Inventory Management:

Better Controls Needed to Prevent Misuse of Excess DOD Property

OSI/NSIAD-00-147: Published: Apr 28, 2000. Publicly Released: May 30, 2000.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) inventory management activities, focusing on the: (1) reliability of using DOD's database systems to determine whether activity codes are authorized to obtain excess DOD property; and (2) adequacy of oversight of the management and use of excess DOD property provided to selected universities and a Florida Army National Guard unit where ownership of the property remains with DOD.

GAO noted that: (1) inadequate control, as a result of inconsistent and incorrect data in DOD's databases, has allowed organizations to obtain excess DOD property to which they may not be entitled; (2) for example, the Defense Reutilization and Marketing Automated Information System contains invalid activity code data--and all activity codes are not recorded in the Defense Automatic Addressing System Center master file; (3) many central service points for military services and DOD activities do not validate and reconcile their files to the Defense Automatic Addressing System Center master file in a timely manner as required by regulation; (4) consequently, the data maintained by the various central service points for military services and DOD activities include activity address codes that are not recorded in the master file; (5) in GAO's investigation of the University of Alabama at Huntsville, GAO found that the University had used an invalid activity code to obtain over $3.5 million worth of excess DOD property to which it was not entitled; (6) the activity code was associated with an expired contract and it had been deleted several years earlier; (7) in addition, a Florida Army National Guard unit was able to obtain excess property between 1998 and 1999 by using an invalid activity code that had been deleted in 1990; (8) Defense Logistics Agency (DLA) officials were unable to determine why the Defense Reutilization and Marketing Automated Information System had failed to reject the invalid codes; (9) further, the activity code used by the University to obtain the excess property was a nonrequisitioning code, indicating that the activity was not authorized to use this code to requisition; (10) GAO determined that 65 nonrequisitioning codes had been used to obtain over $101 million in excess DOD property from fiscal year 1995 to the present and that there were no edits in the system to prevent it; (11) DOD has not exercised adequate oversight of the management and use of excess DOD property provided to selected universities and a Florida Army National Guard unit; (12) the property obtained by the University had not been inventoried as required, a significant portion could not be located, and some of the property had been misused or stolen; (13) the University had also failed to provide pertinent information to government officials, which limited the effectiveness of the officials' oversight activities; and (14) the Florida National Guard unit had failed to follow procedures in place to obtain and account for excess DOD property it had received in 1998 and 1999.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Defense should direct the military services and DOD activities to comply with regulations that require them to: (1) periodically update the inventory and management data in the Defense Automatic Addressing System Center master file, especially with regard to activity address codes; and (2) ensure that their central service points validate and reconcile their activity code files to the Defense Automatic Addressing System Center master file in a timely manner.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Deputy Under Secretary of Defense for Logistics issued a memorandum on September 11, 2000, to the services and DOD activities directing compliance with DOD 400.25-6-M and asking that the components' service points review their procedures for updating inventory and management data in the Defense Automatic Addressing System Center Master File to ensure the system is maintained, up-to-date, and accurate.

    Recommendation: The Secretary of Defense should direct the Director, DLA, to determine why the Defense Reutilization and Marketing Automated Information System failed to reject invalid activity codes and take corrective measures so that the system will reject invalid activity codes in the future.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Defense Reutilization and Marketing Service issued more stringent guidance for field activities that included: (1) verification that the DOD Activity Address Code (DODAAC) is listed in the official DOD Activity Address File located on the Defense Automatic Addressing System Center website; (2) rejecting invalid DODAACs before releasing property; (3) providing advice to requisitioning customers; (4) displaying signs/placards at the field activities reminding customers that valid DODAACs must be listed in the official DODAAC file; and (5) implementing system changes to generate daily reports for field activities to use in determining whether generators are attempting to use invalid DODAACs and assisting the generator in obtaining the correct DODAACs.

    Recommendation: The Secretary of Defense should direct the Deputy Under Secretary of Defense (Logistics) and the military services to develop and implement a system to prevent organizations from using nonrequisitioning activity codes to acquire excess DOD property by including the appropriate edits in the Defense Reutilization and Marketing Automated Information System and the Defense Automatic Addressing System.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD has developed edits in the Defense Reutilization and Marketing Automated Information System and the Defense Automatic Addressing System to prevent organizations from using non-requisitioning activity codes to acquire DOD property. The system matches the address code information in the Defense Automatic Addressing System and rejects any that contains an invalid address code.

    Recommendation: The Secretary of Defense should direct the Director, DLA, and the Chief, Office of Naval Research, to assess the adequacy of controls and procedures to help ensure the proper management and use of excess DOD property provided to universities for government contracts.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD reports that the Defense Logistics Agency has no responsibility in the oversight of excess DOD property provided to universities under government contracts. The Office of Naval Research (ONR) recognizes the need for continued attention to adequately controlling university-acquired excess government property. Two steps were implemented to improve oversight of excess government property. Existing guidance was updated to include additional internal controls so that upcoming reviews will emphasize the proper acquisition and management of excess property acquired from the Defense Reutilization and Marketing Offices (DRMOs). Further, on visits to institutions and during presentations at professional organizations, ONR will mention the requirements for obtaining property from DRMOs and the attendant liabilities.

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