GAO

United States General Accounting Office

Report to the Chairman, Committee on 

Armed Services, House of 

Representatives

July 1999 DEFENSE 

INVENTORY

Property Being 

Shipped to Disposal Is 

Not Properly 

Controlled

GAO/NSIAD-99-84

Page 1 GAO/NSIAD-99-84 Defense Inventory

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-281629 Letter

July 1, 1999

The Honorable Floyd D. Spence

Chairman, Committee on Armed Services

House of Representatives

Dear Mr. Chairman:

As requested, we reviewed the Department of Defense’s (DOD) 

management procedures for controlling excess weapon system parts, 

components, equipment, and other inventory items that are being shipped 

to disposal.1

 You asked that we determine if this property is vulnerable to 

waste, abuse, or loss. During fiscal year 1998, the military services shipped 

millions of items to disposal with a reported acquisition value totaling over 

$20 billion. This report discusses (1) types and amounts of excess property 

that is reported as not received2

 when shipped to disposal and (2) 

weaknesses in management controls over excess property that is being 

shipped to disposal that makes it vulnerable to waste, abuse, or loss. This 

report focuses on property that DOD considers sensitive or pilferable. 

Sensitive property is comprised of military parts and equipment that have 

capabilities and technologies involving weapons, national security, or 

military advantages. Pilferable property has no military capability or 

technology implications but is especially subject to theft because it can be 

readily resold or converted to personal use. 

This is the third in a series of reports responding to your request. We 

previously reported on DOD’s needless destruction of certain usable 

aircraft parts and on inappropriate sales of parts with military technology 

and flight safety risks.3

 Our previous reports are summarized in appendix I. 

This report is also part of our continuing effort to address defense

1

DOD refers to property being shipped from one DOD activity to another as in-transit property.

2

DOD refers to shipped property that was not recorded as received as unaccounted for property. 

3

Defense Inventory: Management of Surplus Usable Aircraft Parts Can Be Improved (GAO/NSIAD-98-7, 

Oct. 2, 1997) and Defense Inventory: Action Needed to Avoid Inappropriate Sales of Surplus Parts 

(GAO/NSIAD-98-182, Aug. 3, 1998).
B-281629

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inventory management as a high-risk area4 because of vulnerabilities to 

waste, fraud, abuse, and mismanagement. The scope and methodology of 

our work are described in appendix II.

Results in Brief DOD has had problems accounting for excess property that is being 

shipped to disposal and has developed comprehensive procedures to track 

the property. However, the procedures are not working effectively, leaving 

property vulnerable to loss or theft. In 1998, the Defense Logistics Support 

Command reported accountability over property being shipped to disposal 

as a material weakness because there was little enforcement or use of 

appropriate control procedures. DOD reports that during fiscal year 1998, 

property valued at about $2.7 billion was shipped to disposal but was not 

recorded as received by disposal offices. Our analysis of DOD’s data for the 

12-month period ending March 31, 1998, shows that over one-half of the 

dollar value of property that was reported as not received involved items 

that require special handling such as communications equipment, aircraft 

components, and gun parts.

DOD does not consider all property reported as not received as lost or 

stolen. DOD officials stated that in many instances the property in question 

is received and disposed of properly but is incorrectly reported as not 

received because the systems used to track the property are not reliable. 

However, DOD does not know the status of property being shipped to 

disposal because of the questionable accuracy of data and lack of 

adherence to control procedures. The reports used to manage and track 

this property are not accurate because of computer system programming 

and data input errors. For example, we identified 30 shipments that were 

correctly entered into a service’s information system but, due to a 

programming or data transmission problem, were not entered into the DOD 

In-transit Accountability System. Consequently, the reports incorrectly 

identified some property as not received, did not recognize large numbers 

of disposal transactions reported by the services, and contained duplicate 

information. Also, control procedures are not being followed because 

4

In 1990, we began a special effort to review and report on the federal program areas we identified as 

high risk because of vulnerabilities to waste, fraud, abuse, and mismanagement. This effort, which was 

supported by the Senate Committee on Government Affairs and the House Committee on Government 

Reform, brought a much needed focus on problems that were costing the government billions of 

dollars. We identified DOD’s inventory management as a high-risk area at that time because levels of 

unneeded inventory were too high and systems for determining inventory requirements were 

inadequate.
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service and disposal office personnel either are not fully aware of the 

procedures or do not always understand them. For example, service and 

disposal office personnel did not always know how to research and 

investigate discrepancies between what was shipped to disposal and what 

was received. We reviewed 191 sample shipments of sensitive military 

property reported as not received. No investigations had been made for any 

of these shipments. After further review, we were able to satisfactorily 

determine the status of 114 of these shipments (60 percent). We found that 

disposal offices received the shipments but, due to a backlog of property 

waiting to be processed, had not recorded the receipts. However, we were 

unable to trace the actual disposition of the remaining 77 shipments

(40 percent). These included sensitive items such as a wiring assembly 

used for encrypted electronic communications, optical magnifying devices 

for 25-millimeter guns, and assorted components for the Bradley fighting 

vehicle and other weapon systems.

We are recommending among other things that the Secretary of Defense 

take actions to correct information system errors and provide training on 

control procedures. These actions should be incorporated into a 

congressionally required plan to improve controls over items shipped 

between DOD activities.

Background The Federal Property and Administrative Services Act of 1949, as amended, 

places responsibility for the disposition of government real and personal 

property with the General Services Administration. That agency delegated 

disposal of DOD personal property to the Secretary of Defense, who in turn 

delegated it to the Defense Logistics Agency (DLA). The Office of the 

Deputy Under Secretary of Defense (Logistics) provides overall guidance 

for disposing of property. The military services are responsible for 

determining if certain property they hold exceeds their needs. Once they do 

so, the Defense Reutilization and Marketing Service (DRMS), a component 

of DLA, carries out disposal functions. Excess property is generally sent to 

1 of 113 disposal offices5

 for redistribution within DOD or transfer to other 

federal agencies. Property that is not redistributed or transferred is 

designated as surplus and can be donated to eligible entities such as state 

and local governments among many others. The property that remains after 

this process may be sold to the general public. Disposal offices are not 

5

DRMS operates 85 domestic disposal offices and 28 international disposal offices.
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authorized to handle weapons, classified material, drugs, firearms, 

ammunitions, and explosives. The military services dispose of these items. 

DOD provides guidance for establishing an internal control system to 

safeguard property that is being shipped. The key management information 

system supporting these controls is the In-transit Accountability System. 

Maintaining control and accountability over excess property being shipped 

is important for two key reasons. First, the property includes sensitive 

military parts and equipment that need to be safeguarded. Second, the 

property is valuable and may include pilferable items, such as photographic 

equipment and supplies, hand tools, shop equipment, and clothing. During 

fiscal year 1998, the military services shipped to disposal millions of items 

with a total reported acquisition value exceeding $20 billion.6

Inadequate Accountability 

Is a Long-standing Problem

DOD’s problems with accountability over property being shipped to 

disposal date back to the 1970s. In response, DOD over time developed 

comprehensive procedures to control that property. However, audits 

continued to find that these procedures were not effective. For example, 

we reported in 1991 that some procedures for such shipments had been 

discontinued.7

 At the time, DOD agreed that control procedures were 

ineffective but stated that it planned actions to improve controls.

In its annual Federal Managers’ Financial Integrity Act report for fiscal year 

1995, DRMS identified accountability over property shipped to disposal as 

a material weakness.8

 In 1996, DRMS reported that use of the In-transit 

Accountability System would provide control over the shipment of excess 

property and that accountability was no longer a material weakness. 

6

Excess property may be valued at salvage prices (3.4 percent of latest acquisition cost for fiscal year 

1998). However, the standard price (i.e., latest acquisition cost and a surcharge covering the costs to 

operate the supply system) is used throughout DOD in its logistics systems. Therefore, throughout the 

remainder of this report, the standard price is the value associated with inventory being shipped to 

disposal.

7

Property Disposal: Controls Needed to Preclude DOD Release of Unsafe Surplus M151 Jeeps

(GAO/NSIAD-91-10, Jan. 2, 1991).

8

The Federal Managers’ Financial Integrity Act of 1982 requires that executive agencies establish and 

maintain systems of internal controls that conform to standards established by the Comptroller General 

of the United States. The act also requires that agencies evaluate these controls periodically and report 

to the President and Congress annually on their status. These controls must provide reasonable 

assurance (i.e., a satisfactory level of confidence, given considerations of costs, benefits, and risks) that 

resources are accounted for. When the head of the agency decides that the internal controls do not 

comply with established standards, the agency's annual report must identify weaknesses and describe 

how and when they will be corrected.
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However, in 1998, the Defense Logistics Support Command reported 

accountability over the shipment of excess property as a material 

weakness because there had been little enforcement or use of the In-transit 

Accountability System.

Amounts and Types of 

Excess Property 

Reported as Not 

Received 

DOD reports of shipped property for fiscal years 1997 and 1998 indicate 

unacceptably large amounts of property identified as not received at 

disposal offices. For fiscal year 1997, DOD reported that the services 

shipped excess property valued at about $19.9 billion to disposal. 

According to the report, property worth about $2.2 billion (11 percent) was 

not recorded as received by disposal offices. For fiscal year 1998, DOD 

reported that the services shipped excess property valued at about $20.5 

billion to disposal and that property worth about $2.7 billion (13 percent) 

was not recorded as received by disposal offices (see table 1).

Table 1: Value of Property Reported by DOD as Not Received (fiscal year 1998)

a

Includes Marine Corps.

Source: DOD In-transit Accountability System. 

We analyzed In-transit Accountability System data for the 12-month period 

ending March 31, 1998. About $1.8 billion of the property shipped to 

disposal by the services was not recorded as received. Table 2 shows the 

categories, number of items, and dollar value of property reported as not 

received.

Dollars in millions

DOD component

Total sent to

disposal

Amount not

received

Percent not

received

Air Force $6,151.3 $209.9 3.4

Army 6,250.4 1,675.5 26.8

Navya 5,242.5 676.2 12.9

Other DOD 2,867.6 104.5 3.6

Total $20,511.8 $2,666.1 13.0
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Table 2: Categories of Property Reported by DOD as Not Received (12 months 

ending Mar. 31, 1998) 

Source: DOD In-transit Accountability System.

Over one-half of the dollar value of the shipments in table 2 involved 

pilferable items and sensitive military items comprised of technologies, 

capabilities, and weapons that should not be made available to the public. 

Our review focused on excess sensitive and pilferable items. Nonsensitive 

items were excluded from our review because DRMS has an initiative 

related to disposing of excess nonsensitive property that is designed to 

reduce the number of unmatched transactions in the In-transit 

Accountability System. DRMS and service officials told us that In-transit 

Accountability System reports of property not received do not 

automatically equate to lost or stolen property. They said that in many 

instances, the property was incorrectly identified as not received by the 

In-transit Accountability System. However, DOD’s management controls do 

not provide sufficient confidence that property is actually received.

Management Control 

Weaknesses Leave 

Property Vulnerable to 

Loss or Undetected 

Theft

DOD does not know the status of property being shipped to disposal 

because of the questionable accuracy of data and lack of adherence to 

control procedures. The reports used to manage and track this property are 

not accurate because of computer system programming and data input 

errors. Using judgmentally selected samples of items, we identified 

weaknesses in the In-transit Accountability System relating to

(1) inaccuracies in the In-transit Accountability System data and (2) failure 

to determine what happened to items that were shipped but not reported as 

received. These conditions leave property vulnerable to loss or undetected 

theft. The problems were caused primarily by programming and data input 

errors and personnel not following or being familiar with required 

procedures.

Dollars in millions

Category Number of shipments Number of items Value

Sensitive military items 16,656 283,171 $339.0

Pilferable items 141,197 3,068,674 692.5

Nonsensitive items 175,453 26,009,763 746.1

Total 333,306 29,361,608 $1,777.6
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Shipment Control 

Procedures

Military procedures require that excess property that is sensitive, 

pilferable, or more than $800 in value be controlled from the time it leaves a 

military unit's shipping activity until it arrives at a disposal office. 

Implementing the controls is a shared responsibility. The military units are 

supposed to provide information to the In-transit Accountability System 

when the property is shipped. The disposal office provides information to 

the In-transit Accountability System when the property is received. The 

system then compares information on the property received from the 

disposal office with information received from the military unit. If there is a 

discrepancy, the military unit is notified. The unit is supposed to research 

the discrepancy, coordinate with the disposal office, document its research, 

and provide information on the results to the In-transit Accountability 

System (see app. III for more detail).

Procedures also require disposal offices, upon receiving property, to 

provide information to the In-transit Accountability System on the type, 

quantity, and date of receipt. To reduce the cost, handling, and 

administrative time needed to process property through the disposal 

system, the services or disposal offices can accumulate nonsensitive 

property under $800 in value together as a batch lot. Batch-lotted property 

is not reported to the In-transit Accountability System and, therefore, 

cannot be accounted for under the shipment control procedures. The 

procedures, however, do not allow property considered pilferable, 

sensitive, or over $800 in value to be placed in batch lots. Shipments of 

such property must be reported to the In-transit Accountability System. All 

property in the shipments we reviewed were considered sensitive or 

pilferable. 

Inaccurate Reporting Data 

Input and System Problems

DRMS’ and services’ automated systems used to track excess property 

shipped to disposal had programming and data input problems that caused 

the In-transit Accountability System reports to contain inaccurate 

information. Because of these problems, accountability reports did not 

recognize large numbers of disposal transactions reported by the services 

and contained duplicate or inaccurate information. Also, the Navy's 

information system was not programmed to forward discrepancy notices to 

shipping activities for review. This situation reduces the value of reports 

generated as a management tool, thus increasing the vulnerability to 

undetected property loss.

One type of discrepancy recorded by the In-transit Accountability System 

involved property that was recorded as received at the disposal offices, but 
B-281629

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that was not recorded as having been shipped. This situation occurred 

primarily because transactions processed by the services’ information 

systems did not show up in the In-transit Accountability System. We 

reviewed a selection of 33 shipments that the In-transit Accountability 

System identified as received by the Oklahoma City disposal office but that 

had no corresponding shipment record. Of these shipments, 30 had been 

correctly entered into the Air Force’s information system but had not been 

recorded in the In-transit Accountability System. DRMS personnel were 

investigating whether the cause of the problem was programming or data 

transmission.

Records showed that the other three shipments were manually processed 

and not entered into either the military service’s information system or the 

In-transit Accountability System. The shipments involved Army gun 

barrels. The unit typed the shipping documents and did not enter the 

shipments into an information system or report the transactions to the 

In-transit Accountability System. Procedures require units that do not have 

computer connections to the In-transit Accountability System to either 

arrange for shipments to be processed by a unit with those capabilities or 

to mail a copy of the shipment documents for input into the system. The 

personnel lacked training and did not know they were supposed to provide 

data to the information system. Officials at the four disposal offices we 

visited stated that they routinely received and processed excess property 

accompanied by handwritten or typed shipping documents.

The In-transit Accountability System also contained duplicate information. 

For example, shipments to the Texarkana, Texas, disposal office had been 

recorded twice. The system reported the shipments both as sent but not 

received and as received but not sent. The system created two 

discrepancies for the same shipment because service and disposal office 

personnel entered different stock numbers for the same shipment. 

According to disposal office officials, this discrepancy occurs frequently on 

shipments for which the military services have not obtained national stock 

numbers9

 and to which they assigned local stock numbers. Since the 

disposal office's system cannot recognize local stock numbers, personnel 

there routinely enter a national stock number that closely resembles a 

description of the item being shipped. But because local and national stock 

9

National stock number refers to a 13-digit stock number used by DOD and other agencies to identify 

items of supply. It consists of a four-digit federal supply class that designates the general commodity 

grouping of the item and a nine-digit item identification number that differentiates one supply item from 

another.
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numbers are different, the system cannot match the shipment with the 

receipt, and a double discrepancy occurs.

In addition, Navy information systems were not programmed to forward 

discrepancy notices for review by shipping activities. Consequently, items 

were not being researched. The In-transit Accountability System 

electronically notifies the Naval Inventory Control Point system that a 

shipment to a disposal office has not been received. The Navy system 

searches for a corresponding shipment transaction and informs the 

accountability system that the shipment has been made. Once this happens, 

the discrepancy notice is cleared from the Navy's system. However, 

regulations require verification of receipts and research of discrepancies. 

The Navy is working to correct this system error. 

Disposal Office Personnel Did 

Not Correctly Record Receipts 

We also noted that In-transit Accountability System reports were 

inaccurate and control procedures were not always properly implemented 

because receiving personnel at the disposal offices either were not familiar 

with receipt recording procedures or did not follow them. Specifically, we 

found the following problems:

• At the Texarkana disposal office we physically inspected 33 batch lots 

and found pilferable property in 5 of them. The items were a firearms 

part, hand tools, a typewriter, and a wrench set. At the Oklahoma City 

disposal office, 4 of the 54 batch lots we inspected included pilferable 

property. We also identified a likely case of theft involving excess 

pilferable property. In June 1998, the Air Force shipped a camera lens, 

valued at $424, to the Oklahoma City disposal office. Disposal office 

personnel did not enter receipt of the lens into the tracking system. 

Instead, the lens was placed together with office supplies in a batch lot. 

Our inspection of the batch lot showed that the camera lens was 

missing. After a comprehensive search, disposal office personnel 

concluded that the camera lens had been stolen. 

• At the Philadelphia disposal office, a military sensitive item, a 

night-vision image intensifier, was among 26 batch lots we inspected. 

Disposal office personnel stated that they checked the demilitarization 

codes and acquisition dollar value of property before it is placed in 

batch lots. However, they did not know that the procedures also 

required a check for pilferable and sensitive property.

Based on our discussions with DRMS officials, DRMS sent a memorandum 

to all disposal offices addressing our findings. The memorandum directs 

the disposal offices to comply with requirements covering batch lots and 
B-281629

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requires managers to periodically review the requirements with disposal 

office employees. In addition, the officials revised the DRMS’ operational 

compliance guide to include a periodic self-assessment by disposal offices 

to ensure that pilferable and sensitive property is not included in batch lots. 

Following this action, we reviewed 106 batch lots at the San Diego disposal 

office and found no discrepancies. 

Failure to Follow 

Procedures Results in Loss 

of Accountability

Our review of 191 judgmentally selected shipments showed that the 

services and disposal offices did not follow procedures for researching 

discrepancies between what was reported as sent to disposal and what was 

received. Service and disposal office personnel were not adequately trained 

and did not always understand or were not fully aware of the procedures. 

Consequently, service and disposal personnel did not know how to 

research and investigate discrepancies. As with the reporting problems, 

this situation made property vulnerable to loss. Procedures require that the 

sending unit research such discrepancies. If the unit and the disposal office 

cannot resolve the discrepancy, the unit is required to alert its security 

office or criminal investigators.10 If a unit does not respond to a 

discrepancy report after two notices, DRMS takes no further action but 

leaves the discrepancy on its records for 2 years.

Although the property we selected for review had military capabilities, 

technologies, or value that warranted protecting, the discrepancies were 

not being researched and investigated. We researched available records 

and found that 114 shipments had been properly disposed. In most cases, 

we found that the disposal offices had received the shipments but did not 

record the receipts in a timely manner. The In-transit Accountability 

System automatically reports a discrepancy if property is not recorded as 

received within 60 days after being shipped. Officials pointed to a backlog 

of property waiting to be processed as the reason for the delays. However, 

for the other 77 shipments, we were unable to determine what happened to 

the property. Specifically:

• Records on 27 shipments of sensitive property sent by the Army to the 

Texarkana, Texas, disposal office showed no evidence of receipt or 

10The criminal investigative agency in the Air Force is the Office of Special Investigations, in the Army it 

is the Criminal Investigative Division, and in the Navy it is the Naval Criminal Investigative Service. 

Other agencies that may become involved include the Defense Criminal Investigative Service; the DLA 

Command Security Office; the U.S. Customs Service, Office of Special Investigations; and the Federal 

Bureau of Investigation. 
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disposition of the property. The missing property included optical 

magnifying devices for 25-millimeter guns and assorted components for 

the Bradley fighting vehicle and other weapon systems.

• Records on 48 shipments of sensitive property sent by the Air Force to 

the Oklahoma City, Oklahoma, disposal office showed no evidence of 

receipt or disposition. The missing property included aircraft lighting 

panels that displayed name plates or tags identifying the panels as part 

of a specific weapon system. Procedures require the name plates or tags 

to be removed and destroyed.

• Records on two shipments of sensitive property sent by the Navy to the 

San Diego, California, disposal office showed no evidence of receipt or 

disposition. One missing item was a sensitive wiring assembly used for 

encrypted electronic communications.

Results Act Goals and 

Related Reporting 

Requirements

The weaknesses in management controls over excess property shipped to 

disposal also undermine DOD’s ability to measure progress towards 

achieving the selected goals set out in its fiscal year 2000 Performance 

Plan. The plan was prepared in response to the requirements of the 

Government Performance and Results Act.11 The plan contains a 

performance indicator for achieving 90-percent visibility over material by 

fiscal year 2000 and 100-percent visibility by 2004. Visibility refers to 

knowing on a real-time basis how many units of specific items are on hand, 

where the items are located, and their condition. Officials stated that they 

were evaluating ways to enforce their control procedures and to increase 

management oversight of the accountability of excess property shipped to 

disposal. 

The officials stated that the accountability problem with property shipped 

to disposal is part of a larger problem involving visibility over all shipped 

property. DOD was required by the Strom Thurmond National Defense 

Authorization Act for Fiscal Year 1999 to develop, by March 1, 1999, a 

comprehensive plan to ensure visibility over shipped items.12 According to 

11The Results Act requires federal agencies (including DOD) to develop departmentwide strategic and 

performance plans and reports. They must set strategic goals, measure performance, and report on the 

degree to which goals were met. This is expected to provide Congress and other decisionmakers with 

objective information on the relative effectiveness and efficiency of federal programs. Annual 

performance plans are included as appendix J to the Secretary of Defense’s Annual Report to the 

President and the Congress.

12The Authorization Act requires that the Comptroller General review the plan and submit to Congress 

any appropriate comments. 
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DOD officials, the plan will be available later in 1999 and will address 

improvements needed in accountability over excess inventory shipped to 

disposal.

Conclusions DOD management controls over excess property being shipped to disposal 

are not working effectively, leaving the property vulnerable to loss or 

undetected theft. DOD believes that property is not being lost and that 

most record discrepancies are due to administrative errors. However, such 

administrative problems are systemic and widespread. In addition, DOD 

does not know the status of property being shipped to disposal because of 

the questionable accuracy of data and lack of adherence to control 

procedures. Further, control procedures over property shipped to disposal 

are not being followed because service and disposal personnel either are 

not fully aware of the procedures or do not always understand them. 

Underlying causes of these conditions appear to be the heavy flow of 

property to disposal, insufficient management attention, and a lack of 

training. These conditions make it impossible to report accurate 

performance measures results for inventory that is being shipped.

Recommendations We recommend that the Secretary of Defense include actions in the 

statutorily-required plan for visibility over shipped inventory that would 

address the following areas of concern:

• Lack of adherence to internal control procedures for safeguarding 

excess property shipped to disposal to include researching and 

investigating discrepancies between what was reported as sent to 

disposal and what was received.

• Insufficiently trained personnel.

• Data accuracy problems contained in the In-transit Accountability 

System reports.

• The need for performance measures, milestones, and timetables to help 

monitor the progress being made to reduce the vulnerability of property 

being shipped to disposal to undetected loss or misplacement. 

Agency Comments and 

Our Evaluation

In commenting on a draft of this report, DOD concurred with the report. 

DOD stated that it has convened an Integrated Process Team to address 

in-transit control visibility. The team will address our report 

recommendation, including the responsibilities of the various types of 
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organizations that generate excess personal property as well as the 

responsibilities of the disposal activities. DOD’s comments are included in 

appendix IV. DOD also provided detailed technical comments and we 

revised the report to reflect them where appropriate. 

We are sending copies of this report to the appropriate congressional 

committees; the Honorable William Cohen, Secretary of Defense; the 

Honorable Louis Caldera, Secretary of the Army; the Honorable Richard 

Danzig, Secretary of the Navy; the Honorable F.W. Peters, Acting Secretary 

of the Air Force; Lieutenant General Henry T. Glisson, Director, DLA; and 

the Honorable Jacob Lew, Director, Office of Management and Budget. 

Please contact me at (202) 512-8412 if you or your staff have any questions 

concerning this report. Major contributors to this report are listed in 

appendix V.

Sincerely yours,

David R. Warren, Director

Defense Management Issues
Page 14 GAO/NSIAD-99-84 Defense Inventory

Contents

Letter 1

Appendix I

Summary of Prior GAO 

Reports

16

Appendix II

Scope and 

Methodology

19

Appendix III

Control Procedures for 

Excess Property 

Shipped to Disposal

21

Appendix IV

Comments From the 

Department of Defense

23

Appendix V

GAO Contacts and 

Staff 

Acknowledgments

24

Tables Table 1: Value of Property Reported by DOD as Not Received (fiscal

year 1998) 5

Table 2: Categories of Property Reported by DOD as Not Received

(12 months ending Mar. 31, 1998) 6
Contents

Page 15 GAO/NSIAD-99-84 Defense Inventory

Abbreviations

DLA Defense Logistics Agency

DOD Department of Defense

DRMS Defense Reutilization and Marketing Service
Page 16 GAO/NSIAD-99-84 Defense Inventory

Appendix I

Summary of Prior GAO Reports ApeInxdi

1. Defense Inventory: Management of Surplus Usable Aircraft Parts Can Be 

Improved (GAO/NSIAD-98-7, Oct. 2, 1997).

We reviewed selected aspects of the Department of Defense's (DOD) 

disposal process, focusing on whether (1) during the disposal process DOD 

destroyed usable aircraft parts that did not have military technology and 

flight safety implications and (2) the military services recalled aircraft parts 

from the disposal process to preclude unnecessary purchases or repairs.

We noted that management of the aircraft parts disposal process could be 

improved. DOD destroyed some usable aircraft parts and sold them as 

scrap. These parts were in new or repairable condition and did not have 

military technology or flight safety implications. The parts could possibly 

have been sold intact at higher than scrap prices. This situation occurred 

for several reasons. For example, disposal offices destroyed parts because 

the demilitarization codes the military services had assigned to the parts 

were inaccurate. The codes indicated the parts contained military 

technology when they did not. Our work showed that the Oklahoma City 

disposal office destroyed 62 of 71 sample items, even though they did not 

have technology implications, because the assigned codes required their 

destruction. Personnel responsible for assigning and reviewing the codes 

had not been sufficiently trained and guidance was not adequate. In 

addition, policies and practices designed to prevent the inadvertent or 

unauthorized release of parts with military technology and flight safety 

implications did not distinguish between parts with or without such 

implications. Parts without military technology and flight safety concerns 

were destroyed along with parts that had these characteristics.

Our work also showed that DOD could have purchased or repaired fewer 

aircraft parts if it had recalled the needed parts from the disposal process. 

For example, the Army could have reduced current and planned purchases 

by about $200,000 by using Cobra helicopter parts scheduled for 

destruction. DOD regulations require the military services to know which 

parts they have placed in the disposal process. However, interface 

problems between service and disposal office computer systems precluded 

the services from knowing what parts were at the disposal offices. The 

military services had not instituted alternative ways to obtain this 

information on a routine basis. 

Problems with the disposal process were likely not unique to the three 

disposal yards we visited because DOD, military service, and Defense 

Logistics Agency policies and procedures generally apply to activities being 
Appendix I

Summary of Prior GAO Reports

Page 17 GAO/NSIAD-99-84 Defense Inventory

performed at all locations. Our past reviews and DOD internal studies 

identified similar problems at these and other locations over the past 10 

years or earlier.

2. Defense Inventory: Action Needed to Avoid Inappropriate Sales of 

Surplus Parts (GAO/NSIAD-98-182, Aug. 3, 1998).

We reviewed DOD’s disposal process for surplus parts with both military 

technology and flight safety risks, focusing on DOD’s efforts to (1) identify 

and destroy parts with military technology and (2) implement a flight safety 

program to prevent aircraft parts with potential flight safety risks from 

being sold through the disposal process.

We noted that while DOD recognized the dangers associated with selling 

surplus parts with military technology to the public and had taken certain 

actions to address the problem, DOD’s disposal offices inadvertently sold 

surplus parts with military technology intact. These sales occurred for 

three reasons. First, the military services assigned the wrong 

demilitarization codes to the parts. Because guidance was inadequate, 

codes assigned to parts with military technology incorrectly indicated that 

the parts did not contain the technology. DOD has been considering ways 

to address this situation but has not yet reached a final decision. Second, 

an initiative intended to correct inaccurately assigned demilitarization 

codes did not ensure that data systems were updated with the corrected 

codes. As a result, disposal offices continued to sell parts with military 

technology intact after the codes for the parts were determined to be 

inaccurately assigned. Personnel responsible for correcting the 

inaccurately assigned codes did not always update their data systems with 

the corrected codes. Third, the methods that the disposal offices used to 

demilitarize some parts did not adequately destroy the military technology 

contained in the parts. Guidance to disposal offices on how to destroy the 

military technology inherent in some items was not adequate.

DOD and its components had not aggressively pursued implementation of 

initiatives to prevent the sale of potentially dangerous flight safety critical 

aircraft parts through the disposal system. DOD and the components had 

not set timelines for implementing the flight safety program. Also, none of 

the components had fully implemented all of the program initiatives, but 

some have made greater progress than others. For example, at the time our 

fieldwork was completed, the Army had identified over 4,500 aircraft parts 

with flight safety implications, whereas the Navy had not identified any 

aircraft parts with these implications. DOD planned to increase its 
Appendix I

Summary of Prior GAO Reports

Page 18 GAO/NSIAD-99-84 Defense Inventory

interaction and involvement in the program, but the military services and 

the Defense Logistics Agency continued to have problems accomplishing 

flight safety program initiatives.
Page 19 GAO/NSIAD-99-84 Defense Inventory

Appendix II

Scope and Methodology ApeInxdi

To determine DOD’s policies and practices to account for excess property 

that is shipped between the military services and disposal offices, we met 

with officials and performed work at the Office of the Deputy Under 

Secretary of Defense (Logistics), Washington, D.C.; Army, Navy, and Air 

Force Headquarters, Washington, D.C.; the Defense Logistics Agency, Fort 

Belvoir, Virginia; and the Defense Reutilization and Marketing Service, 

Battle Creek, Michigan. We also reviewed policies, procedures, disposal 

and transaction histories, and related records obtained from the Defense 

Supply Center, Philadelphia, Pennsylvania; the Naval Inventory Control 

Point, Philadelphia, Pennsylvania; the Oklahoma City Air Logistics Center, 

Tinker Air Force Base, Oklahoma; Defense Distribution Depots located in 

San Diego, California, Texarkana, Texas, Susquehanna, Pennsylvania, and 

Oklahoma City, Oklahoma; and the U.S. Army Reserve, Oklahoma City, 

Oklahoma. We also interviewed personnel and collected information from 

six disposal offices located in Oklahoma City, Oklahoma; Philadelphia and 

Mechanicsburg, Pennsylvania; San Diego and North Island, California; and 

Texarkana, Texas.

To identify the reported types and amounts of excess DOD property 

shipped to disposal that are identified as not received, we obtained data 

from DOD’s In-transit Accountability System showing discrepancies 

between shipment and receipt data. We analyzed the data to identify 

shipments of pilferable, sensitive, and nonsensitive items that were 

reported by the In-transit Accountability System as not received. 

At the Defense Reutilization and Marketing Service, we obtained 

computerized records from the In-transit Accountability System showing 

property that was not received between February 1997 and March 1998, 

giving us the most current and complete shipping data available. Using the 

data, we judgmentally selected for review 191 shipments reported by DOD 

as not received at disposal to determine whether the material was missing 

and whether any discrepancies were researched. We selected these 

shipments based on the military sensitivity of the items in the shipments. 

We selected and reviewed 56 Air Force shipments of excess military 

sensitive items sent to the Oklahoma City disposal office, 84 shipments of 

excess Navy military sensitive items sent to the San Diego disposal office, 

and 51 shipments of excess Army military sensitive items sent to the 

Texarkana disposal office. We selected these locations because, according 

to DOD records, large quantities of excess military parts and equipment, 

including our sample items, were sent to these locations but were never 

recorded as received. We did not independently verify the overall accuracy 

of the In-transit Accountability System database from which we obtained 
Appendix II

Scope and Methodology

Page 20 GAO/NSIAD-99-84 Defense Inventory

data but used it as a starting point for selecting shipments which we then 

tracked back to records and documents on individual transactions.

For each sample shipment, we researched shipment records, analyzed 

inventory records, reviewed disposal office documentation and receipt 

records, and held discussions with service and disposal office personnel at 

the locations selected. We also examined 219 batch lots of property at the 

disposal offices to determine whether the batch lots contained pilferable or 

sensitive property. 

To determine whether military units properly reported disposal 

transactions, we reviewed an additional 33 transactions that were 

identified by the In-transit Accountability System as received at the 

Oklahoma City disposal office but were not identified as having a 

corresponding shipment. We also selected these shipments on the basis of 

the military sensitivity of the items in the shipments. 

We reviewed the In-transit Accountability System reports for other issues 

that negatively impacted DOD’s management controls. For example, to 

determine whether duplicate transactions were included in the In-transit 

Accountability System reports, we compared discrepancies involving 

shipments of excess property to the Texarkana disposal office with 

discrepancies involving receipts of excess property at the Texarkana 

disposal office for fiscal year 1998.

We used the same computer programs, reports, records, and statistics that 

DOD, the military services, the Defense Logistics Agency, and the Defense 

Reutilization and Marketing Service use to control excess property that is 

shipped between the military services and the disposal offices. We did not 

independently determine the reliability of all these sources. 

For historical perspective and illustrations of past problems, we reviewed 

the results of prior DOD internal studies and DOD Inspector General 

reports. We also used documentation and data obtained during prior work 

on disposal operations.

We performed our review between July 1998 and March 1999 in accordance 

with generally accepted government auditing standards. 
Page 21 GAO/NSIAD-99-84 Defense Inventory

Appendix III

Control Procedures for Excess Property 

Shipped to Disposal ApIenxdi

(1) Inventory manager determines that an item is excess and prepares an 

inventory release order (A5J). The A5J is sent electronically to the 

shipping activity where the item is stored.

(2) The shipping activity fills out a Shipping and Receiving Document

(DD Form 1348-1A), which accompanies the item to the disposal office.

(2a) The shipping activity notifies the Inventory Control Point that the item 

was shipped. This notification clears the inventory manager’s records of 

accountability for that item.

(2b) The shipping notification is also sent to the DOD In-transit 

Accountability System, and a suspense file is established by document 

number, national stock number, and number of items shipped.

(3) The disposal office inspects the shipment, signs the DD 1348-1A, and 

returns the form to the shipping activity. The shipping activity is required 

to keep this form for 2 years.

Inventory Control Point

Shipping Activity

(4) Defense Reutilization and

Marketing Office

Department of Defense

In-transit Accountability System

Match

case closed Discrepancies

(1) Release Order

(2) DD Form1348-1A

(2a) Shipping notice

(2b) Shipping notice

(3) Signed 1348-1A

(5) Receipt notice

(6) (7)

(8) First 

 follow-up

(9) Second 

 follow-up

Manual Process

Electronic Process

(10) Results of

 research
Appendix III

Control Procedures for Excess Property 

Shipped to Disposal

Page 22 GAO/NSIAD-99-84 Defense Inventory

(4) The disposal office inspects and counts the number of items received 

and enters the receipt information into its inventory system. The receipt 

notice is sent electronically to the DOD In-transit Accountability System, 

and a suspense file is established for the document number, national stock 

number, and number of items received. 

(5) The system compares document numbers, national stock numbers, and 

quantities for each notification of shipment and each notification of 

receipt.

(6) If an exact match of document number, national stock number, and 

quantity occurs, the file is closed.

(7) A discrepancy occurs if there are quantity differences, no shipping 

notification exists for a receipt notification, or no receipt notification exists 

for a shipping notification. 

(8) A first follow-up request (AFX) is sent to the shipping activity to 

investigate the reason for the discrepancy and resolve it. A report of the 

investigation is to be sent to the In-transit Accountability System within 10 

working days.

(9) If no report of investigation is received within 20 days, a second 

follow-up request (AFZ) is sent to the shipping activity to investigate the 

reason for the discrepancy and resolve it. If no investigative report is 

received, the file remains active for 1 year and is then moved to the history 

file as unresolved. The history file is maintained for 2 years.
Page 23 GAO/NSIAD-99-84 Defense Inventory

Appendix IV

Comments From the Department of Defense ApVenIxdi
Page 24 GAO/NSIAD-99-84 Defense Inventory

Appendix V

GAO Contacts and Staff Acknowledgments ApVendxi

GAO Contacts Charles I. Patton, Jr., (202) 512-4412

Ronald L. Berteotti, (214) 777-5702

Acknowledgments In addition to those named above, Roger L. Tomlinson, Jackie L. Kriethe, 

Frederick T. Lyles, Jr., Thomas E. Baril, Jr., and Robert C. Sommer made 

key contributions to this report.

(709363) Lret
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