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I
.I
COMPTROLLER
GENERAL
OF
WASHINGTON.
THE
D.C.
UNITED
STATES
20548
B-106190
Dear Mr.
Chairman:
This report contains
audit findings rYmY,,
developed
during our
--~~*Q~W**YdlUSM18,,mA-dk
,,1/
./
audits and other examinations
i~~ndep~tm~.~d~a~n.~~e-~
of
t he..JGoxeL~nt
. These findings pertain for the most part to matters on
which we believe administrative
action, and in some cases legislative
action, is rewired
to ac~~,“~~e~~.~~,“.~~,~~~~~,~y”~q~,,~e/f~ciency in Government
options.
Some fziigs
and recommendations
on which the departments and agencies have reported that corrective
action was being taken
also have been included because we have not yet observed the effectivene ss of the reported action.
This compilation
is made in response to the request that information of this type be made available to your Committee
before the commencement of appropriation
hearings at each session of the Congress.
Concurrently
with the release of this report, we are sending to the departments
and agencies copies of the sections specifically
applicable to
them so that they may be in a position to answer any inquiries
which may
be made on these matters during the appropriation
hearings.
A report on significant
audit findings
Defense and the three military
departments
involving the Department
of
being
submitted
separateI;“-.
is
Sincerely
yours,
Comptroller
General
of the United States
The Honorable George H. Mahon
Chairman,
Committee
on Appropriations
House of Repre sentative s
ti30”
Contents
DEPARTMENTOF AGRICULTURE
Agricultural
Stabilization
and Conservation
Animal and Plant Health Inspection
Service
Export Marketing Service
Farmers Home Administration
Food and Nutrition
Service
Forest Service
Service
1
3
-.
11
13
15
17
DEPARTMENTOF COMMERCE
Economic Development Administration
Maritime Administration
19
21
25
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
Food and Drug Administration
Health Services and Mental Health Administration
National Institutes
of Health
Office of Education
Social and Rehabilitation
Service
Social Security Administration
27
29
33
37
39
43
51
DEPARTMENTOF HOUSINGAND URBAN DEVELOPMENT
Community Development
Housing Production and Mortgage Credit
55
57
59
DEPARTMENTOF THE INTERIOR
Bonneville
Power Administration
and Bureau of Reclamation
Bureau of Reclamation
Bureau of Land Management, Bureau of Indian Affairs,
and
Geological Survey
Bureau of Land Management and Geological
Survey
Bureau of Mines
Bureau of Indian Affairs
Geological Survey
Office of Territorial
Affairs
65
67
69
DEPARTMENTOF JUSTICE
Bureau of Narcotics and Dangerous Drugs
Immigration
and Naturalization
'Service
Law Enforcement Assistance Administration
87
89
91
93
DEPARTMENTOF LABOR
Employment Standards Administration
Manpower Administration
95
97
99
DEPARTMENTOF STATE
103
DEPARTMENTOF STATE, AGENCYFOR INTERNATIONAL DEVELOPMENT
107
73
75
77
79
83
85
Page
DEPARTMENTOF TRANSPORTATION
Federal Aviation
Administration
Federal Highway Administration
111
113
115
DISTRICT OF COLUMBIA GOVERNMENT
Department of Economic Development
Department of Human Resources
Executive Office of the Commissioner
119
121
123
125
ENVIRONMENTALPROTECTIONAGENCY
Office of Air Programs
Office of Water Programs
Office of Solid Waste Management Programs
127
129
133
137
GENERALSERVICES ADMINISTRATION
Public Buildings
Service
139
141
NATIONAL AERONAUTICSAND SPACE ADMINISTRATION
143
OFFICE OF ECONOMICOPPORTUNITY
Community Action Program
Comprehensive Health Services
General
147
149
151
153
Program
OFFICE OF MANAGEMENT
AND BUDGET
155
TENNESSEEVALLEY AUTHORITY
161
U.S. CIVIL SERVICE COMMISSION
165
U.S. POSTAL SERVICE
171
VETERANS ADMINISTRATION
175
VARIOUS DEPARTMENTSAND AGENCIES
Department of Commerce, Department of Housing and Urban
Development, and Small Business Administration
Department of Defense and Department of State
Department of Defense, Department of State, and Agency
for International
Development
Department of Housing and Urban Development and Department of Transportation
Department of Labor and Department of Health, Education,
and Welfare
Department of Labor; Department of Health, Education,
and Welfare; and Department of Housing and Urban Development
Department of Labor; Department of Health, Education, and
Welfare; and Office of Economic Opportunity
Department of the Treasury and Department of State
Office of Management and Budget and Department of Housing
and Urban Development
Smithsonian Institution
and Office of Management and Budget
179
181
183
185
189
191
195
197
199
203
205
DETARTMENTOF AGRICULTURE
Contents
Page
AGRICULTURALSTABILIZATION AND CONSERVATIONSERVICE
Greater conservation
benefits coulti be attained under the
agricultural
soil and water conservation program
Payment limitation
under 1971 cotton, wheat, and feed grain
programs had limited
effect
3
ANIMAL AND PLANT HEALTH INSPECTION SERVICE
Enforcement of Federal sanitation
standards at poultry
continues to be weak
Better inspection
and improved methods of administration
for foreign meat imports
7
EXPORTMARKETING SERVICE
Economic benefits possible through
lieu of offshore procurements
FOREST SERVICE
Need to ensure that
program findings
plants
7
needed
8
use of butter
in
11
of donating
best possible
4
11
increased
FARMERSHOMEADMINISTRATION
Need for more adequate disclosure
of costs related
insured loan funds
Recreation projects provided benefits to a limited
rural residents
FOOD AND NUTRITION SERVICE
Two ways to reduce costs
3
to two
number of
commodities
use is made of research
13
13
14
15
15
17
17
DEPARTMENTOF AGRICULTURE
AGRICULTURALSTABILIZATION
AND CONSERVATIONSERVICE
Greater conservation
benefits could
be attained under the agricultural
soil and water conservation program
Under the Rural Environmental
Assistance Program, the Agricultural
Stabilization
and Conservation Service (ASCS) shares with farmers the co:t
of carrying out practices
to build soil and conserve soil and water.
The
Federal cost share is usually 50 percent.
In February 1972, the General Accounting Office (GAO) reported to the
Congress that the program could be more effective
if (1) the authorizing,
legislation
were amended to eliminate
a provision
for increases in small
payments to farmers, .(2) certain ineffective
conservation
practices were
eliminated
from the program, and (3) the administration
of the program WY.
improved.
A 1938 amendment to the Soil Conservation anti Domestic Ailotment Act
states that, if a farmer receives Federal cost shares totaling
less thx
$200 a year for carrying out conservation
practices
on a farm, he will bt
paid an additional
nominal amount. The amendment was intended to provide
greater financial
assistance to operators of small farms.
However, the
nominal payments-- which may range from 40 cents to $14 each--do not further
the objectives
of the program and are an administrative
burden. GAO recommended that the Congress amend the act to eliminate
the nominal payments,
which totaled about $7 million
annually,
and thereby enable thousands of additional
farmers to participate
in the program.
This view was concurred in
by ASCS officials
at the county, State, and national
levels.
Although significant
soil and water conservation
benefits had been
realized under the program, GAO reported that (1) substantial
amounts of
funds had been spent on practices
that did not produce any appreciable conservation benefits,
that stimulated
agricultural
production rather than providing lasting
conservation
benefits,
or that were otherwise questionable
and (2) the method of allocating
funds to the States did not include realistic
adjustments,
as provided for in the authorizing
legislation,
to meet
each State's proportionate
conservation
needs. GAO recommended that ASCS
take a number of actions to make the program more effective.
In commenting on these matters in September 1971, the Department stated
that it agreed in general with the recommendations.
The Department said
that a number of practices
which GAO had questioned were eliminated
from the
national program and advised that additional
actions were proposed to improve
the program.
GAO believed that certain additional
questioned practices
should be eliminated.
In May 1972 the Department
the following
matters.
indicated
3
differences
of opinion
with
GAO on
DEPARTMENTOF AGRICULTURE
AGRICULTURALSTABILIZATION
AND CONSERVATIONSERVICE (continued)
Temporary practices .--The Department said that, although GAO had suggested that all temporary cost sharing practices
be eliminated
from
the national program on the basis that they were production oriented,
some of the temporary practices were still
needed. The Department also
said that, in accordance with recent legislative
history,
each county
agricultural
committee has the option of retaining
any practice which
it had in its county program for 1970 even though such practice may
have been eliminated
from the national program.
GAO was aware of
this option but believes that counties which had not used the temporary practices
previously
could elect to include them in future years
only if the practices
remain in the national program,
Fencing grassland .--The Department said that cost sharing for fencing
would be continued as a part of other practices
to protect grass cover
in connection with grazing operations.
GAO believes that the fencing
practice
is production oriented in that its primary purpose often is
to assist in the management of livestock
by restricting
grazing to
fenced areas.
Use of high-cost Coastal Bermuda grass.--GAO had pointed out that
Coastal Bermuda grass was drought resistant
and excellent
for feeding
cattle,
thus stimulating
production of meat and dairy products.
Therefore, GAO expressed the opinion that the cost-share assistance should
be reduced.
The Department said that it believed that, in the long run,
conservation
benefits from this costly grass would be more economical
than from a cheaper grass.
GAO believes that cost sharing for grass
cover should be limited
to the minimum necessary for satisfactory
conservation.
Conservation practices
on land already in an approved conservation
use.-The Department said that placing acreage in a conserving use under other
agricultural
programs, such as an acreage-diversion
program, did not
assure that all needed conservation
practices
would be carried out and
that many times a conservation
problem could be corrected when the land
was not being used for crop production.
GAO believes that, if cost
sharing is allowed on diverted acreage, the amount should be reduced because the producer is already obligated under the acreage-diversion
program to conserve the land.
(~-114833, Feb. 16, 1972.)
Payment limitation
under 1971
cotton, wheat, and feed grain programs
had limited
effect
Title
I of the Agricultural
Act of 1970 limited
the annual amount of
direct Federal payments a person could receive under the 1971-73 upland
cotton, wheat, and feed grain programs to $55,000.
In April 1972 report to
the Congress, GAO said that the limitation
had caused no significant
reduction in the total amount of 1971 program expenditures because the authorizing legislation
and subsequent regulations
issued by ASCS did not prohibit
4
DETAR'XEKI OF AGRICULTURE
AGRICULTURALSTABILIZATION
AND CONSERVATIONSERVICE (continued)
producers from changing their farming operations and organizations
to reduce
Also
the
regulations
allowed
each
the financial
impact of the limitation.
individual
in a partnership
to be considered as a single person for payment
as
purposes, whereas prior payments sometimes were made to the partnership
an entity,
GAO's review of the operations of 98 producers in six States showed
that, largely because of the organizational
or operational
changes made by
the producers, only about $356,000 of a potential
$17.1 million
in savings
were realized
for these producers.
A Department study showed nationwide
savings of only $2.2 million.
The actions most frequently
taken by producers to reduce the financial
impact of the limitation
included (1) leasing acreage allotments
to spread
(2)
having
payments
made
to
individual
partners
the payments to more persons,
in an existing
partnership
instead of to the partnership
as an entity,
and
(3) forming new partnerships
to qualify more persons for payments.
Some of
the actions permitted persons to hold interests
concurrently
in several
entities
receiving
program payments,
By these means the persons, in effect,
received more than $55,000.
Other changes allowed some producers to receive
additional
payments indirectly.
To improve administration
of the limitation
and to ensure that payments
subject to the limitation
would be valid,
accurate, and in compliance with
applicable
laws and regulations,
GAO recommended that ASCS (1) establish
procedures to obtain information
on all farming interests
of each farm program participant
so that the payment limitation
regulations
could be applied
fully
and fairly,
(2) provide for periodic
reviews at a higher organizational
level of the propriety
and consistency of the determinations
made by county
and expand instructions
for controlling
and State committees, and (3) clarify
payments to persons with more than one producer-identification
number.
In March 1972 the Department described actions that had been taken or
were being initiated
to improve the administration
of the payment limitation,
and in June 1972 the Department reported that action had been completed on
each of the recommendations.
These actions --if effectively
implemented-should significantly
strengthen the administration
of the payment limitation.
(B-142011, Apr. 12, 1972.)
DEPARTMENTOF AGRICULTURE
ANIMAL AND PLANT HEALTH INSPECTION SERVICE
Enforcement of Federal sanitation
standards
at poultry plants continues to be weak
In November 1971 GAO reported to the Congress that the Department of
Agriculture's
Consumer and Marketing Service (C&MS), which was responsible
for meat and poultry inspection
activities
until April 1972, had taken some
prior GAO reviews, to improve the enforcement of sanitaaction, following
tion standards at federally
inspected poultry plants but that the action had
not been adequate.
In the followup review, GAO accompanied C&MS supervisory
inspectors
to 68 federally
inspected plants,
including
17 which were covered
in a prior review and 51 selected at random.
GAO reported that one or more deficiencies
in sanitary conditions
existed in each of the plants reviewed and that the type and extent of the
deficiencies,
classified
as either minor variations
or unacceptable conditions, varied from plant to plant.
Because many of the sanitation
deficiencies appeared to have existed for prolonged periods, they indicated a lack
of strong day-to-day enforcement by C&M§ plant inspectors,
a lack of effective supervisory review, and weaknesses in C&MS's enforcement of sanitation
standards, some of which might be widespread.
employees that conGAO recommended that, to convince C&MS inspection
sumer protection
was the main objective
of sanitation
standards enforcement
and that strict
enforcement of those standards was essential,
the Secretary
of Agriculture
reevaluate an earlier
recommendation, made by departmental
consultants
but not adopted, that a separate agency be established
within
the Department for consumer protection
programs.
Because GAO realized that
implementation
of the recommendation would take some time and that many of
the employees then responsible
for enforcing
sanitation
standards would
still
be responsible
if a separate agency were established,
GAO recommended
also that the Secretary explore other avenues to improve and emphasize the
enforcement of sanitation
standards.
GAO suggested (1) an intensification
of efforts
then underway to strengthen supervision
and to improve the training of inspectors,
and (2) increased disciplinary
actions when inspectors
do
not meet their responsibilities.
Effective
April 2, 1972, C&MS was renamed the Agricultural
Marketing
Service, and its meat and poultry
inspection
activities
were transferred
to
a new departmental agency, the Animal and Plant Health Inspection
Service.
In response to the second recommendation, the Department stated that
C&MS was attempting
to respond in specific
ways to deficiencies
in its
supervisory
structure,
which had been totally
inadequate, and that it was
taking or planning other action to improve the enforcement of sanitation
standards.
GAO believes that the actions taken or planned to strengthen the supervisory structure
and to correct other organizational
weaknesses should help
to improve the inspection
program.
However, unless these actions result in
better enforcement of sanitation
standards by individual
inspectors,
they
7
DEPARTMENTOF AGRICULTURE
ANIMAL AND PLANT HEALTH IN,SPECTIONSERVICE (continued)
will not correct the basic weakness in the inspection program--inadequate
enforcement of sanitation
standards at the plants.
(~-163450, NOV. 16,
1971.)
Better inspection
and improved methods of
administration
needed for foreign meat imports
In February 1972, GAO reported to the Congress that C&MS, whose meat
and poultry inspection
activities
were transferred
to the Animal and Plant
Health Inspection
Service in April 1972, needed to provide greater assurance
that foreign meat and meat products were imported only from plants which
complied with U.S. wholesomeness requirements for products processed under
sanitary conditions
and received thorough and uniform inspections
at U.S.
ports before being accepted for entry.
To determine the adequacy of the import meat inspection program, GAO
accompanied C&MS foreign programs officers
on their reviews of 80 plants in
four major meat exporting countries--Australia,
Argentina,
Canada, and
Denmark. GAO also reviewed import inspection
activities
at eight ports of
entry and one border inspection
station.
Among other things, GAO found that C&MS had not reviewed foreign meat
plants as often as it considered desirable and that formal training
of imC&MS said that foreign plant reviews
port inspectors needed to be improved.
were infrequent
because it did not have enough foreign programs officers
and, since those officers
were stationed in the United States, they spent
only about 30 weeks a year in foreign countries.
In May 1971 C&MS began
stationing
some of its officers
in foreign countries.
C&MS officials
at two
regional offices
said that formal meat inspection
training
had not been
emphasized in the past.
GAO recommended that additional
officers
be stationed in those foreign
countries where necessary to meet plant-review
frequency objectives.
GAO
recommended also that C&MS establish
a program to identify
the training
needs of import meat inspectors and develop a training
program to meet such
needs.
The Department responded that it had added more foreign programs officers to improve surveillance
over foreign systems and plants and that
others would be added as needed and as permitted by budgetary and other
constraints.
The Department stated also that a training
program had been
established
and that it should resolve the variances in inspections
of imported products and upgrade the entire import inspection
force.
In May 1972, the Department stated that eight foreign programs officers
were stationed in foreign countries and that program capacity for review and
followup inspections
in problem plants had been greatly increased.
The Department stated also that a week-long import inspection
training
course,
begun in October 1971, would be actively
maintained and that additional
training
sessions would be held as needed.
DEPARTMENTOF AGRICULTURE
ANIMAL AND PLANT HEALTH INSPECTION SERVICE (continued)
GAO believes that the actions taken on these matters should help assure
that import meat products will be more thoroughly and uniformly
inspected
for wholesomeness prior to being permitted entry for domestic consumption.
(~-163450, Feb. 18, 1972.)
DEPARTMENTOF AGRICULTURE
EXPORTMARKETING SERVICE
Economic benefits possible through
increased use of butter
in lieu of offshore procurements
GAO inquired into the cost and balance-of-payments
benefits that could
be realized by increasing
the use of U.S. agricultural
commodities in lieu
of offshore procurements to satisfy military
requirements in Europe.
GAO learned that the European Exchange System (EES), which is part of
the Army and the Air Force Exchange Service and a non-appropriated-fund
activity
in Europe, used annually approximately
820,000 pounds of coconut
oil, rather than butter,
to make ice cream. The purchase of coconut oil, a
net import item, adversely affects our Nation's balance-of-payments
position
by about $200,000 annually.
An inventory of surplus butter,
the desired commodity in the manufacture
of ice cream, in excess of 100 million
pounds was available
from the Department of Agriculture,
but EES told GAO that coconut oil was substituted
because of price considerations.
To be competitive
with coconut oil, the
butter would have to be offered at 16 cents a pound, f.o.b.
New Jersey.
Although GAO recognized that the price EES would be willing
to pay for
butter was considerably
less than the support costs incurred by the Department of Agriculture,
it seemed that selling.the
surplus butter would be more
advantageous to the U.S. Government than incurring
the costs of storing and
handling a substantial
supply.
GAO estimated that Agriculture
would realize
budgetary benefits of about $200,000 annually if EES used surplus butter.
In view of the potential
economic benefits,
GAO suggested that the Department of Agriculture
explore the possibilities
of making surplus butter
available
to EES for use in making ice cream. With the understanding
that
coconut oil was being used in making ice cream by military
and exchange
activities
in other parts of the world, GAO suggested that Agriculture
query
the Department of Defense and the military
exchange service to determine the
additional
potential
for using surplus butter in place of coconut oil.
Agriculture
agreed with GAO's analysis of the potential
savings in
budget and foreign exchange, However, other considerations
make Agriculture
reluctant
to sell butter to EES at 16 cents a pound, about 55 cents below
the domestic market price.
Agriculture
considers EES to be in the same
category as a foreign buyer, since EES buys in the open market with nonappropriated
funds.
To sell butter for export for less than the support
costs incurred by the Department, Agriculture
had to consult with the principal competitors
to protect the United States from accusations of "dumping"
and violation
of the General Agreement on Tariffs
and Trade.
Agriculture
has sold butter to.the military
at reduced prices of
52 l/2 cents a pound for our troops overseas.
Also, Agriculture
has a supplementary arrangement with the Defense Supply Agency (DSA) to enable DSA to buy
surplus butter for such uses as making ice cream. Agriculture
is willing
to
11
DETARTMENTOF AGRICULTURE
EXPORTMARKETING SERVICE (continued)
make a similar
of EES.
arrangement with
EES but feels
it
cannot discriminate
in favor
GAO continues to believe that as long as the Government has large inventories of surplus butter,
all possible cost and balance-of-payments
benefits should be considered,
Agriculture's
response did not address this
basic point.
As of September 1, 1972, the inventories
of surplus butter
amounted to 126 million
pounds.
(B-172539, July 22, 1971.)
12
DEPARTMENTOF AGRICULTURE
FARMERSHOMEADMINISTRATION
Need for more adequate disclosure
of costs
related to two insured loan funds
The Farmers Home Administration
(FHA) is authorized to make loans from
the Agricultural
Credit Insurance Fund and the Rural Housing Insurance Fund
to individuals
and to public and nonprofit
associations
for various purposes.
As required by law, FHA sells the borrowers' loan notes to investors on a
guaranteed basis 'and usesthe
proceeds to finance additional
loans.
In a July 1971 report to the Congress, GAO stated that FHA had incurred
substantial
losses ($104 million)
in recent years in operating the two funds,
primarily
because, under money-market conditions,
FHA interest
rates on loans
to borrowers had been substantially
less than the rates at which FHA sold the
borrowers' loan notes to investors.
FHA's financial
statements furnished to the Treasury Department and the
budget justifications
presented to the Congress relating
to the two funds
did not show the full costs of administering
the loan programs and did not
show the interest
cost on the Government's investment in the two funds.
Further, FHA budget justifications
did not show the substantial
interest
costs on sales of borrowers' loan notes that FHA had committed the Government
to pay in future years.
For the loan notes of $3.8 billion
held by investors
at March 31, 1970, FHA estimated that, if the investors
held the loans for
the full nonredemption periods, the interest
paid to investors would be about
$443 million
in excess -of the interest
collected
from the borrowers.
GAO recommended that
--including
in its
programs and
FHA provide
financial
for
statements
_
all
costs
related
to the loan
--disclosing
in its annual budget justifications,
the commitments of
Government resources which the loan sales program has created and the
current yields which FHA is required to guarantee investors who purchase such loans.
In October 1971, the Department stated that FHA had taken action to
modify the design of its financial
management system to provide better cost
information
and that FHA would provide the additional
information
suggested
by GAO in the explanatory notes to its budget justifications.
(B-114873,
July 20, 1971.)
_
13
DEPARTMENTOF AGRICDLTLRE
FARMERSHOMEADMINISTRATION (continued)
Recreation pro.jects provided
to a limited
number of rural
benefits
residents
FHA had made loans to public and nonprofit
organizations
for the development of rural recreational
projects under three loan programs--association
recreation,
resource conservation
and development, and rural renewal.
In August 1971, GAO reported to the Congress that its review of loans
made to 24 organizations
in five States showed that, in many instances,
the
loans did not contribute
effectively
to the program objective
of providing
rural residents with outdoor-oriented
recreational
projects
because the projects (1) served only a small percentage of the residents of rural areas,
(2) served primarily
urban rather than rural residents,
(3) imposed restrictions which limited
the use of recreational
facilities
to organization
members only, and/or (4) charged fees that were beyond the means of many rural
residents.
Also GAO reported
that
FHA had made loans:
--For some projects which, contrary to its instructions,
competed with
existing
or planned facilities;
included land excess to project needs;
included clubhouses not modest in design, size, or cost; or had memberships inadequate to support the projects.
--To some organizations
without adequately verifying
ni zations ’ projected revenues would be sufficient
expenses and loan repayments.
whether the orgato meet operating
The scope of the recreational
loan programs has changed substantially
in recent years.
For example, loan volume under the principal
program--the
association
recreation
loan program--decreased
from about $23.9 million
in
fiscal
year 1968 to an estimated $2 million
in fiscal year 1971. For fiscal
year 1972, FHA did not request any funds for this program; for fiscal
year
1973, FHA requested and received $500,000.
In view of the limited
extent to which the recreational
loan programs
had served rural residents,
GAO recommended that the Congress consider the
matters discussed in the report with a view to determining whether the programs should be continued and, if so, what form the programs should take.
The Administrator,
FHA, stated that FHA had started action early in
fiscal year 1970 to discontinue
making further loans for golfing facilities,
to provide more funds for higher priority
programs, such as the rural water
and sewer program, and for other reasons.
The Administrator
stated also
that the association
recreation
loan program had been placed in a standby
position
for fiscal
year 1972 and that FHA would consider the program's
future in connection with its plans for redevelopment of rural areas.
(B114873, Aug. 23, 1971.)
14
DEPARTl%NT OF AGRICULTURE
FOODAND NUTRITION SERVICE
Two ways to reduce costs
of donating commodities
In a February 1972 report to the Congress, GAO stated that, to reduce
the Food and Nutrition
Service (FNS)
the cost of donating certain commodities,
needed to (1) enforce its requirement that commodities be requisitioned
in
more economically
sized packages and (2) require State distributing
agencies
to submit requisitions
promptly to avoid special purchases which are more
costly.
In the seven States where GAO reviewed program operations,
the State
flour,
vegetable shortening,
distributing
agencies, rather than requisition
and nonfat dry milk in large-size
packages when practicable
for schools and
institutions,
requisitioned
small-size
packages meant for small users, such
as families.
FNS did not question,
or require the agencies to justify,
such
requests.
Some schools and institutions
used only small amounts of these commodities, and the use of small packages may have been warranted in those cases.
Many other schools and institutions,
however, used large quantities.
For
fiscal year 1970, GAO estimated that, nationwide,
the additional
cost of
providing
these commodities to schools and institutions
in small, rather tha
large, containers was about $1.6 million.
Also, controls over special purchases of processed grain commodities-such as flour,
cornmeal, and rolled wheat--needed to be strengthened.
State
distributing
agencies frequently
were late in requisitioning
their monthly
As a result,
special purchases, which cost from
needs for such commodities.
3 to 8 percent more than regular monthly purchases, had to be made. In many
instances,
justifications
for such purchases were not provided.
About $1 million worth of special purchases for 17 million
pounds of processed grain
commodities were made nationwide during fiscal
year 1970.
In October 1971 the Department outlined certain long-range actions it
would take to provide foods in more economically
sized packages.
After GAO
pointed out the need for more timely action, FNS instructed
its regional
offices
to reemphasize to the States the need to provide foods in larger containers,
when possible.
These actions were intended to implement GAO's proposals but, to ensure that full implementation
was effective
and timely,
GAO recommended that FNS vigorously
enforce the requirement that State agencies requisition
commodities in the most economically
sized packages and
have State agencies justify,
when necessary, requisitioning
commodities in
smaller packages for schools and institutions.
In March 1972 the Department
reported that FNS had directed its regional offices
to implement the recommendations.
With respect to special purchases, the Department took or proposed
certain actions which, if properly implemented, should result in the elimination of unjustified
special purchases.
(B-133059, Feb. 4, 1972.)
15
DEPARTMENTOF AGRICULTURE
FOREST SERVICE
Need to ensure that best possible use
is made of research program findings
The Forest Service carries out a forestry
research program to help
Federal agencies, States, and private landowners solve problems in managing
forest lands and resources,
In January 1972 GAO reported to the Congress that information
on over
1,000 forestry
research findings
had been published annually but that the
Forest Service had not identified
which findings were ready for use by field
managers.
Instead, hundreds of field managers individually
determined
whether the findings
could be applied to improve their operations.
These
managers were not required to advise top management of their decisions or of
problems encountered in attempting
to use research findings.
Also, Forest
Service procedures did not provide adequate means for (1) ensuring that the
best possible use was made of research results
and (2) furnishing
research
officials
with feedback of information
which could be useful in planning and
directing
future work.
To identify
and exploit
fully
the opportunities
for improved resource
management through the use of results of forestry
research, GAO recommended
that procedures be established
to require that (1) evaluations
be made of
the extent of potential
use, (2) field managers' decisions be documented,
and (3) research officials
be advised of the results of evaluations
of the
implementation
of research results.
GAO said that these procedures should
be applied through an official
or officials
who would be responsible
for
coordinating
the use of findings.
The Forest Service agreed in principle
with GAO's findings
and conclusions and in general with the recommendations.
In May 1972, the Forest Service reported that the Chief had directed the various regional foresters
to
designate a principal
staff officer
as regional research coordinator
on or
before October 1972. The research coordinators,
in consultation
with appropriate staff specialists,
are to
--identify
those research
the region's activities,
--develop
standards
--provide
advice
results
and guidelines
and guidance
that
apply or may have application
covering
to the regional
the use of research
forester,
results,
and
--provide
feedback to the research organization
on the actual
, use of research results.
(B-125053, Jan. 6, 1972.)
17
to
operational
DEPARTMENTOF COMMERCE
Contents
Page
ECONOMICDEVELOPMENTADMINISTRATION
Coordination with other available
Federal assistance programs
Need for adequate evaluations
of proposed public works projects
Limited effect of Federal expenditures on economic development
21
21
22
23
MARITIME ADMINISTRATION
Savings available
by consolidating
tivities
25
certain
reserve
fleet
ac25
:
.
19
DEPARTIYENTOF COMMERCE
VELOPMENTADMINISTRATION (continued)
public works and development facilities
projects for
which EDA had m
ts and loans totaling
$77.7 million
and found that,
for about 14 percent
the projects reviewed, grants of $10.7 million
and
red questionable because (1) the potential
ecoloans of $1.9 million
nomic impact of some
se projects on the unemployed and underemployed
residents
seemed nonexis
(2) there was inadequate assurance
that the projects would b
nstruction
would start within a reasonable
was inadequate assurance
time.
It was GAO's opinion that
d awarded financial
assistance without
er
the
indicated
benefits
of the promaking adequate evaluations
as to
posed projects were realizable
and t
provements were needed in the evalthat it had approved each of the
uation and approval processes.
projects in question in accordance with
iteria
after a thorough review
of all factors deserving consideration.
In view of the number of projects which
believed that EDA's procedures did not provide
ing projects within each region to insure that on1
significant
and timely economic impact and which w
beginning construction
on a timely basis would be
d questionable,
GAO
e criteria
for evaluatose projects which had
sonably certain of
Consequently, GAO recommended to the Secretary of
be required to establish
improved procedures for evaluating
development areas,
and (3) the timeliness
of the economic impact.
rce that
p
EDA
DEPARTMENT
OF COMMERCE
ECONOMICDE'VEEOPMENT
ADMINISTRATION
Coordination
with other available
Federal assistance programs
The Economic Development Administration
(EDA), Department of Commerce,
makes grants and loans to nonprofit
entities
for public works projects,
such
as water, sewer, and waste treatment facilities
, and for development facilities projects,
such as industrial
parks and tourism projects,
in areas of
substantial
and persistent
unemployment and underemployment.
EDA provided financial
assistance to many projects without first
determining whether they could have been funded under other programs.
Also
some of EDA's grants replaced grants and loans previously
awarded or tentatively
committed for the same projects under other Federal programs.
In GAO's opinion,
EDA's manner of awarding assistance did not provide
adequate assurance that it was not supplanting
assistance from other Federal
agencies and raised a question as to whether the EDA program was being administered
in accordance with the intent of the legislation,
which provides
that all assistance authorized under the legislation
be in addition to, and
not substituted
for, Federal assistance available
under other existing
programs.
Under an interdepartmental
agreement for coordinating
financial
assistance to public works projects among the Departments of Agriculture,
Commerse, and Housing and Urban Development and the Environmental
Protection
Agency, EDA was assigned the primary responsibility
for funding projects
in
EDA-designated areas when EDA determined that the projects would have'significant economic impact.
GAO recommended that EDA effectively
coordinate its public works financial assistance programs with those of other Federal agencies and urged
the adoption of changes in the interdepartmental
agreement, to provide
greater assurance that such agencies provide available
funds for projects
under their programs before EDA provides any financial
assistance.
EDA does not agree that the legislative
intent of the act authorizing
EDA's financial
assistance program requires EDA to determine whether assistance is available
under public works programs of other Federal agencies before EDA assistance can be provided.
EDA stated
that, although it attempted
to determine whether funds were available
from other Federal programs, it is
difficult
at the time an application
is filed with EDA to determine whether
the other agencies will fund the project.
(B153449, Mar. 21, 1972.)
21
DEPARTMENTOF COMMERCE
ECONOMICDEVELOPMENTADMINISTRATION (continued)
Need for adequate evaluations
of
proposed public works projects
GAO reviewed 150 public works and development facilities
projects for
which EDA had made grants and loans totaling
$77.7 million
and found that,
for about 14 percent of the projects reviewed, grants of $10.7 million
and
loans of $1.9 million
appeared questionable
because (1) the potential
economic impact of some of these projects on the unemployed and underemployed
residents
seemed nonexistent
or very low, (2) there was inadequate assurance
that the projects would be completed within a reasonable time, and (3) there
was inadequate assurance that construction
would start within a reasonable
time.
It was GAO's opinion that EDA had awarded financial
assistance without
making adequate evaluations
as to whether the indicated
benefits of the proposed projects were realizable
and that improvements were needed in the evaluation and approval processes.
EDA stated that it had approved each of the
projects
in qrrestion in accordance with EDA criteria
after a thorough review
of all factors deserving consideration.
In view of the number of projects which appeared questionable,
GAO
believed that EDA"s procedures did not provide adequate criteria
for evaluating projects within each region to insure that only those projects which had
significant
and timely economic impact and which were reasonably certain of
beginning construction
on a timely basis would be funded.
Consequently, GAO recommended to the Secretary of Commerce that EDA
be required to establish
improved procedures for evaluating
proposed projects to provide for a more realistic
evaluation
of (1) the projected economic benefits to the unemployed and underemployed residents
of the redevelopment areas, (2) the economic benefit in relation
to project costs,
and (3) the timeliness
of the economic impact.
(D-153449, Mar. 21, 1972.)
22
DEPARTMENTOF COMMERCE
ECONOMICDEVELOPMENTADMINISTRATION (continued)
Limited effect of Federal
on economic development
expenditures
The Federal Government has established
a number of programs aimed at alleviating
chronic poverty, unemployment, and underemployment.
GAO evaluated
the assistance provided under these programs to Johnson County, Kentucky, to
determine their effect on the economy of a specific
area.
Johnson County,
in the heart of Appalachia, was selected as the area for the study because
high
it had the typical
characteristics
of economically
distressed
areas:
Although the study
unemployment, low family income , and high out-migration.
covered only one county, GAO believed that other rural counties in Kentucky
and elsewhere in the Appalachian region had experienced similar
difficulties.
Development handicapped
lack of industry
by
Johnson County received $28.2 million
in Federal assistance from fiscal
years 1965 through 1969, primarily
for economic development, agriculture,
A large part of the assistance was for
education, and public assistance.
economic development, but its impact on broadening the economic base and
creating new jobs was very limited
at the time of GAO's review.
There are many obstacles to attracting
industry to Johnson County.
GAO's opinion, the county's heavy dependence on Federal assistance will
tinue unless new industry can be encouraged to locate in the area.
In
con-
Among GAO's recommendations was a recommendation that EDA make a comprehensive study to identify
additional
incentives
that might encourage inAccording to EDA some steps along these
dustry to expand in rural areas.
lines had been taken and some were underway.
Need for improved planning
and coordination
The effect of Federal assistance on the economic development of Johnson
County was also limited
by inadequate coordination
between the Federal and
ImState agencies concerned with implementation
of the Federal programs.
proved planning and coordination
was needed to assign priorities
and design
plans aimed at achieving economic independence.
No Federal organization
had
this overall
responsibility.
The agencies most closely concerned with economic development of Johnson County are the Appalachian Regional Commission--a joint
Federal-State
group established
by the Congress in 1965 to conduct a special development
effort --and ED&-which partially
funds projects
aimed at alleviating
high
unemployment.
GAO recommended that the Appalachian Regional Commission, in
cooperation with EDA, take a more active role in coordinating
Federal activities at the local level.
(B-130515, Feb. 7, 1972.)
23
DEPARTMENT OF COMMERCE
MARITIME
ADMINISTRATION
Savings
certain
available
reserve
by consolidating
fleet
activities
In November
1971, GAO reported
that,
after
the first
year,
annual
savings of about
$664,000
could
be realized
by having
the Maritime
Administration,
Department
of Commerce,
assume the function
of preserving
certain
Army
and Navy inactive
vessels
in the Beaumont,
Tex.,
and San Francisco,
Calif.,
areas and by closing
a Navy berthing
site
and an Army wet storage
area,
Savings
during
the first
year would amount to about
$392,000
because
of certain
nonrecurring
impact
costs,
such as towing,
corrective
preservation
steps,
and site
preparation,
that would be incurred
in effecting
the consolidation.
Maritime
would be able to assume the maintenance
and preservation
function more economically
than the Navy because
Maritime
uses experienced
civilian employees,
whereas
the Navy primarily
uses relatively
inexperienced
military
personnel.
Additionally,
fewer administrative
employees
would be
needed by Maritime
because
some of the Navy administrative
tasks would be absorbed by the employees
located
at Maritime
reserve
fleet
sites.
Maritime
and the Army agreed with GAO's recommendation
that
these
activities
be consolidated.
The Navy concurred
in the intent
of GAO's recommendation
but was strongly
opposed
to having
Maritime
assume the maintenance,
preservation,
and related
administrative
functions
at one of its San Francisco
The Navy was concerned
about
the ability
of Maritime
to preserve
comsites.
bat ships
and the ability
of the Navy site
to carry
out its military
responsibilities
should
Maritime
assume the maintenance
and preservation
responsibility
for the inactive
vessels.
GAO also recommended
that
the Secretary
of Commerce and the Secretary
Defense
study
the feasibility,
including
the effect
on costs,
of consolidating functions
for other
Army, Navy, and Maritime
Administration
inactive
fleet
sites.
GAO was informed
that
such a study would be made.
(B-168700,
Nov. 18, 1971.)
25
of
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
Contents
FOODAND DRUGADMINISTRATION
Insanitary
conditions
found in food manufacturing
industry
Need for action to preclude ineffective
or subpotent biological
products from being marketed in interstate
commerce
Lack of authority
limits
protection
of consumers from
harmful products
Page
29
29
30
31
HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION
Need for adequate planning to provide for orderly transition in funding methods under title
V, Social Security
Act
Need for improved controls over changes in use of medical
facilities
financed with Hill-Burton
program funds
33
NATI6NAL INSTITUTES CIF HEALTH
Improvement needed in management of construction
for health research and teaching programs
37
33
34
grants
37
CFFICE OF EDUCATION
Improved administration
needed in New Jersey for Federal
program of aid to educationally
deprived children
Federal program of aid to educationally
deprived children
in Illinois
can be strengthened
Opportunity
for increased effectiveness
of the Teacher Corps
program
Need for improved coordination
of federally
assisted student
aid programs in institutions
of higher education
39
SOCIAL AND REHABILITATION SERVICE
Problems in attaining
integrity
in welfare programs
Problems in functioning
of State systems for reviewing use
of medical services financed under Medicaid
Need for guidance to States in establishing
rates of payment
for nursing home care under Medicaid program
Problems in collection
of child support under program of aid
to families
with dependent children
Excessive payments to States for administrative
expenses of
public assistance programs
43
43
SOCIAL SECURITY ADMINISTRATION
Need for improvement in systems designed to assure that
physicians'
services are medically
necessary
Questionable payments to hospitals
for costs of health services
Problems in collecting
overpayments to institutions
terminating their participation
in Medicare program
Excessive cost of providing
durable medical equipment to
Medicare patients
51
27
39
39
40
41
i: 4
45
46
4s
51
52
53
54
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
FOODAND DRUGADl'KINISTRATION
Insanitary
conditions
found in
food manufacturing
industry
The Food and Drug.Administration
(FDA), Department of Health, Education,
and Welfare (HEW>, has the responsibility
to provide assurance that food
products shipped across State borders are processed under sanitary conditions and are safe, pure, and wholesome to eat.
To determine whether FDA
was able to provide this assurance, GAO requested FDA to inspect 97 food
manufacturing
and processing plants selected at random from about 4,550 such
plants in six FDA districts
including
21 States.
The inspectors
found that, of the 97 plants,
39--or about 40 percent-were operating under insanitary
conditions,
On the basis of this sample,
GAO projected that 1,800 plants in the 21 States were operating under insanitary conditions.
Further, FDA officials
stated that conditions
at
plants in the 21 States would be representative
of conditions
nationwide.
Although responsibility
for sanitation
rests with the food manufacfactors
contributing
to
the
poor
sanitation
conditions
in the inturers,
dustry were FDA's limited
resources for making inspections
and the lack of
timely and aggressive enforcement actions by FDA when poor sanitation
conAlso, FDA's inventory of food manufacturers,
used for
ditions were found.
planning inspections
and measuring the scope of its plant inspection
responsibility,
was not complete or accurate.
Among the recommendations
GAOmade to HEWwere that
FDA be required
to:
--Periodically
select and inspect a representative
number of food
plants to assess industrywide
conditions
and report its assessments
to the Congress.
--Periodically
evaluate the accuracy of the inventory of food plants
so that FDA would know the scope of its responsibilities
and resources required for sanitation
inspections.
--Take a stronger enforcement posture against those plants that show
continuing
flagrant
disregard of the Federal Food, Drug, and Cosmetic
Act.
--Issue written
notices in all cases of plants not complying with the
act and request written
responses on actions taken or planned to
correct the violations
and to insure continued compliance.
HEW concurred in all of GAO's recommendations
of corrective
actions had been or would be taken.
and stated
that
a number
In the light of the insanitary
conditions
shown to exist in the food
manufacturing
industry,
GAO recommended that the Congress consider the
adequacy of FDA's inspectional
coverage of food plants with the resources
Also, GAO stated that the
available
under its current appropriations.
29
DEPARmENT OF HEALTH, EDUCATICN, AND WELFARE
FOODAND DRUG
--- AD~~IMISTRATION (continued)
Congress should he aware that FDA relies almost entirely
on State and local
governments for inspectional
coverage of some 500,000 restaurants
and retail
food stores that receive or ship products interstate,
Ir:spectiun.s of these
establishments
by FDA to the extent necessary to judge whether such reliance
is justified
would require the use of inspection
resources.
To attain additional
flexibility
in enforcing the Federal Food, Drug,
and Cosmetic Act, GAO recommended that the Congress consider amending the
law to provide for civil
penalties when sanitation
standards are violated.
(B-164031(2), April 18, 1972.)
Need for action to preclude ineffective
or
subpotent biological
products from being
marketed in interstate
commerce
Pursuant to the Public Health Service Act, biological
products (vattines, serums, etc.) must be licensed by the Secretary of the Department of
Health, Education, and Welfare (HEW) before they nay be transported
interstate.
To obtain a license under that act, manufacturers must produce prod-ucts which meet standards of safety, purity,
and potency.
The Division
of
Biologics
Standards (DBS), a division
of the National Institutes
of I1e~lt.h
(NIH), licensed biological
products.
Another act, the Federal Food, Drug, and Cosmetic Act, requires thaiL.
the Secretary of HEWapprove a drug for safety and efficacy
before it may
be introduced into interstate
commerce. The requirement for efficacy
was
added by a 1962 amendment and was to be applied to (11 all drugs approved
subsequent to October 10, 1962, and (2) any drugs approved during the
period June 25, 1938, to October 10, 1962, which generally were not recognized by scientific
experts to be effective
in use,
Although it found no evidence of any ineffective,
biological
products
licensed after 1962, GAO did find that ineffective
products licensed prior
to 1962 were being marketed.
Seventy-five
of the 263 biological
products
licensed by DBS generally were not recognized--according
to the Director
of DBS--as being effective
by most of the medical profession.
All 75 of
the products were licensed by DE'S prior to the 1962 amendment.
DBS had not required biological
products to be effective
as a condition of licensing
and had not removed ineffective
products from interstate
commerce because it did not believe that legislative
authority
existed for
such actions.
However, JJEW's General Counsel ruled that drugs, as defined
in the Federal Food, Drug, and Cosmetic Act, included biological
products,
and the Secretary of ISEWtook action in February 1972 to require DBS to
apply the provisions
of the act to biological
products.
GACIalso found that, of 221 lots of influenza virus vaccines permitted
to be released by DBS during 1966, 1967, and 1968, 115 lots failed,
according
to the manufacturers'
own tests, to meet potency tests established
by DBS.
A licensed product may not be released by a manufacturer- for sale until
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
FOODAND DRUGADMINISTRATION (continued)
the manufacturer has completed tests to determine that the product conforms
to the standards applicable
to its safety, purity,
and potency.
DBS may
require a manufacturer to submit, prior to the release of a product to the
public,
samples of production lots and the results of the manufacturer's
tests.
DBS then may either release a lot or reject it when necessary to
insure the safety, purity,
or potency of the product.
GAO recommended that:
--To stop the marketing of ineffective
or subpotent biological
products, HEW (1) require NIH to establish
milestones
to implement the
efficacy
provisions
of the Federal Food, Drug, and Cosmetic Act and
(2) monitor NIH's progress in stopping the marketing of biological
products determined to be ineffictive.
--HEW require DBS to revise its instructions
to provide sufficient
controls to preclude vaccines from being released if tests by either
the manufacturers
or DBS show the vaccines to be subpotent.
HEW stated that it was in full agreement with these recommendations
and informed GAO of actions that had been or would be taken.
One of the
actions taken was to transfer
DBS to the Food and Drug Administration
on
July 1, 1972. (B-164031(2), Mar. 28, 1972.)
Lack of authority
limits
protection
of consumers from harmful products
The Federal Food, Drug, and Cosmetic Act and the Federal Hazardous
Substances Act were enacted to protect American consumers from harmful and
potentially
harmful commercial products.
Except with respect to biological
products, the Secretary of HEWdelegated his responsibility
for administering
these acts to FDA. GAO examined FDA's actions in fulfilling
the intent of
the legislation
and evaluated the authority
provided FDA to protect consumers.
FDA's effectiveness
depends largely on its ability
to act promptly.
GAO found that FDA has had difficulties
in removing defective
products
from markets because, with the exception of records relating
to prescription drugs, it lacks authority
to obtain access to records needed to identify,
examine, and remove products suspected or known to be defective
and,
without obtaining court action,
it lacks authority
to (1) detain products
from interstate
shipment until determination
can be made as to whether or
not they should be removed from the market, and (2) take steps required to
withdraw them.
GAO recommended that the Secretary of HEW propose legislative
changes
and
Cosmetic
Act
and
the
Federal
Hazardous
to the Federal Food, Drug,
Substances Act to provide FDA with authority
to (1) examine records and
data related to the production and distribution
of products,
(2) detain
products suspected or known to be defective,
and (3) require firms to recall these products.
31
DEPARTi?ENTOF HEALTH, EDUCATION, AND WELFARE
FOODAND DRUGADMINISTRATION (continued)
GAO also recommended that the Congress consider amending the Federal
Food, Drug, and Cosmetic Act and the Federal Hazardous Substances Act to
strengthen FDA's authority.
HEW said it was giving serious consideration
to the inclusion
of GAO's
legislative
proposals in its legislative
program for the Ninety-third
Congress.
(B-164031(2), Sept. 14, 1972.)
32
DEPARTMENTOF HEALTH,, EDUCATION, AND WELFARE
HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION
Need for adequate planning to provide for
orderly transition
in funding methods
under title
V, Social Security Act
In response to a request from the Chairman, House Ways and Means Committee, GAO reviewed the plans for, and impact of, the change in the method of
distributing
funds under title
V of the Social Security Act that was scheduled to become effective
July 1, 1972. GAO was requested to obtain information primarily
on (1) plans made and actions taken by the Department of
Health, Education, and Welfare (HEW) and the States for an orderly transition
from a combination of special project and formula grants to formula grants
on July 1, 1972, and (2) the impact that termination
of the authority
for
funding special project grants directly
would have on the amount of funds
previously
made available
to individual
States.
Social
Of the funds appropriated
Security Act:
annually
for allocation
under title
V of the
--50 percent were available
for distribution
to States, on the basis of
formulas,
for maternal and child health services and for services for
crippled children.
--40 percent were available
for special project grants for maternity
and
infant-care
services,
health services for children and youths, and
dental health services for children and youths.
--lo percent were available
for supporting
ects as authorized by the act.
training
and research
proj-
Title V stipulated
that, for fiscal year 1973 and subsequent years, 90 percent of the funds would be available
for distribution
to the States through
formula grants, thus terminating
the authority
for making 40 percent available for special projects.
GAO reported that, on the basis of the formula used for fiscal year 1972,
the termination
of authority
for special project grants would result in a
substantial
change in the amount of funds made available
to many States.
GAO estimated that (1) 37 States and Guam would receive additional
funds of
about $31 million,
and (2) 13 States, the District
of Columbia, Puerto Rico,
and the Virgin Islands would experience reductions
of about the same amount.
The change in the method used to distribute
funds also could result,
according to GAO, in a substantial
shift in emphasis from maternal and child
health programs to crippled children's
programs and could have a substantial
impact on the health services being provided within the States.
GAO also reported that HEW had made no plans for an orderly transition
from a combination of special project and formula grants to formula grants
and that few States had made plans for the transition,
primarily
because of
the lack of Federal guidance.
Although the impact of the transition
on existing projects
could not be fully
assessed in the absence of State plans,
33
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION (continued)
responses from States
were located indicated
their projects.
in which the major portion
that most of these States
of the existing
projects
would reduce funding of
were to
GAO suggested to the Committee that, if an orderly transition
be achieved, the termination
date for Federal funding of special project
grants would have to be extended beyond June 30, 1972. Subsequently,
the
Congress extended the termination
date to June 30, 1973.
nation
In its report to the Committee,
date, HEW should:
GAO stated
that,
prior
to the new termi-
--Consider revising
the formula being used to allocate
title
V funds
among States, to lessen the immediate impact of large reductions
in
funds on States having concentrations
of low-income families.
--Reconsider its practice
of dividing
formula funds equally between the
maternal and child health program and the crippled
children's
program
after making a determination
of the types of services which can be
provided under each program.
--Advise each State of the estimated amount of funds it will
and the services it must provide subsequent to the revision
distribution
methods.
--Assist
levels
(B-164031(3),
each State in developing
with a minimal disruption
plans to adjust
of services.
receive
in fund
to the new funding
June 23, 1972.)
Need for improved controls over changes in use
of medical facilities
financed with Hill-Burton
propram funds
The Health Services and Mental Health Administration
(HSMHA), Department
of Health, Education,
and Welfare (HEW), is responsible
for the administration of the hospital
and medical facilities
construction
grant program authorized by title
VI of the Public Health Service Act, commonly known as the
Hill-Burton
program.
Under this program, HSMHAmakes grants for the construction of certain types of hospital
and medical facilities
for which a need is
certified
to exist by the responsible
State agency.
In a review of certain aspects of the Hill-Burton
program, GAO noted
that some grantees, after receiving
Federal .assistance for the construction
of specific
types of medical facilities,
had redesignated
and used a part of
the facilities
for other purposes without obtaining
approval.
In one case, HEW approved an application
from a hospital
for Federal
assistance to (1) construct a new diagnostic
and treatment unit and (2) reconstruct
several floors of the hospital.
The reconstruction
project was to
34
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION (continued)
provide about 247 (later reduced to 224) long-term-nursing-care
beds. When
the hospital
applied to the State for the annual renewal of its hospital
license on December 1, 1969, shortly after the reconstruction
had been completed, only 49 of the 224 beds which had been constructed with Federal assistance were shown on the application
as long-term-nursing-care
beds. Hospital officials
advised GAO that the other 175 beds in the reconstruction
project were licensed and used for general-care
purposes or were unoccupied.
State planning documents showed that, at the time the Federal financial
assistance was approved, a need existed for long-term-nursing-care
beds in
the area where the hospital
was located but that a need did not exist for
general-care
beds. A State official
advised GAO that the bed reclassification by this hospital
had contributed
to both the shortage of long-termnursing-care
beds and the excess of general-care
beds in the local area.
It was GAO's belief that, because projects
are approved for Federal financial assistance under a priority
system based on need, it would be desirable to have a procedure requiring
review and approval by HEW and the responsible State agencies of proposed changes in the use of facilities
to insure
that the changes are merited.
Although HEW did not agree that Federal approval should be required,
it
did agree with GAO's proposal that grantees be required to obtain approval
from their State agencies for proposed changes in the use of facilities
constructed with Hill-Burton
funds.
HEW stated that it had an understanding
with grantees that (1) changes from one eligible
use to another must not
exceed the requirements for the facility
category shown in the HEW-approved
State plan and (2) the State agency would be notified
before such changes
took place.
HEW advised GAO that, to strengthen this long-established
policy,
it planned to require that applicants
for Hill-Burton
funds include statements in their applications
that they would not convert any parts of their
proposed facilities
from one use to another without State approval.
HEW also
advised GAO that it planned to require,
as GAO had recommended, that State
agencies establish
policies
and procedures for monitoring
and approving
changes in the use of facilities
constructed
with Hill-Burton
funds.
(B-164031(2), Mar. 23, 1972.)
35
36
'DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
NATIONAL INSTITUTES OF HEALTH
Improvement needed in management
of construction
grants for health
research and teaching programs
The National Institutes
of Health (NIH) makes grants to assist in
financing
the construction
of facilities
for use in health research teachThe objectives
of the programs are to prevent and control
ing programs.
the many crippling
and killing
diseases affecting
the Nation's population
and to alleviate
shortages of physicians
and other professional
health
personnel.
In reviewing these programs GAO found that, since the NIH system for
awarding health research facilities
grants was based primarily
on the individual
scientific
merits of each proposed project,
many approved appliGAQ recommended in a report issued to the
cations had not been funded,
Secretary, FEW, on June 16, 1972, that, to obtain the most benefits
from
the health research facilities
construction
program, HEW determine systematically
the nature and dimensions of the Nation's health research needs,
including
assessing the existing
research efforts
and capabilities
by area,
discipline,
and disease, and establish
program objectives
and priorities
on the basis of such determinations
so that these needs can be met within
the constraints
of available
funding limitations.
HEWconcurred with the recommendation and stated that it would develop
a program plan if research facility
program funds again became available.
According to NIH, funds were not requested for this program in recent years
because of overall constraints
on funds.
GAO also found, in a review of seven research facilities
which had
been completed for more than 2 years, that none had attained the research
personnel levels projected in the grant applications.
At five of these
space
was
being
used
for
research
in
areas
other than the specfacilities,
ific areas to which the grantees had committed themselves as conditions
of
the grants.
Similar problems were noted in the use of space at a completed
The law provides for recovery of Federal funds when fateaching facility.
cilities
are not used for the purposes for which constructed.
GAOrecommended that
HEW:
--require
applicants
for grants
proposed use of space, and
to submit detailed
information
on the
--establish
appropriate
follow-up
procedures to insure that the grant,funded facilities
are being used for the purposes for which they were
constructed,
and either concur in such uses or seek appropriate
recoveries.
HEW concurred with these recommendations and informed GAO of corrective
actions which had been or would be taken,
(B-164031(2),
June 16, 1972.)
37
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
OFFICE OF EDUCATION
Improved administration
New Jersey for Federal
of aid to educationally
needed in
propram
deprived children
Title
I of the Elementary and Secondary Education Act of 1?65, adrninistered by the Office of Education, provides financial
assistance to local
educational
agencies to meet the special educational
needs of educationally
deprived children residing
in areas having high concentrations
of children
In a report dated April 7, 1971, GAO expressed
from low-income families.
the belief that a substantial
part of the title
I program in Camden, New
Jersey, funded at about $1 million
annually, had provided general aid to the
public and private school systems there rather than aid to educationally
deprived children
as prescribed
in the act.
GAO recommended that HEW review those projects
in Camden that appeared
to be inconsistent
with the objectives
of the act and effect recoveries of,
or make adjustments in, title
I funds where warranted.
HEWadvised GAO that the Office of Education, in conjunction
with State
officials,
would conduct a thorough review in Camden and make prompt recoveries or appropriate
adjustments of all amounts'found to have been exwith title
I objectives
or
pended for purposes, or in a manner, inconsistent
GAO was informed in August 1971 that a task force had been esregulations.
tablished to study its findings
and determine the amount of recoveries to be
effected.
In response to questioning
during hearings by the House Subcommittee on
Appropriations
in February 1972 on its appropriations
for 1973, the Office
of Education submitted for the record a statement
in which it said that it
had conducted an on-site visit,
interviewed
both State and local officials,
examined relevant information,
and prepared a report on its findings.
The
Office of Education also said in its statement that
it was preparing a letto send to the New Jersey Commissioner of
ter, on the basis of its report,
Education stating the Office of Education's preliminary
determination
as to
the amounts due for recovery.
Office of Education officials
advised GAO in September 1972 that the
letter
had not been sent to the New Jersey Commissioner of Education but
GAO is reporting
herein on the status of this
that one was being prepared.
matter because the report prepared by the Office of Education indicated that
further action was warranted.
(~-164031(l),
Apr. 7, 1971.)
Federal program of aid to
educationally
deprived children
in Illinois
can be strengthened
In a report dated June 22, 1972, GAO expressed the belief
that, under
the title
I program, local
educational
agencies in Chicago, Harrisburg,
and
Rockford, Illinois,
implemented projects
that provided new or additional
39
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
OFFICE OF EDUCATION (continued)
services which otherwise might not have been available,
been available
only on a limited
basis, to educationally
or which would have
deprived children.
GAO noted, however, that certain areas in program operation and administration
required special attention
by management officials
to help insure
that their programs were having the maximum impact on the educationally
deprived children and recommended that HEWwork with the State and local educational
agencies or take other necessary action to insure:
--That project objectives
are developed in measurable terms and that
techniques and procedures for evaluating
the success of the projects
are devised.
--That current and complete data on the number of children are used in
determining
school attendance areas eligible
to participate
in the
program.
--That comprehensive
deprived children.
assessments are made of the needs of educationally
--That the title
I program (1) is concentrated in a limited
number of
eligible
school attendance areas and is providing a variety
of serv(2) is focused on the most eduices to the participating
children,
cationally
deprived children,
(3) is extended to eligible
non-publicschool children,
and (4) involves parents and other groups in the
community.
--That equipment purchased with title
I funds is being used to meet the
needs of educationally
deprived children and, if no longer used for
such purposes, is properly disposed of.
HEW concurred in GAO's recommendations and described
taken or planned to take to implement them. (~-164031(l),
actions it had
June 22, 1972.)
Opportunity
for increased effectiveness
of the Teacher Corps program
In a report assessing the effectiveness
of the Teacher Corps program in
attaining
its legislative
objectives,
GAO noted that the program strengthened
educational
opportunities
for children in low-income area schools where corps
members were assigned.
Corps members introduced several innovative
teaching
methods and projects
not previously
used in the schools and participated
in
education-related
community activities.
Almost 75 percent of the corps members covered by the GAO review remained in the field of teaching and, of
these , almost 80 percent became teachers in schools serving poor areas.
Also, some degree of success was achieved in accomplishing
the Teacher
Corps' second legislative
objective--broadening
teacher preparation
programs.
40
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
OFFICE OF EDUCATION.(continued)
The program could have been more effective
if local educational
agencies
had continued successful innovative
methods after corps members completed
their assignments and if the participating
universities
had established
formal procedures for evaluating
and incorporating
useful ideas, experiments,
and techniques into their teacher preparation
programs.
Also, State departments of education and the Office of Education needed to take a more active
role in disseminating
information
about successful features of the Teacher
Corps program.
By letter
dated August 24, 1972, HEW stated that it concurred with GAO's
recommendations and that a number of actions had been or would be taken to
strengthen the Teacher Corps program.
(~-164031(l),
JUIY 14, 1972.)
Need for improved coordination
of
federally
assisted student aid programs
of higher education
-in institutions
The Office of Education administers
four major programs providing
financial aid to students attending colleges,
universities,
and vocational
schools.
These include the Guaranteed Student Loan program, the National
Defense Student Loan program, the College Work-Study program, and the Educational Opportunity
Grant program.
The four programs provided assistance of
about $1.7 billion
to approximately
2.3 million
students in fiscal year
1971. GAO examined the coordination
of these programs because student enrollment
and tuition
costs have increased significantly
in recent years and
have added to the demand for financial
assistance and to the Government's
potential
liability
in the case of defaulted loans.
In an August 1972 report to the Congress, GAOpointed out that seven of
eight institutions
visited
generally
awarded aid to students under Office of
Education programs that require a showing of need without considering whether
the students also had obtained or requested loans from lending institutions
under the Guaranteed Student Loan program.
As a result,
some students were
provided with aid in excess of their indicated
financial
needs and some
students borrowed under both loan programs and incurred large debts that
could be difficult
to repay.
GAO reviewed 400 student aid cases selected at random from a list of
approximately
6,500 students who had obtained loans under the Guaranteed
Student Loan program.
Of the 400 students, 57 (14 percent) were awarded aid
totaling
about $51,800 in excess of their indicated financial
needs. On the
basis of the sample, GAO estimated that 900, or 14 percent of the 6,500
students, had been provided with aid totaling
at least $761,000 in excess of
their indicated
needs.
GAO also noted that some institutions
have not had sufficient
Federal
aid funds to meet the financial
needs of their students and that students
who received excess aid made such aid unavailable
to others who qualified.
41
DEPARTMENTOF HEALTH EDUCATION, AND WELFARE
OFFICE OF EDUCATION (continued)
GAO recommended that
HEW direct
the Office
of Education
to:
--Require institutions
of higher education to establish procedures for
coordinating
assistance provided under Federal student aid programs
which require a showing of financial
need with any assistance provided
under the Guaranteed Student Loan program and other schooladministered
aid programs.
--Monitor
implementation
of the procedures 'to preclude
ance in excess of students'
financial
needs.
awardi!!g assist-
By letter
dated April 24, 1972, HEW stated that it concurred with the
intent of GAO's recommendations.
However, before deciding on whether to
implement the recommendations, HEWplanned to determine the magnitude of the
coordination
problem nationwide,
by requiring
institutions
of nigher eduza-tion to provide data on total student aid awards.
GAO believes that such data may not be adequate for determining the
extent of the coordination
problem.
The data must also show students' total
resources (aid, parental contributions,
and student income or savings) that
are to be applied toward the costs of their education.
GAO intends to stay
abreast of the progress of HEW's study and to determine, on the basis of the
study results,
whether appropriate
action was taken.
GAO also suggested that the Congress consider establishing
an overall
limitation
on the amount that a student may borrow when participating
in
more than one loan program.
(B-164031(1), Aug. 2, 1972.)
42
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE
Problems in attaining
in welfare programs
integrity
In March 1972, GAO reported to the Congress on the effectiveness
of the
quality
control system used by States to insure that public assistance funds
are being provided to eligible
persons only and that public assistance programs are being managed fairly
and efficiently.
This system was developed
by the Department of Health, Education, and Welfare (HEW) in 1964., In
October 1970, HEW required the States to implement a revised quality
control
system.
GAO informed the Congress that the revised system had not accomplished
its purpose of maintaining
integrity
over the public assistance programs.
In a review of the system used by eight States--California,
Colorado,
Louisiana,
Maryland, Michigan, New York, Ohio, and Texas--GAO noted that
these States had not fully
implemented the revised system and had encountered
problems in implementing,
operating,
and carrying out the quality
control
function.
HEW had decided that the revised system should be implemented as ~001-1
as possible after its design was completed.
GAO reported that HEW was not
ready, however, to deal with many of the complexities
of implementing a
system that required close cooperation between the Federal Government and the
GAO reported further that HEW regional offices,
because of insuffiStates.
cient staff and limited knowledge of the system, usually were able only to
react to State problems as they occurred rather than to anticipate
them and
assist States in avoiding the problems.
On the State level, GAO noted that problems varied in intensity
from
State to State.
Two States--California
and New York--had not implemented
the Federal system statewide as of July 1971 but had attempted to use other
methods to control public assistance expenditures.
The methods used were
not designed to meet Federal objectives.
The remaining six States --which implemented the system statewide-encountered one or more of the following
problems.
--Staffing.
As of April 30, 1971--7 months after the Federal system
was to be implemented --only Colorado and Michigan had met their staffing needs. Insufficient
staffing
continued to be a major problem.
--Investigations.
HEW specified
the number of cases to be reviewed in
each State so that reliable
statistical
projections
could be made concerning the total number of cases.
None of the six states completed
the required number of quality
control reviews for the first
quarter,
October to December 1970, although Colorado and Ohio came close.
For
those cases that were reviewed, ineligibility
rates or incorrect
payment rates generally were high.
--Verification,
tation of all
HEW requires that independent verification
and documen-,
aspects of eligibility
and payment be pursued to the
43
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE (continued)
point at which decisions on eligibility
and the amounts of payment
About 90 percent of the completed quality
control
are conclusive.
reviews analyzed by GAO had not done this.
GAO recommended that HEW:
that top State officials
are aware
--Insure,
through appropriate
efforts,
of the benefits to be derived from an effective
quality
control system.
--Increase headquarters and regional
level at which they can effectively
control operations.
office quality control staffs to a
assistand
monitor State quality
--Define,
for the guidance of State and local quality
control reviewers,
necessary steps to be considered as requirements
in determining recipients' resources,incomes,
and other eligibility
factors so that quality control investigations
can provide conclusive findings.
HEW informed GAO that (1) its regional commissioners were taking vigorous action to insure that States which did not have fully
operational
quality
control systems complied with Federal regulations,
(2) training
seminars were
being conducted for its regional staff so that they could provide assistance
to States for realizing
fuller
use of quality
control as a management tool,
(3) as of March 1972 all but one of the 55 quality control staff members
authorized for its headquarters and regional offices had been hired, and a request had been submitted to the Congress for additional
staff members, and
(4) it was developing additional
guidelines
for issuance to State agencies so
that quality
control investigations
could provide conclusive
findings.
(B-l64031(3),
Mar. 16, 1972.)
Problems in functioning
of State systems
for reviewing use of medical services
financed under Medicaid
At the request of the Chairman, House Committee on Ways and Means, GAO
reviewed the functioning
of the utilization
review systems under the Medicaid
program in Missouri and Florida.
The purposes of the review systems are to
safeguard against unnecessary medical care and services and to insure that
Medicaid payments are reasonable and consistent
with efficiency,
economy, and
quality care.
GAO concluded that the utilization
review system in Missouri was operating in a satisfactory
manner and was producing positive
benefits.
Over a lyear period, payments to hospitals
were reduced by about $260,000 and payments to physicians were reduced by about $715,000.
Florida's
utilization
review system, like Missouri's,produced
positive
results.
The use of claimsprocessing procedures resulted in reducing claims for payment by hospitals
by
about $268,000 over a 4-month period.
Claims for payment for skilled
nursinghome care were reduced by about $222,000 during an ll-month period.
Nevertheless, GAO-noted opportunities
for improvement.
44
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE (continued)
GAO recommended that HEW assist
Missouri's
actions to
--periodically
and
evaluate
the State
the effectiveness
of Missouri
and monitor
of utilization
review
controls,
--expand the utilization
review of hospital
care to increase the number
of hospitals
covered and the incidence of evaluations
of the need for
continued care.
GAO recommended that HEW assist
both States
and monitor
their
actions
to
--provide
for the systematic
of the costs of utilization
accumulation
review with
of data enabling a comparison
the benefits
it provides,
and
--study the HEWmodel system for the purpose of adopting
offering
opportunity
for improvement.
design
features
HEW informed GAO that the Social and Rehabilitation
Service had established the study and improvement of utilization
review systems as one of its
priorities.
HEW also stated that, in those States that were implementing
and try to correct
the SRS utilization
review system, it planned to identify
any problem areas the States might encounter in implementing the system.
(B-164031(3), Mar. 27, 1972, and‘June 9, 1972.)
Need for guidance to States in establishing
rates of payment for nursing home care
under Medicaid program
HEW administers
the Medicaid program under which the Federal Government
pays part of th e State's cost of nursing home care provided to persons unable
to pay for such care.
GAO reported
to the Congress in April
--formulated
the States
and issued appropriate
in establishing
rates
1972 that
HEWhad not
criteria
and requirements to guide
of payment for nursing home care,
--enforced
the requirement of the Social Security Act that State plans
include a description
of the methods and procedures used in establishing payment rates, or
--instituted
effective
policies
and procedures for reviewing and evaluating methods and procedures actually
being used by the States in establishing
payment rates.
GAO believed that the administration
of the Medicaid nursing home program
could be significantly
improved through HEW's issuance of definitive
criteria
to guide.States
in establishing
payment rates.
These criteria
should consider
45
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE (continued)
such matters as frequency of rate setting,
use of audited cost data, allowon allowances for
ability
of items to be included in the rate, limitations
inflation
and profit,
desirability
of home-by-home rate setting,
and recognition of differences
caused by demographic characteristics
when group rates
are used.
GAO recommended that
HEW:
--Instruct
the Social and Rehabilitation
Service (SRS) to expedite "ihe
formulation
and issuance of appropriate criteria
and requirements
for guiding States in the establishment
of payment rates for nursing
home care.
--Require that States furnish periodically
for review by HEW's regional
offices detailed descriptions
of the methods followed in establishing
payment rates,
--Require that SRS review periodically
States' implementations
prescribed criteria
to help insure the proper and efficient
tration
of the Medicaid nursing home program,
of the
adminis-
HEWadvised GAO that:
--It would issue formal guidelines
for implementing
reimbursement regulation
by June 15, 1972.
the nursing
home
--It was preparing proposals for studies on nursing home costs which
would have significant
bearing on future departmental policy governing reimbursement for skilled
nursing home services and lead to
guides which would assist States in adopting general reimbursement
principles.
--It intended to make program reviews in each State on a continuing
basis with emphasis on reimbursement methods.
--States would be required to furnish periodically
for review by HEW's
regional offices
detailed descriptions
of the methods followed in
establishing
payment rates.
(B-164031(3),
Apr.
19, 1972.)
Problems in collection
of child
under program of aid to families
with dependent children
support
At the request of the Chairman, House Committee on Ways and Means, GAO
examined into the collection
of child support from absent parents whose
children are receiving
assistance under the aid to families
with dependent
children (AFDC) program.
The examination was made in four States.
The AFDC
program is administered
by the States, and general guidance is provided by
HEW.
46
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE (continued)
An absent father who is financially
support of his public assistance-receiving
Federal and State Governments) to carry
borne by the parent.
able but does not contribute
to the
family causes tapayers
(through
a financial
burden which should be
In line with the requirements of the Social Security Act, HEWregulations require States to have a program for establishing
paternity
for
children born out of wedlock and for securing financial
support for these
and all other children being aided under the AFDC program who have one or
both of their parents absent from the home. In addition,
each State is required to establish
a separate unit for carrying out these support enforcement activities.
In March 1972 GAO reported to the Committee that opportunities
existed
to increase substantially
the amount of child support collected
from absent
parents.
HEW has not emphasized the collection
of child support because
there is a shortage of regional staff and because this activity
represents
Nor
a small part of the total effort needed to administer
the AFDC program.
has HEW required States to report regularly
on their accomplishments in
securing child support.
Consequently HEW has not been in a position
to
provide guidance to the States to assist them in overcoming problems in
their support enforcement programs.
In three States the responsibility
for establishing
paternity,
locating
Also, these States
absent parents, and securing support was fragmentized.
did not routinely
collect
and analyze pertinent
data regarding their programs for collection
of child support.
Consequently they did not have a
sound basis for evaluating
the effectiveness
of their programs.
The fourth
was
achieving
the
best
results,
principally
because
emState, Washington,
phasis was placed on encouraging absent parents to contribute
to child support voluntarily
and State laws and regulations
emphasized the responsibility
of .absent parents for the financial
support of their children.
GAO recommended that
enforcement program
HEW initially
review
each State's
child
support
--to determine how effective
the program had been in identifying
locating
absent parents and in securing child support,
--to identify
problems
ment program, and
--to
find
ways to assist
encountered
by the State
the State
in solving
in its
its
support
and
enforce-
problems.
GAO recommended also that, to fulfill
its continuing
responsibility
for
the oversight of the States' support enforcement activities
and to assist
the States in increasing
the effectiveness
of their programs, HEW should
--adopt procedures
programs;
for monitoring
the Statess
47
support
enforcement
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE (continued)
--require
States to periodically
report to HEW statistical
information,
such as the number of cases involving
absent parents and the amount
and accomplishments and problems encountered;
of support collected,
--disseminate
to all States information
on particular
accomplishments
or organizational
or operational
features of either States or HEW
regional offices
that might assist other States in improving their
programs; and
--encourage States to consider the features of the State of Washington's
program that had contributed
to its success and, when practicable,
to adopt those features that would strengthen their support enforcement programs.
(B-164031(3),
Mar. 13, 1972.)
Excessive payments to States
administrative
expenses of
public assistance proprams
for
The Federal Government shares with the States the expense of administering the public assistance programs for the needy--the States spent $1.3 billion for this purpose in fiscal
year 1970; the Federal share was about
$800 million.
GAO reviewed the payments made by HEW to two States and found that they
exceeded authorized amounts by $3.7 million
in two counties in one State-California--and
by $1.7 million
Statewide in the other State--Pennsylvania.
State officials
estimated that, Statewide,
the excessive payments could
have amounted to $7 million
in California.
GAO noted that the excessive payments to California
could have been
avoided if HEW had promptly reviewed claims and had disapproved those which
exceeded authorized amounts, Excessive payments to Pennsylvania could have
been avoided if HEW had promptly (1) resolved questions concerning payment
rates and conditions
to be met in making claims and (2) determined whether
the amounts claimed were proper,
GAO recommended that HEW insure
--Issues
relating
to claims
that:
are resolved
promptly.
--When issues are unresolved,
States be directed
the lower rates until
the issues are resolved.
--States
adhere to prescribed
conditions
and rates
to claim
payment at
of payment.
--When payments in excess of authorized amounts are identified,
actions be taken to recover the excess payments.
48
prompt
DEPARTMENTOF REALTH, EDUCATION, AND WELFARE
SOCIAL AND REHABILITATION SERVICE (continued)
GAO recommended also that
to evaluating
the effectiveness
tive expenses.
the HEWAudit Agency give increased attention
of State procedures for claiming administra-
HEW informed GAO of various actions it had taken or was considering
meet the objectives
of GAO’s recommendations.
to
Pennsylvania repaid the excess amount in question, but California
did
not agree that its claims had been excessive.
California
contended that
the lack of a definitive
response from HEW had led it to believe that its
approach eventually
would be approved and that, because of the tacit approva
exceptions to payments made seemed unjustified.
HEWwas negotiating
with
California
to settle the questioned payments. (B-164031(3),
Feb. 7, 1972.)
48
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL SECURITY ADMINISTRATION
Need for improvement in systems designed
to assure that physicians'
services
are medically
necessary
requireSince the advent of Medicare and Medicaid --and the legislative
ment to prevent payment for unnecessary medical services--HEW and its paying
agents have devoted much effort
to developing and implementing utilization
review systems designed to detect and prevent payments for physicians'
servGAO reviewed
ices provided unnecessarily
to Medicare and Medicaid patients.
the safeguards used by seven paying agents in five States to evaluate the
progress that had been made.
Each of the paying agents included in GAO's review had estabiished
procedures which helped to identify
instances of unnecessary services,
for
Six of the agents reported that they had
which payments were disallowed.
disallowed payments of $8.6 million
during the first
6 months of 1971 for
GAO
believed,
however, that opservices found to be medically
unnecessary.
portunities
existed for further
savings by improving the paying agents' procedures, which had been independently
developed and varied widely.
GAO recommended that HEW evaluate the overall effectiveness
of the paying agents' utilization
review systems to identify
the more effective
features or procedures of each system and provide information
to the paying
agents as to which systems and/or procedures are most effective
and should
be adopted.
GAO recommended also that HEW (1) provide guidance to paying agents for
identifying
the patterns of medical services which warrant further investigation to determine whether unnecessary services were provided, encourage
their investigation
to the fullest
extent possible,
and require that evaluations of the need for medical services be based on professional
medical judgment, and (2) establish
procedures for effective
exchange of data on known
or potential
utilization
problems and monitor the exchange of such data.
HEW agreed that there was a need for improvement in the utilization
view systems being used by paying agents and outlined
several actions
taken or proposed to take to improve the utilization
review function.
(B-164031(4), Aug. 2, 1972.)
it
rehad
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL SECURITY ADMINISTRATION (continued)
Questionable payments to hospitals
for costs of health services
Federal payments to hospitals
for health services provided to Medicare
patients usually are made through fiscal
intermediaries
acting under contracts with HEW. The contracts are administered
by the Social Security Administration
(%A).
GAO made a review at 14 hospitals
to determine whether the Federallyprescribed systems and procedures were adequate to insure that Medicare payments to hospitals
were in accordance with the law and regulations.
Although most of the payments were correct,
GAO noted several problem
areas in the administration
of the existing
systems and questioned net
charges of about $622,000 to Medicare for payments made by the intermediaries.
These questionable
payments were made because:
--Hospitals
had difficulty
in identifying
the costs of services and activities
not covered under the Medicare program--such as private-duty
nurses; convenience items, such as television
and telephone services;
and research, educational,
or commercial activities
which are not
directly
related to the care of Medicare patients.
--Hospitals
did not apply certain non-patient
revenues or other monies
as offsets to reimbursable
costs as required by HEWregulations.
--Certain
hospital
costs were incorrectly
and outpatient
activities.
allocated
between inpatient
--Statistical
and payment data used by hospitals
in computing Medicare's
share of the hospital
costs and/or in computing the cost settlements
were incomplete or inaccurate because (1) there were errors in computer programs and (2) hospitals
and intermediaries
did not consider
the most current data available
at the time of the audits and settlements.
--Hospitals
charged Medicare more than the hospitals
ices rendered by radiologists
and pathologists.
paid for the serv-
GAO recommended that HEW--through SSA--(l) communicate to all intermediaries the problem areas of hospital
reimbursement discussed in GAO's report and (2) emphasize to all intermediaries
the need for improving audits
to better assure that payments made under the current Medicare reimbursement
system are in accordance with the law and regulations.
(B-164031(4), Aug. 3,
1972.)
52
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL SECURITY ADMINISTRATION (continued)
Problems in collecting
overpayments to
institutions
terminating
their participation
in Medicare program
GAO made a review to find out why health care institutions
were leaving
Medicare and whether Federally-prescribed
systems and procedures were adequate to insure that terminated institutions
refunded any amounts due the
Government.
While institutions
have terminated their participation
in Medicare for
a variety of reasons, GAO believed that actions already proposed by the Congress and HEW should reduce many of the objections
to the program which were
mentioned by officials
of the institutions
as reasons for leaving it.
Many of the institutions
that terminated their participation
in Medicare
owed the Government sizeable amounts totaling
millions
of dollars.
These
debts resulted from overpayments by intermediaries,
who act as fiscal
agents
for SSA in reviewing and paying Medicare benefit claims to health care institutions.
Most of the overpayments resulted from the intermediaries'
making
interim payments that were higher than the actual cost of providing services
to Medicare patients.
Interim payments are made on the basis of estimated
costs, and adjustments are supposed to be made after the institutions
file
annual reports of actual costs which are subject to audit by the intermediaries.
GAO found that the efforts
of both the intermediaries
and HEW to recover
overpayments had been only partially
successful.
When an overpayment to an
institution
has been identified,
the intermediary
generally has two ways to
recover it within the present legislative
framework and SSA instructions.
These are to offset the overpayment against other Medicare amounts due the
institution
or obtain a refund from the institution.
GAO recommended that
management controls be designed to enable SSA to more effectively
manage its
collection
activities.
GAO also recommended that, to reduce overpayments,
HEW take actions to obtain closer adherence by intermediaries
to existing
SSA
instructions
for estimating
costs.
While improvements in existing
instructions
and procedures would help
avoid or minimize overpayments, there also was a need for better means of
obtaining refunds from institutions
that were overpaid.
Since many of the
institutions
that terminated their participation
in Medicare without refunding overpayments continued to participate
in State Medicaid programs, which
GAO recommended that the Congress
are to a large extent Federally-financed,
authorize HEW to withhold--subject
to appropriate
advance notice to a StateFederal participation
in State Medicaid payments to those institutions
that
terminate from Medicare and refuse to refund Medicare overpayments.
On March 20, 1972, the Senate Committee on Finance announced that, in
connection with its deliberations
on the Social Security Amendments of 1971
(H.R. l>, it had decided to initiate
an amendment to the law along the line
recommended by GAO. (B-164031(4), Aug. 4, 1972.)
53
DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
SOCIAL SECURITY ADMINISTRATION (continued)
Excessive cost of providing durable medical
equipment to Medicare patients
In a review made to see if the Medicare law was promoting the most economical ways of providing durable medical equipment, such as wheelchairs,
hospital
beds, and respirators,
used by Medicare patients
in their homes, GAO
found that it was not.
Medicare patients often rented durable medical equipment even when the periods of need--as estimated by their physicians--were
long enough to justify
purchase.
Based on an analysis of samples selected
from the claims of 20,000 patients at six Medicare insurance carriers
in five
States, GAO estimated that savings of nearly $1 million
could have been
realized for the 20,000 patients if equipment had been purchased when the
anticipated
period of need indicated that purchases would have been more economical than rentals.
The original
Medicare law provided only for rental of equipment for use
in patients'
homes. In January 1968 the Congress amended the law to authorize either purchase or rental but required Medicare to pay for purchases of
"expensive" equipment costing over $50 in periodic installments
equal to
rental payments.
The amendment was intended to prevent Medicare payments
for the purchase of costly equipment used or needed for only a short time.
If a Medicare patient dies, recovers, or is hospitalized,
Medicare installment
payments are stopped even though the patient or his estate may
not have been fully reimbursed for the purchase price.
A factor that led
patients to rent equipment even though their physicians
indicated that the
equipment would be needed for a long time was their inability
to afford to
make lump-sum purchase payments which were reimbursable
by Medicare only
through installments.
GAO recognized that the best solution to this problem
might vary from area to area and believed that HEW should have flexibility
in finding the best solution
in a given locality.
GAO recommended that the Congress amend the Medicare law to enable HEW
to deal more effectively
with the problem by including
authority
to (I) make
lump-sum payments for purchases of equipment when, on the basis of anticipated periods of need, purchase appeared to be more economical than rental,
and (2) enter into agreements with suppliers
aimed at limiting
rental payments after they exceed the purchase prices by specified
percentages.
HEW agreed with GAO's recommendations.
Further, on March 17, 1972, the
Senate Committee on Finance announced that, in connection with its deliberations on the Social Security Amendments of 1971 (H.R. 11, it had decided to
initiate
an amendment to the Medicare law along the lines recommended by
GAO. (B-164031(4), May 12, 1972.)
54
DEPARTMENTOF HOUSINGAND URBAN DEVELOPMENT
Contents
Page
CWMUNITY DEVELOPMENT
Stricter
enforcement
of housing codes needed
HOUSINGPRODUCTIONAND MORTGAGECREDIT
Benefits could be realized
through reuse of designs for
public housing projects
Benefits could be realized by revising
policies
and practices
for acquiring existing
structures
for low-rent public housing
5.5
57
57
55,
59
51
DEPARTMENTOF HOUSINGAND URBANDEVELOPMENT
COMUNITY DEVELOPMENT
Stricter
enforcement
of housing
codes needed
The Congress directed that communities, to be eligible
for Federal housing programs, adopt and enforce codes to prevent deterioration
and decay of
Also
the
Congress
established
the
housing and stop the spread of blight.
Code Enforcement Grant Program, administered by the Department of Housing
and Urban Development (BUD), to assist communities financially
in enforcing
housing codes.
Ineffective
local
code enforcement
The General Accounting Office (GAO) reviewed code enforcement activities
in 29 communities and found that 28 of them had not enforced housing codes
effectively
and that HUD had not used its legislative
authority
to stop funds
for other Federal housing programs until
they did so.
HUD had continued to certify
cities
as eligible
for Federal assistance
colmnuwithout insuring that they had effective
citywide code enforcement.
nity resistance
to adopting and carrying out local code enforcement is a
difficult
problem, causing HUD to emphasize construction
of low- and
In
moderate-income housing and to give a low priority
to code enforcement.
GAOss opinion, HUD had been continuing piecemeal, sporadic thrusts at a
problem which should have been attacked in all its aspects simultaneously.
GAO recommended that HUD (1) promote the acceptance of the benefits
to homeowners of effective
code enforcement,
(2) set minimum requirements
for certification
of a community's workable program, which must include information showing the community's progress in adopting and enforcing housing
codes and be certified
by HUD before the community is eligible
for other
a new requirement iniurban renewal programs, and (3) apply, nationwide,
tiated by one HUD area office for code inspection
and compliance as a condition for Federal Housing Administration
mortgage insurance.
HUD acknowledged that more needed to be done and said that it planned
to work with the cities
to develop their techniques and capacities
for evaluating the adequacy and effectiveness
of local code enforcement activities.
Projects
approved for
inappropriate
areas
The objectives
of the Code Enforcement Grant Program were to prevent
the spread of blight and,to preserve good neighborhoods by using Federal
aid to restore basically
sound housing which was beginning to deteriorate.
HUD had frequently
approved projects
in areas where housing was too detein two
riorated
for code enforcement to work. GAO's review of 10 projects
HUD regions showed that only three were in areas appropriate
for code enforcement and that seven were in areas which should have been either rehabili tated or redeveloped,
HUD's guidelines
for selecting
appropriate
code enforcement areas were
inadequate because they did not take into consideration
the degree of deterioration
in the structures
and the incomes of property owners.
Intensive
57
DEPARTMENTtiF HOUSINGAND URBANDEVELOPMENT
C&iMUNITY DEVELOPMENT(continued)
deterioration
coupled with low incomes results in the owners being unable
to make the repairs necessary to bring their properties
into compliance with
housing codes.
GAO recommended that the Secretary of HUD reemphasize the slum prevention objective
of code enforcement and establish
criteria
to insure that the
program be used only in areas appropriate
for preventing housing deterioration.
HUD said that it planned to implement several management changes in
its criteria
for site selection.
HUD did not agree, however, with GAO's
suggestion that HUD's site-selection
criteria
include provision
for more
intensive
testing of the degree of deterioration
in proposed project areas
and the extent of poverty in the areas.
Deficiencies
in staffing
and monitoring
code
enforcement projects
GAO found that additional
time and administrative
costs had been incurred because HUD had not adequately reviewed the communities'
plans to
insure that the proposed staffing
would be adequate to complete the code
enforcement projects
in the approved time periods.
Also, HUD had not ade,.
quately monitored the projects to identify
and correct problems causing
In response to GAO's recommendations, HUD said that it planned to
delays.
implement administrative
changes to improve its management of the program.
Gveremphasis on public
improvements
GAO found that as of June 30, 1970, about 54 percent of all code enforcement funds approved by HUD had been for public improvements.
GAO believes that the Congress intended that the code enforcement program should
concentrate on preventing housing deterioration
and arresting
blight and
that spending for public improvements (paving streets,
repairing
sidewalks,
etc.) should be minimal.
GAO recommended that the Secretary of HUD have procedures established
to provide for a more critical
review of requests for public improvements.
To do so, HUD would have to revise its criteria
to provide sufficient
and
adequate guidance for approving public improvements in code enforcement
projects.
HUD commented that, although it believed public improvements
were important to the success of the program and, in some cases, essential
public improvements were keys to the success of the projects,
it was reviewing its present policy and expected to provide clearer guidelines
as
part of its overall review of the program.
(~-118754, June 26, 1972.)
58
DEPARTMENTOF HOUSINGAND URBANDEVELOPMENT
HOUSINGPRODUCTIONAND MORTGAGECREDIT
Benefits could
of designs for
be realized
through reuse
public housing projects
Most of the 2,500 public housing projects approved and subsidized by HUD
Since designs are ofsince July 1965 have been based on individual
designs.
ten reused in the construction
of private housing, motels, schools, and other
GAO made a review to determine the benefits
public and private buildings,
that might feasibly
be realized
by reusing designs in the construction
of
public housing projects.
GAO's review showed that construction
of public
pedited and that project costs could be significantly
were reused.
1
housing could be exreduced if designs
One of the major benefits of reusing designs is that construction
can be
started earlier.
Information
obtained during GAO's review indicated
that construction
of public housing projects could be started from 5 to 19 months
sooner when designs were reused.
;i
GAO's review showed also that reuse of designs could result in reductions in (1) design costs and (2) labor and material costs, because of the
avoidance of price escalation.
GAO estimated that such cost reductions
could have amounted to about $31 million
in fiscal
year 1970 if 50 percent
of the projects placed under construction
during that year had been based
on existing
designs.
Over 55 percent of the 700 housing projects placed in construction
during fiscal
year 1970 were turnkey projects
for which local housing authorities (LHAs) had not acquired title
to the designs.
GAO recommended that HUD implement procedures to encourage greater reuse
of designs for public housing projects and require that LHA contracts with
developers under the turnkey method provide for acquiring title
to designs so
that they will be available
for reuse on other turnkey projects
and on conventional
projects also.
HUD agreed that there was potential
for economies in reusing designs
modified to fit different
sites, but stated
that there were constraints
which limited
the degree to which reuse of designs was feasible
to produce
savings.
HUD stated that public housing should not become standardized
and must
reflect
the architectural
standards of the neighborhood and community.
Since an inventory of approximately
1,400 designs could be made available
to LHAs for selection,
GAO believes that such variety would preclude the
necessity of duplicating
a project in any one community.
HUD stated
extensive effort
also that implementation
of design reuse would involve an
and widespread cooperation
by LHAs and architectural
firms
59
/
I
DEPARTMENTOF HOUSINGAND URBANDEVELOPMENT
HOUSINGPRODUCTIONAND MORTGAGECREDIT (continued)
servicing
them, as well as considerable
Federal effort
in providing assistance. GAO interviews
indicated
that there is a willingness
by both LHAs and
architects
to participate
in the reuse of designs.
GAO therefore believes
that the Federal assistance needed to promote such a program should be provided and that the costs for such assistance would be minimal compared to the
savings in time and costs that could be achieved.
HUD stated that public housing sites differed
so widely that completely
new site and landscape plans were inevitable.
GAO agrees that basic designs
generally have to be modified to meet local conditions
and foundation requirements but believes that such modifications
would not represent a major problem. Representatives
of an engineering and building
firm stated that necessary changes in basic building
designs could be identified
and made within
30 days after a proposed site was selected.
Although HUD stated that it hoped to develop a systematic method of
bringing superior project designs to the attention
of housing authorities
on a nationwide basis, GAO believes that HUD's proposal to encourage the reuse of only superior designs would limit the inventory of project designs
which LHAs could choose from and would not afford LHAs the opportunity
to reuse project designs which go unrecognized but which are otherwise attractive,
well-designed,
and perhaps suitable to the needs of local communities.
(B-114863, Dec. 2, 1971.)
60
DEPARTMENTOF HOUSINGAND URBAN DEVELOPMENT
HOUSINGPRODUCTIONAND MORTGAGECREDIT (continued)
Benefits could be realized
by revising policies
and practices
for acquiring
existing
structures
for low-rent public housing
The low-rent housing program is designed to make decent, safe, and sanitary dwellings available
to low-income families
at rents within their financial means. HUD provides financial
and technical
assistance to LHAs, which
develop and/or acquire, own, and operate low-rent public housing projects to
accomplish this aim.
To provide low-rent public housing, LHAs use several methods--conventional construction,
turnkey, direct acquisition
of existing
privately
owned
dwellings , and leasing.
Use of direct acquisition
method
does not increase housing supply
GAO reviewed HUD's and LHAs' practices
and procedures relating
to the
direct acquisition
method of obtaining existing,
occupied standard structures
and found that, although the method had the advantage of being expedient,
it
had certain disadvantages which tended to make it less desirable than other
methods.
By using the direct acquisition
method, the LHAs increased the supply of
low-rent public housing but did not directly
help to achieve the national
housing goal of increasing
the housing supply.
GAO's review of 15 projects
in eight selected cities
or metropolitan
areas showed that about $80 million
had been expended by the LHAs to acquire
the projects without increasing
the supply of standard housing by a single
unit.
HUD's analyses of housing-market
conditions
showed that, in seven of
the eight cities,
a need for both subsidized and nonsubsidized
standard housing existed at the time of the acquisition
of these projects.
The LHAs' action, therefore,
did not improve the overall condition
of the housing market.
It appears that, in such cases, the construction
of new housing and the rehabilitation
of substandard housing would be the preferred method and would
use Federal funds more effectively
by adding to the supply of standard housing.
GAO proposed that HUD limit
its financial
assistance to LHAs to the acquisition
of privately-owned
standard housing at those locations
where the
supply of such housing exceeds the demand and terminate the acquisition
of
currently
occupied, privately-owned
standard housing which is in
existing,
the planning or early development stages and use the funds instead to finance the construction
of new low-rent public housing projects
or to purchase
and rehabilitate
existing
substandard housing.
HUD did not agree with this limitation
because it felt that such a practice would be too restrictive.
HUD commented that, despite an overall
demand
for unsubsidized housing in a community, for various reasons, some structures
would not meet the demand.
DEPARTMENTOF HOUSINGAND URBAN DEVELOPMENT
HOUSING PRODUCTIQNAND MORTGAGECREDIT (continued)
GAO agreed that, if certain standard housing had a high vacancy rate and
could be purchased at an acceptable price, acquisition
of such housing by an
LHA would be beneficial.
Of the 15 projects reviewed by GAO, however, all
had low vacancy rates.
Acquired units are not being
used to house those most in need
GAO's review showed that the acquisition
of privately
owned standard
housing generally had not resulted in substantially
reducing the number of
families
or persons living
in substandard housing, because many of the occupants of the acquired housing units had previously
lived in standard housing.
Some of the families
occupying the acquired units had incomes exceeding
Also, some persons
the established
limits
entitling
them to public housing.
were occupying units larger than those suggested in HUD's guidelines.
Because only a relatively
small number of the occupants of the acquired
housing projects included in GAO's review had previously
occupied substandard
housing, there appeared to be a need for specific
standard admission policies
to insure that those families
or persons most in need are given preference.
GAO suggested that the Congress might wish to require that LHAs give
preference for admission to public housing to occupants of private substandard housing over those who are occupying private standard housing.
Hardships to former occupants
of acquired properties
The acquisition
of privately
owned standard housing has provided standard housing to certain low-income families
sooner than it could have been
provided under the other methods, but it has resulted in (1) hardships to
former occupants of acquired projects who were forced to move and (2) loss of
tax revenues to local governments.
In some cases, the people forced to move
were not given assistance in relocating
although such assistance was provided
for by HUD regulations.
Other displaced occupants were subjected to physical
and financial
hardships.
GAO recommended that HUD, prior to approving LHAs' acquisition
of occupied, privately
owned standard housing, require the LHAs to adequately demonstrate that housing of comparable quality
and rent exists in the areas and
that adequate relocation
assistance will be available
for tenants who will be
displaced.
HUD stated that it was preparing a program description
of the direct acquisition
method which would provide that relocation
responsibilities
and requirements be fulfilled
in accordance with its relocation
handbook that requires the submission of a complete.relocation
plan.
62
DEPARTMENTOF HOUSINGAND URBAN DEVELOPMENT
HOUSING PRODUCTIONAND MORTGAGECREDIT (continued)
Need to assure that prices
of acquired properties
are
reasonable
GAO's review indicated
that HUD needed to improve its procedures to provide adequate assurance that the prices of acquired properties
are reasonable.
GAO recommended that HUD establish
appraisal requirements
for the
direct acquisition
method similar
to those established
for the turnkey method
which require that two independent cost estimates be obtained and provide
that the total price be no greater than the average of the cost estimates.
HUD agreed with this recommendation.
HUD stated that revised procedures were
being prepared that would include pertinent
instructions
and regulations.
(B-114863, Sept. 7, 1972.)
63
DEPARTMENTOF THE INTERIOR
Contents
Page
BONNEVILLE POWERADMINISTRATION AND BUREAUOF RECLAMATION
Charges for use of Federal electrical
power transmission
lines should be reevaluated
67
BUREAUOF RECLAMATION
Need for revision
in interest-rate
criteria
for determining
financing
costs of water resource projects
Need for comparison of scheduled and actual repayments of
Government's investment in Missouri River Basin hydroelectric
system
Need for development of public recreation
facilities
at
Lake Berryessa, California
69
BUREAUOF LAND MANAGEMENT,BUREAU OF INDIAN AFFAIRS, AND
GEOLOGICALSURVEY
Need for improvements in administration
of surface exploration, mining, and reclamation
regulations
Need to appraise adequacy of application
fees for coal
exploration
and mining permits and leases
Need to develop procedures for implementing the National
Environmental
Policy Act of 1969
BUREAUOF LAND MANAGEMENTAND GEOLOGICALSURVEY
Improvements needed in administration
of Federal
leasing program
67
69
70
71
73
73
74
74
75
coal75
BUREAUOF MINES
Improvements needed in assessment and collection
of penalties --Federal Coal Mine Health and Safety Act of 1969
77
BUREAUOF INDIAN AFFAIRS
Increased income could be earned on Indian trust monies
Opportunity
to improve Indian education
Slow progress in eliminating
substandard Indian housing
79
79
79
80
GEOLOGICALSURVEY
More specific
policies
and procedures needed for determining royalties
on oil from leased Federal lands
83
OFFICE OF TERRITORIAL AFFAIRS
Opportunities
for improving
of Government Comptroller
effectiveness
for Guam
6.5
of activities
77
83
85
85
DEPARTMENTOF THE INTERIOR
BONNEVILLE POWERADMINISTRATION AND
BUREAU OF RECLAMATION
Charges for use of Federal electrical
transmission
lines should be
reevaluated
power
The Bonneville
Power Administration's
wheeling rates--fees
charged for
transmitting
non-Federal power over Federal transmission
systems--in
effect
in fiscal year 1970, had not been adjusted for changes in costs and other
factors that had occurred after the rates were established
in 1956, and the
wheeling revenues received in 1970 were inadequate to recover the cost of
providing wheeling services.
At its Missouri River Basin Project,
the Bureau of Reclamation generally
had paid for Federal power transmitted
over private transmission
systems at a
standard rate and had charged the same rate for non-Federal power transmitted
over the Federal system. The General Accounting Office (GAO) was unable to
determine the basis on which the standard rate had been established
or
whether the rate was intended to recover the Government's costs of providing
the wheeling services.
Bureau officials
stated that periodic reviews had
not been made of the adequacy of the standard rate.
GAO recommended that the Secretary of the Interior
(1) establish
a
policy providing specific
criteria
as to the cost elements or other factors
to be considered by the power agencies in developing wheeling rates and
(2) require the power agencies to periodically
reevaluate
the adequacy of
wheeling rates.
With respect to GAO's first
recommendation, the Department stated that
it had, within general principles,
approved established
criteria
and guidelines for determining wheeling rates, but that specific
criteria
had not
been established
because of the complexities
involved and the advantages
in system management of retaining
flexibility
of criteria
in determining
specific
wheeling charges.
With respect to GAO's second recommendation,
the Department stated that the power agencies were continually
involved in
the determination
of the adequacy of the wheeling rates and that each established wheeling rate was reviewed at least once every 5 years.
The Department did not furnish GAO either Department-approved
criteria
or guidelines
which required &hat wheeling rated be adequate to recover the
cost of wheeling services or evidence that periodic
reviews of the adequacy
of the wheeling rates had been made by the power agencies.
In GAO's opinion,
the varying circumstances
involved in wheeling power and the advantages of
having flexible
criteria
do not overcome the need for a policy which clearly
defines the elements of cost to be considered in developing wheeling rates
because, in the absence of such a policy,
significant
variances will continue
to exist between and within the agencies relative
to the establishment
of
wheeling rates.
In view of its findings,
GAO continues to believe that the
actions recommended are necessary to recover from wheeling customers the
full cost of providing wheeling services and therefore should be implemented.
(~~114858, Sept. 29, 1971.)
67
,,DEPARTMENTOF THE INTERIOR
BUREAUOF RECLAMATION
Need for revision
in interest-rate
criteria
for
determining
financing
co&
of
water resource projects
Multipurpose
water resource projects
are constructed,
operated, and
maintained by the Federal Government through the Bureau of Reclamation,
Department of the Interior,
and the Corps of Engineers (Civil
Functions),
Department of the Army. The Bureau also makes loans to assist State and
local organizations
in developing small reclamation
projects.
Costs repayable by project users generally
include (1) the Government's investment-land acquisition
costs, construction
costs, and interest
capitalized
during
construction--and
(2) annual interest
on the unrepaid investment in the
project or loan.
The rates at which interest
is capitalized
and is payable
annually on the unrepaid Federal investment in the projects
are based on
formulas and criteria
in existing
legislation.
The Water Supply Act of 1958 (43 U.S.C. 390) prescribes
criteria
for
computing interest
rates on the Government's investment in municipal and
industrial
water supply projects.
The act requires that interest
rates be
computed on the basis of the computed average interest
rate payable by
Treasury on those outstanding obligations
which are neither due nor callable
for redemption for 15 years from their dates of issue.
GAO's review of three Bureau and two Corps multipurpose
projects
in the
Southwestern United States, constructed at a total cost of about $170.4 million, showed that basing interest
rates on criteria
prescribed in the 1958
act rather than on rates more representative
of Treasury's borrowing costs
--resulted
iri'the Government's understating
its investment in the municipal
and industrial
water suppiy features of the projects by about
$5 million
and
--will
result in reduced annual interest
payments of about $80 million
to Treasury on'the Government's unrepaid investments in the projects
during the repayment-period.
The interest
rate criteria
in the 1958 act also applies to the interest
charged on repayable costs associated with the recreation
and fish and widelife enhancement feature's of multipurpose
projects.
GAO believes that interest
rates based on such criteria
are not repreof Treasury's cost of borrowing funds to finance multipurpose
projects
and that using current market yields on outstanding Government obligations
of comparable maturity
is the best measurement of the Government's
cost of financing
an activity.
sentative
In addition to charging interest
on certain costs associated with financing Bureau and Corps multipurpose
water resource projects,
the Bureau
charges.interest
on portions of the funds it lends to State and local
69
DEPARTMENTOF THE INTERIOR
BUREAUOF RECLAMATION(continued)
However, the interorganizations
to construct small reclamation
projects.
est rate criteria
used by the Bureau, as prescribed by the Small Reclamation
Projects Act of 1956, as amended (85 Stat. 4881, do not result
in full recovery of the Government's cost of financing
the loans.
GAO recommended that
provide that:
the Congress amend the existing
legislation
to
--The interest
costs to be capitalized
as part of the Government's
investment in water resource projects
be based on an interest
rate
annually prescribed by the Secretary of the Treasury and, in establishing
a rate, the Secretary consider the average market yield,
during the year in which the investment is made, on the outstandin&
marketable obligations
which he considers to be most representative
of Treasury's cost of borrowing money to finance construction
of the
projects.
--The interest
to be paid to Treasury annually on the Goverrhnent's unrepaid investment in water resource projects be based on a composite
of the average market yields used in computing the capitalized
interest costs.
--The interest
on unrepaid small reclamation
loans be charged at the
rate prescribed by the Secretary of the Treasury for the year in
which the loan is made.
The Treasury Department noted that it had long recommended use of current market yields on long-term outstanding Government obligations
of comparable maturities
as the best measurement of the Government's cost of financing an activity.
Treasury said that GAO's recommendation was consistent
with the approach taken by the Congress for other Federal lending and investment activities
in recent
years.
The Department of the Interior
observed that the net effect of GAO's
recommendation would be to make the interest
rate for repayment of all
interest-bearing
debts representative
of Treasury's borrowing rate for the
year in which the investment or loan was made. Interior
noted that, although it had revised its interest
rate criteria
for new Federal power
projects
to more nearly reflect
the current cost of money borrowed to finance power projects,
the Congress had been reluctant
to deviate from the
interest
rate criteria
in the 1958 act.
(~-167712, Aug. 11, 1972.1
Need for comparison of scheduled and actual
repayments of Government's investment in
Missouri River Basin hydroelectric
system
The Bureau of Reclamation has not published or prepared annual rate
and repayment studies since 1963 to show whether electric
power rates are
adequate to repay the Federal investment in the Missouri River Basin hydro-electric
system within the required 50 years,
The results
of similar
studies usually are published annually for other Federal hydroelectric
power
projects.
70
DEPARTMENTOF THE INTERIOR
BUREAUOF RECLAMATION(continued)
GAO is of the view that the Bureau, in addition to publLshing annual
rate and repayment studies for the power projects,
should publish supplementary statements comparing the actual repayments to date with the schcd-uled repayments established
on an orderly basis for repaying the investment
in the projects within the repayment period.
Such comparisons would show
whether the scheduled repayments were being met in accordance with predetermined milestones
and, if not, the extent of the deficiencies.
Such comparisons also would provide management and the Congress with a basis for
inquiry into the action necessary to insure that revenues will be available
to meet the increased repayments required during the remainder of the rcpayment period.
Although the legislation
authorizing
the Missouri River Basin integrated projects
does not require that the Federal investment therein be repaid in regularly
scheduled annual amounts, GAO computed the annual repayments required for repaying the Federal investment in the projects over a
50-year period on the basis of two amortization
methods--the compoundinterest
amortization
method and the straight-line
amortization
method.
GAO's comparison of the actual repayments as of June 30, 1969, with
the cumulative computed annual repayments required under each of these
methods showed that the deficiency
in the actual repayments would have been
about $41.8 million
under the compound-interest
amortization
method and
about $131.2 million
under the straight-line
amortization
method.
Preparation
of annual rate and repayment studies supplemented with
statements comparing actual repayments with scheduled repayments established
on an orderly basis , which GAO recommended, would provide useful information
for inquiry into how the additional
revenues will be obtained and into the
adequacy of power rates.
The Department agreed that the Bureau should give consideration
to the
practicability
of publishing
an annual rate and repayment study, but did not
agree that a supplemental statement showing the status of repayments was
GAO believes,
however, that a comparison of actual repayments
necessary.
with scheduled repayments is needed for evaluating
the adequacy of revenues
in meeting repayment requirements.
(B-125042, Feb. 28, 1972.)
Need for development
recreation
facilities
Berryessa, California
of public
at Lake
The Bureau of Reclamation entered into a management agreement with
Napa County, California,
in July 1958 for the administration
and development
of recreational
facilities
at Lake Berryessa, California.
This agreement,
rewritten
in 1962, provided that the county , and all parties acting under
its authority,
would develop the Lake Berryessa area in accordance with a
public use plan prepared by the National Park Service in 1959. The plan
stipulated
the areas that should be developed and the number of boat launching, picnicking,
and other recreational
facilities
that should be provided
in each area.
71
DEPARTMENT
OF THE INTERIOR
--"-.---I
BUREAUOF RECLAMATION(continued)
GAO reported to the Secretary of the Interior
that the Bureau had not
adequately controlled
the development of public recreational
facilities
at
Lake Berryessa and that the general public has been severely restricted
in
its access to and use of the lake because of (1) extensive development by
concessionaires
of mobile-home parks along the shoreline and (2) the failure to provide recreational
facilities
in accordance with the plan.
The
principal
development at the lake has been the construction
of mobile-home
parks which occupy some of the most desirable areas along the shoreline.
GAO recommended that
the Secretary
of the Interior
--require
the Bureau of Reclamation to act to insure adequate development of public recreational
facilities
at the lake, as provided in
the proposed revised public use plan;
--require
the Bureau to prescribe suitable accounting records
maintained by the concessionaires
operating the facilities;
to be
and
--consider
the feasibility
of obtaining Federal authorization
and funding for capital improvements at the lake, to reduce the reliance on
others for development of public recreational
facilities.
The Bureau indicated that it was aware of the problems at the lake and
was considering
various corrective
actions,
including
taking over the management of the lake.
(B-174172, Feb. 22, 1972.)
72
DEPARTHENT
OF THEINTERIOR
BUREAU
OF LANDMANAGEMENT,
BUREAU
OF INDIAN AFFAIRS, AND
GEOLOGICAL
SDRVEY
At the joint request of the Chairman and the ranking minority memberof
the Conservation and Natural Resources Subcommittee of the House Committee
on Government Operations, GAQreviewed the Department of the Interiorss administration .of regulations for, surface exploration, mining, and reclamation
of public and Indian coal lands,
In January 1972 the Department estimated that 41 million acres of the
825 million acres of public land had coal deposits, Of the 41 million acres,
1.6 million were covered by prospecting permits or mining leases. The Department also estimated that 13.5 million acres of the 50 million acres of
Indian lands had coal deposits. Of the 13.5 million acres, 700,000 were
covered by coal prospecting permits or mining leases,
Need for improvements in administration of
surface exploration, mining, and reclamation
regulations
On January 18, 1969, the Department of the Interior issued new regulations for surface exploration, mining, and reclamation of public and Indian
lands, to avoid, minimize, or correct damageto the environment and hazards
to public health and safety.
These regulations, which apply only to permits
and leases issued, extended, or readjusted after January 18, 1969, do not
provide specific requirements for exploration, mining, or reclamation activities.
The specific technical requirements for such activities
are based
on examinations (called technical examinations) and are included as special
stipulations in permits or leases granted by the Department to the mining
operators.
Permits and leases on-public and Indian lands are administered by the
Department's Bureau of Land Management(BIM) and Bureau of Indian Affairs
(BIA), respectively.
The Department's Geological Survey (Survey) is responsible for providing scientific
and technical advice to both BLMand BIA.
GAO's review of 65 permits and leases (53 for BLMand 12 for BIA) showed
that:
--The required technical examinations had not been conducted for 35 of
the permits and leases. The purpose of a technical examination is
to determine the effects that the proposed exploration or mining
would have on the environment and to serve as a basis for formulating
appropriate reclamation requirements.
--Some permittees were operating without approved exploration plans-an essential element of control in protecting the environment--and
some plans had been approved without technical examinations,
--Some required compliance and performance bonds had not been obtained
'from the operators.
The amounts of some of those that had been
73
DEPARTMENTOF THE INTERIOR
BUREAUOF LAND MANAGEMENT,
BUREAUOF INDIAN AFFAIRS, AND
GEOLOGICALSURVEY (continued)
obtained were insufficient
to meet the estimated
tion requirements of the permits or leases.
cost of the reclama-
--Some of the reports required to be submitted by the operators at
various stages of their operations on such matters as grading and
and abandoning of operations had not been rebackfilling,
planting,
ceived by the Department.
GAO recommended that the Secretary of the Interior
clarify
the requirements of the Department's regulations
by providing guidance as to (1) the
timing and scope of technical
examinations and the submission and approval
of exploration
and mining plans, (2) the required amount of performance
bonds, (3) the need for adequate documentation of the results of the activities conducted under the regulations,
and (4) the need for documented periodic reviews of the administration
of the regulations,
Department officials
stated that appropriate
actions would be taken
by BLM, BIA, and the Survey to develop procedures which would clarify
the
requirements of the regulations
and to require adequate documentation of the
results of the activities
conducted under the regulations.
Need to appraise adequacy of
application
fees for coal exploration
and mining permits and leases
The Department requires an applicant
to submit a $10 fee with each perThe fee was to
mit and lease application
for coal exploration
or mining.
Because personnel costs
recover the cost of processing the applications.
have nearly doubled since the amount of the fee was established
and because
the regulations
now require a more comprehensive evaluation
of the applicaGAO recommended that the Secretary of the
tion than previously
required,
Interior
appraise the adequacy of the $10 fee.
Department officials
agreed
to study the matter and indicated
that fees would be adjusted,
if warranted.
Need to develop procedures for
implementing the National
Environmental Policy Act of 1969
BT.Jl procedures for applying the provisions
of the National Environmental
Policy Act of 1969 to the exploration
or coal mining operations did not
comply with guidelines
of the Council on Environmental
Quality because they
did not outline the criteria
to determine when and under what circumstances
environmental
impact statements should be prepared.
Also, BIA had not developed procedures for the preparation
of impact statements.
Both agencies
stated that they would issue the necessary procedures, as recommended by
GAO, (~-148623, Aug. lo, 1972.1
74
DEPARTMENTOF THE INTERIOR
BUREAUOF LAND MANAGEMENT
AND
GEOLOGICALSURVEY
Improvements needed in administration
of Federal coal-leasing
program
'
In a review of the Department of the Interior's
program for leasing
Federal lands to be used for mining coal, GAO found that only limited mining of coal had been conducted on leased Federal lands, and most lessees
apparently had no immediate plans to begin mining operations.
The Department permitted this condition
to exist by issuing leases for indeterminate
periods with no requirement that coal be mined if the lessee made a minimum
royalty payment for 1 year in advance. GAO recommended that the Department
consider discontinuing
the issuance of leases that permit lessees to defer
or suspend mining operations without special justification.
GAO also found that the Government had not received equitable royalties
for coal produced on Federal lands because (1) royalties
were computed on
the basis of a fixed amount a ton which did not take into account variances in costs of extracting
coal and in coal selling
prices and (2) increases in royalty rates were not applied to outstanding
leases on a timely
basis, inasmuch as lease terms could be adjusted only at ZO-year intervals.
Although an improved method, which provides that royalties
be computed on a
percentage of the value of coal mined, was adopted in February 1971, it was
not to be applicable
to existing
leases until
their terms were adjusted at
the expiration
of the ZO-year lease periods.
GAO recommended that the Department study the desirability
of seeking a change in the law that would
permit the adjustment of royalty rates and other lease terms on a more
timely basis.
The Department advised
(B-169124, Mar. 29, 1972.)
GAO that
it
75
would consider
its
recommendations.
DEPARTMEXI OF THE INTERIOR
BUREAUOF MINES
Improvements needed in assessment and
collection
of penalties--Federal
Coal
Mine Health and Safety Act of 1969
In July 1972 GAO reported to the Chairman, Conservation and Natural
Resources Subcommittee, House Committee on Government Operations, on its
review of the Department of the Interior's
implementation
of the civil
penalty provisions
of the Federal Coal Mine Health and Safety Act of 1969.
Delays in assessing
penalties
GAO found, in sampling assessments, that (1) about 4 months elapsed
from citation
of a violation
by a mine inspector to assessment of a penalty
and ('2) about 10 weeks elapsed from the request for a hearing by a mine operator to the Bureau's referral
to the Department's Solicitor's
Office for
initiation
of the hearings process.
The Chief of the Assessment Office
stated that, although an initial
backlog of 39,000 violation
citations-created during the period following
a temporary order of the court restraining the assessment of penalties--was
eliminated
by June 1971, the time required for processing the initial
backlog resulted in a further backlog and
in time lapses in assessing penalties
throughout 1971.
The Chief stated further that, as of February 18, 1972, the backlog
was down to 5,800. According to the Chief,after
January 1972 penalties
were being assessed within 30 days of receipt of citations
of violations
by
the Assessment Office.
This 30-day period was not comparable to the
4-month average mentioned above because it did not include the time from
the citation
of a violation
to its receipt by the Assessment Office,
The Bureau's management control system was not adequate to readily
identify
the status of cases and to provide data needed to identify
and correct the causes of processing delays,
The Bureau was changing its system
at the time of GAO's review, and GAOrecommended that the Director,
Office
of Survey and Review, Department of the Interior,
be given responsibility
for determining whether the revised system, when installed,
is effective
in
meeting management's needs.
Delays in conducting
hearings
Significant
delays in referring
cases for hearings and in conducting
hearings on cases disputed by mine operators resulted in a backlog of 1,062
cases awaiting hearings at December 31, 1971. The Director of the Hearing
Office informed GAO in March 1972 that certain steps were being taken or
planned to expedite the processing of cases.
GAO recommended that the Director,
Office of Survey and Review, be given responsibility
for evaluating
the effectiveness
of the actions taken to speed the processing of the cases.
77
DEPARTMENTOF THE INTERIOR
BUREAUOF M-INES (continued)
Consideration
of factors
required
by law
Bureau officials
stated that the six statutory
factors which the act
requires to be considered in determining
the amounts of penalties
to be assessed were considered in making assessments.
GAO noted, however, that
(1) no written guidelines
had been established
to aid the assessors in considering the factors,
(2) there was no documentation of the consideration
given to each of the factors by the assessors, and (31 no such documentation was required,
GAO believes that the Bureau should (1) develop written
guidelines
defining the factors and the consideration
and weight that
should be given to each, (2) make the guidelines
available
to mine. operators so that they can better understand how penalties are assessed, and
(3) require assessors to document adequately the consideration
and wejght
they give to each factor in assessing a penalty.
Limited
collection
results
GAO reported also that 9 as of November 30, 1971, there were 1,785 assessment cases on which collection
action should have been taken.
As of
December 31, 1971, no collection
action had been taken on about 60 percent
of these cases and action taken on the remaining 40 percent had not been
timely,
The Chief of the Assessment Office stated that primary efforts
had
been, and would continue to be, directed toward assessment of penalties
because it was important to impress upon mine operators that violations
of
regulations
would result in penalty assessments.
GAO recommended that the
collection
of penalties
be given equal priority
with their assessment.
Staffing
of Assessment Office
By December 31, 1971, the Assessment Office had filled
only 4 of the
12 permanent assessor positions
authorized under fiscal
year 1972 appropriations
because of problems in attracting
qualified
personnel and manpower
limitations
imposed by the Office of Management and Budget.
Hn November
1971, the Assessment Office began developing plans ta decentralize
the assessment operation by establishing
four field offices,
which were expected
to assist in attracting
qualified
personnel.
(~-170686, July 5, 1972.)
7s
DEPARTMENTOF THE INTERIOR
BUREAUOF INDIAN AFFAIRS
Increased
on Indian
income could be earned
trust monies
At the joint request of the Chairman, Subcommittee on Indian Affairs,
Senate Committee on Interior
and Insular Affairs,
and Senator Mike Gravel,
the General Accounting Gffice (GAO) reviewed the procedures and policies
of
the Bureau of Indian Affairs
(BIA) for managing Indian trust monies.
GAO
found that additional
income could have been earned if surplus Tribal Trust
Funds under BIA's control and available
for investment had been invested at
yields comparable to those earned on investments of other Tribal Trust Funds.
BIA's area and agency office officials
were not able to invest funds
promptly as they became available,
because the monthly financial
reports
they received from the Division
of Financial
Management contained data up
Also, these officials
seldom used the information,
even
to 45 days old.
though it was untimely,
to determine whether funds were available
for investment and to advise Indian groups on possible investments.
GAO recommended that the Department of the Interior
require the Commissioner of Indian Affairs
to determine and implement the most effective
and
economical method of realizing
the maximum possible investment return on
Tribal Trust Funds. The Department concurred with this recommendation but
stated that existing
policies
and procedures provided such a method. GAG
believed,
however, that BIA's policies
and procedures did not provide the
needed assurance that all Tribal Trust Funds were invested to the maximum
extent possible.
(B-114868, April 28, 1972.)
Opportunity
to improve Indian
education
The major goal of BIA's education program is 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. In April 1972,
GAG reported to the Congress that BIA had made relatively
little
progress
toward attaining
this goal.
BIA had not adequately communicated the goal
to its area offices and schools and had not developed a specific
plan for
identifying
and overcoming obstacles to, or for measuring progress toward,
its accomplishment.
Certain factors which adversely affected students'
abilities
to achieve
at the national average were not fully dealt with in the established
school
programs.
These factors included the need for (1) compensatory training
in
English communication skills,
(2) special education programs, (3) professional counseling services,
and (4) a sufficient
number of substitute
teachers.
Also, BIA did not have an effective
management information
system
which would provide education program officials
with data necessary for
identifying
educational
needs of Indian children,
designing programs and
activities
for accomplishing
educational
goals, allocating
resources to
these programs, and evaluating
the costs and benefits
in relation
to the
goals.
79
DEPARTMENTOF THE INTERIOR
BUREAUCrF INDIAN AFFAIRS (continued)
The Department of the Interior
stated that it was in general accord
with GAG's findings and that its conclusions and recommendations would constructively
support the Department's efforts
to improve the Indian education
program.
The Department outlined a number of steps to be implemented for
identifying
and assigning priorities
to deal with all critical
factors known
to impede accomplishment of the program goal.
Concerning GAO's recommendation for establishing
periodic milestones-such as the amount of improvement in the academic-achievement
level necessary at the end of each successive year to accomplish the established
goal-and for making periodic evaluations
of program results,
the Department
stated that these exercises were impractical
because the goal must be
tempered by the reality
of Indian self-determination,
the special nature of
the students served, and the availability
of funds.
GAO believes,
however, that, in the Indian education program, effective
management requires the development of an appropriate
strategy for meeting
established
goals and the periodic evaluation
of progress toward meeting
these goals.
(~-161468, April 27, 1972.)
Slow progress in eliminating
substandard Indian housing
The goal of the Indian housing program is to eliminate
substandard
housing on reservations
in the 1970's.
GAO reported to the Congress in
October 1971 that the program's progress had been slow and, unless it was
accelerated substantially,
thousands of Indian families
would continue to
live under severe hardship conditions.
The Department of the Interior
informed GAO that the programUs slow
progress was due, in part, to reluctance of some tribes to obtain Federal
housing assistance.
Also, BIA officials
cited delays in obtaining Federal
Other problems were inadequate
financing
as contributing
to slow progress.
identification
of Indian housing needs, and defective
design, incomplete
construction,
and inadequate maintenance of houses.
GAG reported
cause BIA
that housing needs had not been identified
adequately
be-
--had not established
guidelines
for determining whether existing
housing units were standard or substandard and, if substandard,
whether they needed to be renovated or replaced;
--had classified
newly constructed or renovated
although they lacked basic necessities;
--had not insured that inventories
were taken periodically;
and
houses as standard
of housing conditions
and needs
--had not considered family migration,
adjacent off-reservation
Indian
population,
housing deterioration,
and family size and income, in
determining and planning to meet long term needs.
80
DEPARTHENTOF THE INTERIOR
BUREAUOF INDIAN AFFAIRS (continued)
As a result of suggestions GAOmade during its review, BIA issued new
guidelines
providing
standards for general construction,
heating, plumbing,
wiring,
and living
space for use in inventorying
housing needs.
The Department was in general agreement with GAO's conclusions and
recommendations and informed GAO of various actions that had been taken or
planned to improve the program.
(~-114868, Oct. 12, 1971.)
81
DEPARTMENTOF THE INTERIOR
GEOLOGICALSURVEY
More specific
policies
and procedures
needed for determining
royalties
on
oil from leased Federal lands
The Geological Survey (Survey) is responsible
for supervising
oil production on leased Federal lands, maintaining
oil production accounts, and
collecting
oil royalties
on the oil which lessees sell or remove from Federal land.
At the option of the Government, royalties
may be paid in oil
or in cash.
If paid in cash, the amount of the royalty is based on the
value of the oil sold.
In February 1972 GAO reported to the Congress that Survey's regional
officials
had not evaluated adequately the reasonableness of many royalty
payments because of the lack of adequate definitive
criteria
for determining the value of ail sold or removed and its transportation
costs to the
nearest market.
In several cases, information
available
to Survey's regional personnel indicated
that the oil might have had a value greater than
that used to compute the royalties
due the Government.
In response to GAO's recommendation that Survey be required to establish more definitive
policies
and procedures, the Department stated that
Survey would review and revise.its
operating manual to insure proper computation of royalties
due the Government.
Survey also investigated
the specific
cases which GAO brought to its attention
and took corrective
action on these
cases.
(~-118678, Feb. 17, 1972.)
83
DEPARTMENTOF THE INTERIOR
OFFICE OF TERRITORIAL AFFAIRS
Opportunities
for improving effectiveness
of
activities
of Government Comptroller
for Guam
At the request of the Chairman, House Committee on Interior
and Insular
Affairs,
GAO reviewed the effectiveness
of the activities
of the Government
Comptroller
for Guam and the adequacy of support furnished to his office by
the Department of the Interior.
GAO's review
showed that:
--The manner in which the Comptroller
allocated
his audit resources
resulted in certain significant
activities
of the government of Guam
being given very little
attention.
--The Comptroller's
audit reports often did not contain enough information to permit an understanding
of the problems reported,
their
actions needed. These inadecauses, or the necessary corrective
quacies resulted mainly from the Comptroller's
not adhering to auditing standards established
by his office.
--Certain
of the basic support needed to maintain a professional
staff
in the Comptroller's
office was not being furnished by the DepartVacancies on the Comptroller's
staff were not
ment of the Interior.
being filled
on a timely basis.
--Members of the staff were not provided with employee benefits
comparable to those provided to employees of other Federal agencies on
or paying for housGuam: they received no assistance in obtaining
ing, the Department did not pay for the shipment of their privately
office
space had not been furowned automobiles to Guam, suitable
nished to the Comptroller
or his staff , and members of the Comptroller's staff did not have reemploymentrights
with the Department in
the continental
United States.
The Department informed GAO that it intended to take or had taken acto improve auditing and reporting
by the Comptroller
and to improve
The Department did not agree, however,
some of the other conditions
noted.
with GAO's recommendation that reemployment rights be provided and therefore took no action in this matter,
(B-146742, Feb. 2, 1972.)
tion
DEPARTMENT OF JUSTICE
Contents
BUREAU OF NARCOTICS AND DANGEROUS DRUGS
Need for improved
efforts
to prevent
dangerous
illicitly
reaching
the public
drugs
from
IMMIGRATION AND NATURALIZATION SERVICE
Opportunities
to reduce costs of returning
Mexico
aliens
LAW ENFORCEMENT ASSISTANCE ADMINISTRATION
Need for dissemination
of data on existing
information
systems to prevent
duplication
development
costs
criminal
justice
of design and
87
to
G?
DEPARTMENTOF JUSTICE
BUREAUOF NARCOTICS'AND DANGEROUSDRUGS
Need for improved efforts
to prevent dangerous
drugs from illicitly
reaching the public
In April 1972 the General Accounting Office (GAO) reported to the Congress on the manner in which the Bureau of Narcotics and Dangerous Drugs
(BNDD), Department of Justice,
was carrying out its responsibility
to curb
the flow of dangerous drugs (stimulants
and depressants) from legitimate
manufacturers to the illicit
market.
BNDD estimated that about 90 percent of
the dangerous drugs in the illicit
market were diverted from licensed
sources--manufacturers,
distributors,
doctors, and pharmacists--either
intentionally
or unintentionally,
into the hands of illicit
dealers.
that
GAO noted that BNDDwas making some progress in curbing
much more needed to be done. GAO reported that:
1. Opportunities
existed
garding drug diversion
for BNDDto improve its
by
--developing
a more complete
tion markings,
inventory
--developing
a procedure for identifying
seized by State and local enforcement
diversion,
information
but
system re-
of manufacturers'
identifica-
the manufacturers
groups,
of drugs
--developing
a more systematic method for obtaining
drug manufacturers and distributors
on suspected
chases,
information
from
illegal
drug pur-
--developing
a procedure for obtaining
services on possible drug diversion,
from the military
information
and
--defining
the types of statistical
information
and local agencies on dangerous drug thefts,
desired
seizures,
from State
and arrests.
2. BNDD needed to increase its activity
in monitoring
the drug industry's compliance with Federal regulations.
As a result of congressional action, BNDD developed plans to increase significantly
its
monitoring
activities.
GAO believed that BNDD's plans, if effectively
carried out, would provide added assurance that drug firms
were complying with Federal regulations.
3. BNDD needed to work with the drug industry to establish
selfregulation
guidelines
for members of the industry,
develop a means to
disseminate self-regulation
information
to all members, and establish
a procedure for gathering information
on self-regulation
measures
taken by them.
4. A need existed for increased monitoring
of licensed drug retailers!
activities.
BNDD was establishing
agreements with States to share
the monitoring
of these retailers
although some of the States involved
89
DEPARTMENTOF JUSTICE
BUREAUOF NARCOTICSAND DANGEROUSDRUGS(continued)
have limited
capabilities
to carry out the monitoring
activities.
began to evaluate systematically
the capabilities
of the States
effective
monitoring programs.
Also SNDD
tc
carrv
w!i
GAOmade several recommendations to BNDD for strengthening
its methods
to curb diversion.
The Department of Justice agreed that GAO's recommendations were valid and said that they would be implemented, to ,the greatL.s:
on a priority
basis.
extent possible,
With respect to suggesting that BNDD define the types of statisticcneeded from States and local agencies, the Department said that development
of a .uniform collection
program would require extensive time, effort,
and
resources and would hamper present operations.
The Department stated that
BNDD, the Federal Bureau of Investigation,
and the Law Enforcement Assistance Administration
were establishing
a task force to consider this matter.
(B-175425, April 17, 1972.)
90
DEPARTMENTOF JUSTICE
IMMIGRATION AND NATURALIZATION SERVICE
Opportunities
to reduce costs
aliens to Mexico
of returning
In an August 1971 report, GAO informed the Department of Justice that,
in GAO's opinion, the In-migration and Naturalization
Service (INS) could reduce the costs in its Southwest Region of transporting,
for return to Mexico,
aliens illegally
in the United States, by:
--Transporting
the aliens in INS-owned buses exclusively.
that it was much more expensive to transport
the aliens
planes than in INS-owned buses.
GAO showed
in INS-owned
--Requesting
aliens who are financially
able, to pay their own transporThe INS Southwest Region did
tation costs within the United States.
not request aliens who were financially
able, to pay the costs of their
transportation
from the point of apprehension to the Mexican border.
In contrast,
the INS Northeast, Northwest, and Southeast Regions did
request aliens to pay for their transportation.
In commenting on GAO's report, the Department of Justice said that INS
was rapidly extending the use of buses in substitution
for the more expensive
transportation
of aliens by plane.
Subsequent to the issuance of the report,
INS discontinued
the use of its three planes in transporting
aliens and began
using buses in their place.
Also, INS began requesting aliens to pay their
transportation
costs when being transported
on chartered buses within the
Southwest Region and stated that it planned to request aliens to pay their
transportation
costs when being transported
on INS-owned buses within that
region.
(B125051, Aug. 26, 1971.)
91
DEPARTMENTOF JUSTICE
LAW ENFORCEMENTASSISTANCE ADMINISTRATION
Need for dissemination
of data on existing
criminal
,justice information
systems
to prevent duplication
of design
and development costs
In March 1972 GAO reported to the Administrator
of the Law Enforcement
Assistance Administration
(LEAA), Department of Justice,
that there was a
need for controls to prevent duplicative
design and development of criminal
justice
information
systems by State and local criminal
justice
agencies.
Under provisions
of the Omnibus Crime Control and Safe Streets Act of
1968, LEAA awards grants for the development of criminal
justice
information
systems.
As of fiscal
year 1971, about $54 mill
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