Defense Inventory: Improvements Needed in DOD's Implementation of
Its Long-Term Strategy for Total Asset Visibility of Its	 
Inventory (06-DEC-04, GAO-05-15).				 
                                                                 
For more than 30 years, the Department of Defense (DOD) has	 
worked to achieve full visibility over and accessibility to its  
spare parts inventory. This initiative, called total asset	 
visibility (TAV), aims to provide timely, accurate information on
the location, movement, status, and identity of units, personnel,
equipment, and supplies. In 1999, GAO examined DOD's TAV	 
implementation approach and recommended that DOD develop a	 
strategic plan to guide its efforts. DOD did not concur and	 
stated it would rely on the components to individually achieve	 
TAV. DOD's current target to achieve TAV is 2010. As requested,  
GAO examined DOD's progress towards, and impediments to,	 
achieving TAV over its spare parts inventory. GAO also assessed  
DOD's progress in ensuring that its inventory management systems 
comply with federal financial management standards.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-15						        
    ACCNO:   A14219						        
  TITLE:     Defense Inventory: Improvements Needed in DOD's	      
Implementation of Its Long-Term Strategy for Total Asset	 
Visibility of Its Inventory					 
     DATE:   12/06/2004 
  SUBJECT:   Inventory control					 
	     Inventory control systems				 
	     Military inventories				 
	     Spare parts					 
	     Strategic planning 				 

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GAO-05-15

     

     *  
          * Component Inventory Management Systems Provide Some Visibility
          * Continuing Systems Development Efforts May Not Achieve TAV by
            2010
          * TAV Hindered by Lack of a Clear Long-Term Strategy
          * Information Systems Integration Challenges Hinder TAV Achievement
          * Long-Standing Data Accuracy and Reliability Issues Hamper TAV
            Achievement
     * Appendix I: Scope and Methodology
     * Appendix II: Key Programs and Systems
     * Appendix III: Comments from the Department of Defense
     * Appendix IV: GAO Contacts and Staff Acknowledgments
          * Order by Mail or Phone
     * D0515cov.pdf
          * Report to the Chairman, Subcommittee on Defense, Committee on
            Appropriations, House of Representatives
               * December 2004
          * DEFENSE INVENTORY
               * Improvements Needed in DOD's Implementation of Its Long-Term
                 Strategy for Total Asset Visibility of Its Inventory
     * cover4.pdf
          * http://www.gao.gov

                 United States Government Accountability Office

Report to the Chairman,

 Subcommittee on Defense, Committee on Appropriations, House of Representatives

December 2004

DEFENSE INVENTORY

Improvements Needed in DOD's Implementation of Its Long-Term Strategy for Total
                       Asset Visibility of Its Inventory

                                       a

GAO-05-15

DEFENSE INVENTORY

Improvements Needed in DOD's Implementation of Its Long-Term Strategy for
Total Asset Visibility of Its Inventory

  What GAO Found

Although DOD, the military services, and the Defense Logistics Agency
(DLA) made varying degrees of progress toward achieving visibility over
instorage assets, DOD did not meet its prior goal to achieve TAV by 2004.
In a series of reports issued since March 1999, GAO reported that DOD also
lacks visibility and control over items being shipped from one location to
another. GAO's most recent work indicates that the military services and
DLA generally have inventory management systems that provide visibility
over specific segments of their inventories, but existing systems cannot
always share data on a near real-time basis within their organizations or
across the department. While DOD and the components all have ongoing
efforts to modernize their business systems and improve the capability to
share data on a near real-time basis, the requirements, time frames, and
cost estimates for these additional systems have not been developed.
Consequently, DOD's ability to achieve the new TAV goal of 2010 remains
uncertain.

Three significant impediments hinder the achievement of TAV. First, DOD
does not have a clear long-term strategy for achieving TAV. While DOD has
identified TAV as a key goal of its departmentwide effort to refine and
implement a business enterprise architecture, components' plans and
initiatives lack a clear link to the architecture and DOD's long-term
business management modernization program. Further, while the logistics
community identified TAV as a key element in its logistics transformation
efforts, it did not include TAV as a goal within its Future Logistics
Enterprise, its mid-term logistics transformation plan. Consequently, the
components are pursuing internal initiatives to attain TAV. Second, DOD
lacks the systems integration necessary to provide TAV. As GAO recently
reported, DOD has made little progress in refining its business enterprise
architecture, which leaves DOD without a long-term strategy needed to
successfully guide efforts to achieve TAV. Without proper oversight and
approval of emerging systems, DOD will continue to deploy systems that do
not have the ability to provide TAV. While DOD plans to address GAO's
recommendations aimed at improving its institutional oversight of business
system investments, DOD has yet to fully implement these recommendations.
Third, DOD's inventory management systems have long-standing data accuracy
and reliability issues. Without accurate, reliable data from these
systems, new systems will also contain suspect data and not provide TAV.
Unless DOD overcomes these impediments, it is unlikely that it will meet
its goal of achieving TAV by 2010.

DOD has made little progress in assuring that its inventory management
systems are substantially compliant with federal financial management
standards. DOD has recognized the weaknesses within its financial
management and feeder systems, and stated in its Performance and
Accountability Report for fiscal year 2003 that its systems did not
substantially comply. GAO's review of two emerging logistics systems
raises concerns regarding DOD's lack of policies and procedures to ensure
new systems substantially comply with federal standards.

                 United States Government Accountability Office

Contents

  Letter 1

Results in Brief 3 Background 6 DOD, the Military Services, and DLA Have
Not Achieved TAV over

Spare and Repair Parts in Storage 9 Significant Impediments Hinder
Achievement of TAV 14 DOD Has Made Little Progress toward Assuring That
Inventory

Systems Comply with Financial Standards 19 Conclusions 20 Recommendations
21 Matter for Congressional Consideration 21 Agency Comments and Our
Evaluation 22

Appendix I Scope and Methodology

Appendix II Key Programs and Systems

Appendix III Comments from the Department of Defense

Appendix IV GAO Contacts and Staff Acknowledgments

  Tables

T able 1:Summary of In-Storage Inventory Management Systems 10 Table 2:
Reported DOD Logistics Business Systems by

Functional Area 16

Abbreviations

CFO            Chief Financial Officers Act of 1990                        
DLA            Defense Logistics Agency                                    
DOD            Department of Defense                                       
FFMIA                 Federal Financial Management Improvement Act of 1996 
GPRA           Government Performance and Results Act of 1993              
JFMIP          Joint Financial Management Improvement Program              
JTAV           Joint Total Asset Visibility                                
SGL            Standard General Ledger                                     
TAV            Total Asset Visibility                                      

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separately.

United States Government Accountability Office Washington, DC 20548

December 6, 2004

The Honorable Jerry Lewis Chairman Subcommittee on Defense Committee on
Appropriations House of Representatives

Dear Mr. Chairman:

We have repeatedly reported that the Department of Defense (DOD) does not
have adequate visibility and control over the approximately $70 billion of
inventory, including its spare and repair parts. 1 While DOD has
recognized the importance of achieving total asset visibility (TAV) for
more than 30 years, its efforts to improve its capability have fallen
short. DOD defines TAV as the ability to provide timely and accurate
information on the location, movement, status, and identity of units,
personnel, equipment, and supplies and having the ability to act on that
information. 2 In 1999, we reported that DOD's efforts to achieve TAV
could be improved through the development of a strategic plan. 3 DOD
responded that the department planned to address TAV in the context of
improved asset management through the business system modernization
efforts of its military services and the Defense Logistics Agency (DLA).
The ability to harness such detailed, near real-time 4 information for
spare and repair parts could significantly improve military readiness by
more efficiently and effectively getting needed items to the operating
forces. If the information contained in the inventory management systems
is not accurate, complete, and timely, ongoing operations could be
adversely impacted. Although DOD had established a goal of achieving TAV
by 2004, it recently revised its estimate for achieving this elusive goal
to fiscal year 2010.

1

GAO, Defense Inventory: Consumption of Inventory Exceeding Current
Operating Requirements Since September 11, 2001, GAO-04-689 (Washington,
D.C.: Aug. 2, 2004).

2

DOD 4140.1-R, Supply Chain Materiel Management Regulation, May 23, 2003.

3

GAO, Defense Inventory: DOD Could Improve Total Asset Visibility
Initiative With Results Act Framework, GAO/NSIAD-99-40 (Washington, D.C.:
Apr.12, 1999).

4

Data or information that has been delayed by the time required for
electronic communication and automatic data processing. This implies that
there are not significant delays.

This report responds to your request that we review DOD's progress toward
achieving TAV over its spare and repair parts, especially across the
military services at the wholesale and retail levels of supply. 5 As
requested, we also discuss the department's efforts to improve financial
management reporting on its inventory. For TAV purposes, supplies, which
include spare and repair parts, are categorized as "in storage," 6 "in
process" (on order or in repair), or "in transit." Because of the recent
designation of the

U.S. Transportation Command as the distribution process owner, the many
problems identified with in-transit visibility in recent years and the
magnitude of the in-storage inventory, we agreed to focus this report on
spare and repair parts in storage. Specifically, we addressed (1) what
progress DOD, the military services, and DLA have made in implementing TAV
and (2) what impediments, if any, DOD, the military services, and DLA must
overcome in order to achieve TAV. In addition, you requested that we
assess the progress that DOD has made in ensuring that inventory
management systems are fully compliant with statutory requirements for
federal financial management systems.

To accomplish these objectives, we obtained and analyzed information on
inventory management practices from DOD, the military services, and DLA,
including DOD's Supply Chain Materiel Management Regulation.7 In addition,
we reviewed previous GAO reports, other audit agency reports, and
appropriate DOD guidance. We also interviewed knowledgeable officials
within the military services and DLA to enhance our understanding of
inventory management practices. Additionally, we interviewed officials who
establish inventory management policy within the Office of the Secretary
of Defense. Finally, we reviewed documentation on a wide variety of DOD,
military service, and DLA initiatives and programs addressing inventory
management. We conducted this assignment in accordance with generally
accepted government auditing standards. Our scope and methodology are
discussed in further detail in appendix I. Appendix II contains a list and
brief description of key programs and systems that are applicable to TAV.

5

DOD maintains spare parts at two levels of inventory. Wholesale level
represents inventory managed centrally, while retail level inventory
represents inventory held for use at maintenance activities or operational
units.

6

"In storage" inventory refers to any items being held for future use. This
includes items held at the wholesale, retail, and unit levels of supply in
anticipation of future needs.

7

DOD 4140.1-R, Supply Chain Materiel Management Regulation, May 23, 2003.

Page 2 GAO-05-15 Defense Inventory

  Results in Brief

Although DOD, the military services, and DLA have made varying degrees of
progress toward achieving visibility over in-storage assets, DOD failed to
meet its goal to achieve TAV by 2004. DOD did not achieve its goal because
existing inventory systems continue to lack the ability to share data on a
near real-time basis for all inventory segments. In a series of reports
issued since March 1999, we have reported numerous weaknesses in DOD's
visibility and control over items being shipped from one location to
another. Our most recent work identified that the military services and
DLA generally have inventory management systems that provide visibility
over only specific segments of their inventories, such as wholesale and
retail inventories. They also have the ability to share data both within
their respective organizations and among the defense components, although
this capability does not always exist on a near real-time basis. The 1998
DOD Logistics Strategic Plan established a goal for attaining 100 percent
visibility over all assets by 2004. DOD's definition of visibility also
includes the capability to act on the information provided by the
information systems to improve overall logistics operations. While DOD,
the military services, and DLA all have ongoing efforts to modernize the
business systems they use to provide visibility over in-storage assets,
these systems by themselves will not provide TAV because the TAV
capability is dependent on additional systems that have not yet been
developed. In some cases, the requirements, time frames, and cost
estimates for these additional systems have not been developed. Similarly,
the capability to share data both within the respective organizations and
on a departmentwide level is currently evolving. Consequently, the
department's ability to achieve the new TAV goal of 2010 remains
uncertain.

DOD, the military services, and DLA must overcome three significant
impediments, which present a number of challenges, in order to achieve
TAV. First, while DOD has identified achieving TAV as one of the
objectives for its ongoing efforts to refine and implement a business
enterprise architecture, it continues to lack a clear long-term strategy
for achieving TAV deparmentwide. In May 2004, we reported that the
architecture did not provide sufficient descriptive content related to
future business operations and supporting technology to permit effective
acquisition of systems solutions and associated operational changes. In
another recent review, we found that DOD component efforts, including the
military services and DLA, were not clearly linked to DOD's long-term
improvement initiative, the business management modernization program. The
department is required to report annually to the Congress on the progress
it is making on refining and implementing the business enterprise
architecture in support of its business management modernization program.
8 Further, the logistics community has identified TAV as one of the four
pillars for its logistics transformation initiative but did not
specifically include it in its Future Logistics Enterprise-DOD's mid-term
strategic plan for logistics transformation. Because DOD has not developed
a clear long-term strategy, the military services and DLA will be exposed
to the risk of spending billions of dollars on duplicative, stovepiped,
nonintegrated systems that do not support the department's business
transformation goals, including attaining TAV. In fact, DOD's goal for
achieving TAV has slipped from 2004 to 2010 since we reported on this
issue in 1999. Without a clear long-term strategy, DOD lacks a key
management control for ensuring that time frames, results-oriented
performance measures, and accountability mechanisms are established and
monitored to help achieve TAV. In addition, DOD has not achieved the
necessary integration or interoperability among its many inventory systems
to support TAV and, without proper oversight and approval of emerging
systems, DOD and the defense components will likely continue to deploy
systems that do not have the ability to provide TAV. In addition to
deficiencies in DOD's business enterprise architecture that diminish its
utility as a blueprint for guiding TAV efforts, in May 2004 we reported
that two emerging systems intended to transform logistics operations for
DLA and the Army did not resolve problems associated with TAV and
integrated systems. 9 For example, the Army system, the Logistics
Modernization Program, is dependent on two additional systems that are
under development to attain TAV. However, neither the time frames nor cost
estimates to develop these systems has been established. Until integration
or interoperability is achieved and processes and controls are improved,
DOD will continue to rely on current processes and procedures that include
the use of multiple data entry points for transactions, which can result
in data entry errors concerning the amount and location of inventory.
While DOD has indicated it plans to address our recent recommendations
aimed at improving DOD's institutional oversight of planned and ongoing
business systems investments-steps we have previously stated that DOD
needs to take in a timely manner-DOD has yet to fully implement these
recommendations. Finally, DOD, the military services, and DLA must
overcome long-standing data accuracy and

8

Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005,
Pub. L. No. 108-375, S: 332, 118 Stat. 1811 (Oct. 28, 2004)

9

GAO, DOD Business Systems Modernization: Billions Continue to Be Invested
with Inadequate Management Oversight and Accountability, GAO-04-615
(Washington, D.C.: May 27, 2004).

Page 4 GAO-05-15 Defense Inventory

reliability issues associated with their numerous legacy systems used to
report the quantity, location, and value of DOD's inventory. Without
implementation of efficient and effective business processes and controls
to ensure accurate, complete, timely, and reliable data, DOD's systems,
both legacy and emerging systems, will fail to provide TAV. Recent audit
reports prepared by the DOD Inspector General and the military services'
audit agencies, for example, have identified more than $200 million in
excess or unrecorded inventory that was not visible to item managers as
well as significant misstatements in the reported inventory balances.
Given that DOD has not developed a departmentwide long-term strategy to
overcome these various impediments, it appears unlikely that it will
achieve TAV by 2010.

DOD, the military services, and DLA have made little progress in assuring
that inventory management systems are substantially compliant with
statutory requirements for federal financial management systems as defined
in the Federal Financial Management Improvement Act (FFMIA) of 1996. 10
The department recognizes the weaknesses within its financial management
and feeder systems and stated in its Performance and Accountability Report
for fiscal year 2003 that these systems did not substantially comply.
While DOD is requiring the military services and DLA to certify that
emerging systems are substantially compliant with federal financial
management requirements, we are concerned that the department lacks
adequate policies and procedures to determine whether compliance has been
achieved. For example, we recently reported weaknesses in the development
and testing of systems requirements for two new systems, the Business
Systems Modernization and the Logistics Modernization Program. 11 For
example, the Army did not perform testing on 147 of the systems'
requirements because the core requirements from the software package had
previously been certified through the Joint Financial Management
Improvement Program (JFMIP). Relying on the JFMIP certification does not
provide assurance that federal financial management standards are met
because the Army had modified the commercial software package and did not
perform specific transaction testing to determine if the modified system
software provided the anticipated results. Consequently, although these
two systems were certified as being compliant, the weaknesses identified
in the certification

Pub. L. No. 104-208, div. A, S:101 (f), title VIII, 110 Stat. 3009,
3009-389 (Sept. 30, 1996). 11 GAO-04-615.

Page 5 GAO-05-15 Defense Inventory

                                   Background

process make it difficult to determine if the systems do in fact comply
with the FFMIA requirements.

We are recommending that DOD develop a comprehensive, long-term strategy
as part of its Business Enterprise Architecture with key elements such as
milestones, to assist the department in achieving TAV over its spare and
repair parts inventory. In commenting on a draft of this report, DOD
concurred with the intent of three of our recommendations and partially
concurred with our final recommendation. While recognizing the need to
improve visibility over spare and repair parts, DOD believes that its
current approach of modernizing logistics systems and implementing an
integrated data approach is the way to achieve TAV. We continue to believe
that DOD needs to place more specific emphasis on attaining TAV.
Therefore, we have added a matter for congressional consideration
suggesting that the Congress may wish to require having the Secretary of
Defense specifically address the plans and progress the department is
making on attaining TAV in his annual report to the Congress on the
refinement and implementation of the business enterprise architecture
pursuant to Sect. 332 of the fiscal year 2005 national defense
authorization act.

While total asset visibility (TAV) has been a goal of DOD's since the
early 1970s, target completion dates of 1980, 1995, and 2004 have not been
met. In fact, DOD's target date for achieving TAV has slipped by nearly 30
years, most recently being moved from fiscal year 2004 to fiscal year
2010. In 1972, DOD launched a Logistics Systems Plan to meet its TAV needs
with a target completion date of 1980. This plan was created to eliminate
unnecessary duplication of inventories and to establish common use of
inventories whenever possible; however, it did not succeed. Subsequently,
in 1992, DOD instituted a second TAV Plan to provide managers with the
capability to access and act on timely and accurate information regarding
the location, quantity, condition, movement, and status of DOD materiel
assets. Once again, the target date was not achieved. In 1996, DOD
developed a third TAV Implementation Plan, which expanded the scope of the
1992 plan. However, this plan had no clear completion date and was
superceded by the 1998 DOD Logistics Strategic Plan. The 1998 plan was
created to "...meet total asset tracking requirements established in the
DOD regulation on asset management." 12 This plan's target completion date
was 2004.

In 1999, we reported 13 on DOD's TAV initiative and noted significant
wartime logistics management problems that had occurred during Operations
Desert Shield and Desert Storm due to the lack of visibility over spare
parts and supplies. In our 1999 report, we recommended that DOD develop a
departmentwide strategic plan and associated component implementation
plans in accordance with specific outcome-oriented management principles
embodied in the Government Performance and Results Act of 1993 (GPRA) 14
and the Clinger-Cohen Act. 15 The department, however, disagreed with our
recommendation that it develop an overarching strategic plan and stated
that TAV could be attained as each of the components proceeds with its own
logistics supply chain modernization efforts.

Subsequent to our 1999 report, TAV continued to be an important goal
within the department. The business support community, under the direction
of the Under Secretary of Defense (Comptroller) and the Chief Information
Officer, recognized the importance of realizing TAV and included achieving
TAV by 2010 as part of its Business Management Modernization Program. This
program is designed to guide the departmentwide business transformation
efforts that are ongoing throughout the organization through the
refinement and implementation of a business enterprise architecture. This
architecture is intended to serve as a blueprint to guide and constrain
investments in systems related to DOD's business processes and provide a
basis for planning, developing, and implementing business management
systems. However, as we reported in September 2004, DOD components'
mid-term implementation plans were not clearly linked to the long-term
improvement initiative known as the business management modernization
program. 16 Within the logistics community, the Deputy Under Secretary of
Defense for Logistics

12

DOD Regulation 4140.1-R, version dated May 1998, chapter 4, "Asset Management."

13

GAO/NSIAD-99-40.

14

Pub. L. No. 103-62, Aug. 3, 1993.

15

40 U.S.C. S:S:11101-11703

16

GAO, Financial Management: Further Actions Are Needed to Establish
Framework to Guide Audit Opinion and Business Management Improvement
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).

and Materiel Readiness published the Future Logistics Enterprise document
as a mid-term guide for achieving logistics transformation. Although TAV
was not specifically identified within this document, the End-to-End
Distribution initiative contained in the document incorporated many of the
same characteristics as TAV. In the Focused Logistics Campaign Plan, the
Joint Chiefs of Staff also recognized the importance of TAV and identified
it as one of four pillars upon which logistics transformation must be
built. Despite this focus, we recently reported that DOD experienced
logistics management weaknesses during the build up and early phases of
Operation Iraqi Freedom due to inadequate asset visibility. 17 These
weaknesses are similar to those experienced during Operations Desert
Shield and Desert Storm. For example, as Operation Iraqi Freedom began, a
number of asset visibility weaknesses contributed to a $1.2 billion
discrepancy between the material shipped to Army activities in the Iraqi
theater and the material acknowledged as received. While Army officials
believe that this material was received in theater, lapses in asset
visibility, in some instances, resulted in units cannibalizing major
equipment items, submitting duplicate requisitions, and circumventing the
normal supply systems to obtain needed parts.

As we have previously reported, accurately reporting the amount of
inventory, both in terms of the numbers of items on hand and the valuation
of that inventory, has been a continuing struggle for DOD. 18 One of the
primary factors contributing to this struggle is DOD's outdated and
ineffective management information systems. FFMIA 19 and other financial
management reform legislation have emphasized the importance of improving
financial management, which necessarily encompasses proper inventory
management, across the federal government. Built upon the foundation laid
by the Chief Financial Officers (CFO) Act of 1990, 20 FFMIA emphasizes the
need for agencies to have financial management systems that can generate
timely, accurate, and useful information to make informed decisions and to
ensure accountability on an ongoing basis. With such information,
government leaders will be better positioned to invest

17

GAO, Defense Logistics: Preliminary Observations on the Effectiveness of
Logistics Activities during Operation Iraqi Freedom, GAO-04-305R
(Washington, D.C.: Dec. 18, 2003).

18

GAO/NSIAD-99-40.

19

  Pub. L. No. 104-208, div. A, S:101 (f), title VIII, 110 Stat. 3009, 3009-389
                               (Sept. 30, 1996).

20

Pub. L. No. 101-576, 104 Stat. 2838, Nov. 15, 1990.

Page 8 GAO-05-15 Defense Inventory

  DOD, the Military Services, and DLA Have Not Achieved TAV over Spare and
  Repair Parts in Storage

resources, reduce costs, oversee programs, and hold agency managers
accountable for the way they run government programs. FFMIA requires that
financial management systems comply substantially with federal financial
management systems requirements, applicable federal accounting standards,
and the U.S. Government Standard General Ledger at the transaction level
in order to help achieve these goals.

Although DOD, the military services, and DLA have made varying degrees of
progress toward achieving visibility over in-storage assets, DOD's most
recent goal to achieve TAV by 2004 was not met, and the department's
ability to achieve the new TAV goal of 2010 remains uncertain. First,
while the military services and DLA generally have inventory management
systems that provide visibility over in-storage assets, they do not have,
in all cases, the capability to share data on a near real-time basis.
Second, the inability to share data on a near real-time basis negatively
affects DOD's ability to make efficient and effective inventory management
decisions in support of operating forces. Consequently, DOD did not reach
the goal established in its 1998 Logistics Strategic Plan of achieving 100
percent visibility by 2004. Finally, the ongoing business systems
modernization efforts and other efforts to develop data sharing capability
may not be completed prior to the new goal of achieving TAV in 2010.

Component Inventory As shown in table 1, each of the military services and
DLA has a variety of Management Systems inventory management systems that
provide visibility over the assets Provide Some Visibility stored at the
various levels of supply throughout the department.

However, these systems do not always have the capability to share data on

a near real time basis.

Table 1: Summary of In-Storage Inventory Management Systems
Wholesale supply  Retail intermediate Retail consumer   Servicewide        
level                    level        level             capability         
Army:                                                   
New system: logistics                                   
Modernization program                                   
Legacy systems:        Standard Army  Standard Army       Army Total Asset 
commodity              Retail Supply  Retail Supply             Visibility 
command standard       System         System            
system, and                                             
the standard depot system                               
Navy:                                                   
Uniform Inventory   Uniform Automated Uniform Automated One Touch Support  
Control                   Data        Data              
Program             Processing System Processing System 
                       and Force         and Force         
                               Inventory Inventory         
                              Management Management        
                                Analysis Analysis          
                       Reporting System  Reporting System  
Air Force:                                              
Stock control system  Stock Control   Standard Base     Stock Control      
(DO35A)               System (DO35K)  Supply System     System             
DLA:                                                    
New system: business systems                            
modernization                                           
Legacy systems: Standard     N/Aa     N/Aa              N/Aa               
Automated Materiel                                      
Management                                              
System, and the Defense                                 
Integrated Subsistence                                  
Management System                                       

Source: GAO analysis.

a

For the purposes of this comparison, we did not consider the relatively
small amount of inventory held at DLA retail facilities.

Table 1 shows the various management tools that the military services and
DLA have developed to enable data sharing among the levels of supply for
which they are responsible. These systems generally provide visibility
over specific segments of inventory, but visibility across different
levels of supply or across services is dependent upon being able to share
data from multiple systems. For example, the Navy's Uniform Inventory
Control Program System provides the Navy with visibility over assets
within its wholesale supply system and its Uniform Automated Data
Processing System and Force Inventory Management Analysis Reporting System
provide visibility over assets within its retail supply system. While each
of the components has the ability to share data from existing logistics
systems throughout its particular organization, the capability to share
data on a near real time basis does not always exist. Without the ability
to share data on a near real-time basis, DOD, the military services, and
DLA cannot be assured that they are making inventory management decisions
with accurate and timely records.

While the capability to share some information on a departmentwide basis
also exists, this capability is also negatively affected by the lack of
near real-time data sharing. Specifically, at this time the capability to
share data is sometimes achieved by reconstructing data from other data
sources, which can introduce data reliability errors into the system, or
batch processing of data, which can result in timeliness issues. For
example, the Navy's One Touch Support system provides the Navy with the
capability to access logistics information from a wide variety of Navy
data sources as well as from DLA and other military service systems. Some
of these data are provided through near real-time data links, while other
data are shared among the Army, Air Force, and DLA on a periodic basis
through batch processing.

Lateral redistribution also provides the military services and DLA with
some capability to act upon information provided by the various systems
within the department. Lateral redistribution is an automated capability
used to satisfy a requisition through the most efficient and effective
means. Generally speaking, the lateral redistribution process takes place
when no assets are available to satisfy the requisition at the appropriate
wholesale supply source. The item manager uses an automated query
capability to determine if any of the military services has the item
available in their retail systems prior to initiating a procurement
action. Generally, redistribution of assets that exceed an activity's
authorized inventory level occur automatically, while redistribution of
assets that comprise an activity's authorized inventory level is dependent
on a complex matrix of priorities. If an asset is found within the retail
supply systems of any of the military services, then the lateral
redistribution business rules are used to determine if that asset should
be used to satisfy the requisition or whether the procurement action
should proceed.

In a series of reports issued between March 1999 and July 2004, we have
reported numerous weaknesses in DOD's visibility and control over items
being shipped from one location to another. Specifically, we reported in
March 1999 that the Navy had not effectively controlled its in-transit
inventory and placed enormous amounts of inventory at risk of undetected
theft or misplacement. 21 For example, we found that between fiscal years
1996 and 1998, the Navy reported that it had lost more than $3 billion in
intransit inventory, including some classified and sensitive items such as

GAO, Defense Inventory: Navy's Procedures for Controlling In-Transit Items
Are Not Being Followed, GAO/NSIAD-99-61 (Washington, D.C.: Mar. 31, 1999).

Page 11 GAO-05-15 Defense Inventory

    Continuing Systems Development Efforts May Not Achieve TAV by 2010

aircraft guided-missile launchers, military night vision devices, and
communications equipment. Similarly, we reported in June 2000 that the
Army did not know the extent to which shipped inventory was lost or stolen
because of weaknesses in its inventory controls and financial management
practices. 22 In addition, we reported in July 2002 that the Air Force and
contractor personnel had largely not complied with DOD and Air Force
inventory control procedures designed to safeguard material shipped to
contractors, placing items worth billions of dollars at risk of fraud,
waste, and abuse. 23 Most recently, we reported in July 2004 that the Navy
had failed to maintain proper accountability and visibility over
government furnished equipment shipped to repair contractors. 24

Each of the components has ongoing efforts for developing new systems to
improve their inventory management capabilities. For example, both DLA and
the Army are in the process of fielding their next generation of inventory
management systems for use at the wholesale level, Business Systems
Modernization and Logistics Modernization Program, respectively. In
addition, the Air Force and Navy also have similar ongoing efforts to
redesign their logistics systems. While these efforts may help to attain
TAV, we are concerned that DOD's near term efforts may not be consistent
with its long-term strategy-Business Management Modernization Program. For
example, we reported in September 2004 that clear links between mid-range
and long-range efforts to address deficiencies in DOD's business
operations were not yet established. 25 Further, recent reviews of two DOD
system efforts have raised concerns regarding aspects of DOD's system
development oversight and monitoring. 26 For example, we recently reported
that Army and DLA systems do not provide a corporate solution for TAV
because that solution depends on the successful development and
implementation of other systems for which timeframes and associated costs
have not yet been fully

22

GAO, Defense Inventory: Army Needs to Strengthen and Follow Procedures to
Control Shipped Items, GAO/NSIAD-00-109 (Washington, D.C.: June 23, 2000).

23

GAO, Defense Inventory: Air Force Needs to Improve Control of Shipments to
Repair Contractors, GAO-02-617 (Washington, D.C.: July 1, 2002).

24

GAO, Defense Inventory: Navy Needs to Improve the Management Over
Government-Furnished Material Shipped to Its Repair Contractors,
GAO-04-779 (Washington, D.C.: July 23, 2004).

25 GAO-04-910R.

26 GAO-04-615.

defined. Achieving TAV within the Army will require the Logistics
Modernization Program to be integrated with other Army systems currently
under development-the Product Lifecycle Management Plus and Global Combat
Support System-Army. As of May 2004, there were no estimates for the cost
or time frames for completing the development and implementation of the
Product Lifecycle Management Plus system. Similarly, although the Army's
capital investment program includes funding of more than $1 billion for
the Global Combat Support System-Army through fiscal year 2009, the Army
stated that the total cost of the program could not be accurately
estimated until all process requirements are defined at some later date.

From a departmentwide perspective, joint total asset visibility is an
evolving process designed to (1) provide users with information on the
location, movement, status, and identity of units, personnel, equipment,
and supplies and (2) facilitate the capability of users to act upon the
information. Currently, this capability is provided through the Joint
Total Asset Visibility (JTAV) system, which relies on non-integrated
inventory management systems within the military services and DLA for
visibility data. While JTAV is available to users throughout the
department, it does not provide TAV because the system is constrained by
reliance on the availability, accuracy, and timeliness of information from
the military services' and DLA's information systems. For example, a
recent contractor study of logistics performance in Operation Iraqi
Freedom stated that because JTAV will be replaced at the end of fiscal
year 2005 and is only being funded to support its existing capabilities,
little has changed in JTAV capability since the DOD Inspector General
reported shortfalls in the system's capability in 2002. 27 In addition,
the contractor study stated that JTAV was seen by users as being
incomplete and untimely, and therefore, could not be relied upon.
Consequently, users were accessing component information systems
separately and integrating the data from multiple systems manually.

At this time, DLA is leading a departmentwide effort called the Integrated
Data Environment that is intended to provide joint visibility throughout
the department. This new capability is based on establishing normalized
data requirements that will have to be supported by existing and new
business information systems. This capability is expected to be
operational during fiscal year 2005 within DLA, and is expected to provide

Science Applications International Corporation, Objective Assessment of
Logistics in Iraq, March 2004.

Page 13 GAO-05-15 Defense Inventory

  Significant Impediments Hinder Achievement of TAV

DLA logistics data to users throughout DLA and the department. DLA's
capability is expected to serve as the model for instituting similar data
environments in the military services that can ultimately be linked to
provide visibility across the department. This departmentwide capability
is expected to be available in August 2007. However, because the
Integrated Data Environment utilizes data from the various military
service and DLA systems, TAV will not be achieved through the Integrated
Data Environment until the individual systems are developed and
implemented within the military services and DLA.

A number of significant impediments hinder DOD and the components'
abilities to attain their goals of achieving TAV. First, DOD lacks a clear
long-term strategy to guide its TAV efforts and address key issues such as
systems integration. Second, integration and interoperability of the
numerous information systems used to support logistics operations and
inventory management continue to present challenges to DOD, the military
services, and DLA. Finally, DOD, the military services, and DLA have
longstanding data accuracy and reliability issues pertaining to their
numerous inventory management systems. Given the lack of an overarching
plan to guide TAV efforts, the continuing integration issues, and the
shortcomings of the existing systems, it seems unlikely that the military
services and DLA will meet the department's target of achieving TAV by
2010.

                           TAV Hindered by Lack of a
                            Clear Long-Term Strategy

Because DOD continues to rely on the individual efforts of DLA and the
military services to achieve TAV without a clear link to its long-term
improvement initiative the Business Management Modernization Program, it
is unlikely DOD will achieve TAV by its 2010 target date. When we examined
the status of TAV within DOD in 1999, we recommended that DOD develop a
departmentwide strategic plan or common strategy and associated
components' implementation plans to improve the management and
implementation of TAV. Furthermore, we recommended these plans be based on
the outcome-oriented principles of GPRA. However, DOD responded that
better asset management would be attained by each component through
improvements to their business and inventory systems and databases. DOD's
Business Management Modernization Program is responsible for oversight and
monitoring of the department's business transformation initiatives. As
part of this program, DOD is continuing its efforts to refine and
implement the department's business enterprise architecture to serve as a
blueprint to guide business transformation efforts and business systems
acquisition and development. One of the objectives of this architecture is
to attain TAV by fiscal year 2010.

However, as discussed below, we have previously reported that weaknesses
exist in the design and content of the most recent version of the
architecture. Further, we reported in September 2004 that there is no
clear link between the components' implementation plans and the longterm
objectives of the department's business transformation program. 28
Currently, the department is required to report annually to Congress by
March 15 of each year on the progress it is making in refining and
implementing the business enterprise architecture in support of its
business management modernization program.

While the logistics community has identified TAV as one of the four
pillars needed as the foundation for its logistics transformation in its
Focused Logistics Campaign, it has not established a long-term strategy to
focus and guide the components' efforts. However, TAV is not specifically
included in the Future Logistics Enterprise-the mid-term plan for
logistics transformation. While the End-to-End Distribution initiative
within the Future Logistics Enterprise incorporates many of the
characteristics of TAV, it does not require the components to submit
supporting plans and does not include some key elements of a comprehensive
plan necessary to achieve TAV. For example, the department still has not
defined a management framework, established accountability, identified
resource requirements, or established performance measures in regards to
TAV.

Even when a plan to improve TAV is developed, problems with departmentwide
implementation still occur. For example, in response to Program Budget
Decision 422, dated December 2001, each of the military services developed
separate plans for implementing the decision, which reflected a disparity
in the extent to which they were willing to implement the departmentwide
policy. While this document called for the military services to eliminate
duplicative retail supply operations by returning management and ownership
of DLA-managed items being held by the military services to DLA, the
services' implementation plans each interpreted the requirements
differently. For example, the Navy plan called for a small number of pilot
sites where DLA would take over the ownership of the DLA-managed items
being stored at the Navy retail supply activities. The Air Force, on the
other hand, did not participate in

GAO, Financial Management: Further Actions Are Needed to Establish
Framework to Guide Audit Opinion and Business Management Improvement
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).

Page 15 GAO-05-15 Defense Inventory

    Information Systems Integration Challenges Hinder TAV Achievement

any of the pilot projects, and planned only to eliminate co-located
inventory items at the Air Logistics Centers.

DOD has not achieved the necessary integration or interoperability of its
inventory (business) systems to support TAV. TAV cannot be achieved unless
these multiple business systems provide users such as combatant
commanders, operating units and inventory managers with accurate data on
the quantity, location, condition, and movement of inventory. As part of
its ongoing business systems modernization efforts DOD is creating a
repository of the department's existing business systems. As of April
2003, this repository contained 210 inventory-related information systems
within the logistics domain, as shown below in table 2.

Table 2: Reported DOD Logistics Business Systems by Functional Area
Logistics                    
                                 Air         Navy/ Marine                     
Functional Area              Force   Army Corps        DFASa Other b Total
Inventory                        50    90           42   4     24      210 
Logistics                        57    44           28   2     29      160 
Transportation                    8    11            2   0     11       32 
Personal property management      6     5            5   0      2       18 
Real property management          3     3            4   0      0       10 
National defense property                                            
management                         2    0            1   0      0        3 
Other functions combined          51    30          21   5     11      118 
Acquisition                        3    8            1   0      2       14 
Subtotal                          180  191         104  11     79      565 

Source: GAO analysis of BMMP April 2003 Data.

aDefense Finance and Accounting Service.

bIncludes the Defense Logistics Agency systems.

Table 2 clearly shows that there are numerous systems operating throughout
DOD within the logistics domain and the inventory functional area. As we
reported in May 2004, these systems are not integrated and thus have
multiple points of data entry, which can result in data reliability
problems due to data input errors at the various points of data entry. 29

29 GAO-04-615.

DOD is refining and implementing a business enterprise architecture as
part of its Business Management Modernization Program in order to define
the common operating environment and data requirements for its business
systems including logistics. Under the incremental approach adopted by
DOD, the target for achieving TAV is fiscal year 2010. In the long-term,
this architecture could serve to guide business systems investments
throughout the department and ensure that new business systems are
designed and built to be integrated. In May 2001, we advocated the
creation of an architecture to guide and constrain the billions of dollars
the department planned to spend to modernize its business systems. 30 We
reiterated this recommendation in September 2003 and further recommended
that DOD provide more sufficient descriptive content related to the future
business operations and supporting technology necessary for refining and
implementing a business enterprise architecture. 31 However, as we
recently reported, 32 after three years, more than $203 million in
obligations, and disbursements totaling $111 million, there has not been
any significant change in the content of DOD's architecture. Consequently
the architecture continues to lack many of the key elements such as
sufficient descriptive content related to future business operations and
supporting technology to support effective acquisition and implementation
of systems solutions and associated operational changes. In addition, DOD
has not established the necessary management structure, processes, and
controls necessary to refine and implement the business enterprise
architecture. For example, DOD has not yet (1) assigned accountability and
responsibility for directing, overseeing, and approving the architecture;
(2) developed specific performance measures needed to evaluate the
progress made in developing the architecture; (3) developed either
near-term or long-term plans for developing the architecture that
explicitly identify and establish a baseline for actions to be taken,
milestones to be achieved, cost estimates to be met and targeted outcomes
to be achieved; and

(4) established effective management oversight and control over ongoing

30

GAO, Information Technology: Architecture Needed to Guide Modernization of
DOD's Financial Operations, GAO-01-525 (Washington, D.C.: May 17, 2001).

31

GAO, DOD Business Systems Modernization: Important Progress Made to
Develop Business Enterprise Architecture, but Much Work Remains,
GAO-03-1018 (Washington, D.C.: Sept. 19, 2003).

32

GAO, DOD Business Systems Modernization: Limited Progress in Development
of Business Enterprise Architecture and Oversight of Information
Technology Investments, GAO-04-731R (Washington, D.C.: May 17, 2001).

    Long-Standing Data Accuracy and Reliability Issues Hamper TAV Achievement

business systems modernization investments. Finally, as we reported in May
2004, DOD has not yet developed the detailed plans that include
performance measures for the quality, content, and utility of the
architecture in support of the incremental approached being used to
develop the business enterprise architecture.

Problems with data accuracy and reliability of data pertaining to the
quantity, location, and value of inventory within the numerous inventory
management systems are long-standing issues that hinder the achievement of
TAV. For example, military service audit agencies and the DOD Inspector
General identified various types of inaccurate inventory data in the
military services' information systems. Since fiscal year 2002, these
inaccuracies included more than $200 million of excess or unrecorded
inventory that was not visible to item managers as well as significant
misstatements in the reported inventory balances. Since these unrecorded
inventories were not visible to item managers, they could not be used to
satisfy current operating requirements and represent an unnecessary cost
if additional inventory was purchased that was not needed. To illustrate
this point, the Air Force Audit Agency identified a $3.3 million
overstatement in the procurement and repair requirements for three
aircraft systems that resulted from the lack of visibility over $10.8
million worth of inventory for these three systems.

Because DOD does not have integrated systems, methods such as multiple
points of entry, manual reentry of data, and data interpreters are relied
upon to enable data sharing among the various DOD, DLA, and military
service systems. All of these methods introduce the potential for
inaccurate data. For example, in fielding emerging systems such as the
Business Systems Modernization and the Logistics Modernization Program,
numerous interfaces had to be developed with existing systems to enable
data sharing. When some of these interfaces did not work as intended,
manual reentry of transactions was relied upon to enable the required data
transfer. According to DOD officials these, problems were only a temporary
solution until modifications to the interfaces could be made. This problem
was not only costly, but could have also led to the introduction of
inaccurate and unreliable data into emerging systems.

  DOD Has Made Little Progress toward Assuring That Inventory Systems Comply
  with Financial Standards

DOD, the military services, and DLA have made little progress in assuring
that inventory management systems that provide visibility over spare and
repair parts are substantially compliant with the requirements of the
Federal Financial Management Improvement Act (FFMIA) of 1996. The
department recognizes the weaknesses in their financial management systems
in general and stated in DOD's Performance and Accountability Report for
fiscal year 2003 that these systems did not substantially comply with
Federal financial management systems requirements, generally accepted
accounting principles, and the U.S. Government Standard General Ledger at
the transaction level. In addition, the report stated that DOD's financial
management and feeder systems could not provide adequate evidence to
support various material amounts on the financial statements. Since 1990,
we have identified inventory management as a high-risk area within DOD and
specifically identified DOD's outdated and ineffective management
information systems as a primary factor causing this weakness. Inventory
management system weaknesses hinder DOD's and components' efforts to
collect accurate, reliable, and timely financial information.

While DOD is currently requiring the military services and DLA to certify
that emerging systems are in substantial compliance with federal financial
management requirements, we are concerned that the department lacks
adequate policies and procedures to determine whether compliance has in
fact been achieved. For example, we recently reported that in developing
the Business Systems Modernization and Logistics Modernization Program,
DLA and the Army, respectively, had not fully defined the capabilities
required from these systems or how these capabilities would be tested to
ensure the new systems provided the capabilities needed, including whether
the systems comply with federal financial management requirements. 33 In
addition we found, in both instances, that testing of transactions was not
performed to validate that they would be processed as intended. For
example, to test the Logistics Modernization Program, the Army relied upon
Joint Financial Management Improvement Program (JFMIP) 34 testing of the
commercial off the shelf software in fiscal year

33 GAO-04-615.

34

The Joint Financial Management Improvement Program is a joint and
cooperative undertaking of the Department of the Treasury, the GAO, the
Office of Management and Budget, and the Office of Personnel Management
working in cooperation with each other and other agencies to improve
financial management practices in government. The Program Management
Office, managed by the Executive Director, tests vendor
commercial-off-the-shelf packages and certifies that they meet certain
federal financial management systems requirements for core financial
systems.

                                  Conclusions

1999 to validate that 147 requirements were satisfied for the Logistics
Modernization Program. We concluded that JFMIP's testing should not be
relied on to validate these requirements because it did not address
entityspecific tests of transactions or systems interfaces. In addition,
because the Army modified the basic commercial software package, the Army
cannot be assured that these 147 requirements will produce the intended
results. Consequently, although these two systems were certified as being
compliant, the weaknesses identified in the certification process raise
concerns regarding the system's compliance with the FFMIA requirements.

While considerable efforts were made to increase asset visibility over
spare and repair parts in storage, DOD did not attain TAV by the end of
fiscal year 2004. Further, it remains questionable whether DOD will
achieve TAV by fiscal year 2010. While some efforts have been undertaken
to increase asset visibility, these efforts have been limited to specific
components due to the absence of an effective departmentwide long-term
strategy. As a result, DOD's efforts to achieve TAV have generally been
narrow in scope, uncoordinated with other components, not integrated with
other inventory management systems, and fail to address longstanding data
reliability problems. Without an effective long-term strategy containing
goals, measures, time frames, and accountability, wartime logistics
problems similar to those encountered in our most recent operations in
Iraq are likely to continue. These problems could negatively impact
readiness, could cause operating units to resort to inefficient practices
such as cannibalization, and could result in the unnecessary expenditure
of millions or even billions of dollars on unneeded inventory or on
systems and initiatives that do not attain TAV. In addition, DOD has made
little progress in assuring that its inventory management systems comply
with federal financial management standards, and we remain concerned that
system tests were not conducted to validate that relevant data were
processed as intended. Until DOD ensures that its inventory management
systems are fully compliant with federal financial management standards,
concerns will remain about the quality of the financial data reported and
its value for making inventory management decisions related to procurement
and distribution of items.

We continue to believe, as we recommended in April 1999, that DOD

  Recommendations

should develop a cohesive, departmentwide plan to ensure that TAV is
achieved. Specifically, we recommend that the Secretary of Defense develop
a departmentwide long-term TAV strategy as part of the Business Enterprise
Architecture that

     o describes the complete management structure and assigns accountability
       to specific offices throughout the department, with milestones and
       performance measures, for ensuring timely success in achieving TAV;
     o identifies the resource requirements for implementing TAV and includes
       related investment analyses that show how the major information
       technology investments will support TAV goals;
     o identifies how departmentwide systems issues that affect
       implementation of TAV will be addressed; and
     o establishes outcome-oriented TAV goals and performance measures for
       all relevant components and closely links the measures with timelines
       for improvement.

In addition, since 2001, we have made a number of recommendations aimed at
improving DOD's refinement and implementation of the business management
modernization program. Most recently, we identified the need to have
component plans clearly linked to the long-term objectives of the
department's business management modernization program. As they relate to
TAV, we continue to believe that these recommendations are valid.

  Matter for Congressional Consideration

If the Congress wants a better understanding of the department's plans and
progress for attaining TAV, it may wish to consider having the Secretary
of Defense include a section specifically addressing TAV implementation in
its annual report to the Congress on the progress it is making in refining
and implementing the business enterprise architecture in support of the
business management modernization program, as required by section 332 of
the fiscal year 2005 national defense authorization act. Specifically, the
Congress may wish to consider requiring the Secretary of Defense to
outline in this annual report the department's plans, milestones,
performance measures, and progress for attaining TAV throughout the
department.

  Agency Comments
  and Our Evaluation

In commenting on a draft of this report, the Acting Deputy Under Secretary
of Defense for Logistics and Materiel Readiness concurred with the intent
of our first three recommendations and partially concurred with our last
recommendation. Specifically, the department acknowledges the need to
improve visibility over spare and repair parts, but believes that its
current strategy of modernizing logistics systems and implementing an
integrated data approach is the way to achieve TAV. In addition, while
DOD's comments also recognized the need to place increased emphasis on TAV
in its modernization program and ensure that the component efforts link
more closely to long-term objectives like TAV, the comments did not
include specific actions the department plans to take to address its asset
visibility weaknesses, nor did it provide milestones for when it plans to
implement all of its modernization programs. Because DOD does not plan to
modify its approach to implementing TAV, we have added a matter for
congressional consideration suggesting that the Congress may wish to
require the Secretary of Defense to report annually on the Department's
plans and progress for attaining TAV. DOD's comments are reprinted in
appendix III of this report.

In concurring with the intent of our recommendations that the Secretary of
Defense develop a deparmentwide long-term TAV strategy that

(1)
           describes the complete management structure and assigns
           accountability to specific offices throughout the department, with
           milestones and performance measures for ensuring timely success in
           achieving TAV, (2) identifies the resource requirements for
           implementing TAV and includes related investment analyses that
           show how the major information technology investments will support
           TAV goals, and

(3)
           identifies how departmentwide systems issues that affect
           implementation of TAV will be addressed, DOD stated that these
           issues would be addressed as part of the ongoing business systems
           modernization programs. However, as discussed in this report,
           these ongoing efforts may not ensure that DOD will attain TAV. For
           example, we reported in May 2004 that DOD had not yet established
           the necessary management structure, processes, or controls
           necessary to refine and implement the business enterprise
           architecture, a key component of DOD's business management
           modernization program. In addition, component efforts to modernize
           business systems will not necessarily provide solutions to TAV
           because these efforts rely on the creation of yet more systems to
           attain TAV. Without a departmentwide long-tem strategy as part of
           the Business Enterprise Architecture that clearly identifies how
           business systems modernization programs relate to and address TAV,
           DOD may not achieve its TAV goal.

In partially concurring with our recommendation that the Secretary of
Defense develop a departmentwide long-term TAV strategy that establishes
outcome-oriented goals and performance measures for all relevant
components and links the measures with timelines for improvement, DOD
stated that outcome-oriented goals and measures specific to the end-to-end
supply chain, such as customer wait time, will continue to be monitored.
We agree that measures such as customer wait time should continue to be
monitored. Similarly, we agree that having a viable data strategy as part
of the Business Enterprise Architecture and a sound portfolio management
process are also essential to attaining TAV. However, as we reported in
May 2004, DOD had not yet established an effective management oversight
and control process for ongoing business systems modernization
investments. In addition, the integrated data environment, which could
provide the viable data strategy, is still under development. With
business systems modernization taking place while both the integrated data
environment and business enterprise architecture are still being
developed, a departmentwide long-term strategy becomes even more critical
to ensure that the modernization efforts support the department's
objectives such as TAV.

We are sending copies of this report to Chairman and Ranking Member, House
Appropriations Subcommittee on Defense. We are also sending copies to the
Secretary of Defense; the Director, Office of Management and Budget; the
Secretary of the Army; the Secretary of the Navy; the Secretary of the Air
Force; and the Director, Defense Logistics Agency. Copies will also be
available at no charge on our Web site at

http://www.gao.gov

If you or your staff have any questions about this report, please contact
me at (202)512-8365 or e-mail me at [email protected]. GAO contacts and key
contributors to this report are listed in appendix IV.

Sincerely yours,

William M. Solis Director, Defense Capabilities and Management

                       Appendix I: Scope and Methodology

To determine what progress has been made in implementing TAV within DOD,
the military services, and the DLA, we obtained and analyzed information
on various initiatives pertaining to improving inventory management
practices. We reviewed these initiatives to identify the objectives and
scope of the initiatives. We also evaluated whether these initiatives
would have any impact on the visibility over assets. To learn more about
the initiatives themselves and what benefits would be derived from
implementing them, we interviewed knowledgeable officials from the
following logistics organizations:

     o Department of Air Force: Deputy Chief of Staff Installations &
       Logistics, Directorate of Logistics Readiness, Material Management
       Policy Division; AF/ILFD; Deputy Chief of Staff Installations &
       Logistics, Maintenance Management Division; Air Force Material
       Command;
     o Department of Army: Supply Policy Division, Headquarters, Office of
       the Deputy Chief of Staff, G4; Supply Policy & Logistics Automation
       Task Force, Headquarters, Office of the Deputy Chief of Staff, G4;
       Transportation, Headquarters Army Material Command; Headquarters,
       Office of the Deputy Chief of Staff, G4-LESCO; Headquarters Army
       Material Command; DALO-SMP; DALO-TEO; Headquarters, Army Material
       Command-Logistics Support Activity;
     o Department of Navy: Naval Supply Systems Command;
     o Defense Logistics Agency: DLA/J-333-Supply Chain Integration Division;
       and
     o The Joint Staff Directorate of Logistics (J-4).

Additionally, we relied on other GAO audit work for information about some
on-going business systems modernization efforts as they related to
inventory management. Finally, we analyzed the findings documented in
audit reports prepared by the DOD Inspector General and the military
service audit agencies dating back to fiscal year 2001 as another means of
gauging the amount of progress being made in implementing TAV.

To identify the impediments that DOD, the military services, and DLA must
overcome in order to achieve TAV, we reviewed previous GAO reports
(including the 1999 report on TAV). We also reviewed DOD Inspector General
reports and military service audit reports pertaining to asset visibility
and inventory management to determine if additional

Appendix I: Scope and Methodology

impediments existed and whether previously identified impediments continue
to be a problem. We also discussed impediments to achieving TAV with the
officials identified above as well as officials from the Supply Chain
Integration Office and the Transportation Policy Office within the Office
of Deputy Under Secretary of Defense Logistics Materiel Readiness. Also we
reviewed policies, rules, and regulations to determine what departmentwide
guidance are provided for achieving TAV. Lastly, we relied on other GAO
audit work for information about (1) logistics challenges experienced
during Operation Iraqi Freedom due to inadequate asset visibility, (2) the
Business Enterprise Architecture effort underway and its relationship to
TAV, and (3) the relationship between DOD component improvement
initiatives and the departments business management modernization program.

To assess what progress has been made in ensuring that inventory
management systems are fully compliant with statutory requirements for
federal financial management systems, we reviewed the requirements
outlined in the Federal Financial Management Improvement Act of 1996 and
the standards prescribed in the Joint Financial Management Improvement
Program. Additionally, we relied on other GAO audit work for information
about how DOD is ensuring compliance of existing and emerging inventory
systems with the federal financial management systems requirements.

We conducted our work from August 2003 to August 2004 in accordance with
generally accepted government auditing standards.

                     Appendix II: Key Programs and Systems

Future Logistics Enterprise-DOD's mid-term vision to accelerate logistics
improvements, enhance support to the warfighter, and align logistics
processes with the operational demands of the 21st century. The Future
Logistics Enterprise builds upon and accelerates specific, ongoing service
and agency initiatives to meet the requirements of the Quadrennial Defense
Review and the National Defense Strategy.

End-to-End Distribution-One of six initiatives contained in the Future
Logistics Enterprise. End-to-End Distribution is designed to streamline
warfighter support by providing materiel, including retrograde and
associated information from the source of supply or point of origin to the
point of use.

Focused Logistics Campaign Plan-A comprehensive, integrated approach for
achieving full spectrum support for the future joint warfighter. The plan
describes how the full potential of focused logistics will be achieved
through revolutionary changes to information systems, reengineered
processes, innovation in organizational structures, and advances in
transportation technology.

Business Management Modernization Program-The Business Management
Modernization Program is the department's business transformation
initiative and encompasses defense policies, processes, people, and
systems that guide, perform, or support all aspects of business
management-including development and implementation of the business
enterprise architecture. The Under Secretary of Defense (Comptroller)
established a program management office called Business Modernization and
Systems Integration (BMSI), to oversee and manage the program.

Business enterprise architecture-The business enterprise architecture is
designed to provide a clear and comprehensive picture of DOD's business
operations across six domains. This picture consists of a snapshot of the
current operational and technical environment and its target environment,
as well as a capital investment roadmap for transitioning from the current
environment to the target environment.

Joint Total Asset Visibility-Joint Total Asset Visibility is the Defense
Department's evolving process designed to track equipment, personnel, and
supplies.

Logistics Modernization Program-The Army Materiel Command system that will
be used to capture logistics data from the wholesale supply system. It
will replace two existing materiel management systems,

Appendix II: Key Programs and Systems

the Commodity Command Standard System and the Standard Depot System.

Business systems modernization-The DLA system that will replace two
existing materiel management systems, the Standard Automated Materiel
Management System and the Defense Integrated Subsistence Management
System.

Integrated data environment-This initiative will provide the capability to
integrate DOD logistics information within DLA. The environment will
facilitate the sharing of data across the department.

Global Combat Support System-This is a family of systems that are designed
to provide an information-centric environment thereby allowing DOD users
to access shared data and applications regardless of location.

Standard General Ledger-The Standard General Ledger provides a uniform
Chart of Accounts and technical guidance to be used in standardizing
Federal agency accounting.

Joint Financial Management Improvement Program-The Joint Financial
Management Improvement Program is a joint and cooperative undertaking of
the Department of the Treasury, the GAO, the Office of Management and
Budget, and the Office of Personnel Management working in cooperation with
each other and other agencies to improve financial management practices in
government. The Program Management Office, managed by the Executive
Director, tests vendor commercial-off-the-shelf packages and certifies
that they meet certain federal financial management systems requirements
for core financial systems.

Virtual Master Stock Inventory Record-The Virtual Master Stock Inventory
Record is a database managed by the Navy that displays stock availability
at the major Navy stock points. The Virtual Master Stock Inventory Record
also provides the capability to view quantity and location of specific
items.

Appendix III: Comments from the Department of Defense

Appendix III: Comments from the Department of Defense

Appendix IV: GAO Contacts and Staff Acknowledgments

David Schmitt (757) 552-8124

  GAO Contacts

John Wren (757) 552-8235

In addition to the individuals named above, key contributors to this
report included Ann DuBois, Shvetal Khanna, Harry Knobler, Katherine
Lenane, and Janine Prybyla.

(350420)

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