We are currently conducting a review of close air support which in some aspects is similar to our review of air-to-ground missiles. We initiated this review because of significant congressional interest concerning the possibility of duplicating defense expenditures for different weapon systems to fulfill the close air support mission. The systems in question are the AH-56-Cheyenne-the A-X, and the AV-8AHarrier. Our main objective is to provide principal committees and other concerned Members of Congress with observations on how the aircraft in question meet the close air support mission requirements. We plan to provide this information in time to assist the Congress in their deliberations on Defense requests for fiscal year 1972. We will continue our coverage of the supply management functions in the Department of Defense since we continue to find areas requiring significant improvement. Examples of areas currently under review or planned for review include equipment and material requirement determinations; repair of major items vs. procuring new items; readiness of equipment and material in the hands of military units in the United States and abroad; maintenance activities; and utilization of excess material. In the manpower management area we will be examining practices in assigning and utilizing military personnel; education and training programs; and administration of military and civilian pay and allowances. In the research and development area we will be examining such matters as contractors' independent research and development; management of research projects being performed in military facilities, universities, not-for-profit organizations, and industrial laboratories; and research and development of specific systems and equipment. In the defense facilities area we will be reviewing both the acquisition and management of the facilities. Our work in the support services area includes such matters as ADP systems, communications activities; civil defense, medical activities, industrial facilities at Government-owned plants, and military commissaries. INTERNATIONAL PROGRAMS In the international program area our workload for fiscal year 1972 will continue to be associated with the very large expenditures of the various U.S. Government agencies in Vietnam and Southeast Asia. We also plan to continue reviews of other foreign assistance and related programs. We will review trade and international commerce activities, particularly the industrial and agricultural trade expansion programs and their relationships to our balance-of-payment problems. We will be inquiring into changes in the structure of U.S. foreign assistance programs, such as trends toward regional programs and increasing reliance on multilateral international financial institutions, i.e., the World Bank and regional development banks. Most of the international programs continue to be performed by the Department of State and the Department of Defense. However, other U.S. Government departments and agencies are also engaged in administering international programs or elements of them. These include: Department of the Treasury-International Finance Func tions. Post Office Department-International Services. Department of Commerce-International Programs and Af fairs. Department of Agriculture-Foreign Agricultural Functions. Peace Corps. Export-Import Bank of the United States. Various independent agencies, such as NASA, AEC, and so forth. We plan to expand our reviews in these activities since many international programs involve interrelated programs in which several departments and agencies, or coordinating bodies, participate. This is particularly important as I see it, Mr. Chairman, because the President has indicated it is his plan to shift more of our foreign assistance through international organizations rather than through aid and on a direct assistance basis. TRANSPORTATION MANAGEMENT The Government's $6 billion expenditures for transportation of equipment, material, and personnel will continue to require audit emphasis. We plan increased attention to the impact of containerization in the shipment of material for the Department of Defense involving the inland and overseas portions of the movements, and to the adequacy of the Department's freight rate negotiations for these and other movements. We also plan to review the readiness of transportation support units in Europe. The management of selected civil transportation activities, including those of the General Services Administration in support of components of the Department of Defense, will also be reviewed. Under the Joint Financial Management Improvement Program which is the program of GAO, Treasury, and Budget, we participated in the Joint Agency Transportation Study. The report, released in September 1970, included 58 recommendations to simplify and expedite payment and audit procedures, and to reduce the cost of transportation. This will require a good deal of followup action by the General Accounting Office during this next year. CLAIMS MANAGEMENT The Federal Claims Collection Act of 1966 has increased the authority of the departments and agencies to compromise and terminate debts due the United States. We have reviewed the regulations and collection operations of a number of representative agencies under this statute and found a need for substantial improvement. We plan, therefore, to expand our reviews of both claims collection and claims settlement activities, as well as those involving the waiver of certain debts due the Government to insure that they are being appropriately administered. EXAMINATION OF AGENCIES' FINANCIAL STATEMENTS, ACCOUNTING SYSTEMS, AND ACCOUNTABLE OFFICERS' ACCOUNTS Our work in connection with the examination of agencies' financial statements, accounting systems, and accountable officers' accounts is required by various statutes and includes: Centralized audit of transportation payments. Annual audits of corporations and other governmental activities. Centralized voucher audits at military finance centers, including account settlement. Settlement of accounts of accountable officers in civil departments and agencies. Audits of civilian pay and allowances. Reviews of accounting systems in operation. The number of staff positions needed in fiscal year 1972 to carry out these financial-type audit activities will be 1,020 compared to 1,032 in 1971. We plan to shift our emphasis within this program area. For example, we are reducing the estimated staff resources needed for the centralized audit of transportation payments since we expect a decrease in the volume of transportation bills applicable to shipments to Vietnam and Southeast Asia. We are planning, on the other hand, to increase somewhat manpower resources applied to reviews of department and agency accounting systems in operation to determine whether these systems provide adequate and reliable information on program and activity costs and related results. The Transportation Act of 1940 requires the GAO to postaudit all billings for transportation under standard Government transportation forms. This activity, performed centrally in Washington by our Transportation Division, will require the application of 651 man-years in fiscal year 1971 and 630 man-years in 1972, a reduction of 21 manyears. In addition to an anticipated reduction in the volume of transportation payments for audit, we expect to achieve additional economies through increased use of computerized audit techniques. During fiscal year 1970, a total of 108,499 overcharge notices by the United States against carriers amounted to $17.7 million. During the same period we collected $16.3 million. The Government Corporation Control Act of 1945 and other specific statutes require annual audits of financial statements in accordance with principles and procedures applicable to commercial corporate transactions. During the last session, the Senate passed legislation which would provide for this type of audit at least once every 3 years. This would, we believe, be desirable in that it would give us more flexibility in the use of our professional staff for higher priority work. LEGAL SERVICES AND DECISIONS The legal work of the Office extends, with certain exceptions, to virtually the full range of the Government's receipt and expenditure activity. Many legal questions arise as a result of our audits and reviews of agency operations. Heads of departments and agencies as well as disbursing and certifying officers have a statutory right to submit for advance decision any question on the legality or propriety of proposed expenditures of Federal funds. Contracting and procurement officers may also obtain decisions on questions arising in connection with proposed awards of Government contracts. I might add here, Mr. Chairman, on bid protest cases our workload has increased very substantially as a result of the downturn in the economy and greater competition for Government contracts. There has been a very substantial increase in number, about 20 percent within this last year. Also, individuals and firms whose claims have been disallowed by actions of our Claims and Transportation Divisions and bidders for Government contracts who feel that procurement statutes and regulations have not been properly applied may apply for decision to our office. Under the law, decisions of the Comptroller General in these matters are final and conclusive upon the executive branch of the Government and payments made contrary to our decisions are subject to disallowance. Private concerns and individuals who may be adversely affected have further recourse to the courts in most cases. The legal work includes the preparation of decisions concerning the legality and propriety of the receipt and expenditure of public funds; the preparation of advisory opinions and reports on proposed and pending legislation to Members of Congress and congressional committees, and to the Office of Management and Budget; and the formulation and presentation of legislative recommendations to the Congress. As you know, the Comptroller General has responsibility for determining the legality of expenditure of appropriated funds. This decision function, involving the interpretation and application of Federal statutes and regulations, has produced a large body of decisions over the years which serve as guidelines applicable to receipt and appropriated fund expenditure transactions of the Government. Of the 226 man-years we estimate will be needed to carry out the legal activities of the Office in 1972, 188 will be in our General Counsel's office and 38 in our Transportation Division. The Transportation Division provides legal and technical assistance to the Department of Justice in the prosecution and defense of transportation suits by and against the United States as well as in cases before the Court of Claims. The contract area continues to constitute the largest individual category of our legal decision work. Recent decisions of the District of Columbia Court of Appeals in Scanwell Laboratories, Inc. v. Thomas, and of the District Court for the District of Columbia in A. G. Schoonmaker Co., Inc. v. Resor, et al., have altered certain concepts relating to the rights of those who bid for Government contracts. These decisions and the work of the Commission on Government Procurement (created by Public Law 91-129 with the Comptroller General as a statutory member) will significantly affect the Government procurement process and have already had an impact on the work of our Office. Two of our lawyers are assigned full time and two are working part time for the Procurement Commission. In addition, the Office was requested to prepare several studies for use by the Commission. Additional work of this type is anticipated during this next year. We are also asking for six additional staff positions over our 1971 level to meet the increased workload of our legal staff due to the growing complexity of our audit work and to handle an increased volume of bid protests. FINANCIAL MANAGEMENT IMPROVEMENT In recent years the Office has devoted considerable effort in assisting the Federal agencies in their efforts to improve their accounting systems to the point where they can be approved by our office, as required by the Accounting and Auditing Act of 1950. In 1966, about a third of the civil departments and agencies and only the Corps of Engineers (civil functions) had approved systems. By June 30, 1970, the number of system approvals in civil departments and agencies had increased to approximately 50 percent of those subject to approval. In addition, for the Department of Defense, we have approved 26 statements of accounting principles and standards as well as four systems designs. We plan to continue to work with all agencies in promoting improved systems and methods of producing reliable financial and program information. A major financial management project started last year is the development of auditing standards and guidelines for application under Federal grant programs. This work is being carried out under GAO leadership by a working group composed of representatives of the principal Federal agencies involved in grant programs. Assistance is being obtained from State and local governments and various professional organizations. The objective is to develop audit standards and guidelines that will be applicable to audit work performed at State and local government levels and for other recipients of Federal grants irrespective of who performs the audit work. We feel encouraged here. As you may recall, we had some difficulty in the past in getting agencies to give attention to this. CLAIMS SETTLEMENTS AND DEBT COLLECTION The Budget and Accounting Act of 1921 places final responsibility for settling most claims for and against the Government in the General Accounting Office. The passage of the Federal Claims Collection Act of 1966 increased the authority of the departments and agencies to compromise and terminate debts of the United States under certain conditions. As agencies gain more experience in exercising the authority granted under the act and their debt collection operations improve, it is expected that the GAO debt collection operations will gradually diminish. Accordingly, we plan to decrease from 141 in 1971 to 139 in 1972 the man-years applied to these claims activities. EXECUTIVE DIRECTION AND ADMINISTRATIVE SUPPORT Our program category of Executive Direction and Administrative Support includes: Control and direction of the General Accounting Office and performance of duties by the Comptroller General as specified in the Budget and Accounting Act of 1921, the Budget and Accounting Procedures Act of 1950, the Legislative Reorganization Act of 1970, and other laws. Policy review of reports prior to release. Personnel management. Computer services. |