We found that in some cases DOD had authorized contractors operating Government-owned plants to provide the financing for new facilities and to recover the costs involved through overhead charges against Government supply and research and development contracts over a period of years-usually 5 years. Title vests in the Government when the facilities are built. Proposed acquisition of facilities under this method are not specifically identified in budget presentations to the Congress.

At the five installations we reviewed, new buildings costing $31 million had been acquired by the Air Force and the Navy under supply and research and development contracts and financing was provided by the contractors who were being reimbursed over a period of years. We did not question the legality of these indirect acquisitions but pointed out that the lack of disclosure of such acquisitions to the Congress was inconsistent with the procedures applicable to construction projects funded directly by the Government under either military construction appropriations or procurement or research and development appropriations.

There are no specific provisions in DOD procurement regulations covering facilities acquisition by the Government through contractor financing and subsequent reimbursement of the contractor under a supply or research and development contract. Consequently DOD does not require reporting of such projects to the Congress in the budget process, nor does it provide guidance as to when this method of financing should be used.

We did not inquire into the relative economy of acquiring facilities indirectly through contractor financing as compared with acquiring facilities under the traditional method of direct financing by the Government. With respect to the financing charges, however, we noted that interest on the contractors' investment in the facilities was not charged to the Government. Also, the profit earned by the contractors on the facility costs charged as overhead over the amortization period appeared to be less than the interest cost the Government would have incurred if it had initially paid for the construction.

We recommended that the Secretary of Defense take action to revise DOD's budgetary procedures, as appropriate, to effect full disclosure in applicable budget submissions to the Congress of all proposed expenditures from procurement and RDT&E appropriations, either directly or indirectly, for construction of Government-owned facilities. We recommended also that, if it is deemed desirable to have contractors provide initial financing for Government-owned industrial facilities, the Secretary of Defense have the Armed Services Procurement Regulation (ASPR) revised, as necessary, to (1) provide clear criteria concerning when this method of financing should be employed and (2) spell out the controls to be exercised.

DOD advised us that it was reviewing its current budget policies and procedures to determine what changes may be necessary to ensure disclosure of industrial facilities acquired indirectly through other basic contracts and that it was considering whether ASPR should be revised to contain guidance in this

area.

The House Committee on Appropriations, in its report accompanying the Department of Defense Appropriation Bill for fiscal year 1970, cited our findings and stated that the Committee desired that in the future all proposed major improvements to, and construction of, Government-owned facilities funded in any manner with procurement and research, development, test, and evaluation appropriations be clearly identified in budget requests.

By letter dated March 16, 1970, DOD advised us that it was revising its internal regulations to require disclosure in budget requests of all proposed industrial real property acquisitions to be financed with procurement or RDT&E funds. We were further advised that, since indirect financing was not deemed desirable, and would be precluded, it was not necessary to act upon our recommendation concerning the establishment of criteria and controls for use of indirect financing.

Index No. 55, B-118718, March 24, 1970

NEED TO STRENTHEN CONCRETE INSPECTIONS AND TESTING REQUIREMENTS IN THE CONSTRUCTION OF LOW-RENT PUBLIC HOUSING PROJECTS-DEPARTMENT HOUSING AND URBAN DEVELOPMENT

We reported that:

OF

1. The Department of Housing and Urban Development (HUD) construction representatives and local housing authority inspectors did not enforce construction contract requirements regarding concrete testing to determine whether

the concrete used in the construction of low-rent public housing projects complied with contract specifications.

2. For some projects the frequency of concrete compressive-strength tests was not specified in the construction contracts, HUD did not require local housing authorities to adhere to generally accepted concrete-testing standards, even though concrete of a specified strength was required by the construction.

3. Visits to project construction sites by HUD construction representatives were relatively infrequent and of short duration. HUD regional officials stated that the construction representatives sometimes did not have sufficient time during their visits to local housing authority construction projects to make all the checks and evaluations required under HUD procedures.

We recommended to the Secretary of Housing and Urban Development that: 1. HUD's proposed revision to its construction procedures require that more effective use be made of HUD's construction representatives during their periodic visits of low-rent housing construction projects by having them place greater emphasis on determining whether the on-site inspections by the local housing authorities are adequate to ensure compliance with contract specifications.

2. HUD internal auditors schedule reviews of HUD regional office activities and controls relating to low-rent housing construction projects as an aid to management in protecting the Government's interest in such projects.

3. In the absence of specific contractual requirements for the testing of concrete, local housing authorities be required to adhere to generally accepted concrete-testing standards, unless advanced approval has been obtained from HUD for justifiable deviations from such standards.

HUD informed us that it recognized that certain administrative failures had occurred, that it would advise its regional offices to be more alert to such inspection failures, and that it would insist that greater attention be given to enforcing construction contract requirements.

HUD advised us that revised construction procedures to be issued would impress upon the local housing authorities and their architects the importance of carrying out all of their responsibilities and of fully enforcing all contract obligations, including inspections, which HUD considers to be of primary importance.

Index No. 56, B-167490, May 14, 1970

ACTION BEING TAKEN BY THE DEPARTMENT OF DEFENSE TO ACHIEVE CLOSER ADHERENCE TO ESTABLISHED POLICY FOR PROVIDING HOUSEHOLD FURNITURE IN THE UNITED STATES

Under a 1962 Bureau of the Budget policy directive, Government-owned furnishings are not, with certain exceptions, to be provided in housekeeping quarters within the United States. Several exceptions are authorized, including authority to provide (1) household equipment such as stoves, refrigerators, washers and dryers and (2) household furniture to supplement personally owned furniture.

We found that the Department of Defense (DOD) had not effectively implemented the Budget Bureau's policy. DOD had an inventory of about $114 million worth of household furniture in the United States, and had approved an average of about $6 million a year for fiscal years 1967-69 for maintenance, repair, moving, and handling of such furniture. Our tests at six military installations showed that household furniture was being maintained and provided with no assurance that the exceptions authorized by the Budget Bureau had been complied with.

We were advised by DOD officials that DOD intended to phase out the providing of furniture stocks in the United States as furniture stock were depleted through attrition. A practice of the last few years of not providing funds for procurement of new furniture was said to have reduced furniture on hand. We expressed the belief that the DOD practice of attempting to phase out the stateside household furniture program by not buying new furniture while continuing to spend significant amounts on maintenance and repair is not the most economical and effective method of accomplishing the phaseout. We suggested that the Secretary of Defense:

-Prescribe procedures to be followed by the military departments so that the providing and maintaining of household furniture in the United States complies with Budget Bureau policy.

Emphasize that military personnel must rely on the use of their own furniture.

-Consider transferring unneeded furniture being retained for housekeeping quarters in the United States to fill requirements for non-housekeeping quarters, and overseas housekeeping quarters.

DOD concurred and, on March 11, 1970, issued instructions to the military departments which restrict the providing and repairing of supplemental Government-owned furniture and facilitate redistribution of household furniture within the United States.

INDEX NO. 57, B-118638, JUNE 9, 1970

IMPROVEMENT MADE IN BUILDING CONSTRUCTION INSPECTIONS TO DETERMINE COMPLIANCE WITH CONTRACT SPECIFICATIONS-DISTRICT OF COLUMBIA GOVERNMENT We reported that:

1. Required and recommended tests and checks of concrete to determine compliance with contract specifications had not been made.

2. Concrete had been accepted even though tests and checks showed that it did not comply with contract specifications.

3. Required samples, shop drawings, descriptive literature, and certifications— relating to materials, equipment, and systems-used to determine compliance with contract specifications had not been received.

4. Compacted soil (fill and backfill) had been accepted even though tests showed that it did not meet specification requirements.

5. Although the District relied on its site inspectors to determine compliance with contract specifications, it had not provided them with needed guidance and test equipment.

6. The system for reporting and reviewing the results of the inspection activites needed improvement.

The Assistant to the Commissioner of the District of Columbia generally agreed with our findings and prompt action was taken to improve inspection policies and practices.,

Index No. 58, B-140389, November 24, 1967

NEEDS FOR IMPROVEMENTS IN CONTROLS OVER GOVERNMENT-OWNED PROPERTY IN CONTRACTORS' PLANTS-DEPARTMENT OF DEFENSE

We found a need for the Department of Defense to improve its system of controls over Government-owned facilities, special tooling, and material in the possession of contractors. Generally, our review disclosed weaknesses 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.

We made a number of recommendations to improve the administration over Government-owned property. The Department of Defense took corrective action on most of these points. In particular, extensive revisions and additions were made to the Armed Services Procurement Regulation.

Index No. 59, B-163691, May 23, 1968

ACTION TAKEN TO PUT INACTIVE INDUSTRIAL PLANT EQUIPMENT IN ARMY ARSENALS TO USE-DEPARTMENT OF DEFENSE

We found that millions of dollars worth of industrial plant equipment—such as woodworking and metalworking machines, crane and crane shovel attachments, compressors, power and hand pumps, and electric motors—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 for considerable lengths of time and stated that Army regulations relating to such retention were being revised.

Index No. 60, B-140389, April 7, 1970

MANAGEMENT OF GOVERNMENT INDUSTRIAL PLANT EQUIPMENT KEPT FOR POSSIBLE FUTURE USE SHOULD BE IMPROVED DEPARTMENT OF DEFENSE

We found that the Army had retained industrial plant equipment reserved to meet production contingences, referred to as "packages", which did not meet Department of Defense (DOD) requirements. Some had the capability for more production than DOD estimated would be needed. Others did not contain enough equipment to meet planned production requirements. For others, contrary to requirements, no specific contractor or Government plant had been designated to use the packages in the production of defense items in the event of mobilization. In some cases, no requirement existed for items that the package was capable of producing.

As a result of our report, DOD is making a study of its package program, including policies and procedures for their establishment, justification, approval, retention and management, and intends to improve the program in accordance with the study recommendations. The Army has directed its Commanders to review all packages and to report to the Defense Industrial Plant Equipment Center any equipment found to be excess.

Index No. 61, B-140389, June 17, 1970

OPPORTUNITIES FOR IMPROVEMENT IN MANAGEMENT OF GOVERNMENT MATERIALS PROVIDED TO OVERSEAS CONTRACTORS, DEPARTMENT OF ARMY-DEPARTMENT OF AIR FORCE

We found that the operating contractors generally were not complying satisfactorily with the stock control provisions of their contracts and were not adequately supervised in this respect by Government property administrators.

As a result of our review about $3.8 million worth of Government material has been declared excess and available for redistribution. Further, outstanding requisitions for another $1.4 million worth of Government materials were excess to current requirements and cancelled. We found that contractors were not (1) periodically reviewing material requirements levels, (2) properly computing consumption data, (3) giving full consideration to all available stock on hand or due to arrive, (4) cancelling outstanding requisitions when found to be in excess of requirements, and (5) properly determining levels of materials to be retained for insurance purposes. Many of these unsatisfactory practices were known or should have been known by the Government property administrators responsible for monitoring the contractors' operations.

Although the primary responsibility for efficient management of Governmentfurnished material rests with the contractors, many of the deficiencies could have been prevented or corrected by more effective property administration by Government personnel.

We suggested that the Secretary of Defense consider increasing the size and quality of the property administration staffs and consider taking measures which would elicit more effective cooperation by contractors in the management of Government-furnished materials. We were advised that improved management efforts and training will be emphasized to increase the quality of property management, and consideration will then be given to increasing the staffing for property administration overseas.

Index No. 62, B-163136, February 26, 1968

NEED FOR IMPROVED CONTROLS IN MILITARY DEPARTMENTS TO ENSURE REIMBURSEMENT FOR SERVICES PROVIDED TO NON MILITARY AND QUASI-MILITARY ACTIVITIES— DEPARTMENT OF DEFENSE

We found that the military departments did not uniformly or consistently implement Department of Defense policy 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 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 for services, sufficient in amount for the recovery of applicable costs, 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.

Index No. 63, B-118678, September 3, 1969

OPPORTUNITY FOR THE GEOLOGICAL SURVEY TO INCREASE REVENUES THROUGH CHANGES IN ITS MAP-PRICING PRACTICES DEPARTMENT OF THE INTERIORBUREAU OF THE BUDGET

We reported to the Congress that an opportunity exists for the Federal Government to realize additional revenues if the Geological Survey (Survey) would sell its maps at prices based on their fair market value. In the determination of its map-pricing structure, Survey has followed the practice of pricing its maps on the basis of costs essentially in accordance with that provision of Bureau of the Budget (BOB) Circular No. A-25 which deals with Government services rather than on the basis of the fair market value which is required by the circular when the Government sells property or resources.

We believe that maps are tangible commodities and that they would more properly be considered as resources or property and should not be sold at prices which are based solely on cost. Information obtained in our review indicates that the fair market value of Survey's maps is greater than the prices being charged. The potential additional revenues which could be realized if Survey sold its maps at prices based on their fair market value could be significant because of the large volume of maps sold by Survey-5 million in 1968.

The Department of the Interior disagreed with our finding. The Department is of the opinion that Survey's maps are a service and should be priced to recover essentially the cost of printing and distributing the maps.

BOB advised us, however, that it plans to undertake a review of the broader issue implied in the question raised in our report; that is, whether maps produced by Federal agencies, and probably other services or products supplied by the Government, are services or property. BOB's objective in this review will be to develop policy guidance for the pricing of services and products that may not fall clearly into either the service or product group discussed in BOB Circular A-25.

We consider BOB's planned review to be responsive to the matters discussed in our report. However, because of the potential additional cost recoveries that may be obtainable, we recommend that the Director, BOB, undertake the review as soon as possible.

Index No. 64, B-125051, October 7, 1969

NEED TO REVISE FEES FOR SERVICES PROVIDED BY THE IMMIGRATION AND NATURALIZATION SERVICE AND UNITED STATES MARSHALS-DEPARTMENT OF JUSTICE We reported that certain fees charged by the Immigration and Naturalization Service (INS) for various services dealing with immigration and naturalization matters were not sufficient to recover the cost of these services by about $2.8 million during fiscal year 1967. Certain other fees exceeded the cost of the services by about $2.2 million during the same period.

Public Law 90-609 of October 21, 1968, in effect, authorized the Attorney General to revise all the fees charged for INS services in accordance with the Government's general policy that services provided to or for any person shall be self-sustaining to the fullest extent possible. As of June 30, 1969, none of the fees had been revised.

We also reported that statutory fees charged by the United States marshals (USMs) for serving processes (subpoenas, summonses, complaints, writs, and various other court orders) for private litigants were insufficient by about $470,000 during fiscal year 1968 to recover the costs incurred.