General Services Administration's Working Capital Fund

Published by the Government Accountability Office on 1971-09-24.

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

                                    UNITED STATES GENERAL ACCOUNTING OFFICE
                                                WASHINGTON,    D.C.   20548

CIVIL       DIV,lSION                                                                      SEP 2 4 1971

        I          Dear Mr. Gardner:

                          The purpose of this letter     1s to inform you of the results            of our
                   review of the General Services Administration's            Working Capital Fund
                   established       under authority of the Independent     Offices Appropriations
                   Act of 1946 (40 U.S.C. 293).        The fund centralizes       and facllltates
                   blueprinting,       photostating, and duplicating    services     required     by GSA
                   &nd other Federal agencies.        To ensure continuous       operation,     the act
                   provided      that the fund is to be reimbursed on the basis of the estimated
                   or actual costs of the services        financed by the fund.

                           GSA finances the operations       of 25 reproduction     plants through the
                    fund.    The Printing   and Publlcatlons      Dlvlsion,   Offlce of Adminlstratlon,
                   GSA Central Office,      1s responsible     for fund administration,      including
                   the setting of uniform natronwlde          prices based on actual costs for the
                    services provided     by the plants.

                        We made a review of the fund's operations      at the GSA Central Office
                   and at Reg?on 3 offlces.      Two problem areas were noted-the   high prices
                   being charged for electrostatic      copying and the absence of allocation
                   of some indirect  expenses.


                         Fund revenues for electrostatic      copying service rendered by
                   Region 3 plants at established      prices substantially   exceeded the costs
                   of the service.

                          Region 3 furnishes   the electrostatic   copying service    to customers
                   through use of 23 machines manufactured       by the Xerox Corporation.
                   Thirteen    of the machlnes, although fund equipment, are being operated
                   currently    by the customer organizations    which are being charged actual
                   costs for machine rentals,     maintenance,   and supplies.     In operating   the
                   other 10 machlnes, the fund is paying the rental,         mazntenance, and supply
                   costs as well as the cost of personnel who operate the machines.             Customers
                   are charged at a rate of 6 cents a copy produced.

                         For the period July 1, 1970, to March 31, 1971, we compared sales
                   generated and expenses Incurred   by eight of these 10 machines,   One of
                   the two remaining machines was used irregularly    and thus was not included,
                   and the other was not placed In operation    until April 1971. In making the

                         .                     50 TH ANNIVERSARY      1921- 1971
 comparison, we adjusted reported  sales to eliminate           revenues resulting
 from a 20 percent surcharge levled on GSA customers            In Region 3 and we
 excluded Central Office expenses, which are covered            by the surcharge.
 We estimate that for the 9 months the fund showed a            profit  on the eight
 machlnes as follows:

 Sales                                                                               $268,605

 Expenses :
      Machine rentals  and maintenance                              $ 82,733
      SalarIes,  wages, and fringe benefits                           59,063
      Supplies                                                        13,542
      Payments to Admlnlstratlve    Operations        Fund
         for support services                                         14,773

           Total    expenses                                                          180,111

           Profit                                                                    $ 88,494

           Profit    as a percentage    of expenses                                    49.1%

         Region 3's overall    fund operations   for the period produced a profit
 of'$23‘,586    on total sales of $1.8 mzlllon.        Thus it 1s apparent that the
 profit    from operating   the electrostatic    copying service has offset     losses
 zncurred by the other prlntlng        and reproduction    actlvltles  of the fund.

        A GSA Audits and Compliance report dated September 25, 1970, disclosed
 that a similar     sltuatlon    existed in Region 2. The report stated that the
 Printing    and Publlcatlons     Branch "earns a comparatively       substantial   profit
 on the plant's     most simple activity      - Xerox copyzng service."        On sales
 of $8,800, for the month of July 1969, Region 2 made a profit               of $4,700
 or 114.6 percent.        The report stated further       that "The gain on this
 operation    serves to dlmlnlsh       the operating  loss, and to a large degree,
 subsldlzes    the more complex przntlng        and duplication   work performed by
 the plant."

          The Reproduction     and Distribution      Handbook states that "Nationwide
  prices are based on actual costs and are subject to revision              as costs
  change,"       We believe   that prices should approximate       costs as closely
  as 1s admlnlstratlvely         feasible.      The charge of 6 cents a copy for
  electrostatic      copies may have resulted        In copies being made by the
  plants'     offset   copying process, when It would have been less costly
1 to the plants,       and therefore      to the Government, to have made the copies
  by the electrostatic        process.

       We discussed the pricing         of the electrostatic   copying service with
Central Office Printing        and Publications      Dlvlslon personnel who said they
would seek to establish        prices consistent      with the cost of providing   the
services.      In the interim,      they are consztdering reducing the prices for
electrostatic     copying and increasing        prices for offset   services which are
operating     at a loss,


       Central Office expenses of the Printing         and Publications  Division
for personal    services,   travel,   telephone,    and so forth are classed as
expenses of Region 3's plant 1 and are recovered           by a surcharge assessed
only on the GSA organizations        within   Region 3. This practice    is unde-
sirable,    in our oplnlon,    because

          --it       1s inequitable     to recover the cost of providing  these
                 services   from only Region 3 customers when the expense
                 was Incurred     for the benefit  of all plants operated by
                 the fund, and
           --the operating      results          of Region 3's plant 1 cannot   be
               compared readily    with          those of other plants.

      We believe     that the Central Office expenses, which amounted to
about $275,000 In fiscal      year 1971, should be either allocated      to all
plants or segregated from other expenses in the flnanclal         reports.      We
also believe     that the expense should be regarded as a cost of providing
the various    services and, therefore,     be reflected in the related prices.

        Printing     and Publications    Division    personnel     informed us in
August 1971 that they are conslderlng             allocation      of the Central Office
expenses to all plants,           along with possible changes In the manner of
accounting       for certain     other costs that are currently           recovered by means
of the surcharge on Region 3 customers.                We believe      that, as part of this
effort,      accounting    records and flnanclal       reports for the plants in Region 3
should be placed on a basis consistent             with those of the other plants in
order to facilitate          financial  analysis and comparisons of the results           of


       In view of the consideration   being given to improvements as
discussed in this letter,     we are maklng no speclflc  recommendations.

We would appreciate       being   advised   when further       actlons   are taken on
these matters.

      We appreczate     the cooperation       and assistance        extended   to our
representatives    during the review.
                                              Sincerely    yours,

                                              V. L. H111
                                              Asslstant  Dlrector

Mr. G. C.    Gardner, Jr.
Asslstant    Administrator     for   Admlnrstratlon
Office of    Administration
Office of    the Administrator       of
   General   Servzces