Fifth, Air Force procedures for following up on shipments that contractors have not confirmed as received are ineffective. Sixth, the Air Force has not provided adequate oversight of shipments to contractors. Quarterly Shipment Reports Not Provided

To independently verify that contractors have accounted for all government-furnished material received, DOD policy requires inventory control points to provide to property administrators at the Defense Contract Management Agency quarterly status reports showing all shipments of Air Force material to contractors. We found that contractors had not always properly posted material receipts for these items into their records or into the inventory control points’ reporting systems. Conclusions

Inventory worth billions of dollars has been vulnerable to fraud, waste, and abuse because the Air Force either did not adhere to control procedures or did not establish effective procedures. Finally, the Air Force has not exercised the required extent of program oversight by collecting data on contractor shipment discrepancies and using it to assess practices for safeguarding shipped inventory; as a result, it cannot identify the extent and cause of contractor shipment discrepancies or take corrective action. Recommendations for Executive Action

To improve the control of inventory being shipped, we recommend that the Secretary of Defense direct the Secretary of the Air Force to undertake the following: Improve processes for providing contractor access to government- furnished material by listing specific stock numbers and quantities of material in repair contracts (as they are modified or newly written) that the inventory control points have agreed to furnish to contractors;   demonstrating that automated internal control systems for loading and screening stock numbers and quantities against contractor requisitions perform as designed; loading stock numbers and quantities that the inventory control points have agreed to furnish to contractors into the control systems manually until the automated systems have been shown to perform as designed; and requiring that waivers to loading stock numbers and quantities manually are adequately justified and documented based on cost- effective and/or mission-critical needs. High-Risk Series: Defense Inventory Management.
What GAO Found

GAO has considered Department of Defense (DOD) inventory management to be a high-risk area since 1990 because inventory management systems and procedures are ineffective. This report evaluates the Air Force's inventory control procedures for material shipped to contractors for repair or for use in repair. The Air Force and contractor personnel have not complied with DOD and Air Force inventory control procedures designed to safeguard material shipped to contractors, placing items worth billions of dollars at risk of fraud, waste, and abuse. The Air Force's three inventory control points have not restricted repair contractors' access to the specific items and quantities of government-furnished material needed to accomplish the contract. Quarterly reports on the status of shipped material have not been sent to property administration officials at the Defense Contract Management Agency. Contractors receiving shipped material have not (1) properly entered the receipt of shipments into their records and into the inventory control points' reporting systems or (2) routinely reported shipment discrepancies. Air Force procedures for following up on shipments that contractors have not confirmed as received are ineffective, leaving the status of the shipments uncertain. The Air Force has not provided adequate program oversight because it does not request and analyze data on contractor shipment discrepancies to identify their extent and cause so that corrective action may be taken.