Navy Financial Management: Improved Management of Operating Materials and Supplies Could Yield Significant Savings
AIMD-96-94
Published: Aug 16, 1996. Publicly Released: Aug 16, 1996.
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Highlights
GAO examined the Navy's financial reporting on and management of operating materials and supplies that are not part of Defense Business Operations Fund (DBOF) inventories, focusing on the: (1) Navy's accountability and visibility over approximately $5.7 billion in operating materials and supplies on board vessels and at redistribution sites; (2) Navy's management of excess items; and (3) accuracy of operating unit records for operating materials and supplies.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Navy | The Secretary of the Navy should direct the Chief of Naval Operations to direct the fleets to eliminate redistribution sites. |
Closed – Not Implemented
The Navy did not concur with this recommendation. GAO held this recommendation open for a number of years in the event that GAO and the Navy could reach concurrence. However, while not supported by the findings in the GAO report, the Navy continues to contend that the centers provide a critical interface between the consumer and wholesale levels and an accessible and controllable collection/distribution point for excess consumer-owned assets, and that excess assets are only held for up to 12 months at these sites before being returned to the wholesale system.
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| Office of the Assistant Secretary of the Navy (Financial Management) | Until the redistribution sites are eliminated, the Assistant Secretary for Financial Management should direct the fleets to continue reducing their O&M budget estimates by the value of the items annually issued free from these redistribution sites. |
Closed – Implemented
According to Navy officials, the Navy has integrated a reduction into its O&M budget estimates for the value of items annually issued free from the redistribution sites. However, Navy officials have been unable to provide budget documents supporting any such reductions for fiscal years 1998, 1999, or 2000. According to a Navy official, the value of such "free" issues are factored into the Navy's budget development model--the Navy views the free material as cost avoidance, and adjusts its budget to reflect cost avoidance expect to result from its forecast of free material. However, because of the lack of supporting documentation supporting the value of such free materials, it is extremely difficult to identify whether: (1) any such reductions occurred in the Navy's O&M budget estimates; and (2) if so, the reduction accurately reflected the full extent of such free issues from redistribution sites.
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| Department of the Navy | The Secretary of the Navy should direct the Chief of Naval Operations to ensure that the various asset visibility efforts are properly coordinated and integrated to fully meet the information needs of item managers for data on operating materials and supplies. |
Closed – Not Implemented
DOD disagrees with GAO's interpretation of SFFAS No. 3 with respect to operating materials and supplies that are to be tracked to maintain visibility. Consequently, while the Navy has a number of initiatives underway directed at improving operating materials and supply visibility, these efforts are not focused on the full extent of operating materials and supplies intended by this recommendation.
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| Department of the Navy | The Secretary of the Navy should direct the Chief of Naval Operations to, in conjunction with the Navy Assistant Secretary for Financial Management, ensure that the asset visibility efforts facilitate complete, reliable, and prompt consolidated financial reporting of operating materials and supplies in accordance with the Federal Accounting Standards Advisory Board Statement Number 3 and the Office of Management and Budget's financial reporting guidance. |
Closed – Not Implemented
The Navy does not agree that Federal Accounting Standards Advisory Board Statement (SFFAS) No. 3 requires operating materials and supplies aboard surface combatant ships to be reported in DOD's consolidated financial reporting. DOD does not intend to take action on this recommendation because it considers these items to be in the hands of end users and therefore are expensed and not subject to SFFAS No. 3 reporting requirements. GAO has been working unsuccessfully for the past several years to convince the Navy and DOD that their interpretation of requirements is incorrect.
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| Department of the Navy | The Secretary of the Navy should direct the Chief of Naval Operations to report on a quarterly basis to the Secretary of the Navy the progress made on eliminating the unnecessary redistribution sites and the asset visibility efforts in meeting item managers' and consolidated financial reporting needs. |
Closed – Implemented
The Navy does not agree that the redistribution centers should be closed. However, DOD did agree to provide quarterly reporting on its asset visibility efforts.
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Topics
Financial management systemsInventory control systemsManagement information systemsMilitary inventoriesMilitary vesselsNaval suppliesReporting requirementsSpare partsSurplus federal propertyWarehouse facilities