Inventory Management:

Receipt Confirmation Problems

NSIAD-88-179: Published: Jul 14, 1988. Publicly Released: Sep 12, 1988.

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GAO reviewed inventory management practices within the Army, Navy, Air Force, and the Defense Logistics Agency (DLA) to determine whether their internal controls were adequate to ensure that they received the materials they paid for.

GAO found that: (1) generally, the military services and DLA failed to provide the Department of Defense (DOD) with assurances that items paid for were received at storage facilities; (2) of 121 Army shipments, it could not determine the status of 5 shipments valued at $491,000; (3) the Army's automated inventory records did not accurately identify shipment receipt status, the follow-up on overdue shipments received low priority, and inventory control points did not reconcile financial records; (4) due to the Navy's ineffective automated control system, the status of 48 shipments valued at $154,000, out of a total of 140 overdue shipments, was unclear; and (5) because of improper receipt processing and inadequate documentation, the Air Force could not account for 22 shipments valued at about $330,150. GAO also found that: (1) DLA did not have records for 12 of 62 shipments it received due to erroneous data on shipping documents and on receiving reports which transmitted receipt data to the inventory control points; (2) although DLA had a receipt follow-up system in one of its centers, managers failed to follow up with vendors and depots to clear overdue shipments; and (3) although DLA policy required investigation on shipments over $100, management did not expect follow-up unless the missing shipment exceeded $10,000. In addition, GAO found that DOD failed to implement changes to the material receipt acknowledgement and supply discrepancy reporting process because of the services' objections to its procedural complexities and implementation costs.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The services and DLA are seeking to fully comply with current DOD guidance and have implemented some improved procedures and systems to ensure that no shipments of material to wholesale activities are lost intransit.

    Recommendation: The Secretary of Defense should require the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, to comply with existing DOD guidance regarding shipments of material in transit to wholesale storage activities.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD components have taken positive actions to ensure that all material receipt processes, including followups, are in place to validate that all material paid for is received.

    Recommendation: The Secretary of Defense should require the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, to establish or reemphasize routine follow-up procedures on shipments of material that have been paid for but not received.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Office of the Secretary of Defense issued a policy statement emphasing the importance of this reconciliation process to the services and DLA.

    Recommendation: The Secretary of Defense should require the Secretaries of the Army, Navy, and the Air Force, and the Director, DLA, to establish routine reconciliation procedures for their supply and financial records to ensure that material that is paid for is actually received.

    Agency Affected: Department of Defense

 

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