Navy Inventory Management:

Inventory Accuracy Problems

NSIAD-88-69: Published: Mar 4, 1988. Publicly Released: Apr 13, 1988.

Additional Materials:

Contact:

Donna M. Heivilin
(202) 512-8430
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO reviewed the: (1) accuracy of inventories at the Naval Supply Center in Norfolk, Virginia; and (2) management of these inventories by the Navy Ships Parts Control Center (SPCC).

GAO found that the Norfolk Center: (1) inconsistently implemented or misinterpreted Department of Defense (DOD) or Navy policies concerning physical inventories, adjustments, causative research, and reversals; (2) did not know if its inventory records accurately reflected the status of its on-hand inventories; (3) used inadequate and incomplete data to measure inventory accuracy, and subsequently overstated the amount of inventoried items and inventory accuracy; (4) postponed discrepancy adjustments pending completion of causative research; and (5) consistently exceeded the deadline for completing causative research. GAO also found that: (1) current policies concerning adjustment reversal and inclusion of unscheduled inventories in accuracy measures cause overstatement or understatement of inventory accuracy; (2) the Navy plans to implement the Statistical Accuracy Techniques and Measurements Analysis sampling and analysis tool to improve inventory accuracy; and (3) SPCC did not maintain adequate control over items sent to contractors or interservice maintenance facilities for repair. GAO believes that the Navy's reports of supply system accuracy are unreliable, since they are based on rates computed from questionable and inaccurate data.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Navy is implementing a Commercial Asset Visibility Program. No further action is necessary.

    Recommendation: To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should require that SPCC stock records be established and kept current with regard to items sent to non-Navy facilities for repair.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Implemented

    Comments: The Commanding Officer of the Norfolk Naval Supply Center has reemphasized the proper application and enforcement of procedures to ensure timely inventory adjustments and causative research. He also has discontinued deferral of adjustments. No further action is necessary.

    Recommendation: To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should require the Commanding Officer of the Norfolk Naval Supply Center to: (1) properly apply and enforce inventory regulations; (2) make adjustments within the established time frames for completing inventories; and (3) complete causative research as rapidly as is feasible.

    Agency Affected: Department of Defense: Department of the Navy

  3. Status: Closed - Implemented

    Comments: DOD has changed its reporting requirements to include an annual statistical random sample and reporting of the resultant initial records accuracy, dollar and unit variances. No further action is necessary.

    Recommendation: To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should provide the naval supply centers with specific criteria for designing physical inventory samples to eliminate inventory abuses that distort accuracy reports. These criteria should include guidance that ensures that STATMAN, the Navy's new statistical sampling and analysis tool, enables managers to obtain a representative view of inventory accuracy based on such indicators as initial record accuracy and dollar and unit variances.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed - Implemented

    Comments: The Military Standard Transaction and Accounting Procedures (MILSTRAP) were changed to implement this recommendation. The change clarifies the reversal procedure and establishes additional performance measures that include inventory adjustment reversal transactions. No further action is necessary.

    Recommendation: The Secretary of Defense should clarify inventory adjustment reversal procedures to: (1) preclude misinterpretation; (2) ensure complete financial and inventory accountability; and (3) ensure that inventory adjustment reversals are included in the computation of inventory accuracy rates.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: The Navy included physical inventory control as a mandatory element to be addressed in its annual assessment in August 1989. No further action is necessary.

    Recommendation: To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should require that the next annual Financial Integrity Act assessment include a review of the internal control weaknesses discussed in this report, such as inventory accuracy and causative research.

    Agency Affected: Department of Defense: Department of the Navy

 

Explore the full database of GAO's Open Recommendations »

Sep 21, 2016

Aug 3, 2016

Aug 1, 2016

Jul 14, 2016

Jul 5, 2016

Jun 30, 2016

Jun 28, 2016

Jun 23, 2016

Jun 22, 2016

Looking for more? Browse all our products here