Text File

U.S. General Accounting Office Reports and Testimony: February 1993

AGRICULTURE AND FOOD

Farmers Home Administration: Final Resolution of Farm Loan or Servicing Appeals

GAO/RCED-93-28, Feb. 10 (61 pages).

In deciding on about 7,700 appeals of Farmers Home Administration (FmHA) loan or loan-servicing decisions, hearing officers ruled that lending officials had not made correct decisions in about 40 percent of the cases. As a result, FmHA must reconsider such applications and again decide whether to offer the appellants loans or loan servicing. GAO estimates that nearly half of the 2,900 appellants whose cases were remanded received at least part of their requested loans or loan servicing. FmHA reconsidered and denied loans or loan servicing for 19 percent of the appellants. Another 14 percent did not receive loans or loan servicing because they had rejected FmHA's offers. Actions for the remaining 18 percent of the appellants were still pending at the time of GAO's review. Although FmHA regulations generally specify time frames for completing actions on initial loan and loan-servicing applications, the agency has not set deadlines for completing actions on remanded decisions. GAO estimates that only 34 percent of the appellants who received loans and loan servicing had their appeals processed in a timely way. Appellants' not providing information in a timely manner was the main reason cited by FmHA officials for the delays.

Testimony

Food Safety: Inspection of Domestic and Imported Meat Should Be Risk-Based, by John W. Harman, Director of Food and Agriculture Issues, before the Subcommittee on Commerce, Consumer Protection, and Competitiveness, House Committee on Energy and Commerce. GAO/T-RCED-93-10, Feb. 18 (12 pages).

During the past 15 years, the U.S. system for inspecting domestic and imported beef has changed little. Inspectors still rely on sight, smell, and feel when inspecting meat--a method that may not protect the public from harmful bacteria. Contaminated beef recently caused extensive illness and two deaths in several western states, once again raising concerns about inadequate U.S. inspection. In the wake of a GAO report on Canadian meat, the U.S. Department of Agriculture (USDA) and the Canadian government have improved their inspection procedures and better documented that the Canadian inspection system is equivalent to that of the U.S. That system, however, suffers from the same shortcomings as does the U.S. system--the need for fundamental improvement to protect against the greatest food safety risks. USDA needs to weigh the benefits and the risks of inspection by sight, smell, and feel. This method of inspection is extremely labor-intensive and drains resources that could be put to better use. In addition, no matter how many USDA inspectors are assigned to the slaughter line, pathogenic bacteria often avoid detection by sight, feel,or smell.

U.S. Department of Agriculture: Better Management Could Increase Effectiveness of FAS Export Operations, by Allan I. Mendelowitz, Director of Financial Institutions and International Trade Issues, before the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies, House Committee on Appropriations. GAO/T-GGD-93-5, Feb. 23 (36 pages).

Subsidized agricultural export competition has intensified, and agricultural trade has become a point of friction between the United States and its major trade partners. At the same time, the number and the costs of U.S. agricultural export programs have risen. Budgetary constraints and the substantial money spent on agriculture export programs make good program management critical. The U.S. Department of Agriculture's Foreign Agricultural Service (FAS) manages about $10 billion a year in agricultural export assistance programs intended to boost U.S. agricultural exports and to develop and maintain foreign agricultural markets for U.S. products. This testimony outlines a number of crosscutting program and management weaknesses that diminish the efficiency and the effectiveness of FAS' export operations.

BUDGET AND SPENDING

Impoundments: Historical Information and Statistics on Proposed and Enacted Rescissions of Budget Authority, 1974 to the Present

GAO/OGC-93-3, Feb. 1 (four pages).

To keep Congress apprised of the amount and the frequency of rescissions proposed and enacted, GAO updated its April 1992 compilation of historical information and statistics on rescissions proposed by the President and rescissions enacted by Congress. Included is an updated table showing, from 1974 to the present, the (1) aggregate number and amount of rescissions proposed by the President; (2) aggregate number and amount of proposals enacted by Congress; (3) aggregate number and amount of rescissions initiated by Congress; and (4) total number of rescissions enacted and the total amount of budget authority rescinded, with grand totals for each category. GAO also provides an updated table, showing by administration, from 1974 to the present, the aggregate number and amount of rescissions proposed by the President and enacted.

Impoundments: Unreported Withholding of Funds in the Forest Service Timber Salvage Sales Account and Proposed Deferrals of Security Assistance and Emergency Refugee Funds

GAO/OGC-93-4, Feb. 5 (four pages).

On December 30, 1992, the President submitted his second special impoundment message for fiscal year 1993. The message reports two deferrals of budget authority and revises the amounts of three deferrals previously reported. GAO reviewed these deferrals and found them to be in accordance with the Impoundment Control Act. GAO also reports an impoundment of Department of Agriculture budget authority that should have been reported by the President to Congress but was not. The impoundment involved the Forest Service Timber Salvage Sales account, while the proposed deferrals affected security assistance and emergency refugee funds.

Budget Issues: A Comparison of Fiscal Year 1992 Budget Estimates and Actual Results

GAO/AFMD-93-51, Feb. 12 (26 pages).

The critical issue for fiscal year 1992 budget projections was not whether any particular forecaster had more-accurate models or more-relevant data, but rather the capacity of any economic model to predict key turning points in economic performance; on this question, all forecasters to a large degree failed in 1992. The total budget for fiscal year 1990 was $290.2 billion--the highest in the nation's history, surpassing the previous record of $268.7 billion set in fiscal year 1991. This result appears to track rather well with the original deficit estimate of $280.9 billion. This rough comparability, however, masks (1) significant underlying variations between original receipt and outlay projections and actual results and (2) the impact of substantially lower deposit insurance spending than originally estimated. Actual 1992 receipts were more than $73 billion less than original estimates. Receipts from almost all sources fell below original estimates, led by individual income taxes ($53 billion) and social insurance taxes ($15.7 billion), due largely to the economy's not performing as well as assumed in the original estimates. Total outlays also were less than original estimates by about $64 billion. In 1992, the inherent difficulty of any economic model to accurately predict key turning points in the economy was clearly demonstrated, with significant implications for the accuracy of receipt and outlay estimates.

Performance Budgeting: State Experiences and Implications for the Federal Government

GAO/AFMD-93-41, Feb. 17 (16 pages).

Advocates of performance budgeting--budgeting that links performance levels with specific budget amounts--have argued that systematically presenting information on agency and program performance will improve budget decision-making by focusing choices on program results. The Senate's recent passage of legislation calling for a series of pilot projects dealing with performance measurement and performance budgeting indicates renewed interest in this subject at the federal level. This report looks at the uses and the limitations of performance measurement and budgeting as experienced by certain states. GAO describes the experiences of these states, considered leaders in performance budgeting, and discusses the potential implications of these experiences for the federal government.

EDUCATION

Compensatory Education: Additional Funds Help More Private School Students Receive Chapter 1 Services

GAO/HRD-93-65, Feb. 26 (48 pages).

For more than two decades, public school teachers in the Chapter 1 program--a federal program of compensatory education for the disadvantaged--provided remedial services to students in religious schools. The Supreme Court ruled in 1985, however, that this practice violated the doctrine of separation of church and state, and school districts were forced to find new ways to provide Chapter 1 services to private school students. These alternatives were often more expensive and initially resulted in fewer private school students receiving Chapter 1 services. This report provides an update on Chapter 1 services provided to private sectarian school students since Congress authorized additional funds to help local school districts comply with the Supreme Court decision. GAO identifies (1) what changes have occurred in participation rates, (2) how services are provided to private school students and what changes have occurred in services, and (3) what the current status of state expenditures is and how much additional Chapter 1 funding has been allocated for complying with the Supreme Court decision.

Testimony

Student Achievement Standards and Testing, by Eleanor Chelimsky, Assistant Comptroller General for Program Evaluation and Methodology, before the Subcommittee on Elementary, Secondary, and Vocational Education, House Committee on Education and Labor. GAO/T-PEMD-93-1, Feb. 18 (11 pages).

In this testimony on student achievement standards and testing, GAO discusses (1) the extent and the cost of testing in this country and (2) the experience with standards and tests in Canada. GAO believes that Congress should consider specific ways to encourage the participation of teachers, as well as state and local education administrators, in developing standards and in all aspects of increased testing. Congress should also carefully consider how to ensure the technical quality of any tests in a national examination system.

EMPLOYMENT

Dislocated Workers: Worker Adjustment and Retraining Notification Act Not Meeting Its Goals

GAO/HRD-93-18, Feb. 22 (62 pages).

About 7,000 plant closures and mass layoffs occurred in 1990 and 1991, leaving more than one million Americans out of work. Although a 1988 law requires certain employers to give their workers and state and local agencies 60 days' notice of impending plant closings or layoffs, about half of all employers in a GAO survey did not give any notice at all and many of those who had provided notice gave less than the required time. The notification provisions of the Worker Adjustment and Retraining Notification Act (WARN) were intended to give workers time to adjust and allow states to begin helping workers find new jobs as quickly as possible. As the law is written, however, many major layoffs are not covered and, given the high percentage of closures for which there was no notice or notices were late, the use of the courts as an enforcement mechanism does not appear to be working. GAO suggests that as Congress considers ways to improve the implementation of WARN, the Department of Labor be given responsibility for enforcing the law. GAO summarized this report in testimony before Congress; see:

Dislocated Workers: Implementation of the Worker Adjustment and Retraining Notification Act, by Linda G. Morra, Director of Education and Employment Issues, before the Subcommittee on Labor, Senate Committee on Labor and Human Resources. GAO/T-HRD-93-6, Feb. 23 (nine pages).

ENERGY

Nuclear Security: Safeguards and Security Planning at DOE Facilities Incomplete

GAO/RCED-93-14, Oct. 30 (19 pages).

High-risk vulnerabilities may be going undetected at Department of Energy (DOE) field facilities because of ineffective safeguards and security planning. Protection plans, many of which have been in the works for years, remain incomplete for a large number of DOE's sensitive facilities and most of its sites. Although DOE has cited various reasons--such as lack of staff or changes in mission--to explain the situation, GAO believes that the underlying problem is DOE's lack of commitment to the planning process. According to DOE officials, the agency's proposal to improve the process by requiring a new overall plan may actually further complicate the process. They believe that the modified planning process could further delay the safeguards and security plans because many plans now being prepared will have to be rewritten and because work required to develop vulnerability assessments will be increased. GAO agrees that implementation of the revised process could increase the amount of vulnerability assessment work, further delaying the completion of plans. In GAO's view, it is important for DOE to complete the remaining sensitive facility plans.

Energy Management: Types of Allowable and Unallowable Costs Incurred Under Two DOE Contracts

GAO/RCED-93-76FS, Jan. 29 (18 pages).

This fact sheet provides information on costs that the Department of Energy's (DOE) management and operating contractor, Martin Marietta Energy Systems, incurred while running DOE's facilities at Oak Ridge, Tennessee; Paducah, Kentucky; and Portsmouth, Ohio. Martin Marietta has two contracts with DOE, one involving Oak Ridge and the other involving the Kentucky and Ohio facilities. GAO identified some limited instances in which costs incurred were determined to be unallowable, including Martin Marietta employee memberships in trade, business, and professional organizations. Compared with the more than $1.8 billion spent on the two contracts in fiscal year 1991, however, the amounts of the unallowable costs were relatively small, and either DOE or Martin Marietta plans to take appropriate corrective action. GAO also found that the most recent allowability-of-costs report, an examination of fiscal year 1991 costs prepared by Martin Marietta's internal audit staff, included a broad discussion of unallowable cost issues and identified some unallowable costs. The two previous reports did not identify any unallowable costs. Further, Martin Marietta gave GAO data showing that it had incurred more than $2.2 million in costs to run DOE facilities in 1992 that had not been charged to the government because Martin Marietta considered them unallowable. These costs included relocation expenses, community relations expenses, incentive compensation for executives, country club dues, and entertainment costs. Also, in fiscal year 1991, Martin Marietta charged more than $320,000 in allowable recreational costs, including $7,300 for golf balls and $20,000 for a Christmas party.

Testimony

Energy Management: High Risk Area Requires Fundamental Change, by Victor S. Rezendes, Director of Energy and Science Issues, before the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce. GAO/T-RCED-93-7, Feb. 17 (18 pages).

The Department of Energy's (DOE) contract management philosophy has put billions of dollars in yearly contractors' services at risk. These problems date back to the Manhattan Project of the 1940s, when the government, desirous of enlisting the private sector in developing the atomic bomb, gave contractors wide latitude in running the government's weapons research and production facilities. Today, DOE is trying to overcome this legacy of inadequate oversight by giving contractors more incentive to act responsibly while simultaneously increasing oversight of contractors' activities. GAO applauds these efforts but recognizes that they will take years to implement. With the new administration, DOE has a chance to build on the momentum from recent changes in contract management. The new administration needs to continue demanding greater contractor accountability. Improved information and financial management systems, along with better-trained technical staff, will also be needed to ensure accountability. Finally, changes of this magnitude will take long-term commitment and sustained leadership to implement.

ENVIRONMENTAL PROTECTION

Testimony

Pesticides: U.S. and Mexican Fruit and Vegetable Pesticide Programs Differ, by Peter F. Guerrero, Associate Director for Environmental Protection Issues, before the Subcommittee on Commerce, Consumer Protection, and Competitiveness, House Committee on Energy and Commerce. GAO/T-RCED-93-9, Feb. 18 (13 pages).

GAO testified that several differences exist in tolerances--maximum limits of pesticides allowed in or on foods--between the United States and Mexico. These differences fall into three main categories: (1) pesticides that have tolerances in both countries but have tolerance in Mexico for some commodities and no comparable tolerances in the Unites States; (2) pesticides that have tolerances in Mexico but none in the United States; and (3) pesticides that have tolerances in both countries for the same commodities, but at different levels. If Congress approves the North American Free Trade Agreement, the level of imported Mexican produce may soar. This anticipated rise has heightened concern among environmental groups that pesticide levels for Mexican produce may exceed U.S. limits if growers attempt to maximize production with the new opportunities for agricultural exports. Whether or not Congress approves the agreement, pesticide standards for produce will most likely play a larger role in trade discussions as imports from Mexico and other nations continue to increase. In addition, the Food and Drug Administration will need to continue monitoring fruits, vegetables, and other food imported into the United States from Mexico regardless of whether the agreement is enacted. GAO outlines several steps that need to be taken by both governments to ensure that Mexican produce does not violate U.S. pesticide tolerance levels.

Creation of a Department of the Environment, by Richard L. Hembra, Director of Environmental Protection Issues, before the Senate Committee on Governmental Affairs. GAO/T-RCED-93-6, Feb. 18 (eight pages).

GAO testified on proposed legislation that would create a Department of the Environment. GAO supports such a move. Conferring Cabinet status on the Environmental Protection Agency (EPA) would not only enhance the status of environmental protection issues on the nation's agenda but would also help the nation to respond more effectively to the complex environmental challenges it faces. Other reasons for GAO's support include the growing importance of EPA and of environmental issues; the interrelationship of environmental protection issues and other issues represented by Cabinet departments; and the ability of the proposed elevation to Cabinet status to improve EPA's oversight and accountability.

FINANCIAL INSTITUTIONS

Bank and Thrift Regulation: Improvements Needed in Examination Quality and Regulatory Structure

GAO/AFMD-93-15, Feb. 16 (74 pages).

This report summarizes the results of GAO's review of bank and thrift examinations done by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. (Each organization is discussed in a separate report listed below.) GAO focused on how well regulators assess the quality of bank and thrift loan portfolios and related loan loss reserves and the effectiveness of the institutions' internal control systems. In reviewing examinations for 58 randomly selected banks and thrifts, GAO discovered surprising weaknesses. Specifically, examinations were too limited to fully reveal the extent of deficiencies jeopardizing safety and soundness. These limitations impeded early warning of the seriousness of bank and thrift weaknesses and reduced the chance to take timely corrective action and minimize losses to the insurance funds. Similar weaknesses affected the quality of bank holding company inspections. Extensive flexibility granted examiners and a lack of minimum requirements were common problems affecting the quality of examinations and inspections. As measured by the unprecedented failures of banks and thrifts since 1980, the regulatory system has become far less effective in preventing and minimizing the number and the cost of failures. Successful implementation of the FDIC Improvement Act of 1991 and strengthened examinations and accounting rules are vital to regulatory effectiveness and protection of the insurance funds. GAO also identified many inconsistencies among the regulators that may hinder their efficiency and effectiveness. GAO concludes that the regulatory structure that arose from the Great Depression has not kept pace with the banking world, one that has become increasingly competitive and complex in the 1990s. The Comptroller General summarized this series of reports in testimony before Congress; see:

Bank and Thrift Regulation: Improvements Needed in Examination Quality and Regulatory Structure, by Charles A. Bowsher, Comptroller General of the United States, before the House Committee on Banking, Finance, and Urban Affairs. GAO/T-AFMD-93-2, Feb. 16 (47 pages).

Thrift Examination Quality: OTS Examinations Do Not Fully Assess Thrift Safety and Soundness

GAO/AFMD-93-11, Feb. 16 (52 pages).

Bank Examination Quality: FDIC Examinations Do Not Fully Assess Bank Safety and Soundness

GAO/AFMD-93-12, Feb. 16 (65 pages).

Bank Examination Quality: FRB Examinations and Inspections Do Not Fully Assess Bank Safety and Soundness

GAO/AFMD-93-13, Feb. 16 (63 pages).

Bank Examination Quality: OCC Examinations Do Not Fully Assess Bank Safety and Soundness

GAO/AFMD-93-14, Feb. 16 (50 pages).

Penny Stocks: Regulatory Actions to Reduce Potential for Fraud and Abuse

GAO/GGD-93-59, Feb. 3 (74 pages).

During the 1980s, the widespread peddling of low-priced securities known as penny stocks was fraught with fraud and abuse; investor losses due to unscrupulous sales of these stocks may have topped more than $2 billion annually. In response, Congress granted the Securities and Exchange Commission (SEC) additional authority to go after individuals involved in questionable sales of penny stocks. Broker-dealers that sell penny stocks and companies that issue penny stocks must now disclose information about the stocks and the companies before finalizing penny stock sales. Although SEC statistics show that the number of broker-dealers trading penny stocks and complaints involving penny stocks have decreased in recent years, continued complaints by investors and newly uncovered selling tactics suggest that the potential for fraud and abuse in penny stock sales remains high. This report presents information on the overall status of penny stock activity and the National Association of Securities Dealers' efforts to (1) increase its regulation of the market during recent years, (2) implement new information collection and dissemination systems, (3) coordinate enforcement with other federal and state authorities, and (4) examine penny stock broker-dealers' sales practices.

Securities Regulation: SEC's Oversight of Privately Placed Transactions Among Large Investors

GAO/GGD-93-37, Feb. 19 (17 pages).

This report reviews how the Securities and Exchange Commission (SEC) collected and analyzed data for its first two reports to Congress on the implementation of Rule 144A. SEC adopted Rule 144A in April 1990 to (1) increase the liquidity and the efficiency of the secondary market among large institutional U.S. investors for privately placed foreign and domestic securities that are not registered with SEC and (2) attract foreign securities to the U.S. capital markets. The rule allows large institutional U.S. investors to trade unregistered securities among themselves and eases disclosure requirements for foreign issues of privately placed Rule 144A securities. Obtaining accurate and complete information on the Rule 144A market is difficult, however. The nonpublic characteristics that make the private placement market appealing to large, sophisticated investors also make it hard for SEC to monitor market activity. Consequently, SEC uses various data sources to monitor developments in the Rule 144A marketplace and to prepare the reports. SEC's first effort to report on Rule 144A relied on limited supporting data and analysis. Modifications and expansions in SEC's data collection and procedures during the second reporting efforts enabled SEC to collect and analyze more-comprehensive and more-detailed data on the Rule 144A market. Although the private nature of the market might not allow SEC to identify all Rule 144A transactions, SEC officials have agreed to use two additional data bases when preparing future reports. This should provide more-complete data on Rule 144A transactions and enable SEC to better monitor and assess the impact of the Rule 144A market.

FINANCIAL MANAGEMENT

Testimony

Government Management: Status of Progress in Correcting Selected High-Risk Areas, by Donald R. Wurtz, Director of Financial Integrity Issues, before the Subcommittee on Oversight, House Committee on Ways and Means. GAO/T-AFMD-93-1, Feb. 3 (26 pages).

GAO testified on seven of 17 high-risk areas within the government that are particularly vulnerable to fraud, waste, abuse, and mismanagement. The seven areas involve the Pension Benefit Guaranty Corporation, the Internal Revenue Service, Medicare, the Customs Service, asset forfeiture, the Resolution Trust Corporation, and Superfund. This testimony focuses on program weaknesses; agency corrective actions; and recommendations for future actions by Congress, the administration, and agency officials.

GOVERNMENT OPERATIONS

Status of Open Recommendations: Part A--Improving National Security and International Affairs Programs

GAO/OP-93-1A, Jan. 15.

Status of Open Recommendations: Part B--Improving Resources, Community, and Economic Development Programs

GAO/OP-93-1B, Jan. 15.

Status of Open Recommendations: Part C--Improving Human Resource Programs

GAO/OP-93-1C, Jan. 15.

Status of Open Recommendations: Part D--Improving Justice, General Government, Financial and Information Management, and Evaluation Programs

GAO/OP-93-1D, Jan. 15.

This annual report summarizes the findings and open recommendations resulting from GAO audits and other review work in federal agencies for which satisfactory legislative or administrative actions have not yet been completed. To encourage prompt, responsive actions on its recommendations, GAO follows up on them. This report contains information on 2,522 GAO recommendations that were open as of September 30, 1992. The report is available in a four-volume set totaling more than 1,000 pages or on computer disk. Either format can be obtained by using the order form in the back of this publication.

Personnel Practices: Career Appointments Granted Political Appointees From Jan. Through Nov. 1992

GAO/GGD-93-49FS, Jan. 22 (six pages).

GAO reviewed the conversion of political appointees to career positions from January 1 through November 30, 1992. In total, the Office of Personnel Management (OPM) reported that it had processed and approved the conversion of 13 noncareer Senior Executive Service (SES) and Schedule C appointees during that period. Of the 13 conversions, nine were to career General Schedule/General Management appointments and four were to career SES appointments. All nine conversions to career General Schedule/General Management appointments consisted of Schedule C appointments. The four conversions to career SES appointments were all noncareer SES appointees. In all but one instance, the Schedule C and noncareer SES appointees converted to career appointments in the same agencies. OPM also reported that during that period, six conversions received were not processed. OPM officials said that these cases either had been withdrawn by the requesting agencies after discussions with OPM or had not been processed to completion because they did not meet the merit and fitness requirements of civil service rules. GAO did not look into the reasons why these cases had not been processed. Two of the six involved noncareer SES appointees, and four involved Schedule C appointees. OPM also reported that as of November 1992, another five cases were in process--all Schedule C appointees.

Legal Services Corporation: National Support Center Grantees' Activities

GAO/HRD-93-9, Feb. 5 (33 pages).

In response to congressional interest in congressional funds spent on programs involved, directly or indirectly, in political, cultural, institutional, ideological, and/or economic advocacy, this report provides information on the Legal Services Corporation (LSC). GAO presents data on the activities of the 16 grantees, referred to as national support centers, that received funds from LSC in 1990. GAO discusses (1) the amount and the sources of the centers' funding, (2) their principal activities, (3) the estimate of funds spent on lobbying activities, and (4) the makeup of their boards of directors. GAO also discusses recent findings of monitoring reviews done by LSC on each center's funded activities.

State Department: Management Weaknesses at the U.S. Embassy in Mexico City, Mexico

GAO/NSIAD-93-88, Feb. 8 (24 pages).

The U.S. embassy in Mexico City lacks sufficient management controls to ensure full compliance with regulations and reduce its vulnerability to waste, fraud, and abuse. In less than two years, the embassy lost property, including office equipment and household furnishings, valued at $120,000. Essentially, the problem was "swept under the rug" because the embassy's records were so poor that it could not identify how the items had been lost and if employees should be held responsible. The embassy did not report its missing property to the State Department, though this was required. In addition, weaknesses in controls over cashiering have affected mission operations since the mid-1980s. Moreover, the embassy has not established a formal competition advocacy program to ensure that contracts are fully competed. Other problems at the embassy include a lack of compliance with the State Department's new residential housing standards, weaknesses in the personnel system, and a lack of effective budget controls. Although the embassy plans to correct many of these problems, GAO believes that a formal program of management improvement is needed to (1) focus senior management attention on problems and issues and (2) provide a basis for continuity as foreign service officers rotate to their next assignments and are replaced by new officers having management responsibilities in critical control areas.

Kennedy Center: Information on the Capital Improvement Program

GAO/GGD-93-46, Feb. 9 (10 pages).

This report discusses a $27.4 million appropriation for repairs and alterations at the Kennedy Center--mechanical, structural, and handicapped-access projects, as well as garage repairs--included in the fiscal years 1991 and 1992 appropriation acts. During the next few years, the Center--despite limited staff--plans to undertake several large capital projects. It lacks an in-house federal contracting officer, architects, engineers, or other professionals to handle capital projects. As a result, the Kennedy Center has contracted for these services when necessary. During fiscal year 1992, Congress considered, but did not pass, legislation providing the Center with permanent authority for managing these projects. GAO doubts whether the Center, at present, has enough capability to effectively manage a capital improvement effort of the scope now being considered. Given enough time and funding, however, the Center should be able to acquire that capability.

Postal Service: Service Impact of South Dakota Mail Facility Not Fully Recognized

GAO/GGD-93-62, Feb. 25 (13 pages).

This report examines planned changes in mail service to communities that will be served by a new Dakota Central Area Mail Processing Center in Huron, South Dakota. Area mail processing is meant to cut labor costs by consolidating mail processing--canceling and sorting--functions of many post offices at one facility. The plan for the Dakota Central mail processing facility called for a minor decline in mail service along with some improvements, with a net overall improvement in mail service to the affected communities. GAO found, however, that the consolidation will affect service more adversely than was suggested in the Postal Service's consolidation plan and could result in a net decline in service. The Postal Service did not seek the comments of the local communities or discuss the service aspects of the consolidation with them before initially approving the new facility. Among other things, some postal customers are concerned that reduced service will harm their businesses. GAO believes that the Postal Service needs to review the costs and the benefits of options that could offer the same or better service to the affected communities after the consolidation. Options might include revising or adding routes to the affected communities, adjusting collection schedules, keeping some processing capability in the communities, and establishing separate mail drops for local delivery.

HEALTH

Prescription Drug Prices: Analysis of Canada's Patented Medicine Prices Review Board

GAO/HRD-93-51, Feb. 17 (26 pages).

As the public debate about health care costs intensifies, congressional attention has focused on ways to curb the upward spiral of prescription drug prices. The last Congress saw 11 bills introduced that would have constrained drug prices, yet none of these was enacted. Some of these bills would have created a federal board, modeled after Canada's Patented Medicine Prices Review Board, to monitor prescription drug pricing. A September 1992 GAO report (GAO/HRD-92-110) found that manufacturers charge less for many drugs in Canada than in the United States and that the Canadian approach to regulating drug prices contributes to this price differential. This report (1) describes the purpose and the structure of Canada's Patented Medicine Prices Review Board as well as its guidelines and procedures, especially those used to determine if a drug price is excessive, and (2) summarizes the evidence about the effects of the Board's actions in Canada on the prices of new drugs, on price increases for existing drugs, and on pharmaceutical research and development.

Testimony

Health Insurance: Legal and Resource Constraints Complicate Efforts to Curb Fraud and Abuse, by Janet L. Shikles, Director of Health Financing and Policy Issues, before the Subcommittee on Crime and Criminal Justice, House Committee on the Judiciary. GAO/T-HRD-93-3, Feb. 4 (10 pages).

GAO testified on health care fraud and abuse and the need for better remedies and more resources to combat the problem. Health insurance experts estimate that fraud and abuse contribute to about 10 percent of the more than $800 billion now spent on health care. GAO's past work has shown that (1) all health care payers are vulnerable to fraud and abuse, (2) significant obstacles hinder the prevention of dishonest billing practices and the pursuit of health care profiteers, and (3) the resources devoted to detection and prosecution are inadequate. This testimony discusses these issues in detail.

Medicare: Funding and Management Problems Result in Unnecessary Expenditures, by Janet L. Shikles, Director of Health Financing and Policy Issues, before the House Committee on the Budget. GAO/T-HRD-93-4, Feb. 17 (17 pages).

Medicare's soaring expenditures underscore the need for the government to fund and manage the program judiciously. Among the many problems plaguing Medicare management, two stand out. First, the Health Care Financing Administration (HCFA), the agency that oversees Medicare, does not have an effective, national strategy to protect the program from making erroneous or wasteful payments. Second, budget constraints have led to the underfunding of the types of payment controls that prevent or detect losses due to waste, fraud, and abuse. For example, Medicare failed to adequately investigate complaints of fraud and abuse telephoned in by Medicare beneficiaries, little was done initially to claim more than $250 million in overpayments owed by hospitals, Medicare paid an estimated $2 billion in claims that may have been the responsibility of other health insurers, and loose controls over who can bill Medicare have allowed profiteers to exploit the program through fraud and abuse. GAO believes that Congress should continue to pursue modifying budget procedures so that funding for safeguards could be increased without having to cut spending elsewhere. In addition, GAO believes that HCFA needs to develop a national strategy to manage the Medicare safeguard program. This would entail assessing the appropriateness and effectiveness of individual contractors' controls and developing ways to ensure that controls that have proven effective are implemented nationwide.

Prescription Drugs: Companies Typically Charge More in the United States Than in Canada, by Janet L. Shikles, Director of Health Financing and Policy Issues, before the Subcommittee on Health and the Environment, House Committee on Energy and Commerce. GAO/T-HRD-93-5, Feb. 22 (six pages).

Drug manufacturers typically charge wholesalers more in the United States than in Canada. In studying prices for 121 widely dispensed drugs sold in both countries, GAO found that these drugs would cost 32 percent more in the United States than in Canada if a common prescription of each drug were purchased at its factory price. Differences between U.S. and Canadian drug prices can be explained largely by two factors that are unique to Canada: (1) federal regulations designed to restrain prices on patented drugs and (2) provincial drug benefit plans that pay for drugs for a large segment of the population. Differences in costs, whether of research, production, or distribution, are not a major factor in explaining differences in drug manufacturers' prices.

INCOME SECURITY

Testimony

Assessing PBGC's Short-Run and Long-Run Conditions, by Joseph F. Delfico, Director of Income Security Issues, before the Subcommittee on Labor-Management Relations, House Committee on Education and Labor. GAO/T-HRD-93-1, Feb. 2 (seven pages).

The risks to the Pension Benefit Guaranty Corporation (PBGC), as well as pension plan participants, from underfunded plans have become more apparent with the termination of several large pension plans sponsored by companies in declining industries. PBGC's administrative and accounting problems have added to concerns about the pension insurance agency. This testimony highlights the following three areas: (1) operational and administrative problems at PBGC, (2) the financial status of PBGC's single-employer insurance funds and the threat to it from currently underfunded private sector plans, and (3) the risks still faced by plan participants. Pension plan sponsors who fail to fully fund their plans put an undue burden on others--sponsors of well-funded plans who may have to pay higher PBGC premiums to cover the insured shortfall; participants in underfunded plans who may end up losing some of their benefits; and, under a worst-case scenario, the federal government, which could be forced to pay guaranteed benefits should PBGC be overwhelmed by a rash of large terminations during an economic downturn. Reducing plan underfunding would lower PBGC's future losses by targeting the greatest threat to the pension insurance agency. Congress should also consider making the variable rate premium more risk-related to cut future losses PBGC will most likely incur.

Pension Plans: Underfunded Plans Threaten PBGC, by Joseph F. Delfico, Director of Income Security Issues, before the Subcommittee on Oversight, House Committee on Ways and Means. GAO/T-HRD-93-2, Feb. 4 (14 pages).

Several years ago, GAO placed the Pension Benefit Guaranty Corporation (PBGC) on its "high-risk" list of federal programs because of long-standing internal control weaknesses and potentially huge losses to taxpayers. This testimony discusses GAO's December 1992 high-risk series report on PBGC (GAO/HR-93-5). In GAO's view, successfully addressing the problems confronting PBGC involves management reforms, modification of the pension funding rules, and possible changes in the insurance premium structure. As long as pension plan underfunding persists, the pension insurance program and plan participants' benefits are at risk. GAO believes that this is the time--while PBGC still has a positive cash flow--to develop solutions to better fund pension promises. GAO supports more effective funding standards for defined benefit pension plans. Reducing underfunding would limit PBGC's future exposure and appropriately target the greatest threat confronting it--underfunded pension plans. In addition, Congress should consider whether the overall premium ceiling and existing variable premium rate best reflect the risk to PBGC. Raising premiums, by making the variable rate premium more risk-related, would cut PBGC's deficit.

INFORMATION MANAGEMENT

Weather Forecasting: Important Issues on Automated Weather Processing System Need Resolution

GAO/IMTEC-93-12BR, Jan. 6 (25 pages).

To improve its weather forecasting, the National Weather Service (NWS), part of the National Oceanic and Atmospheric Administration (NOAA), is spending an estimated $4.6 billion to modernize its observational, information processing, and communications systems. The centerpiece of this effort is the Advanced Weather Interactive Processing System (AWIPS)--an information network that will analyze and display data received from radars and satellites, NWS field offices, and other sources. The tab for AWIPS is pegged at about $467 million. This briefing report (1) determines how effectively NOAA has analyzed and defined its system requirements, (2) identifies key risks associated with the AWIPS acquisition, and (3) determines whether any identified risks were severe enough to warrant delaying the scheduled award of the AWIPS contract in late 1992.

Software Reuse: Major Issues Need to Be Resolved Before Benefits Can Be Achieved

GAO/IMTEC-93-16, Jan. 28 (21 pages).

The Pentagon estimates that expenses for developing and maintaining software for automated information systems now top $24 billion a year. To contain costs and improve the development of high-quality software, the Defense Department (DOD) has turned to software reuse--the practice of developing new applications from existing software. This report provides background information on software reuse, including an overview of issues that can inhibit effective software reuse and information on DOD's strategy to implement a departmentwide software reuse program.

Asset Management System: Liquidation of Failed Bank Assets Not Adequately Supported by FDIC System

GAO/IMTEC-93-8, Feb. 3 (34 pages).

The Federal Deposit Insurance Corporation's (FDIC) requirements to liquidate failed bank assets are not always being followed. As a result, FDIC is not maximizing cash recovery on all failed bank assets. Foreclosure requirements were not followed for 35 of 135 assets GAO reviewed; income of about $1.4 million being generated by collateral on 13 delinquent loans went uncollected; and collateral valued at nearly $80,000 for one loan was inadequately protected, resulting in its being sold by a local jurisdiction to recover unpaid taxes. Information on asset values and status is supposed to be contained in FDIC's computer system and in manual asset case files. GAO discovered, however, that this information is incomplete and hard to retrieve. These weaknesses exist because effective information systems have not been developed to satisfy the Division of Liquidation's needs. FDIC has contracted with a consultant to strengthen its strategic business and information resource management processes.

Telecommunications: FCC's Oversight Efforts to Control Cross-Subsidization

GAO/RCED-93-34, Feb. 3 (32 pages).

Regulated telecommunications services include basic interstate telephone service, while unregulated services encompass such technologies as voice mail and electronic mail that transmit information over telephone lines. If carriers' costs for these two types of services are not properly allocated, customers of regulated telephone services may end up paying for some of the costs of the unregulated services--a practice known as cross-subsidization. GAO reported in 1987 (GAO/RCED-88-34) that the Federal Communications Commission (FCC) had not assigned enough staff to monitor carriers' cost allocations to protect ratepayers from cross-subsidization. This report reviews FCC's implementation of (1) GAO's recommendation to boost on-site audits of carriers' cost allocations and (2) certain accounting safeguards established after 1987 to protect ratepayers from cross-subsidization, including audits of carriers' cost allocations done from the carriers by certified public accounting firms, FCC's reviews of these audits, and a computerized system for maintaining carriers' cost and revenue data.

Testimony

Tax Systems Modernization: Comments on IRS' Portion of President's Request for Fiscal Year 1993 Supplemental Funds, by Howard G. Rhile, Director of General Government Information Systems Issues, before the Subcommittee on Treasury, Postal Service, and General Government, House Committee on Appropriations. GAO/T-IMTEC-93-1, Feb. 24 (three pages).

The Internal Revenue Service (IRS) is requesting nearly $150 million to buy computer and telecommunications equipment for 12 projects. The proposed acquisitions, in GAO's view, do not appear to be spur-of-the-moment purchases but mostly represent accelerated acquisitions of planned computer hardware and software buys. Three of the acquisitions, totaling about $41 million, will directly support IRS' Tax Systems Modernization program, which includes telecommunications modernization, an automated system to inventory and control taxpayer correspondence, and a system to support criminal investigations. The remaining $107.4 million is primarily to support IRS' current operations. This testimony provides GAO's observations on the proposal.

INTERNATIONAL AFFAIRS

Aid to Kenya: Accountability for Economic and Military Assistance CanBe Improved

GAO/NSIAD-93-57, Jan. 25 (81 pages).

The United States has provided more than $300 million in economic and military aid to Kenya since 1987--a period of mounting allegations of Kenyan government misuse of foreign aid. Inadequate controls and other problems make some U.S. assistance vulnerable to ineffective use or to diversion by the Kenyan government. GAO did not identify specific instances of diversion of U.S. funds or equipment; however, the United States cannot be certain that all assistance is being used for its intended purposes. For example, the Agency for International Development's accountability for local currency funds is inadequate, housing guaranty repayments by the Kenyan government are delinquent, food aid distribution is sometimes delayed, military aid monitoring could be strengthened, and questions exist about the potential use of U.S.-supplied helicopters.

JUSTICE AND LAW ENFORCEMENT

Bank and Thrift Criminal Fraud: The Federal Commitment Could Be Broadened

GAO/GGD-93-48, Jan. 8 (128 pages).

Although criminal fraud, often involving real estate, has been a factor in the failure of many financial institutions, the Justice Department has not done all that it could with the authority it has to strengthen the government's financial institution fraud program. Fraud committed by officers, directors, and customers at banks and thrifts across the country has resulted in scores of failed financial institutions and heavy dollar losses. In "land flips," for example, related parties transferred land between themselves to inflate its value. They then used the fraudulently overvalued land as collateral to obtain loans, which typically greatly exceeded the land's actual value. The Attorney General has pledged to beef up the federal government's attack on bank and thrift fraud, and Congress has passed two major bills supporting the government's effort. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the Crime Control Act of 1990 provided the Justice Department with additional powers and resources to investigate and prosecute financial institution fraud. This report provides an overview of the government's efforts, with a particular focus on the implementation of certain provisions of the Crime Control Act, Justice's local enforcement efforts against criminal bank and thrift fraud, and the progress achieved to date.

Federal Prisons: Inmate and Staff Views on Education and Work Training Programs

GAO/GGD-93-33, Jan. 19 (50 pages).

Concerns have been raised about the failure of many federal prisoners to complete basic prison education programs and about how useful prison vocational training programs have been in providing inmates with marketable skills. Only about 36 percent of the Federal Bureau of Prisons (BOP) staff GAO surveyed considered BOP's principal data base on inmate prison education activities--the Education Data System--to be very accurate. The system is supposed to track an inmate's education history, program enrollments, withdrawals, and completions. BOP's own internal reviews have frequently noted, however, that key data were inaccurate or missing, and GAO's tests of the education records at three federal prisons had similar findings. Inmates GAO surveyed said that they are inclined to participate in programs when they see clear opportunities to enhance their abilities and for postprison success. The staff, on the other hand, tended to consider inmates to be motivated by cash awards and other tangible benefits for participation. Both staff and inmates strongly favored an incentive of reduced prison time for participation. Staff and inmates also strongly favored some ideas that are generally within BOP's discretion, such as security classification reductions, preferred housing assignments, and being paid the starting wage for inmate work to attend class. BOP should explore the feasibility of some of these ideas, perhaps on a test basis. BOP also needs to ensure that prison officials enforce the requirement that inmates lacking a high school diploma acquire a General Equivalency Diploma before receiving pay raises. More than half the inmates and three fourths of the staff responding to GAO's survey thought that vocational training would generally be useful in providing inmates with marketable skills.

Bankruptcy Trustees: Oversight Improved, but Extent of Trustee Fraud Is Unknown

GAO/GGD-93-54, Jan. 27 (25 pages).

Over the past several years, bankruptcy filings have risen more sharply than at any other time in history. Filings since 1986 have increased 109 percent--from about 500,000 to an estimated 1,000,000 in 1992; more than 1.2 million bankruptcy filings are predicted for 1993. The oversight and monitoring of bankruptcy trustees is one of several areas in the Justice Department that GAO has deemed to be at "high risk." The trustee system is vulnerable to fraud because of the large number of trustees administering ten of billions of dollars in estate funds and because of the limited resources available to conduct and thoroughly follow up on trustee audits and reports. The Justice Department has sought to improve its oversight of private bankruptcy trustees through more rigorous review of trustee candidates, enhanced trustee reporting requirements, more extensive trustee audit coverage by the Inspector General, and the replacement of 14 of the 21 U.S. Trustees who run the program. Yet several challenges remain to be addressed, including the number of old cases, problems identified by Inspector General audits, and funding limitations. Concerns about possible conflicts of interest between those parts of the Justice Department representing the federal government as a creditor in bankruptcy cases and the Executive Office for U.S. Trustees have not been borne out. Only two cases have been identified in which conflict of interest might have been an issue. The authority of the bankruptcy courts in approving key case administration decisions provides a check and balance to Justice's dual role.

Drug Control: Status Report on Counterdrug Technology Development

GAO/NSIAD-93-104, Jan. 28 (17 pages).

This report provides information on counterdrug technology and its development. GAO reviewed the current efforts of the Defense Department and the Office of National Drug Control Policy to develop and demonstrate counterdrug technology applications with an emphasis on the Pentagon's efforts to develop cargo container inspection technology.

Drug Control: Treatment Alternatives Program for Drug Offenders Needs Stronger Emphasis

GAO/GGD-93-61, Feb. 11 (19 pages).

This report examines the Treatment Alternatives to Street Crime program, an offender case management program designed to link drug abusers within the criminal justice system to community-based drug abuse treatment as an alternative to criminal penalties. Elements of the case management include (1) identifying drug abusers within the criminal justice system; (2) assessing their need for treatment; (3) matching them to the most appropriate treatment program; and (4) monitoring their performance during treatment, which includes drug testing. GAO looks at whether the Treatments Alternatives to Street Crime program has elements that can be attributed to successful drug abuse control, evaluates program results, and identifies any barriers that may limit program potential.

Testimony

Drug Control: Increased Interdiction and Its Contribution to the War on Drugs, by Louis J. Rodrigues, Director of Systems Development and Production Issues, before the Subcommittee on Treasury, Postal Service and General Government, Senate Committee on Appropriations. GAO/T-NSIAD-93-4, Feb. 25 (eight pages).

The portion of the federal drug budget devoted to reducing the flow of drugs into the United States has almost doubled during the past five years, and funding for the Pentagon's detection and monitoring missions has soared more than 400 percent since 1989. Yet cocaine remains affordable, its purity remains high, and it continues to be readily available on American streets. The failure to reduce the amount of cocaine entering the country is the combined result of (1) the enormous profits that make interdiction losses relatively inconsequential to drug traffickers and (2) the inability of the Unites States to counter successful smuggling methods. Some level of interdiction effort must be maintained, not only as a symbolic gesture of national resolve but also as a key part of the national strategy for combatting the cocaine cartels. The level of that effort, however, should be commensurate with the relative contribution that interdiction is making--and can be expected to make--to the national war on drugs. GAO testified that additional investments in air and maritime surveillance will not substantially improve drug interdiction.

NATIONAL DEFENSE

Navy Carrier Battle Groups: The Structure and Affordability of the Future Force

GAO/NSIAD-93-74, Feb. 25 (148 pages).

Mounting budget pressures, reduced global threats, competing priorities, and affordability issues dominate the congressional debate on national security. At the same time, the Navy is embarking on several costly carrier programs--procuring another carrier, refueling the reactors on existing nuclear carriers, and replacing and upgrading aircraft. These programs will have long-term impacts on the size and cost, and potentially the capability, of a 12-carrier force. For example, replacing the current tactical combat aircraft with the planned F/A-18E/F and AX aircraft could cost more than $120 billion. Alternatives exist that could save tens of billions of dollars. In addition, less costly options exist that could satisfy many of the carrier battle groups' traditional roles without endangering U.S. national security. For example, a smaller, less expensive carrier force could be achieved by relying more on increasingly capable surface combatants and amphibious assault ships and/or by employing a more flexible carrier deployment strategy. GAO believes that the Pentagon and Congress must agree on the size and affordability of the carrier force required to meet national defense goals, including the consideration of other options, before committing to build another nuclear carrier.

Chemical Weapons Destruction: Issues Affecting Program Cost, Schedule, and Performance

GAO/NSIAD-93-50, Jan. 21 (34 pages).

Congress told the Pentagon in 1985 to destroy the bulk of the U.S. stockpile of lethal chemical weapons. The Defense Department plans to spend nearly $8 billion to build and run specially designed, high-temperature incinerators on Johnston Island in the Pacific Ocean and at eight locations around the continental United States. GAO's review of test results from the Johnston Island facility shows lower than anticipated destruction rates stemming from unreliable equipment. This could mean that the destruction program will take longer than planned and exceed cost estimates. The overall average hourly rate of rocket destruction improved substantially from the first to the second test phase, but extensive maintenance downtime continued to slow operations. Public concerns about the safety of chemical weapons incineration have caused several states to consider legislation that could halt construction of the facilities. The Army began a study in October 1991 to identify and evaluate the possible use of alternative technologies to destroy chemical weapons and agents. The Army has also continued to encounter difficulties in obtaining the required environmental permits. Congress recently extended the mandatory completion date of the disposal program by more than five years and postponed funding decisions for future incineration facilities until the results of the alternative technology study are known.

Operation Desert Storm: Army Not Adequately Prepared to Deal With Depleted Uranium Contamination

GAO/NSIAD-93-90, Jan. 29 (42 pages).

During the Persian Gulf War, a number of U.S. combat vehicles were contaminated by depleted uranium after being struck by munitions or when ammunition stored on board was ignited by accidental fires. Although the Army does not know the full extent to which personnel were exposed to depleted uranium--a radioactive, chemically toxic metal--GAO discovered that at least several dozen U.S. soldiers, some unknowingly, either breathed it in, ingested it, or were hit by contaminated shrapnel. Army and Nuclear Regulatory Commission (NRC) officials believe, however, that the exposure levels did not exceed allowable limits set by NRC. Although the Army's policy is to minimize individuals' exposure to radiation, it has not effectively educated its personnel about the hazards of depleted uranium contamination or about proper safety measures. What little information is available is not widely disseminated. The military has begun to test crew members who were injured in Abrams tanks and Bradley Fighting vehicles contaminated by munitions hits, along with an Army National Guard unit that claimed exposure while working with contaminated vehicles in the Persian Gulf, but the Army has no plans to medically evaluate other personnel who might have been exposed. The Army still lacks a formal plan to ensure that contaminated vehicles are decontaminated, disposed of, and repaired in an efficient way. These issues may also be relevant to the other services.

Strategic Bombers: Adding Conventional Capabilities Will Be Complex, Time-Consuming, and Costly

GAO/NSIAD-93-45, Feb. 5 (68 pages).

The Air Force's "Bomber Roadmap" estimates that it will cost about $3 billion to modify and equip the B-1B and B-52 bombers with conventional capabilities, but this figure is understated by billions of dollars. At the end of the Cold War, the Air Force redefined the role of its bomber force from one focused on nuclear war to one equipped to do a variety of conventional missions--a scenario spelled out in the June 1992 "Bomber Roadmap." This report discusses operational and fiscal challenges that Congress and the Pentagon will need to address when deciding the level of funding needed to make the changeover to a conventional role. GAO identifies some operational problems that must be resolved if the B-1B aircraft is to become the backbone of the conventional bomber force, and GAO questions the Air Force's plans to equip each type of bomber with some mix of precision-guided munitions.

B-2 Bomber: Acquisition Cost Estimates

GAO/NSIAD-93-48BR, Feb. 10 (15 pages).

Estimating the cost of acquiring the B-2 bomber has been a challenge for the Air Force. Schedule delays in development, changes in procurement estimates, and funding restrictions have contributed to difficulties in estimating cost. This report evaluates the difference between the B-2 acquisition cost estimates for the 75 aircraft program, the 20 aircraft program, and a 15 aircraft program. GAO also identifies how appropriated funds have been applied by the program and how the Air Force plans to apply future funds.

Mine Warfare: Consolidation at Ingleside Has Not Been Justified

GAO/NSIAD-93-147, Feb. 16 (10 pages).

The Secretary of the Navy's January 1993 analysis of the plan to consolidate mine warfare forces at Ingleside, Texas, does not justify that move. The Center for Naval Analysis estimates that moving to Ingleside is one of the costliest alternatives. The Secretary's report neither adequately challenges that view nor addresses the fundamental need for mine warfare forces to train with the fleets they are to protect--a difficult task if Ingleside is chosen. A draft National Academy of Science study directed by the House Armed Services Committee argues that mine warfare forces need to be located with the fleets on both coasts. The draft says that this is one of the many disadvantages of locating these forces at Ingleside. The Navy's failure to support its decision with compelling evidence that can override the cost factor and the fleet training issue suggests that Ingleside is not the best alternative.

Reserve Forces: Aspects of the Army's Equipping Strategy Hamper Reserve Readiness

GAO/NSIAD-93-11, Feb. 18 (75 pages).

Although Army Reserve and National Guard units are much better equipped than they were a decade ago, substantial equipment shortages persist. Shortages of major equipment items totaling $13.7 billion remain, including some items considered essential to the reserves' wartime missions. Some shortages are especially widespread. Major shortages surfaced in preparing reserve support units to deploy to the Gulf War and, in some cases, harmed the ability of these units to carry out their missions. This report discusses in detail the (1) progress made in equipping the reserves, (2) aspects of the Army's equipping strategy that account for continuing shortages, (3) impact that additional separate funding for reserve equipment has had on the reserves' equipment posture, and (4) extent that equipment freed from force reductions might alleviate existing shortages.

NATURAL RESOURCES

Testimony

Natural Resources Management: Issues to Be Considered by the Congress and Administration, by J. Dexter Peach, Assistant Comptroller General for Resources, Community, and Economic Development Programs, before the Subcommittee on Oversight and Investigations, House Committee on Natural Resources. GAO/T-RCED-93-5, Feb. 2 (seven pages).

This testimony discusses GAO's December 1992 transition series report entitled Natural Resources Management Issues (GAO/OCG-93-17TR). During this era of budgetary constraints, Congress and the new administration face hard choices in how to protect the nation's natural resources. Current funding is inadequate to handle the declining condition of the nation's natural resources and related infrastructure on federal lands. A number of proposals to obtain a better return for the sale or use of natural resources have not succeeded, GAO believes, because (1) the full extent of the staffing and funding shortfalls facing federal natural resources management agencies has not been clearly articulated and (2) the proposals and the dialogue surrounding them have not focused on the need to encourage uses that are compatible with sustaining the nation's natural resources for future generations.

SCIENCE, SPACE, AND TECHNOLOGY

Federal Research: Super Collider Is Over Budget and Behind Schedule

GAO/RCED-93-87, Feb. 12 (46 pages).

The Superconducting Super Collider--a potential source of basic knowledge about matter and energy--will, when completed, be the world's largest particle accelerator. The prime contractor for the multibillion dollar project, which is being built about 30 miles south of Dallas, Texas, still has not come up with a fully functioning cost and schedule control system. Such a system--with trend analysis showing the estimated cost and schedule for completing the project--is not expected to be up and running until July 1993 or later. Analysis of the major subcontractors' work in progress showed that the project is over budget and behind schedule. For example, trend analyses show that costs at completion for architect and engineering services and conventional construction will be $630 million over the baseline cost estimate of $1.25 billion. Further, it is unclear how much these increases will ultimately change the project's total cost and schedule. To counter cost increases, the Department of Energy (DOE) plans to follow a build-to-cost strategy. This effort is intended to hold constructions costs to baseline cost estimates by eliminating, reducing, or deferring some components. Such actions would reduce the Super Collider's experimental capabilities, could harm the experimental research, and could increase overall costs to the government. DOE recently advised Congress that it may only be able to obtain about $400 million of the $1.7 billion that it is seeking from foreign contributors--leaving a shortfall of $1.3 billion. As a result, Congress faces the prospect of having to substantially boost federal funding to complete the project.

NASA Program Costs: Space Missions Require Substantially More Funding Than Initially Estimated

GAO/NSIAD-93-97, Dec. 31 (21 pages).

In response to concerns that Congress has been asked to authorize the start-up of new NASA programs estimated to cost hundreds of millions of dollars without having reasonably accurate estimates of their total funding requirements, GAO reviewed NASA's historical experience at estimating space program costs. Almost all of the 29 programs GAO reviewed required substantially more funding than the initial estimates given to Congress. Changes in estimates ranged from a 44-percent decrease to a 426-percent increase over the initial estimates; the median change was a 77-percent increase. General reasons NASA gave for differences between the initial and current estimate included insufficient definition studies, program and funding instability, overoptimism by program officials, and unrealistic contractor estimates. Specific reasons for changes in estimates included program redesigns, technical complexities, budget constraints, incomplete estimates, shuttle launch delays, and inflation. As a result of these factors, the content and schedule of many programs changed substantially between the initial and current cost estimates.

Goddard Space Flight Center: Decision to Contract for Plant Operations and Maintenance

GAO/NSIAD-93-92, Jan. 12 (nine pages).

This report reviews the impacts of Goddard Space Flight Center's decision to contract out the operations and maintenance of its plant facilities. GAO compared the cost of the current mixed work force of civil service and contractor employees who do this work with the cost of (1) an all civil service work force and (2) an all contractor work force. GAO also looked at the benefits realized and the problems encountered by Goddard as a result of the contracting decision and the transitioning of some of the functions from a civil service staff to a contractor staff. Finally, GAO obtained information from Langley Research Center, which has a similar mix of contractor and civil service staff doing operations and maintenance work, to see if any lessons could be learned that might apply to Goddard.

Testimony

Science and Technology: Federal Efforts to Collect and Analyze Information on Foreign Science and Technology, by Jim Wells, Associate Director for Energy and Science Issues, before the Subcommittee on Technology, Environment, and Aviation, House Committee on Science, Space, and Technology. GAO/T-RCED-93-8, Feb. 23 (12 pages).

A whole host of federal offices and laboratories collect information on foreign science and technology. Scattered throughout the government, these organizations are concerned primarily with defense, intelligence, commerce, and science. Generally, the groups obtain their information from open (public) sources. In some cases--particularly in the intelligence community--they analyze it and restrict access to their analyses. No central federal agency is responsible for coordinating either the collection or the monitoring of information on foreign science and technology. Agencies with common interests, however, are trying to coordinate the collection and monitoring of relevant information. It is unclear at this point how valuable this data might be to U.S. businesses and whether firms would have much interest in obtaining the information from the government.

SOCIAL SERVICES

Foster Care: State Agencies Other Than Child Welfare Can Access IV-E Funds

GAO/HRD-93-6, Feb. 9 (29 pages).

Foster care caseloads nationwide swelled from about 276,000 in 1985 to 390,000 in 1990 and are expected to reach about 540,000 by 1995. Faced with less money and rising caseloads, states are now under pressure to transfer a greater share of foster care program costs to the federal government. This report examines (1) the federal statutes that allow federal reimbursement for foster care placements by state juvenile justice and mental health agencies, as opposed to more usual placements by child welfare agencies, and whether the procedural safeguards required by the Adoption Assistance and Child Welfare Act of 1980 apply; (2) which states are claiming reimbursements for juvenile justice and mental health agency placements and the amounts claimed during 1991; and (3) barriers that states encounter in trying to claim reimbursement for these placements.

TAX POLICY AND ADMINISTRATION

Tax Administration: Overstated Real Estate Tax Deductions Need to Be Reduced

GAO/GGD-93-43, Jan. 19 (40 pages).

The Internal Revenue Service (IRS) needs to reduce overstated real estate tax deductions that lead to millions of dollars in tax losses for federal, state, and local governments. From 1982 to 1990, individuals' federal deductions of real estate taxes increased 81 percent--from $27 billion to $49 billion. IRS audits show that individuals in 1988 overstated their real estate tax deductions by an estimated $1.5 billion nationwide. GAO believes that this level of noncompliance has resulted in nearly $300 million in federal income tax loss for 1988 and has increased to about $400 million for 1992. However, GAO's review of IRS audits of taxpayers who claimed the deduction for 1988 in three locations--Montgomery County, Maryland; New Jersey; and Minnesota--uncovered a much higher level of noncompliance. IRS detected only about $37 million (29 percent) of $127 million in overstated deductions that arose from user fee and rebate errors. Examiners would have caught more noncompliance had they followed IRS audit guidelines on checking source documents to verify taxpayers' support for deductions.

Testimony

Tax Administration: Status of Tax Systems Modernization, Tax Delinquencies, and the Tax Gap, by Jennie S. Stathis, Director of Tax Policy and Administration Issues, before the Subcommittee on Treasury, Postal Service, and General Government, House Committee on Appropriations. GAO/T-GGD-93-4, Feb. 3 (29 pages).

This testimony, which draws on GAO's December 1992 transition series report on the Internal Revenue Service (IRS) (GAO/OCG-93-24TR), discusses three of the most critical issues facing the agency: (1) managing the $23 billion Tax Systems Modernization program, (2) collecting $30 billion in delinquent taxes, and (3) reducing a $114 billion tax gap. These issues are related. IRS would be better able to collect delinquent taxes and reduce the tax gap if its employees had on-line access to information when they need it--a basic goal of Tax Systems Modernization. GAO cannot overemphasize the importance of modernizing IRS's outdated systems. Dramatic improvements in IRS' ability to collect delinquent taxes and reduce the tax gap will only come about, in GAO's view, through fundamental changes in the way IRS does business. GAO spells out several potential obstacles to successful implementation of Tax Systems Modernization.

TRANSPORTATION

Aviation Safety: Slow Progress in Making Aircraft Cabin Interiors Fireproof

GAO/RCED-93-37, Jan. 6 (33 pages).

The Federal Aviation Administration (FAA) issued regulations in the 1980s to strengthen the flammability standards for materials used in aircraft cabin interiors. In establishing the stricter standards, FAA anticipated that nearly 85 percent of the U.S. aircraft fleet would comply by the year 2000 and indicated that it would consider proposing a mandatory retrofit requirement if all airlines did not meet the standards as anticipated. At the start of 1992, about 11 percent of the more than 4,200 aircraft in the fleet had complied with the standards. Although the number of newly built aircraft meeting the standards will increase each year, no airline has replaced or plans to completely replace the interior components of aircraft that were in-service before the stricter standards went into effect. As a result, 45 percent of the aircraft fleet at the end of the decade may not meet the new flammability standards; the entire fleet is not expected to comply with the stricter flammability standards until 2018. The total cost to the airlines to modify aircraft not meeting the standards would be several billion dollars and would average more than $1 million per aircraft. FAA estimates that nine to 16 lives could be saved each year if all aircraft met the stricter standards. If the Department of Transportation's current value of $1.5 million for a human life were used to extrapolate a value for the potential fatalities avoided, then up to $110 million could potentially be saved by modifying aircraft to meet the standards. In the event, however, of one or two major crashes in which hundreds of people are killed, the potential savings could be much higher depending how high a value was used for a human life.

New Chicago-Area Airport: Site Comparison Selection Process and Federal Funding

GAO/RCED-93-105, Feb. 22 (35 pages).

The need for a major new airport in the Chicago region has been much studied and debated in recent years. A site selection process narrowed possible candidates to five locations in Illinois and Indiana, which an independent consultant then evaluated on the basis of nine factors. In a controversial decision, a policy committee consisting of representatives from each state reviewed the consultant's analysis and settled on the Lake Calumet site in the city of Chicago. An analysis of the factors in the consultant's study, however, does not indicate a clear-cut choice for the location of a new Chicago-area airport. For two of the nine factors--airspace and air traffic control--particular sites had advantages over the others. The consultant estimated that the rural sites would have the fewest airspace and air traffic control delays and would incur significantly lower costs than the urban sites. For another factor--collateral development costs for utilities and highways and rail lines to access a new airport--the consultant did not provide cost data for comparing the sites. The remaining six factors identified advantages and disadvantages for each site but did not strongly favor any particular one. The policy committee's site selection was based on its interpretation of the consultant's study and other considerations. The committee votes indicate that Illinois members favored the Illinois sites, while Indiana members supported the Indiana site. Seven of the 11 committee members were from Illinois, and a majority-rule process was used to choose a site. Federal funds to help defray the costs of a new Chicago-area airport would have totaled about $3.1 billion for the Lake Calumet site. By comparison, the new Denver airport--the only major airport to be built since 1974--will receive $498 million in federal funds. FAA is concerned that funding a new airport at such levels would seriously affect the government's ability to fund other airport projects across the country.

Testimony

Airline Competition: Strategies for Addressing Financial and Competitive Problems in the Airline Industry, by Kenneth M. Mead, Director of Transportation Issues, before the Subcommittee on Aviation, House Committee on Public Works and Transportation. GAO/T-RCED-93-11, Feb. 18 (26 pages).

Although deregulation of the domestic airline industry has benefitted U.S. consumers through lower fares and more frequent service on many routes, some firms face serious financial problems, and the long-term competitive health of the industry could be at risk. This testimony discusses the interrelated competitive and financial problems of the industry, with a view toward protecting the interests of consumers and ensuring that U.S. airlines are positioned to successfully compete in domestic and international aviation markets. In GAO's view, an effective strategy for reviving the ailing U.S. airline industry should include four key elements: improving airlines' access to capital markets by easing restrictions on foreign investments and control; improving access to the growing international market; reducing barriers to competition; and examining airline pricing practices, especially those of bankrupt carriers.

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