Someone at Hill Air Force Base was supposed to type into a computer that the Ogden Air Logistics Center there had received and was storing 21 digital indicators for airplanes.
Instead of typing "21," he or she typed "10,021."So the Air Force thought it had 10,000 more indicators than it actually did. And because each one costs $20,720, the Air Force thought the inventory at Hill was worth $207.2 million more than it in truth was.
Auditors at the U.S. General Accounting Office, an investigative arm of Congress, found the error during an audit and wondered why no one questioned such a large and unusual amount appearing on ledgers for months.
They say such errors are all too common at Air Logistics Centers and that internal auditing controls do not catch them. The result is the Air Force has only a foggy idea about what is in its inventory, what supplies it should buy and what it should declare as surplus - which may waste billions.
Those are the conclusions of a new GAO report for Gen. Charles C. McDonald, commander of the Air Force Logistics Command. The command has five logistics centers nationally that buy, store and distribute supplies for the Air Force and other Defense Department customers.
The operation is so massive that if it were a private corporation, the GAO said it would be one of the nation's 10 largest.
"But it cannot produce an accurate total value for its inventory," the GAO said. "Inventory records are substantially inaccurate and provide misleading inventory data to systems used in requirements computations and financial reporting."
It gave several examples of problems at Hill's Ogden Air Logistics Center that it said are typical of blunders seen at all five such centers nationally, including:
- Ogden found inventory records errors on 14 different high-value items in 1989, but ignored them - probably to avoid the questioning and possible wrath of commanding officers.
"For example, on Jan. 24, 1990, we counted guided missile launchers (in Hill warehouses) and found 640 . . . (but) only 579 items were recorded" - which amounted to a $1.31 million error, GAO auditors said. Ogden records showed that it had twice earlier found the same discrepancy, but ignored it.
"We were told by Ogden ALC staff that the reason . . . was to avoid making, and having to report to ALC management a high-dollar inventory adjustment," the GAO said. "If an inventory manager used this information in a requirements decision for this item, the result would probably be a purchase of an excess quantity."
- Ogden was supposed to add into computers a 3 percent surcharge on a brake part to increase its total cost to customers from $2,390 to $2,460. But the new price was mistakenly entered as "$24,600." Ogden had 20 such parts on hand, resulting in an overstatement in the value of its inventory by more than $400,000.
- Auditors estimated that Ogden lost $5.5 million in 1989 because of billing problems. It said sales records "sometimes contained erroneous codes which . . . resulted in charges to incorrect appropriations and to Air Force units that were not . . . customers."
- Ogden has supplies on hand adequate to meet the demand of its customers for 8.6 years, which auditors said "is clearly excessive."
It said the result of such large inventories "is increased operating costs and surcharge rates. Appropriations have been invested for years in stock which cannot be sold or is seldom needed by customers. Thus, the Air Force had to pay for the cost of storing and handling the extra items."
Such large inventories also lead to many supplies never actually being used and sold off at bargain rates as surplus. Such disposal cost the Air Force a $146 million loss in 1989, "equivalent to about 16 percent of fiscal year 1989 sales and was a major cause of the need to add $180 million to the cost of . . . items in fiscal 1990."
- Ogden's computer programs are designed so that statements are forced into balance by sometimes automatically including large errors.
The GAO said, for example, one transaction for only $888,000 was mistakenly entered into the computer in the amount of $333 million. The computer noted that it was more than $10 million, and by rules should be verified. It was not. And at the end of the month, the computer automatically balanced accounts including that $332 million error.
- Ogden managed to avoid one mistake that all other centers made. It did not duplicate inventories by accident in the computer. But the GAO figured the other four centers duplicated $2.6 billion worth of supplies in records.
The GAO said much of the research needed to correct all such problems is not performed "because of staffing shortages." Recently announced job cutbacks at Ogden - expected to be achieved through attrition - could worsen that.
Big bungles in bookeeping
Examples of what a recent General Accounting Office audit found wrong with inventory controls at the Ogden Air Logistics Center at Hill Air Force Base:
- The center lost $5.5 million in 1989 because of billing problems.
- A mistake on inventory rec-ords for guided missle launchers amounted to $1.31 million.
- $2,460 brake parts were mistakenly valued at $24,600.
- An inventory error led the Air Force to believe that its stock at Hill was worth $207.2 million more than it really was.