Mr. FASCELL. That would build up to show that they have an excess when they really do not? Mr. WOOTTON. That is true. Mr. WOOTTON. That is true. It could be vice versa with respect to materiel that may be returned to the Department. Mr. FASCELL. Just so we do not put the onus on the Air Force, this is probably true of the other branches, too; is it not? Mr. WOOTTON. Yes. Let me correct that. We did not review MAP in the Navy. Stateside we reviewed Air Force and Army. I will give you the reasons for that. Mr. FASCELL. In other words, you can speak as to the Army and Air Force and not the Navy! Mr. WOOTTON. It was on a percentage basis. It was done on the basis of a worldwide review that Navy to date had received about 10 percent of foreign aid funds, Air Force about 30 percent, and the Army about 60 percent, from the inception of the foreign aid program. That is going all the way back to the beginning of MAP. I cannot give you the exact figures but somehow or other it comes to me that the Army has received about $10 billion, the Air Force about $4 billion to $4.5 billion and the Navy around $1.5 billion. I may be off a few dollars in my percentages. I think that my percentages though are right. Mr. MICHEL. Over a period of how many years? Mr. MICHEL. In 6 years of the total amount appropriated that we designated for military assistance under the foreign aid program, you add these three figures here and that would give you the amount of military assistance actually produced in the United States and sent over here? Mr. WOOTTON. Yes, sir; but some of it may not have been delivered. That may be the dollars appropriated but the deliveries are lagging: I think that through the Department of Defense, Army, Navy, and Air Force, some $2 billion worth of materiel is still to be delivered for the funds that have been appropriated up to June 30, 1956. Mr. MICHEL. Do you recall the total amount appropriated during those years for military assistance in the foreign-aid program? Mr. WOOTTON. In my recollection, it adds up to about $18 billion. I do not know how accurate those figures are that I just gave you, but about $18 billion. Mr. FASCELL. Mr. Conrardy, getting on to further discussions about corrective actions, has there been any corrective action on the problem of excesses and redistribution of military hardware declared excess? Mr. CONRARDY. Not to my knowledge since the date of our review. We have not yet made any followup examination since our review. Most of our reviews were conducted during the months of January and February of this year. Mr. FASCELL. Mr. Blair, is it not true that it would be your hope and position that if any agreement is reached with respect to this problem, that it would be retroactive? Mr. BLAIR. Yes. Mr. FASCELL. If it were just to go into the future, with the decline in the program, while it is necessary it would not be helpful from a dollars-and-cents standpoint ? Mr. BLAIR. That is correct. Mr. FASCELL. If the State Department and the Defense Department are going to do anything with respect to the redistribution problem, or on OSP, it is your hope that it would be retroactive! Mr. BLAIR. Particularly in the OSP area. With respect to the other, it is a matter of redistribution of excess equipment. It may mean we will be getting back some obsolete materiel, but with respect to dollars what we are pushing for is to make these agreements retroactive. The bulk of our OSP funds were placed in fiscal years 1952, 1953, and 1954. Mr. FASCELL. Offshore procurement this last fiscal year was $6 million ? Mr. BLAIR. I have a figure here. Again, it is in a classified document as to what the offshore procurement has been in Europe. Mr. FASCELL. I do not know what it was but it went from the scale of several billion dollars a few years ago down to several million dollars and with all prospects that it would continue in that same general pattern. Mr. BLAIR. We feel that we have covered the major problem areas in that field. Mr. FASCELL. Now it is a question of going back and getting what you think is due us. Mr. Conrardy, did you tell us anything with respect to corrective action in this regard, dealing specifically with OSP? Mr. CONRARDY. Excesses under OSP Mr. FASCELL. Yes; the question of no profits and tax exemptions and all of that. Mr. CONRARDY. No; I have no personal knowledge of any corrective actions within the military-assistance programs since the date of our last review on the problem of excesses. With regard to taxes and no profits Mr. FASCELL. Mr. Blair, this has been of concern to you; has it not? Mr. BLAIR. That is right. Mr. FASCELL. As far as you know, there has been no corrective action? Mr. BLAIR. No effective corrective action. That is correct. The office has issued a report on the matter that is classified and the Comptroller General has brought the matter up with the Secretary. Mr. FASCELL. That has been recently? Mr. FASCELL. Again, this has been over a period of several years and just recently you felt compelled again to bring this matter forcibly to the attention of State and the Defense Departments in an effort to get some kind of corrective action? Mr. BLAIR. That is correct, sir. a Mr. FASCELL. There are two things we want to touch on very quickly before we get into this other group: Mr. BLAIR. Mr. Chairman, you said something about views. The Comptroller General feels this way also. The European branch has a position confirmed on this and the Comptroller General feels Mr. FASCELL. Do you know of any reason why our negotiations with these countries with respect to money which is due us under contractual arrangements should not be made known to everybody? Mr. BLAIR. We had been informed by the officials we have been talking to that the reason it is classified is because they are in the process of negotiations and they feel that publicity will hinder their negotiations. Mr. FASCELL. Publicity would hinder them or their position is what they have stressed to you? Mr. BLAIR. That is right. They are in the process of conducting negotiations with the foreign governments. Mr. MICHEL. Would it tend in State to make it a standard negotiation rather than favoring one over another Is that the consideration maybe? Mr. BLAIR. Again, I think the State Department ought to answer that question for you because they could speak with authority. I would like to say that I feel that they had problems in dealing with it during the Suez situation when there was a delay. There was a change of government and during the Suez situation the matter of no profits was way down the priority list. Mr. FASCELL. Something they could not get to? Mr. BLAIR. Right. You do have problems of that kind and they do come up. Mr. FASCELL. As a matter of good business, I think we all agree that when you have money due you, you should not let the claim for it lie around too long or you will not get it. Mr. BLAIR. Mr. Rosenberger calls to my attention that that has not been a case of love's labor lost because with respect to a contract in Spain the Department has acted on recommendations proposed by us and they have negotiated out of a particular contract the profit factor involved. Mr. Montgomery was down there and developed the data on that. That is at least one area where we made progress. Mr. FASCELL. It would appear to me that if that is true, it would be most anxious to let everybody know what they have accomplished. We will ask them when we get down to Madrid. Mr. ROSENBERGER. Mr. Fascell, on taxes I believe it was in Signal where the Army recovered some $60,000 due us from a Holland firm. Mr. HUNTER. Also Ordnance here. Army Ordnance has recovered roughly $300,000 in various taxes. There has been action. . Mr. BLAIR. Yes. Mr. MICHEL. Mr. Blair, the chairman has mentioned on several occasions, or at least inquired on several occasions, what General Accounting Office recommendations have been carried out in this overall field. Can you cite specifically or enumerate any General Accounting Office recommendations that have not been carried out by any of the agencies involved here over which you have jurisdiction? Mr. BLAIR. That is a very broad question, Mr. Congressman. It would take considerable time to answer that. a а Mr. MICHEL. Those recommendations are important to your operation and of profound interest to us. I am dismayed to learn that they have not yet been implemented. Mr. BLAIR. I see what you are getting at. I believe that we have brought to your attention the major areas where we feel corrective action has not been taken. However, when we get into the field of supply, on which we are now concentrating, we are not satisfied with the action that has been taken. The one site that we have now surveyed on 3 different occasions--that is, at Chateauroux where they have the central air materiel area—we have gone in there 3 times and we found the same errors every time we went back. When you get into that area, you will find matters on which effective corrective action was not taken. Mr. MICHEL. Who was at fault there? Mr. BLAIR. Let me say that the Air Force is attempting to correct the errors. We have received splendid cooperation from the Air Force. They have attempted to carry out our recommendations and have installed Project GÃO to clean up the inventories. However, we have not been satisfied with the progress that has been made, and we just completed another examination at Chateauroux. That report has not gone forward to Washington. They are submitting monthly progress reports to us on the progress that they are making in that particular area. The memorandum containing information requested from us on how we were implementing our responsibilities under the Administrative Services Act of 1949 does describe very succinctly what we are doing in the supply area. I think it would be of value to you to have that in your report. Mr. POLAND. That is tab G? Mr. Michel. I was about to suggest that that be incorporated in the record if, in your opinion, that covers what you have done under the accounting system, section 205. Mr. BLAIR. It does. Mr. MICHEL. Does it also cover section 112 (b) of the Accounting and Auditing Act of 1950 ? Mr. Blair. That is right. That is the responsibility for working out systems for them, and that begins with page 17 of the brief, tab G. Mr. MICHEL. In the report on history, organization, and operations of the European Branch, two cases are cited. The first one is cited on page 28 and the second one on page 30. Could you differentiate for us now, unless it is already in tab G, the difference between the obligation or the duty of the Comptroller General to prescribe principles and standards in accounting for property and the duty of the GAO under section 112 (g) to cooperate with executive agencies in the development of their accounting systems? What is the difference? Mr. FASCELL. While he is getting ready to answer that, we will include, without objection, in the record the document entitled "Audit and Accounting System Responsibilities Under the Federal Property and Administrative Services Act of 1949." That is under tab G in the folder. The document referred to is as follows:) AUDIT AND ACCOUNTING SYSTEM RESPONSIBILITIES UNDER THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 INTRODUCTION The Federal Property and Administrative Services Act of 1949 and its amendments require placing property under accounting control. This act includes a pattern of cooperation for the executive agencies and the Comptroller General which is consistent with the cooperative approach under the joint accounting improvement program. The Accounting and Auditing Act of 1950 also contains pertinent sections on this subject. Section 113a provides: “The head of each executive agency shall establish and maintain systems of accounting and internal control designed to provide effective control over and accountability for all funds, property, and other assets for which the agency is responsible.” [Emphasis supplied.] Pursuant to these laws, the Comptroller General, on November 6, 1952, issued accounting principles memorandum No. 1. This memorandum contains important basic principles and standards for the guidance of executive agencies in maintaining property accounting records and controls. In the area of property accountability, records, and controls, the responsibilities of the Comptroller Gen. eral and the General Accounting Office are contained in sections 205 (b) and 206 (c) of the Federal Property and Administrative Services Act of 1949. Section 205 (b) of the act provides : “The Comptroller General, after considering the needs and requirements of the executive agencies, shall prescribe principles and standards of accounting for property, cooperate with the Administrator and with the executive agencies in the development of property accounting systems, and approve such systems when deemed to be adequate and in conformity with prescribed principles and standards. From time to time the General Accounting Office shall examine such property accounting systems as are established by the executive agencies to determine the extent of compliance with prescribed principles and standards and approved systems, and the Comptroller General shall report to the Congress any failure to comply with such principles and standards or to adequately account for property.” Section 206 (c) provides : "The General Accounting Office shall audit all types of property accounts and transactions at such times and in such manner as determined by the Comptroller General. Such audit shall be conducted, as far as practicable, at the place or places where the property or records of the executive agencies are kept, and shall include, but not necessarily be limited to, an evaluation of the effectiveness of internal controls and audits and a general audit of the discharge of accountability for Government-owned or controlled property based upon generally accepted principles of auditing.” These statutory requirements are the bases upon which the Comptroller General and the Washington staff of the General Accounting Office have formulated the guiding policies and procedures for the operation of the European Branch. In the Government-owned property area, new and complex problems have been encountered in Europe by the Branch in carrying out its functions. Some of the problems are inherent in overseas military operations, and others are traceable, either directly, or indirectly, to the economic conditions within the several countries. The roles of wages, labor, and transportation in the economies of European countries vary considerably from those in the United States. Other problems have evolved from the fact that operations of executive agencies in Europe, as in most foreign lands, are under treaties or other forms of international agreements which, in many instances, require deviations from those operating procedures used by executive agencies in the United States. These differences have affected the approach of the European Branch in its attempt to utilize procedures for the performance of its delegated functions in an economical, efficient, and professional manner. 98996-58-6 |
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