As of December  2016, the LESO program office finalized a memorandum of  understanding (MOU) that it plans to sign with participating federal  agencies. According to the MOU, it will establish DLA’s authority as the  owner of the program and, among other things, establish general terms  and conditions. DLA Has Taken Actions and Is Planning Additional Actions to Address Identified Weaknesses in Its Transfer Process

			Revisions to Policy and Procedures, Compliance Reviews, and LESO Program Application

DLA has taken some steps to address identified weaknesses in its  processes for transferring and monitoring its excess controlled property  through revisions to its policy and procedures on the management,  oversight, and accountability of the LESO program. DLA Has Deficiencies in Its Processes for Verifying and Approving Applications and Transferring Property and Has Not Conducted a Risk Assessment

			DLA Has Deficiencies in Its Processes for Verifying and Approving Federal Agency Applications

Our independent testing of the LESO program’s internal controls  identified deficiencies in the processes for verification and approval of  federal law enforcement agency applications. DLA Did Not Routinely Request and Verify Identification of Individuals Picking Up Controlled Property or Verify the Quantity of Approved Items Transferred

Our independent testing of DLA’s internal controls also identified  deficiencies in the transfer of controlled property, such as DLA personnel  not routinely requesting and verifying identification of individuals picking  up controlled property or verifying the quantity of approved items prior to  transfer. We subsequently submitted  requests to obtain controlled property, including non-lethal items and  potentially-lethal items if modified with commercially available items. The estimated value of each item  ranged from $277 to over $600,000, including items such as night-vision  goggles, reflex (also known as reflector) sights, infrared illuminators,  simulated pipe bombs, and simulated rifles. If DLA  conducted a fraud risk assessment on the LESO program, to include the  application process, and designed and implemented a strategy with  specific internal control activities to mitigate assessed fraud risks, DLA  would be more effective in preventing, detecting, and responding to  potential fraud and security risks. DLA Maintains a Public Internet Site with Data on Property Transfers, Including Information on Excess Controlled Property

The National Defense Authorization Act for Fiscal Year 2016 included a  provision for DOD to create and maintain a publicly available Internet site  that provides information on the controlled property transferred and the  recipients of such property. However, after we briefed DLA officials in April 2017 on the results of our  audit, DLA officials took immediate action and added a definition of  controlled property to their Internet site to distinguish for the general  public what items are considered controlled. However, our investigators tested the LESO program’s internal controls  by creating a fictitious agency allowing us to gain access to the program  and to obtain over 100 controlled property items valued at about $1.2  million. Finally, we found that DLA lacks a comprehensive framework for  instituting fraud prevention and mitigation measures that would allow it to  examine potential risks for all stages of the process from application to  transfer of excess controlled property to legitimate law enforcement  agencies. Recommendations for Executive Action

We are making four recommendations to enhance the department’s  transfer of its excess controlled property. DOD concurred with all four recommendations and highlighted the  actions it was taking to address each recommendation. Appendix I: Law Enforcement Agencies Reported Various Uses and Benefits from the Transfer of the Department of Defense’s (DOD) Excess Controlled Property

Federal, state, and local law enforcement agencies reported various uses  and benefits from the receipt of DOD’s excess controlled property through  the Law Enforcement Support Office (LESO) program. Appendix II: Objectives, Scope, and Methodology

This report addresses the extent to which the Defense Logistics Agency  (DLA) has: (1) taken actions to enhance processes, including internal  controls, relating to its transfers of excess controlled property; and (2)  addressed the statutory requirement to maintain a public Internet site that  provides transparency about controlled property transfers and about the  recipients of such property. In our  survey of select federal law enforcement agencies, training had not been  regularly provided to participating federal law enforcement agencies.
Why GAO Did This Study

Since 1991, DOD has reported transferring more than $6 billion worth of its excess controlled and non-controlled personal property to more than 8,600 federal, state, and local law enforcement agencies through the LESO program, which is managed by DLA. According to DOD, about 4 to 7 percent of the total excess property transferred is controlled property, which typically involves sensitive equipment and items that cannot be released to the public.
The National Defense Authorization Act of 2016 included a provision that GAO conduct an assessment of DOD's excess property program. This report addresses the extent to which (1) DLA has taken actions to enhance processes, including internal controls, related to its transfers of excess controlled property; and (2) DLA has addressed the statutory requirement to maintain a public Internet site that provides transparency about controlled property transfers and about the recipients of such property. GAO reviewed DOD policies and procedures, interviewed cognizant officials, and conducted independent testing of LESO's application and DLA's transfer process.

What GAO Found

The Defense Logistics Agency (DLA) has taken some actions and is planning additional actions to address identified weaknesses in its excess controlled property program. However, internal control deficiencies exist for, among other things, ensuring that only eligible applicants are approved to participate in the Law Enforcement Support Office (LESO) program and receive transfers of excess controlled property. DLA is establishing memorandums of understanding with participating federal agencies intended to, among other things, establish general terms and conditions for participation, revise its program application to require additional prospective participant information, and plans to provide additional online training for participating agencies that is expected to begin in late 2017. However, GAO created a fictitious federal agency to conduct independent testing of the LESO program's internal controls and DLA's transfer of controlled property to law enforcement agencies.
Through the testing, GAO gained access to the LESO program and obtained over 100 controlled items with an estimated value of $1.2 million, including night-vision goggles, simulated rifles, and simulated pipe bombs, which could be potentially lethal items if modified with commercially available items (see photos). GAO's testing identified that DLA has deficiencies in the processes for verification and approval of federal law enforcement agency applications and in the transfer of controlled property, such as DLA personnel not routinely requesting and verifying identification of individuals picking up controlled property or verifying the quantity of approved items prior to transfer. Further, GAO found that DLA has not conducted a fraud risk assessment on the LESO program, including the application process. Without strengthening DLA and LESO program internal controls over the approval and transfer of controlled property to law enforcement agencies, such as reviewing and revising policy or procedures for verifying and approving federal agency applications and enrollment, DLA lacks reasonable assurance that it has the ability to prevent, detect, and respond to potential fraud and minimize associated security risks.
Examples of Controlled Property Items Obtained
DLA maintains a public Internet site to address statutory requirements to provide information on all property transfers to law enforcement agencies. DLA's public Internet site shows all transferred property, and, as of April 2017, in response to GAO's findings, has included a definition of controlled property to distinguish for the general public what items are considered controlled.

What GAO Recommends

GAO is making four recommendations to DLA, including strengthening internal controls over the approval and transfer of DOD excess controlled property to law enforcement agencies, and conducting a fraud risk assessment to institute comprehensive fraud prevention and mitigation measures. DOD concurred with all four recommendations and highlighted actions to address each one.