Defense Supply:

Inventories Contain Nonessential and Excessive Insurance Stocks

NSIAD-95-1: Published: Jan 20, 1995. Publicly Released: Jan 20, 1995.

Additional Materials:

Contact:

Mark E. Gebicke
(202) 512-5140
contact@gao.gov

 

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

GAO reviewed the Navy's and the Defense Logistics Agency's (DLA) management of their spare parts and supplies inventories, focusing on whether their insurance stocks are limited to: (1) mission-essential parts; and (2) one replacement unit as required by Department of Defense (DOD) regulations.

GAO found that: (1) the Navy and DLA stock millions of dollars of unnecessary insurance items that are not mission-essential; (2) the Navy and DLA frequently exceed their authorized maximum stock levels, contrary to DOD regulations; (3) the Navy and DLA do not periodically review insurance items to ensure that they are mission-essential and stocked in appropriate quantities because they lack the internal controls necessary to prevent excessive stock buildup; (4) DOD downsizing, weapon system obsolescence and retirement, and stock retention policies have also contributed to excessive inventories; and (5) the excessive inventories cost DOD millions of dollars to procure, manage, and maintain.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD stated that DOD Regulation 4140.1-R already requires all DOD components to review insurance requirements prior to stock replenishment. On February 10, 1995, DOD issued a memorandum to the military services and DLA reemphasizing this policy. GAO believes that this action will be helpful, but it does not go far enough. Because insurance items are not expected to fail, most will not be reviewed if DOD only reviews those in need of stock replenishment. DOD should review all insurance items periodically to identify nonessential and excessive stocks.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy and the Director, DLA, to periodically review insurance items to ensure that they are mission-essential and stocked in allowable quantities.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD agreed that nonessential stocks should be disposed of where these stocks are determined not to be in compliance with policy. On February 10, 1995, DOD sent a memorandum to the military services and DLA emphasizing the proper classification and processing of nonessential and excess stocks.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy and the Director, DLA, to dispose of existing nonessential and excess insurance stock.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD stated that the Navy would direct the Aviation Supply Office to reduce its stockage of insurance items where the stockage is not in compliance with DOD Regulation 4140.1-R. On April 27, 1995, the Naval Supply Systems Command sent a memorandum to the Aviation Supply Office emphasizing the need to comply with the inventory management policies contained in this regulation.

    Recommendation: The Secretary of the Navy should direct the Commanding Officer, Aviation Supply Office, to set the retention level for insurance items at one unit and change the disposal computer program so that the on-hand stockage floor for these items also is one unit.

    Agency Affected: Department of Defense: Department of the Navy

 

Explore the full database of GAO's Open Recommendations »

Sep 22, 2016

Sep 21, 2016

Sep 19, 2016

Sep 12, 2016

Sep 8, 2016

Sep 7, 2016

Sep 6, 2016

Aug 25, 2016

Looking for more? Browse all our products here