DLA Has Taken Some Actions to Address Weaknesses in Its Excess Controlled Property Program, but Deficiencies Exist in Key Processes

		DLA Actions to Address Weaknesses in LESO Program

DLA has taken some steps to address previously 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. In addition, DLA is in the process of developing additional training on  LESO program policies and procedures, and is establishing  memorandums of understanding with federal law enforcement agencies  on the general terms and conditions of participating in the program,  including the restrictions on the transfer and sale of controlled property. First, 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’s internal controls for verifying and approving federal agency  applications and enrollment in the LESO program were not adequate to  prevent the approval of a fraudulent application to obtain excess  controlled property. Second, our independent testing 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. In less than a week after  submitting the requests, our fictitious agency was approved for the  transfer of over 100 controlled property items with a total estimated value  of about $1.2 million. 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. Overall, we concluded in our July 2017 report that DLA’s internal controls  did not provide reasonable assurance in preventing fraud. Therefore, we  made four recommendations for DLA to:  review and revise policy or procedures for verifying and approving federal agency applications and enrollment; ensure compliance that DLA Disposition Services on-site officials transferring controlled property verify that persons picking up items have valid identification and are authorized to pick up allocated property from the LESO program; issue guidance that requires DLA Disposition Services on-site officials to verify the type and quantity of approved items against the actual items being transferred prior to removal from the sites; and conduct a fraud risk assessment to design and implement a strategy with specific internal control activities to mitigate assessed fraud risks. Contacts and Acknowledgments

For questions about this statement, please contact Zina D. Merritt at (202)  512-5257 or merrittz@gao.gov or Wayne A. McElrath at (202) 512-2905  or mcelrathw@gao.gov.
Why GAO Did This Study

This testimony summarizes the information contained in GAO's July 2017 report, entitled DOD Excess Property: Enhanced Controls Needed for Access to Excess Controlled Property ( GAO-17-532 ).
merrittz@gao.gov or Wayne A. McElrath at (202) 512-2905 or mcelrathw@gao.gov .

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 . 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.