Defense Inventory: Control Weaknesses Leave Restricted and Hazardous Excess Property Vulnerable to Improper Use, Loss, and Theft
Published: 2002-01-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Defense Department (DOD) encourages the reuse of excess property, including vehicles, weapons, hand tools, lumber, medical equipment, and furniture. DOD components, civilian federal agencies, and "special programs" have equal priority and first rights to excess property. This report discusses excess property issued to three of 12 special programs--the Military Affiliate Radio System, the Civil Air Patrol, and the 12th Congressional Regional Equipment Center.
section_title: What GAO Found
paragraphs: Between 1995 and 2000, these programs obtained $34 million worth of items that they were not eligible to receive. The three programs were able to obtain the items because the DOD facilities that store the property are not required to verify which items the programs are eligible to receive, and because program officials do not consistently follow applicable guidelines. GAO also noted that the programs' lists of property they are allowed to obtain are not comprehensive because the lists exclude mission-related items similar to those already permitted. Furthermore, these programs did not have reliable records for more than three-quarters of their excess property. Together, the three special programs obtained more than 80,000 hazardous supplies. In many cases, program officials were unaware that their programs had received such items. GAO found similar problems in other special programs. This lack of accountability increases the risk of mishandling excess property and the potential for waste, fraud, and abuse.

section_title: Letter
paragraphs: Each year over the past 5 years, the Department of Defense has  accumulated billions of dollars in excess property. This property covers  the entire range of materials, equipment, and articles the Department uses,  including vehicles, weapons, hand tools, lumber, medical equipment, and  furniture. The Department is authorized to dispose of excess property and  encourages the reuse of excess property to the maximum extent possible.  Defense components, civilian federal agencies, and 12 programs have  equal priority and first rights to excess property. The 12 programs are  referred to by the Department and in this report as “special programs.”  Property not reused by the federal agencies or the special programs is  made available to state and local governments, nonprofit organizations,  and the public.
We have previously reported on the potential for fraud, waste, abuse, and  mismanagement of Defense inventory and have identified the  Department’s inventory management as a high-risk area. Because of  continuing concerns about the Department’s management of its excess  inventory in general, you asked us to further investigate this area. As  agreed with your offices, this report addresses issues involving the special  programs. Specifically, it focuses on excess property issued to 3 of the 12  special programs—the Military Affiliate Radio System, the Civil Air Patrol,  and the 12th Congressional Regional Equipment Center. We judgmentally  selected these three programs because they (1) were found by our Office  of Special Investigations to have obtained and used some excess property  that was not consistent with their mission, (2) had readily available  information about the excess property they received, (3) store their data in  relatively few locations, and (4) are subject exclusively to Department of  Defense oversight.
Our objectives were to determine whether these three programs (1) were  acquiring property that they were not eligible to receive and, if so, how  much, and (2) could account for the property they received, as required by  the Department’s or their own policies and procedures. Our program  selection process, scope, and methodology are described in greater detail  in appendix I. The three programs are described in appendix II.
subsections: section_title: Background
paragraphs: Responsibility for disposal of excess Department of Defense property has  been delegated to the Defense Reutilization and Marketing Service, which  is part of the Defense Logistics Agency. When a military service or Defense  agency organization has property it no longer needs, it turns the property  over to a Defense Reutilization and Marketing Service field office—or  reutilization facility.  At the time we concluded our review, there were 97  reutilization facilities, located in 41 states and territories and 13 countries.  Appendix III shows the locations of the 97 Defense reutilization facilities.
The property in these reutilization facilities changes daily and includes a  myriad of items, ranging from air conditioners to automobiles, tents to  typewriters, and computers to couches. Items are made available for  reuse according to established priorities. First priority is given to federal  agencies—including other Defense activities—and 12 special programs  that have equal status with Department activities. The 12 special programs  are:
Department of Defense Humanitarian Assistance Program;
Law enforcement agencies;
12th Congressional Regional Equipment Center;
Department of Defense or service museums;
Academic institutions and nonprofit educational organizations;
National Guard units;
Senior Reserve Officer Training Corps units;
Morale, welfare, and recreation activities and services;
Military Affiliate Radio System;
Civil Air Patrol;
Department of Defense contractors; and
Foreign governments and international organizations.
The Military Affiliate Radio System is run by licensed amateur radio  operators whose primary mission is to augment existing communications  during disasters and handle personal communications for the Armed  Forces and the U.S. government civilian personnel stationed throughout  the world. It is composed of separate Army, Navy (including the Marine  Corps and the Coast Guard), and Air Force components, all managed and  funded separately, and the Joint Staff Directorate for Command, Control,  Communications, and Computer Systems provides Department oversight.  The Civil Air Patrol is the civilian auxiliary of the Air Force and is  overseen by the Civil Air Patrol–Air Force, a unit of the Air Education and  Training Command. Its mission includes emergency services such as  search and rescue, disaster relief, and counterdrug operations and the  promotion of aerospace education in schools. The 12th Congressional  Regional Equipment Center was established in 1992 as a demonstration  project to help municipalities and nonprofit organizations in western  Pennsylvania complete infrastructure projects that would otherwise be  too costly to undertake. The Center acquires excess heavy equipment, and  according to Center officials, rents it at below-market rates.
Excess property items are dispensed on a first-come, first-served basis to  those activities with the same reuse priority. In fiscal year 2000, the  Department of Defense reused excess property valued at $1.9 billion, and  other federal agencies reused excess property valued at $2.5 billion.  Property that is not reused within the federal government is declared  surplus and is made available first to state and local governments and  nonprofit organizations. In fiscal year 2000, property valued at $334 million  was donated to state and local governments and others. Surplus material  that remains after the donation cycle is sold to the public, and residual  property is sent to a landfill or another appropriate site for final disposal.  The disposal process is depicted in figure 1.
Defense reutilization facilities accept most items, including those that pose  health and environmental risks and those built for military purposes.Hazardous property may be reused, but its transportation, storage, use,  and disposal are subject to federal and state laws and regulations.  Examples of hazardous property include motor oil, paint, and freon from  air conditioners. Department of Defense policy also calls for identifying  and demilitarizing or imposing trade limits on items that have a significant  military technology/application before they are released from the  Department’s control. Trade security controls are designed to preclude the  transfer of items with a significant military technology/application to any  entity whose interests are counter to those of the United States. Examples  of items with a demilitarization requirement include tanks, some  electronics equipment, military aircraft, night-vision devices, radio sets,  and optical sights. Examples of items with a trade security requirement  include binoculars, electronic digital counters, power supply units,  computer equipment, and test equipment such as oscilloscopes and  multimeters. Department officials estimate that of the 14 million active  and inactive items in the Department’s supply system, about 140,000  (1 percent) have hazardous characteristics and 3.6 million (26 percent)  have demilitarization and/or trade security control requirements.
In this report, items referred to as “eligible” and “ineligible” are items that  the special programs are allowed and not allowed to have, respectively.  “Restricted” items are those with a demilitarization requirement and/or  trade security control.
section_title: Special Programs Obtained Property They Should Not Have Received
paragraphs: Between 1995 and 2000, the three special programs obtained items valued  at millions of dollars that they were not eligible to receive. Consequently,  this property was unavailable for reuse by federal agencies or other  special programs. Moreover, a significant portion of the ineligible supplies  were restricted or hazardous items and the special program officials did  not always know the restriction or hazardous nature of these items. As our  other investigations have shown, these problems are not limited to the  three special programs. These problems are caused both by the  Department that does not require its reutilization facility staff to verify a  requester’s eligibility to receive an item and by the special program  officials who do not always follow applicable guidelines concerning the  types of items they can have. We also found that the programs’ lists of  eligible property were not comprehensive and did not include other  mission-related items that were similar to items already permitted.
subsections: section_title: Three Special Programs Received $34 Million of Ineligible Material—Some Restricted or Hazardous
paragraphs: During the study period, the Military Affiliate Radio System, the Civil Air  Patrol, and the 12th Congressional Regional Equipment Center staff  submitted more than 32,000 orders (see fig. 2) valued at $171 million (see  fig. 3). Of these, more than 4,300 (13 percent) were for ineligible property  valued at about $34 million (20 percent). All of the orders represented  2.2 million supplies, of which a half-million (24 percent) were ineligible  (see fig. 4).
section_title: Some Program Officials Were Unaware of Receiving Ineligible Hazardous and Restricted Property
paragraphs: All of the special programs received restricted and/or hazardous excess  property, although not all of the program officials were aware that their  programs had obtained the items. Program officials at the three Military  Affiliate Radio System programs and at the 12th Congressional Regional  Equipment Center were unaware that they had received restricted items, and Air Force and Navy Affiliate Radio System officials were unaware that  they had received hazardous items (see tables 1 and 2).
The three programs obtained almost 25,000 ineligible hazardous supplies  such as batteries, chemicals, computer equipment, and oils. In addition,  about 3,800 of the ineligible supplies were restricted. The 12th  Congressional Regional Equipment Center is the only program that the  Department does not permit to have restricted items because its mission  does not require them. Center officials said that they knew of this  exclusion but were unaware that they had received more than 500 such  supplies during the study period. The number of ineligible, restricted, and  hazardous supplies obtained by each program are shown in table 3.
section_title: The Department May Have Incurred Unnecessary Cost to Ship Excess Property
paragraphs: During 1995-2000, the Department may have incurred unnecessary cost to  ship 915 orders of excess property to the 12th Congressional Regional  Equipment Center. According to both Department of Defense policy and  the 1993 agreement between the Department and the Center, the Center is  responsible for all shipment costs. However, in 1995 the Department  began an experimental project at several installations to keep excess  property in place to minimize transportation and handling costs (as  opposed to sending the property first to a reutilization facility, which is  normally the procedure). No limitation was placed on the Center’s  participation in the program. Property that was subsequently reused was  shipped to all recipients, including the Center, at the Department’s  expense. It is not clear whether the agreement should have precluded the  Center from participating in this project. Defense officials estimate that  the Department spent $46,000 to ship items from reutilization facilities as  far away as California, Washington, and Texas to the Center’s  headquarters in Blairsville, Pennsylvania. Almost one-third of these  orders—valued at $521,000—were for ineligible items and estimated  shipping costs exceeded $15,000.
section_title: Problems Had Been Previously Identified in Other Special Programs
paragraphs: Other special programs are also obtaining excess property that they are  not allowed to receive. According to several recent investigations  conducted by our Office of Special Investigations:  During 1998 and 1999, a National Guard unit in Florida obtained thousands  of dollars of excess property without prior approval from the appropriate  office as required. Furthermore, the unit used an invalid activity address  code to acquire the property.
The president of a construction company obtained excess property under  false pretense by purporting to be the curator of a military museum. Some  of the property was used on company projects. In November 1999, 36  military vehicles (including tanks and armored personnel carriers) and  weapons (including howitzers and a rocket launcher) were removed from  the individual’s custody. In November 1999, his company was fined  $10,000, and in February 2000, he was sentenced to probation and  community service.
Defense contractors used invalid activity codes and expired contracts to  obtain property valued at over $6 million of property without proper  authorization. One contractor obtained 256,648 supplies from  reutilization facilities, but could account for only 54,561 of them. The  202,087 (79 percent of the total) missing supplies included raw materials,  equipment, and clothing. Some of the property had been reported stolen.
An activity code assigned to the Department of Defense Humanitarian  Assistance Program was used to order about $12 million of excess  property after the code was invalidated. This matter is currently under  investigation, and we plan to report on this in the future.
A number of law enforcement agency program participants are currently  under investigation for their alleged role in the improper acquisition of  excess property according to Defense investigative agencies. In addition,  we recently determined that a number of activity codes remained active  after they should have been deleted and that law enforcement agencies  obtained more excess property than authorized. We are also investigating  inconsistencies in the type of excess property authorized for issuance to  law enforcement agencies and plan to report on this in the future.
In May and June of 2000, a number of law enforcement agency program  participants received excess property that was not authorized on 16  different occasions. The approving program official was not aware that  additional property had been issued until we requested a transaction  history comparing the quantity of property approved to the property  acquired.
As was the case with the three special programs, these other programs  were able to obtain ineligible property because the Department did not  exercise adequate oversight. To eliminate weaknesses cited in our recent  reports, the Deputy Under Secretary of Defense for Logistics and Materiel  Readiness directed the Defense Logistics Agency to review how it  establishes and controls activity codes. The Agency plans to redesign its  activity code database to take advantage of modern electronic commerce  methods. This review began in February 2001, and it is expected to be  completed in the summer or fall of 2002.
As part of its redesign effort, the Agency is considering establishing  purpose codes to identify property an organization is eligible to obtain.  Officials involved in this effort believe that the accountable program  officers for the 12 special programs could use these specific codes to  verify their eligibility to obtain excess property.
section_title: Control Weaknesses Allowed Special Programs to Obtain Ineligible Items
paragraphs: The three special programs obtained ineligible excess property partly  because of internal control weaknesses at the Defense reutilization  facilities, which are not required to determine whether a program is  allowed to have a requested item, and partly because program officials do  not consistently follow guidelines when approving requests for property.
subsections: section_title: Reutilization Facility Staff Is Not Required to Review Property Requests for Eligibility of Items
paragraphs: Current Department policydoes not require reutilization facility staff to  scrutinize property requests to determine whether a requester is eligible to  receive a particular type of property. Defense reutilization facility staff is  required to verify only that (1) individuals requesting and picking up  property are authorized representatives of a valid receiving organization  and (2) the property request form is signed by an accountable program  officer. Before releasing the property, reutilization facility staff also  verifies that the item on the request form matches the item that is being  picked up.
section_title: Special Program Officials Did Not Follow Guidelines
paragraphs: Special program officials did not follow applicable guidelines for obtaining  excess property. Policies and procedures established for the programs  were supposed to prevent ineligible requests from reaching the  reutilization facilities. However, requests for ineligible property were  numerous and widespread.
Military Affiliate Radio System. Although each of the three Military  Affiliate Radio Systems obtained items it was not allowed to have, officials  responsible for approving property requests said they were unaware that  their members had received any unauthorized items. However, almost one  out of five requests approved by the three systems was for property not in  the 18 authorized federal supply classes (see fig. 4). The three systems  also obtained over 9,000 unauthorized restricted or hazardous supplies,  even though all three have a two-tiered review and approval process for  property requests to verify, among other things, that the requested item is  within the authorized federal supply classes. The Air Force and Navy  Systems have issued guidance allowing their members to obtain property  outside the authorized federal supply classes on a case-by-case basis and  when properly justified. The Air Force requires this justification in writing.  The Army System is stricter and does not allow its members to have items  outside of the authorized federal supply classes.
In their response to a draft of this report, Army System officials provided  another list of authorized federal supply classes that they said was used to  approve excess property requests. This list was in effect from October 22,  1996, to June 30, 1997. This 8-month time period is also covered by  guidance issued by the Department that contains a different, more  restrictive set of authorized federal supply classes. Using the Army  System’s list, 11 orders (not 21) with ineligible federal supply classes were  approved. These were valued at $14,000 (down from $128,000) and  represented 30 supplies (down from 48).  According to a Department  official, when Department and program guidance conflict, Department  guidance is followed.
Civil Air Patrol. According to Air Force and Patrol officials, very few  written requests for items outside of the 97 allowed federal supply classes  were submitted and approved by the Air Force during the 5-year study  period. Our analysis of Department records showed that during this  period, the Patrol received 1,720 orders for 94,000 supplies (valued at $8.1  million) that were not in the eligible federal supply classes. Civil Air Patrol  and Air Force policies differ on what must be done to obtain an item not  in the eligible federal supply classes. A Civil Air Patrol regulation states  that a request for an item not in the eligible federal supply classes may be  approved by the Air Force regional director for logistics if a valid need for  that item exists. Patrol officials stated that the list of eligible federal  supply classes is intended to be a guide, not a definitive list. However, the  Air Force instruction states that requests for items outside of the allowed  federal supply classes are approved on a case-by-case basis and require  written justification, which should be kept for 1 year. We asked for copies  of justification letters that had been submitted for ineligible items;  however, Civil Air Patrol and Air Force officials could not locate any and  could only recall receiving a few justification letters. According to an Air  Force official who oversees Patrol operations, in cases where a Patrol  regulation differs from an Air Force regulation, the Air Force regulation is  followed.  12th Congressional Regional Equipment Center. During the study period,  the Center staff submitted to Defense reutilization facilities almost 1,200  orders (for 382,000 supplies) valued at $5.1 million that were not included  in its agreement with the Defense Logistics Agency. Center officials stated  that they were aware the orders were for ineligible items but approved the  requests on the assumption that the reutilization facilities would reject any  that were deemed inappropriate. According to Center officials, fewer than  five property requests from 1995 to 2000 were rejected by the reutilization  facilities because of the type of property involved. In one instance, the  only one that officials could recall, the ineligible property included office  supplies, parachute cords, and computer equipment.
The 12th Congressional Regional Equipment Center does not have to  obtain Department approval before submitting a property request to the  reutilization facilities, unless the item is not covered by its agreement with  the Defense Logistics Agency. In that event, according to the Defense  Logistics Agency, the Center is required to submit a written request to the  Agency, but has rarely done so. (In contrast, the Civil Air Patrol and the  Military Affiliate Radio System must have all their requests cleared by a  Department of Defense official.)  As a result, the Defense reutilization  facilities provide the only consistent external oversight of the Center’s  property requests. According to Defense Logistics Agency officials, it is  not the role of the reutilization facility staff to determine whether a  property request is appropriate, although a couple of times a year the  Agency is contacted by a reutilization facility clerk questioning the  appropriateness of a particular property request submitted by the Center.  However, the Agency maintains that this responsibility resides with the  accountable program officer, who, in the case of the Center, is a Center  employee.
section_title: Lists of Eligible Items Do Not Accurately Reflect the Special Programs’ Needs
paragraphs: Department and program guidance allows the Military Affiliate Radio  System, the Civil Air Patrol, and the 12th Congressional Regional  Equipment Center only to obtain excess property that supports their  respective missions. Program officials, in collaboration with the  Department of Defense, have compiled a list of federal supply classes for  each program that contains items that members may obtain. However,  with the assistance of Department officials, we reviewed these lists and  determined that they are not comprehensive and therefore do not  accurately reflect the programs’ missions. Some ineligible property seems  to be mission-related in that it is similar to property the programs are  eligible to receive. For example, 71 percent ($14.6 million) of the $20.5  million in ineligible property that the three Military Affiliate Radio Systems  obtained consisted of communication items and electrical or electronic  components. Similarly, the Civil Air Patrol obtained more than $800,000 in  communication items, and the 12th Congressional Regional Equipment  Center obtained about $675,000 in metal that was made into various  shapes, including sheets, I-beams, and rods.
There were also instances where the ineligible property did not appear to  be mission related (see table 4).
The 1993 agreement between the 12th Congressional Regional Equipment  Center and the Defense Logistics Agency has been amended several times  to increase the quantities of heavy equipment the Center may acquire, but  the types of eligible items have only changed once since 1993. In  November 1996, eight new federal supply classes were added and two  classes were eliminated from the original list of eligible items.
Besides heavy equipment, the Center is allowed to obtain ancillary  equipment and supplies (e.g., oil, antifreeze, and repair parts). In addition,  the Center is to only request property that is necessary for its operation.  No guidance has been issued to identify all the items covered by the  agreement. Similarly, the agreement does not address limits on the number  of ancillary items the Center can have. As a result, the Center was able to  acquire a large number of eligible supplies, including more than 20,000  hand tools and almost 900 pieces of firefighting equipment. Defense  Logistics Agency officials agreed that these quantities probably exceeded  what the Center is required to sustain its operations.
section_title: Property Accountability Is Inadequate
paragraphs: Two of the three Military Affiliate Radio System programs and the Civil Air  Patrol maintain poor accountability over the excess property they have  acquired, including restricted and hazardous items. (The Department does  not require the 12th Congressional Regional Equipment Center to track  received excess property because it is given title to the property.) This  lack of accountability increases the property’s vulnerability to misuse,  loss, and theft. We compared the property the Department recorded  issuing to the special programs with the property recorded in the  programs’ databases and found that the databases had a significant  number of missing records (see table 5). The Civil Air Patrol, for example,  could not account for 98 percent of the excess property supplies (77  percent based on value) it had obtained from the Defense reutilization  facilities.
subsections: section_title: Military Affiliate Radio System
paragraphs: On the basis of annual inventories, officials at the Army and Air Force  Affiliate Radio System programs believed that most of their excess  property could be accounted for. We found that the Army Affiliate Radio  System could account for all of the excess supplies the Defense  reutilization facilities reported releasing to its members.  Conversely, the  Air Force Affiliate Radio System could not account for 87 percent of its  excess supplies (31 percent based on value). We also judgmentally  sampled items obtained by the Navy Affiliate Radio System and asked that  the program’s regional officials search their local databases for records of  the items. The officials could not account for 12 percent of the supplies (33  percent based on value) in our sample; however, more than three-quarters  of the restricted supplies the program had obtained were unaccounted for  (see table 6). These included radio and television equipment, batteries,  measuring and test instruments, and computer equipment.
section_title: Civil Air Patrol
paragraphs: In accordance with Air Force supply policy, the Civil Air Patrol is required  to track nonexpendable property, that is, items that can be reused.  However, we could not account for most of the more than 28,000  nonexpendable supplies the Patrol acquired from the Defense reutilization  facilities. Items we could not locate in the property database included  radio and television equipment, office furniture, and special purpose  clothing. More than half of the supplies were special purpose clothing  items such as cold weather clothing and flyers’ helmets, jackets, and  coveralls. Patrol officials explained that a majority of the clothing was in  poor condition, was not reusable, and therefore did not require tracking.  However, we found no evidence to suggest that Patrol officials considered  an item’s condition when deciding if it should be tracked. Air Force  supply policies do allow senior officials some discretion on what property  to track, and we believe linking this decision to an item’s condition is  reasonable, when accompanied by a record of the decision.
Based on a recommendation by the Department of Defense Inspector  General’s Office, beginning on January 1, 2002, the Patrol will track only  those items, excess or otherwise, valued at $2,500 or more. While we  agree a dollar threshold is an important factor to consider in determining  which items should be tracked, other factors should not be ignored. For  example, Air Force policy requires pilferable items to be tracked,  regardless of their value, because of their demand in the civilian economy.  The Patrol obtained 5,500 expendable, pilferable supplies during the study  period, such as hand tools, communications and electronic equipment, and  vehicle equipment and parts. Tracking nonexpendable and expendable  restricted and hazardous items, regardless of their value, also is prudent.
The Civil Air Patrol’s ability to manage its property, including that  obtained from reutilization facilities, has been impaired by its information  systems. The Patrol does not include national stock numbers or indicate  whether an item is restricted or hazardous in its property database. As a  result, the Patrol cannot readily determine the status of this property, nor  can it ensure its proper handling. The Air Force has directed the Patrol to  improve how it accounts for excess property, and the Patrol is reviewing  different approaches.
section_title: 12th Congressional Regional Equipment Center
paragraphs: Although the Center is not required to track excess property, we found  that it had disposed of some property in a manner that was inconsistent  with the terms of its agreement with the Defense Logistics Agency. The  Center is only supposed to obtain property that it needs for its operations  and should not sell property without the permission and knowledge of the  Defense Logistics Agency. However, the Center was selling excess  property to its members without permission or notification. Items for sale  included office equipment and supplies, paper products, hand tools, and  furniture. Sales revenue from 1995 to 2000 was reported at $636,000.According to Center officials, sales proceeds were used to fund the  Center’s operations.
section_title: Restricted or Hazardous Items Are Not Adequately Tracked
paragraphs: The Civil Air Patrol and the Air Force Military Affiliate Radio System could  not properly account for restricted or hazardous excess property they had  obtained. The Army Affiliate Radio System could account for all of its  restricted property and did not receive any hazardous property.  Department policy requires non-Department of Defense organizations to  sign an agreement acknowledging the receipt of restricted items and  accepting responsibility for their care. However, because Defense policy  treats the 12 special programs like Defense organizations, a recipient is not  required to sign this agreement. Consequently, program officials are often  unaware that the property they have is restricted. Department policy also  requires Defense reutilization facilities to store hazardous property  separately and under increased security control.  Additionally, recipients  of hazardous property are provided information on how to use it safely  and the consequences of misuse. While we did not attempt to confirm  whether reutilization facility officials complied with this requirement,  officials from the Navy and Air Force Military Affiliate Radio Systems and  the Civil Air Patrol—programs that had obtained hazardous items—did not  recall receiving this information.
Program officials who are unaware that they have restricted or hazardous  property cannot track its whereabouts and cannot take necessary  precautions to safeguard its distribution or use and store and transport it  safely. Currently, only the Civil Air Patrol has procedures for dealing with  restricted property. Of the three programs that received hazardous  property, only the 12th Congressional Regional Equipment Center has  necessary procedures. None of the special programs indicate whether an  item is restricted or hazardous in their property databases. As tables 6 and  7 show, many of these supplies were not recorded. Officials from all three  special programs agreed that it would be beneficial to track the status of  restricted and hazardous items in their property databases.
Examples of restricted items not in the databases included 14 pieces of  night vision equipment, over 2,700 radio equipment supplies (which  according to Department officials, could be used to disrupt military  communications, send and receive secure transmissions, or transmit on  military frequencies), and over 100 pieces of camouflage equipment. These  items are shown in figure 5.  (See app. IV for an explanation of how Defense reutilization facilities, the  Military Affiliate Radio System programs, and the Civil Air Patrol track  excess property.)
section_title: Problems Also Identified With Other Special Programs
paragraphs: Our Office of Special Investigations has found similar problems with  property accountability in the other special programs. For example, a  Florida National Guard unit did not follow procedures to account for  excess property it had obtained, and Defense contractors did not  inventory or track excess property. According to the Defense Reutilization  and Marketing Service’s Office of Command Security, a lack of inventory  records creates conditions conducive to crime because property could be  stolen or diverted.
section_title: Conclusions
paragraphs: Internal control weaknesses, both at Defense reutilization facilities and at  special programs, leave excess property vulnerable to misuse, loss, and  theft. As a result, there is the risk that unauthorized individuals or  organizations may be able to obtain property with military applications or  technology. Special programs have been able to obtain ineligible excess  property with military technology/applications and hazardous items—in  some cases without realizing it. In addition, program officials did not know  the whereabouts of much of their excess property. Further, because these  programs have obtained property that they are not eligible to have, the  property is unavailable for reuse by federal agencies or other special  programs. These problems also exist in other special programs.
section_title: Recommendations for Executive Action
paragraphs: Given the unique policies and regulations associated with each of the  special programs, addressing the control weaknesses we identified  requires actions that apply to all programs as well as actions tailored to  each individual program.
For all programs, we recommend that the Secretary of Defense direct the  Director of the Defense Logistics Agency to take the following actions:  (1) As part of the Department’s redesign of its activity code database,  establish codes that identify the type of excess property—by federal  supply class—and the quantity that each special program is eligible to  obtain and provide accountable program officers access to appropriate  information to identify any inconsistencies between what was  approved and what was received.  (2) Reiterate policy stressing that Defense reutilization facility staff must  notify special program officials of the specific tracking and handling  requirements of hazardous items and items with military  technology/applications.
We also recommend that the Secretary of Defense ensure that accountable  program officers within the Department verify, prior to approving the  issuance of excess property, the eligibility of special programs to obtain  specific types and amounts of property, including items that are hazardous  or have military technology/applications. This could be accomplished, in  part, through the Department’s ongoing redesign of its activity code  database.
For each individual program, we further recommend the following.  (1) With regard to the 12th Congressional Regional Equipment Center, we  recommend that the Secretary of Defense direct the Director of the  Defense Logistics Agency to review and amend, as necessary, its  agreement with the Center in the following areas:  the Center’s financial responsibility for the cost of shipping excess  property obtained under the experimental project,  the ancillary items the Center is eligible to receive,  the rules concerning the sale of property and procedures for the  Center to notify the Agency of all proposed sales of excess  property,  the Center’s responsibility for tracking items having military  technology/application and hazardous items, and  the need for Agency approval of the Center’s orders for excess  property.  (2) With regard to the Army, the Navy, and the Air Force Military Affiliate  Radio Systems, we recommend that the Secretary of Defense direct the  Chairman of the Joint Chiefs of Staff to have the Joint Staff Directorate  for Command, Control, Communications, and Computer Systems  review which items these systems are eligible to receive, on the basis  of their mission and needs, and direct each of the Military Affiliate  Radio Systems to accurately track excess property, including pilferable  items, items with military technology/applications, and hazardous  items.  (3) With regard to the Civil Air Patrol, we recommend that the Secretary of  Defense direct the Secretary of the Air Force to have the Civil Air  Patrol-Air Force review which items the Patrol is eligible to receive, on  the basis of its mission and needs, and direct the Patrol to accurately  track its excess property, including pilferable items, items with  military technology/applications, and hazardous items.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, the Department of Defense  generally concurred with our recommendations.  It fully concurred with  four of our recommendations and partially concurred with two—those  calling for the establishment of an automated process to reject requests  for excess property that each special program is not eligible to obtain and  to provide accountable program officials access to information about their  property requests.
The Department agreed with our assessment that modifying the current  approval process to ensure that only valid requests for excess property are  filled would enhance program oversight.  The Department further stated if  it is not economically feasible to modify the exiting database, it would  consider alternative approaches to achieving the intent of our  recommendation.  The Department also indicated that the Defense  Reutilization and Marketing Service has placed an inventory query on its  website to assist program officials in monitoring their reutilization  transactions. We are encouraged by the Department’s commitment to  correct the current approval process.  The Department’s comments are  reprinted in their entirety in appendix V.
In separate written comments, 12th Congressional Regional Equipment  Center officials generally agreed with the accuracy of the report’s contents  as it relates to the Center.  The Center also noted that the success of the  Center could be improved with a revised contract with the Defense  Logistics Agency, which the Department indicated it is doing now.  The  Center’s comments are reprinted in their entirety in appendix VI.
The Defense Logistics Agency, the Air Force, the Joint Staff, and the 12th  Congressional Regional Equipment Center provided technical comments,  which were incorporated in the report as appropriate.
As arranged with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from its issue date. At that time, we will send copies of this report to interested congressional committees; the Secretaries of Defense, of the Army, of the Navy, and of the Air Force; and the Director of the Defense Logistics Agency.
If you or your staff have any questions about this report, please contact me at (202) 512-8412 or Robert H. Hast at (202) 512-7455. Key contributors to this report are listed in appendix VII.
section_title: Appendix I: Scope and Methodology
paragraphs: We selected the Military Affiliate Radio System, the Civil Air Patrol, and  the 12th Congressional Regional Equipment Center for review because  they (1) were found by our Office of Special Investigations to have  obtained and used some excess property that was not consistent with their  mission, (2) store their data in relatively few locations, (3) are subject  exclusively to Department of Defense oversight, and (4) have information  about their excess property that is readily available from the Defense  Reutilization and Marketing Service.
We collected and analyzed data on excess Department of Defense property  obtained by the three special programs from January 1, 1995-June 30, 2000,  with the exception of the 12th Congressional Regional Equipment Center,  where we used data from October 1, 1995-December 31, 2000. The reason  for this time shift is because the Center did not begin acquiring excess  defense property until October 1995.  During our review, we did not assess  the effectiveness of the 12th Congressional Regional Equipment Center.
To answer the two questions addressed in this report, we spoke with  officials from:
Headquarters, Defense Logistics Agency, Fort Belvoir, Virginia.
Headquarters, Defense Reutilization and Marketing Service, Battle Creek,  Michigan.
Defense Reutilization and Marketing Office, Fort Meade, Maryland.
Army Logistics Management College, Fort Lee, Virginia.
Headquarters, Army Military Affiliate Radio System, Fort Huachuca,  Arizona.
Headquarters, Navy Military Affiliate Radio System, Washington, D.C.
Headquarters, Air Force Military Affiliate Radio System, Scott Air Force  Base, Illinois.
Headquarters, Navy Military Affiliate Radio System, Region 2, Charleston,  South Carolina.
Headquarters, Civil Air Patrol, Maxwell Air Force Base, Alabama.
Headquarters, Civil Air Patrol–U.S. Air Force, Maxwell Air Force Base,  Alabama.
12th Congressional Regional Equipment Center, Blairsville, Pennsylvania.
Headquarters, Air Force Equipment Policy Team, Directorate of Supply,  Washington, D.C.
Joint Staff, Communications and Computer Networks Division,  Directorate for Command, Control, Communications, and Computers,  Washington, D.C.
To determine whether the three special programs had received ineligible  excess property--and if so, how much--we compared the federal supply  classes of the acquired property to each program’s list of approved federal  supply classes. The Defense Reutilization and Marketing Service provided  a record of the excess property issued to each program over the  5-1/2 years in electronic spreadsheet files. According to Defense  Reutilization and Marketing Service officials, the data they provided us  was the most accurate information available on the disposition of excess  property.  We did not independently verify the data we received on excess  property at these special programs.
Records contained descriptive and identifying information about each  order, including date of the transaction, price data, national stock number,  demilitarization and environmental codes, and quantity issued. For the  Military Affiliate Radio System and the Civil Air Patrol programs, items  with federal supply classes not on the approved lists were treated as  ineligible. For the 12th Congressional Regional Equipment Center, a list of  eligible heavy equipment was included as an attachment to its agreement  with the Defense Logistics Agency. The eligibility of various ancillary  items was determined by unanimous agreement between our staff and  Defense Logistics Agency officials who oversee the Center’s operations on  behalf of the Department. Where the eligibility of a certain item was  ambiguous, we considered it to be eligible. For example, the Military  Affiliate Radio Systems limit some items to their state and regional  directors; however, we did not take this distinction into account in our  analysis.  In those cases where an apparent typographical error resulted in  a mismatch between a Defense Reutilization and Marketing Service record  and a property database record, we treated the two as a match.
To determine whether the special programs could account for the  property they had received, we met with officials from the Army, Navy,  and Air Force Military Affiliate Radio Systems and the Civil Air Patrol to  discuss their policies, procedures, and practices for tracking the excess  property and obtained electronic or paper copies of the programs’  property databases. We matched the Defense Reutilization and Marketing  Service records of property issued to these programs with entries in the  programs’ databases.  Although we did not evaluate how well the 12th  Congressional Regional Equipment Center had tracked the excess  property it was issued, we spoke with Center officials about measures  taken to account for restricted and hazardous property.
In accordance with Army regulation, the Army Affiliate Radio System  retains excess property records for 2 years after an item has been disposed  of, transferred to another member, or returned to a Defense reutilization  facility. Because we could not determine with certainty an item’s status  that was obtained before the 2-year limit, we limited our review of items to  2 years instead of 5-1/2 years. This reduced the number of supplies that we  tried to match from 5,986 to 127. Because the Navy Affiliate Radio System  does not account for its property centrally, we selected a sample of items  from the Defense Reutilization and Marketing Service records and relied  on Navy Affiliate Radio System personnel in each of its seven regions.
The Patrol follows Air Force supply policy and only tracks nonexpendable  items (i.e., items that can be used more than once). This reduced the  excess property the Patrol is required to track from 1.2 million expendable  and nonexpendable supplies to 34,000 nonexpendable supplies—a 97- percent reduction. An additional 5,000 supplies were eliminated based on  discussions with Civil Air Patrol and Air Force supply officials, reducing  the number of supplies that should be tracked to 29,000.
To determine whether similar conditions existed in other special  programs, we examined recent work by our Office of Special  Investigations.
We conducted our review from November 2000 through September 2001 in  accordance with generally accepted government auditing standards. We  performed our other investigative work during the same period in  accordance with investigative standards established by the President’s  Council on Integrity and Efficiency.
section_title: Appendix II: Descriptions of the Three Special Programs
subsections: section_title: Military Affiliate Radio System
paragraphs: The Military Affiliate Radio System is a Department of Defense-funded  organization of volunteer amateur radio operators with an interest in  military communications. Its beginnings can be traced to 1925 with the  formation of the Army Amateur Radio Systems. The Air Force program  and the Navy program—which includes the Marine Corps and the Coast  Guard—were established in 1948 and 1962, respectively. On November 30,  1968, the Department issued a directive formalizing the composition, the  mission, the functions, and the organization of the Military Affiliate Radio  System.
Membership requirements for each of the programs are similar: be at least  17 years old, be a U. S. citizen or resident alien, possess a valid Federal  Communications Commission license for the frequencies to be used, and  agree to participate in Affiliate Radio System activities a minimum of  12 hours every 3 months.
The Affiliate Radio System’s mission includes providing emergency communications on a local, national, or international providing auxiliary communications during periods of emergency and  under all hazard conditions; creating interest and training Affiliate Radio System members in military providing a potential reserve of trained radio communications personnel; handling personal communications for Armed Forces personnel stationed  throughout the world; and conducting an amateur radio program as part of the annual celebration of  Armed Forces Day.
Within the past 20 years, its primary mission has shifted from one of  handling personal communications to providing emergency and auxiliary  communications.
The Office of the Assistant Secretary of Defense for Command, Control,  Communications, and Intelligence provides overall policy guidance, but  the responsibility for managing and operating the individual Affiliate Radio  System programs—including acquiring, storing, distributing, and  maintaining accountability over equipment—falls to the secretaries of the  military departments. To satisfy this requirement, each of the Affiliate  Radio System programs has established a headquarters office and  appointed a program chief. The headquarters location and current size of  the three programs are shown in table 8.
The Army and Air Force Affiliate Radio System programs are centrally  managed from their headquarters; the Navy program is headquartered in  Washington, D.C., but day-to-day management is performed at its seven  geographic regional headquarters.
In fiscal year 2000, there were 4,600 reutilization organizations. The Army,  Navy, and Air Force Affiliate Radio Systems ranked 229th, 266th, and 54th,  respectively, as measured by the value of excess property obtained.
subsections: section_title: Civil Air Patrol
paragraphs: Congress established the Civil Air Patrol as a federally chartered, private,  nonprofit corporation in 1946, and the Patrol is recognized by 10 U.S.C.  9441 as a volunteer civilian auxiliary of the Air Force. As such, the Air  Force is authorized to provide financial and material assistance and  advice. To accomplish these responsibilities, the Air Force relies on the  Civil Air Patrol-Air Force, a unit of the Air Force’s Air Education and  Training Command that is collocated with the Patrol’s national  headquarters at Maxwell Air Force Base, Alabama.
The Civil Air Patrol has three primary missions:  Emergency services. The Patrol participates in search and rescue, disaster  relief, and humanitarian assistance. The Patrol flies more than 85 percent  of all inland search and rescue missions directed by the Air Force. It  provides air and ground transportation and communications resources in  support of local, state, and federal agencies during disaster relief and  humanitarian assistance efforts. The Patrol also provides aerial  reconnaissance and airborne communications support for counter drug  operations.
Aerospace education. The Patrol provides its members and the general  public an appreciation for and knowledge of aviation and space issues.  External programs are primarily conducted through the nation’s school  systems. Each year, the Patrol sponsors workshops to provide teachers  materials on basic aerospace knowledge and advances in aerospace  technology to use in their classrooms.
Cadet training. The purpose of the Cadet Program is to provide youth  between the ages of 12 and 18 an opportunity to develop their leadership  skills through their interest in aviation. Cadets progress through a 15-step  program, including aerospace education, leadership training, and physical  fitness.
The Patrol is organized into 8 geographic regions consisting of 52 wings—  1 wing for each state, Puerto Rico, and the District of Columbia. Wings are  then subdivided into groups, squadrons, and sometimes flights, depending  on their size. Collectively, there are about 61,000 Patrol members and  1,700 individual Patrol units.
In fiscal year 2000, there were 4,600 reutilization organizations. The Civil  Air Patrol ranked 106th, as measured by the value of excess property  obtained.
section_title: 12th Congressional Regional Equipment Center
paragraphs: The 12th Congressional Regional Equipment Center was established in  1992 as an infrastructure demonstration project in Cambria County, in  western Pennsylvania. Participation in the project by the Department of  Defense is mandated.The project’s purpose is to assist municipalities and  nonprofit organizations in Pennsylvania complete specific public projects  that would otherwise be too costly to undertake. The Center acquires  Department excess heavy equipment, such as dump trucks, backhoes,  front-end loaders, snowplows, forklifts, and rollers, and restores them to  acceptable working condition.  It then leases the equipment for land  reclamation, site preparation, road repair, soil conservation, garbage and  snow removal, and other community improvements.
The Center leases equipment on a daily, weekly, monthly, or yearly basis  and continues to maintain the equipment during the leasing period.  Recently, the Center began to provide operators with the equipment for an  additional fee and added a lease-with-an-option-to-buy provision. To be  eligible to lease equipment, an organization must be governmental or  nonprofit and pay a $300 annual membership fee. Since its inception, the  Center’s membership has increased each year, and in calendar year 2000 it  totaled 283 members.
The Center’s headquarters is in Blairsville, Pennsylvania. A  12-member Board of Directors oversees the Center; a paid managing  director and staff handle day-to-day business activities. The Center’s  principal sources of revenue were equipment lease fees and auction  proceeds.
In fiscal year 2000, there were 4,600 reutilization organizations. The Center  ranked 15th, as measured by the value of excess property obtained.
section_title: Appendix III: Location of Defense Reutilization and Marketing Offices
paragraphs: Department of Defense excess property is managed by Defense  reutilization and marketing offices located on or near major U.S. military  facilities around the world. At the time we concluded our review, there  were 97 Defense reutilization facilities (see figs. 6, 7, and 8).
section_title: Appendix IV: Processes Used by the Department of Defense and Two Special Programs to Track Excess Property
subsections: section_title: Military Affiliate Radio System
paragraphs: The three Military Affiliate Radio System programs follow similar  procedures to maintain accountability over the excess property issued to  their members. Members are held accountable for the property and are  expected to safeguard it from misuse, theft, loss, and damage. Further,  members cannot modify or remove any part of the equipment without  advance approval or dispose of it for personal financial gain. When  property is no longer required, it is to be turned in to the nearest Defense  reutilization facility, if economically feasible, as determined by Affiliate  Radio System officials.
Each Affiliate Radio System program tracks the excess property from the  Defense reutilization facilities to its final disposition. The Army and Air  Force Affiliate Radio Systems have automated databases to track excess  property. Information in these databases links each item to a member and  includes the item’s name, the national stock number, the acquisition date,  and a unique transaction number. To ensure that the information in the  databases corresponds with the physical property the members have, the  two programs conduct an annual inventory by tasking each property  holder to verify the accuracy of the descriptive information in the  databases. The Navy Affiliate Radio System tracks excess property at its  seven regional headquarters with varying degrees of automation and does  not require an annual inventory.
section_title: Civil Air Patrol
paragraphs: Like the Military Affiliate Radio System, the Civil Air Patrol has created an  automated database to track its excess property. The database includes an  item’s name, federal supply class, transaction number, and location, but  not its national stock number. Without a national stock number, it is  difficult to get information about an item, including whether the item is  restricted or hazardous. Patrol officials recognize this deficiency, and they  are considering including an item’s national stock number in the property  database that is under development. The Patrol uses the database to  prepare an annual inventory report that is provided to the Air Force. If  property held by the Patrol is no longer needed, it is redistributed within  the Patrol or returned to a reutilization facility. The Air Force grants  waivers on a case-by-case basis to dispose of this property by other means  (e.g., landfill and donation) if it is economical to do so. When excess  property cannot be accounted for, an investigation is conducted under the  stewardship of the wing commander.
section_title: Tracking of Restricted and Hazardous Property
paragraphs: When a Defense activity no longer requires a restricted item, it turns the  item over to a Defense reutilization facility. The activity is required to  indicate the item’s demilitarization code in the accompanying  documentation. This code identifies the degree of demilitarization  necessary before the item can be released from the Department’s control.  Reutilization facilities are not supposed to accept any property unless the  documentation contains a demilitarization code. When a reutilization  facility issues an item, however, its demilitarization code is not included in  the accompanying documentation.
An item is not demilitarized if it is transferred to a civilian federal agency,  donated to a qualified organization, or reused within the Department.  Before a transfer is made, a representative of the civilian agency or donee  organization must sign an agreement that outlines the agency’s  responsibilities for safeguarding the restricted item. An agreement is not  required when a restricted item is reused by another Defense agency  because the attendant requirements are assumed to be known by the  recipient and are enforceable. Because the 12 special programs are  considered to be a part of the Department of Defense, they are eligible to  receive restricted items—unless program-specific restrictions are  imposed—and are not required to execute an agreement. According to the  Department’s Demilitarization Program Office, like the Department, these  programs are responsible for preventing unauthorized access and use of  these military-unique and dual-use items.
When an item with hazardous properties is issued, the Defense  reutilization facility provides the receiving organization with information  on the item’s physical and chemical characteristics, the precautions for its  safe handling and use, and the environmental and health hazards it poses.  We did not assess the ability of the three special programs to store, handle,  and dispose of hazardous property in accordance with applicable  environmental, health, and safety laws and regulations.
section_title: Appendix VII: GAO Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to those named above, Lawson Gist, Jr.; John J. Ryan; Marc J.  Schwartz; David S. Epstein; Richard C. Newbold; Norman M. Burrell;  George J. Ogilvie; Carin M. Wyche; John G. Brosnan; Alan S. Goldberg;  Kord H. Basnight, Peter Iannicelli, Stefano Petrucci, and Frank A.  Papineau, Jr. made key contributions to this report.
section_title: Related GAO Products
paragraphs: Inventory Management: Better Controls Needed to Prevent Misuse of  Excess DOD Property (GAO/OSI/NSIAD-00-147, Apr. 28, 2000).
Concerns Raised About Use of Unreconciled Activity Codes to  Requisition New and Excess Government Property (GAO-01-86R, Dec. 6,  2000).
Department of the Army: Unauthorized Activity Codes Used to  Requisition New DOD Property (GAO-01-85R, Dec. 6, 2000).
Department of the Air Force: Unauthorized Activity Codes Used to  Requisition New and Excess DOD Property (GAO-01-196R, Jan. 8, 2001).
Department of the Navy: Unauthorized Activity Codes Used to  Requisition New and Excess DOD Property (GAO-01-206R, Jan. 8, 2001).
General Services Administration: Unauthorized Activity Codes Used to  Requisition New and Excess Government Property (GAO-01-221R, Jan. 8,  2001).
High-Risk Series: An Update (GAO-01-263, Jan. 2001).