Defense Inventory: Inadequate Compliance With Controls for Excess
Firearms and Other Sensitive Items (Letter Report, 11/29/1999,
GAO/NSIAD-00-27).

Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) procedures for the disposal and destruction of excess
firearms, items with national security implications, and
pharmaceuticals.

GAO noted that: (1) internal control procedures designed to protect
firearms, items with national security implications, and pharmaceuticals
were not always followed at three of the seven defense components GAO
visited; (2) instead of being separated, key duties in the areas of
transport, destruction, and record keeping were done by the same person;
(3) required certificiations that sensitive excess items were actually
destroyed were missing; (4) also, serial numbers were not always
recorded on shipping documents as required: (5) although GAO was able to
account for the items in 104 of 107 transactions reviewed, GAO was
unable to trace the actual disposition of the items in 3 transactions;
(6) while the number of these items potentially lost or stolen is small
relative to the total defense inventory, it is still of concern because
they could be misused if they get in the wrong hands; (7) DOD believed
that the items involved in the three transactions had been destroyed,
but it could not be certain since no documentation existed that would
support its position; (8) when firearms, items with national security
implications, and pharmaceuticals become excess and are no longer
needed, DOD procedures require the component to destoy them and remove
the items from inventory records by coding the transactions as
"inventory decreases associated with destruction of the item"; (9)
however, defense components have been removing these items from
inventory records by recording these transactions as "items being
shipped to a disposal office"; (10) none of the items, however, were
actually shipped to a disposal office; and (11) these transactions were
incorrectly recorded because of mistakes and unsupported inventory
adjustments that occurred because of inadequate management oversight and
training and computer systems programming errors.

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

 REPORTNUM:  NSIAD-00-27
     TITLE:  Defense Inventory: Inadequate Compliance With Controls for
	     Excess Firearms and Other Sensitive Items
      DATE:  11/29/1999
   SUBJECT:  Logistics
	     Equipment inventories
	     Military inventories
	     Internal controls
	     Property disposal
	     Surplus federal property
	     Drugs
	     Firearms
IDENTIFIER:  E2 Aircraft
	     DOD In-Transit Accountability System
	     MK46 Torpedo

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Report to the Chairman, Committee on Armed Services, House of
Representatives

November 1999

DEFENSE INVENTORY

Inadequate Compliance With Controls for Excess Firearms and Other
Sensitive Items
*****************

*****************

GAO/NSIAD-00-27

Letter                                                                     3

Appendixes

Appendix I:Scope and Methodology

                                                                         16

Appendix II:Comments From the Department of Defense

                                                                         18

Appendix III:GAO Contacts and Staff Acknowledgments

                                                                         20

Table 1:  Reasons Item Disposition Was Incorrectly Recorded10

 The Department refers to firearms as "small arms." Small arms are defined
as handguns; shoulder-fired weapons; light automatic weapons up to and
including 50-caliber machine guns; recoilless rifles up to and including
106 millimeter; mortars up to and including 
 See our reports DOD Financial Management: More Reliable Information Key
to Assuring Accountability and Managing Defense Operations More Efficiently 
                                                     National Security and 
                                             International Affairs Division

B-282574

November 29, 1999

The Honorable Floyd D. Spence
Chairman, Committee on Armed Services
House of Representatives

Dear Mr. Chairman:

This is the fourth and final report in a series of reports responding to
your request that we review the Department of Defense's management
procedures for controlling excess items. We previously reported on the
Department's needless destruction/Footnote1/ of certain usable aircraft
parts, on inappropriate sales of parts with military technology and flight
safety risks, and on items not being properly controlled during shipment
to disposal./Footnote2/

This report responds to your request that we review the Department's
management controls for three types of sensitive excess items-firearms,
items that are protected for national security reasons such as those with
precision guidance technologies, and pharmaceuticals./Footnote3/
Specifically, we evaluated compliance with internal control procedures for
(1) safeguarding excess firearms, items with national security
implications, and pharmaceuticals and (2) recording the removal of such
items from inventory records. Controlling these items is particularly
important because they include military technologies and capabilities and
are vulnerable to theft. 

Department internal control regulations require that defense components
safeguard sensitive excess items and accurately record the location of
these items in inventory records. To achieve this, Department regulations
require separating work assignments, documenting item destruction events,
and recording excess item serial numbers on shipping documents. The
Department depends on its components to develop local procedures and
instructions for implementing these regulations. The Department also
depends on the component that has the excess firearms, items with national
security implications, and pharmaceuticals to destroy and/or dispose of
them and to record the transactions in inventory records. The Department
uses other procedures for disposing of less sensitive excess items that
involve sending the items to local disposal offices. To determine if the
Department's safeguarding and recording procedures were being followed, we
judgmentally selected and reviewed 107 transactions valued at $3.9 million
of excess firearms, items with national security implications, and
pharmaceuticals disposed by defense components. The scope and methodology
of our work are described in greater detail in appendix I.

Results in Brief

Internal control procedures designed to protect firearms, items with
national security implications, and pharmaceuticals were not always
followed at three of the seven defense components we visited. Instead of
being separated, key duties in the areas of transport, destruction, and
record keeping were done by the same person. Required certifications that
sensitive excess items were actually destroyed were missing. Also, serial
numbers were not always recorded on shipping documents as required.
Although we were able to account for the items in 104 of 107 transactions
reviewed, we were unable to trace the actual disposition of the items in 
3 transactions. These included a digital computer used for defensive
countermeasures on the E-2 aircraft, a high power simulator used to test
early warning systems on aircraft, and 18 computers used for guiding air
or surface launched MK-46 torpedoes to a target. While the number of these
items potentially lost or stolen is small relative to total defense
inventory, it is still of concern because they could be misused if they
get in the wrong hands. The Department believed that the items involved in
the three transactions had been destroyed, but it could not be certain
since no documentation existed that would support its position. 

When firearms, items with national security implications, and
pharmaceuticals become excess and are no longer needed, Department
procedures require the component to destroy them and to remove the items
from inventory records by coding the transactions as "inventory decreases
associated with destruction of the item." However, defense components have
been removing these items from inventory records by recording these
transactions as "items being shipped to a disposal office." None of the
items, however, were actually shipped to a disposal office. Inventory,
shipping, receipt, and disposal records showed that the items were instead
destroyed or disposed of by the defense component that had the items.
These transactions were incorrectly recorded because of mistakes and
unsupported inventory adjustments that occurred because of inadequate
management oversight and training and computer system programming errors.
For example, for the 12-month period ending 
March 31, 1998, the disposition of almost $99 million of excess firearms,
items with national security implications, and pharmaceuticals was
incorrectly recorded in the Department's inventory records. This incorrect
information on the location of excess sensitive items was automatically
provided to the Department's In-transit Accountability System, causing the
system's reports to be erroneous and diminishing their value as a tool for
tracking excess items. 

To improve controls over these sensitive excess items, we are recommending
that the Secretary of Defense direct defense components to follow the
Department's procedures, provide increased management oversight and
training on record keeping procedures, and correct computer programming
errors.

Background

The Department's procedures for disposing of excess nonsensitive property
and most sensitive property with military technologies involve sending the
items to local disposal offices and recording the transactions as
shipments to the disposal offices./Footnote4/ Unlike the items that are
sent to disposal offices for disposition, the Department requires excess
firearms, items with national security implications, and pharmaceuticals
to be destroyed and disposed by the component that has the items and for
recording the transactions as "inventory decreases associated with the
destruction of the item." The Department does not maintain information on
the amounts of these excess sensitive items, but it estimates that
annually it could be several hundred million dollars. 

Physical security over excess firearms, items with national security
implications, and pharmaceuticals is more stringent than for other excess
nonsensitive and sensitive items. Specifically, access to firearms is
limited to authorized personnel and controlled by individual serial
numbers at a central registry and at base and unit level registries. Items
with national security implications and pharmaceuticals are stored
separately from other material in a limited access area and secured under
an approved locking system. Items with national security implications are
also controlled by serial number at the unit level. Firearms, items with
national security implications, and pharmaceuticals must be physically
inventoried quarterly and missing items must be accounted for.

The Department's problems with accountability over firearms, items with
national security implications, and pharmaceuticals date back to the 1970s
when many thefts of such items were discovered. The Department has
developed procedures to control such items, but according to the
Department's and our audits, these procedures and their implementation are
not always effective. For example, in March 1999, we reported that
sensitive Navy items, including items with national security implications,
were vulnerable to loss or undetected theft because the Navy did not
follow control procedures./Footnote5/ Further, we, the Department's
Inspector General, and service auditors have reported on the Department's
ineffective asset control and accountability procedures leaving items
vulnerable to loss or theft./Footnote6/

Section 503 of the Antiterrorism and Effective Death Penalty Act of 1996
required the Attorney General and the Secretary of Defense to conduct a
joint study of the number and extent of thefts from military arsenals of
firearms and other materials that are potentially useful to terrorists.
The Department's reported losses are not extensive relative to the total
inventory of these items but are still a concern because of their
potential danger should they get into the hands of terrorists or foreign
countries. Specifically, the Department's 1998 report under the act
disclosed 
117 instances of losses of firearms and other materials of potential use
to terrorists during the period October 1992 through November
1996./Footnote7/ Many of those losses occurred during training exercises,
but 69 of the losses 
(59 percent) were attributed to theft and were never located. For example,
nine thefts reported during fiscal year 1996 involved firearms, including
a machine gun, which are still missing. 

Inadequate Compliance With Internal Controls Leaves Excess Sensitive Items
Vulnerable to Loss or Theft

Department regulations, which set up internal controls to safeguard excess
firearms, items protected for national security reasons, and
pharmaceuticals, were not always followed. Defense components at three of
the seven sites we visited did not follow the Department's internal
control regulations. Specifically, (1) key duties in the areas of
transport, destruction, and record keeping were done by the same person
instead of being separated, (2) required certifications were missing from
forms used to control the destruction of excess items protected for
national security reasons, and (3) serial numbers were not always recorded
on shipping documents. These conditions leave excess firearms, items
protected for national security reasons, and pharmaceuticals vulnerable to
loss or theft. For example, we were able to account for items in 104 of
the 107 sample transactions reviewed. However, for three transactions, we
could not trace the actual disposition of the items. The Department
believes that the items involved had been destroyed, but it could not be
certain since no documentation existed that would allow additional research.

Key Duties Not Separated 
-------------------------

Department regulations require key duties in the areas of transport,
destruction, and accounting for excess items protected for national
security reasons to be done by different people. However, at the Defense
Distribution Depot in San Diego, California, the same person did these
duties for the 24 Navy transactions we reviewed that included depth
calculating and submarine countermeasure equipment. The employee
transported the items several miles to a destruction site, destroyed the
items, and upon returning to the depot, prepared the destruction documents
from the list of items that were supposed to be on the truck. He then
certified that the items had been destroyed. No independent check was made
to determine if all items had been transported and destroyed. Depot
officials explained that excess items had been handled in this manner for
20 years. 

Destruction Certifications Were Missing
---------------------------------------

A Department regulation requires that both the person that destroys
military items and a government technical representative sign and date a
certification that the items were destroyed. At the Naval Undersea Warfare
Center in Keyport, Washington, we reviewed 17 transactions involving
excess items protected for national security reasons disposed of by the
Center during 1997 and 1998. Personnel at the Center's excess,
reutilization, and recycling site annotated on each shipping document the
type of destruction action (e.g., shredding) performed on an item and the
date of the action. However, neither the personnel at the site nor a
government representative certified that the item was destroyed as
required by Department regulations. For one transaction involving 
18 computers used for guiding air or surface launched MK-46 torpedoes to a
target, there was no annotation or destruction certification. Center
officials believe the computers in question were destroyed, but they could
not be sure due to the control weaknesses. Center officials told us that
they are developing additional instructions for their personnel to ensure
that the Department's regulation is followed. This action will improve the
Center's control of excess items protected for national security reasons. 

For 23 of 24 transactions we reviewed involving disposal of excess Navy
items protected for national security reasons held by the Defense
Distribution Depot in San Diego, California, the depot provided
destruction certifications. No destruction certification existed for one
item, a digital computer used for defensive countermeasures on the E-2
aircraft with technologies that could be used against the Department's
forces by a foreign military. Depot officials speculated that the computer
had been destroyed and that the destruction certification had been
misplaced.

At the Defense Distribution Depot in Norfolk, Virginia, we reviewed two
transactions involving excess items to be protected for national security
reasons and recorded as disposed of by the depot during 1998. The depot
still had the items in its warehouse for one of the two transactions.
However, there was no destruction certification for the other item, a high
power simulator used to test early warning systems on Navy aircraft. Depot
officials believe that the simulator had been destroyed and that the
certification had been misplaced because there was an annotation on a
logbook that the item was destroyed. However, the officials could not be
certain this was the case. 

Serial Numbers Not Recorded on Shipping Documents 
--------------------------------------------------

When excess items protected for national security reasons are shipped,
Department regulations require the serial number of each item to be
annotated on the shipping document. At the Naval Undersea Warfare Center
in Keyport, excess items to be protected for national security reasons
such as guidance systems on torpedoes and related shipping documents were
accumulated together on pallets for transport to the Center's excess,
reutilization, and recycling site. Material movement documents/Footnote8/
did not identify either the shipping documents or the serial numbers of
the items on the pallets. Instead, the items were identified as a
"pallet," resulting in a loss of control over the individual items. Thus,
the Center had no assurance either that the pallet included all items that
were supposed to be sent or that all items arrived at the excess,
reutilization, and recycling site. Center officials told us that earlier
this year they recognized that their local procedures for implementing the
Department's regulation were deficient and that a moratorium was placed on
disposing of items to be protected for national security reasons until
improved procedures could be developed. Center officials told us
additional instructions are being developed to ensure that the
Department's regulation is followed. 

Inadequate Oversight and Training Cause Continuing Inaccuracies in
Accountability System Reports

When firearms, items with national security implications, and
pharmaceutical items become excess and are no longer needed, Department
procedures require the defense component with the items to
destroy/Footnote9/ them and to remove the items from inventory records by
coding the transactions as "inventory decreases associated with
destruction of the items." However, the components have been removing the
items from inventory records by recording these transactions as "items
being shipped to a disposal office." None of the items, however, were
actually shipped to a disposal office. Inventory, shipping, receipt, and
disposal records showed that the items were instead destroyed or disposed
of by the component that had the items. These items were incorrectly
recorded because of mistakes and unsupported accounting adjustments that
occurred because of inadequate management oversight and training and
computer system programming errors. In both cases, the items could be
deleted from the component's inventory records. However, when the items
were recorded as "items being shipped to a disposal office" information
was automatically provided to the Department's In-transit Accountability
System, causing the system's reports to be erroneous and diminishing its
value as a tool for tracking excess items. 

We evaluated 107 transactions involving $3.9 million of items defense
components had recorded in their inventory records as having been shipped
to disposal offices. None of the items were actually sent to disposal
offices. Inventory, shipping, receipt, and disposal records showed that
the items instead were incinerated, shredded, or otherwise destroyed by
defense components./Footnote10/ Thus, the transactions should have been
recorded as inventory decreases associated with destruction of the items.
Table 1 shows the number of sample transactions in which the disposition
of the items was incorrectly recorded in inventory records and the reasons.

Table****Helvetica:x11****1:    Reasons Item Disposition Was Incorrectly
                                Recorded

------------------------------------------------------------------------
| Reason for incorrect coding          :        Number of occurrences  |
|----------------------------------------------------------------------|
| Coding mistakes                      :                           46  |
|----------------------------------------------------------------------|
| Unsupported accounting adjustments   :                           12  |
|----------------------------------------------------------------------|
| Programming errors                   :                           49  |
|----------------------------------------------------------------------|
| Total                                :                          107  |
------------------------------------------------------------------------

The items were incorrectly recorded in inventory records because 
(1) personnel were not adequately trained on inventory transaction
procedures and had mistakenly coded destroyed items as being sent to
disposal offices, (2) personnel had made unsupported accounting
adjustments to write off the items and make their books balance, and 
(3) the depot inventory system was programmed to automatically record all
excess items as being sent to a disposal office, including sensitive items
destroyed by the services. An underlying cause of these conditions was
that management officials had not monitored the excess items transactions
as close as they should have.

Coding Mistakes
---------------

Personnel at some locations were not adequately trained on inventory
transaction procedures and had mistakenly coded excess firearms, items
protected for national security reasons, and pharmaceuticals as sent to
disposal offices. Specifically, records on 23 pharmaceutical transactions,
including over one-quarter million dosages of morphine, showed that
personnel at the Defense Supply Center, Philadelphia, Pennsylvania, had
entered data in the inventory system that these drugs were sent to the
local disposal office. Our review showed that none of these items were
actually shipped to the disposal office. Inventory, shipping, receipt, and
disposal records showed that the Defense Distribution Depot in Susquehana,
Pennsylvania, where the drugs were stored, incinerated all drugs contained
in the 23 shipments. Depot officials told us that the transactions should
have been coded as inventory decreases due to destruction instead of
shipments to the disposal office and should not have been recorded in the
In-transit Accountability System. The officials told us they would correct
the situation by providing instructions and training to personnel on
transaction recording procedures.

Records on 17 transactions involving excess items protected for national
security reasons showed that personnel at the Naval Undersea Warfare
Center had entered data in the inventory system that showed the items were
sent to the disposal office at Fort Lewis, Washington. Our review showed
that none of these items were actually shipped to a disposal office.
Inventory, shipping, receipt, and disposal records showed that the items
were sent to and received by a private company to be destroyed in
accordance with a contract between the company and the Center. During the
12-month period ending May 18, 1999, the Naval Undersea Warfare Center
generated excess items protected for national security reasons totaling
$10.3 million that were incorrectly coded as shipped to the Fort Lewis
disposal office and automatically provided to the In-transit
Accountability System. Center officials told us that the transactions
should have been coded as inventory decreases due to destruction instead
of shipments to the disposal office and should not have been recorded in
the In-transit Accountability System. The officials told us they would
correct the situation by providing instructions and training to personnel
on transaction recording procedures.

Records on six transactions involving firearms showed that Marine Corps
personnel at Camp Lejeune, North Carolina, had incorrectly coded the
transactions into their inventory system as shipments to the local
disposal office and their system automatically provided the incorrect
information to the In-transit Accountability System. Our review showed
that none of these items were actually shipped to the disposal office, but
were sent to Marine Corps Logistics Bases in Albany, Georgia, and Barstow,
California, for disposition. The transactions should have been coded as
"item relocated to another storage site."

Unsupported Accounting Adjustments
----------------------------------

Personnel at some locations had made unsupported accounting adjustments to
write off the items and make their books balance. Specifically, records on
four firearms transactions showed that personnel at Fort Hood, Texas, had
entered data in the inventory system that these firearms, including eight
machine guns, were sent to the local disposal office, which is not
authorized to accept firearms. Our review showed that none of these items
were shipped to the disposal office. Army officials told us that these
four transactions occurred when they discovered that the firearms were
listed in their inventory records but were no longer on hand. No
investigation was made to determine what had happened to the firearms.
Personnel simply entered a "shipment to a disposal office" transaction
code to write off the items and make their books balance. We also found
eight transactions where Texas Army National Guard units had entered a
"shipment to a disposal office" transaction code to write off firearms and
make their books balance. After further review, we found that the firearms
included in the four transactions at Fort Hood and the eight transactions
by Texas Army National Guard units had been sent to and received by the
Anniston and Rock Island Army Depots. The transactions should have been
coded as "item relocated to another storage site." Officials told us that
the transactions occurred when they were transitioning to a new inventory
system and did not get entered into the new system. 

Computer Programming
--------------------

At three locations we visited, computer programming caused excess
sensitive items to be mistakenly recorded as sent to disposal offices.
Specifically, records on 24 transactions involving items protected for
national security reasons showed that the Defense Distribution Depot in
San Diego had recorded the transactions in its inventory system as
shipments to the disposal office at San Diego. Our review showed that none
of these items were shipped to the disposal office. Depot officials told
us that when the Navy item manager entered the transactions into their
system to notify the depot that the items were excess, their system coded
the transactions as shipments to a disposal office. The officials stated
that, no matter how sensitive the excess item is, the depot system
automatically assigns a code to ship excess items to a disposal office
even though their more sensitive items are destroyed. 

Records on nine pharmaceutical transactions and two transactions involving
items protected for national security reasons at the Norfolk Distribution
Depot showed that the depot had recorded in its inventory system that the
items were sent to the local disposal office. Our review of inventory,
shipping, receipt, and disposal records showed that none of these items
were actually shipped to the disposal office but either were in inventory
awaiting disposal or were destroyed. Depot officials said that when the
item manager entered the transactions into their system to notify the
depot that the items were excess, the depot system automatically coded the
transactions as shipments to a disposal office. The officials said that
even though disposal offices cannot accept items protected for national
security reasons and controlled drugs, the depot system automatically
assigns a code to ship all excess items to a disposal office regardless of
the sensitivity of the item. The same situation existed for 
14 transactions involving items protected for national security reasons at
the Defense Distribution Depot in Tobyhanna. 

Conclusions

The Department's controls over excess firearms, items protected for
national security reasons, and pharmaceuticals are weakened because
personnel do not follow the Department's control procedures, leaving the
items vulnerable to loss or theft. Key duties in the areas of transport,
destruction, and record keeping were done by the same person instead of
being separated, required certifications were missing from forms used to
control the destruction of excess items protected for national security
reasons, and serial numbers were not always recorded on shipping
documents. Further, personnel are not adequately trained to record the
disposition of these items and flawed computer programming logic caused
records to show that sensitive items were sent to disposal offices when
the items were not actually sent there. Also, management oversight of the
transactions was lax leading to noncompliance with internal control
procedures and inaccurate in-transit accountability reporting. Given the
national security implications of the items and the control weaknesses
noted, these matters warrant serious attention. 

Recommendations

We recommend that the Secretary of Defense direct the Secretaries of the
Air Force, Army, and Navy and the Director, Defense Logistics Agency, to
follow Department procedures for safeguarding excess firearms, items
protected for national security reasons, and pharmaceuticals and require
periodic reviews to ensure that the procedures are followed so that key
duties in the areas of transport, destruction, and record keeping are
separated, required destruction certifications are prepared, and serial
numbers are recorded on shipping documents. We also recommend that the
Secretary of Defense improve the reporting accuracy of the Department's In-
transit Accountability System by directing particular attention to
training personnel and increased management oversight of inventory
transaction procedures and to correcting computer system programming errors.

Agency Comments 

The Deputy Under Secretary of Defense (Logistics) provided written
comments for the Department on a draft of this report. They are included
in appendix II. The Department concurred with the report and its
recommendations and recognized the importance of safeguarding firearms,
items protected for national security reasons, and pharmaceuticals. The
Deputy Under Secretary stated that the Department will emphasize in a
memorandum to the service secretaries and the Director, Defense Logistics
Agency, the need to follow proper procedures and conduct periodic reviews
to ensure that key duties are separated, required destruction
certifications are prepared, and serial numbers are recorded on shipping
documents. Also, the Department has established a task force under the
Joint Logistics Commander's Materiel Management Group to revise the system
used to control property in transit to disposal and enhance associated
procedures and training. The estimated completion date for the development
of recommendations by the task force is the second quarter of fiscal year
2000.

As arranged with your office, we plan no further distribution of this
report until 10 days from its issue date unless you publicly announce the
report's contents earlier. At that time, we will send copies of this
report to the appropriate congressional committees; the Honorable William
S. Cohen, Secretary of Defense; the Honorable Louis Caldera, Secretary of
the Army; the Honorable Richard Danzig, Secretary of the Navy; the
Honorable F.W. Peters, Secretary of the Air Force; Lieutenant General
Henry T. Glisson, Director, Defense Logistics Agency; and the Honorable
Jacob Lew, Director, Office of Management and Budget. 

Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report. Key contributors to this report are
listed in appendix III.

Sincerely yours,
*****************

*****************

David R. Warren, Director
Defense Management Issues

--------------------------------------
/Footnote1/-^ The Department refers to the destruction of military items,
  either by partial or total destruction that makes the item unfit for its
  originally intended purpose, as demilitarization.
/Footnote2/-^ Defense Inventory: Management of Surplus Usable Aircraft
  Parts Can Be Improved (GAO/NSIAD-98-7, Oct. 2, 1997), Defense Inventory:
  Action Needed to Avoid Inappropriate Sales of Surplus Parts (GAO/NSIAD-
  98-182, Aug. 3, 1998), and Defense Inventory: Property Being Shipped to
  Disposal Is Not Properly Controlled (GAO/NSIAD-99-84, July 1, 1999).
/Footnote3/-^81 millimeter; portable rocket and grenade launchers; and
  individually operated weapons that are portable and can be fired without
  special mounts or firing devices. Pharmaceuticals are drugs or other
  controlled substances requiring storage in a vault or safe. 
/Footnote4/-^ The Department also uses other sets of procedures for
  destroying and disposing of excess ammunition and explosives and
  chemical and nuclear weapons.
/Footnote5/-^ Defense Inventory: Navy's Procedures for Controlling In-
  transit Items Are Not Being Followed (GAO/NSIAD-99-61, Mar. 31, 1999).
/Footnote6/-^(GAO/T-AIMD/NSIAD-99-145, Apr. 14, 1999), Financial
  Management: Better Controls Essential to Improve the Reliability of
  DOD's Depot Inventory Records (GAO/AIMD-99-132, June 28, 1999), and
  Inventory Management: Vulnerability of Sensitive Defense Material to
  Theft (GAO/NSIAD-97-175, Sept. 19, 1997).
/Footnote7/-^ This was a one-time reporting requirement and the most
  current information available.
/Footnote8/-^ The Naval Undersea Warfare Center used a locally developed
  material movement document known as Form 4430/4.
/Footnote9/-^ These excess items may be destroyed on site, transported to
  another defense location for destruction, or turned over to a contractor
  for destruction.
/Footnote10/-^ For three transactions, we could not trace the actual
  disposition of the items.

SCOPE AND METHODOLOGY
=====================

To determine the Department of Defense's compliance with internal control
procedures for safeguarding excess firearms, items with national security
implications, and pharmaceuticals that the military services are required
to dispose of, we met with officials and performed work at the Office of
the Deputy Under Secretary of Defense (Logistics), Washington, D.C.; Army,
Navy, Marine Corps, and Air Force Headquarters, Washington, D.C.; the
Defense Logistics Agency, Fort Belvoir, Virginia; and the Defense
Reutilization and Marketing Service, Battle Creek, Michigan. We also
reviewed policies, procedures, disposal and transaction histories, and
related records obtained during visits to the following seven sites: the
Defense Supply Center, Philadelphia, Pennsylvania; the Defense
Distribution Depots in San Diego, California, Norfolk, Virginia, and
Tobyhanna, Pennsylvania; Army III Corps, Fort Hood, Texas; the 2nd Marine
Division, the 2nd Force Service Support Group, and Marine Corps Base, Camp
Lejeune, North Carolina; and the Naval Undersea Warfare Center, Keyport,
Washington. We also collected information from the Naval Inventory Control
Point, Philadelphia, Pennsylvania; the Defense Distribution Depot,
Susquehana, Pennsylvania; the Rock Island Arsenal, Rock Island, Illinois;
and Army National Guard units in Austin, Fort Worth, and Terrell, Texas.

To determine the Department of Defense's compliance with internal control
procedures for recording the removal of firearms, items with national
security implications, and pharmaceuticals, we used both data obtained
during our prior work and new data. Specifically, we identified 1,700
transactions of excess firearms, items protected for national security
reasons, and pharmaceuticals valued at $98.9 million that had been
reported as sent to disposal offices by the Department's In-transit
Accountability System report for the 12-month period ending March 31,
1998. To have the most current and complete accountability data available,
we obtained computerized records from the system showing transactions that
occurred between January 1998 and February 1999. We identified 2,612
transactions valued at $143 million of excess firearms, items protected
for national security reasons, and pharmaceuticals that were reported as
sent to disposal. Using both sets of data, we judgmentally selected for
review 107 transactions valued at $3.9 million. We selected these
transactions based on the military sensitivity of the items in the
shipments. We selected and reviewed 18 transactions of firearms, 57
transactions of excess items protected for national security reasons, and
32 transactions of pharmaceuticals. We used these 107 transactions to
determine why the 
In-transit Accountability System included excess firearms, items protected
for national security reasons, and pharmaceuticals as sent to disposal
offices when these items are supposed to be disposed by the military
services and to determine if the material was missing. We did not
independently verify the overall accuracy of the Department's database
from which we obtained data but used it as a starting point for selecting
shipments that we then tracked back to inventory, shipping, receipt, and
disposal records and documents on individual transactions.

For each sample transaction, we analyzed inventory records, researched
shipment records, and held discussions with service and Defense Logistics
Agency personnel at the locations selected. Such information provided the
basis for conclusions regarding the management controls over excess
firearms, items protected for national security reasons, and
pharmaceuticals that the military services are required to dispose.

We used the same computer programs, reports, records, and statistics that
the Department, the military services, the Defense Logistics Agency, and
the Defense Reutilization and Marketing Service use to control excess
items that the military services are required to dispose. We did not
independently determine the reliability of all these sources. 

For historical perspective and illustrations of past problems, we reviewed
the results of prior defense studies and the Department's Inspector
General reports. We also used documentation and data obtained during prior
work on disposal operations.

We performed our review from April through August 1999 in accordance with
generally accepted government auditing standards. 

COMMENTS FROM THE DEPARTMENT OF DEFENSE
=======================================

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GAO CONTACTS AND STAFF ACKNOWLEDGMENTS
======================================

GAO Contacts

Ronald L. Berteotti, (214) 777-5702
Roger L. Tomlinson, (214) 777-5777

Acknowledgments

In addition to those named above, Jackie L. Kriethe, Anthony B. Radford,
David A. Schmitt, Patricia F. Blowe, and Robert C. Sommer made key
contributions to this report.

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