Introduction

1. The effective management of explosive ordnance^[1] is integral to military capability and is essential to military operations. Explosive ordnance management is a core function of the Australian Defence Force (ADF) and involves considerable levels of expenditure. At 30 June 2010, the Department of Defence (Defence) reported explosive ordnance inventory of $3.1 billion,^[2] (some 60 per cent of Defence’s reported total inventory at that date) comprising mainly the inventory of the 17 depots managed by Joint Logistics Command (JLC), from which explosive ordnance is issued to ADF units.

2. The main focus of this audit is Defence’s management of explosive ordnance inventory after it has left the depots and has become the responsibility of Air Force, Navy and Army units. It is at this point that Defence’s explosive ordnance is most widely dispersed and at greatest risk of loss or theft. The Defence Security Manual (DSM)^[3] imposes correspondingly important responsibilities on ADF unit commanders and managers, including the responsibility to:

secure and account for all [explosive ordnance] on charge to, or in the custody of, units under their control.^[4]

3. The critical nature of these responsibilities has been highlighted by a number of high-profile safety and security incidents involving explosive ordnance that have been the subject of internal and external scrutiny over recent years. In late December 2006, the then Minister for Defence announced an internal security performance audit of Defence’s weapons, munitions and explosives.^[5] This followed advice from the Australian Federal Police (AFP) to Defence of a police investigation into the origins of a military rocket launcher in the possession of criminal elements, which it believed could have been of ADF origin.[6]

4. Defence’s subsequent Weapons, Munitions and Explosives Security Performance Audit (WME Audit) report was completed in August 2007.^[7] The 2007 WME Audit reviewed the security policies and practices applying to Defence weapons, munitions and explosives and concluded that the culture and policies related to explosive ordnance security within Defence needed improvement. The audit made 58 recommendations, with overall responsibility for their implementation lying with the Vice Chief of the Defence Force (VCDF) Group through Joint Logistics Command (JLC).

5. Defence recognises that it needs to have a suitable system for the oversight and physical control of explosive ordnance held by ADF units, to support the effective management and control of explosive ordnance throughout its life cycle—from procurement and manufacture through to final use or disposal. Specifically, Defence’s 2007 WME Audit noted that there should be an integrated system to support the end-to-end management of explosive ordnance and that, ideally, all ADF units should have access to that system for managing explosive ordnance.

6. Accordingly, it was recommended that Defence improve the policies and systems for the management and accounting of weapons, munitions and explosives to enhance visibility and control throughout their life cycle. Defence’s progress in implementing this recommendation and other relevant 2007 WME Audit recommendations was examined during the course of this audit.

Distributing and recording explosive ordnance

7. In recent years, there have been some 75 000 movements of explosive ordnance between the explosive ordnance depots and ADF units each year.^[8] The volume and type of explosive ordnance involved varies markedly, depending on the timing of major training exercises and other activities. While the volume of explosive ordnance moving through ADF units can be significant, Defence’s assessment is that ADF units hold relatively small amounts in their magazines and lockers at any one time.^[9]

8. Defence considers this explosive ordnance to be ‘low value and less sensitive’, comprising standing issues to units, along with the balance of other ordnance that has been issued to units but has not been returned to depots. This explosive ordnance is not visible through Defence’s Computer System for Armaments (COMSARM). Instead, ADF units record it on Defence’s general inventory management system or on other Service-specific systems.^[10]

9. At the time of audit fieldwork, each Service had different arrangements in place for recording and managing explosive ordnance at the unit level. Air Force had authorised units to use COMSARM and Defence’s general inventory management system, though neither system was mandated. COMSARM was available only to two Air Force units. Other Air Force units were using the general inventory management system as well as unit-level manual paper-based systems and other computer-based spreadsheets to manage their explosive ordnance transactions and holdings. Other units relied solely on unit-level systems.

10. Army had mandated Defence’s general inventory management system for unit management of explosive ordnance. In addition, some Army units also used manual paper-based systems to manage their explosive ordnance transactions and holdings. Other Army units relied solely on unit-level systems.

11. Navy required units to use an ‘approved inventory management system’.^[11] In practice, this included computer-based spreadsheets and paper-based inventory management systems. Additionally, Navy explosive ordnance was accounted for in COMSARM through a manual process, under which Navy units reported (via signal) all explosive ordnance transactions to a COMSARM operator, who updated COMSARM accordingly.

Previous and ongoing ANAO audit activity

12. This audit is the third in a current series of ANAO performance audits examining aspects of the major stages of management of explosive ordnance by Defence and the Defence Materiel Organisation (DMO). The major stages are:

• the identification of explosive ordnance requirements and the acquisition of the explosive ordnance, aspects of which were examined in Audit Report No.24 2009-10, Procurement of Explosive Ordnance for the Australian Defence Force (March 2010) and in Audit Report No.37 2009-10, Lightweight Torpedo Replacement Project (May 2010);
• storage of explosive ordnance at Defence explosive ordnance depots and distribution of explosive ordnance to ADF users, which is the focus of another current ANAO audit. That audit is examining Defence's management of the delivery of these services through the Explosive Ordnance Services Contract;^[12]
• the sustainment or management of the explosive ordnance throughout its useful life;
• the management of explosive ordnance by the end users of this materiel in Defence; and
• disposal of explosive ordnance not consumed during its useful life, or otherwise declared excess or obsolete.

Audit approach

13. The objective of this audit was to examine the effectiveness of Defence’s management of explosive ordnance by the end users of this materiel in Air Force, Army and Navy (the Services). In particular, the focus was on the effectiveness of arrangements for the oversight and physical control of explosive ordnance once it is issued to Service units.

14. The audit reviewed Defence’s policies, procedures, processes and inventory management systems for explosive ordnance at the unit level in the ADF, from receipt and storage through to the use or return^[13] of explosive ordnance. The audit also examined the relationship between the management of explosive ordnance at the unit level and the Explosive Ordnance Services Contract and, where relevant, the regional Garrison Support Services (GSS) Contracts.^[14]

Overall conclusion

15. Effective control arrangements are an essential requirement for the movement and storage of explosive ordnance. Responsible authorities impose strict regulation and controls on the private and commercial transport, possession and storage of explosives to ensure that it does not create an unacceptable risk to people and property.^[15] Explosive ordnance in the Defence domain, by its nature,^[16] poses potentially higher risks to public safety and to Defence’s reputation if it is mishandled or falls into the hands of those seeking to misuse it, and merits correspondingly stringent oversight and control.

16. There is an average of some 75 000 movements^[17] of explosive ordnance from ADF depots to ADF units annually, representing many thousands of pallet-loads of freight. This explosive ordnance is distributed to and used by ADF units, who manage more than 800 magazines and storage lockers around Australia.^[18] It is at this point that Defence’s explosive ordnance becomes most dispersed, mobile and potentially vulnerable to loss or theft.

17. The sum of the explosive ordnance inventory stored in ADF units’ magazines and lockers cannot be centrally scrutinised in Defence unless the ADF units holding it correctly record it on Defence’s general inventory management system, MILIS.^[19] However, the ANAO found ADF units, Aiu that were not recording their explosive ordnance on MILIS.^[20] Instead, they relied on a range of inconsistent guidance for recording and managing their explosive ordnance, using stand-alone computer-based spreadsheets and manual stock recording systems. Defence had limited assurance over ADF unit holdings, which were not subject to an effective program of monitoring and review.

18. The causes of these weaknesses in Defence’s oversight and control of explosive ordnance are:

• the continuing need for ADF units to frequently process large volumes of manual explosive ordnance transactions, as Defence cannot automate an interface between its key ordnance management system (COMSARM) and MILIS;^[21]
• the lack of consistent and complete procedures and guidance to ADF units on recording their explosive ordnance transactions in MILIS, adding to the risks already inherent in manual processing;
• the lack of consistent guidance and instruction on the recording and reporting of explosive ordnance security incidents; and
• the lack of an effective program of monitoring and review within Defence, able to provide assurance that ADF units are completely and correctly recording their receipt, use and residual holdings of explosive ordnance in their magazines and lockers.

19. In practice, the arrangements for recording explosive ordnance transactions and holdings vary from Service to Service and within the Services, depending on the unit to which the explosive ordnance is issued. It is therefore difficult for Defence to gain assurance that all its explosive ordnance is visible and being managed in a properly controlled fashion. This difficulty was compounded by delays in MILIS achieving functionality, so that, by the end of 2010, there was a significant quantity of explosive ordnance transactions not yet entered into the system.

20. Defence informed the ANAO in February 2011 that it has embarked on a staged approach to remediating these deficiencies and making MILIS the only system on which ADF units record their explosive ordnance transactions and holdings. Defence informed ANAO that all ADF units have been directed to manually enter into MILIS their explosive ordnance holdings by 28 February 2011. Defence intends to:

• establish unit-level procedures for entering explosive ordnance holdings onto MILIS;
• by the end of 2011, develop and test, at selected ADF units, a framework for assessing unit-level procedures, so that it can obtain reliable evidence of compliance; and
• in the longer term, withdraw COMSARM from use, so that all explosive ordnance transactions and holdings will be recorded exclusively on MILIS.^[22]

21. At the unit level, the ANAO observed that Defence’s policies, procedures and guidelines for the management of explosive ordnance had incomplete coverage and, in some cases, contained inconsistent advice. The gaps and inconsistencies extended from central policies and procedures, down to unit-specific instructions. The ANAO also observed inconsistencies in Defence’s reporting, recording and investigation of explosive ordnance security incidents. The effect of these was to limit Defence’s ability to detect, assess and mitigate its security vulnerabilities.

22. In the light of the absence of integrated systems solutions for recording explosive ordnance inventory in ADF units, and the multiple policies, procedures and guidelines applying to explosive ordnance management in ADF units, it is evident that Defence has yet to achieve oversight and assurance that all its explosive ordnance is being effectively managed at the unit level. There have been delays in implementing this core element of the recommendations of Defence’s 2007 Weapons, Munitions and Explosives Security Performance Audit that were intended to achieve this end. More than three years on, Defence is only now achieving improvements to the policies and systems necessary to ensure that it achieves central visibility and control of all its explosive ordnance throughout its life cycle. The suggested actions arising from this audit aim to better position Defence to assure that its program of improvements is achieving the desired outcomes.

Key Findings

Ongoing monitoring and review at the unit level

23. Defence currently undertakes a number of ongoing reviews to inform its management of explosive ordnance and provide some assurance in relation to stock holdings. However, reviews of the management of explosive ordnance at the unit level are not well-integrated, have gaps in their coverage and do not provide an overall view of holdings or the state of controls. For example:

• While technical audits of explosive ordnance safety procedures are covered sufficiently at the unit level, there is no arrangement for counterpart audits focussing on the physical control of explosive ordnance stock holdings.
• Defence does not carry out any assurance checks of the stocktakes that ADF units are required to take of their explosive ordnance holdings.
• The findings and recommendations from all explosive ordnance audit activities at the unit level conducted by the various bodies are not centrally consolidated by Defence for monitoring, review and analysis. This limits Defence’s ability to make full use of all the relevant data when identifying ongoing trends and issues in the management and physical control of explosive ordnance at the unit level in the Services.

24. The ANAO considers that there would be benefit in Defence widening the scope of its existing explosive ordnance management monitoring and review activities to include a focus on the physical control of explosive ordnance, including conducting stocktakes and business process testing at the unit level.

Managing Explosive Ordnance in ADF units

25. At the Service unit level, Defence’s management of explosive ordnance relies upon multiple policies, procedures and guidelines that have gaps and inconsistencies in coverage and advice. Central oversight of Service units’ explosive ordnance holdings is complicated by the Services’ use of different systems to support their management tasks. These difficulties were evident at the time of Defence’s 2007 WME Audit, which recommended that all publications relating to weapons, munitions and explosives management and accounting should be consolidated into an easily accessible single reference point and all obsolete security references should be removed.

26. Defence’s overarching Defence Instruction General (DI(G)) on explosive ordnance management in Defence—DI(G) LOG 4-1-013 Management of Explosive Ordnance in Defence—has been in draft form since 2006.^[23] The draft DI(G) specifies the roles and responsibilities of the authorities involved in the management of explosive ordnance in Defence. Defence informed ANAO that in March 2011 the draft DI(G) was forwarded to the Secretary of Defence and Chief of the Defence Force for formal approval.

27. The Defence Security Manual (DSM) and Electronic Supply Chain Manual (ESCM) govern explosive ordnance security and the use of Defence’s general inventory management system. In addition to these Defence-wide policy and procedure documents, Defence has single-Service policy and procedure documents dealing with the management of and accountability for explosive ordnance. These documents do not stand alone and are to be used in conjunction with other subordinate publications, instructions and manuals setting out requirements for the management of explosive ordnance. There are currently more than 600 guidance documents for managing explosive ordnance within Defence.^[24] Many of the guidance documents relevant to the tracking of explosive ordnance contain outdated references to a number of other Defence publications, instructions and manuals.

28. Some areas in Defence have also created additional guidance material to supplement Defence-wide and single-Service documents, including unit-level instructions. The volume of documents addressing the physical control of explosive ordnance at the unit level, and the number of cross references between them, creates a significant challenge for Defence to maintain a suite of documentation that is relevant and reliable. Clear and up-to-date policy and procedural documentation is important to provide some assurance that there is consistency of understanding, interpretation and sound practices to support the physical control of explosive ordnance.

29. In January 2011, Defence informed the ANAO that changes made to key policy documents in late 2010 and others scheduled for release in the first half of 2011 should address the majority of the more significant issues.

Information and Records Management Systems

30. COMSARM records physical and financial data up to the point at which the explosive ordnance is issued to Service units, except where an explosive ordnance item is what Defence describes as a high cost or sensitive item that Defence has determined must be continued to be tracked in COMSARM until it has actually been used. The reported amount^[25] of explosive ordnance inventory in Defence’s financial statements is based primarily on the information held in COMSARM.

31. The annual volume of explosive ordnance issued to ADF units is considerable, particularly for units involved in large scale exercises or training. Each year, there are an average of 75 000 movements of explosive ordnance between ADF depots and units, representing several thousand pallet-loads of freight. Once explosive ordnance is issued to them it becomes the responsibility of the Service units. Units use the explosive ordnance issued to them, returning unused ordnance to depots (where it is re-entered onto COMSARM), or holding it in their unit magazines or lockers.^[26]

32. Unit holdings can be recorded in Defence’s general inventory management system MILIS, or in other systems including paper records, spreadsheets and other Service-specific systems. Defence does not currently have a central view of all these systems or a single system with a consolidated set of records for all explosive ordnance holdings that are not recorded in COMSARM or MILIS, notably those items issued to Service units and described by Defence as ‘low value and less sensitive’.

33. Some ADF units were not recording their explosive ordnance holdings on the general inventory management system, instead managing these items on other inventory management systems such as computer based spreadsheets and manual stock recording systems. Consequently, Defence is not able to readily ascertain the quantity or physical location of all the explosive ordnance recorded in systems other than COMSARM or MILIS.

34. ANAO’s findings are consistent with those of Defence’s 2007 WME Audit, which found both a loss of visibility of explosive ordnance to the wider explosive ordnance domain within Defence, and a lack of clarity between the accounting systems used to manage explosive ordnance. The 2007 WME Audit considered this loss of visibility of explosive ordnance to be an accountability gap or ‘accounting black hole’ and a significant security weakness. It noted that there should be an integrated system to support the end-to-end management of explosive ordnance which, ideally, could be used by all ADF units. Defence’s 2007 WME Audit recommended that Defence improve the policies and systems for the management and accounting of weapons, munitions and explosives to enhance visibility and control throughout their life cycle.

35. Pending the development of a longer-term solution to the management and control of explosive ordnance issued from COMSARM, the ANAO considers it is important that the Services develop an integrated management system to account for explosive ordnance held at the unit level. This would provide Defence-wide visibility of such explosive ordnance, and support the Vice Chief of the Defence Force in his role as the single point of accountability in Defence for explosive ordnance.^[27]

36. In February 2011, Defence informed the ANAO that it is currently undertaking studies to ascertain the security and functionality requirements necessary to manage all explosive ordnance on MILIS, with the intention of moving the management of all explosive ordnance to MILIS in the future. Further Defence informed the ANAO in February 2011 that to provide more rigorous governance, it is introducing a Business Process Testing Controls Framework into the explosive ordnance domain, and that this testing will have a particular focus on explosive ordnance management by ADF units. Defence intends that the initial trial of this testing at selected Navy, Army and Air Force units will be completed by the end of 2011.

Security and Security Incident Management

37. It is important for Defence to have in place clear policies, procedures and instructions for identifying and reporting explosive ordnance security incidents and a reliable information system to manage reported incidents from initial identification through to the outcome of subsequent investigations. An effective reporting and investigation regime for explosive ordnance security incidents would inform Defence’s understanding of vulnerabilities and reduce the risk of future occurrences.

38. Defence’s 2007 WME Audit found that the key Defence documents describing weapons and explosive ordnance security incident requirements were inconsistent and recommended that the requirements in each be aligned. However, notwithstanding Defence’s 2009 revision of key documents, ambiguities and inconsistencies remain; including important threshold definitions of what constitutes explosive ordnance security incidents, and the subsequent threshold requirements for reporting such incidents. The ambiguities and inconsistencies within and between these key documents detract from their clarity and reduce certainty for those who rely on them for guidance. This limits Defence’s ability to effectively oversee and manage these types of incidents. In January 2011 Defence informed the ANAO that changes to some of Defence’s key defence manuals and instructions for the management of explosive ordnance security incidents had either been completed or were in draft and that in Defence’s view, these changes would address the more significant issues identified during the audit.

39. Defence’s 2007 WME Audit found that Defence was not able to provide a reliable and comprehensive summary of security incidents involving weapons, munitions and explosives reflecting, in part, the disjointed system for reporting, recording and monitoring security incidents. Specific recommendations were made that policies and systems for managing and accounting for weapons, munitions and explosives be improved to enhance visibility and control of these throughout their life cycle, and that the systems (COMSARM and, at the time, SDSS) should be managed in a way that unresolved discrepancies were automatically reported to the Defence Security Authority (DSA) Security Incident Centre. Defence’s 2007 WME Audit noted that these were early audit recommendations on which action had already started.

40. At the time of this audit, there was evidence that not all explosive ordnance security incidents were being promptly reported to DSA and the extant reporting examined by the ANAO showed some limitations. Defence was not able to provide the ANAO with complete and consistent data on explosive ordnance security incidents, leading the ANAO to conclude that Defence has yet to achieve visibility of all explosive ordnance security incidents. In January 2011, Defence informed the ANAO that it intends to institute a system to automatically report all unresolved explosive ordnance discrepancies to DSA as part of the longer term MILIS explosive ordnance management enhancements. Additionally, Defence informed the ANAO that Defence is now regularly reviewing the progress of explosive ordnance security incident investigations.

Recommendations

41. The ANAO has made five recommendations aimed at improving Defence’s monitoring of explosive ordnance tracking arrangements at the unit level; providing an authoritative and consistent framework for the management of explosive ordnance across Defence; developing a suitable inventory management system for the Services to physically account for explosive ordnance at the unit level; and addressing limitations in the guidance, reporting requirements and data for explosive ordnance security incidents in Defence.

Summary of agency response

42. Defence welcomes the ANAO report and, while the amount of explosive ordnance held by ADF units is a small percentage of Defence’s total explosive ordnance inventory, acknowledges that there is scope for further improvement in the management of explosive ordnance held by Navy, Army and Air Force. Defence agrees with all five recommendations made by the ANAO, which reflect initiatives already being pursued by Defence.

43. Defence takes its responsibility for the management and security of all explosive ordnance holdings very seriously. This is evidenced in the robust controls Defence already has in place for access to explosive ordnance including stringent requirements when custody is transferred to or from a unit and security vetting of all personnel involved in the management of explosive ordnance. Complementing this is a comprehensive regime of controls to detect any irregularities. These controls include the policy requirement for fortnightly stocktakes and regularly scheduled technical inspections. In addition, senior Defence leaders regularly review all security incidents.

44. These activities form part of an extensive program to further improve control of explosive ordnance, which is described in the 2010 Australian Defence Strategic Logistics Strategy. This program includes the promulgation of high level Defence explosive ordnance policy, and implementation of revised business processes and comprehensive business process testing in 2011. It also includes moving the management of all explosive ordnance stockholdings onto MILIS progressively, as functionality and security requirements are addressed.

Footnotes

^[1] Explosive ordnance consists of all munitions containing explosives, nuclear fission or fusion materials and biological and chemical agents. This includes bombs and warheads; guided and ballistic missiles; artillery, mortar, rocket and small arms ammunition; all mines, torpedoes and depth charges; demolition charges; pyrotechnics; clusters and dispensers; cartridge and propellant actuated devices; electro-explosive devices; clandestine and other improvised explosive devices; and all similar or related items or components explosive in nature. Source: Department of Defence, Defence Security Manual, 2009.

^[2] Defence’s inventory is reported at cost, adjusted where applicable for loss of service potential. The costs of inventories are assigned by using a weighted average cost formula. Department of Defence, Defence Annual Report 2009–10, Volume 1, p. 214. The total explosive ordnance inventory reported in financial statements is based on the information held in Defence’s Computer System for Armaments (COMSARM), plus adjustments for some transactions not recorded in COMSARM. Explosive ordnance inventory recorded in other systems used by ADF units is not reflected in the total explosive ordnance inventory reported in Defence’s financial statements.

^[3] Department of Defence, Defence Security Manual, 2009 was the current version of this manual at the time of fieldwork for this audit.

^[4] Department of Defence, Defence Security Manual, 2009, paragraph 67.22 (a).

^[5] The audit was conducted by the Defence Security Authority (DSA) under the guidance of an Oversight Board chaired by the Deputy Secretary Intelligence, Security and International Policy. The Oversight Board included representatives from relevant areas of Defence, the Australian Security and Intelligence Organisation (ASIO), and the Australian National Audit Office (ANAO) with observer status.

^[6] By early 2007 a joint Defence and AFP investigation confirmed that the rocket launcher was a version of an M72 short-range light anti-armour weapon disposed of by Defence some years earlier. A subsequent joint AFP and NSW Police operation resulted in charges being laid against a serving Army officer and an ex-soldier.

^[7] Department of Defence, Defence Security Authority, Weapons, Munitions and Explosives (WME) Security Performance Audit, August 2007. Defence’s 2007 WME Audit was conducted in two phases, the first focusing specifically on security procedures for the M72 light anti-armour weapon and completed in January 2007. The second, broader, phase covered Defence’s security policy and practice for weapons and EO security throughout the life cycle from acquisition to disposal. Unless indicated otherwise, this ANAO audit report refers to the second phase and its August 2007 report.

^[8] Based on Department of Defence data of explosive ordnance issues and returns between ADF units and explosive ordnance depots for 2003-04 to 2009-10. This represents many thousands of pallet-loads of freight.

^[9] Defence informed ANAO in January 2011 that its preliminary estimate was that ADF units collectively held no more than $20 million of explosive ordnance recorded on systems outside of COMSARM.

^[10] COMSARM is hosted on the Defence Secret Network (DSN). Explosive ordnance items that Defence considers to be ‘high value, high risk’ remain visible on COMSARM after being issued to units.During the time of fieldwork for this audit, Defence’s general inventory management system was the Standard Defence Supply System (SDSS). SDSS was replaced by the MILIS on 5 July 2010.

^[11] Department of Defence, Australian Book of Reference 862, Volume 2, Revision 3, Technical Manual: Maritime Explosive Ordnance Safety Manual, 19 May 2009, paragraph. 1-51 (b).

^[12] Under the Explosive Ordnance Services Contract, explosive ordnance storage and distribution operations are centred on the contractor's management of 17 Defence-owned explosive ordnance storage and distribution facilities. They also include activities such as local and long haul road transport, issuing explosive ordnance to ADF units and accepting returns of explosive ordnance from ADF units, unloading imported explosive ordnance from commercial merchant vessels, and a range of repairs and scheduled maintenance.

^[13] To Defence’s explosive ordnance depots which are managed by a contractor under the Explosive Ordnance Services Contract.

^[14] The scope of the audit did not extend to: an assessment of the technical aspects of explosive ordnance storage and use at the unit level, including safety and occupational health and safety issues related to handling of explosive ordnance and the associated incident reporting; management of explosive ordnance in operations; examination of the management of explosive ordnance at relevant DMO managed facilities (repairs, maintenance and disposals); and base security arrangements including those managed by Defence Services Group under the regional GSS Contracts. It also did not include examination of the management of explosive ordnance at Defence explosive ordnance depots managed by a contractor under the Explosive Ordnance Services Contract. This, however, is included in the scope of another ANAO audit currently underway (see paragraph 12).

^[15] See, for instance, Government of Western Australia, Department of Consumer and Employment Protection, Storage of explosives – Dangerous goods safety guidance note X03/08, December 2008, page 4.

^[16] Most of the explosive ordnance items issued to ADF units are small and portable items.

^[17] Based on Department of Defence data of explosive ordnance issues and returns for 2003-04 to 2009-10.

^[18] While considerable volumes of explosive ordnance can be issued to ADF units (for example, for large-scale exercises), Defence informed ANAO in February 2011 that it estimates that at other times ADF units collectively hold less than $20 million in ‘low value and less sensitive’ explosive ordnance, which is not material in a financial sense.

^[19] During the time of fieldwork for this audit, Defence’s general inventory management system was the Standard Defence Supply System, SDSS. On 5 July 2010, SDSS was replaced by the Military Integrated Logistics Information System, MILIS.

^[20] Defence informed the ANAO in February 2011 that MILIS has the same functionality for the management of explosive ordnance as its predecessor SDSS. As for SDSS, to ensure that their explosive ordnance transactions are centrally visible, ADF units must manually enter their transactions onto the new general inventory management system, MILIS.

^[21] Defence informed the ANAO that an automated interface between COMSARM (hosted on the Defence Secret Network-DSN), and MILIS (hosted on the Defence Restricted Network-DRN), cannot be achieved without compromising the level security required for COMSARM on the DSN.

^[22] In February 2011, Defence informed the ANAO that until such time as a single Defence inventory management and accounting system is implemented, Air Force will pursue a solution based on COMSARM to account for all explosive ordnance managed by Air Force units. Air Force intends to introduce COMSARM to all Air Force units by the end of 2011.

^[23] Defence’s first recorded consideration of DI(G) ) LOG 4-1-013 Management of Explosive Ordnance in Defence was on 5 July 2006.

^[24] These 600 documents include all documents relating to the management of explosive ordnance including legislation, regulations, policies, standards, procurement inventory management and safety manuals and detailed work instructions. Under the Explosive Ordnance Reform Program, Defence is, undertaking the Document Management Project to rationalise the number publications related to management of explosive ordnance. This project is discussed in further detail in chapter 2 of this audit.

^[25] Defence’s inventory is reported at cost, adjusted where applicable for loss of service potential. The costs of inventories are assigned by using a weighted average cost formula. Department of Defence, Defence Annual Report 2009–10, Volume 1, p. 214.

^[26] Defence’s preliminary estimate is that, at any given point in time, ADF units collectively hold no more than $20 million of explosive ordnance on systems outside of COMSARM. Defence informed the ANAO that this preliminary estimate was derived from its analysis of summary reports of ‘low value and less sensitive’ explosive ordnance issued to and returned from ADF units for the months of March, October and November 2010. Defence informed the ANAO that ‘during these three months $30.7 million of ‘low value and less sensitive’ explosive ordnance was issued to ADF units and $13.9 million of ‘low value and less sensitive’ explosive ordnance was returned from ADF units, reflecting usage of approximately $17 million.

^[27] The VCDF, through the CDF’s Directive 4/2008, in 2008 was appointed as the single point of accountability for explosive ordnance within Defence. The VCDF has delegated this responsibility to the Commander of Joint Logistics Command (CJLOG).