DOD Financial Management: Actions Needed to Account for Army Ammunition at Contractor-Owned, Contractor-Operated Sites
Fast Facts
We reviewed how well the Army kept track of ammunition being repaired at sites that contractors own and operate. This included Stinger air defense missiles, Javelin anti-tank missiles, and more.
We estimate the Army didn't properly account for at least 95% of the ammunition held at these sites, as of July 2024.
The Army was unaware of which sites held ammunition. Initially, the Army told us that 5 held such inventory; it later determined only 2 did.
The Army didn't ensure that it had accurate and timely records, and it didn't have procedures to compare its records against those of contractors. Our recommendations address these issues.
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Highlights
What GAO Found
The Secretary of the Army (Army) is the single manager for conventional ammunition for the Department of Defense (DOD). Conventional ammunition includes items ranging from small arms cartridges to rockets, mortars, and artillery shells.
GAO focused its audit on Army ammunition held for repair and managed at contractor-owned, contractor-operated (COCO) sites. Of the approximately $41 billion in ammunitions the Army reported in its financial statement as of September 30, 2024, $966 million of it was held at COCO sites. The Army uses the Logistics Modernization Program (LMP) system to account for ammunition inventory held at these sites.
GAO found that the Army did not accurately record ammunition inventory information in its financial accounting records. For example, the Army did not have accurate information about which COCO sites held ammunition inventory during GAO’s audit. Further, based on the sample testing results, GAO estimated that the Army did not properly record in the LMP system approximately 95 percent of the selected records as of July 31, 2024. Specifically, GAO tested 94 Army ammunition records held at three COCO sites and found that the Army did not properly record 89 of the selected records, as shown below.
Accuracy of 94 Selected Army Ammunition Records as of July 31, 2024
The Army did not properly account for COCO-held ammunition because it lacked a process and related guidance for recording and reporting ammunition inventory at COCO sites. The Army has taken some steps to document the reconciliation of Army ammunition held for repair at COCO sites. However, the actions the Army has taken do not address all the weaknesses GAO identified in its review. In addition, the Army lacks key guidance to help ensure that it accurately and timely records ammunition inventory transactions in its financial accounting records and retains supporting documentation for ammunition inventory transactions.
Until corrected, these deficiencies increase the risk that the Army’s accounting records for ammunition inventory are inaccurate. Further, inconsistently performing, or not performing, ammunition inventory reconciliations increases the risk of management and Congress lacking reliable ammunition accounting information needed to make informed decisions regarding Army’s resources.
Why GAO Did This Study
DOD remains the only major federal agency to have never received a department-wide clean audit opinion. One contributing factor is DOD’s long-standing material weakness in operating material and supplies (OM&S).
During the fiscal year 2024 audit of the Army’s financial statement, the independent public accountants reported that the Army did not consistently design, implement, and document internal controls over all aspects of OM&S. Having accurate financial accounting records is an important, basic tool in the management and oversight of organizations. The Army accounts for ammunition, spare parts, and repair parts in its OM&S account.
This report, developed in connection with fulfilling GAO’s mandate to audit the U.S. government’s consolidated financial statements, examines the extent to which the Army properly accounted for ammunition inventory managed and held for repair at COCO sites in its financial accounting records. To do this, GAO reviewed relevant DOD guidance and instructions. GAO also reviewed a random sample of 94 records from the Army’s LMP system for ammunition inventory held for repair at three COCO sites as of July 31, 2024.
Recommendations
GAO recommends that the Army develop and implement guidance to ensure that it accurately and timely records ammunition inventory transactions and retains supporting documentation, and that the Army update existing standard operating procedures to include certain key steps for completing reconciliations.
The Army concurred with both recommendations.
Recommendations for Executive Action
Agency Affected | Recommendation | Status |
---|---|---|
Department of the Army | The Secretary of the Army should ensure that the Army develops and implements a process and associated guidance for ammunition inventory held at COCO sites to help ensure that it (1) identifies responsible officials and the COCO sites that hold ammunition inventory, (2) accurately and timely records ammunition inventory transactions in its financial accounting records, and (3) retains supporting documentation over ammunition inventory transactions. (Recommendation 1) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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Department of the Army | The Secretary of the Army should ensure that the Army updates the AMCOM Operating Materials and Supplies Contractor-Owned, Contractor-Operated Reconciliation Standard Operating Procedures to include key steps for completing the reconciliations, such as (1) identifying which specific data elements in the LMP system the Army will reconcile with contractor records, including serial numbers, condition codes, and quantities, and (2) resolving discrepancies related to aged ammunition records where supporting documentation is no longer available. (Recommendation 2) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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