(The statement follows:) BUDGET ESTIMATES FOR FISCAL YEAR 1972 Mr. Chairman and members of the subcommittee: We appreciate the opportunity to present for your consideration our budget estimates for fiscal year 1972 and to discuss with you the operations of the General Accounting Office. The justifications we have furnished your Subcommittee provide details of our organization, our work programs and plans, and related budget requirements in terms of manpower and money. We have furnished the Subcommittee our 1970 Annual Report to the Congress which presents details on the results of our operations last year. My statement is designed to set forth the major factors considered in preparing our budget for fiscal year 1972. As you know: Our original appropriation for 1971 was.. Total appropriation for 1971 is---- $74, 020, 000 5, 971, 000 79, 991, 000 Let me give you some idea of the effect recent pay and other increases have had on our appropriation. If we calculate the cost of items included in our 1972 estimate of $87,598,000 at 1967 costs, our estimate would be about $23 million less and would total about $65 million. This represents an increase over the 5-year period of about 36 percent. Our fiscal year 1972 estimate of $87,598,000 is an increase of $7,607,000 over our 1971 appropriation. This increase is composed of : The additional cost of the January 10, 1971, pay increase to put it on a full year basis-$2,267,600. A net increase of 177 in the average number of employees (162 professional staff and 15 others)-$2,060,300, which includes the following items: Salaries Benefits Travel Other costs-- Other increases in salary costs $2,585,300, which include the following: Periodic step increases.. Promotions to fill vacancies and grade increases Others increases (net)--- $1,560, 900 156, 900 286, 000 56, 500 $823, 600 1, 561, 600 200, 100 $193, 200 211, 900 16, 900 Increases in employee benefit costs $422,000, which include the following: Contribution to employee health benefits fund. Contribution to retirement fund--- Other increases (net)--- Increases in travel and per diem costs $132,000. Net increase in other objects $139,800. In preparing our 1972 estimates, we considered the growing demands on the General Accounting Office imposed through: Recent legislative and other congressional actions, Increases in specific requests of congressional committees and individual members of Congress for GAO work, Expansion and growth of Government programs, and Congressional efforts to intensify and broaden GAO reviews of programs to better assist the Congress in its oversight responsibilities. We have found it necessary to request for fiscal year 1972 an increase of 177 average positions over our revised fiscal year 1971 estimate of 4,744, or a total of 4,921 average total staff for fiscal year 1972. The requested increase of 177 is made up of 162 professional positions and 15 support positions. The increase will be applied primarily to activities involving direct assistance to the Congress and to reviews of growing domestic civil programs. HOUSE COMMITTEE ON APPROPRIATIONS RECOMMENDATIONS I would like to make a few comments at this point with regard to our proposed increase of 177 average positions. I am sure you are aware that the Legislative Branch Appropriations Bill, 1972, as reported by the House Committee on Appropriations, and as passed by the House on June 4, provides the General Accounting Office with an appropriation of $86,618,000 based on an increase of 93 in lieu of the requested 177. The reduction of 84 was made "in the areas where work and projects are initiated by the General Accounting Office" and resulted in an allowance of $980,000 less than the $87,598,000 requested. Our Justification of Estimates provides some detail on our plans for applying staff resources to reviews of management efficiency and program results in the many departments and agencies. These plans, including the determination of resources needed, were developed on the basis of in-depth reviews and analyses of the proposed program and manpower budgets submitted by our accounting and auditing operating divisions. In addition to requiring each division and office to submit to our Program Planning Committee an extensive written justification to support their requests for manpower, we require each division director and his top managers to present their proposals to the Committee much the same as we do at our hearings before the Appropriations Committees. In comparison to the 4,921 total positions which we are requesting in our budget justification, our operating divisions and offices requested 5,364 or 443 more than we are asking for. Most of this 443 was requested by our accounting and auditing divisions concerned with making reviews of management efficiency and program results. We believe, therefore, the reduction of 84 will place us well below the minimum staff resources needed to achieve the program objectives established for fiscal year 1972. As I mentioned previously, the major requirement for the requested increase of 177 average positions stems from the need to adequately review and evaluate the rapidly expanding domestic civilian programs, especially those related to poverty, health, education, housing and urbanization, and environmental quality. To enable us to achieve this objective, we have actually provided for a reduction in the 1971 fiscal year level of resources applied in the audits and reviews of defense activities (71), international activities (10), and transportation activities (3). Details of these reductions are included in our Justification of Estimates. The House Committee report stated that "The increase in 36 man-years for assistance to Congress has been approved which will provide an availability of 760 man-years during next year." While we make a distinction in our program categories between "Assistance to the Congress" and "Reviews of Management Efficiency and Program Results," all of our audit, review, and evaluation work is directed toward assisting the Congress in maintaining legislative oversight of governmental programs and activities with the objective of achieving more effective and economical operations. In fiscal year 1970, the collections and other measurable savings attributable to work of the General Accounting Office amounted to $250 million—about three times the annual cost of GAO operations. Most of this was effected through our self-initiated reviews of management efficiency and program results. More important, however, many significant financial benefits to the Government, not fully measurable in financial terms, result from actions that are taken by the Congress, the departments, and the agencies to eliminate unnecessary expenditures or to otherwise correct deficiencies brought to light in GAO's audit reports on our self-initiated reviews. The reduction of the manpower planned for application to reviews of management efficiency and program results would adversely affect our ability to assist the Congress overall in its legislative oversight of Government operations and in its efforts to obtain needed improvements and economies. As I will mention in more detail later in my statement, a significant number of bills passed in the last session of the Congress, including the Legistative Reorganization Act, will increase the assistance requested by congressional committees; other legislation creating or expanding Government programs will require additional manpower resources to carry out our audit responsibilities. With our limited number of professional staff resources, it is becoming increasingly difficult to adequately examine into the many programs and operations of direct interest to the Congress or which should be reviewed by GAO as an arm of the Congress. Finally, I would stress our objective to increase our emphasis on, and our capability to perform, appraisals of Government program management. More specifically, we are placing more of our effort toward determining whether programs are achieving the objectives intended by the Congress in enacting legislation, as well as whether funds and resources are utilized only for authorized programs and activities, and whether agency resources are managed efficiently and economically. To accomplish these objectives effectively, we have found the need to add professional staff educated and experienced in disciplines other than accounting, such as economics, business administration, mathematics, actuarial science, engineering, and systems analysis. We are planning this year to continue our recruiting efforts in this direction. Any significant reduction to our requested increase of 177 average positions, of course, would adversely affect our plans in this regard. In view of the factors outlined, I must urge that your Subcommittee, in considering the Legislative Branch Appropriation Bill for 1972, restore the $980,000 reduction (84 average positions) made by the House in the General Accounting Office appropriation request. I would like now to discuss more specifically the anticipated impact of recent legislative and other congressional actions on GAO programs. IMPACT OF RECENT LEGISLATIVE AND OTHER CONGRESSIONAL ACTIONS ON GAO The general purpose of certain sections of the Legislative Reorganization Act of 1970 was to provide for better use of the General Accounting Office as an arm of the Congress in examining and analyzing the management of existing Federal programs and further increasing our staff assistance to legislative committees during their consideration of proposals or appropriations for new or revised Federal programs. Section 204 directs the Comptroller General to review and analyze the results of Government programs and activities carried on under existing law, including the making of cost benefit studies, when ordered by either House of Congress, or upon his own initiative, or when requested by any committee of the House or Senate, or joint committee of Congress, having jurisdiction over such programs and activities. Section 204 also directs the Comptroller General to have available in the General Accounting Office employees who are expert in analyzing and conducting cost benefit studies of Government programs. On request, these employees are to assist committees analyze cost benefit studies furnished by Federal agencies or conduct cost benefit studies of programs under their jurisdiction. Section 231 directs the Comptroller General, at the request of any committee or committee staff, to explain and discuss any report made by the General Accounting Office which would assist in consideration of proposed legislation, including requests for appropriations, or in its review of any program or operation of any Federal agency within its jurisdiction. We anticipate that these provisions of the Legislative Reorganization Act of 1970 will increase the assistance requested by congressional committees for reviews of existing Federal programs and activities and on proposed legislation. Other provisions also will result in increased assistance to the Congress, such as Section 201 which requires the Comptroller General to cooperate with the Secretary of the Treasury and the Director, Office of Management and Budget, in developing, establishing, and maintaining a standardized information and data processing system for budgeting and financial data. Also Section 451 makes subject to GAO audit those private organizations which perform services in or on the U.S. Capitol buildings or grounds. We expect that two other significant legislative actions will continue to impact directly or indirectly on GAO work. These are the establishment of the Cost Accounting Standards Board, chaired by the Comptroller General, and the establishment of the Commission on Government Procurement of which the Comptroller General is a member. Ten GAO staff members are presently assigned full time to the Procurement Commission which was directed to study the statutes, policies, and practices followed by executive agencies in procuring facilities, material, and services. A number of recent legislative acts provide for audits by the General Accounting Office. For example, Public Law 91-599, which authorizes U.S. participation in increases in the resources of certain international financial institutions, requires an audit of the administrative expenses of the Exchange Stabilization Fund by the General Accounting Office. Other legislation which increases Federal program levels or creates new programs will require expansion of GAO's auditing and review activities. Public Law 91-230, for example, expands programs of assistance for elementary and secondary education and includes GAO access to records provisions as do the Occupational Safety and Health Act of 1970, the Clean Air Amendments of 1970, the Housing and Urban Development Act of 1970, the Comprehensive Alcohol Abuse and Alcoholism Prevention, Treatment, and Rehabilitation Act of 1970, the Intergovernmental Personnel Act of 1970, and the Emergency Rail Services Act of 1970, to name just a few. A provision of the Armed Forces Appropriation Authorization (1970) directed us to make a study of profits made by contractors and subcontractors under defense and certain other Government contracts for which there was no formally advertised competitive bidding. Our report on this extensive study was released on March 17. We expect, however, that follow-up work in this general problem area will be required. As you know, we have been limited in our audit of Internal Revenue Service activities because the Treasury Department has denied GAO access to information regarding tax administration activities. Recently, however, at the request of the Joint Committee on Internal Revenue Taxation, we have, as agent for the Committee, begun a study of the handling and collection of taxpayers' delinquent accounts. The purpose of the study is to evaluate procedures and controls used, to identify problem areas, if any, and to make recommendations to the Joint Committee on Internal Revenue Taxation if we believe improvements are needed. In preparing our budget, we have considered, to the extent practicable, the impact of legislative actions, such as those identified, on GAO resource requirements. I will now comment on the seven major program categories. DIRECT ASSISTANCE TO THE CONGRESS The GAO staff resources applied to activities involving direct assistance to the Congress have more than tripled from 238 man-years in 1966 to about 724 manyears in 1971. We anticipate that these activities will increase further to 760 man-years in 1972. Nearly 20 percent of our professional staff resources is applied to this work. This direct assistance work results primarily from specific legislative action by the Congress and requests of congressional committees, and individual members of the Congress. During fiscal year 1970, we issued 321 reports, covering a wide variety of studies and inquiries requested by committees and individual members. This compares to 204 in 1969. For the first half of fiscal year 1971, we issued 163 reports. At April 30, 1971, we had on hand 167 requests on which our staffs were performing required work, 50 more than we had on hand last December. Audits and reviews requested by committees and individual members and those directed by legislation, of course, constitute the bulk of our direct assistance to the Congress. However, we also provide direct assistance to the Congress through: Testimony on the results of our audits and reviews of Federal programs and operations and on other matters. Direct assignment of GAO staff to committees. Reports on bills under consideration by congressional committees and advice in legal, legislative, accounting, and auditing matters. Advice and assistance on House and Senate financial and administrative operations, including accounting and auditing services provided and request audits of legislative branch activities, including concessionaires. Liaison activities with congressional committees and individual members provided by the attorneys in our Office of Legislative Liaison and other members of our staff. Furnishing information to committees, individual Congressmen and their staffs on a wide variety of matters. EXAMPLES OF REQUESTS FOR REVIEWS RECEIVED FROM COMMITTEES AND INDIVIDUAL MEMBERS Not only has the number of requests from committees and individual members increased, but the magnitude of the work involved in some has been substantial. I would like to give you just a few examples. Military activities We are continuing our reviews of selected automatic data processing systems as requested by the House Committee on Appropriations. These reviews are concerned with the effectiveness of the Department of Defense's management of the development and installation of these systems and the acquisition of related equipment. Since July 19.0, we have issued nine reports to the Committee-one on the management of automatic data processing systems in the Department of Defense, one on problems in the acquisition of standard computers for the Worldwide Military Command and Control System of the Department of Defense, one on the potential problems in developing the Air Force's advanced logistics system, and one on the Defense Supply Agency's standard automated materiel management logistics system. The other five reports covered various aspects of DOD's tactical data systems. Currently, we have a large number of ADP systems under review. At the request of the Chairman, House Committee on Appropriations, we reviewed the operation and management of nonappropriated fund activities at selected installations of the Department of Defense in the United States, Europe, and the Far East. With the issuance of a report on February 23, 1971, we completed a series of reports on 12 individual installations. We also issued a report on military exchange activities and an overall report on nonappropriated fund activities of the Department of Defense was issued on May 7, 1971. We recently completed a study of the proliferation of tactical air-to-ground missiles in the Department of Defense at the request of the Chairman, Senate Committee on Armed Services. That study covered the Tow and Shillelagh antitank missile system, the Condor program and the Maverick program. Another review performed at the request of the Chairman, Special Subcommittee on Military Airlift, House Committee on Armed Services, was a study of the long-range plans for miltary airlift/sealift capability to meet world-wide requirements. A report on this review was issued to the Committee in April 1971. Domestic civil activities Congressional requests for studies of domestic civil activities cover a very wide range of programs and subjects. At December 31, 1970, we had on hand 72 such requests in various stages of completion. I should like to give you just a few examples of the areas of congressional interest in civil activities. At the request of the Senate Committee on Finance and the House Ways and Means Committee, we reviewed selected medicare payments, made by Blue Shield plans in various states, to supervising and teaching physicians. Our reports were used by the committees in their consideration of proposed legislation which would change the basis for reimbursement of teaching physicians' services from a free-for-service basis to a cost-reimbursement basis under certain conditions. The Committee on Finance estimated the payments for the services of supervisory physicians in teaching hospitals involved more th $100 million annually and that, in general, such payments were not custom prior to medicare and that it was not intended that medicare would cover noncustomary charges. In another study, requested by the Joint Committee on Atomic Energy, we reviewed the policies and procedures of the Atomic Energy Commission for the management of radioactive waste. In our report dated January 29, 1971, we recommended that the Atomic Energy Commission's Division of Waste and Scrap Management formulate and implement a comprehensive radioactive waste management plan. On June 15, 1970, the Joint Committee on Atomic Energy asked us to review certain factors relating to the Atomic Energy Commission's proposal to amend its Uranium Enrichment Services Criteria to change the basis for computing the charge for such services from a cost recovery basis to one which would be more closely comparable to that of a commercial operation. The Commission also proposed to increase its price for separating the isotopes of uranium in the gaseous |