Mr. ANDREWS. Not the pay increase that will become effective July 1, 1968 ?

Mr. KELLER. That is correct. In fact, I am not sure we have the precise figures on that increase at this time.

Mr. SIMMONS. We do not.

OFFICE OF PERSON NEL

Mr. ANDREWS. What about the Office of Personnel; you are asking for a salary increase of $21,600. There is no change in the average number, but $21,600 is requested additionally.

Mr. SIMMONS. That is the same situation as the Office of the General Counsel, Mr. Chairman. The increase provides for a few promotions, the added cost of last years' pay increase on a full-year basis, and the within-grade steps that we have to pay.

Mr. ANDREWS. Is that all for mandatory increases?

Mr. SIMMONS. No, sir. Some promotions are in there. Very few, but the increase is mostly for within grades and the pay increase.

Mr. ANDREWS. Does it include the salary increases that became effective October 1, 1967?

Mr. SIMMONS. Yes, sir.

Mr. ANDREWS. Not the salary increases that will become effective July 1?

Mr. SIMMONS. That is right.

Mr. ANDREWS. In fact, there is no money in this request anywhere for the pay increase that will take place July 1, 1968? Mr. SIMMONS. That is right.

PERSONNEL INCREASES REQUESTED DEFENSE DIVISION

Mr. ANDREWS. I notice that you are asking for an average increase of 27 positions for the Defense Division. What was the increase in Defense that you mentioned earlier, or what percent of the budget is allocated to defense spending?

Mr. STAATS. Mr. Bailey will be able to respond to that.

Mr. BAILEY. We are asking for 27 additional positions in the Defense Division as a part of the 100 additional positions discussed earlier. The amount that is involved is some $370,000, which would be for additional compensation for promotions, in-grades, and pay act costs. The increase is designed to bring our average number of positions from 264 up to 291 in 1969.

Mr. ANDREWS. Do you plan to send any of these new employees to Vietnam or Southeast Asia?

Mr. BAILEY. Well, sir, these particular employees will go everywhere. The new ones won't necessarily go, but some of the ones that we now have will go and the new ones will have to pick up some of the work in the United States.

Mr. ANDREWS. In other words, you are going to increase your staff in South Vietnam?

Mr. BAILEY. We will increase the effort, yes, sir, in South Vietnam as well as the effort in the Department of Defense as a whole with these additional employees.

Mr. ANDREWS. I suppose that as a general proposition you would

feel that you could greatly augment the effort in this area, defense area, and still not be overdoing it?

Mr. BAILEY. Yes, sir. I think that is right. For example, the Defense budget is increasing some $7 billion for 1969. That is their request. I might point out, Mr. Chairman, that during 1967 the work of the Defense Division, in terms of measurable savings as well as cash collections, resulted in some $70,700,000 in benefits, a ratio of 171⁄2 to 1 compared to our Division's 1968 budget. This would not account for the items where you cannot put a dollar figure on them. Of course these things could not be accomplished without the substantial support given by other parts of the General Accounting Offices particularly Field Operations Division and International Division. I do not think that by any means in the Department of Defense have we reached a leveling-off point, such as was discussed yesterday here. Mr. ANDREWS. Approximately how many audit reports did you file last year dealing with defense spending or other defense matters? Mr. BAILEY. I have the figure here.

Mr. STAATS. While he is getting that, Mr. Chairman, I would like to say this: While the dollar savings here have been very substantial, the work which our Division has done on the improvement of supply systems, controls, and reduction of inventories in this whole area in the Far East, in my opinion, has really been an outstanding job. It undoubtedly has saved several times over what he is talking about in terms of measurable savings.

Mr. ANDREWS. How much do you estimate your Office has saved in the Defense Department last year?

Mr. BAILEY. In fiscal year 1967, the actual collections were $5.5 million and the measurable benefits were $65,240,000, for a total of $70,700,000. This does not count the savings that you cannot quantify. Mr. ANDREWS. Such as what?

Mr. BAILEY. Improved procedures which will continue to result in improvements in their activities, handling of their resources, this type of thing.

Mr. ANDREWS. Tell us briefly about the $5 million in cash that you recovered.

Mr. BAILEY. This resulted from amounts that were collected as a result of errors that were made, collections from contractors, resulting from our audits, this type of thing.

FOLLOW-UP ON GAO RECOMMENDATIONS

Mr. ANDREWS. Do you maintain some sort of monitoring of the extent to which your recommendations and suggestions in connection with defense matters are actually taken up and followed through on by the Defense Department and by the committees of Congress?

Mr. STAATS. Yes, sir; we do.

Mr. ANDREWS. Tell us briefly about that. You make a recommendation. What happens?

Mr. STAATS. Many times the Defense Department will accept our recommendations based upon seeing a draft of our report.

Mr. ANDREWS. Do you check on them to see whether or not they have followed your recommendations?

Mr. STAATS. We do.

Mr. ANDREWS. In a case where you make a recommendation and they ignore it, what happens?

Mr. STAATS. We go ahead and report it to Congress anyway. It is up to Congress from then on.

Mr. ANDREWS. To what committee do you report?

Mr. STAATS. We make these reports to the Congress as a whole unless we are requested specifically by a committee to report to that committee, in which case we report to that committee.

Mr. ANDREWS. In the case of the Defense Department, most of the requests would be made by the Armed Services Committee, or where? Mr. STAATS. I think most of them are made by the Appropriations Committee. Then second would be the Armed Services Committee.

Mr. WEITZEL. Mr. Chairman, we have had very good success in past year in the actions taken by the Department of Defense in response to our reports, particularly in the procurement and supply management area. We recommended, for example, that they amend their regulations under the Truth in Negotiations Act, requiring contractors to furnish cost and pricing data for negotiated contracts, and I think the Defense Department adopted practically every recommendation. We made recommendations in the supply management area, for example, that they appoint a high-level committee to study their whole inventory situation, and they announced last December that they were doing this. We made a trip out to Vietnam to study the supply management system and came back and conferred with Assistant Secretary Tom Morris on this and he immediately went out with an Assistant Secretary of the Army on a trip to Vietnam, after which Mr. McNamara appointed a task force to redistribute excess supplies found in the area.

I think we made 108 reports in the defense area last year. You asked sent to the Congress, committees or individual congressmen. An additional 282 went to officials of the defense agencies.

In addition to this, we are doing a great deal of work now in the accounting system area, which Mr. Staats has revitalized. As you know, we are required to cooperate with the agencies in developing their financial management systems and improving their accounting systems when they comply with our principles and standards. We have had about 20 people in the Washington office in a special group that was set up in 1966, working on this area, and we are also working on the requirements that Congress placed on us under section 640 (b) of the Defense Department Appropriation Act to report to the Congress on whether any new cost-based or expense-based accounting systems in the Department of Defense met the standards of law, regulations, and procedures that are set up in those areas.

We have had about 15 people from our Washington office and quite a large number of people from our field offices working on this program. This does not show up in the number of reports that are made.

Mr. STAATS. I would like to add one further thought here with respect to your question as to whether the agencies follow up, whether there is any followup procedure. In addition to our own

Mr. ANDREWS. That is what I had reference to, your followup, to see whether the agencies were implementing your recommendations. Mr. STAATS. We do that. In addition, I would like to point out the Bureau of the Budget has a circular called Circular A-50, which is

a requirement to the agencies that on all GAO recommendations which they do not accept that the reasons for that be filed with the Budget Bureau so the Budget Bureau can review that independently. Mr. ANDREWS. And then you check with them?

Mr. STAATS. We have close liaison with the Bureau.

Thirdly, there is in some of the committees of Congress a regular procedure for followup on these reports that we make directly with the agency. The House Government Operations Committee, for example, writes letters to the agencies on all of our reports so, in addition to our reports to the committee, the committee will get a report from the agency as to what it has done about it.

ADEQUACY OF AUDIT COVERAGE IN DEFENSE

Mr. ANDREWS. One final question about your Defense Division. Do you feel that you are in a position to fully audit and supervise the expenditure of these vast billions of dollars by the Defense Department?

Mr. STAATS. I would have to answer honestly, I do not think we are. But again, here is the question of how fast can you grow and how can you get the kind of people, the trained people who can deal with some of these complicated problems.

Mr. ANDREWS. Are you reasonably satisfied with the effort you are making?

Mr. STAATS. I am. I think we are making good progress. I would like to cite to you just one instance here of a request we are going to be getting from the Joint Committee on Atomic Energy. This has to do with getting GAO to give the committee help on reviewing the new antiballistic-missile program. This will involve our staff who are familiar with the Atomic Energy Commission, but it will primarily involve the staff in our Defense Division. This is one of the most complicated problems that you can find anywhere in Government.

Mr. ANDREWS. The ABM system does come under Defense because they are requesting money before the Defense Committee. Mr. STAATS. It is about a $5 billion program.

Mr. ANDREWs. Five and a half.

Mr. STAATS. I cite this again. We cannot deal with a problem like this with people who are not pretty well trained.

Mr. ANDREWs. I can understand that.

Mr. STAATS. It has a bearing on really how fast we can grow. That is the reason we bring these young people in.

Mr. ANDREWS. You are telling us you are doing the best you can with what you have and are reasonably satisfied?

Mr. STAATS. Yes.

Mr. WEITZEL. The facilities and construction area, as you know, is a very important area in the Defense Department. We feel we have had to neglect this in the past because of emphasis on procurement and supply management.

Mr. Staats also set up a special group to cover this area in the Defense Division. It is getting started with much more activity than we have had in the past, but it has not really borne full fruit yet and it will take more staff to be able to do what we would like to do in this

area.

PERSONNEL INCREASES REQUESTED INTERNATIONAL DIVISION

Mr. ANDREWS. Let's talk about the International Division. You are requesting a salary increase of $372,300. For the International Division you show an increase of 26 average positions.

Mr. STAATS. I excused Mr. Stovall this morning because he is conferring with Mr. Gaud on the very problem we talked about yesterday on how do we strengthen the audit program of the AID. So he is not present this morning. He had this meeting and we felt it was important he be there.

Mr. ANDREWS. This $372,300 increase requested for the International Division I assume is for the 26 average new positions.

Mr. WEITZEL. Plus the within-grade increases, and some promotions and also the full annualization of the pay cost from last October. Mr. ANDREWS. I wish you would insert in the record how much money is involved in the 26 average new positions.

Mr. WEITZEL. We will do that.

(The information follows:)

Two hundred and thirty-eight thousand dollars.

Mr. ANDREWS. In what principal areas are you proposing to concentrate if you get this additional money?

Mr. STAATS. For the International Division?

Mr. ANDREWS. Right.

Mr. STAATS. May we supply that for the record?
Mr. ANDREWS. Yes.

(The information follows:)

In the International Division we plan to concentrate on the following areas: 1. Broader and more comprehensive reviews of the economic and military assistance given selected countries.

2. Reviews of the manner in which U.S. contributions to international organizations are managed and controlled.

3. Reviews of U.S. military and economic activities in Southeast Asia.

4. Analyses of ways in which Government agencies, through better management, can effect savings in the U.S. balance-of-payments position.

5. Efforts to improve internal audit and other financial management activities of the Department of State and other U.S. agencies having responsibilities for foreign affairs.

(Off the record.)

Mr. STAATS. It is going to be in foreign aid. Two years ago we got criticized sharply by the Senate Foreign Relations Committee on not doing enough work on review of foreign aid programs overseas. They were considering a similar directive to the one we got on poverty, which would require us to audit every program of $500,000 or more. Obviously we could not have done it.

I conferred with the leadership in the Senate and we agreed we would step up our efforts in the foreign aid field. As a result of that they dropped the amendment from the bill. But I agree with them, we need to give more attention to our work overseas in the foreign assistance field.

So we have, therefore, added a great deal of work in the review of the foreign assistance program, military as well as economic.