Audit Reports

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FAA’s Ability To Manage Its National Airspace System Inventory Is Limited by Several Gaps in Its Processes That Remain After Adoption of the Agency’s Current Inventory Management System

Self-initiated
Project ID: 
FI2021029
What We Looked At
Through its Logistics Center, the Federal Aviation Administration (FAA) maintains, repairs, and overhauls equipment for the National Airspace System (NAS). The Logistics Center is FAA’s only centralized distribution center for NAS inventory, valued at $735 million. Each year, it ships and receives approximately 200,000 parts to FAA field offices and other domestic and international customers. Previous reviews have found that FAA did not have sufficient controls in place to track and manage its inventory. Accordingly, we initiated this audit with the following objective: to determine if FAA has effective oversight controls for managing the NAS inventory, including controls to appropriately account for excess, obsolete, or unserviceable (EOU) items.
 
What We Found
FAA lacks sufficient oversight controls for managing its NAS inventory and continues to maintain excessive quantities of old and unserviceable parts. In part, this is because FAA lost the automatic functionality for monitoring excess inventory levels after it transitioned to a new inventory management system. The transition to the new system also impacted FAA’s ability to track EOU inventory to final disposition and monitor exchange and repair (E&R) parts shipped to and from the field. Furthermore, FAA must manually recalculate inventory values for most E&R parts and faces about $1 million in quantity discrepancies. The lack of sufficient controls limits FAA’s ability to accurately report its inventory values and determine the stock levels it needs to support NAS systems.
 
Our Recommendations
We made seven recommendations to improve FAA’s ability to manage and provide oversight for the NAS inventory. FAA concurred with recommendations 1–4, 6, and 7. Thus, we consider these recommendations resolved but open pending an OIG review and FAA’s completion of planned actions. FAA partially concurred with recommendation 5 and provided an alternative action but did not describe the course of action it will take if parts are never returned or the impact of unreturned parts on its financial statements. Therefore, we consider recommendation 5 open and unresolved. We request that the Agency reconsider its position on this recommendation and provide us with its revised response within 30 days of the date of this report in accordance with DOT Order 8000.1C.

Recommendations

Open

Closed

No. 1 to FAA

Revise FAA's process for identifying excess, obsolete, or unserviceable inventory toinclude consideration for the quantity of repairable parts on hand, and theexpected future demand for those parts.

No. 2 to FAA

Develop and implement an interim process for receiving, sorting, and disposing of excess, obsolete, or unserviceable inventory items at the Thomas Road Warehouse that includes the tracking of individual inventory parts from receipt through to final disposition.

No. 3 to FAA

Implementan oversight process for core due-ins that includes continuous tracking as wellas following up on any core due-ins that are not returned within 30 days.

No. 4 to FAA

Evaluate and revise the Advance Due-In Report to maximize its effectiveness in accurately tracking actual due-ins from the field.

$38,000,000
No. 5 to FAA

Research,identify, and account for the due-ins identified in the Advance Due-in Reportand request that parts be returned. If unreturned, bill NAS customersaccordingly. Implementation of this recommendation could put over $38 million infunds to better use.

No. 6 to FAA

Document and implement FAA's process forconducting monthly exchange and repair inventory value calculations.

No. 7 to FAA

Develop and implement a plan to continuously track,reconcile, and reduce the inventory quantity discrepancies that currently existbetween the Logistics Center Support System and the Warehouse ManagementSystem.