oversight

Budget Estimates for FY 1972

Published by the Government Accountability Office on 1971-03-30.

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

                                              STATEMENT OF
                        ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES
                                               BEFORE THE
                           LEGISLATIVE SUBCOMMITTEE, APPROPRIATIONS COMMITTEE
                                        HOUSE OF REPRESENTATIVES
                                                   ON
                                 BUDGET ESTIMATES FOR FISCAL YEAR 1972



          MR. CHAIRMAN AND MEMBERSOF THE SUBCOMMITTEE:

                We appreciate           the opportunity                      to present          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                which       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 appropriation            for     1971 was . . , . , . . . . . , . .                                         $74,020,000

          Our revised          1971 estimate  includes a supplemental
          request of          . .’ . , . . . . . . . . . . . . . . . . . . .                                                5,971,ooo

          The total       revised      estimate             for    1971 is          . . . . , . . . .                     $79,991,000

                   Our request        for     the 1971 supplemental                       appropriation               includes          funds

          to cover      pay increase           costs         totaling          $5,678,000              for    both   Public       Law

          91-231      (effective       December 28, 1969) and Public                                   Law 91-656          (effective
   ! -,
i; f
          January      10, 1971).            Also included                in our supplemental                    request       are

          $173,000      for    the increased                cost      of contributions                  for     Federal      employee
group health benefits          as required           by Public     Law 91-418 (effective

January 10, 1971) and $120,000 for the increased                         cost of travel     by

air resulting      from a     tax       (effective     July 1, 1970) imposed by

Public Law 91-258.
      Let me give you some idea of the effect                        recent pay and other

increases      have had on our appropriation,                    If we calculate      the cast

of items included          in our 1972 estimate           of $87,598,000 at 1967 costs,

our estimate would be about $23 million                     less and would total         about

$65 million.       This represents            an increase        over the S-year period of

about 36 percent.
      For fiscal     year 1972, OUT estimate                totals     $87,598,000 or an

increase    of $7,607,000 over our revised                  1971 estimate.

This increase      is composed of:
      Y     The additional          cost of the January 10, 1971, pay
                increase     to put it on a full            year basis     b , . .      $ 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        l    . . . . . . . .          $1,560,900

                    Benefits        . . . a . . . . .                 156,900

                    Travel      t . . W.         l   . - . .          286,000

                    Other costs             . . . . . . .              56,500




                                                                                                 -2-
     0       Other increases       in salary        costs c . . . . . . . q $ 2,585,300

                which include      the following:

                     Periodic     step increases         . .   $ 823,600
                     Promotions to fill  vacancies
                       and grade increases . . .                 1,561,600
                     Other increases        (net)     . . .        200,100

     .        Increases    in employee benefit          costs , r) . . . . .           422,000

                which include       the following:
                     Contribution to employee
                       health benefits fund . .                 $ 193,200
                     Contribution to retirement
                       fund . . . , . . . , . .                    2Il,900

                     Other increases        (net)     e . .             16,900

     .        Increases    in travel      and per diem costs             . . . . .     132,000

     .       Net increase       in other objects         . . . . . . . . . .           139,800
     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 GAOwork

     .       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




                                                                                            -3s
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 total        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 GAO Programs
       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

programs.
       Section     204 directs         the Comptroller     General to review and analyze

the results       of Government programs and activities                  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 programs and

activities.




                                                                                                     -4-
        Section 204 also directs             the Comptroller        Gefieral 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
conduct cost benefit            studies     of programs under their            jurisdiction,

        Section 231 directs            the ComptroHer        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     far

appropriations,         or in its review of any program or operation                          of any

Federal agency within            its    jurisdiction.
        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

and 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

Budget, in developing,            establishing,          and maintaining       a standardized

information        and data processing          system for budgeting           and financial

data.     Also Section 451 makes subject                  to GAOaudit        those private

organizations        which perform services              in or on the U.S. Capitol              buildings

or grounds.

                                                                                                       -5-
       We expect that           two other significant           legislative      actions will       continue

to impact directly             or indirectly       on GAOwork.         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. Nine GAO staff                    members are presently

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       institutions,        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 1970, 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       y’

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

Taxation      if we believe         improvements are needed.
        In preparing       our budget, we have considered,                   to the extent practicable,

the impact of legislative              actions , such as those identified,                  on GAOresource

requirements .
        I will    now comment on the seven major program categories.
                          DIRECT ASSISTANCETO THE CONGRESS

        The GAOstaff        resources 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 our professional                  staff     resources       is applied     to this

work.




                                                                                                         -7-
         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 1972, we

issued 1.63 ,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

and those directed             by legislation,       of course,       constitute        the bulk

of our direct          assistance      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 GAOstaff            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       toncessionaires




                                                                                                    -a-
*




           l       Liaison          activities        with       congressional          committees            and

                       individual           members provided               by the attorneys                 in our

                       Office        of Legislative              Liaison      and other        members of our staff

           .       Furnishing             information        to committees,              individual           Congressmen

                       and their           staffs       on a wide variety             of matters

           Together         with     representatives              of the Library            of Congress             and

    the,Clerk      of the House,              we are also          providing       direct       assistance             to the

    House Administration                  Committee       in developing           a program           for     the use of        i ’

    computers      by the House of Representatives.                              The First          and Second

    Progress      Reports          of the Committee’s              Working       Group on Automatic                  Data

    Processing        for     the House of Representatives                       were submitted               to the

    House Administration                  Committee       in October          1969 and October                1970.

    Examples      of Requests for                 Reviews
    Received      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 concerned             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,

    we have issued            two reports           to the Committee--one                 on the management

    of automatic            data processing             systems      in the Department                of Defense
(August       1970)      and one on problems                   in the acquisition              of standard

computers        for     the World-wide             Military          Command and Control                  System of

the Department            of Defense             (December       1970).        Currently,            we have

25 ADP systems            under      review.          These include            20 tactical            data     systems,

four     logistics        systems,           and one administrative                   sys tern.       We recently

issued       a report          on computer         simulations,           war gaming,           and contract

studies       and one on potential                  problems          in developing           the Air         Force’s

logis tics       system,

         We plan        to review         selected         additional         systems        based on our            findings

as work on those                currently         under     review      is    completed.

         At the request             of the Chairman,              House Committee               on Appropriations,

we reviewed            the operation             and management           of nonappropriated                  fund

activities           at selected          installations           of the Department                  of Defense           in

the United           States,      Europe,         and the Far East.                 With     the issuance            of

a report.       on February          23, 1971,            we completed         a series         of reports           on

12 individual            installations.               We recently            issued        a report        on military

exchange        activities          and will         shortly      issue       an overall          report       on non-

appropriated            fund     activities          of the Department                of Defense.

         We recently            completed         a study       of the. proliferation                 of     tactical

air-to-ground            missiles           in   the Department           of Derense          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.



                                                                                                                               -lO-
              Another          review      which      is being          performed         at the request                 of the

     Chairman,           Special        Subcommittee            on Military           Airlift,             House Committee                   ‘-

     on Armed Services                  p is a study           of the long-range                  plans       for     military

     airlift/sealift               capability           to meet world-wide                  requirements.

              Domestic          Civil      Activities

              Congressional               requests       for     studies       of domestic                 civil      activities

     cover      a very         wide     range      of programs           and subjects.                   At Deczmber 31,

     1970, we had on hand 72 such requests                                  in various              stages          of completion.

     I should           like    to give          you just       a few examples              of the areas               of

     congressional              interest          in civil       activities.

              At the request               of the Senate               Committee        on Finance                 and the                 . :         ‘2

     House Ways and Means Committee,                             we ,reviewed           selected            medicare

     payments , made by Blue Shield                            plans     in various              states,           to supervising

     and teaching              physicians.            Our reports           were used by the committees

     in their           consideration             of proposed           legislation              which      would       change

     the basis           for    reimbursement            of teaching            physicians*                services         from

     a fee-for-service                   basis     to a cost-reimbursement                        basis       under      certain

     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
1-
     Energy,           we reviewed         the policies            and procedures                 of the Atomic              Energy
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 June 15, 1970,                the Joint          Committee        on Atomic           Energy         asked

us to review             certain       factors       relating         to the Atomic              Energy         Commission’s

proposal        to amend its             Uranium         Enrichment      Services         Criteria              to change

the basis        for      computing           the charge        for    suc?l services             from a cost

recovery        basis       to one which           would       be more closely             comparable             to that

of a commercial              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

doubtful        legality.             After      the issuance          of our report,              the Joint

Committee        introduced            legislation           which     was enacted          on December 19,

1970,       to prohibit            AEC from       changing       the criteria            as it       had proposed.

         International              Activities

         In the international                    area,      congressional            interest        in programs

and activities              related       to Vietnam           and Southeast           Asia       continues          to

result       in specific            requests        for     audits     and reviews.               Of 1S reports

issued       in response            to requests            from congressional              committees             between

July     1 and December 31, 1970,                         12 related     to management               and administrative

problems        in Vietnam            or Southeast           Asia.      At ,January           1,1971,           we had
     7 reviews        in process         pertaining            to matters              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
\I   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-

     ance training         programs.




                                                                                                                              - 13 -
                 REVIEWS OF MANAGEMENTEFFICIENCY AND PROGRAMRESULTS

         The work that                 we undertake            on our own initiative,                      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

oversight              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 Congress              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 expenditures,                     investment            in assets,         etc.,      through         our

program          planning           system,

         The 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       our plans

provide          for      directing          reasonable             review       efforts        to all      important

Federal          program           areas.

Domestic          Civil      ian Programs

         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 are planning                    to increase,           during        fiscal       year       1972,     our total




                                                                                                                         - 14 -a
manpower applied             to reviews of domestic civilian                    programs by 187

man-years,            while so        insreased     audit     emphasis will         be applied
to all      civil      departments and a number of the larger                      independent

agencies,       the more significant              increases      will    be applied      to the

Departments of Health,                Education,         and Welfare,     Transportation,

Labor, Housing and Urban Development, and the newly-created

Environmental            Protection      Agency.         These agencies account for a

net increase of about $8.2 billion                        of the $16.4 billion         increases
in Federal budget outlays                 proposed’by        the Bresident         for 1972.

         In planning         our reviews of domestic civil                program,       we are

attempting           to look more than previously               at related        programs which

cross agency lines.                 For example, we have madle one of our senior
officials       the point          for coordination         of all’GA0      work in the

medical and health-related                 activities.          Total Fedekl         outlays

for health           in 1972 are esttiated              at about $22.2 billion         compared
to $20.7 billion             in 1971,      We have underway studies                of (1)

comprehensive health planning,                     (2) health      facilities       construction,
(3) health           activities      related     to sanitation,         drug manufacture,         and
consumer protection,                and (4) purchases of drugs for use in Federal

hospitals.

         Additional         domestic civil        program areas to whfch we plan to

direct      increased        attention         during       1972 are:

         * Education,             especially     higher education         and

                    elementary      education




                                                                                               - 15 -
                         ssistanceand           ily    services        programs
       .   Urban renewal and model cities                 activities

       .   Manpower programs

       .   Air     traffic   control      systems development and operation

       .   Federal-aid       highway programs, highway safety programs,

                 and urban mass transportation

       .   Air and water polllution            and solid      waste management

       .   cansum%r p~ot%ctiQR pnagrams
In other program areas, such as those of the Departments of

Agriculture       S              Interior,      Justice,      ‘I’rea~ury~ and most inde-

pendent agencies ) we anticipate               t at our overall        level      of effort
                                                                         ’
will   remain substantially            at the same level          as 1971.
Defense Programs

       We are planning         to reduce our overall            effort     in the defense
area to 1,256 man-years in fiscal                 year 1972.           Although this      repre-

sents a rellatively          small reduction          of about 70 man-years as                    >
applied    in 1971, our 1971 saquirements                  were considerably        increased

by the study dir c-ted by the Congress of the profits                          made by
contractors        and subcontractors         on contracts        on which there is no

formally      advertised      competitive      bidding.       We are not anticipating
that the Congress will           either      legislate      or request during           fiscal
year 1972 a study of this magnitude.
       0% the 1,256 man-years we plan to apply to defense activities,

908 will      be applied      to surveys and reviews initiated                 within     GAO




                                                                                                 - 16 -
and 348 to special         requests        received     from congressional             committees

and individual       members.
      As in previous        years,        a significant       portion       of our effort      will

be devoted to defense procurement activities.                           We plan to continue

in-depth      reviews of contract           pricing     by defense procurement agencies.
We are starting       an extensive          study of the use of formal advertising

methods in procuring           military      equipment and supplies.                We plan also

to perform 9hould          cost”     studies     at selected         contractorst        plants.

Also, we are currently             reviewing     the reasonableness            of costs
incurred      under major prime contracts,                such as those for the GSA,

F-14, F-15, and COBRAaircraft                  programs,.       In addition       to pricing

and costing      studies    under negotiated            contracts,         we plan to make
studies      of such aspects of procurement as wlity                         assurance,
Govekent-furnished             materials,       emergency procurement procedures,
contract      administration        and termination          activities,       value

engineering,      processing        of contractors’          claims,       operation     of

Government-owned-contractor-operated                      [GOCO) plants,       and competitive

and noncompetitive         procurement practices.
       In view of the congressional                concern with regard tc the problems
identified      in the acquisition           of major weapon systems, He plan to

continue      our reviews of major weapon systems which are in various

stages of the acquisition             cycle.       We have as our primary objectives
in these reviews the determination                    of the basic causes of cost growth,

schedule slippage,         and deterioration            of the originally           expected
performance characteristics.                 We are giving      particular        attention      to

providing      effective       assistance     to the Armed Services and Appro-

priations      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 March 18.

      We are currently           conducting      a review of close air support which
in some aspects is similar                to our review of air-to-ground             missiles,

We initiated        this     review because of significant              congressional
interest     concerning        the possibility      of duplicating         defense expen-

ditures     for different        weapon systems to fulfill              the close air support
mission.       The systems in question           are the AH-56 (Cheyenne), the
A-X, and the AV-8A (Harrier).                 Our main objective          is to provide

principal      committees and other concerned members of Congress with

observations        on how the aircraft          in question meet the close air
support mission requirements.                 We plan to provide this             information

in time to assist             the Congress in their         deliberations         on Defense

requests     for fiscal        year 1972.
      We will       continue     our coverage of the supply management functions

in the Department of Defense since we continue                      to find areas requir-

ing significant            improvement.      Examples of areas currently             under
review or planned for review include                    equipment and material          requirement




                                                                                                 - 18 -
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         a
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 the support services                     area includes           such

matters as ADP systems, communications activities;                                  civil   defense,
medical activities,               industrial      facilities        at Government-owned
plants,        and military        commissaries.

International         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 other foreign                 assistance

and related        programs.          We will     review trade and international
commerce activities,               particularly        the industrial            and agricultural



                                                                                                   - 19 -
trade expansion programs and their                 relationships             to our balance-

of-payment problems.            We will   be inquiring             into 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 World Bank and

regional     development banks.

      Most of the international            programs continue                 to be performed by
the Department of State and the Department of Defense.                                However,

other U.S. Government departments and agencies are also engaged
in administering        international       programs or elements of them.                      These

include :

            Department of the Trea,sury-- International                       Finance Functions
            Post Office     Department--International                  Services

            Department of Commerce--International                      Programs and Affairs
            Department of Agriculture             --Foreign        Agricultural       Functions
            United States Information             Agency

            Peace Corps
            Export-Import        Bank of the United States

            Various independent agencies,                  such as NASA, AEC, etc.
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     transportation      activities,          including   those of the
General Services Administration                in support of components of the

Department of Defense, will               also be reviewed.

      Under the Joint          Financial      Management Improvement Program, we
participated          in the Joint     Agency Transportation            Study.      The report,

released      in September 1970, included               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

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

the waiver of certain              debts due the Government to insure that they are
being appropriately           administered.



                                                                                                  ” 21 -
               EXAMINATIONOF AGENCIES’ FINANCIAL STATEMENTS,
            ACCOUNTINGSYSTEMS,AND ACCOUNTABLE
                                            OFFICERS’ 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:

        .   Centralized      audit of transportation           payments

        .   Annual audits      of corporations        and other governmental

               activities

        * Centralized        voucher audits      at military         finance       centers,
               including     account settlement

        .    Settlement     of accounts of accountable              officers       in
               civil   departments and agencies

        .   Audits of civilian       pay and allowances

        * Reviews of accounting            systems in operation
        The number of staff       positions      needed in fiscal              year 1972 to carry
out     these financialttype       audit     activities      will     be 1,020 compared to

1,032 in 1971.         We plan to shift       our     emphasis        within       this     program

area.       FOG 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

other hand, to increase          somewhat manpower resources                   applied      to
reviews of department and agency accounting                    systems in operation                  to

determine whether these systems provide                   adequate and reliable

information       on program and activity           costs and related            results.




                                                                                                   - 22 -
         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       1971 and 630 man-years                  in 1972,      a

reduction           of 21 man-years.                     In addition         to an anticipated            reduction

in the volume                 of transportation               payments        for      audit,     we expect         to

achieve           additional         economies            through       increased         use of computerized

audit       techniques.              During        fiscal      year      1970,       a total      of 108,499

overcharge            notices        by the United             States        against       carriers      amounted

to $17.7           million.          During        the      same period          we collected         $16.3     million.

         The 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 -
                                           LEGAL SERVICES AND 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.

         Many legal         questions             arise      as a result       of our audits             and reviews

of agency operations.                      Heads of departments                and agencies             as well        as

disbursing           and certifying               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 pracurement

officers           may also      obtain       decisions         on questions           arising         in connection

with     proposed        awards of Government                   contracts.            Also,      individuals           and

firms       whose claims           have been disallowed                   by actions          of our Claims            and

Transportation             Divisions          and bidders          for     Government           contracts        who

feel       that     procuremen’t          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 courts           in most       cases.

           The legal       work includes               the preparation           of decisions             concerning

the     legality        and propriety              of the receipt            and expenditure              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.
         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-years                   we estimate            will     be needed to carry                     out the

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

and against          the United           States            as well     as in cases before                   the Court           of

Claims D

         The contract           area       continues            to constitute            the    largest            individual

category         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       time      for      the Procurement

Commission.            In addition,                 the Office         was requested              to prepare            several
studies       for     use by the Commission.                        Additional           work of this            type       is

anticipated.

        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

volume       of bid          protests.

                                         FINANCIAL MANAGEMENTIVPRr3VEMJZNT

          In recent           years       the Office        has devoted            considerable               efCo~       Z.P

assisting           the Federal             agencies       in their      efforts          to improve            their

accounting           systems          to the point          where they           can be approved                by ‘3~ Office,

as required           by the Accounting                  and Auditing            Xcrc of 19.50.               In 1966,       about

a third       of the civil                departments            and agencies           and only        the Corps of

Engineers           (civil       functions)            bad approved        systems.               By June 30, 1970,

the number of system                      approvals        in civil      departments               and agencies             had

increased           to approximately                  50 percent       of those          subject        to approval.

In addition,             for     the Department             of Defense,            we have approved                26 state-

ments of accounting                      principles        and standards               as well       as 4 systems

designs.            We plan          to continue         to work with            all     agencies        in promoting

improved        systems          and methods            of producing        reliable              financial        and

program        information.

          A major        financial           management project             started          last       year     is the

development            of auditing            standards           and guidelines            for      application

under       Federal          grant       programs.         This     work is being            carried           out under

GAO leadership                 by a working            group      comnosed of Teprcsentatives                           of the

principal           Federal          agencies         involved      in grant           programs.         Assistance
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 SETTLEMENT AND 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

expected         that     the GAO debt               collection         operations            will       gradually        diminish.

Accordingly,             we plan        to decrease            from        141 in 1971 to I39 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
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 members 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 statement.