ment, prison populations, pregnant female addicts and their addicted infants, and issues of organization, financing, consumer input, and public policy. In addition, OEO is developing its role extensively in total evaluation of the governmental effort of drug treatment and rehabilitation. These roles have been developed in cooperation with the Special Action Office of Drug Abuse Prevention. c. Family Planning.—OEO anticipates transferring to HEW its traditional family planning efforts in the near future. A small R. & D. program addressing specific problems of the poor, with emphasis on economics, financing, quality of care, consumer participation, unmet needs, public policy, and organization of services, will be maintained. USE OF CONSULTANTS Mr. FLOOD. How much do you propose to spend on consultants in 1973? What specific functions will they be performing for you? That is another bete noire around here, consultants. What about you? Mr. HJORNEVIK. We dramatically reduced the use of consultants. I don't have the number offhand, but we cut it 80 to 90 percent over what it was a few years ago. Mr. FLOOD. Put that in capital letters. How does it compare with prior years? Mr. HJORNEVIK. Yes, sir. We have cut it down, but we will supply that. (The information follows:) Three years ago, national consulting contracts made by OEO with consulting firms numbered 55. Responding to regional offices' and grantees' and others' objections to this high figure, OEO has now reduced the number to seven. Mr. FLOOD. Right now this is so? Mr. HJORNEVIK. Yes, sir. Mr. HJORNEVIK. Yes, sir. GREATER USE OF CONTRACTS Mr. FLOOD. We note that you are proposing to spend $60 million for "Other services," an increase of over $30 million over last year. Why is it needed, a 100-percent increase at this time, and what is the money being used for? Go ahead. Mr. HJORNEVIK. You are referring to the object classification in the budget? Mr. FLOOD. Yes. Mr. HJORNEVIK. It shows one place if it is grants Mr. FLOOD. Don't rephrase the question. I am asking the question. What about that? Mr. HJORNEVIK. For many of the activities, in our view, a grant is not the appropriate mechanism. For example, in technical assistance and evaluation studies, where the Government is buying a definite service Mr. FLOOD. Contract? Mr. HJORNEVIK (continuing). We have moved from using a grant instrument to a contract instrument, which changes the relationship. Mr. FLOOD. Is that good? Mr. HJORNEVIK. Yes; in terms of management control. Mr. HJORNEVIK. A grant connotes giving somebody money to do their thing. A contract is a buyer-seller relationship and the relationship is much tighter managementwise. Mr. FLOOD. You are breathing down their neck all the time? Mr. HJORNEVIK. Yes, sir. Because we changed some of our activities from contracts to grants, the object classification has changed. Mr. FLOOD. Give us something more for the record on that. (The information follows:) The increase in "other services" is produced by an increase in the number of contracts versus grants funded. Principally responsible for this are the educational vouchers contract and contracts in the drug rehabilitation area. MONMOUTH COUNTY, N.J. CASE Mr. FLOOD. Here we come to a prominent example of the potential misuse of OEO funds, which came to light recently in the Monmouth County, N.J., case. You knew I would ask you this, so you have an answer here someplace. I am referring to that tour of Europe and Africa taken this summer by 67 "poverty-level" high school students from that county, most of whom, it turns out, were not so poor after all. This particular case received a great deal of publicity and the grant was rescinded after the fact. This type of thing leads us to wonder whether you have sufficient control of these grants and contracts that you are bragging about. Who has the final responsibility for making grants? And do you think that they are being properly reviewed, audited? If so, by whom? Do we have to go to GAO, an arm of the legislature, to do this, or are you doing this? This is a murder case and this is why we make it exhibit A. This is a horrible example. I know everybody makes mistakes, even Congress. It is hard to believe, but we do once in a while. There is the horrible example. What about it? Mr. SANCHEZ. I understand that. Very briefly, there are a lot of elements in this particular case. Let me relate back to another complaint that surfaced earlier. That is, in some areas you received complaints that the so-called community people serving on the board were not getting the opportunity really to serve on the boards. They were being left out. Here is a classic example of not delegating authority but relinquishing it, in which the manager or director of the board made some pretty far-reaching decisions without the board taking part, and later on they politely ratified his action. This is the other extreme. These are people who not only give out their prerogative as board members but relinquish it. Mr. FLOOD. When you give the average person like that an inch, the classic expression is they will take a mile. If you are not interested, away they go. Mr. SANCHEZ. We hope or hoped in our idealism that these boards would fulfill the myths of "community blends"; establishment people and the poverty people. We had a good cross-section of the community and the manager would be a functionary: not a policymaker, but a policy reflector. In this case he went beyond, in my judgment, the bounds of the authority he was delegated. This is the chink in our armor. This type of thing could recur. We hope, though, as you Mr. FLOOD. With an organization of the magnitude of this nationwide operating in every crossroads of the country, you are bound to encounter horrible examples. When you do, we want to know who has the final responsibility for making grants or, two, for awarding contracts if you are not going to make a grant. Then to us on this committee it is of great importance, are they being properly audited? Are they being properly reviewed? Not just some local county director going to the board and put their imprimatur on it and go down to the district office without telling the Congress or anyone else, that is perfunctorily acted on and you are busy in 50 States and Puerto Rico, and bang, it is done. Are these things reviewed? Mr. SANCHEZ. You may find this difficult to believe, but just as late as last year and a half or 2 years, when I first came down here, an agency handling this much money involved with this many grants, contracts, grantmaking authority did not have a controller's office, did not have a controller as such. We have it now. What I am about to say next may sound a little self-serving, but I do believe that we have the proper mechanism Mr. FLOOD. You are supposed to be self-serving. Mr. SANCHEZ (continuing). To deal with these problems. The fact that one Monmouth does manage to creep up to the surface is not prima facie evidence that the whole program is maladministered in the same fashion. That is a very bad example. Mr. FLOOD. You come in here next year with a Monmouth case, you will need an armed guard. Mr. SANCHEZ. I won't have the nerve with one of these. (The following additional statement was submitted: On June 15, 1972, the New York regional office of the Office of Economic Opportunity approved a grant application submitted by the Monmouth, N.J., Community Action program, requesting $60,000 to send disadvantaged children abroad for the summer. Questions regarding the appropriateness of this project and the eligibility of the participants were raised, and, on June 29, Mr. Sanchez initiated an investigation of the grant and the procedures that led to its award. As a result of the investigation and its findings, Mr. Sanchez determined that the grant was an injudicious use of Federal antipoverty funds and that many who participated in the project were not eligible for its services. Therefore, on July 20, he rescinded the grant and no Federal funds were used to defray the costs of the project. In addition, disciplinary action was taken against three members of the staff of the regional office in New York, authority to approve grants of this nature was withdrawn from that regional office, and complete documentation on the grant was forwarded to the Department of Justice for review and possible legal action. RESEARCH, DEVELOPMENT, AND EVALUATION Mr. FLOOD. You spent a great deal of money on R.D. & E. and you are proposing an increase in this budget, and again we touched upon this a few minutes ago. We hear a great deal of talk about educational vouchers, the performance contracting, income maintenance experiments, and so forth. Are we really gaining any useful or practical information from these studies or are we just keeping you jokers in the think tank business? Mr. SANCHEZ. Let me pull one example out of the air: The so-called performance contracting program. Again, when I came to Washington I didn't know what that meant either. We, as a part of our mandate for research and evaluation, did an experiment on performance contracting. We found that the performance contract was not necessarily the way to develop new initiatives and methods of education and to raise the comprehension levels of children. The important thing, Mr. Chairman, is that there were many school districts and boards about to embark on multimillion-dollar projects of this type and because we spent a relatively small sum of research money and our findings are now promulgated, those many millions are not going to be expended on a program which has little chance of success. COMMUNITY DEVELOPMENT CORPORATIONS Mr. FLOOD. This one I cannot understand. Tell us more about "special impact program," particularly the role of the community development corporation. Is the OEO supplying venture capital for this system? Mr. HJORNEVIK. I apologize for the language. We borrowed it right from the legislation, which is a title and section of our law. It contemplates community development corporations which would develop economic enterprises in poverty areas to employ poor people. That is the concept. We have been going very cautiously about it. Economic development in poverty areas, we are talking about ghettos, poor rural areas. In economic terms the normal private sector does not have good viable businesses with opportunity in the ghettos. This is an experimental program with a limited number of CDC's and we are trying to understand whether this will work or not. The Congress embraced us in the new legislation that just became law, a little more strongly than we are comfortable with at this point. The new title 7 inserted in the act has large authorization dollars for community development corporations and economic development, and we are proceeding at a pace here that is half or less of the authorized level in the appropriation bill. OEO ADVOCACY FOR POOR Mr. FLOOD. You stated in your justification OEO is preparing to take initiatives concerned with exercising a Government-wide advocacy role for the poor. What are you talking about? Mr. SANCHEZ. We think initially it is a big problem. When you get to advocating something for poor people and the advocacy takes the form of expressing an opinion of what another agency is or is not doing, you are in trouble. Mr. FLOOD. Sure. Mr. SANCHEZ. But we realize that the language of the act clearly denotes or sets aside an agency in the Government of the United States that is supposed to be the advocate for poor people just as Mrs. Knauer is the advocate for the consumer. Mr. FLOOD. You are flying in the face of the palace guards. Mr. FLOOD. That is lese majeste. Mr. SANCHEZ. You will note that we have been able, by treading lightly-here is a bureaucratic term-impact on the activities of the 211 - 72 - 19 other Government agencies through some of the research and development that we have been doing through the marriage of some of the subactivities of our community ACTION agencies plus subactivities of the HEW and Labor. All of this is part of the advocacy mission of this agency. Mr. FLOOD. We get the impression from these other agencies because of what you propose to do and have done or intend to do and are doing, that you are transgressing upon their statutory jurisdictions. What they think or say or feel are their jurisdictions, anyway. They apparently, in turn, and very human, are passing the word to the brothers here and there, "Why don't you ask this or that?" Birdies go by and drop things on your desk. This is what I mean. Mr. SANCHEZ. If we did or said anything that is not provided for, of course, by congressional enactment, it would be transgression. I do believe, though, that we are operating within the intent of the Economic Opportunity Act. The Economic Opportunity Act, as you know, is a very unique creation in the Government because it affects not only OEO but it affects other agencies. Yet we are, in effect, the steward of all of that money. When we get to dealing with programs other people are operating, I can understand the hackles being raised. Mr. FLOOD. When I grew this mustache it was unique. I understand that. Mr. SANCHEZ. They cannot change it and I cannot change it. Only the Congress of the United States can change it. STATE ECONOMIC OPPORTUNITY OFFICES Mr. FLOOD. We get a very definite impression there is considerable potential for overlap and duplication in the functions of your regional offices and the State economic opportunity offices. With certain Members of the House especially, States rights is a very important thing. Can you clarify that for us? Mr. SANCHEZ. We will be happy to for the record. (The information follows:) The State Economic Opportunity Offices (SEOO's) provide State governments with a unique capability to provide information and advice with respect to programs of OEO and other matters affecting the poor, and also perform a range of programmatic and administrative functions which complement the efforts of the OEO regional offices. The SEOO's assist in the mobilization and coordination of antipoverty resources, particularly at the State level. SEOO's have developed the capability to provide technical assistance to CAA's and other OEO grantees, and may operate antipoverty programs and participate in research and demonstration programs. The SEOO may act as an advisor to OEO in developing statewide funding plans, consultation in development of training and technical assistance plans, provide advice on funding requests from all applicants within a State, and may jointly participate with the regional office in the evaluation of OEO-funded programs. To insure coordination of SEOO and OEO regional offices, each SEOO and regional office negotiates a memorandum of agreement on their respective activities and functions. Mr. SANCHEZ. Briefly at this point let me say this. There is a danger of overlap. But the danger exists from not that corner but that one. Let me be specific. The law specifies the makeup of the 10 regional offices, and we have them spread out just like the rest of the Federal |