BETTER CATALOGS (Recommendation 9):

AID should provide better excess property catalogs. More detailed descriptions are needed in the field. AID also should suggest examples of possible uses.

Results. (See under recommendation 7 above.)

BUREAU FOR LATIN AMERICA (Recommendation 10):

The Bureau for Latin America should embrace the excess property program with enthusiasm and dedication. Decisions should be given promptly on excess property agreements submitted to it by individual missions. The Bureau also should make certain that all development and program loans contain an excess property provision whenever practicable, no matter how small that utilization might be.

Results. As stated under recommendation 1 above, the AID Administrator advised the committee chairman on May 23, 1966, that the Bureau "has already begun to bolster its excess property program." The Administrator also mentioned a regional seminar to be held in the near future and added his confidence that a greater understanding of the excess property would result.

Nevertheless, the trend since fiscal year 1966 for property acquisition by the Latin American countries has been downward, and there are only occasional bright spots in the fiscal year 1969 report. Any effect of the new AID/GPR procedures is, of course, not yet measurable.

[H. Rept. No, 2319, 89th Cong., second sess.]

EVALUATION OF THE DONABLE SURPLUS PROPERTY PROGRAM

Forty-fourth Report by the Committee on Government Operations

(Submitted to the Speaker October 19, 1966)

This report examines the efficiency and accomplishments of the Federal donable surplus property program, the effect on that program of GSA's revised regulations on exchanges or sales on property for replacement, an administrative action of the Department of Defense involving exchange/sale policy, and certain excess property matters related to AID's programs.

Under the donation program, Federal personality not required for the needs of all Federal agencies may be donated, through appropriate State agencies, to qualified educational, public health, civil defense, and certain other organizations benefiting the public. The authority for the program is subsection 203 (j) of the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 484 (j)), a subsection which the Congress has several times broadened and perfected.

Subcommittee hearings were called in June 1965 to review the general progress of the donation program. They showed, inter alia, the

close and important relationship between that program and Federal excess property programs, on the one hand, and the way in which Federal agencies carry out the exchange/sale authority granted by subsection 201 (c) of the Federal Property Act on the other. That subsection provides that in acquiring personal property, agencies may exchange or sell similar items and apply the sales proceeds or trade-in allowances against the cost of the property being acquired. It authorizes GSA to prescribe regulations governing exchange/sale transactions. When personal property is thus sold or exchanged, it is not available for further Federal use (unless the acquiring agency reimburses) or for donation.

In March 1966, GSA issued revised exchange/sale regulations to be effective July 1, 1966. They contained nothing to require the Department of Defense to change its then existing exchange/sale policy, under which property eligible for exchange/sale was given a prior screening first for nonreimbursable transfer as excess to other Federal agencies, and second for transfer as surplus or donation. Nevertheless, DOD advised the subcommittee that it was altering this policy in August of 1966 and that prior screening or utilization and donation would no longer be required.

The need to measure the significance of the revised GSA regulations as related to the donation program and the concern over the effect on the program of any change in DOD's existing policy prompted further subcommittee hearings late in August of 1966.

Among the findings of the committee report are: That amount of property available for donation will, in all probability, decline in the future; that the character of surplus property being generated is changing from common use items to exotic technical electronic and scientific equipment; that screening procedures by State agencies need tightening; and that use of surplus Government property is extremely valuable to eligible donee organizations.

The report contained the conclusions that the announced change in policy by the Department of Defense regarding use of its exchange/ sale authority was being accomplished without adequate information and data in certain important areas relating to property management and disposal.

RECOMMENDATIONS

DEFER REVERSAL OF DOD EXCHANGE/SALE POLICY (Recommendation 1):

The committee recommends that the Department of Defense hold in abeyance any change in its 1962 policy of making personal property under its control available for further Federal use on a nonreimbursable basis and for donation screening prior to exchange/sale, until

(a) the General Services Administration, Department of Health, Education, and Welfare, General Accounting Office, and Department of Defense have assembled information and data not presently available but necessary to a comprehensive understanding of the relative merits of disposals by donation, further Federal use on a reimbursable and nonreimbursable basis, and exchange/sale; and

(b) the Committee on Government Operations has had an opportunity to evaluate this information and make recommendations with respect to the establishment of a system of property disposal to assure a sound and reasonable balance between the needs and benefits of the donable property program and reutilization of property by Federal agencies on the one hand and exchange/sale activity on the other.

Results. The Department did, in fact, defer putting the change into effect. On October 27, 1967, however, DOD advised the committee that it would be prudent to make this change and discontinue offering exchange/sale property to other Federal agencies and eligible donees prior to attempting recoupment of funds or establishment of credit through the exchange/sale authority. Prior to this, representatives of DOD, GSA, HEW, and BOB had advised the committee that they did not have available information of the type on which the analysis referred to in the above recommendation would have to be based. To compile it, they said, would be difficult and costly. Thus, DOD determined to reverse its policy notwithstanding the lack of information on which to make a determination of comparative benefits under the old and the new policies.

The subcommittee formally requested the Department on December 15, 1967, to consider certain suggestions regarding elimination from exchange/sale disposal of some items showing a low rate of return. It was suggested that DOD compile figures on proceeds and allowances from exchange or sale transactions so that the rate of return on original acquisition cost could be computed for various categories of property. The Department replied on January 31, 1968, that it would impose a requirement that there be careful evaluation of each contemplated exchange/sale transaction and then advance determination whether the expected return would warrant the administrative effort and related cost involved. This instruction was issued to the Army, Navy, Air Force, and Defense Supply Agency on March 27, 1968. DOD also agreed to supply exchange/sale data by Federal supply classification group number, which data would include acquisition cost and dollar return for disposals within each group.

The first recapitulation of these data sent by DOD covered the period July through December 1968. It showed low percentage returns for a number of high demand groups. These data, when compared with the corresponding data demand subsequent recapitulations, will permit administrative determinations concerning exclusion of certain property types from the exchange/sale list.1

BASIC DATA NEEDED (Recommendation 2):

The committee notes with approval the steps taken by the GSA to make more viable and efficient the donable property program (some of them reflected in its new regulations on the use of exchange/sale authority), but recommends that GSA undertake promptly, in conjunction with DHEW, GAO, and DOD to assem

1 The Defense Supply Agency's Defense Logistics Services Center, by letter dated July 10, 1969, has determined that several important categories of property previously eligible for exchange/sale disposal, are no longer eligible, e.g., ambulances, fire trucks, buses, binoculars, compressors, and industrial and special purpose trailers.

ble and furnish to the committee as soon as practicable the information and data described in finding number VII, supra. Included therein should be information on the relative benefits, tangible and intangible, as well as costs to the Federal Government as a whole and to the taxpayer of disposal of personal property by donation, further Federal use on a reimbursable and nonreimbursable basis, and exchange/sale.

Results. No results except as indicated under recommendation (1) above.

MORE PROPERTY CATALOGS FOR STATES (Recommendation 3):

So that additional checks may be made on the adequacy of screening activity and procedures, the committee recommends that the GSA, DHEW, and DOD take such steps as may be necessary to assure that a reasonable number of information copies not only of GSA's and DOD's excess property catalogs but also of their surplus sales catalogs are regularly furnished to the State agencies for surplus property. The committee also urges that the State agencies take appropriate steps to facilitate the access of their donee institutions to these catalogs.

Results. With respect to DOD catalogs, DOD apprised the committee on December 9, 1966, that it would be pleased to furnish through the Defense Logistics Services Center enough declared excess listings and surplus sales catalogs to meet any specific requirements. The General Services Administration on December 15, 1966, indicated reluctance with respect to furnishing its surplus sales offering. On December 22, 1969, the Department of Health, Education, and Welfare reported that two copies of all DOD sales catalogs within the United States would be circularized among the States by each HEW regional office.

GSA advised on June 7, 1967, that it was increasing the number of its excess property catalogs and bulletins being made available to HEW for use of State agencies by approximately 50 percent. The committee was advised by HEW on June 16, 1967, that the Department had made arrangements with GSA to secure all needed copies of sales catalogs and that GSA and HEW had agreed to increase the total number of excess property catalogs from 457 to 674.

GSA REVIEW OF EXCHANGE/SALE TRANSACTIONS Recommendation 4):

From time to time, the GSA should review exchange/sale transactions of various Federal agencies to see if their implementation of GSA's regulatory provisions on using eligible property categories and on making special findings of similarity are in harmony with the intent of the similarity requirement of section 201(c) of the Federal Property Act. The GSA should apply the results of such reviews also in considering the effectiveness and adequacy of its regulations and whether greater use in the regulations of "four-digit" property classes as well as specific

line items might simplify and facilitate agency determinations relating to property-item similarity.

Results. In a letter dated December 15, 1966, GSA expressed the opinion that agencies' compliance with eligible property requirements of the exchange/sale regulations was "almost 100 percent.” It was not aware of any problems with respect to findings of similarity, which are prerequisite to the completion of an exchange/sale replacement. It added that it felt this was an appropriate mission for GAO and was notifying GAO of its desire to discuss this part of the recommendation. It concluded that the use of "four digit" property classes to assist in the test for similarity was probably unnecessary, since under GAO rulings the similarity must be specific in any case.

On June 7, 1967, GSA wrote that after discussion of the recommendation with the GAO, the latter had made the point that exchange/sale cases are subject to review of the internal audit group of each agency. Thus, it is the responsibility of these groups along with other auditing duties to assure that the provisions of the regulations pertaining to tests for similarity are being applied in strict conformance with regulations. GSA stated that it would emphasize this aspect of the regulation by an amendment which will make it applicable to all executive agencies.

Agency compliance with GSA's regulations regarding eligible property has not been perfect. Review of GSA's report on exchange/sale transactions for fiscal year 1967 showed several disposals of property from categories which GSA had declared ineligible for exchange/sale. GSA, asked to explain this, stated that in many instances the agencies making the disposals had misconstrued or neglected to follow the regulations. Other examples of such failure have been noted by the subcommittee and called to GSA's attention. In addition, the committee has requested GSA to provide instances of all waivers granted by that agency from the restriction imposed by GSA's list of 30 ineligible categories. This has been done.

SCREENING PROPERTY FOR STATES (Recommendation 5):

The Department of Health, Education, and Welfare should encourage the States to hire an adequate number of State screeners even if it requires State-appropriated funds. For example, the Secretary might bring the benefits of the donable property program to the direct attention of individual Governors by letter or a message to the next Governors' conference. The National Association of State Agencies for Surplus Property should be invited to participate in this effort.

Results. On December 7, 1966, HEW advised the committee that because of a rapidly decreasing number of installations generating surplus property, it felt that the need for additional screeners was down. HEW noted, however, that there was a substantial need for screener training to assure that screeners to review and list property at holding agencies are competent to recognize and list all property which has the potential health or educational utilization. Screener training seminars were planned.