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Response:

The recommendation states that the accounting system should be used to monitor contractor performances. This is not the primary purpose of the accounting system. Contractor performance is evaluated and monitored by the Contracting Officer and his representatives. Also, as stated in a previous recommendation, it is not practical to bill from the accrual. Many other factors affect the billing price such as, significant discounts, transportation charges, and inspections at contractors' plants by GPO.

Page 224

Recommendation:

Accounting processes for billing customers for procured printing should be streamlined, with the billing based on the purchase printing accrual as recommended in the preceding paragraph.

Response:

The recommendation implies that the accrual is a firm price and the actual bill to the customer agency will be the same. This is not so.

This recommendation is identical to the last part of the previous recommendation under this caption where it was suggested that billings be made on the basis of the accrued payable estimate. As was pointed out in response to that recommendation, many other factors affect the billings that may not be included in the estimates. If billings were made from the estimate, additional billings would be necessary for subsequent adjustments, thereby creating additional workload for both GPO and the agencies.

Pages xiv and 224

Recommendation:

The accounting treatment for general sales publications received for inventory without charge should be revised to reflect the value of assets received without charge from agencies as an increase to the investment of the U.S. Government (2 GAO 14.4).

Response:

The recommendation implies that the accounting for donated publications to be sold to the public should be entirely different than for other publications offered for sale. We do not agree with the recommended accounting treatment. The cited GAO reference is applicable to the receipt of capital type assets, i.e., machinery and equipment. The receipts of publications for resale, whether purchased or donated, are placed in inventory, hopefully for a short duration, and sold. To account for these very low valued publications in the same manner as a high priced piece of capital equipment is not practical. It would be similar to capitalizing office supplies.

Moreover, treating them as an investment item would necessitate entirely separate and duplicative inventory and sales systems. When donations of publications identical to those already in inventory were received, it would require the segregation of stock and additional recordkeeping. Furthermore, multiple entries to the investment account for small amounts, adjustments for returns, etc., would create an unnecessarily complex accounting system that would be useless as a management tool.

Page 225

Recommendation:

This process should be simplified by distribution of charges and payments to the applicable fund account at the time the initial transaction is recorded, and a clearing account should be used in the S&E appropriation to record those transactions for which charges are to be distributed to two or more activities.

Response:

The contractor has missed the entire concept of the GPO revolving fund. The revolving fund is, in effect, a clearing account whereby the cost of performing work for our customers is accummulated and in turn such cost is passed on to the customer. For example, when departments and agencies request us to perform work, all transactions are initially paid for by the revolving fund with subsequent billing and reimbursement. The financing of S&E expenses is no different from financing work for other customer agencies. The initial expenditures will continue to be paid from the GPO revolving fund account with appropriate distributions identified by program, to the applicable appropriation accounts.

Page 225

Recommendation:

Other cash management actions recommended by the Comptroller General for improvement of Federal payment practices, which are considered appropriate for GPO adoption, include:

- Establishment of procedures requiring bills to be scheduled for payment

in accordance with the due dates, or the discount date.

Inclusion of payment terms, when practical, in each contract and purchase order. Payment terms would include both the starting point for computing the due date (for example, date of invoice) and the number of days allowed for payment.

Cash nanagement actions should be expanded to include those recommended by the Comptroller General as enumerated above.

Response:

With regard to cash management and discounts, GPO is in full compliance with the regulations of the Comptroller General and the Department of Treasury Regulations transmitted to agencies on March 31, 1978.

Pages xiv and 226

Recommendation:

A policy of "break-even" should be adopted as the revolving fund profit objective. Operating policy would conform with the policy expressed in the annual business-type budget enacted by Congress through adjustment of rates, prices and surcharges to approximately match revenues with costs of operations on an annual basis.

Response:

This recommendation is not clear. On the one hand, it seems to imply that we do not have a "break-even" policy as the revolving fund objective while, at the same time, it appears to acknowledge that our annual business-type budgets have consistently been prepared on a break-even basis.

Perhaps the recommendation is directed toward the fact that we have not been 100% effective in achieving that objective on a year-to-year basis. If so, it is an unrealistic recommendation. There are too many variables which must be estimated in advance to permit such precision.

Nevertheless, over the existence of the revolving fund, we have managed to keep very close to meeting our "break-even" objective. In fact, the $58.5 million mentioned by the contractor in the lead-in to this recommendation represents a 25-year accumulation which is only 1.2 percent over the "break-even" objective. We intend to continue with a "break-even" objective, but it is doubtful that we will be able to improve on the 1.2 percent in view of the multitude of variables which must be estimated in advance.

On the other hand, the contractor may be recommending that the GPO plan for losses each year until such time as the retained earnings have been reduced to zero. If so, it would also be an unrealistic recommendation. The operations of the GPO have grown steadily over the years and, as a result, increased funds have been required to keep our operations and financing in balance. In fact, our need for additional working capital has required us to request (and receive) appropriations in excess of our retained earnings. It would seem to be somewhat foolish to simultaneously plan for operating losses and request working capital appropriations.

Congress has been informed of the use of Retained Earnings to finance our continuing operations. We have always put the Congress on notice of our capital needs and acquisitions. These are set forth in the business-type budget submitted annually and the Joint Committee on Printing approves each capital acquisition on an item-by-item basis.

H. Congressional

Page 226

Recommendation:

The basis for establishing the price at which publications are offered for sale to the public should be revised to reflect the change in costs to be recovered from sales revenues. The revised basis should provide that the price be established based on:

- Cost of publications.

- Expenses incurred in connection with general sales of publications.

Other costs not funded by the revolving fund, such as depreciation and interest, if determined applicable for sales to the public, or a fixed percentage as determined appropriate.

The provision pertaining to basing the price on the "cost as determined by the Public Printer plus 50 percent" and the discount allowable for certain sales would be superseded by the revised basis for pricing documents.

Response:

This recommendation implies that Public Law 95-94 changed the basis for determining the costs to be recovered through the sales prices of publications and also revised the provisions of 44 U.S.C. 1708 regarding the method of establishing prices. This is not so. The costs to be recovered include and have previously included all program costs. The method of financing does not have any bearing on what is or is not a cost. Nor does the Public Law revise the method of pricing. Consequently, the recommendation is misdirected.

Page xiv and 227

Recommendation:

The accrual basis of accounting should be adopted for all appropriations as prescribed by 31 U.S.C. 66 a(c) for executive agencies.

Response:

The lead-in to this recommendation implies that the appropriation accounting for the Congressional Printing and Binding and the Printing and Binding appropriations does not provide sufficient administrative control and has limited usefulness in budget estimating. This is not so. Appropriation accounting is custodial accounting as required by the Congress and approved by the GAO. The appropriations are single annual appropriations and must be accounted for on a yearly basis. The accounting treatment for them does facilitate reporting for administrative control and does provide information necessary to prepare budget estimates. GPO also has financial accounting on the accrual basis. It is appropriate for GPO to maintain both types of accounting methodology to provide, (1) proper control of appropriated funds and (2) financial results of program activities. These methods have provided an effective system for over 20 years in serving the needs of the Congress, OMB, Treasury, and GPO.

35-533 O. 79. 5 (Pt. 2)

Pages xiv and 226

Recommendation:

A policy of "break-even" should be adopted as the revolving fund profit objective. Operating policy would conform with the policy expressed in the annual business-type budget enacted by Congress through ad justment of rates, prices and surcharges to approximately match revenues with costs of operations on an annual basis.

Response:

This recommendation is not clear. On the one hand, it seems to imply that we do not have a "break-even" policy as the revolving fund objective while, at the same time, it appears to acknowledge that our annual business-type budgets have consistently been prepared on a break-even basis.

Perhaps the recommendation is directed toward the fact that we have not been 100% effective in achieving that objective on a year-to-year basis. If so, it is an unrealistic recommendation. There are too many variables which must be estimated in advance to permit such precision.

Nevertheless, over the existence of the revolving fund, we have managed to keep very close to meeting our "break-even" objective. In fact, the $58.5 million mentioned by the contractor in the lead-in to this recommendation represents a 25-year accumulation which is only 1.2 percent over the "break-even" objective. We intend to continue with a "break-even" objective, but it is doubtful that we will be able to improve on the 1.2 percent in view of the multitude of variables which must be estimated in advance.

On the other hand, the contractor may be recommending that the GPO plan for losses each year until such time as the retained earnings have been reduced to zero. If so, it would also be an unrealistic recommendation. The operations of the GPO have grown steadily over the years and, as a result, increased funds have been required to keep our operations and financing in balance. In fact, our need for additional working capital has required us to request (and receive) appropriations in excess of our retained earnings. It would seem to be somewhat foolish to simultaneously plan for operating losses and request working capital appropriations.

Congress has been informed of the use of Retained Earnings to finance our continuing operations. We have always put the Congress on notice of our capital needs and acquisitions. These are set forth in the business-type budget submitted annually and the Joint Committee on Printing approves each capital acquisition on an item-by-item basis.

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