We also have been cutting back in the nonprofessional area, in our Claims Division and in our Transportation Division. I believe, like a large management consulting organization or a large public accounting organization, there is a factor of size that we have honestly to face. I do not believe we are at that point. I am confident that we are not. I am making really three points in answering your question. The second is that our growth has been conditioned heavily upon the availability of good people that we can bring in and train in our organization. Third, we have an unresolved question of how big GAO should eventually become from the standpoint of being able to manage a large professional staff. Mr. ANDREWS. I notice on page 108 of the justifications that your actual employment has grown from 4,306 permanent positions in 1967 to 4,499 in 1968, estimated, and 4,606 is projected for 1969. Mr. STAATS. Those are gross positions, Mr. Chairman. We do not, as you know, finance all of those positions. The lapse takes into account our gap in filling positions and turnovers. Mr. ANDREWS. I was giving the total number of permanent positions. Mr. STAATS. That is correct. Mr. ANDREWS. The average number of employees for those years: 4,071 for 1967, 4,280 estimated for 1968, and 4,411 projected for 1969. Mr. STAATS. That is correct, sir. Mr. ANDREWS. You think that will be the average increase in growth of the General Accounting Office for the next few years? Mr. STAATS. When you say the next few years, I would certainly say Mr. ANDREWS. Five years? Mr. STAATS. If I had to make the judgment at the moment, I would say yes; but again, I would want to condition that upon what happens to the budget as a whole. Mr. ANDREWS. You are saying again, that as the Federal budget increases, the need for additional appropriations and manpower in GAO increases? Mr. STAATS. That is right. I believe this to be correct. INCREASE IN PROFESSIONAL CAPABILITY Mr. WEITZEL. I might point out, Mr. Chairman, our staff is increasing its professional capability, as we will cover later. In the defense area, we are going into many areas of activity which we did not adequately cover before. In the civil area, we are going into construction contracts, for example, in GSA and the Veterans' Administration, where we have not done too much work before. As we develop a larger professional staff, we can go into areas that we have not really tapped before. Mr. YATES. How does it happen you are going into those now and did not go into them in previous years? Mr. WEITZEL. Largely because we did not have sufficient staff to cover all of the work that needed to be covered. For example, in the Defense Department, research and development and certain support An increase in mandatory personnel benefits associated with the above items. An increase in travel to cover projected increase in the professional staff, which will be $167,000, and an increase in the average daily cost of travel, or $68,000, making a total of $207,000 225,000 This $225,000 is made up of an increase of $269,000 on the domestic side, and a reduction of $44,000 on the foreign side, leaving a net of $225,000. NEED FOR INCREASED STAFF The President's budget, submitted to Congress in January, contemplates total outlays for fiscal year 1969 of $186 billion, an increase of $88 billion since 1961. The operating budget of the General Accounting Office for the same period increased from $40.9 million to an estimated $57.7 or $16.8 million. This means that during this period the GAO budget increased 41 percent while the budget for the Government as a whole increased nearly 90 percent. We continue to place special emphasis on the further gradual increase in our professional staff as the activities subject to our audit continue to expand. To meet the expressed needs of the Congress and to imporve the effectiveness of our work I believe we must go more deeply into a number of Federal programs. We must place increased emphasis, for example, on improving financial management in the Federal service. Yet we find that to meet our most pressing obligations we must continue to defer or delay work which needs our attention. Aside from the unprecedented number of new social, economic, and health programs which the Federal Government has undertaken in the past few years, we are confronted with an increasing workload in practically all the larger civil agencies. To assist the Congress in maintaining effective legislative oversight of governmental programs and operations, we have increased our capability to appraise the adequacy of program management as well as the effectiveness or results of those programs of heavy dollar impact and congressional interest. For example, we have scheduled 27 reviews involving approximately 75 staff members of programs and activities in space research and technology. Every one of these reviews is in an area of immediate concern or interest to congressional committees concerned with the financial requirements or legislative surveillance of the programs. During fiscal year 1969 we contemplate that we will provide nearly 400 man-years in direct assistance to the Congress and its committees. This compares with 315 man-years in 1967 and does not include our review of the activities of the Office of Economic Opportunity which I will mention later. For example, we are currently engaged in about 20 studies requested by the House Appropriations Committee. In 1967, we assigned 106 GAO staff members to the staffs of 23 committees and subcommittees of the Congress. Through February of this year we have assigned 4 employees compared to 56 for the same period a year ago. We, of course, are pleased that the Congress continues to find our work more useful since our primary objective is to render assistance to the Congress. To this end we have taken action to improve the timeliness of our reporting to the Congress on the results of our reviews. We will continue to make improvements in this area. Our overall need for increased staff arises essentially from the fact that with growing Federal outlays we do not have sufficient staff to cover our governmentwide statutory responsibilities. The policy we have followed through the years has been to recruit top quality graduates of the universities and colleges. Our experience over the past 10 years has been that we are able to recruit annually approximately 350 students of prime quality. We could have lowered our standards for recruitment and obtained a greater number of graduates but with less potential to develop rapidly to positions of competence and responsibility. In spite of losses to other Government agencies, public accounting and private industry, we have been able to gradually increase the professional staff on a net basis by approximately 100 man-years each year since fiscal year 1957. We are pleased to report a distinct improvement in the turnover of our professional staff over last year. Through better retention of our staff, we have conserved a part of our investment in recruiting, training, and experience of these people. We had 200 separations for the first 8 months of this fiscal year compared to 247 separations for the same period last year. In other words, we have lost to date 47 fewer well-qualified accountants and auditors. It should be noted here that of those who left us from 1961 through 1967, excluding losses for military service, retirements, and deaths, 55 percent transferred to other Federal agencies and 27 percent went to private industry. This fiscal year we have been able to attract and employ more qualified applicants than last year. We appointed 264 accountants and auditors for the first 8-month period of the current fiscal year compared to 167 for the same period a year ago, or 97 more. On February 29, 1968, our professional accounting and auditing staff totaled 2,391, an increase of 182 above the prior year total of 2,209. For the 8-year period from June 30, 1959, to June 30, 1967, we increased our professional accounting and auditing staff from 1,792 to 2.326, a net increase of 534 or about 30 percent. Offsetting this increase is a reduction in other areas totaling 1,521, from 3,411 to 1,890 for the same period. We expect to have 2,605 professional accounting and auditing staff members by June 30, 1969, giving a 10-year increase of 813 or about 45 percent. TRAVEL Our work requirements for 1969 will require travel estimated to cost $1,200,000, an increase of $225,000 above our 1968 revised estimate of $3.975,000. 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 numerous locations abroad. During 1967, we performed about 2,200 reviews and audits in the United States and in 33 other countries. We worked at about 760 non-Federal locations such as State and local government offices, universities, and plants and offices of private contractors. GENERAL PERFORMANCE HIGHLIGHTS During fiscal year 1967, over $190 million in revenues and savings were attributable to actions taken or planned resulting from the work of our Office compared to $130.6 million for 1966. This amount includes: Over $23 million in refunds and collections; Twenty-one million dollars representing 1 year's value of savings and revenues which we expect will recur in future years; and The sum of $145.7 million in nonrecurring savings in planned or current programs. Over $96 million of the total savings and revenues were achieved through improvement of Government supply management and procurement. While many of our individual recommendations resulting in dollar savings are small, others are quite substantial. An example is a study we made at the request of the Joint Committee on Atomic Energy of AEC's proposed criteria and contract for uranium enrichment services. Our report included our conclusions and recommendations on: AEC policy applicable to certain fixed costs relating to excess plant capacity; The potential for accommodating future changes in AEC policy by contract amendments; The financial consequences to AEC in the event of cancellation of contracts by customers; and The limitations on AEC for entering into contract commitments in excess of its present productive capability. As a result of our report and the hearings held by the Joint Committee, AEC made a number of changes designed to strengthen and improve its program, including a specific change relating to the inclusion of additional charges of depreciation and interest on investment amounting to a total of $42 million in charges for enrichment services. In addition to this, AEC revised its proposed contract for these services to permit it to initiate directly negotiations for amendments or revisions to restrictive provisions in the contract, to increase from 3 to 31⁄2 years the contract termination notice period-to provide better assurance that there will be no costs accrued to the Government for any electrical power cancellation caused by customer contract terminations and to establish procedures for recording and reporting annually to the Joint Committee its commitments and available capability to meet such commitments. Many other important 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 A-11. Our justifications and our annual report also contain details concerning our accomplishments during 1967. Briefly, we issued 963 audit reports, including 338 reports to the Congress, committees, or Members of Congress, and 625 reports to other Government officials; We undertook approximately 2,200 audits and reviews of selected Government activities and programs throughout the United States and in 33 foreign countries; We audited 5.6 million freight shipments and 2.9 million passenger movements for which the Government had paid about $2 billion: We collected $13 million in transportation overpayments, and settled over 26,000 claims from public carriers against the United States for amounts totaling $83.9 million or $3.1 million less than claimed; We disposed of over 9,700 general claims against the United States for amounts totaling $46.5 million, adjusted and settled over 32,000 claims by the United States, and collected over $3.6 million from debtors. We handled over 4,600 decisions and other legal matters, including more than 749 legislative and legal reports to committees and Members of Congress and 96 reports to the Bureau of the Budget; and We testified before congressional committees on 18 occasions. 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 1969, 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.-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. In fiscal year 1969, defense outlays are estimated as amounting to about $79 billion, or 42 percent of the total Federal budget of $186 billion. The magnitude and complexity of the operations of the Department of Defense require that we place extremely heavy responsibilities upon our staff. For example, in the area of procurement alone, the Department of Defense is awarding contracts for weapon systems and related equipment and supplies at the rate of over $35 billion annually. The importance of our work in this area can be attested to by the assistance we have provided to the Appropriations, Government Operations, and the Armed Services Committees of both the House and the Senate. Our examinations into procurement have led to: Enactment of legislation to strengthen the procedures for establishing prices under negotiated contracts-the Truth-in-Negotiations Act, Public Law 87-653. Improvements in the administration of contract terms and conditions. More effective utilization of Government-owned equipment in the hands of contractors. There are about $15 billion of this equipment. Cancellation of plans to procure equipment or supplies in excess of needs. Department of Defense procurement is such an important and changing area that we must provide further assistance to Congress in this area. Additional details concerning our plans are contained in pages 44 through 57 of our budget justifications. 2. Domestic activities of civil agencies.-New or expanded programs for health, labor, and welfare-including the economic opportunity |