Inventory Management:

Air Force Inventory Accuracy Problems

NSIAD-88-133: Published: May 12, 1988. Publicly Released: Jun 1, 1988.

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Pursuant to a congressional request, GAO evaluated the Air Force's: (1) physical inventory procedures to determine their accuracy and completeness; (2) research into differences between inventory counts and records; and (3) physical security over inventory.

GAO found that, although the Air Force has implemented a variety of policies and practices that have improved the Air Force Logistics Command's (AFLC) inventory management and accuracy, it: (1) cited inventory management controls as a material weakness in its fiscal year 1986 Federal Managers' Financial Integrity Act (FMFIA) report; (2) adopted a new physical inventory statistical sampling approach which may have overstated inventory accuracy, since it assumed that zero-balance item records with no storage location were correct; (3) adopted, without specific Department of Defense (DOD) authority or sufficient support, a policy for researching and adjusting potential inventory variances; (4) continues to experience problems in conducting adequate causative research into the differences between physical inventory counts and its records; (5) did not routinely conduct trend analysis of causative research at air logistics centers; and (6) allowed privately owned and contractor vehicles to park adjacent to warehouse facilities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: AFLC has cages and fencing around essential areas and over 40 miles of new fencing has been installed around warehouses and primary storage facilities. Policy is in place to limit parking of privately-owned vehicles adjacent to warehouses.

    Recommendation: The Secretary of the Air Force should direct the Commander, AFLC, to strengthen physical security at ALC by providing fencing around warehouses where practical, especially primary storage facilities, and not allowing parking of contractor or privately owned vehicles adjacent to warehouses.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Closed - Implemented

    Comments: AFLC has instituted a program to measure the effectiveness of causative research and has taken extensive management action to identify and correct problem areas. Sampling under monetary criteria is required and a reporting criteria has been established.

    Recommendation: The Secretary of the Air Force should direct the Commander, AFLC, to continue emphasizing the need for effective causative research that determines underlying causes of inventory discrepancies and systemic problems. Variances currently under the monetary criteria for causative research should be sampled as further input to identifying and correcting systemic problems.

    Agency Affected: Department of Defense: Department of the Air Force

  3. Status: Closed - Implemented

    Comments: DOD has approved the Air Force's testing of its inventory research and adjustment policies.

    Recommendation: The Secretary of the Air Force should direct the Commander, AFLC, to reevaluate its research and adjustment policies, especially the policy of not adjusting discrepancies under $5,000, which do not involve more than 10 percent of recorded items, to ensure that they do not have adverse effects on inventory management. If the policy is determined to be supportable, ensure that approval to implement it has been obtained from DOD.

    Agency Affected: Department of Defense: Department of the Air Force

  4. Status: Closed - Implemented

    Comments: In requiring annual statistical samples as a basis for measuring and reporting inventory accuracy in the DOD Inventory Control Effectiveness Report, samples must exclude zero balance items where there is no record of a storage location.

    Recommendation: The Secretary of Defense, in requiring annual statistical samples as the basis for measuring and reporting inventory accuracy in the inventory control effectiveness report, should provide that these samples exclude zero balance items where there is no record of a storage location.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: The Air Force has reported inventory management as a material weakness in its annual statement and will continue to report it until all major weaknesses are corrected.

    Recommendation: The Secretary of the Air Force should reassess inventory accuracy in its next FMFIA statement and continue executing and reporting progress on the milestones for correction of the material weaknesses identified in the fiscal year 1986 FMFIA statement.

    Agency Affected: Department of Defense: Department of the Air Force

 

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