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Report to the Chairman, Subcommittee on Defense, Committee on 
Appropriations, House of Representatives:

United States Government Accountability Office:

GAO:

December 2004:

Defense Inventory:

Improvements Needed in DOD's Implementation of Its Long-Term Strategy 
for Total Asset Visibility of Its Inventory:

GAO-05-15:

GAO Highlights:

Highlights of GAO-05-15, a report to the Chairman, Subcommittee on 
Defense, Committee on Appropriations, House of Representatives: 

Why GAO Did This Study:

For more than 30 years, the Department of Defense (DOD) has worked to 
achieve full visibility over and accessibility to its spare parts 
inventory. This initiative, called total asset visibility (TAV), aims 
to provide timely, accurate information on the location, movement, 
status, and identity of units, personnel, equipment, and supplies. In 
1999, GAO examined DODís TAV implementation approach and recommended 
that DOD develop a strategic plan to guide its efforts. DOD did not 
concur and stated it would rely on the components to individually 
achieve TAV. DODís current target to achieve TAV is 2010. As requested, 
GAO examined DODís progress towards, and impediments to, achieving TAV 
over its spare parts inventory. GAO also assessed DODís progress in 
ensuring that its inventory management systems comply with federal 
financial management standards.

What GAO Found:

Although DOD, the military services, and the Defense Logistics Agency 
(DLA) made varying degrees of progress toward achieving visibility over 
in-storage assets, DOD did not meet its prior goal to achieve TAV by 
2004. In a series of reports issued since March 1999, GAO reported that 
DOD also lacks visibility and control over items being shipped from one 
location to another. GAOís most recent work indicates that the military 
services and DLA generally have inventory management systems that 
provide visibility over specific segments of their inventories, but 
existing systems cannot always share data on a near real-time basis 
within their organizations or across the department. While DOD and the 
components all have ongoing efforts to modernize their business systems 
and improve the capability to share data on a near real-time basis, the 
requirements, time frames, and cost estimates for these additional 
systems have not been developed. Consequently, DODís ability to achieve 
the new TAV goal of 2010 remains uncertain.

Three significant impediments hinder the achievement of TAV. First, DOD 
does not have a clear long-term strategy for achieving TAV. While DOD 
has identified TAV as a key goal of its departmentwide effort to refine 
and implement a business enterprise architecture, componentsí plans and 
initiatives lack a clear link to the architecture and DODís long-term 
business management modernization program. Further, while the logistics 
community identified TAV as a key element in its logistics 
transformation efforts, it did not include TAV as a goal within its 
Future Logistics Enterprise, its mid-term logistics transformation 
plan. Consequently, the components are pursuing internal initiatives to 
attain TAV. Second, DOD lacks the systems integration necessary to 
provide TAV. As GAO recently reported, DOD has made little progress in 
refining its business enterprise architecture, which leaves DOD without 
a long-term strategy needed to successfully guide efforts to achieve 
TAV. Without proper oversight and approval of emerging systems, DOD 
will continue to deploy systems that do not have the ability to provide 
TAV. While DOD plans to address GAOís recommendations aimed at 
improving its institutional oversight of business system investments, 
DOD has yet to fully implement these recommendations. Third, DODís 
inventory management systems have long-standing data accuracy and 
reliability issues. Without accurate, reliable data from these systems, 
new systems will also contain suspect data and not provide TAV. Unless 
DOD overcomes these impediments, it is unlikely that it will meet its 
goal of achieving TAV by 2010.

DOD has made little progress in assuring that its inventory management 
systems are substantially compliant with federal financial management 
standards. DOD has recognized the weaknesses within its financial 
management and feeder systems, and stated in its Performance and 
Accountability Report for fiscal year 2003 that its systems did not 
substantially comply. GAOís review of two emerging logistics systems 
raises concerns regarding DODís lack of policies and procedures to 
ensure new systems substantially comply with federal standards.

What GAO Recommends:

GAO recommends that DOD develop a departmentwide strategy to ensure TAV 
is achieved, with outcome-oriented goals and performance measures. 
While DOD concurred with the intent of our recommendations, it stated 
in written comments that it did not plan to change its current 
approach. Therefore, GAO has added a matter for congressional 
consideration suggesting that the Congress may wish to require DOD to 
report annually on TAV implementation. 

www.gao.gov/cgi-bin/getrpt?GAO-05-15.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William M. Solis at (202) 
512-8365 or solisw@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

DOD, the Military Services, and DLA Have Not Achieved TAV over Spare 
and Repair Parts in Storage:

Significant Impediments Hinder Achievement of TAV:

DOD Has Made Little Progress toward Assuring That Inventory Systems 
Comply with Financial Standards:

Conclusions:

Recommendations:

Matter for Congressional Consideration:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Key Programs and Systems:

Appendix III: Comments from the Department of Defense:

Appendix IV: GAO Contacts and Staff Acknowledgments:

Tables:

Table 1: Summary of In-Storage Inventory Management Systems:

Table 2: Reported DOD Logistics Business Systems by Functional Area:

Abbreviations:

CFO: Chief Financial Officers Act of 1990:

DLA: Defense Logistics Agency:

DOD: Department of Defense:

FFMIA: Federal Financial Management Improvement Act of 1996:

GPRA: Government Performance and Results Act of 1993:

JFMIP: Joint Financial Management Improvement Program:

JTAV: Joint Total Asset Visibility:

SGL: Standard General Ledger:

TAV: Total Asset Visibility:

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. However, because 
this work may contain copyrighted images or other material, permission 
from the copyright holder may be necessary if you wish to reproduce 
this material separately.

United States Government Accountability Office:

Washington, DC 20548:

December 6, 2004:

The Honorable Jerry Lewis: 
Chairman: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives:

Dear Mr. Chairman:

We have repeatedly reported that the Department of Defense (DOD) does 
not have adequate visibility and control over the approximately 
$70 billion of inventory, including its spare and repair 
parts.[Footnote 1] While DOD has recognized the importance of achieving 
total asset visibility (TAV) for more than 30 years, its efforts to 
improve its capability have fallen short. DOD defines TAV as the 
ability to provide timely and accurate information on the location, 
movement, status, and identity of units, personnel, equipment, and 
supplies and having the ability to act on that information.[Footnote 2] 
In 1999, we reported that DOD's efforts to achieve TAV could be 
improved through the development of a strategic plan.[Footnote 3] DOD 
responded that the department planned to address TAV in the context of 
improved asset management through the business system modernization 
efforts of its military services and the Defense Logistics Agency 
(DLA). The ability to harness such detailed, near real-time[Footnote 4] 
information for spare and repair parts could significantly improve 
military readiness by more efficiently and effectively getting needed 
items to the operating forces. If the information contained in the 
inventory management systems is not accurate, complete, and timely, 
ongoing operations could be adversely impacted. Although DOD had 
established a goal of achieving TAV by 2004, it recently revised its 
estimate for achieving this elusive goal to fiscal year 2010.

This report responds to your request that we review DOD's progress 
toward achieving TAV over its spare and repair parts, especially across 
the military services at the wholesale and retail levels of 
supply.[Footnote 5] As requested, we also discuss the department's 
efforts to improve financial management reporting on its inventory. For 
TAV purposes, supplies, which include spare and repair parts, are 
categorized as "in storage,"[Footnote 6] "in process" (on order or in 
repair), or "in transit." Because of the recent designation of the U.S. 
Transportation Command as the distribution process owner, the many 
problems identified with in-transit visibility in recent years and the 
magnitude of the in-storage inventory, we agreed to focus this report 
on spare and repair parts in storage. Specifically, we addressed 
(1) what progress DOD, the military services, and DLA have made in 
implementing TAV and (2) what impediments, if any, DOD, the military 
services, and DLA must overcome in order to achieve TAV. In addition, 
you requested that we assess the progress that DOD has made in ensuring 
that inventory management systems are fully compliant with statutory 
requirements for federal financial management systems.

To accomplish these objectives, we obtained and analyzed information on 
inventory management practices from DOD, the military services, and 
DLA, including DOD's Supply Chain Materiel Management 
Regulation.[Footnote 7] In addition, we reviewed previous GAO reports, 
other audit agency reports, and appropriate DOD guidance. We also 
interviewed knowledgeable officials within the military services and 
DLA to enhance our understanding of inventory management practices. 
Additionally, we interviewed officials who establish inventory 
management policy within the Office of the Secretary of Defense. 
Finally, we reviewed documentation on a wide variety of DOD, military 
service, and DLA initiatives and programs addressing inventory 
management. We conducted this assignment in accordance with generally 
accepted government auditing standards. Our scope and methodology are 
discussed in further detail in appendix I. Appendix II contains a list 
and brief description of key programs and systems that are applicable 
to TAV.

Results in Brief:

Although DOD, the military services, and DLA have made varying degrees 
of progress toward achieving visibility over in-storage assets, DOD 
failed to meet its goal to achieve TAV by 2004. DOD did not achieve its 
goal because existing inventory systems continue to lack the ability to 
share data on a near real-time basis for all inventory segments. In a 
series of reports issued since March 1999, we have reported numerous 
weaknesses in DOD's visibility and control over items being shipped 
from one location to another. Our most recent work identified that the 
military services and DLA generally have inventory management systems 
that provide visibility over only specific segments of their 
inventories, such as wholesale and retail inventories. They also have 
the ability to share data both within their respective organizations 
and among the defense components, although this capability does not 
always exist on a near real-time basis. The 1998 DOD Logistics 
Strategic Plan established a goal for attaining 100 percent visibility 
over all assets by 2004. DOD's definition of visibility also includes 
the capability to act on the information provided by the information 
systems to improve overall logistics operations. While DOD, the 
military services, and DLA all have ongoing efforts to modernize the 
business systems they use to provide visibility over in-storage assets, 
these systems by themselves will not provide TAV because the TAV 
capability is dependent on additional systems that have not yet been 
developed. In some cases, the requirements, time frames, and cost 
estimates for these additional systems have not been developed. 
Similarly, the capability to share data both within the respective 
organizations and on a departmentwide level is currently evolving. 
Consequently, the department's ability to achieve the new TAV goal of 
2010 remains uncertain.

DOD, the military services, and DLA must overcome three significant 
impediments, which present a number of challenges, in order to achieve 
TAV. First, while DOD has identified achieving TAV as one of the 
objectives for its ongoing efforts to refine and implement a business 
enterprise architecture, it continues to lack a clear long-term 
strategy for achieving TAV deparmentwide. In May 2004, we reported that 
the architecture did not provide sufficient descriptive content related 
to future business operations and supporting technology to permit 
effective acquisition of systems solutions and associated operational 
changes. In another recent review, we found that DOD component efforts, 
including the military services and DLA, were not clearly linked to 
DOD's long-term improvement initiative, the business management 
modernization program. The department is required to report annually to 
the Congress on the progress it is making on refining and implementing 
the business enterprise architecture in support of its business 
management modernization program.[Footnote 8] Further, the logistics 
community has identified TAV as one of the four pillars for its 
logistics transformation initiative but did not specifically include it 
in its Future Logistics Enterprise--DOD's mid-term strategic plan for 
logistics transformation. Because DOD has not developed a clear long-
term strategy, the military services and DLA will be exposed to the 
risk of spending billions of dollars on duplicative, stovepiped, 
nonintegrated systems that do not support the department's business 
transformation goals, including attaining TAV. In fact, DOD's goal for 
achieving TAV has slipped from 2004 to 2010 since we reported on this 
issue in 1999. Without a clear long-term strategy, DOD lacks a key 
management control for ensuring that time frames, results-oriented 
performance measures, and accountability mechanisms are established and 
monitored to help achieve TAV. In addition, DOD has not achieved the 
necessary integration or interoperability among its many inventory 
systems to support TAV and, without proper oversight and approval of 
emerging systems, DOD and the defense components will likely continue 
to deploy systems that do not have the ability to provide TAV. In 
addition to deficiencies in DOD's business enterprise architecture that 
diminish its utility as a blueprint for guiding TAV efforts, in May 
2004 we reported that two emerging systems intended to transform 
logistics operations for DLA and the Army did not resolve problems 
associated with TAV and integrated systems.[Footnote 9] For example, 
the Army system, the Logistics Modernization Program, is dependent on 
two additional systems that are under development to attain TAV. 
However, neither the time frames nor cost estimates to develop these 
systems has been established. Until integration or interoperability is 
achieved and processes and controls are improved, DOD will continue to 
rely on current processes and procedures that include the use of 
multiple data entry points for transactions, which can result in data 
entry errors concerning the amount and location of inventory. While DOD 
has indicated it plans to address our recent recommendations aimed at 
improving DOD's institutional oversight of planned and ongoing business 
systems investments--steps we have previously stated that DOD needs to 
take in a timely manner--DOD has yet to fully implement these 
recommendations. Finally, DOD, the military services, and DLA must 
overcome long-standing data accuracy and reliability issues associated 
with their numerous legacy systems used to report the quantity, 
location, and value of DOD's inventory. Without implementation of 
efficient and effective business processes and controls to ensure 
accurate, complete, timely, and reliable data, DOD's systems, both 
legacy and emerging systems, will fail to provide TAV. Recent audit 
reports prepared by the DOD Inspector General and the military 
services' audit agencies, for example, have identified more than 
$200 million in excess or unrecorded inventory that was not visible to 
item managers as well as significant misstatements in the reported 
inventory balances. Given that DOD has not developed a departmentwide 
long-term strategy to overcome these various impediments, it appears 
unlikely that it will achieve TAV by 2010.

DOD, the military services, and DLA have made little progress in 
assuring that inventory management systems are substantially compliant 
with statutory requirements for federal financial management systems as 
defined in the Federal Financial Management Improvement Act (FFMIA) of 
1996.[Footnote 10] The department recognizes the weaknesses within its 
financial management and feeder systems and stated in its Performance 
and Accountability Report for fiscal year 2003 that these systems did 
not substantially comply. While DOD is requiring the military services 
and DLA to certify that emerging systems are substantially compliant 
with federal financial management requirements, we are concerned that 
the department lacks adequate policies and procedures to determine 
whether compliance has been achieved. For example, we recently reported 
weaknesses in the development and testing of systems requirements for 
two new systems, the Business Systems Modernization and the Logistics 
Modernization Program.[Footnote 11] For example, the Army did not 
perform testing on 147 of the systems' requirements because the core 
requirements from the software package had previously been certified 
through the Joint Financial Management Improvement Program (JFMIP). 
Relying on the JFMIP certification does not provide assurance that 
federal financial management standards are met because the Army had 
modified the commercial software package and did not perform specific 
transaction testing to determine if the modified system software 
provided the anticipated results. Consequently, although these two 
systems were certified as being compliant, the weaknesses identified in 
the certification process make it difficult to determine if the systems 
do in fact comply with the FFMIA requirements.

We are recommending that DOD develop a comprehensive, long-term 
strategy as part of its Business Enterprise Architecture with key 
elements such as milestones, to assist the department in achieving TAV 
over its spare and repair parts inventory. In commenting on a draft of 
this report, DOD concurred with the intent of three of our 
recommendations and partially concurred with our final recommendation. 
While recognizing the need to improve visibility over spare and repair 
parts, DOD believes that its current approach of modernizing logistics 
systems and implementing an integrated data approach is the way to 
achieve TAV. We continue to believe that DOD needs to place more 
specific emphasis on attaining TAV. Therefore, we have added a matter 
for congressional consideration suggesting that the Congress may wish 
to require having the Secretary of Defense specifically address the 
plans and progress the department is making on attaining TAV in his 
annual report to the Congress on the refinement and implementation of 
the business enterprise architecture pursuant to Sect. 332 of the 
fiscal year 2005 national defense authorization act.

Background:

While total asset visibility (TAV) has been a goal of DOD's since the 
early 1970s, target completion dates of 1980, 1995, and 2004 have not 
been met. In fact, DOD's target date for achieving TAV has slipped by 
nearly 30 years, most recently being moved from fiscal year 2004 to 
fiscal year 2010. In 1972, DOD launched a Logistics Systems Plan to 
meet its TAV needs with a target completion date of 1980. This plan was 
created to eliminate unnecessary duplication of inventories and to 
establish common use of inventories whenever possible; however, it did 
not succeed. Subsequently, in 1992, DOD instituted a second TAV Plan to 
provide managers with the capability to access and act on timely and 
accurate information regarding the location, quantity, condition, 
movement, and status of DOD materiel assets. Once again, the target 
date was not achieved. In 1996, DOD developed a third TAV 
Implementation Plan, which expanded the scope of the 1992 plan. 
However, this plan had no clear completion date and was superceded by 
the 1998 DOD Logistics Strategic Plan. The 1998 plan was created to 
"Ömeet total asset tracking requirements established in the DOD 
regulation on asset management."[Footnote 12] This plan's target 
completion date was 2004.

In 1999, we reported[Footnote 13] on DOD's TAV initiative and noted 
significant wartime logistics management problems that had occurred 
during Operations Desert Shield and Desert Storm due to the lack of 
visibility over spare parts and supplies. In our 1999 report, we 
recommended that DOD develop a departmentwide strategic plan and 
associated component implementation plans in accordance with specific 
outcome-oriented management principles embodied in the Government 
Performance and Results Act of 1993 (GPRA)[Footnote 14] and the 
Clinger-Cohen Act.[Footnote 15] The department, however, disagreed with 
our recommendation that it develop an overarching strategic plan and 
stated that TAV could be attained as each of the components proceeds 
with its own logistics supply chain modernization efforts.

Subsequent to our 1999 report, TAV continued to be an important goal 
within the department. The business support community, under the 
direction of the Under Secretary of Defense (Comptroller) and the Chief 
Information Officer, recognized the importance of realizing TAV and 
included achieving TAV by 2010 as part of its Business Management 
Modernization Program. This program is designed to guide the 
departmentwide business transformation efforts that are ongoing 
throughout the organization through the refinement and implementation 
of a business enterprise architecture. This architecture is intended to 
serve as a blueprint to guide and constrain investments in systems 
related to DOD's business processes and provide a basis for planning, 
developing, and implementing business management systems. However, as 
we reported in September 2004, DOD components' mid-term implementation 
plans were not clearly linked to the long-term improvement initiative 
known as the business management modernization program.[Footnote 16] 
Within the logistics community, the Deputy Under Secretary of Defense 
for Logistics and Materiel Readiness published the Future Logistics 
Enterprise document as a mid-term guide for achieving logistics 
transformation. Although TAV was not specifically identified within 
this document, the End-to-End Distribution initiative contained in the 
document incorporated many of the same characteristics as TAV. In the 
Focused Logistics Campaign Plan, the Joint Chiefs of Staff also 
recognized the importance of TAV and identified it as one of four 
pillars upon which logistics transformation must be built. Despite this 
focus, we recently reported that DOD experienced logistics management 
weaknesses during the build up and early phases of Operation Iraqi 
Freedom due to inadequate asset visibility.[Footnote 17] These 
weaknesses are similar to those experienced during Operations Desert 
Shield and Desert Storm. For example, as Operation Iraqi Freedom began, 
a number of asset visibility weaknesses contributed to a $1.2 billion 
discrepancy between the material shipped to Army activities in the 
Iraqi theater and the material acknowledged as received. While Army 
officials believe that this material was received in theater, lapses in 
asset visibility, in some instances, resulted in units cannibalizing 
major equipment items, submitting duplicate requisitions, and 
circumventing the normal supply systems to obtain needed parts.

As we have previously reported, accurately reporting the amount of 
inventory, both in terms of the numbers of items on hand and the 
valuation of that inventory, has been a continuing struggle for 
DOD.[Footnote 18] One of the primary factors contributing to this 
struggle is DOD's outdated and ineffective management information 
systems. FFMIA[Footnote 19] and other financial management reform 
legislation have emphasized the importance of improving financial 
management, which necessarily encompasses proper inventory management, 
across the federal government. Built upon the foundation laid by the 
Chief Financial Officers (CFO) Act of 1990,[Footnote 20] FFMIA 
emphasizes the need for agencies to have financial management systems 
that can generate timely, accurate, and useful information to make 
informed decisions and to ensure accountability on an ongoing basis. 
With such information, government leaders will be better positioned to 
invest resources, reduce costs, oversee programs, and hold agency 
managers accountable for the way they run government programs. FFMIA 
requires that financial management systems comply substantially with 
federal financial management systems requirements, applicable federal 
accounting standards, and the U.S. Government Standard General Ledger 
at the transaction level in order to help achieve these goals.

DOD, the Military Services, and DLA Have Not Achieved TAV over Spare 
and Repair Parts in Storage:

Although DOD, the military services, and DLA have made varying degrees 
of progress toward achieving visibility over in-storage assets, DOD's 
most recent goal to achieve TAV by 2004 was not met, and the 
department's ability to achieve the new TAV goal of 2010 remains 
uncertain. First, while the military services and DLA generally have 
inventory management systems that provide visibility over in-storage 
assets, they do not have, in all cases, the capability to share data on 
a near real-time basis. Second, the inability to share data on a near 
real-time basis negatively affects DOD's ability to make efficient and 
effective inventory management decisions in support of operating 
forces. Consequently, DOD did not reach the goal established in its 
1998 Logistics Strategic Plan of achieving 100 percent visibility by 
2004. Finally, the ongoing business systems modernization efforts and 
other efforts to develop data sharing capability may not be completed 
prior to the new goal of achieving TAV in 2010.

Component Inventory Management Systems Provide Some Visibility:

As shown in table 1, each of the military services and DLA has a 
variety of inventory management systems that provide visibility over 
the assets stored at the various levels of supply throughout the 
department. However, these systems do not always have the capability to 
share data on a near real time basis.

Table 1: Summary of In-Storage Inventory Management Systems:

Army: New system: Logistics Modernization program.

Wholesale supply level: Legacy systems: commodity command standard 
system, and the standard depot system; 
Retail intermediate level: Standard Army Retail Supply System; 
Retail consumer level: Standard Army Retail Supply System; 
Servicewide capability: Total Asset Visibility.

Navy: Wholesale supply level: Uniform Inventory Control Program; 
Retail intermediate level: Uniform Automated Data Processing System and 
Force Inventory Management Analysis Reporting System; 
Retail consumer level: Uniform Automated Data Processing System and 
Force Inventory Management Analysis Reporting System; 
Servicewide capability: One Touch Support.

Air Force: Wholesale supply level: Stock control system (DO35A); 
Retail intermediate level: Stock Control System (DO35K); 
Retail consumer level: Standard Base Supply System; 
Servicewide capability: Stock Control System.

DLA: Wholesale supply level: New system: business systems 
modernization.

DLA: Wholesale supply level: Legacy systems: Standard Automated 
Materiel Management System, and the Defense Integrated Subsistence
Management System; 
Retail intermediate level: N/A[A]; 
Retail consumer level: N/A[A]; 
Servicewide capability: N/A[A]. 

Source: GAO analysis.

[A] For the purposes of this comparison, we did not consider the 
relatively small amount of inventory held at DLA retail facilities.

[End of table]

Table 1 shows the various management tools that the military services 
and DLA have developed to enable data sharing among the levels of 
supply for which they are responsible. These systems generally provide 
visibility over specific segments of inventory, but visibility across 
different levels of supply or across services is dependent upon being 
able to share data from multiple systems. For example, the Navy's 
Uniform Inventory Control Program System provides the Navy with 
visibility over assets within its wholesale supply system and its 
Uniform Automated Data Processing System and Force Inventory Management 
Analysis Reporting System provide visibility over assets within its 
retail supply system. While each of the components has the ability to 
share data from existing logistics systems throughout its particular 
organization, the capability to share data on a near real time basis 
does not always exist. Without the ability to share data on a near 
real-time basis, DOD, the military services, and DLA cannot be assured 
that they are making inventory management decisions with accurate and 
timely records.

While the capability to share some information on a departmentwide 
basis also exists, this capability is also negatively affected by the 
lack of near real-time data sharing. Specifically, at this time the 
capability to share data is sometimes achieved by reconstructing data 
from other data sources, which can introduce data reliability errors 
into the system, or batch processing of data, which can result in 
timeliness issues. For example, the Navy's One Touch Support system 
provides the Navy with the capability to access logistics information 
from a wide variety of Navy data sources as well as from DLA and other 
military service systems. Some of these data are provided through near 
real-time data links, while other data are shared among the Army, Air 
Force, and DLA on a periodic basis through batch processing.

Lateral redistribution also provides the military services and DLA with 
some capability to act upon information provided by the various systems 
within the department. Lateral redistribution is an automated 
capability used to satisfy a requisition through the most efficient and 
effective means. Generally speaking, the lateral redistribution process 
takes place when no assets are available to satisfy the requisition at 
the appropriate wholesale supply source. The item manager uses an 
automated query capability to determine if any of the military services 
has the item available in their retail systems prior to initiating a 
procurement action. Generally, redistribution of assets that exceed an 
activity's authorized inventory level occur automatically, while 
redistribution of assets that comprise an activity's authorized 
inventory level is dependent on a complex matrix of priorities. If an 
asset is found within the retail supply systems of any of the military 
services, then the lateral redistribution business rules are used to 
determine if that asset should be used to satisfy the requisition or 
whether the procurement action should proceed.

In a series of reports issued between March 1999 and July 2004, we have 
reported numerous weaknesses in DOD's visibility and control over items 
being shipped from one location to another. Specifically, we reported 
in March 1999 that the Navy had not effectively controlled its in-
transit inventory and placed enormous amounts of inventory at risk of 
undetected theft or misplacement.[Footnote 21] For example, we found 
that between fiscal years 1996 and 1998, the Navy reported that it had 
lost more than $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. 
Similarly, we reported in June 2000 that the Army did not know the 
extent to which shipped inventory was lost or stolen because of 
weaknesses in its inventory controls and financial management 
practices.[Footnote 22] In addition, we reported in July 2002 that the 
Air Force and contractor personnel had largely not complied with DOD 
and Air Force inventory control procedures designed to safeguard 
material shipped to contractors, placing items worth billions of 
dollars at risk of fraud, waste, and abuse.[Footnote 23] Most recently, 
we reported in July 2004 that the Navy had failed to maintain proper 
accountability and visibility over government furnished equipment 
shipped to repair contractors.[Footnote 24]

Continuing Systems Development Efforts May Not Achieve TAV by 2010:

Each of the components has ongoing efforts for developing new systems 
to improve their inventory management capabilities. For example, both 
DLA and the Army are in the process of fielding their next generation 
of inventory management systems for use at the wholesale level, 
Business Systems Modernization and Logistics Modernization Program, 
respectively. In addition, the Air Force and Navy also have similar 
ongoing efforts to redesign their logistics systems. While these 
efforts may help to attain TAV, we are concerned that DOD's near term 
efforts may not be consistent with its long-term strategy--Business 
Management Modernization Program. For example, we reported in September 
2004 that clear links between mid-range and long-range efforts to 
address deficiencies in DOD's business operations were not yet 
established.[Footnote 25] Further, recent reviews of two DOD system 
efforts have raised concerns regarding aspects of DOD's system 
development oversight and monitoring.[Footnote 26] For example, we 
recently reported that Army and DLA systems do not provide a corporate 
solution for TAV because that solution depends on the successful 
development and implementation of other systems for which timeframes 
and associated costs have not yet been fully defined. Achieving TAV 
within the Army will require the Logistics Modernization Program to be 
integrated with other Army systems currently under development--the 
Product Lifecycle Management Plus and Global Combat Support System-
Army. As of May 2004, there were no estimates for the cost or time 
frames for completing the development and implementation of the Product 
Lifecycle Management Plus system. Similarly, although the Army's 
capital investment program includes funding of more than $1 billion for 
the Global Combat Support System-Army through fiscal year 2009, the 
Army stated that the total cost of the program could not be accurately 
estimated until all process requirements are defined at some later 
date.

From a departmentwide perspective, joint total asset visibility is an 
evolving process designed to (1) provide users with information on the 
location, movement, status, and identity of units, personnel, 
equipment, and supplies and (2) facilitate the capability of users to 
act upon the information. Currently, this capability is provided 
through the Joint Total Asset Visibility (JTAV) system, which relies on 
non-integrated inventory management systems within the military 
services and DLA for visibility data. While JTAV is available to users 
throughout the department, it does not provide TAV because the system 
is constrained by reliance on the availability, accuracy, and 
timeliness of information from the military services' and DLA's 
information systems. For example, a recent contractor study of 
logistics performance in Operation Iraqi Freedom stated that because 
JTAV will be replaced at the end of fiscal year 2005 and is only being 
funded to support its existing capabilities, little has changed in JTAV 
capability since the DOD Inspector General reported shortfalls in the 
system's capability in 2002.[Footnote 27] In addition, the contractor 
study stated that JTAV was seen by users as being incomplete and 
untimely, and therefore, could not be relied upon. Consequently, users 
were accessing component information systems separately and integrating 
the data from multiple systems manually.

At this time, DLA is leading a departmentwide effort called the 
Integrated Data Environment that is intended to provide joint 
visibility throughout the department. This new capability is based on 
establishing normalized data requirements that will have to be 
supported by existing and new business information systems. This 
capability is expected to be operational during fiscal year 2005 within 
DLA, and is expected to provide DLA logistics data to users throughout 
DLA and the department. DLA's capability is expected to serve as the 
model for instituting similar data environments in the military 
services that can ultimately be linked to provide visibility across the 
department. This departmentwide capability is expected to be available 
in August 2007. However, because the Integrated Data Environment 
utilizes data from the various military service and DLA systems, TAV 
will not be achieved through the Integrated Data Environment until the 
individual systems are developed and implemented within the military 
services and DLA.

Significant Impediments Hinder Achievement of TAV:

A number of significant impediments hinder DOD and the components' 
abilities to attain their goals of achieving TAV. First, DOD lacks a 
clear long-term strategy to guide its TAV efforts and address key 
issues such as systems integration. Second, integration and 
interoperability of the numerous information systems used to support 
logistics operations and inventory management continue to present 
challenges to DOD, the military services, and DLA. Finally, DOD, the 
military services, and DLA have long-standing data accuracy and 
reliability issues pertaining to their numerous inventory management 
systems. Given the lack of an overarching plan to guide TAV efforts, 
the continuing integration issues, and the shortcomings of the existing 
systems, it seems unlikely that the military services and DLA will meet 
the department's target of achieving TAV by 2010.

TAV Hindered by Lack of a Clear Long-Term Strategy:

Because DOD continues to rely on the individual efforts of DLA and the 
military services to achieve TAV without a clear link to its long-term 
improvement initiative the Business Management Modernization Program, 
it is unlikely DOD will achieve TAV by its 2010 target date. When we 
examined the status of TAV within DOD in 1999, we recommended that DOD 
develop a departmentwide strategic plan or common strategy and 
associated components' implementation plans to improve the management 
and implementation of TAV. Furthermore, we recommended these plans be 
based on the outcome-oriented principles of GPRA. However, DOD 
responded that better asset management would be attained by each 
component through improvements to their business and inventory systems 
and databases. DOD's Business Management Modernization Program is 
responsible for oversight and monitoring of the department's business 
transformation initiatives. As part of this program, DOD is continuing 
its efforts to refine and implement the department's business 
enterprise architecture to serve as a blueprint to guide business 
transformation efforts and business systems acquisition and 
development. One of the objectives of this architecture is to attain 
TAV by fiscal year 2010. However, as discussed below, we have 
previously reported that weaknesses exist in the design and content of 
the most recent version of the architecture. Further, we reported in 
September 2004 that there is no clear link between the components' 
implementation plans and the long-term objectives of the department's 
business transformation program.[Footnote 28] Currently, the 
department is required to report annually to Congress by March 15 of 
each year on the progress it is making in refining and implementing the 
business enterprise architecture in support of its business management 
modernization program.

While the logistics community has identified TAV as one of the four 
pillars needed as the foundation for its logistics transformation in 
its Focused Logistics Campaign, it has not established a long-term 
strategy to focus and guide the components' efforts. However, TAV is 
not specifically included in the Future Logistics Enterprise--the mid-
term plan for logistics transformation. While the End-to-End 
Distribution initiative within the Future Logistics Enterprise 
incorporates many of the characteristics of TAV, it does not require 
the components to submit supporting plans and does not include some key 
elements of a comprehensive plan necessary to achieve TAV. For example, 
the department still has not defined a management framework, 
established accountability, identified resource requirements, or 
established performance measures in regards to TAV.

Even when a plan to improve TAV is developed, problems with 
departmentwide implementation still occur. For example, in response to 
Program Budget Decision 422, dated December 2001, each of the military 
services developed separate plans for implementing the decision, which 
reflected a disparity in the extent to which they were willing to 
implement the departmentwide policy. While this document called for the 
military services to eliminate duplicative retail supply operations by 
returning management and ownership of DLA-managed items being held by 
the military services to DLA, the services' implementation plans each 
interpreted the requirements differently. For example, the Navy plan 
called for a small number of pilot sites where DLA would take over the 
ownership of the DLA-managed items being stored at the Navy retail 
supply activities. The Air Force, on the other hand, did not 
participate in any of the pilot projects, and planned only to eliminate 
co-located inventory items at the Air Logistics Centers.

Information Systems Integration Challenges Hinder TAV Achievement:

DOD has not achieved the necessary integration or interoperability of 
its inventory (business) systems to support TAV. TAV cannot be achieved 
unless these multiple business systems provide users such as combatant 
commanders, operating units and inventory managers with accurate data 
on the quantity, location, condition, and movement of inventory. As 
part of its ongoing business systems modernization efforts DOD is 
creating a repository of the department's existing business systems. As 
of April 2003, this repository contained 210 inventory-related 
information systems within the logistics domain, as shown below in 
table 2.

Table 2: Reported DOD Logistics Business Systems by Functional Area:

Logistics: 

Inventory; 
Air Force: 50; 
Army: 90; 
Navy/Marine Corps: 42; 
DFAS[A]: 4; 
Other[B]: 24; 
Total: 210.

Functional area: Logistics; 
Air Force: 57; 
Army: 44; 
Navy/Marine Corps: 28; 
DFAS[A]: 2; 
Other[B]: 29; 
Total: 160.

Functional area: Transportation; 
Air Force: 8; 
Army: 11; 
Navy/Marine Corps: 2; 
DFAS[A]: 0; 
Other[B]: 11; 
Total: 32.

Functional area: Personal property management; 
Air Force: 6; 
Army: 5; 
Navy/Marine Corps: 5; 
DFAS[A]: 0; 
Other[B]: 2; 
Total: 18.

Functional area: Real property management; 
Air Force: 3; 
Army: 3; 
Navy/Marine Corps: 4; 
DFAS[A]: 0; 
Other[B]: 0; 
Total: 10.

Functional area: National defense property management; 
Air Force: 2; 
Army: 0; 
Navy/Marine Corps: 1; 
DFAS[A]: 0; 
Other[B]: 0; 
Total: 3.

Functional area: Other functions combined; 
Air Force: 51; 
Army: 30; 
Navy/Marine Corps: 21; 
DFAS[A]: 5; 
Other[B]: 11; 
Total: 118.

Functional area: Acquisition; 
Air Force: 3; 
Army: 8; 
Navy/Marine Corps: 1; 
DFAS[A]: 0; 
Other[B]: 2; 
Total: 14.

Functional area: Subtotal; 
Air Force: 180; 
Army: 191; 
Navy/Marine Corps: 104; 
DFAS[A]: 11; 
Other[B]: 79; 
Total: 565. 

Source: GAO analysis of BMMP April 2003 Data.

[A] Defense Finance and Accounting Service.

[B] Includes the Defense Logistics Agency systems.

[End of table]

Table 2 clearly shows that there are numerous systems operating 
throughout DOD within the logistics domain and the inventory functional 
area. As we reported in May 2004, these systems are not integrated and 
thus have multiple points of data entry, which can result in data 
reliability problems due to data input errors at the various points of 
data entry.[Footnote 29]

DOD is refining and implementing a business enterprise architecture as 
part of its Business Management Modernization Program in order to 
define the common operating environment and data requirements for its 
business systems including logistics. Under the incremental approach 
adopted by DOD, the target for achieving TAV is fiscal year 2010. In 
the long-term, this architecture could serve to guide business systems 
investments throughout the department and ensure that new business 
systems are designed and built to be integrated. In May 2001, we 
advocated the creation of an architecture to guide and constrain 
the billions of dollars the department planned to spend to modernize 
its business systems.[Footnote 30] We reiterated this recommendation in 
September 2003 and further recommended that DOD provide more sufficient 
descriptive content related to the future business operations and 
supporting technology necessary for refining and implementing a 
business enterprise architecture.[Footnote 31] However, as we recently 
reported,[Footnote 32] after three years, more than $203 million in 
obligations, and disbursements totaling $111 million, there has not 
been any significant change in the content of DOD's architecture. 
Consequently the architecture continues to lack many of the key 
elements such as sufficient descriptive content related to future 
business operations and supporting technology to support effective 
acquisition and implementation of systems solutions and associated 
operational changes. In addition, DOD has not established the necessary 
management structure, processes, and controls necessary to refine and 
implement the business enterprise architecture. For example, DOD has 
not yet (1) assigned accountability and responsibility for directing, 
overseeing, and approving the architecture; (2) developed specific 
performance measures needed to evaluate the progress made in developing 
the architecture; (3) developed either near-term or long-term plans for 
developing the architecture that explicitly identify and establish a 
baseline for actions to be taken, milestones to be achieved, cost 
estimates to be met and targeted outcomes to be achieved; and 
(4) established effective management oversight and control over ongoing 
business systems modernization investments. Finally, as we reported in 
May 2004, DOD has not yet developed the detailed plans that include 
performance measures for the quality, content, and utility of the 
architecture in support of the incremental approached being used to 
develop the business enterprise architecture.

Long-Standing Data Accuracy and Reliability Issues Hamper TAV 
Achievement:

Problems with data accuracy and reliability of data pertaining to the 
quantity, location, and value of inventory within the numerous 
inventory management systems are long-standing issues that hinder the 
achievement of TAV. For example, military service audit agencies and 
the DOD Inspector General identified various types of inaccurate 
inventory data in the military services' information systems. Since 
fiscal year 2002, these inaccuracies included more than $200 million of 
excess or unrecorded inventory that was not visible to item managers as 
well as significant misstatements in the reported inventory balances. 
Since these unrecorded inventories were not visible to item managers, 
they could not be used to satisfy current operating requirements and 
represent an unnecessary cost if additional inventory was purchased 
that was not needed. To illustrate this point, the Air Force Audit 
Agency identified a $3.3 million overstatement in the procurement and 
repair requirements for three aircraft systems that resulted from the 
lack of visibility over $10.8 million worth of inventory for these 
three systems.

Because DOD does not have integrated systems, methods such as multiple 
points of entry, manual reentry of data, and data interpreters are 
relied upon to enable data sharing among the various DOD, DLA, and 
military service systems. All of these methods introduce the potential 
for inaccurate data. For example, in fielding emerging systems such as 
the Business Systems Modernization and the Logistics Modernization 
Program, numerous interfaces had to be developed with existing systems 
to enable data sharing. When some of these interfaces did not work as 
intended, manual reentry of transactions was relied upon to enable the 
required data transfer. According to DOD officials these, problems were 
only a temporary solution until modifications to the interfaces could 
be made. This problem was not only costly, but could have also led to 
the introduction of inaccurate and unreliable data into emerging 
systems.

DOD Has Made Little Progress toward Assuring That Inventory Systems 
Comply with Financial Standards:

DOD, the military services, and DLA have made little progress in 
assuring that inventory management systems that provide visibility over 
spare and repair parts are substantially compliant with the 
requirements of the Federal Financial Management Improvement Act 
(FFMIA) of 1996. The department recognizes the weaknesses in their 
financial management systems in general and stated in DOD's Performance 
and Accountability Report for fiscal year 2003 that these systems did 
not substantially comply with Federal financial management systems 
requirements, generally accepted accounting principles, and the U.S. 
Government Standard General Ledger at the transaction level. In 
addition, the report stated that DOD's financial management and feeder 
systems could not provide adequate evidence to support various material 
amounts on the financial statements. Since 1990, we have identified 
inventory management as a high-risk area within DOD and specifically 
identified DOD's outdated and ineffective management information 
systems as a primary factor causing this weakness. Inventory management 
system weaknesses hinder DOD's and components' efforts to collect 
accurate, reliable, and timely financial information.

While DOD is currently requiring the military services and DLA to 
certify that emerging systems are in substantial compliance with 
federal financial management requirements, we are concerned that the 
department lacks adequate policies and procedures to determine whether 
compliance has in fact been achieved. For example, we recently reported 
that in developing the Business Systems Modernization and Logistics 
Modernization Program, DLA and the Army, respectively, had not fully 
defined the capabilities required from these systems or how these 
capabilities would be tested to ensure the new systems provided the 
capabilities needed, including whether the systems comply with federal 
financial management requirements.[Footnote 33] In addition we found, 
in both instances, that testing of transactions was not performed to 
validate that they would be processed as intended. For example, to test 
the Logistics Modernization Program, the Army relied upon Joint 
Financial Management Improvement Program (JFMIP)[Footnote 34] testing 
of the commercial off the shelf software in fiscal year 1999 to 
validate that 147 requirements were satisfied for the Logistics 
Modernization Program. We concluded that JFMIP's testing should not be 
relied on to validate these requirements because it did not address 
entity-specific tests of transactions or systems interfaces. In 
addition, because the Army modified the basic commercial software 
package, the Army cannot be assured that these 147 requirements will 
produce the intended results. Consequently, although these two systems 
were certified as being compliant, the weaknesses identified in the 
certification process raise concerns regarding the system's compliance 
with the FFMIA requirements.

Conclusions:

While considerable efforts were made to increase asset visibility over 
spare and repair parts in storage, DOD did not attain TAV by the end of 
fiscal year 2004. Further, it remains questionable whether DOD will 
achieve TAV by fiscal year 2010. While some efforts have been 
undertaken to increase asset visibility, these efforts have been 
limited to specific components due to the absence of an effective 
departmentwide long-term strategy. As a result, DOD's efforts to 
achieve TAV have generally been narrow in scope, uncoordinated with 
other components, not integrated with other inventory management 
systems, and fail to address long-standing data reliability problems. 
Without an effective long-term strategy containing goals, measures, 
time frames, and accountability, wartime logistics problems similar to 
those encountered in our most recent operations in Iraq are likely to 
continue. These problems could negatively impact readiness, could cause 
operating units to resort to inefficient practices such as 
cannibalization, and could result in the unnecessary expenditure 
of millions or even billions of dollars on unneeded inventory or on 
systems and initiatives that do not attain TAV. In addition, DOD has 
made little progress in assuring that its inventory management systems 
comply with federal financial management standards, and we remain 
concerned that system tests were not conducted to validate that 
relevant data were processed as intended. Until DOD ensures that its 
inventory management systems are fully compliant with federal financial 
management standards, concerns will remain about the quality of the 
financial data reported and its value for making inventory management 
decisions related to procurement and distribution of items.

Recommendations:

We continue to believe, as we recommended in April 1999, that DOD 
should develop a cohesive, departmentwide plan to ensure that TAV is 
achieved. Specifically, we recommend that the Secretary of Defense 
develop a departmentwide long-term TAV strategy as part of the Business 
Enterprise Architecture that:

* describes the complete management structure and assigns 
accountability to specific offices throughout the department, with 
milestones and performance measures, for ensuring timely success in 
achieving TAV;

* identifies the resource requirements for implementing TAV and 
includes related investment analyses that show how the major 
information technology investments will support TAV goals;

* identifies how departmentwide systems issues that affect 
implementation of TAV will be addressed; and:

* establishes outcome-oriented TAV goals and performance measures for 
all relevant components and closely links the measures with timelines 
for improvement.

In addition, since 2001, we have made a number of recommendations aimed 
at improving DOD's refinement and implementation of the business 
management modernization program. Most recently, we identified the need 
to have component plans clearly linked to the long-term objectives of 
the department's business management modernization program. As they 
relate to TAV, we continue to believe that these recommendations are 
valid.

Matter for Congressional Consideration:

If the Congress wants a better understanding of the department's plans 
and progress for attaining TAV, it may wish to consider having the 
Secretary of Defense include a section specifically addressing TAV 
implementation in its annual report to the Congress on the progress it 
is making in refining and implementing the business enterprise 
architecture in support of the business management modernization 
program, as required by section 332 of the fiscal year 2005 national 
defense authorization act. Specifically, the Congress may wish to 
consider requiring the Secretary of Defense to outline in this annual 
report the department's plans, milestones, performance measures, and 
progress for attaining TAV throughout the department.

Agency Comments and Our Evaluation:

In commenting on a draft of this report, the Acting Deputy Under 
Secretary of Defense for Logistics and Materiel Readiness concurred 
with the intent of our first three recommendations and partially 
concurred with our last recommendation. Specifically, the department 
acknowledges the need to improve visibility over spare and repair 
parts, but believes that its current strategy of modernizing logistics 
systems and implementing an integrated data approach is the way to 
achieve TAV. In addition, while DOD's comments also recognized the need 
to place increased emphasis on TAV in its modernization program and 
ensure that the component efforts link more closely to long-term 
objectives like TAV, the comments did not include specific actions the 
department plans to take to address its asset visibility weaknesses, 
nor did it provide milestones for when it plans to implement all of its 
modernization programs. Because DOD does not plan to modify its 
approach to implementing TAV, we have added a matter for congressional 
consideration suggesting that the Congress may wish to require the 
Secretary of Defense to report annually on the Department's plans and 
progress for attaining TAV. DOD's comments are reprinted in appendix 
III of this report.

In concurring with the intent of our recommendations that the Secretary 
of Defense develop a deparmentwide long-term TAV strategy that 
(1) describes the complete management structure and assigns 
accountability to specific offices throughout the department, with 
milestones and performance measures for ensuring timely success in 
achieving TAV, (2) identifies the resource requirements for 
implementing TAV and includes related investment analyses that show how 
the major information technology investments will support TAV goals, 
and (3) identifies how departmentwide systems issues that affect 
implementation of TAV will be addressed, DOD stated that these issues 
would be addressed as part of the ongoing business systems 
modernization programs. However, as discussed in this report, these 
ongoing efforts may not ensure that DOD will attain TAV. For example, 
we reported in May 2004 that DOD had not yet established the necessary 
management structure, processes, or controls necessary to refine and 
implement the business enterprise architecture, a key component of 
DOD's business management modernization program. In addition, component 
efforts to modernize business systems will not necessarily provide 
solutions to TAV because these efforts rely on the creation of yet more 
systems to attain TAV. Without a departmentwide long-tem strategy as 
part of the Business Enterprise Architecture that clearly identifies 
how business systems modernization programs relate to and address TAV, 
DOD may not achieve its TAV goal.

In partially concurring with our recommendation that the Secretary of 
Defense develop a departmentwide long-term TAV strategy that 
establishes outcome-oriented goals and performance measures for all 
relevant components and links the measures with timelines for 
improvement, DOD stated that outcome-oriented goals and measures 
specific to the end-to-end supply chain, such as customer wait time, 
will continue to be monitored. We agree that measures such as customer 
wait time should continue to be monitored. Similarly, we agree that 
having a viable data strategy as part of the Business Enterprise 
Architecture and a sound portfolio management process are also 
essential to attaining TAV. However, as we reported in May 2004, DOD 
had not yet established an effective management oversight and control 
process for ongoing business systems modernization investments. In 
addition, the integrated data environment, which could provide the 
viable data strategy, is still under development. With business systems 
modernization taking place while both the integrated data environment 
and business enterprise architecture are still being developed, a 
departmentwide long-term strategy becomes even more critical to ensure 
that the modernization efforts support the department's objectives such 
as TAV.

We are sending copies of this report to Chairman and Ranking Member, 
House Appropriations Subcommittee on Defense. We are also sending 
copies to the Secretary of Defense; the Director, Office of Management 
and Budget; the Secretary of the Army; the Secretary of the Navy; the 
Secretary of the Air Force; and the Director, Defense Logistics Agency. 
Copies will also be available at no charge on our Web site at http://
www.gao.gov:

If you or your staff have any questions about this report, please 
contact me at (202)512-8365 or e-mail me at solisw@gao.gov. GAO 
contacts and key contributors to this report are listed in appendix IV.

Sincerely yours,

Signed by: 

William M. Solis: 
Director, Defense Capabilities and Management:

[End of section]

Appendix I: Scope and Methodology:

To determine what progress has been made in implementing TAV within 
DOD, the military services, and the DLA, we obtained and analyzed 
information on various initiatives pertaining to improving inventory 
management practices. We reviewed these initiatives to identify the 
objectives and scope of the initiatives. We also evaluated whether 
these initiatives would have any impact on the visibility over assets. 
To learn more about the initiatives themselves and what benefits would 
be derived from implementing them, we interviewed knowledgeable 
officials from the following logistics organizations:

Department of Air Force: Deputy Chief of Staff Installations & 
Logistics, Directorate of Logistics Readiness, Material Management 
Policy Division; AF/ILFD; Deputy Chief of Staff Installations & 
Logistics, Maintenance Management Division; Air Force Material Command;

Department of Army: Supply Policy Division, Headquarters, Office of the 
Deputy Chief of Staff, G4; Supply Policy & Logistics Automation Task 
Force, Headquarters, Office of the Deputy Chief of Staff, G4; 
Transportation, Headquarters Army Material Command; Headquarters, 
Office of the Deputy Chief of Staff, G4-LESCO; Headquarters Army 
Material Command; DALO-SMP; DALO-TEO; Headquarters, Army Material 
Command-Logistics Support Activity;

Department of Navy: Naval Supply Systems Command;

Defense Logistics Agency: DLA/J-333-Supply Chain Integration Division; 
and:

The Joint Staff Directorate of Logistics (J-4).

Additionally, we relied on other GAO audit work for information about 
some on-going business systems modernization efforts as they related to 
inventory management. Finally, we analyzed the findings documented in 
audit reports prepared by the DOD Inspector General and the military 
service audit agencies dating back to fiscal year 2001 as another means 
of gauging the amount of progress being made in implementing TAV.

To identify the impediments that DOD, the military services, and DLA 
must overcome in order to achieve TAV, we reviewed previous GAO reports 
(including the 1999 report on TAV). We also reviewed DOD Inspector 
General reports and military service audit reports pertaining to asset 
visibility and inventory management to determine if additional 
impediments existed and whether previously identified impediments 
continue to be a problem. We also discussed impediments to achieving 
TAV with the officials identified above as well as officials from the 
Supply Chain Integration Office and the Transportation Policy Office 
within the Office of Deputy Under Secretary of Defense Logistics 
Materiel Readiness. Also we reviewed policies, rules, and regulations 
to determine what departmentwide guidance are provided for achieving 
TAV. Lastly, we relied on other GAO audit work for information about 
(1) logistics challenges experienced during Operation Iraqi Freedom due 
to inadequate asset visibility, (2) the Business Enterprise 
Architecture effort underway and its relationship to TAV, and (3) the 
relationship between DOD component improvement initiatives and the 
departments business management modernization program.

To assess what progress has been made in ensuring that inventory 
management systems are fully compliant with statutory requirements for 
federal financial management systems, we reviewed the requirements 
outlined in the Federal Financial Management Improvement Act of 1996 
and the standards prescribed in the Joint Financial Management 
Improvement Program. Additionally, we relied on other GAO audit work 
for information about how DOD is ensuring compliance of existing and 
emerging inventory systems with the federal financial management 
systems requirements.

We conducted our work from August 2003 to August 2004 in accordance 
with generally accepted government auditing standards.

[End of section]

Appendix II: Key Programs and Systems:

Future Logistics Enterprise--DOD's mid-term vision to accelerate 
logistics improvements, enhance support to the warfighter, and align 
logistics processes with the operational demands of the 21st century. 
The Future Logistics Enterprise builds upon and accelerates specific, 
ongoing service and agency initiatives to meet the requirements of the 
Quadrennial Defense Review and the National Defense Strategy.

End-to-End Distribution--One of six initiatives contained in the Future 
Logistics Enterprise. End-to-End Distribution is designed to streamline 
warfighter support by providing materiel, including retrograde and 
associated information from the source of supply or point of origin to 
the point of use.

Focused Logistics Campaign Plan--A comprehensive, integrated approach 
for achieving full spectrum support for the future joint warfighter. 
The plan describes how the full potential of focused logistics will be 
achieved through revolutionary changes to information systems, 
reengineered processes, innovation in organizational structures, and 
advances in transportation technology.

Business Management Modernization Program--The Business Management 
Modernization Program is the department's business transformation 
initiative and encompasses defense policies, processes, people, and 
systems that guide, perform, or support all aspects of business 
management--including development and implementation of the business 
enterprise architecture. The Under Secretary of Defense (Comptroller) 
established a program management office called Business Modernization 
and Systems Integration (BMSI), to oversee and manage the program.

Business enterprise architecture--The business enterprise architecture 
is designed to provide a clear and comprehensive picture of DOD's 
business operations across six domains. This picture consists of a 
snapshot of the current operational and technical environment and its 
target environment, as well as a capital investment roadmap for 
transitioning from the current environment to the target environment.

Joint Total Asset Visibility--Joint Total Asset Visibility is the 
Defense Department's evolving process designed to track equipment, 
personnel, and supplies.

Logistics Modernization Program--The Army Materiel Command system that 
will be used to capture logistics data from the wholesale supply 
system. It will replace two existing materiel management systems, the 
Commodity Command Standard System and the Standard Depot System.

Business systems modernization--The DLA system that will replace two 
existing materiel management systems, the Standard Automated Materiel 
Management System and the Defense Integrated Subsistence Management 
System.

Integrated data environment--This initiative will provide the 
capability to integrate DOD logistics information within DLA. The 
environment will facilitate the sharing of data across the department.

Global Combat Support System--This is a family of systems that are 
designed to provide an information-centric environment thereby allowing 
DOD users to access shared data and applications regardless of 
location.

Standard General Ledger--The Standard General Ledger provides a uniform 
Chart of Accounts and technical guidance to be used in standardizing 
Federal agency accounting.

Joint Financial Management Improvement Program--The Joint Financial 
Management Improvement Program is a joint and cooperative undertaking 
of the Department of the Treasury, the GAO, the Office of Management 
and Budget, and the Office of Personnel Management working in 
cooperation with each other and other agencies to improve financial 
management practices in government. The Program Management Office, 
managed by the Executive Director, tests vendor commercial-off-the-
shelf packages and certifies that they meet certain federal financial 
management systems requirements for core financial systems.

Virtual Master Stock Inventory Record--The Virtual Master Stock 
Inventory Record is a database managed by the Navy that displays stock 
availability at the major Navy stock points. The Virtual Master Stock 
Inventory Record also provides the capability to view quantity and 
location of specific items.

[End of section]

Appendix III: Comments from the Department of Defense:

DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS: 
3500 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-3500:

Mr. William Solis:
Director, Defense Capabilities and Management: 
U.S. General Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:

OCT 29 2004:

Dear Mr. Solis:

This is the Department of Defense (DoD) response to the GAO draft 
report, GAO-05-15, "DEFENSE INVENTORY: Improvements Needed In DoD's 
Implementation of Its Long-Term Strategy for Total Asset Visibility of 
Its Inventory," dated September 30, 2004 (GAO Code 350420). The 
Department concurs with the intent of the recommendation to improve 
visibility over spare and repair parts, but we believe that our 
strategy of modernizing our logistics systems and implementing an 
integrated data approach is the way to achieve that goal.

As acknowledged in the audit, the Department has put considerable 
effort into achieving asset visibility over spare and repair parts over 
the past several years. Over that time, the Department has made 
considerable progress towards enhancing asset visibility by improving 
our legacy inventory systems and creating Department-wide policy and 
procedures for required asset visibility capability. We also 
implemented business rules for lateral redistribution to act upon that 
visibility. Through these improvements, we have achieved visibility of 
our spare and repair parts for item managers who can act upon that 
information. However, fully realizing timely and accurate asset 
information requires modernization of our business systems and the 
implementation of the integrated data environment (IDE) that is a key 
component of that modernization.

TAV is an enabler, not an end to itself. Asset visibility is the by 
product of any well designed and enabled end-to-end supply chain. As 
the Department continues to modernize through implementation of 
commercial off-the-shelf software and integration techniques, timely 
and accurate asset visibility will become institutionalized in the 
Department's logistic chain. Our logistics systems modernization 
programs, along with a viable data strategy and sound portfolio 
management process, are the long term solutions to TAV. The Department 
continues to stand behind this approach as our long-term TAV strategy. 
However, we will place increased emphasis on TAV in our modernization 
programs and ensure that the Component efforts link more closely to 
long term objectives like TAV.

Should additional information be required, Mrs. Kathy Smith of my staff 
is the point of contact. She may be reached at (703) 604-0098x135.

Sincerely,

Signed for: 

Bradley Berkson: 
Acting: 

GAO DRAFT REPORT - DATED SEPTEMBER 30, 2004 GAO CODE 350420/GAO-05-15:

"DEFENSE INVENTORY: Improvements Needed in DoD's Implementation of Its 
Long-term strategy for Total Asset Visibility of Its Inventory."

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

RECOMMENDATION 1: The Secretary of Defense develop a Department-wide 
long-term TAV strategy that describes the complete management structure 
and assigns accountability to specific offices throughout the 
department, with milestones and performance measures, for ensuring 
timely success in achieving TAV. (Page 21 /GAO Draft Report):

DOD RESPONSE: Concur with intent. The management structure in place for 
the business systems modernization will be used to ensure timely 
success in achieving our long-term objectives, to include TAV.

RECOMMENDATION 2: The Secretary of Defense develop a Department-wide 
long-term TAV strategy that identifies the resource requirements for 
implementing TAV and includes related investment analysis that show how 
the major information technology investments will support TAV goals. 
(Page 21/GAO Draft Report):

DOD RESPONSE: Concur with intent. The resource requirements in place 
for the business systems modernization will focus efforts on long-term 
objectives, to include TAV.

RECOMMENDATION 3: The Secretary of Defense develop a Department-wide 
long-term TAV strategy that identifies how department wide systems 
issues that affect implementation of TAV will be addressed. (Page 21/
GAO Draft Report):

DOD RESPONSE: Concur with intent. The Department-wide approach to 
managing the business system modernization will address Department-wide 
systems issues, if any.

RECOMMENDATION 4: The Secretary of Defense developed a Department-wide 
long-term TAV strategy that establishes outcome-oriented TAV goals and 
performance measures for all relevant components and closely links the 
measures with timelines for improvement. (Page 21 /GAO Draft Report):

DOD RESPONSE: Partially concur. As carefully pointed out by the GAO in 
previous audits, TAV is an output, not an outcome measure. Outcome-
oriented goals and measures specific to the end-to-end supply chain 
will continue to be monitored, such as customer wait time. 

[End of section]

Appendix IV: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

David Schmitt (757) 552-8124 John Wren (757) 552-8235:

Acknowledgments:

In addition to the individuals named above, key contributors to this 
report included Ann DuBois, Shvetal Khanna, Harry Knobler, Katherine 
Lenane, and Janine Prybyla.

(350420):

FOOTNOTES

[1] GAO, Defense Inventory: Consumption of Inventory Exceeding Current 
Operating Requirements Since September 11, 2001, GAO-04-689 
(Washington, D.C.: Aug. 2, 2004).

[2] DOD 4140.1-R, Supply Chain Materiel Management Regulation, May 23, 
2003.

[3] GAO, Defense Inventory: DOD Could Improve Total Asset Visibility 
Initiative With Results Act Framework, GAO/NSIAD-99-40 (Washington, 
D.C.: Apr.12, 1999).

[4] Data or information that has been delayed by the time required for 
electronic communication and automatic data processing. This implies 
that there are not significant delays.

[5] DOD maintains spare parts at two levels of inventory. Wholesale 
level represents inventory managed centrally, while retail level 
inventory represents inventory held for use at maintenance activities 
or operational units.

[6] "In storage" inventory refers to any items being held for future 
use. This includes items held at the wholesale, retail, and unit levels 
of supply in anticipation of future needs.

[7] DOD 4140.1-R, Supply Chain Materiel Management Regulation, May 23, 
2003.

[8] Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005, Pub. L. No. 108-375, ß 332, 118 Stat. 1811 (Oct. 28, 2004)

[9] 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).

[10] Pub. L. No. 104-208, div. A, ß101 (f), title VIII, 110 Stat. 3009, 
3009-389 (Sept. 30, 1996).

[11] GAO-04-615.

[12] DOD Regulation 4140.1-R, version dated May 1998, chapter 4, "Asset 
Management."

[13] GAO/NSIAD-99-40.

[14] Pub. L. No. 103-62, Aug. 3, 1993.

[15] 40 U.S.C. ßß11101-11703

[16] GAO, Financial Management: Further Actions Are Needed to Establish 
Framework to Guide Audit Opinion and Business Management Improvement 
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).

[17] GAO, Defense Logistics: Preliminary Observations on the 
Effectiveness of Logistics Activities during Operation Iraqi Freedom, 
GAO-04-305R (Washington, D.C.: Dec. 18, 2003).

[18] GAO/NSIAD-99-40.

[19] Pub. L. No. 104-208, div. A, ß101 (f), title VIII, 110 Stat. 3009, 
3009-389 (Sept. 30, 1996).

[20] Pub. L. No. 101-576, 104 Stat. 2838, Nov. 15, 1990.

[21] GAO, Defense Inventory: Navy's Procedures for Controlling In-
Transit Items Are Not Being Followed, GAO/NSIAD-99-61 (Washington, 
D.C.: Mar. 31, 1999).

[22] GAO, Defense Inventory: Army Needs to Strengthen and Follow 
Procedures to Control Shipped Items, GAO/NSIAD-00-109 (Washington, 
D.C.: June 23, 2000).

[23] GAO, Defense Inventory: Air Force Needs to Improve Control of 
Shipments to Repair Contractors, GAO-02-617 (Washington, D.C.: July 1, 
2002).

[24] GAO, Defense Inventory: Navy Needs to Improve the Management Over 
Government-Furnished Material Shipped to Its Repair Contractors, GAO-
04-779 (Washington, D.C.: July 23, 2004).

[25] GAO-04-910R.

[26] GAO-04-615.

[27] Science Applications International Corporation, Objective 
Assessment of Logistics in Iraq, March 2004.

[28] GAO, Financial Management: Further Actions Are Needed to Establish 
Framework to Guide Audit Opinion and Business Management Improvement 
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).

[29] GAO-04-615.

[30] GAO, Information Technology: Architecture Needed to Guide 
Modernization of DOD's Financial Operations, GAO-01-525 (Washington, 
D.C.: May 17, 2001).

[31] GAO, DOD Business Systems Modernization: Important Progress Made 
to Develop Business Enterprise Architecture, but Much Work Remains, 
GAO-03-1018 (Washington, D.C.: Sept. 19, 2003).

[32] GAO, DOD Business Systems Modernization: Limited Progress in 
Development of Business Enterprise Architecture and Oversight of 
Information Technology Investments, GAO-04-731R (Washington, D.C.: May 
17, 2001).

[33] GAO-04-615.

[34] The Joint Financial Management Improvement Program is a joint and 
cooperative undertaking of the Department of the Treasury, the GAO, the 
Office of Management and Budget, and the Office of Personnel Management 
working in cooperation with each other and other agencies to improve 
financial management practices in government. The Program Management 
Office, managed by the Executive Director, tests vendor commercial-off-
the-shelf packages and certifies that they meet certain federal 
financial management systems requirements for core financial systems.

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