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DCCUMWNT RESUME
03463 - [ A2!13644 ] 0*sttLteA
(Recovery of the Cost of Normal Inventory Operating Stock Losses
cn Sales cf Articles to Foreign Government3]. FGMSD-77-43;
B-174901. September 8, 1977. 9 pp.
Report to Secretary, Department of Defense; by Harold L. Stugart
(for D. L. Scantlebury, tirectcr, Financial and General
adLagement Studies Div.).
Issue Area: Accounting and Financial Reporting (2800).
Contact: Financial and General Management Studies Div.
Budget Function: fiscellaneous: Finrncial manamuent and
Information Systems (1002).
Organizaticn Concerned: Department of the Navy; Department of
Defense; Department of the Army; Department of the Air
Force.
Congressional Relevance: House Committee on Armed Services;
Senate Committee on Armed Services.
Authority: International Security Assistance and Arms Export
Ccntiol Act (F.L. 94-329). DOD Instruction 2140.1. DOD
Directive 7420.1.
The repartment of Defense (DOD) is losing millions of
dcllars on salps cf articles to foreign governments because
normal inventory losses are not being recovered. Pricing
policies and systems used by military services to recover normal
inventory losses are inadequate. Findings/Conclusions:
sufficient management attention has not been given to the
recovery cf normal inventory losses on the sale of nonstock fund
inventory items. It has been over 8 years since DOD issued
instructicns requiring th>. recovery of these losses from foreign
governments on sales under supply support arrangements. Unless
timely acticn is taken by DOD to change . ts policy guidance and
by the military services to implement the guidance provided,
additional gillions cf dollars cf normal inventory losses
related to the sale of secondary items to foreign governments
will not te recovered. Becommendations: The Secretary of
Defense should direct: the Department to change its pricing
policy for foreign military sales, requiring the inclusiou of
normal inventory losses in charges to foreign governments for
all nonstock fund items sold from DOD inventories; and the
military services to implement DOD polices on the recovery of
these losses and services to attempt to recover previously
unbilled costs for normal inventory losses on sales of ncnstock
fund inventory items for all sales agreements for which a final
billing has not been made and for supply support arrangements
for which a final billing has been made. (Author/SW)](ViewImageLocal?handle=hein.gao/gaobaacqk0001&div=1&collection=&method=preview&ext=.png&size=3)