oversight

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)

                                              , .~ .
                            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




                                       .
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                                                                                                      -   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..


                                                                                                                                 .    .


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                                                                                                                      .
.-       .   .

     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-
. .
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              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-       .