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Highlights

Pursuant to a congressional request, GAO reviewed the: (1) accuracy of inventories at the Naval Supply Center in Norfolk, Virginia; and (2) management of these inventories by the Navy Ships Parts Control Center (SPCC).

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. The Secretary of Defense should clarify inventory adjustment reversal procedures to: (1) preclude misinterpretation; (2) ensure complete financial and inventory accountability; and (3) ensure that inventory adjustment reversals are included in the computation of inventory accuracy rates.
Closed - Implemented
The Military Standard Transaction and Accounting Procedures (MILSTRAP) were changed to implement this recommendation. The change clarifies the reversal procedure and establishes additional performance measures that include inventory adjustment reversal transactions. No further action is necessary.
Department of the Navy 2. To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should provide the naval supply centers with specific criteria for designing physical inventory samples to eliminate inventory abuses that distort accuracy reports. These criteria should include guidance that ensures that STATMAN, the Navy's new statistical sampling and analysis tool, enables managers to obtain a representative view of inventory accuracy based on such indicators as initial record accuracy and dollar and unit variances.
Closed - Implemented
DOD has changed its reporting requirements to include an annual statistical random sample and reporting of the resultant initial records accuracy, dollar and unit variances. No further action is necessary.
Department of the Navy 3. To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should require the Commanding Officer of the Norfolk Naval Supply Center to: (1) properly apply and enforce inventory regulations; (2) make adjustments within the established time frames for completing inventories; and (3) complete causative research as rapidly as is feasible.
Closed - Implemented
The Commanding Officer of the Norfolk Naval Supply Center has reemphasized the proper application and enforcement of procedures to ensure timely inventory adjustments and causative research. He also has discontinued deferral of adjustments. No further action is necessary.
Department of the Navy 4. To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should require that SPCC stock records be established and kept current with regard to items sent to non-Navy facilities for repair.
Closed - Implemented
The Navy is implementing a Commercial Asset Visibility Program. No further action is necessary.
Department of the Navy 5. To improve inventory accuracy and develop more meaningful accuracy measures, the Secretary of the Navy should require that the next annual Financial Integrity Act assessment include a review of the internal control weaknesses discussed in this report, such as inventory accuracy and causative research.
Closed - Implemented
The Navy included physical inventory control as a mandatory element to be addressed in its annual assessment in August 1989. No further action is necessary.

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