oversight

GAO's Functions and Activities

Published by the Government Accountability Office on 1971-03-18.

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

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                                 United     States General Accounting                     Office
                                             Washington,  D.C. 20548
                             .


                                                                                                        For Release on Delivery
                                                                                                        Expected at 10 AM EST
                                                                                                        March 18, 1971


                                         STATEMENT OF
                   ELMER B. STAATS, COMPTROLLERGENERAL OF THE UNITED STATES
                                          BEFORE THE
                          COMMITTEE ON POST OFFICE AND CIVIL SERVICE
                                              ON
                                  FUNCTIONS AND ACTIVITIES
                                           OF THE
                           UNITED STATES GENERAL ACCOUNTING OFFICE


        Mr.   Chairman      and Members of the Committee:

                 We are    pleased         to be here        this        morning,       at your       request,             to discuss

        the functions            and activities          of the General                Accounting       Office         as they

        relate      to matters        within      the jurisdiction                  of this     committee.             We have

        enjoyed       a good and we believe                 mutually         beneficial         relationship                with     the

        committee       over      the years       and hope that              this      relationship          will          continue.

                 As you know,         the General           Accounting          Office        was created            by the

        Budget      and Accounting             Act of 1921 as an independent                        office       in the

        legislative         branch        of the Government.                 The Congress           gave the GAO

        extensive       authority          to render        legal        opinions,to          adjudicate         certain           types

        of claims       and contract            disputes,       and to make independent                      audits          and

        reviews       of the executive            branch.           It    intended        clearly      that         the GAO be
                                                                                                          3
        8 non-political,             independent         arm of the Congress                   to assure            that     funds

        were spent         in accqrdance          with      law and that             programs       were carried               out as

        intended       by the Congress.
c




             The GAO charter               is broad          and may be summarized                    under       five

    principal         headings:

             1. Audit         and Review-- The primary                       purpose       of General            Accounting

    Office      audits        and reviews           is      to make independent                   examinations            of     the

    implementation                 of legislation            by the executive                branch,          including

    inquiring         into         such questions            as:

                   (a)       whether       the funds          and other            resources         are utilized              only

                             for     authorized          programs          and activities             and are        properly

                             accounted       for     and reported,

                   (b)       whether       agency        resources           are      managed efficiently                 and

                             economically,            and

                   (c)       whether       programs          are achieving              the objectives              intended           by

                             the Congress            in enacting             the      legislation.

              In addition,             the GAO audits               negotiated          contracts          and audits,

    centrally,bills                 and claims        for        transportation            services           purchased          from

    commercial           sources.

              2. Assistance             to Congress --The                 GAO provides            direct        assistance            to

    the Congress             through       special          reports        made at        the request            of congressional

    committees         and individual               members,             through       informal       staff       assistance               to

    committees         and by assigning                  staff          to the committees.                 We are        often

    called      upon to testify               before         congressional              committees          and furnish

    reports      on several             hundred          bills          during     each session            at    the request

    of   committees.                We are    pleased            that     we have had the opportunity                          to be

    of service           to this        committee           many times           in    the past.


                                                                                                                                       -2-
           3. Accounting            Principles            and Standards--The                      GAO is        required            to

prescribe            principles         and standards                for    accounting             in    the executive

agencies        ; to cooperate                with      those     agencies           in    the development                 and

improvement            of their         accounting           and financial                 management systems;                       to

determine            the adequacy             of their       accounting              systems;           and to approve

them when they                meet our requirements.

           4. Legal       Opinions--           Many legal            questions            arise     as to the authority

for     expenditures            of funds.              These      questions           arise        in the course               of our

audit       work;      some originate                 in the agencies                or in the Congress;                      or     they

arise       in connection              with     claims       originating              outside           of    the Government.

The Comptroller                General’s             decisions        are    final         and conclusive                on the

executive            branch     subject         only      to contrary            action           by Congress            or the

Courts.

          5. Claims           Settlement--The               law places           final        responsibility                  for

settling        most claims             for     and against            the Government                   in the General

Accounting           Office.

           In addition            to our       basic      authorities            and responsibilities                         under

the     1921 act        and certain             other       legislation              of general              applicability,

the Post        Office         Department             Financial        Control            Act of        1950 (39 U.S.C.

2206,et.        seq.)         placed      specific          responsibilities                  upon us with               respect

to the Post            Office       Department.              These         responsibilities                   related         to

auditing        of     the Department’s                  financial          transactions                and the development

and approval             of its        accounting           system,         and were generally                     consistent

with       similar       responsibilities                 we have with               respect        to other            departments

and agencies             of the executive                 branch.                                                                         -3-
         With        the enactment          of the Postal        Reorganization          Act which           was

approved         on August         12, 1970 (P.L.          91-3751,     our     relationship          with     the

postal         establishment            has been significantly            altered.         In effect,          this

law negated              our   prior     authorities       and responsibilities,               both    under

general         legislative            provisions       and those     specifically         applicable          to

the Post         Office        Department.          The general       legislative        provisions          were

rendered         inapplicable            to the new Postal          Service      by section           410

of   the act          which     provides       that,     with   some exceptions          not pertinent              here,
         II*     *   *
                   except as otherwise     provided                    in this title       or insofar      as
         such laws remain in force as rules or                           regulations     of the Postal
         Service,   no Federal   law dealing     with                  public     or Federal    contracts,
         property,   works, officers,    employees,                      budgets,    or funds,    including
         the provisions    of chapters   5 and 7 of                      title    5, shall apply to the
         exercise   of the powers of the Postal                        Service."




         Those legislative                 provisions      which    had previously          given      us specific

responsibilities                with     respect       to the Post     Office        Department       were

repealed.




                                                                                                                       -4-
                                     0                                                          l

         Our relationship                 with     the new Postal           Service        will      be based

upon two provisions                   in the Postal           Reorganization             Act.        Section         2002

of that       act     provides           in part     that:

         I' * * * the value of assets and the amount                                 of liabilities
         transferred   to the Postal Service upon the                                commencement of
         operations  of the Postal Service shall be                                determined       by the
         Postal Service subject    to the approval of                              the Comptroller
         General * * *.'I

This     provision           places       upon us a very          specific       and important                 responsibility.

The value       of assets             recorded       on the books of the Postal                           Service      will      be

an important           factor         in determining           the amount of depreciation                           costs

which,       in turn,         will       have an effect         on postal         rates         and fees.

         Section       2008 of the act provides,                     in part,           that:

         "The accounts and operations   of the Postal Service shall be
         audited by the Comptroller   General and reports  thereon made
         to the Congress to the extent and at such times as he may
         determine."

         This   provision             gives      us rather       broad      authority           and responsibility

to review       not only             the financial           transactions         of the Service                but also

the entire          effort       put forth          by the Service           to fulfill             its     mission.

It   also     gives      us broad          discretionary          powers       to select            for     review       those

areas       in which         we can make a significant                   contribution.
         We will,       of course,           also     continue               to give         such assistance              to     the

Congress         and its      committees            with      respect          to the new Postal                   Service

as we may be called               upon to provide.

         Aside      from our work at the Postal                              Service,         which      I will       discuss

in a minute,          we do carry            out under             our general               authorities           work     in a

number of areas             within       the jurisdiction                     of     this     committee.             These

include,         among other          things,        the activities                   of the Civil            Service

Commission          and the Bureau              of the Census,                 matters          relating          to civilian

personnel         employed    by the Federal                   Government               and to their              utilization,
                                          0
generally,          and certain    statistical                     gathering            and reporting              activities.

I have attached              to my statement
                                       *                     a list          of our         recent      reports        to the

Congress         relating       to these         areas.            We would           be happy           to discuss            these

reports      or our         current      work       in these           areas         to the extent            you may wish,

or as you suggested                   in your       letter         dated        March 8, discuss                  them at a

later      time     with      the appropriate                subcommittee.

         With     regard       to the Postal               Service,           I would          like      to briefly

describe         how we see our           role        in our audit                  capacity          and the approach

we propose          to follow          in carrying            it      out.          I would       also     like      to mention

our     recent      reports      to the Congress                   on postal            operations           and activities,

which,       I believe,         illustrate            to a degree                  the types          of reports          we

will      be making         to the Congress                in the future.




                                                                                                                                   -6-
                As you know,           section        2008 of         the Postal           Reorganization                  Act,in

     addition        to authorizing                our Office             to audit        the accounts              and operations

     of the Postal            Service,contains                    other      provisions           relating          to audit.                    .

     Subsection            (b)     requires         that         the Postal          Service       mai.ntain          an adequate

     internal        audit       of    the financial               transactions            of the Postal                  Service;

     subsection          Cd>, in effect,               authorizes              the Postal          Service          to obtain

     audits       of its      accounts            by certified              public      accounting           firms;         and

     finally,        subsection           (e)      requires          that     beginning           with      the fiscal              year

     commencing          after        June 30,        1971,        the Postal           Service          obtain       an opinion

     from an independent                  certifi6d              public      accounting           firm     on any financial

     statements          of the Service               used in determining                       and establishing               postal

     rates.

                The authorities             and requirements                  for     audit       contained           in these

     provisions          properly         place       upon the Postal                  Service       the responsibility

     for      assuring       the      integrity        of its         financial           transactions              and of          its
..
     statements          of financial              condition          and operations.                    We will,          of course,

     keep abreast            of the manner             in which             these     authorities            and responsibilities

     are      implemented          by the Postal                 Service      and will           work with          its     internal

     audit       organization           and with           its     outside          auditors,        to the extent

     appropriate,            and in carrying                out      our o,wn audit              work will          give      con-

     sideration          to the adequacy               of the audits                 performed           by them.


                                                                                                                                           -7-
                                  e                                                              *




         In addition,            in the area         of financia            .1 auditing,              we wil 1 continue

to audit,        on a centralized                basis,          transportation             charges            to the

Postal      Service       as we do for            the Federal   Government                      generally.                This
                                                                     basis
function       will      be performed            on a reimbursable/under                        agreement            between

our Office           and the Postal             Service.

         These and other            matters         concerning             our    relationship                 to the

Postal      Service       have been the subject                      of    two exchanges               of correspondence

which      I would       be’happy         to submit         for      the    record.

         Beyond the strictly                financial             audit     activities,               as I have

mentioned,           section      2008 of the act                 gives     us broad           authority            to

examine       into      postal     operations         and activities                  generally.

         The Service            remains     a public             service      institution              charged           with

responsibility                    to provide         reliable             and efficient               postal        service

to patrons           in all      communities.              Its     operations           will         continue        to have

large      financial          dimensions         and to affect              virtually           all      the citizens

and enterprizes                in the nation.              Therefore,            Congress            retains        a’strong

continuing           interest      in the Postal                 Service      and has,          of course;               retained

the     power to alter,            amend,        or repeal           any or all           sections             of   the act

under      which       the Service         is    established.               Accordingly,               we intend            to

continue       with      our previous            practice          of examining             selected            postal

operations           and activities             and reporting              thereon        to the Congress.




                                                                                                                                 -8-
                                     e                                                         *




          Our audit          coverage         of postal       activities            is    planned      with         two major

considerations               in mind-- the         interest       of       the Congress            and the benefit

to the Postal               Service.

          As in the past,                  to maximize       the benefits            resulting         from         our      work,

we will          concentrate           our efforts        in those          areas        of postal          operations

and activities               which         seem to have the greatest                     potential          for     improvement.

Various          factors       influence         our judgment          in selecting             an area            for     review

including          indications              of congressional           interest,           the financial                  signifi-

cance of the area,                   and indications           of weaknesses               in its      management.

          The types          of reviews          we make can be categorized                        as (1)          management

efficiency           reviews--         studies     of managementiutilization                         of resources,                   and

(2)      program      reviews --studies              dealing       with      the extent            program          objectives

are      being     achieved.

          Our recent           efforts        have been concern’ed             primarily             with         evaluating

management           systems         for     assuring     the assessment                 and collection                  of appro-

priate       revenues          for     postal     services       rendered           and management’s                     efficiency

in utilizing               resources.

          For     example,       in a May 1970 report    to the Congress,   we stated   that
                                                    full
the Department               did not recover  the/costs    of providing   address correction

service.




                                                                                                                                     -9-
              In September              1970 we issued                  a report           to the Congress                 in which           we

     noted     the need for              better              controls          over     the assessment             and collection                  .
     of postage         for      second-class                  mail      because          certain        publishers             were

     charged        a postal           rate         lower      than      that         to which      they     were entitled.

              In an October               1970 report                  to a member of Congress,                     which         was

     subsequently             released              to the public,               we stated,           among other               things,

     that     the Department                  had exceeded               its     legal       authority         in its           use of

     emergency         contracts              for      air      taxi     service          to transport            mail;         that      a

     number of contracts                      were awGrded without                        obtaining        formal          competitive

     bids;     and that          questionable                  contract          rate      increases         were granted

     because        the Department                   did      not have adequate                   procedures         for        evaluating

     rate     increases          requested              by the contractors.

              In December              1970,         we reported               to the Congress             that      maintenance

     costs     on certain              post         office       equipment             could      be reduced,         without

-_   adversely        affecting               the operation               of the          equipment,         by reducing               the

     frequency        of certain               routine           preventive             maintenance          and by reducing

     the     time    prescribed               for      performing              such maintenance.

                              Our current                reviews         concern          such matters            as whether              the

     Postal      Service         is:

              1. making          the best              use of its              manpower and machines,

              2. providing              certain              publications              priority       treatment            at    no

                    additional            charge             to pub1 ishers,


                                                                                                                                       - 10 -
          .                                        a
.’                                                                                                               ‘e
                        3. adequately              planning,           testing,           and contracting                  for      the

                              installation           of an automated                 system            for      collecting             and

                              processing           management            data     (the      postal            source         data       system),


                        4. using         sound methods              to collect             data        to serve           as the basis

                        .     for     allocating           costs     and revenues                 to the various                  classes

                              of mail         and types        of services                provided,

                        5. permitting              only      eligible         nonprofit               organizations               to mail

                              matter      at reduced            rates,        and

                        6. following             efficient          traffic         management                practices           in    the
                                                               .
                              transportation               of mail.


                        Our plans         for      future-work            call      for     more emphasis                  on reviews

              dealing-with              the extent           the Postal           Service             is providing               patrons         with

              reliable         mail      service       at     reasonable-           rates         and fees.               We will         also      be

              looking         at     the effectiveness               of some recently                        initiated           programs          such

     .-       as the express              mail      program--a            door-to-door                 service           provided         by postal

              employees             serving      as special          messengers;                 reviewing           the use of              the

              mailgram         and other           systems         to reduce         the physical                 volume          of mail;         and

              reviewing             the value       of assets           and amount               of    liabilities               transferred

              to the Postal              Service.            We will       also      stay         abreast          of the Postal                 Service’s

              capital         expenditure           program,           including           its        borrowing           activities             and its

              investments             in postal           equipment        and facilities.

                        We will        hold      periodic          discussions             with        the Postal            Service          concerning

              the scope,             frequency,        and nature             of our        reviews.               In the past               we have

              found         such discourse           between         the staffs             to be mutually                   beneficial.


                                                                                                                                                        - 11 -
.   I

        ”




                 We will    also    be glad   to disctiss    with   this   committee   or its

            subcommittees    at any time      our audit     plans   and areas    of mutual      interest

            and concern.

                 This   concludes     my statement,       Mr. Chairman,      We will   be happy

            to answer any questions       you may have.




                                               .




                                                                                                      - 12 -