The GAO Review, Spring 1971

Published by the Government Accountability Office on 1971-01-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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REVIEW                                              SPRING 1971

Contents   Managing U.S. Interests i n International Or-

             gan izat ions
                FRANK C. C O N A H A N . .                                                    1
           Neapon Systems Cost-Effectivenes St dies
              JAMES P. WRIGHT . . . . . . . . . . . . . . ?
                                                           ’.        F&                 2     9
           Jdequacy of Contractors’ Cost RpFJds                         ~7~   -(,

              MILTON H. HARVEY . . . . . . . . . . . .&.      .I.$. . r.. . .                17
           2oncepts of Auditing and Systems Analysis
              ELLSWORTH H. MORSE, JR . . . . . Q.42             .,kc>f.                      23
                                                         -.-       2.,*-
           lob Satisfactions of Accountants
                                                                                           7~4 Pi
                  HERBERT................................                                    28   ’
           3ehaviora I Science-A
                ROBERT Y . HILL, JR         ,   .                                            37
           Legislative Control Over Ex
              GERALD GOLDBERG . . .                                                          40
           An Old Lady Gets a New Dress
              G.V.GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        47
           Auditape t o the Rescue .
                CLIFFORD L. GARDNER             ....                                ....     51
           Application of Marketing Concepts to the Analy-
             sis of a Government Progtam ovAgency
              BILL c o x , . .    , d . 4 ~ . / $ 4 .. . . . . . . .                         60
           Cost Accounting Standards Board Appointed . .                                     68
           From GAO Speeches.. . . . . . . . . . . . . . . . . . . . . . .                   71
           News and Notes.. . . . . . . . . . . . . . . . . .                       2.
                                                         k , “>      ;

           Hearings and Legislation . . A?.. . ;.                                   ....     82
           GAO Staff Changes . .                                                             84
           Professional Activities                  .                                        92
           New Staff Members.. . . . . . . . . . . . . . . . . . . . . . . .                101
           Readings of Interest. . . . . . . . . . . . . . . . . . . . . . . .              102

                         Published quarterly for the professional staffs of the
                                   U S . General Accounting Office

            Managing U.S. Interests
            in International Organizations

            How do nations that contribute funds to international
            organizations influence the management of the activities of
            those organizations? H o w do they assure themselves that funds
            are being managed and applied properly and effectively?
            GAO’s increased involvement in these kinds of questions, as
            far as U S . participation in international organizations is
            concerned, is described belou?.

   Several years ago a cynic was over-            This article discusses a GAO review
heard to say that U S . management of          effort in this area and how it con-
its interests in international organiza-       tributed to clearing the official air.
tions was based on faith, hope, and
charity :                                      Some Necessary Background
  -Faith in the ability of the orga-
                                                  The United States participates in two
    nizations to do the job,
                                               categories of international organiza-
  -Hope    that some results will be
                                               tions. One category includes the United
    achieved, and
                                               Nations system of organizations, re-
  -Charity to show continuing sup-
                                               gional organiza tioris such as the Orga-
    port for faith and hope.
                                               nization of American States, and a
   We assert that we are not cynics.           rather long list of relatively small inter-
Moreover, at about the time we heard           national cooperative ventures. The
this story, the executive branch was           Secretary of State has primary re-
making representations quite to the            sponsibility for managing U S . interests
contrary. It was contending, at least          in these organizations. The State De-
publicly, that its manaFement of U.S.          partment estimated that the United
interests in international organizations       States would contribute $418 million to
was well in hand.                              these organizations in fiscal year 1971.

   Mr. Conahan is an assistant director in the International Division. He holds a B.S.
   degree in accounting from King’s College, Willies Barre, Pa., and completed the Execu-
   tive Development Program at the University of Michigan Graduate School of Business
   Administration. Except for 2 years active duty in the Navy, Mr. Conahan has been with
   GAO since 1955.
                                                        1NTERNATlONAL ORGANlZATlONS
   The other category consists of the        lyzing programs and budgets and in
international financial institutions such    evaluating performance?
as the World Bank and the regional              Surface problems were easily de-
development banks. Responsibility for        tected. The United States was contribut-
managing US.interests in these institu-      ing more to some of the international
tions rests with the National Advisory       organizations than it wanted to and,
Council on International Monetary and        because it was not obtaining adequate
Financial Policies under the chairman-       information from the organizations, it
ship of the Secretary of the Treasury.       was not entirely certain what the con-
The United States has purchased capital      tributions were being used for. Other
o r otherwise contributed over $9 billion    more deeply rooted problems were
to these institutions.                       beginning to be seen.

Arrive on the Scene, GAO                     Initial Representations
   I n 1967 GAO decided to take a look           At an early point this author met
at U.S. participation in the first cate-     with Mr. X who was the responsible
gory of organizations-those for which        State Department official, randomly
the Secretary of State has responsibility    opened a copy of the World Health
for managing U S . interests.                Organization budget document, and
   After a preliminary look-see, we saw      asked what Mr. X knew about the pro-
our objective as determining how well        grams discussed on that particular
the executive branch was able to bring       page.
its influence to bear on ( 1 ) the level,        Mr. X said that the State Department
content, and formulation of the pro-         did not have that kind of information
grams and budgets of the organizations       and referred the author to Mr. Y in the
which were supported by our contribu-        Department of Health, Education, and
tions, and (2) the economical and effi-      Welfare who had “all that kind of
cient management of these activities.        information.”
Our objective recognized that GAO had           Mr. Y said it was the U S . Mission
no authority to make audits of the inter-    i n Geneva: Switzerland, the location of
national organizations themselves.           the headquarters of the World Health
   From the outset, eyebrows were lifted     Organization, that had “all that kind of
and questions were raised as to just         information” and to see Mr. Z.
what GAO thought it could accomplish            Mr. Z said that he regretted to tell me,
in this area. After all. the United States   after such a long trip, that the Mission
is only one of 100 or more member            did not have the information. He was
governments who do not have any spe-         troubled. however, that I had come all
cific charter rights of inspection or        the way from Washington because it
examination of source data relating to       was Mr. X in the State Department who
implementation of the programs of the        had “all that kind of inforniation.”
international organizations. How far            One might tend to look at the exer-
can one member go, and how far can           cise just described a s a typical run-
GAO expect one member to go, in ana-         around and let it go at that. However,
INTERNATIONAL ORGANIZATIONS                                                             3
consider the following. In March 196‘7,           the Department‘s authority was being
a State Department witness was telling            eroded and its responsibility was being
a House Appropriations Subcommittee:              diffused because other U.S. departments
     0 : : Of course we know how many pel-
                                                  and agencies enjoyed a relatively more
sons there are i n this [international] organi-   powerful or influential position in re-
zation. When you say, “1-ou negotiate,” I         gard to individual international organi-
don’t personally negotiate. We have field mi.-    zations. Moreover, we were still petting
sions. Ambassador Goldberg and Ambasador
                                                  the Mr. X-1’-Z treatment referred to
Tubby and our people i n Geneva do the
negotiating-our representative in UNESCO          above.
does the negotiating-the Assistant Secretary
is sitting back here i n Washington-these
                                                  Two Years Later
people in our missions are all fully familiar
with the number of people in these organi-          In 1969, we made the following re-
zations. And they have the number of people
                                                  ports to the Congress:
in these organizations. And they have knowl-
edge not only of personnel, but the programs        US. Participation in the World
in the budget. They have gnt all the intimate         Health Organization iB-164031
                                                       (21, Jan. 9, 1969).
  At that same time, Ambassador                     U S . Financial Participation in the
Tubby i n Geneva was complaining that                 Organization of American States
the United States did not know nearly                  (B-165850, Apr. 9 , 1 9 6 9 ) .
enough about United Nations projects.               U.S. Financial Participation in the
The Ambassador, since 1962, had re-                   United Nations Children’s Fund
peatedly reported to the State Depart-                 iB-166’780, July 8, 1969).
ment his deep concern over the total                U S . Financial Participation in the
lack of information from U.S. Govern-                 Food and Agriculture Organiza-
ment sources regarding the effectiveness              tion of the United Nations (B-
of such projects.                                      167593, Nov. 17, 1969).
   Other examples could be cited where
                                                  In 1969, we also completed a review of
ihe State Department chose to defend its
                                                  the United Nations Development Pro-
activity and to make statements indicat-
                                                  gram and issued a report to the Con-
ing that a given situation was more sat-
                                                  gress on “Management Improvements
isfactory than it actually was rather
                                                  Needed in U.S. Financial Participation
than taking those actions required to
                                                  in the United Nations Development Pro-
meet and deal with the admittedly very
                                                  gram” (B-168767, Mar. 18, 1970).
difficult problems that had to be dealt              Our reviews and reports dealt with
with.                                             problems associated with the role of the
   Was this simply a case of the State            United States in relation to the pro-
Department trying to cover up its                 grams and priorities of the organiza-
shortcomings in this area? Such would             tions, improving their management
be understandable enough. Yet, our re-            capability, monitoring their activities,
views were beginning to suggest that              and assessing their accomplishments
international organization affairs com-           and efficiency of operations. We made a
manded a very low priority in the State           number of specific recommendations
 Department scheme of things and that             aimed at improving the management of
4                                                                                 1NTER NATlO NA L 0RGA NlZATlO N S

U.S. participation with the view of in-                                  Also in September 1969, a study
creasing the effectiveness of the inter-                             made for the United Nations concluded
national organizations themselves in                                 that the capacity of the United Nations
contributing to their respective objec-                              system to handle development projects
tives.                                                               was overextended and that unless sub-
   In light of the long history of                                   stantial reforms were undertaken the
“business as usual” surrounding U.S.                                 capacity of the system to effectively
financial participation in international                             absorb projects was limited to its then
organizations, it should not have been                               current leveL3
surprising that little attention was being                               While all this public debate was
given by the executive branch to seek-                               taking place, we were quietly pursu-
ing the needed improvements. A consid-                               ing our objective-what       needs to be
eration in this history could have been                              done so that the United States can
that U S . contributions to the organiza-                            achieve effective participation in these
tions were relatively small when com-                                organizations?
pared with the U S . bilateral assistance                                In December 1969, congressional
                                                                     members of the U S . Delegation to the
                                                                      24th Session of the United Nations
A Turning Point
                                                                      General Assembly asked us to come to
   However, the decade of the sixties                                 New York and assist in their work.
saw the pendulum begin to swing to-                                   During that visit we emphasized the
ward multilateral assistance and at the
                                                                     need for according international orga-
end of the decade its momentum ac-
                                                                     nization affairs a higher priority within
celerated. In September 1969, the Com-
                                                                      the U.S. Government and recommended
mission on International Development
recommended that aid donors channel                                   that there be established a central
more of their foreign assistance                                      authority within the executive branch to
through international organizations and                               manage U S . participation in the devel-
institutions. The Commission recog-                                   opmental assistance activities of inter-
nized at the same time that improve-                                  national organizations. We said that the
ments w-ere needed in these multilat-                                 central authority within the executive
eral agencies. About a week later, the                                branch should review, coordinate, and
President appointed a Task Force on                                   clear all U.S. positions; develop priori-
International Development. This Task                                  ties and long-range objectives; and
Force recommended in March 1970 that                                  establish appropriate machinery for
international institutions become the                                 appraising, monitoring, and evaluating
major channel for developmental assist-                               the economic and technical assistance
ance and that U S . bilateral assistance
                                                                      programs of international organiza-
be confined essentially to security
                                                                      tions. The Delegation’s report cited our
                                                                      findings and recommended the estab-
  1 Partners in D r r r l o p r n e n t . Rrport [to the President        ~~~

of the Torlrl Bank] of the Commission an International               International Development, Rudolph A. Peterson, Chnir-
 Development,      Lester   B.    Pearson,    Chairman-Sept.         man-Mar. 4, 1970.
15, 1969.                                                              311 Study of the Capacity of the United Nations De-
   U.S. Foreign Assistance in the 1970‘s: A New Ap-                  velopment System, by a team of experts headed b y Sir
proach, Report to the President from the Task Force on               Robert Jackson-Sept. 30, 1969.
INTERNATIONAL ORGANIZATIONS                                                                                                     5

lishment of a central authority? This executive branch organization for
was the first real external support of managing U S . participation in the de-
our views.                                   velopmental assistance activities of
   In early 1970, we Tz-ere also auditing international organizations. This out-
a fellowship fund administered for the line was submitted to the subcommittee
United States by the Iriited Nations in on April 15, 1970, and subsequently to
New York. We found incorrect finan- the State Department and the Office of
cial reporting by the United Nations. Management and Budget.
We were also completing, at that time.          The pace quickened. On May 1,1970,
a review regarding the International we testified before the Subcommittee on
Labor Organization. These reviews Foreign Operations and Government
resulted in a report to the Secretary of Information, House Committee on
State entitled, “Review of Adlai E. Government Operations, and subse-
Stevenson Memorial Fellowship Pro- quently detailed a staff member to work
gram” (B-165161, Sept. 14,1970) and with the subcommittee in its further re-
a report to the Congress entitled, “US. view of US. participation in the United
 Participation in the International Labor Nations developmental a s s i s t a n c e
 Organization Not Effectively Managed” activities.
 (B-168767, Dec. 22, 1970).                     On May 6, 1970, the Cleveland Plain
   Our conclusions were similar to those Dealer editorialized:
expressed in our earlier reviews. The re-
                                                  GbO WARNING ON FOREIGN AID
 sponses of the executive agencies were
 about the same as their responses to our       There is strong feeling in the R’ixon admin-
                                             istration that less U.S. foreign aid money
 earlier reviews--agreement in concept,
                                             should be given directly to other countries,
 but little in the way of corrective action. that more should be distributed through inter-
                                                            national agencies.
                                                              Well and good. That route might be one
Another Platform-Then                    Others             approach to the goal of a “low profile” for
                                                            America abroad. But those in the executive
  I n early 1970, the Comptroller Gen-                      and legiqlative branches whn go along with
eral was asked to appear before the                         the idea =houlcl heed a caution signal r a i d
hbcommittee on International Orga-                          by the General Accounting Office ( G A O ) .
nizations and Movements, House Com-                            Lnoking into U.N.-administered programs.
                                                            G-40 found the United States has no assur-
mittee on Foreign Affairs, during its
                                                            ance that the major contribution. it proiides
review of the performance, operations,                      are spent as intended. and that U.S. diplnmatic
and future goals of the United Nations.                     officials in beneficiary nations frequently are
The Comptroller General appeared on                         unaware of the programs.
March 5,1970, and, after a thorough re-                       On June 1, 1970, the House Com-
view of our findings, conclusions, and                      mittee on Appropriations reported out
recommendations, offered to prepare a
                                                            the bill making appropriations for vol-
detailed outline of the machinery we
                                                            untary contributions to international
felt was needed for a more effective
                                                            organizations for fiscal year 1971.5 The
     “To S J \ C Suc~~emIrtx
                           Grnrrntinn-  ..  _’* Report bv
 members o f the     5 Delra.ltion to the 21th Srssion of       Rrpnrt f r o m tlw T<mnnittre           on Appropriations         on

 the General Acsemhlv of t h e United Nations-H.    Rppt.   the F o r e ~ r n- \ c ~ a , t a n r r a n d Related Programs -4ppropria-
 91-837-Feb. 10. 1970.                                      tiom BIIl, 19il-H.         Rept. 91-1134-June         1, 1970.
INTERNATlONAL ORGANIZATIONS                                                            7
committee cut the administration’s               the outline we had prepared earlier in
request by $37,620,000. The commit-              the year. The Department reported that
tee’s report said in this connection:            it was also working towards an im-
   According to a recent report from the         proved U S . system for evaluating pro-
Comptroller General of the United States,        grams of the international organiza-
dated March 18, 1970, and based on a study
                                                 tions and for related improvements.
entitled, ‘Study of the Capacity of the United
Nations Development Sy-stem”, made by a          The Department further said that it
team of experts headed by Sir Robert Jackson     was strongly supporting efforts to im-
of Australia, the United Nations Detelopment     prove the United Nations develop-
Program (UNDP) has not been operating in         mental machinery.
the most effective manner. Some of the broad
                                                    Two days later, the Department ap-
conclusions reached were * * ”..
   During Committee hearings, it was indi-       peared before the Subcommittee on
cated that these reports were presently under    Foreign Operations and Government
consideration but no conclu4ons or recom-        Information, House Committee on Gov-
mendations have yet been formulated. Pend-       ernment Operations, and elaborated on
ing any positit-e action on the part of the UX
                                                 the corrective actions taken and ini-
Development Program concerning this report,
the Committee is of the opinion that a reduced   tiated. The Department expressed one-
level of funding should be allowed.              ness u-ith the objectives of the General
                                                 Accounting Office and pledged to make
  In view of all the indications that the
                                                 every effort to bring about needed
administration would propose the
channeling of increasing amounts of
                                                    In December 1970, at the request of
U S . developmental assistance through
                                                 the chairman of the House Foreign
the international organizations, and the
                                                 Affairs Committee, we made a report
mounting criticism of the multilateral
                                                 to him entitled, “Comments and Sug-
machinery and US.participation in it,
                                                 gestions for Independent Review and
some action by the State Department
                                                 Evaluation of International Organiza-
was certainly to be expected.
                                                 tions and Institutions” (B-161$70,
                                                 Dec. 4, 1970). On December 15, 1970,
The Conclusion Seems Near                        the chairman sent a copy of the report
                                                 to the Secretary of State and asked to
   The President’s September 15, 1970,           be advised of the State Department’s
message to the Congress on “Foreign              plans to implement our suggestions.
Assistance for the Seventies‘’ confirmed
                                                 (At the time this article was written,
previous recommendations that inter-
                                                 the State Department’s response had
national institutions should become the
                                                 not been received.) With the increas-
major channel for developniental
                                                 ing concern from various quarters, it
   On September lG, 1970, the State              uould seem that the State Department
Department advised our Office that it            will need to strenuously follow through
had considered the organizational 2nd            on its pledge to work toward needed
staffing changes which were needed to            improvements in this area.
effect improvements and, to improve its             Is the situation thus well in hand?
operations, had initiated action essen-          No. Much, much remains to be done.
tially in line with the steps set forth in       But, the situation is quite different
8                                                                          1NTERNATlONAL ORGANlZATlONS

from that of 3 or 4 years ago when the                      To avert a shut down of this unique,
State Department was telling the Con-                     valuable, and unquestionably effective inter-
gress that it had all the intimate details                national financial institution, its 18 economi-
                                                          cally advanced member governnients plus
on the programs and operations of the
                                                          Switzerland have agreed, subject to neces-
international organizations-which       it
                                                          5ary legislative approval, on a replenishnient
did not-without any mention of the                        of tits1 resources ’> * *.
serious deficiencies both in the man-                                  *      :
                                                                              ;    :;:    *      *
agement of US. interests in the organi-                      The National Advisory Council * * ’:
zations and in the organizations                          fully supports the desirability of continuing
themselves. In this latter connection,                    this useful and important institution at an
although some efforts are being made,                     increased level. I t is economical and effec-
actual accomplishment of financial and                    tive in its operations ‘.’ * ‘ 8 .
management reforms needed within                             Requesting appropriations for a con-
the international developmental agen-                     tribution to another of the financial in-
cies associated with the United Nations
                                                          stitutions, the Secretary of the Treasury
seems almost as remote as it did 4 years
                                                          said to the Congress:
   Our work is thus not finished. More-                     * *   :h
                                                                     the United States receives full in-
over, we have not dealt with the inter-                   formation upon not only lending operations
national financial institutions which                     but also policy issues a s they evolve. This
                                                          information is used by the Treasury staff and
were mentioned briefly at the outset of
                                                          the other agencies of the NAC-including
this article. Early in 1970 we directed
                                                          the Department of State, the Federal Reserve,
our attention to U.S. participation in                    the Expurt-Import Bank, and the Department
these institutions. We again met with                     of Commerce-in advising me how the United
skepticism, foot-dragging, and resist-                    States should instruct the U S . Executive Di-
ance-perhaps even greater than that                       rector t o \-ate on a particular issue. There-
 encountered 3 years earlier. But we                      fore, it is with experience, exposure, and full
 were resolved to persist here too. As our                information that the United States pursues
 operating instructions tell us, start at                 it5 responsibilities with this Rank.
 the beginning: legislative history, ap-                     Because the United States has such
propriation considerations, hearings,                     a stake in the international financial in-
etc. We did. And guess what we found.                     stitutions, we believe it is important to
                                                          carry on the review we have undertaken
Initial Representations-Again                             in order to make an independent as-
                                                          sessment of the “experience, exposure,
   In a recent request for appropria-
                                                          and full information” with which the
tions for a contribution to one of the
international financial institutions, the                 United States pursues its responsihili-
executive branch said to the Congress:                    ties in these institutions.

  0 Special Report of the National Ad\isory Council o n
                                                            7 Statement of the Secretary of the Treasury before

International Monetary and Financial Policies-H. Doc.     the Committee on Banking and Currency. House of
29P-Apr. 25, 1968.                                        Keprrsentatires on H.R. 18236-June 30, 1970.

            Weapon Systems
            Cost-Effect iveness Studies

            Recently there has been increasing scrutiny of the defense
            budget b y the Congress. In line with this interest, GAO has
            expanded its efforts to inform the Congress of the process b y
            which the Department of Defense acquires weapon systems.
            An infegralpart of this process-the analysis performed to
            compare alternutire methods of fulfilling military objectives-
            is discussed below.

   During the past 2 years, in response        article the discussion is limited to those
to both stated and implied congression-        studies that compare various complete
al interest, the General Accounting Of-        weapon systems, either existing or pro-
fice has to a greater extent than ever         posed. These studies may be contrasted
before been examining into the decision-       with comparisons of various possible
making process of the Department of            components for the purpose of deciding
Defense as it relates to the acquisition       upon the best combination for use in
of weapon systems. In carrying out             a single system.
such examinations GAO auditors have               Weapon system cost-effectiveness
encountered and are likely to continue         studies are highly technical and often
to encounter reports of the results of         contain much that is relatively un-
cost-effectiveness studies performed           familiar to GAO staff members. Fre-
either by or for a military service and
                                               quently present are complex formulas,
related to the system or systems under
                                               equations, and graphs, as well as un-
                                               familiar terminology. For this reason,
   The intent of this article is to describe
                                               one can easily become lost in the trees
in general terms what an auditor might
expect to find in such a report. Although      and thus lose sight of the forest. I hope
many kinds of analytical effort related        that this article will, by focusing on
to weapon system development and ac-           what a study does and citing some
quisition can be appropriately referred        examples of how it might do it, help the
to as cost-effectiveness studies, in this      auditor to remain forest-oriented.

   The author is a member of the Systems Analysis Staff of the Office of Policy and
   Special Studies. He has been with GAO since 1961. first with the Philadelphia Regional
   Office and, since July 1969. with OPSS. He holds a bachelor’s degree from La Salle
   College and an M.B.A. from Temple University.

                                       WEAPON SYSTEMS COST-EFFECTIVENESS STUDIES
Cost-Effectiveness Defined                  tary objective were the destruction of a
                                            certain kind of target, a weapon system
    Perhaps an appropriate point of de- should be judged, as to effectiveness,
parture is the term itself-cost-effec-      on the basis of its ability to destroy
tiveness. Initially, it is important to such targets, not on the basis of the
think of cost-effectiveness as a relative, size of the blast which it produces.
rather than an absolute, concept. It Under the assumption that the reader
does not appear to be very useful to will agree to interpret “bang” as “the
speak of a weapon system as being cost- ability to meet the desired objective,”
effective. The term has significance only I shall continue to advocate the use of
when used to describe a relationship the “bang per buck” definition of cost-
between one system and something else. effectiveness. This distinction between
Thus, whereas a statement such as ILsys- output and effectiveness is, in my opin-
tem A is more cost-effective than system ion, an important one to remember
B” is useful, a statement such as “sys- when reviewing any cost-effectiveness
tem A is cost-effective” seems totally study, whether or not weapon systems
devoid of significance.                     are involved.
    Now that this distinction between re]-
ative and absolute cost-effectiveness has
                                            The Study Defined
been made, it would appear useful to
 provide a short and simple definition of       Under the above definition, the ob-
cost-effectiveness. I know of no defini- jective of a cost-effectiveness study
tion or description that better captures would be to determine which of the
the essence of cost-effectiveness than known ways of carrying out a military
does the oft-repeated phrase “bang per mission provides the most “bang per
 buck.” While suggesting this defini- buck.” This desire to obtain the most
 tion as a useful one, I should also point “bang per buck” follows directly from
 out that the “bang” portion of it may the traditional assumption of economics
be somewhat misleading.                     that resources are limited. Here, de-
    Ordinarily, “bang” connotes an fining resources as dollars available to
 amount or degree of blast or firepower: the Department of Defense, one would
 eg., one megaton. In that sense. ‘‘bang” probably concede the validity of this
 would usually represent not effective- assumption.
ness, but merely output. Although fre-          To ascertain which of the available
 quently the size of the blast produced alternatives provides the most “bang
 by a weapon system is a prime deter- per buck,” a cost-effectiveness study
 minant of its ability to destroy its des-
                                            compares the costs and effectiveness of
 ignated targets, and as such is one of
                                             those alternatives. In such comparisons,
 the more important output measures
                                            there are two basic approaches, either
 related to the system, it is not usually
 a valid measure of the system’s effec-
                                             or both of which may be found to have
 tiveness.                                  been    followed in any study which GAO
    A weapon system: or anything else,       staffs might be required to review.
 is effective only to the extent to which       The first is to assume a desired level
 it meets its objective. Thus, if its mili- of effectiveness, such as the ability to
WEAPON SYSTEMS COST-EFFECTIVENESS STUDIES                                          11
destroy 100 targets of a specific kind          Thus, if the mission of an antiballis-
per day for a )-ear, and then examine        tic missile system were defined as the
alternative ways of achieving the ob-        protection of Minuteman missile sites,
jective in an effort to determine the        an alternative which could appro-
least costly of the alternatives. The sec-   priately be included in a study related
ond approach is to assume a fixed level      thereto would be a program of harden-
of expenditure, i.e., a budget level, such   ing the Minuteman sites. In such a n
as 5100,000 per year, and then attempt       instance, two distinctly dissimilar ap-
to find the alternative that provides the    proaches, one involving complex data
most effectiveness, again possibly the       gathering and processing hardware and
number of targets destroyed per daj-         software as well as highly sophisticated
for a year, for that budget expenditure.     missile-firing equipment, and the other
   I n order to make these “least costly”    involving only the comparatively simple
or “most effective” determinations: it is    process of reinforcing the Minuteman
necessary for those performing the           silos with concrete or other appropriate
study to calculate the costs estimated to    materials, would be viewed as compet-
be incurred under each of the alterna-       ing alternatires in terms of cost-
tives being examined as well as the          effectiveness.
amount of effectiveness expected to be
provided by each. The description of         Cost Estimates
the methods and data used in and the
                                                In accordance with the sequence of
presentation of the results of these cal-
                                             the term, cost-effectiveness, as well as
culations constitute the major portion       that of the alphabet, I have chosen to
of the document that I refer to as the       briefly discuss the cost portion of a
                                             study before proceeding to a more
   Before proceeding to a discussion of      lengthy discussion of the effectiveness
the contents of a study, I would like to     aspects. In doing so, I would not wish
mention a second distinction, not totally    to imply to the reader that this is the
unrelated to that between output and         order in which he will find these mat-
effectiveness. This distinction might be     ters presented in a study.
labeled one between “competing” and             Usually a study will refer to the cost
“similar.” As indicated earlier. the em-     model being used. Essentially, the
phasis in a cost-effectiveness study         model, which may appear as a series
should be on determining the most            of lengthy formulas or equations, is
“bang per buck” way of achieving the         merely a description of the manner in
                                             whic-h the costs related to each alterna-
desired objective. In order to be con-
                                             tive have been calculated, or, stated
sidered a competitor for this designa-
                                             differently, the rules followed in mak-
tion, it is necessary onIy that a can-
                                             ing such calculations.
didate system or method be capable of           For example, if. as is usually the
achieving that objective. It is not nec-     case, the study were examining one or
essary that the candidate method be          more proposed systems in comparison
siniilar to the other method or methods      with existing systems, the cost model
being studied.                               would ordinarii!- specify the inclusion
12                                      WEAPON SYSTEMS COST-EFFECTIVENESS STUDIES

of such onetime costs as those of re-        pared. For example, in a study com-
search, development, engineering, and        paring alternative methods of perform-
special tooling in the estimate of the       ing an antiaircraft mission, the scenario
total costs of the proposed system or        might be that there would be an enemy
systems, but exclude such costs from         air attack of a specific number of air-
calculations related to existing systems.    craft, with the attacking aircraft carry-
Such exclusion is appropriate, since,        ing a specific number of weapons and
for existing systems, these items con-       being accompanied by a specific num-
stitute sunk costs, in that they have        ber of escort aircraft. Additionally,
already been incurred, and thus are          there would probably be specific as-
not relevant to a decision regarding         sumptions concerning weather condi-
future actions. It is only those addi-       tions and visibility during the attack
tional costs, which would be incurred as     as well as jamming techniques and at-
a result of a decision to continue the       tack tactics employed by the enemy.
use of an existing system, that should       There would also probably be specific
be considered to be the costs of that        assumptions regarding the geographi-
system.                                      cal location of the site being attacked,
   I n addition to specifying the kinds of   and a large number of other assump-
costs included in the study’s calcula-       tions which in total would tend to paint
tions, the cost model will usually set       a picture of the combat environment in
forth the period for which costs have        which the performance of a proposed
been calculated. The time period in-         system and that of possible alternative
volved might be that of a specific com-      systems are to be examined and
bat engagement, a 10-year peacetime          compared.
period, or the total expected life of each      After describing the scenario, a cost-
system being considered.                     effectiveness study will usually present
                                             its calculation of the effectiveness of
Effectiveness Calculations                   each of the various systems in carrying
                                             out the intended mission in that sce-
   Although, as mentioned earlier, they      nario. Generally, effectiveness calcula-
may be cloaked in unfamiliar notation,       tions are made either by computer sim-
the cost calculations performed in a         ulation of military engagements or by
cost-effectiveness study certainly do not    the use of any of a number of mathe-
constitute anything which the typical
                                             matical analysis techniques.
GAO auditor has not previously en-
                                                I n some cases, the simulations are
countered. The calculations related to
                                             performed solely by computers, while
effectiveness, however, may often in-
                                             in others, humans are permitted to
volve approaches less familiar to the
GAO auditor.                                 participate, as in the case of some sim-
   In reviewing the effectiveness aspects    ulations of aircraft operations in which
of a study, one will usually find refer-     experienced pilots interact with the
ence to a scenario. In simplest terms, a     computer. Whether it be in the form of
scenario is merely a set of assumptions      a computer simulation or that of an
under which the performances of the          extensive mathematical analysis, the
systems being studied are to be com-         calculation of effectiveness is based
WEAPON SYSTEMS COST-EFFECTIVENESS     STUDIES                                      13
upon large amounts of data of varying each competing alternative might be
degrees of reliability.                       stated in terms of the estimated number
    For example, in the hypothetical          of target kills per day which one unit
antiaircraft case, the final results of the of each alternative could achieve, as
calculation of the effectiveness of each determined by technical judgments,
system would depend on such factors as computer simulations, mathematical
the probability that (1) the system’s ra- analyses, or combinations thereof.
dar would be able to detect the incom- Thus, the number of target kills achiev-
ing enemy aircraft, (2) the system’s able per day by one unit of each com-
weapons would fire when called upon peting weapon system would be the
to do so, (3) the system’s missiles or measure of effectiveness used in the
other munitions would be delivered study. Each study applies one or more
accurately; i.e., would hit their in- such measures of effectiveness in
tended enemy aircraft targets, and (4) comparing the alternative systems’
 when hit, an enemy aircraft would be performance.
 rendered harmless.                              The early identification of the effec-
    For the existing systems being con- tiveness measure or measures being em-
 sidered, much of the required data will ployed greatly facilitates the review of
be historical, although much may of ne- a cost-effectiveness study. For this rea-
 cessity be in the nature of informed son, I will now try to illustrate the
 estimates. The data related to proposed kinds of measures which a reviefirer
 systems, however, often has a strong might expect to find.
 flavor of subjectivity in that it essen-        In addition to the target kills just
 tially consists of the results of many referred to, the number of enemy cas-
 military and engineering judgments ualties inflicted might be an appropri-
 as to the probable performance of the ate effectiveness measure. If the mis-
 systems. In some studies, it may even sion being addressed in the study were
 be that extensive quantitative analysis, essentially defensive, the effectiveness
 either electronic or manual, is not in measure used might be the number of
 evidence, and instead, the entire effec- attacking enemy vehicles destroyed or
 tiveness calculation for each competing the number of US. weapons or per-
 system is shown in terms of engineering sonnel surviving the attack.
 judgments as to its probable ranking,            Another effectiveness measure that
 relative to the other alternatives, in might be found in such a study would
 each of several performance character- be the number of days of service of
  istics that, in the opinion of military ex- equipment lost as a result of an ene-
 perts, are important in carrying out the my attack. Since it is obviously de-
  intended mission.                            sirable to minimize such losses, the
                                               competitor achieving the c‘lOw’’ score
 Effectiveness Measures                        would be the most effective. Conversely,
     Earlier, I cited a hypothetical mili- if in a study related to a defensive mis-
 tary objective of destroying targets of sion the effectiveness measure were
  a specific kind. In a study related to some element of cost to the enemy, such
  such an objective, the effectiveness of as the number of enemy aircraft re-
14                                          WEAPON SYSTEMS COST-EFFECTIVENESS STUDIES

                                                                                  U.S. Navy P h n t o
Prior to approval of continued development of the F-1.l: aircraft, shown here, a Navy study
compared the cost-effectivenessof the F-14 and other aircraft in carrying out specific missions.

quired in order to inflict a specific            mate purpose of performing the study.
level of destruction on U.S. forces, the         In a single study, however, there
most effective alternative would be the          might be several calculations and rank-
one “scoring” the highest.                       ings of cost-effectiveness.
                                                    It may be, for example, that separate
                                                 cost-effectiveness calculations are made
Cost-Effectiveness Determinations
                                                 for each of several specific combat sce-
   After using its cost model to calcu-          narios deemed relevant in light of the
late the costs of each alternative and in        overall mission involved. The scenarios
some way estimating the effectiveness            could differ in either the nature of the
of each, although not necessarily in             engagement or in the level of effec-
that order, a study will compute the rel-        tiveness considered necessary for suc-
ative cost-effectiveness of the alterna-         cess. Similarly, separate calculations of
tives, using either one or both of the           cost-effectiveness might be made for
previously mentioned “least costly” or           each of several expenditure levels.
“most effective” approaches. This rank-             Additionally, within each scenario
ing of the competing alternatives in             one or more assumptions may be
terms of cost-effectiveness is the ulti-         changed, and the cost-effectiveness re-
WEAPON SYSTEMS COST-EFFECTIVENESS STUDIES                                           15

sults examined in that light. The ex-        many factors not included in the quan-
ploration of the cost-effectiveness ques-    tified portion, as stated previously, a
tion under differing assumptions in this     study’s primary objective. and thus the
manner, frequently referred to as sensi-     aspect receiving most attention, is the
tivity analysis, is useful to the deci-      ranking of the competitors in terms of
sionmaker both in allowing him to ap-        cost-effectiveness.
ply his experienced judgment as to the           Their reliance upon assumptions is
relative likelihood that each of the         necessitated by the fact that, regardless
assumptions would be valid and in            of the amount of time and money avail-
providing him with “what if“ informa-        able, no study could possibly examine
tion regarding those occurrences which       every conceivable alternatire under
he believes to be comparatively              every conceivable future circumstance.
unlikely.                                    In this regard, the mark of a satisfac-
    To summarize then, a cost-effective-     tory study is the success of those per-
ness study consists of a comparison of        forming it in achieving the currently
 the costs and effectiveness of compet-       overworked term, relevance, \\-hen de-
 ing systems. The time periods for which      ciding which assumptions to use.
 costs are estimated and the kinds of            Some may believe. with some justifi-
 costs included in the estimates may          cation, that the limitations of cost-
 vary greatly among studies, as may the       effectiveness studies number more than
 effectiveness measures used. In all
                                             the two just stated. I have mentioned
studies, however, the essential elements
                                             these two because each should be of par-
 remain the same, in that in some way
                                              ticular interest to those of us in GAO.
 the effectiveness of each competing sys-
 tem is estimated, as are its costs,
                                                  R y remaining aware of the first limi-
 with the intent of determining the           tation. we may be able to appropriately
 most cost-effective of the available         separate in our review work the cost-
 alternatives.                                effectiveness decision from the related
                                              weapon choice decision, which might
Limitations                                   reflect considerations not included in
                                              the cost-effectiveness study. It may be
   From the standpoint of balance, it         that the most cost-effective system
would seem appropriate before closing         as determined by a study is not the
this article to mention two limitations       “ b e d ’ weapon choice. For example. in
of cost-effectiveness studies. These are
                                              the choice of an aircraft. such possibly
their inability to deal with all consider-
                                               nonquantifiable factors as pilot safety
ations pertinent to a weapon system
                                              might outweigh the quantified conclu-
choice and their reliance upon
                                              sions of a cost-effectiveness study per-
   Their inability to deal with all perti-    formed on the subject.
nent considerations follows from the              With regard to the second limitation,
nonquantifiable nature of some such           T would suggest a review of a study’s
considerations. Although it is true that       assumptions as an excellent starting
a study usually contains a narrative           point for an examination into the valid-
portion that qualitatively discusses           ity of its conclusions.
16                                     WEAPON SYSTEMS COST-EFFECTIVENESS STUDIES

Value of Studies                            weapon selection. In doing so they can
  In spite of these limitations, as well    also serve as valuable information
as others which someone else might          sources to the Congress and to GAO as
point out, these studies can serve a use-   an agent of the Congress, regarding the
ful purpose for the decisionmaker.          decisionmaking process by which the
They can provide him with an orderly        Department of Defense enters upon the
and explicit consideration of factors       costly and complex acquisition of major
important i n the final decision as to      weapon systems.

              Adequacy of
              Contractors’ Cost Records

              GAO’s study of the feasibility of establishing and applying
              cost accounting standards in the negotiation and administration
              of defense contracts, as required b y Public Law 90-370, was
              described i n the GAO Review, Spring 1970. In connection with
              this study, 15 GAO regional oftices made a special inquiry into
              the nature and extent of cost accounting systems and related
              records maintained b y selected contractors.

  A provision of the Armed Services                small contractors engaged in both Gov-
Procurement Act, as revised in 1936,               ernment and commercial work on a
(10 U.S.C. 2313 ( b ) ) , sets forth that:         wide variety of products. Of these con-
   * ”’ :: each contract negotiated under this     tractors, 18 had total annual sales of
chapter shall provide that the Comptroller         more than $50 million; 14 had annual
General and his representatives are entitled,      sales ranging between $15 million and
until the expiration of three years after final    $50 million ; and 13 had annual sales of
payment. to examine any hooks, documents,
                                                   less than $15 million.
papers, or records of the contractor, or any
of his subcontractors, that directly pertain to,      Efforts were directed toward ascer-
and involve transactions relating to, the con-     taining whether contractor cost ac-
tract or subcontract.                              counting records and the records used
   The approach taken in making this               to support price proposals for negoti-
review was to gather information on the            ated contracts were generally ade-
characteristics of cost records main-              quate; in particular, the purpose of the
tained by defense contractors and                  study was to find out:
evaluate their usefulness for specific               -Whether     the accounting system
purposes. The cost accounting records                  provided sufficient data to deter-
of 45 contractors were examined. The                   mine the cost of performing given
selection included large, medium, and                  contracts.

   Mr. Harvey is an assistant regional manager in the Philadelphia Regional Office.
   He has been with G 4 0 since 1957. He is a CPA (Pennsylvania and Kew Jersey) and
   a member of the American Institute of CPAs, the Pennsylvania Institute of CPAs,
   the National ilssociation of Accountants, and the Federal Government Accountants

18                                                             CONTRACTORS’ COST RECORDS

  -Whether    the accounting records          As shown below, several types of cost
    permitted p r i c i n g evaluation      systems were found among the 45
    reviews.                                contractors:
  -Whether they were useful for other                                                      Number of
                                            T j p e of cost r)strrn                        conIT(Ictors
    evaluation reviews such as those        Job order  . . . .         .   .   .   .   .    . .35
    for terminations, delay claims, or      Process . . . . .          .   .   .   .   .    . . 2
    change-order pricing.                   Product . . . . .          .   .   .   .   .    . . 3
                                            Departmental . . .         .   .   .   .   .    . . 1
  A byproduct of this inquiry was the       Job order/process         . . . . . . . . 1
information it provided on the extent       Job order/product         . . . . . . . . 1
of similarity and/or uniformity of cost     None . . . . .            . . . . . . . . 2
records presently prepared by defense                                                               45

contractors. This information should be
                                            There was little relatinnship between the
useful to the Cost Accounting Stand-
ards Board.                                 type of cost accounting system and the
                                            type of summary or report-type records
Results of Survey
                                               During the survey emphasis was di-
   The survey showed that supporting        rected to the following:
documentation was maintained by all            -Adequacy      of contractor cost ac-
contractors for basic accounting trans-           counting records for the calcula-
actions. Material costs, both direct and          tion of cost of performance.
indirect, and regardless of the type of        -Identification of costs by contract,
accounting system, were supported by              line item, and change order.
records such as purchase orders, in-           -Inclusion in contractor records of
voices, receiving reports, vouchers, and          the information required for pric-
paid checks. Similarly, labor costs, both         ing reviews.
direct and indirect, were supported by         -Comparability     of proposal costs
some form of labor timecard or job                with incurred costs.
ticket and other payroll and payment        Each of these points is commented upon
records. To this extent the survey          below.
showed a general uniformity in types of
cost records in use by contractors.
                                            Calculation of Cost of Performance
   The area in which contractors’ cost
records were found to differ was in the        From the results of our inquiries, we
summary records prepared from the           classified the adequacy of contractor
above source documents. Reports for         cost accounting records for the calcula-
management summarized material, la-         tion of cost performance. (See the table
bor, and overhead costs in many forms.      on the following page.)
For example, labor costs were summa-           Noteworthy is the fact that the con-
rized by contract, work package, labor      tractors whose records were inadequate
classification. or uhatever other form      were in the lower sales volume groups
was required by management or the           and that more than half in the third
customer.                                   group were inadequate.
CONTRACTORS’ COST RECORDS                                                                 19

                                            Numher of          Records considered
            Annual sales volume             contrdctnrs   -~
                                                           Adequate         Inadrrluatc

Over $50 million. . .         ..                18         18        . . ..
$15 to $50 million. . . .                       I4         11      3 or 21yp
Under $15 million.      .                       13          6      7 or %yo
                                                _ _ _ ~ _ _ _-___-____
    Total                                                  33     10
                                                             -               -

   The 10 contractors whose records         the individual contracts niay generally
were inadequate emploj-ed a variety of      exempt their records from any critical
cost accounting systems and practices,      scrutiny to determine the bases for
but there was little correlation of the     pricing.
type of system with the type of product        The larger defense contractors segre-
or the volume of Government sales.          gate costs in such a manner that sum-
   Of the 10 inadequate accounting sys-     mary data related to overall costs of
tems, two did provide for the recording     performance are readily available. They
of costs by contractor or job order. but    maintain not only source documents but
neither of the two contractors effec-       also summaries that identify, in one for-
tively administered its system. For those   mat or another, costs associated with
contractors who employed other than         total contractual effort. However, in
a job order system: our conclusions         only a relatively few cases are contract
that sufficient data were not available     costs segregated as between basic con-
were based on overall aspects of the        tract costs and separately negotiated
systems or practices. For example. one      modifications to the contract. These
contractor’s costs were recorded by de-     contractors, who receive a large per-
partment; as a result, costs applicable     centage of the defense procurement
to Government work were not identifi-       dollars, already have: in effect, stand-
able to specific contracts or products.     ards of their own for summarizing
Two small contractors ij-ho had no cost     costs.
systems maintained only records re-            The reason or reasons for this differ-
quired for basic financial requirements     ence in recordkeeping between large
and operating statements.                   and small contractors were not devel-
   Overall, the survey results suggest      oped in depth during this survey. In the
that the nonavailability of sufficient      case of the smaller contractor, however:
summary data to provide cost of per-        it appears that management is more
formance by contract may be limited to      closely associated with production and
relatively small companies having a Ion-    other aspects of operations; thus there
volume or percentage of Gorernment          is less need for records to provide a cost
sales. However, the aggregate of their      control or a reporting system. Con-
prime and subcontract sales to the Gov-     versely, the larger contractor whose
ernment is likely to be quite substantial   management is possibly three or four
even though the relatively small size of    echelons removed from operations finds
20                                                      CONTRACTORS’ COST RECORDS

that a comprehensive reporting system       procedures. However, from the survey
is essential for the assembly of data for   it appears that the problem is not only
informed decisions.                         whether records are available by which
   A contractor whose involvement is        a contractor’s interpretation of cost of
substantial in either Government o r        performance can be evaluated, but also
commercial work, or both, develops and      whether the various treatments em-
records significant cost accounting data    ployed by contractors yield uniform
because they are needed for effective       and meaningful cost determinations.
operations. With respect to inadequate
records, the most critically affected       Identification of Costs by Contract,
group of Government contractors may         Line Item, and Change Order
be expected to be those who have out-
                                                We found that contractors whose
grown the personalized control possible
                                            accounting records permit a calculation
in the small enterprise but have not yet
                                            of cost of performance generally pro-
adopted the sophisticated reporting
                                            vide for identification of cost by con-
practices that are indispensable when
                                            tract. The survey, however, indicated
responsibility must be delegated. The
                                            instances where adequate determina-
adverse effect on the contractor will, to
                                            tions of cost of performance could be
some extent, almost always be passed on
                                            made even though costs were not re-
to the Government.
                                            corded by contract. Typical of such a
   Although summary data related to
                                            situation is one in which a contractor
cost of performance of the smaller
                                            with a process or product line cost
contractors may not be available o r
                                            system has records that require only the
readily assembled, and the volume of
                                            establishment of individual contract
transactions involved might seem to
                                            production cutoff points to identify the
limit the significance of this problem
                                            shop costs related to a contract. Appli-
area, the facts, if available, might well
                                            cable general and administrative and
show that this is not the case. Reviews
                                            other costs could then be allocated.
made by the GAO Philadelphia
                                                Both large and small contractors
Regional Office have disclosed indica-
                                            tended to minimize the need for cost
tions of significant overpricing which
                                            reporting systems refined to the point
were not reported because of the inad-
                                            of associating incurred costs to line
equacy of documentation available to
                                            iterris or change or-ders. Although the
GAO from existing accounting records.
                                            reasons for minimizing such refine-
On the other hand, we have seen in-         ments in their costs systems were not
stances where failure to summarize cost     developed as a part of this survey, we
data in the normal course of operations     believe they represent the difference
has caused contractors to be unaware        between satisfying the recognized needs
of or to overlook costs that would be       of company management and the
acceptable in price negotiations.           Government in the identification of
   With respect to contractor records       costs.
providing cost of performance, we              The identification of cost by line item
made determinations as to adequacy on       o r change order is, nevertheless, neces-
the basis of contractor definitions and     sary in certain instances. For example,
CONTRACTORS’ COST RECORDS                                                        21

 contractors’ claims against the Govern- contractors could not be made because
 ment occur with some frequency and a data related to cost of performance
 reasonably precise identification of cost were not recorded by contract, line
 is necessary if an equitable settlement item, or change order to permit com-
 is to be achieved. In addition, congres- parison with pricing proposals. As in-
sional inquiries regarding contract dicated previously, individual instances
 overruns may request an identification of such a condition may not be signifi-
of cost not only by contract but also by cant in respect to possible adverse con-
items procured under the contract. Al- tract pricing. However, the author be-
 so, the segregation of cost by line item lieves that in the aggregate a significant
 and/or change order generally pro- number of Government procurements
 vides a better basis for identifying pro- and contracting entities are seldom sub-
 curement and/or production weak- jected to the restraints provided by in-
nesses. All in all, it would seem that such dependent reviews of pricing and pric-
 a desirable refinement of costs has de- ing practices.
pended primarily on a company’s view           For the larger contractors, historical
 as to whether the value to management cost data were considered generally ad-
exceeded the added cost.                    equate for pricing reviews. It w-as noted
    The Defense Contract Audit Agency that contractor records generally were
 and contracting officers are continually retained for a sufficient period to satisfy
required to make pricing decisions that any postaward audit requirements.
rest on the reasonableness and validity
 of contract costs. I n addition the Armed Comparison of Proposed and
Services Board of Contract Appeals, Incurred Costs
the GAO, and the Federal courts are
from time to time involved in efforts          Not all desirable comparisons of pro-
which require determination of the          posed and incurred costs could be made
reasonableness or equitability of con-      readily  for 20 of the 45 contractors
tract costs. The fact that such reviews surveyed. For some of these contrac-
may be necessary makes difficult any tors, summaries of cost of performance
persuasive argument for denying the were not available; for others, certain
need for records to be kept in such a comparisons could not be made for
manner as to permit identification, reasons such as the commingling of
when necessary, of cost by significant basic contract costs and change order
line item and/or change order, espe- costs. The deficiencies here concerned
cially for the larger procurements.         the smaller contractors and contracts.
                                            We feel that a close line of reference
 Information Required for
                                            should exist between the classifications
 Pricing Reviews
                                            of proposed costs and actual costs.
                                               The inability to make a reasonable
    Reviews of pricing proposals could comparison appears to be the result of
not be effectively performed at the a lack of similarity between estimating
plants of several relatively small con- and accounting systems. Although such
tractors. Comparisons of proposal costs comparisons may not provide a total
with costs of performance for these measure of a contractor’s efficiency,
22                                                       CONTRACTORS' COST RECORDS

reliability, or overall technical capa-      Concluding Comments
bility, the) do provide a common basis
                                                As mentioned preLiously, the direc-
 for evaluating the performance of a con-
 tract, procurement decisions, and/or        tiun taken in this inquiry was to gather
the effectiveness of operations by con-      information on the kinds of records
tractor officials as well as by those Gov-   kept by defense contractors arid the ade-
ernment representatives with related re-     quacy of the records for examinations
sponsibilities.                              made by the Comptroller General. All
   The degree to which contract costs        of the 45 contractors surveyed main-
should be segregated depends upon the        tained basic transaction records. From
specific circumstances involved. A clear     that point their accounting summations
relationship between line item costs on      ranged from simple operating state-
a proposal and the costs subsequently        ments prepared on an enterprise basis
recorded for the contract should be          to highly sophisticated statements pre-
evident. Where this relationship is not      pared in great detail on a division,
evident, the identification of costs by
                                             plant, contract, task, product, process,
contract and cost element should be
                                             or other basis.
the minimum requirement for cost pres-
                                                The existence of a wide variety of sys-
entation. With respect to the recording
                                             temized cost controls certainly is no
of such data, regulations or standards
could provide for specific contractual       surprise to the accountant M ith broad
agreement on the identification of costs     commercial or Government experience.
by change order whenever practicable         Correspondingly, it should be no great
and necessary. In many instances, the        surprise to find inconsistencies among
segregation of change order costs may        contractors as to what should be the
be neither feasible nor economical. In       nature of any selected cost accounting
such instances, contractors might be         principles to be applied in the identifi-
 required to satisfy Government pro-         cation, classification, and control of
curement officials, generally in advance     costs. Cost controI systems, whatever
of performance, as to why costs of           their form, can be guided by broadly
change orders cannot or should not be        defined cost accounting standards, when
 identified.                                 established, generally without radically
    Improvement in the auditability of
                                             changing present systems or attempting
proposals and performance data for
                                             to introduce uniform systems. Existing
any desired review, including those for
                                             cost controls provide a valuable fund
postaward audit or contract pricing
                                             of information on procedures and s p
purposes, depends largely on improve-
ment in estimating and cost accounting       tems which could serve as a framework
systems and a corresponding improve-         for the development and application of
ment in the relationship between these       sound cost accounting standards that
systems.                                     will gain general acceptance.
ELLSWORTH            H. MORSE, JR.

                  Concepts of Auditing and
                  Systems Analysis                                          YJ(5-/ c:

                  How do the perspectioes and techniques of the practitioners in
                  these two fields differ? What are the prospects of bringing
                  them closer together as a further means of expanding the
                  competence of GAO staffs?

   The systems analysis group of the                                    The responses received were quite il-
Office of Policy and Special Studies has                             luminating and, in my opinion, of con-
12 members at the present time. Four                                 siderable value in our continuing
of these came from outside of GL\O.                                  efforts to narrow the hap in thinking
The other eight came from other parts                                and practice between the two groups.
of GAO, either from the Civil Division                               As an overall objective, we in GA0
or from regional offices. Each of these                              should head toward integrating the two
eight individuals spent about a ear of                               approaches for all of our review work
intense, advanced study at major uni-                                as much as possible. In this way we
versities under the Educational Pro-                                 can capitalize on the best from each
gram in Systems Analysis sponsored br;                               approach and thereby further ad-
the U.S. Civil Service Commission and                                vance our collective capabilities and
the National Institute of Public                                     competence.
Administrati0n.l                                                        The specific views of the ex-auditor
   Not long ago I invited those who had                              systems analysts varied somewhat Lut
had experience on the GAO audit staffs                               all struck the common chord that the
to let me have their views on the dif-                               big difference was in the scope of work
ferences in approach and practice be-                                embraced in the systems approach. Use
tween a systems analyst and a GAO au-                                of sophisticated analj-tical techniques
ditor in carrying out an examination                                 !<-asmentioned as a common tool of &e
into the results of a government                                     systems analyst but they all recognized
program.                                                             that most auditors had not had the op-
                                                                     portunity to learn how to apply these
  '  See "Edurntional Prvprnni in S!stem< 4 n a l \ s i c , " LI,
V n r t o n A . 3 1 ~ e r s .the G 40 Rei tetc, Winter 1971, p 53.   techniques.

                          Mi-.11Ior.e    is the director. Offire of I'olicy and Special Studie.;.

24                                                AUDITING AND   SYSTEMS ANALYSIS

  The specific views of these analysts  the basis of known or suspected prob-
are synthesized below in a composite    lems and opportunities to contribute
rCsumi of major areas of difference,    to improvement. He would be less con-
together with my own arbitrating        cerned with overall benefits o r program
commentary.                             effects and more concerned with iden-
   The comments are analyzed under       tifying weaknesses in management or
these broad headings :                   administration and getting them
  Coverage o r scope of work            corrected.
   Analytical techniques                    He may cover the management o r
   Use of data                           administrative  aspects of an entire pro-
   Consideration of alternatives         gram   over a period  of time but his ap-
   Use of other analytical studies       proach  would  be  on a piecemeal basis.
                                         He would be more likely to be con-
                                         cerned with the program o r activity of
Coverage or Scope of Work                one agency rather than to examine into
                                         the operations of other agencies in the
   The systems analyst considers a pro-
                                         same activity area. Also, he probably
gram o r activity as a system requiring
                                         would not get into State and local gov-
inputs and producing outputs. His ap-
                                         ernment programs and operations un-
proach to examining a system is to re-
                                         less Federal funds were directly
view it in its entirety and to evaluate
all aspects.                             involved.
   For a government program, he would Commentary
not restrict himself to the primary
agency responsible for the program but     These approaches are not incompat-
would also look at similar programs ible. Both have very definite merits.
conducted by other agencies o r organi- The audit approach evolved on the
zations. This means, too, that he would basis of hard experience and recogni-
not confine himself to Federal agency tion that government programs and ac-
operations and expenditures. He would tivities are simply too big to lend
also be concerned with State and local themselves to effective examinations of
government operations in the same all aspects in depth and the production
                                         of evaluative conclusions within any
   As to outputs produced, he would be
                                         reasonable time period. Also, the audit
concerned not only with benefits to the
primary recipients but with benefits to
                                         approach dealt primarily with input         .
society as a whole. He would also ex- factors, such as costs, and the efficiency
amine into any negative aspects of a and economy with which operations
program, sometimes called disbenefits. were carried out. Recommendations for
*    c   ,

   In contrast, the auditor would not changed procedures, bulwarked with
usually take on an entire program or solid evidence in support of the need
activity and examine into all of its as- for change, produced savings in public
pects. He would be more likely to se- expenditures and this. in itself, was
lect specific aspects or segments for (and still is) a desirable audit
penetrating examination, primarily on objective.
AUDITING AND SYSTEMS ANALYSIS                                                     25
   Little attention was paid to examin-     significant conclusions. Such tech-
ing outputs or accomplishments and          niques include linear programming,
evaluating them in relation to costs.       regression analysis, queuing methods,
However, with the gradual extension of      netw-ork analysis, Monte Carlo meth-
the scope of audit work to embrace          ods, and decision theory application.
evaluations of results, accomplishments,       Auditors are not usually so trained.
or effectiveness of programs, the more      As a result, they are not prepared to
conventional audit approach and meth-       recognize the usefulness of such tech-
ods need expansion along the lines en-      niques or to apply them. They are more
visioned by the systems analyst.            likely to fall back on specific ex-
   The systems approach described is        amples, usually selected on a judgment
somewhat theoretical in that most sys-      basis, to support conclusions.
tems analysts also recognize the im-
practicability of analyzing all inputs      Commentary
and outputs pertaining to a specific
program or to a recognized objective           This difference is one that can be
being sought through government ac-         largely eliminated through training.
tion. Thus, in practice, the scope of the   Even though all GAO staff members
systems analyst’s work would probably       may not acquire all of the skills nec-
not be as comprehensive as described.       essary to directly apply these tech-
   The problem of seemingly impossible      niques, knowledge of them and what
scope would also be resolved by the         they can do will enable auditors to rec-
systems analyst in part by not exam-        ognize their usefulness in specific sit-
ining specific operations in great de-      uations and arrange for special assist-
tail. Instead, he would try to make over-   ance in using them. Such assistance
all analyses of inputs and outputs, i.e.,   may be provided either in-house or 1)y
cost-benefit analyses, in an effort to      consultants.
assess overall accomplishments or bene-        By their nature, these techniques
fits in relation to costs and to inquire    are not models of easy understandabil-
into the extent to which the outputs        ity. Systems analysts owe it to the
or results of a program are achieving       users of their work to simplify their
the established objectives.                 terminology and explanations of these
   In any reasonably complete exami-        highly technical procedures. This is of
nation of a government program, both        special importance in GAO where the
approaches will need to be followed,        products of such applications will be
preferably in a fully coordinated, if       communicated to the Congress: the
not integrated, manner.                     Members of which have to be assumed
                                            to be laymen.
                                               In practice. it would seem appropri-
Analytical Techniques
                                            ate to prepare the main body of our
  Systems analysts are trained to rec-      reports as clearly as possible in nontech-
ognize and apply highly sophisticated       nical terms and include the more tech-
analytical techniques to large aggre-       nical aspects of the analytical work per-
gations of data in their effort to reach    formed in an appendix for the use of
                                                       AUDITING AND SYSTEMS ANALYSIS
those interested in delving into the tech-     clusions of the kind that might be
nical support and methods used.                reached hi- the systems analyst who is
                                               willing to base his opinions on proba-
                                               bilistic assumptions o r even on aspects
Use of Data
                                               difficult to measure in numbers.
   The systems approach often calls for
the use of large amounts of data in try-       Commentary
ing to assess accomplishments and
                                                  Under either approach, GAO con-
benefits. The systems analyst is more
                                               clusions must be convincing and sup-
comfortable with large and relatively
                                               portable. There is room for the audit
complex aggregations of data.
                                               approach to embrace the analytical ap-
   He is more likely to accumulate the
                                               proaches that make possible reasonable
data necessary, in his judgment, to
                                               conclusions based on data which may
measure the impact of a program or
                                               be imperfect but which represent all
activity, if not otherwise available. He
will test the data that is available or col-   that exists. At the same time, such data
lected for significant differences and         must be analyzed and evaluated with
correlations, where appropriate. At the
                                               skill and due care to avoid improper or
                                               misleading conclusions. Factors to be
same time, he recognizes that very lit-
                                               considered in all cases are the costs of
tle data is absolutely precise and that
in dealing with program results, the           the various approaches and the ex-
evaluator has to be concerned with             tent to which each approach will sup-
ranges, probabilities, and similarities.       port valid conclusions and constructive
   Where models are used in an analysis        recommendations.
and evaluation of programs, they are
usually simplified and include only            Consideration of Alternatives
those factors (i.e., variables) consid-           The systems analyst is concerned
ered significant. This approach to eval-       with alternative programs or activities
uating program results necessarily             and with whether they can accomplish
involves some risk and the making of           specified objectives possibly better or
assumptions.                                   at less cost. He believes that his task is
   The auditor, on the other hand, tends       to ( 1 ) discover, describe, and compare
to be suspicious of or even to display         alternatives, (2) provide information,
a dislike of large data banks. This may        and ( 3 ) identify problems for the con-
be due, in part, to a lack of experience       sideration of decisionmakers rather
in using such data which also usually          than addressing specific recommenda-
involves computer handling. It may             tions to them.
also be due, in part, to a desire for more        Auditors, by contrast, do not usually
precision than is likely to exist in large     seek out and evaluate the possibilities
aggregations of data.                          of alternative programs.
   The auditor is more inclined to want
to document his findings and conclu-
sions with verified facts and specific
examples which support his conclu-               The two approaches are not as far
sions. He tends to avoid reaching con-         apart as these views might indicate.
AUDITING AND SYSTEMS ANALYSIS                                                      27

GAO   audit policy has generafly called      studies and the fact that they are in-
for the identification of better ways of     telligible only to other trained analysts.
doing things in the areas in which ex-       The GAO approach in this case is to
aminations are made. Recommenda-             call for expert in-house assistance to
tions for different (that is, alternative)   examine such work and to assist in de-
courses of action usually result. GAO’s      termining its relevance and usefulness.
audit effort has been directed mostly
at operating matters rather than pro-        General Observations
gram results. Thus, application of es-          The above viewpoints as to GAQ
tablished audit policy in the area of        audit approaches do not fit all GAO
program results will automatically in-       audit groups and it is not likely that
volve consideration of alternatives.         they fit even any one group. It is an
   On the other hand, whether specific       unsafe practice in GAO to make gen-
audit recommendations on identified          eralizations as to auditing practices
program alternatives will be made to         among the several operating divisions
decisionmakers, as contrasted with           or even among individual groups within
merely pointing out possible alterna-        a division.
tives, will undoubtedly be determined           However, the contrasts described
on a case-by-case basis considering          above (1) do reflect the views of ex-
 such factors as congressional policy        perienced GAO auditors who have be-
 objectives, related experiences, judg-      come systems analysts and (2) there-
ments on impact of possible changes,         fore provide useful insights into the
and: possibly, political considerations.     principal cited differences between the
                                             two fields. With the program evaluation
Use of Other Analytical Studies              objectives, at least in GAQ, being the
   The systems analyst is more likely to     same, these differences will narrow in
examine and make extensive use of            time.
analyses and evaluations made by                I n expanding GAO efforts into more
others.                                      penetrating evaluations of government
   Auditors are less likely to take ad-      programs, our objective should be to
vantage of other studies in the same         amalgamate the best features of both
field.                                       approaches. Incorporation of the con-
                                             cepts of systems analysis into GAO
Commentary                                   audit approaches will be an essential
                                              ingredient in broadening the scope of
   On this score, the two approaches          our review work.
should be identical in practice. GAO            Some of the differences referred to
audit policy has long called for ex-         above are already becoming less pro-
amination of all pertinent evidence re-      nounced as GAQ auditors increase their
lating to matters being examined and         efforts in program evaluation work and
this policy extends to review of studies     as understanding of systems analysis
by other groups. In the case of analyti-     concepts by the audit staffs improves
cal studies, failures on the part of         through staff contacts, increased com-
auditors to delve into them may be due       munications, and participation in train-
to the technical coniplexity of the          ing programs.

                             &‘a-     )L-JT
            Job Satisfactions of

   The job satisfactions of many pro-           Research Studies of Motivation
fessional groups such as attorneys,                A precise definition of motivation is
physicians, and educators have been             elusive. I n lieu of adding to the seem-
studied by behavioralists at an increas-        ingly endless list of new and old inter-
ing rate in the last two decades. A com-        pretations of the term, for purposes of
parable group, that of professional             our investigation, motivation is defined
accountants in government, public ac-           as an awareness on the part of the indi-
counting, and industry, however, has            vidual of tension within him which stirs
been virtually ignored.                         him to action intended to relieve that
   In this paper our purpose is to com-         tensi0n.l
pare the job satisfactions of account-             Many studies concerned with motiva-
ants employed by agencies of the                tion have utilized the Maslow need-
Federal Government to those of their            hierarchy theory as a conceptual frame-
counterparts employed in public ac-             work and starting point.’ Maslow con-
counting. Hopefully the findings pre-           tends that human needs arrange them-
sented w d l provide needed insight into        selves in hierarchies of prepotency. As
the characteristics of those accounting         one need is satisfactorily fulfilled, it is
                                                replaced by a n ~ t h e r .Man
                                                                           ~ continually
positions in both the Federal Govern-
                                                seeks to gratify some need. The hier-
ment and public accounting which are
perceived to be the most and the least               Leslie Brach and Elon L. Clark, Pyrchology in Buri-
satisfying. For those interested in in-         ness ( N e w York: McCrowHill Book Company, 1 9 5 9 ) ,
                                                p 7.
creasing the psychological rewards                   Atlaptwl from A . 1%. hlaslorv, Motivation and Per.
                                                sonrilrt, ( N e w York : H a r p m and Row, Publishers, Inc.,
obtained from the accountant’s job,             1951) a n d A. H. hl.idnw, “.% Throry of Human Moti.
these findings also can be used to de-          \.itiun.”   Ps?r-hn/opicnl R r r ~ r w , 1‘01. 50 (1913), p p .
lineate areas for improvement.                     3 /bid.

   Mr. Strawser, a certified public accountant. is an associate professor of accounting a t
   the Pennsylvania State University; Mr. Ivancevich is an associate professor of admin-
   istrative scienre a t the University of Kentucky; and Mr. Herbert is the director, Officc
   of Personnel Management.

J O B SATISFACTIONS O F ACCOUNTANTS                                                                  29

                                                                              H IGHER-ORDE R

                                                                               LOW E R-BRDE R

archy of needs from the lowest to the      needs, 20 per cent in his esteem and
highest order is presented above.          status needs, and only 10 per cent in his
  Maslow characterized these needs as:     self-actualization needs.
  Physiological-The requirement for           Lyman W. Porter conducted a series
    food, clothes, shelter, sex, etc.      of studies to investigate how managers
  Safety-The requirement for physi-        perceived the psychological character-
    cal protection.                        istics of their jobs.’ To date, these
  Social-The opportunity to develop        studies have excluded accountants.
    close associations with other          Porter investigated the relationships
    persons.                               between job level, type of work, orga-
  Esteem-The prestige received both        nizational size, and line and staff posi-
    within and from outside of the         tions on the one hand; and need satis-
    organization.                          faction as reported in questionnaire
  Self-Actualization-The opportunity       responses on the other. Porter elimi-
    for self-fulfillment and accomplish-   nated the physiological need category
    ment through personal growth and       discussed by Maslow and added an au-
    development.                           tonomy need category. He felt that the
  He also regarded these five sets of      physiological needs of managers are
needs as being in a definite hierarchy,    relatively satisfied and investigating
but not in an all-or-none relationship     these needs would not provide any use-
to one another. Maslow felt that de-       ful information concerning motivation.
creasing percentages of satisfaction are   He defined the autonomy need as oppor-
encountered as an upper level need re-     tunity, with related authority, for
placed a lower level one in predomi-       independent thought and a ~ t i o n . ~
nance. For example, an accountant
                                               Lyman W. Porter, ‘‘A S t u d y of Perceived Need
might be 93 per cent satisfied in his      Satisfaction in Bottom a n d Ifiddle hlansTement Jobs,”
physiological needs, 75 per cent in his    Journol of A p p l i e d Ps.+chologj, Vol. 45 (Fel~ruary.1961).
                                           pp. 1-10,
safety needs, 50 per cent in his social      5   Ibid.. p. 3.
30                                                                          J O B SATISFACTIONS OF ACCOUNTANTS

    In studies of the effect of job level                           tions.” He defined a professional model
upon satisfaction Porter found, using                               as one in which the individual behaved
samples comprised of first-line super-                              as a professional and a bureaucratic
visors and middle managers, that job                                model as one in which the individual
level did influence need fulfillment.                               behaved as an employee.
Middle managers reported more need                                     The research concluded that CPAs
fulfillment in most categories than did                             with low bureaucratic orientations con-
first-line supervisors. The highest need                            sistently reported lesser degrees of job
deficiency for both groups was found                                satisfaction. The bureaucratic orienta-
in the self-actualization category.6 and                            tion of subjects appeared to be the most
    Haire, Ghiselli, and Porter studied                             significant determinant of the level of
3,641 managers from 14 countries in-                                satisfaction.
cluding the United States.8 Managers                                   Do the findings reported in the stud-
in 13 countries (all except Japan) re-                              ies cited above also apply to profes-
ported that the self-actualization need                             sional accountants employed by the
category was the least satisfied. Other                             Federal Government and by public ac-
areas noted to be deficient in need ful-                            counting? To date, this question re-
fillment were the autonomy and esteem                               mains unanswered due to the lack of
areas. The deficit in the self-actualiza-                           empirical research data. We have at-
tion and autonomy needs was more                                    temped to fill this gap with the present
than twice as great as the deficit in the                           investigation.
other three need areas ~ o m b i n e d . ~
    A study of union officials by Miller                            Methodology
 considered the impact of position in the
 union hierarchy upon job satisfac-                                   A modified form of the Porter job
 tion.’” This investigation disclosed that                          satisfaction questionnaire was used to
lower level union officials u-ere gener-                            obtain the data for this study. The
 ally less satisfied than upper level                               questionnaire contained 12 need items
 officers in all five need categories.                              which were randomly arranged in the
                                                                    questionnaire but are presented below
    A study of certified public account-
                                                                    according to Maslow’s need hierarchy.
 ants conducted by Sorenson attempted
                                                                    Categories are arranged from the lowest
 to identify and to analyze commonali-
                                                                    order (most dominant need) to the
 ties and conflicts in need satisfaction
                                                                    highest order (least dominant).
 between professional and bureaucratic
 models of public accounting organiza-                              I. Security Need
                                                                       1. The feeling of security in my ac-
  ” I h d . , pp. 1-10,                                                   counting position.
     Lyman W. PortPr, “Job Atirtuales I” I l a n a g r m m t :
IV. Perceived Deficiencies in Need Fulfillment os a                 11. Social Needs
Function of Size of Company,” Journal of A p p l i e d Psj-            1. The opportunity, in my account-
chology, Vol. 47 (DecembPr. 1963), pp. 38G-397.
     Masun Haire, E d w n E. Ghiselli, and Lyman lV.                      ing position, to give assistance to
Porter, Managerial T h i n k i n g : A n Inremotional S t u d y           other people.
(Kew York’ John WIIPYand Sons, Inc., 1966).
     I b i d . , p. 175.
   lo E. Miller, “Job Satisfaction of National Union Of-             l1 James E. Sorenson, ‘‘Pruf*sstonal and Bureaucratic
ficials,” Personnel P s j c h o l a g y , Vol. 19 (Autumn, 1966).   Organization in the Publlr Arrountlng F~rrn,” The
pp. 261-27L                                                            n u n l r n g R ? , i e c , , I#,l.X L I I I l , , h , 19hi1, pp. 553-565,
JOB SATlSFACJfONS OF ACCOUNTANTS                                                                            31
  2. The opportunity to develop close               nected with your accounting position.
      associations in my accounting                 For each you will be asked to provide
      position.                                     two ratings on a 7-point scale:
111. Esteem Meeds                                     a. How much of the characteris-
   1. The feeling of self-esteem ob-                     tic is there now connected with
      tained from my accounting                          your accounting position?
      position.                                       b. How much of the characteristic
  2. The prestige of my accounting                       do 1-ou feel should be con-
      position within the firm or agency                 nected with your accounting
       (that is, the regard receil-ed from               position ?
      others in the firm or agency).
  3. The prestige of my accounting             For each of the 12 need-related items,
      position outside the firm or           the respondents were instructed to an-
      agency (that is, the regard re-        swer the above questions by circling a
      ceived from others not in the firm     number on a rating scale that ranged
      or agency).                            from 1 to 7. The low numbers repre-
                                             sented minimum amounts, high num-
IV. Autonomy Needs
                                             bers represented maximum amounts.
   1. The opportunity for independent
      thought and action in my ac-           Need Fulfillment Deficiency
      counting position.
   2. The authority connected with my           The amount of perceived deficiency
      accounting position.                   for each of the 12 need items was cal-
   3. The opportunity, in my account-        culated by subtracting the rating for
      ing position, for participation in     part a of an item (“HOWmuch is there
      the setting of goals.                  now?”), from part b of the item (“How
V. Self-Actualization Needs                  much should there be?”) .13 For ex-
   1. The opportunity for personal           ample, assume that a respondent com-
       growth and development in my          pleted the security need question as
      accounting position.                   follows:
   2. The feeling of self-fulfillment ob-      The feeling of security in my ac-
       tained from my accounting posi-       counting position:
       tion (that is, the feeling of being     2. How much is there now?

       able to use one’s own unique ca-        (min.) 1 @ 3 3 5 6 7 (max.)
       pabilities, realizing one’s poten-      b. How much should there be?
       tialities, etc.) .                                      12345@7
   3. The feeling of worthwhile ac-            This accountant has circled “2” in
       complishment in my accounting         answer to part a and “6” in answer to
       position.                             part b. His need-deficiency score would
  The accountants participating in the       therefore be “4.“ The assumption is
study were provided with the following       made that the larger the difference,
instructions :
                                                 Lyman ‘T. Porter, “Job Attitudes in Management:

     On the following pages will be          I\-.Pcrreired Drficiencres i n Need Fulfillment as B
                                             Funclion of Job Lerel,” Journal of A p p l t e d P s j c h o l o p i .
  listed several characteristics con-        Yo1 46 (DecemhPr, 1962). pp. 3.5-381.

32                                                        JOB SATISFACTIONS OF ACCOUNTANTS

when part a is subtracted from b, the                approximately 60,000 CPAs by name
larger the degree of dissatisfaction or              and agency or firm affiliation.’j Replies
the smaller the degree of satisfaction.              were received from 351 of the 600 ac-
Individual scores are then averaged to               countants (for a response rate of 58.5
derive an overall score for each need                percent). A random sample of nonre-
item for that particular group of ac-                spondents to the survey was contacted
countants.                                           in order to analyze nonresponse bias. It
   This method of measuring perceived                was found, however, that there was
need satisfaction is an indirect measure             similarity between respondents and
derived from answering part a and part               nonrespondents on such variables as:
b. The method has two advantages:                    (1) age, (2) education, (3) length of
          The subject is not directly questioned     tenure with present firm or agency, and
          as to his satisfaction. Therefore, any      (4) length of tenure in present position.
          tendency for a simple “response set”
          to determine his expression of satis-
          faction measure to conform to what         Findings
          he thinks he “ought” to put down ver-
          sus what he actually feels to be the          Table 1 presents data comparing the
          real situation is a ~ 0 i d e d . l ~      average need-satisfaction scores of the
           Secondly, this method of measuring        top level accountants. The item scores
          need fulfillment is a more conservative
                                                     indicate that the largest need deficien-
          measure than would be obtained by
          a single question concerning satis-        cies (i.e., highest mean value) for both
          faction. I t takes into account the fact   groups of respondents occur in the self-
          that higher level positions should be      actualization need category. The scores
          expected to provide more rewards be-       also indicate that for five need items-
          cause it utilizes the difference between
                                                     security in position, feeling of self-
          obtained and expected satisfaction. In
          effect this method asks the respondent:    esteem, prestige inside firm or agency,
          “How satisfied are you in terms of         prestige outside firm or agency, and
          what you expected from this particular     authority in position-the     public ac-
          management position?” Thus, i t is de-     countants perceive more deficiency. For
          signed to be a meaningful measure in
                                                     the other seven items-opportunity       to
          c o m p a r i n g different management
                                                     help people, opportunity for friend-
                                                     ships, opportunity for independent
Sample                                               thought and action, opportunity to par-
                                                     ticipate in goal setting, opportunity for
   The questionnaire was distributed to
                                                     growth and development, feeling of
a random sample of 600 certified public
                                                     self-fulfillment, and feeling of accom-
accountants employed by agencies of
the Federal Government and by public                 plishment-the       Government account-
accounting firms in the United States.               ants report higher deficiency. It is in-
The sample was chosen by random                      teresting to note that with regard to one
methods from the membership direc-                   need item, security in job, the Govern-
tory of the American Institute of Cer-                ment accountants report that there is an
tified Public Accountants which lists
                                                       l5 American Institute of Certified Public Account.
  13   Ibrd., p. 378.                                ants, Alphabetical List of Members (Kew York: Am&.
  34   Ibid.                                         can Institute of Certified Public Accountants, 1967).
JOB SATISFACTIONS OF ACCOUNTANTS                                                                              33
                                                     TABLE 1
               Average Need-Satisfaction Scores of Top Level Accountants:
                       Federal Government and Public Accounting

                                                                                 Federal              Public
                         Need categories and items                             Government          accountants:
                                                                               accountants:          N = 107
                                                                                  x =51

  I. Security need:
       a. Security in position. .......................                                   (. 29)             **   42
 11. Social needs:
       a. Opportunity to help people. . . . . . . . . . . . . . . . .                     .57                 .49
       b. Opportunity for friendships. . . . . . . . . . . . . . . . .                    .49                 .48
111. Esteem needs:
       a. Feeling of self-esteem . . . . . . . . . . . . . . . . . .                      .43                 .56
       b. Prestige inside firm or agency. . . . . . . . . .                               .49                *. 82
       c. Prestige outside firm or agency. . . . . . . . . . .                            .SO                 .6h
1V. Autonomy needs:
       a. Opportunity for independent thought and action.                                 .66                 .60
       b. Authority in position. .......................                                  .10                 .46
       c. opportunity to participate in goal setting. . . . . .                           .63                *. 35
 V. Self-actualization needs:
       a. Opportunity for growth and development.. . . . .                               .97                 *. 70
       b. Feeling of self-fulfillment, . . . . . . . . . . . . . . . . . . .             .97                 *. 43
       c. Feeling of accomplishment. . . . . . . . . . . . . . . . . .                  1. 06                 .95

  Note: The larger the average mean valiips the less the perceivrd need satisfaction.
  'Designates significant differences at .05 level of confidence as determined by two-tailed t-test.

excess rather than a deficiency. Sta-                        somewhat from the theoretical model.
tistically significant differences were                      For example, the autonomy need is the
found in analyzing five of the 1 2 need                      second most satisfied category and the
items.                                                       esteem need the fourth most satisfied.
   The item score for each of the five                       It is Porter's contention that the rank
need categories were combined to de-                         order of need satisfaction from most
rive cluster scores.16 These scores are                      to least would normally be-security,
presented in rank order format for top                       social, esteem, autonomy, and self-ac-
level accountants in the Federal Gov-
                                                                The findings presented in Table 3
ernment and public accounting in Table
                                                             report the average need-satisfaction
2. A review of Table 2 shows that while
                                                             scores of middle level Government and
the rankings of the two groups are sim-                      public accountants. The middle level
ilar, the Government accountant rank                         public accountants report greater per-
order is closer to the need hierarchy                        ceived need satisfaction for 11of the 12
model. The security, autonomy, and                           items (all except security in position).
self-actualization needs are ranked ex-                      Four statistically significant differences
actly as postulated by Porter. The pub-                      were found. Again, the largest need de-
lic accountant rank order deviates                           ficiencies are perceived LO he in ihe
                                                             opportunities to fulfill the self-actual-
  l6 The cluster scores are the average of the item scores
for each need category.                                      ization category.
34                                                                     JOB SATISFACTIONS OF ACCOUNTANTS

                                                    TABLE 2
Average Need-Satisfaction Cluster Scores i n Rank Order by Category for Top
       Level Accountants: Federal Government and Public Accounting

        Federal Government accountants:       N =5l                          Public accountants: N=107
-                                                       __
Rank           Need category                Cluster score                 Need category               Cluster score

 1 Security..                                            (. 29) Security.                                           .42
 2 Esteem.. .                                            .46       Autonomy                                         .4?
 3 Social.. . . .                                        .53       Social.. . . . . .                               .49
 4 Autonomy.. . . . .             . .                    .56       Esteem.. . . . . . . . .                         .68
 5 Self-actualization..           . .                    .99       Self-actualization . . . . .                     .69

                                                    TABLE 3
            Average Need-Satisfaction Scores of RIiddle Level Accountants:
                      Federal Government and Public Accounting

                                                                                      Fedrral            Public
                       h e e d categorips and i k m e                              Covcrnnient        arcountants:
                                                                                   accountants:         X=128

   1.Security need:
       a. Security in position . .                                                           .16                    .40
 11. Social needs:
       a. Opportunity to help people                                                         .52                    .33
       b. Opportunity for friendships. . .                                                   .55                    .51
111. Esteem needs:
       a. Feeling of self-esteem. . . .                                                    1. 16                   *. 60
       b. Prestige inside firm or agency. . .                                               .''8                    .63
       c Prestige outside firm or agency         .                                          .91                    *. 56
1V. Autonomy needs:
       a. Opportunity for independent thought and action                                     .86                    .62
       b. Authority in position. . . .              ,   .                                    .91                    .71
       c. Opportunity to participate in goal setting ,                                     1. 26                   1. 11
 V. Self-actualization needs:
       a. Opportunity for growth and development      .                                    1. 56                   *. 92
       b. Feeling of self-fulfillment. . . . . .                                           1. 23                   1. 12
       c . Feeling of accomplishment. . . . . .                                            1.23                    *. 84
  'Designata significant differences at . 0 5 level of cnnfidmre as detcrinined hy two-tailrd t-test.

   Table 4 brings into clear focus the                         higher, particularly among the higher
rank orders of the cluster scores for the                      level need items.
middle level accountants. The five need
categories are ranked in an identical                          ~               i                  ~            ~           ~   ~
array for both groups of accountants.
It should be noted, however, that the                             Previous empirical studies of the ef-
absolute values of the five cluster scores                     fects of position in the managerial
for the Government group is somewhat                           hierarchy of respondents on perceived
JOB SATISFACTIONS OF ACCOUNTANTS                                                                                                          35
                                                                 TABLE 4
.!,\.rage            Aeed-Sati3faction Cluster Scores i n llanli Order b> Category- for 1liddle
                     Leiel Accountants: Federal Goiernment and Public .!,cco~inting
~   ~   ~~~~~               .-   ~~~~~       -        .                                               ~   ~~~~~~~~~~                          ~~~

                  Fedrral Go\rrnmrnt aclroiint.tnts: h =65                                     I'ublic accountants: 3 = 128
K.i"k                   herd category                     Clubtrr score                 h e e d category                       Clustrr scow
                                                 ~~              ~~.
                                                                   .~           ~____~    ~~                               ~      -

        1       Securitv                                                 . 20    Security                                                 . 40
        2       Social..                                                 . 57    Social.. .                                               .12
        3       Esteem . .                                         1. 03         Ebteeiil                                                 .59
        4       Autonorn>- .                                       1. 07 Autonorri>-                                                      .80
        5       Self-actualization .                               1. 40 Self-actualrzatiou                            .                  .96
                      ~-                 ..~~                       ~~    -

need satisfaction have consistently                                             level positions. It is interesting to note
found that self-actualization needs are                                         that the top level public accountants
the most deficient area of satisfaction.                                        report less satisfaction in the esteem
The present study lends further support                                         need items than do their middle level
to these findings.                                                              colleagues. Although the top level re-
   The present research indicates that                                          spondents are more satisfied in the irn-
the security need is fairly w-ell satisfied                                     portant self-actualization category they
for both groups of accountants. A high                                          appear to be less satisfied with their
degree of satisfaction in this category                                         prestige both within and outside their
is hypothesized by Maslow and Porter                                            firms. This finding may indicate that
in their need hierarchy frameworks.                                             the upper echelons of the public ac-
Unprecedented, however, is the finding                                          counting profession may be coping with
that top level Government accountants                                           the question of professiorialisrn in ac-
report too much security in their posi-                                         counting. It has been stated that while
tions. (Middle level Government ac-                                             the public readily accepts the premise
countants and both groups of public                                             that the physician, lawyer, and scien-
accountants report a slight deficiency                                          tist are professionals, there are some
in the security need). It appears that                                          who question the accountant's claim to
further research designed to identify                                           full professional status. This lack of
the specific factors underlying this un-                                        recognition from the public may be re-
usual finding is warranted.                                                     sponsible for the top level accountants'
   The results of the present study also                                        responses to the esteem need item ques-
indicate that social needs are relatively                                       tions. Further research must be under-
satisfied for both groups of account-                                           taken to determine the exact reasons for
ants. The public accountants report                                             this finding.
slightly higher need satisfaction in this                                          While middle level Government ac-
category than do their Government ac-                                           countants report relatively low levels of
counting counterparts.                                                          esteem need satisfaction, this situation
   At middle level positions, public ac-                                        improves considerably at the top level
countants report significantly higher                                           of Government accounting.
degrees of esteem satisfaction while                                               The certified public accountants em-
exactly the opposite is true at the top                                         ployed in public accounting report
36                                              JOB SATISFACTIONS OF ACCOUNTANTS

higher degrees of satisfaction in the      needs a challenge; it is possible to have
autonomy need in every item except         “too much satisfaction.”
“authority in position” where the op-         In addition, the present research
posite is true for the top level           compares the job satisfactions of CPAs
accountants.                               at top and middle level positions em-
   Both levels of Government account-      ployed in public accounting and Gov-
ants report significantly fewer op-        ernment. In some ways, the groups may
portunities to satisfy the important       be somewhat different. In a sense, mid-
self-actualization needs. Statistically    dle level accountants are “still striving”
significant differences were noted in      while those at top levels have usually
analyzing four of the six items in this    attained many of their goals. Also,
category.                                  there may be different methods of effec-
   In interpreting the above findings,     tively motivating the CPA in public
it would seem that several “caveats” are   practice as opposed to his counterpart
                                           in Government. All of these factors
in order. First of all, a “0” score for
                                           complicate direct comparisons among
the various “need deficiencies” should
                                           the groups and, to some extent, should
not be regarded as any type of absolute
                                           be kept in mind in considering the find-
goal or objective. As previously indi-
                                           ings reported above and the tentative
cated, different percentages of satis-     conclusions drawn from them. The re-
faction are expected among the various     sults of the study, however, should be
categories of needs. Furthermore, a        useful in designing and implementing
certain amount of “deficiency” is not      possible improvements in programs and
necessarily bad; some need would seem      methods of employee motivation and in
to be a healthy situation. Every job,      identifying those areas where further
especially one of a professional nature,   research seems to be appropriate.

            Behavioral Science-
            A Management Pool

            Understanding the principles and techniques of behavioral
            science can help auditors achieve their audit objectives.

   Having problems accomplishing                approaches to management-Theory              X
your audit goals? Perhaps you need to           and Theory Y.
consider behavioral science in your
managerial approach.                            Theory X
   What is behavioral science? I t is not
running rats through mazes. Instead,               Theory S is the favorite of the defen-
behavioral science is the study of an           sive boss. He believes that most workers
                                                are untrustworthy, lazy, and irrespon-
individual’s conduct influenced nega-
                                                sible and require close supervision, and
tively or positively by his environment.
                                                that external rewards must be carefully
It is considered a management tool to
                                                rationed to keep workers motivated.
be used to turn men’s irritability into
useful effort, creative and beneficial to          Is this your attitude and approach?
the organization.                               Then undoubtedly you have wondered
                                                what 1-ou did to make that staff member
   Behavioral science is an approach
that can be used to avert serious prob-         blow up! Is it possible you need to
                                                think a little before you speak? Per-
lems that men and organizations could
                                                haps you need to remind yourself that
be unconsciously building. I t can assist
                                                the men and women who work with
in identifying organizational hangups,
                                                you, and for you, are people and will
maximizing an employee’s strength,
                                                not favorably respond unless you treat
and assuring audit efficiency and               them as people.
timely reporting.                                  ‘Xhile behavioral science is not a
                                                people-problem panacea, it can help
Management Approaches                           avoid the kinds of misunderstandings
                                                that stifle efficiency and creativity. This
   The basic tenets of behavioral scien-        does not mean that individual whims
tists include two distinct and conflicting      are to be humored-but it does mean

   Mr. Hill is a supervisory auditor with the Detroit Regional Office. He is a graduate of
   Ferris State College, and has been with the General Accounting Office since 1962.

                                                                   BEHAVIORAL SCIENCE
that an individual’s viewpoint should         that audit problems are technical in
be understood and considered.                 nature and that the human element
                                              plays only a minor role in the solution.
Theory Y                                      To accomplish the audit objective effi-
                                              ciently, effectively, and timely, however,
   Theory Y presumes that people are          requires understanding and manage-
inherently creative, strong, and want         ment of individuals assisting in the
to make a contribution. According to          work.
Theory Y, people work best %hen                  If individuals are allowed to partici-
supervisors stop erecting defenses            pate, does behavioral science lead to
against presumed apathy and act as            better decisions by consensus or cause
though they recognize potential.              wasted audit time in bull sessions?
   Have you overheard your nien say,          Wasted time can be prevented if the
“This is not an operation, it is a hap-       sessions are confined to audit condi-
pening!” Perhaps behavioral science is        tions and objectives. The advantage of
the solution. How often has one of your       these sessions is the realization that
men felt he could bypass you when he          consensus, rather than a determination
believed the problem beneath your              by one individual. can frequently lead
attention, and come up with a sound            to better decisions.
workable solution that would withstand
                                              Techniques To Consider
Understanding and Supervising                    Some techniques for consideration,
Your Staff                                    according to Abraham H. Maslow in
                                              his book /Yotivation and Personality,
   When did you use a staff member‘s          published by Harper in 1954, are:
potential, tailored to job needs, to
                                                 Learn what makes each of your sub-
minimize the amount of time required
                                                   ordinates tick.
to audit and issue a report? Each super-
                                                 Find out what turns them off.
visor honestly interested in doing a job
                                                 Keep an open mind.
should organize his staff by function.
                                                 Remember that you are managing
responsibility, and authority to get the
                                                   people, not machinery.
most effective performance available,
                                                 Key your actions to avoid misunder-
or that can be made available. Without
                                                   standings that turn off creativity.
sincerity toward men, difficulty will be
                                                 Do not expect miracles from beha-
experienced and the performance of
                                                   vioral science. I t is a tool, not a
individuals will slip to the point that
                                                   panacea. Use it. but do not let it
productivity is affected.
                                                   become a crutch.
   Auditing, as well as any management
function requiring technical knowl-               Not all supervisors use these tech-
edge, must be blended with judgment.           niques. Instead. they use conflict to ar-
 While it is true that effectively conduct-    rive at a decision or audit procedure
 ing an audit requires a thorough              that everyone supports. These super-
 knowledge of conditions and objectives,       visors, although considered successful,
 some people have the mistaken notion          must learn that attitudes have changed.
BEHAVIORAL SCIENCE                                                                 39
People today will not tolerate this bull-      If taught behavioral science, the su-
of-the-woods approach. Behavioral sci-      pervisors of tomorrow should obtain
ence, therefore, must be used to over-      the desired results and should meet
come such reaction. Supervisors do not      the needs of the employees. If beha-
need new tools. Instead, they should        vioral science is learned and supervi-
learn to practice some of the old ones:     sors satisfy the needs of employees,
awareness, rapport, communication,          efficiency will increase and turnover
patience, and understanding.
                                            rates u-ill decrease.
Behavioral Science: A Solution                 Behavioral science needs to be prac-
                                            ticed in order to audit efficiently and ef-
  Ever wonder what supervisors do
                                            fectively. Remember these are not new
with human resources? Do they achieve
the best possible potential from their      techniques-j ust refinements of old
subordinates which, in turn, expedites      ones. Patience, understanding, hon-
completion of the job?                      esty, and fair play still work.
                                                           YJf      37;ra-

           Legislative Control Over

           The author reciews the British and American systems of
           legislative control over Treasury expenditures and comments
           on their relevance to today’s changing economy.

   I n order to adjust to changing eco-
                                      of England ranked third among the
nomic and social conditions, a countrygreat medieval officers of England,
must have a flexible system of finaricial
                                      after the Archbishop of Canterbury
administration. With certain improve- and the Lord Chancellor. The Treas-
ments made over the years, the Britishurer actually held two positions, Lord
system of financial administration,   Treasurer of England and Treasurer of
from which our system evolved, has    the Exchequer. The Office of Lord
proven superior to other types of con-Treasurer advised the king on financial
trol used in other countries.         policies; that is, whether the king could
    This article will attempt to show (11
                                      afford a new palace or fleet. The Office
the development of the British financial
                                      of Treasurer of the Exchequer was ( 1 )
administration system including Parlia-
                                      the custodian for some of the king’s
ment’s increasing control over the fi-valuables and ( 21 the accounting
nancial affairs of the Crown (executiveagency responsible for collecting taxes
branchj and ( 2 ) how the British Par- d u e the C r o w n and paying a m o u n t s
 liament and our Congress control es-  owed by the Crown in accordance with
penditures of the executive branches oflaw and custom.
 the respective Governments.
                                           At first, the British system did not
                                       function properly due primarily to a
Treasurer of England                   lack of supervision of the clerks by the
                                       Lord Treasurer and the Exchequer. In
  The Office of the Treasurer of Eng-
land is of Norman origin and dates addition, appointments were made for
from 1216.                             political reasons to the most lucrative
   From the middle of the reign of positions and for family reasons to the
Henry I11 ( 1216-1272) the Treasurer average positions. Once appointed, offi-

   Mr. Goldherg is a supervisory auditor in the Civil Division. He is a graduate of the
   University of Maryland and has been with the General Accounting Office since 1959.

LEGISLATIVE CONTROL OVER EXPENDlTURES                                             41
cials could hold their jobs for life since   1667 and in that year he instituted the
there was no procedure for adminis-          first system of Treasury records which
tratively removing dishonest or incom-       showed disbursements and revenues by
petent officials.                            program.
   The development of the Treasury as           In 1663 Parliament spelled out the
a department began in the late 1500’s        Treasury’s powers in greater detail.
when the Office of the Lord Treasurer        Basically, all money warrants except
of England started giving instructions       secret service warrants (for intelli-
to executive departments concerning          gence) were required to be signed by
receipts and disbursements of the            the Exchequer and countersigned by
Exchequer.                                   the Treasury Lords. Further, all dis-
   In 1612 King James I established the      bursements were required to be made
post of Treasurer of England in the          out of the Exchequer, which meant that
Treasury Commission and entrusted to         the departments must apply to the
a board of five or six persons the duties    Treasury for money. Secret service re-
of providing advice on monetary and          quests for funds came under Treasury
fiscal matters and maintaining account-      control in 1676. Thereafter, all depart-
ing records.                                 ments needed Treasury authorization to
   In order to prevent excessive grants      spend any money.
from being issued, the king of England          The British Bill of Rights of 1688
in 1660 required that the Treasury’s         required the Crown to relinquish to
opinion of appropriation laws be ob-         Parliament the right to impose taxes
tained before any warrants were pre-         and the right to control expenditiires
sented for his signature. Warrants are       out of the public revenues. From being
documents authorizing certain officials      a department wholly responsible to the
to disburse monej-s from the Treasury.       king, the Exchequer after 1683 became
                                             responsible to Parliament, with the
Parliamentary Control                        function of determining that no pay-
                                             ments were made out of the public
   The origin of the British system of       money without the express authority of
legislative control over financial mat-      Parliament.
ters was the Magna Carta proclaimed             The next major development was
in June 1215, which provided that only       Standins Order No. 73 issued in 1706
the legislature could authorize the im-      by the House of Commons which pro-
position of taxes. The next major de-        vided that only the Crown could initiate
velopment in Parliamentary control oc-       proposals for expenditure. Since 1714,
curred 450 years later when Sir George       the Treasury has been governed by a
Downing persuaded Charles I1 to agree        Board of Commissioners, numbering
to accept a Parliamentary appropria-         seven ministers, who carry out the du-
tion for a specific purpose.                 ties of the ancient office of Lord Treas-
   Sir Downing. known as the father of       urer. One Commissioner is the Prime
the principal of “supply” (financing         Minister. another is the Chancellor of
programs throuph specific appropria-         the Exchequer. and the remaining five
tions), was appointed Secretary of the       are Junior Lords, Members of Parlia-
Treasury Commission by Charles I1 in         ment. The Chancellor of the Exchequer
42                                             LEGlSLATlVE C O N T R O L O V E R EXPENDITURES

has the responsibility for preparing the            in arrears. Coinciding with the ad-
annual Estimates (budget) and for de-               ministrative reforms previously
ciding the amounts and details of the               mentioned, an Audit Board con-
Estimates.                                          sisting of five commissioners was
                                                    established at the end of the 18th
                                                    century. In 1830, the first appro-
Four Principles of Financial                        priation audit was performed in
Administration                                      which the auditors not only ascer-
                                                    tained that the payments con-
   By the end of the 18th century four
                                                    formed to proper official Parlia-
principles for sound financial admin-
                                                    mentary authority, but that all of
istration had emerged in England.
                                                    the payments were in accordance
  -No         money can be obtained or              with the purposes and amount of
        spent without legislative authority.        Parliamentary appropriation acts.
        The development of this principle
        was discussed above.                      These four principles were incorpo-
                                               rated into the financial system of the
     -All funds obtained are deposited
        in a single fund from which all ex-    United States as follows:
        penditures are made. A British            -Article I, section 9, of the United
        commission in 1780 recommended              States Constitution of 1789 pro-
        that one fund should be established         vides that:
        to account for revenues and ex-                 No Jfoney shall be drawn from the
        penditures of public money. The              Treasury, but in Consequence of Appro-
        Customs and Excise Act of 1787               priations made by Law;
        established the Consolidated Fund         -The     fiscal year concept was
         (Exchequer) as “a fund into                adopted in 1789 in the first general
        which shall flow every stream of            appropriation act passed by the
        the revenue and from which shall            Congress (1Stat. 95).
        issue the supply for every public         -The fund, with several exceptions,
        service.”                                   into which revenues are deposited
     -The period of financial account-              and from which expenditures are
        ability is a year. From the earliest        made has by usage and custom
        English records until 1752 the fi-          since 1789 been called the general
        nancial year (fiscal year) ended            fund.
        September 29. The financial year          -Responsibility for making audits
        was changed several times until              and investigations of Government
        March 31 was established as the             agencies was provided for in the
        end of the financial year in 18.54.         first Treasury Act of September 2,
      -The audit was instituted as a meas-           1789.
        ure of supervision and control.
         During the 16th and 17th centu-
         ries, audits required by Elizabeth    British Budget System
         I (1558-1603) of the public ac-
        counts were not very efficient and       The British supply or appropriation
        the audits were usua!ly many years     process begins December 1, u-hen the
    departments submit their Estimates           and approved by the Ways and Means
     I budgets) for Consolidation Fund sup-      Conmiittee with consent of the House
    ply services to the Treasury for revielv     of Commons to amend the law authoriz-
    for the financial year beginning April 1.    ing the national debt for another )-ear.
    Supply services are public services             The House of Commons has a rule
    financed bj- annual appropriations of        that nothing may be included in a
    the Parliament. The Estimate excludes
                                                 Finance Bill which was not covered by
    any request for Consolidated Fund
                                                 a previous resolution. The Finance Bill,
    standing services. Standing services are
                                                 which is then introduced and discussed
    those items which Parliament has deter-
                                                 over a period of 8 to 10 weeks, puts the
    mined to be of a permanent nature and
    include such items as interest and man-      budget proposals on taxation, duties,
    agement costs on the national debt. pap-     and the national debt into statutory
    ment to the Sovereign and Royal House-       form.
    hold, and pensions of former Prime              The House of Commons, after debate
    Ministers.                                   on the Estimate in its Committee of
        Parliament and the general public        Supply, grants (votes) the sums to be
    are informed of the Estimates in Febru-      spent. Before the grants are legally ap-
    ary of each year when the “Vote on           propriated, the House of Commons,
    Account” bill, which shows the totals        upon approval of its Committee of
    for each Estimate, is published by           Ways and Means, authorizes the issue
    Treasury. Because it is impractical for      of monej- to meet the voted expendi-
    Parliament to go through the entire          tures. The House of Lords must assent
    supply process before the financial year     to the Appropriation Act before it is
    begins on April 1, the “Vote on              passed. Passage usually occurs at the
    Account” also shows the amounts that         end of July.
    will be required to cover the first 3 or 5      Other items in the supply process
    months of the financial year. Vote is the    include (1) Supplementary Estimates
    deed by which Parliament actually            in the March Consolidated Fund Act
    grants or appropriates funds. The            and (2) Excess Votes. Supplementary
    ”Vote on Account” generally becomes           Estimates provide funds to agencies
    law as a clause of the March Consoli-        which do not have enough money for
    dated Fund Act on the last day of            the current financial year, similar to
    March upon the signature of the               supplemental appropriation acts en-
    sovereign.                                   acted in the United States. I n the one
        I n early April the Chancellor of the       t o cases when it becomes necessary
                                                 or M
    Exchequer makes the budget statement         for the Crown to make expenditures not
    to Parliament, after which the Com-          authorized by Parliament and Parlia-
    mittee of Ways and Means of the House        ment is not in session, Excess Votes
    of Commons votes immediately on reso-        provide Parliamentary authority for
    lutions to continue taxes at the current     the expenditure pursuant to a Treasury
    rate: to increase: or to lower them. A       authorization that the need was real and
    general resolution is then introduced        urgent.
                                             LEGISLATIVE CONTROL OVER EXPENDITURES
United States Budgetary System               for a staff of 587 persons to review the
                                             British expenditures of g11.5 billion
    I n the United States, the Office of     ($27.6 billion) in financial year 1968.
Management and Budget is responsible            The actual process of issuing money
for preparing the budget, which is pre-      appropriated by Parliament is formal
sented by the President to the Congress      and is in accordance with Sections 14
in early January of each year. Appro-        and 15 of the Exchequer and Audit De-
priation and tax bills originate in the      partments Act, 1866. Parliament votes
House of Representatives. The Ways           (appropriates) money for specific pur-
and Means Committee of the House of          poses to various heads of expenditure
Representatives has the power over tax       (account symbols and titles) and the
measures, and appropriation commit-          funds are accounted for under the same         I

tees in the House and Senate review the      heading. Supply grants (appropria-
budget requests of the departments.          tions) are technically made to the
Upon passage by both Houses and ap-          Crown and must be released by a Royal
proval by the President, appropriation       Order before the funds are placed at
and tax measures become law.                 the disposal of the Treasury. Money is
    We have basically three types of ap-     issued in the form of imprests (or ad-
propriation acts : ( 1) general appro-       vances) from the Exchequer account
priation acts which are mainly those         to the credit of the spending depart-
for the current fiscal year, (2) supple-     ments in the accounts of the Treasury.
mentary appropriation acts which sup-           Pursuant to the 1866 act, the Comp-
ply additional funds during the current      troller-Auditor General is responsible
fiscal year to departments which need        for insuring that the Treasury’s request
more money than originally appropri-         for credit (authorization) is in accord-
ated, and ( 3 ) continuing joint resolud     ance with the grants of Parliament.
tions which provide spending authority       Section 15 of the act allows the Comp-
for the first several months of the new      troller-Auditor General to grant credits
 fiscal year until the Congress has passed   to the Exchequer at the Rank of Eng-
the general appropriation acts.              land “when any Ways and Means shall
                                             have been granted by Parliament or
Control Functions                            resolution of the House of Commons.”
                                             The total credits must r i w t exceed the
  The Exchequer and Audit Depart-            amount of Ways and Means granted.
ments Act, 1866, established the             On the Treasury’s requisition form
Exchequer and Audit Department,              called an imprest, the Comptroller-
headed by the Comptroller-Auditor            Auditor General writes the following :
General. The Comptroller-Auditor Gen-
                                               I hereby grant a credit to the Treasury on
eral is independent of the Treasury          the Account of the Exchequer at the Bank
and the Crown, and is responsible to         of England or on the growing balance thereof
and reports to the House of Commons          to the amount of f ------------,on account
of Parliament.                               of Ways and Means granted for the year
   The Financial Year 1969 Estimate          _---.
budgeted $977,000 ($2,344,800) for           This is the critical measure that releases
the Exchequer and Audit Department           the credit. Without the credit, Treasury
LEGISLATIVE CONTROL OVER EXPENDITURES                                                           45
would have no legal authority to issue           The Treasury’s requisition form,
checks from the Exchequer account at          “The Department of the Treasury Ap-
the Bank of England. A Treasury Lord          propriation Warrant.” which author-
would run the risk of being held              izes disbursement of funds by the
accountable for an unauthorized check.        Treasurer of the United States, is ini-
I n summation, each issue out of the          tiated and signed by the Secretary of
Exchequer for supply services requires        the Treasury and contains the
the authority of a grant of Parliament,       following:
a Roya1 Order, an imprest from the               The Congress having. by the Acts hereon
Treasury to the Comptroller-Auditor           stated, made the appropriations hereunder
General, a grant of the credit by the         specified. the amounts thereof are directed
Comptroller~Auditor General, and a            to he estahlished in the general and detailed
                                              appropriation account=, totaling in all
Treasury Order to the issue of credit.
                                              $- - _ _ _ - - _ _ _ _ _ and for so doing this shall be
    In the United States, the Budget and      the
Accounting Act, 1921. established the
                                                 The authority that releases the credit
General Accounting Office as an inde-
                                              enabling authorized disbursing officers
pendent agency directly responsible to
                                              to issue checks on the account of the
the Congress. In the fiscal year ended
                                              Treasurer of the United States is the
June 30, 1970, the appropriation for
                                              countersigned signature of the Comp-
GAO was $70,273,000 for a staff of
                                              troller General or his designated repre-
4,516 persons. In contrast, total out-
                                              sentative. The Treasurer of the United
lays of all Federal agencies for 1970
                                              States could be held accountable to re-
were about $197 billion.
                                              fund any amount issued without this
    Article I, section 9, of the United
States Constitution states that no
                                                 Unlike the British Comptroller-
money shall be spent, except as author-
                                              Auditor General. the American Comp-
ized by the Congress. Amounts are
                                              troller General has statutory power
credited to the accounts of the spendin$
                                              pursuant to 31 U.S.C. 74 to make ad-
 departments in the Treasury’s central
                                              vance decisions on the legality of any
 accounting records for cash operations.
                                              proposed disbursements. These deci-
 The vehicles for issuing the credits are
                                              sions are final and conclusive upon the
 “appropriation warrants.”
    The actual process of issuing money       executive branch.
 or credits appropriated by the Congress
 is not spelled out in the Constitution,      Conclusion
 but the practice of using warrants was
 established in the act of September 2,          The British system of lepislative con-
 1789 (1 Stat. 6 5 ) , which created the      trol over expenditures has proven its
 Department of the Treasury.                  flexibility to meet changing needs for
    The Comptroller General, the head of      over 750 years. During that time, Par-
 GAO, is responsible for determining          liament has increased its control over
 that a request by the Treasury to estab-     the financial affairs of the Crown and
 lish a credit for an agent!- is in accord-   has been able to institute important
 ance with the appropriation of the           changes in the Crowi’s financial affairs.
 Congress.                                    The Comptroller-Auditor General who
46                                        LEGISLATIVE CONTROL OVER EXPENDITURES

is independent of the Treasury and the       The principal function of both the
Crown provides an important check on British Comptroller-Auditor General
financial matters. Also, the “vote on ac- and his American counterpart, the
count” method of supplying temporary Comptroller General, is of course not
funds for new programs until Parha- to control, but to audit expenditures.
ment officially appropriates the funds Recently, a bill was introduced in the
provides flexibility in that it allows 92nd Congress to create an agency in
Parliament to allocate moneys without the Congress to examine budget re-
the entanglements and delays involved quests, program costs and effectiveness,
in the regular appropriation process.     appropriations, and national priorities.
    I n the United States, there has been A section of this bill would have the
a trend away from detailed legislative Comptroller ceneral furnish copies of
control of finances and an inclination analyses of expenditures with respect to
toward greater reliance on the executive any department or agency in the execu-
agencies to maintain proper controls.
                                          tive branch. Congress needs this mech-
Nevertheless, I believe that, for eco-
                                          anism to help congressional staffs ex-
nomic reasons, more congressional con-
                                          amine the policies and programs, re-
trol over finances should be established.
                                          flected in the President’s budget. There
There is not enough money to solve all
 of our social and economic problems.     is a great need for the Congess to have
 For the Congress io allocate funds to the manpower:                 with the most
those programs where it would do the modern computerized methodology, to
most good, progr3ms competing for the fully examine and evaluate apPropria-
limited funds should be subjected to tion measures with regard to the needs
 strong legislative control.              of the Nation.

               An Old Lady Gets a
               Mew Dress

               Since the turn of the 19th century Government auditors hare
               been required to settle the accounts of accountable officers.
               The author describes his esperiences in performing such a n
               audit under the approach prescribed b y the Coniptroller
               General in 1969 to test theadequacy of agency internal control
               systems as the basis for settling accounts of accountable officers.

   “I would like you to prepare an audit       accountable officers’ accounts-was
program for settlement of accounts of          made a duty of the Treasury Depart-
accountable officers and then monitor          ment by various acts beginning about
the subsequent review,” my supervisor          the turn of the 19th century. With the
stated in February 1969. At first I was        passage of the Budget and Accounting
not overly pleased at the assignment           Act, on June 10, 1921. however, this
since settlement review were treated           responsibility was transferred to the
by many GAO supervisors as necessary           General Accounting Office. The act of
evils at best. I quickly found, however,       May 19, 1947. still in effect, specified
that a very challenging and interesting        that accounts, generally, must be settled
assignment faced me. Before telling you        by GAO within 3 )-ears from the date
my experiences on the assignment, I            of the receipt of the account with three
will give some background information          very important qualifications :
about settlement reriervs.                        -The 3-year period is suspended
                                                    during any war in which the
Background                                          United States is engaged.
                                                  -After an account has been settled,
   Determining the amount due the                   that settlement is final and conclu-
Government from the person held re-                 sive upon GAO after the expiration
sponsible for the receipt, disbursement,            of the 3-year period except as to
retention, or approval of the expendi-              moneys which have been or may
ture of public funds-i.e., settlement of            be lost through fraud or criminal-

   Mr. Grant is a super\irury auditor in the Cikil Dibiiiun currently assigned to the
   Interior audit site. He joined GAO in Fehr-ary 1962 after graduation from Duquesne
   University and holds a CPA certificate from the State of Virginia.

      421.l):s--T1---   4                                                               47
                                                              01.D LADY GETS A NEW DRESS
    ity on the part of the accountable            to do such a review at all locations of
    officer.                                      the agency concerned.
  -Amounts      found due within the
    3-year period may be recovered                Audit Program
    after the 3-year period has expired.
                                                     While my first thought was that GAO
   During fiscal years 1967-69. 31 re-            had not prepared audit programs for
ports on Corps of Engineers (Civil                settlement reviews, I was mistaken. In
Functions) settlement reviews were sent           fact, the Washington Regional Office
to agency officials. The amount of time           had prepared a program for use in set-
spent on a number of these rei’iews
                                ’    was          tlement reviews at Federal agencies in
disproportionate to the significance of           general. Therefore, with their knowl-
the findings in the reports. (An un-              edge, I was able to use their general
known but important factor, of course,            program as a guide in writing our
is the deterrent value of our settlement          specific one.
audits.)                                              Other helps in compilin,0 our pro-
   In the settlement area, our policy has         gram were various accounting texts.
been to base our review work and re-              Since the proposed settlement review
lated tests to the extent possible on an          was to be a review of the system of
evaluation of the internal controls at            internal controls over receipt and ex-
each location on a cycle basis. On                penditure transactions, we decided to
August 1, 1969, the Comptroller Gen-              include an internal control question-
eral sent a letter to the Heads of Fed-           naire in our program. Therefore, we re-
eral Departments and Agencies in                  viewed the advice contained in various
which he informed them that :                      accounting and auditing texts.
   In recognition that the basic responsibility       Two problems immediately arose :
for proper accounting and internal control         ( 1 ) the internal controls mentioned in
is that of each agency. t h e GAO audit of
                                                   the texts were for private business op-
accountable officers’ functions will place its
major emphasis on the adequacy and effec-          erations and did not necessarily apply
tiveness of the accounting and internal            to Government operations and (2) in
controls, including internal audit, of the de-     many instances the texts indicated that
partments and agencies in assuring that the        a client should have a certain internal
accountable officers’ functions are discharged
                                                   control procedure but failed to state
correctly and in accordance with the require-
ments of all applicahle laws and regulations.      w-hy. This second problem was es-
                                                   pecially troublesome and challenging
   Thus, our audit approach in the re-
                                                   because, as accountants, we tend to ac-
view just completed was to determine               cept certain internal controls as good
whether the agency’s overall system of             Tvithout questioning the reason why the
accounting and internal controls was               controls are good.
proper. If so, we then could review the                To illustrate? one of the questions we
adequacy of the system of receipts and             thought appropriate for inclusion in
disbursements and study the system in              the internal control questionnaire in
operation, including a test check of                our audit program was: Are creditors’
transactions, at a limited number of               statements checked by the accounting
locations since it would be duplicative             department to open accounts payable?
OLD LADY GETS A NEW DRESS                                                         49
   The first impression is that they          trols and a report to the Congress may
should be checked to increase internal        be justified.) We noted in the report,
control. If all vouchers for payment          however, that there was a need for:
must be properly supported with orig-           -Further separation of duties in the
inal documents, however, what addi-               Finance and Accounting Branch.
tional control does the checking to open        -Separation of purchasing and re-
accounts payable provide? Would such              ceiving duties.
a checking procedure really add some-           -Written notification to be given
thing other than additional time and               to the Finance and Accounting
 expense? Our Regional Office even-               Branch when purchases are re-
tually decided that the other controls            turned to and adjustments are re-
in the system prevented duplicative or            ceived from vendors after the re-
unnecessary payments to vendors and               ceiving report is sent to the
the cited internal control procedure was          Branch.
nice in theory but unneeded in the in-
stant case.                                     The Acting Chief of Engineers in a
                                              reply dated November 12, 1970, stated
                                              in essence that corrective action would
Evaluation of the Corps’                      be taken on all matters reported. I n
System of Internal Controls                   addition, the Corps expressed its ap-
   Our review was conducted using the         preciation for our assistance in im-
audit program described above in the          proving their system of administrative
Kansas City District, Missouri River          procedures and controls.
Division ; the Tulsa District, South-
western Division; and the St. Louis           Comparison of Results
District, Lower Mississippi Valley Di-
vision. The Kansas City District was             Some of the advantages of the new
selected because in addition to paying        procedure as shown below are (1) the
travel, procurement, and other expenses       attainment of an overall evaluation of
as do other district offices, it also func-   the system of internal controls in an
tions as one of the two Central Pay-          agency rather than just an evaluation
roll Offices (CPO) for most Corps per-        of controls at a number of individual
sonnel. Tulsa and St. Louis were              locations and ( 2 ) a reduction in man-
selected because they were within the         day requirements and travel expendi-
GAO Kansas City Region and were               tures.
serviced by the Kansas City CPO.                 A n overall eraluation of the sys-
   On October 14, 1970, we reported to        tem-If     implemented properly, the
the Chief of Engineers that we found the      newly authorized approach insures a
Corps system of administrative pro-           systematic review of the agencywide
cedures and internal controls over ac-        system of internal controls over receipt
countable officers’ functions to he gen-      and expenditure transactions. The tend-
erally satisfactory. (While in the case       ency in the past was to review indi-
of the Corps we directed our report to        vidual transactions at the location o r
the agency, other agencies’ systems may        locations under review. Thus, of the
not contain generally satisfactory con-        31 Corps settlement reports issued dur-
50                                                      OLD LADY GETS A NEW D R E S S

ing fiscal years 1967-69, none con-         The travel expenditures were incurred
tained specific romments on the Corps-      b!- the Regional Office in trips of short
wide system of internal controls.           duration to Tulsa and St. Louis.
   A reduction in man-day require-              In the Corps only 11 of 37 locations
ments and travel expenditure+-We            at which GAO makes settlement audits
spent a total of -130 man-days in con-      are in the same city as a GAO Regional
ducting the current review. This was        Ofice location. For reviews performed
significantly less than the 2,831 nian-     at the other 26 locations there will be
days spent on Corps settlement reviews      daily travel costs. Thus, in future re-
during fiscal years 1967-69 although        views, the regional travel costs will in
the end result-the clearing of all Corps    most instances be higher than such
District and Division accountable of-       costs on the present review. Even so,
ficer accounts €or a 3-year period-         however. travel costs will be less than
was the same.                               on past reviews because now we per-
   In regard to travel expenditures,        form our review at a limited number
there should also be a reduction in total   of locations whereas previously we per-
expenses over a 3-year period. 'Total       formed our review at about 37 loca-
travel expenditures on the present re-      tions over a %year period.
view bere $914 of which 5735 was                                       i

spent for travel of regional office per-       At the Corps audit site we found that
sonnel and $179 was spent for travel        the new procedure was advantageous
of Civil Division personnel. The total      and that it resulted in an efficient
travel cost for the period 1967-69 in-      method of settlement. Also, it was a
clusive uas $19,617.                        challenging and interesting assignment.
   The present review was performed         I hope that your experiences in up-
primarily in Kansas City, the same city     coming settlement reviews are similar
in which our Regional Ofice is located.     to mine.

            Auditape to the Rescue

            T h e Fall 1970 issue of the Review included t w o articles
            relating experiences with the use of Auditape in the GAO
            review of supply management at nacal shipyards. A member
            of the Seattle Region's audit team presents the background
            that led to the decision to use Auditape and computers in this
            examination and discusses the benefits achieved from
            the use of these audit tools.

   I n October 1969, the Seattle Regional       involved in our lack of familiarity. R7e
Office, as lead region, began a review          obtained the Auditape package, con-
of supply management at naval ship-             sisting of the taped computer pro-
yards. Within a matter of days, we              grams, instruction manual, and speci-
were overwhelmed by the gigantic di-            fication sheets, from our headquarters
mensions of our assignment. The four            Office of Policy and Special Studies;
shipyards selected for review-Puget             learned how to use it /not without some
Sound, Philadelphia, Pearl Harbor, and          occasional problems ; and provided
Mare Island-maintained           approxi-       for its successful use at all four loca-
mately 261,000 individual inventory             tions where a number of significant
records representing an inventory val-          findings were produced. An unexpected
ued at about $60 million. The most per-         result of using Auditape was the de-
plexing problem facing us was how               gree of acceptance of our findings by
these records could be manipulated so           agency personnel that might not have
we could take statistically sound Sam-          occurred if we had selected and proc-
ples of the inventory items and project         essed our samples manually.
our results into convincing azldit
findings.                                       Gradual Awareness of the
   ' e knew that several regional offices
   W                                            Problem
in GAO had used the Haskins & Sells
Auditape to solve similar problems, but            Our adventure into computerland on
we lacked personal experience in using          this assignment began in July 1969 with
it. Nevertheless, we accepted the risks         the arrival of a work assignment from

   hIr. Gardner is a supervisory auditor on the Seattle Regional Office staff. He has been
   with the General Accounting Offic~since 1968. He holds R.A. and hI.R.4. degrees from
   the University of Washington.

52                                                         AUDlTAPE TO THE RESCUE

our headquarters Defense Division au-       2 to 3 week period, it became evident
thorizing us to review the management       that the work needed to substantiate
of the shipyards’ Direct Material In-       any findings developed in these areas
ventory (DMI) account and the related       would be difficult and time consuming
activities of the nearby Naval Supply       to carry out using manual sampling
Centers. We had surveyed this area at       techniques. As an example, our survey
Puget Sound Naval Shipyard near             work in the shop stores area illustrates
Seattle in early 1969. Based on our ob-     the magnitude of the problems encoun-
servations at that time, it appeared that   tered which led us t o consider the use
material valued at millions of dollars      of Auditape in this review.
was being ordered and delivered as             Our first meeting with the Material
much as 1 year in advance of issuance       Supervisor and the Chief of the Inven-
to work-in-process for ship construc-       tory Control Section in the Supply De-
tion, repair, or overhaul. As a result,     partment at Puget Sound brought out
excess inventories accumulated be-          the following inventory information.
cause of changes in work scope and
overprocurement.                              -All inventory records were main-
                                                 tained on punched cards and were
   Our initial assignment was to firm up
                                                 filed by stock number and shop
the findings at Puget Sound. confirm
them at other selected locations, define         store number in file tubs.
the causes, and formulate recommenda-         -Inventory items were classified as
                                                 standard and nonstandard stock,
tions aimed at reducing the inventory
levels. At this point, no thought was            each classification carrying an
                                                 identifying stock number.
given to the possibility of using com-
                                              --Shop store items were further sub-
puters in any way to manipulate the
shipyard DMI records in developing               categorized as regular issue, insur-
                                                 ance, and preexpeiided (charged
our findings. The potential use of com-
puters on the review was not considered          to overhead and issued with no di-
until after the responsible Washington           rect charge to the user).
                                              -There were over 80,000 punched
operating group expanded the scope of
                                                 cards, two cards for each item,
the review to include Shop Stores In-
                                                 filed in two separate file tubs and
ventory and supply system responsive-
                                                 each     containing    information
ness as well as DMI. The Seattle Re-
                                                 needed for our review.
gional Office was also given the respon-
sibility for developing the audit pro-         From 10 to 12 inventory clerks
gram to cover the entire review and         worked with the punched card files at
coordinate i t with the participating       all times, filing updated cards, prepar-
regional offices.                           ing requisitions, consulting with shop
   Since our previous work had been         stores personnel, and offsetting cards
limited to the DMI account, we started      having receipts, withdrawals, or any
additional work in the area of shop         other informational change. Each night
stores material accounts and supply         all cards that had been offset during the
system responsiveness prior to devel-       day were pulled from the files and sent
oping the audit program. During this        to the data processing center for up-
AUDITAPE   TO THE RESCUE                                                         53
dating. The new cards were returned the      Staff’s Prior Exposure
following morning for filing and the         to Auditape
old cards were destroyed.
   We found that while each file tub            Once we had tentatively determined
contained all the card records for items     the scope of our work and the require-
carried in one shop store (there were        ments for a workable audit program
a total of 27 shop stores) there was no      that would give us the information we
separation by subcategory of items           wanted, our next step was to find the
within the shop. Filing was by stock         best way to handle the problems in-
number only, regardless of the category      volved. The audit team had had a min-
the item was in. Since each of these         imum of exposure to the use of the com-
categories had special characteristics       puter in performing audit work al-
which would have to be considered in         though we were aware it had been used
any analysis of supply management, it        successfully on other GAO reviews. One
was important that we devise some            member had previously been exposed
method to separate the shop store items      to the potential of the Auditape, par-
into the various categories.                 ticularly in the field of inventory man-
   Similar situations existed in the areas   agement, and based on the situation
of supply responsiveness and DMI.            in the shipyard as he saw it, suggested
While each area had its own character-       the possibility of using the Auditape on
istics which required identification and     this review. The two other team mem-
analysis, the common problem was to          bers and our regional specialist in the
find a method for extracting the infor-      computer field agreed that the Audi-
mation needed from the mass of record-       tape would be a useful and practical
ed data in the most efficient and eco-       means of manipulating shipyard inven-
nomical manner possible.                     tory data, whether it was kept on tape
   Once we had determined the m a p i -       or on a punched card, to get the infor-
tude of the problem at Puget Sound,          mation we needed.
 our next concern was with the situation
we could expect to find at the other         Auditape a s a Solution
three shipyards included in the review.
 During our short survey of shop store          The Auditape system is a set of gen-
 inventory records, we had met with the      eralized computer programs that can
 Puget Sound data processing personnel.      effectively utilize the computer for au-
 They had informed us that to their          dit personnel who are not data process-
 knowledge Puget Sound was the only          ing specialists. No knowledge of how to
 shipyard still using punched cards for      actually operate the computer itself is
 inventory files, and that the other ship-   necessary as sufficient instructions are
 yards were using magnetic tape for          included in the Auditape manual so
 recordkeeping. The inventory accounts       that any computer operator can run the
 were the same in all shipyards, but in-     tapes on the machine.
 formation on data storage and retrieval        The basic requirements for the audi-
 systems was not available for the other     tor are a knowledge of the format of
 locations.                                  the agency records, the Auditape in-
                                                           AUDITAPE TO THE RESCUE
struction manual, a set of specification    we suggested detailed steps to follow
sheets to fill out for each program, and    that were largely based on what we felt
a keypunch machine for putting the in-      could be accomplished in a relatively
formation from the specification sheets     short time by using Auditape and a
onto punched cards that can be read         computer.
by the computer. These programs, or            A prejob conference was held with
routines, are used to extract various       all participating regions and the Wash-
bits of data from agency records            ington operating group. At this meet-
through the edit routine and put them       ing, the audit program was discussed
in a format on a work tape that is then     and one of our team members pre-
used as the input for a number of ad-       sented our case for incorporating the
ditional routines. Among these routines     use of the computer and the Auditape in
are those that perform arithmetic           it. Some of the representatives present
calculations, special analyses, and sta-    were apprehensive about using the Au-
tistical sampling. For example, by pre-     ditape, primarily due to lack of experi-
paring a few specification sheets and       ence. However, all agreed to give it the
having them keypunched, an auditor          old college try. All regional representa-
with no computer knowledge can uti-         tives were assured that help would be
lize the computer to add material due-in    forthcoming if they got into difficulty
to quantity on hand, subtract the au-       using the Auditape. No attempt was
thorized quantity to be held, multiplj-     made at this meeting to specifically de-
the result by the unit price, and print     lineate where the Auditape was to be
out the amount of excess, if any.           used. It was only pointed out what the
    The special analyses routines made      Auditape could do and the areas where
it possible to electronically segregate      our experience had demonstrated its
all the different categories and subcate-   value.
gories of inventory items contained in
 the records and operate on each set as
                                            Putting Auditape     To Work
 a separate inventory account, thus solv-
 ing one of our most perplexing                After the audit program was ac-
 problems.                                  cepted, we armed ourselves with the
    After we agreed in the Seattle Region   Auditape and tackled one of our major
 that the use of the Auditape appeared to   objectives: determination of the ex-
 be a satisfactory way to solve some of     cess material the shipyard had on hand.
 the problems encountered in attempting        The approach we took was rather
 to manually manipulate the shipyard        straightforward. We wanted each in-
 records, we wrote the audit program to     ventory account segregated, as well as
guide ourselves and the assist regions.     the segregation of all subcategories
 Based on our experience at Puget           within the accounts that had special
 Sound and on the limited information       characteristics requiring a separate
 we had about the other shipyards, we       analysis. For example, the dollar value
 incorporated the suggested use of the      of insurance items carried in the inven-
 Auditape wherever possible. As we          tory account at Puget Sound appeared
 outIined the information \be wanted        to be excessive in retation to total
 from each participating audit team,        shop stores inventory. For us to ade-
AUDIJAPE T O T H E RESCUE                                                        55
quately analyze the items in the insur-    Problems Encountered
ance items category, we had to isolate
                                              The Seattle and Philadelphia Regions
them from other items in the shop stores
                                           had problems that complicated to some
                                           extent the use of the Auditape. As indi-
   Once the Auditape's editing routine
                                           cated previously, the Puget Sound Ship-
had made these segregations for us, we
                                           >-ard had all inventory records on
could use the Auditape's other routines
                                           punched cards which were continually
for summarizing, doing arithmetic
                                           being updated. The Auditape accepts
computations, sampling to manipulate
                                           punched cards as input a s well as mag-
the data in each account or subaccount.
                                           netic tape. However. the shipyard com-
and printing out a sample list of items
                                           puter had a menlor>- unit too small to
for further analysis and projection. If
                                           accommodate the Auditape require-
necessary, w-e could use the computer
                                           ments. so we were unable to use its
to age the accounts by length of time
                                           computer facilities. The nearest avail-
held in inventory. compare one list
                                           able computer with all the required
of items with a second list for duplica-
                                           capabilities was at Portland, Oreg., but
tions, and scan large inventory listings
                                           it was out of the question to transport
for items showing predetermined char-      the thousands of inventory records to
acteristics, such as low unit cost, non-   Portland to serve as input on the com-
standard stock numbers- qualit). con-      I)uter there. In a meeting with the ship-
trol requirements, etc.                    !-ard data processing personnel. we
            the Same genera'               con\.-incedthem of the desirability, both
uras followed at each of the shipyards,    to them and us. of using the Auditape
the operating conditions and record        and the)- agreed to put all the inventory
storage at each shipyard varied to some    card records for the shop stores
degree. The Pearl Harbor and Mare          accounts on magnetic tape which u-e
Island Naval Shipyards maintained          could then take to Portland and use
updated master inventory records on        with the Auditape.
magnetic tape. These tapes included all       Once this was done. we applied the
the inventory records for the three in-    Auditape edit routine to the shipyard
ventory accounts, simplifying the work     record. extracted the desired informa-
of the audit team since all necessary      tion. and put it on our own worktape
records were in one place. In addition.    for further manipulation and analysis.
both shipyards printed a quarterlj- ex-    The shipyard spent 2 hours putting the
cess listing report showing the amount     records on tape for us, but they did it
of material the shipyard considered to     at night so that it did not disrupt the
be excess. Consequently, much of the       \rork of the inventory control section
work that we had to do at Puget Sound      personnel at all. This procedure not
was already done at these two ship-        on14- eliminated a p e a t deal of inter-
yards. Roth auclit teams also had rela-     ference b!- our staff in the normal work
tively free access to computers that had   pattern of the ship)-ard inventory clerks.
sufficient capacity to accommodate         hut it provided u s an inventory record
Auditape requirements.                     cutoff date which would have been very
56                                                          AUDITAPE T O THE RESCUE

difficult to get if we had tried to sample tapes so the Auditape programs could
the records on a manual basis.               be used.
    Later in our review we found it
necessary to go back to our original
                                             The Payoff
worktape of records for additional in-
formation on selected areas of the in-          As the result of our review of the
ventory accounts. With the Auditape inventory accounts at the four ship-
we were able to quickly obtain the in- yards, we were not only able to point
formation we needed without disrupt- out the amount of excess material car-
ing the work of the shipyard staff. ried by the shipyards, but, in several
Based on our sample results, certain specific instances, we were able to pin-
areas of shipyard operations appeared point where the excess was being held.
to be the focal point for large amounts At Honolulu, the shipyard printed out
of excess material. The Auditape a quarterly excess listing report so that
allowed us to isolate these areas in their it was aware that excess inventories
entirety for further analysis, rather were being carried. The Honolulu audit
than having to rely strictly on a sample team's analysis of this excess listing
of these items.                              showed that out of the thousands of line
    The Philadelphia Region had the items carried in the various shops, 90
biggest problem to contend with in percent of the dollar value was concen-
applying the Auditape to shipyard trated in 745 items physically located
records.' In September 1969, the ship- in two of the 12 shops. This informa-
yard at Philadelphia converted its in- tion was not known to shipyard man-
ventory records to conform to the agement prior to our review. At Puget
Navy's Management Information Sys- Sound, we were able to show that 91
tem. This system uses the UIL'IVAC percent of the insurance items were held
I11 computer, and unfortunately the in three shops. Therefore. our analysis
UNIVAC tape record was not compati- of this account was confined to these
ble with Auditape.                           areas, resulting in considerable time
    The UNIVAC tape must be converted        savings.
to an IBM format which can then serve            While most of our analysis of the
as input for Auditape application. The       inventory   accounts was done on a Sam-
audit team at Philadelphia could find        ple   basis, the use of the computer
                                             enabled the audit teams to review the
 no Government activity in the area with
                                             total number of records in certain areas
 this conversion capability. After an un-
                                             and to make comparisons on a scale
 successful attempt by UNIVAC to con-
                                             impossible to achieve by manual meth-
 vert the tape, one of the programmers
                                              ods. The San Francisco audit team
from our Office of Policy and Special
                                              analyzed all issues from shop stores for
 Studies was called in and through his
                                              1 month (23.000) to test shipyard
 efforts, combined with shipyard and
                                              compliance with Navy requirements
 UNIVAC cooperation, finally achieved
                                              concerning low-value (under $2.00)
 a successful conversion of the inventory
                                              issues. At Pearl Harbor, the audit team
   1 See C 4 0 Review, Fall 1970, pp. 48-54.  wanted   to determine whether items
AUDITAPE TO THE RESCUE                                                          57
carried in the insurance category were         1. The auditor’s interruption of the
available in other inventory accounts or    normal work routine in the shipyards’
were shelf items in the nearby naval        inventory sections icas drastically
supply center. A 50-item sample of          reduced. Without the Auditape, manual
insurance items was compared with           sampling would have been required,
over 20,000 standard issue line items       and one or more auditors Ji-ould have
and any duplications were printed out       spent days trying to sort through the
for further analysis. The over 1:000,000    file tubs at the same time the inventory
comparisons were made in approxi-           clerks were working with the records,
mately 13 minutes of computer running       keeping them current. Once we had the
time.                                       records on tape, our need to use the
   These examples are only a few of the     card information was minimal since we
Auditape applications made to ship-         could print out any portion of the
yard records, but they point out the        records we needed.
analysis of records that is possible when      2. The Auditape allowed us to do a
the speed and efficiency of the com-        much more extensive analysis of the
puter are utilized.                         inventory accounts and produced more
   The difficulties experienced at Phil-    reliable information than would have
adelphia in using the Auditape had          come from manual sampling. With the
some beneficial results. The Auditape       computer’s speed and accuracy, we
applications, particularly in the Sam-      were able to perform a number of math-
pling area, were closely examined by        ematical computations and compari-
shipyard statisticians, and the results     sons which ~ r o u l dhave been be)-ond
of some of the samples taken and the        manual capabilities. To take monetary
evaluations made were discussed w-ith       samples, we needed the dollar value of
them. Consequently, when the results        each inventory item. Multiplying the
of the review made at Philadelphia were     unit price times quantity on hand for
presented to and questioned by ship-        the thousands of items carried in the
yard officials, our GAO team had the        records would have taken a number of
 unique experience of having the ship-      man-days. Using the computer, about
yard statisticians assure the officials     2,000 of these computations were made
that GAO’s findings were based on           every minute.
a c c e p t a b 1 e statistical sampling        3. Significant savings in audit time
techniques.                                 were also evident, even considering the
   Our review disclosed convincing          extended depth of our analysis. The
evidence that the Navy could and            printouts of sample items and evalua-
should reduce excess inventories, and       tions were used as workpapers, saving
the findings have been included in a
                                            many hours of scheduling time. Thou-
 report being issued to the Congress.
                                            sands of items were quickly screened
Advantages and Disadvantages                for special characteristics. and certain
of Auditape                                 categories of items were isolated and
  Based on our experience with using        their location pinpointed, thus elimi-
the Auditape on this review, several        nating unnecessary work being done in
distinct advantages were noted.              unproductive areas.
58                                                         AUDITAPE T O T H E RESCUE

   4. More comparable results from            The disadvantages of the Auditape
participating regions were obtained.       were minor. A number of reruns were
We were generally aware of the kinds       required to get the desired information
 of information available at each ship-    in final form, but the speed of the com-
 yard, but we were not sure of how it      puter tended to counteract this require-
was maintained. With the Auditape, it      ment to some degree. For certain
didn’t make any difference and \\-e        records, additional columns in the
could specify certain steps in the audit   Auditape format would have been use-
program with the assurance that the
                                           ful, but usually the 12 columns were
other regions could easily get us the
information desired. The large number
of records maintained at the shipyards     Conclusion
necessitated the use of sampling tech-
                                              ‘The extended use of the Auditape on
niques. Although each audit team could
                                           this review demonstrated to us that its
have selected its own samples, the Audi-
                                           sampling capability is but one facet of
tape sampling routine gave us a com-       a very useful device for improving our
mon procedure that assured impartial       audit performance. The increased depth
selection. By consistently using the       of our analysis, the acceptability of our
same confidence and precision levels,      projections, and the comparability of
there was no questioning our ability to    our results were all made possible
comhine the results from the four ship-    through the use of this easy-to-use
yards and use them in our consolidated     audit tool. The Auditape enabled us not
report.                                    only to develop audit findings, but was
AUDITAPE TO THE RESCUE                                                         59
also beneficial in helping us determine    available from these programs far out-
areas of shipyard operations that war-     weigh the disadvantages due to lack of
ranted little or no further work.          experience. We found that each of the
   For audit teams with no prior experi-   regions participating in this review had
ence in computer applications, the use     at least one individual knowledgeable
of Auditape, or any of the other gen-      in the computer area. In addition, the
eralized computer programs, requires a     Washington staff in the Office of Policy
certain amount of learning time. Our       and Special Studies was very willing to
experience has been that the ad\ antages   provide an! assistance required.

             Application of Marketing Concepts
             to the Analysis of a Government
             Program or Agency

             Four marketing concepts are involved when analyzing the
             management of a Government program. Only one of these-
             failure to produce or distribute needed services-has
             historically been emphasized by the GAO auditor. Yet, from
             a marketing point of view, the underlying causes for varying
             degrees of program ineffectiveness can be found in three
             other areas: defined need does not exist, unrealistic allocation
             of resources, or an improperly defined target market.

Introduction                                  offer solutions to problems which affect
                                              an agency’s ability to achieve its in-
   As the complexities of Government-         tended objectives. In connection with
wide decisionmaking have increased, so        this changing role, this article attempts
has the need for valid information upon       to show how problem identification
which new decisions can be based and          techniques used in the field of market-
past decisions reviewed. These com-           ing ran prove helpful in identifying
plexities created a need for the General      problems contributing to an agency’s
Accounting Office to analyze where it
                                              lack of effectiveness.
has been going and where the needs of
the Government will take it. The result
of such an introspection ideally has          Assumptions
been to realize that economy in the
                                                 -The legislative, executive, and judi-
Government is a relative term and is
dependent upon how effectively Govern-        cial branches of the US.Government
ment-sponsored programs meet the ob-          form a holding company which makes
jectives they set out to achieve. The         decisions to enter or exit a certain
changing needs of the Government have         market with its products whenever such
increased GAO’s need to identify and          a move seems to be for the ‘‘good of the

   Mr. Cox is a management auditor i n the Portland Suboffice of the Seattle Region. He
   holds B.S. and M.B.A. degrees from the University of Oregon and is a member of
   the American Marketing Association. Mr. Cox has been with GAO since January 1969.

APPLICATION OF MARKETING CONCEPTS                                                  61
nation.” It produces these products in           In an attempt to satisfy these social
one or more of its manufacturing plants       needs, the Great Trust appoints existing
(agencies). Although this holding com-        agencies or establishes new agencies
pany has many manufacturing plants at         to produce need-satisfying services.
its disposal, it periodically finds it        Ideally, the agency’s size is directly re-
necessary to establish a new one. One         lated to the complexity involved in pro-
unique characteristic of this holding         ducing need-satisfying services and to
company is that it seldom finds it ex-        the size of the target market for those
pedient to dispose of any of its means        services. Its size should vary only in
of production. Given the dynamic              proportion to changes in the target mar-
nature of the environment in which it         ket and complexity of production.
operates, this characteristic becomes             The key to satisfying a properly
even more unique. We will call this           identified need is proper definition of
holding company the Great Trust.              its target market. (Who possesses the
   -A product is that service which an        need?) To effectively establish the cor-
 agency provides.                             rect target market, extensive research
   -A target market is that group of           of potential consumers must be made to
people who are the prime consumers of          determine the market’s characteristics
 a product.                                    and its parameters. Without this knowl-
   -There are two basic types of needs:       edge prior to production, not only is
      1. Those which when satisfied the        an improperly constructed product
          first time disappear.                developed, it is incorrectly marketed.
      2. Those which are recurring and         This is a not uncommon failure of the
          must continually be satisfied.       Great Trust, which has a tendency to
   Which type any specific need is de-         develop general products in order to be
    pends largely upon definition. Very
                                               sure the people with the need get helped.
    few of type 1 are found in the Great
                                               Much is wasted in such an approach
    Trust’s long-range plans. Some have
                                               because either more people than origi-
    existed in the short run but tend to be
    redefined to a tj-pe 2 by the indi-        nally intended use the service or too
    vidual agencies.                           much service is produced and no one
                                               uses it. The reason the welfare system
 Factors Qf                                    is now under attack may be explained
 a Marketing System                            as a lack of understanding of the char-
                                               acteristics which make up a person in
    Before the production of any product       need of public assistance. Such an ap-
 can be justified, a need must be deter-
                                               proach can be compared to a hunter
 mined to exist for that product. Once
                                               who does not really know what type of
 this need is determined to exist and is
                                               game he is after. He buys a shotgun
 properly defined, it must periodically
 be redefined because needs are not stag-       hoping that whatever presents itself can
 nant factors. A major function of the          be handled. He encounters a bear on
 Great Trust is defining those social           the first day and can do no more than
 needs which will officially exist in the       make it angry by scaring it with all the
 public eye.                                    noise. On the second day out he en-
62                                           APPLICATION OF MARKETING CONCEPTS

counters a sparrow and after firing can-         might exist when 100 dollars are
not find the carcass.                            needed to produce a service to
   We have been speaking, in general             satiate the target market‘s needs.
terms, of the factors which make up a            There are 100 persons in the
marketing system. More concisely, these          target market as it is identified,
are identification of a need; definition         but only 50 dollars were allotted
of the group most strongly possessing            by the Great Trust. If the agency
thie need (target market) ; production           in question is attempting to spread
of a need-satisfying product; and dis-           the 50 dollars to the 100 persons,
tribution of this product to the target          we get the effect of shooting at the
market in an effective, efficient, and           bear with the shotgun. The pro-
economical manner.                               posed recipients only get angry
   If we view the Great Trust‘s opera-           because they require (and have
tions as a system, the needs it identifies       been led to believe they deserve)
should be effectively met by the activi-         more than exists to satisfy them.
ties of its various agencies. If this is         Many of today’s social programs
not being done, some portion of the               fit into this category.
system is malfunctioning. This malfunc-      3 . The target market has not been
tioning can arise from one or more of            well defined or concisely stated in
four problem areas:                              terms of who actually possesses
  1. The need as it is defined does not          the need. An example of this can
     exist (the definition may require           be found in the low-rent housing
     updating or it is a type 1 need as          program which tends to reach the
     set forth in the assumptions).              marginal poor rather than the
     Therefore, the whole system may             poor poor. This is also the case
     have no reason for existing in its           with the Department of Com-
     present form. “NOdefined need” is            merce’s commercial exhibition’s
     not an uncommon problem. For                program which attempts to in-
     example, the Post Office Depart-
                                                 crease U S . exports. The focal
     ment did not properly define a
                                                 points for its efforts have been es-
     need when it initiated a midday
                                                  tablished exporters and the de-
     mail Accelerated Business Collec-
                                                 veloped countries of the world.
     tion and Delivery (ABCD) serv-
     ice only to realize after an                The program could be more ef-
     expensive faux pas that business            fective, however: if it concentrated
     would not mail in midday.                   on inexperienced exporters and
  2. The target market’s size has not            the developing markets.
     been well defined in relation to        4. The agency management involved
     existing funds. For example, the             is failing to produce the correct
     definition of the target market may          need-satisfying products or is not
     be too encompassing to be satis-             distributing what it does produce
     factorily reached using the re-              in a manner to reach the target
     sources the Great Trust has                  market effectively, efficiently, or
     allotted for this purpose. This              economically.
APPLICATION   OF MARKETING CONCEPTS                                               63
     The activities of the Federal High-          are in the lowest income group
     way Administration (FHWA)                    and cannot afford to pay enough
     possibly illustrate this probleni            to cause private enterprise in their
     area. For example, if a goal of the          locality or metropolitan area to
      FHWA is to reduce accidents                 build an adequate supply of de-
     caused by relatively unsafe high-            cent, safe, and sanitary dwellings
     ways, it has not been successful.            for their use.” The law does not
     It has not produced a system of              specifically state rihich families
     hazard-free highways and thus                are in the lowest income group.
     the need remains unsatisfied.                The 1959 amendments to the
     While many of the newly con-                 Housing Act of 1937 state, how-
     structed highways are relatively             ever, “Income limits for occu-
     hazard free, many older roads still          pancy and rentals shall be fixed
     contain driving hazards. FHWA                by the public housing agency and
     has the ability to produce less              approved b!-        the Authority
     hazardous roads but it has failed             (HUD‘I after taking into consid-
     to distribute this ability to the            eration ( a ) the family size, com-
     target market of its services-the            position, age, physical handicaps,
     people who drive on hazardous                and other factors which might
     roads. This is possibly due to the           affect rent-paying ability of the
     agency being more concerned                  family, and (h) the economic
     with producing additional high-              factors which affect the financial
     ways than w-ith reducing hazards             stability and solvency of the
     on all highways.                             project.‘’ Section (b) of the
     Failure in this problem area some-           amendments seenis to negate any
     times is not solely the fault of the
                                                  attempts to reach the poorest of
     agency or agencies involved. The
                                                  the poor, in that stability of the
     problem may be in the Great
                                                  housing project forces the local
     Trust‘s stated approach to be used
                                                  housing authority to place the
     in reaching the target market. The
                                                  marginal or wealthy poor first
     “Trust,“ in its zeal to write legis-
                                                  because they can pay a higher
     lation, sometimes composes plans
                                                  percent of their own rent.
     of action in a manner which,
     when followed. result in agency-           If GAO used this four-step problem
     produced services missing the in-       identification approach in addition to
     tended target market.                   its present auditing techniques, prob-
      Such is the case with the guiding      lem areas heretofore passed over might
     legislation for providing low-rent      be identified. For example, in problem
     public housing. The I-nited States      area 1. “defined need does not exist,”
      Housing Act of 1937 p r o d e s that   when we are conducting an effective-
     low--rent housing shall be avail-       ness review of an agency, we must
      able solely for families of low in-    analyze the ohjective the agency is at-
      come. The act describes ‘*families     tempting to achieve. If the character of
      of low income” as “families who        that objective has changed, it is pos-
64                                             APPLICATION OF MARKETfNG CONCEPTS

sible the agency is “hunting for an         Use of Marketing Techniques
extinct animal.”                            To Audit Federal Agencies
   Problem areas 2 and 3, “unrealistic
allocation of resources” and “improp-          Any public need is held by a specific
erly defined target market,” are both       social group which is located in a
to be found in the planning stage of a      specific geographical area during a
program’s development. In problem           specific time period and living under
area 2 the agency should plan its activi-   specifically understood social and
ties so that it can significantly satisfy   environmental conditions. The size of
the needs of people in the target market,   this public need can be represented by
because a partially satisfied need re-      the total amount of resources required
mains an unsatisfied need. When             to produce services which will satiate
restricted by funds, the target market      it. These services we will call need-
should be divided into smaller groups       satisfying services.
whose needs can be significantly                As is indicated by the previous para-
reduced with available funds. This          graph, it is necessary to do considerable
would require establishing a priority       research to accurately estimate any pub-
system to determine the order in which      lic need. Under our system of Govern-
the groups should receive assistance. In    ment it is only after this need is felt to
problem area 3, before any action is        have reached a size large enough to
taken, the agency must attempt to deter-    prompt Great Trust intervention in its
mine the exact characteristics of the       reduction that public resources are
possessors of the need identified by the    allocated to it. This critical size is de-
Great Trust.                                fined by the Great Trust. A basic prob-
    Problem area number 4, “failure to       lem facing the “Trust,” and therefore
produce or distribute needed services.”      the agencies providing the services it
has historically been the domain of the     has requested, is the lack of research
 GAO auditor because this is where           conducted prior to allocating need-
 efficiency and economy can be deter-        satisfying resources. The Great Trust
 mined. This is also where the few effec-    and its service-producing agencies often
 tiveness reviews done by GAO have           do not know exactly what the public
 been centered. However, from the            need is because they do not know the
 marketing system point of view, prob-       characteristics of the social group
 lem areas 1, 2, and 3 are where basic       possessing this need, the location of the
 causes of ineffectiveness in Great Trust    group, the social and environmental
 programs can be found.                      conditions confronting the group, or
    The following section sets forth an      the time period during which this need
 approach which may provide some in-         will exist. Because of this, many deci-
 sights for applying marketing theories     sions made by the Great Trust and its
 to the audits done by GAO. As this sec-     agencies are subject to being based on
 tion pointed out, marketing theories        reactions to unsubstantiated informa-
lend themselves primarily to effective-      tion which may significantly overstate
 ness audits.                                or understate needs.
APPLICATION OF MARKETING CONCEPTS                                                  65
Analyzing a Program                          Social Group: How large is the group
                                               of people possessing the need? Is
   The following elements go into defin-       there more than one distinct group
ing who possesses the need for the serv-       involved? What are the demographic
ices produced by the Great Trust. They         characteristics of the group? These
will be recognized as those presented in       characteristics must be distinctly
this section’s introductory paragraph.         defined.
They are presented in a manner to show
some of the thinking an analyst must go      Location :Is the need for these services
through when looking at each element           limited to a specific geographic area?
and its relationship to the need-              Demand €or a need-satisfying service
satisfying service offered by the              should be analyzed with reference to
“Trust.” It should be noted that               well-defined geographical bound-
assumptions about the elements of a            aries. For instance, the amount of
public need made at the time a program         Indian housing needed in the next
is established are the basis for man!- of      year will naturally vary depending
the decisions which go into creating the       upon whether the boundaries are
new program. It is therefore important         limited to reservations in the State
for anyone trying to analyze the effec-        of Washington or include all reser-
tiveness of a Great Trust program to           vations west of the Mississippi.
determine these assumptions. The pro-        Social and Environmental Conditions:
gram’s ineffectiveness may be caused by        The ability to satisfy any need is
the fact that an assumption about one          affected by many uncontrollable fac-
of the elements was incorrect or short         tors, such as nature, technological
lived. In some cases assumptions made          breakthroughs, economic reversals,
during the course of a program’s opera-        changes in social values, and new
tion can be the cause for that program’s       legislation. A generally stated, inflex-
inability to meet its goals. The analyst       ible set of program operating stand-
 should be on the lookout for these also.      ards may be the cause of that
 The elements are :                            program’s lack of effectiveness. For
Need-Satisfying Service: The agency            example, because of great climatic
  appointed to reduce a need identified        differences, a furnace designed to
  by the Great Trust must thorou~hly           heat a house on a New Mexico Indian
  understand the characteristics of that       reservation should not be placed in
  need. If the need is for housing, it         a house on a Montana reservation
  must be known (1) what the poten-            and be expected to perform satisfac-
  tial inhabitants of that housing re-         torily. In this case the construction
  quire for shelter and (2) what class         standards for low-rent housing on
  of shelter is needed; i.e., deluxe or        reservations should reflect the cli-
  bare necessity. If the Great Trust           matic differences. In order to most
  identifies a need for a postal service,      effectively satisfy needs, a program’s
  research must be conducted to deter-         structure must be flexible enough to
  mine the type of postal service which        incorporate technological advances
  will most effectively satisfy that need.     and ecological requirements into its
                                               APPLICATION OF MARKETING CONCEPTS
  operations. For example, the develop-     set forth. But any analysis of a pro-
  ment of nuclear electric power has        gram’s effectiveness will be incomplete
  altered the United States’ means and      unless we answer the basic question-
  and ability to satisfy needs for elec-    “Are the people intended to be helped
  tricity. An organization like the         being reached?’’ There are various
  Corps of Engineers must take these        methods which can be used to estimate
  elements into consideration when it       public need and the type of service re-
  analyzes the need for more dams.          quired to satiate it. An analyst can use
                                            these methods on a test basis to see if a
Ti:me: Most   needs, if broadly defined,
                                            “Trust” program is actually meeting
  are timeless, but the means of satisfy-
                                            the goals it set out to achieve.
  ing those needs are ever changing.
                                               Basically, there are three informa-
  Any development of a need-satisfying
                                            tion bases upon which an estimate of
  service must take into consideration
                                            need or the development of a need-
  its potential lifespan. For example,
                                            satisfying product can be established.
  the need for electricity may always       Borroir ins terms from Phillip Kotler’s
  exist, but the need-satisfying service,
                                            hook.     “Marketing      Management,”
  hydroelectric production, has a
                                             ~ p 106)
                                                 .     these three are: what people
  definite lifespan.                        say, what people do, or what people
  This section’s introductory statement     have done.
was broken down by its five elements in       What people say involves determin-
order to elaborate on each. They are        ing the opinions of those thought to
not, however, to be viewed as separate      possess a predefined need or of those
or independent. The statement, with the     understanding their plight, such as out-
addition of a provision for feedback.       side experts. In the case of social pro-
describes a “system” or complete entity     grams, for example. those outside
whose total effect is something more        experts would be sociologists, psychol-
than the sum of the individual parts.       ogists, etc. There are two methods we
This system can be of practical appli-      can use to determine these opinions:
cation in auditing agencies and their        (1) contacting the need possessor and
programs in that it gives the auditor a      12) composites of expert opinion.
means of viewing that agency’s or pro-
                                               What people do involves using a test
                                             market or markets to determine if the
gram‘s operation as a whole. It is up
                                            need exists and its intensity by record-
to the auditor to adapt it to his indi-
                                            ing people’s reactions to various
vidual job and to use his personal
                                            stimuli. This method is also used to
knowledge in identifj-ing the program’s
                                            determine the effectiveness of a need-
weaknesses. At best it can only be
                                            satisfj-ing service in reducing a pre-
viewed as a means to identify problems.
                                            defined need.
                                               What people have done involves
Are the People Being Reached?
                                            mathematical and statistical analysis of
  In the preceding sectinn a means of       past reactions by the social group in-
analyzinF the elements which go into        \.-olved. or a similar group. to certain
developing a Great Trust program was        stimuli and the projection of these reac-
tions into the future. The tools used in      identification techniques presented in
this method are usually classical time         this paper, many of the previously
series analysis or statistical demand         unidentified causes of agency and pro-
analysis.                                     gram lack of effectiveness can be under-
                           -                   stood and corrected. The General
   The Great Trust needs valid infor-         Accounting Office should be in a posi-
mation on the results of its agencies'        tion to conduct such analj-ses and
attempts to satisfy the needs it has          report its findings to the Great Trust in
identified as requiring public resources.     order to insure that our Gorernment
If analysis of the '.Trust's" activities is   reall!- is of the people, by the people,
done in terms of the marketing problem        and for the people.
           Cost Accounting Standards Board

   The amendment to the Defense Pro-           trator, Small Business Administra-
duction Act of 1950 passed in August           tion.
1970 which provided for the establish-        The Board members were sworn into
ment of the Cost Accounting Standards      office on February 8 at a ceremony
Board designated the Comptroller Gen-      attended by Members of Congress,
eral as Chairman and authorized him to     GAO officials, and representatives of
appoint the other four members.            executive branch agencies, industry
   The law further specified that two of   associations, and other interested orga-
the additional members are to be from      nizations.
the accounting profession; one is to be       The law establishing the Cost
a representative of industry; and one      Accounting Standards Board (Public
is to be from a Federal department or      Law 91-379) was passed by the Con-
agency.                                    gress following an 18-month study by
   On January 21, 1971, the Comp-          the General Accounting Office under-
troller General, Elmer B. Staats, an-      taken by previous direction of the Con-
nounced the following appointments         gress. In this study, GAO found that
as Board members:                          such standards were both feasible and
  From the accounting profession :         desirable. The directive establishing the
    Herman W . Bevis, former Senior        Board was then incorporated in the
    Partner of Price, Waterhouse &         amendments to the Defense Production
    Co., Kew Tork City.                    Act, approved August 15, 1970. Funds
     Robert K . fVautz, Weldon Powell      for the establishment of the Board were
     Memorial Professor of Account-        approved recently by the Congress.
     ancy, University of Illinois,            The Board will have the responsi-
     Urbana, Ill.                          bility for promulgating cost accounting
  From industry:                           standards designed for prime contrac-
    Charles A . Dana, Manager of           tors and subcontractors to be used in
    Government Accounting Controls,        the pricing, administration, and settle-
    Raytheon Company.                      ment of negotiated defense contracts
  From the Federal Government:             in excess of $100,000, except where the
    Robert C. Moot, Assistant Secre-       price negotiated is based on established
    tary (Comptroller), Department of      catalog or market prices of commercial
    Defense, and formerly Adminis-         items sold in substantial quantities to
70                                                                 COST ACCOUNTING STANDARDS BOARD

the general public or prices set by law
or regulation.
  I n announcing the appointments to
the Board, the Comptroller General
said :
   I am delighted to hate a+ociated with me
o n the Board inch1 irlunls with such out-tund-
ing p r o f t ~ - i o n dclualificationr in tlie hi4d of
accounting arid cri-t .tandad.. I ani alw mu.t
plt:astd tjitli tliv coolierution wo h a \ e had
from the Govcrnrticnt agencie.;, tlit. account-
ing prufe+*ion, froni industry groups and
other5 in m a k i n g nominations f o r tlir Boaril
and i n their offer, fJf ai.i.tance a n d ciiopvra-
tion in c a r p i n g out ttic tlitficult a . . i ~ n n i m t
with which the Eoard \\ill Iw facwl. 'Th~sc
expression- of r ( i o p i ~ a t i i mand offw- of a.-i.t-
clnw a u g u r i \ t ~ l l f o r tlic future uork of the

   On March 3: 1971>Mr. Staats. as                                        Arthur Schoenhaut
Chairman of the Board, announced that
the Board had selected Arthur Schoen-                             hlr. Schoenhaut received his B.B.A.
haut as Executive Secretary.                                    degree from the City College of New
   Mr. Schoenhaut has served the Fed-                           York and is a graduate of the Advanced
eral Government since 1950. Until 1967                          Management Program of the Harvard
he was with the General Accounting                              Business School. He is a CPA (Vir-
Office and served as Deputy Director                            ginia), and a member of the American
of the Civil Division from 1964 to 1967.                        Institute of Certified Public Account-
Since 1967 he has been Deputy Comp-                             ants, the Federal Government Account-
troller of the Atomic Energy Commis-                            ants Association, and the Kational
sion.                                                           Association of Accountants.
               From GAO Speeches

   Elmer B. Staats, Comptroller Gen-                understand it. For example, the budget does
eral, speaking on “Public Affairs Chal-             not indicate where choices among competing
                                                    priorities have been made, nor does it identify
lenges to Business in the 1970’s” at the
                                                    the large number of feasible spending alter-
scholarship dinner, Florida Atlantic                natiies that might be judfied. Senator
University, Ft. Lauderdale, Fla., Feb-              Charles Percy of Illinois emphasized such
ruary 27, 1971:                                     inadequacies when he testified :
   I n our society, the responiibilities of Gov-      ‘-Let me, again, repeat the olirious-we
ernment for sohing the Kation’s problemu              [the Congress] no lnnger ha\-e the capa-
have increased significantly in every decade          bility to reiiew rationally and analyze
since the “great depression.” The massive             critically the national budget. I t has gone
growth in population and, hence, in public            Lel-ond our present ability.”
needs has been a dominant reason in recent
                                                       Senator Jacob Ja\its, x\-ho introduced the
years for continued Government expansion.
                                                    lrgislation concerning a Federal Office of
But a larger part of Go\-ernment’s growth is
                                                    Goals and Priorities Analyzis, explains his
the result of legislator<’ and voter.‘ wanting
                                                    reasoning in these words.
a particular result but hoping to get the
“other fellow” to pay for it.                         ‘-E\ery time we enact a program or an
   Everything that Government does, of                appropriation, we are i n effect making a
course, must eventually he paid for by the            priority decision, since we are decreasing
taxpayer who is the other fellow i n most             the resources aiailable for other programs.
cases. Confusion ariscs because the accom-            Yet, there a r e prohably few RIemhers of
plishment of most Government work is sep-             Congress who hare abailable to them a
arated from the collection of money necessary         clear and up-to-date picture of what ha.;
to achieve it. As one writer said, “It should         already been enacted or appropriated dur-
be easy for any government to please the              ing that session of Congress, what remains
people. All they want is lower taxes and              on the agenda or is likely to come up for
larger appropriations.” People want more              enactment or appropriation, or what con-
money spent for schools, roads. pollution con-        stitutes the total amount of resources
trol, dams, police, and an infinity of other          available to the Nation that year.”
things; but then they grumble that they can-          The question of how we can obtain more
not understand why their tax bills rise every       comprehendible information and, as a result,
year. They have been learning in recent 4-ears      more puhlic diqcussion on major budgetary
as the fate of many State and local hond
                                                    programs should he of major concern to every
issues will attest.                                 bcsiness group, to every citizen organization,
           e    *    *    :    ;    *
                                                    and, yes, to el-ery univerqity.
   Unless the Federal budget is sufficiently          I have gone into this subject of the Federal
understood-and     this is very difficult due to    budget a t some length because it is the single
its length and complexiti--and     it5 priorities   most important way we ha)-e of determining
questioned, the shaping and conduct of the          national priorities. I t can readily be seen
Nation’s business becomes the virtual prerog-       that there are substantial grounds for the
ative not just of those in power but of those       difficulties, experienced by businessmen in
few in power who have the information and           the paPt, of understanding the process of

72                                                                      FROM GAO SPEECHES

selecting priorities and that substantial        tional Division, speaking on “The
changes and reforms are needed.                  U S . General Accounting Office in
                                                 the International Field” presented at
  E. H. Morse, Jr., director, Office of          the Thunderbird Graduate School
Policy and Special Studies, speaking on          of International Management, Phoenix,
“Increasing the Visibility of the Gov-           Arizona, November 2, 1970:
ernment Accountant’s Work” before
the Dallas, Fort Worth, and Houston
Chapters, Federal Government Ac-                   I n this context I believe that sometimes the
countants Association, February 16               G.40 role, particularly in the international
and 18, 1971:                                    field, can be most effective in identifying the
                                                 fundamental questions, putting them into rea-
                                                 sonable context with the underlying facts, and
   I think the professional accounting a w -     bringing them before the top people respon-
ciations could do much more to promote           sible-the department head or the chairman
wider puhlic understanding of the account-       of a congressional committee-for     their con-
ant’s job-what    he does, how he functions,     zidrration and judgment. An unbiased presen-
and what he accomplishes. We think we are        tation of the pertinent facts in this fashion
pretty useful-but do others think the same       may sometimes he of more real value than
way?                                             our opinions, even though we make every
   The professional aworiations *      * rould   effort to assurc that our opinions arc     well
do more in the way of orienting and educat-      founded.
ing the public as well a s policymakers and         Meanwhile, since we can only report and
managers about the accounting function.          recommend, we must somehow capture a busy
Their journals could do a better job of de-      reader’s attention long enough to convey the
scribing and interpreting the nature and         essence of our message in a report. We are
significance of accounting work. And here I      using a technique of condensed digests at the
a m not referring to the kind of writing, so     front of our reports which helps on this score.
prevalent in some of these journals these        Also, we don’t underestimate the value in
days, that displays extensive arrays of math-    some cases of a simple illustrative factual
ematical formulations. This kind of writing,     “horrible example” in engaging reader inter-
while useful, is also apparently aimed only      est. We are striving, however, to not stop
a t the mathematically trained.                  with the example, but to go hack of it, find
    The communication challenge for account-
                                                 the underlying causes, and hopefully make
ants is to write in the simple language of
                                                 constructive recommendations directed to cor-
those who provide the money to finance oper-
                                                 recting those underlying causes.
ations whether these operations be private or
                                                    I n this presentation I have dwelt a t some
puhlic. How else can we communicate to
                                                 length upon the purposes and problems of
probably our most important audience? Nor
                                                 management reviews as GAO sees them.
should we write only for our brother (or
                                                 Before closing I would like briefly to discuss
sister) accountants. W e should also give some
                                                 another element of the management process
thought to writing for non-technical pulli-
                                                 which we believe is very significant and too
cations-a   field left largely to reporters or
                                                 little recognized in Government programs-
reviewers who seldom have-or         take-the
time to really delve into what accountants       that is the need for clear program objectives
do and where they fit into our society. We       against which to measure results.
                                                    I n the field of international relationships,
have much to do and much to say. W e need
some better ways to get i t said.                we recognize that normal definitions or con-
                                                 cepts of management are not always accept-
                                                 able. The industrial profits yardstick is not
   O y e V . Stovall, director, Interna-         applicable. The concrete factors by which
F R O M GAO SPEECHES                                                                        73
G-40 would normally try to measure and              opportunities for better application of man-
evaluate management results or plans may be         agement yardsticks-particularly in the field
obscured or some elements may be missing.           of debelopmental assistance.
Recognizing these unique circumstances, re            We believe that program objectives need
neverthelws beliebe that U.S. Go\ ernment           to be defined. and the results measured
activities in the international field offer great   against those objecti\eL.

                               On Audit Effectiveness
              “A mere audit of money is no protection whatever against
           misuse of money and of power; audit or field studies of results
           is needed.”

                                                    Wm. H . Allen, Director,
                                                    Institute for Public Service.
                                                    Writing on “The United States Comp-
                                                    troller General and His Opportuni-
                                                    ties,” in National Municipal Review,
                                                    February 1923.
Cross Florida Barge Canal                             tinir.1) .iccount of thr en\ ironmcntal impact
                                                      of zucli projrct5-.11   that instead of merely
   President Nixon directed on Janu-                  halting the ilamage. we prevent it.
ary 19, 1971, that further construc-                    An article in Reader’s Digest for
tion of this project be halted “to pre-               January 1970 about this project was
vent potentially serious environmental                noted in the Spring 1970 issue of the
damages.”                                             Reuiezir. Entitled “Rape on the Okla-
   Of the total estimated cost of this                \+aha” and written by James Nathan
project of about $180 million, about                  Miller, the article was quite critical of
$50 million has been spent. The object                this Army Corps of Engineers project.
of the canal was to reduce transporta-                One of his recommendations was that
tion costs for barge shipping. In direct-             GAO audit all benefit-cost reports on
ing the stoppage, President Nixon                     projects recommended by the Corps.
stated :
     . . . It was conceived and de4gned a t a         GAO Report on
time when the focus of Fedcral concern i n
such matter3 Ira5 still almoit conipletrly on
                                                      Water Pollution Cited
maximizing economic return. I n calculating
                                                         Continuing congressional attention
that return. the de-truction of natural, eco-
logical value5 waq not counted as a coqt. nor         is being given to the landmark GAO
was a rredit alloaed for actions p r e i e n i n g    report on effectiveness of the construc-
the environment.                                      tion grant program for abating, con-
   A natural treawre i5 involced in the case          trolling, and preventing water pollu-
of the Barge Canal-the Oklawaha River-a
                                                      tion 1 R-166506, Nov. 3,1969). During
uniquely beautiful, semitropical stream, one
 of a very few of its kind i n the United States,     hearings hefore the Conservation and
which would he de-troyeil hl- ronstruction of         Natural Resources Subcommittee of the
the Canal.                                            House Government Operations Com-
    T h e Council on Environmental Quality ha-        mittee in November 1970 on applica-
recommended to me that the project he
                                                      tion of aerospace and defense industry
halted, a n d I have accepted it- advice. The
Council ha. pointed nut to me that the project        technology to environmental problems.
could enddnger the unique wildlife of t h r area      one witness referred to this report in
a n d deqtroy this region of unuiual and unique       support of his testimony. The witness,
natural beauty.                                        Conpessman F. Bradford Morse of
    T h e total cost of the project if it were com-
                                                      hiassachusetts. a proponent of the
pleted would be ahout $180 niillion. Ahout
$50 million has alreadv fieen committed tn            greater use of systems techniques de-
 construction. I a m asking the Secretary of the      veloped in the private sector in the solu-
Army to work with the Council on Environ-             tion of nondefense problems, placed the
mental Quality i n developing recrmimenda-            full digest of the report in the hearing
 tions for thc. future of the area.                   record. In requesting permission of the
    T h e step I have taken today r\ill prekent
 a past mistake from cauiinp permanent dam-
                                                      subcommittee chairman, Henry S.
 age. But more important. w e mu-t a,sure that        Reuss of Wisconsin, to include this in-
 in the future we take not only full but al-o         fortnation. Mr. Morse stated :

   I n 1969, the General Accounting Office suh-   General as part of a study that, mind you,
mitted a report to the Congress entitled “An             limited only to the feed grain program
Examination Into the Effectivenesb of the         az it ha- oprratrd in a few cuuntirs in only
Construction Grant Program for Abating,           six States. Eren 5 0 , the GAO report found
Controlling, and Prmenting Water Pollu-           "questionable" payments of $618,000 going
tion.” Its conclusion5 were that due both to      to 938 participants in 1969. .4nd a closer study
insufficient funding. and to inadequate plan-     conkinred them that 215 recipients have un-
ning and implementation on a coniprehencive       lawfully collectetl 8116,000 for not planting
and coordinated scale. our efforts have not       on land which lid< no conct.i\al)le agricultural
been as effectir-e as they might or should he.    purpose.
I ask your permission to include in the record        While the areas studies [sic] were not
the digest of this report, and emphaiize the      selected at randoni anti may therrfore not
GAO recommendation regarding the rule that        hy typical, the repurt itself notes that sim-
systems ana1y.k techniques can and ihould         ilar niispayments ob\iou.ly muct habe oc-
play in planning for and implenirnting our        cured [hicl in other areaz and programs as
water pollution control programs.                 well.
                                                      hlr. Speaker. I want to point out that the
                                                  Agriculture Department has readily agreed
Improper Payments Under                           that such payment5 are improper, and in a
Federal Feed Grain Program                        re*punse to a draft of this report has indicated
                                                  i u m r steps hakc alreatl) bren taken to re-
   The GAO report on “Objectives of               coler tlirqe fund. and correct practices which
the Feed Grain Program not Attained               hare permitted this atuse.
because of Inclusion of Nonagricultural             Mr. Conte inserted the digest of the
Land” (B-114824) sent to the Con-                 GAO report in the Record along rtith
gress on January 12,1971, drew a quick            the Department of Agriculture‘s coin-
reaction from one Member. As reported             nients on the report draft and Mr.
in the Congressional Record for Janu-             Conte’s request to the Secretary of Ag-
ary 22, Congressman Silvio 0. Conte               riculture for ‘‘a detailed report on both
made the following comments about the             the extent of such abuses and the cor-
improper payments reported by GAO                 rective measures which have and will
for diversion of land from the growing            be taken to prevent their re-occurrence.“
of feed grains to approved conservation
                                                  Congressional Interest in
   hlr. CONTE. hIr. Speaker. since 1962, a        GAO Audit Work
nudist colony has been receiring annual farm
subsidy payments, although none of its land         The report of the activities of the
has been farmed.                                  House Committee on Armed Services
   I n 1969. $2,000 was paid to another program   during the 9 l s t Congress (1969-1970)
participant whose acres are within a private
                                                  has this to say about its interest in GAO
ordnance pro\ing ground where “ordnance
devices from small caliber ammunition to          audit work:
bombleta. grenades, and land mines” are              Throughout each year, the euhcommittee
tested.                                           routinely maintains a continuing review of a
  I n other cases suhsidies have gone to gar-     v8ide variety of military prohlem areas, par-
bage dumps, housing developments, and             ticularly those brought to its attention by
gravel pits.                                      the Gencral Accounting Office.    of Decem-
  These and other shocking items are con-         ber 1, 1970, the subcommittee had received
tained in a recent report of the Comptroller      and esaniined 104 formal reports from G,40.
                                                                             NEWS   AND NOTES

The subcommittee also keeps abreast of GAO        and Rodenticide Act. Under the act, U.S.
reviews in progress through continuous con-       Agriculture [sic] Research Service can take
tacts Hith their operating personnel.             action to remove products from the market,
                                                  cancel registration, and classify those who
                                                  ship products who violate the law.
More on GAO Report on                               GAO found that in over 2,751 samples of
Pesticides Regulation                             products tested and reviewed during fiscal
                                                  year 1956, over 750 were found to be in sub-
   Extended hearings on migrant and               stantial \iolation of the law. Of these 70 per-
seasonal farmworker powerlessness                 cent or 520 with major violation of the law.
were held in 1969 and 1970 by the                 A 1967 total of about 5,000 samples were
                                                  taken and 23 percent were found to be in
Subcommittee on Migratory Labor of
                                                  violation. I don’t consider this to be effective
the Senate Committee on Labor and                 compliance of the regulation.
Public Welfare. Several sessions were
devoted to pesticides and the farmwork-           (Part G A of Hearings, Aug. 1, 1969,
er. The subcommittee was chaired by               p. 3219)
Senator Walter F. Mondale of Minne-                  The report referred to the need to im-
sota.                                             prove regulatory enforcement proce-
   One witness, Jerome Gordon, presi-             dures involving pesticides (B-133192,
dent of Delphic Systems Research                  Sept. 10, 1968).
Corp., in testifying on pesticide poison-
ing dangers, called attention to Federal          Allowability of Training Costs
agency regulatory deficiencies reported
by GAO in 1968. He stated:                          From The Defense Contract Audit
                                                  Agency Bulletin for December 1970:
  I would like to read from a report that was
                                                     I n an audit of labor costs incurred under a
prepared by US. General Accounting Office
                                                  C P F F contract awarded to a major manufac-
in the course of a review of the entire pesti-
                                                  turer of computers, a DCAA Branch Office
cide regulatory program and released last
                                                  reported that the contractor at a nearby off-
September and probably smothered in the
                                                  site location had conducted two Basio Pro-
back pages of the New York Times.
                                                  gramming (Electronic Data Processing)
  On September 10 the US. General Ac-
                                                  training courses and one Computing System
counting Office issued a report on regulatory     Course for 50 employees, with the cost of the
enforcement of the Federal Insecticide, Fun-      training being charged to the Government
gicide, and Rodenticides [sic] Act. The sub-      contract. Of these employees, 37 were trans-
stance of the review was there was little ef-     ferred to other contractor locations immedi-
fective compliance action and no review by        ately after completion of their training,
the Justice Department in over 13 years.          obviating benefit to the Government csontract.
  This was true, the GAO found, even in in.       Furthermore, any such training was not
stances where repeated major violations of        within the scope of contractual requirements.
the law were cited by the Agricultural Re-        DC4A auditors, therefore, recommended that
search Service and when shippers did not          $192,000, the total cost of the two training
satisfactorily act to correct violations or ig-   courses, be disapproved. The contracting offi-
nored Agricultural Research Service notifica-     cer sustained $145,000 of this amount.
tions that prosecutions were being contem-
   The extent of that violation is in the data    Glance at the 1972 Budget
accumulated on the samples that the GAO
reviewed that did not meet specifications laid      The Federal budget for the fiscal
down by thc Federal Insecticide, Fungicide,       year 1972, submitted by President
NEWS AND NOTES                                                                                          77
Nixon on January 29, 1971, contains                    table bearing the heading “The Budget
a welcome overview in the form of a                    at a Glance.”

                                   THE BUDGET AT A GLANCE
                                        (Fiscal gears. In billions)

                     Description                          1970               1971             l9i2
                                                         actual            estimate         estuna te

Budget receipts.. ......................                    $193.7             $194.2             $217.6
Budget outlays. .......................                      196.6              212.8              229.2

Actual deficit (-)    ......................                  -2.     8        -18.6              -11.6

Full-employment surplus, ...............                            2. 6              1.4               0. 1

Budget authority.      .....................                  213.0             236.3                259.0

Revenue Sharing and                                    States and localities the power to spend cer-
                                                       tain Federal tax monies will increase the
                                                       influence of each citizen on how those monies
   One of the debatable aspects of the                 are used. I t will make government more re-
                                                       sponsive to taxpayer pressures. I t m-ill en-
proposal for sharing Federal tax reve-                 hance accountability.
nues with State and local governments                     In the first place, there is no reason to think
is the concept of accountability for the               that the local taxpayer will be less motivated
shared revenues. As the debate over                    to exert pressure concerning the way shared
this proposal waxes warmer, it is well                 revenues are spent. For one thing, the local
                                                       taxpayer is usually a Federal taxpayer as
to know just what President Nixon said                 well; he would know that i t was his tax
on this point. In his message to the                   money that was being spent.
Congress of February 4, 1971, propos-                      Even if local taxpayers were only concerned
ing a $5 billion program of general                    about local taxes, however, they would still
revenue sharing, the President stated:                 have a direct stake in the spending of Fed-
                                                       eral revenues. For the way Federal money is
   Ironically, the central advantage of revenue         used determines how much local money is
sharing-the fact that i t combines the advan-          needed. Each wise expenditure of Federal
tages of Federal taxation with the advantages          dollars would mean an equivalent release of
of State and local decision-making-is the              local money for other purposes-including
very point at which the plan is frequently              relief from the need to raise high local taxes
criticized. When one level of government                even higher. And every wasted Federal dollar
spends money that is raised at another level,           vould represent a wasted opportunity for
it has been argued, it will spend that money            easing the pressure on local revenues.
less responsibly; when those who appropriate               Most voters seldom trace precisely which
tax revenues are no longer the same people              programs are supported by which levies.
who levy the taxes, they will no longer be as           What they do ask is that each level of gov-
sensitive to taxpayer pressures. The best way           ernment use all its money-wherever it comes
to hold government accountable to the peo-              from-as wisely as possible.
ple, some suggest, is to be certain that taxing            The average taxpayer, then, will be no less
authority and spending authority coincide.             disposed to hold public officials to account
   If we look at the practice of government             under revenue sharing. What is more, he will
i n modem America, however, we find that                I Jable
                                                              ~ to hold them to account far more
this is simply not the case. I n fact, giving           effectively.
                                                                                 NEWS AND NOTES
    The reason for this is that “accountability”      to hold local officials responsible for their
really depends, in the end, on accessibility-         strwdrdship of d l public funds.
on how eusily a given official can Le held               In short, revenue sharing will not shield
responsible for his spending decisions. The           State and local officials from taxpayer pres-
crucial question is not where the nioney              krires It will work in just the opposite direc-
comes from but nhether the official who               tion. Under revenue sharing, it will be harder
spends i t can be made to a n b ~ e rto those         for State and local officials to excuse their
who are affected by the choices he makes.             error5 by pointing to empty trea3uries or to
Can they get their views through to him? Is           pa<> the buck by blaniing Federal bureau.
 the prusprct of their future support a signifi-      mats for misdirected spending. Only leaders
cant incentive for him? Can they remo\e him           whu h a t e the responsibility to decide and
from office if they are unhappy uith his               the means to implenient their decisions can
 performance?                                          r e d y he held accountable when they fail.
     These questions are far more likely to re-
 ceive a n affirmative answer in a smaller juris-     (Weekly Compilation of Presidential
 diction than in a larger one.                        Documents, Feb. 8, 1971, Vol. 7, No. 6,
     For one thing. as the number of issues is        pp. lCttl70.)
 limited, each i>bue becomes more important.
 Transportation policy, for example, is a cru-        New Urban Institute
 cial matter for niillions of L4n~ericans-yet a
 national election is unlikely to turn on that
 issue when the great questions of war and                The Urban Institute has launched a
 peace are a t stake.
     I n addition, each constituent has a greater     new newsletter-type publication to in-
 influence on policy as the Lumber of con-            crease the visibility of its work. En-
 stituents declines. An angry group of com-           titled Search, the first issue which is
  muters, for example, will have far less impact
                                                      dated January-February 1971 explains
  in a Senatorial or Congressional election than
  in an election for alderman o r county execu-       its purposes as follows:
  tive. And i t is also true that the alderman or        Search is a new bi-monthly report that
  county executive will often be able to change       will share the finding.;, insights, data, and
  the local policy in question far more easily        further questions that turn up in the research
  than a single Congressman or Senator can            work of The Urban Institute.
  change policy at the Federal level.                    Research is not really complete until what-
      Consider what happens with most Federal         ever emerges from an investigation is made
  programs today. The Congress levies taxes           widely available to possible users. In addi-
   and authorizes expenditures, but the crucial       tion to federal agencies which sponsor much
   operating decisions are often made by anony-       of our reiearch. these uiers include the policy
   mous bureaucrats who are directly account-         makers and administrators who manage cities
   able neither to elected officials nor to the       day after day and officials at the state and
   public at large. When programs prove un-           federal leiel. They include also the citizens,
   responsive to public needs, the fact that the      action groups, scholars and researchers, busi-
   same level of government both raises and           nes5 and labor organizations, writers and
   spends the revenues is little comfort.             others whose concerns and enthusiasms some-
      At the local level, however, the situation is   how get reflected in the kinds of cities we
   often reversed City councils, school boards        have.
   and other local authorities are constantly            The brief descriptions of the Institute proj-
   spending re\enues which are raised by State        ects reported here may stimulate an interest
   governments-in this sense, revenue sharing         in the more extensive studies from which they
   has been with us for some time. But the            are drawn. Usually material on these studies
   separation of taxing and spending authority         is available and requests should he addressed
    does not diminish the ability of local voters      to our publications office.
NEWS   AND NOTES                                                                79
   The publication goes on to explain          rector of the Office of Manage-
that each issue will feature an account        ment and Budget, the Chairman
of one of the Institute's projects. The        of the Civil Service Commission,
first issue features the Beat Commander        and the Comptroller General of
project in Detroit, described as a new         the United States.
concept in city crime control.               -The second annual summary re-
   The Urban Institute was organized           port of the activities of the JFMIP
in 1968 as a private, nonprofit research       Steering Committee. The compo-
organization to help find solutions to         sition of this committee is as
the problems and concerns of Ameri-            follows:
can cities (see GAO Review, Fall 1968,         William J. Armstrong,
p. $ 2 ) . President of the Institute is          Chairman                     OMB
William Gorham, a former Assistant             Steve L. Comings            Treasury
 Secretary of the Department of Health,        Chester Wright                 csc
 Education, and Welfare. Its head-             Frederic H . Smith             GAO
quarters are located at 2100 A4 Street,
N.W., Washington, D.C. 20037.              Transportation Financial
Water Usage                                   A major study of the Federal Gov-
                                           ernment's transportation practices was
  According to the GAO report on
                                           completed last year under the auspices
"Controlling "ldustrial
                                           of the Joint FirlaIlcial hIanagenlent Im-
tion--Progress  and               (B-      proyernent Program. The study began
166506, Dec. 2, 1970)3 the productioll     in April 1968 as an in-depth examinam
of one automobile requires '070°0 gal-     tion into the transportation practices
Ions of water. Getting even closer to      and procedures of civil agencies of the
home, the report, which is '2 Pages        Government. The objective was to de-
long, notes that 1 0 Sallons of water      velop improvements in docunientation
were required to Produce each COPY Of      and procedures to alleviate problems
the report.                                in procuring, pa)-ing, auditing, and
                                           settling accounts with common carriers
Joint Financial Management                 for freight and passenger transporta-
Improvement Program Reports                tion services used by the Government.
                                           The General Services Administration
   Two reports summarizing activities
                                           chaired the rnultiagenc y working group
and accomplishments under this pro-
                                           making the study. The study group re-
gram over the past year were recently
                                           ceived extensive cooperation from the
   -The regular annual progress re-        carrier associations, carriers, and Gov-
     port covering the fiscal year 1970    ernment agencies contacted.
     and signed by the heads of the           The comprehensive report on the
     four central agencies that provide    stud]- contains 58 recommendations for
     leadership for the program, the       improving the Government's transpor-
     Secretary of the Treasury, the Di-    tation practices. As they are placed into
80                                                                    NEWS AND NOTES

effect, they are expected to bring sig-         -A    6-months’ pilot test of a pro-
nificant savings in time and money to             posed plan for automatic payment
the transportation industry and the               of airline ticket charges procured
Government.                                       by teleticketing facilities should be
   Significant recommendations in the             undertaken.
report are:                                     -A civilian transportation central
  -The U.S. Government bill of lad-               payment facility should not be
      ing should be extensively revised,          established.
     including the elimination of the           -A central point should be desig-
      Consignee’s Certificate of Delivery.        nated in each civilian department
  -The short form U.S. Government                 and agency to handle all improp-
     bill of lading should be eliminaled.         erly addressed transportation
  -Government agencies should be au-              bills identified with that depart-
     thorized to pay in cash, under cer-          ment or agency.
     tain conditions, for freight charges       Adoption of a number of the recom-
     not exceeding $25.                      mendations is contingent upon enact-
  -Government agencies should re-            ment of legislation to modify certain
     view their domestic small surface       provisions of existing law which affect
     shipments, including parcel post,        the manner in which the Government
     to determine areas where it is more     pays for its transportation serv-
     efficient and economical to use
                                             ices. The General Services Administra-
    commercial services.
                                             tion with the support and assistance of
 --Government agencies should treat
                                             the General Accounting Office has
     claims for loss and damage on
     domestic shipments as separate ac-      agreed to sponsor legislation to amend
     tions apart from the carriers’ bills    the law.
     for freight charges, and the Gov-
    ernment should establish a realis-       New Format of Comptroller
     tic minimum below which it is           General’s Annual Report
     uneconomical or impractical to file
    formal claims against carriers.             The 1970 report of the Comptroller
 -The General Services Administra-           General was submitted to the Congress
    tion systems concept of automati-        on January 21, 1971. This annual re-
    cally paying freight charges on          port, a requirement of the Budget and
    certain shipments covered by             Accounting Act, 1921, describes the
     freight-all-kinds rates should be       activities and accomplishments of the
    vigorously pursued.                      General Accounting Office in some
 -The      Government Transportation         detail.
    Request should be revised exten-            A number of improvements were
    sively.                                  made in the 1970 report, all designed
 -The authorization to pay in cash           to increase its usefulness.
    for passenger transportation serv-         -Physical     size was increased to
    ices costing up to $15 should be in-          77h” x             permitting two-
    creased to $100 per trip.                     column printing and therefore
NEWS AND NOTES                                                                  81
    greater readability. The old size,         the financial savings attributable
    578" x 91/s", had been used since          to the work of GAO, a complete
    the first annual report covering the       listing of audit reports issued dur-
    fiscal year 1922.                          ing the year, and approvals of
  -A separately bound appendix was             agency accounting principles and
    prepared containing the compila-           standards and systems designs.
    tion of GAO findings and recom-           Both volumes are thoroughly in-
    mendations for improving Govern-       dexed and provide an excellent refer-
    ment operations which had been         ence source for anyone wishing to
    published as a separate report in      inform himself about the operations
    previous )-ears. Other appendix        and accomplishments of the General
    material includes information on       Accounting Office.
     I   HEARING:               -li

                         By MARG-IRETL. RI.4CFARL.iXE
          Chief, Legal Reference Services, Ofice of the General Counsel

Export-Im port Bank                         Lobbying Regulation

   At the request of the Senate Bank-          On March 16, 1971, the Comptroller
ing. Housing and Urban Affairs Com-         General testified before the House Com-
mittee, the Comptroller General, Elmer      mittee on Standards of Official Conduct
B. Staats, discussed legislation to re-     on H.R. 5239, to require public disclo-
move the Export-Import Bank from            sure of certain lobbying activities. Mr.
the budget process at a hearing on          Staats directed his statement to the pro-
March 9, 1971. The bills before the         visions of the bill placing the adminis-
committee for consideration were: S. 19     tration of the lobbying regulation under
sponsored by Senator Mondale and            the Comptroller General. Although Mr.
S. 581 sponsored by Senators Spark-         Staats indicated that GAO does not seek
man, Tower, and Bennett. Mr. Staats         the responsibility, it would accept it if
restated GAO's traditional position of      the Congress so desired and made the
favoring the principle of full disclosure   legislation clear that the duties would
of agency activities to the Congress as     be performed by GAO as an agent of
well as the annual review bj- the Con-
                                            the Congress. I Other participants:
gress of budgetary programs. In lieu
                                            Messrs. Socolar, Moore, Masterson, and
of the proposed legislation, Mr. Staats
detailed for the committee several
alternative courses of action. The al-
ternatives suggested would provide the      Ocean Movement of
Export-Import Bank with the desired         Military Cargo
flexibility to promote U S . export ex-
                                               At the request of the House Merchant
pansion and still permit Congress to
                                            Marine and Fisheries Committee, the
retain its control. Subsequent to the
hearings, the committee ordered favor-      Assistant Comptroller General, Robert
ably reported with amendments 581,          F . Keller, presented information con-
which passed the Senate April 10.           cerning the use of time charters for the
(Other participants: Messrs. Smith,         ocean movement of military cargo and
Hylander, Zappacosta, Moore, Master-        its impact on U S . flag vessels offering
son, and Blair.)                            berth service.

HEARINGS AND LEGISLATION                                                          83
   GAO had issued a report on the Mili-      Health Service. (Other participants:
tary Sealift Command's ocean trans-          Messrs. Moore and Fade.)
portation procurement procedures on
January 22,1971 (l3-145455), and the         Impounding of Funds by the
hearing was a followup on the report.        Executive Branch
(Other participants: Messrs. Sullivan,
Shafer, Connor, and Fitzgerald.)                The Subcommittee on Separation of
                                             Powers of the Senate Judiciary Com-
                                             mittee, during a series of hearings on
Public Health Service
                                             the impoundment of funds by the ex-
Hospital Facilities
                                             ecutive branch of the Government, in-
  Follow-ing the issuance of an advi-        vited GAO to present its views on
sory opinion on February 23, 1971            March 25, 1971. Robert F. Keller pre-
tB-156510), at the request of the            sented the statement. (Other partici-
House Committee on Merchant Marine           pants: Messrs. Denzbling. Moore. Litt-
and Fisheries, on the legality of the        m a n , and Fitzgerald.)
proposed closing of Public Health Serv-
ice hospitals and clinics. both the House    House Post Office and
Committee on Interstate and Foreign          Civil Service Committee
Commerce, Subcommittee on Public
                                                The House Post Office and Civil Serv-
Health and Welfare, and the Senate           ice Committee invited the Comptroller
Committee on Labor and Public Wel-           General to a briefing-t)-pe hearing on
fare, Subcommittee on Health, con-           March 18,1971. At this time, Mr. Staats
ducted hearings on the closing of such       discussed the work GAO had done with
hospital facilities. Paul 6. Dem bling,      respect to the Post Office Department
General Counsel. reviewed for the sub-       as well as the type of audit coverage
committees the legislative historj- of the   and review that is contemplated under
various Public Health Service hospital       the Postal Reorganization Act begin-
system statutes which reflect the long-      ning in fiscal year 1972. (Other partici-
standing congressional intent that the       pants : Messrs. Irieller, Ahart. Moore,
facilities be maintained by the Public       and Blair.)
           GAO Staff

                                                        Marvin Colbs

  Marvin Colbs was designated as deputy associate director for supply manage-
ment in the Defense Division, effective December 14, 1970. I n this position he
will share the responsibility for planning, programming, and directing reviews
of supply and logistics operations in the Departments of the Army, Navy, and
Air Force, and the Department of Defense.
  Mr. Colbs received a bachelor of science degree in accounting from Temple
University in 1950 and joined GAO in the Dayton Regional Office in 1955 after
5 years in public accounting. In 1963, he was transferred to the Defense Division.
   Mr. Colbs has had broad experience in the review of defense activities both in
the field and in Washington. He has had responsibility for assignments in pro-
curement, military pay and allowances, construction, and contract audits as well
as all aspects of supply management.
   I n June 1969, Mr. Colbs graduated from the National War College at Fort
McNair after a 10-month resident course in national security affairs. He also
received a master's degree in international affairs from The George Washington
University in September 1969. He is a CPA (Pennsylvania) and a member of
the American and Pennsylvania Institutes of CPAs.
GAO STAFF CHANGES                                                             85

           John F. Flynn

   John F. Flynn was designated deputy associate director in the Defense Division,
effective December 14, 1970. In this position he will assist in the overall super-
vision of GAO accounting and auditing work in the procurement area of the
Department of Defense.
  Mr. Flynn served in the U.S. Navy from 1943 to 13-25and has had broad and
diversified experience in accounting and auditing in the defense agencies of the
Federal Government since joining the General Accounting Office in September
1952. Prior to joining GAO, Mr. F l p n worked in public accounting and private
industry. He graduated from the Bentley School of Accounting and was graduated
cum Zaude from Northeastern University with a B.B.A. degree in June 1952.
   He is a CPA iblassachusetts) and a member of the American Institute of
Certified Public Accountants and the Federal Government Accountants Associa-
tion. Mr. Flynn received the GAO Meritorious Service AMard in 1961.
86                                                             GAO STAFF CHANGES

                                                     Albert Goldstein

  Albert Goldstein, assistant general counsel. retired from active service on Jan-
uary 29, 1971, after more than 46 years of Government service.
  Mr. Goldstein was born in Washington, D.C., and earned his bachelor of laws
degree from Georgetown University in 1933. He served as an Assistant U.S. Attor-
ney for the District of Columbia from 1937 to 1910. Mr. Goldstein was appointed
as a principal attorney in the General Accounting Office on July 17, 1940. Later,
Mr. Goldstein was appointed to the position of assistant general counsel and
served in that position from October 30, 1949, to the date of his retirement.
Mr. Goldstein is a member of the District of Columbia Bar and the Federal Bar
GAO STAFF CHANGES                                                           87

        Kenneth F. Luecke

  Kenneth F. Luecke was designated as an assistant regional manager, Kansas
City Regional Office, effective February 7, 1971.
  Mr. Luecke received a bachelor of science degree in business administration
from Washington University- in 1954. He served as a commissioned officer in the
U S . Army from 1954 to 1956.
   Since joining the General Accounting Office in 1934, Mr. Luecke served in the
St. Louis office and in the International Division in Frankfurt, Germany. His
overseas assignments included reviews of Army and Air Force supply and mainte-
nance activities and foreign aid proFrams. In recent !-ears. Mr. Luecke has been
involved in reviews of the management of major weapons systems and has at-
tended the Department of Defense Teapon Si-stems Management Course at the
Defense Weapon Systems Management Center in Da)-ton, Ohio.
88                                                               GAO STAFF CHANGES

                                                       Robert   L. Rasor

   Robert L. Rasor, associate director, Office of Policy and Special Studies, retired
from active service in December 1970.
  Mr. Rasor, a native of South Carolina, entered Government service in 1941
with the Ordnance Corps of the War Department. He served in this agency until
1946, most of the time as chief project auditor at Baytown Ordnance Works,
Baytown, Tex.
   In 1946 he joined the Corporation Audits Division of the General Accounting
Office. In that division and later in the Division of Audits, he was actively engaged
in audits of the Tennessee Valley Authority, the Federal Crop Insurance Corpo-
ration, the Commodity Credit Corporation, and Defense contracts. In 1956, as an
assistant director, he became a charter member of the Accounting and Auditing
Policy Staff, renamed the Office of Policy and Special Studies in 1966. In 1961
he was designated as an associate director. In this assignment, he had primary
responsibility for developing the audit policies of the General Accounting Office
and related staff review work. In recognition of his consistently outstanding per.
formance, he received the GAO Distinguished Service Award in 1969.
  Prior to entering the Federal service, Mr. Rasor was associated with the public
accounting firm of Harris, Kerr, Forster 8i Co. in New York City and Washington.
   Mr. Rasor attended Columbia University, The George Washington University,
and New York University, receiving his B.S. degree from the latter in 1941. He
is a CPA (District of Columbia) and a member of the American Institute of
CPAs, the District of Columbia Institute of CPAs, and the Federal Government
Accountants Association.
GAO STAFF CHANGES                                                              89

       Robert G. Rothwell

  Robert G. Rothwell was designated as an associate director for facilities and
support services in the Defense Division, effective December 14, 1970.
   Mr. Rothwell received a bachelor of science degree in 1942 and a master of
business administration degree in 1951 from New York University. In 1966 he
completed the Advanced Management Program of Harvard Business School. He
is a CPA (New York) and a member of the Federal Government Accountants
   During World War 11, Mr. Rothw-ell served in the U S . Army Counter Intelli-
gence Corps. Prior to joining the General Accounting Office in 1951, Mr. Rothwell
was a staff member of several public accounting firms in New r o r k City. Since
joining the Office, he has been assigned principally to work related to activities
of the Department of Defense. He was one of the initial staff members of the
European Branch, serving in the Frankfurt suhoffice from January 1953 to July
1955, and he has been assigned to the Defense Division since its inception in 1956.
                                                               GAO STAFF CHANGES

                                                       Paul Shnitzer

  Paul Shnitzer was designated as an assistant general counsel in the Office of
the General Counsel, effective February 22, 1971.
  Mi-. Shnitzer served in the U.S. Army Air Corps from 1943 to 1946. In 1948
he received a &.A. degree from Epsala College, and during 1948-49 he completed
a year of graduate I\ ork at the Max\+ell School of Citizenship and Public Affairs,
Syracuse University. On June 4, 1954, he received a J.D. degree from The George
Washington University. He attended the Judge Advocate General’s School in
Charlottesville, Va.. in 1953.
   Mr. Shnitzer entered civilian Government service in 1949 as a junior manage-
ment assistant, serving with the Air Force until joining the GAO as an attorney
in the Office of the General Counsel on November 8, 1954. He received the GAO
Meritorious Service Award in 1961 and 1963.
  I n 1954, he was admitted to the bar of the District of Columbia. He has written
a number of articles and lectured extensivelj- on Federal procurement matters.
He is coauthor of the second edition of West’s Federal Practice Manual and is
currently the chairman of the Federal Bar Association’s Government Contracts
Committee and the editor of the Public Contract Newsletter published by the
American Bar Association. He also has serred as a member of the House Office
Building Commission Contract Appeals Board since August 1963.
GAO STAFF CHANGES                                                            91

        Jerome H. Stolarow

  Jerome H. Stolarow was designated as an associate director of the Defense
Division, effective December 14, 19iO. In this position, Mr. Stolarow will be
responsible for the direction of special projects undertaken by the Defense
  Mr. Stolarow received a bachelor of business administration degree from the
University of Oklahoma in 1951 and a juris doctor degree from Georgetown
University Law School in 1955. He is a CPA in the State of Oklahoma and the
District of Columbia, and has been admitted to the bar in the District of Colum-
bia. He is a member of the American Institute of CPAs.
   Mr. Stolarow served in the U.S. Army from 1951 to 1953. He joined the Gen-
eral Accounting Office in 1958 and has been on the staff of the Defense Division
since that time.
   In 1963, Mr. Stolarow attended the Program for Management Development,
Harvard Business School, and during 1969-70 he attended the Industrial College
of the Armed Forces. He received the GAO Special Education Award in 1970.
           Professional Activities

Office of the Comptroller General             The National Institute of Public
                                            Affairs Program for Executive Offi-
  The Comptroller General, Elmer B.         cers, Group, Charlottesville, Va., on
Staats, addressed the following groups:     “The Use of Consultants,” March 5.
     The Federal Management Confer-           The Tax Foundation’s Conference
  ence, Washington, D.C., on the “Leg-      on Federal Affairs, Washington,
  islative Reorganization Act of 1970,”     D.C., on “Program Evaluation Role
  January 13.                               of GAO,” and “Proposal to Change
     The Brookings Institution Confer-      Fiscal Year,” March 8.
  ence on Federal Government Opera-           The Financial Management Round-
  tions, Washington, D.C., January 18.      table, Washington Chapter of the
      The Brookings Institution Round-      Federal Government Accountants
  table on Selected Issues in Public        Association, Washington, D.C., on
  Law, Annapolis, Md., on “The              “Issues Facing Financial Managers
   Changing Role of the GAO and GOV-        in the Seventies,” March 11.
  ernment-Business Relations,” Jan-            The National Capital Chapter of
  uary 19.                                  the American Institute of Industrial
      The Operational Auditing Semi-         Engineers, Washington, D.C., on
  nar, American Management Associa-         “Legislative Reorganization Act,
   tion, New York City, on “Financial,      Particularly as it Relates to Improv-
   Management and Program Auditing          ing Program Evaluation Services
   in the Federal Government,” Feb-         for the Congress and with Particular
   ruary 1.                                  Reference to the Role of the GAO,”
      The Graduate School of Business,       March 13.
   Indiana University, Bloomington,
                                             Mr. Staats’ address on “Potentials
   Ind., on “National Priorities and the
                                           for Management Improvement,” deliv-
   American Dream,” February 18.
                                           ered at the Federal Management Im-
      The Scholarship Dinner, Florida
                                           pro\-ement Conference, Washington,
   Atlantic University, Ft. Lauderdale,
   Fla., on “Public Affairs Challenges
                                           D.C., September 21, was printed in the
   to Business in the 1970’s,” Febru-      Winter 1971 issue of the GAO Review.
   ary 27.                                 It was also printed in the February
      The Executive Discussion, Armed      1971 issue of the Defense Management
    Forces Management Association, on      Journal which contains other papers
   “New Army Materiel Acquisition          and materials from the conference.
   Policies and Procedures,” Washing-         The Assistant Comptroller General,
   ton, D.C., March 2.                     Robert F. Keller:

PROFESSIONAL ACTIVITIES                                                         93
      Spoke before the Northern Vir-           Spoke on “GAO’s Changing Role”
   ginia Chapter, Federal Government        before the Veterans Administration
   Accountants Association, on “New         Legal Seminar, Washington, D.C.,
   Responsibilities for the General Ac-     February 25.
   counting Office in the Legislative Re-      Spoke before the Briefing Confer-
   organization Act, and the Ribicoff       ence on Government Contracts spon-
   Bill, S. 4 3 2 , ” January 5.            sored by the Federal Bar Association
      Participated in the Industry-Go\---   and the Foundation of the FBA in
   ernment Seminar on President Nix-        cooperation with the Bureau of Na-
   on’s Anti-Inflationary Policies spon-    tional Affairs, Inc., Philadelphia, Pa.,
   sored by the Kational Institute of       on “Competitive Negotiated Procure-
   Public Affairs, January 6.               ment,” March 1.
      Spoke on “Controlling Agency          Stephen P. Haycock, associate gen-
   Policies and Programs” before the eral counsel:
   U S . Civil Service Commission              Spoke on “Claims-The        Govern-
   Training Program, Institute for New      ment Strikes Back” before the Brief-
   Government Attorneys, January 20.        ing Conference on Government Con-
   Thomas D. Morris, Special Assistant      tracts sponsored by the Federal Bar
to the Comptroller General, addressed       Association and the Foundation of
members of the Federal Bar Associa-         the FBA in cooperation with the Bu-
tion Briefing Conference on Govern-         reau of National Affairs, Inc., Phila-
ment Contracts at a luncheon meeting,       delphia, Pa., March 1.
Philadelphia, March 2. He spoke on
                                               Spoke before the Legal Logistics
GAO’s organization, staffing, program
                                            Officer Course, Advanced, at the
planning, and quality control practice.
                                            Judge Advocate General’s School,
   Ralph J . Guokas, Program Planning
                                            U S . Army, on “GAO’s Role in the
Staff member, received a master of bus-
                                            Procurement Process,” Charlottes-
iness administration degree in interna-
                                            d e , Va., March 10.
tional business from The George Wash-
ington University, February 15.             illelcin E. Miller, assistant general
                                               Spoke before the Defense Procure-
Office of the General Counsel
                                            ment Management Course on “The
   Paul G. Dem bling, general counsel :     Role of the G.40 in Defense Procure-
      Participated in the American In-      ment,” Fort Lee, Va., February 22.
   stitute of Aeronautics and Astronau-     Robert H . Rumisen, assistant general
   tics President’s Forum, New York counsel:
   City, January 26-28.                        Spoke before the Defense Ad-
      Spoke before the Annual Confer-       vanced Procurement Management
   ence of the Attorneys of the Army        Course on “Problems in Formal Ad-
   Materiel Command on “Bid Protests        vertising,” Fort Lee, Va., January 7.
   under the Scanwell Doctrine-The             Spoke before the Defense Ad-
   Courts and the GAO,” Alexandria,         vanced Procurement Management
   Va., February 9.                         Course on “Problems in Formal Ad-
94                                                        PROFESSIONAL ACTlVlTI ES

  vertising,” Crystal City, Va., March      at a meeting jointly sponsored by the
  11.                                       National Contract Management As-
   Paul Shnitzer, assistant general         sociation. the Federal Government
counsel:                                    Accountants Association, the Federal
      Spoke before the Government Con-      Bar Association, and the National Se-
   struction Contracting Course spon-       curity Industrial Association, Boston,
   sored by the College of William and      Mass., February 23.
   Mary in cooperation with Federal            Spoke before the Basic Course in
   Publications, Inc., on “Preparation      Government Contract Administra-
   of Drawings and Specifications and       tion. conducted by Louisiana Siate
   Preparation of Bidding,” Dallas,         University, New Orleans, La.,
   Tex., January 11.                        March 12.
      Spoke before a training class for
   procurement personnel at Warner        Office of Policy and
   Robins Air Force Base. Macon. Ga..     Special Studies
   on “Problems in Formal Advertising
   and Negotiation.” January 13.            E . H. Morse. Jr., director. addressed
      Spoke before the Defense Ad-        the following groups:
  vanced Procurement Mana,wement               The Austin and Huntsville Chap-
   Course on c‘Problems in Formal Ad-       ters, Federal Government Account-
  vertising.” Fort Monmouth, N.J..          ants Association, January 14 and 21,
  February 5.                               on “Some Recent Developments in
      Spoke hefore the Concentrated         Federal Accounting and Auditing.”
  Course in Government Contracts               The Dallas. Fort Worth? and Hous-
  presented by the Marshall-Wythe           ton Chapters, Federal Government
  School of Law. College of William          Accountants Association, Febru-
  and Mary. in cooperation with Fed-        ary 16 and 18, on “Increasing the
  eral Publications, Inc., on “Con-         Visibility of the Government Ac-
  tracting Techniques and Subcon-           countant’s Work.”
  tracting.” Williamsburg, Va., Feb-           The Kansas City and Denver
  ruary 23.                                 Chapters, Federal Government Ac-
     Participated as moderator a t the      countants Association, March 9 and
  meeting of the FBA Government             11. on “The Expanding Activities of
  Contracts Committee re ccScanwell-        Government Accountants.”
  Bid Protests in the Courts” spon-            The Baltimore Chapter, Federal
  sored by the Federal Bar Associa-         Government Accountants Associa-
  tion and the Foundation of the FBA        tion. March 12, on “Professional De-
  in cooperation with the Bureau of         velopment and the FGAA.”
  National Affairs: Inc.. Philadelphia.      Mr. Morse had an article published
  Pa., March 1.                           in the February 1971 issue of The Of-
  Seymour Efros, deputy assistant gen-    fice entitled “Accountants Evaluate
eral counsel :                            Federal Management.”
     Spoke on “Truth in Negotiation-         Frederic H. Smith, deputy director,
  What Is I t and Where I s It Today,”    and Herbert L. Feay, assistant director,
have been appointed to an Ad Hoc              On February 22, Mr. Marvin and
Committee of the Federal Government        Arthur R. Goldbeck, supervisory audi-
Accountants Association’s Federal Fi-      tor, jointlj- led a discussion on analysis
nancial Management Standards Board         for the Congress at the Industrial Col-
to study the exposure draft of the         lege of the Armed Forces.
AICPA on audits of life insurance             Mortimer A . Dittenhofer, assistant
companies. Mr. Smith is serving as         director:
chairman of the committee.                       Addressed the Montgomery-Prince
   Edward J . Mahoney, deputy director        Georges County Chapter of the Fed-
for ADP, made presentations on the            eral Government Accountants Asso-
following subjects :                          ciation, February 10, on “The Statue
      GAO’s Government-wide computer          of the Audit Standards Project.”
   program at the American Manage-               Addressed the Detroit Chapter of
   ment Association’s Management              the Institute of Internal Auditors,
   Systems and Sciences Planning              March 2, on “The Status of the Audit
   Council meeting, Key Biscayne, Fla.,       Standards Project.”
   January 22.                                   Participated in a Council of State
      GAO’s ADP activities, particularly      Governments Seminar for State audi-
   those associated with G.40’~ long-         tors in Brownsville, Tex., on per-
   range plans in the ADP area. before        formance auditing and presented
   a special subcommittee of the Inter-       two papers: one on the work of the
   agency ADP Committee studying              Audit Standards Work Group and its
   long-range planning for Government         current status, and a second on the
   ADP activities, Washington, D.C.,          application of audit standards to the
   January 26.                                public sector.
      “Budgeting and Costing for ADP             Is currently serving as a member
   Activities” at the American Manage-        of a Technical Advisory Committee
   ment Association Data Processing           on an audit research project being
   Seminar, Washington, D.C., Febru-          conducted by the Department of Edu-
   ary 9.                                     cation of the State of Alabama and
       “Interfacing Peripherals with the      by the University of Alabama.
   Main Frame” at the American Man-          The following articles by Mr. Ditten-
    agement Association’s 17th Annual      hofer have been published :
    Systems Management Conference,              “A Systems Approach to Imple-
    New York City, March 9.                  mentation to State Audit Systems”
    Keith E. Muruin, associate director,     in a Special Bulletin of the Municipal
 and Joseph D. Comtois, assistant direc-     Finance Officers Association.
 tor, jointly led a discussion on “What         “Application of Audit Standards
 Accountants Need to Know About Sys-         to the Public Sector” in The Federal
 tems Analysis” at a section of the mem-     Accountant, Spring 1971 issue.
 ber participation meeting of the               “Performance Auditing Simpli-
 Washington Chapter of the National As-      fied” in Public Administration Re-
 sociation of Accountants, January 16.       view, March/April 1971.
96                                                            PROFESSIONAL ACTIVITIES

  Earl M . Wysong, Jr., supervisory             Max Hirschhorn, associate director,
systems accountant :                         attended the Residential Program in
      Spoke on “Auditing and EDP’ al         Executive Education at the Federal
   a seminar at The George Washing-          Executive Institute, Charlottesville, Va.,
   ton University, March 2.                  March 7 to April 30.
      Served as chairman of the Ac-             Dean K. Crowther, assistant direc-
   counting Subcommittee of the FGAA        tor, addressed the Third Institute on
   National Research Committee Bib-          Federally Sponsored Grants for Edu-
   liography Project, which was com-         cational Institutions, Non-Profit Orga-
   pleted in March.                         nizations, and Governmental Agencies,
      Served as chairman of the 1911        Iliashington, D.C., February 1. He
   nominating committee for the Doc-        spoke on the “Role of the GAO in
   toral Students Association of The        Auditing Federal Health Activities.”
   George Washington University.               Bernard Sacks, assistant director,
                                            attended the Intergovernmental Pro-
  Frankie L. Schlender, systems ac-         grams-Problem Seminar at the Federal
countant, participated as a member of        Executive Seminar Center, Kings Point,
the Accounting Subcommittee of the          N.Y., March 8-19.
FGAA National Research Committee               Frank V . Subalusky, supervisory
Bibliography Project.                       auditor, addressed the members of the
                                            1971 Intergovernmental Affairs Fel-
Civil Division                              lowship Program, Chantilly, Va., Jan-
                                            uary 22. He spoke on his participation
   A . T . Samuelson, director, addressed   and experiences while assigned to var-
the Calumet, Indiana Chapter of the         ious governmental offices at the State
 National Association of Accountants,
                                            level in Harrisburg. Pa.
March 23. He spoke on “The General
Accounting Office-Its Changing Role.”
   Gregory J. Ahart, deputy director,       Defense Division
attended the Conference on Business
                                               Charles M. Bailey, director, partici-
Operations in San Francisco conducted
                                            pated in the January seminar of the Na-
by the Brookings Institution, Janu-
                                            tional Contract Management Associa-
ary 24-29.
                                            tion, Houston, Tex. The subject of the
   Henry Eschwege and Victor Lowe,
associate directors, briefed State and      seminar was “The Market Place To-
local law enforcement officials in          day.” His remarks were on the general
the Internal Revenue Service Special        subject of today’s environment as it
Agency Basic School Program spon-           affects the market place. Mr. Bailey also
sored by the Law Enforcement Assist-        addressed the professional military
ance Administration-Department         of   comptroller course, Air University,
Justice, February 11 and March 3.           Maxwell Air Force Base, Ala., March 8.
They spoke on the functions of GAO             Jerome H . Stolarow, associate direc-
and the results of selected reviews that    tor, gave a presentation entitled “Re-
have been made primarily by the Civil       sults of GAO Should Cost Study,‘’
Division.                                   March 1, at the directors’ meeting of
PROFESSIONAL ACTlVITlES                                                                            97

the Department of Defense Procure-                   tion, February 24, Washington, D.C.
ment Management Review Program.                      Their subject was the General Account-
   John F. Flynn, deputy associate di-               ing Office’s review of the Vietnamiza-
rector, discussed how the GAO con-                   tion Program.
ducted the defense industry profit                      John Landicho, supervisory auditor,
study before the Chicago Chapter of the              addressed the Logistics Executive De-
National Contract Management Associ-                 velopment Course at the Arinj- Logis-
ation, February 17.                                  tics Management Center, Fort Lee, Va.,
   Hyrnan S. Baras, assistant director,              Januarj- 20. His subject was “GAO and
addressed the Procurement Seminar for                Military Supply Management.”
Auditors and Contract Managers spon-
sored by the Interagency Auditor                     Field Operations Division
Training Center, March 8, Washington,
D.C. His topic was “How GAO Re-                         Robert A . Wlodarek, supervisory au-
sponds to the Needs of the Congress.”                ditor. Chicago, addressed the Federal
   i5Ia.x Stettner, assistant director, at-          ADP Council of the Chicago Federal
tended the Civil Service Commission’s                Executive Board, December 15. The
Executive Seminar at Kings Point,                    topic of his presentation was “GAO
N.Y.. February 1-12.                                 and ADP in the Federal Government.”
   Joseph J . Kline, assistant director,                Dacid P. Sorando. reczional manager,
and Charles A . Schulrr, supervisory au-             Cincinnati, addressed the American
ditor. spoke before the Vietnam Task                 Society of Military Comptrollers at
Group, an intra-Government organiza-                 their luncheon meeting. February 11,

C u ~ r t r r n d a n.4urlit Ofiicials L isit G.40. From leir tu riglit are Sr. Levpdilo .\.-IJCHE: \ow.
Comptroller Generul uf Guatenlala: Arthur Angel. I:.S. Apen1.j !or Internutional Det,elop-
m e n t : AIjonso J. Strazzullo, i%-eioI‘ork Regional Munager; (2nd Sr. Fernando R O D A S Corzo.
Deputv Comptroller General of Guatemala, during a briefing. January 22, on the planning
and conduct of G A O audits b y a field office. T h e audit officials of Guatemala were also g i w n
a briefing. January 29. b y members o f the Los Anpeles Regional O f i c e .
98                                                         PROFESSIONAL ACTlVlTlES

at Fort Benjamin Harrison. His topic improvements adopted by Federal man-
was “The Role of the GAO in the Fi- agers.
nancial Management of the DOD.”              On March 5, Donald L. Scantlebury,
    Deon H . Dekker, assistant regional regional manager, and James B. Deem-
manager, Dallas, participated as a pan- er, supervisory auditor, Washington,
elist in the Career Day program at Texas participated in a West Virginia ac-
A & M University, College Station, Tex., counting symposium hosted by West
January 26.                                Virginia Wesleyan College, of Buck-
    Stewart D. McElyea, regional man- hannon, W. Va. The purpose of the sym-
ager, Denver, is serving as chairman of posium was to acquaint students and
the nominating committee of the Den- faculty members from all the West Vir-
ver Chapter of FGAA.                       ginia colleges and universities with var-
    Duane Lownsberry, audit manager, ious Government and private account-
Denver, took part in a Claims Activities ing careers. Mr. Scantlebury discussed
Workshop sponsored by Region 2 of the career opportunities offered by the Gen-
Forest Service, January 14. He also eral Accounting Office.
participated as a panel manager in a         On February 25, Mr. Deemer at-
symposium on career opportunities in tended ribbon-cutting ceremonies for
Government at the University of South the new Technological Building of the
 Dakota: February 25.                      Northern Virginia Community College.
    Frank B. Graves. supervisory audi- He is a member of the college’s account-
 tor. San Francisco, addressed the De- ing advisory committee.
 cember meeting of the Electronic Ap-
plications Research Forum in San
                                           International Division
 Francisco on the subject “Federal
 Trends in Automatic Data Processing.”        On February 3, James A . OUR,asso-
    Irwin M . D’Addario, assistant region- ciate director, and Eugene C. Wohlhorn
 al manager, Seattle, has been appointed and Frank C. Conahan, assistant direc-
 chairman of the Subcommittee for Iden- tors, conducted a seminar for partici-
 tifying Program Conflicts, a subcom- pants in American University’s Wash-
 mittee of the Seattle Federal Executive ington Semester Program. Participants
 Board. Also, Mr. D’Addario addressed      in the program were government and
 the Pupet Sound Chapter of the In- political science students selected from
 stitute of Internal Auditors at Renton. among 200 colleges and universities
 Wash.. February 23. He discussed GAO
                                           throughout the United States. The pur-
 functions and responsibilities.
                                           poses and functions of GAO were dis-
    L. Neil Rulherlord, supervisory au-
                                           cussed with international activities be-
 ditor. Seattle, was recently appointed a
 member of the Committee for Improv- ing emphasized.
 ing the Quality of the Federal Govern-       Harold E. Lewis, supervisory auditor,
 ment. a standing committee of the         Far  East Branch, Honolulu, was elected
 Seattle Federal Executive Board. His president of the FGAA Hawaii Chap-
 area of interest involves increasing the ter for 1971. William J . Anderson,
 effectiveness and efficiency of Federal supervisory auditor, was elected treas-
 operations by periodically publicizing urer. Clifford I . Gould, assistant direc-
PROFESSIONAL ACTIVITIES                                                          99

tor, and John J. Simon and Richard C.      Transportation Division
Thabet, supervisory auditors, were
elected directors.                            T . E. Sullivan, director, attended the
                                           meeting of the Standard Transporta-
                                           tion Commodity Code Committee of the
Office of Personnel Management             Association of American Railroads, At-
   Leo Herbert, director, spoke on “The    lanta, Ga., February 3-5. He discussed
United States General Accounting Of-       problems of mutual concern regarding
fice-50 Years: A Perspective of Ac-         the use of the freight commodity codes.
counting,” before the Accounting              E. B. Eberhart, supervisory trans-
Group of the College of Business Ad-       portation specialist. and Lozcsell James,
ministration, Texas Technological Uni-     supervisory management auditor, at-
                                           tended the semiannual meetings of the
versity in Lubbock, Tex., February 11.
                                           Cargo and Passenger Revenue Account-
On February 13, he participated in the
                                           ing Committees of the Airline Finance
Second Annual Sacramento State Col-
                                           and Accounting Conference, Washing-
lege Accounting Symposium and spoke        ton, D.C., March 16 and 17. Mr. Eber-
on “Training for Auditing of Manage-       hart discussed various problems en-
ment Systems.” Mr. Herbert was se-         countered by carriers on Government
lected as a member of the Accreditation    traffic, including the procurement and
Revisitation Team of the American As-      payment on excess baggage. hlr. James
sociation of Collegiate Schools of Busi-   gave a progress report on the imple-
ness that renewed the accreditation of     mentation of the Joint AFency Trans-
the University of Kentucky. March 1-2.     portation Study recommendations.
             Successful Candidates-
             November 1970 CPA Examination
  Listed below are the employees who passed the Kovember 1970 CPS

                                          REGIONAL             OFFICE
                   Name                                         Regional O s c e                   State

James E. Caldwell       .     .                           . Philadelphia     .           . Pennsylvania.
Kathan K. Cheney.. , . ,                                      Washington , .         .       Virginia.
Thomas G. Coupar            .                             .   San Francisco                  California.
John J. Dombrosh)                                         .   Detroit. . . .                 Ohio.
John &I. Donnelly .                                       .   Philadelphia                   Pennsylvania.
Ronald D. Flynn                                           .   Philadelphia                   Pennsylvania.
Stanley C. George . . .                                   .   San Francisco              .   California.
Edgerton R. Haskin, J r .                                     Dallas . .                     Texas.
William F. Laurie.. . . . . .                             .   Detroit. . . . ,           .   Ohio.
Charles A. McClendon                                      .   Kansas City.       ,       .   Illinois.
Kathryn E. KlcNurlin (Ifiss)                                  Denver      .. .           .   Colorado.
J. Peter Sewlon. . .                                      .   San Francisco              .   California.
Joseph G. Sakelaridos . .                                 .   Philadelphia.              .   Pennsylvania.
Weldon E. Stanley                                         .   Dallas                         Texas.

                   Name                                             Diaision                      State

Lawrence J. Dychrnan . . . . .                 .. .           Defense.. . .               New York.
Anthony J. Gabriel. . .      .                                Officeof the                Virginia.
Paul J. Granetto                                              International-Far           Illinois.
                                                                East Branch.
Charles A. Pistole .                      ...     .           Civil.. . . . . . .         Washington. D.C.
Duane 112. Ponko. .                             , ,   .       Civil ,                 . . Virginia.
Henry J. Steininger . .                                       International               Virginia.
John N. Toler, Jr . . .                                       Defense.          . . . . Texas.
Joseph E. Totten.       . .           .    .                  Civil,                    . West Virginia.
Joanne E. Weaver (bliss)          .                           Civil .                     Virginia.
Gary L. Whittington.. . .                             .       Civil. . .                  West Virginia.
David W. Yeakel . . . .                                       Civil     .             , , Virginia.

              New Staff Members

  The following new professional staff members reported for work during
the period December 16, 1970, through March 15, 1971.

Civil Division          Campbell, Wayne E.         Rloomsburg State College
                        Costa, Robert J.           Bryant College
                        Cronin, Robert E.          University of Maryland
                        Kaulfuss, Ernest J., Jr.   Lehigh University
                        Mozzer, Joseph W., Jr.     Florida State University
                        Samsell, Lewis P.          West Virginia University

Defense Division        Justice, Floyd B.          Florida State University
                        Zipp, Alan S.              University of Tennessee

International           Avalos, Henry              Thunderbird Graduate School
Division-               Nason, Steven L.           Thunderbird Graduate School

Office of Personnel     Culkin. Mary A. (Miss)     U.S. Civil Service Commission

Office of Policy        Epley, Harlan B.           Department of Commerce
and Special Studies     Kozura, Ronald             Board of Governors of the
                                                    Federal Reserve System
                        Simonette. John F.         Honeywell, Incorporated


Denver                  Alvarez, Joseph I.         Baylor University

Los Angeles             Roth, Norman E.            California State College

Norfolk                 Radosevich, Joseph J.      Virginia Polytechnic Institute

            Readings of hterest

            The reviews of books, articles, and other documents in
            this section represent the views and opinions of the individual
            reviewers, and their publication should not be construed
            as an endorsement by GAO of either the reviewers’ comments
            or the books, articles, and other documents revieued.

The GAO: Untapped Source of                  tial.” He selected one agency-the
Congressional Power                           Tennessee Valley Authority ( TVA -
                                              ‘.to serve as the analytical tool for de-
By Richard E. Brown: The University           picting how, specifically, the GAO’s
of Tennessee Press, Knoxville, 1970;          audit work serves Congress and for de-
$5.95.                                        scribing in some detail the GAO’s
                                              relations with those whose activities it
   This is the first book published since
 1939 which is concerned almost exclu-
                                                  Senator Proxmire explains in the
 sively with the role and activities of
                                               foreword to the book “This book began
the General Accounting Office (GAO) .
                                              as a case study of the GAO and its
The author is a staff member of the
                                              relationship to the Tennessee Valley
State of New York Legislative Com-
                                               Authority. Professor Brown has ex-
 mission on Expenditure Review. He has
 worked for the National Security             tended that original plan so that the
                                               book encompasses far more than its
 Agency and the Tennessee Valley Au-
                                               original objective.” The significance
 thority, and he taught at the College of
                                               of this comment by the Senator becomes
 William and Mary. Prior to his present
                                               apparent upon reading the book be-
position he was a consultant to GAO.
                                               cause essentially what the author has
   The author limits his attention to
                                               done is to describe briefly in the first
 GAO’s auditing and related investiga-
                                               part of the book the legislative develop.
tive functions in this book because            ment of GAQ functions and its role in
-‘these two functions give the GAO             the executive branch. He then proceeds
a special opportunity to make an              in the second part to discuss in some-
invaluable contribution to Congress in         what more detail the conflicts and rela-
carrying out its own enormous respon-          tions between the various Comptrollers
sibilities. To explore in detail the GAO’s     General, starting with the first, and
total responsibilities could easily be-        TVA management. The third part of
 come confusing and further obscure            the book is a brief discussion of con-
 the area of the GAO’s greatest poten-         gressional use of GAO reports. The
READINGS   OF INTEREST                                                           103
final part consists of the author’s evalu-       sible in a political environment-
ation of the work by GAO and his con-             that is, not politically motivated.
clusions concerning the additional             6. The results of the GAO’s audit
services GAO could undertake in the               work must be significant, and the
future to serve the Congress-provided              audit effort must deal with a va-
the Congress is interested in and capa-            riety of timely issues that are im-
ble of carving out for itself a stronger           portant to Congress and to the
position vis-a-vis the executive branch.           departments and agencies directly
   GAO staff members will find the dis-            concerned.
cussions of early (1933-1945) TVA
                                                 The author concludes that all the
and GAO events particularly interest-         criteria are met except number 4. In
ing because many of these events were         fact, throughout the book GAO fares
part of a conflict scenario in which          quite well except for some not so com-
GAO developed its modus operandi.             plimentary remarks about early TVA
These events are not well known to most       problems and a comment (p. 75) about
of GAO’s staff. In the third section of
                                              a lack of promptness in making audit
the book the author illustrates the con-      reports.
gressional use of GAO reports, but he
                                                 Numerous suggestions are made
offers no analysis of frequency of use
                                              which the author believes would en-
of reports or the manner in which re-
                                              hance the effectiveness of GAO. For
ports have been used by committees.           example, he believes that conflicting
The author’s approach throughout the
                                              agency views on GAO reports should
book is anecdotal.
                                              be put in separate reports attached to
   The author’s evaluation in the last
                                              GAO documents in order that the pro-
part of the book of how well GAO real-
                                              fessional views of GA40might not be
izes its full potential is based on GAO
                                             compromised by agency management
performance in relation to four key
criteria established by Joseph Harris in     views ( p. 62). No evidence is presented
his 19M book Congressional Control           to illustrate how GAO views may have
of Administration and two additional          been compromised. He also suggests
criteria suggested by the author. These      that it may be in the best interests of
criteria are :                               both the GAO and the Congress if GAO
                                             would serve committees but not indi-
  1. The GAO must be independent of
      the executive branch and respon-       vidual Congressmen ip. 79 1 . The ques-
      sible only to Congress.                tion of executive privilege is brought
  2. The GAO audit must be a true            up briefly and just as briefly disposed
      postaudit.                             of by the comment that “This dilemma
  3 . The audit must be comprehensive.       is one which cries out for additional
      intensive, and promptly executed.      research and an attempt to establish
  4. Congress must be organized to re-       badly needed guidelines.”
      ceive, consider, and act on audit         Several further suggestions of par-
      reports.                               ticular interest are made:
  5. The GAO must be professionally              GAO could review the program
      competent and as objective as pos-         evaluations and program planning
                                                            READINGS OF INTEREST
      and budgeting judgments made by      capabilities are not discussed in the
      executive departments (p. 1001.      book although a few passing comments
      GAO could provide budget inior-      are made in each of these areas.
      mation in the form of a pro forma       Another important subject which
      cost-effectiveness analysis of al-   might have been discussed in this book,
      ternative courses of action (p.      or in any book concerned with a Fed-
     102).                                 eral agency whose principal resource
  * GAO could add to its functions is a professional staff, is the philoso-
     that of ombudsman, which func- phies and bearing of the agency lead-
     tion might be described as the ers- its high level managers. The
     < bpeople’s watchdog against abuses
                                           author says almost nothing about such
     of power” (p. 103).
   I believe that there is something of        In summary, I believe GAO staffs will
interest in this book for all GAO staff find the book worthwhile reading, but
members and for others who want to they will probably find themselves look-
know something of the workings and ing forward to another book about
products of GAO. Unfortunately, there GAO u.hich is considerably more thor-
is too little discussion of many of the ough and analytical in approach than
topics introduced in the book. The au-
                                            is this one. But. after all, should one
thor’s analysis of GAO products is i1lost
                                            expect much more in only 106 pages?
noticeable by- its near absence, at least
in a statistical sense. Trends of the num-                  Ted M . Rabun,
bers of GAO reports, the scope and                          ASSISTANTDIRECTOR,
types of reports, the uses made of GAO                      OFFICEOF POLICY     AND
reports, and the professional manpower                         SPECIAL   STUDIES.

        Annual Awards for Articles Published in €he GAO Review
   Cash awards are available each year     at the time of publication are eligible
for the best articles written by GAO       for these awards.
staff members and published originally        The awards are based on recom-
in the GAO Review. Each award is           mendations of a panel of judges des-
known as the GAO Award for Signifi-        ignated by the Comptroller General.
                                           The judges will evaluate articles from
cant Contribution to Financial Man-
                                           the standpoint of the excellence of their
agement Literature and is presented
                                           overall contribution to the knowledge
during the GAO awards program held
                                           and professional development of the
annually in June in Washington.
                                           GAO staff, with particular concern for:
   One award of $250 is available to
                                              Originality of concepts.
contributing staff members 31 years of
                                             Quality and effectiveness of written
age or under at the date of publication.
Another award of $250 is available to        Evidence of individual research
staff members over 31 years of age at           performed.
that date.                                   Relevancy to GAO operations and
   Staff members through grade GS-15            performance.

                       Statement of Editorial Policies
1. This publication is prepared for use by the professional staff members of
   the General Accounting Office.
2. Except where otherwise indicated, the articles and other submissions gen-
   erally express the views of the authors, and they do not necessarily reflect
   an official position of the General Accounting Office.
3. Articles, technical memorandums, and other information may be submitted
   for publication by any professional staff member. Submissions may be
   made directly to liaison staff members who are responsible for representing
   their offices in obtaining and screening contributions to this publication.
4. Articles submitted for publication should be typed (double-spaced I and
   range in length between five and 14 pages. The subject matter of articles
   appropriate for publication is not restricted but should be determined on
   the basis of presumed interest to GAO professional staff members. Articles
   may be submitted on subjects that are highly technical in nature or on
   subjects of a more general nature.

                                                   U S   GOVERNMENT P R I N T I N G OFFICE 1 9 7 1
                                THE GAO REVIEW
                                       LIAISON STAFF

Office of Policy and Special Studies_ _ _ _ _ _ _ _ _ _ E. H . Morse, Jr., Coordinator
Office of the Comptroller General _ _ _ _ _ _ _ _ _ _ _ _ Rodnej E. Espe
Office of the General Counsel _ - - _ - _ _ _ _ _ _ _ _ _ _                  Milton J . Socolar
  .  .   . . .
Civil Division _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _     Jack L. !Vert-
             .  .  .
Defense Division - _ - - _ _ _ - - _ _ _ _ _ _ _ _ - - - _ _ _ _ _ _         Frank   111. Kimmel
                     .  .  .                                                 Charles   E. Hughes
International Division _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
European Branch__----_---_---____--------                                    William   L. Martino
F a r East Branch _ _ _ - _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _      Clifford  1. Gould
                         .  .  .
Transportation Division _ _ _ _ - _ - _ _ _ - _ - - - - _ _ _ _              Fred  J. Shafer
                           ...                                               Clyde E . !llerrill
Field Operations Division _ _ _ _ _ - - _ _ _ - - _ _ _ - - - -
Office of Personnel Management - - _ _ _ - - - _ _ _ _ _ - N . E. Cheatham
Atlanta _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _  Andrew F . McCall
Boston __________________________________                                    Charles   F . Carr
Chicago - - _ _ _ _ _ _ _ - __ _ _ - - - _ _ - - - _ _ _ - _ _ _ _ _ _ _ Clement K . Preiizisch
                        _       _                     _
Cincinnati - - _ _ - - _ - _ - _ - _ - - _ _ _ - - - - _ - - - - _ Daniel L. McCafferty
Dallas _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - - _ _ _ - - - _ Hurold C. Burton
Denver _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ John T . Lacy
Detroit _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - _ _ _ _ - _ _ _ _ _ - _ _ _ - _ -  Robert 0.Gray
Kansas City _______________________________                                  .drnett E. Burrow
 Los Angeles_--___--_____-_------_----_-__ Eugene T . Cooper, Jr.
 New York ________________________________                                    William F . Paller
 Norfolk _________________________________                                   Paul  Gaskill
Philadelphia - - - - - - _ - _ _ - - _ _ - - _ - _ - - _ - _ _ - _ _ _ _      Horace   Y . Rogers
 San Francisco _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - - _ - - -      Kenneth    A . Pollock
Seattle__---------------___-------_---___-                                    Richard    0.  Long
 Washington - - - - - - - - _ _ - - - _ _ _ _ _ _ _ _ - _ _ _ _ _ _ -         George    L.   Egan, Jr.

                                    EDITORIAL ASSISTANCE

 Office of Policy and Special Studies-_------_-_                  Josephine :IZ.Clark
 Office of Administrative Services_ _ - _ _ _ _ _ _ _ _ _ _       Jane A . Eenoit
                                                                  Alice E. Graziani
                                                                  Linda M . Lysne
'     WASHINGTON, D.C. 20548

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