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standard computers of the Worldwide Military Command and Control System of the Department of Defense (December 1970). Currently, we have 25 ADP systems under review. These include 20 tactical data systems, four logistics systems, and one administrative system. We recently issued a report on computer simulations, war gaming, and contract studies and one on the potential problems in developing the Air Force's logistics system.

We plan to review selected additional systems based on our findings as work on those currently under review is completed.

REVIEW OF NONAPPROPRIATED FUND ACTIVITIES

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 recently issued a report on military exchange activities and will shortly issue an overall report on nonappropriated fund activities of the Department of Defense.

Mr. ANDREWS. How long have you been taking a look at these nonappropriated fund activities in the Department of Defense? Mr. BAILEY. About a year or a year-and-a-half.

Mr. ANDREWS. Do you look into NCO Clubs?

Mr. BAILEY. Yes.

Mr. ANDREWS. Did you get into the picture before all of this hankypanky came up that has been exposed by the Senate?

Mrs. STAATS. Before the recent hearings, yes. There had been some publicity on it before that. I think that is the reason the House Appropriations Committee wanted us to get into it.

Mr. ANDREWS. Prior to the time this started you were not in it? Mr. STAATS. Yes, we were. Prior to the latest hearings in the Senate. Mr. ANDREWS. Did you make any contribution to the revelations that came about?

Mr. STAATS. We did not. What we are getting into here and what the committee asked us to review was how effective a job was the Defense Department doing in auditing, what kind of financial controls. do they have or were they in effect on top of the job themselves. That is what we have been trying to get at. We have done these 12 reports on the individual installations where we go into detail, what the problems are, what the deficiencies were and what needs to be done.

Mr. ANDREWS. If you find problems and deficiencies, do you call them to the attention of the Army?

Mr. BAILEY. Yes, sir; we have reports on every one of them.

Mr. ANDREWS. Do they correct themselves?

Mr. BAILEY. They tell us they are going to; yes, sir.

Mr. ANDREWS. That is the whole cliche around here: They are going to study it, it is under consideration.

Proceed.

Mr. STAATS. 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.

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Another review which is being performed at the request of the chairman, Special Subcommittee on Military Airlift, House Committee on Armed Services, is a study of the long-range plans for military airlift/sealift capability to meet worldwide requirements.

I bring these up only as illustrations. Mr. Chairman, of the work we have been doing in this general area. The same point is involved in our domestic civil work.

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 fee-for-service basis to a cost-reimbursement basis under certain conditions. The Committee on Finance estimated that payments for the services of supervisory physicians in teaching hospitals involved more than $100 million annually and that, in general, such payments were not customary 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 diffusion plants. On July 17, 1970, we issued a report to the committee in which we stated that the proposed criteria should not be adopted without further action by the Congress because it was of doubtful legality. After the issuance of our report, the Joint Committee introduced legislation which was enacted on December 19, 1970, to prohibit AEC from changing the criteria as it had proposed.

INTERNATIONAL ACTIVITIES

In the international area, congressional interest in programs and activities related to Vietnam and Southeast Asia continues to result in specific requests for audits and reviews. Of 18 reports issued in response to requests from congressional committees between July 1 and

December 31, 1970, 12 related to management and administrative problems in Vietnam or Southeast Asia. At January 1, 1971, we had seven reviews in process pertaining to matters of an international character resulting from requests of congressional committees and Members of Congress.

As an example of our congressional assistance work in the international area, I shall describe our work on one request received from the chairman, Senate Committee on Foreign Relations, involving the administration of the military assistance training program. Our review was carried out in approximately 10 countries overseas as well as at installations in the United States. We found that, in some areas, the military assistance training programs, costing about $75 million a year, were not being fully coordinated with the various other U.S. Government training programs. We also found that some training was unnecessary or not of high priority; some training was related to equipment not on hand; and there was inadequate consideration by the U.S. resident military advisers of the recipient countries' capabilities to provide training from their own resources. We recommended in our report of February 16, 1971, specific actions to improve the management of the military assistance training programs. We also suggested the possibility of enacting legislation requiring the Secretary of Defense to establish a measurement system to assist in determining the effectiveness of expenditures for the military assistance training programs.

REVIEWS OF MANAGEMENT EFFICIENCY AND PROGRAM RESULTS

The work that we undertake on our own initiative, directed to evaluating whether programs are achieving the objectives intended by the Congress and at reasonable cost, materially assists the Congress and its committees in maintaining effective legislative oversight of governmental programs and operations.

We feel this provides the same kind of help but this work we are describing here is work we initiate on our own authority.

In selecting areas for review, we give primary attention to those areas known or considered to be of direct interest to the Congress or which, in our judgment, should be reviewed by GAO as an arm of the Congress. Here we try to take note of committee reports, particularly those of the Appropriations Committee. We also take note of debate on the floor, and any other indication of congressional interest. In making these judgments, we give due consideration to the importance and effectiveness of programs and activities, size of expenditures, investment in assets, et cetera, through our program planning system.

Every 6 months we review our program looking forward to areas we ought to be concerned with and particularly in connection with our own budget plans.

The 2.273 man-years which we plan to apply to these reviews during fiscal year 1972 represent an increase of 139 man-years over the revised fiscal year 1971 program level. In total our plans provide for directing reasonable review efforts to all important Federal program areas.

DOMESTIC CIVILIAN PROGRAMS

In the years ahead, we envision continued growth in the number and size of domestic civilian programs and in the portion of total Federal budget resources applied to them. I am referring especially to programs related to poverty, health, education, housing and urbanization, and environmental quality. Accordingly, we are planning to increase, during fiscal year 1972, our total manpower applied to reviews of domestic civilian programs by 187 man-years. That is 10 more you will note than we have in our request.

While some increased audit emphasis will be applied to all civil departments and a number of the larger independent agencies, the more significant increases will be applied to the Departments of Health, Education, and Welfare, Transportation, Labor, Housing and Urban Development, and the newly created Environmental Protection Agency. These agencies account for a net increase of about $8.2 billion of the $16.4 billion increases in Federal budget outlays proposed by the President for 1972.

VIOLATIONS OF INTENT OF CONGRESS

Mr.ANDREWS. Let me ask a question. Suppose you find an agency is not carrying out the law in the spirit or intent that the Congress intended. What do you do?

Mr. STAATS. We try to make our case and give the Congress a report of it. We try also to follow up informally with the committee to see what we can do. Sometimes we find the agency is willing to agree with us and they take corrective action, and if they do that, we simply note that in our report, too. This is as far as we can go.

If it is illegal, if we can say it is contrary to the law, we can disallow the payment. But if it is simply not well managed or not accomplishing the results or if we don't think they are getting enough for what they are spending, all we can do then is to report it to the Congress. Mr. ANDREWS. Proceed.

Mr. STAATS. In planning our reviews of domestic civil programs, we are attempting to look more than previously at related programs which cross agency lines. For example, we have made one of our senior officials the point for coordination of all GAO work in the medical and health-related activities. Total Federal outlays for health in 1972 are estimated at about $22.2 billion compared to $20.7 billion in 1971. We have underway studies of (1) comprehensive health planning, (2) health facilities construction, (3) health activities related to sanitation, drug manufacturers, and consumer protection, and (4) purchases of drugs for use in Federal hospitals.

Additional domestic civil program areas to which we plan to direct increased attention during 1972 are:

Education, especially higher education and elementary educa

tion.

Public assistance and family services programs.
Urban renewal and model cities activities.

Manpower programs.

Air traffic control systems development and operation.

Federal-aid highway programs, highway safety programs, and urban mass transportation.

Air and water pollution and solid waste management.

Consumer protection programs.

In other program areas, such as those of the Departments of Agriculture, Commerce, Interior, Justice, Treasury, and most independent agencies, we anticipate that our overall level of effort will remain substantially at the same level as 1971.

DEFENSE PROGRAM

We are planning to reduce our overall effort in the defense area to 1,256 man-years in fiscal year 1972. Although this represents a relatively small reduction of about 70 man-years as applied in 1971, our 1971 requirements were considerably increased by the study directed by the Congress of the profits made by contractors and subcontractors en contracts on which there is no formally advertised competitive bidding.

We spent over $2 million on this study which we had not anticipated. We are not anticipating that the Congress will either legislate or request during fiscal year 1972 a study of this magnitude.

Of the 1.256 man-years we plan to apply to defense activities, 908 will be applied to surveys and reviews initiated within GAO and 348 to special requests received from congressional committees and individual members.

As in previous years, a significant portion of our effort will be devoted to defense procurement activities. We plan to continue indepth reviews of contract pricing by defense procurement agencies. We are starting an extensive study of the use of formal advertising methods in procuring military equipment and supplies. We plan also to perform "should cost" studies at selected contractors' plants. Also, we are currently reviewing the reasonableness of costs incurred under major prime contracts, such as those for the C-5A, F-14, F-15, and COBRA aircraft programs. In addition to pricing and costing studies under negotiated contracts, we plan to make studies of such aspects of procurement as quality assurance, Government-furnished materials, emergency procurement procedures, contract administration and termination activities, value engineering, processing of contractors' claims, operation of Government-owned-contractor-operated (GOCO) plants, and competitive and noncompetitive procurement practices. In view of the congressional concern with regard to the problem identified in the acquisition of major weapon systems, we plan to continue our reviews of major weapon systems which are in various stages of the acquisition cycle. We have as our primary objectives in these reviews the determination of the basic causes of cost growth, schedule slippage, and deterioration of the originally expected performance characteristics. We are giving particular attention to providing effective assistance to the Armed Services and Appropriations Committees by furnishing independent, timely, and complete information on the status of specific major weapon systems, as well as on overall issues involved in the management of the acquisition process, for use in carrying out their legislative and oversight responsibilities. We issued our most recent report on the acquisition of major weapon systems on March 18.

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