Purchased material—new material shipped from a commercial source to a storage activity. Our analysis of financial reports showed that NAVICP Philadelphia was responsible for about $2.5 billion, or 84 percent, of these losses. Classified and sensitive items included aircraft-guided missile launchers, military night vision devices, and communications equipment. Third, NAVICP Philadelphia and its issuing activities, intended recipients, and commercial carriers have not adequately investigated cases in which warehoused material was not acknowledged as received. Fourth, NAVICP Philadelphia has not monitored the receipt of purchased material from commercial sources. End Users’ Receipts of Material Were Not Routinely Reported

End users have not routinely reported receipt of items to NAVICP Philadelphia. However, the Navy did not identify significant weaknesses in internal controls over NAVICP’s in-transit inventory in its Financial Integrity Act statements over the past 3 years, despite the fact that it had written off as lost inventory valued at more than $3 billion. Moreover, the Navy has not established any performance measures, milestones, or timetables for reducing the risk of its in-transit inventory to undetected theft or misplacement. Our review of items that the Navy had reported as being lost in transit indicated that at least some had in fact been acknowledged as received. For secondary items, the law requires that DOD’s plan address such issues as the vulnerability of in-transit items to loss through fraud, waste, and abuse; loss of oversight of in-transit items, including items transported by commercial carriers; and loss of accountability over in-transit items due to either a delay of delivery of the items or a lack of notification of the delivery. Conclusions

The Navy has not effectively controlled its in-transit inventory, leaving significant amounts of inventory unaccounted for. Scope and Methodology

Our objectives for this report were to (1) identify the reported value and types of inventory in transit within and between storage and repair activities, vendors, and end users that were unaccounted for (or lost) and (2) assess the Navy’s adherence to procedures for controlling such in-transit inventory. To assess the Navy’s procedures for controlling in-transit inventory and identify the reported types and amounts of in-transit items that were not accounted for, we took the following steps:
We reviewed policies and procedures and obtained other relevant documentation related to in-transit inventory from officials at the Defense Logistics Management Standards Office, McLean, Virginia; the Defense Automated Addressing System Office, Dayton, Ohio; and the Naval Supply Systems Command (NAVSUP), Mechanicsburg, Pennsylvania. Using the financial reports, we identified the Naval Inventory Control Point (NAVICP) Philadelphia as the Navy’s inventory control activity with the highest reported dollar value of in-transit inventory losses. Receiving Activity Storage activity Repair facility Reports receipt?
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed selected aspects of the Navy's management procedures for controlling items in transit, focusing on the: (1) reported value and types of inventory in transit within and between storage and repair activities, vendors, and end users that were unaccounted for (or lost); and (2) Navy's adherence to procedures for controlling such in-transit inventory.

What GAO Found

GAO noted that: (1) the Navy has not effectively controlled its in-transit inventory and places enormous amounts of inventory at risk of undetected theft or misplacement; (2) for fiscal years 1996-1998, the Navy reported that it had lost over $3 billion in in-transit inventory, including some classified and sensitive items such as aircraft guided-missile launchers, military night vision devices, and communications equipment; (3) the Navy's Inventory Control Point (NAVICP) at Philadelphia, which manages the largest portion of the Navy's inventory, reported the largest losses--$2.5 billion, or 84 percent of the Navy's in-transit losses; (4) however, GAO's work showed that a few of the items reported as lost by NAVICP Philadelphia had in fact been accounted for in inventory records; (5) Navy activities involved in issuing and receiving inventory items have not always followed the Navy's control procedures to ensure that in-transit items are accounted for; (6) Navy units have not always reported to NAVICP Philadelphia that they received requested items; (7) ineffective accounting systems have been used to monitor receipts of items redistributed between storage activities, shipped to and from repair facilities, and shipped from end users; (8) NAVICP Philadelphia and its shipping and receiving activities have not adequately investigated unreported receipts of items redistributed between storage activities, shipped to and from repair facilities, and shipped from end users; (9) NAVICP Philadelphia has not monitored receipts of items it purchased from commercial sources; (10) as early as 1990, GAO reported that there were indications of inadequate internal controls over procured assets; (11) Naval Supply Systems Command and NAVICP Philadelphia oversight of in-transit inventory has not been adequate; (12) although Navy officials have initiated actions intended to correct the problems GAO cited, the Navy has not established any performance measures, milestones, or timetable for reducing the vulnerability of in-transit inventory to theft or loss; and (13) the Navy has not identified management of in-transit inventory as a significant weakness in its assessments of internal controls, as provided in the Federal Managers' Financial Integrity Act of 1982.