Defense Inventory:

Reports Need Comparable and Comprehensive Data

NSIAD-91-266: Published: Jul 17, 1991. Publicly Released: Jul 17, 1991.

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Donna M. Heivilin
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Pursuant to a congressional request, GAO examined the Department of Defense's (DOD) inventory reports for: (1) comparability over time and across organizations; (2) inclusion of appropriate items; and (3) trends in inventory size.

GAO found that: (1) in its September 1990 Supply System Inventory Report, DOD reported that its secondary item inventory decreased from $109.5 billion in September 1989 to $101.9 billion in September 1990, but the services did not use the same inventory valuation methods for both years; (2) variances in Defense Logistics Agency (DLA) and military services' inventory valuation methods impede comparisons across organizational lines and undermine the value of having aggregated data for all the services and DLA; (3) the Army and Air Force changed their 1990 inventory evaluation method to reduce the reported value of items that needed repair, the Navy further reduced its reported 1990 inventory by $3 billion by valuing its inventory at the lower of acquisition cost or market value, and DLA used a standard price that included surcharges for transportation costs and inventory losses; (4) DOD excluded secondary items aboard combat ships and with troop units from its inventory reports; (5) the on-hand inventory portion of the total resources increased by $100 million from September 1989 to September 1990, but the increase would have been larger had the services not increased secondary item disposal from $3.2 billion in 1989 to $5.2 billion in 1990; (6) inventory purchased between September 1989 and September 1990 decreased from $26.6 billion to $21 billion; and (7) the Supply System Inventory report overstates required on-hand inventory.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD established a policy for valuing inventory on a uniform basis which was implemented in the September 1991 Supply System Inventory Report. An accomplishment report is in process.

    Recommendation: The Secretary of Defense should direct the military services and DLA to use a uniform inventory valuation method that will provide comparable data between periods and across organizations, and fully disclose any deviations from the uniform valuation method.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD disagreed with the recommendation stating that the recommendation would result in reporting inventory on a basis different from that on which it budgets. GAO was planning a follow-up report in October 1992.

    Recommendation: The Secretary of Defense should report inventory in a manner that recognizes all levels of on-hand inventory and reflects requirements that are consistent with the inventory that DOD defines as the maximum assets which may be on-hand or on order at a given time.

    Agency Affected: Department of Defense


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