Inadequate Visibility Over Excess Items for Navy’s DBOF Budget and Buy Decisions

The Navy’s item managers do not have complete information on hundreds of millions of dollars of operating materials and supplies on ships and at redistribution sites that is needed for budget and purchase decisions. This occurs because the inventory systems on ships and at the redistribution sites do not provide the item managers complete and accurate data on operating level excess items. In addition, the Navy had 17 redistribution sites storing a total of $455 million worth of items, all of which were excess. Further, the lack of visibility over excess items that are free issued has resulted in the operating unit’s Operations and Maintenance budget requests being overstated. Navy Lacks an Integrated and Comprehensive Approach to Reporting on Operating Materials and Supplies

The Navy has various initiatives underway to improve management and reporting of operating materials and supplies. However, some of these efforts are more directed at and concerned with providing visibility for redistribution of excesses among the operating activities sponsoring the initiative than providing item managers with all the data needed to perform their responsibilities from a Navy-wide perspective. Most of these costs could be avoided if excess items were promptly returned to the wholesale supply system. At the 15 shore activities—air stations, redistribution sites, and Trident Refit Facilities—and 12 ships we visited to assess the accuracy of Navy’s records on its operating materials and supplies, we found that 22 out of 27 met the Navy’s minimum inventory record accuracy rate goal of 95 percent. We believe that to ensure reliable financial reporting and maximum operational efficiency, all units should strive to exceed the minimum goal. GAO Comments

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Why GAO Did This Study

GAO examined the Navy's financial reporting on and management of operating materials and supplies that are not part of Defense Business Operations Fund (DBOF) inventories, focusing on the: (1) Navy's accountability and visibility over approximately $5.7 billion in operating materials and supplies on board vessels and at redistribution sites; (2) Navy's management of excess items; and (3) accuracy of operating unit records for operating materials and supplies.

What GAO Found

GAO found that: (1) 261 Navy vessels and 17 redistribution sites are storing a total of about $883 million in excess items; (2) the inventory systems on ships and at redistribution sites do not provide Navy item managers with complete and accurate data on excess items at the operating level; (3) because item managers are not aware of excess items that may be available for redistribution free of charge, their operations and maintenance (O&M) budget requests are overstated; (4) initiatives for improving management and reporting of operating materials and supplies do not represent a coordinated, integrated approach for ensuring that item managers are provided with all of the information they need to perform all of their responsibilities; (5) the Navy could achieve cost savings and increase visibility of its excess items by closing its 17 redistribution sites and returning excess items to the wholesale supply system; and (6) while most of the activities tested met the Navy's minimum goal of 95-percent inventory record accuracy, all of the units should attempt to exceed the minimum goal.