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under the provsions of the Dependents' Medical Care Act. The Army continues to place emphasis on controlling the costs of this supplemental program through the medicare permit system. This control assures optimum use of Army medical treatment facilities; provides extensive analysis of physician fee schedules and payments to insure that they are reasonable; and provides for continuing examination of controls and administrative practices to improve operating efficiency.

A separate presentation will be made on the medicare program.

In addition, Lieutenant General Heaton, the Army Surgeon General, is here today to discuss any other element of the Army's medical program about which committee members may have a question or desire additional information.

Mr. Ford. Is this for the Defense Department as a whole, or simply for the Army?

General DUFF. For the Defense Department as a whole, since it is administered by the Army.

BUDGET PROGRAM 2500-ARMYWIDE ACTIVITIES

The broad range and diversity of activities supported by program 2500 is indicated by the project titles shown in the next chart.

(NOTE.—See justifications included on p. 36.)

With regard to departmental administration, I shall cover reductions made in departmental headquarters later in my discussion. In addition to the reductions made in departmental headquarters employment in fiscal year 1961, the Army has scheduled a 5 percent reduction at major field command headquarters. No increase for employment above the reduced level has been requested for these headquarters in fiscal year 1962.

There is a particularly significant problem area in this budget program for fiscal year 1962. A decrease of $5.5 million from fiscal year 1961 for the operation of oversea dependent schools was included in our budget request based on the expectation that the numbers of dependents in oversea areas would be reduced. The decision to reduce the number of dependents overseas was rescinded by President Kennedy since the preparation of our budget estimates. Thus, instead of the expected savings of $5.5 million for this activity, we are now faced with an increase over the current year's requirements.

Budget project 2550 finances the Army's portion of the Department of Defense global communications system essential for prompt and effective execution of strategic command and control of U.S. forces deployed throughout the world. The fiscal year 1962 increase in this activity provides for: the Army signal detachment on Taiwan, which activity has been financed by Department of Navy in previous years; the complete staffing of the recently opened east coast relay station; increased lease facilities for the implementation of an automatic switching network; and some modernization of the strategic Army communication system.

Evaluation activities, budget project 2560, provides funds for the Army intelligence program, which includes the Army attaché system, the Army Intelligence Center at Fort Holabird, counterintelligence activities, technical and field intelligence and various classified activi

ties. The fiscal year 1962 increase provides : $1.6 million for ACSIMATIC for the application of computers to intelligence processing activities; $1.4 million for communication security equipment; and $2.1 million for other projects.

Budget Project 2570 finances the Army's mapping and geodesy functions, which provide the topographic maps, geodetic information, and topographic and terrain intelligence needed for planning and operational use of all U.S. Armed Forces. Increased emphasis will be placed in fiscal year 1962 on incorporating into operational procedures new techniques for more rapid processing of geodetic and topographic data by area of most critical military interest and on the improvement of knowledge of relative positional relationships on the earth's land masses.

BUDGET PROGRAM 2600—ARMY RESERVE AND RESERVE OFFICERS' TRAINING

CORPS

The $69 million in Budget Program 2600 for fiscal year 1962 provides for the operation and maintenance costs for an Army Reserve with an end-of-the-year paid drill strength of 270,000 and for 157,000 ROTC students in civilian educational institutions. The principal reason for the decrease of $2.5 million from the fiscal year 1961 level is the 30,000 decrease from 300,000 to 270,000 in the paid drill strength of the Army Reserve.

BUDGET PROGRAM 2700-JOINT PROJECTS

Budget Program 2700 provides for expenses related to activities of an interdepartmental nature for which the Army has been assigned administrative responsibility. $11.8 million of the fiscal year 1962 increase in this program is for the Defense Communication Agency, which was activated during fiscal year 1961, and is appearing for the first time in this budget. The establishment of this new agency indicates the positive action being taken by the Department of Defense responsive to past congressional concern about communications. No funds were included in the fiscal year 1961 budget for this agency. As in previous years, detailed presentations on the major projects supported within this program are scheduled for the consideration of this committee.

Those that have been scheduled are the Defense Communication Agency about which Rear Admiral Irvin will testify, the Defense Atomic Support Agency on which Major General Booth of the Army will appear, and the National Security Agency for which Vice Admiral Frost will be the principal witness.

OPERATION AND MAINTENANCE OF FACILITIES

“Operation and maintenance of facilities” is a term used to identify general support at the installation level. The eight "mission” programs I have just discussed produce the need for support installations. On the next table is shown the distribution of these support costs by budget program.

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It will be noted from the last line of the chart that slightly more than one-third of the "Operation and maintenance, Army” appropriation is used to finance operation and maintenance of facilities. with these funds, the Army maintains approximately 2,000 miles of rail lines, over 400 million square yards of surfaced roads and hard stand, and nearly 1 billion square feet of building space. These funds support the local distribution system for the thousands of items required by field armies; they provide for operating field maintenance shops and repair facilities for all kinds of equipment; they support troop and family housing, schools and recreational facilities, and they provide for local services and for operating local headquarters.

Requirements for "Operation and maintenance of facilities" funds are largely determined by the strength, composition and deployment of Army forces and the number of type of installations to be operated. The quantity and the complexity of equipment establish the scope of the requirement for field maintenance and supply.

The decision as to the qualitative level of facilities support is an important factor in determining fund requirements and is the primary means of controlling support costs. For example, at a certain budget level a reduction of the level of maintenance of our physical plant below desirable engineering standards would permit the transfer of millions of dollars during a particular year to higher priority activities; unfortunately, however, this could result in greater maintenance costs in future years. Attaining the most effective and economical level of support of facilities is an objective constantly sought by the Army. On this connection, it is anticipated that in fiscal year 1961 we will arrest the growth of our facility maintenance backlog and in fiscal year 1962 a modest decrease may be accomplished.

These costs, distributed by major groupings, are shown on the next chart. These groupings provide the basic structure for management of this essential function.

(The chart referred to follows:)

CHART VIII

DISTRIBUTION BY MAJOR GROUPS

FISCAL YEAR 1962

Local Maintenance and
Management of Facilities
(Repair of Real Property,
Utilities Services, Fire
Prevention, etc.)

Tield
Maintenance

Local (of troop and instal

Headquarters lation equipment)

Operations

(Postal service,
12%
Local

Finance Office,
Logistic

oto.)
Services
T. Local communications, Supply, 1% 20%

otc.)

23%

Local Welfare Services Chaplain, Troop Information, etc.)

FISCAL LIMITATIONS

The last general topic for discussion is that of fiscal limitations.

For fiscal year 1960, Congress imposed a limitation on the Department of Defense on the amount which could be obligated for hire of motor vehicles. For fiscal year 1961, this limitation was continued and additional limitations were introduced for travel and departmental administration.

A most significant problem in administering such limitations is that all Army operating agencies are faced with additional budgetary controls and increased accounting workloads. As you know, we budget for and control appropriated funds through setting specific dollar objectives for each budget program within an appropriation. When limitations are imposed on this

structure, this restricts the freedom of action the commander has to accomplish his assigned mission and to meet emergencies. For example, the Laos situation necessitates additional travel to increase Army readiness and further the accomplishment of U.S. objectives in this area. The local commander has the double problem of determining the source both of additional travel funds and increased travel limitation.

TRAVEL

Travel costs in the “Operation and maintenance, Army” account have been receiving, and will continue to receive, close examination at every echelon of the Army.

For example, in our Caribbean command, a listing of each trip required during the budget year is prepared prior to the start of the year. This listing of travelers and purpose of trip is examined quarterly by the Chief of Staff of that command to insure that all travel is of high priority and contributes to the command's mission. This procedure has been in effect for several years.

In developing our 1962 travel estimate, we recognized the desire of the Congress and reduced programs requested by field agencies about 15 percent. As a result, our fiscal year 1962 travel estimate approximates the fiscal year 1961 level and will cover the travel related to such increased activities as the field exercise program and the new single manager assignments.

(The following chart was referred to in the above statement :)

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