Summary:

The DoD Inspector General’s Jan 1993 audit of Yardney Technical Products reviewed how Government-furnished silver was priced, acquired, controlled, and stored for DoD contracts (work examined largely from FY1979–FY1991). Auditors identified about $348,950 in potential monetary benefits and urged contracting offices to seek returns of silver where requirements were overstated and to ensure future use of Government-furnished precious metals per DFARS 208.73. Overall internal controls weren’t deemed “materially” weak at the Department level, but specific weaknesses at Yardney and in procurement practices required corrective action.

Key findings: some contracts overstated silver needs; agencies at times bought silver on the open market rather than drawing from Defense stock, contrary to policy; and Yardney’s physical/accounting controls were inadequate. Government silver lost its identity after paper transfers and was commingled with Yardney’s stock; residual/deficit balances lingered on accounts for up to 12 years, contrary to FAR property-management and closeout rules. A “no-cost” storage contract with Yardney was poorly justified, created competition concerns versus recognized precious-metals banks (e.g., Handy & Harman; Engelhard), and obscured true storage costs; it was terminated effective July 23, 1992.

Management responses were mixed. The Army partly concurred—applying Government-furnished silver mainly to production contracts—while the Navy and Air Force issued policy reminders and began actions to reconcile and recover residual silver; SDIO agreed in principle but provided limited specifics. Auditors reiterated DFARS 252.208-7000 should appear in solicitations/contracts except in narrow, stated exceptions and requested further written responses (deadline March 9, 1993). The report also notes Congress authorized disposal of excess National Defense Stockpile silver for FY1993, with cautions to avoid market disruption