oversight

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)

                        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