oversight

Defense Inventory: New York Army National Guard Weapons Parts

Published by the Government Accountability Office on 1990-11-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                                                                 DEFENSE
No\'c~llrt,vt~                        IO00*   *




                                                                                                 INVENTORY
                                                                                                 New York Army
                                                                                                 National Guard
                                                                                                 Weapons Parts
                                                                                                                   -.-
                                                                                                                  I I WI
                                                                                                                  142870




-_.~                                              -_--.----                                      ---    -
(;Ao/                  NSIAI)-!11-28
National Security and
International Affairs Division

IS-241938

November 30, 1990

The IIonorable Pete Wilson
I Jnited States Senate

Dear Senator Wilson:

As requested in your letter of July 26, 1989, we reviewed the New York Army National
Guard’s controls over small arms parts. This is one in a series of reports related to control of
such parts within the Department of Defense.

We are sending copies to interested committees and other Members of the Congress; the
Secretaries of Defense and the Army; the Adjutant General, New York National Guard; and
the Director, Office of Management and Budget. We will also make copies available to other
parties upon request.

(;A(~staff members who made major contributions to this report are listed in appendix I.

Sincerely yours,




Donna Ileivilin
Director, Logistics Issues
Ekecutive Summary


                   Two former New York Army national guardsmen were convicted in
Purpose             1989 of stealing small arms parts from a Guard repair shop over a
                   number of years. Two others, a former guardsman and a Rochester, New
                   York, police captain, were indicted on related charges and are scheduled
                   to go to trial on January 15, 1991. The parts were used to assemble
                   small arms, including .45-caliber pistols and the civilian version of the
                   Ml6 rifle, that were sold illegally. The thefts were discovered by acci-
                   dent, during an investigation of thefts of military clothing. As a result of
                   the thefts, Senator Pete Wilson asked GAO to (1) evaluate the New York
                   Army National Guard’s internal controls and physical security over
                   small arms parts and (2) identify corrective actions taken and needed.


                   The Army defines small arms as all weapons, including those that are
Background         fully automatic, up to and including calibers of 20 millimeters. The
                   stolen small arms parts were primarily repair parts for the .45-caliber
                   pistol and the Ml6 rifle.

                   Four maintenance shops in New York perform complex repairs on the
                   Guard’s small arms. Work orders for maintenance requests are supposed
                   to document and aid in managing the repair process and the parts
                   needed for the repairs. Small arms repairers use a combination of parts
                   stored in their workbench area (bench stock) and requisitioned from an
                   on-site supply room (shop stock). The shops replenish their stocks from
                   two repair parts warehouses. Small arms parts are generally inexpen-
                   sive and, while most are unique to a specific weapon or weapons, some
                   are common hardware, such as screws and washers.

                   The New York Army National Guard is required to follow Army regula-
                   tions that govern supply management, maintenance, and physical
                   security. Repair shop personnel use the computerized Standard Army
                   Maintenance System to track all work orders and repair parts and to
                   receive information from supported units.


                   The New York Army National Guard’s internal controls and physical
Results in Brief   security neither prevented nor detected the thefts of small arms parts
                   by personnel working at one of its repair shops.

           Y
                   Small arms parts are easy targets for thefts because the Guard has weak
                   internal controls over the process used to repair small arms, inspect the
                   work, store the parts, manage the work flow, and track inventory. For
                   example:


                   Page 2                         GAO/NSIAD-91-28 Army National Guard Weapons Parts
                               Executive Summary




                           9 key duties are not separated;
                           . discrepancies in shop stock inventory are not documented or
                             investigated;
                           . standards for inventory accuracy to effectively control inexpensive
                             small arms parts are not applied; and
                           l the Standard Army Maintenance System can be accessed and manipu-
                             lated by unauthorized individuals.

                               Army regulations do not require strict management of the repair process
                               or strong controls over the repair parts. In addition, physical security is,
                               in some instances, inadequate to protect repair parts, including small
                               arms parts.

                               Following the arrests of the former guardsmen, the Guard made changes
                               in an attempt to prevent further thefts. However, those changes have
                               not resolved the problems associated with weak internal controls.



Principal Findings

Inadequate Separation of       One of the convicted guardsmen told GAOhow he had been able to requi-
Duties                         sition unnecessary parts and steal them for his own use. Because he
                               could conduct both the initial and final inspections, as well as make the
                               repair itself, no one had been in a position to question the extra requisi-
                               tioned parts. Moreover, because of poor physical security at the repair
                               shop, he was able to remove the parts from the shop and an adjacent
                               warehouse without detection, GAO'Sreview showed that this situation
                               continues to exist at three of the four repair shops; duties are not sepa-
                               rated in the small arms repair process. Army regulations permit small
                               arms repairers to determine the repairs and parts needed, perform the
                               repairs, inspect the results of their own work, and dispose of used parts.
                               Such a system and poor physical security leave small arms parts vulner-
                               able to theft.


Inadequate Control of          The Army does not require accountability for repair parts after they
Repair Parts                   have been issued from the warehouses to the maintenance shops; at that
                               time the parts are considered to have been expended. The shops store
             I                 the parts as either bench stock or shop stock but do not have strong
                               internal controls over either.



                               Page 3                         GAO/NSIAD-91-28 Army National Guard Weapons Parts
                        Executive Summary




                        The shops had been allowed to keep relatively expensive parts such as
                        bolts and barrels in their bench stock, following the Army’s
                        ,January 1988 rescission of a policy limiting bench stock to parts worth
                        $10 or less. However, in August 1989, following the revelation of the
                        thefts, the New York Army National Guard independently reinstituted
                        the $10 limit. In addition, periodic or perpetual (continuous) inventories
                        are not required for small arms parts stored in bench stock. For this
                        reason, it is difficult to determine the amount of bench stock on hand at
                        any one time.

                        After the thefts of weapon parts had been revealed, the four repair
                        shops reclassified a significant amount of their bench stock to shop
                        stock. Reclassified stock was moved from workbench areas to on-site
                        supply rooms to improve control and physical security for the parts.
                        The shop where the thefts occurred, for example, reduced its small arms
                        bench stock from 393 parts valued at $15,454 to 159 parts valued at
                        $5,007.

                        Although shop stock is better controlled and secured than bench stock,
                        oversight of the inventory is weak. For example, personnel who identify
                        discrepancies during periodic shop stock inventories do not have to
                        report or investigate them. They simply adjust the records to reflect the
                        actual quantity on hand, a practice that makes thefts difficult to detect.
                        In addition, personnel who handle inventory records also handle the
                        parts on the shelves. Because duties are not separated, no checks and
                        balances exist to reduce the risk of thefts.

                        The Standard Army Maintenance System can be easily accessed by
                        unauthorized personnel using a common computer password. Once
                        inside the system, the intruder can create or change work orders, deduct
                        inventory, and requisition parts.


Inadequate Warehouse    GAOexamined the Guard’s two repair parts warehouses and found
                        internal controls to be generally adequate at the Rochester, New York,
Controls and Physical   facility. IIowever, GAOfound that the warehouse in Newburgh, New
Security                York, had poor accounting of resources, lacked separation of duties and
                        responsibilities, did not report inventory adjustments to higher levels of
                        authority, conducted superficial research into inventory discrepancies,
                        and did not document inventory results. Because of these weaknesses,
                        Newburgh’s repair parts inventory is vulnerable to theft and loss. Fur-
                        thermore, inventory inaccuracies can result in critical supply shortages,
                        unnecessary procurement, and accumulations of excess stock.


                        Page 4                         GAO/NSIAD-91-28 Army National Guard Weapons Parts
                      Executive Summary




                      New York Army National Guard officials have attributed most of these
                      weaknesses to staff shortages, inadequate training, and the collocation
                      of five separate repair parts inventories.

                      Army regulations did not require that inventory discrepancies of $50 or
                      less be reported; the inventory record is simply adjusted to reflect the
                      actual inventory on hand. Because many small arms parts are inexpen-
                      sive, discrepancies in these inventories may go unreported.

                      Access to the shops and warehouses is not carefully controlled, and
                      security after duty hours is nonexistent in some instances. The New-
                      burgh warehouse is particularly vulnerable because its perimeter
                      fencing has holes in it and repair parts are stored in unsecured truck
                      trailers outside the warehouse. Other security deficiencies included poor
                      facility access controls, no building alarm systems, and employee and
                      visitor parking next to storage facilities.


                      Because GAO’Swork at the New York Army National Guard showed that
Recommendations       Army regulations were inadequate to control and secure small arms
                      parts, GAOrecommends that the Secretary of Defense direct the Secre-
                      tary of the Army to revise supply and maintenance regulations to
                      require that

                  l key duties and responsibilities be assigned to separate individuals in the
                    small arms repair and supply processes;
                  l repair parts exceeding a unit dollar value of $10 be excluded from bench
                    stock;
                  l discrepancies in shop stock inventories be documented, investigated,
                    reported, and resolved;
                  . access to the Standard Army Maintenance System be protected to pre-
                    vent use by unauthorized personnel; and
                  l standards for inventory accuracy that effectively control inexpensive
                    small arms parts be applied.

                      GAOalso recommends that the Adjutant General, New York Army
                      National Guard, require that physical security be improved to prevent
                      unauthorized access to facilities, including shop supply rooms and ware-
                      houses. GAOmakes additional recommendations in the body of the
                      report.




                      Page 5                        GAO/NSIAD431ZJ3 Army National Guard Weapons Park
                                                                                       ,


                  Jtxeeutive Summary




                  As requested, GAOdid not obtain written agency comments on this
Agency Comments   report. However, GAOdid discuss its findings with Department of
                  Defense, Army, and Guard officials and incorporated their comments
                  where appropriate.




                  Page 0                      GAO/NSIAD-91-28 Army National Guard Weapons Parts
Page 7   GAO/NSIADBl-28   Army National Guard Weapons Parta
contents


Executive Summary                                                                                        2

Chapter 1
Introduction                 Small Arms Maintenance and Repair
                             Prior Audits
                             Objectives, Scope, and Methodology

Chapter 2
Internal Cont.1 ___~01sAre   Key Duties Are Not Separated                                               16
LYUL
hT.-.c  AAti,..
       riucquate to          Work Orders Guide Repair Process                                           16
                             Inventory Controls Over Repair Parts                                       20
Prevent or Detect            Corrective Actions Taken by the Guard                                      21
Theft of Small Arms          Vulnerability of the Standard Army Maintenance System                      22
                             Conclusions                                                                22
Parts                        Recommendations                                                            23

Chapter 3                                                                                               24
Internal Control             Poor Accountability for Repair Parts
                             Inventory Adjustments Not Reported
                                                                                                        24
                                                                                                        26
Weaknessesat Repair          Reasons for Inventory Discrepancies Not Determined                         26
Parts Warehouses             Inadequate Separation of Duties                                            26
                             Requisition Controls                                                       27
                             Conclusions                                                                27
                             Recommendations                                                            28

Chapter 4                                                                                               29
Inadequate Physical          Newburgh Repair Parts Warehouse
                             Rochester Repair Parts Warehouse and Shop C
                                                                                                        29
                                                                                                        32
Security Increases           Shops A, B, and D                                                          35
Potential for Theft          Conclusions                                                                38
                             Recommendation                                                             38

Appendix                     Appendix I: Major Contributors to This Report                              40

Table                        Table 3.1: Information Provided on Work Orders                             18

Figures      1               Figure 1: Gap in Perimeter Fence at Newburgh Warehouse
                             Figure 2: Open Trailer Used to Store Repair Parts



                             Page 0                       GAO/NSIAD-91-28 Army National Guard Weapona Parta
Contents




Figure 3: Warehouse in Which Civilians Were Pitching                          31
     Horseshoes Next to Open Trailers Containing Small
     Arms Parts
Figure 4: Shop C and Adjacent Rochester Warehouse                             33
Figure 6: Cars Parked Next to Rochester Warehouse Exits                       34
Figure 6: Small Arms Parts in Envelopes Stored in Open                        36
     Bins




Abbreviations

CID        Criminal Investigation Directorate
DOD        Department of Defense
GAO        General Accounting Office


Page 9                         GAO/NSIADBM8     Army National Guard Weaponm Parta
                                                                                                               .
Chapter 1

Introduction


                  Four individuals, including a small arms repairman and an artillery
                  repairman, were implicated in 1989 in the theft of weapons parts at a
                  New York Army National Guard maintenance shop in Rochester, New
                  York. The small arms repairman and another guardsman in Buffalo
                  were convicted. The artillery repairman and the fourth individual, a
                  Rochester police captain, have been indicted and are scheduled to go to
                  trial on January 16, 1991.

                  Agents from the Guard’s Criminal Investigation Directorate (CID) discov-
                  ered the thefts after receiving a tip about the possible sale of military
                  equipment, especially uniforms, to a civilian army-navy store. In the
                  course of its investigation, the CID agents discovered the thefts of small
                  arms parts. According to the agents, the two repairmen provided
                  weapons parts to the Buffalo guardsman and police captain, both of
                  whom held federal firearms licenses and could obtain lower receivers
                  legally on the commercial market.1 The small arms repairman also used
                  the receivers and the stolen parts to assemble weapons himself.

                  The CID agents estimated that the repairman sold between 26 and
                  27 weapons, including a fully automatic Ml4 rifle, AR16 rifles (the
                  civilian version of the military’s Ml6 rifle), and -4%caliber pistols. The
                  CID report listed 17 individuals, mostly guardsmen, who allegedly had
                  weapons built by the small arms repairer. They paid for the weapons in
                  cash or other items such as clothing and boots.


                  The Army defines small arms as all weapons, including those that are
Small Arms        fully automatic, up to and including calibers of 20 millimeters. We
Maintenance and   focused on repair parts for the .4&caliber automatic pistol, M9 semiau-
Repair            tomatic pistol, Ml6 rifle, M60 machine gun, .60-caliber machine gun, and
                  M203 grenade launcher.

                  Complex repairs of small arms are handled at four New York mainte-
                  nance shops operated by the Guard in the following locations: Peekskill
                  (referred to as Shop A in this report), on Camp Smith, a Guard installa-
                  tion; Staten Island (Shop B), in a residential area; Rochester (Shop C);
                  and Fort Drum (Shop D), the home of the 10th Mountain Light Infantry
                  Division. These shops also repair artillery weapons, motor vehicles, and



                  ‘A lower receiver is the part of the weapon that contains the trigger, firing mechanism, and serial
                  number.



                  Page 10                                   GAO/NSIADBl-28       Army   NationalGuard Weapoxw Parta
,


               Chapter 1
               Introduction




               communications and other electronics equipment. The Guard’s opera-
               tions and maintenance funding authorization for surface repair parts
               was about $8 million in both fiscal years 1989 and 1990.2

               On-hand parts used in repairs at the maintenance shops are classified
               either as bench stock or shop stock. Bench stocks are repair parts stored
               in workbench areas and include items such as triggers, screws, and
               springs. Army regulations define bench stocks as low-cost, high-use,
               consumable items used by maintenance personnel at an unpredictable
               rate. Shop stocks are repair parts that are stocked based on prior
               demand. Barrels and bolts are examples of small arms shop stocks,
               which are normally kept in a caged supply room with access limited to
               authorized personnel. Items included in shop stock must be approved by
               the Guard’s headquarters.

               Shop and bench stocks at the four maintenance shops are replenished
               from the Guard’s two repair parts warehouses, maintained by the
               134th Maintenance Company in Rochester and the 42nd Maintenance
               Battalion in Newburgh. These warehouses stock items based on demand
               and requisition items not in stock from supply depots. A stock record
               accountable officer at each warehouse keeps a perpetual inventory (an
               accurate count of stock on hand) of repair parts.

               Repair shop personnel use the computerized Standard Army Mainte-
               nance System to track all work orders and repair parts and to receive
               information from supported units. Repair parts warehouses use the
               computerized Standard Army Retail Supply System to track inventories
               and issue and requisition repair parts.


               After the thefts of small arms parts were discovered, the Guard, in its
Prior Audits   fiscal year 1989 Annual Assurance Statement on Internal Controls,
               reported a systemic problem with control and accountability procedures
               for weapons repair parts. It stated that “weapons repair parts are not
               presently classified as sensitive or pilferable. When received by the
               requester, they are placed in bins and loss of accountability can occur.”
               The Guard also issued a policy calling for greater security over small
               arms parts and an increased awareness by armament foremen of the
               importance of closely monitoring these parts.

               2Surface repair parts are used to repair trucks and trailers, communications and electronics equip
               ment, missile systems, combat vehicles and tanks, and all other surface equipment, including small
               arms.



               Page 11                                  GAO/NSIAD91-28 Army National Guard Weapons Parta
    Chapter 1
    Introduction




    In a 1989 report,3 the Guard’s U.S. Property and Fiscal Office, which is
    responsible for the proper obligation and expenditure of federal funds
    and for safeguarding federal property, examined the internal and
    external controls and the accountability of stocks of warehouse opera-
    tions. The report said that repair parts warehouses in general were
    operating without appointed accountable officers, internal controls,
    valid inspections, or proper stock management procedures. Major con-
    tributing factors that led to these conditions were

.   conflicting and confusing regulations and policy guidance,
.   inadequate training and education programs,
.   the absence of external inspection guidelines,
.   recent computer system changes, and
.   the general lack of experience in stock record accounting and direct sup-
    port operations.

    The Property and Fiscal Office also found that personnel at the repair
    parts warehouses were unaware of (1) the requirements for materiel
    accountability, (2) proper inventory adjustment procedures and how to
    determine the causes of inventory discrepancies, and (3) the proper pro-
    cedure for reporting losses and gains. As a result, the warehouses did
    not comply with Army regulations for inventory adjustments.

    Because personnel at the warehouses failed to determine the causes of
    inventory discrepancies, they had not implemented corrective measures
    to ensure that discrepancies did not reoccur. Moreover, the report said,
    the perfunctory posting of inventory adjustments results in the poor
    management of supplies and, possibly, pilferage, waste, mismanage-
    ment, or loss of government assets.

    The report also said that a significant number of parts had not been
    inventoried in two years. The lack of a regular inventory schedule
    results in the poor management of supplies, does not provide timely
    reporting of stock deficiencies, encourages loss and pilferage, and, most
    importantly, does not correct stock level inaccuracies, the report
    asserted.

    According to the New York Army National Guard’s Adjutant General,
    the report’s findings were valid. However, the Adjutant General said
    that many of the findings had been corrected, including those involving

    3Class IX Operations, Office of the U.S. Property and Fiscal Office, New York, Internal Review 88-18
    (Jan. 19,1989).



    Page 12                                  GAO/NSIAD-91-28 Army National Guard Weapon Parts
                            Chapter 1
                            Introduction




                            the appointment of accountable officers, scheduling and conducting
                            inventories, document processing, external inspection guidance, and
                            training.

                            In November 1984, as part of a Department of Defense (DoD)-wide audit
                            of physical inventory adjustments, the Army Audit Agency reported
                            problems with the Army’s inventory controls and inventory record
                            accuracy, including

                        . inaccurately recorded and reported inventory adjustments,
                        . improperly adjusted accountable records,
                        l inadequate analysis of inventory variances, and
                        l superficial quality control program reviews for inventory inaccuracies.


                            We evaluated the New York Army National Guard’s controls over small
Objectives, Scope,and       arms parts at the request of Senator Pete Wilson. Our objectives were to
Methodology                 (1) evaluate the Guard’s internal controls and physical security over
                            small arms parts, and (2) identify corrective actions taken and those
                            needed.

                            We performed our work at the Guard’s headquarters in Latham, New
                            York; four maintenance shops (Peekskill, Rochester, Staten Island, and
                            Fort Drum, New York); and two repair parts warehouses (Newburgh
                            and Rochester, New York).

                            To determine the Guard’s organizational structure, oversight responsi-
                            bilities and activities, we interviewed representatives of its State Main-
                            tenance Office, which is responsible for the Guard’s statewide
                            maintenance and repair program. We also interviewed Guard officials
                            from the offices of the Adjutant General and Chief of Staff, U.S. Prop-
                            erty and Fiscal Office, Military Support and Physical Security Branch,
                            and Office of the Inspector General.

                            To obtain details on the incident that had led to Senator Wilson’s request
                            and to obtain insights on internal control weaknesses that had allowed
                            the thefts to occur., we interviewed the two former New York guardsmen
                            who had pleaded guilty to theft of small arms parts; two agents of the
                            New York Guard’s Criminal Investigation Directorate; and the Assistant
                            U.S. Attorney, Western District of New York State, who shared with us
                            the information that had been developed for prosecuting the individuals
                            involved in the thefts.



                            Page 13                        GAO/NSIAD-91-28 Army National Guard Weapons Parts
                                                                     ‘




chapter 1
Introduction




We reviewed the supply management, maintenance and repair, and
physical security regulations issued by DOD, the Army, the National
Guard Bureau, and the New York Guard, as well as their standard oper-
ating procedures for repair shops and warehouses. In addition, we
examined the Guard’s internal reviews of general operations, repair
parts warehouse operations, and physical security.

We interviewed shop superintendents and foremen to discuss the
weapons repair process, reviewed a sample of small arms work orders,
conducted inventories of some small arms parts and compared the
results to inventory records, reviewed small arms bench and shop stock
lists to determine whether only allowable items had been included on
the lists and if the lists had been approved as required, and evaluated
requirements and practices for reporting inventory discrepancies at
each shop and warehouse. We also evaluated the controls over the
access to the Standard Army Maintenance System (used in the shops)
and the Standard Army Retail Supply System (used in the warehouses)
and reviewed the effectiveness of physical security controls at each
facility for weapons, small arms parts, and other repair parts.

We performed our work between August 1989 and April 1990 in accor-
dance with generally accepted government auditing standards.




Page 14                      GAO/NSLAD91-28 Anuy National Guard Weapons Parts
.

Chapter 2

Internal Controls Are Not Adequate to Prevent
or Detect Theft of Small Arms Parts

                     The Guard’s internal controls are not adequate to prevent or detect the
                     theft of small arms parts. We found that (1) key duties and responsibili-
                     ties are not separated in the repair process, (2) work orders do not con-
                     trol the repair process as intended, (3) inventory controls over bench
                     and shop stock are almost nonexistent, and (4) the Standard Army
                     Maintenance System can be used and manipulated by persons not
                     authorized access to it. These internal control weaknesses increase the
                     risk of fraud, waste, and theft of small arms parts. Work orders can
                     easily be falsified, unneeded parts can be ordered, and replaced parts
                     that are still usable may not be turned in for disposal. Moreover, the
                     lack of accountability for shop and bench stocks make the theft of small
                     arms repair parts virtually undetectable.


                     The small arms repairman convicted in the thefts of small arms parts
Key Duties Are Not   told us how he had been able to steal them between 1980 and 1989
Separated            without being detected. The repairman said he had uncontrolled access
                     to all bench stock (at the time, most parts were stored there rather than
                     in shop stock). Because the repair shop did not account for its parts, he
                     had been able to take whatever he wanted whenever he wanted. The
                     repairman also had total control over the repair process; he had con-
                     ducted the initial inspections, ordered the parts, repaired the weapons,
                     and conducted the final inspections. Without oversight, he had been able
                     to request unnecessary parts on work orders and take them for personal
                     use. Poor security at the repair shop had permitted him to remove the
                     parts from the shop and an adjacent warehouse without detection.

                     We found that this is still a problem. At three of the four shops we vis-
                     ited, the individual who determined the needed repairs also ordered the
                     repair parts, repaired the weapon, and conducted the final inspection.

                     This lack of separation of duties conflicts with the U.S. government’s
                     internal control standards, which state: “To reduce the risk of error,
                     waste, or wrongful acts or to reduce the risk of their going undetected,
                     no one individual should control all key aspects of a transaction or
                     event. Rather, duties and responsibilities should be assigned systemati-
                     cally to a number of individuals to ensure that effective checks and bal-
                     ances exist.“’ The internal control standards also state that “access to
                     resources and records is to be limited to authorized individuals, and


                     ‘Standards for Internal Controls in the Federal Government, Accounting Series, GAO (Washington,
                     DC., 1983).



                     Page 16                                 GAO/NSLAD91-28 Army National Guard Weapons Parts
                        Chapter 2
                        Internal Controla Are Not Adequate to
                        Prevent or Detect Theft of Small Anna Parts




                        accountability for the custody and use of resources is to be assigned and
                        maintained.”

                        Army regulations, however, do not require the separation of duties. For
                        example, the regulations do not require an independent inspection of
                        weapons before they are repaired to ensure that the parts ordered for
                        the repair are in fact needed. The regulations also do not stipulate that a
                        final inspection be conducted by someone other than the repairer.


                        Work orders (Department of the Army Form 5504) guide the repair pro-
Work Orders Guide       cess and serve as a record of the repair; however, key information that
Repair Process          would adequately document the initial inspection and the disposition of
                        used parts is omitted from the work order.

                        Guard units submit the work orders for the repair or modification of
                        equipment, including small arms. Work orders are used to control the
                        repair process from the time a weapon enters a shop for repair until the
                        time it is repaired and picked up by the unit. According to Army regula-
                        tions, the work order is used to record all work done and repair parts
                        used except common hardware and bulk material. “Common hardware”
                        is not defined.

                        Among other things, the work order is used by the shops to record

                    . the   acceptance of the weapon and who accepts it,
                    l the   name of the person assigned to repair the weapon,
                    . the   tasks to be accomplished,
                    . the   parts to be used, and
                    . the   signature of the individual who conducts the final inspection.

                        When a weapon needs to be repaired, a person from the unit owning the
                        weapon brings it to the repair shop along with the work order. The pro-
                        duction control section in the shop numbers the work order and enters it
                        in the Standard Army Maintenance System. This computerized system is
                        used to track and control the work order until the repair is completed
                        and the weapon is picked up by the unit. A shop employee accepts the
                        weapon and checks it to ensure that it is intact and that all lower-level
                        maintenance has been completed. This employee signs the work order
                        acknowledging acceptance of the weapon. The weapon then receives an
                        initial repair inspection or is stored in a vault until it is ready for
                        inspection.



                        Page 16                               GAO/NSIAD-91-28 Army National Guard Weapona Parta
                      Chapter 2
                      internal Controla Are Not Adequate to
                      Prevent or Detect Theft of SmaU Arms Parta




                      According to Army Regulation 750-1, “Army Materiel Maintenance
                      Policy and Retail Maintenance Operations,” the weapon should be
                      inspected by someone who is technically qualified to determine the
                      repairs needed and the parts required to restore the weapon to a ser-
                      viceable condition. The results of the inspection and the inspector%
                      name are recorded on an equipment inspection and maintenance work
                      sheet. The work sheet is attached to the work order until the job is com-
                      pleted, and then the work sheet is generally discarded.

                      After the initial inspection, the work order and the work sheet are for-
                      warded to the shop’s supply section, where the required shop stock
                      parts are obtained. A supply employee initials the work order next to
                      the specific part number as the parts are provided. Parts not in stock are
                      ordered. Once all the parts have been provided, the work order is reclas-
                      sified as awaiting repair, and the armament section is notified that the
                      work order and the parts are ready to be picked up. The repairer
                      assigned the work order signs it, pulls all required bench stocks, and
                      repairs the weapon. After the repair is completed, the weapon is given a
                      final inspection.

                      Work orders, however, are not always adequate records of the work
                      done. For example, the work order does not have a place for the name of
                      the person who conducted the initial inspection; therefore, once the
                      work sheet is discarded, there is no way of verifying who inspected the
                      weapon.

                      Completed work orders also do not (1) provide assurance that an old
                      part is turned in for each new repair part or (2) document the disposal
                      of old parts (for example, whether they were destroyed and sold as
                      scrap or turned in to the disposal office). The former guardsman con-
                      victed of stealing small arms parts told us that he once exchanged three
                      used Ml6 rifle barrels purchased at a gun show for three new barrels
                      from the repair shop.


Work Orders Did Not   Although the repair process was generally the same at the four repair
Document Repairs at   shops, each had slightly different control procedures. We found in our
                      review of sample work orders that, for the most part, the repair process
Shops                 was not adequately controlled by and documented in the work orders to
           w          preclude the theft of small arms parts. Table 3.1 shows the types of
                      information recorded on work orders at each of the repair shops.




                      Page 17                              GAO/NSL4D-91-28 Army National Guard Weapons Parts
                                          Chapter 2
                                          lntemal Controls Are Not Adequate to
                                          Prevent or Detect Theft of Small Arm13Parts




fable 3.1: Information Provided on Work
Orders                                    Work orders listed:                                 Shop A        Shop 6        Shop C       Shop D
                                          --
                                          Who conducted      initial inspection                     No            No           No             Yes
                                          Who picked     up repair parts                            No            No           No             No
                                          DisDosition   of old Darts                                No            No           No             Yes
                                          All parts used in repairs                                 No           Yes           Noa            Yes
                                          Who conducted      final inspection                      Yes           Yes           Yes            Yes

                                          %ubsequent to the implementation of a new procedure (after the thefts were disclosed), our review
                                          showed that all parts, including bench stock, were listed on the work orders.


Shop C                                    We reviewed 20 small arms work orders completed between
                                          October 21, 1988, and July 31, 1989. While all 20 work orders showed
                                          that initial inspections, repairs, and final inspections had been done, we
                                          could not determine when the initial inspections had occurred or who
                                          had conducted them. In four cases, because the work sheets were
                                          attached to the work orders, we were able to determine that the initial
                                          inspector also had repaired the weapon.

                                          We found that Shop C tried to maintain a separation of duties between
                                          the repairer and the final inspector. On 17 of the 20 work orders we
                                          reviewed, we found what appeared to be the armament section
                                          foreman’s signature on the work order as the final inspector. However,
                                          we were told by a former Shop C repairman who pleaded guilty to
                                          stealing small arms parts that he usually had performed the final
                                          inspection on his own repairs and had signed his foreman’s name. In
                                          addition, information on the work orders we reviewed was not always
                                          legible because the only available copy of the work order was often the
                                          fourth carbon copy.

                                          The work orders did not show who had picked up the parts from the
                                          supply section, and there was no way to tell whether all parts required
                                          to repair the weapons had been listed on the work order. However,
                                          Shop C had not required that bench stocks used be listed on the work
                                          orders. The completed work orders also did not show what had hap-
                                          pened to the old parts.

                                          The work orders we reviewed had been completed before the disclosure
                                          of the thefts of small arms parts from Shop C. To determine whether
                                          control over the small arms repair process had improved since then, we
                                          reviewed five additional work orders completed during November 1989.
                                          We found that a new administrative procedure had been instituted
                                          requiring production control technicians to file the work sheet with the



                                          Page 18                                   GAO/NSIAB91-28 Army National Guard Weapons Parts
                        Chapter 2
                        Internal Controle Are Not Adequate to
                        Prevent or Detect Theft of Small Anne Parta




                                                                                                           -
                        completed work order. For three of the five work orders, the person who
                        initially had inspected the weapon also had repaired it.

                        After the thefts, Shop C also had instituted new supply procedures that
                        required (1) the armament foreman to approve all requisitions for small
                        arms parts from shop stock, (2) the foreman to accompany the repairer
                        when the repairer picked up the parts and to verify that all the requisi-
                        tioned parts were received by signing the work order, and (3) all bench
                        stocks used in repairing the weapon be listed on the work order. The
                        five November 1989 work orders we reviewed had what was reported to
                        be the foreman’s signature or initials approving the small arms parts
                        requisitions and verifying that the parts had been picked up. In addi-
                        tion, four of the five work orders listed the bench stocks that had been
                        used.

Shops A, B, and D       In our review of a sample of 10 work orders each at shops A, B, and D,
                        we found that neither shop A nor B performed an independent initial
                        inspection, although Shop B’s standard operating procedure required
                    &   the armament foreman to conduct the initial inspection. At Shop A we
                        could not tell who had conducted the initial inspection because the shop
                        did not use the work sheets and the work orders did not indicate who
                        had conducted the inspection. However, we were told by the armament
                        foreman that there was no requirement for an independent initial
                        inspection. Although Shop B used the work sheets, it had discarded
                        them after the work order had been completed.

                        At Shop D an independent inspector had conducted the initial inspection
                        when he had accepted the weapon, and then he had signed the work
                        order. Shop D personnel also had discarded the work sheets after the
                        work orders had been closed. Therefore, to ensure that the initial inspec-
                        tion had been conducted by an independent inspector, we reviewed five
                        open work orders that still had the work sheets attached. In all cases an
                        independent inspector had conducted the initial inspection.

                        We could not always tell from the work orders at shops A and B who
                        had picked up the parts from supply. However, armament personnel
                        said a new procedure required them to initial the work order whenever
                        they picked up parts from supply. Shop D used a register to record the
                        name of the person who had picked up the parts, the work order
                        number, and the pick-up date.

                        Shops B and D had recorded all repair parts, including bench stock, on
                        their work orders. Procedures at Shop A did not require that bench


                        Page 19                               GAO/NSIAD91-28 Army National Guard Weapons Parts
                     Chapter 2
                     Internal Controls Are Not Adequate to
                     Prevent or Detect Theft of Small Arm13Part13




                     stock parts be recorded on the work order, even though Guard proce-
                     dures required that all repair parts used be recorded there.

                     At both shops A and B we generally found that the repairer had con-
                     ducted the final inspection of the weapon. At Shop D it had been con-
                     ducted by an independent inspector.

                     At shops A and B we could not determine the disposition of the old parts
                     removed from the weapons during repair. The work orders did not
                     reflect their final disposition, and they were not cross-referenced to
                     work orders that would have indicated that the old parts had been ren-
                     dered unusable. In contrast, Shop D personnel had added a separate task
                     to their work orders that required that the technical inspector verify
                     that the old parts were turned in and rendered unusable.


                     No one is held accountable for parts after they are sent from the repair
Inventory Controls   parts warehouses to the repair shops because Army Regulation 735-5,                      M
Over Repair Parts    “Unit Supply Update 11,” states that itew that lose their identity when
                     used in repairs are considered expended.


Bench Stock          Items included in bench stock must be approved by the shop superinten-
                     dent semiannually, but Army and Guard regulations do not require that
                     shops maintain a perpetual inventory. The Army had set a $10 limit on
                     the value of items that could be included in bench stock but rescinded
                     the policy in January 1988. As a result, Army regulations permit rela-
                     tively expensive small arms parts, such as bolts, barrels, and stocks, to
                     be included in bench stock. However, the Guard independently has rein-
                     stituted the $10 limit.

                     In July 1989, following revelations of the thefts, Shop C reviewed its
                     small arms stock. Among the parts found in the bench stock were an
                     M16A2 rifle parts package (containing barrels, hammers, and receiver
                     cartridges), trigger assemblies, gun stocks, and safety assemblies. As a
                     result of the review, Shop C shifted 159 of 393 parts from bench stock
                     to shop stock, reducing the authorized value of the bench stock from
                     $16,454 to $5,007. In addition, the other shops also shifted a significant
                     amount of bench stock to shop stock.


Shop Stock           Although regulations require semiannual inventories of shop stock, they
                     do not require that shop personnel report discrepancies or determine


                     Page 20                              GAO/NSIAD-91:28 Army National Guard Weapons Parts
                       Chapter 2
                       Internal Controls Are Not Adequate to
                       Prevent or Detect Theft of Small Arms Parts




                       why the discrepancies occurred. When inventory discrepancies are iden-
                       tified, personnel simply adjust the records to reflect the actual amount
                       on hand. In addition, shops are not required to maintain a record of
                       these adjustments, although most of the shop superintendents told us
                       they expect their personnel to report significant discrepancies to them.

                       According to a supply worker at Shop C, during a semi-annual inven-
                       tory, the shop had found that a diesel engine, valued at over $10,000,
                       was missing. He said the discrepancy had been handled by adjusting the
                       record to reflect the actual number of engines on hand. Shop C’s supply
                       foreman told us the engine had not been missing; it simply had not been
                       moved from the warehouse storage area to Shop C’s storage area. How-
                       ever, the warehouse foreman could not corroborate the supply
                       foreman’s account, and there was no record of what actually had
                       happened.

                       As in the repair process, there was no separation of duties and responsi-
                       bilities in the handling of shop stock. Individuals working in supply had
                       access to both the stocks of parts and the inventory records. A worker
                       could take a part and adjust the record or could take parts not on the
                       records. In either case, it would be difficult to detect the theft.


                       Following the discovery of the thefts, the Guard took steps to improve
Corrective Actions     internal controls at the repair shops. For example, the Guard now
Taken by the Guard     requires that

                       only small arms parts with a unit price of $10 or less be included in
                       bench stock;
                       bench and shop stock be secured in the armament and supply sections,
                       respectively, and access to the parts be limited to persons assigned to
                       each section;
                     . all parts to be used in the repairs be listed on the work order following
                       the initial inspection;
                       the supply section secure small arms parts until they are needed by the
                       armament section; and
                       unserviceable parts be disposed of properly.

                       Despite these changes, it would be difficult to detect thefts because of
                       significant weaknesses in the controls over the repair and supply
                       functions.




                       Page 21                               GAO/NSIAD-91-28 Army National Guard Weapona Parts
                           Chapter 2
                           Interual Controla Are Not Adequate to
                           Prevent or Detect Theft of Small Arms Parts




                           The computerized Standard Army Maintenance System is used by repair
Vulnerability of the       shop personnel to track and aid in managing items submitted for repair
Standard Army              or maintenance, work loads, and resources. It is used, among other func-
Maintenance System         tions, to

                       . requisition repair parts,
                       . control the use of excess parts,
                       . follow up on requisitions and cancellations,
                       l transfer repair parts from shop stock inventory to work orders,
                       . track items ordered for repairs but not used,
                       . maintain bench and shop stock lists, and
                       l replenish bench and shop stock.

                           One password is used to access the entire system. The Guard’s repair
                           shops do not use unique passwords to access the system.


                           Despite the steps the Guard took to improve internal controls following
Conclusions                the discovery of the thefts, we found that weapons parts at Shop C and
                           at other locations are still vulnerable to theft. Any thefts probably
                           would not be discovered because of the lack of internal controls and
                           accountability.

                           We found weak internal controls in the small arms repair and supply
                           processes at the four repair shops. The controls do not provide adequate
                           accountability and control of repair parts, and they do not sufficiently
                           protect these parts from theft or loss. Key duties in the repair process
                           are typically performed by the same individual, and an independent
                           assessment is not made of whether the repair was actually needed and
                           the parts actually used. These weaknesses generally stem from the
                           Guard’s failure to establish effective controls over the small arms repair
                           process and deficient Army supply and maintenance regulations. Supply
                           personnel generally have access to both repair parts stocks and inven-
                           tory records, leaving the stocks open to theft and the records vulnerable
                           to manipulation.

                           The work order does not provide adequate information to determine
                           that important steps in the repair process, such as the initial inspection
                           and the disposition of used parts, have been completed properly. More-
                           over, there is no requirement to account for either bench stock or shop
                           stock, and shop stock inventory adjustments are not documented or
                           reported.



                           Page 22                               GAO/NSIAD-91-28 Army National Guard Weapons Parts
,



                      Chapter 2
                      Internal Controls Are Not Adequate to
                      Prevent or Detect Theft of Small Arms Parta




                      A password is the Standard Army Maintenance System’s only security
                      control. All of the shops we visited used the same password. Thus, the
                      system can be easily accessed by unauthorized personnel. Once into the
                      system, a user has access to its functions regardless of authorization,
                      leaving production control and supply functions open to manipulation
                      by persons not authorized to use the system.


                      Because our work at the New York Army National Guard showed that
Recommendations       Army regulations were inadequate to control and secure small arms
                      parts, we recommend that the Secretary of Defense direct the Secretary
                      of the Army to revise supply and maintenance regulations to require
                      that

                  l key duties and responsibilities be assigned to separate individuals in the
                    small arms repair and supply processes;
                  l work orders be maintained to show that important steps in the small
                    arms repair process are followed;
                  l repair parts exceeding a unit value of $10 be excluded from bench stock;
                  l for every new part that is requisitioned from shop stock, an old part be
                    turned in and the disposition of the old part be recorded on the work
                    order;
                  l discrepancies in shop stock inventories be documented, investigated,
                    reported, and resolved; and
                  . the Standard Army Maintenance System be protected to prevent access
                    by unauthorized personnel.




                      Page 23                               GAO/NSLAD-91-28 Army National Guard Weapons Parts
Chapter 3

Internal Control Weaknessesat Repair
Parts Wwehouses

                      We examined internal control procedures at both the Newburgh and
                      Rochester repair parts warehouses. In general, the internal controls at
                      the Rochester warehouse were adequate. However, a number of weak-
                      nesses in the internal control procedures at the Newburgh warehouse
                      increase the risk that small arms parts will be lost or stolen. For
                      example, we found that the warehouse did not adequately account for
                      repair parts inventories, document findings from periodic inventories,
                      report inventory adjustments as required, adequately explain inventory
                      discrepancies, or assign key duties to separate individuals.

                      Although both warehouses stock repair parts, they are organized differ-
                      ently. The Rochester warehouse contains only one inventory. The New-
                      burgh warehouse is much larger and contains five separate inventories,
                      which stock many of the same types of repair parts. Four of the invento-
                      ries are stored only in trailers, while the other is stored in trailers and
                      on the warehouse floor.

                      Guard officials said that staff shortages, inadequate training, and the
                      collocation of the repair parts inventories contributed to the problems
                      we identified at the Newburgh warehouse.


                      Army Regulation 7 10-2, “Supply Policy Below the Wholesale Level,”
Poor Accountability   states that inventory variances that have an extended value of $50 or
for Repair Parts      less should not be reported as inventory adjustments unless the items
                      are considered “sensitive” or there is some indication of negligence.’ The
                      inventory record should simply be adjusted to reflect the actual inven-
                      tory on hand. Inventory variances in excess of $50 must be reported on
                      an inventory adjustment report. The cause of inventory variances
                      involving sensitive items or items with an extended value of more than
                      $500 must be determined. Because few small arms parts are coded “sen-
                      sitive” and many cost less than $50, inventory variances involving small
                      arms parts often are not reported or researched for cause.

                      The Newburgh warehouse’s inventory was valued at $6.1 million as of
                      January 30, 1990. During 1989, the facility reported 1,769 inventory
                      adjustments (all variances greater than $50). The reported inventory
                      gains were almost $8 million, and losses were $928,000. The value of
                      these adjustments was almost 1.8 times the inventory value. From Jan-
                      uary 2,1990, to May 8,1990, the warehouse reported 423 inventory

                      ‘The extended value is the item’s unit price times the quantity of the item. In October 1989, the $60
                      standard was raised to $100.



                      Page 24                                   GAO/NSIAD-91-28 Army National Guard Weapons Parta
                          Chapter3
                          Internal Control Weaknesses at Repair
                          Parts Warehouses




                          adjustments. The gains were over $3.3 million while the losses were
                          $132,000.

                          The Newburgh Technical Supply Officer attributed most of the inven-
                          tory variances to errors by supply personnel working with the comput-
                          erized inventory control system. For example, in 1989 a single gain of
                          $4.4 million was attributed to an operator’s data input error. A
                          1989 Guard internal review report also noted that data input errors
                          were a cause of inventory variances. It said that supply personnel were
                          not adequately trained to use the computers but that the problem could
                          be corrected through training, experience, and an internal control pro-
                          gram to monitor errors and their causes.

                          Although Army regulations require that repair parts warehouses be
                          physically inventoried at least annually, we found no documentation to
                          show that an inventory had been conducted at the Newburgh warehouse
                          in 1989.


Inventories Demonstrate   To determine the accuracy of Newburgh’s small arms parts inventory,
Inaccuracies              on February 15,1990, we counted all the parts (63 parts with various
                          quantities) stored on the floor of the warehouse, excluding those in the
                          trailers, and compared the results to the warehouse’s accountable
                          records. The Army standard for accuracy is 86 percent, meaning a vari-
                          ance in the inventory of 15 percent from the accountable records is per-
                          mitted. For 13 (21 percent) of the parts we found inventory gains valued
                          at $137, and for 14 parts (22 percent) we found inventory losses valued
                          at $103. None of the parts were sensitive, none of the variances
                          exceeded $50, and negligence could not be assessed. In accordance with
                          current procedures, the warehouse was not required to report or deter-
                          mine the causes of these inventory variances.

                          Despite the low dollar value of the variances, we expressed our concern
                          over the high error rate to the Guard’s State Maintenance Officer
                          because (1) small arms parts can be assembled into weapons, (2) the
                          warehouse’s inventory of small arms parts, according to the Technical
                          Supply Officer, was likely to grow, and (3) the number of inventory
                          adjustments that had occurred in 1989 and 1990 were significant. Fur-
                          thermore, inventory inaccuracies can result in critical supply shortages,
                          unnecessary procurements, and accumulations of excess stock. In
                          response to our concerns, an internal audit team conducted a special
                          inventory at the Newburgh warehouse. The team took a random sample
                          from 59 parts. The total dollar value of the items sampled was about


                          Page 26                                 GAO/NSIAD-91-29 Army National Guard Weapons Parts
                            Chapter 3
                            Internal Control Weaknesses at Repair
                            Parts Warehouses




                            $18,600. The results showed variances of 25.9 percent, and the absolute
                            dollar value of the errors was about $2,000. However, after applying the
                            Army’s regulation for reporting only substantial variance-those
                            exceeding $50-the error rate fell to 14.8 percent, which is less than the
                            Army’s 15 percent allowable error rate for inventory accuracy.

                    1
                            We found that the Newburgh warehouse was not preparing inventory
Inventory                   adjustment reports of discrepancies exceeding $60, as required by the
Adjustments Not             Army. Without these reports, the unit commander does not have suffi-
Reported                    cient information to evaluate the numbers and types of inventory
                            adjustments being made. A November 1989 Guard report of warehouse
                            operations also disclosed this problem. The report said not one inven-
                            tory adjustment report had been properly prepared or approved.


                            We found that the warehouses had done little causative research of
Reasonsfor Inventory        inventory adjustments. The research that was done was superficial and
Discrepancies Not           did not result in identifying the specific reasons for the variances. For
Determined                  example, we found the following brief explanations of inventory
                            adjustments:

                        . Items were found during location surveys and then recorded on the
                          inventory records.
                        . Receipts and issues were not posted properly.
                        . Gains that resulted from receipts were not being processed prior to
                          inventories and location surveys.
                        l Gains resulted from an issue of items that the computer showed as
                          having a zero balance.

                            The 1989 Guard report stated that neither the Newburgh nor the Roch-
                            ester warehouse was aware of the requirements for determining the
                            cause of inventory variances. It concluded that this “leads to a weak or
                            nonexistent internal control environment whereby the s’ame errors are
                            constantly being made or go unresolved. As these errors multiply they
                            end up masking real problems involving losses or gains.”


                            In reviewing computer records, we found that, with the exception of
Inadequate separation       three individuals, all Newburgh warehouse personnel had access to the
of Duties                   perpetual inventory records, could receive stock from various DOD and
                            Army depots, could process customer requisitions, and had access to the
                            inventories, including small arms parts. Army Regulation 380-380,


                            Page 26                                 GAO/NSIAD-91-28 Army National Guard Weapons Parts
                       Chapter 3
                       Internal Control Weaknesses at Repair
                       Pam Warehouses




                       which governs automation security, requires that “key duties within a
                       facility be separated so as to preclude any one individual from
                       adversely affecting the system.” The Newburgh Assistant Material Man-
                       agement Officer, to whom the Technical Supply Officer reported,
                       acknowledged that this lack of separation of duties constituted an
                       internal control weakness. He said the warehouse had not been able to
                       assign key duties to different individuals because of personnel
                       shortages.

                       We found that, at the Rochester warehouse, key duties were separated
                       among individuals. Personnel were assigned different passwords that
                       allowed them to perform specific tasks and precluded them from per-
                       forming others. Warehouse personnel, who had access to the stocks, did
                       not have access to the accountable records. Stock control personnel, who
                       maintained the accountable records and handled requisitions and
                       replenishment, did not have access to the warehouse stock. The Roch-
                       ester Technical Supply Officer controlled and assigned the passwords,
                       changing them as the need arose. He and the accounting supervisor were
                       the only ones who had access to both the accountable records and the
                       warehouse stockage and who were permitted to process small arms
                       parts requisitions and draw the parts from locked cabinets.


                       Any Army entity, including New York Army National Guard units,
Requisition Controls   regardless of authorization level, can order most repair parts (including
                       weapons parts) from a warehouse or depot. For example, a unit can
                       order a small arms part that, according to Army regulations, should be
                       ordered only by a repair shop and only if the order is authorized by the
                       organizational maintenance officer.

                       In an attempt to place some degree of control over small arms parts req-
                       uisitions, the New York Army National Guard assigned a management
                       review code for selected parts in its inventory control system. Every
                       requisition submitted to the warehouses for these parts is flagged by the
                       system for management review. Once flagged, the technical supply
                       officer reviews the requisitions to ensure that the customer is author-
                       ized to requisition the part.


                       Weak internal controls at the Newburgh warehouse, and to a lesser
Conclusion6            extent at the Rochester warehouse, preclude adequate accountability
                       and protection of assets, thereby making their repair parts inventories



                       Page 27                                 GAO/NSIAD91-28 Army National Guard Weapons Parta
                      Chapter 3
                      Internrrl Control Weaknessee at Repair
                      Parts Warehouses




                      vulnerable to theft and loss. Inadequate separation of duties in the New-
                      burgh warehouse permit personnel to access both the accountable
                      records and repair part stocks. Existing inventory records are highly
                      questionable because of the lack of documentation of periodic invento-
                      ries, a high number of inventory adjustment reports, and insufficient
                      explanation of inventory variances. The accountability of small arms
                      parts is diminished under the regulatory allowance of writing off vari-
                      ances below $50 and under the 85 percent inventory accuracy standard
                      permitted by the regulations. Furthermore, although the Guard recently
                      instituted a procedure to review whether a customer is authorized to
                      requisition selected small arms parts, there is no such procedure Army-
                      wide. Such an Army-wide control could preclude the issuing of parts to
                      an unauthorized customer.


                      We recommend that the Secretary of Defense direct the Secretary of the
Recommendations       Army to require that inventory accuracy standards that effectively con-
                      trol inexpensive small arms parts be applied.

                      We also recommend that the Adjutant’General,                 New York Army
                      National Guard, require that

                  l periodic warehouse inventories be conducted and documented and
                    adjustments be reported to higher levels of authority for review,
                  . reasons for inventory discrepancies be identified and reported as
                    required by Army regulations so that problems can be corrected expedi-
                    tiously, and
                  . the duties of the Newburgh warehouse workers be separated to prevent
                    their access to both the inventory records and the warehouse stock.




                      Page 28                                  GAO/NSIAD-91-28 Anuy National Guard Weapons Parta
Chapter 4

Iddequate Physical Security Increases
Potential for Theft

                  Physical security at the installations we visited was, in some instances,
                  inadequate to protect repair parts, including small arms parts. Collec-
                  tively, the security deficiencies we found included

                  poor facility access controls,
                  inadequate perimeter fencing,
                  doors and windows not adequately secured,
                  no building alarm systems,
                  no guards during duty or off-duty hours,
                  parts unsecured or poorly secured,
                  employee and visitor parking too close to storage facilities, and
                  stock stored outdoors in an unsecured area.

                  The security deficiencies we noted at each installation we visited are
                  discussed below.


                  We found serious physical security deficiencies at the Newburgh repair
Newburgh Repair   parts warehouse. In our inspection of the perimeter fencing, we found
Parts Warehouse   holes and spaces large enough for an adult to pass through (see fig. l), a
                  tree lying across the fence, shrubs and small trees growing along the
                  fence that could hide or facilitate unlawful intrusion, and a section
                  where the fence was only 3 feet high. In addition, many pilferable parts,
                  such as tires and automobile air filters, were stored outdoors in
                  unsecured open trailers covered only with heavy canvas (see fig. 2). A
                  number of government-owned vehicles were stored in an unlit section of
                  the warehouse grounds, making it easy for individuals to steal parts at
                  night. (The facility is not guarded from 12 midnight to 7 a.m.)




                  Page 29                        GAO/NSIAD-91-28 Army National Guard Weapons Parts
                                       Chapter 4
                                       Inadequate Phyebd Security Mere-~
                                       Potential for Theft




Figure 1: Gap in Perimeter Fence at
Newburgh Warehoure




Figure 2: Open frailer Used to Store
Repair Parts




                                        Page 30                            GAO/NSLAD-91-28 Army National Guard Weapon8 Parta
                                         Chapter 4
                                         Inadequate Physical Security Increases
                                         Potential for Theft




                                         All warehouse personnel have access to small arms parts. Once the parts
                                         are pulled from the inventories and are awaiting shipment or pickup,
                                         they are kept in open, unsecured bins that are accessible to everyone in
                                         the warehouse. The Technical Supply Officer said that parts may sit in
                                         these bins for as long as a week before they are shipped or picked up.

                                         The warehouse is located in an armory adjacent to a lower-level mainte-
                                         nance shop. The armory also has a gymnasium used for Guard drills and
                                         various civilian activities. The warehouse maintains five separate inven-
                                         tories. While most of the main inventory is secured in a locked cage at
                                         night, some of the other inventories, which contain small arms parts, are
                                         stored inside the warehouse in trailers that are left open at all times.
                                         The warehouse’s perimeter doors are wired with alarms, and all doors
                                         are supposed to be locked after duty hours. However, on one of our
                                         visits during after-duty hours we found the front gate unlocked and
                                         three open doors through which we were able to enter the warehouse.
                                         The double doors between the gymnasium and the warehouse were
                                         unlocked and a side door to the gymnasium was also unlocked. There-
                                         fore, we were able to enter the warehouse through the gymnasium. In
                                         addition, nine civilians, none of whom were employed at the warehouse,
                                         were pitching horseshoes on the warehouse floor (see fig. 3).

Plguro 3: Warehouse In Which Civilians
Wore Pitching Horrerhoer Next to Open
TraIlerr Conteinlng Small Arms Parts




                                         Page 31                                  GAO/NSIAD-91-28 Army National Guard Weapons Parts
                         chapter 4
                         Inadequate Physical Security Increases
                         Potential for Theft




                         On our way out of the warehouse, we met the Assistant Materiel Man-
                         agement Officer and the Technical Supply Officer for the Newburgh
                         facility. They said that the civilians were members of a horseshoe team
                         who had received permission to practice in the warehouse from
                         December through February. Despite having authorization to be there,
                         the civilians were not supervised and could have easily helped them-
                         selves to a variety of repair parts, including those for small arms.

                         The Rochester warehouse and Shop C are located in attached buildings
Rochester Repair Parts   (see fig. 4) and share an outdoor storage facility and parking lot. The
Warehouse and            warehouse shares its space with a U.S. Property and Fiscal Office
Shop C                   warehouse.

                         The inventories of both the warehouse and the Office are located on the
                         same floor and share a loading dock. The Office has a storage vault and,
                         on occasion, temporarily stores sensitive repair parts, The last physical
                         security inspection (March 1989) of the entire warehouse identified no
                         significant problems. However, we found the following problems:

                     . Employees of the repair parts warehouse and U.S. Property and Fiscal
                       Office have access to each other’s inventory. No security measures are
                       in place to preclude most repair parts from being pilfered by these
                       employees. However, the risk to small arms parts and other pilferable
                       items is substantially less than the general inventory because they are
                       stored in locked cabinets in a locked steel cage with limited access.
                     . General inventory items awaiting piekup or shipment are placed in open
                       bins near a door to the side parking area. These items have been
                       removed from the inventory and are no longer on the accountable
                       records; therefore, they can easily be taken with little chance of
                       detection.
                     . Maintenance units turn in their excess repair parts to the repair parts
                       warehouse, where they are either returned to the inventory to meet
                       future needs or sent to the U.S. Property and Fiscal Office, which even-
                       tually sends them to a depot. Until a worker has the opportunity to pro-
                       cess the items and add them to the accountable records, they are placed
                       in a separate building shared with the Office warehouse. Therefore,
                       employees from both organizations have access to this building and
                       could remove items without being observed. However, small arms parts
                       are placed in a locked cage until they are ready for processing.
                     . Parking is permitted on the side of the warehouse near several exit
                       doors and an overhead door (see fig. 5). These doors are not wired with
                       alarms. Although warehouse personnel are directed to enter and exit the



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                                Chapter 4
                                Inadequate Physical Security Increases
                                Potential for Theft




                                facility through the front door, we observed workers, on several occa-
                                sions, using the side exit doors. Warehouse personnel could exit the
                                warehouse from one of these side doors with government property and
                                enter their vehicles without being noticed. Furthermore, all of the
                                building’s overhead doors are kept open during the summer months to
                                cool the facility. We were told by the Shop C superintendent that he had
                                requested that the parking lot be expanded so that the authorized
                                parking next to the warehouse can be eliminated. In addition, he had
                                requested that the sides of the building be fenced to limit warehouse
                                entry and exit to the front doors.

Figure 4: Shop C and Adjacent
Rocherter Warehouse




                                Page 33                                  GAO/NSIAD-91-28 Army National Guard Weapons Parts
                                          Chapter 4
                                          Inadequate Physiclll Security Increaeee
                                          Potential for Theft




Figure 5: Cars Parked Next to Rochester   ~d#f,
                                           1 :*                                                                     /’
Warehouse Exits




                                          According to Shop C’s standard operating procedure for physical
                                          security, all personnel are required to use the front door, sign in, and
                                          report to the front office. The use of side doors is prohibited. We found
                                          that, contrary to the procedure, people were permitted to enter the shop
                                          through one side door. To check in, they had to walk through the main-
                                          tenance area where bench stock repair parts (not small arms parts) were
                                          sitting in open bins. In addition, there are several bay doors that are
                                          kept open during the summer months and doors that someone can enter
                                          or exit without being noticed.

                                          The only section of Shop C equipped with an alarm is the weapons
                                          vault. The vault has triple barrier protection-combination lock door,
                                          locked cage, and locked weapons racks-and an intrusion detection
                                          device that is monitored by the New York State Police Department.

                                          For the small arms parts inventory, keys and access to storage areas are
                                          controlled, bench stock parts are locked in cabinets in a controlled
                                          access repair room, and shop stock parts are now locked in steel cabi-
                                          nets in a controlled access supply cage. However, on more than one occa-
                                          sion we noticed unauthorized personnel in the supply area. For example,
                                          we observed a production control worker reach over the supply cage
                                          gate, open the latch, and let himself in. At another time, we saw a repair



                                          Page 34                                   GAO/NSIAD-91-28 Army National Guard Weapons Parta
                    Chapter 4
                    Inadequate Physical Security Increases
                    Potential for Theft




                    parts warehouse worker enter the supply cage through a back door left
                    unlocked.

                    After normal duty hours, New York State employees provide security
                    for both the warehouse and Shop C. They tour the facilities every hour,
                    stop at various checkpoints, and record the time on a watch-clock. While
                    most of the important sections of both facilities are checked, we found
                    no checkpoints at one area immediately outside Shop C, the vehicle
                    storage area, and the facilities’ caged storage areas where small arms
                    parts were stored. On one occasion, we walked unescorted through
                    Shop C after duty hours. We encountered a guard, whom we had not
                    seen before, but he did not challenge us or report the incident to anyone.

                    Camp Smith, where Shop A is located, has one entrance for vehicles. The
Shops A, B, and D   entrance is guarded 24 hours a day. After 5 p.m. a security guard peri-
                    odically checks the facility, and the State Police patrol the camp during
                    their normal night patrols. The perimeter of the shop is surrounded by a
                    fence on three sides. The fence is approximately 6 feet high with barbed
                    wire at the top. At two points the bottom of the fence is high enough
                    above the ground to permit a person to crawl under it. The fence
                    encloses the vehicle storage area, which is adjacent to the parts storage
                    area, and the two areas are separated by a sliding gate. On the day of
                    our inspection, the gate was unlocked. The superintendent, with whom
                    we discussed our observations, said he was aware of the gaps in the
                    fence and had already processed a requisition to have it lowered to
                    ground level. In addition, he had the gate between the two storage areas
                    locked.

                    Small arms parts at Shop A are secured in a locked cabinet in the supply
                    building. However, when parts have to be ordered to complete a specific
                    work order, the parts that are available in stock are placed in an enve-
                    lope in an open bin until the other parts come in (see fig. 6). The supply
                    room is located next to a room that is used by an engineer detachment
                    for weekend drills. The two areas are separated by a locked fence
                    topped with barbed wire. However, the fence does not reach the ceiling,
                    so intruders could scale the fence, enter the supply area, and help them-
                    selves to parts, including the small arms parts in the open bins.




                    Page 38                                  GAO/NSIAD-91-28 Army National Guard Weapons Parts
                                                                                                                           0




                                          Chapter 4
                                          Inadequate Physical Security Increases
                                          Potential for Theft




Figure 6: Small Arm8 Part8 in Envelope8                                       “dtw.x0
Stored in Open Sin8




                                          The supply room door is at the far end of the building, and visitors must
                                          walk through the entire length of the storage area to get to the check-in
                                          desk. While workers have a direct line of vision to the door, if no one is
                                          at the desk, an intruder could enter the supply area without being
                                          noticed. The superintendent told us he had submitted a requisition to
                                          have a new door built in front of the reception desk. In addition, we
                                          noticed bars missing from two windows in the supply area.

                                          There are a number of doors and windows on the wing of the shop that
                                          is not within the perimeter fence. The overhead doors are kept open
                                          during the warm months; however, all but two have locked fences in
                                          front of them. During our visit we noticed that the two doors without
                                          fences were left open all day. Questioned about this, the superintendent
                                          said the doors lead to the paint shop and are normally closed, but the
                                          paint shop’s ventilation system had recently broken down; therefore,
                                          the doors had to be left open until the system was repaired, Another
                                          door was locked to the outside and was supposed to be used only as a
                                          fire exit, but we noticed workers going out of the door to smoke, prop-
                                          ping the door open in order to get back in. Also, the door was near a
                                          parking area and situated so that someone could remove government
                                          property from the shop, place it in a vehicle, and return to the shop
                                          without being noticed. While most of the windows had bars, we noticed


                                          Page 36                                  GAO/NSIAD-91-28 Army National Guard Weapons Parts
.   .


        Chapter 4
        Inadequate Physical Security Increaaes
        Potential for Theft




        one window covered by a loose piece of plywood. We mentioned this to
        the superintendent, and he said he would have it repaired.

        Shop B is surrounded by a 6-foot fence topped with barbed wire, and
        there is an interior perimeter fence. Each fence has a gate that is locked
        after duty hours. The facility is unguarded; however, the superinten-
        dent told us he has requested positions for both daytime and evening
        guards. Visitors are required to report to the shop control office,
        although they may enter through one of four doors, two of which are
        out of sight of the front office. The shop’s physical security procedures
        do not preclude entry through these doors.

        During the summer months the overhead doors are kept open to cool the
        building. At the time of our visit the doors were not fenced, but the
        superintendent showed us materials that were to be used to construct
        fences in front of each door. The fences should preclude unauthorized
        entry while allowing the doors to be opened for ventilation.

        The employee parking area is approximately 100 feet from the building,
        but the shop foremen are permitted to park near one of the unlocked
        doors. Only pilferable coded small arms parts are locked in a separate
        cabinet in the supply room. All other small arms parts are stored on
        open shelves.

        Shop D’s perimeter doors, except the front entrance and customer
        entrance, are enclosed by an 8-foot fence topped with barbed wire. With
        the exception of seven windows in front of the building, all windows are
        protected by heavy steel screens. Personal vehicles are parked in the
        front parking lot approximately 20 to 50 feet from the building. Locked
        gates and fencing prevent cars from parking on the side or in back of the
        building.

        Although we were told that all small arms shop stock is locked in a
        wooden cabinet, we found some of the parts on open shelves, The supply
        foreman said that she had simply overlooked the parts and would imme-
        diately put them in the cabinet. In addition, parts orders are placed in
        bags on open shelves until they are picked up. Although unauthorized
        personnel should not be in the supply area, we noticed repairers walking
        in and out of the section. Furthermore, the supply room was not locked
        and a side door leading to the automotive repair section was left open
        the entire time we were there.




        Page 37                                  GAO/NSIAD-91-28 Army National Guard Weapons Parts
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                 Chapter 4
                 InadeQuate Physical Security IncreM
                 Potential for Theft




                 Poor physical security procedures and facility deficiencies compound
Conclusions      the problem of safeguarding inventories of small arms and other parts.
                 Moreover, controls end when parts are pulled from inventory and are
                 awaiting pickup or shipment. Access to the supply area is not closely
                 controlled, and there are multiple unguarded entry and exit points to
                 and from the facilities. Physical deficiencies, such as inadequate perim-
                 eter fencing and unsecured windows, leave the facilities vulnerable to
                 unauthorized entry.


                 We recommend that the Adjutant General, New York Army National
Recommendation   Guard, require that physical security at repair shops and warehouses be
                 improved to prevent unauthorized access to facilities, including shop
                 supply rooms and warehouses.




                 Page 39                               GAO/NE&D-91-28 Army National Guard Weapons Parts
Page 39   GAO/NSIAD-91-28 Army National Guard Weapons Parts
   PP

1 &$k Contributors to This Report


                           Richard A. Helmer, Assistant Director
  Nationa1  Security and   James P Tallon Evaluator
  International Affairs              ’    ’
  Division, Washington,
  D.C.
                           Frank J. Minore, Evaluator-in-Charge
  New York Regional        Gerald J. Thompson, Evaluator
  Office                   Daniel Bertoni, Evaluator
                           Joel W. Hanks, Evaluator




  (YLIHOOL))               Page 40                       GAO/NSIAD-91-28 Army National Guard Weapons Parts
Tt~lc~phorrt~ 202-275-63241

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