nated by the Chief, Forest Service, be made responsible for coordinating the use of research findings and for deciding on the extent to which the findings are to be applied throughout the Forest Service. Subsequently the Forest Service issued instructions that the duties of research coordinator be assigned to a principal staff officer of each regional forester. (See Appendix, Section I, Item 140.)

The Forest Service and the Soil Conservation Service spent about $20 million a year in operating and maintaining about 25,000 motor vehicles. One of our reports to the Secretary of Agriculture concerned improvements needed in the management of these vehicles. (See Appendix, Section I, Item 236.)

Rural Development Activities

The Farmers Home Administration (FHA) makes loans from the Agricultural Credit Insurance Fund and the Rural Housing Insurance Fund, sells the borrowers' notes to investors, and uses the proceeds to finance additional loans. Of the combined operating losses of $104 million at March 31, 1970, about $77 million represented interest paid to investors at rates. in excess of the rates charged borrowers.

Future losses could be minimized if FHA could finance new loans through borrowings from the Treasury rather than through sales of notes to investors. We therefore suggested that the Congress consider amending the legislation which requires FHA to finance the loan programs through such sales.

We suggested also that the Congress consider removing the 5-percent limitation on rates charged borrowers on loans from the Agricultural Credit Insurance Fund and providing, instead, that the rates be based on market yields on outstanding Government obligations of comparable maturities and be adjusted in accordance with the borrowers' abilities to pay. (See Appendix, Section I, Item 60.)

FHA makes loans for the development of rural recreational projects under three loan programs. Our review showed that the programs provided benefits to a limited number of rural residents because the projects served only a small percentage of the residents of rural areas; served primarily urban, rather than rural, residents; had membership restrictions which limited the use of the facilities to organization members only; and/or charged fees that were beyond the ability of many rural residents to pay.

The scope of the programs had been decreased in recent years as a result of FHA's increasing realiza

tion that the programs, as constituted, were not meeting their objectives. Because of the limited extent to which the projects had served rural residents, we recommended that the Congress consider the matters discussed in our report with a view to determining whether the recreation loan programs should be continued and, if so, what form the programs should take. (See Appendix, Section I, Item 58.)

Other Work

We reported to the Secretary that management controls over certain manual aspects of the Department's computerized payroll system needed strengthening to increase the system's efficiency and effectiveness and to minimize the possibility of improper manipulation of the information in the system. (See Appendix, Section I, Item 187.)

Audit work in process at June 30, 1972, included reviews of such activities as economic opportunity cooperative loans, water and sewer loans, peanut price support, reforestation, and utilization of timber. Work in process at that date also included reviews of the child feeding program, State meat inspection systems, and sanitation conditions at fruit and vegetable plants receiving Federal grading service.

Department of the Army
Corps of Engineers
(Civil Functions)

We completed five congressional reports on reviews of activities of the Corps of Engineers: three to the Congress and two to Members of Congress. In addition, nine reports were issued to Department or agency officials.

In one of the reports to the Congress, we stated that the Corps had leased Federal land for agricultural purposes at negotiated rates which did not provide a return to the Government consistent with the cost of the land and that the rentals generally were less than those for comparable privately leased lands in the area. The rentals under some leases were lower than the pricesupport and acreage-diversion payments made to the lessees by the Department of Agriculture. Also, contrary to legislative intent, some leased properties were being operated by individuals other than the former

owners or tenants.

In response to our recommendations, the Department of the Army stated that the Corps would analyze

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its existing policies and practices for leasing project lands for agricultural purposes and would, in future rental appraisals, consider the impact of price-support payments and other economic factors affecting rental values. (See Appendix, Section I, Item 237.)

In another report to the Congress, we stated that pollution from existing and future development in the area of the Burns Waterway Harbor, Ind., unless adequately controlled, would adversely affect the Indiana Dunes National Lakeshore Park area, which is being developed in the general vicinity of the Harbor. In response to our recommendation, the Departments of the Army and the Interior and the Environmental Protection Agency agreed to coordinate their efforts to insure that the Dunes will not be adversely affected by industrial development.

We also questioned the adequacy of the assurances obtained by the Corps from the State of Indiana that the arrangements and schedules for providing public terminal and transfer facilities would support the traffic on which the Burns Waterway Harbor project benefits were based and that such facilities would be financed on a self-liquidating basis. The Department of the Army believed, however, that the State had demonstrated the ability and the intent to provide the facilities as needed. (See Appendix, Section I, Item 89.)

The third report to the Congress concerned the dredging activities of the Corps, which uses its own dredging equipment and also contracts with private dredging firms, in maintaining navigation channels. and harbors. Industry claims that it should be allowed to perform this work. Because of various factors requiring consideration, we recommended that the Congress provide guidance to the Corps on its role in meeting future dredging requirements.

We also recommended that the Congress consider the Corps' practice of developing estimates for bid purposes on the basis of fair and reasonable contractor costs, plus 25 percent, which is inconsistent with existing legislation which requires that the estimate be based on in-house costs plus 25 percent.

In response to our recommendations to the Corps, it agreed to correct certain inconsistencies in cost accounting and cost-estimating procedures for bid purposes and to revise its regulations to prohibit the practice of permitting low bidders whose bids are in excess of the Government's estimate, plus 25 percent, to voluntarily reduce their bids after bid openings. (See Appendix, Section I, Item 91.)

In a report to the Secretary of the Army, we recommended that the Corps develop procedures for negotiating cost-sharing agreements before permits are issued allowing industries to deposit solid waste into navigable waters. (See Appendix, Section I, Item 92.)

Audit work in process included reviews of the estimating of construction costs and completion dates and the management and operation of water resources projects, including land acquisition policies and practices at Corps reservoirs, and the effectiveness of reservoir water releases in improving stream water quality.

Department of Housing and
Urban Development

We completed 15 congressional reports on reviews of activities of the Department of Housing and Urban Development (HUD): three to the Congress and 12 to committees or Members. In addition, 10 reports were issued to HUD officials. The reports dealt principally with HUD activities involving urban renewal; mortgage financing; housing assistance; and community development, including model cities.

In one of our reports to the Congress, we stated that the reuse of existing housing designs in the construction of public housing would result in more timely availability of housing to meet the needs of low-income families and in reduced costs to the Federal Government.

HUD believed that the reuse of existing designs could result in economies in time and cost but stated that there were constraints limiting the degree to which their reuse would produce savings. HUD believed, however, that it would be desirable and feasible to encourage greater reuse of superior designs by LHAS. In our opinion the use of only superior designs would limit the number of designs available for selection by LHAS and preclude the use of many attractive and suitable designs. (See Appendix, Section I, Item 63.)

Another report to the Congress concerned HUD's progress in stimulating communities to adopt and carry out local housing code enforcement programs, which they must do to be eligible for Federal housing programs. The objectives of HUD's code enforcement grant program-under which it assists communities financially in enforcing housing codes-are to prevent the spread of blight and to preserve good neighborhoods. Of the 29 communities included in our review, 28 did not have effective citywide code enforcement. Consequently, housing deterioration and decay had not been arrested.

The objectives of the program could have been enhanced if HUD had approved federally supported code enforcement projects only in areas where housing was basically sound and could have been restored by enforcing codes and if HUD had administered the program more efficiently. Although the emphasis of the program was to be on improvement of housing, about 54 percent of the funds were approved for public improvements, such as streets and sidewalks.

HUD stated that, in its opinion, the program had become a steadily more productive means of conserving the Nation's housing supply but that management improvements and administrative changes were planned to further improve the program. (See Appendix, Section I, Item 7.)

In the third report to the Congress, we reported on our audit of the financial statements of the National Flood Insurance Program for fiscal year 1970.

In response to a report to the Secretary of HUD on the administration of the Neighborhood Facilities Grant Program, HUD stated that it recognized that there were weaknesses in the program and that it had taken a number of actions to improve its administration. These actions included implementing recommendations made by a HUD task force, holding preliminary meetings with the Department of Health, Education, and Welfare to explore ways in which its social service programs could be included in the neighborhood facilities program, and initiating a review to determine the types of services being provided. (See Appendix, Section I, Item 5.)

In response to another report to the Secretary, HUD stated that it had taken or planned to take a number of actions to improve the administration of the openspace land program. For example, grantees will be required to report regularly to HUD on whether openspace land is being used in accordance with the provisions of the grant contracts, and grantees not submitting this information will be subject to site visits and appropriate HUD action. HUD stated also that a new open-space project selection system and the establishment of a number of HUD area offices would make it possible for HUD to be more familiar with local situations. (See Appendix, Section I, Item 6.)

Audit work in process included reviews of property management and disposition policies and practices; opportunities to improve effectiveness and reduce costs of homeownership and rental assistance programs; policies and practices relating to acquisition of existing structures for low-rent public housing; and HUD

activities involving land sales registration, urban renewal, model cities, community development, housing assistance, mortgage financing, special insurance operations, and Department-wide financial administration and management.

Department of the Interior

We completed 15 congressional reports on our reviews of Department of the Interior operations: six to the Congress and nine to committees or Members. Also we issued seven reports to Department officials.

Of the reports to the Congress, five related to water and power activities, seven to Indian affairs, and three to Department responsibilities for natural resources and territorial affairs.

Water and Power Activities

In one of our reports to the Congress, we stated that the Bonneville Power Administration's wheeling charges-fees charged for transmitting non-Federal power over Federal transmission systems-had been inadequate to recover the cost of providing the services. in fiscal year 1970 because (1) the wheeling rates did not reflect current operating costs, (2) the rates had not been applied consistently in establishing charges, and (3) inappropriate adjustments had been made to reduce the wheeling charges to certain customers.

Bonneville revised its wheeling rates effective January 1, 1971, as a result of our recommendations, but it generally disagreed with our recommendations for (1) establishing specific criteria for determining wheeling rates, (2) applying the rates consistently, and (3) amending its contracts at the earliest possible date to eliminate inappropriate reductions in charges to certain customers. We continue to believe that the actions recommended are necessary to recover from customers the full cost of wheeling services. (See Appendix, Section I, Item 93.)

Another report to the Congress concerned improvements needed in the financial activity of the Federal hydroelectric system in the Missouri River Basin. The Bureau of Reclamation usually publishes annual rate and repayment studies showing whether electric power rates are adequate to repay the Federal investment in Federal power systems within the required 50 years. However, since 1963, the Bureau had not published annual studies for the Federal hydroelectric system in the Missouri River Basin. Our comparison of the

actual repayment of the Federal investment with what the repayment would have been under two methods of amortization showed that the Bureau was not meeting the repayment requirements under either of these

methods.

The Department of the Interior stated that the Bureau would consider publishing annual rate and repayment studies but disagreed with our suggestion that a supplemental statement be prepared showing the status of repayments on a systematic basis of amortization. We continue to believe that a supplemental statement comparing actual with scheduled repayments is needed to assist in evaluating the adequacy of revenues in meeting repayment requirements.

We reported also that consolidated financial statements had not been prepared for projects in the system operated by the Bureau and the Corps of Engineers. The Departments of the Interior and the Army agreed that the Bureau and the Corps should have comparable and complete accounting data for the system in order to facilitate the preparation of consolidated financial statements, and the Department of the Interior agreed that consolidated financial statements should be prepared. (See Appendix, Section I, Item 174.)

In another report to the Congress, we expressed our opinion on the financial statements of the Federal Columbia River Power System for fiscal year 1971. (B-114858, Dec. 30, 1971.)

In a report to the Secretary of the Interior concerning the development of public recreational facilities at Lake Berryessa, Calif., we concluded that the Bureau of Reclamation's failure to adequately control the development of the facilities had resulted in a

situation where access to and use of the lake by the general public had been severely restricted. In response to our recommendations, the Bureau stated that it was considering various corrective actions, including taking over the management of the lake. (See Appendix, Section I, Item 57.)

Indian Affairs

One of our reports to the Congress concerned progress being made under the Indian housing program which has as its goal the elimination of substandard housing on Indian reservations in the 1970s. We reported that progress had been slow and that, unless the program was accelerated substantially, thousands of Indian families would continue to live under severe hardship conditions.

The Departments of the Interior and Housing and Urban Development attributed the slow progress, in part, to the reluctance of some tribes to obtain Federal housing assistance. Other causes included inadequate identification of Indian housing needs and inadequate design, construction, and maintenance of houses.

The two Departments expressed general agreement with our conclusions and recommendations and advised us of various actions that were being considered to improve and accelerate the program. (See Appendix, Section I, Item 53.)

The major goal of the Bureau of Indian Affairs education program was to close the education gap between Indians and other Americans by raising the academic achievement level of Indian students up to the national average by 1976. The Bureau had

nade relatively little progress toward attaining this oal. It had not adequately communicated the goal o its area offices and schools and had not developed pecific plans for identifying and overcoming obstacles 0, or for measuring progress toward, its accomplish

nent.

The Department of the Interior was in general acord with our findings and recommendations but conidered it impractical to establish periodic milestones nd make periodic evaluations of results. We believe hat these measures are essential to effective program nanagement. (See Appendix, Section I, Item 36.) In a review made in response to a congressional equest, we found that additional income could have een earned if surplus tribal trust funds under conrol of the Bureau of Indian Affairs had been invested t yields comparable to those earned on investments f other tribal trust funds and if individual Indian nonies had been invested by the Bureau's investment fficer in available securities having higher yields. We ecommended that the Bureau determine and implement the most effective and economical method of ealizing the maximum possible return on tribal trust unds. As to individual Indian monies, the Department tated that they were now being invested in securities ffering the maximum effective interest. (See Appenlix, Section I, Item 189.)

Natural Resources

The Department's Geological Survey had not evaluted adequately the reasonableness of many royalty ayments on oil production from leased Federal lands ecause of the lack of adequate criteria for deterhining the value of oil and transportation costs to the earest market. We noted several cases where the oil night have had a greater value than that used to ompute the royalties due the Government.

We recommended in a report to the Congress that he Survey establish more definitive policies and proceures for use by its regional supervisors in establishing e quantity and value of oil sold or removed from ased Federal land and in determining the transortation allowance to be deducted from the oil value. The Survey agreed with our recommendations and was aking corrective action. (See Appendix, Section I, tem 56.)

Pursuant to a congressional request, we examined to the Department of the Interior's program for asing Federal lands to be used for mining coal. At everal of the strip mines we visited, the land reclama

tion work was not fully satisfactory. The Department's regulations strengthening reclamation requirements did not apply to leases issued before January 1969 but, as a result of our recommendation, the Department's Geological Survey issued guidelines for enforcing the requirements that were contained in leases issued before that date.

Only limited mining of coal had been conducted on leased Federal lands. We recommended that the Department consider discontinuing the issuance of leases which permit lessees to defer or suspend mining operations without justification.

Equitable royalties had not been received for coal produced on Federal lands, partly because increases in royalty rates could be made only at 20-year intervals. We recommended that the Department study the desirability of seeking a change in the law that would permit adjustment of royalty rates and other lease terms on a more timely basis. The Department informed us that it was reviewing its coal-leasing program and would consider our recommendations. (See Appendix, Section I, Item 55.)

Audit work in process included reviews of the adequacy of the interest charged by the Government on its repayable investments in water resources projects, the adequacy of rates for recovering the Federal investment in power facilities, the policy limiting landowner use of federally subsidized irrigation water to 160 acres, the financial operations of the Southwestern Federal Power System, the proposed conveyance of submarginal lands to Indian tribes, the results achieved in awarding Federal grants to States and local communities for recreation, and the administration of mining claims on public lands.

Department of Transportation

We completed 13 congressional reports on our reviews of Department of Transportation operations: one to the Congress and 12 to committees or Members. In addition, six reports were issued to Department or agency officials.

Our primary audit effort at the Department was directed to programs of the Federal Highway Administration (FHWA) and the Federal Aviation Administration (FAA). Other audit work related to various activities of the U.S. Coast Guard, the Urban Mass Transportation Administration, and the National Railroad Passenger Corporation.

The report to the Congress concerned progress and