were taken during fiscal years 2004 and 2005. However, DOD has not
yet addressed the fundamental, conceptual weaknesses that have resulted
in waste and inefficiency.
www.gao.gov/cgi-bin/getrpt?GAO-05-729T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory D. Kutz (202) 512-
9095 or Kutzg@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss the results of our audit and
investigation of the economy and efficiency of the Department of
Defense (DOD) program for reutilization (reuse) of excess property. Our
related report,[Footnote 1] released today and developed at the request
of this Subcommittee, Senator Collins, and Representative Schakowsky,
describes significant breakdowns in management controls that have
resulted in substantial waste and inefficiency in DOD's excess property
reutilization program. Our previous, limited work identified several
examples of waste and inefficiency in DOD's excess property
reutilization program. Our November 2003 report[Footnote 2] identified
several examples that showed that at the same time DOD excessed
biological laboratory equipment items in good or excellent condition
and sold many of them to the public for pennies on the dollar, it was
purchasing the same or similar items. In June 2002, we
testified[Footnote 3] that the lack of asset visibility over the Joint
Service Lightweight Integrated Suit Technology (JSLIST)[Footnote 4]
resulted in DOD selling new, unused JSLIST for $3 per suit (coats and
trousers) while at the same time procuring hundreds of thousands of
JSLIST annually at a cost of over $200 per suit. You were concerned
that these limited examples could indicate systemic problems.
Our current work focused on whether and to what extent we found waste
and inefficiency in DOD's excess property reutilization program and the
root causes of any waste and inefficiency. You also asked us to
determine whether the Defense Logistics Agency (DLA) was purchasing new
items when identical items in new, unused, and excellent condition were
available at Defense Reutilization and Marketing Service (DRMS) field
offices (DRMO). As DOD's combat support agency, DLA has a mission to
provide best-value logistics support to America's armed forces. In
carrying out its mission, DLA manages inventory valued at about $83
billion, consisting of more than 5 million items of food, fuel,
clothing and other textiles, medical supplies, industrial use items,
and spare and repair parts supporting over 1,400 weapon systems. Within
DLA, DRMS is responsible for excess property disposals. Federal
regulations[Footnote 5] require executive agencies to ensure that
personal property not needed by their activity is offered for use
elsewhere within the agency. In accordance with federal regulations,
DOD 4160.21-M, Defense Materiel Disposition Manual, chapter 5, calls
for reutilization of excess property to the extent feasible to fill
existing needs and to satisfy additional needs before initiating new
procurement or repair.
In performing our work, we reviewed applicable laws and regulations;
DOD policies and procedures; and current and planned systems,
processes, and management controls. To identify potential waste and
inefficiencies, we analyzed the universe of recorded commodity purchase
and disposal transactions and compared DOD commodity purchases to
disposals of identical items in new, unused, and excellent condition (A
condition). To assure ourselves that DOD data were sufficiently
reliable for the purpose of our work, we performed a number of
electronic and statistical tests of DOD databases and excess inventory
and data used in our work. We conducted our work, including follow-up
work related to this testimony, from November 2003 through May 2005 in
accordance with U.S. generally accepted government auditing standards
and investigative standards prescribed by the President's Council on
Integrity and Efficiency. We obtained DOD comments on a draft of our
report, and we briefed DOD officials on new findings included in this
testimony.
Today, my testimony will focus on (1) summarizing the results of our
audit and updating our analysis for fiscal year 2004 excess commodity
disposal activity; (2) describing additional case study acquisitions of
new, unused excess DOD commodity items from December 2004 through April
2005; and (3) discussing management control breakdowns that contributed
to reutilization program waste and inefficiency and the results of our
investigations of selected excess property losses noted in our audit
report.
Summary:
DOD does not have effective management processes, systems, and controls
in place to assure that it is reutilizing excess inventory to the
maximum extent possible and safeguarding excess items from damage,
loss, and theft, as required by federal regulations, DOD policy, and
GAO internal control standards.[Footnote 6] Our analysis of DRMS excess
commodity disposal activity identified substantial waste and
inefficiency related to DOD's excess property reutilization program.
For example, of the $33 billion in reported excess commodity disposals
in fiscal years 2002 through 2004, $4 billion related to items in new,
unused, and excellent condition. Of the $4 billion, we determined that
$3.5 billion (88 percent) included substantial waste and inefficiency
because new, unused, and excellent condition items were being
transferred or donated outside of DOD, sold on the Internet for pennies
on the dollar, or destroyed rather than being reutilized. As discussed
in our report,[Footnote 7] our analysis of fiscal year 2002 and 2003
data on commodity purchases and disposal activity found that DOD
purchased at least $400 million of identical commodities instead of
reutilizing available A-condition excess items. Further, the extent of
reutilization waste and inefficiency may be greater due to incomplete
and inaccurate data that are key to identifying excess items for
reutilization. In addition, the DRMS reported $466 million in excess
property losses from fiscal years 2002 through 2004, such as missing,
damaged, and stolen property, adding to reutilization program waste.
Our monitoring of DRMS disposal activity found continuing reutilization
program waste and inefficiency. We ordered several excess DOD items at
little or no cost and purchased other items at minimal cost. Overall,
we paid $2,898 for items with a listed acquisition cost of $79,649. For
example,
* As discussed in our report, from May through October 2004, we ordered
and purchased at little or no cost several new and unused excess
commodity items that DOD continued to buy and utilize, including tents;
boots; power supplies; circuit cards; gasoline burners; and a medical
instrument chest, suction device, and medical supplies and bandages. We
paid a total of $1,471, including tax, buyer's premium, and shipping
cost, for these items, which had an original DOD acquisition cost of
$68,127.
* In addition, from December 2004 through April 2005, we purchased over
the Internet several additional new, unused excess commodity items that
DOD units are continuing to purchase and utilize. These items included
military badges, medals, and insignias; Cooper Trendsetter SE
automobile tires; and military dress uniforms. Although these items had
an original DOD acquisition cost of $11,522, we paid a total of $1,427
for them, including tax, buyer's premium, and shipping cost.
Our analysis, statistical tests of excess inventory accuracy, case
studies, and interviews showed that the root causes for the billions of
dollars in waste and inefficiency related to management control
breakdowns across DOD, including weaknesses in DOD's excess property
reutilization program, stemmed from:
* unreliable excess property inventory data;
* inadequate oversight, accountability, and physical control of excess
property; and:
* inadequate processes and outdated, nonintegrated inventory systems
that do not provide adequate visibility of excess property available
for reutilization at the time military units order and purchase
commodity items.
In addition, as we have reported for many years,[Footnote 8] long-
standing DOD logistics management weaknesses that resulted in purchases
that exceeded actual requirements resulted in the disposal of unused
items due to obsolescence and contributed indirectly to reutilization
program waste and inefficiency. Further, DOD reutilization program
waste and inefficiency is symptomatic of the inventory and supply chain
management issues that have been considered high risk by GAO since 1990.
Our investigations of selected reports of losses of excess DOD
commodity items identified a pervasive lack of physical accountability
over excess inventory, which leaves DOD vulnerable to the risk of theft
and fraud, waste, and abuse. The lack of accountability makes it
impossible to complete an investigation. Specifically, the failure to
verify and accurately document transactions and events at the beginning
of the disposal process and report and investigate losses when they
occur obscures or eliminates the audit trail. Because DRMO personnel
did not always verify turn-in documentation at the time they received
excess items and recorded them in excess inventory, in many cases it is
not possible to determine whether discrepancies represent sloppy
recordkeeping, the loss or theft of excess property, or where or when
the loss or theft occurred. This lack of accountability encourages
theft and fraud because there is little likelihood of detection.
We found that DRMS investigative reports are generally inconclusive
with regard to the causes of the lost property. For example, the
investigative reports on the loss of 75 chemical and biological
protective suits at the Jackson DRMO and 20 units of body armor at the
Meade DRMO each stated that the items were recorded in inventory,
placed in the DRMO warehouse, and subsequently disappeared. According
to the investigative reports, no determination was made as to what
happened to these items. Our follow-up investigations on DLA supply
depot reports of missing aircraft parts at two DLA depots found that
depot personnel did not aggressively research events related to the
missing items because they assumed that the missing items related to
recordkeeping errors, such as the failure to record inventory issues.
In commenting on the recommendations in our audit report, DOD concurred
that actions are needed to improve the reutilization program and noted
a number of improvement initiatives that were taken during fiscal year
2004 and early in fiscal year 2005. While these actions have made some
marginal improvements in the reutilization program, DOD has not yet
addressed the fundamental, conceptual weaknesses that have resulted in
substantial waste and inefficiency in the excess property reutilization
program.
Analysis of Reutilization Program Identifies Billions of Dollars in
Waste and Inefficiency:
Overall, our analysis of the $33 billion in reported excess commodity
disposals in fiscal years 2002 through 2004 showed that $4 billion
related to items in new, unused, and excellent condition. Of the $4
billion, we determined that $3.5 billion (88 percent) included
substantial waste and inefficiency because new, unused, and excellent
condition items were being transferred or donated outside of DOD, sold
on the Internet for pennies on the dollar, or destroyed rather than
being reutilized. As discussed in our report, our analysis of $18.6
billion[Footnote 9] in fiscal year 2002 and 2003 excess commodity
disposal activity identified $2.5 billion in excess items that were
reported to be in new, unused, and excellent condition (A condition).
Although federal regulations and DOD policy require reutilization of
excess property in good condition, to the extent possible, our analysis
showed that DOD units only reutilized $295 million (12 percent) of
these items. The remaining $2.2 billion (88 percent) of the $2.5
billion in disposals of A-condition excess commodities were not
reutilized, but instead were transferred, donated, sold, or destroyed.
Similarly, our analysis of $14.3 billion in fiscal year 2004 disposal
activity identified $1.5 billion in excess commodity items that were
reported to be in A condition. Of the $1.5 billion in A-condition
excess items, DOD units reutilized $200 million (13 percent) and
transferred, donated, sold, or destroyed the remaining $1.3 billion (87
percent). We also found that during fiscal years 2002 and 2003, DOD
purchased at least $400 million (over $200 million each year) of
identical items instead of reutilizing available excess items in A
condition. To illustrate continuing reutilization program waste and
inefficiency, we purchased several new and unused excess DOD commodity
items that were being purchased by DLA, were currently in use by the
military services, or both. Our analysis of transaction data and our
tests of controls for inventory accuracy indicate that the magnitude of
waste and inefficiency could be much greater due to military units
improperly downgrading condition codes of excess items that are in new,
unused, and excellent condition to unserviceable and the failure to
consistently record national stock numbers (NSN)[Footnote 10] needed to
identify like items.
Fiscal Year 2002-2004 Excess Commodity Disposal Activity:
DRMS is responsible for disposing of unusable items, often referred to
as "junk," as well as facilitating the reutilization of usable items.
Although the majority of DOD's excess property disposals relate to
items in unserviceable condition, DOD also disposed of billions of
dollars of serviceable items, including excess commodities in A
condition from fiscal years 2002 through 2004. Our analysis of DRMS
data showed that $28.1 billion of the $33 billion in excess DOD
commodity disposals from fiscal year 2002 through fiscal year 2004
consisted of items listed in unserviceable condition, including items
needing repair, items that were obsolete, and items that were
downgraded to scrap. The remaining $4.9 billion in excess commodity
disposals consisted of items reported to be in serviceable condition,
including $4 billion in excess commodities reported to be in A
condition. However, of the $4 billion, DOD units reutilized only $495
million (12 percent) of these items during the 3-year period. The data
reliability issues noted above and our interviews, case studies, and
statistical sample results indicate that the magnitude of waste and
inefficiency associated with disposals of A-condition items could be
much greater. As shown in figure 1, items that were not reutilized by
DOD were transferred to federal agencies or special programs, donated
to states, sold to the public, or destroyed by demilitarization or
through scrap and hazardous materials contractors.
Figure 1: Waste and Inefficiency in Fiscal Year 2002 through Fiscal
Year 2004 Disposals of Excess DOD Commodities Reported To Be in New,
Unused, and Excellent Condition:
[See PDF for image] - graphic text:
Pie chart with four items.
Fiscal years 2002-2004:
DOD reutilization:
12%: $495 million: DOD reutilization.
Other disposals:
88%: $3.5 billion:
* 9%: $363 million:
DOD special programs ($138 million);
Federal agency transfers ($145 million);
Donations to states ($80 million).
* 28%: $1.1 billion: Demilitarization, scrap, and hazardous material
disposals.
* 51%: $2 billion: Public sales.
Source: GAO Analysis.
[End of figure] - graphic text:
We found that the percentage of DOD reutilization of excess property
was higher in fiscal year 2002 than in fiscal years 2003 and 2004.
According to DRMO officials, reutilization was higher in fiscal year
2002 because excess items were pulled back to support deployment to
Afghanistan and Iraq. In fiscal year 2003, procurement to support the
war on terrorism began to keep up with the demand for supplies, and
reutilization of excess property decreased. DRMS officials attribute
the fiscal year 2004 increase in DOD reutilization to the establishment
of the Joint Services Nuclear, Biological, and Chemical Equipment
Assessment Program (JEAP) to inspect excess military clothing, tents,
and other textile items and reissue items in good condition. The
increase in disposal activity in fiscal years 2003 and 2004 relates to
turn-ins of property used in support of Operation Enduring Freedom and
Operation Iraqi Freedom. Table 1 shows disposal activity related to A-
condition excess commodities for fiscal years 2002 through 2004.
Table 1: Fiscal Year 2002 through 2004 Disposals of Excess DOD
Commodities in New, Unused, and Excellent Condition:
Dollars in millions.
Disposal method: DOD reutilization;
Fiscal year 2002: $145; (14%);
Fiscal year 2003: $150; (10%);
Fiscal year 2004: $200; (13%);
Total: $495; (12%).
Disposal method: Special programs;
Fiscal year 2002: $45;
Fiscal year 2003: $46;
Fiscal year 2004: $47;
Total: $138.
Disposal method: Federal agency transfers;
Fiscal year 2002: $58;
Fiscal year 2003: $45;
Fiscal year 2004: $42;
Total: $145.
Disposal method: Donations to states;
Fiscal year 2002: $28;
Fiscal year 2003: $26;
Fiscal year 2004: $26;
Total: $80.
Subtotal, special programs, transfers, and donations;
Fiscal year 2002: $131; (12%);
Fiscal year 2003: $117; (8%);
Fiscal year 2004: $115; (8%);
Total: $363; (9%).
Disposal method: Demilitarization, scrap, and hazardous material
disposals;
Fiscal year 2002: $102; (10%);
Fiscal year 2003: $532; (37%);
Fiscal year 2004: $480; (32%);
Total: $1,114; (28%).
Disposal method: Public sales;
Fiscal year 2002: $672; (64%);
Fiscal year 2003: $645; (45%);
Fiscal year 2004: $703; (47%);
Total: $2,020; (51%).
Total disposals;
Fiscal year 2002: $1,050; (100%);
Fiscal year 2003: $1,444; (100%);
Fiscal year 2004: $1,498; (100%);
Total: $3,992; (100%).
Source: GAO analysis.
[End of table]
Unnecessary Commodity Purchases:
Our analysis of fiscal year 2002 and 2003 DLA commodity purchases and
DRMS excess property inventory data identified numerous instances in
which the military services ordered and purchased items from DLA at the
same time identical items--items with the same NSN--that were reported
to be in new, unused, and excellent condition were available for
reutilization. We found that DOD purchased at least $400 million of
identical items during fiscal years 2002 and 2003--over $200 million
each year--instead of using available excess A-condition items. The
magnitude of unnecessary purchases could be much greater because NSNs
needed to identify identical items were not recorded for all purchase
and turn-in transactions. For example, we determined that DLA buyers
and item managers did not record NSNs for 87 percent (about $4.9
billion) of the nearly $5.7 billion in medical commodity purchases by
military units during fiscal years 2002 and 2003. Further, as discussed
later, improper downgrading of condition codes to unserviceable could
also result in an understatement of the magnitude of unnecessary
purchases. While our statistical tests found a few instances of
inaccurate serviceable condition codes, most condition code errors
related to the improper downgrading of condition to unserviceable.
Fiscal Year 2004 and 2005 Requisitions and Purchases Demonstrate
Continuing Waste and Inefficiency:
To determine whether the problems identified in our analysis were
continuing, we monitored DRMS commodity disposal activity from May 2004
through April 2005. We found that DOD continued to transfer, donate,
and sell excess A-condition items instead of reutilizing them. To
illustrate these problems, we requisitioned several excess new and
unused items at no cost and purchased other new and unused commodities
at minimal cost. We based our case study selections on new, unused
items that DOD continued to purchase. As discussed in our
report,[Footnote 11] we used the GSA Federal Disposal System, available
to all federal agencies, to requisition several new and unused excess
DOD commodity items during our audit in fiscal year 2004 and the first
half of fiscal year 2005, including a medical instrument chest, two
power supply units, and two circuit cards, at no charge. These items
had an original DOD acquisition cost of $55,817, and we paid only $5
shipping cost to obtain all of them. We also purchased, at minimal
cost, several excess DOD commodity items in new and unused condition
over the Internet at govliquidation.com--the DRMS liquidation
contractor's Web site.[Footnote 12] The items we purchased included
tents, boots, three gasoline burners (stove/heating unit), a medical
suction apparatus, and bandages and other medical supply items with a
total reported acquisition cost of $12,310. We paid a total of $1,466
for these items, about 12 cents on the dollar, including buyer's
premium, tax, and shipping cost.
From December 2004 through April 2005, we purchased several new, unused
excess DOD commodity items, including over 8,000 military badges,
medals, and insignias; 8 new, unused Cooper Trendsetter SE tires; and
Class A military uniforms. Although these items had a total reported
acquisition cost of $11,522, we paid a total of $1,427 for these items,
including tax, buyer's premium, and shipping cost.
New, unused DOD badges, medals, and insignias. On December 6, 2004, we
purchased 8,526 excess DOD badges, medals, and insignias that are used
to indicate rank, the unit or program to which a military member or
civilian employee is assigned, or service awards. These items had a
reported acquisition cost of $9,518. We paid a total of $1,102,
including buyer's premium and tax, for these items--about 12 cents on
the dollar. Units and program areas designated by the badges and
insignias include Army Rangers, Mountain, and Airborne; Air Force Air
Traffic Controller; and DOD Scientific Consultant. Rank insignias
include Air Force Chief Master Sergeant and Air Force Technical
Sergeant; Navy Captain, Midshipman Lieutenant, and Midshipman
Lieutenant Commander; and Army Command Sergeant Major and Master
Sergeant. The listed condition code of these items ranged from A4
(serviceable, usable condition) to H7 (unserviceable, condemned
condition). However, our inspection of the badges and insignias that we
purchased showed that none of them had been used, and many of them were
in original manufacturer packages. Further, DOD is continuing to
purchase and use most of these items. The photograph in figure 2 shows
examples of some of the badges, medals, and insignias that we
purchased.
Figure 2: Examples of Excess DOD Badges, Medals, and Insignias
Purchased over the Internet in December 2004:
[See PDF for image]
[End of figure]
New, unused excess DOD tires. We purchased eight new, unused Cooper
Trendsetter SE 13-inch steel-belted radial tires on February 18, 2005.
According to the Army project officer, these tires are used on over-
the-road passenger vehicles, and one customer ordered them for use on a
forklift. DOD units are continuing to purchase and use these same
tires. The most recent purchase of 50 of these tires was made in April
2005. The eight tires had a total reported acquisition value of $404.
We paid $113 for the tires, including buyer's premium and tax, and an
additional $154 shipping cost. The tires were listed in A4 condition
(usable, with some wear). However, we found that the tires still had
manufacturer labels on the tread and blue paint over the whitewalls,
indicating that they were new and unused. The tires were turned in as
excess by the North Island Naval Air Station's Aircraft Intermediate
Maintenance Detachment. According to the Army Tank Automotive and
Armaments Command Project Officer,[Footnote 13] the NSN listed on the
turn-in document was incorrect. We found that inaccurate item
descriptions, including NSNs, prevent items from being selected for
reutilization. Figure 3 is a photograph of the excess DOD tires that we
purchased over the Internet in February 2005.
Figure 3: New, Unused Excess Cooper Trendsetter SE Tires Purchased over
the Internet in February 2005:
[See PDF for image]
[End of figure]
New, unused Class A military uniforms. We purchased several Class A
military uniforms over the Internet on April 7, 2005. The uniforms were
listed as being in H7 (unserviceable, condemned) condition. Although
the uniforms that we purchased over the Internet from DOD's liquidation
contractor had a listed acquisition cost of $1,600, we paid a total of
$58, including buyer's premium and sales tax, to acquire them--about 4
cents on the dollar. After receiving our purchase we determined that we
had in fact purchased 27 new, unused uniform coats; 4 pairs of new,
unused uniform trousers; 54 jackets in excellent condition; 45 pairs of
trousers in excellent condition; and 5 women's uniform skirts and 1
pair of slacks in excellent condition. DOD is continuing to purchase
and issue two of the four types of trousers that we purchased over the
Internet. According to the DLA clothing and textiles product manager
for dress uniforms, the Army switched from a matte finish gold button
to a shiny sta-briteTM gold button on October 1, 2003. Although the
Army ordered and paid for the new replacement buttons for existing
dress uniforms, it later determined that hiring a contractor to replace
the buttons or sending the coats back to the manufacturers for button
replacement would be very expensive. The Army decided to use the coats
with the older buttons to fill Reserve and Junior Reserve Officer
Training Corps (ROTC and JROTC) orders until current supplies are
exhausted. However, our monitoring of DOD liquidation sales found that
many class A uniforms with the older buttons are being sold over the
Internet for pennies on the dollar instead of being issued to ROTC and
JROTC. In addition, we observed the new sta-briteTM buttons being sold
over the Internet in May 2005. Figure 4 is a photograph of one of the
excess new, unused Class A uniforms with the matte finish buttons that
we purchased over the Internet in April 2005.
Figure 4: New, Unused Excess Class A Uniforms Purchased in April 2005:
[See PDF for image]
[End of figure]
We also purchased an earlier sales lot of the same Class A military
uniforms over the Internet on February 16, 2005. Our winning bid was
$81 for 166 uniform jackets and trousers, which had a listed
acquisition cost of $10,424. However, when we arrived at the Great
Lakes sales location near Chicago to pick up the uniforms, DOD
liquidation contractor personnel were unable to locate them. Contractor
personnel explained that our purchase may have been mistakenly given to
another customer. To compensate, we were offered other items available
for sale. However, these items were not in A condition. Instead of
accepting them, we requested and received a refund. As discussed later,
another of our Internet purchases was damaged due to a leaky roof at
the Norfolk liquidation sales location.
Management Control Breakdowns Resulted in Reutilization Program Waste
and Inefficiency:
The $3.5 billion in DOD waste and inefficiency that we identified in
our analysis of fiscal year 2002 through 2004 excess property disposal
activity stemmed from management control breakdowns across DOD. Key
factors in the overall DRMS management control environment that
contributed to waste and inefficiency in the reutilization program
included (1) unreliable excess property inventory data; (2) inadequate
DRMS oversight, accountability, physical control, and safeguarding of
property; and (3) outdated, nonintegrated excess inventory and supply
systems. In addition, for many years our audits of DOD inventory
management[Footnote 14] have reported that continuing unresolved
logistics management weaknesses have resulted in DOD purchasing more
inventory than it needed. DOD reutilization program waste and
inefficiency is symptomatic of the inventory and supply chain
management issues that have been considered high risk by GAO since
1990. Our analysis of fiscal year 2002 through fiscal year 2003 excess
commodity turn-ins showed that $1.4 billion (40 percent) of the $3.5
billion of A-condition excess items consisted of new, unused DLA supply
depot inventory. Our analysis of fiscal year 2004 excess commodity turn-
ins showed that $1.3 billion (48 percent) of the $2.7 billion of A-
condition excess items consisted of new, unused DLA supply depot
inventory.
Unreliable Data Impair the Economy and Efficiency of the Reutilization
Program:
Our interviews, case studies, screening visits, and statistical tests
of excess commodity inventory led us to conclude that unreliable data
are a key cause of the ineffective excess property reutilization
program. GAO's internal control standards[Footnote 15] require assets
to be periodically verified to control records. In addition, DRMS
policy[Footnote 16] requires DRMO personnel to verify turn-in
information, including item description, quantity, condition code, and
demilitarization code, at the time excess property is received and
entered into DRMO inventory. However, we found that DRMS and DLA supply
depot management have not enforced this requirement. Further, Army,
Navy, and Air Force officials told us that unreliable data are a
disincentive to reutilization because of the negative impact on their
operations. DLA item managers told us that because military units have
lost confidence in the reliability of data on excess property reported
by DRMS, for the most part they have requested purchases of new items
instead of reutilizing excess items. Military users also cited examples
of damage to excess items during shipment that rendered the items
unusable. In addition, other reutilization users advised us of problems
related to differences in quantities and the types of items ordered and
received that could have a negative impact on their operations.
Problems with Excess Inventory Items Noted by Military Services and
Other Users:
Military service officials also told us about the types of problems
they have experienced with property acquired from DRMOs. Army, Navy,
and Air Force medical officials, in particular, told us that they do
not reutilize excess medical items stored at DRMOs because items can
become damaged during shipment to and movement within the DRMO
warehouses. Other users of excess DOD property, including special
program, federal agency, and state officials gave us numerous examples
of problems they encountered with requisitions of excess DOD property.
Several officials noted that these problems have caused them to lose
confidence in the reutilization process. The following examples are
typical of what we were told.
* An Army official told us that he requisitioned 20 excess padlock
sets. When he received the padlocks the keys were missing. After his
second attempt to requisition excess DOD padlocks with keys failed, he
threw the padlocks in a dumpster because they were useless to him and
it would cost too much to return them to the DRMO.
* An Army official told us that items may be in new, unused condition
when they leave the DRMO, but are damaged during shipment. The official
cited his experience with an order of thin copper sheets for use in
testing electronic equipment. The sheeting was shipped on a pallet that
was too small and other material was stacked on top of it.
* A Fairchild Air Force Base official told us that the 92ND Logistics
Readiness Squadron requisitioned 80 sleeping bags from the Hawaii DRMO
but only received 56 of them. The official told our investigators that
the sleeping bags were sealed in heavy-duty plastic bags and were in
excellent condition. However, some of the boxes the sleeping bags were
shipped in had been damaged by rain and handling by the time he
received them.
Statistical Samples Identified Problems with Excess Inventory Accuracy:
Our statistical tests found significant problems with controls for
assuring the accuracy of excess property inventory. Estimated error
rates for the five DRMOs we tested ranged from 8 percent at one DRMO to
47 percent at another,[Footnote 17] and estimated error rates for the
five DLA supply depots we tested ranged from 6 percent to 16
percent,[Footnote 18] including errors related to physical existence of
turn-ins and condition code.[Footnote 19] Our condition code tests
determined whether the condition code was accurately recorded as
serviceable or unserviceable. We estimated that errors related to
condition code accuracy ranged from 6 percent to 26 percent at the 5
DRMOs we tested.[Footnote 20] Overall, we found that DRMO errors were
caused by erroneous turn-in documentation prepared by military units
and the failure of DRMO personnel to verify turn-ins at the time they
were received and correct errors before recording the receipts in
excess inventory. Most DLA supply depot errors related to untimely
recording of transactions for changes in inventory status and
inaccurate quantities. We did not find problems with condition codes at
the DLA depots.
An example from our Norfolk DRMO statistical sample illustrates how
erroneous inventory data can result in waste and inefficiency. On June
30, 2004, the Navy's Environmental Health Center in Portsmouth,
Virginia, turned in six new, unused Level III biological safety
cabinets[Footnote 21] with a total acquisition cost of $120,000. The
Navy unit turned in the Level III cabinets as excess because of
erroneous specifications that resulted in ordering cabinets that were
too large and cumbersome to meet deployment needs.
The Navy unit improperly used a local stock number (LSN)[Footnote 22]
to describe the safety cabinets on the turn-in document and a
demilitarization code that indicated there were no restrictions on the
disposal of these items. However, Level III safety cabinets are subject
to trade security controls,[Footnote 23] and therefore they are
required to be identified by an NSN or other information that
accurately describes the item, the end item application, and the
applicable demilitarization code.[Footnote 24] Further, the DOD risk
assessment performed in response to a recommendation in our November
2003 report[Footnote 25] called for Level III biological safety
cabinets to be destroyed when no longer needed by DOD. Although Norfolk
DRMO personnel advised DRMS officials of the need to correct the turn-
in document errors in July 2004, as of the end of our audit in February
2005, the information had not been corrected and the safety cabinets
had not been posted to the DRMS reutilization Web page to indicate that
they were available for reutilization.
Our in-house scientists who often meet with DOD scientists at the U.S.
Army Biological Warfare Research Center at the Dugway Proving Ground
learned that the DOD scientists were planning to purchase a Level III
safety cabinet and informed them of the availability of the six Level
III safety cabinets at the Norfolk DRMO. The DOD scientists told us
that they were unaware the Navy had excessed the safety cabinets and
said that they could use all six of them. We subsequently confirmed
that as a result of our efforts, the DOD scientists at Dugway had
requisitioned the six Level III safety cabinets for reutilization.
Weaknesses in Reutilization Program Oversight and Physical Inventory
Control:
We found hundreds of millions of dollars in potential waste and
inefficiency associated with the failure to safeguard excess property
inventory from loss, theft, and damage. As previously discussed, our
statistical tests of excess commodity inventory at five DRMOs and five
DLA supply depots identified significant numbers of missing items.
Because the DRMOs and DLA supply depots had no documentation to show
that these items had been requisitioned or sent to disposal
contractors, they cannot assure that these items have not been stolen.
According to DRMS data, DRMOs and DLA supply depots reported a total of
$466 million in excess property losses related to damage, missing
items, theft, and unverified adjustments over a period of 3 years.
However, as discussed below, we have indications that this number is
not complete. Also, because nearly half of the missing items reported
involved military and commercial technology that required control to
prevent release to unauthorized parties, the types of missing items
were often more significant than the number and dollar value of missing
items.
Excess Property Losses:
Weaknesses in accountability that resulted in lost and stolen property
contributed to waste and inefficiency in the excess property
reutilization program. As shown in table 2, our analysis of reported
information on excess property losses at DRMOs and DLA supply depots
found that reported losses for fiscal years 2002 through 2004 totaled
$466 million. Because 43 percent of the reported losses related to
military technology items that required demilitarization
controls,[Footnote 26] these weaknesses also reflect security risks.
GAO Standards for Internal Control in the Federal Government[Footnote
27] require agencies to establish physical control to secure and
safeguard assets, including inventories and equipment, which might be
vulnerable to risk of loss or unauthorized use. Our investigations of
reported losses found that the failure to verify and accurately
document transactions and events at the beginning of the disposal
process and report and investigate losses as they occur obscures or
eliminates the audit trail. Weaknesses in accountability leave DOD
vulnerable to the risk of theft, and fraud, waste, and abuse with
little risk of detection.
Table 2: Reported DRMS Excess Property Losses and Adjustments:
Dollars in millions.
DRMOs;
Fiscal year 2002: $81;
Fiscal year 2003: $47;
Fiscal year 2004: $62;
Total: $190.
DLA supply depots;
Fiscal year 2002: $67;
Fiscal year 2003: $95;
Fiscal year 2004: $114;
Total: $276.
Total;
Fiscal year 2002: $148;
Fiscal year 2003: $142;
Fiscal year 2004: $176;
Total: $466.
Source: Unaudited DRMS data.
[End of table]
DRMO losses. Our statistical samples identified missing turn-ins at two
of the five DRMOs we tested and missing quantities at all five DRMOs
tested, including many items that were in new, unused, and excellent
condition. Because DRMO officials did not have documentation to show
whether these items had been reutilized, transferred, sold, or
destroyed, there is no assurance of whether the missing items reflected
bookkeeping errors or if they related to theft. Missing items in our
statistical samples included turn-ins of 72 chemical and biological
protective suits, 21 pairs of chemical and biological protective
gloves, 47 wet weather parkas that were subject to demilitarization
controls, and 7 sleeping bags, a cold weather coat, computer equipment,
and various other items. Reported DRMO losses included 76 units of body
armor, 75 chemical and biological protective suits (in addition to
those identified in our Columbus DRMO sample),[Footnote 28] 5 guided
missile warheads,[Footnote 29] and hundreds of military cold weather
parkas and trousers and camouflage coats and trousers. Three DRMOs--
Kaiserslautern, Meade, and Tobyhanna--accounted for $840,147, or about
45 percent, of the nearly $1.9 million in reported fiscal year 2004
losses of military clothing and equipment items requiring
demilitarization.
Our follow-up investigations found a pervasive lack of physical
accountability over excess inventory, which leaves DOD vulnerable to
the risk of theft and fraud, waste, and abuse. In many cases, it is not
possible to determine whether discrepancies represent sloppy
recordkeeping or the loss or theft of excess property due to the
failure to verify turn-in documents and correct errors at the time
excess items were received at the DRMOs.
In the case of our Columbus DRMO sample, we found that inventory
records were not adjusted for missing quantities in our sample.
Instead, DRMO personnel recorded the entire amount of the listed
quantities as being transferred to either the liquidation sales
contractor or the Joint Service Nuclear Biological and Chemical
Equipment Assessment Program (JEAP) for inspection and reissue of
military clothing and equipment. Our review of transaction data for
Columbus DRMO transfers showed that JEAP did not confirm most of the
items reported as transferred. For example, JEAP confirmed receiving
only 7 of the 17 turn-ins of clothing and textile items. Further, the
Columbus DRMO recorded a transaction to show that the 72 chemical and
biological protective suits identified as missing during our
statistical tests of Columbus DRMO inventory were transferred to JEAP
on November 10, 2004. However, our follow-up with JEAP officials found
that they have no record of receiving the protective suits. The
Columbus DRMO's apparent manipulation of the inventory data avoided
reporting the missing items as losses.
Our follow-up investigations of other selected DRMO losses found the
following.
* An Air Force turn-in of 75 chemical and biological protective suits
was received, placed in the Shaw RIPL (a receipt in place location
under authority of the Jackson DRMO) warehouse on May 28, 2002, and
subsequently disappeared. DRMO personnel told DRMS investigators that
the 75 protective suits may have been included in a November 15, 2002,
shipment to the Jackson DRMO in South Carolina. However, because DRMO
personnel recorded box counts instead of turn-in document numbers and
item counts, there is no detailed record of the items that were shipped
between the two excess property warehouses.
* Twenty units of body armor reported lost at the Meade DRMO initially
had been ordered by Israel on November 8, 2000. Our investigators
confirmed that the body armor was never picked up for shipment to
Israel. According to the loss report, the items were relocated from the
shipping area to the demilitarization storage area of the DRMO on May
8, 2002. A loss investigation was initiated by the Area Manager for the
Meade DRMO in March 2004. However, because the Meade DRMO contractor
had improperly destroyed inventory records after 2 years, attempts to
determine the events surrounding the loss were fruitless.
* Our investigation of 18 reports on a total of 52 units of body armor
missing from the Hood DRMO during fiscal years 2002 and 2003 determined
that these items were stored outside in an unsecure area resulting in
the theft of at least 48 units of body armor. A DRMS investigative
report noted that items requiring demilitarization had been stored in
this area over a 2-year period, even though the security fence had
barbed wire that was cut or missing and the high ground level outside
the fence provided easy access. According to a DRMO official, a work
order for the fence repair had been submitted but the repairs had not
been made.
* The Naval Operational Logistics Support Center-Ammo, which was
responsible for a turn-in of guided missile warheads, the DRMO that
received these items, and the Demilitarization Center each recorded a
different quantity for the turn-in. However, quantity discrepancies
were not resolved at any point during the turn-in and disposal process.
As a result, there is no audit trail to determine whether or where,
when, or how the reported loss or a recordkeeping error occurred. For
example, the Navy unit reported a turn-in of 24 warheads that had been
used in testing but were certified as inert. DRMO personnel counted
canisters and loose components and determined there were 32 warheads.
The Anniston Demilitarization Center reported that a total of 27
warheads were received for destruction.
DLA supply depot losses. Our statistical samples showed missing items
at four of the five DLA supply depots that we tested. Because depot
officials did not have documentation showing that these items had been
reutilized or sold, there is no assurance that the missing items did
not relate to theft. Missing items in our DLA depot statistical samples
included several sensitive items, such as classified radio frequency
amplifiers and circuit boards, aircraft parts, and computer equipment
that required trade security or demilitarization controls.
We obtained DRMS data on DLA supply depot reports of excess property
losses, including missing and damaged property and unverified
adjustments. We investigated reported losses of selected aircraft parts
at two DLA supply depots--Oklahoma City and Warner Robins--that
reported the largest amount of depot losses. DLA Directive 5025.30, DLA
One Book, includes a section on Inventory Adjustment Research (dated
October 21, 2004), which sets inventory accuracy goals for DLA supply
depots and requires causative research--an in-depth investigation--of
adjustments for selected items[Footnote 30] and suspected fraud, waste,
and abuse to determine why they occurred. A Financial Liability
Investigation of Property Loss is required if the adjustment meets
specific criteria, including (1) gains or losses of classified or
sensitive material; (2) an adjustment in excess of $2,500 for
pilferable material; and (3) a loss where there is a suspicion of
fraud, theft, or negligence. However, we found that DLA depot personnel
did not thoroughly investigate most adjustments related to reported
losses of sensitive items with demilitarization controls that we
selected for investigation. Supply depot officials told us that they
assumed the losses represented inventory recordkeeping errors, even
though causative research results were inconclusive.
Property Damage:
In addition to reported losses, we found significant instances of
property damage at DRMS liquidation contractor sales locations. Because
the terms and conditions of liquidation sales specify that all property
is sold "as is" and assigns all risk of loss to buyers, the buyers have
no recourse when property is damaged after being sold or is not in the
advertised condition. As a result, customers who have lost money on
bids related to damaged and unusable items might not bid again, or they
may scale back on the amount of their bids in the future, affecting
both the volume of excess DOD items liquidated and sales proceeds. On
October 7, 2004, we purchased numerous usable items in original
manufacturer packaging, including 35 boxes of bandages, 31 boxes of
gauze sponges and surgical sponges, 12 boxes of latex gloves, and 2
boxes of tracheostomy care sets. We paid a total of $167, including
buyer's premium, tax, and transportation cost, for these items, which
had a reported total acquisition cost of $3,290. However, these items
had become damaged due to rain and a leaky roof at the Norfolk,
Virginia, liquidation sales location.
The majority of property damage that we observed at liquidation
contractor sales locations is primarily the result of DRMS management
decisions to send excess DLA supply depot property to two national
liquidation sales locations without assuring that its contractor had
sufficient human capital resources and warehouse capacity to process,
properly store, and sell the volume of property received. For example,
excess DOD property sent to the Huntsville, Alabama, liquidation sales
location was stored outside unprotected from weather, including sun,
wind, rain, and hurricanes during the summer and fall of 2004. The
liquidation contractor's failure to record these items in sales
inventory at the time they were received, when combined with lost and
illegible property labels due to weather damage, resulted in a
significant loss of accountability for many of these items.
Outdated, Nonintegrated Systems Impair Economy and Efficiency:
Inefficient, nonintegrated excess inventory and supply management
systems lack controls necessary to prevent waste and inefficiency in
the reutilization program. For example, because the DRMS Automated
Inventory System (DAISY) and DLA's Standard Automated Materiel
Management System (SAMMS) are outdated and nonintegrated, they do not
share information necessary to (1) identify and alert DLA item managers
of excess property that is available to fill supply orders and (2)
prevent purchases of new items when A-condition excess items are
available for reutilization. We have continued to report[Footnote 31]
that long-standing weaknesses with DLA's inventory systems related to
outdated, nonintegrated legacy systems and processes result in DOD and
military units not knowing how many items they have and where these
items are located. DLA has acknowledged serious deficiencies in its
automated inventory management systems. Although DLA has an effort
under way to replace SAMMS with the Business Systems Modernization
(BSM) and DRMS has a Reutilization Modernization Program (RMP) under
way to upgrade DAISY, so far these have been separate, uncoordinated
efforts and they do not adequately address identified process
deficiencies. While the systems improvement efforts are intended to
integrate supply and excess inventory systems to support the
reutilization program, they are not focused on resolving long-standing
problems related to unreliable condition code data and incomplete data
on NSNs. The accuracy of these two data elements is critical to the
ability to identify like items that are available for reutilization at
the time purchases are made.
Concluding Comments:
To effectively address problems with reutilization program waste and
inefficiency, DRMS and DLA will need to exercise strong leadership and
accountability to improve the reliability of excess property data;
establish effective oversight and physical inventory control; and
develop effective integrated systems and processes for identifying and
reutilizing excess property. In addition, the military services will
need to provide accurate information on excess property turn-in
documentation, particularly data on condition codes, and item
descriptions, including NSNs that are key to identifying items for
reutilization. Improved management of DOD's excess property and a
strong reutilization program would help save taxpayers hundreds of
millions of dollars annually.
Mr. Chairman and Members of the Subcommittee, this concludes my
prepared statement. We would be pleased to answer any questions that
you may have.
Contacts and Acknowledgments:
For more information regarding this testimony, please contact Gregory
D. Kutz at (202) 512-9505, or [Hyperlink, kutzg@gao.gov] or Keith A.
Rhodes at (202) 512-6412, or [Hyperlink, rhodesk@gao.gov]. Individuals
making key contributions to this testimony included Mario Artesiano,
Stephen P. Donahue, Gayle L. Fischer, Jason Kelly, Richard C. Newbold,
Ramon Rodriguez, and John Ryan. Numerous other individuals contributed
to our audit and investigation and are listed in our companion report.
Technical expertise was provided by Sushil K. Sharma, PhD, DrPH.
(192164):
FOOTNOTES
[1] GAO, DOD Excess Property: Management Control Breakdowns Result in
Substantial Waste and Inefficiency, GAO-05-277 (Washington, D.C.: May
13, 2005).
[2] GAO, DOD Excess Property: Risk Assessment Needed on Public Sales of
Equipment That Could Be Used to Make Biological Agents, GAO-04-15NI
(Washington, D.C.: Nov. 19, 2003).
[3] GAO, DOD Management: Examples of Inefficient and Ineffective
Business Processes, GAO-02-873T (Washington, D.C.: June 25, 2002).
[4] JSLIST is a universal, lightweight, two-piece garment (coat and
trousers) that when combined with footwear, gloves, and protective mask
and breathing device, forms the warfighter's protective ensemble.
Together, the ensemble is to provide maximum protection to the
warfighter against chemical and biological contaminants without
negatively impacting the ability to perform mission tasks. JSLIST is
the current model protective suit used by the military forces.
[5] Federal Management Regulation, 41 C.F.R. ch. 102 (2004).
[6] Federal Property Management Regulations, 41 C.F.R. ch. 101 (2004)
and the Federal Management Regulation, 41 C.F.R. ch. 102 (2004), issued
by the General Services Administration; DOD 4160.21-M, Defense Materiel
Disposition Manual; and GAO, Standards for Internal Control in the
Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999).
[7] GAO-05-277.
[8] GAO, Defense Inventory: Analysis of Consumption of Inventory
Exceeding Current Operating Requirements Since September 30, 2001, GAO-
04-689 (Washington, D.C.: Aug. 2, 2004), and Major Management
Challenges and Program Risks: Department of Defense, GAO-03-98
(Washington, D.C.: January 2003).
[9] The reported acquisition value at the time the items were turned in
as excess.
[10] An NSN is a 13-digit number that identifies standard use inventory
items. The first 4 digits of the NSN represent the Federal Supply
Classification, such as 8430 for men's footwear, followed by a 2-digit
North Atlantic Treaty Organization (NATO) code (to indicate user
countries) and a 7-digit designation for a specific item, such as a
cold weather boot.
[11] GAO-05-277.
[12] Government Liquidation, LLC is the DRMS commercial venture partner
(contractor) for public sales of excess DOD property.
[13] The Army has product management responsibility for these tires.
[14] GAO-04-689 and GAO-03-98.
[15] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
[16] DRMS-I 4160.14, vol. II, Instructions for Warehousing for DRMS and
the Defense Reutilization and Marketing Offices, ch. 2, "Receipt and
Storage," § 1 (A) (9).
[17] Sampling errors for our DRMO estimates did not exceed 10
percentage points at the 95-percent confidence level.
[18] Sampling errors for our DLA supply depot estimates did not exceed
7 percentage points at the 95-percent confidence level.
[19] Our physical existence tests included whether turn-ins recorded in
inventory could be located, whether inventory changes were recorded
within 7 days, and the accuracy of item descriptions (including item
name(s) and NSN(s)) and quantities. Although some transactions included
more than one type of error, we only counted one failure for a
transaction.
[20] Sampling errors for our DRMO estimates did not exceed 11
percentage points at the 95-percent confidence level.
[21] The technical name for these safety cabinets is closed loop
containment isolators.
[22] An LSN consists of the four-digit federal supply classification
number, a two-digit NATO code (user country code), and up to a seven-
character description, such as "monitor" for a computer monitor and
"boots" for cold weather boots.
[23] Commerce Control List, 15 C.F.R. pt. 774, supp. 1, category 2,
Materials Processing, para. f (2), Protective and Containment Equipment
(2005).
[24] DOD 4160.21-M-1, Defense Demilitarization Manual, ch.1, § D (6),
and app. 5 (B), and DRMS-I 4160.14, vol. VII, ch. 3, "MLI/CCLI -
Disposal Processing and Demilitarization," para. A (2)(d).
[25] GAO-04-15NI.
[26] DOD 4160.21-M-1, Defense Demilitarization Manual, ch. 1.
[27] GAO/AIMD-00-21.3.1.
[28] The missing chemical and biological protective suits are not the
current JSLIST, and the missing body armor is not the ceramic
technology currently in use by deployed troops.
[29] In accordance with DOD 4160.21-M, ch. 4, "Property Requiring
Special Processing," § B, and DRMS-I 4160.14, vol. VII, "Instructions
for Demilitarization for DRMS and the Defense Reutilization and
Marketing Offices," ch. 1, para. G, such items are required to be inert
before turn-in to a DRMO.
[30] DOD 4000.25-2-M, Military Standard Transaction Reporting and
Accountability (MILSTRAP), (Change 2, Apr. 28, 2003), Ch. 7, "Physical
Inventory Control," Section C7.9.3.2, identified selected items as
classified and sensitive items regardless of dollar value, pilferable
items, controlled inventory items, with an extended value greater than
$2,500, and all adjustments with an extended value of greater than
$16,000 or greater than 25 percent unit variance and greater than
$5,000.
[31] GAO, DOD Business Systems Modernization: Billions Continue to Be
Invested with Inadequate Management Oversight and Accountability, GAO-
04-615 (Washington, D.C.: May 27, 2004); DOD Business Systems
Modernization: Longstanding Management and Oversight Weaknesses
Continue to Put Investments at Risk, GAO-03-553T (Washington, D.C.:
Mar. 31, 2003); and DOD Management: Examples of Inefficient and
Ineffective Business Processes, GAO-02-873T (Washington, D.C.: June 25,
2002).
