THE Government Arsenal’s Case and Bullet Division reported manufacturing losses of over one million pieces of 5.56mm bullets in 2023 against its total output of 9.526 million, far exceeding the allowable quantity or normal loss limit of only 268,501.
This was revealed by state auditors in their 2023 report on the Government Arsenal (GA), a copy of which was submitted to GA Director Gerry Amante on March 14, 2024.
Auditors noted that the agency has three manufacturing plants: the Case and Bullet Division (CBD), the Explosives Division (EXD), and the Cartridge Assembly and Packaging Division (CAPD).
All of them submitted summary reports of production line losses to the GA Finance and Management Division (FMD) during the year.
Of the three, the audit team noted that only the CBD showed losses that exceeded the allowable quantity.
“A review of the summary showed that there were reported losses that exceeded the allowable limits, which may be treated as an abnormal loss,” the auditors said.
The CBD report showed total losses of 224,966 pieces of 5.56mm M193 bullets translating to a total loss of 26.85 percent against a total output of 837,676. The allowable quantity to normal loss was set at only 23,608.
On the production of 5.56mm M855 bullets (heavier grain), total losses hit 839,939 pieces or 9.67 percent or the total output of 8,688,171. The allowable quantity or normal loss was only 244,893.
According to the audit report, normal loss “represents the anticipated and inherent waste or spoilage that occurs naturally in the production cycle” attributable to predictable causes.
On the other hand, abnormal losses are caused by “unexpected or abnormal conditions such as plant breakdown, sub-standard materials, carelessness, accidents, etc.” and are over and above what is considered as normal losses.
The Commission on Audit said while normal losses are included in computing the cost of production, abnormal losses are considered non-operating expenses and should be excluded from the computation of cost.
“An interview with the FMD mentioned that they could not account for the abnormal losses due to a process gap from manufacturing plants where the necessary documents were not forwarded to FMD regarding when and where the losses occurred in the process,” the audit team said.
The GA’s Instruction No. 11 governing “Control of Metallic Rawe Materials, Components and Finished Cartridges” issued on June 25, 2016 provides guidelines for the receipt, storage, issuance, utilization, and assembly of finished cartridges including recording, reporting, and transfer to the Armed Forces of the Philippines.
However, nothing in the instructions required the manufacturing plants to forward documents needed by the FMD to trace where and what was causing the abnormal losses.
The GA management said the Internal Control Office will review and amend GA Instruction No. 11 to include specific requirements for manufacturing plants to submit documents relative to abnormal losses.
At the same time, the Manufacturing Division and Engineering Division were directed “to come up with more accurate and reliable computation and reporting of lines losses of each component and caliber.”
