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ON APPR 0PRIATIONS

HOUSE OF REPRESENTATIVES

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087463

Selected Significant Audit Findings

In The Department Of Defense

- 706190

BY THE COMPTROLLER GENERAL

OF THE UNITED STATES

COMPTROLLER GENERAL OF T H E UNITED STATES

WASHINGTON. D.C. 20548

B-106190

Dear Mr. Chairman:

W e a r e pleased to submit our annual report of selected significant audit findings relating to activities of the Department of Defense.

A similar report relating to the civil departments and agencies of the

Government was submitted separately.

In this report we have included items, selected from audit r e ports previously submitted t o the Congress, which we believe should

be of interest and use to the Committee during the appropriations

hearings for fiscal year 1970. Some of the matters commented on in

this report a r e matters on which the Department has indicated that

corrective action either has been or will be taken. The items have

been included, however, in view of their significance and of the fact

that we have not had a n opportunity to evaluate the adequacy of corrective actions taken.

We shall be pleased t o furnish any additional information that

you may desire.

These findings and recommendations have previously been brought

t o the attention of responsible departmental officials by means of audit

reports. We a r e sending copies of this report to the Department of Defense and to the military departments so that they may be in a position

t o answer any inquiries that may be made during the appropriations

hearings with respect to these findings and recommendations.

Sincerely yours,

Comptroller Gene Pal

of the United States

The Honorable George H. Mahon

Chairman, Committee on Appropriations

House of Representatives

C o n t e n t s

Page

DETERMINATION OF REQUIREMENTS FOR SUPPLIES, EQUIPMENT, AND FACILITIES

Need f o r improvement i n exchange of i n f o r m a t i o n

a f f e c t i n g planned u s a g e of weapon systems

Department of the Army

Need f o r u p d a t i n g of o r i g i n a l p l a n s f o r a c q u i s i t i o n of f a c i l i t i e s p r i o r t o actual a c q u i s i t i o n s

Department of t h e A i r Force

Need f o r improvement i n computation of r e q u i r e ments f o r missile r e p a i r p a r t s

Department of: t h e ArTny

PROCUREMENT PRACTICES AND CONTRACT ADMINISTRATION

Need f o r improvement i n c o n t r o l o v e r Governmentowned p r o p e r t y i n p o s s e s s i o n of c o n t r a c t o r s

Department of Defense

I n c r e a s e d c o s t s t o t h e Government t h r o u g h lease

rather t h a n p u r c h a s e of land and b u i l d i n g s by

contractors

Department of Defense

Need t o i n c r e a s e c o m p e t i t i o n i n procurement of

aeronautical spare parts

Department of Defense

Need t o i n c r e a s e c o m p e t i t i o n i n procurement of

coal f o r use i n Europe

Department o m m y

P o t e n t i a l s a v i n g s i n procurement of petroleum

p r o d u c t s f o r use by c o n t r a c t o r s

Department of t h e N a v y

Need f o r improvement i n a d m i n i s t r a t i o n of contracts f o r research studies

Department of t h e Army

STOCK RECORDS AND CONTROLS

Need f o r improvement i n Tnanagement of s u p p l i e s i n

Vietnam

Department of t h e Army

Need f o r improvement i n r e p o r t i n g i n v e n t o r i e s o f

nonexpendable equipment

Department of t h e A i r Force

Keed f o r iinprovernent i n t h e supply management

d a t a system of t h e Army Tank-Autonotive Command

Page

Department of the Army

Need for improvement in the records used in

matching requirements against availability of

stock and effecting redistribution

Department of Defense

Need for improvement in control over repairable

spare parts

Department of the Army

Need for improvement in control of stock levels

of nonstandard aeronautical repair parts

Department of the Navy

SUPPLY MANAGEMENT, GENERAL

Need for improvement in the processing of stock

requisitions

Department of Defense

Need for improvement in supply management of magnetic computer tape

Department of Defense

Need for improvement in funding practices affecting procurement of spare parts

Department of Defense

Potential savings through increased recapping of

aircraft tires

Department of Defense

Potential savings through elimination of duplicate inventories

Department of the Navy

Potential savings through elimination of uneconomical shipments of stock

Department of the Air Force

Potential savings through repairing rather than

scrapping unserviceable spare parts

Department of the Air Force

Potential savings through reuse of shipping containers

Department of the Army

EQUIPMENT MANAGEMENT , GENERAL

Need for improvement in management of inactive

industrial equipment

Department of the Army

Page

Need for improvement in rllanagernent of missionsupport aircraft

Department of the Army

Need for improvement in management of tractortrailer fleet in Europe

Department of the Army

ADMINISTRATION OF MANPOWER MATTERS

Potential savings through conversion of manually

operated furnaces to automatic-type heating

units

Department of Defense

Need for improvement in administration of military pay and allowances

Department of Defense

Need for improvement in management of detailing

of civilian employees

Department of Defense

Potential savings through use of civil service

personnel in lieu of contract personnel

Department of the Air Force

MILITARY ASSISTANCE PROGRAM

Need for screening excess property for feasibility of recovery from recipient countries prior

to release to them for disposal

Department of Defense

Need for improvement in management of equipment

held in storage for the military assistance

program

Department of Defense

AUTOMATIC DATA PROCESSING EQUIPMENT

Need for greater consideration to use of in-house

maintenance of Government-owned automatic data

processing equipment

Department of Defense (and other departments

and agencies)

Potential savings through direct purchase of components and spare parts for automatic data

processing equipment

Department of Defense (and other departments

and agencies)

Page

MANAGEMENT CONTROL SYSTEMS

Need for a study of the coordination of the management review efforts of groups outside the

internal audit organizations

Department of Defense

Favorable opinion on the accounting system for

operations proposed for implementation July 1,

1968

Department of Defense

Need for improvement in reliability of the Air

Force personnel data system

Department of the Air Force

MOVEMENT OF AMERICAN FORCES FROM FRANCE (OPERATION

FRELOC)

Problems incident to relocation of supplies and

equipment

Department of Defense

OTHER AREAS OF OPERATIONS

Potential savings through consolidation of real

property maintenance functions in areas of

highly concentrated military installations

Department of Defense

Need for improvement in control over ammunition

development

Department of the Army

Need for improvement in airlift of cargo to

Southeast Asia

Department of the Air Force

Potential savings through use of available space

on military aircraft to transport baggage between the United States and Europe

Department of Defense

Need for improvement in control over charges for

services provided nonappropriated fund activities and private interests

Department of befens e

Potential savings through use of certified mail

rather than registered mail to transmit confidential material

Page

Department of Defense

Observations on the United States balance-ofpayments position

Department of Defense (and other departments

and agencies)

DETERMINATION OF REQUIREMENTS

FOR SUPPLIES, EQUIPMENT, AND FACILITIES

NEED FOR IMPROVEMENT IN EXCHANGE

OF INFORMATION AFFECTING PLANNED

USAGE OF WEAPON SYSTmS

Department of the Army

In a report issued to the Congress in April 1968, we

stated that Army procedures did not, in OUT opinion, provide a systematic method for the communication and consideration of recommended changes in plans that affect equipment requirements. We found that, had Army officials given

timely consideration to recommendations that usage of the

M-132 flamethrowers be more limited than had been originally planned, the flamethrowers might not have been purchased in excess quantities.

The contracts €or the excess quantities were subsequently terminated at an estimated loss to the Government

of about $2.7 million. (Termination and related costs of

about $4 million less value of usable components of

$1.3 million.)

We advised the Secretary of Defense that there was a

need for systematic procedures to accomplish two things:

First, to ensure formal consideration of recommendations

affecting procurement by top levels of command; secondp to

ensure timely follow-up action by subordinate commands to

determine whether their recommendations had been accepted

or rejected. Accordingly, we suggested that the Army establish appropriate procedures to accomplish this.

The Army concurred in our suggestions and advised us

of procedural changes that had been recently completed or

were nearing completion which, if properly carried out,

should correct the situation disclosed by our review.

(B-146802, Apr. 2 4 , 1968.1

Department of the Air Force

In July 1968 we issued a report to the Congress on our

review of the acquisition by the Air Force of certain test,

launch, and tracking facilities for the TITAN I11 booster

program and a classified satellite program. We found that

these facilities had been acquired in accordance with the

original plans which had not been reevaluated and updated

despite indications that requirements, because of changing

circumstances, were substantially less than originally estimated. Had the plans been reevaluated and updated, we

believe that a substantial portion of the estimated costs

of about $26.3 million, incurred for the following facilities, could have been saved.

Rapid-launch, mobile features of the TITAN I11 launch

complex, Cape Kennedy, Florida--estimated construction

cost of about $23.8 million.

Basic data recording instrumentation and four storage

buildings, Edwards Air Force Base, Californiaestimated procurement and construction cost of about

$820,000.

Tracking and readout equipment installed prematurely

in Alaska--estimated cost of about $1.7 million to

maintain equipment in a caretaker status until needed.

In response to our findings and proposals for strengthening the planning procedures for facilities acquisition,

the Air Force advised us that it had recognized the problem

and was developing criteria specifications €or application

within its existing review system. The Director of Defense

Research and Engineering advised us that the Army and Navy

had reviewed their regulations and that the Navy would modify its existing procedures to provide additional safeguards.

We recommended that the Secretary of Defense take action to ensure that the procedures of the military departments limit the acquisition of facilities to those actually

needed to fulfill firm program requirements. On September 4 , 1968, the Director of Defense Research and Engineering replied to this recommendation on behalf of the Secretary of Defense. The Director stated that the Department

of Defense believed that existing procedures of the Army,

Navy, and Air Force were adequate if fully adhered to. He

stated also that the Air Force and the Navy were taking

steps to strengthen their existing procedures. (B-164027,

July 3, 1968.)

NEED FOR IMPROVEMENT IN COMPUTATION OF

REQUIREMENTS FOR MISSILE REPAIR PARTS

Department of the Army

Our review of requirements computations for expensive

missile repair parts by the Army Missile Command showed a

number of problem areas. In a report issued to the Congress in May 1968, we pointed out that these areas related

primarily to (1) inadequacy of asset and demand data received from user activities, ( 2 ) failure of inventory managers to accurately compile, review, and use historical

supply data, and ( 3 ) inconsistency in the implementation of

supply management procedures and guidelines. These problem

areas contributed to imbalances in the supply system. In

some instances underprocurements were made which could lead

to supply shortages. In other instances overprocurements

were made which could lead to excess material.

The Army agreed, in general, with our findings and

conclusions and initiated several corrective actions which,

we believe, should improve requirements computations.

(3-163706, May 27, 1968.)

PROCUREMENT PRACTICES AND

CONTRACT ADMINISTRATION

NEED FOR IMPROVEMENT IN CONTROL

Department of Defense

We found a need for the Department of Defense (DOD) to

improve its system of controls over Government-owned facilities, special tooling, and material in the possession of

contractors. Our review revealed weaknesses, in general,

with regard to effective use of industrial plant equipment;

rental arrangements; and accounting for, and control of,

special tooling and material. Certain aspects of the work

of Government property administrators and internal auditors

were also in need of improvement. Our report on these

findings was issued to the Congress in November 1967.

We made a number of proposals to improve the administration over Government-owned property. Actions taken or

planned in response to most of our proposals, if properly

implemented, should result in significant improvements in

the control and utilization of such property.

DOD did not fully agree with, or indicate any specific

corrective action on, our proposals to (1) require contractors to furnish machine-by-machine utilization data and to

obtain prior Office of Emergency Planning approval on an

item-by-item basis for the commercial use of industrial

plant equipment and (2) strengthen the controls over special tooling and special test equipment by use of financial

accounting controls. We recommended to the Secretary of

Defense that he reconsider DOD's position on these matters.

We also recommended to the Director, Office of Emergency

Planning, that prior approvals for planned commercial use

of industrial plant equipment be administered on a machineby-machine basis.

Subsequent to t h e i s s u a n c e of our r e p o r t , DOD a d v i s e d

us t h a t it had reconsidered i t s p o s i t i o n . DOD s t a t e d t h a t

a 3-month t e s t , s t a r t i n g on J u l y 1, 1968, would be made a t

20 c o n t r a c t o r l o c a t i o n s t o determine t h e f e a s i b i l i t y and

c o s t of maintaining machine-by-machine u t i l i z a t i o n r e c o r d s

and t h a t t h e Armed S e r v i c e s Procurement Regulation Committee would review t h e m a t t e r of f i n a n c i a l accounting cont r o l s over s p e c i a l t o o l i n g and s p e c i a l t e s t equipment. DOD

s t a t e d a l s o t h a t t h e O f f i c e of Emergency Planning was rev i s i n g t h e a p p l i c a b l e Defense M o b i l i z a t i o n Order i n o r d e r

t o t i g h t e n c o n t r o l s over commercial u s e of Government-owned

equipment and t o e n s u r e e q u i t a b l e r e n t a l s f o r such use.

(B-140389, Nov. 24, 1 9 6 7 . )

INCREASED COSTS TO THE GOVERNMENT

THROUGH LEASE RATHER THAN PURCHASE

OF LAND AND BUILDINGS BY CONTRACTORSDepartment of Defense

W e found t h a t t h s l e a s i n g by c o n t r a c t o r s of land and

b u i l d i n g s t o be used almost e x c l u s i v e l y i n t h e performance

of Government c o n t r a c t s r e s u l t e d i n g r e a t e r c o s t s t o t h e

Governnent than would have been t h e c a s e i f t h e f a c i l i t i e s

had been purchased by t h e c o n t r a c t o r s . Had t h e f a c i l i t i e s

been purchased, a c q u i s i t i o n c o s t s r e c o v e r a b l e by t h e cont r a c t o r s would have been l i m i t e d t o t h e amount of d e p r e c i a tion.

e reviewed t h i s m a t t e r a s i t r e l a t e d t o t h e land and

b u i l d i n g s a t 20 l o c a t i o n s of 1 7 major c o n t r a c t o r s . A s

pointed o u t i n our r e p o r t i s s u e d t o t h e Congress i n Octob e r 1968, t h e a d d i t i o n a l c o s t s t o t h e Government a r e s i g n i f i c a n t . The a d d i t i o n a l c o s t s could amount t o about

$55.8 m i l l i o n by t h e end of t h e i n i t i a l p e r i o d s of t h e

l e a s e s a t t h e l o c a t i o n s we reviewed. They could amount t o

a s much a s $99.3 m i l l i o n i f a l l renewal o p t i o n s of t h e

leases a r e exercised.

The d e c i s i o n t o lease o r purchase r e s t s w i t h t h e cont r a c t o r . However, because c o n t r a c t o r s stand t o g a i n by

l e a s i n g o r , i n some c a s e s , a t l e a s t avoid t h e r i s k a t t e n d a n t on ownership, we b e l i e v e t h a t c o n t r a c t o r s may be swayed

toward a course of action more costly to the Government

since equal treatment is accorded costs associated with

either course of action in negotiating profits and fees.

The weighted guidelines of the .Armed Services Procurement Regulation for the negotiation of contractors' profits

or fees do not make appropriate distinctLon between owned

and leased facilities and therefore do not offer any motivation to contractors to select the method of acquisition

most economical to the Government. We suggested to the Department of Defense that, in negotiating profits and fees,

consideration be given to the methods used by the contractor in acquiring real property for use under Government

contracts.

The Department of Defense is considering new guidelines

for negotiating profits and fees that will give consideration

'to the contractor's investment in facilities. (B-156818,

Oct. 23, 1968.)

NEED TO INCREASE CONPETITION

IN PROCUREMENT OF AERONAUTICAL

SPARE PARTS

Department of Defense

In response to the expressed interest of the Subcommittee on Economy in Government of the Joint Economic Committee, Congress of the United States, we made a Defensewide survey of the procurement of aeronautical spare parts.

Our report on this review was issued to the Congress in

June 1968. We found that problems which we had previously

identified as restricting competition in procurement continued to require management attention and correction. In

addition, many of the procurements reported by procuring

activities as having been made competitively had not, in

our opinion, been made under competitive conditions.

The Department of Defense advised us of the following

corrective measures.

1. Procedures were being revised to provide for earlier

reviews of items to determine whether they could be

procured competitively.

2. A management reporting system would be established

to document reasons for procurement without competition.

3. A means for coordinating interservice spare parts

procurement was under study.

4 . Rules for reporting procurement actions had been

revised.

5. Aggressive action would be taken to correct the

technical data deficiencies revealed by our survey.

On September 12, 1968, the Department of Defense advised us that it expected to be able to provide us with its

evaluation of the effectiveness of the corrective measures

by April 30, 1969. (B-133396, June 25, 1968.)

NEED TO INCREASE COMPETITION

IN PROCUREMENT OF COAL FOR

USE IN EUROPE

Department of the Army

We reviewed the procurement of anthracite coal by the

Army in fiscal years 1962 through 1967. The coal involved

was mined in the United States and was procured by the Army

from European importers under negotiated fixed-price contracts awarded on a competitive basis. Our report on this

review was issued to the Congress in June 1968.

We concluded that the competition was not sufficiently

effective to ensure the lowest price. The contractual

practices permitted the sources of supply to be limited almost entirely to one American exporter. The exporter, in

turn, procured the coal from only a limited number of prohave limited

ducers. Restrictive specifications may &a

competition.

The major anthracite suppliers have, under the provisions of the Webb-Pomerene Act, entered into agreements

among themselves to set prices and to allocate quantities

of coal for export and ultimate sale to the Army. The

general policy of most of the larger American anthracite

suppliers is to offer their coal only to a certain coal export company. This company advised us that it had purchased coal for the Army procurements only from members of

the Anthracite Export Association--an association representing the larger anthracite producers--although there were

other producers, not members of the association, that were

qualified to meet specifications of the Army.

Because of these arrangements, the company was the only

exporter in position to furnish enough coal to meet total

needs of the Army. Furthermore, the exporter's quotations

to European importers were conditioned on their purchasing

from the exporter all of their requirements for the Army

procurements. Members of the Anthracite Export Association,

when participating in these procurements, furnished statements that, under the provisions of the Webb-Pomerene Act,

they were not required to submit unqualified certifications

of independent price determination. Therefore, what little

competition existed was limited to the importer functions

where the costs generated--principally transportation costs-represented only a small fraction of the total cost of the

coal to the Army.

Also, we found considerable evidence that the Army's

specifications for ash content and ash-softening temperature might have been more restrictive than necessary and

might have limited competition.

In response to our findings, the Army stated that, for

the fiscal year 1969 procurement, offerors would not be

permitted to claim exemption under the Webb-Pomerene Act

from certifying that prices proposed were arrived at independently. The Army stated also that t e s t s were being conducted by the Bureau of Mines to determine the minimum

quality of coal which could be used economically in Europe

and that the results of the tests would be considered in

the specifications for the fiscal year 1970 procurement.

On August 7, 1968, the Army advised us of certain additional steps it had taken to increase competition in the

procurement of anthracite coal €or use in Europe. These

steps included strengthening the language in the certificate of independent price determination to be signed by

o f f e r o r s and r e l a x i n g t h e a s h c o n t e n t s p e c i f i c a t i o n s ,

(B-159868, June 4 , 1968.)

POTENTIAL SAViNGS I N PROCUREMENT OF

PETROLEUM PRODUCTS FOR USE BY CONTRACTORS

Department of t h e Navy

Our review showed t h a t s u b s t a n t i a l annual savings

could b e r e a l i z e d i f t h e Navy would f u r n i s h t o i t s contract o r s t h e petroleum products used by them i n t h e t e s t i n g of

a i r c r a f t and a i r c r a f t engines i n s t e a d of p e r m i t t i n g t h e

c o n t r a c t o r s t o supply these products a s a p a r t of t h e i r

contracts.

Our review was made a t three p l a n t s where estimated

requirements represented about 86 percent of t h e t o t a l petroleum needs of Navy a i r c r a f t and a i r c r a f t engine contract o r s . As s t a t e d i n our r e p o r t issued t o t h e Congress i n

February 1968, we estimated t h a t during 1964 t h e Navy paid

two of t h e c o n t r a c t o r s about $229,000 more f o r such produ c t s than i t would have paid i f t h e products had been f u r nished t o t h e c o n t r a c t o r s . We estimated t h a t about $250,000

and about $400,000 could have been saved i n 1965 and 1966,

respectively.

With regard to t h e t h i r d c o n t r a c t o r , our review showed

t h a t t h e c o n t r a c t u a l arrangements i n e f f e c t were d i f f e r e n t

and t h e c o s t d i f f e r e n t i a l was considerably less.

The Navy advised us t h a t , i n t h e c a s e of one of t h e

c o n t r a c t o r s , s u b s t a n t i a l savings might be r e a l i z e d and t h a t

n e g o t i a t i o n s were t a k i n g p l a c e t o change t h e c o n t r a c t u a l

treatment of t h e s e products.

The Navy s t a t e d t h a t , with regard t o t h e second cont r a c t o r , t h e savings would b e small and t h a t i t was t o t h e

o v e r a l l advantage of t h e Government f o r t h e c o n t r a c t o r t o

continue t o f u r n i s h the’petroleum products. Although t h e

p o t e n t i a l savings were not s u b s t a n t i a l , t h e Navy should

consider n e g o t i a t i n g new arrangements with t h e c o n t r a c t o r .

We therefore recommended that, in the case of the second contractor and other contractors under similar conditions, the Navy consider negotiating new contractual arrangements. The Navy concurred. (B-160334, Feb. 6, 1968.)

NEED FOR IMPROVEMENT IN

ADMINISTRATION OF CONTRACTS

FOR RESEARCH STUDIES

Department of the Army

We found that, of the 11 study reports submitted by a

contractor under three research study contracts, seven were

considered by the Office of Civil Defense, Department of

the Army, t o be less useful than had been expected or t o

require major revision. Our report on these findings was

issued t o the Congress in March 1968.

We recognized that contracting for studies of this

type was relatively new and involved uncommon questions.

However, it was our belief that the Office of Civil Defense

could improve its administration of such contracts and

thereby obtain study reports that would furnish the information sought.

The improvements which we considered to be needed involved more specific statements of the scope of work t o be

performed; more effective monitoring of studies; more frequent, timely, and complete progress reports from the contractor; and written records of agreements with contractor

personnel. The Office of Civil Defense has taken steps t o

improve its procedures in these areas. (B-133209, Mar,25,

1968.

STOCK RECORDS AND CONTROLS

NEED FOR IMPROVEMENT IN MANAGEMENT

OF SUPPLIES IN VIETNAM

Department of the Army

We reviewed certain aspects of the Army's management

of supplies in the Republic of Vietnam, Our report on the

review was issued to the Congress in June 1968. In our

opinion, the Army supply system had been responsive to the

combat needs of the military units in Vietnam despite adverse conditions, The high level of support had been

achieved, however, through costly and inefficient supply

procedures.

The Army had recognized many of its supply management

problems and had initiated certain corrective actions prior

to the time of our review. We noted, however, areas which,

in our opinion, warranted additional management attention

as follows:

1. The development of accurate data relating to stocks

on hand and consumed in order to facilitate determinations of supply requirements and preclude imbalances of stock.

2. The identification and redistribution of the large

quantities of excess material now in Vietnam.

3 . The development of programs which will ensure the

prompt return of repairable components to the supply system.

4 . The institution of procedures designed to increase

both intraservice and interservice utilization of

available supplies.

5. The enforcement of greater supply discipline in

order to reduce to a minimum the costly shipment

of supplies under high-priority requisitions.

Although the Army agreed with our findings, it did not

agree with certain of our proposals f o r improved procedures.

We recognized that the management emphasis being applied by

the Army would tend to improve supply discipline and help

to correct the problems. We believed, however, that such

emphasis by itself was not sufficient. Therefore, we recommended to the Secretary of the Army-that certain of our

proposals for improved procedures be reconsidered. On October 8 , 1968, the Office of the Assistant Secretary of the

Army (Installations and Logistics) advised us that the Army

was taking steps to implement our proposals. (B-160763,

June 21, 1968.)

NEED FOR IMPROVEMENT IN REPORTING

INVENTORIES OF NONEXPENDABLE EQUIPMENT

Department of the Air Force

Our follow-up review showed that, although the Air

Force had, since our earlier review (report issued to the

Congress in June 1961), significantly improved its procedures for the management of nonexpendable equipment, there

was a need for further improvement in management controls

over the two major elements of the equipment management

system--the validity of authorizations and the accuracy of

reported inventories of in-use equipment.

As stated in our report issued to the Congress in December 1967, we found that incomplete inventory information

was reported and used in the fiscal year 1966 requirements

computations. Our review showed that equipment valued at

about $44 million was neither reported for use in computing

requirements nor otherwise accounted for. We found also

that the practices followed at the base level in taking

physical inventories did not provide the necessary controls

to ensure that all assets would be counted and that the

same assets would not be counted twice,

Our review of the data used in computing fiscal year

1966 procurement requirements showed that, of the $65 mil-

lion worth of computed requirements, over $8 million worth

was not needed and, of the remaining $57 million worth about

$20 million worth was questionable. Me discussed this with

Air Force officials and, as a result, the requirements for

several high cost items were recomputed and about $3 million

worth of planned procurement was canceled.

The Air Force generally concurred in our findings and

proposals for improvements in the equipment management system. We were advised of actions either taken or planned to

ensure closer adherence to prescribed procedures for forecasting and controlling equipment authorizations. We were

advised also that the Air Force intended to study the feasibility of incorporating additional data into its computer

programs for managing nonexpendable equipment to provide a

basis for periodic verification and reconciliation of reported inventories of in-use equipment. (B-133361, Dec. 5,

1967.)

NEED FOR IMPROVEMENT IN THE

SUPPLY MANAGEMENT DATA SYSTEM OF

THE ARMY TANK-AUTOMOTIVE COMMAND

Department of the Army

The Army Tank-Automotive Command (TACOM) has the mission of providing tank and automotive vehicles and repair

parts for all the military services in the United States and

overseas. As a part of our continuing program of review of

management activities at TACOM, we examined into supply management, giving particular attention to problems in its computerized supply management data system. Our report on the

examination was issued to the Congress in September 1 9 6 8 .

For several years, TACOM has been unable to achieve

the desired levels of supply support. During the period

February 1965 to November 1 9 6 7 , for example, stock requisitions filled on time ranged between 33 and 7 8 percent compared with the objective of 85 percent established by the

Army Materiel Command. In November 1 9 6 7 , only about 46 percent of the requisitions were filled on time.

The situation stemmed primarily from the presence of

inaccurate data in the computerized supply management records. Although TACOM and higher command officials had recognized the seriousnesq of this problem and had taken action

to improve the accuracy of the data, these efforts generally

had been unsuccessful. A 1967 study showed, for example,

that about $94 million worth of material recorded as duein had, in fact, been received and that about $83 million

worth of material had been received but had never been

recorded as due-in. These conditions can cause inventory

managers to either procure unneeded supplies or fail to procure needed supplies.

In our opinion, the prime factor retarding improvement

of supply support effectiveness has been the lack of coordination, evaluation, and follow-up efforts to clear up the

computerized supply management records. Other factors--imposition of additional workloads, major reorganizations,

and saturation of computer capacity--also have had an adverse

effect

We proposed that the Secretary of Defense establish a

coordinated supply management program at TACOM to

--Improve supply records.

--Prevent additional invalid data from entering the

records.

--Review additional workloads or special programs to be

imposed on TACOM to prevent unnecessary interference

with the current management improvement program.

--Establish measures to maintain organizational stability at TACOM and to prevent the constant movement of

experienced supply personne1.

--Review the use being made of the existing automatic

data processing equipment with the objective of eliminating or reducing lower priority projects so that

the equipment can be used f o r matters vitally in need

of correction.

The Army, in its reply on behalf of the Secretary of

Defense, agreed with these proposals and stated that actions

in keeping with the proposals either had been already taken

or were planned. (B-146772, Sept. 23, 1968.)

NEED FOR IMPROVEMENT IN THE RECORDS

USED IN MATCHING REQUIREMENTS AGAINST

AVAILABILITY OF STOCK AND EFFECTING

REDISTRIBUTION

DeDartment of Defense

We examined into the effectiveness of the automated

centralized screening system, maintained by the Department

of Defense (DOD), for matching material available at various

of its locations with the material needs of other locations.

The system includes a master screening file of information

on the needs and the availability of material maintained by

the Defense Logistics Services Center on the basis of periodic reports submitted by inventory control points. Our report on the examination was issued to the Congress in May

1968.

Although this system has greatly benefited DOD, we

found that certain improvements could make the system more

effective.

As operated at the time of our examination, the system

depended on the voluntary cooperation of the organizations

involved. We found many instances where inventory control

points had not reported the necessary information or had

reported information which was not accurate or current. It

appeared to us that there was a need for an organization

vested with the responsibility for ensuring that DOD organizations followed prescribed operating policies and procedures.

We recommended that, since the responsibility for establishing basic policies related to the centralized screening system is vested in the Office of the Assistant Secretary of Defense (Installations and Logistics), the Secretary

of Defense assign to that organization the responsibility

for surveillance of the system.

On August 6 , 1968, DOD advised us that it considered

our recommendation to be an excellent one but, in view of

certain actions already taken, had decided that adoption of

the recommendation was not necessary. DOD cited the actions

which, in its opinion, would achieve the objectives of our

recommendation. (B-163478, May 14, 1968.)

NEED FOR IMPROVEMENT IN CONTROL

OVER REPAIRABLE SPARE PARTS

Department of the Army

Our review of about 12,000 issues o f spare parts at

seven Army installations that should have resulted in the

return of a like quantity of unserviceable parts showed

that some 70 percent of these parts were not returned to

maintenance activities for repair and reissue. The principal reasons, as stated in our report issued to the Congress

in January 1968, were (1) incorrect and inconsistent recoverability codings in publications issued by the National Inventory Control Points and (2) inaction by supply activities to

obtain the return of repairable items.

The Department of the Army concurred in our findings

and took action to improve its management of repairable

spare parts. These actions, if properly carried out, should

improve substantially the recovery of repairable items.

(B-146874, Jan, 23, 1968.)

NEED FOR IMPROVEMENT IN CONTROL

OF STOCK LEVELS OF NONSTANDARD

AERONAUTICAL REPAIR PARTS

Department of the Navy

In May 1968 we issued a report to the Congress on our

review of the Navy's management of the manufacture of nonstandard aeronautical repair parts at four naval air stations, We found that as much as 80 percent of the dollar

value of these items on hand at the four stations were excess. The excess stock on hand amounted to about $3.7 million. In addition, we found that these four stations had

disposed of about $2.2 million worth of excess quantities

of such stock during the period July 1, 1963, to March 31,

1966.

We proposed that the Navy review its management o f nonstandard aeronautical repair parts and develop realistic

criteria to govern manufacturing and stocking and that per i o d i c follow-up reviews be made to ensure adherence to these

criteria. The Navy agreed and advised us of specific actions

which, we believe, should prevent the future accumulation of

excess nonstandard aeronautical repair parts. (B-133396,

May 21, 1968.)

SUPPLY MANAGEMENT, GENERAL

NEED FOR IMPROVEMENT IN THE

PROCESSING OF STOCK REQUISITIONS

Department of Defense

In a prior review of the ability of the military supply systems to respond to increased demands, we observed

that the manner in which supply requisitions were processed

under the Military Standard Requisitioning and Issue Procedures (MILSTRIP) system precluded realization of the maximum benefits of the system. Therefore we undertook a limited examination, at selected installations of the Army,

Navy, and Air Force, of the processing of requisitions under the MILSTRIP system. Our report on the examination was

issued to the Congress in September 1968.

The MILSTRIP system is designed to

--Provide uni€ormity of procedures for all requisitioners and suppliers of stock,

--Meet essential requirements of all the military services.

--Provide for interservice supply transactions and intraservice supply-support operations.

--Accommodate the requisitioning on stocks of the General Services Administration.

We found that MILSTRIP had improved the processing of

requisitions. Maximum benefits of MILSTRIP had not been

realized, however, because large numbers of requisitions

contained erroneous or incompatible data and could not be

processed routinely. A s a result, many of the requisitions

were returned to the originators for additional information

or revision and resubmission. Resubmission of requisitions

is time consuming, causes significant delays, and reduces

supply-support effectiveness

The primary causes of erroneous or noncurrent information on requisitions, in our opinion, were

--Preparation of requisitions by untrained and inadequately supervised individuals.

--Inadequate review of requisitions before forwarding

them to the next higher supply level.

--Absence of current and compatible catalog data at

various supply levels.

We also found that the Defense Supply Agency (DSA) had

not fully carried out its responsibility for surveillance

of MILSTRIP. Surveillance by the DSA on a systematic basis

could have identified the problems so that appropriate corrective actions could have been taken.

The Department of Defense agreed generally with our

findings and proposals for corrective measures. The Department stated that its directive on MILSTRIP had been revised to define responsibilities more explicitly and that a

study was being made of the requirement for, and the frequency o f , catalog changes. The Department stated further

that, pending completion of the study, a moratorium had

been declared on unit-of-issue changes. (B-164500

Sept. 17, 1968.)

NEED FOR IMPROVEMF,NT IN SUPPLY MANAGEMENT

OF MAGNETIC COMPUTER TAPE

Department of Defense

At June 30, 1967, the Federal Government operated

about 3,700 computers at various locations throughout the

world. The Government has accumulated over 10 million reels

of magnetic tape, valued at about $200 million, to serve

these computers. The magnetic tape inventory of the Department of Defense--about 6 million reels valued at about

$125 million--is about 60 percent of the Government-wide

total.

We reviewed the practices of the Department of Defense

in the procurement, use, and disposition of its magnetic

computer tape. Our report on the review was issued to the

Congress in September 1968.

There is a need for the Department of Defense to centralize its management of magnetic tape. Although the Department has generally established centralized controls

over its automatic data processing operations, it has, in

our opinion, given inadequate attention to similar controls

over its magnetic tape activities. At the time of our review, the Air Force was the only service that had centralized its management of magnetic tape activities.

We found that, in the absence of centralized management, local military commands had

--Computed tape requirements without adequate knowledge of the quantity or condition of the tape on

hand.

--Procured tape with little regard to quantity discounts and other advantages of centralized procurement.

--Accumulated large quantities of used tape without

testing or attempting to rehabilitate it for further use.

We found also that in some cases no specific instructions had been established for determining when tape was

unserviceable, for disposing of unserviceable tape, or for

reporting and screening serviceable excess tape for possible

use by others.

The Department of Defense was in general agreement with

our proposals for corrective action. The Department advised us that

--Action had been taken to screen tape for reuse.

--Consideration would be given to the feasibility of

consolidating tape procurements throughout the Department.

--Studies would be made on the need for a uniform

method of computing requirements for tape and the

need for guidance in the control and use of tape.

(B-164392, Sept. 18, 1968.)

NEED FOR I M P R O ~ N TIN FUNDING PRACTICES

AFFECTING PROCUREMENT OF SPARE PARTS

Department of Defense

In a prior review of the ability of the military supply

systems to respond to increased demands, we observed that

some supply-support problems were apparently the result of

the practice of releasing procurement funds on a piecemeal

basis. Therefore we undertook a.lirnited examination into

the effects of such funding practices on the procurement of

aeronautical spare parts by the Air Force. Our report on

the examination was issued to the Congress in August 1968.

We found that in fiscal years 1966 and 1967 the Department of Defense released funds to the military departments on a piecemeal basis. The Air Force, in turn, released funds to its procurement centers on a piecemeal bas i s and without advance notice as to the amounts that would

be made available or when they would be made available.

The funds made available to the procurement centers

were less than the funds needed to cover computed requirements. The incremental funding created additional difficulties for the procurement centers in their management of

the limited funds in that

--Spare parts could not be purchased in larger, more

economical quantities.

--Prices were increased by contractors because of delays in placing orders.

--Administrative costs of procurement were increased

because of additional paperwork.

--Procurement on a piecemeal basis increased the likelihood of shortages of spare parts which could ad=

versely affect the operational readiness of aircraft.

The Assistant Secretary of Defense (Comptroller) stated

that the numerous fund releases in fiscal years 1966 and

1967 were neither desirable nor economical but were necessary under the then-existing circumstances. Further, we

were informed that the Air Force attempted in fiscal year

1968 to reduce the number of separate fund allocations to

the Air Materiel. Areas, We were informed also that the

other military departments pursued the same objective and

that the Office of the Secretary of Defense was cooperating

in every way possible.

We pointed out that similar conditions could recur and

could again necessitate close fund control and incremental

releases of funds, We recommended that, in that event,

consideration be given by the Department of Defense and the

military departments to the additional costs and other adverse effects of incremental fund releases and that efforts

be made to reduce the practice to a minimum. We recommended

a l s o that as much information as possible be furnished to

inventory management activities as to amounts of funds that

will be available and the probable release dates to facilitate the planning of their procurement programs. (B-164301,

Aug. 27, 1968.)

POTENTIAL SAVINGS THROUGH INCREASED

E W P I N G O F A I R C W T TIWS

Department of Defense

We found that the Air Force and Navy do not recap aircraft tires as extensively as commercial airlines do because of arbitrary restrictions on the number of times a

tire may be recapped and, in the case of the Navy, because

of ineffective administration of the tire recapping program. The Army has not established a program for recapping

aircraft tires,

In our report issued to the Congress in February 1968,

we pointed out that the use of recapped aircraft tires often saves as much as 50 percent of the cost of new tires

and--as shown by the practices of the commercial airlinesis consi.dered consistent with safety requirements.

We found that all three services could realize significant savings by recapping aircraft tires more extensively.

These savings could be as much as $1,650,000 annually for

the Air Force and the Navy. If it were found to be practicable to increase the recapping of tires for high-speed and

jet aircraft, substantial additional savings could be realized.

The Air Force and Navy advised us of actions taken or

planned to increase the effectiveness of their respective

aircraft tire recapping programs.

We recommended that the Secretary of Defense issue

policy guidance to the military departments relative to the

recapping of aircraft tires. We recommended further that

the Department of Defense periodically review the recapping

policies and procedures established by the military department s.

The Department of Defense advised us in April 1968

that it had established a study group which comprised representatives from the military departments to develop criteria and policies for uniform application. (B-146753,

Feb. 1, 1968.)

POTENTIAL SAVINGS THROUGH ELIMINATION

OF DUPLICATE INVENTORIES

Department of the Navy

We reviewed the Navy's practice of stocking, for further distribution, material which is normally procured,

stocked, and distributed to Government organizations by the

General Services Administration (GSA). Our .report on this

review was issued to the Congress in May 1968. On the basis of our review, we concluded that Navy wholesale inventories, and similar GSA inventories held for Navy use, unnecessarily duplicated each other and resulted in duplicate

management and warehousing functions in the Government supply system as a whole.

We concluded that inventories valued at about $8.5 million, and related management and warehousing functions,

could be eliminated from the wholesale stocks of either the

Navy or GSA. T o the extent that duplication of stock could

be eliminated, the Government would realize not only increased efficiency in stock management, but also annual

savings of up to $940,000. We suggested that, for those

items stocked by GSA, the Navy overseas stock points, supply ships, and fleet activities within the continental

United States waters requisition their requirements directly from GSA.

The Navy did not believe that this would be feasible

with respect to overseas stock points and supply ships but

did agree to review the existing arrangements for supply

support. GSA expressed the opinion that the procedure of

direct requisitioning from GSA was the most economical

method of supply support except in those cases where the

volume of issues warrants the shipment of wholesale quantities direct from the manufacturers to the Navy.

We recommended that the Secretary of Defense and the

Administrator of the General Services Administration

jointly establish a working group to formulate the necessary policies and procedures for a supply-support system

which will eliminate the duplications cited in our report.

On May 22, 1968, the General Services Administration adv i s e d us that it had informed the Department of Defense of

its readiness to establish -sucha group. On July 23, 1968,

the Department of Defense advised us tha-tit concurred in

this approach to the problem. (B-146828, May 16, 1968.)

POTENTIAL SAVINGS THROUGH ELIMINATION

OF UNECONOMICAL SHIPMENTS OF STOCK

Department of the Air Force

Our review of the Air Force system f o r redistributing

excess parts and other material from Air Force bases to

supply depots showed that, during the last 3 months of

1966, three Air Force supply depots received over 370,000

such shipments. In our report issued to the Congress in

January 1968, we pointed out that over 125,000, or about 34

percent, of these shipments were uneconomical for two reasons. They involved material with which the Air Force was

already well supplied or was in an excess position or material with a value less than the costs incurred for its return.

We estimated that the packaging, handling, and other

administrative costs incurred in connection with the uneconomical shipments totaled about $1.3 million for the

3 months.

In general, the uneconomical shipments were made because (1) the Air Force screening of items reported as excess did not include a determination of stock-level status

of all the items before authorization of their return,

( 2 ) unserviceable items were returned without a determination as to whether there was sufficient serviceable material in Air Force stocks, and (3) the Air Force redistribution system did not provide for the identification of items

valued at less than shipping costs.

After we brought these matters to its attention, the

Air Force took certain actions to effect improvements.

These actions included establishment of retention levels

for excess stocks at Air Force bases, revision of criteria

for shipment of low-value items, and initiation of surveys

by the Air Force Auditor General. The Air Force expressed

the belief that these actions would effectively eliminate

the problem. (B-133019, Jan. 22, 1968.)

POTENTIAL SAVINGS THROUGH REPAIRING

RATHER THAN SCRAPPING UNSERVICEABLE

SPARE PARTS

Department of the Air Force

Air Force regulations provide for the return of certain unserviceable items to designated depots for repair if

they cannot be repaired at the Air Force base level. However, the regulations permit the bases to condemn the items

as scrap if (1) they are beyond repair, (2) repair costs

exceed 65 percent of replacement cost, or ( 3 ) their condemnation is specified by applicable technical orders. During

6 months of 1967, Air Force bases condemned about $6.7 million worth of the type of items designated for repair at

the depots managed by the three Air Materiel Areas included

in our review. The condemnation of a substantial portion

of these items was based on determinations that repair costs

were excessive in relation to replacement cost.

We tested 78 items that had been condemned at five

bases and found that 51 of them could have been repaired

for amounts significantly less than replacement cost. Many

of the condemned items were in short supply and, in some

cases, action had been taken to procure additional items.

These findings were presented in a report issued to the

Congress in October 1968.

The primary reason for improper condemnation was that

maintenance personnel at the bases had made their determinations without adequate knowledge of depot repair costs,

procedures, and capabilities. We proposed that the Air

Force regulations be revised to require the bases to return

the items to the depots unless the bases have been advised

that the items are (1) not needed in Air Force stocks,

( 2 ) obviously beyond repair, or ( 3 ) authorized for disposition under Air Force technical orders.

The Air Force advised us that its analyses indicated

that the magnitude of improper condemnations did not warrant instructing the bases to return such items to the depots. The Air Force stated, however, that certain revisions were being made in existing regulations to require

(1) the reporting of cost data to, and approval of the cost

d a t a by, t h e i t e m managers p r i o r t o condemnation of i t e m s

by t h e b a s e s and ( 2 ) e s t a b l i s h m e n t of a review board a t

each base t o m a i n t a i n s u r v e i l l a n c e over condemnations based

on c o s t c r i t e r i a .

W e were of t h e o p i n i o n t h a t t h e s p e c i a l i z e d r e p a i r act i v i t i e s a t t h e d e p o t s were t h e only o r g a n i z a t i o n s q u a l i f i e d t o e s t i m a t e t h e c o s t s t o r e p a i r i t e m s f o r which they

were r e s p o n s i b l e , and f o r t h a t reason the a c t i o n taken by

t h e A i r Force would only s e r v e t o reduce b u t would n o t p r e v e n t improper condemnation of r e p a i r a b l e i t e m s . We t h e r e f o r e recommended t h a t t h e A i r Force r e c o n s i d e r our proposal.

The A i r Force s t a t e d t h a t a program was being i n i t i a t e d t o

s h i p s e l e c t e d i t e m s , s e l e c t e d on t h e b a s i s of d o l l a r v a l u e ,

t o t h e s p e c i a l i z e d r e p a i r a c t i v i t i e s f o r t h e purpose of de( B - 1 4 6 8 7 4 , Oct. 2 3 , 1968.)

termining t h e i r r e p a i r a b i l i t y .

POTENTIAL SAVINGS THROUGH REUSE

OF SHIPPING CONTAINERS

Department of t h e A r m y

A s s t a t e d i n our r e p o r t i s s u e d t o t h e Congress i n Febr u a r y 1968, w e found a need f o r improvement i n t h e Army's

procedures f o r making shipping c o n t a i n e r s a v a i l a b l e t o manu f a c t u r e r s of e l e c t r o n i c equipment f o r shipment of newly

prodrzced e l e c t r o n i c equipment. U s e of Government-furnished

shipping c o n t a i n e r s would reduce procurement c o s t s . Reusa b l e c o n t a i n e r s were n o t being f u r n i s h e d t o t h e c o n t r a c t o r s

because Army procedures d i d n o t r e q u i r e procurement and

supply personnel t o c o o r d i n a t e t h e i r e f f o r t s and i d e n t i f y

c o n t a i n e r s a v a i l a b l e i n t h e supply system.

The Army concurred, i n g e n e r a l , w i t h our f i n d i n g s and

p r o p o s a l s and r e v i s e d i t s a p p l i c a b l e r e g u l a t i o n t o r e q u i r e

a l l n a t i o n a l inventory c o n t r o l p o i n t s t o e s t a b l i s h proced u r e s and c o n t r o l s t o e n s u r e maximum use of r e u s a b l e cont a i n e r s for a l l t y p e s of equipment.

The Department of Defense informed u s t h a t t h e m i l i t a r y departments and t h e Defense Supply Agency had been d i r e c t e d t o review t h e i r procedures f o r management of r e u s a b l e

c o n t a l n e r s and t o c o r r e c t any d e f i c i e n c i e s . (B-146917,.

Feb. 1 5 , 1968.)

EQUIPMENT MANAGEMENT, GENERAL

NEED FOR IMPROVEMENT IN MANAGEMENT

OF INACTIVE INDUSTRIAL EQUIPMENT

Department of the Army

In May 1968 we issued to the Congress a report on our

review of inactive industrial plant equipment--such as woodworking and metalworking machines, crane and crane shovel

attachments, compressors, power and hand pumps, and electric

motors-in Army arsenals. We found that millions o r dollars

worth of equipment had been permitted to lie idle in Army

arsenals for periods up to 10 years while similar equipment

had been purchased for use elsewhere in the Department of

Defense.

The Department of Defense agreed that there had been

instances of Army retention of inactive industrial plant

equipment €or considerable lengths of time and stated that

Army regulations relating to authorization for retention of

such equipment for current and mobilization needs were being

revised. We believe that the actions of the Departments of

Defense and of the Army should substantially reduce the

quantities of unused and unneeded equipment at the arsenals.

(5-163691, May 23, 1968.)

HEED FOR IMPROVEMENT IN MANAGEMENT

OF MISSION-SUPPORT AIRCRAFT

Department of the Army

We evaluated the management of the aircraft used by the

Army to maintain readiness proficiency for combat flying and

for administrative purposes. Our report on the evaluation

was issued to the Congress in May 1968. We found that,

based on recent flying experience and the utilization criteria established by the Departments of Defense and of the

Army, the number of aircraft authorized at the locations we

reviewed was about 25 percent more than the justifiable requirements. We believe that the overauthorizations resulted

from the incomplete criteria and procedures prescribed and

used for determining aircraft requirements and from

insufficient evaluation o f the justifications for aircraft

submitted by the user organizations.

We found also that the utilization of some military

aircraft was uneconomical and incorisistent with the transportation and traffic management policies of the Department

of Defense. Furthermore, at most of the locations we reviewed, effective management and control over the use of

aircraft for mission-support purposes was, in our opinion,

lacking. The procedures in effect at the time of our review

generally did not provide for a determination, although required by Department of Defense policy, of whether use of

commercial or other means of transportation would be practicable and more economical.

We recommended that the Army establish an effective

integrated system for managing aircraft for mission-support

purposes and outlined the elements which we believe should

be included in such a system. The Army agreed, in general,

with our recommendations and cited actions already taken and

being developed toward that end. (B-163453, May 10, 1968.)

NEED FOR IMPROVEMENT IN MANAGEMENT

OF TRACTOR-TRAILER FLEET IN EUROPE

Department of the Army

In January 1968 we reported to the Congress our findings in a review of the Army's management and utilization

of highway transportation equipment in Europe. We pointed

out that management procedures of the 37th Transportation

Group were inadequate. We found that (1) daily inventory

reports were insufficient to monitor the status and location

of its trailers at all times, (2) control units were not

making the required analyses of equipment use, and (3) full

use of available equipment would have avoided the hiring of

commercial carriers at substantial increase in costs.

There were also indications that costs were increased

unnecessarily because Army European commands failed to

promptly unload trailers and report them as available for

further use.

The Army took corrective action in accordance with all

but one of our proposals. We believed that action should

have been taken on that proposal and, accordingly, we recommended that available refrigerated equipment be transferred and utilized to the maximum extent possible f o r the

transportation of frozen food products. Subsequent to the

issuance of our report, the Army advised us that it concurred in this recommendation. (B-162771, Jan. 3 0 , 1968.)

ADMINISTRATION OF MANPOWER MATTERS

POTENTIAL SAVINGS THROUGH CONVERSION

OF W A L L Y OPERATED FURNACES

TO AUTO-WTIC-TYPE HMTING UNITS

Department of Defense

We reviewed costs of operating heating units of the

types generally used at military bases to heat single buildings. We found that costs could be reduced several million

dollars annually at Army and Air Force installations if

manually operated furnaces were converted to automatic-type

heating units, Such conversions at the 12 military installations covered in our review could reduce costs about

$3.5 million each year, primarily by releasing military personnel for other duties. These findings were stated in our

report issued to the Congress in December 1967.

Department of Defense officials expressed the opinion

th2t (1) there could be no actual reduction of military personnel requirements if the function were eliminated since

no personnel spaces had been authorized for this function,

(2) the Congress was reluctant to support requests for fuel

conversion, ( 3 ) military labor should not be considered an

economic factor in fuel conversions except where such labor

was permanently assigned to the installation engineer and a

reduction in strength could be made, and ( 4 ) these duties

were usually performed as an additional duty or by transient

personnel. We found, however, that the majority of the military personnel used to fire furnaces were on the job full

time for 30 days or longer.

However, the Department of Defense requested the Army

and Air Force to make a study of this matter, including a

comprehensive review of all small hand-fired heating systems

using either military or civilian firemen. On September 8,

1968, the Department reported to us on the progress of the

study. The Department stated that the study showed that

there were 8,053 heating systems in the Army and Air Force

which were hand fired by military or civilian firemen, that

4,059 of them had thus far been tentatively selected for inclusion in a conversion program, and that the study was

continuing.

In view of the need to achieve the most efficient and

effective utilization of military manpower in assignments

requiring military skills and to realize the economies possible through conversion of manually operated, coal-heating

units to automatic gas- or oil-heating units, we suggested

in our report that the Congress may wish to inquire into the

practice of using military labor to perform the function of

tending furnaces. (B-160931, Dec. 27, 1967.)

NEED FOR IMPROVEMENT IN ADMINISTRATION

OF MILITARY PAY AND ALLOWANCES

Department of Defense

Our report on an earlier review, issued to the Congress

in April 1963, presented our findings of significant overpayments and underpayments of military pay and allowances

and our recommendations for improving the administration of

military pay and allowances. Our report on a follow-up review, issued to the Congress in April 1968, presented our

findings that serious deficiencies in administration still

exist. The main cause continues to be the use of inexperienced and untrained clerks and supervisors in the local disbursing and personnel offices.

The Department of Defense and the military services had

taken a number of actions which had improved the administration of military pay and allowances in some areas. A l s o ,

the Department of Defense is implementing its Joint Uniform

Military Pay System (JUMPS), a system for maintaining military pay and leave accounts by electronic data processing

equipment and techniques at one central site for each military service. However, most of the input data in this s y s tem will originate at the local office level where we found

inexperienced and untrained clerks and supervisors. Further

efforts in correcting existing weaknesses in training and

staffing at local levels should therefore be made to ensure

the most accurate input possible and the effective operation

of the new system.

Errors in basic allowance for subsistence for enlisted

men accounted for about 30 percent, or the largest category,

of errors we found. We believe that there is a need for a

change in legislation to place basic allowance for

subsistence for enlisted men on a monthly rate basis rather

than the present daily rate basis. In our opinion, this

would reduce the administrative burden and the administrative costs of handling the large volume of transactions and

could substantially reduce the number of errors in making

payments. The Department of Defense stated that it is considering a proposal for a legislative change. (B-125037,

Apr. 2, 1968.)

NEED FOR IMPROVEMENT IN MANAGEMENT

OF DETAILING OF CIVILIAN EMPLOYEES

Department of Defense

In April 1968 we issued a report to Congressman John E.

Moss on an investigation, made at his request, of the practices at McClellan Air Force Base in detailing (assigning)

civilian employees to work on other than their regular jobs.

Our findings at McClellan led us to an expanded review at

10 industrial-type military installations in the Department

of Defense (DOD). A report on this review was issued to the

Congress in November 1968.

The basic law provides that the head of an executive

department or a military department may detail employees

among the bureaus and offices of his department, except

those employees required by law to be exclusively engaged

on some specific work. Records of details in excess of 30

days are required to be maintained permanently in the official personnel records. We found many instances where large

numbers of employees were being "loaned" or "borrowed" between shops for extended periods in excess of 30 days without appropriate personnel action to credit the individuals

€or the time involved and instances where details either

were not recorded or were improperly recorded.

Details in excess of 6 months (now 120 days) are required to be approved by the local office of the Civil Service Commission. We found many instances where the required

approvals were not being obtained. We found instances also

of employees' being detailed to higher and lower grade positions and instances of temporary promotions to fill vacancies.

We found little evidence that internal audit and review

staffs of the military departments or the Civil Service Commission inspection teams had found these types of deficiencies or that, if they did, they had identified the causes

and made appropriate recommendations.

The Secretary of Defense and the Chairman, Civil Service Commission, agreed, in general, with our suggestions

for corrective measures. DOD outlined to us the actions

that would be taken in each of the military departments and

the Defense Supply Agency, advised us that DOD would provide

surveillance over the actions, and stated that we would be

kept advised of the progress. The Civil Service Commission

advised us that it would issue further guidelines to its inspectors to ensure more specific coverage of detailing in

their inspections. We requested that we be furnished a copy

of the guidelines when issued. (B-160879, Nov. 15, 1968.)

POTENTIAL SAVINGS TJBOUGH USE OF

CIVIL SERVICE PERSONKEL IN LIEU OF

CONTRACT PERSONNEL

Department of the Air Force

Our review confirmed Air Force studies--undertaken

after we issued a report to the Congress in January 1966 on

our survey of research management functions at the Air Force

Cambridge Research Laboratories--which showed that savings

would be realized if some of the research functions performed by contractors were performed by civil service personnel. The savings would result primarily from reduction,

or elimination, of overhead costs and of profits paid to the

contractors. Our report on the review was issued to the

Congress in November 1967.

The Air Force study of contracts for services at the

Laboratories--costing about $3 million annually--showed a

savings potential of $750,000 a year. The amount of the

savings, however, would be less than estimated if considerationweregiven to Federal income taxes forfeited, to the

possibility that the contractors' other Government business

might absorb part of the overhead being applied to these

contracts, and to other factors.

We believe that (1) administrative ceilings on the

availability of civil service personnel for these jobs and

(2) excessive delays in approving or disapproving amendments

to the manpower ceilings have, in the past, been major factors in the continued use of contractor services.

We therefore proposed to the Secretary of Defense that

--Manpower ceilings made available to the Laboratories

be sufficiently flexible to enable the Laboratories

to acquire civil service employees to assume the

long-term research work being performed within its

facilities by contractor-furnished personnel.

--The personnel ceilings of the Laboratories be related

to the facilities and research project approval processes and that appropriate adjustments be made consistent with such approvals.

--A more expeditious manner of processing manpower re-

quirements be established within the Department of

Defense

The Department of Defense concurred, in general, in our

finding and advised us that the civil service personnel authorization at the Laboratories had been increased to permit

conversion of 25 service contracts to Government operation.

The Department did not agree, however, with our conclusion

that manpower ceiling practices prevent economical management of programs and resources. (B-146981, Nov. 28, 1967.)

MILITARY ASSISTANCE PROGRAM

NEED FOR SCREENING EXCESS PROPERTY

FOR FEASIBILITY_ OF RECOVERY FROM

RECIPIENT COUNTRIES PRIOR TO m L W E

TO 'THF,M FOR DISPOSAL

Department of Defense

I n J u l y 1967 w e issued t o t h e Congress a r e p o r t , class i f i e d "Secret," on our review of t h e m i l i t a r y a s s i s t a n c e

program (MAP) property which had become excess t o t h e needs

of r e c i p i e n t c o u n t r i e s . The d i s c u s s i o n which follows w a s

s e l e c t e d from t h e u n c l a s s i f i e d material i n t h a t r e p o r t .

We found t h a t a s i g n i f i c a n t p o r t i o n of t h e property

was r e l e a s e d t o t h o s e c o u n t r i e s by t h e Department of Defense

without f i r s t determining, on a case-by-case basis, whether

it would be economically b e n e f i c i a l t o recover t h e property

f o r e i t h e r r e d i s t r i b u t i o n o r d i s p o s a l purposes by t h e United

States. W e found a l s o t h a t t h e r e w e r e b i l l i o n s of d o l l a r s

worth of KW property s t i l l i n possession of r e c i p i e n t

c o u n t r i e s , which would e v e n t u a l l y become excess.

The proceeds from t h e s a l e of such property by t h e

r e c i p i e n t c o u n t r i e s have t h e e f f e c t of adding m i l l i o n s of

d o l l a r s of a d d i t i o n a l U.S. a i d t o t h o s e c o u n t r i e s , and,

s i n c e t h i s i s not a p a r t of t h e u s u a l a i d program, it is n o t

r e a d i l y apparent. W e expressed t h e opinion t h a t t h e proceeds could have been r e a l i z e d by t h e United S t a t e s had

case-by-case econornic r e c o v e r a b i l i t y determinations been

made and t h a t t h e s e proceeds would havs had a f a v o r a b l e e f f e c t on t h e U . S . balance-of-payments p o s i t i o n .

The U.S. p r a c t i c e of d i s p o s i n g of excess MAP property

d i f f e r e d i n many r e c i p i e n t c o u n t r i e s . W e expressed t h e

opinion t h a t t h e Department of Defense could i n c r e a s e U.S.

revenues from t h e d i s p o s a l of excess MAP property i n f o r e i g n

c o u n t r i e s by recovering, f o r d i s p o s a l by U.S. d i s p o s a l agencies, a g r e a t e r p o r t i o n . o f t h e property which is declared by

r e c i p i e n t c o u n t r i e s t o be excess t o t h e i r needs. We expressed t h e opinion a l s o t h a t t h e release of property which

might have been determined t o b e economically r e c o v e r a b l e

had deprived the United S t a t e s of f o r e i g n currency which

could o t h e r w i s e have been r e a l i z e d by the United S t a t e s and

used t o r e d u c e d o l l a r expenditures.

I n c l a s s i f i e d comments, the Departments of S t a t e and

Defense pointed o u t some of t h e f o r e i g n p o l i c y and o t h e r

c o n s i d e r a t i o n s involved i n t h e matters d i s c u s s e d i n t h i s report. Since we w e r e not i n a p o s i t i o n t o d e a l d i r e c t l y with

such issues, w e brought t h e matter t o the a t t e n t i o n of t h e

Congress t o a d v i s e it of how t h e excess p r o p e r t y w a s handled

and t h e a g e n c i e s ' reasons f o r t h e i r a c t i o n s . (B-161049,

J u l y 1 2 , 1967, S e c r e t . )

NEED FOR IMPROVEMENT I N MANAGEMENT OF

EQUIPMENT HELD I N STORAGE FOR THE

MILITAXY ASSISTANCE PROGRAM

Department of Defense

I n a r e p o r t issued t o t h e Congress i n November 1967, w e

pointed o u t t h a t improvement w a s needed i n the management of

equipment h e l d i n s t o r a g e f o r t h e m i l i t a r y a s s i s t a n c e program (MAP). W e found t h a t

--Certain unassigned MAP-owned equipment i n Army s t o r age w a s n o t being used t o s a t i s f y requirements.

- - S i g n i f i c a n t amounts of MAP funds had been r e q u i r e d t o

o b t a i n equipment t o f i l l g r a n t - a i d and sales r e q u i r e ments which could o t h e r w i s e have been f i l l e d from

s t o c k s of i d e n t i c a l i t e m s of unassigned MAP-owned

equipment i n Army s t o r a g e .

--Because such equipment w a s n o t u s e d , a d d i t i o n a l MAP

funds w e r e expended f o r s t o r i n g and maintaining the

unassigned equipment.

We a t t r i b u t e d t h e f a i l u r e t o use a v a i l a b l e MAP-owned

equipment t o (1) t h e absence Df a c c u r a t e inventory d a t a and

of d e f i n i t i v e procedures f o r s y s t e m a t i c a l l y s c r e e n i n g and

u s i n g unassigned MAP-owned equipment, (2) t h e l a c k of necess a r y c o n t r o l s t o assure h i g h e r echelons of command t h a t exi s t i n g p o l i c i e s w e r e being implemented by o p e r a t i n g u n i t s ,

and (3) t h e u s e of verbal hold orders t o r e s e r v e equipment,

unassigned because of c a n c e l l a t i o n of c e r t a i n grant-aid

r e c i p i e n t country programs, €or p o t e n t i a l but unconfirmed

s a l e s , b a r t e r , o r coproduction agreements.

We also pointed out t h a t t h e r e was a need f o r improvement i n management of Army-owned equipment reserved f o r MAP,

t o ensure t h a t , upon termination o r reduction of t h e MAP requirement f o r which the equipment was reserved, it would be

promptly released f o r general-issue purposes. Our review a t

t h r e e Army locations showed t h a t only one had l o c a l w r i t t e n

procedures i n e f f e c t t o cover t h i s management area.

A t t h e conclusion of our review, Defense and Army o f f i c i a l s agreed generally with t h e findings, conclusions, and

proposals f o r c o r r e c t i v e a c t i o n s contained i n our r e p o r t and

informed us t h a t measures had been taken o r were i n process

t o improve management procedures and controls over MAP inventor i e s

We believe t h a t t h e Department's plans, i f properly

carried o u t , should r e s u l t i n more e f f e c t i v e u t i l i z a t i o n of

MAP-owned equipment and equipment reserved f o r MAP and should

reduce c o s t s t o t h e United S t a t e s . W e intend t o review t h e

Department's actions a s p a r t of our continuing review of

MAP.

(B-162479, NOV. 14, 1967.)

AUTOMATIC DATA PROCESSING EQUIPMENT

Department of Defense (and o t h e r departments and agencies)

The Federal Government i s a l a r g e user o f automatic

d a t a processing (ADP) equipment i n i t s o p e r a t i o n s . I n most

c a s e s , maintenance services f o r Government-owned computers

are being obtained from computer equipment manufacturers.

Only a r e l a t i v e l y small number of Government computer ins t a l l a t i o n s have adopted a policy of in-house maintenance

f o r t h e i r equipment. Because af t h e i n c r e a s i n g investment

o f t h e F e d e r a l Government i n computer f a c i l i t i e s and t h e

r e l a t e d i n c r e a s e i n d i r e c t maintenance c o s t s , w e made a

study o f t h e many f a c t o r s involved i n d e c i s i o n s on o b t a i n i n g adequate maintenance s e r v i c e a t reasonable c o s t .

On t h e b a s i s of o u r study, we concluded t h a t g r e a t e r

c o n s i d e r a t i o n should be given t o in-house maintenance of

Government-owned ADP equipment because o f t h e p o t e n t i a l f o r

c o s t r e d u c t i o n i n o b t a i n i n g t h i s necessary s e r v i c e and o t h e r

p o s s i b l e advantages, including g r e a t e r management c o n t r o l

o v e r maintenance work, increased acceptance of computer ope r a t i o n s by o t h e r employees, and a h i g h e r level o f computer

e f f i c i e n c y ( i . e . , l i t t l e downtime).

Although in-house maintenance of ADP equipment i n t h e

F e d e r a l Government is n o t a common p r a c t i c e , w e d i d v i s i t

several Government i n s t a l l a t i o n s t h a t have followed t h i s

p r a c t i c e successfully. W e a l s o v i s i t e d s e v e r a l non-Federal

and p r i v a t e o r g a n i z a t i o n s t h a t do t h e i r own maintenance

work.

No simple, p r e c i s e c r i t e r i a f o r determining t h e f e a s i b i l i t y o f in-house maintenance can be s e t f o r t h which

w i l l apply uniformly t o a l l Government i n s t a l l a t i o n s . During our i n q u i r i e s a t Government and p r i v a t e i n d u s t r y ins t a l l a t i o n s which had adopted in-house maintenance p o l i c i e s ,

we noted t h a t t h e following o p e r a t i o n a l and c o s t f a c t o r s

were considered before making in-house naintenance d e c i s i o n s .

--Operational character of systems.

--Location of equipment.

--Split maintenance responsibility.

--Quality of maintenance.

--Modification by equipment manufacturers.

--Size of computer installation.

We pointed out in our report issued to the Congress in

April 1968 that the investment of the Federal Government in

computer facilities and related direct maintenance costs,

currently about $50 million annually, could be expected to

continue to increase. We concluded that there was need for

more management attention toward ascertaining the most efficient, effective, and economical methods of maintaining

Government-owned ADP equipment. For these reasons, we recommended that

--the Bureau or' the Budget require the executive agencies to consider in-house maintenance in reaching

procurement and maintenance decisions and that the

General Services Administration accelerate its studies now under way on this subject with an objective

of promulgating more specific policies for the guidance of Federal agencies in obtaining adequate maintenance service at the least cost to the Government.

--the head of each Federal agency arrange for the establishment of procedures for arriving at the most

advantageous decisions for maintenance of ADP equipment.

We also suggested that, pending issuance of more specific policy guidance in the executive branch, the Federal

agencies use the detailed operational and cost factors we

included in the report in arriving at maintenance decisions

for their ADP equipment.

The Bureau of the Budget has advised us that it is

taking steps to amend its Circular No. A-54 which relates

specifically to acquisition and use of ADP equipment to ensure that agencies give appropriate consideration to the use

of in-house maintenance.

The General Services Administration accelerated its

study by awarding a contract for consulting services to conduct -a survey "to identify the optimum least cost alternative means for maintenance of ADP within appropriate parameters such as make, size and type of equipment; type and

priority of applications; and geographical considerations. I 1

The General Services Administration advised us that it would

issue a Federal Property Management Regulation containing

some interim guidelines to assist agencies in their evaluation of alternative means of maintenance. These guidelines

will cover the factors brought out in our report.

(B-115369, Apr. 3, 1968.)

POTENTIAL SAVINGS THROUGH DIRECT PURCHASE

OF COMPONENTS AND SPARE PARTS FOR

AUTOMATIC DATA PROCESSING EQUIPMENT

Department o f Defense (and other departments and agencies)

During our study of maintenance practices of ADP equipment users in the Federal Government and several non-Federal

and private organizations, we noted instances where aggressive managers saved their activities significant sums of

money by not purchasing ADP system components and repair

parts from the computer manufacturer but by purchasing the

items direct from the actual manufacturers of the components

or from other sources of supply. For instance:

--The United States Fleet Numerical Weather Facility

performed its maintenance on an in-house basis. As

a result, it was in a position to determine the best

method of procurement. The Facility, for example,

made two procurements of drum-storage devices and

related controllers for $900,300 from the actual

manufacturers of the items. Equivalent equipment

procured from the computer manufacturer could have

cost an additional $475,200.

--Repair parts for the large-scale computer system at

the Data Processing Center, United States Army Deputy

Chief of Staff for Logistics (DCSLOG), were not

usually purchased from the manufacturer. Some of the

repair parts were obtained by the purchase of a complete computer system, deemed obsolete, at salvage

or scrap price on the open market. This contributed

to the relatively l o w cost of maintenance at this installation.

--A private computer service bureau followed the same

practice as DCSLOG (above). The modest price that

this company paid for spare parts contributed to

the relatively low overall cost of maintenance of the

company.

In our report issued to the Congress in April 1968, we

expressed the view that the cost savings from direct procurement, illustrated by the cases we encountered, suggested

that this method of procurement should be more extensively

explored in procuring ADP components and parts needed in

maintaining Government-owned ADP equipment. We are conducting further studies of this question as a preliminary to

making specific recommendations. (B-115369, Apr. 3 , 1968.)

MANAGEMENT CONTROL SYSTEMS

NEED FOR A STUDY OF THE COORDINATION OF THE

MANAGMENT REVIEW EFFORTS OF GROUPS OUTSIDE

THE INTERNAL AUDIT ORGANIZATIONS

Department of Defense

In a report issued to the Congress in March 1968, we

stated that the organization, audit policies, directives,

plans, and operations of the internal audit organizations

in the Department of Defense complied substantially with

requirements for an effective internal audit system. We

stated also that the Department's internal audit policies,

directives, and plans were being implemented in a generally

satisfactory manner. Our review was directed primarily to

obtaining current information on the adequacy of the auditing activities of the Department's five formally designated

internal audit organizations.

In view of the existence in the Department of numerous

separate internal review and surveillance organizations

performing management reviews, we also gave consideration

to the need for coordination of review work in order to

avoid omissions and duplications and to direct the total

effort s o a s to maximize results. Because of our lack of

knowledge of the management review activities of the Inspectors General of the military departments, which stems

from constraints on making the related records available

for our review, we indicated that we were unable to ascertain whether the activities of the designated audit organizations and the Inspectors General are effectively coordinated so as to avoid duplication and obtain the best results from the total review effort.

We made a number of proposals for consideration in the

performance of future internal audit activities. The Department of Defense concurred except with repsect to our

proposal that a study be made of the work of the numerous

organizations and activities conducting management reviews,

with a view to strengthening overall control, direction,

and coordination of such efforts. The D,epartment doubted

whether such a study would be productivk but proposed to

consider the matter further. (B-132900, Mar. 8, 1968.)

FAVORABLE OPINION ON THE ACCOUNTING

SYSTEM FOR OPERATIONS PROPOSED FOR

IMPLEMENTATION JULY 1, 1968

Department of Defense

Section 640(b) of the Department of Defense Appropriation Act, 1968, provided that none of the funds were available to the Department of Defense (DOD) to install o r utilize any new ''cost based" or "expense-based" system or systems f o r accounting until 45 days after the Comptroller

General of the United States, after consultation with the

Director of the Bureau of the Budget, had reported to the

Congress that the design of the system or systems had met

certain criteria. The section specified that the design

should (1) meet the requirements of all applicable laws

governing budgeting, accounting, and the administration of

public funds and the standards and procedures established

pursuant thereto, (2) provide for uniform application to

the extent practicable throughout DOD, and (3) prevent violations of the antideficiency statute (Rev. Stat. 3679;

31 U. S.C. 665).

In April 1968 we reported to the Congress that, in our

opinion, the DOD accounting system for operations, as outlined in a system design description dated March 19, 1968,

prepared by DOD and proposed for implementation July 1,

1968, met the criteria specified in section 640(b),

Our

opinion was based on analysis and evaluation of the system

design description, supporting directives and instructions,

and other documentation of DOD, and on limited tests of operational feasibility of certain of the features of the proposed system. Our opinion was reached in consultation with

the Director of the Bureau of the Budget. A copy of his

favorable opinion and a copy of the system design description dated March 19, 1968, were enclosed in our report.

Implementation of the DOD accounting system for operations is in progress. We are cooperating actively with DOD

to facilitate the implementation. (B-159797, Apr. 12,

1968

NEED FOR IMPROVEMEKC IN RELIABILITY OF

THE AIR FORCE PERSONNEL DATA SYSTEM

Department of the Air Force

The Air Force maintains a computerized personnel data

system to provide the information needed for management of

its military personnel. The information provided by the

system is used as the basis for management decisions affecting overall planning and budgeting and decisions affecting individual officers and enlisted men in such personnel actions as assignments, promotions, separations, and

retirements. We examined the operation of the system for

the period April through October 1967. Our examination was

directed primarily toward the evaluation of the data recorded in the system and did not include an overall evaluation of the operation, Our report on the examination was

issued to the Congress in July 1968.

We found that the data in the system was not sufficiently reliable to serve management purposes effectively.

Our examination of the recorded personnel data for 378

officers--an average of about 85 items of information for

each officer--showed that 366 of the 378 records had one or

more errors. The errors averaged five for the record of

each officer. A similar examination of the recorded personnel data for 480 enlisted men--an average of about 52

items of information for each enlisted man--showed that 457

of the 480 records had one or more errors. The errors averaged three for the record of each enlisted man.

In our opinion the errors stemmed from

--Lack of adequate review procedures to ensure the accuracy of personnel information.

--Absence of standards for evaluating the reliability

of the data in the system.

--Ineffective guidance and instruction to personnel at

base level by higher levels of command.

--Inadequate staffing and training of personnel at

base level.

The Air Force agreed generally with our findings and

proposals f o r corrective action and informed us of s t e p s

taken to strengthen its management of the personnel data

system. These actions, if properly implemented and monitored, should improve the reliability of the data in the

system. (B-164471, July 25, 1968.)

MOVEMENT OF AMERICAN FORCES

FROM FRPNCE (OPERATION FFSLOC)

PROBLEMS INCIDENT TO RELOCATION

OF SUPFEIES AND EQUIPMENT

Department of Defense

In response to strong congressional interest concerning the movement of American Forces from France (Operation

FTIELOC) , we undertook a broad survey covering military supply matters, disposition of surplus material, disposition

of real property and related personal property, and construction requirements arising from the movement of supplies

and personnel by the Army and Air Force. In May 1967 we

issued to the House Appropriations Committee and to certain

other committees of the Congress a report which presented

our observations to that date. In August 1968 we issued to

the Congress a report which supplemented the earlier report

and summarized our overall findings.

Despite the magnitude of the move from France and the

relatively short period of time available (March 1966 to

April 1, 19671, the Army and the Air Force were able to relocate their personnel, supplies, and equipment on time and

in a generally effective manner. However, as could be expected in an operation of this nature, many difficulties

arose, some of which were directly related to problems existing prior to the move.

The most significant problems noted by us were the

following:

--Control was lost over large quantities of supplies

and equipment, including weapons, ammunition, and

medical supplies. Inaccurate inventory records contributed to this situation.

--Supplies were shipped to locations with inadequate

storage facilities although available facilities

were not being used.

--Requirements for constmction of additional ammunition storage facilities were overstated.

-=.Some of the fixtures and personal property removed

f r o m former French bases were used ineffectively.

--Some usable personal property was not removed from

French bases.

Some of these problems were complicated by the fact

that the Secretary of Defense did not approve new locations

until relatively late dates. Officials of the Department

of Defense stated that the delays were caused by problems

associated with gold flow, relations with foreign governments, and the need to formulate acceptable lines of communications to support American Forces.

We made no recommendations in the reporto We intend

to issue detailed reports on specific aspects of Operation

FRELOC and to make appropriate recommendations at that

time, (B-161507, Aug, 7, 1968.)

OTHER AREAS OF OPEMTIONS

POTENTIAL SAVINGS THROUGH CONSOLIDATION OF

REAL PROPERTY MAINTENANCE FUNCTIONS IN AREAS

OF HIGHLY CONCENTRATED MILITARY INSTALLATIONS

Department of Defense

We examined into the feasibility of consolidating the

eight separate real property maintenance activities operated

by the military services on the island of Oahu, Hawaii, and

the 16 in the area of Norfolk, Virginia. These locations

were selected for examination because the relatively limited

geographical areas involved contained a large concentration

of military installations and facilities. Our findings were

presented to the Congress in a report issued in August 1968.

On the basis of our examination, we concluded that consolidation of the maintenance activities at each of the two

locations was feasible and would result in economies. We

estimated that the consolidations would result in:

--Annual savings of about $ 3 . 4 million in operating

costs ( $ 2 . 4 million on Oahu; $960,000 at Norfolk),

--Annual savings in an indeterminate amount in replacement c o s t s f o r equipment.

--Release of equipment valued at about $ 2 . 2 million

for possible use elsewhere ($1 million on Oahu;

$1.2 million at Norfolk).

We proposed that the Secretary of Defense consider

consolidating real property maintenance organizations on

Oahu and in the Norfolk area, each under a single manager,

with supporting subactivities as appropriate. We proposed

also that the Secretary conduct studies at other locations

having large concentrations of military installations, to

ascertain the feasibility of consolidation. We cited New

Orleans, Los Angeles, San Francisco, New York, and Washington, D.C., as examples of such concentrations.

In response, the Assistant Secretary of Defense (Installations and Logistics) advised us that his office had

established an interdepartmental committee, under the Department of the Navy, to develop measures for effecting

maximum consolidations on Oahu, at Norfolk, and at other

locations of highly concentrated military installations.

We were further advised that the committee was establishing

local interdepartmental committees on Oahu and at Norfolk.

The guidelines provided to the local committees indicated that the installation commanding officers involved

would decide the extent of consolidation, In our report we

recommended that decisions as to the extent of consolidation of real property maintenance activities be made on the

basis of independent studies and that such decisions be made

binding on the installations involved.

On October 4, 1968, the Assistant Secretary of Defense

(Installations and Logistics) advised us that the recommendations of the local interdepartmental committees would be

made binding on the installations involved after review and

approval by the military departments, by the Washington Interdepartmental Committee and by his office. (B-164217,

Aug. 5, 1968.)

NEED FOR IMPROVEMENT IN CONTROL

OVER AMMUNITION DEVELOPMENT

Department of the A m y

The Army Materiel Command is responsible €or developing conventional ammunition required by the Army, Air Force,

and Marine Corps, In September 1968 we issued to the Congress a report on our review of the management controls

over these operations.

The Army has established procedures reasonably adequate

to enable management to identify and to correct deficiencies

in ammunition prior to completion of development. The procedures include five distinct in-process reviews, or periodic evaluations, at specified points in the development

process.

In our opinion, Headquarters, Army Materiel Command,

was not adequately monitoring the development programs or

requiring project managers to perform the necessary reviews.

Insufficient management control had been in large part responsible for the development and production of unacceptable

ammunition in the past.

In our review of 11 items of conventional ammunition

that were in the developmental stage, we found that the

following items had been approved for production although

none of the required reviews and evaluations had been performed during the course of their development:

--73,000

rounds of howitzer cartridges at a cost of

$21 million.

--115,000 rounds of recoilless rifle cartridges at a

cost of $31 million.

In the remaining 9 of the 11 items we reviewed, we

found that, on the basis of their respective stages of development, a total of 30 reviews and evaluations should

have been made. However, only 6 had been made.

In bringing our findings to the attention of the Department of Defense we proposed that

--The Army clarify existing reporting instructions to

ensure that proposed and completed actions in development programs are recorded and reported through

command channels.

--The Army maintain closer supervision over research

and development activities to ensure that in-process

reviews actually are made.

--The Army Audit Agency include in-process reviews in

its audit programs.

The Army, in its reply on behalf of the Department of

Defense, stated its agreement with these proposals and cited

corrective measures that had already been taken.

(B-157535, Sept. 27, 1968.)

NEED FOR IMPROVE3%NT IN AIRZIFT

OF CARGO TO SOUTHEAST ASIA

Department of the Air Force

The Military Airlift Command has responsibility for

providing overseas airlift services for all military departments, Most of the flights to Southeast Asia originate at

Travis Air Force Base, California.

We estimated that the aircraft dispatched from Travis

Air Force Base during July 1, 1965, through October 31,

1966, had unused airlift capacity of about 21 million pounds

although ample and critically needed cargo was on hand

awaiting shipment. The unused space was valued at about

$15 million based on the contract rates then in effect.

We believe the situation at Travis stemmed from (1) a

scarcity of personnel having the experience necessary to

supervise adequately and carry out efficiently air cargo

shipping operations and (2) a weakness in procedures f o r

communicating and coordinating information on availability

of cargo space on special military flights to the Far East

not originating at Travis. We brought our findings to the

attention of the Air Force and proposed certain corrective

measures which the Air Force accepted.

A follow-up review showed improvement in the use of

available cargo space on flights out of Travis, with the

exception of flights not originating there. In our report

issued to the Congress in May 1968, we recommended that the

Air Force require the Military Airlift Command to take the

necessary steps to ensure that accurate load information is

properly prepared and forwarded to appropriate air bases,

We recommended also that the Secretary of Defense require

the internal audit staff to review the matters covered in

our report to provide additional assurance that the necessary corrective actions are taken and effectively implemented. The Department of Defense and the Air Force agreed

with these recommendatiohs, (B-157476, May 14, 1968.)

POTENTIAL SAVINGS THROUGH USE OF AVAILABLE SPACE

ON MILITARY AIRCRAFT TO TRANSPORT BAGGAGE

BETWEEN THE UNITED STATES AND EUROPE

Department of Defense

In a report issued to the Congress in January 1962 we

pointed out that unaccompanied personal baggage of military

personnel, transported by commercial air carriers, could

have been transported in unused space on aircraft of the

Military Airlift Command (MAC) at less cost. The Department

of Defense stated at that time that steps had been, or

would be, taken to ship as much of this baggage as possible

on MAC flights.

In our follow-up review we found, as stated in our report issued to the Congress in September 1968, that the

problem reported on in 1962 was continuing. We estimated

that, of the 13.2 million pounds of unaccompanied baggage

moved by commercial air carriers between selected points,

6.8 million pounds could have been moved in unused space

on MAC flights at savings of about $1 million. The space

was unused because of a Department of Defense policy which

impeded the flow of unaccompanied baggage into MAC air terminals.

The Department of Defense concurred in our findings

and conclusions but stated that priority military cargo,

rather than baggage, would be used in the future to achieve

fuller use of space on MAC aircraft. In our opinion unaccompanied baggage should be reintroduced into the MAC system to achieve maximum use of available space, because the

Department of Defense has experienced difficulty in supplying sufficient quantities of high-priority military cargo

to make full use of space on MAC aircraft. (B-133025,

Sept. 26, 1968.)

NEED FOR IMPROVEMENT IN CONTROL OVER

Department of Defense

We found that the military departments did not m i fsmly or consistently implement Department of Defense p o l icy with respect to charges for services provided to nonappropriated fund activities and private interests. The

practices varied among military installations. The military

installations did not recover fully the costs of services

provided, and they used military personnel in lieu of civilian employees for nonmilitary activities without first

attempting to employ civilians.

We pointed out, in a report issued to the Congress in

February 1968, that the Office of the Secretary of Defense

had not required military departments to issue uniform instructions and to comply fully with Department of Defense

instructions relating to such charges. Also, the military

departments had not in all cases provided adequate surveillance at the installation level to ensure that charges f o r

services, sufficient in amount for the recovery of applicable c o s t s , were properly developed and consistently applied. Moreover, surveillance was not adequate to ensure

that assignments of military personnel to nonmilitary and

quasi-military activities were limited to positions of command supervision or were made only when qualified civilians

were not available.

The Department of Defense concurred, in general, with

our findings and acknowledged the need for added measures

to improve the controls over user charges and military personnel assignments. The Department stated that it was reevaluating its directive governing the funding of morale,

welfare, and recreational activities with a goal of establishing uniform and consistent practices. (B-163136,

Feb. 26, 1968.)

POTENTIAL SAVINGS THROUGH USE OF

CERTIFIED MAIL RATHER THAN REGISTERED MAIL

TO TRANSMIT CONFIDENTIAL MATERIAL

Department of Defense

Executive orders, a Department of Defense directive,

and service regulations permit the use of certified mail

for transmitting confidential material within the continental United States. A s stated in a report issued to the

Congress in April 1968, we found that certified mail was

not being used for this purpose to the fullest extent practicable because regulations do not require its use and because opinions differ regarding the adequacy and suitability of certified mail.

In our opinion considerable savings could be realized

and adequate security could be maintained if certified mail

rather than registered mail were used in the Department of

Defense f o r transmitting confidential material. The Department of Defense agreed and took steps to revise its d i rective to require that, as a general policy, certified

mail be used to the maximum extent practicable.

We recommended that the Director, Bureau of the Budget, in consonance with his responsibilities under the

President's cost reduction program, inquire into the practices of other Government agencies with a view toward the

use of the least costly and most suitable method of mailing

classified material. The Bureau of the Budget concurred.

(B-146979, Apr. 8, 1968.)

OBSERVATIONS ON THE UNITED STATES

BALANCE-OF-PAYMENTS POSITION

Department of Defense (and other departments and agencies)

Over the past several years, we have issued a number

of reports to the Congress on the subject of the United

States balance-of-payments position. Many of these reports

have been cited in our annual reports on selected significant audit findings that are made to the House Committee on

Appropriations

The problem of balance-of-payments is one of

Government-wide importance and is one which is identified

with several departments and agencies. It has been an area

of increasing interest to both the Congress and to the Executive branch. Because of this interest we felt that a

compilation-type report of all our prior reports was in order.

This report was issued to the Congress in October 1967

and pointed out that over the years we had sought ways and

means of benefiting the United States balance-of-payments

position. The report, and a separate classified supplement,

summarized the results of our efforts since 1961.

A wide range of Government programs has been developed

to deal with continuing balance-of-payments deficits. Some

of these programs depend for their success on the voluntary

cooperation of a broad segment of the American business

community and public; others involve largely matters of

domestic or foreign policies.

We have directed our efforts toward identifying specific situations which lend themselves to achieving additional balance-of-payments benefits. We have examined into

the management of Govesnment-owned foreign assets and

claims; the negotiation and enforcement of bilateral agreements that result or should result in the accrual of proceeds to the Government; efforts made to encourage multinational participation in foreign aid programs; and areas

where operations could be carried out abroad with more efficiency o r at less cost.

As we discovered situations having beneficial balanceof-payments implications, we brought them to the attention

of the Congress and of the appropriate officials of the

agencies involved. In many cases remedial action was taken.

While it is not possible to estimate precisely how

much the United States balance-of-payments situation was

benefited because of th& actions later taken by agency officials, we believe that such actions with respect to the

matters included in the report and in the separate classified supplement have resulted in benefits of many millions

of dollars. In a number of cases, little or nothing was

done about the matters we identified because agency officials maintained that the adoption of our proposals would

not be in the interest of the foreign policy of the United

States. It appears that significant balance-of-payments

advantages in these areas are not likely until and unless

basic policies change.

We issued our report to the Congress because the problem of coping with chronic balance-of-payments deficits is

prominent among the contemporary economic issues confronting the United States. The report outlined areas of Government operations where balance-of-payments advantages may

be possible, the status of agencies' efforts in these areas,

and reasons why in some cases the potential advantages have

not been pursued to date. (B-162222, Oct. 31, 1967.)

U.S. GAO Wash., D.C.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.