GAO

United States Government Accountability Office

A

Testimony

Before the Subcommittee on National Security, Emerging 

Threats and International Relations, Committee on 

Government Reform, House of Representatives

For Release on Delivery

Expected at 2:00 p.m.

Tuesday, June 7, 2005

DOD EXCESS PROPERTY

Management Control 

Breakdowns Result in 

Substantial Waste and 

Inefficiency

Statement of Gregory D. Kutz

Managing Director

Forensic Audits and Special Investigations

GAO-05-729T
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

Highlights of GAO-05-729T, a testimony 

before the Subcommittee on National 

Security, Emerging Threats and International 

Relations, Committee on Government Reform, 

House of Representatives 

 

www.gao.gov/cgi-bin/getrpt?GAO-05-729T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory D. 

Kutz (202) 512-9095 or Kutzg@gao.gov. 

June 7, 2005

DOD EXCESS PROPERTY 

Management Control Breakdowns Result 

in Substantial Waste and Inefficiency 

DOD does not have management controls in place to assure that excess 

inventory is reutilized to the maximum extent possible. Of $33 billion in 

excess commodity disposals in fiscal years 2002 through 2004, $4 billion 

were reported to be in new, unused, and excellent condition. DOD units 

reutilized only $495 million (12 percent) of these items. The remaining $3.5 

billion (88 percent) includes significant waste and inefficiency because new, 

unused, and excellent condition items were transferred and donated outside 

of DOD, sold for pennies on the dollar, or destroyed. DOD units continued to 

buy many of these same items. GAO identified at least $400 million of fiscal 

year 2002 and 2003 commodity purchases when identical new, unused, and 

excellent condition items were available for reutilization. GAO also 

identified hundreds of millions of dollars in reported lost, damaged, or stolen 

excess property, including sensitive military technology items, which 

contributed to reutilization program waste and inefficiency. Further, excess 

property improperly stored outdoors for several months was damaged by 

wind, rain, and hurricanes. 

Waste and Inefficiency Related to $3.5 Billion in Fiscal Year 2002-2004 Disposals of Excess 

DOD Commodities Reported To Be in New, Unused, and Excellent Condition 

12%

9%

28%

51%

$495 million

DOD reutilization

$363 million 

DOD special programs ($138 million)

Federal agency transfers ($145 million)

Donations to states ($80 million)

88% $3.5 billion

$1.1 billion

Demilitarization, scrap, and

hazardous material disposals

$2 billion

Public sales

Source: GAO analysis.

Fiscal years 2002-2004

DOD reutilization

Other disposals

GAO ordered and purchased at little or no cost several new and unused 

excess commodities that DOD continued to buy and utilize, including tents, 

boots, power supplies, circuit cards, and medical supplies. GAO paid a total 

of $2,898, including tax and shipping cost, for these items, which had an 

original DOD acquisition cost of $79,649. 

Root causes for reutilization program waste and inefficiency included 

(1) unreliable excess property inventory data; (2) inadequate oversight and 

physical inventory control; and (3) outdated, nonintegrated excess inventory 

and supply management systems. Procurement of inventory in excess of 

requirements also was a significant contributing factor. Improved 

management of DOD’s excess property could save taxpayers at least 

hundreds of millions of dollars annually. 

GAO was asked to assess the 

overall economy and efficiency of 

the Department of Defense (DOD) 

program for excess property 

reutilization (reuse). Specifically, 

GAO was asked to determine 

(1) whether and to what extent the 

program included waste and 

inefficiency and (2) root causes of 

any waste and inefficiency. GAO 

was also asked to provide detailed 

examples of waste and inefficiency 

and the related causes. GAO’s 

methodology included an 

assessment of controls, analysis of 

DOD excess inventory data, 

statistical sampling at selected 

sites, and detailed case studies of 

many items. 

What GAO Recommends

Today, GAO is issuing a report 

(GAO-05-277) with 13 

recommendations to improve the 

economy and efficiency of DOD’s 

reutilization program for excess 

commodities in the areas of 

(1) data reliability; (2) oversight, 

accountability, and physical 

inventory control; and (3) the 

functional design of DOD’s future 

commodity inventory systems. 

In commenting on GAO’s report, 

DOD concurred that actions are 

needed to improve the reutilization 

program and noted a number of 

improvement initiatives that were 

taken during fiscal years 2004 and 

2005. However, DOD has not yet 

addressed the fundamental, 

conceptual weaknesses that have 

resulted in waste and inefficiency. 
Page 1 GAO-05-729T 

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to discuss the results of our audit and 

investigation of the economy and efficiency of the Department of Defense 

(DOD) program for reutilization (reuse) of excess property. Our related 

report,1

 released today and developed at the request of this Subcommittee, 

Senator Collins, and Representative Schakowsky, describes significant 

breakdowns in management controls that have resulted in substantial 

waste and inefficiency in DOD’s excess property reutilization program. 

Our previous, limited work identified several examples of waste and 

inefficiency in DOD’s excess property reutilization program. Our 

November 2003 report2

 identified several examples that showed that at the 

same time DOD excessed biological laboratory equipment items in good or 

excellent condition and sold many of them to the public for pennies on the 

dollar, it was purchasing the same or similar items. In June 2002, we 

testified3

 that the lack of asset visibility over the Joint Service Lightweight 

Integrated Suit Technology (JSLIST)4

 resulted in DOD selling new, unused 

JSLIST for $3 per suit (coats and trousers) while at the same time procuring 

hundreds of thousands of JSLIST annually at a cost of over $200 per suit. 

You were concerned that these limited examples could indicate systemic 

problems. 

Our current work focused on whether and to what extent we found waste 

and inefficiency in DOD’s excess property reutilization program and the 

root causes of any waste and inefficiency. You also asked us to determine 

whether the Defense Logistics Agency (DLA) was purchasing new items 

when identical items in new, unused, and excellent condition were 

available at Defense Reutilization and Marketing Service (DRMS) field 

1

 GAO, DOD Excess Property: Management Control Breakdowns Result in Substantial 

Waste and Inefficiency, GAO-05-277 (Washington, D.C.: May 13, 2005). 

2

 GAO, DOD Excess Property: Risk Assessment Needed on Public Sales of Equipment That 

Could Be Used to Make Biological Agents, GAO-04-15NI (Washington, D.C.: Nov. 19, 2003). 

3

 GAO, DOD Management: Examples of Inefficient and Ineffective Business Processes,

GAO-02-873T (Washington, D.C.: June 25, 2002).

4

 JSLIST is a universal, lightweight, two-piece garment (coat and trousers) that when 

combined with footwear, gloves, and protective mask and breathing device, forms the 

warfighter’s protective ensemble. Together, the ensemble is to provide maximum protection 

to the warfighter against chemical and biological contaminants without negatively 

impacting the ability to perform mission tasks. JSLIST is the current model protective suit 

used by the military forces. 
Page 2 GAO-05-729T 

offices (DRMO). As DOD’s combat support agency, DLA has a mission to 

provide best-value logistics support to America’s armed forces. In carrying 

out its mission, DLA manages inventory valued at about $83 billion, 

consisting of more than 5 million items of food, fuel, clothing and other 

textiles, medical supplies, industrial use items, and spare and repair parts 

supporting over 1,400 weapon systems. Within DLA, DRMS is responsible 

for excess property disposals. Federal regulations5

 require executive 

agencies to ensure that personal property not needed by their activity is 

offered for use elsewhere within the agency. In accordance with federal 

regulations, DOD 4160.21-M, Defense Materiel Disposition Manual, 

chapter 5, calls for reutilization of excess property to the extent feasible to 

fill existing needs and to satisfy additional needs before initiating new 

procurement or repair. 

In performing our work, we reviewed applicable laws and regulations; DOD 

policies and procedures; and current and planned systems, processes, and 

management controls. To identify potential waste and inefficiencies, we 

analyzed the universe of recorded commodity purchase and disposal 

transactions and compared DOD commodity purchases to disposals of 

identical items in new, unused, and excellent condition (A condition). To 

assure ourselves that DOD data were sufficiently reliable for the purpose of 

our work, we performed a number of electronic and statistical tests of DOD 

databases and excess inventory and data used in our work. We conducted 

our work, including follow-up work related to this testimony, from 

November 2003 through May 2005 in accordance with U.S. generally 

accepted government auditing standards and investigative standards 

prescribed by the President’s Council on Integrity and Efficiency. We 

obtained DOD comments on a draft of our report, and we briefed DOD 

officials on new findings included in this testimony.

Today, my testimony will focus on (1) summarizing the results of our audit 

and updating our analysis for fiscal year 2004 excess commodity disposal 

activity; (2) describing additional case study acquisitions of new, unused 

excess DOD commodity items from December 2004 through April 2005; 

and (3) discussing management control breakdowns that contributed to 

reutilization program waste and inefficiency and the results of our 

investigations of selected excess property losses noted in our audit report.

5 Federal Management Regulation, 41 C.F.R. ch. 102 (2004). 
Page 3 GAO-05-729T 

Summary DOD does not have effective management processes, systems, and controls 

in place to assure that it is reutilizing excess inventory to the maximum 

extent possible and safeguarding excess items from damage, loss, and 

theft, as required by federal regulations, DOD policy, and GAO internal 

control standards.6

 Our analysis of DRMS excess commodity disposal 

activity identified substantial waste and inefficiency related to DOD’s 

excess property reutilization program. For example, of the $33 billion in 

reported excess commodity disposals in fiscal years 2002 through 2004, $4 

billion related to items in new, unused, and excellent condition. Of the $4 

billion, we determined that $3.5 billion (88 percent) included substantial 

waste and inefficiency because new, unused, and excellent condition items 

were being transferred or donated outside of DOD, sold on the Internet for 

pennies on the dollar, or destroyed rather than being reutilized. As 

discussed in our report,7

 our analysis of fiscal year 2002 and 2003 data on 

commodity purchases and disposal activity found that DOD purchased at 

least $400 million of identical commodities instead of reutilizing available 

A-condition excess items. Further, the extent of reutilization waste and 

inefficiency may be greater due to incomplete and inaccurate data that are 

key to identifying excess items for reutilization. In addition, the DRMS 

reported $466 million in excess property losses from fiscal years 2002 

through 2004, such as missing, damaged, and stolen property, adding to 

reutilization program waste. 

Our monitoring of DRMS disposal activity found continuing reutilization 

program waste and inefficiency. We ordered several excess DOD items at 

little or no cost and purchased other items at minimal cost. Overall, we 

paid $2,898 for items with a listed acquisition cost of $79,649. For example, 

• As discussed in our report, from May through October 2004, we ordered 

and purchased at little or no cost several new and unused excess 

commodity items that DOD continued to buy and utilize, including tents; 

boots; power supplies; circuit cards; gasoline burners; and a medical 

instrument chest, suction device, and medical supplies and bandages. 

6 Federal Property Management Regulations, 41 C.F.R. ch. 101 (2004) and the Federal 

Management Regulation, 41 C.F.R. ch. 102 (2004), issued by the General Services 

Administration; DOD 4160.21-M, Defense Materiel Disposition Manual; and GAO, 

Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

7 GAO-05-277.
Page 4 GAO-05-729T 

We paid a total of $1,471, including tax, buyer’s premium, and shipping 

cost, for these items, which had an original DOD acquisition cost of 

$68,127. 

• In addition, from December 2004 through April 2005, we purchased over 

the Internet several additional new, unused excess commodity items 

that DOD units are continuing to purchase and utilize. These items 

included military badges, medals, and insignias; Cooper Trendsetter SE 

automobile tires; and military dress uniforms. Although these items had 

an original DOD acquisition cost of $11,522, we paid a total of $1,427 for 

them, including tax, buyer’s premium, and shipping cost.

Our analysis, statistical tests of excess inventory accuracy, case studies, 

and interviews showed that the root causes for the billions of dollars in 

waste and inefficiency related to management control breakdowns across 

DOD, including weaknesses in DOD’s excess property reutilization 

program, stemmed from 

• unreliable excess property inventory data; 

• inadequate oversight, accountability, and physical control of excess 

property; and 

• inadequate processes and outdated, nonintegrated inventory systems 

that do not provide adequate visibility of excess property available for 

reutilization at the time military units order and purchase commodity 

items. 

In addition, as we have reported for many years,8

 long-standing DOD 

logistics management weaknesses that resulted in purchases that exceeded 

actual requirements resulted in the disposal of unused items due to 

obsolescence and contributed indirectly to reutilization program waste and 

inefficiency. Further, DOD reutilization program waste and inefficiency is 

symptomatic of the inventory and supply chain management issues that 

have been considered high risk by GAO since 1990.

8

 GAO, Defense Inventory: Analysis of Consumption of Inventory Exceeding Current 

Operating Requirements Since September 30, 2001, GAO-04-689 (Washington, D.C.: Aug. 

2, 2004), and Major Management Challenges and Program Risks: Department of Defense, 

GAO-03-98 (Washington, D.C.: January 2003). 
Page 5 GAO-05-729T 

Our investigations of selected reports of losses of excess DOD commodity 

items identified a pervasive lack of physical accountability over excess 

inventory, which leaves DOD vulnerable to the risk of theft and fraud, 

waste, and abuse. The lack of accountability makes it impossible to 

complete an investigation. Specifically, the failure to verify and accurately 

document transactions and events at the beginning of the disposal process 

and report and investigate losses when they occur obscures or eliminates 

the audit trail. Because DRMO personnel did not always verify turn-in 

documentation at the time they received excess items and recorded them 

in excess inventory, in many cases it is not possible to determine whether 

discrepancies represent sloppy recordkeeping, the loss or theft of excess 

property, or where or when the loss or theft occurred. This lack of 

accountability encourages theft and fraud because there is little likelihood 

of detection. 

We found that DRMS investigative reports are generally inconclusive with 

regard to the causes of the lost property. For example, the investigative 

reports on the loss of 75 chemical and biological protective suits at the 

Jackson DRMO and 20 units of body armor at the Meade DRMO each stated 

that the items were recorded in inventory, placed in the DRMO warehouse, 

and subsequently disappeared. According to the investigative reports, no 

determination was made as to what happened to these items. Our followup investigations on DLA supply depot reports of missing aircraft parts at 

two DLA depots found that depot personnel did not aggressively research 

events related to the missing items because they assumed that the missing 

items related to recordkeeping errors, such as the failure to record 

inventory issues.

In commenting on the recommendations in our audit report, DOD 

concurred that actions are needed to improve the reutilization program and 

noted a number of improvement initiatives that were taken during fiscal 

year 2004 and early in fiscal year 2005. While these actions have made 

some marginal improvements in the reutilization program, DOD has not yet 

addressed the fundamental, conceptual weaknesses that have resulted in 

substantial waste and inefficiency in the excess property reutilization 

program. 
Page 6 GAO-05-729T 

Analysis of 

Reutilization Program 

Identifies Billions of 

Dollars in Waste and 

Inefficiency

Overall, our analysis of the $33 billion in reported excess commodity 

disposals in fiscal years 2002 through 2004 showed that $4 billion related to 

items in new, unused, and excellent condition. Of the $4 billion, we 

determined that $3.5 billion (88 percent) included substantial waste and 

inefficiency because new, unused, and excellent condition items were 

being transferred or donated outside of DOD, sold on the Internet for 

pennies on the dollar, or destroyed rather than being reutilized. As 

discussed in our report, our analysis of $18.6 billion9

 in fiscal year 2002 and 

2003 excess commodity disposal activity identified $2.5 billion in excess 

items that were reported to be in new, unused, and excellent condition (A 

condition). Although federal regulations and DOD policy require 

reutilization of excess property in good condition, to the extent possible, 

our analysis showed that DOD units only reutilized $295 million (12 

percent) of these items. The remaining $2.2 billion (88 percent) of the $2.5 

billion in disposals of A-condition excess commodities were not reutilized, 

but instead were transferred, donated, sold, or destroyed. Similarly, our 

analysis of $14.3 billion in fiscal year 2004 disposal activity identified $1.5 

billion in excess commodity items that were reported to be in A condition. 

Of the $1.5 billion in A-condition excess items, DOD units reutilized $200 

million (13 percent) and transferred, donated, sold, or destroyed the 

remaining $1.3 billion (87 percent). We also found that during fiscal years 

2002 and 2003, DOD purchased at least $400 million (over $200 million each 

year) of identical items instead of reutilizing available excess items in A 

condition. To illustrate continuing reutilization program waste and 

inefficiency, we purchased several new and unused excess DOD 

commodity items that were being purchased by DLA, were currently in use 

by the military services, or both. Our analysis of transaction data and our 

tests of controls for inventory accuracy indicate that the magnitude of 

waste and inefficiency could be much greater due to military units 

improperly downgrading condition codes of excess items that are in new, 

unused, and excellent condition to unserviceable and the failure to 

consistently record national stock numbers (NSN)10 needed to identify like 

items. 

9

 The reported acquisition value at the time the items were turned in as excess. 

10 An NSN is a 13-digit number that identifies standard use inventory items. The first 4 digits 

of the NSN represent the Federal Supply Classification, such as 8430 for men’s footwear, 

followed by a 2-digit North Atlantic Treaty Organization (NATO) code (to indicate user 

countries) and a 7-digit designation for a specific item, such as a cold weather boot.
Page 7 GAO-05-729T 

Fiscal Year 2002-2004 

Excess Commodity 

Disposal Activity

DRMS is responsible for disposing of unusable items, often referred to as 

“junk,” as well as facilitating the reutilization of usable items. Although the 

majority of DOD’s excess property disposals relate to items in 

unserviceable condition, DOD also disposed of billions of dollars of 

serviceable items, including excess commodities in A condition from fiscal 

years 2002 through 2004. Our analysis of DRMS data showed that $28.1 

billion of the $33 billion in excess DOD commodity disposals from fiscal 

year 2002 through fiscal year 2004 consisted of items listed in unserviceable 

condition, including items needing repair, items that were obsolete, and 

items that were downgraded to scrap. The remaining $4.9 billion in excess 

commodity disposals consisted of items reported to be in serviceable 

condition, including $4 billion in excess commodities reported to be in A 

condition. However, of the $4 billion, DOD units reutilized only $495 

million (12 percent) of these items during the 3-year period. The data 

reliability issues noted above and our interviews, case studies, and 

statistical sample results indicate that the magnitude of waste and 

inefficiency associated with disposals of A-condition items could be much 

greater. As shown in figure 1, items that were not reutilized by DOD were 

transferred to federal agencies or special programs, donated to states, sold 

to the public, or destroyed by demilitarization or through scrap and 

hazardous materials contractors. 
Page 8 GAO-05-729T 

Figure 1: Waste and Inefficiency in Fiscal Year 2002 through Fiscal Year 2004 

Disposals of Excess DOD Commodities Reported To Be in New, Unused, and 

Excellent Condition

We found that the percentage of DOD reutilization of excess property was 

higher in fiscal year 2002 than in fiscal years 2003 and 2004. According to 

DRMO officials, reutilization was higher in fiscal year 2002 because excess 

items were pulled back to support deployment to Afghanistan and Iraq. In 

fiscal year 2003, procurement to support the war on terrorism began to 

keep up with the demand for supplies, and reutilization of excess property 

decreased. DRMS officials attribute the fiscal year 2004 increase in DOD 

reutilization to the establishment of the Joint Services Nuclear, Biological, 

and Chemical Equipment Assessment Program (JEAP) to inspect excess 

military clothing, tents, and other textile items and reissue items in good 

condition. The increase in disposal activity in fiscal years 2003 and 2004 

relates to turn-ins of property used in support of Operation Enduring 

Freedom and Operation Iraqi Freedom. Table 1 shows disposal activity 

related to A-condition excess commodities for fiscal years 2002 through 

2004.

12%

9%

28%

51%

$495 million

DOD reutilization

$363 million 

DOD special programs ($138 million)

Federal agency transfers ($145 million)

Donations to states ($80 million)

88% $3.5 billion

$1.1 billion

Demilitarization, scrap, and

hazardous material disposals

$2 billion

Public sales

Source: GAO analysis.

Fiscal years 2002-2004

DOD reutilization

Other disposals
Page 9 GAO-05-729T 

Table 1: Fiscal Year 2002 through 2004 Disposals of Excess DOD Commodities in 

New, Unused, and Excellent Condition 

Source: GAO analysis.

Unnecessary Commodity 

Purchases 

Our analysis of fiscal year 2002 and 2003 DLA commodity purchases and 

DRMS excess property inventory data identified numerous instances in 

which the military services ordered and purchased items from DLA at the 

same time identical items—items with the same NSN—that were reported 

to be in new, unused, and excellent condition were available for 

reutilization. We found that DOD purchased at least $400 million of 

identical items during fiscal years 2002 and 2003—over $200 million each 

year—instead of using available excess A-condition items. The magnitude 

of unnecessary purchases could be much greater because NSNs needed to 

identify identical items were not recorded for all purchase and turn-in 

transactions. For example, we determined that DLA buyers and item 

managers did not record NSNs for 87 percent (about $4.9 billion) of the 

nearly $5.7 billion in medical commodity purchases by military units during 

fiscal years 2002 and 2003. Further, as discussed later, improper 

downgrading of condition codes to unserviceable could also result in an 

understatement of the magnitude of unnecessary purchases. While our 

statistical tests found a few instances of inaccurate serviceable condition 

codes, most condition code errors related to the improper downgrading of 

condition to unserviceable.

Dollars in millions

Disposal method

Fiscal year

2002

Fiscal year

2003

Fiscal year

2004 Total

DOD reutilization $145

(14%)

$150

(10%)

$200

(13%)

$495

(12%)

Special programs 45 46 47 138

Federal agency transfers 58 45 42 145

Donations to states 28 26 26 80

Subtotal, special programs, 

transfers, and donations

$131

(12%)

$117

(8%)

$115

(8%)

$363

(9%)

Demilitarization, scrap, and 

hazardous material disposals

$102

(10%)

$532

(37%)

$480

(32%)

$1,114

(28%)

Public sales $672

(64%)

$645

(45%)

$703

(47%)

$2,020

(51%)

Total disposals $1,050

(100%)

$1,444

(100%)

$1,498

(100%)

$3,992

(100%)
Page 10 GAO-05-729T 

Fiscal Year 2004 and 2005 

Requisitions and Purchases 

Demonstrate Continuing 

Waste and Inefficiency

To determine whether the problems identified in our analysis were 

continuing, we monitored DRMS commodity disposal activity from May 

2004 through April 2005. We found that DOD continued to transfer, donate, 

and sell excess A-condition items instead of reutilizing them. To illustrate 

these problems, we requisitioned several excess new and unused items at 

no cost and purchased other new and unused commodities at minimal cost. 

We based our case study selections on new, unused items that DOD 

continued to purchase. As discussed in our report,11 we used the GSA 

Federal Disposal System, available to all federal agencies, to requisition 

several new and unused excess DOD commodity items during our audit in 

fiscal year 2004 and the first half of fiscal year 2005, including a medical 

instrument chest, two power supply units, and two circuit cards, at no 

charge. These items had an original DOD acquisition cost of $55,817, and 

we paid only $5 shipping cost to obtain all of them. We also purchased, at 

minimal cost, several excess DOD commodity items in new and unused 

condition over the Internet at govliquidation.com—the DRMS liquidation 

contractor’s Web site.12 The items we purchased included tents, boots, 

three gasoline burners (stove/heating unit), a medical suction apparatus, 

and bandages and other medical supply items with a total reported 

acquisition cost of $12,310. We paid a total of $1,466 for these items, about 

12 cents on the dollar, including buyer’s premium, tax, and shipping cost. 

From December 2004 through April 2005, we purchased several new, 

unused excess DOD commodity items, including over 8,000 military 

badges, medals, and insignias; 8 new, unused Cooper Trendsetter SE tires; 

and Class A military uniforms. Although these items had a total reported 

acquisition cost of $11,522, we paid a total of $1,427 for these items, 

including tax, buyer’s premium, and shipping cost. 

New, unused DOD badges, medals, and insignias. On December 6, 

2004, we purchased 8,526 excess DOD badges, medals, and insignias that 

are used to indicate rank, the unit or program to which a military member 

or civilian employee is assigned, or service awards. These items had a 

reported acquisition cost of $9,518. We paid a total of $1,102, including 

buyer’s premium and tax, for these items—about 12 cents on the dollar. 

Units and program areas designated by the badges and insignias include 

11 GAO-05-277.

12 Government Liquidation, LLC is the DRMS commercial venture partner (contractor) for 

public sales of excess DOD property. 
Page 11 GAO-05-729T 

Army Rangers, Mountain, and Airborne; Air Force Air Traffic Controller; 

and DOD Scientific Consultant. Rank insignias include Air Force Chief 

Master Sergeant and Air Force Technical Sergeant; Navy Captain, 

Midshipman Lieutenant, and Midshipman Lieutenant Commander; and 

Army Command Sergeant Major and Master Sergeant. The listed condition 

code of these items ranged from A4 (serviceable, usable condition) to H7 

(unserviceable, condemned condition). However, our inspection of the 

badges and insignias that we purchased showed that none of them had 

been used, and many of them were in original manufacturer packages. 

Further, DOD is continuing to purchase and use most of these items. The 

photograph in figure 2 shows examples of some of the badges, medals, and 

insignias that we purchased.

Figure 2: Examples of Excess DOD Badges, Medals, and Insignias Purchased over 

the Internet in December 2004

New, unused excess DOD tires. We purchased eight new, unused 

Cooper Trendsetter SE 13-inch steel-belted radial tires on February 18, 

2005. According to the Army project officer, these tires are used on overthe-road passenger vehicles, and one customer ordered them for use on a 

Source: GAO.
Page 12 GAO-05-729T 

forklift. DOD units are continuing to purchase and use these same tires. 

The most recent purchase of 50 of these tires was made in April 2005. The 

eight tires had a total reported acquisition value of $404. We paid $113 for 

the tires, including buyer’s premium and tax, and an additional $154 

shipping cost. The tires were listed in A4 condition (usable, with some 

wear). However, we found that the tires still had manufacturer labels on 

the tread and blue paint over the whitewalls, indicating that they were new 

and unused. The tires were turned in as excess by the North Island Naval 

Air Station’s Aircraft Intermediate Maintenance Detachment. According to 

the Army Tank Automotive and Armaments Command Project Officer,13 the 

NSN listed on the turn-in document was incorrect. We found that 

inaccurate item descriptions, including NSNs, prevent items from being 

selected for reutilization. Figure 3 is a photograph of the excess DOD tires 

that we purchased over the Internet in February 2005. 

Figure 3: New, Unused Excess Cooper Trendsetter SE Tires Purchased over the 

Internet in February 2005

13 The Army has product management responsibility for these tires.

Source: GAO.
Page 13 GAO-05-729T 

New, unused Class A military uniforms. We purchased several Class A 

military uniforms over the Internet on April 7, 2005. The uniforms were 

listed as being in H7 (unserviceable, condemned) condition. Although the 

uniforms that we purchased over the Internet from DOD’s liquidation 

contractor had a listed acquisition cost of $1,600, we paid a total of $58, 

including buyer’s premium and sales tax, to acquire them—about 4 cents 

on the dollar. After receiving our purchase we determined that we had in 

fact purchased 27 new, unused uniform coats; 4 pairs of new, unused 

uniform trousers; 54 jackets in excellent condition; 45 pairs of trousers in 

excellent condition; and 5 women’s uniform skirts and 1 pair of slacks in 

excellent condition. DOD is continuing to purchase and issue two of the 

four types of trousers that we purchased over the Internet. According to 

the DLA clothing and textiles product manager for dress uniforms, the 

Army switched from a matte finish gold button to a shiny sta-briteTM gold 

button on October 1, 2003. Although the Army ordered and paid for the 

new replacement buttons for existing dress uniforms, it later determined 

that hiring a contractor to replace the buttons or sending the coats back to 

the manufacturers for button replacement would be very expensive. The 

Army decided to use the coats with the older buttons to fill Reserve and 

Junior Reserve Officer Training Corps (ROTC and JROTC) orders until 

current supplies are exhausted. However, our monitoring of DOD 

liquidation sales found that many class A uniforms with the older buttons 

are being sold over the Internet for pennies on the dollar instead of being 

issued to ROTC and JROTC. In addition, we observed the new sta-briteTM

buttons being sold over the Internet in May 2005. Figure 4 is a photograph 

of one of the excess new, unused Class A uniforms with the matte finish 

buttons that we purchased over the Internet in April 2005. 
Page 14 GAO-05-729T 

Figure 4: New, Unused Excess Class A Uniforms Purchased in April 2005

We also purchased an earlier sales lot of the same Class A military uniforms 

over the Internet on February 16, 2005. Our winning bid was $81 for 166 

uniform jackets and trousers, which had a listed acquisition cost of $10,424. 

However, when we arrived at the Great Lakes sales location near Chicago 

to pick up the uniforms, DOD liquidation contractor personnel were unable 

to locate them. Contractor personnel explained that our purchase may 

have been mistakenly given to another customer. To compensate, we were 

offered other items available for sale. However, these items were not in A 

condition. Instead of accepting them, we requested and received a refund. 

As discussed later, another of our Internet purchases was damaged due to a 

leaky roof at the Norfolk liquidation sales location. 

Source: GAO.
Page 15 GAO-05-729T 

Management Control 

Breakdowns Resulted 

in Reutilization 

Program Waste and 

Inefficiency 

The $3.5 billion in DOD waste and inefficiency that we identified in our 

analysis of fiscal year 2002 through 2004 excess property disposal activity 

stemmed from management control breakdowns across DOD. Key factors 

in the overall DRMS management control environment that contributed to 

waste and inefficiency in the reutilization program included (1) unreliable 

excess property inventory data; (2) inadequate DRMS oversight, 

accountability, physical control, and safeguarding of property; and 

(3) outdated, nonintegrated excess inventory and supply systems. In 

addition, for many years our audits of DOD inventory management14 have 

reported that continuing unresolved logistics management weaknesses 

have resulted in DOD purchasing more inventory than it needed. DOD 

reutilization program waste and inefficiency is symptomatic of the 

inventory and supply chain management issues that have been considered 

high risk by GAO since 1990. Our analysis of fiscal year 2002 through fiscal 

year 2003 excess commodity turn-ins showed that $1.4 billion (40 percent) 

of the $3.5 billion of A-condition excess items consisted of new, unused 

DLA supply depot inventory. Our analysis of fiscal year 2004 excess 

commodity turn-ins showed that $1.3 billion (48 percent) of the $2.7 billion 

of A-condition excess items consisted of new, unused DLA supply depot 

inventory.

Unreliable Data Impair the 

Economy and Efficiency of 

the Reutilization Program 

Our interviews, case studies, screening visits, and statistical tests of excess 

commodity inventory led us to conclude that unreliable data are a key 

cause of the ineffective excess property reutilization program. GAO’s 

internal control standards15 require assets to be periodically verified to 

control records. In addition, DRMS policy16 requires DRMO personnel to 

verify turn-in information, including item description, quantity, condition 

code, and demilitarization code, at the time excess property is received and 

entered into DRMO inventory. However, we found that DRMS and DLA 

supply depot management have not enforced this requirement. Further, 

Army, Navy, and Air Force officials told us that unreliable data are a 

disincentive to reutilization because of the negative impact on their 

14 GAO-04-689 and GAO-03-98. 

15 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

16 DRMS-I 4160.14, vol. II, Instructions for Warehousing for DRMS and the Defense 

Reutilization and Marketing Offices, ch. 2, “Receipt and Storage,” § 1 (A) (9). 
Page 16 GAO-05-729T 

operations. DLA item managers told us that because military units have 

lost confidence in the reliability of data on excess property reported by 

DRMS, for the most part they have requested purchases of new items 

instead of reutilizing excess items. Military users also cited examples of 

damage to excess items during shipment that rendered the items unusable. 

In addition, other reutilization users advised us of problems related to 

differences in quantities and the types of items ordered and received that 

could have a negative impact on their operations. 

Problems with Excess Inventory 

Items Noted by Military Services 

and Other Users

Military service officials also told us about the types of problems they have 

experienced with property acquired from DRMOs. Army, Navy, and Air 

Force medical officials, in particular, told us that they do not reutilize 

excess medical items stored at DRMOs because items can become 

damaged during shipment to and movement within the DRMO warehouses. 

Other users of excess DOD property, including special program, federal 

agency, and state officials gave us numerous examples of problems they 

encountered with requisitions of excess DOD property. Several officials 

noted that these problems have caused them to lose confidence in the 

reutilization process. The following examples are typical of what we were 

told. 

• An Army official told us that he requisitioned 20 excess padlock sets. 

When he received the padlocks the keys were missing. After his second 

attempt to requisition excess DOD padlocks with keys failed, he threw 

the padlocks in a dumpster because they were useless to him and it 

would cost too much to return them to the DRMO. 

• An Army official told us that items may be in new, unused condition 

when they leave the DRMO, but are damaged during shipment. The 

official cited his experience with an order of thin copper sheets for use 

in testing electronic equipment. The sheeting was shipped on a pallet 

that was too small and other material was stacked on top of it. 

• A Fairchild Air Force Base official told us that the 92nd Logistics 

Readiness Squadron requisitioned 80 sleeping bags from the Hawaii 

DRMO but only received 56 of them. The official told our investigators 

that the sleeping bags were sealed in heavy-duty plastic bags and were 

in excellent condition. However, some of the boxes the sleeping bags 

were shipped in had been damaged by rain and handling by the time he 

received them.
Page 17 GAO-05-729T 

Statistical Samples Identified 

Problems with Excess Inventory 

Accuracy

Our statistical tests found significant problems with controls for assuring 

the accuracy of excess property inventory. Estimated error rates for the 

five DRMOs we tested ranged from 8 percent at one DRMO to 47 percent at 

another,17 and estimated error rates for the five DLA supply depots we 

tested ranged from 6 percent to 16 percent,18 including errors related to 

physical existence of turn-ins and condition code.19 Our condition code 

tests determined whether the condition code was accurately recorded as 

serviceable or unserviceable. We estimated that errors related to condition 

code accuracy ranged from 6 percent to 26 percent at the 5 DRMOs we 

tested.20 Overall, we found that DRMO errors were caused by erroneous 

turn-in documentation prepared by military units and the failure of DRMO 

personnel to verify turn-ins at the time they were received and correct 

errors before recording the receipts in excess inventory. Most DLA supply 

depot errors related to untimely recording of transactions for changes in 

inventory status and inaccurate quantities. We did not find problems with 

condition codes at the DLA depots.

An example from our Norfolk DRMO statistical sample illustrates how 

erroneous inventory data can result in waste and inefficiency. On June 30, 

2004, the Navy’s Environmental Health Center in Portsmouth, Virginia, 

turned in six new, unused Level III biological safety cabinets21 with a total 

acquisition cost of $120,000. The Navy unit turned in the Level III cabinets 

as excess because of erroneous specifications that resulted in ordering 

cabinets that were too large and cumbersome to meet deployment needs. 

17 Sampling errors for our DRMO estimates did not exceed 10 percentage points at the 95-

percent confidence level.

18 Sampling errors for our DLA supply depot estimates did not exceed 7 percentage points at 

the 95-percent confidence level.

19 Our physical existence tests included whether turn-ins recorded in inventory could be 

located, whether inventory changes were recorded within 7 days, and the accuracy of item 

descriptions (including item name(s) and NSN(s)) and quantities. Although some 

transactions included more than one type of error, we only counted one failure for a 

transaction. 

20 Sampling errors for our DRMO estimates did not exceed 11 percentage points at the 95-

percent confidence level.

21 The technical name for these safety cabinets is closed loop containment isolators.
Page 18 GAO-05-729T 

The Navy unit improperly used a local stock number (LSN) 22 to describe 

the safety cabinets on the turn-in document and a demilitarization code 

that indicated there were no restrictions on the disposal of these items.

However, Level III safety cabinets are subject to trade security controls,23

and therefore they are required to be identified by an NSN or other 

information that accurately describes the item, the end item application, 

and the applicable demilitarization code.24 Further, the DOD risk 

assessment performed in response to a recommendation in our November 

2003 report25 called for Level III biological safety cabinets to be destroyed 

when no longer needed by DOD. Although Norfolk DRMO personnel 

advised DRMS officials of the need to correct the turn-in document errors 

in July 2004, as of the end of our audit in February 2005, the information 

had not been corrected and the safety cabinets had not been posted to the 

DRMS reutilization Web page to indicate that they were available for 

reutilization. 

Our in-house scientists who often meet with DOD scientists at the U.S. 

Army Biological Warfare Research Center at the Dugway Proving Ground 

learned that the DOD scientists were planning to purchase a Level III safety 

cabinet and informed them of the availability of the six Level III safety 

cabinets at the Norfolk DRMO. The DOD scientists told us that they were 

unaware the Navy had excessed the safety cabinets and said that they 

could use all six of them. We subsequently confirmed that as a result of our 

efforts, the DOD scientists at Dugway had requisitioned the six Level III 

safety cabinets for reutilization. 

22 An LSN consists of the four-digit federal supply classification number, a two-digit NATO 

code (user country code), and up to a seven-character description, such as “monitor” for a 

computer monitor and “boots” for cold weather boots. 

23 Commerce Control List, 15 C.F.R. pt. 774, supp. 1, category 2, Materials Processing, para. f 

(2), Protective and Containment Equipment (2005). 

24 DOD 4160.21-M-1, Defense Demilitarization Manual, ch.1, § D (6), and app. 5 (B), and 

DRMS-I 4160.14, vol. VII, ch. 3, “MLI/CCLI – Disposal Processing and Demilitarization,” para. 

A (2)(d).

25 GAO-04-15NI. 
Page 19 GAO-05-729T 

Weaknesses in Reutilization 

Program Oversight and 

Physical Inventory Control 

We found hundreds of millions of dollars in potential waste and inefficiency 

associated with the failure to safeguard excess property inventory from 

loss, theft, and damage. As previously discussed, our statistical tests of 

excess commodity inventory at five DRMOs and five DLA supply depots 

identified significant numbers of missing items. Because the DRMOs and 

DLA supply depots had no documentation to show that these items had 

been requisitioned or sent to disposal contractors, they cannot assure that 

these items have not been stolen. According to DRMS data, DRMOs and 

DLA supply depots reported a total of $466 million in excess property 

losses related to damage, missing items, theft, and unverified adjustments 

over a period of 3 years. However, as discussed below, we have indications 

that this number is not complete. Also, because nearly half of the missing 

items reported involved military and commercial technology that required 

control to prevent release to unauthorized parties, the types of missing 

items were often more significant than the number and dollar value of 

missing items.

Excess Property Losses Weaknesses in accountability that resulted in lost and stolen property 

contributed to waste and inefficiency in the excess property reutilization 

program. As shown in table 2, our analysis of reported information on 

excess property losses at DRMOs and DLA supply depots found that 

reported losses for fiscal years 2002 through 2004 totaled $466 million. 

Because 43 percent of the reported losses related to military technology 

items that required demilitarization controls,26 these weaknesses also 

reflect security risks. GAO Standards for Internal Control in the Federal 

Government27 require agencies to establish physical control to secure and 

safeguard assets, including inventories and equipment, which might be 

vulnerable to risk of loss or unauthorized use. Our investigations of 

reported losses found that the failure to verify and accurately document 

transactions and events at the beginning of the disposal process and report 

and investigate losses as they occur obscures or eliminates the audit trail. 

Weaknesses in accountability leave DOD vulnerable to the risk of theft, and 

fraud, waste, and abuse with little risk of detection.

26 DOD 4160.21-M-1, Defense Demilitarization Manual, ch. 1. 

27 GAO/AIMD-00-21.3.1.
Page 20 GAO-05-729T 

Table 2: Reported DRMS Excess Property Losses and Adjustments 

Source: Unaudited DRMS data.

DRMO losses. Our statistical samples identified missing turn-ins at two of 

the five DRMOs we tested and missing quantities at all five DRMOs tested, 

including many items that were in new, unused, and excellent condition. 

Because DRMO officials did not have documentation to show whether 

these items had been reutilized, transferred, sold, or destroyed, there is no 

assurance of whether the missing items reflected bookkeeping errors or if 

they related to theft. Missing items in our statistical samples included turnins of 72 chemical and biological protective suits, 21 pairs of chemical and 

biological protective gloves, 47 wet weather parkas that were subject to 

demilitarization controls, and 7 sleeping bags, a cold weather coat, 

computer equipment, and various other items. Reported DRMO losses 

included 76 units of body armor, 75 chemical and biological protective suits 

(in addition to those identified in our Columbus DRMO sample),28 5 guided 

missile warheads,29 and hundreds of military cold weather parkas and 

trousers and camouflage coats and trousers. Three DRMOs—

Kaiserslautern, Meade, and Tobyhanna—accounted for $840,147, or about 

45 percent, of the nearly $1.9 million in reported fiscal year 2004 losses of 

military clothing and equipment items requiring demilitarization. 

Our follow-up investigations found a pervasive lack of physical 

accountability over excess inventory, which leaves DOD vulnerable to the 

risk of theft and fraud, waste, and abuse. In many cases, it is not possible 

to determine whether discrepancies represent sloppy recordkeeping or the 

Dollars in millions

Location

Fiscal year

2002

Fiscal year

2003

Fiscal year

2004 Total

DRMOs $81 $47 $62 $190

DLA supply depots 67 95 114 276

Total $148 $142 $176 $466

28 The missing chemical and biological protective suits are not the current JSLIST, and the 

missing body armor is not the ceramic technology currently in use by deployed troops.

29 In accordance with DOD 4160.21-M, ch. 4, “Property Requiring Special Processing,” § B, 

and DRMS-I 4160.14, vol. VII, “Instructions for Demilitarization for DRMS and the Defense 

Reutilization and Marketing Offices,” ch. 1, para. G, such items are required to be inert 

before turn-in to a DRMO.
Page 21 GAO-05-729T 

loss or theft of excess property due to the failure to verify turn-in 

documents and correct errors at the time excess items were received at the 

DRMOs. 

In the case of our Columbus DRMO sample, we found that inventory 

records were not adjusted for missing quantities in our sample. Instead, 

DRMO personnel recorded the entire amount of the listed quantities as 

being transferred to either the liquidation sales contractor or the Joint 

Service Nuclear Biological and Chemical Equipment Assessment Program 

(JEAP) for inspection and reissue of military clothing and equipment. Our 

review of transaction data for Columbus DRMO transfers showed that 

JEAP did not confirm most of the items reported as transferred. For 

example, JEAP confirmed receiving only 7 of the 17 turn-ins of clothing and 

textile items. Further, the Columbus DRMO recorded a transaction to 

show that the 72 chemical and biological protective suits identified as 

missing during our statistical tests of Columbus DRMO inventory were 

transferred to JEAP on November 10, 2004. However, our follow-up with 

JEAP officials found that they have no record of receiving the protective 

suits. The Columbus DRMO’s apparent manipulation of the inventory data 

avoided reporting the missing items as losses. 

Our follow-up investigations of other selected DRMO losses found the 

following.

• An Air Force turn-in of 75 chemical and biological protective suits was 

received, placed in the Shaw RIPL (a receipt in place location under 

authority of the Jackson DRMO) warehouse on May 28, 2002, and 

subsequently disappeared. DRMO personnel told DRMS investigators 

that the 75 protective suits may have been included in a November 15, 

2002, shipment to the Jackson DRMO in South Carolina. However, 

because DRMO personnel recorded box counts instead of turn-in 

document numbers and item counts, there is no detailed record of the 

items that were shipped between the two excess property warehouses. 

• Twenty units of body armor reported lost at the Meade DRMO initially 

had been ordered by Israel on November 8, 2000. Our investigators 

confirmed that the body armor was never picked up for shipment to 

Israel. According to the loss report, the items were relocated from the 

shipping area to the demilitarization storage area of the DRMO on May 

8, 2002. A loss investigation was initiated by the Area Manager for the 

Meade DRMO in March 2004. However, because the Meade DRMO 
Page 22 GAO-05-729T 

contractor had improperly destroyed inventory records after 2 years, 

attempts to determine the events surrounding the loss were fruitless. 

• Our investigation of 18 reports on a total of 52 units of body armor 

missing from the Hood DRMO during fiscal years 2002 and 2003 

determined that these items were stored outside in an unsecure area 

resulting in the theft of at least 48 units of body armor. A DRMS 

investigative report noted that items requiring demilitarization had been 

stored in this area over a 2-year period, even though the security fence 

had barbed wire that was cut or missing and the high ground level 

outside the fence provided easy access. According to a DRMO official, a 

work order for the fence repair had been submitted but the repairs had 

not been made. 

• The Naval Operational Logistics Support Center-Ammo, which was 

responsible for a turn-in of guided missile warheads, the DRMO that 

received these items, and the Demilitarization Center each recorded a 

different quantity for the turn-in. However, quantity discrepancies were 

not resolved at any point during the turn-in and disposal process. As a 

result, there is no audit trail to determine whether or where, when, or 

how the reported loss or a recordkeeping error occurred. For example, 

the Navy unit reported a turn-in of 24 warheads that had been used in 

testing but were certified as inert. DRMO personnel counted canisters 

and loose components and determined there were 32 warheads. The 

Anniston Demilitarization Center reported that a total of 27 warheads 

were received for destruction.

DLA supply depot losses. Our statistical samples showed missing items 

at four of the five DLA supply depots that we tested. Because depot 

officials did not have documentation showing that these items had been 

reutilized or sold, there is no assurance that the missing items did not relate 

to theft. Missing items in our DLA depot statistical samples included 

several sensitive items, such as classified radio frequency amplifiers and 

circuit boards, aircraft parts, and computer equipment that required trade 

security or demilitarization controls.

We obtained DRMS data on DLA supply depot reports of excess property 

losses, including missing and damaged property and unverified 

adjustments. We investigated reported losses of selected aircraft parts at 

two DLA supply depots—Oklahoma City and Warner Robins—that 

reported the largest amount of depot losses. DLA Directive 5025.30, DLA 

One Book, includes a section on Inventory Adjustment Research (dated 
Page 23 GAO-05-729T 

October 21, 2004), which sets inventory accuracy goals for DLA supply 

depots and requires causative research—an in-depth investigation—of 

adjustments for selected items30 and suspected fraud, waste, and abuse to 

determine why they occurred. A Financial Liability Investigation of 

Property Loss is required if the adjustment meets specific criteria, 

including (1) gains or losses of classified or sensitive material; (2) an 

adjustment in excess of $2,500 for pilferable material; and (3) a loss where 

there is a suspicion of fraud, theft, or negligence. However, we found that 

DLA depot personnel did not thoroughly investigate most adjustments 

related to reported losses of sensitive items with demilitarization controls 

that we selected for investigation. Supply depot officials told us that they 

assumed the losses represented inventory recordkeeping errors, even 

though causative research results were inconclusive. 

Property Damage In addition to reported losses, we found significant instances of property 

damage at DRMS liquidation contractor sales locations. Because the terms 

and conditions of liquidation sales specify that all property is sold “as is” 

and assigns all risk of loss to buyers, the buyers have no recourse when 

property is damaged after being sold or is not in the advertised condition. 

As a result, customers who have lost money on bids related to damaged 

and unusable items might not bid again, or they may scale back on the 

amount of their bids in the future, affecting both the volume of excess DOD 

items liquidated and sales proceeds. On October 7, 2004, we purchased 

numerous usable items in original manufacturer packaging, including 35 

boxes of bandages, 31 boxes of gauze sponges and surgical sponges, 12 

boxes of latex gloves, and 2 boxes of tracheostomy care sets. We paid a 

total of $167, including buyer’s premium, tax, and transportation cost, for 

these items, which had a reported total acquisition cost of $3,290. 

However, these items had become damaged due to rain and a leaky roof at 

the Norfolk, Virginia, liquidation sales location. 

The majority of property damage that we observed at liquidation contractor 

sales locations is primarily the result of DRMS management decisions to 

send excess DLA supply depot property to two national liquidation sales 

locations without assuring that its contractor had sufficient human capital 

30 DOD 4000.25-2-M, Military Standard Transaction Reporting and Accountability 

(MILSTRAP), (Change 2, Apr. 28, 2003), Ch. 7, “Physical Inventory Control,” Section 

C7.9.3.2, identified selected items as classified and sensitive items regardless of dollar value, 

pilferable items, controlled inventory items, with an extended value greater than $2,500, and 

all adjustments with an extended value of greater than $16,000 or greater than 25 percent 

unit variance and greater than $5,000.
Page 24 GAO-05-729T 

resources and warehouse capacity to process, properly store, and sell the 

volume of property received. For example, excess DOD property sent to 

the Huntsville, Alabama, liquidation sales location was stored outside 

unprotected from weather, including sun, wind, rain, and hurricanes during 

the summer and fall of 2004. The liquidation contractor’s failure to record 

these items in sales inventory at the time they were received, when 

combined with lost and illegible property labels due to weather damage, 

resulted in a significant loss of accountability for many of these items.

Outdated, Nonintegrated 

Systems Impair Economy 

and Efficiency

Inefficient, nonintegrated excess inventory and supply management 

systems lack controls necessary to prevent waste and inefficiency in the 

reutilization program. For example, because the DRMS Automated 

Inventory System (DAISY) and DLA’s Standard Automated Materiel 

Management System (SAMMS) are outdated and nonintegrated, they do not 

share information necessary to (1) identify and alert DLA item managers of 

excess property that is available to fill supply orders and (2) prevent 

purchases of new items when A-condition excess items are available for 

reutilization. We have continued to report31 that long-standing weaknesses 

with DLA’s inventory systems related to outdated, nonintegrated legacy 

systems and processes result in DOD and military units not knowing how 

many items they have and where these items are located. DLA has 

acknowledged serious deficiencies in its automated inventory management 

systems. Although DLA has an effort under way to replace SAMMS with the 

Business Systems Modernization (BSM) and DRMS has a Reutilization 

Modernization Program (RMP) under way to upgrade DAISY, so far these 

have been separate, uncoordinated efforts and they do not adequately 

address identified process deficiencies. While the systems improvement 

efforts are intended to integrate supply and excess inventory systems to 

support the reutilization program, they are not focused on resolving longstanding problems related to unreliable condition code data and 

incomplete data on NSNs. The accuracy of these two data elements is 

critical to the ability to identify like items that are available for reutilization 

at the time purchases are made.

31 GAO, DOD Business Systems Modernization: Billions Continue to Be Invested with 

Inadequate Management Oversight and Accountability, GAO-04-615 (Washington, D.C.: 

May 27, 2004); DOD Business Systems Modernization: Longstanding Management and 

Oversight Weaknesses Continue to Put Investments at Risk, GAO-03-553T (Washington, 

D.C.: Mar. 31, 2003); and DOD Management: Examples of Inefficient and Ineffective 

Business Processes, GAO-02-873T (Washington, D.C.: June 25, 2002).
Page 25 GAO-05-729T 

Concluding Comments To effectively address problems with reutilization program waste and 

inefficiency, DRMS and DLA will need to exercise strong leadership and 

accountability to improve the reliability of excess property data; establish 

effective oversight and physical inventory control; and develop effective 

integrated systems and processes for identifying and reutilizing excess 

property. In addition, the military services will need to provide accurate 

information on excess property turn-in documentation, particularly data on 

condition codes, and item descriptions, including NSNs that are key to 

identifying items for reutilization. Improved management of DOD’s excess 

property and a strong reutilization program would help save taxpayers 

hundreds of millions of dollars annually. 

Mr. Chairman and Members of the Subcommittee, this concludes my 

prepared statement. We would be pleased to answer any questions that 

you may have.

Contacts and 

Acknowledgments

For more information regarding this testimony, please contact Gregory D. 

Kutz at (202) 512-9505, or kutzg@gao.gov or Keith A. Rhodes at (202) 512-

6412, or rhodesk@gao.gov. Individuals making key contributions to this 

testimony included Mario Artesiano, Stephen P. Donahue, Gayle L. Fischer, 

Jason Kelly, Richard C. Newbold, Ramon Rodriguez, and John Ryan. 

Numerous other individuals contributed to our audit and investigation and 

are listed in our companion report. Technical expertise was provided by 

Sushil K. Sharma, PhD, DrPH. 

(192164) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go to 

www.gao.gov and select “Subscribe to Updates.”

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional 

Relations

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548

Public Affairs Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548