Financial Management: Poor Internal Control Has Led to Increased Maintenance Costs and Deterioration of Equipment

On December 3, 1992, the Department of the Army issued a written directive that all Army units shipping repairables enforce DOD and Army regulations concerning packing repairables.

DLA policy is not to allow condition code alone to drive the decision on where to store reparable items. When outside storage must be considered, an item's overall characteristics are reviewed. The policy is not to store expensive, fragile, and highly corrodible items outside. DLA policy is also to cover items that require addition protection against the elements when stored outside. DLA has completed actions to properly store repairables in accord with established storage and security requirements. DLA has completed moving repairables improperly stored at Army depots to storage facilities that meet requirements.

DLA regional security officers developed corrective actions to ensure host institutions provide acceptable security and police protection to protect mission stock. A personnel challenge policy was initiated on October 26, 1992 to ensure that only authorized personnel are present in depot facilities.

Actions are in progress to reduce or eliminate inventory levels at sites where facilities are unsuitable by relocating hazardous items to suitable storage. DLA has moved all hazardous materials to proper storage facilities.

On October 26, 1992, the DLA provided to the Commanders of Distribution Regions and Depots the directive (1) to include physical security over, and storage of, reparables and hazardous materiel as areas of emphasis in maintenance depot annual Federal Managers' Financial Integrity Act reviews and (2) to report actions needed to correct identified weaknesses. DLA has followed up to properly store hazardous materials in facilities that meet all requirements. The deficiencies disclosed in the GAO report have been eliminated.

The Army's Standard Depot System (SDS) is being replaced by the Distribution Standard System for all Defense Distribution Depots. The new system will process repairables and identify by model number, using common routines for receiving, assigning storage locations, and issuing repairables to maintenance in the same manner as any other shipment. System implementation is planned for July 1995.

DLA's letter of October 26, 1992, to Commanders of Distribution regions and depots directed region and commandwide plans of actions and milestones be developed to address storage deficiencies at depots and ensure compliance with existing storage policies and procedures. DLA has completed restoring repairables at Army depots in accord with requirements and in ways to facilitate timely and accurate inventory counts.

As of October 30, 1992, policy was reemphasized that any repairables stored at the depots would be subject to: (1) inventory-by-location reconciliation; (2) Order of Merit prioritization; and (3) the pending statistical sampling technique. DLA is implementing its inventory program, which requires inventories for all materiel denials and location reconciliation mismatches. Effective October 28, 1994, DOD has been performing quarterly random physical inventories of its repairables stored at the depots.

It is DLA policy to reconcile inventories with a depot's custodial record and the cognizant commodity command's accountable record. To this end, an inventory integrity program is being instituted at the four audited depots. The estimated completion date for fully integrating the inventory management program is September 1993. This action has been completed.

The Standard Depot System, as currently structured, can provide cost reports by individual job. The Army will issue guidance to direct a more disciplined approach to data input to that system. By strengthening the input procedures, the Standard System will accurately capture and report maintenance work and costs by individual job. Under DBOF management, SDS is being replaced by the Distribution Standard System for all Defense Distribution Depots. The new system will process cost information for repairables more accurately. System implementation is planned for July 1995.