USE OF ACCOUNTING SYSTEMS

The third would be that work that we do in connection with the approval of the accounting systems where we are charged by law with cooperating with the agencies in developing better accounting systems and ultimately we have to approve those accounting systems when we believe that they are in line with our own principles and standards. Mr. LANGEN. Can I interrupt you here?

Mr. STAATS. Yes, sir.

Mr. LANGEN. In connection with the accounting systems, I would like to inject a thought.

You say that you approve the accounting systems?

Mr. STAATS. Yes, sir.

Mr. LANGEN. I raise the question with regard to that because of the experience on another committee; namely. Government Operations. In altogether too many instances we found where the accounting systems were reliable as could be from an accounting standpoint, they would verify that a department had bought a typewriter, a chair, and any number of other things because there was an invoice, or sales slip. But there was no check made as to whether they needed a typewriter or whether these were purchases that were really authentic. In these days when there is an obvious need for austerity in all parts of Government, I am wondering just how much of that goes on in the respective departments that could be eliminated if that auditing went just a little bit further rather than just accounting for the fact that, a typewriter was purchased or a transaction took place.

The question is: Just what part do these transactions play in the overall efficiency?

Mr. STAATS. In part, they are related in this sense: If you have a good accounting system which tells a manager at all times what his accrued costs are, and you can hold him responsible then for meeting cost targets, then he is going to be more concerned about whether he buys that extra typewriter or not; and to that extent an accounting system will be helpful in forcing the manager to be more careful in terms of his total costs.

Mr. LANGEN. I agree.

Mr. STAATS. To carry this one step further, if I may, there is nothing inherent in an accounting system per se, regardless of how good, which is going to prevent management from making mistakes in the sense of overbuying. This is a budgetary review function which has to be looked at through the budget process of the agencies, Budget Bureau, and in the Appropriations Committee.

Mr. WEITZEL. Mr. Langen, one of the cardinal points in our standards for an accounting system to be approved by the Comptroller General is that it must be an integral part of an overall management system. The management system is the key to successfully keeping down expenses. One of the objectives of our audit is to see that all property and other assets and all resources of the agency, including people. machinery, equipment, real property, what have you, is employed to the maximum useful extent.

In other words, if we find that they have more property on hand than they need, we will bring it to their attention. The inventory report that we discussed before Senator Proxmire's Subcommittee on Economy in

Government had to do with exactly this, with the great amount of inventories that the military had in their stores and the poor management control that they had over it. They didn't know what they did have. They had to make about 25 percent adjustments up or down in 2 successive years in total inventories of $10 billion.

The message of that report was that they should get better control so that they could avoid buying what they didn't need, so they would not go out and buy things that were not in short supply. We have made reports to the Congress, for example, on utilization of automobiles by GSA, on utilization of office equipment of all kinds, so that we are cognizant of this in our audit approach to the agencies, not just looking at what their accounting systems show but what their actual activities are using.

Mr. LANGEN. I am real pleased to hear this.

To be a little more specific about it and point out what I was referring to, in this day with all of the varied number of grants of Federal moneys for one purpose or another, particularly in fields of research and where there are continuing grants of $50,000 a year for a particular project I recall many instances where we noted when the project first started obviously they needed a desk, typewriter, chair, drapes, and so on. But this became a recurring item every year. It became a part of a grant and moneys that had been intended to accomplish a research endeavor.

It was used to buy furnishings. I recall in those instances, the accounts had been audited and checked off and, sure, they bought a typewriter every year. The question was, was that a necessary part of that research project? Was that a necessary item in that grant of money? Were you getting a return for this money that Congress intended when they appropriated the funds?

Mr. STAATS. Unless you have a good accounting system, the Federal agency is not going to know whether they are overbuying. In other words, this will be a factor

Mr. LANGEN. That is the point. That is why I raise the question. In approving the accounting systems or in reviewing these respective activities, are these points that you at times find yourself concerned with?

Mr. STAATS. Absolutely. One of the things that we have got to put more staff on is in the area of grant-in-aid programs. Grant-in-aid programs have increased very sharply, as you know. They are up to $17 billion this year. This is an increase from about $10 billion in 1961. We have a problem here of whether or not the agencies' accounting systems are going to produce information on the grant-in-aid programs which enables them to maintain the proper controls.

Mr. LANGEN. I hope that you do not mind my raising these questions. It just occurs to me there is such a broad field in this kind of activity where the taxpayers' dollars could be saved, or put to a use that served the public better.

I think of one that was called to my attention the other day by a visitor in the office talking about the food stamp program. This person was talking about her own mother where two people called, first to inform her that their records indicated eligibility to participate in the food stamp program.

"Sign here," which she did.

She now becomes a participant in the food stamp program. The next month two people come back again to recheck to see if there is any change in her financial status or whether the program was working right. Comes the third month, two people come back again to recheck to see whether the same status prevailed. In this case this lady had vision enough of her own and said:

What does it cost to send two people here every month to check to see whether I am getting any benefit from this food stamp program? With per diem and mileage it must cost way more to carry on this activity than the $8 a month that I get out of the food stamp program. Please cancel me out.

Mr. YATES. Much cheaper to take her to dinner.

Mr. LANGEN. Much cheaper.

It is these kinds of activities that I am wondering whether or not we have a system that accounts for them to the degree that they ought to be accounted for, to the benefit of the taxpayers as well as the participants in the program and the objectives of the program.

SAVINGS FROM GAO OPERATIONS

Mr. YATES. I agree with you completely. I was going to ask questions about that, too. Here we have last year's budget, $146 billion plus. The statement by our very good and capable Comptroller General says that the agencies saved approximately $190 million for the fiscal year, which is roughly about 1.8 percent.

Mr. STAATS. In terms of savings we would measure it. We also made large numbers of recommendations where we were not able to measure the savings.

Mr. YATES. You say attributable to actions taken or planned resulting from the work of our office compared to $130 million for 1966? Mr. STAATS. That is, that portion of our recommendations that were accepted where you could translate directly into dollar savings. What I am saying is that there were large numbers of savings also which we could not price out and therefore we did not think it was proper for us to take a dollar credit.

Mr. ANDREWS. Mr. Yates point is that the savings is not much. Mr. STAATS. The point is still the same.

Mr. ANDREWS. Compared to total amount of expenditures.

Mr. YATES. Yes. This gets to what Mr. Langen has been asking you about; that is, how much activity does your organization engage in with relation to the total budget. If you had a bigger staff, would the savings be measurably greater? Is our committee not giving you the opportunity to extend the savings by limiting the amount of money made available to you? Here this year there is a budget of $186 billion. Suppose we were to ask you how much could you save if we were to increase the size of the GÃO? We want operation by the Government agencies to be as efficient and economical as possible. We try to do it through this committee. Other committees of Congress do it.

Mr. Langen's Committee on Government Operations does it. The amount that we can do is necessarily limited because we just do not have the close relationship with the operations of the executive branch that we ought to have if we were to carry out properly our constitutional checks on the operations of the executive.

We bank on you. We depend on you. We look to you to be the congressional arm for doing this kind of work.

For instance, last year had we given you more than we gave you in our appropriation, could you have saved more than $190 million out of $146 billion?

Mr. STAATS. I think it would be fair to say we would have probably saved more. The thing I would want to emphasize is that we in the GAO ought not to be deciding what areas we look at simply to chalk up a dollar saving figure here. We ought to be looking at the programs where their dollar expenditures are large even though we cannot take credit in the GAO. We don't want to be in the position of simply taking credit in the sense of blowing our own horn.

Mr. YATES. You are to be commended for that.

Mr. STAATS. Just to give you an example, I am convinced myself that the work we did to improve the supply management in the Far East last year and again this year probably saved several times over the dollar figure that we are able to attribute to matters which we could take specific credit for in the sense that the agencies agreed with our recommendations.

Take another example Congressman Langen is talking about.

We think a great deal needs to be done to tighten up the audit controls on grant-in-aid programs in the Government. I don't think there is any conceivable way that we would ever be able to price out a specific saving that would result from improvement in an accounting system or auditing system in the grant-in-aid area. It might have a far greater effect in terms of total expenditures than some of the other things we do where we are able to take credit for a specific dollar savings.

I am sure that you understand this point and appreciate it, but it is something we have to keep in perspective because there is always a danger when we measure effectiveness purely in terms of whether last year we saved $130 million and this year $190 million, next year the figure will be somewhat different.

Mr. ANDREWS. Aren't you, figuratively speaking, like the cop on the beat? If it were not for your office with a hawkeye on Government agencies, it might be that their waste would be far worse than it is today?

Mr. STAATS. We have made the statement so many times. It is the GAO's presence in an agency, the mere fact you go in or may come in a situation is a healthy discipline on the agency in terms of how careful they are about decisions that are made, and for the very reason that if this presence were not there, if the GAO were not in existence, then I think you would have a different situation. It is impossible to measure what that effect is.

Mr. ANDREWS. Mr. Langen?

Mr. LANGEN. I was trying to determine whether or not there was an opportunity to accomplish some further efficiency in Government, or a little more value for the taxpayer's money as expended.

Mr. STAATS. Again, it is a question of how fast we should go. Mr. LANGEN. I don't know how much it would take or whether we ought to expand it. It seems like there is an area for consideration at this point.

Mr. STAATS. I don't know either. I am convinced that we are not

at the maximum size that we ought to be. I am also convinced that we ought to have quality people and that we ought to be relying as much as we can on the quality of our work rather than the numbers. I am also convinced that we need to grow some more. I will be the first person to say so if I reach the conclusion that we ought to quit growing.

Mr. YATES. I made the same point with respect to the Bureau of the Budget on my other subcommittee. I think that the Bureau at the inception of the budget, and your agency watching the operation of the program, are the two watchdogs of the Congress. We look to you much more than the Bureau of the Budget because you are the congressional

arm.

I suppose this same argument could have been made many years ago when budgets began to move up, but when we have budgets of $145 and $186 billion now, it seems to me that the General Accounting Office ought to be sharpening its tools.

Perhaps you will say they are as sharp now as we can make them, under existing circumstances. But I think that if you can think of ways in which you can get the Government to be operated more efficiently and economically with additional personnel, or additional computerization or mechanization, I am sure the committee would be glad to go along with you.

That is the thrust of Mr. Langen's question. Wasn't it?

Mr. LANGEN. Yes. The mere fact of seeing whether we can accomplish any more efficiency in Government. It occurs to me there is room for it.

Mr. WEITZEL. Mr. Chairman, along the lines Mr. Staats was talking on, I think you folks would like to know about some work we are doing with the Labor Department and, specifically, the Bureau of Employment Security, to improve their cost accounting systems all the way down through the State and local levels so that everybody concerned will have more of an idea what the services are costing that are being actually given to the people.

Now we don't know with things being on an obligation basis if offices are operating on the basis of the money that they get rather than the cost of the service needed. We are working to try to encourage them and to help them to convert their systems to a cost basis all the way out to the State and local level, but we are not neglecting the opportunities that we see for cost savings. In a recent report in a Federal-State area we have pointed out the Federal Government was reimbursing one State too much for administrative expenses in connection with welfare programs.

We pointed out that the food distribution program, for example, in one State was being carried on without regard to the eligibility of the people. There were too many ineligibles on the rolls.

Mr. ANDREWS. In connection with that disclosure that your Office made, what happened?

Mr. WEITZEL. They cut thousands of ineligibles off the rolls. This was an unhappy thing for the people that got on the rolls.

Mr. ANDREWS. And got off. I can understand that. But your Office was responsible for certain people whom you considered to be ineligible removed from the rolls?

Mr. WEITZEL. Yes, sir.