Australian Defence Force stocktake audit reveals $1.7bn failure

We’re all guilty of buying things we don’t need but the Australian Defence Force has taken it to new lengths.

Households might overstock on the odd pack of spaghetti or tin of baked beans but an audit of Defence’s shelves has found $1.7bn in goods that could not be identified against a “need or activity”.

According to the Australian National Audit Office (ANAO) the figure represented 65-79 per cent of all general stores inventory identified as “overstock” with officers failing to adequately calculate or model needs of our forces.

In its latest report card on the management of Australian Defence Force warehouses, Defence failed to demonstrate it was achieving any efficiency and economy in management of general stores inventory (GSI).

GSI includes everything from ration packs, uniforms, sleeping bags and high value spare parts for specialist military equipment through to toiletries, light globes and hardware.

It comprises more than 70 million items of stock at 547 locations.

Warehouse storage at the ADF’s Joint Logistics Unit-East facility at Moorebank, NSW.

The report has blasted Defence for not even being able to provide the auditor with any evidence senior officers responsible for logistics policies and procedures know of or are managing the risk to its inventory, under its own documented framework of responsibilities.

“Defence has allowed the framework to degrade over time, and non-compliant practices to arise, while awaiting the implementation of new systems and supporting policies,” the auditor reported in a report tabled overnight to federal parliament.

The report concluded: “Defence cannot demonstrate that it is achieving efficiency and economy in its management of general stores inventory.

“Defence is not able to demonstrate that it has fully implemented its framework requirements regarding cost-effective and efficient inventory management, and a ‘balanced inventory’ that avoids both understocking and overstocking. Defence was also unable to demonstrate, until late in this audit, an active focus or response by Defence senior leaders on known issues contributing to inefficiency and overstocking in the management of general stores inventory.”

A forklift driver moves stores within the warehouse at the Joint Logistics Unit-East facility at Moorebank, NSW.

The overall value of general stores was $2.6bn with $1.7bn value “that could not be identified against a need or activity at 30 June 2022, 65-79 per cent of GSI identified by Defence systems as overstock between 2015/16 and 2021/22”.

The auditor has made four recommendations which Defence has agreed to.

In response, Defence stated it “acknowledges the ANAO’s assessment that Defence cannot fully demonstrate it has implemented a framework that achieves ‘balanced inventory’”.

“Defence is committed to strengthening processes and controls for the management of general stores inventory and will consider key strategic inputs to Defence preparedness and planning … to deliver enhanced capability to track labour, storage and distribution costs to a greater level of granularity.”

As at 30 June 2022, aside from GSI, Defence also reported inventories comprised of explosive ordnance, $5.3 billion, and more than $61.6 million worth of fuel.

Originally published as Australian Defence Force stocktake audit reveals $1.7bn failure