Defense Inventory:

Navy's Procedures for Controlling In-Transit Items Are Not Being Followed

NSIAD-99-61: Published: Mar 31, 1999. Publicly Released: Apr 27, 1999.

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Pursuant to a congressional request, GAO reviewed selected aspects of the Navy's management procedures for controlling items in transit, focusing on the: (1) reported value and types of inventory in transit within and between storage and repair activities, vendors, and end users that were unaccounted for (or lost); and (2) Navy's adherence to procedures for controlling such in-transit inventory.

GAO noted that: (1) the Navy has not effectively controlled its in-transit inventory and places enormous amounts of inventory at risk of undetected theft or misplacement; (2) for fiscal years 1996-1998, the Navy reported that it had lost over $3 billion in in-transit inventory, including some classified and sensitive items such as aircraft guided-missile launchers, military night vision devices, and communications equipment; (3) the Navy's Inventory Control Point (NAVICP) at Philadelphia, which manages the largest portion of the Navy's inventory, reported the largest losses--$2.5 billion, or 84 percent of the Navy's in-transit losses; (4) however, GAO's work showed that a few of the items reported as lost by NAVICP Philadelphia had in fact been accounted for in inventory records; (5) Navy activities involved in issuing and receiving inventory items have not always followed the Navy's control procedures to ensure that in-transit items are accounted for; (6) Navy units have not always reported to NAVICP Philadelphia that they received requested items; (7) ineffective accounting systems have been used to monitor receipts of items redistributed between storage activities, shipped to and from repair facilities, and shipped from end users; (8) NAVICP Philadelphia and its shipping and receiving activities have not adequately investigated unreported receipts of items redistributed between storage activities, shipped to and from repair facilities, and shipped from end users; (9) NAVICP Philadelphia has not monitored receipts of items it purchased from commercial sources; (10) as early as 1990, GAO reported that there were indications of inadequate internal controls over procured assets; (11) Naval Supply Systems Command and NAVICP Philadelphia oversight of in-transit inventory has not been adequate; (12) although Navy officials have initiated actions intended to correct the problems GAO cited, the Navy has not established any performance measures, milestones, or timetable for reducing the vulnerability of in-transit inventory to theft or loss; and (13) the Navy has not identified management of in-transit inventory as a significant weakness in its assessments of internal controls, as provided in the Federal Managers' Financial Integrity Act of 1982.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Commander, Naval Supply Systems Command (NAVSUP), communicated the importance of the proper and timely posting of receipts, as well as prompt and accurate responses to follow-up requests, to supply activities through the NAVSUP monthly update. Additionally, he chartered an Integrated Process Team to look at the current systems, policies, and processes to investigate material receipt acknowledgement problems and proposed short-term solutions.

    Recommendation: In conjunction with developing a statutorily required, comprehensive plan to address visibility over in-transit inventory, the Secretary of Defense should direct the Secretary of the Navy to comply with existing Department of Defense and Navy procedures regarding material receipt acknowledgement of in-transit shipments and reemphasize follow-up procedures on unconfirmed warehoused and purchased material receipts.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Supply System Command's Integrated Process Team designed an initiative known as "Brute Force" to provide temporary improvements in the manual reconciliation process until automated programming changes can be made. Brute Force involves the reallocation and increase in staff to: (1) resolve unconfirmed receipts of warehoused material earlier, thereby avoiding potential write-offs; (2) reconcile in-transit write-offs of classified items with inventory records; and (3) perform causative research and analysis of write-offs of warehoused material.

    Recommendation: In conjunction with developing a statutorily required, comprehensive plan to address visibility over in-transit inventory, the Secretary of Defense should direct the Secretary of the Navy to modify the Navy's integrated accounting and logistics systems so that they routinely update both financial and inventory records when in-transit inventory items are received. Until the systems are operational, NAVICP Philadelphia should establish routine reconciliation procedures for its supply and financial records to ensure oversight and control over in-transit inventory items.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: According the Navy's Office of Financial Operations, the Naval Inventory Control Point reviewed selected aspects of shipped inventory during its fiscal year 1999 management control review pursuant to the Federal Managers' Financial Integrity Act of 1982. In a September 1, 1999, letter to the Chief of Naval Operations, the Vice Commander, Naval Supply Systems Command, identified material weaknesses in the Naval Inventory Control Point internal controls over shipped inventory. The Vice Commander's letter also outlined planned corrective actions, including milestones and timetables for completion.

    Recommendation: In conjunction with developing a statutorily required, comprehensive plan to address visibility over in-transit inventory, the Secretary of Defense should direct the Secretary of the Navy to specifically target in-transit inventory problems as an issue for review in Federal Managers' Financial Integrity Act assessments.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Naval Supply Systems Command established four goals at the Naval Inventory Control Point to reduce fiscal year 2000 write-offs and gain better control of classified, sensitive, and high dollar value warehoused material. The goals are based on the number, value, and types of unconfirmed receipts of warehoused material shipments. Progress toward attaining these goals is assessed monthly by the Commander, Naval Supply Systems Command.

    Recommendation: In conjunction with developing a statutorily required, comprehensive plan to address visibility over in-transit inventory, the Secretary of Defense should direct the Secretary of the Navy to establish performance measures, milestones, and timetables to help monitor the progress being made to reduce the vulnerability of in-transit inventory to undetected loss or misplacement.

    Agency Affected: Department of Defense

 

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