expenditures around, there was additional room to absorb authorization? Is that going to produce any higher appropriations?

Mr. PACKARD. That is exactly what my point was earlier. I would be interested in knowing. We discussed earlier that we have been appropriating about $30 million less than what is authorized for Member accounts and the combined mail and clerk hire accounts.

POTENTIAL CHANGES IN MEMBERS' SPENDING TRENDS

And I would be interested in what Mr. Fazio was asking, and that is, we would like to know if in fact Members are spending a higher level of that authorized amount than what we have historically done.

Mr. FAZIO. It wouldn't surprise me that, given no increase in these former accounts, now that we have blended them all, that people are becoming innovative and shifting around to make sure that they can maintain their operations.

Mr. PACKARD. Which may still be a savings compared to what we were spending for the work being done. But those are some things that we would be interested in at the end of the first fiscal year of this experience.

Mr. FAZIO. I guess when our new accounting system is up and operating, we will be able to monitor on a monthly basis. We are not there yet.

Mr. FAULKNER. We are still tweaking the system, but certainly in terms of accounting for what has happened on a monthly basis, we are basically there. What we are doing now is trying to project out, say for a Member who is already paying rent for office space in their district, what salary patterns there are. We can begin projecting into the future, which is still something that we are trying-some Members purchase equipment in just one-month, not necessarily evenly throughout the year-how to factor that into the equation so that it doesn't burden or create too much projected savings or projected costs. And that is something that we are working

on.

Mr. PACKARD. Mr. Young? Other questions?

Let's proceed then on page 27.

PRIVATIZATION OF SERVICES

Mr. FAULKNER. I would like to take the privatization chart, which is Chart G in everyone's book, which speaks to what we have already talked about on the folding room and insert it in the record.

[The information follows:]

Mr. FAULKNER. What we would also like to do is, picking up on page 27, House Barber and Beauty Shops were privatized, resulting in an FTE reduction of 12. The House receives 12 percent of gross sales and 10 percent of product sales from the beauty and barber shops; and we also have a privatized shoe shine. Since October 1, 1995, the House has received the $7,397 which has been deposited in the General Fund of the U.S. Treasury; and what this does is project that out further, which is, we are saying that if this pattern continues, we should be getting about $30,000 a year for the balance of this fiscal year.

Mr. PACKARD. I think the Members would be interested in the barber shop and the beauty shop response, both from the private contractors and the Members and staff here in the buildings.

What kind of response have you gotten?

Mr. FAULKNER. We have been getting quite sizable positive response, in particular on the shoe shine front. The vendor is six months beyond his business plan at this point because the response has been overwhelming. The combination of being able to do shoe repair, being able to pick up and deliver shoes, has been a tremendous service enhancement over what has been initially just one person sitting in the Rayburn Building.

Mr. PACKARD. I would have to say that the marketing of the shoe man is a lot better, too.

Mr. FAULKNER. Entrepreneurial fervor instead of just working off the salary. The beauty and barber shops have increased business. Mr. PACKARD. I still get my haircut there most of the time; not all the time. I save money by doing it out in my district. That has always been that way, and it never was

Mr. FAZIO. It is a good place to pick up on what is going on, too. Mr. PACKARD. There never was a subsidized haircut. Not compared to my district. I have got it cheaper in my district. But nevertheless, they at first were having some problems. They did not think that they were as busy as they were before. Is that changing?

PRIVATE SECTOR ENTERPRISE

Mr. FAULKNER. It is changing. And again the key component to this is that even though the barber and beauty shops were charging, as you rightly say, nonsubsidized rates, they were still losing over $191,000 a year, even though they were charging. And so the operation has moved again from being a taxpayer-funded enterprise to a private-sector funded enterprise where we are gaining money.

Mr. PACKARD. Any response on those two items, just to close?

Mr. FAZIO. My only comment was that I did notice what seemed to be a drop-off in business in the early months. Otherwise, it was a very smooth transition; two out of three people I know out of here were the same people that were there before. And I don't know about the beauty shop as well, but it seemed that people adjusted to the transition relatively quickly.

Mr. PACKARD. Let's go on.

Mr. FAULKNER. Another milestone for the House came with the first-ever furniture auction. This furniture had been sitting for years in a nearby warehouse and the trend in business, according to the 1993 industry study by the Warehousing Education and Re

search Council, is away from warehousing in order to eliminate unnecessary spending and enhance product tracking.

With careful planning, hard work, and advertising, the auction was a very large success. We had over 7,000 people from the public attend the auction. And we earned a profit of $140,000, which was deposited in the General Fund of the United States Treasury.

ESTIMATED FY 95 HOUSE SURPLUS

Thanks to these and other efforts of leadership, Appropriations, and the Committee on House Oversight, our current projections show that the House will return to the U.S. Treasury $50 million when funds lapse in September 1997.

In regards to the overall operations of the House, the Price Waterhouse audit exposed many inefficiencies in the financial operation of the House. We have actively been involved in implementing the 226 recommendations. In March of this year we will be making a significant move into the "financial electronic age" The manual entry records of the House will be replaced by the Federal Financial System currently used by the majority of Federal agencies. This continuous improvement of our financial operations creates greater accountability. Most importantly, for the first time in history, the House will have auditable financial statements. I thank you again, Mr. Chairman, for your tremendous support in this very important endeavor.

COMMUNICATIONS IMPROVEMENTS

Price Waterhouse also noted ways in which service to Members could improve. The Committee on House Oversight and this subcommittee approved a very important electronic initiative called the Wide Area Network Flagship Data Service. This will improve communication between your Washington and district offices. This service represents a major enhancement to daily congressional office operations and is available through House Information Resources, HIR.

I want to note that Ken Miller, who is the Associate Administrator for HIR, is also at the table with us to answer any further details on this and any other data related items.

By relocating video conferencing facilities from the Ford Building into the Rayburn radio and television studio, Members are provided easier access to these services. Use of these services has dramatically increased.

The last 13 months have been very exciting for the Office of the CAO. More than two-thirds of my staff at all levels have been trained in the principles of quality management with this and other training programs available to all House staff. Several new initiatives have been developed to enhance service to Member offices.

NEW INITIATIVES ENHANCE SERVICE

One is House Smart, which is a quick reference guide designed for use by Members and staff of the House of Representatives, providing information on services available from the various CAO operations with a general description and a Q&A section outlining

the most frequently asked questions for each department. It is available through the CAO World Wide Web page.

OneCall.CAO provides service information with one telephone call for Members and staff. It acts as a liaison office for all offices under the CAO in coordination of services to the House of Representatives. As we say, "One call does it all."

The mark of success of any organization is its ability to respond to rapidly changing events while still maintaining its level of excellence. The entire CAO staff looks forward to another year of service to the House of Representatives.

With that, we look at specifics on the operational budget for fiscal 1997. The 1997 operational budget request is $44,166,000, which is a net decrease of $1,429,000 under the amount provided in fiscal 1996. If the HIR estimated fiscal 1997 reimbursements remain constant in comparison to the originally estimated fiscal 1996 HIR reimbursements, this fiscal year 1997 operating budget would be $5.5 million less than what is being requested today.

The fiscal year 1996 reimbursement estimate was based on an aggressive marketing strategy. There is a plan to reduce the reimbursement gap in fiscal year 1996. The current HIR paying customers reacting to their own budget cuts have begun to reduce their expenditures for HIR services.

There will be a decline in outside consultants after initial "ramp up" support of the Cyber Congress begins to level off. At the same time, however, due to privatization of offices, installation of the FFS accounting package in Finance, for example, there will remain a need for contractual funds.

EMPHASIS ON EMPLOYEE TRAINING

There is a greater emphasis placed on training in this budget request. I strongly believe in the continuation of employee training for employees in their fields as they continue to better themselves, which in turn will better provide service to the House.

The operational budget increases are primarily in mandatory pay raises, which represent 12 percent of the overall increase in the total CAO budget. This mandatory increase is offset by the net reduction of 13 FTEs, previously mentioned, which total $453,000.

I would like to add that there are several requests that are in the process of being prepared for the Committee on House Oversight that, if adopted, could further reduce the FTE requirements for fiscal 1997 and beyond. And I am prepared to talk about those either here or at other sessions.

Turning to page 30, the comparative table shows a combined operating and capital budget for the CAO. Chart C, the pie chart. And then also the spreadsheet on the bottom of page 30, and then we move on to more details in the operational budget, which is on page 31.

Mr. PACKARD. Any questions on the charts or the information presented thus far?

BREAKOUT OF $50 MILLION SURPLUS

Mr. FAZIO. Mr. Chairman, I haven't really had a chance to look at these, but the one thing did jump out is this $50 million reduction, or "return to the Treasury," as you put it. Could you break