, .~ . STATE&T OF EIJ!ER B. STAATS, COMPTROLLERGENERALOF THE UNITED STATES BEFQRETHE LEGISLATIVE SUBCOMXIT'I'EE, APPROPRIATHONSCOblNITI'EE ___L -.L.n--e IJMITED .qTATES .SWlTTE 4N BUDGETESTIFIATES FOR FISCAL YE%!'?1972' MR. CHAIRMAN AND MEMBERSOF THE SUBCObDlITTEE: . - . We appreciate the opportunity to preseng for your consideration ' 'our budget estimates for fiscal year 1972 and to discuss with you the operations of the General Accounting Office. The justifications we have furnished your Subcommittee provide details of our organization, our work programs and plans, and related budget requirements in terms of manpower and money. We have furnished the Subcommittee our 1970 Annual Report to the Congress dlich presents details on the results of our operations last year. My statement is designed to set forth the major factors considered in preparing our budget for fiscal year 1972. As you know: Our original appropriation for 1971 was ............ $74,020,000 . Our 1971 supplemental appropriation was .............. 5,971,OOO The total appropriation ,for 1971 is . . . . . . . . . . . . . . . $79,991,000 Let me give you some idea of the effect recent pay and other increases have had on our appropriation.' If we calculate-the cost of items included in our 1972 estimate of $S7,59S,OOO at 1967 costs, . our estimate would be about $23 million less a.zd would total about $65 million. This represents an increase over the S-year period of about 36 percent. Our fiscal year 1972 estimate of $87,598,000 is an-_increase _ of $7,607,000 over our 1971 appropriation .I a This increase is composed of: - l 0 The additional cost of the January 10, 1971, pay s increase to put it on a full year basis . . . . $ 2,267,600 / * A net increase of 177 in the average number of employees (162 professional staff and 15 others ) 2,060;300 which includes the following items: Salaries . . . e . e . . . $1,560,900 Benefits o . , . . . . . . . 156,900 Travel . . . .’ - . 0 . 0 . i&6,000 Other costs. , . . a . . ; 56,500 . c - 3&..- . .. . * . Other increases in salary costs . e . . . . . . . $ 2,585,300 which include the following: Periodic step increases e o $ 823,600 i Promotions to fill vacancies and grade increases . . . l,S61,600 Other increases (net) . Q. 200,100 . Increases in employee benefit costs , . . . . . . 422,000 !’ which include -the following: Contribution to employee health benefits fund . . $ 193,200 Contribution to retirement ’ fund . e . . . . . , . . 211,900 ---- .-. . C&her increases ,fnet) . . . 16,900 -1 ,. . Increases in travel’and per diem costs . , . . . 132,000 ‘. ’ Net increase in’other objects . ; . . :, . . . ., 1 X39,800 In preparing our 1972 estimates, we considered the growing demands on the General Accounting Office imposed through: * Recent legislative and other congressional actions . Increases in specific requests of congressional . committees and individual members of Congress . -. . . for GAO work , , . Expansion and growth of Government programs, and . Congressional efforts to intensify and broaden .. GAO reviews of programs to better assist the -’ Congress in its oversight responsibilities -3- . .. . We have found it necessary to request for fiscal year 1972 an increase of 177 average positions over our revised fiscal year 1971 estimate of 4,744, or a totai of 4,921 average total staff for fiscal year 1972,. The requested increase of 177 is made up of 162 professional positions and 15 support positions. The increase will be applied primarily to activities involving direct assistance to the Congress and to reviews of growing domestic civil programs. Impact of Recent Legislative and Other Congressional Actions on GAOPrograms The general purpose of certain sections of the Legislative Reorganization Act of 1970 was to provide for better use of the General Accounting Office as an arm of the Congress in examining and analyzing the management of existing Federal programs and further * increasing our staff assistance to legislative committees during their consideration of proposals or appropriations for new or revised Federal Section 204 directs the Comptroller General to review and analyze the results of Government programs and activitiesI carried on under existing law, including the making of cost benefit studies, when , ordered by either House of Congress, or upon his own initiative, or when requested by any committee of the House or Senate, or joint committee of Congress, having jurisdiction over such progkams and activities. : . . -4- & .. ,... . Section 204 also directs the Comptroller General to have’ available in the General Accounting Office employees who are expert in analyzing and’conducting cost benefit studies of Government ’ programs. On request, these employees are to assist committees analyze cost benefit studies furnished by Federal agencies or c’onduct cost benefit studies of programs under their jurisdiction. Section 251 dir-ets the Comptroller General, at the request of *. any committee or committee staff, to explain and discuss any report made by the General Accounting Office which would assist in Consideration of proposed. legislation, including requests for appropriations, or in its review of any program or operation of any .--. ,’ Federal”agency within its jurisdiction. 1 We anticipate that these provisions of the Legislative ; Reorganization Act of 1970 will increase the assistance requested by congressional committees for reviews of existing Federal programs afld activities and on proposed legislation. Other provisions also will result in increased assistance to the Congress, such as Section 201 which requires the Comptroller General to cooperate with the Secretary of the Treasury and the Director, Office of Management and * &get, in developing, establishing, and maintaining a standardized , information and data processing system for budgeting and financial data. Also Section 451 makes subject to GAO audit those private . organizatfons which perform services in or on the U.S. Capitol buildings -- or grounds. -5- .’ . . I t .,._ . We expect that two other significant legislative actions will continue to impact directly or indirectly on GAO work. These are the establishment of the Cost Accounting Standards Board, chaired by the Comptroller General, and the establishment of the Commission on Government Procurement of which ? the Comptroller General is a member. NinefGAO staff members are presently L 0 assigned full time to the Procurement Commission which was directed to study the statutes, policies, and practices followed by executive agencies in procuring facilities, material, and services. A number of recent legislative acts provide for audits by the General Accounting Office. For example, Public Law 91-599, which authorizes U.S. . participation in increases in the resources of certain international financial institr‘iors, requires an audit of the administrative,expenses of the Exchange Stabilization Fund by the General Accounting Office. Other legislation which increases Federal program levels or creates new programs will require expansion of GAO’s auditing and review activities. Public Law’ 91-230, for example, expands programs ‘of assistance for elementary . and secondary education and includes GAO access to records provisions as do the Occupational Safety and Health Act of 1970, the Clean Air Amendments of 1970, the Housing and Urban Development Act of 1370, the Comprehensive Alcohol Abuse and Alcoholism Prevention, Treatment, and Rehabilitation Act of 1970, the Intergovernmental Personnel Act of 1970, and the Emergency Rail Services Act of 1970, to name just a few. .. A provision of the Armed Forces Appropriation Authorization (1970) directed us to make a study of profits made by contractors and subcontractors ‘under defense and certain other Government contracts for which ,there was -6- ,... . no formally advertised competitive bidding. Our report on this extensive study was released on March 17. We expect, however, that follow-up work in this general problem area will be required. As you know, we have been limited in our audit of Internal Revenue Service activities because the Treasury Department has denied GAO access to information regarding tax administration activities. Recently, however, at the request of the Joint Committee on Internal Revenue Taxation, we have, as agent for the Committee, begun a study of the handling and collection of taxpayers’ delinquent accounts. The purpose of the study is to evaluate procedures and controls used, to identify problem areas, if any, and to make recommendations to the Joint Committee on Internal Revenue Tpation if we believe improvements are needed. 3 In preparing our budget, we have considered, to the extent practicable, , the impact of legislative actions, such as those identified, on GAO resource reqviremtnts . ,li- I will now comment on the seven major program categories. DIRECT ASSISTANCE TO THE CONGRESS The GAO staff &sources applied to activities involving direct assistance to the Congress have more than tripled from 238 man-years in 1966 to about 724 man-years in 1971. We anticipate that these activities will increase further to 760 man-years in 1972. Nearly 20 percent of dur professional staff resources is applied to this work.. . . -7- . .- . . t ‘ . . .. . This direct assistance work results primarily from specific legislative action by the Congress and requests of congressional committees, and individual members of the Congress. During fiscal year 1970, we issued 321 reports, covering a wide variety of studies and inquiries requested by committees and individual members. This compares to 204 in 1969. For th? first half of fiscal year 1971, we issued 163 -reports and at December 31, 1970, we had on hand an additional 117 requests on which our staffs were performing required work. Audits and reviews requested by committees and individual members I and those directed by legislation, of course, constitute the bulk of our direct ajsistance to the Congress. However, we also provide direct assistance to the Congress through: . -Testimony on the results of our audits and reviews of Federal programs and operations and on other matters .,-. . Direct assignment of GAO staff to committees * . Reports on bills under consideration by congressional committees and advice in legal, legislative, accounting’, and auditing matters . Advice and assistance on House and Senate financial and administrative operations, including accounting and auditing services provided and request audits of legislative branch activities, including concessionaires .. . . * 1 . Liaison activities with congressional committees and individual members provided by the attorneys in our . . Office of Legislative: Liaison and other members of our staff . and their staffs on a wide variety of matters we are also > computers by the House The First and Second House Administration Committee in -*-. October 1969-.and.October 1970. ’ I _---I--‘- _ _._,- .. .--- -- _.^. ..---- s- --- _- ___.-_. ~..-*- :-..-*__._ Examples of Requests for Reviews moved from Committees and Individual Members Not only has the number of requests from committees and individual .*. members increased, but the magnitude of the work involved in some has been substantial. I would like to give you just a few examples. Military Activities We are continuing our reviews of selected automatic data processing systems as requested by the House Committee on Appropriations. These reviews are concenled with the effectiveness of the Department of Defense’s management of the development and installation of these . systems and the acquisition of related equipment. Since July 1970, 7LLG WC have issued tr.L*reports to the Committee--one on the management 4 of automatic data processing systems in the Department of Defense * -9- . . c , one on problems in the acquisitioti of standard computers for the World- wide Military Command and bontrol System of the Department of Defense, one on the potential problems in developing the Air Force's advanced 2. logistics system, and one on the Defense Supply Agency's standard auto- , mated materiel management logistics system. The other five reports were on various aspedtsof DOD's tactical data systems. Currently, we 1 have 8 large number of ADP systems under review. _. At the requestc of the Chairman, House Committee on Appropriations, we reviewed-the operation and management of nonappropriated fund activ- 7 ities at selected installations of the Department of Defense in the United States, Europe, and the Far East. With that issuance of a report on February 23, 1971, we completed a series of reports on 12 individual installations. We also issued a report on military exchange activities and an overall report on nonappropri'ated fund activities , of the Depart- ment of Defense was issued on May 7, 1971. _ We recently completed a study of the proliferation of tactical air- to-ground missiles in the Depar-tment of Defense at the request of the . Chairman, Senate Committee on Armed Services. That study covered the TOW and Shillelagh anti-tank missile system, the Condor program and the .. Maverick program. ' c- , .. . Another review which-:is*Lbeing performed at the request of the -. Chairman, Special Subcommittee on )!ilitary Airlift, House Committee w on Armed Services, i% a study of t’i;6long-rang; plans for military 4 l PO * airlift/sealift capability to meet world-wide requirements. a &?$i4WA~ /tub&&M w-is@ &AE SC!?& 2&* cz-f&-Fti>~&~ 2, .&/ ?A2 / 7 7/ -- Domestic Civil Activities 0” . Congressional requests for studies of domestic .ciuil activi tics cover a very wide range of programs and subjects. ‘At DeCmbCT 31, . 1970, we had on hand 72 such requests in various stage<: of completion. - ,- I ‘should like to give you just a fe;t examples, of the arezs of ., \ congressional interest in civil activities. .’ -----_ .. . . At. the request of the Senate Committee on @inan& and the .v . , House Ways and Means Committee, we reviewed selected medicare ‘payments #’ made ‘by Blu e Shield plans in various states, to s’upervising 3 , and teaching physicians. Our reports were used by the commi ttecs : in their Fonsideration of propos!d legislation uilich would change ;i the basis for reimbursement of teaching physicians’ services from a fee-for-s’ervice basis to a cost-reimbursembnt basis under certain - 4 conditions. The Committee on Finance estimated that payments for ”. , the. services of supervisory physicians in teaching hospitals involved ’ more than $100 million annually and that, in ‘general, such payments were not customary prior to medicare and that .it was not intended that .. medicare would cover noncustomary charges. -. In another study, requested by the *Joint Committee on Atomic Energy, we rivieired the policies and proccclurcs of the Atomic Energy - 11 - _- Commission for the management of radioactive waste. In our report dated January 29, 1971, we recommended that the Atomic Energy . . Commission’s Division of Waste and:Scrap Management formulate and implement a comprehensive radioactive waste management@plan. On Jrane 15, 1970, the Joint Committee on Atomic Energy asked us to.revSw certain factors relating tb the Atcz:nic Energy Commission~s proposal to amend its Uranium Enrichment Services Criteria to change . the basis for computing the charge ior suc5 services from a cost recovery basis to one which would be more closeHy comparable to that of a conunercial operation. The Commission also proposed to increase . its price for separating the isotopes of uranium in the gaseous diffusion plants. On July 17, 1970, we issued a report to the Committee in which we stated that the proposed criteria should not be adopted without further action by the Cqngress because it was of doub,tful legality. After the. issuance of our re;-sort , the Joint Committee introduced legislation which was enacted on December 19, ’ 1970, to prohibit AEC from changing the criteri,a as it had proposed: L_nternationaI Activities . In the international area, congressional interest in programs and activities related to Vietnam and Southeast Asia continues to problems in Vietnam or Southeast Asia. . 7 reviews in process pertaining tomatters of an international character resulting from requests of congressional committees and members of Congress. As an example of our congressional assistance work in the international area, I shall describe our work on one request received from the Chairman, Senate Committee on Foreign Relations, involving the administration of the military assistance’ training program. our review was carried out in approximately 10 countries overseas as well as at installations in the United States. We found that, in some areas, the military assistance training programs, costing about $75 million a year, were not being fully coordinated with the various ‘other U.S. Government training programs. We also found that some training was unnecessary or not of high priority; some training was related to equipment not on hand; and there was inadequate consideration by the U.S. resident military advisers of the recipient countries’ capabilities to provide training from their own resources. We recom- mended in our report of February 16, 1971, specific actions to improve the management of the military assistance training programs. We also suggested the possibility of enacting legislation requiring,the . Secretary of Defense to establish a measurement system to assist in . determining- the effectiveness of expenditures for the military assist- i’ I ante training programs. - 13 - . .._ . REVIEWS OF MANAGEMENTEFFICIENCY AND PROGRAMRESULTS The work that we undertake on our own initiitive, directed to evaluating whether programs are achieving the objectives intended by the Congress and at reasonable cost, materially assists the Congress and its committees in maintaining effective legislative over&ght of governmental programs and operations. In selecting areas for review, we give primary attention to those areas known or considered to be of direct interest to the Congr‘ess or which, in our judgment, should be reviewed by GAO as an arm of the Congress. ’ In making these judgments, we give. due consideration ., to the.importance and effectiveness of programs and activities, ----- __ size of expcnditui&,‘investment!in issets, etcl, through our .I program planning system. . ‘I%: 2,273 man-years which we plan to apply to these reviews during-fiscal year 1972 represent an increase of 139 man-years over the revised fiscal year 1971 program level. In total o’lr plans provide for directing reasonable review efforts’to all important Federal program areas. Domestic Civilian Programs -. . a In the years ahead, we envision continued growth in the number and size of domestic civilian programs and in the portion of total Federal budget resources applied to them. I am referring .. especially to programs related to poverty, health, education, -. housing and urbanization, and environmental quality. Accordingly, ‘.we arc planning to increase, during fiscal year 1972, our total - 14 - . .. . manpowerapplied to reviews of domestic civilian programs by 187 man-years. While some increased audit emphasis will be applied to all civil departments and a.nuaber of the larger independent agencies, the more significant increases will be applied to the Deparments of Health, Education, and Welfare, Transportation, Labor, Housing and Urban Development, and the newly-created Fqnviromental Protection Agency. These agencies account for a net increase of about $8.2 billion of the $16.4 billion increases in Federal budget outlays pz-oposed’by the,President for 1972. In planning our reviews of domstic civil programs, we are attempting to look more than previously at related program which cross agency li- 2s. For example, we have‘made one of our senior officials’the point for coordination of all GAOwork in the I medicaX and health-related activities. Total Fedekl outlays for health in 1972 are-estimated at about $22.2 billion c&pared to.920.7 billion in 1971. 5% have underway studies of (1) comprehensive health planning, (2) health facilities coktruction,’ (3) health activities related to sanitation, drug manufacture, and consmer protection, and (4) purchases of drugs for use in Federal hospitals. Additional domestic civil progrm areas to which we plan to . direct increased attention during 1972 are: .. . Education, especially higher education and elemmtary education .. . . - 15 - . * Public assistance and family services programs e Urban renewal and Bode1 cities activities 0 Manpowerprogram 0 Air traffic control systems dsvefopaent and opmation 0 Federal-aid highmy program, highway safety paogrzms, and urban mass transportation , . Air and water pollution and solid waste management 0 Consmer protection program In other program areds, such as those of the Dspnrtmmts of Agriculture, Comerce, Interior, Sustice, Treasury, and most inde- pendent agencies, we anticipate that our overall level of effmt 1,* will remain substantially at the sme level as 1971. 1 Defense Pro$rams I’ r Wetire plaming to reduce our overall effort in the defense area to 1,256 man-years in fiscal year 1972. Although this repre- sents a relatively mall reduction of about 70 man-years as \ applied in 1971, our 1971 requiremmts were considerably increased by the study dir&ted by the Congress of the profits made by contractors and subcontractors on contracts on which there is no focally advertised competitive bidding. We are not anticipating that the Congreks will either legislate or request during _.fiscal year 1972 a study of this magnitude. L Of the 1,256 man-years we plan to apply to defertse activities, 908 will be applied to surveys and reviews initiated within GAO -16- . ’ . I a’ . and 348 to special requests received , .. . from koqressional committees and individual members. - As in previous years, a significant'port~on of our effort w5J.l be devoted to defense'procurement,activities, We plan I to continue e in-depth reviews of contract pricing by defense procurement activities. We plan to continue to perform "should cost" studies at selected cbntractorsl plants, and at some in-house,over-haul activities. We plan also to review the Defense Contract AudL%Agency's postaward (defective pricing) program. Wewill. review -&heefficiency and effectiveness of the audit agency's performance, its basis.for select- . ing contracts for review, the audit techniques employed, and the benefits compared with the costs of the prograi. Additionally, we plan to initiate a review of the waivers of cost or pricing d.ata by the heads of the military departments in connection with negotiated' procurement. The objective of this review is-to examine in-Lo the reasons for the waivers and whether this has resulted in prices that a& higher than would normally be negotiated had the cost data been made available. Wewill explore alternate meamsavailable to the Government to assure that prices are fair and reasonable. Also, we are currently reviewing the reasonableness of costs incurred under major prime contracts, s&h as those for the &5A, F-14, F-15 and * COBRAaircraft programs. We are bringing to a conclusion our review of close air support.. We initiated this review because of congressional interest concerning the pos'sibility of duplicating defense expenditiures for different . weapon systems to fulfill the close air su~pork n;ission. Tne'dif- ferent systems in question are the AH-56 (Cheyenne), the A-X, and r &/ 17 I 3 L I the AV-8A (Harrier). We plan to provide the Congress with our obser- vations on how the aircraft in.'question meet the close air support - mission requirements. In addition to pricing and-costing studies under negotiated con- * 2 tracts, we plan to make studies of such aspects of procurement as l Government financing of contractors f working capital, product warranties, acquisition , of technical-data for reprocurement purposes, and the opera- tion of the Defense Contract Administration Services including the : inspection practices and procedures of that agency. We plan also t,o review the Government's effectiveness in obtaining contractor compliance with the Equal Employment Opportunity Program. In view of the congressional concern xith regard to the problems identified in the acquisition of major weapon systems, we plan to continue 'our reviews of major weapon systems which are in various stages of the acquisition cycle. Fie have as our primary objectives in these revie?rs the deter.Znation of the basic causes of ccst growth, .. schedule slippage,' and deterioration of the orlginnlly eqected . performance. characteristics. We are giving particular attention to provi&ng effective r assistance to the Armed S&-vices and Appropria- tions Committees by furnishing independent, timely, and complete information on the status of specific major weapon systems, as well as on overall issues involved in the management of the acquisition .__ process, for use in carrying out their legislative and oversight -- responsibilities. We issued our most recent 'report on the acquisition of major weapon systems on &rch 18. We plan to initiate a review of tactical 2i.r defense rdissiles. The Army and Navy have accumulated an array of ,... . significant duplication between the services. The result of our work ,_ . will be made available to the Congress for its use in considering appropriation requests. ,'. I e We plan also to review the ~~-48 torpedo pilot production con- / I tracts as they are awarded to the two competing contractors. Additionally, we plan to continue our surveillance of the data available from the I . performance measurement systems applicable to the F-14, F-15, S-3, and ' B-l aircraft programs. We will continue our coverage of the supply management functions in the Department of Defense since we continue to fi,nd Iareas requir- ing significant improvement. Examples of areas currently under review 0 or planned for review include equipment and material requirement 1 1 > .. . . L r c .. . determinations; repair of major items vs. procuring new items; readiness of equipment and material in the hands of military units in the U.S. and abroad; maintenance activities; and utilization of excess material. In the manpower management area we will be examining practices in assigning and utilizing military personnel; education and training programs; and administration of military and civilian pay and allowances. In the research and development area we will’ be ,. . examining into such matters as contractors’ independent research and development; management of research projects being performed ,in military facilities, universities, not-for-profit organizations, and industrial laboratories; and research and development of specific systems and equipment. In the defense facilities area we will be reviewing both the acquisition and management of the facilities. Our work in tile support services area includes such a> matters as ADP systems, communications activities; civil defense, medical activities, industrial facilities at Government-owned 1 plants, and military commissaries. Lnt enat ional Programs . . In the international program area our workload for fiscal year 1972 will continue to be associated with the very large expenditures of the various U.S. Government agencies in Vietnam and Southeast .. Asia. We also plan to continue reviews of otier foreign assistance and related programs. We will review trade and international commerce activities, particularly the industrial and agricultural , - 19 - trade expansion programs and thei+ relationships to our balance- of-payment problems. We will be inquiring intc changes in the structure of U.S. foreign assistance programs, such as trends toward regional programs and increasing reliance on multilateral international financial institutions, i.e., the iorld Bank and regional development banks. Most of the international programs cojltinue to be performed by the Department of State and the Department of Def&nse. However, other U.S. Government departments and agencies are also engaged ‘in administering international programs or elements of them. These I Y include : -.--_-_ _. e ,Departme?t of the Treasury-- Intenationdl Finance Functions ’ .( . Post Ot’fice Department--International Services ‘Q Department of Commerce-- International Programs and Affairs ’ > . Department of Agriculture --Foreign Agricultuial Functions 0 United States Information Agency * Peace Corps . Export-Import Bank of the United States : * Various independent agencies, such as NASA, AEC, etc. . . I We,plan to expand our reviews in these,activities since many inter: , national programs involve interrelated programs in which several departments and agencies, or coordinating bodies, participate. .. Transportation Management ’ -’ The Government’s $6 billion expenditures for transportation of ‘, equipment, material, and personnel will continue to require audit - 20 - ? ,... . emphasis. We plan increased attention to the impact of contain- erization in the shipment of materiel for the Department of Defense involving the inland and overseas portions of the movements, and to the adequacy of the Department’s freight rate negotiations for , these and other movements. We also plan to review the readiness of transportation support units in Europe. The management of selected civil trnnsportation activities, including those of the A General Services Administration in support of components of the Department of Defense, will also be reviewed. Under the Joint Financial Management Improvement Program, we ‘r participated in the Joint Agency Transportation Study. The report, ----- _. .’ released in Septem&r 1970, inc’lu&ed 58 recommendations to simplify and expedite payment and audit procedures, and to reduce the cost \ of transportation. This will require follow-up action by the General ’ I Accounting Office. Claims Management The Federal Claims Collection’Act of 1966 has increased the authority of the departments and agencies to compromise and terminate debts due the U.S. We have reviewed the regulations and collection - * operations of a number of representative agencies under this > statute and found a need for substantial improvement. We plan, therefore, to expand our reviews of both claims .. collection and claims settlement activities, as well as those involving -I ‘the waiver of certain debts due the Government to insure that they are being appropriately administered. - 21 - a,.. . EXAMINATION OF AGENCIES’ FINANCIAL STATEMEhiS, ACCOUNTINGSYSTEMS, AND ACCOUNTABLEOFFICERS’ ACCOUNTS Our work in connection with the examination of agencies’ financial statements, accounting systems, and accountable officers’ accounts is required by various statutes and includes: , 0 Centralized audit of transportation payments 0 Annual audits of corporations’and other governmental activities 0 Centralized voucher audits at military finance centers, including account settlement e Settlement of accounts of accountable officers in civil c departments and agencies . kudits of civilian pay and allowances I 0 Reviews of accounting systems in operation The number of staff positions needed in fiscal year 1972 to carry out these financial-type audit activities will be 1,020 compared to 1,032 in 1971. We plan to shift our emphasis within this program area. For example, we are reducing the estimated _) staff resources needed for the centralized audit of transportation payments since we expect a decrease in the volume of transportation bills applicable to shipments to Vietnam and Southeast Asia. We are planning, on the k other hand, to increase somewhat manpower resources appli’ed to reviews of department and agency accounting systems in operation to - determine whether these systems provide adequate ald reliable information on program and activity costs and related results. - 22. - . . -I I ,*. . . The Transportation Act of 1940 requires the GAO to postaudit all billings for transportation under standard Government trans- portation forms. This activity, performed centrally in Washington by our Transportation Division, will require the application of 651 man-years in fiscal year 1973. and 630 man-years in 1972, a reduction of 21 man-years. In addition to, an anticipated reducti.on ,? in the volume of transportation payments fcr audit, I, we expect to achieve additional economies through increased use of computerized audit techniques. During fiscal year 1970, 3 total of 108,499 overcharge notices by the United States against carriers amounted to $17.7 million. During the s&e period we collected $16.3 million,- - SW .’ Tho’Government Corporation Control Act of 1945 and other specific statutes require annual audits of financial statements in (’ accordance with principles and procedures applicable to commercial corporate transactions. During the last session, the Senate passed legislation which would provide for this type of audit at least once every 3 years. This would, we believe, be desirable in that it would give us more flexibility in the use of our professional , staff for higher priority work. * . . .. - 23 - t LEGAL SERVICES A!!D DECISIONS The legal work of the Office extends, with certain exceptions, to virtually the full range of the Government’s receipt and expendi- ture activity. ‘I Many legal questions arise as a result of our audits and reviews of’agency operations. i-leads of departments and agencies as well as disbursing and cbrtify’.ng officers have a statutory right to submit .< for advance decision any question on the legality or prorpiety of proposed ,expenditures of Federal funds. Contracting and procurement officers may also obtain decisions on questions arising in connection .. with proposed awards of Government contracts. Also, individuals and -- -._-- - I-, .’ ~ * .’ firms. wh&e claims have been ‘disallowed by actions of 0’~ Claims and Transportation Divisions and bidders for Government contracts who \ ~feel that procurement statutes and regulations have not been properly / , applied may apply for decision. Under the law, decisions of the Comptroller General in these matters are final and conclusive upon the executive branch of the Government and payments made contrary to our decisions are subject to disallowance. Private concerns and .’ individuals who may be adversely affected have further recourse to the kourts in most cases. 1 The legal work includes the preparation of de’cisions concerning the legality and propriety of the’rcceipt and exuenditure of public -. funds; the preparation of advisory opinions and reports on proposed -. and pending legislation to members of Congress and congressional committees, and to the Office of Management and Budget; and the formulation and presentation of legislative recommendations to the , Congress. - 24 - As you know, the Comptroller General has responsibility for determining the legality of expenditure of appropriated funds. This decision function, involving the interpretation and application of Federal statutes and regulations, has produced a large body of decisions over the years which serve as guidelines applicable to receipt and appropriated fund expendi- ture transactions of the Government. Of the 226 man-yesrs we estimate willbe needed to carry out the $8 legal activities of the Office in 1972, 188 will be in our General Counsel’s office and 38 in our Transportation Division. The Transporta- tion Division provides legal and technical assistance to the Department ” \ of Justice in the prosecution and defense of transportation suits by . ST ,t , and against the United States, 4s well as in cases before the Court of Claims. ’ , The contract area continues’ to constitute the largest individual categorjr of our legal decision work. Recent decisions of the District of ,Columbia Court of Appeals in Scanwell Laboratories, Inc. v. Thomas and of the District Court for the District of Columbia in -A. G. Schoonmaker co., Inc. v. Resor, et al., have altered certain concepts relating to the rights - of those who bid for Government contracts. These decisions and * the work of the Commission on Government Procurement (created by Public Law 91-129 with the Comptroller General as a statutory member) will significantly affect the Government procurement process and have already had an impact on the work of our Office. Two of our lawyers -- are assigned full time and two are working part tine for the Procurement. C?mmission. In addition, the Office was requested to prepare several - 25 - . ... . ‘ studies for use by the Commission. Additional work of this type is anticipated. 0 We are also asking for 6 additional staff positions over our 1971 level to meet the increased workload of our legal. staff, due to the growing complexity of our audit work and to handle an increased voluie of bid protests. FIKSCIAL !4UAGEblENT I!;PROVEK& In recent years The Office has dcvot’ed considerable effort ‘LP ” assisting the Federal agencies in their efforts to improve their accounting systems to the point where they can be* apTroved, by our Office, , as required by th e Accounting and Auditing Act of 1950. In 1966, about ., a third of the civil departments and 1 Engineers (civil functions) had J5f In addition, for the Department of Defense, we have approved 26 state- c&-L& ments ‘of accounting principli;s and standards,asl~~--r-l-l~~~s 4 systems , &.l e c d designs. We pIan to continue t3 workAclth all agmcies;i.% pronoti2.g improved systems and methods of producing reliable financial ‘and program information. A major financial management project starte’d’last year. is the _ development of auditing standards and guidelines, TOY’ application .. under Federal grant programs. This ‘work is being carried out under GAO leadership by a working group composed of representatives of the principal Federal agencies involved in grant nrogz~~. Assistance - 26 - . .._ . is being obtained from State and local governments and various professional organizations. The objective is to develop audit standards and guidelines that will be applicable to audit work performed at State and local government levels and for other recipients of Federal grants irrespective of who performs the audit work. . CLAIMS SETTLEMENTAND DEBT COLLECTION The Budget and Accounting Act of 1921 *places final responsibility . for settling most claims for and against the Government in the General. Accounting Office. The passage of the Federal Claims Collection Act of 1966 increased the authority of the departments and agencies to \ compromise and terminate debts of the United States under’certain conditions. As agencies gain more experience in exercising the authority granted under the act and their debt collection operations improve, it is . expect&d that the GAO debt collection operations will gradually diminish. Accordingly, we plan to decrease from 141 in 1971 to 139 in 1972 the ,” man;years applied to these claims activities. . ,EXECUTIVE DIRECTION AND ADMINISTRATIVE SUPPORT Our program category of Executive Direction and Administrative ’ ’ Support includes: . Control and direction of the General Accounting Office and performance.of duties by the Comptroller General ._-_~- as specified in the Budget and Accounting Act of 1921, .. the Budget and Accounting Procedures’ Act of 1950, the Legislative Reorganization Act of 1970, and other laws Policy review of reports prior to release Administrative services Personnel management Computer services - 27 - . .. . These activities, which will involve 391 man-years in fiscal year 1972, are necessary to the internal management and administration of the Office. Mr. Chairman, I have covered, very briefly, the highlights of our major program requirements and operations. We are very proud of ?- the high quality and productivity of the membkrs of our organization, both in Washington and in the field. It is our goal to make continuing improvements in this respect. To this end, we will devote increased effort to improving our program planning, as well as our internal organization and management practices during fiscal year 1972. Additional details concerning our activities are contained in our budget justification and I will be happy to-answer any questions you may have. This concludes my statem<nt. -28- .
GAO Budget Estimates for Fiscal Year 1972
Published by the Government Accountability Office on 1971-06-07.
Below is a raw (and likely hideous) rendition of the original report. (PDF)