Defense Inventory: Control Weaknesses Leave Restricted and	 
Hazardous Excess Property Vulnerable to Improper Use, Loss, and  
Theft (25-JAN-02, GAO-02-75).					 
                                                                 
The Defense Department (DOD) encourages the reuse of excess	 
property, including vehicles, weapons, hand tools, lumber,	 
medical equipment, and furniture. DOD components, civilian	 
federal agencies, and "special programs" have equal priority and 
first rights to excess property. This report discusses excess	 
property issued to three of 12 special programs--the Military	 
Affiliate Radio System, the Civil Air Patrol, and the 12th	 
Congressional Regional Equipment Center. Between 1995 and 2000,  
these programs obtained $34 million worth of items that they were
not eligible to receive. The three programs were able to obtain  
the items because the DOD facilities that store the property are 
not required to verify which items the programs are eligible to  
receive, and because program officials do not consistently follow
applicable guidelines. GAO also noted that the programs' lists of
property they are allowed to obtain are not comprehensive because
the lists exclude mission-related items similar to those already 
permitted. Furthermore, these programs did not have reliable	 
records for more than three-quarters of their excess property.	 
Together, the three special programs obtained more than 80,000	 
hazardous supplies. In many cases, program officials were unaware
that their programs had received such items. GAO found similar	 
problems in other special programs. This lack of accountability  
increases the risk of mishandling excess property and the	 
potential for waste, fraud, and abuse.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-75						        
    ACCNO:   A02704						        
  TITLE:     Defense Inventory: Control Weaknesses Leave Restricted   
and Hazardous Excess Property Vulnerable to Improper Use, Loss,  
and Theft							 
     DATE:   01/25/2002 
  SUBJECT:   Accountability					 
	     Inventory control					 
	     Military inventories				 
	     Military materiel					 
	     Procurement policy 				 
	     Procurement records				 
	     Surplus property					 
	     12th Congressional Regional Equipment		 
	     Center						 
                                                                 
	     Civil Air Patrol					 
	     DOD Humanitarian Assistance Program		 
	     Military Affiliate Radio System			 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-02-75
     
United States General Accounting Office

GAO

Report to Congressional Requesters

January 2002

DEFENSE INVENTORY

Control Weaknesses Leave Restricted and Hazardous Excess Property Vulnerable
to Improper Use, Loss, and Theft

GAO-02-75

Contents

    Letter                                                                             1

                                          Results in Brief                             2
                                             Background                                3
                Special Programs Obtained Property They Should Not Have

                                              Received                                 6
                               Property Accountability Is Inadequate                  18
                                            Conclusions                               24
                                Recommendations for Executive Action                  24
                                 Agency Comments and Our Evaluation                   26
  Appendix I                           Scope and Methodology

  Appendix II                Descriptions of the Three Special Programs

Appendix III Location of Defense Reutilization and Marketing Offices

Appendix  IV Processes  Used by the  Department of  Defense and  Two Special
Programs to Track Excess Property

Appendix V Comments From the Department of Defense

Appendix VI Comments From the 12th Congressional Region Equipment Center 44

                 Appendix VII GAO Staff Acknowledgments 46

                          Related GAO Products 47

Tables

Table 1: Some Special Programs Obtained Ineligible Hazardous Property

Table 2: All Three Special Programs Obtained Ineligible Restricted Property

Table 3:  Number of  Ineligible Restricted and Hazardous  Supplies Issued to
Special Programs (1995-2000)

Table 4: Ineligible Property Obtained by the Three Special Programs That Did
Not Appear to Be Mission Related

Table  5:  Accountability  of Excess  Property  Issued  to Special  Programs
(1995-2000)

Table 6:  Accountability of  Restricted Supplies Issued  to Special Programs
(1995-2000)

Table  7: Accountability  of Hazardous  Supplies Issued to  Special Programs
(1995-2000)

Table 8: Military Affiliate Radio System Locations and Membership

                                     10

                                     10

                                     11

                                     17

                                     18

                                     22

                                   22 32

Figures

Figure 1: Department of Defense Disposal Process 5

Figure 2: Number (Percentage) of Eligible and Ineligible Excess Property
Orders Received by Special Programs (1995-2000) 7

Figure 3: Value (Percentage) of Eligible and Ineligible Excess Property
Acquired by Special Programs (1995-2000) 8

Figure 4: Number (Percentage) of Eligible and Ineligible Excess Property
Supplies Acquired by Special Programs (1995-2000) 9

Figure 5: Examples of Restricted Items Not in the Special Programs' Property
Databases 23 Figure 6: Defense Reutilization and Marketing Offices in the
Western Hemisphere and the Pacific Zone 35 Figure 7: Defense Reutilization
and Marketing Offices in the Southeast and Asia Zones and the Pacific Zone
36 Figure 8: Defense Reutilization and Marketing Offices in the Atlantic,
Central European, and Mediterranean Zones 37

United States General Accounting Office Washington, DC 20548

January 25, 2002

The Honorable Tom Harkin United States Senate

The Honorable Nick Lampson House of Representatives

Each year over the past 5 years, the Department of Defense has accumulated
billions of dollars in excess property.1 This property covers the entire
range of materials, equipment, and articles the Department uses, including
vehicles, weapons, hand tools, lumber, medical equipment, and furniture. The
Department is authorized to dispose of excess property and encourages the
reuse of excess property to the maximum extent possible. Defense components,
civilian federal agencies, and 12 programs have equal priority and first
rights to excess property. The 12 programs are referred to by the Department
and in this report as "special programs." Property not reused by the federal
agencies or the special programs is made available to state and local
governments, nonprofit organizations, and the public.

We have previously reported on the potential for fraud, waste, abuse, and
mismanagement of Defense inventory and have identified the Department's
inventory management as a high-risk area.2 Because of continuing concerns
about the Department's management of its excess inventory in general, you
asked us to further investigate this area. As agreed with your offices, this
report addresses issues involving the special programs. Specifically, it
focuses on excess property issued to 3 of the 12 special programs-the
Military Affiliate Radio System,3 the Civil Air Patrol, and the 12th
Congressional Regional Equipment Center.4 We judgmentally

1 The Department defines this as property that a military service or Defense
agency no longer needs. The Department lists the value of its excess
property as the cost of items when last purchased. This probably overstates
the true value of items because they are not all new. The figures cited in
this report are the Department's.

2 Inventory Management: Better Controls Needed to Prevent Misuse of Excess
DOD Property (GAO/OSI/NSIAD-00-147, Apr. 28, 2000) and High-Risk Series: An
Update (GAO-01-263, Jan. 2001).

3 The Military Affiliate Radio System consists of Army, Navy, and Air Force
components.

4 This program is sometimes referred to as the Cambria Regional Equipment
Center.

Results in Brief

selected these three programs because they (1) were found by our Office of
Special Investigations to have obtained and used some excess property that
was not consistent with their mission, (2) had readily available information
about the excess property they received, (3) store their data in relatively
few locations, and (4) are subject exclusively to Department of Defense
oversight.

Our objectives were to determine whether these three programs (1) were
acquiring property that they were not eligible to receive and, if so, how
much, and (2) could account for the property they received, as required by
the Department's or their own policies and procedures. Our program selection
process, scope, and methodology are described in greater detail in appendix
I. The three programs are described in appendix II.

Between 1995 and 2000, the three special programs obtained items that they
were not eligible to receive with a total reported value of $34 million.
Many of these included items whose use, storage, and disposal were
restricted because of military technology/applications or items hazardous to
public health and safety. Further, special program officials were sometimes
unaware of the items' nature. Additionally, the Department of Defense may
have incurred unnecessary costs to ship ineligible property to one special
program. The three special programs were able to obtain the items because
the Defense facilities that store the property are not required to verify
which items the programs are eligible to receive, and because program
officials do not consistently follow applicable guidelines. We also noted
that the programs' lists of property they are allowed to obtain are not
comprehensive because the lists exclude mission-related items similar to
those already permitted. The problems we identified were not limited to the
three special programs. We found similar problems associated with the other
programs.

The Army component of the Military Affiliate Radio System could account for
all of the property it obtained. Conversely, the Civil Air Patrol and the
Air Force component of the Military Affiliate Radio System could not
properly account for most of the excess property they obtained, including
about 17,000 supplies with military applications or trade restrictions and
about 17,000 hazardous supplies. (The 12th Congressional Regional Equipment
Center is not required to track items because it is given title to the
property.) Indeed, these three programs did not have reliable records for
over three-quarters of their excess property. The Navy Military Affiliate
Radio System could account for most of its items, although it did not have
records for more than 500 supplies with military applications or trade

Background

restrictions. Together, the three special programs obtained over 80,000
hazardous supplies. In many cases, program officials were unaware that their
programs had received such items. We also found similar problems in other
special programs. This lack of accountability increases the risk of
mishandling excess property and the potential for waste, fraud, and abuse.

We are making programwide as well as program-specific recommendations aimed
at enhancing internal controls over the Department's disposal of its excess
property and the subsequent accountability for the property. In commenting
on a draft of this report, the Department of Defense generally concurred
with our recommendations.

Responsibility for disposal of excess Department of Defense property has
been delegated to the Defense Reutilization and Marketing Service, which is
part of the Defense Logistics Agency. When a military service or Defense
agency organization has property it no longer needs, it turns the property
over to a Defense Reutilization and Marketing Service field office-or
reutilization facility. At the time we concluded our review, there were 97
reutilization facilities, located in 41 states and territories and 13
countries. Appendix III shows the locations of the 97 Defense reutilization
facilities.

The property in these reutilization facilities changes daily and includes a
myriad of items, ranging from air conditioners to automobiles, tents to
typewriters, and computers to couches. Items5 are made available for reuse
according to established priorities. First priority is given to federal
agencies-including other Defense activities-and 12 special programs that
have equal status with Department activities. The 12 special programs are:

* Department of Defense Humanitarian Assistance Program;

* Law enforcement agencies;

* 12th Congressional Regional Equipment Center;

* Department of Defense or service museums;

* Academic institutions and nonprofit educational organizations;

* National Guard units;

5 Here and throughout this report, "items" refers to the number of
containers of items issued. For example, if canteens are issued by the box,
1 box of 50 canteens constitutes 1 item. If cable is issued in 1,000-foot
lengths, 12,000 feet of cable constitute 12 items.

* Senior Reserve Officer Training Corps units;

* Morale, welfare, and recreation activities and services;

* Military Affiliate Radio System;

* Civil Air Patrol;

* Department of Defense contractors; and

* Foreign governments and international organizations.

The Military Affiliate Radio System is run by licensed amateur radio
operators whose primary mission is to augment existing communications during
disasters and handle personal communications for the Armed Forces and the
U.S. government civilian personnel stationed throughout the world. It is
composed of separate Army, Navy (including the Marine Corps and the Coast
Guard), and Air Force components, all managed and funded separately, and the
Joint Staff Directorate for Command, Control, Communications, and Computer
Systems provides Department oversight. The Civil Air Patrol is the civilian
auxiliary of the Air Force and is overseen by the Civil Air Patrol-Air
Force, a unit of the Air Education and Training Command. Its mission
includes emergency services such as search and rescue, disaster relief, and
counterdrug operations and the promotion of aerospace education in schools.
The 12th Congressional Regional Equipment Center was established in 1992 as
a demonstration project to help municipalities and nonprofit organizations
in western Pennsylvania complete infrastructure projects that would
otherwise be too costly to undertake. The Center acquires excess heavy
equipment, and according to Center officials, rents it at below-market
rates.

Excess property items are dispensed on a first-come, first-served basis to
those activities with the same reuse priority. In fiscal year 2000, the
Department of Defense reused excess property valued at $1.9 billion, and
other federal agencies reused excess property valued at $2.5 billion.
Property that is not reused within the federal government is declared
surplus and is made available first to state and local governments and
nonprofit organizations. In fiscal year 2000, property valued at $334
million was donated to state and local governments and others. Surplus
material that remains after the donation cycle is sold to the public, and
residual property is sent to a landfill or another appropriate site for
final disposal. The disposal process is depicted in figure 1.

Figure 1: Department of Defense Disposal Process

Source: Our analysis of Defense Reutilization and Marketing Service data.

Defense reutilization facilities accept most items, including those that
pose health and environmental risks and those built for military purposes.6
Hazardous property7 may be reused, but its transportation, storage, use, and
disposal are subject to federal and state laws and regulations. Examples of
hazardous property include motor oil, paint, and freon from air
conditioners. Department of Defense policy also calls for identifying and
demilitarizing8 or imposing trade limits on items that have a significant
military technology/application before they are released from the
Department's control. Trade security controls are designed to preclude the
transfer of items with a significant military technology/application to any
entity whose interests are counter to those of the United States. Examples

6 Certain items, such as classified material and ammunition, are disposed of
by other means.

7 The Department defines this as any substance that may be hazardous to
human health and the environment and whose use or disposal is regulated by
federal and state safety and environmental laws.

8 Demilitarization is the act of destroying the military offensive or
defensive advantages inherent in certain types of equipment or material.

of items with a demilitarization requirement include tanks, some electronics
equipment, military aircraft, night-vision devices, radio sets, and optical
sights. Examples of items with a trade security requirement include
binoculars, electronic digital counters, power supply units, computer
equipment, and test equipment such as oscilloscopes and multimeters.
Department officials estimate that of the 14 million active and inactive
items in the Department's supply system, about 140,000 (1 percent) have
hazardous characteristics and 3.6 million (26 percent) have demilitarization
and/or trade security control requirements.

In this report, items referred to as "eligible" and "ineligible" are items
that the special programs are allowed and not allowed to have, respectively.
"Restricted" items are those with a demilitarization requirement and/or
trade security control.

Between 1995 and 2000, the three special programs obtained items valued at
millions of dollars that they were not eligible to receive. Consequently,
this property was unavailable for reuse by federal agencies or other special
programs. Moreover, a significant portion of the ineligible supplies were
restricted or hazardous items and the special program officials did not
always know the restriction or hazardous nature of these items. As our other
investigations have shown, these problems are not limited to the three
special programs. These problems are caused both by the Department that does
not require its reutilization facility staff to verify a requester's
eligibility to receive an item and by the special program officials who do
not always follow applicable guidelines concerning the types of items they
can have. We also found that the programs' lists of eligible property were
not comprehensive and did not include other mission-related items that were
similar to items already permitted.

Special Programs Obtained Property They Should Not Have Received

Three Special Programs During the study period, the Military Affiliate Radio
System, the Civil Air Received $34 Million of Patrol, and the 12th
Congressional Regional Equipment Center staff Ineligible Material-Some
submitted more than 32,000 orders (see fig. 2) valued at $171 million (see
Restricted or Hazardous fig. 3). Of these, more than 4,300 (13 percent) were
for ineligible property

valued at about $34 million (20 percent). All of the orders represented 2.2
million supplies, of which a half-million (24 percent) were ineligible (see
fig. 4).

Figure  2: Number  (Percentage) of  Eligible and Ineligible  Excess Property
Orders Received by Special Programs (1995-2000)

Source: Our analysis of Defense Reutilization and Marketing Service data.

Figure 3: Value (Percentage) of Eligible and Ineligible Excess Property
Acquired by Special Programs (1995-2000)

Note: Totals may not add due to rounding. Source: Our analysis of Defense
Reutilization and Marketing Service data.

Figure  4: Number  (Percentage) of  Eligible and Ineligible  Excess Property
Supplies Acquired by Special Programs (1995-2000)

Source: Our analysis of Defense Reutilization and Marketing Service data.

Some  Program Officials   All of  the special  programs  received restricted
and/or hazardous  excess Were Unaware  of property, although  not all of the
program officials  were aware that  their Receiving Ineligible  programs had
obtained the  items. Program officials  at the three Military  Hazardous and
Restricted  Affiliate Radio  System programs  and at the  12th Congressional
Regional

Equipment Center were unaware that they had received restricted
items,Property and Air Force and Navy Affiliate Radio System officials were
unaware that they had received hazardous items (see tables 1 and 2).

    Table 1: Some Special Programs Obtained Ineligible Hazardous Property
                              Special program

Did programs/members obtain hazardous items they were not eligible to have?

Were program officials aware members had these items?

Military Affiliate Radio System

Army No N/A

                                Navy Yes No

Air Force Yes No

            Civil Air Patrol Yes Yes 12th Congressional Regional

a

Equipment Center

Yes Yes

a  Ineligible  hazardous property  was determined  in consultation  with the
Defense Logistics Agency. Source:  Our analysis of Defense Reutilization and
Marketing Service data.

Table 2: All Three Special Programs Obtained Ineligible Restricted Property

                              Special program

Did programs/members obtain restricted items they were not eligible to have?

Were program officials aware members had these items?

Military Affiliate Radio System

Army Yes No

Navy Yes No

Air Force Yes No

Civil Air Patrol Yes Yes

12th Congressional Regional Yes No

a

Equipment Center

a Ineligible restricted property was determined in consultation with the
Defense Logistics Agency.

Source: Our analysis of Defense Reutilization and Marketing Service data.

The three programs obtained almost 25,000 ineligible hazardous supplies such
as batteries, chemicals, computer equipment, and oils. In addition, about
3,800 of the ineligible supplies were restricted.9 The 12th

9 One program official questioned whether some items classified as
restricted were indeed restricted. We did not verify the accuracy of the
restricted or the hazardous codes reported by the Department because the
Department expects the recipients of these items to handle them as if they
were.

Congressional Regional Equipment Center is the only program that the
Department does not permit to have restricted items because its mission does
not require them. Center officials said that they knew of this exclusion but
were unaware that they had received more than 500 such supplies during the
study period. The number of ineligible, restricted, and hazardous supplies
obtained by each program are shown in table 3.

Table 3:  Number of  Ineligible Restricted and Hazardous  Supplies Issued to
Special Programs (1995-2000)

                            Ineligible suppliesa

Special program Restricted Hazardous

Military Affiliate Radio System

Army 7

Navy 268

a Four ineligible
supplies,   which
were  obtained by
the Navy Military
Affiliate   Radio
System, were both
restricted and hazardous. These supplies are reported in this table as both.

b The number  of ineligible restricted and hazardous supplies was determined
in consultation with the Defense Logistics Agency.

Source: Our analysis of Defense Reutilization and Marketing Service data.

The Department May Have Incurred Unnecessary Cost to Ship Excess Property

During 1995-2000, the Department may have incurred unnecessary cost to ship
915 orders of excess property to the 12th Congressional Regional Equipment
Center. According to both Department of Defense policy and the 1993
agreement between the Department and the Center, the Center is responsible
for all shipment costs.10 However, in 1995 the Department began an
experimental project at several installations to keep excess property in
place to minimize transportation and handling costs (as opposed to sending
the property first to a reutilization facility, which is normally the
procedure). No limitation was placed on the Center's participation in the
program. Property that was subsequently reused was shipped to all
recipients, including the Center, at the Department's expense. It is not
clear whether the agreement should have precluded the Center from
participating in this project. Defense officials estimate that the
Department spent $46,000 to ship items from reutilization facilities as

10 Defense Reutilization and Marketing Service Instruction 4160.14, vol.
III, ch. 8 (Jan. 4, 2000).

far away as California, Washington, and Texas to the Center's headquarters
in Blairsville, Pennsylvania. Almost one-third of these orders-valued at
$521,000-were for ineligible items and estimated shipping costs exceeded
$15,000.

Problems Had Been Previously Identified in Other Special Programs

Other special programs are also obtaining excess property that they are not
allowed to receive. According to several recent investigations conducted by
our Office of Special Investigations:

During 1998 and 1999, a National Guard unit in Florida obtained thousands of
dollars of excess property without prior approval from the appropriate
office as required.11 Furthermore, the unit used an invalid activity address
code12 to acquire the property.

The president of a construction company obtained excess property under false
pretense by purporting to be the curator of a military museum. Some of the
property was used on company projects. In November 1999, 36 military
vehicles (including tanks and armored personnel carriers) and weapons
(including howitzers and a rocket launcher) were removed from the
individual's custody. In November 1999, his company was fined $10,000, and
in February 2000, he was sentenced to probation and community service.

Defense contractors used invalid activity codes and expired contracts to
obtain property valued at over $6 million of property without proper
authorization.13 One contractor obtained 256,648 supplies from reutilization
facilities, but could account for only 54,561 of them. The 202,087 (79
percent of the total) missing supplies included raw materials, equipment,
and clothing. Some of the property had been reported stolen.

An activity code assigned to the Department of Defense Humanitarian
Assistance Program was used to order about $12 million of excess

11 Inventory Management (GAO/OSI/NSIAD-00-147, Apr. 28, 2000).

12 An activity address  code is a unique six-position alphanumeric code that
identifies a  specific activity or account  authorized to receive Department
of Defense material.

13 Inventory Management (GAO/OSI/NSIAD-00-147, Apr. 28, 2000).

property after the code was invalidated.14 This matter is currently under
investigation, and we plan to report on this in the future.

A number of law enforcement agency program participants are currently under
investigation for their alleged role in the improper acquisition of excess
property according to Defense investigative agencies. In addition, we
recently determined that a number of activity codes remained active after
they should have been deleted and that law enforcement agencies obtained
more excess property than authorized. We are also investigating
inconsistencies in the type of excess property authorized for issuance to
law enforcement agencies and plan to report on this in the future.

In May and June of 2000, a number of law enforcement agency program
participants received excess property that was not authorized on 16
different occasions. The approving program official was not aware that
additional property had been issued until we requested a transaction history
comparing the quantity of property approved to the property acquired.

As was the case with the three special programs, these other programs were
able to obtain ineligible property because the Department did not exercise
adequate oversight. To eliminate weaknesses cited in our recent reports,15
the Deputy Under Secretary of Defense for Logistics and Materiel Readiness
directed the Defense Logistics Agency to review how it establishes and
controls activity codes. The Agency plans to redesign its activity code
database to take advantage of modern electronic commerce methods. This
review began in February 2001, and it is expected to be completed in the
summer or fall of 2002.

As part of its redesign effort, the Agency is considering establishing
purpose codes to identify property an organization is eligible to obtain.
Officials involved in this effort believe that the accountable program
officers for the 12 special programs could use these specific codes to
verify their eligibility to obtain excess property.

14 Concerns Raised About Use of Unreconciled Activity Codes to Requisition
New and Excess Government Property (GAO-01-86R, Dec. 6, 2000).

15 A list of related GAO products appears at the end of this report.

Control Weaknesses Allowed Special Programs to Obtain Ineligible Items

Reutilization Facility Staff Is Not Required to Review Property Requests for
Eligibility of Items

Special Program Officials Did Not Follow Guidelines

The three special programs obtained ineligible excess property partly
because of internal control weaknesses at the Defense reutilization
facilities, which are not required to determine whether a program is allowed
to have a requested item, and partly because program officials do not
consistently follow guidelines when approving requests for property.

Current Department policy16 does not require reutilization facility staff to
scrutinize property requests to determine whether a requester is eligible to
receive a particular type of property. Defense reutilization facility staff
is required to verify only that (1) individuals requesting and picking up
property are authorized representatives of a valid receiving organization
and (2) the property request form is signed by an accountable program
officer. Before releasing the property, reutilization facility staff also
verifies that the item on the request form matches the item that is being
picked up.

Special program officials did not follow applicable guidelines for obtaining
excess property. Policies and procedures established for the programs were
supposed to prevent ineligible requests from reaching the reutilization
facilities. However, requests for ineligible property were numerous and
widespread.

Military Affiliate Radio System. Although each of the three Military
Affiliate Radio Systems obtained items it was not allowed to have, officials
responsible for approving property requests said they were unaware that
their members had received any unauthorized items. However, almost one out
of five requests approved by the three systems was for property not in the
18 authorized federal supply classes17 (see fig. 4). The three systems also
obtained over 9,000 unauthorized restricted or hazardous supplies, even
though all three have a two-tiered review and approval process for property
requests to verify, among other things, that the requested item is within
the authorized federal supply classes. The Air Force and Navy Systems have
issued guidance allowing their members to obtain property outside the
authorized federal supply classes on a case-by-case basis and

16 Defense Reutilization and Marketing Service Instruction 4160.14, vol.
III, ch. 4 (Jan. 4, 2000).

17 Prior to July 1, 1997, the number of authorized federal supply classes
was 54. The Department assigns a federal supply class to items it requires
on a regular basis. Each of the 639 supply classes covers a relatively
homogeneous group of items with respect to their physical or performance
characteristics.

when properly justified. The Air Force requires this justification in
writing. The Army System is stricter and does not allow its members to have
items outside of the authorized federal supply classes.

In their response to a draft of this report, Army System officials provided
another list of authorized federal supply classes that they said was used to
approve excess property requests. This list was in effect from October 22,
1996, to June 30, 1997. This 8-month time period is also covered by guidance
issued by the Department that contains a different, more restrictive set of
authorized federal supply classes. Using the Army System's list, 11 orders
(not 21) with ineligible federal supply classes were approved. These were
valued at $14,000 (down from $128,000) and represented 30 supplies (down
from 48). According to a Department official, when Department and program
guidance conflict, Department guidance is followed.

Civil Air Patrol. According to Air Force and Patrol officials, very few
written requests for items outside of the 97 allowed federal supply classes
were submitted and approved by the Air Force during the 5-year study period.
Our analysis of Department records showed that during this period, the
Patrol received 1,720 orders for 94,000 supplies (valued at $8.1 million)
that were not in the eligible federal supply classes. Civil Air Patrol and
Air Force policies18 differ on what must be done to obtain an item not in
the eligible federal supply classes. A Civil Air Patrol regulation states
that a request for an item not in the eligible federal supply classes may be
approved by the Air Force regional director for logistics if a valid need
for that item exists. Patrol officials stated that the list of eligible
federal supply classes is intended to be a guide, not a definitive list.
However, the Air Force instruction states that requests for items outside of
the allowed federal supply classes are approved on a case-by-case basis and
require written justification, which should be kept for 1 year. We asked for
copies of justification letters that had been submitted for ineligible
items; however, Civil Air Patrol and Air Force officials could not locate
any and could only recall receiving a few justification letters. According
to an Air Force official who oversees Patrol operations, in cases where a
Patrol regulation differs from an Air Force regulation, the Air Force
regulation is followed.

18 Civil Air Patrol-Air  Force Regulation 67-2 (June 15, 1990) and Civil Air
Patrol Regulation 67-1(E) (Aug. 15, 2000).

12th Congressional Regional Equipment Center. During the study period, the
Center staff submitted to Defense reutilization facilities almost 1,200
orders (for 382,000 supplies) valued at $5.1 million that were not included
in its agreement with the Defense Logistics Agency. Center officials stated
that they were aware the orders were for ineligible items but approved the
requests on the assumption that the reutilization facilities would reject
any that were deemed inappropriate. According to Center officials, fewer
than five property requests from 1995 to 2000 were rejected by the
reutilization facilities because of the type of property involved. In one
instance, the only one that officials could recall, the ineligible property
included office supplies, parachute cords, and computer equipment.

The 12th Congressional Regional Equipment Center does not have to obtain
Department approval before submitting a property request to the
reutilization facilities, unless the item is not covered by its agreement
with the Defense Logistics Agency. In that event, according to the Defense
Logistics Agency, the Center is required to submit a written request to the
Agency, but has rarely done so. (In contrast, the Civil Air Patrol and the
Military Affiliate Radio System must have all their requests cleared by a
Department of Defense official.) As a result, the Defense reutilization
facilities provide the only consistent external oversight of the Center's
property requests. According to Defense Logistics Agency officials, it is
not the role of the reutilization facility staff to determine whether a
property request is appropriate, although a couple of times a year the
Agency is contacted by a reutilization facility clerk questioning the
appropriateness of a particular property request submitted by the Center.
However, the Agency maintains that this responsibility resides with the
accountable program officer, who, in the case of the Center, is a Center
employee.

Lists of Eligible Items Do Not Accurately Reflect the Special Programs'
Needs

Department and program guidance allows the Military Affiliate Radio System,
the Civil Air Patrol, and the 12th Congressional Regional Equipment Center
only to obtain excess property that supports their respective missions.
Program officials, in collaboration with the Department of Defense, have
compiled a list of federal supply classes for each program that contains
items that members may obtain. However, with the assistance of Department
officials, we reviewed these lists and determined that they are not
comprehensive and therefore do not accurately reflect the programs'
missions. Some ineligible property seems to be mission-related in that it is
similar to property the programs are eligible to receive. For example, 71
percent ($14.6 million) of the $20.5 million in ineligible property that the
three Military Affiliate Radio Systems

obtained consisted of communication items and electrical or electronic
components. Similarly, the Civil Air Patrol obtained more than $800,000 in
communication items, and the 12th Congressional Regional Equipment Center
obtained about $675,000 in metal that was made into various shapes,
including sheets, I-beams, and rods.

There were also instances where the ineligible property did not appear to be
mission related (see table 4).

Table 4: Ineligible Property Obtained by the Three Special Programs That Did
Not Appear to Be Mission Related

Military Affiliate Radio
Systema Civil Air Patrol

12th Congressional Regional Equipment Center

                 Trucks Combat headsets Passenger vehicles

Pumps and compressors Sewage treatment equipment

Food preparation and serving equipment

Air conditioning and air  circulating equipment Computer hardware, including
monitors,  printers,   and  central  processing   units  Computer  hardware,
including monitors and central processing units

    Special purpose clothing Laundry equipment Special purpose clothing

Maintenance and repair shop equipment

Diesel engines and power transmission equipment

Office supplies Photographic supplies Television sets Photographic supplies

Furniture Optical sighting equipment Furniture

Hand tools Camouflage netting Radios

Demolition material Medical and dental instruments

aThe Army Affiliate Radio System did not obtain any of the items listed in
this column.

Source: Department and GAO review of approved federal supply classes.

The 1993 agreement between the 12th Congressional Regional Equipment Center
and the Defense Logistics Agency has been amended several times to increase
the quantities of heavy equipment the Center may acquire, but the types of
eligible items have only changed once since 1993. In November 1996, eight
new federal supply classes were added and two classes were eliminated from
the original list of eligible items.

Besides heavy equipment, the Center is allowed to obtain ancillary equipment
and supplies (e.g., oil, antifreeze, and repair parts). In addition, the
Center is to only request property that is necessary for its operation. No
guidance has been issued to identify all the items covered by the agreement.
Similarly, the agreement does not address limits on the number

Property Accountability Is Inadequate

of ancillary items the Center can have. As a result, the Center was able to
acquire a large number of eligible supplies, including more than 20,000 hand
tools and almost 900 pieces of firefighting equipment. Defense Logistics
Agency officials agreed that these quantities probably exceeded what the
Center is required to sustain its operations.

Two of the three Military Affiliate Radio System programs and the Civil Air
Patrol maintain poor accountability over the excess property they have
acquired, including restricted and hazardous items. (The Department does not
require the 12th Congressional Regional Equipment Center to track received
excess property because it is given title to the property.)19 This lack of
accountability increases the property's vulnerability to misuse, loss, and
theft. We compared the property the Department recorded issuing to the
special programs with the property recorded in the programs' databases and
found that the databases had a significant number of missing records (see
table 5). The Civil Air Patrol, for example, could not account for 98
percent of the excess property supplies (77 percent based on value) it had
obtained from the Defense reutilization facilities.

    Table 5: Accountability of Excess Property Issued to Special Programs
                                (1995-2000)

                            Dollars in millions

                        In database Not in database

Special program 
Supplies (percent)

Value (percent)

Supplies (percent)

Value (percent)

                      Military Affiliate Radio System

Source: Our
analysis of
Defense
Reutilization and
Marketing Service
and program data.

19 Under the
agreement between
the Defense
Logistics Agency
and the Center,
the Agency can request the return of any property covered by the agreement,
at which time title would revert to the Agency.

Military Affiliate Radio System

On the basis of annual inventories, officials at the Army and Air Force
Affiliate Radio System programs believed that most of their excess property
could be accounted for.20 We found that the Army Affiliate Radio System
could account for all of the excess supplies the Defense reutilization
facilities reported releasing to its members. Conversely, the Air Force
Affiliate Radio System could not account for 87 percent of its excess
supplies (31 percent based on value). We also judgmentally sampled items
obtained by the Navy Affiliate Radio System and asked that the program's
regional officials search their local databases for records of the items.
The officials could not account for 12 percent of the supplies (33 percent
based on value) in our sample; however, more than three-quarters of the
restricted supplies the program had obtained were unaccounted for (see table
6). These included radio and television equipment, batteries, measuring and
test instruments, and computer equipment.

                              Civil Air Patrol

In accordance with Air Force supply policy, the Civil Air Patrol is required
to track nonexpendable property, that is, items that can be reused. However,
we could not account for most of the more than 28,000 nonexpendable supplies
the Patrol acquired from the Defense reutilization facilities. Items we
could not locate in the property database included radio and television
equipment, office furniture, and special purpose clothing. More than half of
the supplies were special purpose clothing items such as cold weather
clothing and flyers' helmets, jackets, and coveralls. Patrol officials
explained that a majority of the clothing was in poor condition, was not
reusable, and therefore did not require tracking. However, we found no
evidence to suggest that Patrol officials considered an item's condition
when deciding if it should be tracked.21 Air Force supply policies do allow
senior officials some discretion on what property to track, and we believe
linking this decision to an item's condition is reasonable, when accompanied
by a record of the decision.

20 According to Army regulation, the Army Affiliate Radio System is required
to retain excess property records for 2 years after an item has been
disposed of, transferred to another member, or returned to a Defense
reutilization facility. This reduced the number of items that should have
been tracked from 5,986 to 127.

21 Some of this property is vulnerable to misuse. In one recent case, the
wing vice commander of a Civil Air Patrol wing fraudulently obtained excess
property with an acquisition value of over $450,000 and subsequently sold
the property for personal gain. The case was presented for prosecution in
1999, and the vice commander pled guilty to converting to his own use and
selling government property.

Based on a recommendation by the Department of Defense Inspector General's
Office, beginning on January 1, 2002, the Patrol will track only those
items, excess or otherwise, valued at $2,500 or more. 22 While we agree a
dollar threshold is an important factor to consider in determining which
items should be tracked, other factors should not be ignored. For example,
Air Force policy requires pilferable items to be tracked, regardless of
their value, because of their demand in the civilian economy. The Patrol
obtained 5,500 expendable, pilferable supplies during the study period, such
as hand tools, communications and electronic equipment, and vehicle
equipment and parts. Tracking nonexpendable and expendable restricted and
hazardous items, regardless of their value, also is prudent.

The Civil Air Patrol's ability to manage its property, including that
obtained from reutilization facilities, has been impaired by its information
systems. The Patrol does not include national stock numbers23 or indicate
whether an item is restricted or hazardous in its property database. As a
result, the Patrol cannot readily determine the status of this property, nor
can it ensure its proper handling. The Air Force has directed the Patrol to
improve how it accounts for excess property, and the Patrol is reviewing
different approaches.

12th Congressional Regional Equipment Center

Although the Center is not required to track excess property, we found that
it had disposed of some property in a manner that was inconsistent with the
terms of its agreement with the Defense Logistics Agency. The Center is only
supposed to obtain property that it needs for its operations and should not
sell property without the permission and knowledge of the Defense Logistics
Agency. However, the Center was selling excess property to its members
without permission or notification. Items for sale included office equipment
and supplies, paper products, hand tools, and furniture. Sales revenue from
1995 to 2000 was reported at $636,000.24 According to Center officials,
sales proceeds were used to fund the Center's operations.

22 Administration and Management of the Civil Air Patrol, Report No.
D-2000-075 (Feb. 15, 2000).

23 The Department assigns a national stock number to identify an item and
distinguish it from other items that the Department uses on a recurring
basis. The first four digits of an item's national stock number identify the
item's federal supply class.

24 A Center official pointed out that the Center's 1999 and 2000 sales
figures have not been audited.

Restricted or Hazardous Items Are Not Adequately Tracked

The Civil Air Patrol and the Air Force Military Affiliate Radio System could
not properly account for restricted or hazardous excess property they had
obtained. The Army Affiliate Radio System could account for all of its
restricted property and did not receive any hazardous property. Department
policy requires non-Department of Defense organizations to sign an agreement
acknowledging the receipt of restricted items and accepting responsibility
for their care. However, because Defense policy treats the 12 special
programs like Defense organizations, a recipient is not required to sign
this agreement. Consequently, program officials are often unaware that the
property they have is restricted. Department policy also requires Defense
reutilization facilities to store hazardous property separately and under
increased security control. Additionally, recipients of hazardous property
are provided information on how to use it safely and the consequences of
misuse. While we did not attempt to confirm whether reutilization facility
officials complied with this requirement, officials from the Navy and Air
Force Military Affiliate Radio Systems and the Civil Air Patrol-programs
that had obtained hazardous items-did not recall receiving this
information.25

Program officials who are unaware that they have restricted or hazardous
property cannot track its whereabouts and cannot take necessary precautions
to safeguard its distribution or use and store and transport it safely.
Currently, only the Civil Air Patrol has procedures for dealing with
restricted property. Of the three programs that received hazardous property,
only the 12th Congressional Regional Equipment Center has necessary
procedures. None of the special programs indicate whether an item is
restricted or hazardous in their property databases. As tables 6 and 7 show,
many of these supplies were not recorded. Officials from all three special
programs agreed that it would be beneficial to track the status of
restricted and hazardous items in their property databases.

25 The Navy Military Affiliate Radio System obtained 34 hazardous items that
it was eligible to receive. See table 3.

Table 6:  Accountability of  Restricted Supplies Issued to  Special Programs
(1995-2000)

Not in database (percent)

                              Special program

Restricted supplies

In database (percent)

                      Military Affiliate Radio System

12th
Congressional
Regional
Equipment Center

 819 Not required
                                  to track

aThe  Civil Air Patrol also  received 15,549 expendable restricted supplies.
The Patrol is tracking 1 percent of these expendable supplies.

Source:  Our analysis  of  Defense Reutilization  and Marketing  Service and
program data.

Table  7: Accountability of  Hazardous Supplies  Issued to Special  Programs
(1995-2000)

Not in database (percent)

Hazardous supplies

In database (percent)

Special program 
                      Military Affiliate Radio System

12th
Congressional
Regional 65,052
Not required to
track Equipment
Center

aNone of the 34 hazardous supplies obtained by the Navy Radio Affiliate
System were included in the sample.

bThe Civil Air Patrol also received 7,419 expendable hazardous supplies. The
Patrol is tracking less than 1 percent of these expendable supplies.

Source: Our analysis of Defense Reutilization and Marketing Service and
program data.

Examples of restricted items not in the databases included 14 pieces of
night vision equipment, over 2,700 radio equipment supplies (which according
to Department officials, could be used to disrupt military communications,
send and receive secure transmissions, or transmit on military frequencies),
and over 100 pieces of camouflage equipment. These items are shown in figure
5.

Figure 5: Examples of Restricted Items Not in the Special Programs' Property
                                 Databases

           Source: Department of Defense and Radian Incorporated.

(See app. IV for an explanation of how Defense reutilization facilities, the
Military Affiliate Radio System programs, and the Civil Air Patrol track
excess property.)

Problems Also Identified With Other Special Programs

Conclusions

Our Office of Special Investigations has found similar problems with
property accountability in the other special programs. For example, a
Florida National Guard unit did not follow procedures to account for excess
property it had obtained, and Defense contractors did not inventory or track
excess property. According to the Defense Reutilization and Marketing
Service's Office of Command Security, a lack of inventory records creates
conditions conducive to crime because property could be stolen or diverted.

Internal control weaknesses, both at Defense reutilization facilities and at
special programs, leave excess property vulnerable to misuse, loss, and
theft. As a result, there is the risk that unauthorized individuals or
organizations may be able to obtain property with military applications or
technology. Special programs have been able to obtain ineligible excess
property with military technology/applications and hazardous items-in some
cases without realizing it. In addition, program officials did not know the
whereabouts of much of their excess property. Further, because these
programs have obtained property that they are not eligible to have, the
property is unavailable for reuse by federal agencies or other special
programs. These problems also exist in other special programs.

Recommendations for Executive Action

Given the unique policies and regulations associated with each of the
special programs, addressing the control weaknesses we identified requires
actions that apply to all programs as well as actions tailored to each
individual program.

For all programs, we recommend that the Secretary of Defense direct the
Director of the Defense Logistics Agency to take the following actions:

(1) As part of the Department's redesign of its activity code database,
establish codes that identify the type of excess property-by federal supply
class-and the quantity that each special program is eligible to obtain and
provide accountable program officers access to appropriate information to
identify any inconsistencies between what was approved and what was
received.

(2) Reiterate policy stressing that Defense reutilization facility staff
must notify special program officials of the specific tracking and handling
requirements of hazardous items and items with military
technology/applications.

We also recommend that the Secretary of Defense ensure that accountable
program officers within the Department verify, prior to approving the
issuance of excess property, the eligibility of special programs to obtain
specific types and amounts of property, including items that are hazardous
or have military technology/applications. This could be accomplished, in
part, through the Department's ongoing redesign of its activity code
database.

For each individual program, we further recommend the following.

(1) With regard to the 12th Congressional Regional Equipment Center, we
recommend that the Secretary of Defense direct the Director of the Defense
Logistics Agency to review and amend, as necessary, its agreement with the
Center in the following areas:

* the Center's financial responsibility for the cost of shipping excess
property obtained under the experimental project,

* the ancillary items the Center is eligible to receive,

* the rules concerning the sale of property and procedures for the Center to
notify the Agency of all proposed sales of excess property,

* the Center's responsibility for tracking items having military
technology/application and hazardous items, and

* the need for Agency approval of the Center's orders for excess property.

(2) With regard to the Army, the Navy, and the Air Force Military Affiliate
Radio Systems, we recommend that the Secretary of Defense direct the
Chairman of the Joint Chiefs of Staff to have the Joint Staff Directorate
for Command, Control, Communications, and Computer Systems review which
items these systems are eligible to receive, on the basis of their mission
and needs, and direct each of the Military Affiliate Radio Systems to
accurately track excess property, including pilferable

Agency Comments
and Our Evaluation

items, items with military technology/applications, and hazardous items.

(3) With regard to the Civil Air Patrol, we recommend that the Secretary of
Defense direct the Secretary of the Air Force to have the Civil Air
Patrol-Air Force review which items the Patrol is eligible to receive, on
the basis of its mission and needs, and direct the Patrol to accurately
track its excess property, including pilferable items, items with military
technology/applications, and hazardous items.

In written comments on a draft of this report, the Department of Defense
generally concurred with our recommendations. It fully concurred with four
of our recommendations and partially concurred with two-those calling for
the establishment of an automated process to reject requests for excess
property that each special program is not eligible to obtain and to provide
accountable program officials access to information about their property
requests.

The Department agreed with our assessment that modifying the current
approval process to ensure that only valid requests for excess property are
filled would enhance program oversight. The Department further stated if it
is not economically feasible to modify the exiting database, it would
consider alternative approaches to achieving the intent of our
recommendation. The Department also indicated that the Defense Reutilization
and Marketing Service has placed an inventory query on its website to assist
program officials in monitoring their reutilization transactions. We are
encouraged by the Department's commitment to correct the current approval
process. The Department's comments are reprinted in their entirety in
appendix V.

In separate written comments, 12th Congressional Regional Equipment Center
officials generally agreed with the accuracy of the report's contents as it
relates to the Center. The Center also noted that the success of the Center
could be improved with a revised contract with the Defense Logistics Agency,
which the Department indicated it is doing now. The Center's comments are
reprinted in their entirety in appendix VI.

The Defense Logistics Agency, the Air Force, the Joint Staff, and the 12th
Congressional Regional Equipment Center provided technical comments, which
were incorporated in the report as appropriate.

As arranged with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
its
issue date. At that time, we will send copies of this report to interested
congressional committees; the Secretaries of Defense, of the Army, of the
Navy, and of the Air Force; and the Director of the Defense Logistics
Agency.

If you or your staff have any questions about this report, please contact me
at (202) 512-8412 or Robert H. Hast at (202) 512-7455. Key contributors to
this report are listed in appendix VII.

David R. Warren, Director
Defense Capabilities and Management

Robert H. Hast, Managing Director
Office of Special Investigations

                      Appendix I: Scope and Methodology

We selected the Military Affiliate Radio System, the Civil Air Patrol, and
the 12th Congressional Regional Equipment Center for review because they (1)
were found by our Office of Special Investigations to have obtained and used
some excess property that was not consistent with their mission, (2) store
their data in relatively few locations, (3) are subject exclusively to
Department of Defense oversight, and (4) have information about their excess
property that is readily available from the Defense Reutilization and
Marketing Service.

We collected and analyzed data on excess Department of Defense property
obtained by the three special programs from January 1, 1995-June 30, 2000,
with the exception of the 12th Congressional Regional Equipment Center,
where we used data from October 1, 1995-December 31, 2000. The reason for
this time shift is because the Center did not begin acquiring excess defense
property until October 1995. During our review, we did not assess the
effectiveness of the 12th Congressional Regional Equipment Center.

To answer the two questions addressed in this report, we spoke with
officials from:

* Headquarters, Defense Logistics Agency, Fort Belvoir, Virginia.

* Headquarters, Defense Reutilization and Marketing Service, Battle Creek,
Michigan.

* Defense Reutilization and Marketing Office, Fort Meade, Maryland.

* Army Logistics Management College, Fort Lee, Virginia.

* Headquarters, Army Military Affiliate Radio System, Fort Huachuca,
Arizona.

* Headquarters, Navy Military Affiliate Radio System, Washington, D.C.

* Headquarters, Air Force Military Affiliate Radio System, Scott Air Force
Base, Illinois.

* Headquarters, Navy Military Affiliate Radio System, Region 2, Charleston,
South Carolina.

* Headquarters, Civil Air Patrol, Maxwell Air Force Base, Alabama.

* Headquarters, Civil Air Patrol-U.S. Air Force, Maxwell Air Force Base,
Alabama.

* 12th Congressional Regional Equipment Center, Blairsville, Pennsylvania.

* Headquarters, Air Force Equipment Policy Team, Directorate of Supply,
Washington, D.C.

* Joint Staff, Communications and Computer Networks Division, Directorate
for Command, Control, Communications, and Computers, Washington, D.C.

Appendix I: Scope and Methodology

To determine whether the three special programs had received ineligible
excess property--and if so, how much--we compared the federal supply classes
of the acquired property to each program's list of approved federal supply
classes. The Defense Reutilization and Marketing Service provided a record
of the excess property issued to each program over the 5-1/2 years in
electronic spreadsheet files. According to Defense Reutilization and
Marketing Service officials, the data they provided us was the most accurate
information available on the disposition of excess property. We did not
independently verify the data we received on excess property at these
special programs.

Records contained descriptive and identifying information about each order,
including date of the transaction, price data, national stock number,
demilitarization and environmental codes, and quantity issued. For the
Military Affiliate Radio System and the Civil Air Patrol programs, items
with federal supply classes not on the approved lists were treated as
ineligible. For the 12th Congressional Regional Equipment Center, a list of
eligible heavy equipment was included as an attachment to its agreement with
the Defense Logistics Agency. The eligibility of various ancillary items was
determined by unanimous agreement between our staff and Defense Logistics
Agency officials who oversee the Center's operations on behalf of the
Department. Where the eligibility of a certain item was ambiguous, we
considered it to be eligible. For example, the Military Affiliate Radio
Systems limit some items to their state and regional directors; however, we
did not take this distinction into account in our analysis. In those cases
where an apparent typographical error resulted in a mismatch between a
Defense Reutilization and Marketing Service record and a property database
record, we treated the two as a match.

To determine whether the special programs could account for the property
they had received, we met with officials from the Army, Navy, and Air Force
Military Affiliate Radio Systems and the Civil Air Patrol to discuss their
policies, procedures, and practices for tracking the excess property and
obtained electronic or paper copies of the programs' property databases. We
matched the Defense Reutilization and Marketing Service records of property
issued to these programs with entries in the programs' databases. Although
we did not evaluate how well the 12th Congressional Regional Equipment
Center had tracked the excess property it was issued, we spoke with Center
officials about measures taken to account for restricted and hazardous
property.

In accordance with Army regulation, the Army Affiliate Radio System retains
excess property records for 2 years after an item has been disposed

Appendix I: Scope and Methodology

of, transferred to another member, or returned to a Defense reutilization
facility. Because we could not determine with certainty an item's status
that was obtained before the 2-year limit, we limited our review of items to
2 years instead of 5-1/2 years. This reduced the number of supplies that we
tried to match from 5,986 to 127. Because the Navy Affiliate Radio System
does not account for its property centrally, we selected a sample of items
from the Defense Reutilization and Marketing Service records and relied on
Navy Affiliate Radio System personnel in each of its seven regions.

The Patrol follows Air Force supply policy and only tracks nonexpendable
items (i.e., items that can be used more than once). This reduced the excess
property the Patrol is required to track from 1.2 million expendable and
nonexpendable supplies to 34,000 nonexpendable supplies-a 97-percent
reduction. An additional 5,000 supplies were eliminated based on discussions
with Civil Air Patrol and Air Force supply officials, reducing the number of
supplies that should be tracked to 29,000.

To determine whether similar conditions existed in other special programs,
we examined recent work by our Office of Special Investigations.

We conducted our review from November 2000 through September 2001 in
accordance with generally accepted government auditing standards. We
performed our other investigative work during the same period in accordance
with investigative standards established by the President's Council on
Integrity and Efficiency.

Appendix II: Descriptions of the Three Special Programs

Military Affiliate Radio System

The Military Affiliate Radio System is a Department of Defense-funded
organization of volunteer amateur radio operators with an interest in
military communications. Its beginnings can be traced to 1925 with the
formation of the Army Amateur Radio Systems. The Air Force program and the
Navy program-which includes the Marine Corps and the Coast Guard-were
established in 1948 and 1962, respectively. On November 30, 1968, the
Department issued a directive formalizing the composition, the mission, the
functions, and the organization of the Military Affiliate Radio System.

Membership requirements for each of the programs are similar: be at least 17
years old, be a U. S. citizen or resident alien, possess a valid Federal
Communications Commission license for the frequencies to be used, and agree
to participate in Affiliate Radio System activities a minimum of 12 hours
every 3 months.

The Affiliate Radio System's mission includes

* providing emergency communications on a local, national, or international
basis;

* providing auxiliary communications during periods of emergency and under
all hazard conditions;

* creating interest and training Affiliate Radio System members in military
communications procedures;

* providing a potential reserve of trained radio communications personnel;

* handling personal communications for Armed Forces personnel stationed
throughout the world; and

* conducting an amateur radio program as part of the annual celebration of
Armed Forces Day.

Within the past 20 years, its primary mission has shifted from one of
handling personal communications to providing emergency and auxiliary
communications.

The Office of the Assistant Secretary of Defense for Command, Control,
Communications, and Intelligence provides overall policy guidance, but the
responsibility for managing and operating the individual Affiliate Radio
System programs-including acquiring, storing, distributing, and maintaining
accountability over equipment-falls to the secretaries of the military
departments. To satisfy this requirement, each of the Affiliate Radio System
programs has established a headquarters office and appointed a program
chief. The headquarters location and current size of the three programs are
shown in table 8.

Appendix II: Descriptions of the Three Special Programs

     Table 8: Military Affiliate Radio System Locations and Membership

                            Approximate number of volunteer members in 2000a

Program Office location

Army U. S. Army Signal Command, Fort Huachuca, Arizona

                                   2,700

Navy Naval Computer and Telecommunications Command, Washington, D.C.

                                   1,900

Air Force Air Force Communications Agency, Scott Air Force Base, Illinois

                                   1,850

aThis represents volunteer, licensed, amateur radio operators. The Army,
Navy, and Air Force Affiliate Radio Systems also have a small number of
contingency radio stations staffed by active-duty military, reserve, and
National Guard personnel.

Source: Program data.

The Army and Air Force Affiliate Radio System programs are centrally managed
from their headquarters; the Navy program is headquartered in Washington,
D.C., but day-to-day management is performed at its seven geographic
regional headquarters.

In fiscal year 2000, there were 4,600 reutilization organizations. The Army,
Navy, and Air Force Affiliate Radio Systems ranked 229th, 266th, and 54th,
respectively, as measured by the value of excess property obtained.

Civil Air Patrol Congress established the Civil Air Patrol as a federally
chartered, private, nonprofit corporation in 1946, and the Patrol is
recognized by 10 U.S.C. 9441 as a volunteer civilian auxiliary of the Air
Force. As such, the Air Force is authorized to provide financial and
material assistance and advice. To accomplish these responsibilities, the
Air Force relies on the Civil Air Patrol-Air Force, a unit of the Air
Force's Air Education and Training Command that is collocated with the
Patrol's national headquarters at Maxwell Air Force Base, Alabama.

The Civil Air Patrol has three primary missions:

Emergency services. The Patrol participates in search and rescue, disaster
relief, and humanitarian assistance. The Patrol flies more than 85 percent
of all inland search and rescue missions directed by the Air Force. It
provides air and ground transportation and communications resources in
support of local, state, and federal agencies during disaster relief and
humanitarian assistance efforts. The Patrol also provides aerial

          Appendix II: Descriptions of the Three Special Programs

reconnaissance and airborne communications support for counter drug
operations.

Aerospace education. The Patrol provides its members and the general public
an appreciation for and knowledge of aviation and space issues. External
programs are primarily conducted through the nation's school systems. Each
year, the Patrol sponsors workshops to provide teachers materials on basic
aerospace knowledge and advances in aerospace technology to use in their
classrooms.

Cadet training. The purpose of the Cadet Program is to provide youth between
the ages of 12 and 18 an opportunity to develop their leadership skills
through their interest in aviation. Cadets progress through a 15-step
program, including aerospace education, leadership training, and physical
fitness.

The Patrol is organized into 8 geographic regions consisting of 52 wings- 1
wing for each state, Puerto Rico, and the District of Columbia. Wings are
then subdivided into groups, squadrons, and sometimes flights, depending on
their size. Collectively, there are about 61,000 Patrol members and 1,700
individual Patrol units.

In fiscal year 2000, there were 4,600 reutilization organizations. The Civil
Air Patrol ranked 106th, as measured by the value of excess property
obtained.

12th Congressional Regional Equipment Center

The 12th Congressional Regional Equipment Center was established in 1992 as
an infrastructure demonstration project in Cambria County, in western
Pennsylvania. Participation in the project by the Department of Defense is
mandated. 1 The project's purpose is to assist municipalities and nonprofit
organizations in Pennsylvania complete specific public projects that would
otherwise be too costly to undertake. The Center acquires Department excess
heavy equipment, such as dump trucks, backhoes, front-end loaders,
snowplows, forklifts, and rollers, and restores them to acceptable working
condition. It then leases the equipment for land reclamation, site
preparation, road repair, soil conservation, garbage and snow removal, and
other community improvements.

1 P. L. 102-396, sec. 9148.

Appendix II: Descriptions of the Three Special Programs

The Center leases equipment on a daily, weekly, monthly, or yearly basis and
continues to maintain the equipment during the leasing period. Recently, the
Center began to provide operators with the equipment for an additional fee
and added a lease-with-an-option-to-buy provision. To be eligible to lease
equipment, an organization must be governmental or nonprofit and pay a $300
annual membership fee. Since its inception, the Center's membership has
increased each year, and in calendar year 2000 it totaled 283 members.

The Center's headquarters is in Blairsville, Pennsylvania. A 12-member Board
of Directors oversees the Center; a paid managing director and staff handle
day-to-day business activities. The Center's principal sources of revenue
were equipment lease fees and auction proceeds.

In fiscal year 2000, there were 4,600 reutilization organizations. The
Center ranked 15th, as measured by the value of excess property obtained.

Appendix III: Location of Defense Reutilization and Marketing Offices

Department of Defense excess property is managed by Defense reutilization
and marketing offices located on or near major U.S. military facilities
around the world. At the time we concluded our review, there were 97 Defense
reutilization facilities (see figs. 6, 7, and 8).

Figure  6:  Defense  Reutilization  and  Marketing Offices  in  the  Western
Hemisphere and the Pacific Zone

Source: Defense Reutilization and Marketing Service.

Appendix III: Location of Defense Reutilization and Marketing Offices

Figure 7:  Defense Reutilization and Marketing  Offices in the Southeast and
Asia Zones and the Pacific Zone

Note: The numbers indicate the number of Defense reutilization and marketing
offices located in that country.

Source: Defense Reutilization and Marketing Service.

Appendix III: Location of Defense Reutilization and Marketing Offices

Figure  8:  Defense Reutilization  and  Marketing Offices  in the  Atlantic,
Central European, and Mediterranean Zones

Notes:

1. The  numbers indicate  the number of Defense  reutilization and marketing
offices located in that country.

2.  The locations  of two  additional sites,  United Arab Emirates  and Site
Alpha, are not included.  Site Alpha is a mobile, nonpermanent reutilization
facility that is established when and where needed.

Source: Defense Reutilization and Marketing Service.

Appendix IV: Processes Used by the Department of Defense and Two Special
Programs to Track Excess Property

Military Affiliate Radio System

Civil Air Patrol

The three Military Affiliate Radio System programs follow similar procedures
to maintain accountability over the excess property issued to their members.
Members are held accountable for the property and are expected to safeguard
it from misuse, theft, loss, and damage. Further, members cannot modify or
remove any part of the equipment without advance approval or dispose of it
for personal financial gain. When property is no longer required, it is to
be turned in to the nearest Defense reutilization facility, if economically
feasible, as determined by Affiliate Radio System officials.

Each Affiliate Radio System program tracks the excess property from the
Defense reutilization facilities to its final disposition. The Army and Air
Force Affiliate Radio Systems have automated databases to track excess
property. Information in these databases links each item to a member and
includes the item's name, the national stock number, the acquisition date,
and a unique transaction number. To ensure that the information in the
databases corresponds with the physical property the members have, the two
programs conduct an annual inventory by tasking each property holder to
verify the accuracy of the descriptive information in the databases. The
Navy Affiliate Radio System tracks excess property at its seven regional
headquarters with varying degrees of automation and does not require an
annual inventory.

Like the Military Affiliate Radio System, the Civil Air Patrol has created
an automated database to track its excess property. The database includes an
item's name, federal supply class, transaction number, and location, but not
its national stock number. Without a national stock number, it is difficult
to get information about an item, including whether the item is restricted
or hazardous. Patrol officials recognize this deficiency, and they are
considering including an item's national stock number in the property
database that is under development. The Patrol uses the database to prepare
an annual inventory report that is provided to the Air Force. If property
held by the Patrol is no longer needed, it is redistributed within the
Patrol or returned to a reutilization facility. The Air Force grants waivers
on a case-by-case basis to dispose of this property by other means (e.g.,
landfill and donation) if it is economical to do so. When excess property
cannot be accounted for, an investigation is conducted under the stewardship
of the wing commander.

  Appendix IV: Processes Used by the Department of Defense and Two Special
                     Programs to Track Excess Property

Tracking of Restricted and Hazardous Property

When a Defense activity no longer requires a restricted item, it turns the
item over to a Defense reutilization facility. The activity is required to
indicate the item's demilitarization code in the accompanying documentation.
This code identifies the degree of demilitarization necessary before the
item can be released from the Department's control. Reutilization facilities
are not supposed to accept any property unless the documentation contains a
demilitarization code. When a reutilization facility issues an item,
however, its demilitarization code is not included in the accompanying
documentation.

An item is not demilitarized if it is transferred to a civilian federal
agency, donated to a qualified organization, or reused within the
Department. Before a transfer is made, a representative of the civilian
agency or donee organization must sign an agreement that outlines the
agency's responsibilities for safeguarding the restricted item. An agreement
is not required when a restricted item is reused by another Defense agency
because the attendant requirements are assumed to be known by the recipient
and are enforceable. Because the 12 special programs are considered to be a
part of the Department of Defense, they are eligible to receive restricted
items-unless program-specific restrictions are imposed-and are not required
to execute an agreement. According to the Department's Demilitarization
Program Office, like the Department, these programs are responsible for
preventing unauthorized access and use of these military-unique and dual-use
items.

When an item with hazardous properties is issued, the Defense reutilization
facility provides the receiving organization with information on the item's
physical and chemical characteristics, the precautions for its safe handling
and use, and the environmental and health hazards it poses. We did not
assess the ability of the three special programs to store, handle, and
dispose of hazardous property in accordance with applicable environmental,
health, and safety laws and regulations.

                    Page 40 GAO-02-75 Defense Inventory

                    Page 41 GAO-02-75 Defense Inventory

                    Page 42 GAO-02-75 Defense Inventory

                    Page 43 GAO-02-75 Defense Inventory

Appendix VI: Comments From the 12th Congressional Region Equipment Center

Appendix VI: Comments From the 12th Congressional Region Equipment Center

Appendix VII: GAO Staff Acknowledgments

Acknowledgments In addition to those named above, Lawson Gist, Jr.; John J.
Ryan; Marc J. Schwartz; David S. Epstein; Richard C. Newbold; Norman M.
Burrell; George J. Ogilvie; Carin M. Wyche; John G. Brosnan; Alan S.
Goldberg; Kord H. Basnight, Peter Iannicelli, Stefano Petrucci, and Frank A.
Papineau, Jr. made key contributions to this report.

Related GAO Products

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

Concerns Raised About Use of Unreconciled Activity Codes to Requisition New
and Excess Government Property (GAO-01-86R, Dec. 6, 2000).

Department of the Army: Unauthorized Activity Codes Used to Requisition New
DOD Property (GAO-01-85R, Dec. 6, 2000).

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).

General Services Administration: Unauthorized Activity Codes Used to
Requisition New and Excess Government Property (GAO-01-221R, Jan. 8, 2001).

High-Risk Series: An Update (GAO-01-263, Jan. 2001).

GAO's Mission

Obtaining Copies of GAO Reports and Testimony

The General Accounting Office, the investigative arm of Congress, exists to
support Congress in meeting its constitutional responsibilities and to help
improve the performance and accountability of the federal government for the
American people. GAO examines the use of public funds; evaluates federal
programs and policies; and provides analyses, recommendations, and other
assistance to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents is through the
Internet. GAO's Web site (www.gao.gov) contains abstracts and full-text
files of current reports and testimony and an expanding archive of older
products. The Web site features a search engine to help you locate documents
using key words and phrases. You can print these documents in their
entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its Web
site daily. The list contains links to the full-text document files. To have
GAO e-mail this list to you every afternoon, go to www.gao.gov and select
"Subscribe to daily e-mail alert for newly released products" under the GAO
Reports heading.

Order by Mail or Phone The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out to
the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. General Accounting Office P.O. Box 37050 Washington, D.C. 20013

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

Visit GAO's Document GAO Building

Distribution  Center  Room 1100,  700 4th  Street, NW  (corner of 4th  and G
Streets, NW) Washington, D.C. 20013

To Report Fraud, Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm,

Waste, and Abuse in E-mail: [email protected], or

Federal Programs 1-800-424-5454 or (202) 512-7470 (automated answering
system).

Jeff   Nelligan,   Managing  Director,   [email protected]  (202)   512-4800

Public Affairs U.S.  General Accounting Office, 441 G. Street NW, Room 7149,
Washington, D.C. 20548
*** End of document. ***