GAO

United States General Accounting Office

Report to the Honorable 

Duncan L. Hunter, 

House of Representatives

April 2000 INVENTORY 

MANAGEMENT

Better Controls 

Needed to Prevent 

Misuse of Excess DOD 

Property

GAO/OSI/NSIAD-00-147

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United States General Accounting Office

Washington, D.C. 20548

Office of Special Investigations

B-284877 Letr

April 28, 2000

The Honorable Duncan L. Hunter

House of Representatives

Dear Mr. Hunter:

This report is part of our continuing effort to address inventory 

management activities within the Department of Defense (DOD) as a highrisk area1

 because of vulnerabilities to fraud, waste, abuse, and 

mismanagement. Throughout the United States and overseas, the Defense 

Reutilization and Marketing Service—a component of the Defense 

Logistics Agency (DLA)—transfers and disposes of excess DOD property.2

The Defense Reutilization and Marketing Service carries out these 

functions through 72 domestic3

 and 27 international Defense Reutilization 

and Marketing Offices (DRMO). The excess property is available for reuse 

by DOD agencies and other associated organizations, such as government 

contractors. The Defense Reutilization and Marketing Service may also 

transfer property to federal agencies or donate property to qualified 

organizations. During fiscal years 1996 through 1999, excess property with 

an acquisition value of $17.8 billion4

 was issued through reutilization, 

transfer, and donation by the Defense Reutilization and Marketing Service.

1

 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 fraud, waste, abuse, and 

mismanagement. This effort, supported by the Senate Committee on Governmental Affairs 

and the House Committee on Government Reform, resulted in 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.

2

 Excess DOD property is any property that exceeds the needs of a military service.

3

 The number of domestic Defense Reutilization and Marketing Offices includes annexes.

4

 The total acquisition value for fiscal year 1996 was $4.08 billion; for fiscal year 1997, 

$4.25 billion; for fiscal year 1998, $5.05 billion; and for fiscal year 1999, $4.42 billion.
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DOD has two database systems that provide accounting and management 

controls over the transfer and disposal of excess DOD property: (1) the 

Defense Reutilization and Marketing Automated Information System,5

which is used to inventory and manage excess property, and (2) the 

Defense Automatic Addressing System Center,6

 which maintains the DOD 

activity address code master file. As a control mechanism, an activity 

address code—which is alphanumeric—identifies government entities and 

other organizations authorized to requisition and receive excess DOD 

property.

To facilitate our review, we compared the requisitions of property recorded 

in the Defense Reutilization and Marketing Automated Information System 

against the Defense Automatic Addressing System Center master file on a 

particular day and identified 55 questionable activity codes. We viewed 

these 55 codes as questionable because they did not appear in Defense 

Automatic Addressing System Center records as being active but were 

considered valid by the Defense Reutilization and Marketing Automated 

Information System. We selected two entities with questionable codes for 

further investigation—the University of Alabama at Huntsville (a 

government contractor) and a Florida Army National Guard unit. Pertinent 

information on the 55 activity codes has been provided to the DOD 

Inspector General and DLA for review and appropriate action.

This report responds to your request that we investigate whether the 

transfer and disposal of excess DOD property is vulnerable to fraud and 

abuse because of inaccurate information in DOD’s database systems. 

Specifically, this report discusses (1) the reliability of using DOD’s database 

systems to determine whether activity codes are authorized to obtain 

excess DOD property and (2) the adequacy of oversight of the management 

and use of excess DOD property provided to selected universities and a 

Florida Army National Guard unit where ownership of the property 

remains with DOD.

5

 Referred to as DAISY.

6

 Referred to as DAASC.
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Results in Brief Inadequate control, as a result of inconsistent and incorrect data in DOD’s 

databases, has allowed organizations to obtain excess DOD property to 

which they may not be entitled. For example, the Defense Reutilization and 

Marketing Automated Information System contains invalid activity code 

data; and all activity codes are not recorded in the Defense Automatic 

Addressing System Center master file. We found that many central service 

points7

 for military services and DOD activities do not validate and 

reconcile their files to the Defense Automatic Addressing System Center 

master file in a timely manner as required by regulation.8

 Consequently, the 

data maintained by the various central service points for military services 

and DOD activities include activity address codes that are not recorded in 

the master file.

In our investigation of the University of Alabama at Huntsville, we found 

that the University had used an invalid activity code to obtain over 

$3.5 million9

 worth of excess DOD property to which it was not entitled. 

The activity code was associated with an expired contract and it had been 

deleted several years earlier. In addition, a Florida Army National Guard 

unit was able to obtain excess property between 1998 and 1999 by using an 

invalid activity code that had been deleted in 1990. In commenting on the 

results of our investigation, DLA officials were unable to determine why 

the Defense Reutilization and Marketing Automated Information System 

had failed to reject the invalid codes. Further, the activity code used by the 

University to obtain the excess property was a nonrequisitioning code, 

indicating that the activity was not authorized to use this code to 

requisition.10 DLA officials indicate that this type of code should not be 

used to obtain property from a DRMO. However, we determined that 

65 nonrequisitioning codes had been used to obtain over $101 million11 in 

7

 Military services, DOD activities, and federal agencies have central service points that 

assign activity address codes to organizations that are authorized to requisition property 

from the Defense Reutilization and Marketing Service. These central service points are 

required to assign activity codes and provide updated code data (additions, changes, and 

deletions) to the Defense Automatic Addressing System Center.

8

 Department of Defense 4000.25-6-M (Chap. 1).

9

 This amount represents the acquisition value of the property.

10 Army Regulation 725.50, Table E-329 (Format for Army Additions/Revisions to the 

Department of Defense Activity Address File).

11 This amount represents the acquisition value of the property.
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excess DOD property from fiscal year 1995 to the present and that there 

were no edits in the system to prevent it.

DOD has not exercised adequate oversight of the management and use of 

excess DOD property provided to selected universities and a Florida Army 

National Guard unit. When a university obtains excess DOD property for 

use on a government contract, the property remains under DOD ownership. 

The university must account for the property, and it is prohibited from 

using the property for purposes other than those stated in the contract. 

However, in our investigation of the University of Alabama at Huntsville, 

we found that the property obtained by the University had not been 

inventoried as required, a significant portion could not be located, and 

some of the property had been misused or stolen. The University had also 

failed to provide pertinent information to government officials, which 

limited the effectiveness of the officials’ oversight activities. Internal DOD 

studies have identified mismanagement of excess property by other 

universities. In our investigation of a Florida Army National Guard unit, we 

found that the unit had failed to follow procedures in place to obtain and 

account for excess DOD property it had received in 1998 and 1999.

We are making recommendations (1) to help DOD and the military services 

correct the problems that allow organizations to obtain excess DOD 

property without proper authorization and (2) to help ensure the proper 

management and use of excess DOD property provided to universities for 

government contracts.

Background The Federal Property and Administrative Services Act of 1949,12 as 

amended, places responsibility for the disposition of government real and 

personal property with the General Services Administration. That agency 

delegated disposal of DOD property to the Secretary of Defense, who in 

turn delegated it to DLA. The Office of the Deputy Under Secretary of 

Defense (Logistics) provides overall guidance for disposing of property, 

and DLA’s Defense Logistics Support Command is responsible for disposal 

policy. 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 carries out disposal functions through 

DRMOs. Excess property is generally sent to DRMOs for redistribution 

12 40 U.S.C. § 484.
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within DOD and government contractors or transferred to other federal 

agencies. Property that is not redistributed or transferred is designated as 

surplus and can be donated to qualified organizations. The property that 

remains after this process may be sold to the public.

The Defense Automatic Addressing System Center was created in 1965 to 

address problems with the routing of transactions. Customers—such as the 

military services, DOD activities, federal agencies, and contractors—use 

the Defense Automatic Addressing System Center through an interactive 

network of gateways and databases. The center is linked to over 

100 databases and serves over 177,000 customers. To requisition property 

from a DRMO, a DOD customer must have an activity code. Service points 

are required to assign activity address codes and provide updated data 

(activity code additions, changes, and deletions) to the Defense Automatic 

Addressing System Center. The Center updates the master activity address 

code file and provides updated information on a daily basis to designated 

service and agency activities so that they may update their records. DLA 

applies certain edits through the system to validate the codes.

DLA created the Defense Reutilization and Marketing Automated 

Information System database in 199013 to provide accounting and 

management capability for all property in the inventory. In general terms, 

the system provides for the automated administrative processing of most 

DRMO operations and operational management. The system is used (1) to 

process the receipt of property into the inventory and the storage and 

handling of property under the DRMO’s control and (2) to track the 

disposition of property through reutilization, transfer, and donation; sales; 

hazardous waste disposal; abandonment; or destruction. The Defense 

Reutilization and Marketing Service headquarters is responsible for 

maintaining and updating the Defense Reutilization and Marketing 

Automated Information System. To do this, it receives updated Defense 

Automatic Addressing System Center information on a daily basis.

13 The system was not available to all DRMOs until 1993.
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Inadequate Controls 

Allowed Organizations 

to Improperly Obtain 

Excess DOD Property

Inconsistent and incorrect data in DOD’s databases have allowed 

organizations to improperly obtain excess DOD property. For example, the 

Defense Reutilization and Marketing Automated Information System 

contains invalid activity code data. In addition, all codes are not recorded 

in the agency’s Defense Automatic Addressing System Center master file 

because many central service points do not validate and reconcile their 

files to the system in a timely manner as required by regulation. 

Consequently, the data maintained by the various central service points 

include activity codes that are not recorded in the Defense Automatic 

Addressing System Center master file. In our investigation of the University 

of Alabama at Huntsville, the University used an invalid activity code to 

obtain over $3.5 million in excess DOD property to which it was not 

entitled. Further, the activity code used by the University to obtain the 

excess property was a nonrequisitioning code,14 indicating that the activity 

was not authorized to use this code to requisition.15 DLA officials indicate 

that this type of code should not be used to obtain property from a DRMO. 

However, we determined that 65 nonrequisitioning codes were used to 

obtain over $101 million16 in excess DOD property from fiscal year 1995 to 

the present and there were no edits in the system to prevent it. In addition, 

the Florida Army National Guard unit we investigated was able to obtain 

nearly $24,000 worth of excess property between 1998 and 1999 by using an 

activity code that had been deleted in 1990.

Inconsistent and Incorrect 

Data

The two DLA database systems used to determine whether military 

services, DOD activities, federal agencies, and other organizations are 

authorized to obtain excess DOD property do not always contain the same 

information regarding valid and invalid activity codes. The Defense 

Reutilization and Marketing Automated Information System database 

contains invalid code data; and all codes are not recorded in the Defense 

Automatic Addressing System Center master file.

14 Army activity codes designated as “XU” are not authorized to requisition. The “U” 

indicates that the activity is not authorized to requisition.

15 Army Regulation 725.50, Table E-329 (Format for Army Additions/Revisions to the DOD 

Activity Address File).

16 This amount represents the acquisition value of the property.
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DRMO staff we interviewed incorrectly assumed that activity codes are 

valid if accepted by the Defense Reutilization and Marketing Automated 

Information System. This is not the case. Our investigation revealed 

55 questionable codes that had acquired DOD property valued at about 

$8.5 million from January 1998 through February 1999. These activity codes 

are questionable because they did not appear in Defense Automatic 

Addressing System Center master file records as being active but were 

considered valid by the Defense Reutilization and Marketing Automated 

Information System. Regarding the 55 questionable codes, we found the 

following:

• Thirteen activity codes were valid but were not in the database.

• Seventeen military entities with valid activity codes improperly used 

their unit identification codes17 as activity codes to acquire DOD 

property.18

• Twenty-five activity codes were not valid because they had been deleted 

or reassigned or could not be located. The acquisition value of the 

property transferred to the 25 codes from January 1998 to February 1999 

totaled approximately $453,000.

17 A unit identification code is an alphanumeric code used to identify organizational entities 

within DOD.

18 Program officials were unable to explain why the Defense Reutilization and Marketing 

Automated Information System accepted unit identification codes as valid activity codes. 

They are currently researching this issue.
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Officials of the Defense Logistics Support Command told us that since 

1993, the Defense Reutilization and Marketing Automated Information 

System has had an edit feature that confirms the validity of requisitioning 

activities’ address codes by checking them against the codes in the Defense 

Automatic Addressing System Center master file. All organizations 

requesting excess property—either by walking into a DRMO or 

requisitioning the property electronically—are verified in this way. 

However, DLA officials told us that many of the central service points have 

not validated and reconciled their files on a yearly basis, as required. 19 We 

were told that since 1996, the Marine Corps has been the only military 

central service point to meet this requirement, which indicates that the 

activity codes maintained by many central service points are inconsistent 

with the codes contained in the Defense Automatic Addressing System 

Center master file. With regard to walk-in customers, we discovered 

instances in which DRMO staff did not furnish a copy of the completed 

shipping document to the accountable officer, as required by DOD 

regulation.20

We advised DLA officials that we had discovered a number of instances in 

which organizations were using invalid activity codes to requisition excess 

DOD property and that the Defense Reutilization and Marketing Automated 

Information System was reporting the codes as valid. These officials 

reviewed the transactions we had cited and subsequently advised us that 

they were unable to determine why the Defense Reutilization and 

Marketing Automated Information System had failed to reject the invalid 

codes.

Invalid Activity Code Use at 

the University of Alabama at 

Huntsville

Our investigation of the invalid activity code assigned to the University of 

Alabama at Huntsville disclosed that the University used the code to obtain 

over $3.5 million worth of excess DOD property to which it was not 

entitled. In addition, between January 1999 and May 1999, the University 

improperly used another code to obtain nearly $80,000 in DOD property.

19 DOD 4000.25-6-M (Chap. 1).

20 DOD 4160.21-M (Chap. 5).
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The University was assigned the activity code for a contract that was 

awarded in November 1986 to provide engineering support services to the 

U.S. Army Missile Command.21 Although Army records indicate that the 

assigned code was a nonrequisitioning code, the University reportedly used 

the code to requisition excess DOD property to facilitate the requirements 

of the contract. The 1986 contract expired in fiscal year 1991, and the 

University received a follow-on contract that same fiscal year.22 However, 

Army central service point records do not indicate that the activity code 

assigned to the 1986 contract was reassigned to the follow-on contract. In 

1993, the Army central service point deleted the activity code for the 1986 

contract from its files and the Defense Automatic Addressing System 

Center master file.23 Nevertheless, we found that this code was still 

recorded in the Defense Reutilization and Marketing Automated 

Information System database as a valid code. Consequently, the University 

was able to use the activity code provided for the 1986 contract to 

requisition excess property for the fiscal year 1991 contract. Specifically, 

between October 1994 and November 1998, the University requisitioned 

more than $3.5 million in excess DOD property using this invalid code. 

21 Contract number DAAH01-87-D-0021.

22 Contract number DAAH01-91-D-R002 was awarded in December 1990 to provide 

engineering support services to the U.S. Army Missile Command, and it expired in 

December 1998. Contracting office officials describe this as a follow-on contract to the 1986 

contract.

23 Although the Army record is silent on the reason for the deletion, we believe it was related 

to a 1993 audit by the Army Audit Agency. From January 1993 through September 1993, the 

Army Audit Agency reviewed the U.S. Army Missile Command’s acquisition and use of 

government-furnished property. This review was designed to determine, among other 

things, whether the command adequately controlled government material furnished to 

contractors. The audit determined that control was lacking and one of the findings noted 

inadequate control over activity codes. The Army auditors found that the command had lost 

accountability over material furnished to contractors and Army personnel circumvented 

established internal controls by extending contractor activity codes past contract 

completion dates. The audit report recommended that the command improve controls over 

the use of activity codes by (1) discontinuing the procedure of extending activity codes 

beyond the expiration of the contract, (2) comparing the expiration dates of all codes with 

the contract expiration date to identify those with different expiration dates, and 

(3) changing the activity code expiration date to agree with the expiration date of the 

contract. The report indicated that in August 1993, the expiration dates of all activity codes 

were changed to reflect the expiration date of the contract.
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In early 1999, a DRMO official questioned the validity of the activity code 

used by the University of Alabama at Huntsville and contacted the 

responsible Army contracting officer for guidance. In response, the 

contracting officer provided the University another activity code to obtain 

excess DOD property. This code was also assigned to the U.S. Army 

Aviation Missile Command (formerly the U.S. Army Missile Command). 

Army regulations regarding the acquisition of government property require 

that contractors and military commands use different activity codes.24

From January 1999 until May 1999, the University improperly used the 

activity code it had received in 1999 to obtain nearly $80,000 in excess DOD 

property.

Organizations Used 

Nonrequisitioning Activity 

Codes to Obtain Over 

$101 Million in Excess DOD 

Property

According to the Defense Automatic Addressing System Center, there are 

currently 2,723 nonrequisitioning Army activity codes on record.25

According to the Defense Reutilization and Marketing Service, 

organizations used 65 of these codes to obtain over $101 million worth of 

excess DOD property from DRMOs from fiscal year 1995 to the present.

The Army activity code used by the University of Alabama at Huntsville to 

obtain over $3.5 million of excess DOD property was a nonrequisitioning 

category code, indicating that the activity was not authorized to 

requisition.26 According to DLA officials, this code category should not be 

used to obtain property from a DRMO. However, Defense Reutilization and 

Marketing Service staff note that there is only one edit in place in the 

Defense Reutilization and Marketing Automated Information System that is 

designed to prevent excess DOD property from being requisitioned or 

issued through the use of activity codes that are valid only for 

nonrequisitioning purposes. This particular edit pertains to one specific Air 

Force code. In all other cases, if an activity code appears in the Defense 

Automatic Addressing System Center master file as valid, the Defense 

Reutilization and Marketing Automated Information System will consider 

the code valid for requisitioning and issuing purposes; and no further edits 

are applied. According to Defense Automatic Addressing System Center 

personnel, the automatic addressing system database contains no edit 

24 Army Regulation 725.50 (Chap. 9).

25 This total includes Army contractor codes.

26 Army Regulation 725.50, Table E-329 (Format for Army Additions/Revisions to the DOD 

Activity Address File).
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mechanism to prevent an organization from using a nonrequisitioning code 

to acquire excess DOD property.

Improper Use of an Activity 

Code by a Florida Army 

National Guard Unit

Our investigation of the questionable activity code used by a Florida Army 

National Guard unit revealed that the unit had been using an invalid code to 

obtain excess DOD property. In 1990, the Army deleted the activity code 

associated with Company D of the Florida Army National Guard. However, 

the Defense Reutilization and Marketing Automated Information System 

accepted this code, and the National Guard unit used it to obtain nearly 

$24,000 worth of excess DOD property from June 1998 to June 1999.

Inadequate Oversight 

of the Management and 

Utilization of Excess 

DOD Property

DOD has not exercised adequate oversight of the management and use of 

excess DOD property provided to selected universities and a Florida Army 

National Guard unit. Universities did not coordinate requests for DOD 

excess property; nor did they inventory and track excess DOD property in 

their possession, as required by the Office of Naval Research—the entity 

responsible for administrative oversight of university contracts. In our 

investigation of the University of Alabama at Huntsville, we found that the 

property obtained by the University had not been inventoried as required, a 

significant portion could not be located, and some of the property had been 

misused or stolen. Furthermore, internal reviews of the program have 

reported similar problems with the use of excess DOD property at the 

University of Hawaii, the University of Denver, and the University of Rhode 

Island. In our investigation of a Florida Army National Guard unit, we 

found that the unit had failed to follow procedures in place to obtain and 

account for excess DOD property it received in 1998 and 1999.
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Regulations Regarding 

University Acquisition and 

Use of Excess DOD 

Property

When a university obtains excess property for use on a government 

contract, the property remains under government ownership and must be 

accounted for by the university.27 The Office of Naval Research28 has 

administrative contract oversight for DOD contracts with universities. 

According to Office of Naval Research officials, property acquired from a 

DRMO by a university must not be used for purposes other than what the 

contract states. Office of Naval Research officials also advised that 

university contractors must obtain authorization from the Office of Naval 

Research before obtaining DRMO property and are required to coordinate 

requests for excess property through that office. Office of Naval Research 

officials noted that they would then determine, in concert with the 

government project manager, whether it was appropriate for the university 

to acquire the property for use on a particular contract. That determination 

is to be made in accordance with the DOD requirement that requisitioned 

property be authorized by the DOD contract for which the property will be 

used.29 If approved, the Office of Naval Research would advise the 

university to acquire the property.

After obtaining the excess DOD property, a university is required to record 

the items and identify them as government property. While the Office of 

Naval Research provides general guidance and parameters to universities 

on maintaining a property control system, the contractor is responsible for 

record maintenance. Office of Naval Research officials stated that using 

property for purposes other than what is stated in the contract is a violation 

of property control, protection, preservation, and maintenance policies 

concerning government property management. In addition, university 

contractors are required to submit a DD Form 1662 annually, which lists the 

acquisition value of government property provided under contract.

27 FAR 52.245-5.

28 FAR 42.003 provides that subsection G.11 of OMB Circular A-21 lists the cognizant federal 

agency responsible for the administration of contracts with educational institutions. Here, 

the Office of Naval Research is identified in Circular A-21 as the cognizant federal agency.

29 DOD 4160.21-M (Chap. 5).
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The University of Alabama 

at Huntsville Improperly 

Acquired, Tracked, and 

Used Excess DOD Property

The University of Alabama at Huntsville has a long-standing history of 

mismanagement of excess DOD property. Historically, the University has 

not followed government regulations or its own written policy governing 

the acquisition, tracking, and use of excess DOD property.

The University did not adhere to the requirement in Federal Acquisition 

Regulation (FAR) 45.505 to inventory and track DRMO property. Moreover, 

it did not follow the “Obtaining Excess Property or Surplus Property” 

provision of its Government Property Control System Manual. The 

screener30—who “screens for” or inspects, requests, and obtains excess 

DOD property—failed to provide copies of DD-1348-1 requisition forms to 

the Research Administration Office prior to obtaining property. The manual 

states

“... excess property that is identified as usable on a contract can be requested by completing 

DD Form 1348 [DD-1348-1]. This form should be submitted to the Research Administration 

Office with justification as to how it will be used on a designated contract. Research 

Administration will forward the request to the Property Administrator at the Office of Naval 

Research for approval.”

Further, the University’s Associate Vice President for Research confirmed 

that the Research Administration Office was responsible for ensuring that 

all material was properly acquired and inventoried.

The University of Alabama at Huntsville screener in charge of obtaining 

excess DOD property stated that he was aware of the University’s 

Government Property Control System Manual but had never read the 

section entitled, “Obtaining Excess Property or Surplus Property.” The 

screener added that he would meet independently with University 

researchers who requested specific items and then go to the DRMOs to 

fulfill these requests, without obtaining approvals from the Research 

Administration Office or the Office of Naval Research. When we spoke to 

the screener’s then supervisor, the Associate Vice President for Research, 

about this matter, the supervisor told us that the screener was sometimes 

“ambitious” in his acquisitions of excess DOD property. However, he stated 

that he believed that as long as the property could be used on any 

government contract, the “spirit” of the acquisition procedures was met. 

The supervisor added that acquisition and reporting procedures at the 

30 The screener was the University employee authorized to select and remove excess DOD 

property. He was hired in 1992 to work in the machine shop and eventually became the 

machine shop supervisor.
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University were “fuzzy” and “loose” and that it was impractical to attribute 

excess DOD property to a particular contract because the University “had 

so many government contracts.”

The University of Alabama at Huntsville neither inventoried nor tracked the 

excess DOD property it obtained and dismissed the need to do so. Because 

the screener failed to provide the University’s Research Administration 

Office copies of the DD-1348-1 forms as required, the property was not 

included in the government-furnished material inventory. The screener told 

us, however, that no one ever told him to inventory the excess DOD 

property. Although the screener kept the DD-1348-1 forms, no one had 

asked to see them until 1997. At that time, the University’s Research 

Administrator noticed University staff driving around the campus in trucks 

she had never seen before and asked the screener about them. The 

screener provided the Research Administrator with the DD-1348-1 forms he 

had used to acquire the vehicles from a DRMO.31 In addition, safes and 

shredders were improperly located at various offices, laboratories, and 

workshops on campus; and University personnel used sleeping bags as 

packing material and new garments as shop rags.

Moreover, the University of Alabama at Huntsville ignored the requirement 

in FAR 45.505-14 to report annually the total acquisition cost of government 

property provided under each contract. The DD-1662s (DOD Property in 

the Custody of Contractors) for the fiscal year 1991 contract completed by 

the University for fiscal years 1996 and 1997 are silent on the existence of 

DOD property. The DD-1662s for fiscal years 1998 and 1999 list only two 

items with a total acquisition value of $2,500. However, DLA records show 

that the University acquired DOD property and material from DRMOs with 

an acquisition value of about $1.1 million in fiscal year 1996; about 

$2 million in fiscal year 1997; $52,631 in fiscal year 1998; and $78,624 in 

fiscal year 1999. Based on our investigation, we provided this information 

to the Office of Naval Research for review and appropriate action.

31 By letter dated Apr. 15, 1997, the procurement contracting officer (U.S. Army Missile 

Command) authorized the University to use these vehicles on any Army contract. However, 

according to Office of Naval Research officials, this information should have been provided 

to the administrative contracting officer, in this case an Office of Naval Research official. 

According to an Office of Naval Research official, this notification did not occur.
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In August 1996, the Office of Naval Research reviewed the University’s 

management of excess DOD property and found that it was unsatisfactory 

in the areas of property management, physical inventories, and movement 

and disposition of government property.32 A follow-up review in September 

1997 concluded that all shortcomings had been addressed. However, at the 

time of this review, the Office of Naval Research was not aware that the 

University had obtained a vast amount of excess DOD property. The followup review did not take this into consideration, thus hampering the 

effectiveness of the oversight of the Office of Naval Research. 

In July 1998, the University of Alabama at Huntsville’s Office of Internal 

Audit reported the following to the University president: (1) the University 

lacked internal controls for receiving and transporting excess DOD 

property, (2) no segregation of duties for receiving and documenting the 

property was in place, and (3) inventory records were minimal. The audit 

report recommended that the University take a comprehensive inventory of 

all federal government surplus property in its possession and that any 

unused property be disposed of in accordance with government property 

guidelines. The screener and his supervisor told us that they had been 

briefed on the audit findings and recommendations. For its part, the 

University’s Research Administration Office ignored recommendations for 

changes that the internal auditors had made until we began our 

investigation.

In August 1999, University internal auditors inventoried the excess DOD 

property obtained by the screener but could not locate most of the property 

from 977 DRMO transactions. Indeed, of the 256,648 items obtained from 

DRMOs, the University could account for only 54,561 of the items. The 

202,087 missing items included raw materials and consumables (such as 

building materials, aluminum bars, and cable); equipment (such as a 

camcorder, oscilloscope, microscope, grinding machine, laser printer, 

refrigerator, sander, drill machine, generator, typewriters, and copiers); and 

clothing (such as coats, jackets, combat boots, socks, and undershirts). 

Also among the missing items were a coffee urn and 10 bunk beds. In 

addition, the University’s screener told us that some excess DOD property 

had been stolen from the University. The University’s Office of Public 

Safety provided incident reports indicating that material “obtained from 

32 The Office of Naval Research tests university record-keeping systems during periodic 

analyses of property control systems.
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federal sources [DRMOs]” had been stolen on a number of occasions. Some 

stolen items were described as aluminum sheeting and bars.

Mismanagement of Excess 

DOD Property by Other 

Universities

During the course of this investigation, we reviewed studies conducted by 

the Office of Naval Research and the Office of Command Security, Defense 

Reutilization and Marketing Service that identified mismanagement of 

excess DOD property by other universities. Many of the same issues that 

we found at the University of Alabama at Huntsville surfaced, such as the 

lack of prior approvals, inventories, and a direct relationship between 

contract requirements and the property obtained. A brief summary of the 

findings at the University of Hawaii, the University of Denver, and the 

University of Rhode Island follows.

• University of Hawaii personnel screened for and obtained over 

$3 million in excess DOD property. However, Office of Naval Research 

personnel had not authorized the University of Hawaii to receive any 

property from the DRMO in Hawaii. The Defense Reutilization and 

Marketing Service’s Office of Command Security determined that 

conditions conducive to crime existed at the University of Hawaii 

because no records had been kept of items received from the DRMO. 

They determined that property could have been stolen or diverted 

without the knowledge of University personnel. In this case, DRMO 

officials allowed University personnel to screen for property based on 

its recognition of screeners without obtaining the proper approvals from 

the Office of Naval Research.

• Both the University of Rhode Island and the University of Denver 

acquired excess DOD property through expired contracts. Neither 

received prior approval from the Office of Naval Research before 

making acquisitions and both were in possession of government 

property whose use was questionable for carrying out the contracted 

research. The major difference between the two is that the Office of 

Naval Research was able to reconcile the University of Rhode Island 

inventory of property because the records were in good condition. They 

were legible, source documentation was complete, and there was a 

clearly defined audit trail. The Office of Naval Research accounted for 

100 percent of the University of Rhode Island property and had it 

returned to the DRMO or transferred to another agency. In the 

University of Denver case, however, a full reconciliation of the property 

record was impossible because the inventory forms were illegible and 

had no unit prices and no serial numbers.
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A Florida Army National 

Guard Unit Failed to Follow 

Procedures to Obtain and 

Account for Excess DOD 

Property

DOD regulations state that an Army National Guard unit may not obtain 

excess DOD property without prior approval from the appropriate U.S. 

Property and Fiscal Officer.33 The Property and Fiscal Officer processes 

requests for excess property and then forwards the request for approval. 

The Property and Fiscal Officer authorizes screeners to inspect, request, 

and obtain excess DOD property. Screeners then itemize the screened 

property on a tally sheet and forward the tallies to the Property and Fiscal 

Officer for approval before property is removed from the DRMO. If the 

Property and Fiscal Officer approves the property request, a completed 

property requisition is faxed to the unit, which uses it to obtain the 

property from the DRMO. The Property and Fiscal Officer is to maintain an 

inventory of all property obtained by National Guard units.

However, Company D of the Florida Army National Guard in Cocoa, 

Florida, failed to follow these procedures to obtain and account for nearly 

$24,000 worth of excess DOD property it received from June 1998 to June 

1999. Company D failed to notify the Property and Fiscal Officer as 

required and did not obtain permission to take possession of the property. 

Consequently, the items obtained by Company D were not on record with 

the Property and Fiscal Officer because he had maintained no inventory or 

control of the property. Further, DRMO staff ignored the requirement to 

advise the Property and Fiscal Officer of the property acquisition.34 In this 

case, Company D of the Florida Army National Guard provided the DRMO 

an authorization-to-screen letter on agency letterhead with the signatures 

of the authorizing official and the screener. DRMO officials told us that 

receiving an authorization-to-screen letter with the required signatures is 

all a DRMO needs to release the property. These officials said that a DRMO 

is not a compliance agency and staff do not routinely contact the 

authorizing official to confirm a letter’s authenticity. Although we located 

the property and determined it was being used appropriately, this situation 

clearly illustrates system vulnerability.

Conclusions DOD controls are inadequate to ensure authorized requisition and proper 

use of excess DOD property. One control weakness is that the central 

service points for the military services and DOD activities are not 

33 PAM 710-2-1.

34 DOD 4160.21-M (Chap. 5).
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periodically updating their inventory and management data in the Defense 

Automatic Addressing System, especially with regard to DOD activity 

address codes. In addition, the Defense Reutilization and Marketing 

Automated Information System fails to reject invalid activity codes. 

Another control weakness is that DOD does not have a department-wide 

system to prevent organizations from using nonrequisitioning activity 

codes to acquire excess property. Finally, controls and procedures to help 

ensure the proper management and use of excess DOD property provided 

to universities for government contracts appear to be inadequate.

Recommendations We recommend that the Secretary of Defense direct

• the military services and DOD activities to comply with regulations that 

require them to (1) periodically update the inventory and management 

data in the Defense Automatic Addressing System Center master file, 

especially with regard to activity address codes, and (2) ensure that 

their central service points validate and reconcile their activity code 

files to the Defense Automatic Addressing System Center master file in a 

timely manner;

• the Director, Defense Logistics Agency, to determine why the Defense 

Reutilization and Marketing Automated Information System failed to 

reject invalid activity codes and take corrective measures so that the 

system will reject invalid activity codes in the future;

• the Deputy Under Secretary of Defense (Logistics) and the military 

services to develop and implement a system to prevent organizations 

from using nonrequisitioning activity codes to acquire excess DOD 

property by including the appropriate edits in the Defense Reutilization 

and Marketing Automated Information System and the Defense 

Automatic Addressing System; and

• the Director, Defense Logistics Agency, and the Chief, Office of Naval 

Research, to assess the adequacy of controls and procedures to help 

ensure the proper management and use of excess DOD property 

provided to universities for government contracts.

Agency Comments DOD provided comments on a draft of this report. DOD concurred with our 

recommendations and provided clarification on the appropriate agencies 

responsible for addressing the issues discussed in our report. DOD also 

provided technical corrections; and where appropriate, we have made 

those corrections.
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Scope and 

Methodology

We conducted our work from March 1999 to March 2000. We obtained 

activity code data from DLA on requisitioned excess DOD property 

recorded in the Defense Reutilization and Marketing Automated 

Information System. We then compared this data to DLA’s Defense 

Automatic Addressing System Center master activity address code file on a 

particular day and identified 55 questionable codes. We researched DLA 

records to determine why organizations using these questionable activity 

codes were allowed to obtain excess DOD property. We selected two of 

these organizations for further investigation: the University of Alabama at 

Huntsville and a Florida Army National Guard unit.

We obtained a list of all DRMO transactions associated with the 

questionable code used by the University of Alabama at Huntsville from 

October 1994 through November 1998. We interviewed DRMO staff and 

obtained copies of pertinent property requisition forms. We interviewed 

University personnel and reviewed pertinent records. We inspected the 

University facility in an effort to locate property obtained from DRMOs. We 

interviewed current and former Army contracting staff and reviewed 

pertinent contract records at the Army Aviation Missile Command. We 

interviewed current and former Office of Naval Research staff and also 

obtained and reviewed pertinent Office of Naval Research records.

We worked with Defense Reutilization and Marketing Service headquarters 

staff to compile and analyze data pertaining to the Florida Army National 

Guard unit activity code. We obtained a list of all transactions involving this 

code as well as photocopies of property requisition forms and 

authorization-to-screen letters. We interviewed DRMO and Office of the 

U.S. Property and Fiscal Officer staff concerning policies and procedures 

and to ascertain their knowledge of this case. We also interviewed all 

Florida Army National Guard (Company D) personnel involved in this 

matter. Finally, we reviewed the Company’s property records to locate the 

excess DOD property obtained from DRMOs and conducted a physical 

inspection of that property.

We worked with Defense Automatic Addressing System Center staff and 

Defense Reutilization and Marketing Service staff to compile and analyze 

data pertaining to nonrequisitioning activity codes used to obtain 

government property from DRMOs. We also worked with Defense 

Automatic Addressing System Center staff to obtain information pertaining 

to central service point activities. In addition, we interviewed and obtained 

pertinent documentation from central service point members.

W
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We performed our investigative work in accordance with investigative 

standards established by the President’s Council on Integrity and Efficiency 

and our audit work in accordance with generally accepted government 

auditing standards.

As arranged with your office, unless you announce its contents earlier, we 

plan no further distribution of this report until 30 days after the date on this 

letter. At that time, we will send copies of this report to interested 

congressional committees and members; the Office of the Secretary of 

Defense; the Director of DLA; the Secretaries of the Army, Navy, and Air 

Force; and the Commandant of the Marine Corps. We will also make copies 

available to others upon request. If you have questions about this report, 

please call Robert H. Hast on (202) 512-7455 or David R. Warren on 

(202) 512-8412. John Ryan, Richard Newbold, Carin Wyche, Mark Little, and 

Roger Tomlinson made key contributions to this report.

Sincerely yours,

Robert H. Hast

Acting Assistant Comptroller General

for Special Investigations

David R. Warren, Director

Defense Management Issues

National Security and International

Affairs Division

(600610/709498) Letr
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