Conrail Needs To Further Improve Inventory Control and Management

CED-81-140: Published: Sep 4, 1981. Publicly Released: Sep 4, 1981.

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Since 1976 Congress has provided $3.3 billion in Federal funds to Consolidated Rail Corporation, commonly known as Conrail. Of this, about $1.4 billion has been spent for track rehabilitation. The Regional Rail Reorganization Act of 1973 provides that GAO should keep Congress informed of the security of Federal funds invested in Conrail. GAO evaluated the physical and management controls Conrail has for its maintenance-of-way losses, thefts, or unauthorized use that could occur without detection. Maintenance-of-way inventory consists of items required to maintain and rehabilitate tracks, bridges, and buildings, as well as items to maintain and repair maintenance-of-way work equipment.

To help manage its inventory, Conrail uses a computer-based inventory control system. The system is designed to provide information on where the inventory is, how much is on hand, and what is on order. However, GAO found that Conrail's inventory system is not providing accurate and reliable information. Inventory records are largely inaccurate and are not maintained for many field locations. As a result, the only time Conrail knows what inventory it has and its location, is when the inventory is counted once each year. During the rest of the year, Conrail cannot rely on the information produced by its inventory system. Without reliable inventory information, Conrail managers cannot be sure that items being purchased are actually needed. Inventory records are inaccurate due to: (1) inadequate physical controls over the inventory; (2) failure or delay of Conrail field personnel to complete and process material transaction documents; (3) lack of a requirement to document transfer of materials between Conrail divisions; and (4) lack of inventory records for many field locations.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should maintain stock status inventory records for each inventory store location.

    Agency Affected: United States Railway Association

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should revise procedures to provide for the investigation and evaluation of a representative number of gross, rather than net, physical inventory variances at each store. The procedures should provide guidance on the dollar values of variances to be investigated and should also require that the causes be identified and reported to top management together with recommendations for corrective action.

    Agency Affected: United States Railway Association

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should require that open purchase orders be monitored and that the need for purchase orders that are outstanding for a considerable period beyond the requested delivery dates be reevaluated.

    Agency Affected: United States Railway Association

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should establish a procedure for the transfer of inventory items from one Conrail location to another, requiring that the receiving store verify all items received against accompanying transfer documents and prepare a receiving report for input into the material, accounting and purchasing system.

    Agency Affected: United States Railway Association

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should instruct Conrail personnel to comply with existing procedures requiring that purchase orders be on hand at inventory stores when purchased materials and supplies are received.

    Agency Affected: United States Railway Association

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should assess the physical security of the individual inventory stores and make improvements such as installing fencing and lighting if needed and where deemed economically feasible. Also, access to inventory stores should be limited to authorized persons.

    Agency Affected: United States Railway Association

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should change the organizational structure so that users and custodians of maintenance-of-way materials are not in the same department.

    Agency Affected: United States Railway Association

  8. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman and Chief Executive Officer of Conrail should establish and monitor reasonable inventory record accuracy standards based on the percentage of gross physical inventory variance.

    Agency Affected: United States Railway Association

 

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