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diffusion plants. On July 17, 1970, we issued a report to the Committee in which we stated that the proposed criteria should not be adopted without further action by the Congress because it was of doubtful legality. After the issuance of our report, the Joint Committee introduced legislation which was enacted on December 19, 1970, to prohibit AEC from changing the criteria as it had proposed. International activities

In the international area, congressional interest in programs and activities related to Vietnam and Southeast Asia continues to result in specific requests for audits and reviews. Of 29 reports issued in response to requests from congressional committees and individual members of Congress between July 1, 1970, and May 31, 1971, 18 related to management problems in Vietnam or Southeast Asia. At June 1, 1971, we had 7 reviews in process pertaining to matters of an international character resulting from requests of congressional committees and members of Congress.

As an example of our congressional assistance work in the international area, I shall describe our work on one request received from the Chairman, Senate Committee on Foreign Relations, involving the administration of the military assistance training program. Our review was carried out in approximately 10 countries overseas as well as at installations in the United States. We found that, in some areas, the military assistance training programs, costing about $75 million a year, were not being fully coordinated with the various other U.S. Government training programs. We also found that some training was unnecessary or not of high priority; some training was related to equipment not on hand; and there was inadequate consideration by the U.S. resident military advisers of the recipient countries' capabilities to provide training from their own resources. We recommended in our report of February 16, 1971, specific actions to improve the management of the mlitary assistance training programs. We also suggested the possibility of enacting legislation requiring the Secretary of Defense to establish a measurement system to assist in determining the effectiveness of expenditures for the military assistance training programs.


The work that we undertake on our own initiative, directed to evaluating whether programs are achieving the objectives intended by the Congress and at reasonable cost, materially assists the Congress and its committees in maintaining effective legislative oversight of governmental programs and operations. In selecting areas for review, we give primary attention to those areas known or considered to be of direct interest to the Congress or which, in our judgment, should be reviewed by GAO as an arm of the Congress. In making these judgments, we give due consideration to the importance and effectiveness of programs and activities, size of expenditures, investment in assets, etc., through our program planning system.

The 2,273 man-years which we plan to apply to these reviews during fiscal year 1972 represent an increase of 139 man-years over the revised fiscal year 1971 program level. In total our plans provide for directing reasonable review efforts to all important Federal program areas.


In the years ahead, we envision continued growth in the number and size of domestic civilian programs and in the portion of total Federal budget resources applied to them. I am referring especially to programs related to poverty, health, education, housing and urbanization, and environmental quality. Accordingly, we are planning to increase, during fiscal year 1972, our total manpower applied to reviews of domestic civilian programs by 187 man-years. While some increased audit emphasis will be applied to all civil departments and a number of the larger independent agencies, the more significant increases will be applied to the Departments of Health, Education, and Welfare, Transportation, Labor, Housing and Urban Development, and the newly-created Environmental Pro tection Agency. These agencies account for a net increase of about $8.2 billion of the $16.4 billion increases in Federal budget outlays proposed by the President for 1972.

In planning our reviews of domestic civil programs, we are attempting to look more than previously at related programs which cross agency lines. For example, we have made one of our senior officials the point for coordination of all GAO work in the medical and health-related activities. Total Federal outlays for health in 1972 are estimated at about $22.2 billion compared to $20.7 billion in 1971. We have underway studies of (1) comprehensive health planning, (2) health facilities construction, (3) health activities related to sanitation, drug manufacture, and consumer protection, and (4) purchases of drugs for use in Federal hospitals.

Additional domestic civil program areas to which we plan to direct increased attention during 1972 are:

Education, especially higher education and elementary education.
Public assistance and family services programs.
Urban renewal and model cities activities.
Manpower programs.
Air traffic control systems development and operation.

Federal-aid highway programs, highway safety programs, and urban mass transportation.

Air and water pollution and solid waste management.

Consumer protection programs. In other program areas, such as those of the Departments of Agriculture, Commerce, Interior, Justice, Treasury, and most independent agencies, we anticipate that our overall level of effort will remain substantially at the same level as 1971.

DEFENSE PROGRAMS We are planning to reduce our overall effort in the defense area to 1,256 manyears in fiscal year 1972. Although this represents a relatively small reduction of about 70 man-years as applied in 1971, our 1971 requirements were considerably increased by the study directed by the Congress of the profits made by contractors and subcontractors on contracts on which there is no formally advertised competitive bidding. We are not anticipating that the Congress will either legislate or request during fiscal year 1972 a study of this magnitude.

Of the 1,256 man-years we plan to apply to defense activities, 908 will be applied to surveys and reviews initiated within GAO and 348 to special requests received from congressional committees and individual members.

As in previous years, a significant portion of our effort will be devoted to defense procurement activities. We plan to continue in-depth reviews of contract pricing by defense procurement activities. We plan to continue to perform "should cost" studies at selected contractor's plants, and at some-in-house overhaul activities. We plan also to review the Defense Contract Audit Agency's postaward (defective pricing) program. We will review the efficiency and effectiveness of the audit agency's performance, its basis for selecting contracts for review, the audit techniques employed, and the benefits compared with the costs of the program. Additionally, we plan to initiate a review of the waivers of cost or pricing data by the heads of the military departments in connection with negotiated procurement. The objective of this review is to examine into the reasons for the waivers and whether this has resulted in prices that are higher than would normally be negotiated had the cost data been made available. We will explore alternate means available to the Government to assure that prices are fair and reasonable. Also, we are currently reviewing the reasonableness of costs incurred under major prime contracts, such as those for the C-5A, F-14, F-15 and COBRA aircraft programs.

We are bringing to a conclusion our review of close air support. We initiated this review because of congressional interest concerning the possibility of duplicating defense expenditures for different weapon systems to fulfill the close air support mission. The different sys in question are the AH-56 (Chevenne), the A-X, and the AV-8A (Harrier). We plan to provide the Congress with our observations on how the aircraft in question meet the close air support mission requirements.

in addition to pricing and costing studies under negotiated contracts, we plan to make studies of such aspects of procurement as Government financing of contractors' working capital, product warranties, acquisition of technical data for reprocurement purposes, and the operation of the Defense Contract Administration Services including the inspection practices and procedures of that agency. We plan also to review the Government's effectiveness in obtaining contractor compliance with the Equal Employment Opportunity Program.

In view of the congressional concern with regard to the problems identified in the acquisition of major weapon systems, we plan to continue our reviews of major weapon systems which are in various stages of the acquisition cycle. We have as our primary objectives in these reviews the determination of the basic causes of cost growth, schedule slippage, and deterioration of the originally expected performance characteristics. We are giving particular attention to pro viding effective assistance to the Armed Services and Appropriations Committees by furnishing independent, timely, and complete information on the status of specific major weapon systems, as well as on overall issues involved in the management of the acquisition process, for use in carrying out their legislative and oversight responsibilities. We issued our most recent report on the acquisition of major weapon systems on March 18.

We plan to initiate a review of tactical air defense missiles. The Army and Navy have accumulated an array of expensive surface-to-air missile systems and there are indications of significant duplication between the services. The result of our work will be made available to the Congress for its use in considering appropriation requests.

We plan to review the MK-48 torpedo pilot production contracts as they are awarded to the two competing contractors. Additionally, we plan to continue our surveillance of the data available from the performance measurement systems applicable to the F-14, F-15, S-3A, and B-1 aircraft programs.

We will continue our coverage of the supply management functions in the Department of Defense since we continue to find areas requiring significant improvement. Examples of areas currently under review or planned for review include equipment and material requirement determinations; repair of major items vs. procuring new items; readiness of equipment and material in the bands of military units in the U.S. and abroad; maintenance activities; and utilization of excess material.

In the manpower management area we will be examining practices in assigning and utilizing military personnel ; education and training programs; and administrati of military and civilian pay and allowances. In the research and development area we will be examining into such matters as contractors' independent research and development; management of research projects being performed in military facilities, universities, not-for-profit organizations, and industrial laboratories; and research and development of specific systems and equipment. In the defense facilities area we will be reviewing both the acquisition and management of the facilities. Our work in the support services area includes such matters as ADP systems, communications activities; civil defense, medical activities, industrial facilities at Government-owned plants, and military commissaries.


In the international program area our workload for fiscal year 1972 will continue to be associated with the very large expenditures of the various U.S. Government agencies in Vietnam and Southeast Asia. We also plan to continue reviews of other foreign assistance and related programs. We will review trade and international commerce activities, particularly the industrial and agricultural trade expansion programs and their relationships to our balance-of-payment problems. We will be inquiring into changes in the structure of U.S. foreign assistance programs, such as trends toward regional programs and increasing reliance on multilateral international financial institutions, i.e., the World Bank and regional development banks.

Most of the international programs continue to be performed by the Department of State and the Department of Defense. However, other U.S. Government departments and agencies are also engaged in administering international programs or elements of them. These include:

Department of the Treasury—International Finance Functions.
Post Office Department-International Services.
Department of Commerce International Programs and Affairs.
Department of Agriculture-Foreign Agricultural Functions.
United States Information Agency.
Peace Corps.
Export-Import Bank of the United States.
Various independent agencies, such as NASA, AEC, etc.

We plan to expand our reviews in these activities since many international pro grams involve interrelated programs in which several departments and agencies, or coordinating bodies, participate.

TRANSPORTATION MANAGEMENT The Government's $6 billion expenditures for transportation of equipment, material, and personnel will continue to require audit emphasis. We plan increased attention to the impact of containerization in the shipment of materiel for the Department of Defense involving the inland and overseas portions of the movements, and to the adequacy of the Department's freight rate negotiations for these and other movements. We also plan to review the readiness of transportation support units in Europe. The management of selected civil transportation activities, including those of the General Services Administration in support of components of the Department of Defense, will also be reviewed.

Under the Joint Financial Management Improvement Program, we participated in the Joint Agency Transportation Study. The report, released in September 1970, included 58 recommendations to simplify and expedite payment and audit procedures, and to reduce the cost of transportation. This will require follow-up action by the General Accounting Office.


The Federal Claims Collection Act of 1968 has increased the authority of the departments and agencies to compromise and terminate debts due to the U.S.. We have reviewed the regulations and collection operations of a number of representative agencies under this statute and found a need for substantial improvement.

We plan, therefore, to expand our reviews of both claims collection and claims settlement activities, as well as those involving the waiver of certain debts due the Government to insure that they are being appropriately administered.



Our work in connection with the examination of agencies' financial statements accounting systems, and accountable officers' accounts is required by various statutes and includes:

Centralized audit of transportation payments.
Annual audits of corporations and other governmental activities.

Centralized voucher audits at military finance centers, including account settlement.

Settlement of accounts of accountable officers in civil departments and agencies.

Audits of civilian pay and allowances.

Reviews of accounting systems in operation. The number of staff positions needed in fiscal year 1972 to carry out these financial-type audit activities will be 1,020 compared to 1,032 in 1971. We plan to shift our emphasis within this program area. For example, we are reducing the estimated staff resources needed for the centralized audit of transportation payments since we expect a decrease in the volume of transportation bills applicable to shipments to Vietnam and Southeast Asia. We are planning, on the other hand, to increase somewhat manpower resources applied to reviews of department and agency accounting systems in operation to determine whether these systems provide adequate and reliable information on program and activity costs and related results.

The Transportation Act of 1940 requires the GAO to postaudit all billings for transportation under standard Government transportation forms. This activity, performed centrally in Washington by our Transportation Division, will require the application of 651 man-years in fiscal year 1971 and 630 man-years in 1972, a reduction of 21 man-years. In addition to an anticipated reduction in the volume of transportation payments for audit, we expect to achieve additional economies through increased use of computerized audit techniques. During fiscal year 1970, a total of 108,499 overcharge notices by the United States against carriers amounted to $17.7 million. During the same period we collected $16.3 million.

The Government Corporation Control Act of 1945 and other specific statutes require annual audits of financial statements in accordance with principles and procedures applicable to commercial corporate transactions. During the last session, the Senate passed legislation which would provide for this type of audit at least once every 3 years. This would, we believe, be desirable in that it would give us more flexibility in the use of our professional staff for higher priority work.


The legal work of the Office extends, with certain exceptions, to virtually the full range of the Government's receipt and expenditure activity.

Many legal questions arise as a result of our audits and reviews of agency operations. Heads of departments and agencies as well as disbursing and certifying officers have a statutory right to submit for advance decision any question on the legality or propriety of proposed expenditures of Federal funds. Contracting and procurement officers may also obtain decisions on questions arising in connection with proposed awards of Government contracts. Also, individuals and firms whose claims have been disallowed by actions of our Claims and Transportation Divisions and bidders for Government contracts who feel that procurement statutes and regulations have not been properly applied may apply for decision. Under the law, decisions of the Comptroller General in these matters are final and conclusive upon the executive branch of the Government and pay. ments made contrary to our decisions are subject to disallowance, Private concerns and individuals who may be adversely affected have further recourse to the courts in most cases.

The legal work includes the preparation of decisions concerning the legality and propriety of the receipt and expenditure of public funds; the preparation of advisory opinions and reports on proposed and pending legislation to members of Congress and congressional committees, and to the Office of Management and Budget; and the formulation and presentation of legislative recommendations to the Congress.

As you know, the Comptroller General has responsibility for determining the legality of expenditure of appropriated funds. This decision function, involving the interpretation and application of Federal statutes and regulations, bas produced a large body of decisions over the years which serve as guidelines applicable to receipt and appropriated fund expenditure transactions of the Government.

Of the 226 man-years we estimate will be needed to carry out the legal activities of the Office in 1972, 188 will be in our General Counsel's office and 38 in our Transportation Division. The Transportation Division provides legal and technical assistance to the Department of Justice in the prosecution and defense of transportation suits by and against the United States as well as in cases before the Court of Claims.

The contract area continues to constitute the largest individual category of our legal decision work. Recent decision of the District of Columbia Court of Appeals in Scanwell Laboratories, Inc. v. Thomas and of the District Court for the District of Columbia in A. G. Schoonmaker Co., Inc. v. Resor, et al., have altered certain concepts relating to the rights of those who bid for Government contracts. These decisions and the work of the Commission on Government Procurement (created by Public Law 91-129 with the Comptroller General as a statutory member) will significantly affect the Government procurement process and have already had an impact on the work of our Office. Two of our lawyers are assigned full time and two are working part time for the Procurement Commission. In addition, the Office was requested to prepare several studies for use by the Commission. Additional work of this type is anticipated.

We are also asking for 6 additional staff positions over our 1971 level to meet the increased work load of our legal staff due to the growing complexity of our audit work and to handle an increased volume of bid protests.

FINANCIAL MANAGEMENT IMPROVEMENT In recent years the Office has devoted considerable effort in assisting the Federal agencies in their efforts to improve their accounting systems to the point

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