INCREASES REQUESTED

Consequently, for fiscal year 1968 we are requesting an increase of $3,550,000, which is the figure you referred to, Mr. Chairman, over our revised requirements of $49,350,000 for 1967. The principal elements accounting for the increase in 1968 over the revised 1967 estimate are to provide for:

(1) $1,509,600 to cover the cost of salary adjustments and periodic step increases.

(2) An increase of $833,700, for an average increase of 75 positions in our professional staff and 20 positions for the supporting staff.

(3) An increase amounting to $282,500 in the staff required to audit transportation bills growing out of the increased military operations in Vietnam.

(4) An increase in travel of $400,000 to cover both the projected increase in the professional staff and the increase in travel status of the staff during the year. About one-half of this amount is required to support our increased foreign assistance audit work.

(5) $200,000 to cover the increased cost of establishing additional overseas field offices in Manila, Saigon, and New Delhi.

PERSONNEL AND STAFFING

Our staffing requirements for 1968 contemplate an increase of 75 in the average number of our professional accounting and auditing staff, from 2,350 in 1967 to 2,425 in 1968. This reflects a continuation of our intensive recruiting and training program for our professional staff and is consistent with our experience over the last 10 years during which we have increased our accounting and auditing professional staff from 1,446 on June 30, 1956, to 2,280 on June 30, 1966, an increase of 834.

On March 31, 1967, our professional accounting and auditing staff totaled 2,196, not including 159 who were on military duty. By June 30, 1967, we expect to recruit about 395 new accountants from the falland spring-term college graduating class and we expect about 50 staff members to return from military duty.

In prior years we have been able to more than offset increases in our professional staff by decreases in our fiscal voucher audit work and in other areas of the Office, particularly in the Transportation and Claims Divisions, as a result of reduced workload and improved procedures and productivity. Over the same 10-year period mentioned our total employment was reduced from 5,552 to 4,148, a net reduction of 1,404.

This year, because of increasing demands on our staff, particularly in transportation audit work resulting from military operations in Vietnam, we are not able to offset necessary increases in our professional staff by reduction in other areas. As we anticipated last year, we have experienced a large increase in the number and dollar value of military transportation vouchers as a result of the Vietnam conflict which must be audited and settled by our Transportation Division.

This increased transportation work volume will require an average of 40 additional positions for 1968. We will also need an average of 20 additional clerical positions for the support of our professional staff. In all, we will need an average of 139 additional positions in

1968.

QUALITY OF PERSONNEL

The quality of our personnel is undoubtedly the single most important factor in the long-term effectiveness of the General Accounting Office. Under the best conditions, it take several years to develop our junior staff members to their full potential. Faced with the continuing heavy demand and competition for quality college graduates and trained accounting and auditing talent, we are placing added emphasis on our efforts to attract, develop, and hold good people.

PROFESSIONAL STAFFING GOALS

To meet our professional staffing goals we have obtained approval, effective June 4, 1967, of the Civil Service Commission to make appointments in GS-7 accounting positions beginning at $7,303 this year and in GS-9 positions beginning at $8,218. This compares with $7,090 and $7,957 we paid last year.

In March 1967 the Civil Service Commission placed accountants in a shortage category which will authorize the payment of travel and transportation expenses to new appointees in reporting to their firstduty station.

We are providing more summer employment opportunity for outstanding upperclassmen and graduate students and we will encourage them to continue their career with us when they complete school.

I might add here that this is something that the public accounting firms are doing as well.

We will continue, even more vigorously than in recent years, our contacts with academic officials and our campus visits with students of schools offering a good accounting curriculum to interest top students in joining our staff.

We have obtained authorization from the Civil Service Commission, similar to that now existing under management intern programs, for offering GS-9 positions to those applicants who have appropriate experience or graduate work.

We expect to recruit applicants from the "Federal service entrance and the management intern examinations" at the GS-7 and GS-9 levels with majors in academic work other than accounting which would be of direct relevance to our work; for example, economics, industrial management, engineering, public and business administration, and mathematics.

I stress this, Mr. Chairman, because we have been faced with a very difficult problem of recruiting and holding people in the face of a very tight labor market in this area. Accountants and auditors at the beginning level have experienced the largest increase in salary of any other professional group according to the College Placement Council over the last year. So we have a very difficult problem before us.

TRAVEL

Our work requirements for 1968 will require travel estimated to cost $3,875,000, an increase of $400,000 above our 1967 limitation of $3,475,000. Over $100,000 of this increase is for our work in Southeast Asia alone. The effective examination of the activities of Federal agencies and contractors requires that audit and investigative work be done at Federal agency offices and installations and contractors' plants located throughout the United States and in numerous locations abroad. During 1966 our professional staff worked at 2,833 different locations, including 288 locations in foreign countries. Details about our travel requirements are shown in our justifications beginning on page A32.

Our steadily increasing audit coverage requiring extensive travel is perhaps best indicated by a comparison of expenses for the 9 months of fiscal year 1967 with the same period in fiscal year 1966. In fiscal year 1966 our expenditures amounted to $2,349,500. Our expenditures through March 31, 1967, totaled $2,628,600, an increase of $279,000, and represents about 76 percent of our 1967 travel limitation.

GENERAL PERFORMANCE HIGHLIGHTS

During fiscal year 1966, over $130.6 million in revenues and savings were attributable to actions taken or planned resulting from the work of our office. This amount includes

Over $17 million in refunds and collections, $40 million representing 1 year's value of savings and revenues which we expect will recur in future years;

Over $73 million in nonrecurring savings in planned or current programs; and

Over $74 million or 57 percent of the total savings and revenues were achieved through improvements in the management of Government-owned supplies and equipment.

Many other significant additional savings and management improvements, not readily or fully measurable in dollars, resulted from actions taken by Federal agencies where the needs were brought to their attention through General Accounting Office audits. We have included a few examples of this type in our justification material beginning on page A14.

Our justifications also contain details concerning our accomplishments during 1966. Briefly :

We issued 927 audit reports, including 327 reports to the Congress, committees or Members of Congress and 600 reports to other Government officials.

We were engaged in approximately 3,000 audits and reviews of selected Government activities and programs throughout the United States and in 43 foreign countries.

We audited 4.8 million bills of lading and 2.7 million transportation requests covering freight and passenger transportation for which the Government had paid almost $1.5 billion.

We collected $8.5 million in transportation overpayments, and we settled over 29,000 claims from public carriers against the

United States for amounts totaling $33.4 million or $3.7 million less than claimed.

We disposed of over 8,000 general claims against the United States for amounts totaling $52.6 million, we adjusted and settled almost 34,000 claims by the United States, and collected over $4 million from debtors.

We handled nearly 4,800 decisions and other legal matters, including more than 600 legislative and legal reports to committees and Members of Congress.

We testified before congressional committees on 28 occasions. We assigned 118 members of our staff to work directly with the committees and subcommittees of Congress, providing about 13,000 man-days, the equivalent of 65 man-years of technical assistance.

ACCOUNTING AND AUDITING PROGRAMS

The expanding requirements for services from the Federal Government, the enactment of new national programs for social, economic, and health purposes, and the significant resources devoted to our defense efforts and international commitments have placed additional heavy responsibilities upon our Office.

During the fiscal year 1968, we plan to direct special attention, through our accounting and auditing programs, to those areas of particular financial significance and congressional interest. These include:

DEFENSE ACTIVITIES

In 1968, defense outlays will account for $72.3 billion, or about 50 percent of the total administrative budget. We contemplate scheduling approximately 1,000 man-years of our professional staff on reviews and examinations in the major functional areas of defense activities, including procurement, supply management, manpower, research and development, facilities and construction, support services, and management control systems. Additional details concerning our plans are contained in pages 51 through 54 of our budget justifications.

HEALTH, HOUSING, LABOR AND WELFARE ACTIVITIES

The unprecedented number of new social, economic, and health programs which the Federal Government has undertaken in the past few years requires us to place increased emphasis in these areas. We plan to schedule approximately 400 man-years during 1968 on reviews of such programs in the Office of Economic Opportunity and the Departments of Labor; Health, Education, and Welfare; and Housing and Urban Development.

OTHER IMPORTANT AND DOMESTIC ACTIVITIES

The increasing volume and workloads of other major civilian agencies stem directly from our growing economy and increasing requirements for more and better public services. We plan to make reviews of programs and activities related to space research; land, water, and power resources; agriculture; atomic energy; commerce and trans

portation; postal services and operations; veterans' benefits and services; and other significant activities of Government-wide services. Overall, we expect to program approximately 800 man-years during 1968 for management reviews in these important areas. Additional details concerning our plans in all civil agencies are contained in pages 33 through 40 of our budget justifications.

INTERNATIONAL ACTIVITIES

In 1968, we will step up and broaden our audit coverage of economic and military assistance programs, as well as other Federal Government financial programs. We have adopted a program of periodic reviews of countries receiving large amounts of aid, as well as some of the countries having relatively smaller aid programs.

Our expanded international effort will require the use of approximately 200 man-years in about 40 foreign countries in which we will perform assignments. Because of the significant interest of Congress and the substantial increase in Federal expenditures in South and Southeast Asia, both in international and military programs, we already have established suboffices in Saigon and Manila and are currently establishing an office in New Delhi. The resident staffs in these offices will also be supplemented, as required, with staff members assigned from other overseas locations and the United States on a temporary duty basis.

AUDIT OF TRANSPORTATION PAYMENTS

Another area in which we are providing increased emphasis is in our Transportation Division, particularly with respect to the audit of military transportation payments. During fiscal year 1966, we audited 19 percent more in military payments than in the previous fiscal year, reflecting the buildup in military procurement and personnel resulting from combat and other operations in Southeast Asia. The current increase in military freight payments during the first half of fiscal year 1967 is about 25 percent over the comparable period in fiscal year 1966. This represents an increase of over $100 million in the total amount of freight payments audited for this same period.

For the first 9 months, Mr. Chairman, this 25-percent figure has increased to 30 percent and the amount of $100 million in the first 9 months has increased to $189 million. That is a more recent figure.

Notwithstanding the fact that we have been able to increase our audit productivity (the amount of overcharges stated against carriers increased from $12.75 to $22.10 per hour of technical staff time) we will need to increase the average number of positions in the transportation division from 775 to 815, or an increase of 40, during 1968. This increase is needed to complete our audit on a current basis in view of the statutory time limitation, generally 3 years from date of payment, to institute and collect overcharges from the transportation carriers.

RELATING ACTIVITIES TO WORK OF CONGRESS

In conclusion, I would like to emphasize that in the development and formulation of our program we are relating our activities as