The Half-hearted GAO: Congress Gets What It Wants
Knoll, Erwin
The Half-hearted GAO: Congress Gets What It Wants by ERWIN KNOLL Afunny thing happened to the U.S. General Accounting Office a few weeks ago. For the first time in years— perhaps for the first...
...that there was "no softening of the report as a result of obtaining comments on the rough draft...
...We are told frequently by members [of Congress]," says Comptroller General Staats, "that they consider the General Accounting Office as the only independent and objective source available to them for information regarding program operations in the Executive Branch...
...The GAO is not unaware of these facts of life, and occasionally it is not as aggressive as it might otherwise be if such were not true...
...While some companies lost money on their defense contracts, at least one firm—no names were mentioned in the report—realized a return of 240 per cent on its total invested capital...
...I don't remember precisely...
...the GAO...
...In fact, the lesson of the defense industry profits study is that when the stakes are high enough, the "watchdog of the watchdogs of the public purse" is capable of cuddling up in the burglar's Ian...
...The GAO study showed that the Department of Health, Education and Welfare, in its "desire for expeditious funding" of the desegregation program, had awarded grants for purposes entirely unrelated to the program—and in some instances to systems still committed to racial segregation...
...His successor, Staats, gracefully acquiesced in Holifield's suggestion that the GAO ought to take a more "constructive" tack, avoid such terms as "overcharge," and "respect business privacy...
...General Accounting Office, and a very high regard for the able Comptroller General, the Honorable Elmer B. Staats," Eckhardt said...
...The GAO is accountable to the Government Operations Committee, which authorizes the agency's annual budget...
...Officers of Pride, Inc., a black self-help organization in the nation's capital, charged last year that their work had been disrupted by GAO "harassment...
...The deletion was urged by Shillito, who served as president of the LMI for six years before joining the Pentagon...
...The report focused, instead, on the more modest profit figures reported by defense contractors in response to the GAO's questionnaires...
...In all cases it was pointed out quite clearly that it was all preliminary and subject to change as the facts came out...
...in five years on the job, he had become accustomed to a cordial press...
...And only a few months ago an Associated Press dispatch went it one better by describing GAO as "the watchdog of the watchdogs of the public purse, an arm of Congress that sees that the money goes where it is meant to go...
...The Congress gets the kind of GAO it wants," says a Senate aide...
...Confronted on one hand by its Congressional mandate to investigate, and on the other by the bureaucratic instinct for self-preservation that pervades the Government, GAO is "the birdie caught between the two opponents in a badminton match," the auditor said...
...Holifield raised these questions: "Is the GAO, as some Government and industry parties believe, enforcing its own standards of procurement on Government and industry without authority of law or without the benefit of the intimate technical and business experience which resides in the parties to the procurement process...
...Last year its staff of 4,600 accountants, lawyers, statisticians, clerks, management experts, and computer specialists, working out of Washington headquarters, fifteen regional offices in the United States and five overseas, turned out 1,168 reports on topics ranging from "Problems Resulting from Deterioration of Pavement on the Interstate Highway System" to "Review of Development and Production of the AN/SQS-26 Surface Ship Sonar System...
...GAO's principal weakness, its Congressional critics contend, is that it must serve too many masters whose interests and ideological differences are irreconcilable...
...At one point he conceded, "I think we did make some changes as a result of the comments we received...
...rather, it demonstrated a growing tendency on the part of GAO to violate the integrity of the Government's contracts and force contractors to make refunds...
...Somewhat ruefully, he added, "Nobody likes an auditor...
...The concluding line of the first GAO draft, warning against profits "greater than necessary, particularly with the huge unmet social needs of the country," was dropped from the final report...
...Tora...
...You have to remember that the whole concept of legislative oversight is still at a primitive stage...
...Its inquiries into desegregation programs must meet Senator Mondale's needs without ruffling Senator James Eastland of Mississippi...
...Nonetheless, GAO remains, as one Congressional aide put it, "the only wheel in town"—the only significant resource to which Congress can turn to keep Federal programs and activities under scrutiny...
...Robert H. Charles, Assistant Secretary of the Air Force, told the Holifield Subcommittee: "The sanctity of contracts is the bedrock of our commercial system...
...There might have been some others," he replied...
...Representative Holifield, California Democrat who now heads the full Committee while retaining the chairmanship of its Subcommittee on Legislation and Military Operations, set the tone for the 1965 hearings when he expressed "the great concern that has been shown in industry circles, and recently, in the Department of Defense, over the difficult and sometimes awkward situations created by the GAO audit reports...
...The documents and testimony at the March 26 hearing also disclosed that contacts between top GAO officials and defense industry representatives were not limited to the February 13 Pentagon meeting reported by Jack Anderson...
...How many other meetings had he held with industry groups to discuss the defense profits study before the report was issued...
...It was an inquisition...
...When Staats, a career civil servant for more than thirty of his fifty-six years, left the Bureau of the Budget in 1966 to become Comptroller General, his associates presented him with a pillow embroidered on one side with the Democratic donkey and on the other with the Republican elephant...
...You have done nothing improper," Representative Don Fuqua, Florida Democrat, assured the Comptroller General...
...Not a single figure has been changed," he said...
...In 1950, Congress gave the GAO authority to ascertain that Federal agencies had carried out the intent of the House and Senate in spending their funds...
...The first witness was Eckhardt, whose presentation was respectful, almost diffident...
...It too is overseen by the government operations committees...
...Only last month, employes of the GAO railed against alleged discrimination in hiring and promotions at the agency...
...In 1965 a subcommittee of the House Government Operations Committee, headed by Chet Holifield, began an investigation of—guess who...
...The National Security Industrial Association had urged this addition...
...When I asked Bailey about this meeting, he recalled that he had gone to Key Biscayne in November to give the electronics manufacturers "the general thrust of this study, our procedures, and certain data which were even more preliminary then than in the first draft...
...The GAO points with pride to its record of achievement...
...He did not believe this reflected a deterioration in Pentagon procurement practices...
...Questions are raised, too, about the GAO's priorities...
...by Twentieth Century-Fox...
...Only a few in Congress were impressed and disturbed over the revelations...
...On its own initiative or at the request of Congress, the GAO investigated questionable Medicaid claims in California, imports of duty-free watch movements in the Virgin Islands, slipshod meat inspection practices in the Department of Agriculture, and unreimbursed Pentagon support for the filming of Tora...
...The Electronics Industries Association had requested the change...
...GAO's defense contract studies must satisfy Proxmire, who requests them, without offending Chairman Edward F. H?bert of the House Armed Services Committee, who resents them...
...Now the reports bear titles like 'Need for Improving Administration of the Cost of Pricing Data Requirements of Public Law 87-653 in the Awards of Prime Contracts and Subcontracts.' Nothing sensational about that, and further, one can read that particular report from cover to cover without finding a trace of a contractor's name...
...The Comptroller General's air of injured innocence was understandable...
...Chairman Holifield said he was "in complete concurrence...
...Most of all, if it wants to receive adequate funding, it must stay on the right side of Chairman Holifield...
...These, Shillito wrote, were "the more significant data," and had not received enough attention in the GAO's first draft...
...We congratulate you on your desire to protect the public interest," said Chairman Holifield as he dismissed the witness...
...The nonpartisan (or bipartisan) tradition runs deep at GAO...
...Staats insisted once again that the GAO had not been subjected to "pressure of any type...
...ERWIN KNOLL is the Washington Editor of The Progressive...
...The Legislative Branch has been in a state of arrested development for about a century...
...GAO remains, as one Congressional aide put it, 'the only wheel in town...
...More serious is the suspicion that racism in the GAO's upper echelons has affected GAO's voluminous studies of antipoverty and welfare programs...
...In my opinion, such reports are a disservice to the Office which I head and to the Congress of which the General Accounting Office is a part...
...GAO was given until December 31, 1970, to file its report...
...If Congress is now emerging from that state—and some see evidence that it is in the recent votes against the supersonic transport plane, in the growing Congressional opposition to the war, and in the new willingness to question the Administration's national defense policies—the GAO can probably be transformed into an agency far more effective than it is today in helping to impose checks on the Executive Branch...
...there are charges that far too many man-hours are squandered in the pursuit of trivia...
...These figures showed a considerably lower pre-tax rate of return—21.1 per cent •—on equity capital...
...A 1969 article in Army Digest, of all things, said the GAO was "doing a first-rate job," and called the agency "the watchdog of the public purse...
...Our review of the draft adds to the concern expressed at the time about the use of data on selected contracts...
...It too gets its funds from the House and Senate appropriations committees...
...You nibble away at this and you nibble away at something far bigger than an occasional refund out of the millions of transactions in which we are involved...
...The GAO survey was a huge and complex undertaking, which took eighteen months to complete and cost $2.1 million...
...Comptroller General Campbell suffered a heart attack and retired before the Subcommittee issued its report...
...One of these told me that the excellent field work done by GAO investigators "gets massaged, filtered, sanded down, rounded off" by GAO management when the reports are written...
...It was a table casting doubt on profit studies compiled by the Logistics Management Institute—a Pentagon think-tank—which have been widely publicized to demonstrate that defense contractors earn low profits...
...With only one exception—Democrat Benjamin Rosenthal of New York, one of the dozen Congressmen who had joined with Eckhardt in requesting an inquiry—the members of the Holifield Subcommittee displayed no interest in pursuing these matters with Staats...
...Staats, reserved and correct as always, commented that "it is unfortunate that the leaders have chosen to dramatize their difference in this manner...
...The agency's powers were expanded under the Legislative Reorganization Act of 1946, which authorized the GAO to analyze expenditures and report annually on "whether public funds have been economically and efficiently administered and expended...
...44 4You have to read the reports like a detective to find out what's really going on.'99 The first of the news accounts which Staats was to denounce as "premature, inaccurate, and misleading" appeared on February 24 in Jack Anderson's nationally syndicated "Washington Merry-Go-Round" column...
...Is there developing a clash of procurement philosophies between GAO and DOD...
...Senator Proxmire, chairman of the Joint Economic Committee, has announced he will call Staats to testify, and has made it plain that he believes "the most significant findings concern the results of the on-site inspection of 146 contracts totaling $4.3 billion...
...True to its tradition, GAO has frequently issued reports sharply critical of the Administration in power...
...But when the GAO attempted to verify the cost and profit figures supplied by manufacturers, it found that they had consistently understated their profits on military work...
...GAO's principal weakness . . . is that it must serve too many masters . . Because the GAO is "the only wheel in town," and because they believe controversy could easily undermine the agency's credibility as a "watchdog," Proxmire and other members of Congress who frequently call on the GAO investigative services are reluctant to criticize its shortcomings...
...In a letter to the GAO dated February 6, Assistant Secretary of Defense Barry J. Shillito had warned that "overplaying" of these figures would give "ammunition to the critics of this industry...
...The agency's recent history— and especially the episode that brought an indignant Comptroller General before a House subcommittee on March 26—demonstrate that the GAO is something less than the "balanced, objective, fair" apparatus claimed by Staats...
...Comptroller General Staats vigorously defended the report as "impartial and objective," and denied that the comments of defense contractors had resulted in significant alterations...
...While I welcome this hearing," he told the Congressmen, "I should like to express my regret that a few, but widely circulated, premature, inaccurate, and misleading press stories have made this hearing necessary...
...Its reports, never considered permanent contributions to the world of literature, have been purged of most of the 'colored' and 'sensational' language that the contractors complained of...
...it later obtained a ninety-day extension of the deadline...
...For example: • The data on the 146 defense contracts which earned average pre-tax profits of 56.1 per cent, prominently featured in the draft report, were relegated to the back of the final version, and circumscribed with warnings that they did not comprise "a representative sample...
...Some of its investigators are on virtually permanent assignment to the Government agencies whose activities they monitor...
...that the practice of soliciting industry views on GAO reports "provides additional assurance that our reports are fair, complete, and objective...
...It was in the 1950s, as the Korean War sent military spending skywards, that the GAO began flexing its muscles as a close and critical monitor of Government contracts...
...From the time of its creation under the Budget and Accounting Act of 1921 (which also established the Federal Bureau of the Budget), the GAO has been subjected to extraordinary precautions designed to preserve its impartiality and protect it from political pressures...
...There was some discussion...
...The first witness, Paul R Ignatius, then the Assistant Secretary of Defense (and now the president of The Washington Post), complained that the number of GAO reports on the Pentagon had risen from 206 in 1962 to 544 in 1964...
...In the mood of skepticism about rising military costs that was then emerging in Congress, the Proxmire amendment was narrowly adopted...
...The views of the associations and the agencies did not alter any of our conclusions...
...Staats called it "the most detailed and comprehensive effort made to date comparing profits on defense and non-defense work of private industry...
...It was then that the GAO discovered that its celebrated insulation from political pressures was less than airtight...
...At the outset I wish to state that I have the highest respect for the institution, the U.S...
...Their request went, ironically, to Chairman Holifield of the Government Operations Committee, who invited Staats to testify at a hearing on March 26...
...On February 4, for example, Staats met in his office with Charles Stewart, president of the Machinery and Allied Products Institute, to discuss the draft report...
...But it was ahead of its time...
...In contrast to the first draft, the final report advised the Pentagon to take "risk" as well as capital investment into account in determining proper profit levels...
...There will be other hearings on the defense industry profits study, however...
...Even the inquiries mounted by major investigative committees of the House and Senate rely heavily on the work of GAO experts who are detailed to Capitol Hill for months and even years at a time...
...But before the GAO can be made to perform that function, Congress will have to address itself to this question: Who is going to watch its watchdog...
...In 1968 The Christian Science Monitor credited Staats with "striking out quietly but effectively against waste, incompetence, duplication, and mismanagement at every level of the Federal Government...
...Tora...
...Despite the Comptroller General's insistence that no figures had been added, altered, or deleted between the first and final versions of the report, one set of statistics was, in fact, eliminated...
...Except for certain areas explicitly off limits—most notably the activities of the Central Intelligence Agency and other intelligence operations and the internal workings of the White House —the GAO has a broad franchise to poke into every recess of the labyrinthine Federal Establishment...
...But I am in disagreement in a particular area with the Comptroller General: I do not consider press coverage pointing out the divergence between the draft report and the final report as a disservice to the Office or to the Congress but rather as an alert...
...Some Congressional staff aides who have frequent dealings with the GAO are more willing than their employers to criticize the agency—especially if they are assured of anonymity...
...The Comptroller General and his assistant are appointed by the President for fifteen-year, nonrenewable terms, and may be removed only by joint resolution of Congress for specified causes or by impeachment...
...On March 17, for only the second time in its history, the GAO summoned reporters to a press conference to release its final report on the defense industry profits study...
...It contained a summary of the draft report's findings on the 146 contracts, as well as the disclosure that Staats had gone to the Pentagon on February 13 to discuss the findings with Deputy Secretary of Defense David Packard and with contractor representatives who serve on the Pentagon's Industry Advisory Committee...
...The tide of opinion was in the opposite direction, and many began growing hostile to the GAO green-eyeshade military critics...
...Subsequent Anderson columns, and more detailed news stories by Bernard D. Nossiter in The Washington Post, revealed that the GAO had submitted its draft report to half a dozen leading industry organizations—the Aerospace Industries Association, the Electronics Industries Association, the Machinery and Allied Products Institute, the American Ordnance Association, the National Security Industrial Association, and the Logistics Management Institute—had solicited their views and, ultimately, had revised its final report in line with "suggestions" from the defense industry...
...This inviting tone," Kaufman writes, "was eagerly accepted by the Pentagon and its contractors, who queued up to testify...
...Their concern was to quiet the critics and vindicate the GAO...
...The head of the GAO, Comptroller General Elmer B. Staats, summoned before a Congressional committee to comment on newspaper reports that the GAO had "softened" a massive study of defense industry profits at the industry's behest, was miffed...
...Holifield was in concurrence, too, with the covey of contractors—from Boeing, Lockheed, United Aircraft, Honeywell, Grumman Aircraft, among others—who submitted the bulk of the Subcommittee's testimony and who charged that GAO's widely publicized reports on profiteering were undermining the public's confidence in the process of military procurement...
...A first draft of the report, dated December 22, 1970, and stamped Restricted to Official Use, contained explosive findings...
...Only a month ago, even while its defense industry profits study was coming under fire in the press and on Capitol Hill, GAO released a report compiled at the request of Senator Walter F. Mondale, Minnesota Democrat, which confirmed and documented charges by civil rights groups that the Nixon Administration had improperly disbursed funds intended to help school systems desegregate...
...Comptroller General Joseph Campbell, appointed by President Eisenhower in 1954, issued a series of blistering reports on overcharges and other contract abuses—reports which named names and pulled no punches...
...For the first three decades of its existence, GAO's principal responsibility was the routine checking of all Government vouchers—even to the pettiest expenditures—before funds were disbursed...
...Nonetheless, the newspaper reports prompted a group of thirteen Congressmen, led by Representative Bob Eckhardt, Texas Democrat, to request an inquiry into the circumstances surrounding the GAO report...
...And a letter from the Electronics Industries Association to C. M. Bailey, director of GAO's defense division, included this passage: "You will recall that you received a number of firsthand comments from our members as a result of your presentation on this subject at the annual meeting of our Government Procurement Relations Department at Key Biscayne...
...My statement here is by no means an indictment of the report, of the Office, or of the Comptroller General...
...The GAO concluded that the Pentagon's contracting procedures had encouraged inefficiency and waste on the part of defense manufacturers, and had permitted them to reap inordinately high profits...
...Unfortunately, the instinct for self-preservation is also a fact of life at the GAO...
...The GAO, Proxmire has written, "has had to live in the real world...
...The draft report also contained preliminary findings of a second GAO analysis—one based on information furnished by major contractors in response to a GAO questionnaire...
...A glowing article published by Reader's Digest in 1967 (but still available from the GAO in reprint form) was headed GAO: The Taxpayer's Best Friend...
...GAO's relationship to the Executive Branch is "naturally an adversary one," a GAO auditor told me, and relations with the Administration are often tense...
...You have to read the reports like a detective to find out what's really going on," he said...
...It was only natural, therefore, that when Senator William Proxmire, Wisconsin Democrat, offered an amendment to the 1969 defense appropriations act calling for a detailed survey of military contractors' profits, the GAO should be specified as the agency to conduct the study...
...GAO experts had analyzed 146 defense contracts valued at almost $4.3 billion— about seventeen per cent of the annual defense procurement total—and had found that on these contracts manufacturers earned an annual pre-tax profit of 56.1 per cent on their equity capital—roughly three times the annual profit rate for all manufacturing corporations...
...It estimates that in the last five years its audits and investigations have produced savings of at least $2 billion for the taxpayers— an amount more than three times greater than the total GAO budget for the same period...
...If it ever wants a better one, it will probably get it...
...Eckhardt's testimony, and the Comptroller General's, and the texts of the two report versions, and the industry associations' letters to the GAO—which GAO made available, on request, to members of Congress but not to the press— revealed that there were, indeed, "divergencies...
...For the first time in years— perhaps for the first time in its half-century history—the GAO, which the press almost invariably describes as "the Congressional watchdog agency," found itself under public attack for a lack of vigilance and even a lack of integrity...
...The hearings," Kaufman writes, "had whacked the GAO in the head, and in some ways it has still not recovered...
...Richard Kaufman, economist-counsel to the Joint Economic Committee, writes in his recent book, The War Profiteers: "Cumulatively GAO's reports of the late 1950s and early 1960s were a devastating critique of military contracting...
Vol. 35 • May 1971 • No. 5
