this is the point that I mentioned a while ago, that of the people who have left us since 1961, 55 percent went to other Government agencies. A substantial number of those

Mr. ANDREWS. Were most of them paid more money?

Mr. STAATS. There are three factors, in general, I would attribute this to. One is the case where an individual is with us and has to travel, and he would prefer to get into a situation where he does not have to travel. We are frank to admit this is a factor.

In a great many other cases, it is a case where he comes with the promise of an increase, and we do not feel he has been tested enough or he has not measured up to his competition in our organization so that we can give him the same kind of hope that he will be promoted.

The third would be where he goes out with an actual increase. This applies to both other Government agencies as well as to private industry. This is one way we have to measure whether or not we are in line with other Government agencies.

As far as our grade average is concerned, it has been going up. Overall, in 1966 it was 9.1; in 1967 it was 9.2; in 1968, our estimate for the whole year is 9.5; and next year it goes up another point to 9.6.

Mr. ANDREWS. Who is responsible for that upgrading? Mr. STAATS. These are promotions that we make in the GAO. Mr. ANDREWS. Who has the responsibility for promotion in your agency?

Mr. STAATS. I have established a group of the head of our Office of Policy and Special Studies, the Director of our Staff Development Office, our Personnel Director, the assistant to myself. Mr. Weitzel, and myself, who review all promotions at grade 14 and higher.

Mr. ANDREWS. You have a committee to pass on promotions?
Mr. STAATS. Yes, sir.

Mr. ANDREWS. Do you promote a man on your own, or does he have to make application for promotion?

Mr. STAATS. We do it on the basis of an annual review of all of the professional staff. We call it a promotion performance evaluation. It is made once a year.

In order to try to get some consistency of treatment of the top people, we do this only twice a year. We make promotions only twice a year on people at grade 14 and above. This is important from the standpoint of promotions down the line, because to some degree the grade 14 level and above sets the pattern for promotions below that. We do this twice a year on a systematic review basis across the board. Mr. ANDREWS. The man does not have to apply for promotion or request promotion. You do it on your own.

Mr. STAATS. We do it on our own.

That does not mean to say that in the divisions, individuals may not talk with their supervisors as to where they stand. They may be thinking about the possibility of moving. This sort of thing happens all the time. The procedure is designed to reward the individual with outstanding performance, rather than rewarding the fellow who is a squeaky wheel.

Mr. ANDREWS. Your committee makes the promotions. Does it do so on the recommendation of the supervisor?

Mr. STAATS. That is correct.

Mr. ANDREWS. The supervisor is with him all year and keeps an eye

on him and observes his attitude and his proficiency, and at a certain time makes a recommendation to the committee, and then the committee takes action. Is that the way you operate?

Mr. STAATS. The committee operates with respect to the grade 14's and above, promotions to grade 14, 14 to 15, and higher.

Mr. ANDREWS. What about under grade 14?

Mr. STAATS. Below that level, it is a matter for decision of our Personnel Director and our Director of Staff Development and the division head or, in the case of the regional offices, our regional manager. Mr. ANDREWS. In other words, under 14, the positions do not reach the committee that you described.

Mr. STAATS. That is correct.

Mr. ANDREWS. His supervisor and the Personnel Director make the promotion?

Mr. WEITZEL. As Mr. Staats indicated, the supervisor of the group in which the man is working makes the original recommendation. That comes up through the Division Director to the Staff Development Director and the Director of Personnel; and for 14's and above, it comes to the committee that Mr. Staats mentioned. So, it has consideration all along the line from the standpoint of his development, his career development, and his contribution to the General Accounting Office.

(Off the record.)

MANDATORY OVERSEAS ALLOWANCES

Mr. ANDREWS. What about mandatory overseas allowances? Spell that out more explicitly.

Mr. STAATS. I think Mr. Stovall is probably the best witness on that. Mr. STOVALL. This applies to the staff that we have resident in Honolulu, in Frankfurt, a small office in Saigon, Manila, and New Delhi.

In Frankfurt, there is no mandatory allowance, no extra allowance at this time.

In Honolulu, there is a 15-percent cost-of-living allowance, COLA allowance, so-called.

In Saigon, there is a 25-percent salary premium.

In New Dehli and Manila, 10-percent salary premium.

These are pretty much automatic. When a man is assigned to one of those offices, he is entitled to that.

Mr. YATES. Why in Honolulu?

Mr. STOVALL. We have 12 people in the suboffice in Saigon, which is controlled by our Far East branch out of Honolulu. We have a small office of 12 people there.

Mr. YATES. May I interrupt? Why is there a special allowance in Honolulu?

Mr. STOVALL. It is a cost-of-living allowance. The origin goes way back. It is supposed to be based on higher levels of cost of living.

Mr. YATES. But the costs in Washington and New York are as high as in Honolulu; are they not?

Mr. STAATS. This goes back to World War II. The difficulty of recruiting for Puerto Rico, Alaska, and Hawaii, was such that the

Congress provided for a cost-of-living adjustment or allowance on top of the regular pay.

Mr. YATES. You do not mean to say you have difficulty recruiting people to work in Honolulu?

Mr. STAATS. This has now been removed for Puerto Rico. It was reduced for Hawaii, but was not removed.

Mr. YATES. Why should it not have been removed?

Mr. STAATS. It should have been removed.

(Off the record.)

Mr. ANDREWS. How many employees do you have in Hawaii?
Mr. STOVALL. Thirty-eight.

Mr. ANDREWS. Is this increase in overseas allowances true of all Government agencies, or just GAO?

Mr. STOVALL. All Government agencies and civilian employees of the military agencies.

Mr. ANDREWs. What is the differential in Hawaii?
Mr. STOVALL. Fifteen percent of base salary.

Mr. ANDREWS. What is the differential in Alaska?

Mr. STOVALL. Twenty-five percent.

Mr. ANDREWS. You say the differential has been removed for Puerto Rico?

Mr. STAATS. I believe that is correct.

Mr. YATES. Have you any idea as to what the total cost to the Government is from all agencies as a result of the salary differential?

Mr. STAATS. This is a determinable figure. I am sure it is available. Mr. YATES. Would you have somebody put it in the record for us at this point; the total additional cost for oveaseas allowances, the differential in salaries? Salary is all it is applicable to; is it not?

Mr. STAATS. Base salary.

Mr. STOVALL. There are other allowances, of course-educational allowances and certain other identified allowances.

Mr. ANDREWs. Give us a statement in the record about what the fringe benefits are and what the total cost to the Government in Hawaii and Alaska has been as a result of mandatory overseas allowances. Mr. STOVALL. Yes, sir.

(The information follows:)

From information furnished by the U.S. Civil Service Commission, the allowances paid to Federal employees in Hawaii and Alaska in fiscal year 1967 under provisions of 5, United States Code 5941, are estimated, as follows:

Alaska
Hawaii

Million

$16.0

15. 9

ADDITIONAL AUDIT STAFF FOR TRANSPORTATION BILLS

Mr. ANDREWS. With respect to the item of $128,000 for additional audit staff for transportation bills, did we not allow some considerable increase for that last year, primarily related to the war activity? Mr. STAATS. Yes, but the workload has continued to increase, Mr. Chairman.

Mr. ANDREWS. How many additional employees in that division did we give you last year? Mr. SIMMONS. An average of 40 positions.

Mr. ANDREWS. How many additional are you requesting for 1969? Mr. SIMMONS. Ten for 1969 over the revised estimate for 1968. Mr. SULLIVAN. Ten additional for 1969. However, the increase that was granted last year we were not able to utilize to the full extent because of difficulties in recruiting technical employees. Our average number of employees for fiscal year 1969 including the additional 10 will be 785 as compared with 815 in the original estimate for fiscal year 1968 which was revised downward.

Mr. ANDREWS. How much did that Division return to the Government last year as a result of auditing claims and finding overcharges? Was it $13 million?

Mr. SULLIVAN. $13 million.

Mr. ANDREWS. Were those overcharges paid into the Treasury of the United States?

Mr. SULLIVAN. Paid into miscellaneous receipts of the Treasury or reimbursed to the basic appropriation from which the expenditure

came.

Mr. ANDREWS. In other words, the Division did save the taxpayers $13 million?

Mr. SULLIVAN. That is correct.

Mr. ANDREWs. How much did the Division cost in 1967?

Mr. SULLIVAN. Fiscal year 1967. Approximately $6.5 million.

INCREASE IN TRAVEL COSTS

Mr. ANDREWS. On the travel increase, what do you mean by the increase in the average daily cost of travel? I believe a bill has been reported in the House which proposes to increase the per diem allowance for Government employees in travel status from $16 to $20 a day, which is a 25-percent increase. What would that do to this request, and also sketch for us some idea of what you have in mind when you say that you are projecting an increase otherwise, or do you mean that some portion of the $225,000 is associated with the average increase of 100 additional professional accountants and auditors that you are asking for?

Mr. STAATS. The $225,000 is not related to the bill which has been reported by the House Government Operations Committee, which would increase the allowable per diem to go from $16 to $20 a day. The $225,000 relates entirely to the increase in our staff and the average daily cost of travel that has taken place within the $16-a-day limit.

Our rough estimate as to what the new bill would cost us would be in the neighborhood of $350,000 to $400,000 a year.

Mr. ANDREWS. In other words, if this bill becomes law, you will have a bigger request for travel allowance.

Mr. STAATS. We estimate this could go as high as $400,000, which would be a problem for us, also, in 1968 if it should go into effect before the end of this fiscal year. We have made no allowance for that.

Mr. ANDREWS. What is your travel allowance now? Sixteen dollars? Mr. STAATS. Our average is $15.75.

Mr. SIMMONS. We do not pay the maximum rate of $16 in all cases. Mr. ANDREWS. Sixteen dollars is the maximum. Under the present law, you need $225,000 additional over what you had in 1968.

Mr. STAATS. That is correct.

Mr. ANDREWS. If this travel status bill passes, increasing the allowance from $16 to $20 a day, that will add another $350,000 to $400,000 your travel expense?

to

Mr. STAATS. That is correct.

Mr. ANDREWs. Where is that bill now?

Mr. STAATS. It has been reported by the House Government Operations Committee. It is in the Rules Committee, I believe.

COST OF INFLATION

Mr. ANDREWS. All the military agencies tell our Subcommittee on Defense that inflation is rampant and costs increase about 6 percent per year. Has that been your observation?

Mr. STAATS. I do not believe we have made a calculation of what the cost increases have been, overall. The 6 percent must include the pay increase.

Mr. ANDREWS. All costs are 6 percent more than they were a year before, due to inflation. They have been telling us that for 3 years. They have based their 1969 request before our committee on the assumption that the inflation in 1969 will be at the rate of 6 percent. That is true in R. & D., procurement, and everything except personnel. If the Congress passes another pay increase bill, it might be even higher than 6 percent.

Mr. STAATS. The 6-percent figure sounds about right. It is higher, by the way, than the average increase in the Consumer Price Index. Mr. ANDREWS. Is that about 3 percent?

Mr. STAATS. It has been running about 3 percent a year. This last year it was between 3 and 4 percent.

Mr. ANDREWS. There seems to be no end in sight. One of the best ways to feel the effect of inflation is to visit a grocery store.

Mr. LANGEN. The only item that has shown a decrease in the costof-living index is food. This has been pretty well documented in each of the last cost-of-living indexes.

Mr. YATES. The cost of food at the consumer level?

Mr. LANGEN. At the consumer level. That is primarily because the cost of food has gone down.

Mr. ANDREWS. I think you should say-and I think it is correct that the percentage of the food dollar that the farmer is getting today is less than it has been for a number of years.

Mr. LANGEN. And it is going down. So, while food today costs the consumer 17.7 percent of his income dollar, the farmer, in turn, get only 5 cents out of that dollar as his return for the food purchased The additional money, then, goes into processing, handling, storage freight, labor, and so on.

Mr. ANDREWS. That is where you see the increased labor costs?

Mr. LANGEN. The grocery store is not the place to look for the in flation. I think you will find other places where it is much mor prevalent.

Mr. ANDREWS. I will not argue with you.

Mr. YATES. Medical services are where the costs are going up.