The Air Force Materiel Command (AFMC) administers the Air Force supply system and provides suspended inventory management policies and procedures. Reported Value of Suspended Inventory Is Over $3 Billion

DOD reported that about $3.3 billion of secondary items was in a suspended status between April and June 1997. The Warner Robins ALC accounted for about $1.3 billion (53 percent) of the Air Force’s suspended inventory. Appendix III contains additional details on the quantity and value of suspended inventory items. Ineffective Management Can Increase Costs and Reduce Readiness

Significant management weaknesses exist for inventory categorized as suspended. The Air Force is not reviewing the status of these items in a timely manner and has miscategorized a significant amount of inventory. As a result, the Air Force is likely incurring unnecessary logistics costs and missing opportunities to support operational units’ needs in a timely manner. As a result, suspended inventory is not available for use when needed by customers. For the suspended items in our sample, Warner Robins had over 2,000 concurrent backorders, worth about $53 million. If the duration of suspensions had been monitored and usability had been determined within a reasonable amount of time, over 500 of our sample items, worth about $7 million, could have been used to fill some of the backorders, as shown in table 2. The keyboards, valued at $16,000 each, are used on B-52H aircraft. 6) had been suspended in reclaimed inventory for over 2 years. However, waiving the standard exacerbates existing problems with lengthy suspensions. We reviewed internal control assessments by Warner Robins, AFMC, and the Air Force to determine if the Air Force had reported suspended inventory management by ALCs as a material weakness and found that it had not. Air Force and DOD officials have generally stated, and our review confirmed, that ineffective management and delays in determining the usability of suspended inventory can result in increased logistics and support costs and affect readiness. At Warner Robins, (1) item managers generally were not complying with DOD standards for determining the usability of suspended inventory items, (2) about 64 percent of the items we sampled had been in the suspended category for more than 1 year and some longer than 6 years, (3) item managers were following AFMC guidance that does not comply with DOD and Air Force policy, (4) written procedures for controlling suspended inventory were lacking, and (5) management oversight of suspended inventory was limited. Recommendations

To improve the management of suspended items, we recommend that the Secretary of Defense direct the Secretary of the Air Force to ensure that, at Warner Robins (1) suspended inventory is properly identified, monitored, inspected, and classified within established DOD timeframes and (2) suspended items receive adequate visibility at all management levels, up to and including the service headquarters, through targeting suspended inventory problems as an issue for review in the Federal Managers’ Financial Integrity Act assessments. Therefore, our report notes that these data are reported values. With the use of the inventory records, we identified the Air Force and Warner Robins Air Logistics Center (ALC) as the DOD component and its inventory control activity with the highest reported dollar value of suspended items.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) secondary inventory management, focusing on the: (1) reported quantity and value of suspended inventory; (2) weaknesses in managing suspended inventory and their potential effect on logistics support costs and readiness; and (3) reasons why suspended inventory is not well managed.

What GAO Found

GAO noted that: (1) significant management weaknesses exist in the Air Force's management of inventory that it categorizes as suspended; (2) as a result, the Air Force is vulnerable to incurring unnecessary repair and storage costs and avoidable unit readiness problems; (3) this situation exists largely because management controls are not being implemented effectively or are nonexistent; (4) among DOD components, the Air Force reported the largest amount of suspended inventory--more than 70 percent of the $3.3 billion of all DOD suspended inventory; (5) in April 1997, the Air Force had 403,505 secondary items, valued at $2.4 billion, in a suspended status; (6) the Warner Robins Air Logistics Center (ALC) had the highest reported value of suspended inventory, accounting for about $1.3 billion (53 percent) of the Air Force's suspended inventory; (7) the vast majority of the suspended items reviewed are not being reviewed in a timely manner; (8) of the 1,820 suspended items reviewed with established standards, 97 percent failed to meet these standards; (9) about 64 percent of the inventory reviewed had been in a suspended category for over 1 year, and some had been suspended for over 6 years; (10) delays in determining the usability of suspended inventory can result in increased logistics support costs and readiness problems; (11) Warner Robins had over 2,000 unfilled customer demands (valued at about $53 million) while similar items were in suspension; (12) over 500 of these unfilled demands (valued at about $7 million) could have potentially been filled with these items; (13) two B-52H aircraft had not been fully operational for 175 days and 24 days because two $16,000 data entry keyboards were not available for issue in the Air Force supply system, yet two such keyboards had been maintained in a suspended status for two years; (14) management controls at Warner Robins over items categorized as suspended inventory have broken down and contributed to inventory being in a suspended status beyond established timeframes; (15) Air Force Materiel Command guidance does not comply with DOD policy and safeguard against lengthy suspensions, and Materiel Command and Warner Robins oversight of inventory management has generally been nonexistent; (16) Warner Robins lacks clearly defined suspended inventory management procedures for, and sufficient emphasis on, controlling suspended inventory; and (17) further, management of suspended inventory has not been identified in Air Force assessments of internal controls as a significant weakness, as provided in the Federal Managers' Financial Integrity Act of 1982.