General Services Administration: Unauthorized Activity Codes Used to
Requisition New and Excess Government Property (Correspondence,
01/08/2001, GAO/GAO-01-221R).

As of June 2000, the General Services Administration (GSA) maintained 52
activity codes identified as unauthorized to requisition government
property. During the past 5 years, four of these codes were
inappropriately used to requisition approximately $3,000 in new and
excess government property. While this amount represents a small
percentage of total GSA requisitions made during the 5-year period,
existing safeguards are inadequate to prevent situations in which
unauthorized activity codes are inappropriately used to requisition
government property. GSA is in the process of tracing the various items.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-221R
     TITLE:  General Services Administration: Unauthorized Activity
	     Codes Used to Requisition New and Excess Government
	     Property
      DATE:  01/08/2001
   SUBJECT:  Inventory control systems
	     Internal controls
	     Logistics
	     Federal agency accounting systems
	     Data integrity
	     Federal procurement

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GAO-01-221R

GSA Unauthorized Activity Codes

United States General Accounting Office Washington, DC 20548

January 8, 2001 The Honorable Duncan L. Hunter House of Representatives

Subject: General Services Administration: Unauthorized Activity Codes Used
to Requisition New and Excess Government Property

Dear Mr. Hunter: This letter is part of our continuing effort to address
inventory management activities within the Department of Defense (DOD) as a
high- risk area. 1 We recently determined that the Army, Air Force, and Navy
used activity address codes 2 designated as unauthorized to requisition to
inappropriately requisition over $4 billion in new government property and
over $440 million in excess government property over the past 5 years. You
asked that we determine whether other federal agencies maintained activity
codes designated as unauthorized to requisition and, if so, whether any of
these codes were used to requisition new and excess government property. As
discussed with your office, this letter focuses on the General Services
Administration's (GSA) use of unauthorized activity codes.

Scope and Methodology

We interviewed GSA service point personnel who provided a list of GSA
activity codes identified as unauthorized to requisition. We provided the
codes to the Defense Automatic Addressing System Center and the Defense
Reutilization and Marketing Service to determine whether any had been used
to requisition new and excess government property from January 1995 through
June 2000. We then obtained

1 In 1990, we began a special effort to review and report on the federal
program areas we identified as high risk because of vulnerabilities to
fraud, waste, abuse, and mismanagement. This effort, supported by the Senate
Committee on Governmental Affairs and the House Committee on Government
Reform, resulted in a much- needed focus on problems that were costing the
government billions of dollars. We identified DOD's inventory management as
a high- risk area at that time because levels of unneeded inventory were too
high and systems for determining inventory requirements were inadequate. 2
Department of the Air Force: Unauthorized Activity Codes Used to Requisition
New and Excess DOD

Property (GAO- 01- 196R, Jan. 8, 2001); Department of the Navy: Unauthorized
Activity Codes Used to Requisition New and Excess DOD Property (GAO- 01-
206R, Jan. 8, 2001); Department of the Army: Unauthorized Activity Codes
Used to Requisition New DOD Property (GAO- 01- 85R, Dec. 6, 2000); and

Inventory Management: Better Controls Needed to Prevent Misuse of Excess DOD
Property (GAO/ OSI/ NSIAD- 00- 147, Apr. 28, 2000).

GAO- 01- 221R GSA Unauthorized Activity Codes Page 2 information about the
requisitioning activity associated with these codes from the

Defense Automatic Addressing System Center and the Defense Reutilization and
Marketing Service. We performed our investigative work from June 2000 to
September 2000 in accordance with investigative standards established by the
President's Council on Integrity and Efficiency. Our audit work was
conducted during the same time period and in accordance with generally
accepted government auditing standards.

Results in Brief

As of June 2000, GSA maintained 52 activity codes identified as unauthorized
to requisition government property. During the past 5 years, four of these
codes were inappropriately used to requisition approximately $3,000 in new
and excess government property. While this amount represents a small
percentage of total GSA requisitions made during the 5- year period,
existing safeguards are inadequate to prevent situations in which
unauthorized activity codes are inappropriately used to requisition
government property. As we recommended, GSA is in the process of tracing the
various items. However, it does not agree with our recommendation for
enhancing existing safeguards. We recommend that GSA assess the cost
effectiveness of enhancing existing safeguards before closing this matter.

Background

An activity address code is a distinct, six- position alphanumeric code that
provides a uniform method for controlling government assets and recording
the receipt and disposition of property. The first two characters of an
activity code identify the requisitioning service or agency. GSA is
responsible for activity codes that begin with a G, 0, 1, 2, 3, 4, 5, 6, 7,
8, or 9. 3 Federal Supply Service (FSS) guidelines 4 provide procedures for
establishing, changing, and terminating activity address codes.

The DOD Activity Address File is the automated master activity address code
file maintained for military activities, federal agencies, and contractors
by the Defense Automatic Addressing System Center. An activity within a
military service or federal agency that is assigned the responsibility of
controlling activity code data is known as the service point. The GSA
service point, located at the FSS Acquisition Operations and Electronic
Commerce Center in Arlington, Virginia, is responsible for assigning,
canceling, or changing civilian agency activity codes.

3 The only exceptions are codes that begin with 18. According to GSA, the
Postal Service is responsible for maintaining these codes. A Postal Service
official advised that the Postal Service does not create or maintain
activity codes that are unauthorized to requisition. 4 FSS- 19.10, Automated
Requisition Processing Systems Desk Guide, Aug. 1995.

GAO- 01- 221R GSA Unauthorized Activity Codes Page 3 According to a senior
GSA official, GSA activity codes that are unauthorized to

requisition government property begin with the letter “G.” 5 As
of June 2000, there were 52 such activity codes.

Unauthorized Requisitions Are Infrequent but Safeguards Are Needed

We obtained a list of the activity codes that GSA identified as unauthorized
to requisition. We provided these codes to the Defense Automatic Addressing
System Center and the Defense Reutilization and Marketing Service to
determine whether any had been used to requisition new and excess government
property. It was determined that of the 52 GSA activity codes, 4 had been
used to requisition $1,817 in new property and $1,250 in excess property 6
from January 1995 to June 2000. Although unauthorized requisitioning
activity was minimal, the Defense Automatic Addressing System Center and the
Defense Reutilization and Marketing Service had no safeguards to preclude
these codes from requisitioning property.

Conclusions and Recommendations for Executive Action

Unauthorized activity codes were used in four instances to inappropriately
requisition new and excess government property worth about $3,000 from
January 1995 through June 2000. Whether this condition is indicative of a
large- scale problem is unknown. However, existing GSA safeguards are
inadequate to prevent such situations from occurring. Accordingly, we
recommend that the Administrator of General Services

determine why the unauthorized activity codes were approved for
requisitioning property and whether the requisitions resulted in an
inappropriate transfer of government property and

assess the cost- effectiveness of enhancing GSA's existing safeguards to
prevent this situation from reoccurring.

Agency Comments and Our Evaluation

GSA provided oral comments on a draft of this letter and the data related to
the issues in our letter. GSA agreed with our first recommendation. The
agency has traced transaction activity associated with the new property
requisitions and is in the process of completing an investigation of the use
of unauthorized activity codes to requisition excess government property. As
for our second recommendation, GSA believes that the establishment of
additional safeguards is unnecessary because of

5 In addition, approximately 91, 000 other G category codes are related to
authorized government credit card requisitioning, according to a senior GSA
official. 6 These amounts represent the acquisition value of the property.

GAO- 01- 221R GSA Unauthorized Activity Codes Page 4 the low level of
questionable requisition activity associated with the unauthorized

codes. GSA stated that it plans no further expenditure of resources on this
issue and considers the matter closed. However, as discussed below, we still
believe there is a need to consider enhancing existing safeguards.

GSA stated that the four activity codes we identified as being used to
requisition new and excess government property were unauthorized to do so.
However, GSA believes that no inappropriate transfer of government property
occurred in these instances. Although the Defense Automatic Addressing
System Center attributed about $1,800 of the $3,000 discussed in the draft
letter to new property requisitions, GSA viewed the incidents as “free
issue” transactions. According to GSA, the Air Force, unbeknownst to
GSA, had used one of the codes to redistribute material among various Air
Force entities. However, while GSA described the Air Force's use of this
particular code as peculiar, it stated that there was no indication of an
inappropriate transfer of government property. GSA noted that the Air Force
Materiel Command has been apprised of this situation and is reviewing the
matter at this time. In addition, GSA deleted the code from the master
activity code file maintained by the Center. That action should avoid
unauthorized requisitions using that activity code.

According to a GSA analysis, the other activity code that requisitioned new
government property was used by one of its acquisition centers to replenish
stock using the Defense Logistics Agency as the supply source. This code
accommodated an infrequent situation where an automated system is not used.
A GSA official stated that someone had used this code in a fashion other
than for what it was intended and noted that if this type of activity
occurred more often, it would require a system edit. However, while it was
unusual to use this code in this fashion, GSA does not view it as an
inappropriate transfer of government property. While this may be the case,
system vulnerability does exist that could be corrected by an edit.
Therefore, we have modified our recommendation to state that GSA should
assess the costeffectiveness of making such an edit.

As for the activity codes used to requisition excess government property,
GSA acknowledged that this activity was unusual and is investigating it. The
GSA officials also noted, however, that there is no indication at this time
of an inappropriate transfer of excess government property.

- - - - As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this letter until 30 days after
the letter's date. At that time, we will send copies of this letter to
interested congressional committees, the Administrator of General Services,
the Office of the Secretary of Defense, and the

GAO- 01- 221R GSA Unauthorized Activity Codes Page 5 Director of the Defense
Logistics Agency. The letter will then also be available on

GAO's homepage at www. gao. gov. If you have any questions, please call
Robert H. Hast at (202) 512- 7455 or David R. Warren at (202) 512- 8412.
John Ryan, Richard Newbold, Brian Chan, James Loschiavo, Marc Schwartz, and
David Epstein made key contributions to this investigation and letter.

Sincerely yours, Robert H. Hast David R. Warren Managing Director Director,
Defense Capabilities Office of Special Investigations and Management

(600771)
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