INCREASES REQUESTED FIELD OPERATIONS DIVISION

Mr. ANDREWS. Let's take the Field Operations Division. You are requesting a salary increase of $939,000.

Describe briefly what the Field Operations Division does.

Mr. STAATS. The Field Operations Division supports all of the other divisions that we have. In other words, we draw on the Field Operations Division for staff support for the Defense Division or for the Civil Division, and in some cases for the International Division. So that this represents the general estimate of increase of workload in all three of these areas.

Mr. ANDREWS. Here the dollar figure increase seems quite substantial in relation to the proposal for an additional 23 in the average number of employees. How would you explain that?

Mr. SIMMONS. There are a great many promotions provided for and also within-grades and annualization of the last pay increase on a fullyear basis.

Mr. ANDREWS. What about promotions?

Mr. SIMMONS. The cost for promotions is in here.

Mr. ANDREWS. Why would that be so high?

Mr. SIMMONS. The principal reason would be that field operations is an area where we assign a lot of lower salaried accountants who come directly from the colleges and they progress during the course

of a year.

Mr. STAATS. Practically all of the people we hire initially go into the field office. That is where they get the best training and, as they progress, we simply shift them into the Washington office as we need them. We hire at grade 7 and if they perform well, after the first year they move up to grade 9.

Mr. ANDREWS. Your Field Operations Division is the biggest of your divisions. According to the chart on page B-1, you have a total of 1,724 positions.

Mr. STAATS. We have about 16 regional offices and these people are located in them.

CLAIMS DIVISION

Mr. ANDREWS. Claims Division, you ask for a relatively small decrease of $800. We note a decrease in the Claims Division of average number of five employees. What is the situation there?

Mr. STAATS. This results from the new Federal Claims Collection Act passed last year, which gives the agencies authority to compromise claims against those individuals, and it means less workload comes into our office than there was in the past. I would foresee the possibility that in the years ahead, this will decline further. We cannot be sure yet.

INCREASES REQUESTED-TRANSPORTATION DIVISION

Mr. ANDREWS. Transportation Division. You are asking for a salary increase of $173,500.

Mr. STAATS. Mr. Sullivan, the head of our Division is here. Mr. SULLIVAN. Yes, that covers the increase of 10 personnel, six of which are for the hiring of additional technical personnel for our transportation audits, three are for additional personnel to perform

reviews of transportation and traffic management activities in the agencies, and an additional position for our Report Branch, which does our quasi-legal work in connection with litigation for or against the Government in connection with transportation suits.

Mr. ANDREWS. What is the total cost of operating your Transportation Division? Can you tell us?

Mr. SULLIVAN. For fiscal year 1968, the total cost is estimated at $7,033,000.

Mr. ANDREWS. And how much did your Division recoup?

Mr. SULLIVAN. We recouped in actual collections for fiscal year 1967, approximately $13 million, and we expect in this current fiscal year to recoup somewhere in the neighborhood of $14 million.

Mr. STAATS. That is fiscal year 1968 he is talking about.

Mr. ANDREWS. Do you ever find a pattern of consistent overcharging on the part of carriers?

Mr. SULLIVAN. Not consistent as to any individual carrier. They will be consistent as to a certain technical situation where most carriers would interpret the tariff differently than we would. In some cases there is a pattern there.

Mr. ANDREWs. Does not the General Service Administration have a public utility section that handles the question of tariffs, overcharges, et cetera?

Mr. ANDREWS. Does not the General Services Administration have a transportation section as part of their organization and it is concerned with the negotiating of rates and quotations under section 22 of the ICC Act with the carriers for the transportation of commodities for the account of civil agencies of the Government.

They also do traffic management work for their own account and for other agencies.

Mr. ANDREWS. Are they concerned with overcharges?

Mr. SULLIVAN. No, sir.

Mr. ANDREWS. But your Division is?

Mr. SULLIVAN. Yes, sir.

Mr. ANDREWS. Is there any duplication between the effort on the part of your Transportation Division of the General Accounting Office and the transportation section of General Services Administration? Mr. SULLIVAN. No duplication at all, sir.

Mr. ANDREWS. They are concerned primarily with rates and you with overcharges?

Mr. SULLIVAN. We deal with whether the rate has been properly applied by the carrier and, if not, we recoup it from the carrier.

Mr. YATES. I am under the impression, if my memory serves me correctly, the public utility and transportation section of GSA is concerned with overcharges. As a matter of fact, we had very stiff fights in our committee with public utilities who complained about GSA intervening in rate cases before the ICC in order to prevent overcharges and in order to obtain corrections of rates.

Mr. STAATS. I think we can clarify this.

There are two quite different things involved here. One is the case where either the GSA feels the rate is too high and intervenes in order to get a rate reduction, and this applies not only to transportation but to electric and other utilities

Mr. ANDREWs. And communications?

Mr. STAATS. Yes.

The second situation would be where the carrier proposes to increase his rates and it goes before a regulatory body for a rate increase. Then the GSA, if it feels it has a case, will intervene in an effort to try, on behalf of the Government, to prevent that rate from being raised or to get a lower rate of increase than is being asked.

Mr. YATES. You mean only with a request by carriers or public utilities for rate increases does GSA enter the picture and does not take any action with respect to overcharges on existing rates?

Mr. STAATS. They have no authority to disallow

Mr. YATES. They have no authority to object to an existing rate and say it is an overcharge?

Mr. STAATS. Either with respect to existing rates or proposed rate increases, they can only intervene.

Mr. YATES. How does that differ from what you do?

Mr. WEITZEL. Briefly, we audit the available rates as established by tariffs filed by the ICC or under the so-called section 22 agreements made by the U.S. Government through the Defense Department or GSA with the carriers. Then we try to see what is the lowest available rate that should be charged for a certain commodity that is shipped between two particular points.

Mr. YATES. In other words, you do not object to the rate?

Mr. ANDREWS. What you are saying and what the law is, if I understand correctly, you are concerned with the rates that have been approved by the Public Utilities Commission?

Mr. STAATS. Exactly.

Mr. ANDREWS. And you are more concerned-and concerned almost exclusively with other charges by carriers based on the rates that have been fixed by the regulatory commissions?

Mr. WEITZEL. Yes. We are interested, of course, in traffic management practices, and we have expanded our capability to make surveys and studies of how much the Government is paying, for example, for shipments of household effects, and if we find a pattern of wasteful or inefficient practices, in the Department of Defense, for example, in the way they ship, we cannot get any money back perhaps on this because they have paid the legal rate, but we can suggest better ways to ship, for example, in containers rather than in bulk, or by grouping shipments or by not shipping through a certain port.

We have made recommendations to the Congress and the agencies, but we audit generally to the rates that are established by law by the regulatory commission, the classification under which the commodities are shipped. If we find that a special rate would result in a lower charge to the Government, we will apply that and ask for a refund from the carrier.

GSA may go to a regulatory commission or go to the carrier and say the Government ships a lot of stuff between these two points, will you not give us a lower rate under section 22? Then when that section 22 rate is established, we will audit to that and if we find the carriers charging a regular tariff rate when this Government rate was available at a lower charge, we will apply the lower charge and ask for the money back.

Mr. ANDREWS. When you say you recouped $13 million-plus last year, does that mean you found that carriers had overcharged Government

agencies $13 million and you got back from the carriers the $13 million? Mr. SULLIVAN. Yes, sir; Mr. Chairman.

In fiscal year 1967 we had sent overcharge notices to the carriers in the amount of around $14 million, and the $13 million I referred to was the actual collections of those moneys that were overcharged the various agencies of the Government.

Mr. ANDREWS. Do you know what is the total amount the Govern ment pays for transportation?

Mr. SULLIVAN. The total amount the Government pays for transportation on so-called standard forms-this would be the Government bill of lading or the transportation request-amounted in fiscal year 1967 to about $2 billion.

Mr. ANDREWS. What part of that was military?

Mr. SULLIVAN. The portion of military would have been pretty much in the nature of about 70 percent of that, I believe. The exact percentage for fiscal year 1967 was 69.5.

Mr. ANDREWS. When you are talking about that figure that includes moving the servicemen's furniture from one station to another; does it not?

Mr. SULLIVAN. Yes, sir, and ammunition and any other commodities shipped by or for the account of the Government.

Mr. ANDREWS. All transportation on the part of the Government? Mr. SULLIVAN. That is correct.

Mr. ANDREWS. $2 billion?

Mr. SULLIVAN. Not including Post Office mail.

Mr. STAATS. Nor does this include shipments made by the Government in its own carriers. In other words, this would not include shipment in Government-owned vessels or Government-owned aircraft. If you add that to the $2 billion figure Mr. Sullivan has given you, the figure is more in the nature of around $4.5 billion.

Mr. YATES. Does Mr. Sullivan's figure include foreign carriers as well?

Mr. SULLIVAN. Yes, sir; any common carriers.

Mr. YATES. Is not $14 million a relatively minor rebate for a $2 billion transportation bill? Is it because you do not have the manpower to look at all of the rates, Mr. Sullivan? What do you do, a spot-check of these things? How do you determine whether there is an overcharge?

Mr. SULLIVAN. All of the payments made by all Government agencies for transportation with a few exceptions, such as Post Office mail, are sent into our office centrally on a periodic basis. The accounts come in to us, they are broken down in various fashions in order to facilitate the technical rate audit. We do what we call a 100-percent audit, which needs some explanation, in that a great bulk of it, I might estimate 70 percent, is done on a visual type basis because of either the nature of the amount of the payment or the nature of traffic.

After that visual-type audit, then the other 30 percent go into what we call a more detailed desk audit, and the recoveries I spoke of come pretty much from this 30-percent detailed audit.

The pattern of our recoveries in relation to the amount of money the Government has spent over the years is fairly consistent in terms of that recovery. And then, in addition to that, as part of our own internal operation, we have an internal audit group in our organiza

tion that periodically goes behind the technicians to determine whether the quality of the audit is being maintained.

Mr. ANDREWS. What percentage of claims do you look at?

Mr. SULLIVAN. The percentages of the claims, 100 percent. These are claims in the nature of a carrier claiming against the Government for something either we had taken away from him as part of our audit, or claiming additional moneys from the Government.

Mr. ANDREWS. The question I had in mind, what percentage of the bills presented to the Government do you check?

Mr. SULLIVAN. I would say 100 percent of those that are billed where the forms used for the carriage itself are socalled standard forms, Government bill of lading or the TR's. In most cases the Government traffic does move on standard Government bill of lading forms for freight, or TR for passengers.

Mr. ANDREWS. Let me ask this question: Is the Transportation Division of the General Accounting Office the only Government agency that checks freight bills?

Mr. SULLIVAN. This is correct, and by law, under the Certifying and Disbursing Officers Relief Act, the certifying and disbursing officers of the Government are relieved of any liability for overpayments or overcharges in connection with the technical accuracy or propriety of the rates charged. The responsibility for the final audit and settlement of those bills rests with the General Accounting Office.

Mr. STAATS. I would like to add a point here, Mr. Chairman. We are concerned not only with the auditing of the individual vouchers, but perhaps even more importantly, we are interested in this total cost of transportation to the Government, in other words, whether we can improve the system in such a way as to produce savings which may be far more than what we will recover on individual bills.

For example, we are doing a study now on the possibility of consolidation of small shipments into large containers. This is a practice which private industry has done a good deal in, but we have not done very much. And we feel now we have a report which I believe has been agreed to by Defense and GSA, which may yield very substantial savings to the Government.

What do you estimate the total savings might amount to over a year's time?

Mr. SULLIVAN. I think they vary, but it was as high as $30 million. Mr. STAATS. This is from one study, you see, which would be more than twice what we recover on the audit operation itself.

Mr. YATES. How many bills does Mr. Sullivan's division look at a year?

Mr. SULLIVAN. Approximately 8.5 million Government bills of lad ing or transportation requests.

Mr. YATES. A huge amount, is it not?

Mr. WEITZEL. Could we point out a relationship here by using another example, Mr. Chairman?

During the fiscal year 1967, we reported the savings in excess of a million dollars could have been realized on household shipments diverted at U.S. points during the period March 1963 to December 1964, if the Defense Department had analyzed the potential costs that would have resulted from a negotiated high diversion rate. Subsequently,