Army Logistics:

Use of Long Supply Assets in Depot-Level Repair Programs Could Reduce Costs

NSIAD-90-27: Published: Nov 16, 1989. Publicly Released: Nov 16, 1989.

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Pursuant to a congressional request, GAO examined the Department of the Army's inventory operations, focusing on: (1) whether the Army had a program to use long-supply spares and repair parts in depot-level repair programs and, if so, whether the program worked effectively; and (2) the economic advantages of using those assets in repair programs.

GAO found that: (1) although the Army developed an automated program in 1981, it did not match long-supply assets with the large number of ongoing or scheduled programs; (2) one inventory control point developed an automated program that the Army could use at the other five inventory control points to provide Army-wide capability; (3) although some inventory managers had manually matched long-supply assets to applicable repair programs, the depots did not requisition the assets from inventory control points because of the Depot Systems Command's (DSC) reluctance to pay full price for stock-funded assets; (4) DSC believed that inventory managers should issue stock-funded, long-supply assets to depots at less-than-full unit price, since regulations allowed depots to adjust the next year's prices to recover any losses; (5) none of the six inventory control points routinely screened their inventories to determine the potential for using long-supply assets in their repair programs; (6) the Army could have used its $59.6 million in long-supply assets to replace assets scheduled for repair and saved about $14.9 million; (7) the Army reported problems that hindered the maximum use of long-supply assets but did not correct them because its internal control program did not ensure prompt resolution of audit findings; and (8) the Army Materiel Command (AMC) did not identify material weaknesses in the use of long-supply inventories in its annual assessments for fiscal years 1987 and 1988.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: An accomplishment report is being prepared on the results of the MICOM test. Preliminary data indicates that the value of requisitions satisfied from using serviceable assets in long supply amounted to about $3.4 million.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to determine whether the automated means developed by the Army Missile Command to match long-supply assets to applicable repair programs will produce the desired results. If not, the Secretary should develop an effective automated procedure that will provide Army-wide capability.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: The Department of the Army issued a memorandum dated December 26, 1989, directing that AMC comply with guidance for maximizing the use of long supply assets.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to require inventory control points (ICP) and depots to comply with current policies and procedures for maximizing the use of long-supply assets applicable to repairs performed by contractors and by depots.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: This action had been covered by a material weakness statement issued on this subject last year. For this reason, action has been completed, but GAO will monitor compliance as part of future reviews in the inventory management area.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to strengthen internal control procedures on the use of long-supply inventories in depot-level repair programs by: (1) monitoring the extent to which corrective actions are responsive to audit findings and recommendations; and (2) conducting on-site management reviews to ensure that inventory control points and depots are complying with procedures for maximizing the use of long-supply assets in depot-level repair programs.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: GAO reviewed the material weakness statement on this issue. It addresses the problems GAO surfaced on ineffective use of long-supply assets. This action is completed on the recommendation.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to report the deficiencies in the use of long-supply assets as a material weakness in the Army's system of internal controls.

    Agency Affected: Department of Defense: Department of the Army

 

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