oversight

Inventory Management: Vulnerability of Sensitive Defense Material to Theft

Published by the Government Accountability Office on 1997-09-19.

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

                   United States General Accounting Office

GAO                Report to the Ranking Minority Member,
                   Committee on Governmental Affairs,
                   U.S. Senate


September 1997
                   INVENTORY
                   MANAGEMENT
                   Vulnerability of
                   Sensitive Defense
                   Material to Theft




GAO/NSIAD-97-175
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-276452

             September 19, 1997

             The Honorable John Glenn
             Ranking Minority Member
             Committee on Governmental Affairs
             United States Senate

             Dear Senator Glenn:

             As you requested, we reviewed the actions taken by the Department of
             Defense (DOD) to correct weaknesses cited in our September 1994 report
             on the military services’ most sensitive category I missiles and to
             determine if problems still remain.1 We also reviewed DOD’s oversight of
             category I rockets and the vulnerability of category I missiles and rockets
             and category II grenades, mines, and explosives to theft from U.S. military
             arsenals by terrorists or extremists.


             DOD defines category I items as those that are highly explosive, extremely
Background   lethal, portable, and a potential threat if they were to be used by
             unauthorized individuals or groups. Category I missiles and rockets are
             nonnuclear and handheld. The missiles are the Stinger, Dragon, and
             Javelin; the rockets are the light antitank weapon (LAW) and the AT4.2 The
             Stinger can destroy aircraft in flight, and the Dragon and Javelin missiles
             and the LAW and AT4 rockets can pierce armor. Category II munitions and
             explosives are hand or rifle grenades, antitank or antipersonnel mines, C-4
             explosives, TNT, and dynamite. See appendix I for pictures of the
             category I missiles and rockets.

             In September 1994, we reported that many serious discrepancies in the
             quantities, locations, and serial numbers of handheld category I missiles
             indicated inadequate management oversight for these lethal weapons.
             Further, we reported that the services did not know how many handheld
             missiles they had in their possession because they did not have systems to
             track by serial numbers the missiles produced, fired, destroyed, sold, and
             transferred. At that time, we could not determine the extent to which any
             missiles were missing from inventory. We also stated that security
             measures were not uniformly applied at all locations where missiles were

             1
              Inventory Management: Handheld Missiles Are Vulnerable to Theft and Undetected Losses
             (GAO/NSIAD-94-100, Sept. 16, 1994).
             2
              The Redeye missile was included in our 1994 report but not this report because DOD removed that
             missile from its inventory after 1994. Likewise, the Javelin missile is included in this report but not the
             1994 report because DOD recently added that missile to its inventory.



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                   stored. Our report contained several recommendations to the Secretary of
                   Defense to correct these problems. In addition, the Army Inspector
                   General conducted two follow-up studies and found similar problems.3


                   DOD has taken actions to improve the oversight of category I handheld
Results in Brief   missiles. It conducted a worldwide inventory of handheld missiles;
                   established a new baseline inventory count as of December 31, 1994; and
                   implemented procedures to track changes to the baseline. DOD also
                   established procedures to check containers to ensure that each had a
                   missile and verify serial numbers. In addition, DOD reemphasized physical
                   security procedures to be followed at its facilities.

                   Despite DOD’s progress toward better oversight of handheld missiles, some
                   weaknesses remain. Adjustments continue to be made to the baseline as
                   additional missiles are located and errors are discovered. Discrepancies
                   still exist between records of the number of missiles and our physical
                   count. Also, the missiles may be vulnerable to insider theft because DOD is
                   not always selecting a representative sample of containers to be opened
                   during maintenance checks. In addition, some facilities are not fully
                   complying with DOD physical security requirements.

                   Although we were able to match the physical count of AT4 and LAW
                   rockets at each site visited with the item manager’s records, we also found
                   oversight weaknesses with the category I rockets. The Marine Corps
                   reported three AT4 rockets missing from shipments returning from the
                   Gulf after Operation Desert Storm. The Naval Criminal Investigative
                   Service reached no conclusions on whether the rockets were missing, lost,
                   or stolen, and the investigations were closed. Moreover, the services have
                   different procedures and requirements for maintaining oversight of the
                   rockets. The Marine Corps maintains oversight and visibility of its
                   weapons by serial number, whereas the Army and the Navy currently
                   manage their rockets by production lot and quantity. Because the Marine
                   Corps manages its rockets by serial number, it would be able to accurately
                   identify the missing rockets upon recovery. The Army is presently
                   developing a system that will identify by serial number the last
                   accountable location of an AT4 in the event that it is lost or stolen and
                   recovered by law enforcement or other organizations.



                   3
                   Follow-Up Inspection of Army Corrective Actions to GAO Report on Handheld Missiles Inventory
                   Management (June-Nov. 1996) and Special Assessment of Army Corrective Actions to GAO Report on
                   Handheld Missiles Inventory Management (May-June 1995), Army Inspector General.



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                                      Another issue related to accountability over sensitive defense material
                                      relates to the financial management system. Our reports have repeatedly
                                      pointed out that DOD’s accounting and related systems, including its
                                      logistics systems, are not integrated. In accordance with the Chief
                                      Financial Officers (CFO) Act of 1990, each agency is to establish an
                                      integrated financial management system. Establishing an integrated,
                                      general ledger controller system, which ties together DOD’s accounting
                                      systems with its logistics and other key management systems, is critical if
                                      DOD is to effectively ensure oversight and control over its sensitive
                                      material.

                                      We also did not find any documentation that terrorists or other extremists
                                      had stolen any category I handheld missiles or rockets or category II
                                      munitions or explosives from DOD arsenals. It is more likely terrorists
                                      would seek such items from sources other than DOD arsenals. However,
                                      some weapons continue to be vulnerable to insider theft as quantities of
                                      various category II items, including grenades, C-4, and TNT, have been
                                      stolen by uniformed or DOD civilians. DOD and intelligence sources did not
                                      have any indication that the stolen items were intended for terrorists.


                                      DOD has taken actions to correct the deficiencies cited in our
DOD Has Improved                      September 1994 report. In that report, we recommended that DOD conduct
Oversight of Category                 independent worldwide inventories of category I missiles to establish a
I Missiles                            new baseline number. DOD established the new baseline number as of
                                      December 31, 1994, as shown in table 1. The Army, the Navy, and the
                                      Marine Corps are the primary purchasers of category I missiles;
                                      consequently, our review and the prior report focused on their inventories.

Table 1: DOD Baseline Inventory of
Category I Missiles (as of Dec. 31,                                                        Inventory balance
1994)                                                                                                       Marine
                                      Type of missile                            Army          Navy         Corps       Air Force
                                                                                                    a
                                      Stinger                                   31,029                      10,226            216
                                                                                                    a
                                      Redeye                                     2,427                          24              0
                                                                                                    a
                                      Dragon                                    23,838                      14,148              0
                                                                                                    a
                                      Total                                     57,294                      24,398            216
                                      a
                                      These numbers are classified.

                                      Source: Office of the Under Secretary of Defense.




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                              Our prior report also recommended that DOD establish procedures to track,
                              document, and report additions to and deletions from the new inventory
                              baseline. Since that time, the Army has begun modifying its automated
                              system—the Standard Army Ammunition System—to report changes to
                              the inventories of Stinger, Dragon, and Javelin missiles by serial number.
                              The modification to the system is designed to provide item managers at all
                              Army commands with 24- to 72-hour notification of changes to the
                              inventory. In the interim, the Army has implemented manual reporting
                              procedures to track handheld missiles on a monthly basis. This temporary
                              system has a 30- to 45-day time lag in reporting changes to the missile
                              inventory. The Navy and the Marine Corps have also implemented
                              automated systems to track category I missiles. The Navy’s automated
                              system is intended to provide information within 24 to 48 hours on where
                              a given missile is located, and the Marine Corps’ system is intended to
                              provide such information within 24 hours.

                              In addition, our prior report recommended that DOD establish procedures
                              to include a random sampling of missile containers during inventories to
                              ensure that they contain missiles. The services have since established
                              procedures to verify the presence of missiles inside their containers during
                              maintenance checks. Finally, our report recommended that DOD
                              reemphasize security procedures and reexamine the current security
                              policy. In response, the services reemphasized physical security
                              regulations for all category I munitions.


                              Although the services established a baseline inventory count of category I
Weaknesses Still Exist        missiles as of December 31, 1994, updates to the baseline continue to be
in DOD’s Oversight of         made as additional missiles are located or errors are discovered.
Category I Missiles           Discrepancies existed at some sites between records of the number of
                              category I missiles in their inventories and our physical count, but we
                              were able to reconcile the discrepancies manually. Even though missile
                              containers are being opened and serial numbers are being verified, random
                              checks are not being performed because the services stated that they
                              would be too costly. Also, DOD has not fully complied with physical
                              security regulations at all of its sites.


Category I Missile Baseline   Army officials stated that, because of prior reporting, weaknesses
May Still Be Inaccurate       involving the handheld missile inventory, they cannot fully assure that the
                              category I missile baseline is completely accurate. The baseline had to be
                              updated several times since its establishment because additional missiles



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                        were located. In February 1996, the Army discovered it had not counted
                        3,949 missiles during the initial inventory, which increased its baseline by
                        almost 7 percent. Some of the missiles had been in transit and were not
                        counted by either the shipping or receiving parties. Other missiles were
                        being used by the Signal Communications Electronics Command in Fort
                        Monmouth, New Jersey, for test purposes but were not included in the
                        initial baseline inventory.

                        A Stinger missile had been at a storage facility in Kuwait since September
                        1992. Pakistanis discovered the missile during post-Desert Storm cleanup
                        operations, and Kuwait did not return it to the United States until
                        April 1996. However, the Army had previously reported that 6,373 Stinger
                        missiles were shipped to and subsequently sent back from the Persian
                        Gulf. Thus, the Army did not realize that this missile had been missing
                        from inventory until after it was discovered.

                        Also, errors in the initial inventory count have affected the baseline. For
                        example, two missiles on the Army item manager’s contractor database
                        actually belonged to another country through the Foreign Military Sales
                        program. These missiles, which were included in the baseline number,
                        were at the contractor’s facility for repair. At the time of our visit, one of
                        the missiles was still at the facility, and the other had been fixed and
                        returned. The item manager stated that the contractor was not reporting to
                        her the number of missiles received, completed, and returned. However, as
                        a result of our finding, the contract has been modified to provide the item
                        manager a monthly report of the missiles received at the contractor’s
                        facility and the missiles transferred from the contractor’s facility to a DOD
                        facility.


Discrepancies Found     In our September 1994 report, we noted that records of the number of
Between the Physical    category I missiles in some sites’ inventories did not match our physical
Count of Missiles and   count. This problem still exists at the Army and Marine Corps sites we
                        visited, but we were able to reconcile the discrepancies manually. At a
Records                 Navy storage site, we found no discrepancies between the item manager’s
                        records and our physical count.

                        At the Army military storage location we visited, we found discrepancies
                        between the item manager’s records and the missiles we counted at the
                        storage facility. All of the missiles that were on the item manager’s
                        records, but not at the storage location, had been issued to units for
                        training. We used the Army’s monthly interim reports to reconcile the



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discrepancies. We verified that these missiles had in fact been expended
during training exercises. The item manager still had the missiles on the
records because of the lag time in receiving the interim reports.

We also found five discrepancies with our missile count at a Marine Corps
site that we visited. All of the discrepancies involved the serial numbers.
One missile was not on the item manager’s records because the wrong
serial number was keyed into the system. Two missiles were upgraded and
their serial numbers changed; the new serial numbers, however, were not
yet changed on the database that we used to conduct our reconciliation.
Two of the six digits in one missile’s serial number were apparently
transposed on the container. Finally, one missile’s correct serial number
was in both the depot’s and item manager’s systems, but the wrong
number was apparently stenciled on the container.

We also found discrepancies at two contractor facilities where both the
Stinger and Dragon were being upgraded or modified. Most of the
discrepancies were due to the lag between the time we received the
database and the time we performed our physical count. Many missiles on
the item manager’s records had already been sent to the DOD storage sites
by the time we conducted our inventory count. We verified that the DOD
storage sites had received the missiles.

However, we found four additional missiles at one of the contractor
facilities that were not on the item manager’s records. The item manager
had recorded that one of the missiles, still at the contractor’s facility, was
made non-lethal (demilitarized). Eight additional missiles were also listed
as being at that contractor’s facility, but six were actually at another
location, and two belonged to other countries, as stated previously, under
the Foreign Military Sales program.

Finally, we noted a practice during this review, in addition to those that
have been previously mentioned, that complicates serial number tracking:
giving new serial numbers to missiles that have been upgraded. Stinger
missiles that are undergoing a technical upgrade will be given new serial
numbers once the upgrade has been completed. According to a Production
Assurance and Test Division official, U.S. Army Missile Command, the
justification for changing the serial numbers was that the missiles would,
in effect, become new missiles, since they would be broken down into
major component parts and reassembled with different components. Both
the old and new serial numbers would then be cross-referenced. However,
a Quality Assurance official, U.S. Army Missile Command, stated that he



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                           had opposed changing the serial numbers because it would be harder to
                           track the life cycle of the missiles and that cross-referencing old and new
                           serial numbers would create additional bookkeeping and the potential for
                           transposition and other errors. Instead of changing the serial numbers, the
                           upgraded missiles could be distinguished by adding a suffix to the serial
                           number.


Missile Container Checks   Even though the services have established procedures to verify the
Are Not Done Randomly      presence of missiles inside their containers, a representative sample is not
                           always being selected, according to the services, because it would be too
                           costly. For example, an Army official said that during maintenance checks
                           only the missiles that are easy to access in a storage facility are selected to
                           be opened. This methodology does not provide complete assurance that
                           missiles are not being stolen because it may not deter insider theft.
                           Moreover, opening a representative sample of missile containers helps to
                           obtain assurance that all reported missiles do exist, are held by the
                           services, and are owned by DOD. This check improves the accuracy of the
                           missile inventory reports for item managers as well as DOD’s financial
                           statements required by the CFO Act.

                           We opened 108 missile containers to verify the presence of the correct
                           missile in each container. Figures 1 and 2 show opened Stinger and
                           Dragon missile containers. All containers had a missile, but the serial
                           number on one container did not match the one on the missile. Neither the
                           item manger nor the site officials could determine the reason for the
                           mismatch. In another instance, a contractor official discovered that a
                           missile going through an upgrade did not have the same serial number as
                           its container. The correct container was at the storage depot, and the
                           missile inside belonged in the container located at the contractor’s facility.




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Figure 1: Opened Stinger Missile
Container




Figure 2: Opened Dragon Missile
Container




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                            Also, according to an Army policy notice, the sample size and the results
                            of missile container checks are to be reported to the item managers.
                            However, we found that Army item managers were not receiving this
                            information. As a result of our finding, the Chief of Staff, Army Materiel
                            Command, issued a memorandum reemphasizing the reporting
                            requirement.


Not All Sites Comply With   Some of the sites we visited were not in full compliance with service or
Security Regulations        DOD security regulations. Personnel at one Army location were not
                            inspecting all vehicles leaving the storage area. The Army Inspector
                            General’s 1996 report also noted that not all sites were fully enforcing
                            physical security regulations.

                            The Army Inspector General included the National Guard in its follow-up
                            review of handheld missiles. In its report, the Inspector General noted that
                            National Guard sites were storing category I Dragon missiles in violation
                            of DOD and Army physical security policies.4 Both of these policies permit
                            the National Guard to use the missiles for training purposes only and store
                            them temporarily at Guard installations. However, the Inspector General
                            found that some sites had the Dragon missile in storage for many years.

                            As a result of the Inspector General’s report, the Army National Guard was
                            directed to return the Dragon missiles to the storage sites. Since that time,
                            all missiles have either been returned or used for training. The National
                            Guard requested approval to permanently store Dragon missiles at
                            selected sites. The Army denied this request because some storage sites
                            were not in compliance with its physical security regulations. For
                            example, armed guards were not used to prevent unauthorized access of
                            the storage structures when intrusion detection systems were inoperable.
                            However, if a site can meet physical security regulations, the Army stated
                            it would reconsider a request only to temporarily store Dragon missiles at
                            selected sites.

                            Contractors are required to follow DOD Manual 5100.76, Physical Security
                            of Sensitive Conventional Arms, Ammunition, and Explosives, for their
                            security guidelines. These regulations are not as stringent as the Army’s
                            physical security regulations. For example, Army regulations require that
                            storage sites be secured with two locks and keys and that no one person


                            4
                             For physical security requirements of category I missiles, the Army National Guard was operating
                            under DOD Directive 5100.76 until September 1996 when it began operating under Army
                            Regulation 190-11, Physical Security of Arms, Ammunition, and Explosives.



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                           have possession of both keys at the same time. DOD regulations permit one
                           lock and key, which allows single individuals access to storage sites.

                           We noted the following conditions, among others, at one of the contractor
                           facilities we visited:

                       •   The entrance to the storage area was not locked.
                       •   No guard was available to check vehicles entering or exiting the storage
                           area.
                       •   There was no clear zone outside the security fence. (This area was cleared,
                           however, after our visit.)
                       •   One employee had keys to operate the locks to the storage site, security
                           fence gate, and gate to a perimeter road that led to the main road. This
                           employee also had the code for calling in to security to deactivate the
                           intrusion detection system. We observed this employee leave the storage
                           site in a truck, proceed to unlock the perimeter gate, and exit. We believe
                           that allowing one person such access leaves the missiles more vulnerable
                           to theft. After bringing this concern to the attention of the Commander,
                           Army Materiel Command, a memorandum was issued requiring that the
                           security requirements of Army Regulation 190-11 and the Army Materiel
                           Command supplement requiring that storage sites be secured with two
                           locks and keys, among other things, be included in contracts for activities
                           involving category I munitions.


                           The services have different procedures and requirements for maintaining
Oversight Weaknesses       oversight of AT4 and LAW rockets. The Army and the Navy manage AT4
Also Exist for             and LAW rockets by production lot and quantity. The Marine Corps
Category I Rockets         maintains oversight and visibility of AT4 rockets (it does not have any LAW
                           rockets) by serial numbers. Although we found no missing rockets in our
                           physical count, three AT4 rockets that were sent to the Persian Gulf for
                           Operation Desert Storm are missing from the Marine Corps’ inventory. The
                           investigations were closed on these three missing rockets, but no
                           conclusions were reached by the Naval Criminal Investigative Service on
                           whether the rockets were missing, lost, or stolen. The Marine Corps
                           adjusted their physical inventory to reflect the decrease of the three AT4
                           rockets. However, the serial numbers will remain within its accounting
                           and reporting system should these rockets be recovered.

                           The Army manages AT4 and LAW rockets by production lot and quantity.
                           However, the Army item manager’s oversight of the AT4 rocket extends
                           only to the quantities that are issued to the various major commands. Each



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                        major command then redistributes AT4 rockets to the installations within
                        that command, and oversight for installation inventories is maintained by
                        the major command. The item manager, therefore, does not know the
                        quantities of AT4 rockets at the installation level.

                        The Army is developing a system, called Unique Item Tracking, for all of
                        its category I munitions, including the AT4. This system is intended to
                        provide weekly reports showing the serial number of each munition by
                        location. The purpose of the system is to identify the last accountable
                        location of a weapon in the event that it is lost or stolen and recovered by
                        law enforcement or other organizations. However, the system will not
                        include the LAW rocket, since it is being phased out of the inventory, and
                        most LAWs do not have serial numbers.

                        The Navy also manages AT4 and LAW rockets by production lot and
                        quantity. The Navy item manager does not oversee the rockets by serial
                        number because it is not a requirement. This situation could be
                        problematic if a rocket is missing because the Navy does not have a
                        system in place to identify the missing rocket by serial number. However,
                        some storage locations report AT4 rockets by serial numbers in addition to
                        production lot and quantity.

                        We conducted a physical count of AT4 and LAW rockets at Army, Navy, and
                        Marine Corps storage sites and were able to match the physical count with
                        the item managers’ records. We also opened 89 containers to verify the
                        presence and correct serial number of each rocket. We did not note any
                        violations in the physical security regulations at the sites we visited.


                        Another issue related to accountability over sensitive defense material
Integrated Accounting   relates to the financial management system. In accordance with the CFO
and Logistics Systems   Act of 1990, each agency is to establish an integrated financial
Will Help Ensure        management system. Establishing an integrated, general ledger controller
                        system, which ties together DOD’s accounting systems with its logistics and
Effective               other key management systems, is critical if DOD is to effectively ensure
Accountability for      oversight and control over its sensitive materials. For example, an
                        integrated accounting and logistics system will automatically update both
Sensitive Items         sets of records when missiles or other sensitive inventory items are
                        purchased and received. In addition, carrying out rudimentary controls,
                        such as periodically reconciling DOD’s accounting and logistics records,
                        will help oversee and identify any unaccounted for in-transit items. Audit
                        reports have repeatedly pointed out, however, that DOD’s existing



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                         accounting and related systems, including its logistics systems, are not
                         integrated and lack a general ledger.5

                         As part of DOD’s efforts to reform its financial operations, the DOD Chief
                         Financial Officer has stated that DOD will develop property accountability
                         systems that will meet the federal government’s system requirements. If
                         properly designed and implemented as part of a DOD-wide integrated
                         financial management systems structure called for under the CFO Act,
                         these systems will be integral to ensuring effective accountability over
                         DOD’s sensitive inventories of missiles and rockets and other sensitive
                         material.


                         We did not find any documentation that terrorists or other extremists had
No Evidence of Thefts    stolen category I handheld missiles or rockets or category II grenades,
From U.S. Military       mines, and explosives from DOD arsenals. Intelligence and DOD officials
Arsenals by Terrorists   said that it is more likely that terrorists would seek handheld surface-to-air
                         missiles or other munitions from sources other than DOD arsenals.
or Extremists            International terrorist groups receive financial aid and other forms of
                         assistance from several nations.6 The Secretary of State has determined
                         that these countries have repeatedly provided support for acts of
                         international terrorism by supplying, training, supporting, or providing
                         safehaven to known terrorists.

                         Intelligence officials told us that there are a variety of places around the
                         world for terrorists to obtain weapons. For example, several countries
                         besides the United States, including Bulgaria, China, Egypt, France, Japan,
                         Czech Republic, Pakistan, Poland, Romania, Sweden, and the United
                         Kingdom produce handheld surface-to-air missiles.7

                         Terrorists tend to favor small conventional weapons—handguns, rifles,
                         grenades, machine guns, or explosives—because they can be easily
                         transported and hidden from view. C-4 plastic explosives can be
                         purchased from several countries. In addition, law enforcement officials
                         told us that extremist groups have made their own C-4. Terrorists have
                         used plastic explosives. For example, less than one pound of Semtex,


                         5
                          Defense Financial Management (GAO/HR-97-3, Feb. 1997).
                         6
                         For purposes of administering the Export Administration Act, the Omnibus Diplomatic Security and
                         Anti-Terrorism Act and other laws, the Secretary of State has determined that Cuba, Iran, Iraq, Libya,
                         North Korea, Sudan, and Syria support and sponsor international terrorism. (See 15 C.F.R. 752.4, 22
                         C.F.R. 126.1, and 31 C.F.R. 596.201.)
                         7
                          Jane’s Land Based Air Defence (1996-97).



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                                         similar to C-4, was used to bring down Pan Am Flight 103 over Lockerbie,
                                         Scotland, in 1988.

                                         There have been thefts of category II munitions and explosives by
                                         uniformed and DOD civilian employees that involved quantities of items
                                         such as grenades, C-4 explosives, and TNT. We previously reported that
                                         military inventories remain more vulnerable to employee theft than
                                         outside intrusion.8 Table 2 shows the types and quantities of category II
                                         items reported missing, lost, or stolen from 1993 to 1996. Some of the
                                         weapons were recovered. According to a law enforcement official, DOD
                                         could not determine whether any of the unrecovered stolen DOD weapons
                                         were in the hands of terrorists or other extremists.

Table 2: Quantity and Type of Category
II Munitions and Explosives Reported     Munitions/                                                                     Army National
Missing, Lost, or Stolen From DOD        explosives          Army                Navy               Marine Corps        Guard
Between 1993 and 1996                    Grenade(s):         12/96: One          03/96: 150       02/95: Four           08/95: 16
                                         hand or rifle       04/94: One          08/95: 50 (case)
                                                             10/93: One          07/94: 25
                                                             02/93: One          03/93: 50 (case)
                                                                                 02/93: 30
                                         Mines: antitank or None                 None               03/94: One          None
                                         antipersonnel                                              claymore
                                         C-4 explosive       12/96: 3-3/4 lbs. 10/96: 2-1/2 lbs. None                   12/96: 1-1/4 lbs.
                                                             03/96: 5 lbs.     04/95: 5 lbs.
                                                             06/93: 2-1/2 lbs.
                                         TNT                 04/93: Two lbs.     None               03/94: 1-lb block 12/96: Two 1 lb.
                                                                                                                      blocks,
                                                                                                                      04/96: Three
                                                                                                                      sticks
                                         Military dynamite   None                02/96:             None                None
                                                                                 Twelve sticks
                                         Source: Our analysis based on Army, Navy, and Marine Corps information.




                                         We recognize that DOD has made significant strides in gaining visibility and
Conclusions and                          accountability over its handheld missile inventory. DOD has implemented
Recommendations                          several recommendations from our prior work and has already taken
                                         action to correct some of the problems we cite in this report. We believe,
                                         however, that DOD can take some additional actions to further improve



                                         8
                                          Small Arms Parts: Poor Controls Invite Widespread Theft (GAO/NSIAD-94-21, Nov. 18, 1993) and
                                         Inventory Management: Strengthened Controls Needed to Detect and Deter Small Arms Parts Thefts
                                         (GAO/NSIAD-91-186, July 17, 1991) .



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                         physical security and ensure accurate reporting of its inventory of missiles
                         and rockets. Therefore, we recommend that the Secretary of Defense
                         direct the Secretaries of the Army, the Navy, and the Air Force and the
                         Commandant of the Marine Corps to

                     •   develop a cost-effective procedure for periodically revalidating the
                         category I inventory baseline by, for example, matching item managers’
                         records with site records annually at a representative sample of storage
                         sites;
                     •   develop a cost-effective procedure for opening containers of missiles and
                         rockets, for example, by selecting a representative sample of pallets,
                         rather than individual missiles and rockets, to inspect;
                     •   manage category I rockets by serial number so that the item managers will
                         have total visibility over the numbers and locations of rockets;
                     •   establish procedures for ensuring that serial numbers are not changed
                         during upgrades and modifications of category I missiles and rockets; and
                     •   continue to emphasize compliance with physical security requirements.

                         In commenting on a draft of this report, DOD concurred with all of our
Agency Comments          recommendations (see app. II). DOD noted that it had already begun taking
and Our Evaluation       action to address several of the recommendations. For example, the
                         services have developed or are developing procedures for revalidating the
                         category I baseline. DOD also plans to issue guidance to manage category I
                         rockets by serial numbers, develop procedures to ensure that serial
                         numbers are not changed during upgrades and modifications of category I
                         missiles and rockets, and continue to emphasize compliance with physical
                         security requirements.

                         DOD concurred with our recommendation to develop a cost-effective
                         procedure to open containers of missiles and rockets. DOD’s response also
                         cited various existing regulations, which require that samples selected for
                         inspection be representative of the entire lot under evaluation. We
                         discussed the comments with an official from the Office of the Secretary
                         of Defense and pointed out that during our review we found that this was
                         not always being done. For example, an Army official told us that some
                         inspectors only select and inspect the missiles that are easy to access in a
                         storage facility. The Office of the Secretary of Defense officials agreed to
                         issue guidance reinforcing the need to follow these procedures.


                         We met with officials from the Office of the Secretary of Defense, the
Scope and                Army, the Navy, the Marine Corps, and the National Guard regarding the
Methodology

                         Page 14                 GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
B-276452




oversight and physical security of category I missiles and rockets and the
physical security of category II weapons. We discussed the actions taken
to correct problems cited in our 1994 report.

We also met with officials from the intelligence and law enforcement
agencies to discuss the vulnerability of category I missiles and rockets to
theft by terrorists and other extremists and obtain information on
category I and category II weapons that are missing, lost, or stolen. We
excluded the Air Force because of the limited number of missiles and
rockets in its possession and because that service was not included in our
prior report. Based on initial discussions on the scope of our work, the
Army Inspector General added the National Guard to its follow-up review
of handheld missiles. Because the Inspector General went to the same
sites that we planned to visit, we did not visit any National Guard sites.

To determine whether changes made to the oversight of category I
missiles have improved the services’ visibility over these missiles, we
physically counted about 15,000 Stinger, Dragon, and Javelin missiles by
serial number at selected Army, Navy, and Marine Corps storage sites and
two contractor facilities. We selected sites that had a comparatively high
incidence of problems found during our first review. We opened
108 missile containers to ensure that a missile was in the container.

To inventory the missiles, we used the item managers’ automated
database. We then entered this information into a notebook computer. On
site, as we physically inventoried, we entered into the computer the serial
number of each of the missiles at that location. This information was
automatically compared against the database from the item managers.
Missiles that were not in the database or at the storage location were
reconciled with site and item manager information.

We also counted 6,637 AT4 and LAW rockets at randomly selected Army,
Navy, and Marine Corps storage sites. At these locations, we opened
89 containers (which contained different quantities of rockets depending
on the type) and physically verified the presence of 403 AT4s and 261 LAWs.
We used the same procedures as the missiles to inventory the rockets at
the Marine Corps storage site. At the Navy and the Army rocket storage
sites, an automated database of serial numbers was not available from the
item managers. At these two locations, we matched the inventory count
against the item manager’s or major command’s records.




Page 15                 GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
B-276452




We tested the reliability of the systems’ data by physically counting the
missiles and rockets and matching the count to the item managers’
records; however, we did not test whether the information was provided
to the item managers within 24 to 48 hours.

We conducted our review from September 1996 to July 1997 in accordance
with generally accepted government auditing standards.


Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days from its issue date. At that time, we
will send copies to the Secretaries of Defense, the Army, the Navy, and the
Air Force; the Commandant of the Marine Corps; the Director, Office of
Management and Budget; and other interested congressional committees.
Copies will also be made available to others upon request.

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

Sincerely yours,




David R. Warren, Director
Defense Management Issues




Page 16                  GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Page 17   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Contents



Letter                                                                                                   1


Appendix I                                                                                              20

Pictures of the
Category I Stinger,
Javelin, and Dragon
Missiles and the AT4
and LAW Rockets
Appendix II                                                                                             21

Comments From the
Department of
Defense
Appendix III                                                                                            25

Major Contributors to
This Report
Tables                  Table 1: DOD Baseline Inventory of Category I Missiles                           3
                        Table 2: Quantity and Type of Category II Munitions and                         13
                          Explosives Reported Missing, Lost, or Stolen From DOD Between
                          1993 and 1996

Figures                 Figure 1: Opened Stinger Missile Container                                       8
                        Figure 2: Opened Dragon Missile Container                                        8




                        Abbreviations

                        CFO       Chief Financial Officers
                        DOD       Department of Defense
                        LAW       light antitank weapon


                        Page 18                GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Page 19   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Appendix I

Pictures of the Category I Stinger, Javelin,
and Dragon Missiles and the AT4 and LAW
Rockets




 Stinger                           Javelin




             Dragon




 AT4                               LAW



                      Page 20   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Appendix II

Comments From the Department of Defense




              Page 21   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
             Appendix II
             Comments From the Department of Defense




See p. 14.




See p. 14.




             Page 22                   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
             Appendix II
             Comments From the Department of Defense




See p. 14.




See p. 14.




See p. 14.




             Page 23                   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Appendix II
Comments From the Department of Defense




Page 24                   GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
Appendix III

Major Contributors to This Report


                        Charles I. Patton, Jr.
National Security and   Nomi R. Taslitt
International Affairs   Waverly E. Sykes, Jr.
Division, Washington,   Marilyn K. Wasleski
                        David W. Rowan
D.C.                    Arthur L. James, Jr.
                        Marjorie L. Pratt
                        Yolanda C. Elserwy


                        Jack L. Kriethe
Dallas Field Office     Kimberly S. Carson
                        Jeffrey A. Kans
                        Oliver G. Harter


                        Sandra D. Epps
Norfolk Field Office    Tracy W. Banks




(709239)                Page 25                  GAO/NSIAD-97-175 Vulnerability of Sensitive Defense Material
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