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Mr. ANDREWS. In other words, teach them to get the best price possible for the Government.

Mr. WEITZEL. Exactly. If they ship some material by a particular route and ask that it go that way and describe it in a certain way they have to pay that rate. But by seeing the patterns of shipments or examining their overall practices with respect to shipment of household effects, for example, we can frequently make recommendations to them so that they can ask for a different kind of a service that would be more economical to the Government.

Mr. ANDREWS. Why is it that you audit all transportation vouchers but do not apparently audit all other types of vouchers 100 percent?

Mr. STAATS. You are speaking outside of the transportation field? Mr. ANDREWS. That is right.

Mr. SULLIVAN. I could clarify one point. We audit all transportation vouchers. A certain portion of the audit is done on a so-called preliminary visual basis where our technicians, because of their experience can look at a great volume of vouchers going through and pass those that under certain dollar minimums would not be economic to audit in depth.

Mr. WEITZEL. The primary reason for this situation where we audit all the transportation vouchers is the provisions in the Transportation Act of 1940 and other legislation which permit agencies to pay transportation bills prior to audit and leave the final responsibility for determining errors in classifications, errors in rates, up to the General Accounting Office. If we find an overpayment in the amount that is paid to the carrier by the administrative agency--this applies to those carriers that are under the Interstate Commerce Act-then we can issue an overpayment notice and collect it back, or if the carrier does not pay, then we can ask that it be deducted from some future payment.

This was supposed to help the carriers in a time of great stress and strain on their finances and it leaves the audit primarily up to the GAO. We carry this out with a centralized rate and tariff file that we feel is probably the best either in or out of the Government. In this way there is one single audit and we are able to take advantage of seeing the whole pattern of transportation payments, and the agencies generally do not attempt to make a final audit. In the case of the other areas under the Budget and Accounting Procedures Act of 1950, we are permitted and encouraged by the Congress to make a selective audit, based on our examination of the systems in the agencies, their policies, their practices, their accounting systems in operation, and their observance of governing statutes and other legal requirements, so that we make audits of segments that are representative of their total operations and come up with reports on those audits.

Mr. ANDREWS. But you do audit 100 percent all transportation vouchers ?

Mr. SULLIVAN. Yes, sir.

Mr. ANDREWS. Let me ask you this: How much savings has your Department been responsible for?

Mr. SULLIVAN. In the last fiscal year we had recovered from the carriers approximately $8.5 million, I believe. Mr. ANDREWS. Fiscal year 1966 ?

Mr. SULLIVAN. Yes, sir. This year so far through March 31, 1967, we have stated overcharges against carriers amounting to $11.3 million, of which around $10 million has already been collected.

Mr. ANDREWS. From what Mr. Weitzel said you have a lock on collecting the rest of it.

Mr. SULLIVAN. Pretty much. Mr. ANDREWS. If they want to do business with the Government. Mr. SULLIVAN. As it pertains to carriers, who come under the ICC Act. In other areas, such as maritime shipping we do not enjoy the right to deduct.

Mr. ANDREWS. When you say you recovered $8.5 million in 1966, you mean you saved the Government that much money in 1966 ? Mr. SULLIVAN. That is correct. Mr. ANDREWS. So far in 1967 you have saved them $11.3 million? Mr. SULLIVAN. Yes, sir. Mr. ANDREWS. Do you have the figure for 1965 ?

Mr. SULLIVAN. I believe I have. On page A-2 of the justification, $9.6 million.

COLLECTIONS THROUGH EFFORTS OF GAO, 1957-66 Mr. ANDREWS. It seems you saved $47,655,000 in 1957.

Mr. WEITZEL. We were working on the reaudit of World War II transportation payments in which we recovered some $250 million over and above what had been recovered on the original audit.

You will see those figures tapering down in the early sixties when we were finishing up reaudit of World War II; and we are now on à Inore current basis.

Mr. STAATS. You have a spreadout of the effects of that reaudit.

Mr. ANDREWS. Does this table reflect the amounts that the General Accounting Office can claim as having saved the Government in the field of general audit, transportation, general claims, and total collections?

Mr. STAATS. These are just collections, Mr. Chairman. These are actual cases where the Government collects money back from payments made.

Mr. ANDREWS. Due to your examination and audit. Mr. Staats. Yes. Mr. ANDREWS. “Efforts" is the word I want. Collections by or through the efforts of the General Accounting Office, 1957 through 1966. You show a total of collections by the Government through your efforts from 1957 through 1966 of $417,376,000. Mr. STAATS. That is correct. Mr. ANDREWS. Without objection we shall insert page A-2 in the record.

Mr. ANDREWS. Your audit goes into the question how much is stolen after it is taken from the ship and put on the docks?

Mr. STOVALL. Anywhere along the way, except we found the accountability records are not sufficient to make any reliable estimates. We were attempting to look into any losses anywhere along the way.

Mr. ANDREWS. Does your report mention those black markets that existed on the streets of Saigon?

Mr. STOVALL. We do not deal with it as a specific section. It recognizes it, but we do not attempt to trace it out, because this is also impossible, we think.

Mr. ANDREWS. Does your report indicate that any South Vietnamese officials have been implicated in any of these thieveries?

Mr. STOVALL. Perhaps I should mention on that, Mr. Chairman, there has been and is a major increasing effort by the groups of the departments and agencies themselves in this black market area. This was one of the prime purposes of our review, to have the services themselves devote a great deal more effort in this area. The military services are doing this. The port situation, for example, is under much better security control now, but there is still the problem of the things that happen after the goods move from the port.

We do not believe that accountability records are such that these things can really be traced.

Mr. ANDREWS. My question was, does your report indicate that there is any activity on the part of South Vietnamese officials participating in this stealing that is going on down there? Mr. STOVALL. No direct reference to this.

(Discussion off the record.) Mr. ANDREWS. On the record.

Mr. STOVALL. We have done some work with the military along these lines, some assistance to them in attempting to control and cut down the losses from the PX's, for example, that they have been working on better inventory controls and also reducing the purchases of some of the items that were being bought that were most subject to black market operations.

Mr. ANDREWS. From what I have heard conditions are pretty bad down there and I am wondering if eight auditors from your office are enough to make a meaningful audit and examination and so forth.

Mr. STAATS. It is a very minimal number, Mr. Chairman. I would like to mention two things. We do intend to augment this number on specific studies and audits by assigning them from other locations.

In that connection, that is a major reason why we are establishing an office in Manila. It is awfully difficult to get people, as you have suggested, to serve in Saigon for any long period of time. We had originally hoped we could get people to serve for 2 years there. We had to revise that downward to 18 months and now we again had to revise it down to 12 months. We need an office that is reasonably close by whereby we can assign people from Manila to work in Southeast Asia on these specific audits. This also means that we can get more people to serve in Saigon if they can keep their families in Manila so that they can manage to get back and see their families once in a while.

Mr. ANDREWS. Have you opened an office in Manila?

Mr. Staats. We are just in the process.
Mr. ANDREWS. How many people do you plan to have in that office ?

Mr. STOVALL. About 15 to begin with, but we plan to staff it depending on need.

Mr. ANDREWS. How can they work on South Vietnamese problems from Manila?

Mr. Staats. They have to travel from there. Mr. STOVALL. There has been a major augmentation traveling out of Honolulu of our nucleus group in Saigon. So we have had people going and coming as well as people from Washington.

Mr. Staats. We feel we need to have a minimum number of people in these locations in order to be familiar enough with these problems in order to know what to look into. If we have to handle all of this on a temporary duty basis we are in trouble. That is the reason we plan to have a small office in New Delhi, Saigon, and Manila. Then we can augment our resident staffs on major studies and major audit work by assigning people on a temporary duty basis.

Mr. ANDREWS. You do feel that you have a great problem before you in Southeast Asia ? Mr. STAATS. We certainly do. Mr. ANDREWS. One of the biggest you have ever had, I guess.

Mr. Staats. That is right. I would like to add to Mr. Stovall's remarks of a while ago on the matter of internal audits by the various agencies. We could furnish for the record the increase in the number of audit personnel assigned to Southeast Asia by the operating agencies as a result of our efforts and our report we made to the House Government Operations Committee.

Mr. STOVALL. I have some information on that. Since we were there and made our report last summer it is known that a major part of our concern was to induce the departments and agencies to increase their efforts. At that time the principal internal auditors were the AID mission auditors, there were about 19 Americans and 20-odd nationals and a small contract group, six military men in defense contracts. Since that time, as Mr. Staats mentioned and our report will point out, the total effort has roughly tripled. We have been able since that report to obtain a reconsideration by the Defense Department to permit their auditors to go in. Up to that point they had considered this a combat zone and were not letting the regular auditors of the Army, Navy, and Air Force go in. They reconsidered that policy. They are now going in. Their contract auditors have expanded from six to 19. Our report which will be forthcoming within the next 2 week on this construction operation will point out the woeful need for additional audits of the construction activities. Mr. ANDREWS. Why the woeful need?

Mr. STOVALL. We think that six auditors there who had the primary responsibility for a billion-dollar operation did not begin to touch the need. They have increased that to about 19—I think about 15 on board now—and are increasing to 19.

(Discussion off the record.)


pproximate for people will be a

Mr. STOVALL. If I might add on the AID mission auditors, they have approximately doubled. All in all I think with the plans that are now in being for people being lined up to go to Vietnam for the various departments, there will be a little more than tripling of the effort being applied over there.

Mr. STAATS. Mr. Chairman, could I make the general point here, we have come to the conclusion that we have not really done an adequate job in the review of our overseas AID program generally. Many countries we have not been into at all.

Mr. ANDREWS. What is that due to?

Mr. STAATS. This has been lack of personnel. We have now on March 31, 1967, increased our number of personnel assigned to work on the international area from 144 as of June 30, 1966, to 171. In our current program for 1967 we plan to go up to 187. We have plans in our 1968 budget, if it is approved by the Congress, to go up to 225. This means that we will be able to go into some areas that we have not been into before, particularly on foreign aid programs.

We also plan to review on a fairly comprehensive basis all the aid programs in a given country. This includes programs of the Export-Import Bank, Economic Assistance and other agencies of Government such as Treasury, Labor, and Agriculture. We feel that this is an area that we really have not given enough attention to.

Mr. ANDREWS. With all that overseas responsibility and the war on poverty at home, you are going to have your hands full for the next few years. Mr. Staats. We really will.

Mr. ANDREWS. The President has said there would be no letup on the war on poverty and for fiscal 1968 there would be a minimum of $25 billion available to aid the poor in fiscal 1968. That is in all Gorernment agencies.


Mr. Staats, will you explain your statement on page 3 which reads as follows:

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.

Mr. STAATS. As I have indicated in my statement, we have had a growth in our professional accounting and auditing staff, but in terms of total employment for the GAO as a whole we have been able to offset those increases numberswise by reductions in our staff on trans. portation audit and claims. We had hoped this might be possible for next year. Because of the increase in the audit work for transportation bills growing out of the Vietnam operations, we are going to have to have an increase in that area-an increase of 40—Which I mentioned in my statement.

Mr. Sullivan, who is head of our Transportation Division, is here and if you would like he could give you a brief résumé of how this increase in transportation audits work has come about.

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