Defense Inventory:

Control and Security Weaknesses Create Opportunities for Theft

NSIAD-92-60: Published: Mar 17, 1992. Publicly Released: Mar 17, 1992.

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Pursuant to a congressional request, GAO examined: (1) the Department of Defense (DOD) inventory's vulnerability to theft; and (2) DOD implementation of physical inventory controls, in-transit controls to deter and detect theft, and physical security measures designed to safeguard assets and detect theft.

GAO found that: (1) during fiscal years 1989 and 1990, DOD reported that law enforcement agencies detected losses totalling $65.8 million in DOD inventories; (2) $51.6 million in losses were recovered, and during that period losses disclosed during physical inventories at supply depots totalled about $2.5 billion and gains totalled $1.8 billion; (3) because needed information was not readily available, DOD could not provide narrative information for each of the nearly 2,000 cases investigated annually, but provided a summary analysis of the cases; (4) theft losses disclosed during criminal investigations were relatively small and the large value of inventory gains indicated that paperwork problems, rather than thefts, caused most physical inventory losses; (5) recent criminal investigations show that weaknesses in the implementation of DOD physical inventory control programs, in-transit controls, and physical security programs have created opportunities for theft; (6) DOD requires managers to analyze inventory adjustments and in-transit discrepancies to identify and correct their causes and to determine whether losses were due to criminal or negligent activity; and (7) its analysis of physical inventory adjustment information showed that DOD could use such information to help identify those depots that were most vulnerable to theft.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: DOD does not believe it has physical control in-transit or physical security problems. It does not want to continue its annual report to Congress on security and control of supplies.

    Matter: Congress should consider continuing the requirement for an annual report until physical inventory, in-transit control, and physical security problems are improved.

  2. Status: Closed - Implemented

    Comments: DOD does not believe it has physical control in-transit or physical security problems. It does not want to continue its annual report to Congress on security and control of supplies.

    Matter: To increase the report's usefulness in assessing the risk of supply system assets to fraud and abuse, Congress should consider requiring that the report include: (1) a summary description of the circumstances surrounding major theft cases, for example, cases involving losses greater than $1 million or sensitive and classified items; and (2) the value of and an analysis of in-transit losses.

 

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