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I have a prepared statement and with your permission perhaps I would read that at this point. I believe copies have been made available.

Mr. ANDREWS. You may proceed with your general statement.

Mr. STAATS. Mr. Chairman and members of the subcommittee, we appreciate the opportunity to appear before you today to discuss the work of the General Accounting Office and our budget estimates for 1968. The justifications we have furnished your subcommittee provide details concerning our work and accomplishments, our organization, our plans, and our fiscal requirements. My statement will summarize and highlight our request.

BUDGET ESTIMATES

We are requesting an appropriation for fiscal year 1968 of $52.9 million, an increase of $4.4 million over the appropriation of $48.5 million for 1967.

Since the 1967 appropriation was enacted we have had to assume the following additional fixed costs totaling $2,186,000 over which we had no control and which are also reflected in the increase of $4.4 million for the 1968 budget requests:

(1) $1.3 million to cover the cost of the pay increase, Public Law 89-504, effective July 3, 1966.

(2) $150,000 to cover the cost of moving and related expenses as authorized in Public Law 89-516.

(3) $304,000 to cover the cost of the increase in pay scale for GS-7 and GS-9 accountants and auditors as authorized by the United States Civil Service Commission under 5 U.S.C. 5303.

(4) $432,000 to cover the added cost resulting from the increase in the audit of transportation payments for military operations in Vietnam.

These additional costs of $2,186,000 increased our total requirements for 1967 to $50,686,000. However, we were able to absorb $1,336,000 of these added costs primarily because of delay in filling vacancies. This resulted in a net revised estimate of $49,350,000 for 1967, requiring a supplemental appropriation of $850,000.

INCREASES FOR 1968

Consequently, for fiscal year 1968 we are requesting an increase of $3,550,000 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 fall and 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 that 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. 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 takes 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. 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 first duty 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.

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, and

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.

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, and

Over $73 million in nonrecurring savings in planned or current programs.

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

Many other significant additional savings and management improvements, not readily or fully measurable in dollars, resulted from

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actions taken by Federal agencies where the needs were brought to their attention through General Accounting Office audits.

I would like to say parenthetically, Mr. Chairman, that we do not include in these figures any amounts unless the agency or the Congress, whichever is involved, actually takes the action resulting from our recommendation. We do make some recommendations which are not accepted, of course. These savings we are mentioning here are only those where action has actually been taken to achieve the saving, and secondly, where we feel that a realistic estimate can be made. There are, of course, many cases involved in our work where it is just not possible to put a dollar figure on them.

We, therefore, do not claim any savings in those cases. We have included a few examples of this type in our justification material beginning on page A-14.

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. Mr. ANDREWs. Were you reimbursed for those?

Mr. STAATS. Only to the extent of about 10 percent.
Mr. ANDREWS. You may proceed.

ACCOUNTING AND AUDITING PROGRAMS

Mr. STAATS. 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:

1. 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.

2. 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 Develop

ment.

3. 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 transportation; 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.

4. 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 location and the United States on a temporary duty basis.

5. 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

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