United States General Accounting Office f Report to the Ranking Minority GAO Member, Subcommittee on General - Services, Federalism, and the District of Columbia, Committee on Governmental ; Affairs, U.S. Senate .! February 19!W ,. I. MILITARY INSTALLATIONS Coal Inventory and United States GAO General Accounting Office Washington, D.C. 20548 National Security and International Affairs Division B-23739 1 February 23,199O The Honorable John Heinz Ranking Minority Member Subcommittee on General Services, Federalism, and the District of Columbia Committee on Governmental Affairs IJnited States Senate Dear Senator Heinz: This report responds to your December 15, 1988, request that we review the use of U.S. bituminous and anthracite coal at Department of Defense (DOD) facilities in the Federal Republic of Germany (Germany). The report provides the results of our efforts to independently verify the accuracy of DOD-reported coal inventory data as of April 1, 1988, Sep- tember 30, 1988, and December 31, 1988. It also discusses the accuracy of DOD’Scurrent and projected coal consumption data for these facilities. IK)D had reported that between April 1, 1988, and December 31, 1988, it had between 306,000 and 419,000 tons of US. anthracite and bitumi- nous coal stored in Germany. Roughly two-thirds of that amount was anthracite coal. We reviewed six coal-handling locations that accounted for 72 to 79 pcr- Results in Brief cent of the total 1J.S.coal (bituminous and anthracite) between April and December 1988. We verified DoD’Sreported data for one location- the central coal storage facility at Rheinau, which contains about 60 per- cent of all U.S. coal stored in Germany. We could not verify the official inventory records at the other five loca- tions we visited-two Air Force and three Army locations-for the fol- lowing reasons. The Air Force had not conducted required physical inventories of coal in recent years and special inventories performed for us showed significant inventory-related problems. For example, at one Air Force location the amount of anthracite coal on hand exceeded the totals on the official records by 55 percent. At the other Air Force loca- tion, the special inventory did not provide accurate data that could be compared to the official records because the coal piles could not be prop- erly shaped due to a lack of storage space caused by accumulated excess coal. Page1 GAO/NSIAlXt-96 Military Installations B-237391 A more detailed discussion of our findings and inventory data can be found in appendixes I through VI. Our objectives, scope, and methodol- ogy are described in appendix VII. - WD generally concurred with GAO’Sfindings (see app. VIII), but sug- Agency Comments gested several clarifications, which we have incorporated in the report where appropriate. IJnless you publicly announce its contents earlier, we plan no further distribution of this report until 5 days from the date of this letter. At that time, we will send copies to the Chairmen, House and Senate Com- mittees on Appropriations and on Armed Services; the Secretaries of Defense, the Army, and the Air Force; the Director, Office of Manage- ment and Budget; and other interested parties. We will also make copies available to others upon request. GAOstaff members who made major contributions to this report are listed in appendix IX. If you have any questions, please call me on (202) 275-8412. Sincerely yours, Donna M. Heivilin Director, Logistics Issues Page3 GAO/NSIADW-96 Military Installations __- Contents Appendix VI Coal Consumption Based on Approved and Planned Conversions for Fiscal Years 1989-1992 Appendix VII Objectives, Scope, and Methodology Appendix VIII Comments From the Department of Defense Appendix IX 2x Major Contributors to This Report Figures Figure 1.1: Distribution of Coal in Europe Figure 1.2: Coal Inventory by Location (As of Septembrt 30, 1988) Figure 1.3: Coal Consumption for Fiscal Years 1983-1988 Figure 1.4: Projected Coal Consumption (Approved and Planned) Figure 1.5: Future Anthracite Coal Inventories Compared to Consumption Based on Approved Conversions Figure 1.6: Future Anthracite Coal Inventories Compared to Consumption on Approved and Planned Conversions Abbreviations LWD Department of Defense GAO General Accounting Office Appendix I U.S. Coal Inventory and Consumption in the Federal Republic of C&many business, while the Congress is apprehensive about economic and per- ceived security’ consequences associated with converting from coal to other energy sources. M)D facilities in Germany can obtain coal from any U.S. mine if the coal Shipment, meets DOD’Scontract specifications and price guidelines. In recent years, Distribution, and American coal shipped to Germany has come mainly from Pennsylvania, Management of Coal West Virginia, and Kentucky. The Military Sealift Command ships the coal from Norfolk, Virginia, and Philadelphia, Pennsylvania, to Amster- dam or Rotterdam in the Pietherlands or Antwerp, Belgium. Once the coal arrives, DODcontractors transport the coal by barge, rail- car, or truck to defense facilities in Germany. Contractors off-load the coal from ships in European ports and transport it by barge directly to Rheinau. The principal destination is the Fixed Facility Fuels Division at Rheinau (DOD’Scentral coal storage facility in Germany) managed by the 200th Theater Army Materiel Management Center. The Rheinau coal facility distributes the coal by barges, railcars, or trucks to various Army communities and Air Force bases as needed. In 1988, Rheinau shipped 69,598 metric tons of coal-3,818 metric tons by barges; 5,555 metric tons by railcar; and 60,225 metric tons by trucks. For other stor- age destinations, contractors may transport coal from the European ports directly to the applicable location, or via various commercial transshipment points along the Rhine River. Figure I.1 shows the distri- bution network of coal in Europe. Contractors transfer the coal to DoD at the Rheinau central storage facil- ity or other applicable locations, including the commercial transship- ment points. Before accepting the coal, military representatives review official documents and inspect and analyze the coal to verify quantity and quality. Coal yard personnel also visually inspect the coal for type and size consistency and for evidence of impurities and pilferage. As an additional check, these officials send some coal samples to laboratories for further analysis. The U.S. European Command and two of its major commands--1J.S. Army, Europe, and 1J.S.Air Force, Europe-are responsible for overall ‘SomeMembers of Congresshavearguedthat relyingonheatfromlocalutilitm presentsa security risk because Germanfuel suppliersrely m part ontheSovietUnionandtheMiddleEastfor oil and naturalgassuppbes. Page 7 GAO/NSIAD9096 Military Installations Appendix I U.S. Coal Inventory and Consumption in the Federal Republic of Germany addition, all military locations that use coal are responsible for estimat- ing their annual coal requirements and reporting these needs to the Rheinau facility. The Defense Fuel Supply Center awards coal contracts, and the Army Contracting Center, Europe, manages them. DOD reported that as of April 1, 1988, September 30, 1988, and Decem- DOD-Reported Coal ber 31, 1988, it had between 306,000 and 419,000 tons of coal stored in Inventory Data Germany. Between 63 and 76 percent of the total was anthracite, and the remainder was bituminous coal (see apps. II and III). Most of the IJS. coal stored in Germany was at the Rheinau central storage facility. It stored 56 to 63 percent of DOD’S reported coal inventory during this period. Figure I.2 shows the percent of the total coal stored by location as of September 30, 1988. Due to Rheinau’s large storage capacity (400,000 metric tons), it maintains a coal reserve for the Army and Air Force in Germany. Additionally, Rheinau routinely supplies coal to mili- tary facilities throughout Germany that have limited or no coal storage capacity. Other Army locations in Germany stored between 28 and 35 percent of DOD’S reported coal inventories. Air Force bases in Germany stored the remaining 9 percent of the coal. Figure 1.2: Coal Inventory by Location (As of September 30, 1988) y Army communities 8.5% Air bases Rheinau facility Page 9 GAO/NSIAMO-96 Military Installations Appendix I U.S. Coal Inventory and Consumption in the Federal Republic of Germany In responding to our draft report, DODagreed that the differences between the inventories were within the allowable variance and added that the aerial survey was within 1.4 percent of earlier estimates. Army Locations No recent audit of coal operations addressing inventory practices had been conducted at any of the Army bases in Germany, since a 1982 report by the Office of the Auditor General, U.S. Army, Europe. This report identified a number of deficiencies that could affect inventory accuracy.” For example, the report noted coal piles were estimated and measurements were adjusted to make quantities agree with stock records; some coal piles were not maintained in shapes that could be accurately measured; and the same personnel who maintained the stock record balances also performed the inventories. The audit concluded that, as a result, stock record balances could not be verified and there was no assurance that losses or diversions of coal had not occurred. In view of the 1982 audit and similar findings in the previous Rheinau audit, we were unwilling to accept the accuracy of the inventory data at the three Army locations, unless the Army performed special invento- ries for us to observe. However, the Army did not do this because of (1) the costs involved and (2) insufficient time to award a contract for per- forming the inventories and provide us with the results prior to comple- tion of our work. Instead, coal yard officials gave us inventory results for the previous year and said that the inventories had been performed in accordance with the Army’s guidelines. In response to our draft report, DODstated that since the 1982 Army Audit Agency report the Army has instituted a number of corrective actions to improve its coal inventory procedures, such as training coal inspectors on how to perform inventories and emphasizing to coal yard supervisors the need to maintain uniformly shaped coal piles. WD believes that the Army’s inventory procedures are now thorough and the reported inventories at the Army locations are accurate. Air Force Locations At the two Air Force locations we visited, Bitburg and Spangdahlem, we found that no physical inventories of coal had ever been conducted. As a result, base officials agreed to conduct physical inventories in May 1989 for us to observe. ‘Audit of CoalManagementITS Army,EuropeandSeventhArmy(ReportNo.ElJ-82.203, Mar. 1982). Page I1 GAO/NSIAD-90-96 Military Installations Appendix I U.S. coal Inventory and Consumption in the Federal Republic of Germany Figure 1.3: Coal Consumption for Fiscal Years 1993-1908 550 Metric tons (thousands) 500 450 400 350 300 250 200 150 100 50 0 1983 1984 1985 1986 1987 1988 Fkcal year The Army provided us two scenarios regarding its future coal consump- Projected tion in Germany. One is based on “approved” heating conversions and Consumption the other on approved and “planned” conversions to either district heat or gas.” Because the Air Force is still developing its heating conversion plans, it reported a constant consumption level of about 71,000 metric tons per year. Consequently, the Army’s consumption decrease accounts for the total projected decrease in DOD’sconsumption from the end of fiscal years 1988 to 1992 (see fig. 1.4). Approved and Planned At the beginning of fiscal year 1989, the Army had completed or par- Conversions tially completed 86 of 100 signed contracts for converting its heating facilities in Germany to alternative energy sources. During fiscal years 1989 through 1992, the Army plans to complete the other 14 conver- sions-12 of the conversions are to district heat and 2 are to gas. Under this scenario, the Army projects that between fiscal years 1989 and 1992 its total coal consumption will decrease about 113,000 metric tons. “An “approved”heatingconversionis a contractsignedby all relevantparties.A “planned”heating conversion1sonesubmittedix)theSecretaryof theArmy for approval. Page 13 GAO/NSIAWO-96 Military Installations Appendix 1 U.S. coal Inventory and Consumption in the Federal Republic of Germany accurate because it matched, with minor exceptions, with the data reported on source documents maintained at the facilities and their commands. We found that the coal consumption projections for fiscal years 1989 through 1992 for the three Army communities appeared to be reason- able. The projections were based on 1988 coal consumption data and they reasonably reflected plans for converting existing heating plants to other energy sources. For example, 71 of 73 approved heating plant con- versions in the Army’s V and VII Corps were on schedule. Therefore, the coal consumption projections for their 71 approved conversions were accurate. The other two conversions were not on schedule. One conver- sion had not been completed on time, although this was not reflected in DOD’S projection. In the second case, the actual conversion date differed from the date in DOD’S projection by one year. Because the Air Force had not yet finalized its heating conversion plans, it projected that coal consumption would remain constant at about 71,000 metric tons per year during fiscal year 1989 through 1992. According to Air Force officials, however, an ongoing engineering study may recommend a reduction of coal consumption beginning in fiscal year 1992. According to DOD, it had about 316,000 and 102,000 metric tons of Matching Reported anthracite and bituminous coal, respectively, on hand as of September DOD Coal Inventories 30, 1988 (see app. III). Based on approved heating plant conversions and With Projected Coal DOD’S reported coal inventory levels, these on-hand inventory totals will be sufficient to satisfy demands for anthracite coal through at least fis- Consumption cal year 1993 (see fig. 1.5). If planned conversions are added, the on- hand inventory will satisfy projected demands through fiscal year 1994 (see fig. 1.6). In the case of bituminous coal, less than a l-year supply is available. These estimates are based on the assumption that no addi- tional shipments of coal will be made. Furthermore, these estimates could change, given the potential coal inventory data inaccuracies that could affect about 40 percent of the total inventory, the implementation of 27 conversions certified by the Secretary of Defense, and the uncer- tainty in actual conversion dates. Detailed inventory and consumption data supporting figures I.5 and I.6 are contained in appendixes III, V, and VI. Page 15 GAO/NSIAIMO-96 Military InstalIations Appendix I US. Coal Inventory and Chummption in the Federal Republic of Gem~any Figure 1.6: Future Anthracite Coal Inventories Compared to Consumption on Approved and Planned Conversions 224 240 200 160 120 ml 40 0 1 Fiscal year henDay on hand Consumption Page 17 GAO/NSIAD96-96 MiIitary InaalIations Appendix III DOD-ReportedCoal Inventory by Type and Size April 1, 1906 September 30,1988 December 31,1988 Amount Amount Amount Location ____ ~~~ ~~ ~ ~~ (metric ~~ tons) ~~~ Percent ~~ ~~~~~ (metric tons) Percent (metric tons) Percent Anthracite= Stove 69,750 23 158,431 38 149,457 36 Nut 82,701 27 92,412 22 64,432 20 Pea 40,041 13 64,746 16 57,458 14 Total 192,492 63 315,589 76 291,347 70 Bituminous High 105,739 35 93,340 22 118,221 28 Medium 8,102 3 8,305 ~~~___~ ~~ ~. 2 9,146 2 Total 113,841 38 101,645 24 127,367 ____.____~ 30 TotaP 306,333 100 417,234 100 418,714 100 "Coal~s mined nn a variety of SIZES %rcentages may not add due to rounding Page 19 GAO/NSIAB90-96 Military Imtallations Appendix V Coal Consumption Based on Approved Conversions for Fiscal Years 1989-1992 Metric tons Type Fiscal -L-., vear ~~ Anthracite Bituminous Total 1989 .~~___.._ ~~ 96,487 123,564 220,051 1990 69,628 96,907 166,535 1991 _____- 51,105 59,950 111,055 1992 49,275 58,150 107,425 Consumer Fiscal year Army Air Force Total 1989 149,201 70.850 220.051 1990 95,685 70,850 166,536 1991 40,205 70,850 111,055 1992 36,575 70,850 107,425 Page 21 GAO/NSIAD-96-96 Military Installations Appendix VII Objectives, Scope,and Methodology During the past year, some members of the Congress expressed concern about the accuracy of coal inventory and consumption data reported by DOD for its facilities in Europe. They said that the data were constantly changing and, therefore, probably erroneous. As a result, the Ranking Minority Member, Subcommittee on General Services, Federalism, and the District of Columbia, Senate Committee on Governmental Affairs, asked us to verify DOD’S data. The specific objectives of our review were to verify the accuracy of DOD-reported coal inventories as of April 1, 1988, September 30,1988, and December 31,1988. We were also asked to review past, current, and projected coal consumption at WD facilities in Europe. We visited the Defense Energy Programs Office, Washington, D.C., and the headquarters of the US. Army and Air Force, Europe, to obtain data on the type and amount of coal on hand and consumed at 44 U.S. Army and 6 Air Force locations in Germany. We selected six locations for detailed review. As requested, we reviewed Rheinau because it stored about 60 percent of DOD’S coal in Germany as of September 30,1988. We chose the Army communities at Nuernberg, Schweinfurt, and Hanau because, as of the end of fiscal year 1988, they had the largest reported Army coal inven- tories in Germany and accounted for 39 percent of Army coal. Similarly, we selected Bitburg and Spangdahlem Air Force Bases because, as of the end of fiscal year 1988, they accounted for 66 percent of the reported coal stored by all Air Force bases in Germany. As agreed with your office, we limited our detailed work on actual consumption data at these locations to fiscal year 1988 for two reasons. First, we could not verify DOD’S reported coal consumption data for fiscal year 1982 because the Air Force supporting data for that time period had not been retained and, therefore, the overall data were incomplete. Second, we did not try to verify fiscal year 1983 through 1987 consumption data because it would have involved a time-consuming and labor-intensive review of thousands of coal-fired boiler usage records. However, we did review consumption trends for earlier years as a basis for reviewing DOD’S pro- jected levels of coal usage for fiscal years 1989 through 1992. To verify DOD’S coal inventory data, we reviewed the physical inventory process and/or the coal inventory records at the six coal-handling loca- tions we visited. At three of these locations-Rheinau and the two Air Force bases-we observed coal yard personnel conducting physical inventories. We also obtained the results of a special inventory the Page 23 GAO/NSlAD-90-96 Military Installations Appendix VIII Comments From the Department of Defense supplementing those in the report text appear at the end of this appendix December 22, 1989 Mr. Frank C. Conahan Assistant Comptroller General National Security and International Affairs Division U.S. General Accounting Office Washington, DC 20548 Dear Mr. Conahan: This is the Department of Defense (DOD) response to the General Accounting Office (GAO) draft report, "MILITARY LOGISTICS: Coal Inventory and Consumption m the Federal Republic of Germany," dated October 31, 1989 (GAO Code 3916271, OSD Case 8168. The DOD generally concurs with the report, but offers the following clarifications. The DOD emphasizes that, as of September 1988, DOD facilities in Europe had a minimum of five years' supply of anthracite on hand. These stocks will probably last longer, since only nut size anthracite will be consumed by Fiscal Year (FY) 1993, at the earllest. Other sizes of anthracite will last at least until FY 1998, at projected levels of use. The GAO reported that records could not be verified at specific locatIons wlthout a new Inventory. While technically correct, the report implies that existing data are unreliable. The DOD points See comment 1 out, however, that; in all cases where time and resources were avaIlable to perform new uwentories, the data previously reported were verified or found to be conservative. A more fair picture would be presented if the report showed both the previously estimated and actual inventory data, whew available. The GAO also reported that the Army did not comply with internal control procedures requiring annual physical inventories with properly shaped coal piles at Rheinau. While not directly responsible for coal inventory, the U.S. Army Europe conducted a special inventory of the coal yard in May 1989. This inventory consisted of a "fly oveL" twhnique recommended by the GAO for its Pagr 25 GAO/NSlAD-90-96 Military Installations Appendix VIII Comments From the Department of Defense The following are GAO'Sadditional comments on DOD'sletter dated December 22, 1989. 1. We do not believe that a comparison of previous actual and estimated GAO Comments inventory data by location is relevant to the accuracy of the data for the current inventory. Moreover, the report points out that we could only verify actual current inventory data at two of the six locations reviewed. 2. After we received DOD'Swritten comments, DODadvised us that the 1.6 percent difference between earlier estimates and the aerial survey should be 1.4 percent. Page 27 GAO/NSIAD-96-96 Military Installations Appendix IX Major Contributors to This Report George A. Jahnigen, Assistant Director National Security and International Affairs Division, Washington, D.C. Harry Tyner, Evaluator-In-Charge European Office Christina Warren. Evaluator (391627) Page 28 GAO/NSIAD-SO-96 Military InStdhtiOnS Appendix VIII Gmments FromtheLhzpartmentof Defense accuracy. The results verified the Rheinau inventory to be within See comment 2 1.6 percent of earlier estimates. In addition, the GAO noted internal control inventory problems at three other Army locations and discussed problems identified by the Army Auditor General in 1982. The Army concurred with all of the findings and recommendations concerning coal receipt, handling and inventories reported in the earlier audit and instituted corrective actions to improve its coal accounting procedures. Indications are that the Army coal accounting procedures are now thorough and reflect accurate inventories at all locations. This accuracy has been maintained even though, as the result of congressionally directed procurement, the supply of anthracite coal in Germany is now five to ten times the Army requirement. At several Air Force locations the GAO identified coal excesses so large that they prevented the proper shaping of coal piles necessary for inventory verification. It should be recognized that these excesses resulted from purchases directed by the Congress. To address the inventory accuracy issue, during the fxst quarter of FY 1990 the Air Force ~111 develop an alternative uwentory assessment technique. The Air Force will also consider including coal inventory as a material weakness in the next Air Force Assurance Statement. Overall, the GAO report presents an accurate discussion regarding congressional restrxtions on conversion, environmental concerns of German communities, and an accurate baseline on coal inventories. The DOD appreciates the opportunity to comment on the draft report. Sincerely, ,----,f I ' ., Jack Katzen Assistant Seicretary of Defense (Production and Logistics) Page 26 GAO/NSIAD-96.96Militmy Installations Appendix W Objectives, Scope, and Methodology Army performed at Hhcinau using a photogrammetrical survey,’ and we compared these results to the Army’s manual inventory method. We reviewed past physical inventory documents at the three Army communities. At each of the six locations, we also reviewed applicable inventory records for April t,hrough December 1988. Our review of inventory records included monthly coal activity reports, stock record cards, and receipt and issucl documents. Finally, we attempted to reconcile the offi- cial inventory records (stock record cards) with physical inventory results and r~o~~-t~r~pc~r~ ed inventory data. To verify past coal c,onsumption data, we traced the data reported by DODback to summary or consolidated reports at the Rheinau central coal facility and at the Army’s V and VII Corps headquarters and, in turn, to specific source documents for various coal-burning military facilities in Germany. We also reviewed thts Army’s and Air Force’s projected coal consump- tion data for fiscal years 1989 through 1992. To assess the reasonable- ness of these projec.tlons, we obtained information on the number of contracts signed or planned for converting heating plants from coal to other energy sour(‘c’s. Furthermore, at the Army’s V and VII Corps head- quarters, we revicwtld all heating conversion contracts to verify that the contract completion dates matched the dates used in developing the pro- jections. We rcvic\vcd individual heating facility consumption records and heating convcbrslon plans for three Army communities and discussed heating conversion 1)rogrcss with engineering officials. We also compared reported LIODcoal inventory data with projected coal consumption rates t (1determine how long existing inventories could last. Our comparison was based on the on-hand coal inventory as of Septem- ber 30, 1988. and t 1~sapproved and planned heating plant conversions and an assumpt,ion t hat no additional coal shipments would be made. We conducted our rcbvic>wfrom January to September 1989 in accord- ance with gencrall> 1r(,c%ptcdgovernment auditing standards. Page24 GAO/NSIAB90-96 Military Installations Appendix VI Coal Consumption Based on Approved and Planned Conversions for F’iscalYears 1989- 1992 Metric tons Type Fiscal year Anthracite Bituminous Total 1989 96,487 123,564 220,051 1990 69,438 92,407 161.645 1991 44,136 52,630 96;766 1992 36,922 50,230 67,152 Consumer Fiscal year Army Air Force Total 1989 149,201 70,850 220,051 1990 90,995 70,850 161,645 1991 25,916 70,850 96,766 1992 16,302 70,850 07,152 Page 22 GAO/NSIAD.90-96 Military InstaUations Appendix IV Coal Consumption for l?i.sd Years 1983-1988 Metric tons Type Fiscal year Anthracite Bituminous Total 1983 313,941 191,466 505,407 1984 272,360 205,986 478.346 1985 238 168 203,042 441,210 1986 202,122 210,143 412,265 1987 166.748 190.175 356.923 1988 120,633 141,668 262,301 Consumer Fiscal year Army Air Force Total 1983 405,919 99,488 505,407 1984 388,322 90,024 470,346 1985 354,771 86,439 441,210 1986 325,979 86.286 412,265 1987 286,784 70,139 356,923 1988 194,223 68.078 262.301 Page 20 GAO/NSIAIWO-96 Military InstaUations Appendix II DOD-ReportedCod Inventory by Location April 1,1988 September 30,1988 December 31,1988 Amount Amount Amount Location (metric tons) Percent (metric tons) Percent (metric tons) Percent Rhelnau central storage facility 170,200 56 249,529 59 262,828 63 Army communities 107,889 35 132,056 32 118,069 28 Air Force bases 28,244 9 35,649 9 37,817 9 TotaP 306,333 100 417,234 100 418,714 100 “Percentages may not add due to rounding Page 18 GAO/NSIALWO-96 Military Installations Appendix I U.S. Coal Inventory and Consumption in the Federal Republic of Germany In;entories Compared to Consumption Based on Approved Conversions 280 240 200 160 120 so 40 0 1989 19% 1991 1992 1993 Fiscal year Inventory onhand Consumption DODstated that, as of September 39, 1988, DODfacilities in Germany had a minimum of a 5-year supply of anthracite coal on hand. It said that these stocks will probably last longer, since only nut-sized anthracite will be consumed by fiscal year 1993, at the earliest. Other sizes of anthracite will last at least until fiscal year 1998, at projected levels of use.” “Theprojectedlevelsof usearebasedonthe assumption that the27heatingplantconversions cert- fiedby the Secretaryof Lkfmseto bein thenationalinterestwouldbecompleted betweenfiscal years1992and1993. Page 16 GAO/NSIAIMO-96 Military InstaIlations Appendix I U.S. Coal Inventory and Consumption in the Ftieml Republic of Ge-y Figure 1.4: Projected Coal Consumption (Approved and Planned) 250 240 220 2oa l&I 160 140 120 100 so so 40 20 0 19so 1989 1990 1991 1992 Fi-sal ! - Antiracite - - - - Bihrminous w Total Of this total decrease, anthracite coal accounts for 42 percent and bitu- minous coal for 58 percent (see app. V). In November 1988, the Office of the Deputy Chief of Staff (Engineer), 1J.S.Army, Europe, submitted 24 additional conversion plans to the Sec- retary of the Army. In August 1989, the Secretary of the Army notified the Congress of the planned conversions. After all the conversions are completed, the Army estimates that between fiscal years 1989 and 1992, its total coal consumption in Germany will decrease about 133,000 met- ric tons. Of this total decrease, anthracite coal accounts for about 45 percent and bituminous coal for about 55 percent (see app. VI). We could not verify the accuracy of DOD’S coal consumption data for fis- Accuracy of cal year 1982 because the Air Force data for that time period had not Consumption Data been retained and, therefore, the overall data were incomplete. Also, it was impractical to verify fiscal year 1983 through 1987 coal consump- tion data because it would involve a review of thousands of coal-fired boiler usage records that would be time-consuming and labor-intensive. However, DOD coal consumption data for fiscal year 1988 appeared to be Page 14 GAO/NSIAD-90-96 Military Installations Appendix I U.S. Cal Inventory and Consumption in the Federal Republic of Ge-y Coal yard personnel performed the inventory satisfactorily. However, for two of the three types of coal stored at Bitburg, the inventory results greatly exceeded the amounts shown on stock record cards. For exam- ple, the physical inventory team reported 55 percent more anthracite coal than was recorded on the stock records. The responsible Air Force official could provide no reasons for this or the other wide variance. The official said that Bitburg personnel plan to review their records. At Spangdahlem the coal yard personnel were unable to accurately mea- sure the coal piles because the piles could not be properly shaped due to excess coal on hand resulting from inadequately matching supplies on hand with user needs. According to base officials, a proper inventory could not be conducted until the “overstocked” situation abates. To address the inventory accuracy issue, DODstated that the Air Force will develop an alternative inventory assessment technique by the first quarter of fiscal year 1990. The Air Force will also consider including coal inventory as a material weakness in the next Air Force Federal Managers’ Financial Integrity Act report to DOD. As shown in figure 1.3, DOD’S reported consumption of U.S. coal in DOD-Reported Coal Europe decreased 48 percent, from about 505,000 metric tons in fiscal Consumption Data year 1983 to about 262,000 metric tons in fiscal year 1988. Most of this decrease was in anthracite coal consumption, which fell 62 percent. Bituminous coal consumption decreased 26 percent (see app. IV). DODcited two major reasons for this reduction. One is the Army’s and Air Force’s reduction in overall heating energy demand. For example, as part of its energy conservation program, the Army modified buildings and installed heating controls. According to the Army, its heating energy demand decreased 24 percent from fiscal year 1983 to fiscal year 1988. The Air Force reported a ZO-percent reduction in its energy consumption during this period. The Army also converted many of its facilities to other heating energy sources. In fiscal year 1983, the Army used coal and oil to meet 90 per- cent of its heating energy demand. By fiscal year 1988, the Army used more district heat,’ the coal and oil use rates declined to 65 percent of total heating energy demand. ‘District heatis heatcncrgypnwidcdby localGermanutility cornpanics Page 12 GAO/NSIAD90-96 Military In&allMiOns Appendix I U.S. coal Inventory and Consumption in the Federal Republic of Germany Army guidelines require that coal yard personnel perform physical Accuracy of Inventory inventories annually. Guidelines also specify procedures for shaping and Data measuring coal piles to calculate their volumes accurately. For example, a coal pile might be cone-shaped. By measuring the height and the base of t,he cone, the volume can be calculated. Under these guidelines, a vari- ance of 10 percent or less in the total amount of coal, by type and size, between a physical inventory’s results and the storage site’s official inventory records is allowable. The Air Force has similar guidelines. In September 1988, the 200th Theater Army Materiel Management Center’s Internal Review Office evaluated Rheinau’s fiscal year 1988 coal inventory valued at about $17 million. The review office could not issue an opinion on the accuracy of the inventory because Rheinau did not follow accepted procedures for conducting inventories. First, most coal stockpiles were not uniformly shaped, making accurate measure- ment difficult or impossible. Second, stockpiles were not properly mea- sured due partially to the poor condition of the stockpiles. Third, Rheinau did not follow proper inventory count techniques that require two teams to count the stock and a third count to resolve any discrepan- cies. The Center said that corrective action would be taken by the time Rheinau performed its next scheduled inventory at the end of the fiscal year. To relieve doubts about the accuracy of the reported coal inventory at Rheinau and to assist our review efforts, the Army decided to perform a special or out-of-cycle physical inventory at Rheinau in May 1989. We observed the special inventory, including the shaping and the measuring of coal piles and the calculations of volumes. We determined that coal yard personnel performed the inventory satisfactorily. Later in May 1989, Rheinau officials contracted for another inventory- an independent aerial survey to confirm the earlier inventory’s accu- racy. We compared the resulting measurements with the earlier manual inventory. The results of both inventories differed from Rheinau’s offi- cial inventory record by less than the allowable lo-percent variance, although some of the individual coal piles showed a larger variance. Using the manual inventory as a baseline, we then reconciled DOD’S reported inventory data for the three specified dates with Rheinau’s official inventory records. Page 10 GAO/NSL4D9O+6 Military Installations Appendix I U.S. Coal Inventory and Consumption in the Pederal Republic of Germany Figure 1.1: Distribution of Coal in Europe , Rheinau Central Supplied by Storage Facility I I I I I Barge Railcar 1 Truck I r L Various I , Commercial I Other Locations Transshipment ’ That Store Coal Points coal management. However, the European Command has delegated spe- cific management functions to the 200th Theater Army Materiel Man- agement Center, Fixed Facility Fuels Division, Rheinau. The Rheinau facility’s management responsibilities include l receiving, issuing, accounting for, and inventorying coal at Rheinau; . maintaining a coal reserve for the Army and Air Force in Germany; * developing policy for coal operations at Army locations in Germany; l inspecting coal operations and training coal handlers; and . determining the military’s total annual coal requirements in Germany by obtaining and consolidating input from the various Army and Air Force installations that uw coal. The Army communities and Air Force bases that store coal also receive, issue, account for, and inventory coal at their respective installations. In Page 8 GAO/NSIAB99-96 Military InstaIIatiom Appendix I U.S. Coal Inventory and Consumption in the Federal Republic of Germany After World War II, the US. forces in Germany acquired over 10,000 boilers to heat buildings, about 90 percent of which were hand fired by German coal and then later with U.S. anthracite coal. Later the Depart ment of Defense (DOD) began modernizing some older systems with auto- matic controls and insulation and converting others to more efficient or local heating systems. Some of the older anthracite-fueled boilers have been replaced by boilers fueled with bituminous coal, oil, gas, or energy provided by local utility companies. Military installations (e.g., shops, barracks, and housing areas) in Ger- many use two types of coal: anthracite and bituminous. Anthracite is the harder grade of coal and bituminous is a soft coal. Burning bitumi- nous coal is estimated to be as much as 40 percent cheaper than burning anthracite coal. non-wide energy consumption data for heating military installations in Germany were not readily available. However, the Army reported that during fiscal year 1988 coal comprised about 26 percent (anthracite, 12 percent; and bituminous, 14 percent); oil, 38 percent; local utilities, 29 percent; and natural gas, 7 percent, of its actual heating energy consumption. DODplans to convert most of the remaining heating systems that burn 1J.S.coal to other energy sources. However, the conversions are only partially completed because of congressional restrictions dating back to fiscal year 1972. Most recently, the Defense Appropriations Act of fiscal year 1989 did not permit the expenditure of funds to convert DODfacili- ties from coal to other energy sources until 90 days after a study on the economic consequences of using U.S. coal at DODinstallations in Europe was comp1eted.l However, the act also permits conversions if the Secre- tary of Defense certifies in writing that the conversions are in the best interest of the nation. On August 7, 1989, the Secretary certified that 27 conversions met this criteria. Burning coal has become a sensitive political issue. Both the U.S. and German governments are concerned about the environmental impact associated with burning coal. The coal industry is worried about losing ‘Thestudywascompleted onJune29, 1989. Page 6 GAO/NSIAD-99-96 Military Installations Appendix I U.S. Coal Inventory and Consumption in the Federal Republic of Germany Appendix II 18 DOD-Reported Coal Inventory by Location Appendix III 19 DOD-Reported Coal Inventory by Type and Size Appendix IV Coal Consumption for Fiscal Years 1983- 19838 Appendix V Coal Consumption Based on Approved Conversions for Fiscal Years 1989-1992 Page4 GAo/NSIADSO-96 Military Instdhtions B-237391 We did not accept the inventory data at the three Army locations as accurate for two reasons. First, past audits of coal operations addressing inventory practices at Army installations had identified a number of deficiencies that could affect inventory accuracy. Second, because of the cost and time constraints, the Army was unable to conduct special inventories to verify the data. In responding to our draft report, DODacknowledged the deficiencies dis- closed by past audits, and stated that the Army had instituted correc- tive actions to improve coal inventory procedures. WD indicated that the current inventories at these locations are now accurate. However, no fol- low-up audit had been done to substantiate the extent of any improve- ments made. DOD’scoal consumption data for fiscal year 1988 appeared to be accu- rate since it matched the data reported on source documents maintained at the installations and their commands. Coal consumption projections for fiscal years 1989 through 1992 also appeared to be reasonable. They were based on 1988 coal consumption data and they reasonably reflected scheduled dates for converting existing heating systems from coal to other sources of energy. According to reported DODcoal inventory and consumption data, as of September 30, 1988, IKID had sufficient anthracite coal on hand to sat- isfy projected demands through at least fiscal year 1993, given that no additional heating plant conversions other than those already approved occur and no additional shipments of coal occur. If planned conversions are added, the on-hand inventory will satisfy demands through fiscal year 1994. These estimates could change, given the potential coal inven- tory data inaccuracies affecting about 40 percent of the total, the imple- mentation of 27 conversions certified by the Secretary of Defense to be in the best interest of the nation between fiscal years 1992 and 1993, and the uncertainty of actual conversion dates. On the other hand, addi- tional shipments of bituminous coal are needed during fiscal year 1990 and beyond to satisfy projected demands. According to DOD,as of September 30, 1988, its facilities in Germany had a minimum of a s-year supply of anthracite coal on hand. It said that these stocks will probably last longer, since only nut-sized anthracite will be consumed by fiscal year 1993. Other sizes of anthracite will last at least until fiscal year 1998, at projected levels of use. Page2 GAO/NSIAD+W-96 Military Installations
Military Installations: Coal Inventory and Consumption in the Federal Republic of Germany
Published by the Government Accountability Office on 1990-02-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)