Internal Controls

Theft at Three Defense Facilities in Utah Gao ID: NSIAD-91-215 August 22, 1991

Pursuant to a congressional request, GAO: (1) reviewed the results of Operation Punchout, a sting operation designed to identify and apprehend surplus dealers that bought and sold stolen government property from Department of Defense (DOD) facilities in Utah; and (2) determined the weaknesses in the facilities' internal controls that enabled the thefts and trafficking to occur.

GAO found that: (1) as of March 1, 1991, Operation Punchout had uncovered 65 cases of unlawful sale or suspected theft and trafficking of government property and undercover agents purchased 7,422 items of military equipment with a total replacement value of about $13.8 million; (2) such internal control weaknesses as inadequate supervision and lack of separation of duties, inadequate resource control and accountability, and lack of vigilance in security matters allowed the thefts to occur; (3) the severity of the cases ranged widely, from personnel selling clothing or equipment issued to them to security police breaking into locked warehouses to steal equipment; (4) of 54 cases at 3 Utah facilities, 20 individuals were prosecuted and 17 were found guilty, 27 military personnel received nonjudicial punishments, 3 were involuntarily separated from military service or fired instead of being prosecuted, and 4 either had no action taken against them or were found not to have engaged in illegal activities; (5) the lack of adequate supervision and separation of duties conflicts with a DOD directive which requires supervisors to continuously review and approve the assigned work of their staff and provide their staff with the necessary guidance and training to reduce the risk of errors, waste, and wrongful acts; and (6) although many of the thefts occurred through collusion, the lack of vigilance in security matters at one facility enhanced the opportunity for theft and contributed to its nondetection.

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