	Analysis of Reutilization Program Identifies Billions of Dollars in Waste and Inefficiency

Overall, our analysis of the $33 billion in reported excess commodity  disposals in fiscal years 2002 through 2004 showed that $4 billion related to  items in new, unused, and excellent condition. Of the $4 billion, we  determined that $3.5 billion (88 percent) included substantial waste and  inefficiency because new, unused, and excellent condition items were  being transferred or donated outside of DOD, sold on the Internet for  pennies on the dollar, or destroyed rather than being reutilized. However, of the $4 billion, DOD units reutilized only $495  million (12 percent) of these items during the 3-year period. Unnecessary Commodity Purchases

Our analysis of fiscal year 2002 and 2003 DLA commodity purchases and  DRMS excess property inventory data identified numerous instances in  which the military services ordered and purchased items from DLA at the  same time identical items—items with the same NSN—that were reported  to be in new, unused, and excellent condition were available for  reutilization. We based our case study selections on new, unused items that DOD  continued to purchase. Although these items had a total reported  acquisition cost of $11,522, we paid a total of $1,427 for these items,  including tax, buyer’s premium, and shipping cost. Further, DOD is continuing to purchase and use most of these items. New, unused excess DOD tires. Key factors  in the overall DRMS management control environment that contributed to  waste and inefficiency in the reutilization program included (1) unreliable  excess property inventory data; (2) inadequate DRMS oversight,  accountability, physical control, and safeguarding of property; and  (3) outdated, nonintegrated excess inventory and supply systems. Weaknesses in Reutilization Program Oversight and Physical Inventory Control

We found hundreds of millions of dollars in potential waste and inefficiency  associated with the failure to safeguard excess property inventory from  loss, theft, and damage. Excess Property Losses

Weaknesses in accountability that resulted in lost and stolen property  contributed to waste and inefficiency in the excess property reutilization  program. For example, excess DOD property sent to  the Huntsville, Alabama, liquidation sales location was stored outside  unprotected from weather, including sun, wind, rain, and hurricanes during  the summer and fall of 2004. Outdated, Nonintegrated Systems Impair Economy and Efficiency

Inefficient, nonintegrated excess inventory and supply management  systems lack controls necessary to prevent waste and inefficiency in the  reutilization program. Improved management of DOD’s excess  property and a strong reutilization program would help save taxpayers  hundreds of millions of dollars annually.
Why GAO Did This Study

GAO was asked to assess the overall economy and efficiency of the Department of Defense (DOD) program for excess property reutilization (reuse). Specifically, GAO was asked to determine (1) whether and to what extent the program included waste and inefficiency and (2) root causes of any waste and inefficiency. GAO was also asked to provide detailed examples of waste and inefficiency and the related causes. GAO's methodology included an assessment of controls, analysis of DOD excess inventory data, statistical sampling at selected sites, and detailed case studies of many items.

What GAO Found

DOD does not have management controls in place to assure that excess inventory is reutilized to the maximum extent possible. Of $33 billion in excess commodity disposals in fiscal years 2002 through 2004, $4 billion were reported to be in new, unused, and excellent condition. DOD units reutilized only $495 million (12 percent) of these items. The remaining $3.5 billion (88 percent) includes significant waste and inefficiency because new, unused, and excellent condition items were transferred and donated outside of DOD, sold for pennies on the dollar, or destroyed. DOD units continued to buy many of these same items. GAO identified at least $400 million of fiscal year 2002 and 2003 commodity purchases when identical new, unused, and excellent condition items were available for reutilization. GAO also identified hundreds of millions of dollars in reported lost, damaged, or stolen excess property, including sensitive military technology items, which contributed to reutilization program waste and inefficiency. Further, excess property improperly stored outdoors for several months was damaged by wind, rain, and hurricanes. GAO ordered and purchased at little or no cost several new and unused excess commodities that DOD continued to buy and utilize, including tents, boots, power supplies, circuit cards, and medical supplies. GAO paid a total of $2,898, including tax and shipping cost, for these items, which had an original DOD acquisition cost of $79,649. Root causes for reutilization program waste and inefficiency included (1) unreliable excess property inventory data; (2) inadequate oversight and physical inventory control; and (3) outdated, nonintegrated excess inventory and supply management systems. Procurement of inventory in excess of requirements also was a significant contributing factor. Improved management of DOD's excess property could save taxpayers at least hundreds of millions of dollars annually.