ing of the programs and activities of Federal departments and agencies including contractors with negotiated contracts and grantees of Federal funds. The primary purposes of our audits are (1) to evaluate the efficiency, economy, legality, and effectiveness with which Federal agencies discharge their financial, management, and program responsibilities and (2) to provide the Congress and Federal agency officials with significant and objective information, conclusions, and recommendations which will aid them in carrying out their responsibilities. During the year we conducted 1,838 audits in the United States and in 50 other countries. This work represents about the same level of activity as in other The results of much of the auditing work performed during the year will be included in reports to be published during the next fiscal year. 948 formal audit reports on almost every This year aspect of Federal Government operations were issued: 150 reports were sent to the Congress, all of which are available to the public except those classified. for national security reasons. The Comptroller General submits reports on audit findings, conclusions, and recommendations to the Congress when required specifically by law and when they are judged to be of such significance as to warrant the attention of the Congress. 329 reports were sent to congressional committees, officers of the Congress, or individual Members in response to requests for special audits or investigations, inquiries, or other types of information. 469 reports were sent to Federal departments and agency officials. These reports contain audit findings, conclusions, and recommendations calling for agency attention and action but not deemed to be of sufficient significance to address to the Congress. However, copies of many of these reports are also sent to congressional committees interested or concerned with the subject matter. Copies of those containing recommendations to departments or agency heads are provided to the Appropriations and Government Operations Committees of the House and Senate as required by the Legislative Reorganization Act of 1970. A complete listing of audit reports issued during fiscal year 1972 will be found in Section III of the Appendix. The audit work of GAO during the year is discussed more fully in Chapters Six through Fourteen. These chapters describe many of the more significant reports issued during the year. New laws affecting GAO's auditing authority and responsibility are summarized in Exhibit 2 (p. 167). Financial Management Improvement Under the Budget and Accounting Procedures Act of 1950, GAO assists agencies in the improvement of their accounting systems and approves their systems when they are deemed adequate and in conformity with principles and standards prescribed by the Comp troller General. In fiscal year 1972, GAO approved 10 statements of accounting principles and standards and seven designs of complete accounting systems as submitted by civil and international departments and agencies. Of 149 civil and international department agencies' accounting systems subject to approval, 86 complete accounting systems designs had been approved by the end of fiscal year 1972. As of the same date, we had approved 27 statements of accounting principles and four systems designs in the Department of Defense. During the year we completed a major report on the initial phases of a study of measuring and enhancing productivity in the Federal sector. This study was a joint effort of our Office with the Office of Management and Budget and the Civil Service Commission. More detailed information on our work in the important area of financial management improvement will be found in Chapter Five. Transportation In meeting our responsibility for determining the correctness of charges claimed for freight and passenger transportation services furnished the United States, we audited $1.7 billion in transportation charges this year. This amount consisted of $1 billion paid for 4.3 million freight shipments and $700 million for 2.7 million passenger movements. A total of 84,445 claims of overcharges by the United States against carriers were settled for $14.8 million, while 20,440 claims against the United States by carriers were settled for $6.86 million. 487-093 073-2 Assistance was furnished to the Department of Justice in some 29 legal actions involving claims against the United States for approximately $1,270,000 covering 3,983 shipments. Nineteen suits, the subject of reports in this or prior years, were settled for about $95,000, or about $760,000 less than claimed. Carriers filed 85 suits covering 22,327 shipments. Fifty-five of these suits and nearly 20,000 of the shipments covered overseas movements of household goods by the Department of Defense. Although the amount sued for is not stated in the petitions, we estimate potential liabilities to the Government of approximately $10 million if the final rulings of the court are adverse to the Government. (For details see Chapter Thirteen.) Settlement of Claims One of our important functions is the settlement of claims by and against the Federal Government. During the year we settled 9,439 claims against the United States for $69.9 million. We also settled 22,211 claims by the United States resulting in the collection of $4.6 million. As of June 30, 1972, there were 12,246 claims under collection, representing accounts receivable of approximately $9.5 million. There were also 1,722 claims reported to the Department of Justice for collection by suit. More detailed information on these activities will be found in Chapter Thirteen. Savings It is important to note that many significant financial and other constructive benefits result from the work of the General Accounting Office that are not fully or readily measurable in terms of dollars. These benefits result from actions taken by the Congress or by Federal departments and agencies to improve their procedures, eliminate unnecessary expenditures, or make other changes which contribute to greater efficiency, economy, and effectiveness in the conduct of the Government's far-flung operations. Examples of accomplishments such as these are also included in Section II of the Appendix. Detailed information on financial savings attributable to the work of GAO in fiscal year 1972 are set forth in Section II of the Appendix. During this year total measurable savings amounted to nearly $292 million, including $29 million of cash collections and $263 million of other savings resulting from action required or improvements recommended by our Office. Operating Expenses Operating expenses for fiscal year 1972 amounted to $87.4 million. Nearly 90 percent of this amount-$78.3 million-was for salaries and other personnel costs. Financial statements showing our financial position, summary of operating expenses, and sources and application of funds are included in this report as Exhibits 6, 7, 8, and 9 (pp. 174 to 177). Staffing and Training During fiscal year 1972 we again experienced a small growth in total staff. As of June 30, total employment was 4,826, an increase of 75 over 1971. The professional staff, which includes about 500 persons with degrees in fields other than accounting, totaled 3,128, or nearly 65 percent of the total staff. To refreshen skills and keep abreast of new concepts and techniques, 2,735 professional, technical, and support staff members participated in our numerous internal training programs. Also, 1,775 staff members participated in training outside the Office, including conferences, advanced management training, and executive development programs. Access to Records To make a satisfactory independent audit of the programs and activities of Federal departments and agencies requires access to their books, documents, papers, and records. The Congress recognized this need in providing broad authority for such access when it enacted the Budget and Accounting Act, 1921, and it repeated this authorization in numerous laws enacted since that time. Most executive departments and agencies cooperate satisfactorily with us on this score. However, we continued to encounter restrictions on our access to records by certain agencies, notably the Department of Defense, the Department of State, the Treasury Department, and the Federal Deposit Insurance Corporation. This problem is discussed more fully in Chapter Two because of its impact on our capacity to assist the Congress and, with respect to our audit work in the international area, in Chapter Twelve. Commission on Government Procurement The Commission on Government Procurement was established by law in 1969 to make a comprehensive study of Federal procurement statutes, policies, and practices. The law establishing this Commission named the Comptroller General as one of its 12 members. Because of the Comptroller General's membership and GAO's considerable experience over the years with Federal procurement law and audits of Government agency procurement operations, we provided a considerable amount of assistance to the Commission during its study. The Commission's report is to be submitted to the Congress in December 1972. Chapter Five contains further information on the kind of assistance provided to the Commission. Cost Accounting Standards The Cost Accounting Standards Board was created as an agent of the Congress in August 1970 by an amendment to the Defense Production Act of 1950 (Public Law 91-379). The Board is charged with developing and promulgating cost accounting standards for application in the negotiation and administration of defense contracts. The Comptroller General of the United States is Chairman and he appoints four other members. Although the Board is not a part of GAO, this important activity requires a considerable amount of the time and attention of the Comptroller General and the Deputy Comptroller General. Detailed information on these activities is contained in the annual reports of the Cost Accounting Standards Board, the first of which was submitted to the Congress on August 15, 1972. Audit Standards During the year work was completed in preparing a statement of standards for auditing governmental organizations, programs, activities, and functions. In recognition of the need to promote a substantial improvement and strengthening of the quality of auditing of all levels of governmental activity, this project was begun in 1970 under GAO leadership. Work on the project was performed by an interagency group composed of individuals from the major Federal departments and agencies involved in grant-inaid programs. Assistance was also obtained from State and local governments and other professional associations. The statement of auditing standards was officially published in booklet form on August 1, 1972. We consider it to be a very important landmark in the continuing evolution of auditing of government operations. Additional work to be done in the future includes performing demonstration, audits, developing effective audit coordinating machinery, and devising effective training programs. This project is also discussed in Chapter Five. CHAPTER TWO ASSISTANCE TO THE CONGRESS Importance of Assistance Provided The effectiveness of the General Accounting Office is best judged by its ability to directly serve the many needs of the Congress. Our Office was established as an instrument of Congress, and, as such, it must serve that purpose first. The late Senator Allen J. Ellender, former Chairman of the Senate Committee on Appropriations, said last year: Throughout its long history, the GAO has supplied many facts on Government programs that would otherwise not have reached the Congress. No other source, as far as I know, provides this type of analytic, objective information to the Senate and House of Representatives. The GAO's task of auditing and reporting on activities, programs, and the use of public moneys by the executive agencies is, in reality, an indispensable informational aid to Congress and, consequently, of great significance to the success of our representative Government. The year 1972 was again marked by a continuing increase in our efforts to serve the Congress. About 26 percent of our professional and supporting staff resources were applied to providing direct assistanceup from 20 percent the previous year. We made studies, supplied information, drafted legislation, and worked on assignments with congressional committees. We believe this greater demand on our resources is, in part, a reflection of an increasing congressional awareness of our capabilities and resources. It also reflects the growth in cost and complexity of Government programs and recognizes the need for independently obtained, objective information on them. We anticipate that even more staff resources will be re quired for direct assistance in the coming years to respond to continuing congressional interest in such important areas as rising welfare and medical costs; the environment; consumer protection; health, education, manpower and housing programs; and defense procurement and logistics activities. These increased demands represent both an opportunity and a challenge. We have an opportunity to play an even more meaningful role in Congress' legislative and oversight responsibilities. At the same time we must continue to devote sufficient resources to our selfinitiated work to provide the Congress with useful information and assessments on the conduct of Federal programs and activities and on whether they are efficiently and effectively managed. We believe that fiscal year 1972 was a highly productive year in improving our relationship with and our services to the Congress. We realize, however, that more needs to be done to insure that sufficient information is available to adequately evaluate existing and new complex issues facing Government today and in the future. This chapter discusses the many ways we directly assist the Congress. The information is furnished in accordance with past practice and pursuant to the direction of section 205 (b) of the Legislative Reorganization Act of 1970. Audits Required by Laws Enacted During the Year The Congress enacted a number of laws in fiscal year 1972 which required our Office to undertake specific audits and investigations. The Emergency Loan Guarantee Act created an Emergency Loan Guarantee Board for establishing Government guarantees of loans to major business enterprises threatened with bankruptcy. Our Office is required to make a detailed audit of the transactions of any borrower who makes an application for a loan guarantee. The only firm whose loans were so guaranteed during the year was the Lockheed Aircraft Corporation. Lockheed cooperated in our review of their activities but we met with resistance from the Board itself in obtaining records we believe were necessary to carry out our responsibilities under the act. This and other access-to-records problems are discussed further on page 10. The Military Procurement Authorization Act for 1972 provided a procurement contingency fund of |