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. ELECTROSTATIC COPYING PRICES 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 r 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. -29 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, ALLOCATION OF INDIRECT EXPENSES 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 operations. a--- In view of the consideration being given to improvements as discussed in this letter, we are maklng no speclflc recommendations. -3- 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 -4-
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)