Department of the Navy:

Breakdown of In-Transit Inventory Process Leaves It Vulnerable to Fraud

OSI/NSIAD-00-61: Published: Feb 2, 2000. Publicly Released: Feb 28, 2000.

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Robert H. Hast
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Pursuant to a congressional request, GAO followed up on its previous report on the Navy's in-transit inventory management system, focusing on: (1) determining what happened to the 34 shipments the Navy could not account for; (2) confirming that the Navy actually had receipt information for the 45 shipments that it could not account for in the previous report; and (3) Navy initiatives that address some of the specific control issues associated with in-transit inventory.

GAO noted that: (1) the Navy does not consider to be lost or stolen all items that are written off as losses in transit; (2) Navy officials stated that in many instances the items in question were received but written off as lost because, contrary to requirements in Navy regulations, facilities involved in the movement, repair, and storage of in-transit items did not notify the Naval Inventory Control Point (NAVICP) in Philadelphia, Pennsylvania, that they had shipped or received items; (3) the majority of the shipments written off as lost by NAVICP had in fact been delivered; (4) GAO reviewed 23 of 34 shipments the Navy could not account for and were able to determine the status of 20 shipments; (5) the shipments had been delivered but, due to procedural and system problems, were not reported as received; (6) GAO was unable to determine the disposition of the remaining three shipments because the Navy could not provide documentary evidence; (7) during GAO's previous review, Naval Supply Systems Command officials contended that some items written off as lost had actually been received; (8) however, they could not provide evidence to validate their contention; (9) they explained their information was based primarily on telephone calls and electronic mail messages from the issuing facilities to the intended recipients; (10) GAO found their information to be primarily shipping information and not proof of either delivery or receipt; (11) GAO reviewed 41 of 45 shipments the Navy reported as accounted for and determined 38 shipments had been delivered; (12) however, GAO found that the shipments were either not reported or were reported inaccurately to NAVICP; (13) GAO was unable to determine the disposition of the remaining three shipments because the Navy could not provide sufficient documentary evidence; (14) although GAO's investigation disclosed no evidence of theft in the shipments reviewed, GAO believes that the inventory process is susceptible to fraud, waste, and abuse; and (15) in-transit inventory discrepancies reduce the reliability of Department of Defense inventory financial reports by obscuring true inventory losses and misstating the number of items on hand.

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