Department of State and Related Activities

During the year, two reports were submitted to the Congress on improvements needed in the administration of departmental responsibilities. Four reports were submitted to agency officials and generally related to programming and internal management procedures. In addition, two reports were issued on Peace Corps activities in response to requests from individual Members of the Congress.

GAO reported to the Congress on the need for improved review and coordination of the foreign affairs aspects of Federal research. The Department of State has the responsibility to insure that federally sponsored research does not adversely affect U.S. relations with other countries. However, the Department does not review all proposals for foreign research. GAO made suggestions for departmental issuance of review guidelines to other agencies and for improvement of the Department's review procedures. The Department of State generally agreed and stated that it was taking certain actions, including clarifying procedures to other agencies and the Foreign Service posts, to improve its review function. In February 1971, the Under Secretaries Committee within the National Security Council system was directed to assume responsibility for insuring interagency coordination of foreign affairs research and for an annual plan for such research to be submitted to the President for approval. (See Appendix, Section I, Item 148.)

The Department of State provides consular services to both U.S. and foreign nationals. GAO reported to the Congress that although established Government policy provides that services provided by any Federal agency to the public should be self-sustaining to the fullest extent possible, the costs to the Department for providing immigrant visas exceeded revenues by an estimated $9 million in fiscal year 1970. In addition, the report stated that definitive policy and criteria had not been promulgated for the establishment of consular fees nor was there an accounting system adequate for providing data necessary for the effective financial management of the various consular activities.

In response to GAO's proposals the Department agreed to study the need for a change in the fees and to develop definitive policy and criteria for the establishment of consular fees. However, the Department felt that cost-finding techniques were sufficient to periodically determine the costs of providing consular

services and that the systematic accumulation of such information through an accounting system was unnecessary. GAO firmly believes that without an acceptable accounting system the Department of State is not in a position to obtain reliable cost information necessary for the effective management of the consular services program. (See Appendix, Section I, Item 103.)

Another report was issued to the Department of State suggesting improvements in the establishment and administration of allowances and differentials paid to U.S. civilian employees stationed overseas. (See Appendix, Section I, Item 190.)

As a result of a GAO survey of the activities of the Department of State's Regional Finance and Data Processing Center in Paris, France, a report was issued to the Department which made several suggestions for improving its practices in the processing of payrolls, the utilization of disbursing officers, and the accounting for overseas allotments. The report also included suggestions for improving internal activities of the Paris

Center. The Department agreed with the GAO objectives mentioned in the letter, but differed as to the means, timing, and assignment of responsibilities to assure moving toward those objectives. (See Appendix, Section I, Item 158.)

During the year GAO continued its review of vouchers and supporting documentation for the settlement of accounts of accountable officers of the Department of State, as well as following through on formal and informal exceptions taken in prior years in connection with reviews of fiscal transactions at the Department of State, USIA, and the Peace Corps.

Treasury Department

Chapter 4 of Public Law 91-599, approved on December 30, 1970, provides that the General Accounting Office shall audit the administrative expenses of the Exchange Stabilization Fund administered by the Secretary of the Treasury and previously excluded from GAO audit authority. The Treasury previously had considered its international affairs costs also to be a part of the Exchange Stabilization Fund. In fiscal year 1971 GAO began a survey of the organization and management of the international affairs functions of the Treasury Department. The current GAO survey of all Treasury international functions will provide a foundation and the necessary background information for the audits required under Public Law 91–599, beginning with fiscal year 1972.

Export-Import Bank

Pursuant to the provisions of the Government Corporation Control Act, an audit of the Export-Import Bank of the United States for fiscal year 1970 was made and a report furnished to the Congress. A short-form report was also issued to Eximbank on GAO's examination of its financial statements for inclusion in the Bank's annual report.

The financial statements, except for Eximbank's treatment of sales of certificates of beneficial interest, presented fairly the financial position of Eximbank at June 30, 1970, and the results of its operations for

the year then ended. The certificates of beneficial interest sold subject to contingent repurchase should, in GAO's opinion, be considered as borrowing or financing transactions rather than sales of assets. Eximbank disagreed with GAO's views but is seeking new methods of handling its certificates of beneficial interest.

In its report to Congress GAO recommended that Eximbank should (1) increase borrowing from the Treasury so that the substantially increased costs of borrowing in the private market can be avoided and (2) document and describe in its annual reports to the Congress any activities performed in the national interest that would not be performed in the ordinary course of its business. GAO also recommended that the Secretary of the Treasury and the President of Eximbank should renegotiate the agreement concerning reduced interest rates charged on certain Treasury borrowing. Only portions of these recommendations have been accepted by Eximbank. (See Appendix, Section I, Item 157.)

Problems in Obtaining Access to Information and Documents

GAO has experienced increasing difficulties during the year in obtaining access to information and documents needed to adequately perform its reviews of international programs and activities.

The Departments of Defense and State have increasingly employed delaying tactics in preventing the necessary access to records which would enable GAO to perform its reviews of their programs. The Department of State has continued to refuse GAO access to any records of U.S. occupational costs in Berlin. In April 1971, GAO notified the chairmen of the congressional committees primarily concerned of the continuing refusal. GAO representatives testified before the Subcommittee on Foreign Operations, Senate Appropriations Committee, in June 1971, on the general problems of obstruction and delays. In July 1971, GAO also appeared before the Subcommittee on Separation of Powers, Senate Committee on the Judiciary. The access to records problem is further discussed in Chapter Two on page 13.

CHAPTER SEVEN

TRANSPORTATION

The General Accounting Office is responsible for determining the correctness of charges paid for freight and passenger services furnished for the account of the United States, for the recovery of overcharges, and for the settlement of transportation claims both by and against the Government.

As a further part of its basic audit responsibility, GAO reviews, evaluates, and reports on the transportation and traffic management activities of Government agencies and assists the agencies in their traffic management and transportation activities.

The Transportation Division of the General Accounting Office is responsible for carrying out these functions. Its staff of over 700 professional, technical, and clerical personnel is headed by Thomas E. Sullivan, Director, and Fred J. Shafer, Deputy Director. An organizational chart of the Transportation Division follows on page 114.

In settling transportation claims, GAO furnishes technical support and other assistance to the Department of Justice in the prosecution or defense of transportation suits to which the United States is a party. The scope of GAO's responsibilities for auditing and reviewing transportation in the Federal Government is indicated by the magnitude of the Government expenditures for transportation services. Direct procurement of commercial transportation amounts to about $4 billion annually. Approximately $2 billion of this amount

is for services procured on standard forms and is audited centrally by GAO on the basis of paid bills submitted by Government agencies. Other expenditures for direct procurement of commercial transportation consist primarily of contract services, including the transportation of mail; payments by the Military Sea Transportation Service for commercial ocean services; and payments by Government corporations that are audited on site.

The Government also spends several billion dollars annually for operation of military transportation fleets, for movement of civilian employees' household goods on a commuted basis, for reimbursement of transportation charges incurred by cost-type contractors, and for other indirect transportation services. These expenditures are covered in GAO reviews of selected activities and programs of the various agencies.

Audit of Transportation Payments and Settlement of Claims

Transportation Payments

The Transportation Act of 1940 requires the administrative agencies to pay the bills of carriers subject to the Interstate Commerce Act and the Federal Aviation Act upon presentation prior to audit by the General Accounting Office. Although payments to carriers not subject to these acts may be audited prior to payment, for administrative efficiency all transportation bills for services procured on standard Government forms are normally paid before audit.

Because certifying and disbursing officers are exempted by law from liability for any overcharges by carriers arising from the application of improper rates or charges on services procured by standard Government transportation forms, paid transportation bills are submitted to GAO for central postaudit, determination of overcharges, and recovery of overcharges directly. from the carriers. The principal transportation payments that are not sent to GAO for postaudit are those made by Government corporations and those procured under contract, such as U.S. Postal Service mail contracts and Military Sealift Command shipping contracts. GAO audit of transportation charges is normally completed in 6 to 7 months after payment.

GAO audited 5.3 million bills of lading for freight shipments, for which the Government had paid about $1.2 billion, and 2.9 million transportation requests for