Government Printing Office: Information on September 1996 Major Inventory
Reduction (Letter Report, 09/16/97, GAO/GGD-97-177).

Pursuant to a congressional request, GAO reviewed the Government
Printing Office's (GPO) procedures for managing its inventory of excess
publications, particularly its management of a major inventory reduction
that took place in September 1996, focusing on: (1) whether GPO followed
existing policies and procedures; and (2) how 3,258 copies of The Senate
1789-1989, a four-volume set written by Senator Byrd, were destroyed as
part of that reduction.

GAO noted that: (1) when for the first time in 15 years a potential
financial loss was identified in GPO's sales program in June 1996, the
Superintendent of Documents, who heads the sales program, initiated
several actions intended to improve the program's long-term financial
condition; (2) the Superintendent of Documents said he wanted to dispose
of the excess inventory by September 30, 1996, to take the losses in
fiscal year (FY) 1996 rather than in later years, when it otherwise
would have been identified, disposed of, and charged to expense; (3) the
Superintendent of Documents also said he had erroneously believed that
it was necessary to physically remove excess publications from inventory
storage by September 30, 1996, in order to record them as an expense in
the financial records for FY 1996; (4) although the Superintendent of
Documents had policies and procedures in place to prevent the disposal
of publications that the issuing agency still wanted, in June 1996 he
instructed his staff to disregard those policies that would interfere
with his goal of disposing of as much excess publications inventory as
possible by September 30, 1996; (5) acting under the Superintendent's
overall instructions, GPO sales program staff disregarded a policy that
has existed since at least 1984, which provides that, before disposing
of any excess copies of publications, GPO should offer them to the
issuing agencies; (6) in explaining its inventory reduction to Senator
Byrd, GPO said that it had found that it was generally more
cost-effective to dispose of excess inventory and reprint if necessary,
than to hold it in storage indefinitely; (7) however, GPO officials said
that they knew that the reprint costs would substantially exceed the
holding costs for these copies, given their relatively high printing and
binding costs; (8) in July 1997, after Senator Byrd inquired about the
major inventory reduction, the Superintendent of Documents orally
instructed his staff to retain the remaining volumes of the Senate
history and, at GAO's recommendation, put this instruction in writing in
August 1997; and (9) the Superintendent further said that GPO was
developing a new integrated processing system that would help designate
publications that should not be excessed and, at GAO's recommendation,
agreed to develop a systematic process for identifying publications to
be held indefinitely for valid reasons.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-97-177
     TITLE:  Government Printing Office: Information on September 1996 
             Major Inventory Reduction
      DATE:  09/16/97
   SUBJECT:  Property disposal
             Government publications
             Cost control
             Printing costs
             Inventory control
             Losses
             Surplus federal property
             Government information dissemination
             Recycling

             
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Cover
================================================================ COVER


Report to the Chairman
and the Ranking Minority Member,
Committee on Appropriations,
U.S.  Senate

September 1997

GOVERNMENT PRINTING OFFICE -
INFORMATION ON SEPTEMBER 1996
MAJOR INVENTORY REDUCTION

GAO/GGD-97-177

GPO's September 1996 Major Inventory Reduction

(240268)


Abbreviations
=============================================================== ABBREV

  GPO - Government Printing Office
  IMS - Inventory Management Specialist

Letter
=============================================================== LETTER


B-277904

September 16, 1997

The Honorable Ted Stevens
Chairman
The Honorable Robert C.  Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

In addition to providing printing services to the federal government,
the Government Printing Office (GPO) provides government publications
to the public through its sales program at 24 bookstores across the
country; by telephone, fax, and mail order sales at its headquarters
in Washington, D.C.; and through consigned sales agents in other
agencies.  GPO periodically reviews its inventory of publications to
determine whether any can be considered excess--i.e., no longer
expected to sell--and then disposes of the excess copies.  This
report responds to your request of July 21, 1997, that we review
GPO's procedures involving the management of its inventory of
publications that it determines to be excess, particularly its
management of a major inventory reduction of excess publications that
took place in September 1996. 

Specifically, our objectives were to determine the facts surrounding
the September 1996 inventory reduction:  whether it followed existing
policies and procedures, and how 3,258 copies of The Senate
1789-1989, a four-volume set written by Senator Byrd, were destroyed
as part of that reduction. 

We obtained the information for this report from GPO's policies and
procedures manuals, inventory and financial records, interviews with
agency and contractor personnel, and observations at GPO's warehouse
in Laurel, Maryland.  Our review was conducted in July and August
1997 in accordance with generally accepted government auditing
standards.  A more detailed discussion of our scope and methodology
is contained in appendix I.  On September 5, 1997, we provided a
draft of this report to the Public Printer for review and comment. 
GPO's comments are discussed at the end of this letter and included
in appendix IV. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

When for the first time in 15 years a potential financial loss was
identified in GPO's sales program in June 1996, the Superintendent of
Documents, who heads the sales program, initiated several actions
intended to improve the program's long-term financial condition.  One
action, which was carried out in September 1996, involved a special
identification and disposal of excess publications from its
inventory.  The Superintendent of Documents said he wanted to dispose
of the excess inventory by September 30, 1996, to take the losses in
fiscal year 1996, and to do so by identifying and disposing of as
much excess inventory as possible in fiscal year 1996 rather than in
later years, when it otherwise would have been identified, disposed
of, and charged to expense.  The Superintendent of Documents also
said he had erroneously believed that it was necessary to physically
remove excess publications from inventory storage by September 30,
1996, in order to record them as an expense in the financial records
for fiscal year 1996. 

During the major inventory reduction, GPO identified 2,127 different
publications\1 as excess and disposed of them by selling them to a
contractor, who subsequently shredded them and sold the scrap paper
for recycling.  For fiscal year 1996, GPO charged about $9 million in
surplus publications expense in its financial records to account for
the publications it excessed and disposed of.  Of this, about $3
million was attributable to the special inventory reduction in
September 1996. 

Although the Superintendent of Documents had policies and procedures
in place to prevent the disposal of publications that the issuing
agency still wanted, in June 1996 he instructed his staff to
disregard those policies that would interfere with his goal of
disposing of as much excess publications inventory as possible by
September 30, 1996.  Acting under the Superintendent's overall
instructions, GPO sales program staff disregarded a policy that has
existed since at least 1984, which provides that, before disposing of
any excess copies of publications, GPO should offer them to the
issuing agencies.  Sales program staff also did not follow an
established procedure by which several GPO supervisory personnel were
to review and approve each publication to be disposed of.  Had sales
program policies and procedures been followed, the four-volume
history by Senator Byrd, The Senate 1789-1989, about which the Senate
Historian's Office had expressed interest in receiving excess copies
to GPO, would not have been disposed of. 

As part of the special inventory reduction, GPO excessed and disposed
of 3,258 copies (some of each volume) of the four-volume Senate
history, the printing and binding costs of which accounted for about
$83,000 of the $3 million surplus publications expense.  On the basis
of the contract GPO has with the firm that picked up the excess
copies from GPO's warehouse in September 1996, we estimated the scrap
value GPO received for these copies to have been about $600.  In
August 1997, GPO estimated that the annual storage cost for the
copies of the Senate history that were disposed of would be about
$2,500 and that the reprint cost would be about $210,000. 

In explaining its inventory reduction to Senator Byrd, GPO said that
it had found that it was generally more cost-effective to dispose of
excess inventory and reprint if necessary, than to hold it in storage
indefinitely.  According to GPO, this statement referred to its
publications inventory in general, but it did not specifically refer
to the Senate history volumes.  In September 1996, GPO had not
calculated the cost of holding the Senate history volumes in
inventory or of reprinting them.  However, GPO officials said that
they knew that the reprint costs would substantially exceed the
holding costs for these copies, given their relatively high printing
and binding costs. 

In July 1997, after Senator Byrd inquired about the major inventory
reduction, the Superintendent of Documents orally instructed his
staff to retain the remaining volumes of the Senate history and, at
our recommendation, put this instruction in writing in August 1997. 
The Superintendent further said that GPO was developing a new
integrated processing system that would help designate publications
that should not be excessed and, at our recommendation, agreed to
develop a systematic process for identifying publications to be held
indefinitely for valid reasons, such as historical significance.  In
addition, in response to another recommendation that we made, he
issued a written statement that the policy to offer excess copies to
issuing agencies before disposal cannot be waived.  To help avoid
future misunderstandings on the reduction of inventory, we
recommended, and GPO agreed, that a written statement be included in
its policies and procedures specifying that excess inventory does not
have to be physically disposed of before being charged to surplus
publications expense, and that holding cost as a factor should be
considered when inventory management specialists develop data on
excess inventory.  Finally, GPO has sent a legislative proposal to
the Joint Committee on Printing that would authorize GPO to donate
excess publications to schools or similar institutions.  GPO does not
now have such authority, and this prevents GPO from donating its
excess publications. 


--------------------
\1 Each volume of the four-volume set of the Senate history is
considered a separate publication in GPO's inventory. 


   BACKGROUND
------------------------------------------------------------ Letter :2

GPO was established in 1861 to (1) assist Congress and federal
agencies in the production and replication of information products
and services, and (2) provide the public with government information
products and services.  GPO provides printing services to all three
branches of government--either by producing work in-house or by
procuring it from commercial printers.  Information dissemination is
accomplished through GPO's Superintendent of Documents, who is to
provide public access to government information through (1) the sale
of publications; (2) distribution of publications to depository and
international exchange libraries, to those recipients designated by
law, and for agencies on a reimbursable basis; and (3) compilation of
catalogs and indexes containing complete and authoritative
descriptions of government publications. 

The public printing and documents chapters of title 44 of the U.  S. 
Code require GPO to fulfill the printing needs of the federal
government and distribute government publications to the public. 
GPO's activities are financed through a revolving fund, which is
reimbursed by payments from client agencies and sales of government
publications, and transfers from the Congressional Printing and
Binding Appropriation and the Salaries and Expenses Appropriation of
the Superintendent of Documents.  These annual appropriations are to
reimburse GPO for costs incurred while performing congressional work
and fulfilling statutory requirements associated with the
distribution of government publications.  Reimbursements from these
appropriations to the revolving fund are recorded as revenues.  The
sales program operates within the revolving fund and is expected to
recover its costs from its sales.  According to GPO, the sales
program does not receive any direct appropriation. 

GPO is headed by the Public Printer, who is nominated by the
President and confirmed by the Senate.  The sales program is led by
the Superintendent of Documents, who reports directly to the Public
Printer.  The sales program provides the public the opportunity to
purchase government publications and subscriptions at GPO's 24
bookstores across the country; through telephone, fax, and mail
orders; and through consigned sales agents at other agencies.\2
Within the Superintendent of Documents' staff is the Documents Sales
Service, which includes staff in the Sales Management Division and
Documents Control Branch.  Other key players in the sales program
include Customer Services, whose printing specialists serve as
liaisons with the issuing agencies until the publications are
produced, and the Office of the Comptroller, which keeps the
financial records, including inventory.  For more detail on GPO's
organizational makeup, see appendix II. 

Once a publication is printed and enters the sales program, the
Documents Control Branch, within the Sales Management Division,
maintains inventory control, determines its continued salability, and
makes reprinting and disposal decisions.  Working with the issuing
agency, Sales Management Division staff establish a life cycle for
each publication that represents the period during which sales demand
is expected.  According to GPO, the average life cycle for a
publication in its inventory is now about 12 months. 

As of September 1996, the sales program carried 13,268 publications
in its inventory, valued at about $12.8 million based on printing and
binding costs.\3 The sales program did not report a loss between
fiscal years 1981 and 1995.  For fiscal year 1996, however, the sales
program's expenses of $79.4 million exceeded revenues of $70.5
million, for a net loss of $8.9 million.  As of June 1997, the sales
program was showing a loss of about $537,000 for fiscal year 1997. 


--------------------
\2 Two of the more popular publications are the Budget of the United
States Government and the Occupational Outlook Handbook; some of the
more popular subscriptions are the Code of Federal Regulations,
Commerce Business Daily, and the Federal Register.  Even though GPO's
September 1996 inventory reduction included subscriptions, our review
involved only publications, although the numbers of publications
excessed and their costs cited include both. 

\3 When the sales program acquires publications for sale, it pays
only the incremental printing and binding costs for the copies it
acquires.  All start-up costs are borne by the issuing agency. 


   GPO COMPLETED A MAJOR INVENTORY
   REDUCTION IN 1996
------------------------------------------------------------ Letter :3

In May 1996, financial projections indicated that the sales program
expected a substantial loss for fiscal year 1996, the first such loss
in 15 years.  These projections were based on information that
indicated that revenue was down and expenses were up for several
reasons, including declining sales, the effect of the government
shutdown at the beginning of fiscal year 1996, competition from other
government sales programs, increasing use of free electronic
publications, and a substantial increase in charges to surplus
publications expense (i.e., the printing and binding costs of
publications in GPO's inventory that are expected to be unsalable). 

As a result of the projected loss for fiscal year 1996, the
Superintendent of Documents tasked a management team with developing
an action plan to increase revenue and reduce expenses, with the
objective of returning the sales program to full cost-recovery in
fiscal year 1997.  The plan, dated September 1996, originally
contained 44 individual projects and was later amended to include 2
more projects.  One original project was a special effort, over and
above GPO's routine process for removing excess publications, to move
aggressively to reduce the inventory of surplus publications before
the new fiscal year began on October 1, 1996.  Such a reduction would
increase the surplus publications expense for fiscal year 1996 but
was expected to decrease those expenses in fiscal year 1997 and
subsequent years.  In other words, the sales program's losses for
fiscal year 1996 would be greater, but GPO officials hoped that this
would result in the program breaking even or better for fiscal year
1997 and beyond. 

The inventory reduction began in early September 1996, even before
the action plan was issued, with a deadline for completion of
September 30, 1996.  The September 1996 inventory reduction involved
2,127 publications that had a printing and binding cost of about $3
million, which was about one-third of the surplus publications
expense GPO charged for publications it excessed and disposed of in
fiscal year 1996.  (See appendix III for examples of the publications
disposed of in September 1996.) GPO's records and our discussions
with GPO warehouse and contractor personnel indicate that the
publications inventory that was excessed during the reduction was
sold (for less than 3 cents per pound) to a scrap contractor, who was
required by contractual terms to shred and recycle it rather than
resell the individual publications.\4


--------------------
\4 By law, GPO has implicit authority to dispose of excess
publications as scrap.  GPO also has adopted a policy to offer excess
publications to issuing agencies at no cost. 


      POLICIES AND PROCEDURES
      EXISTED FOR MANAGING THE
      DISPOSAL OF EXCESS INVENTORY
---------------------------------------------------------- Letter :3.1

The Superintendent of Documents had issued policies and procedures
for determining excess, obsolete, damaged, and destroyed information
products and for managing inventory.  Superintendent of Documents
Policy No.  38, dated May 28, 1984, provides that publication
inventories are to be reviewed quarterly to determine the quantities
that are to be retained and those that are excess.  This policy
applies to inventories that are managed by headquarters staff.  A
separate procedure (Superintendent of Documents Policy No.  38.6)
applies to inventories in GPO's bookstores.\5

Under the existing policies and procedures, inventory management
specialists (IMS) in the Documents Control Branch are to review
quarterly the amount of inventory for the publications they manage. 
This review is conducted to identify whether the inventory should be
reduced based on the sales history and projected life cycle of the
publication.  As part of the Superintendent of Documents' existing
policy, which was issued by the current Public Printer when he was
the Superintendent of Documents, once an IMS determines the number
(if any) of copies of a publication that are excess, he or she is to
call the issuing agency to determine whether it wants the extra
copies. 

As part of the inventory review process for publications of high
dollar value or with a large number of copies on hand, the IMS then
is to complete Form 3880, which includes such information as the
estimated printing and binding cost of the publication, anticipated
sales, total copies sold, and whether the issuing agency wants any of
the excess copies.  (The form does not include the holding cost of
retaining the copies in inventory.) This completed form is to be sent
to a Documents Survey Board consisting of the Director of Documents
Sales Service, the Chief of the Sales Management Division, and the
Chief of the Documents Control Branch.  If the Survey Board approves
the form, the IMS then must prepare a notice to be sent to GPO's
warehouse in Laurel, Maryland.  At the warehouse, the excessed stock
(i.e., stock not wanted by the issuing agency) is to be identified
and moved to a separate area for periodic pick up by a contractor,
who is required by the contract to shred the documents and have them
recycled.  The contractor is not permitted to resell the documents
other than for recycling. 


--------------------
\5 According to GPO, its 24 bookstores keep a minimal stock of any
particular publication on hand; therefore, we did not include
policies and procedures that apply to GPO's bookstores in our review. 


      EXISTING POLICIES AND
      PROCEDURES WERE NOT FOLLOWED
---------------------------------------------------------- Letter :3.2

During the major reduction in September 1996, the Superintendent of
Documents' staff followed his orders and disregarded policy and
normal procedures in order to reduce the inventory of excess
publications before October 1, 1996.  When the Superintendent of
Documents realized that the sales program expected a substantial
loss, he told his staff in a June 1996 memorandum that, while
developing an action plan to increase revenue and reduce expenses,
they should:  "Ignore politics and external influences.  Disregard
current policies and practices that inhibit creativity and impede
change." According to the Superintendent of Documents, his
instruction to ignore politics and external influences referred to
frequent requests from issuing agencies to have more copies of
publications in the sales inventory than GPO believes can be sold. 
The Superintendent further said that he subsequently verbally
instructed his staff to begin the inventory reduction before the
action plan was approved and told them to disregard policies that
would interfere with the removal of as much excess inventory by
September 30, 1996, as possible. 

In order to maximize charges to surplus publications expense in
fiscal year 1996, the Superintendent of Documents and GPO's
Comptroller advised IMS staff to focus their attention on excessing
publications that had high printing and binding costs, large
quantities in inventory, and low sales volume.  Also, during this
major reduction, IMS decisions on what publications to excess did not
receive the normal management review, and IMS staff did not call the
issuing agencies to see whether they wanted the excess copies of
their publications. 

Superintendent of Documents staff told us that they disregarded
policy because they would not have had enough time to contact the
issuing agencies and receive answers by September 30.  According to
these staff and Superintendent of Documents management officials, it
would have been very difficult to contact all of the agencies
involved with the 2,127 publications being excessed and to wait for
their various responses concerning whether they wanted the excess
copies.  According to GPO, this response period usually takes about 4
weeks, and GPO officials did not believe that the agencies would be
able to respond appropriately if given only a few days. 

According to Documents Control Branch staff, this disregard of policy
resulted from the Superintendent's June 1996 memorandum and his oral
instructions to his staff regarding the formulation of the action
plan to increase revenue and reduce expenses.  The IMS responsible
for handling congressional publications, and his supervisor in
September 1996, acknowledged discussing between themselves whether
they should follow GPO's policy to offer excess publications to
issuing agencies.  They said that they felt they had the authority to
dispose of the publications without notifying the issuing agencies
because of time constraints and instructions from the Superintendent
of Documents to disregard policies.  They said that, given the
Superintendent of Documents' instructions, they saw no need to tell
management officials above them that they were disregarding this
policy. 

The IMS responsible for handling congressional publications told us
that he made the decision on which publications to excess based
primarily on the criteria he was given--high printing and binding
costs, large quantity in inventory, and low projected sales. 
According to the IMS, his decisions on which publications to dispose
of in September 1996 were not reviewed or approved by the Documents
Survey Board, as generally would be required.  The publications
selected for excessing by the IMS were approved by his supervisor,
but no one else's approval was noted on the inventory records. 

The Superintendent of Documents said that he was responsible for
policies not being followed and for the inventory reductions that
took place at the end of fiscal year 1996.  The Superintendent of
Documents said that he wanted to dispose of the excess inventory by
September 30, 1996, in order to take the losses in fiscal year 1996. 
He also said that he wanted to identify and dispose of as much excess
inventory as possible in fiscal year 1996 rather than in later years,
when it otherwise would have been identified, disposed of, and
charged to expense.  According to the Superintendent of Documents, he
instructed staff to dispose of the excess inventory by September 30,
1996, because he mistakenly believed that the inventory had to be
physically removed from GPO property before surplus publications
expense could be charged. 

However, the inventory identified as excess by the IMS staff did not
have to be disposed of by September 30, 1996, in order that the
surplus publications expense could be charged to fiscal year 1996. 
Neither generally accepted accounting principles nor GPO's own
accounting procedures require physically removing the excessed
publications from GPO property before surplus publications expense
can be charged.  Surplus publications expense can be charged whenever
GPO staff determine that inventory is obsolete or unsalable.  In
fact, GPO had another major inventory stock reduction in fiscal year
1981, and at that time, according to GPO's Comptroller, certain
publications had been identified as excess but had not yet been
disposed of when they were shown as an expense in GPO's financial
records. 

Both GPO's Comptroller and the Superintendent of Documents agree that
the latter misunderstood how publications expenses were handled in
GPO's accounting system at the time of the major inventory reduction
in 1996.  They both said that, at that time, GPO had no written
guidance or instructions stating that excess inventory does not have
to be physically removed from GPO before surplus publications expense
can be charged. 

In July 1997, the Public Printer told us that, while he was notified
that a major inventory reduction would be taking place in 1996, he
was not made aware of the details of the reduction.  He said that he
did not know that the policy to offer excess publications to the
issuing agency, which he had instituted when he was Superintendent of
Documents, was not followed in the September 1996 reduction. 


      THE FOUR-VOLUME HISTORY WAS
      EXCESSED DURING THE
      INVENTORY REDUCTION
---------------------------------------------------------- Letter :3.3

As mentioned earlier, according to the IMS responsible for handling
congressional publications, the decisions concerning which
publications to excess were primarily based on the criteria of high
printing and binding costs, large quantity in inventory, and
projected sales.  The IMS said that the Senate history volumes met
these criteria for disposal.  According to the IMS, he made his
decision concerning the number of copies of the Senate history to
retain based on an estimate of future sales, using a 10-year
estimated life cycle for each of the four volumes.  According to
GPO's records, the 10-year life cycle was developed when the volumes
were first published, as a result of discussions involving the Senate
Historian, House Historian, Joint Committee on Printing staff, and
staff from GPO's Documents Sales Service group. 

GPO records show that, of the inventory that was excessed, 3,258
copies, involving some of each of the four volumes written by Senator
Byrd, were disposed of.  The 3,258 copies were about 10 percent of
the total number originally printed of the four volumes (32,386 at a
total cost of $1,572,291).  The printing and binding cost of the
3,258 excessed copies was about $83,000.  The scrap value received
for the shredded copies was about $600.  See table 1 for more detail. 



                                Table 1
                
                 Scrap Value for Excessed Copies of the
                         Senate History Volumes

                                                                 Scrap
                                                     Scrap    value of
                                     Weight of   value per      copies
                         Number of   each copy       ounce    excessed
                            copies         (in         (in         (in
Volume                    excessed     ounces)  dollars)\a    dollars)
----------------------  ----------  ----------  ----------  ----------
I                            1,188         125  $0.0017343     $257.54
II                             918          99   0.0017343      157.62
III                            660          98   0.0017343      112.17
IV                             492          89   0.0017343       75.94
======================================================================
Total                        3,258                             $603.27
----------------------------------------------------------------------
\a The scrap value contract was for $0.02775 per pound, which
converts to $0.0017343 per ounce. 

Source:  GAO calculation based on GPO records. 

According to GPO records, GPO retained 1,134 total copies of the
Senate history, which GPO inventory management staff kept in
inventory based on the estimated quantity needed to meet a sales
demand calculated on what they initially agreed with representatives
from the Senate Historian's Office and others to be the life cycle
for the publications.  This life cycle was to be 10 years from the
dates the volumes were published; their publication dates were 1988
(volume I), 1991 (volume II), 1994 (volume III), and 1993 (volume
IV). 

Table 2 contains a breakdown of the disposition of the Senate history
volumes, including the number on hand as of July 1997. 



                                               Table 2
                               
                                Inventory Transactions for the Senate
                                           History Volumes

                        Copies
                  acquired for
                     sale from   Copies sold         Other        Copies
                    2/89 to 9/  from 2/89 to  distribution   excessed in    On hand as    On hand as
Volume                      96          9/96           s\a          9/96       of 9/96     of 7/97\b
----------------  ------------  ------------  ------------  ------------  ------------  ------------
I                        4,397         2,356           504         1,188           349           211
II                       2,454           720           504           918           312           224
III                      1,000           167             0           660           173            91
IV                       1,000           208             0           492           300           236
====================================================================================================
Total                    8,851         3,451         1,008         3,258         1,134           762
----------------------------------------------------------------------------------------------------
\a These copies were given to the Senate Historian's Office in
October 1991. 

\b Sixty copies of each of the volumes were distributed without
charge to the U.  S.  Information Agency at the request of the Senate
Historian's Office in June 1997 and thus are not reflected in the
inventory as of July 1997. 

Source:  GPO Office of the Comptroller and inventory control records. 

A representative from GPO's Congressional Printing Management
Division in Customer Services told us that, in June 1996, he told the
IMS responsible for handling congressional publications that the
Senate Historian's Office wanted any excess Senate history volumes
that GPO might have.  The responsible IMS said he knew that in the
past the Senate Historian's Office had inquired about the status of
the Senate history volumes on several occasions and that, while he
recalled the previous inquiries by the Senate Historian's Office, he
did not recall being told in June 1996 that the Senate Historian's
Office wanted any excess copies.  He said that he proceeded with the
inventory reduction based on the Superintendent of Documents'
instructions to disregard policies and ignore politics.  Inventory
records showed that he identified the copies as excess on September
6, 1996, and September 9, 1996.  Warehouse records show that the
copies were removed from the warehouse shelves for pickup by the
scrap contractor on September 10, 1996, and September 12, 1996. 

All of the Superintendent of Documents staff we interviewed who were
involved in the September 1996 inventory reduction said that no
specific discussion of the Senate history volumes occurred during the
September 1996 reduction.  The Public Printer said he did not know at
the time that the Senate history volumes were among those being
excessed and that, if he had, those books would not have been
disposed of. 


   ACTIONS TAKEN OR IN PROCESS
   SHOULD HELP GPO PREVENT A
   RECURRENCE OF INAPPROPRIATE
   INVENTORY REDUCTION
------------------------------------------------------------ Letter :4

GPO has taken action or has actions in process that are aimed at
helping to prevent a recurrence of a situation in which excess
publications are disposed of without regard to established policies
and procedures.  While GPO's initial actions could have helped
prevent a recurrence, they did not appear to address all of the
underlying causes of the problems associated with the September 1996
major inventory reduction.  During the course of our review, we
identified and brought to GPO's attention several additional actions
that we believed would address those causes.  As discussed below, GPO
officials agreed and took additional steps to prevent a recurrence. 


      DESIGNATING THE SENATE
      HISTORY VOLUMES FOR
      INDEFINITE AVAILABILITY FOR
      SALE
---------------------------------------------------------- Letter :4.1

In May 6, 1997, and July 11, 1997, letters to Senator Byrd, the
Public Printer said that GPO had made an error in disposing of the
Senate history volumes and that all four volumes, because of their
historical significance, would remain in print and available through
the sales program indefinitely.  According to the Superintendent of
Documents, this action was carried out through oral instructions to
his staff in July 1997.  In response to these oral instructions, the
IMS responsible for handling congressional publications wrote a note
saying not to dispose of these volumes without top management's
approval and attached the note to the inventory control cards he
maintained for these volumes.  At our recommendation, the
Superintendent of Documents put his oral instructions in writing in
August 1997. 

In response to our inquiries, both the Public Printer and the
Superintendent said that some publications, such as the Constitution
and the Senate history volumes, should be kept indefinitely because
of their historical significance.  The Superintendent said that GPO
did not have a systematic process for identifying or designating such
publications but that, in response to our recommendation, GPO would
develop a formal system for identifying publications that should
remain in inventory indefinitely.  In addition, he said that GPO was
already developing a new inventory management system that would allow
publications that are to be held indefinitely to be designated as
such once they have been identified.  The Superintendent of Documents
also acknowledged that his lack of awareness about the planned
disposal of the Senate history volumes contributed to their being
excessed. 


      STRENGTHENING POLICY ON
      OFFERING EXCESS PUBLICATIONS
      TO ISSUING AGENCIES
---------------------------------------------------------- Letter :4.2

On July 22, 1997, the Superintendent of Documents sent a memorandum
to his staff stating that no further exceptions should be made to the
current policy on excess, obsolete, damaged, and destroyed
information products and that "excess stocks will be offered to the
issuing agency." On July 23, 1997, the Superintendent of Documents
asked his staff to revise his formal policy document dated May 28,
1984, to address the problems that arose in connection with the
September 1996 inventory reduction.  According to the Superintendent
of Documents, this revised policy will provide that excessed
inventory should be charged to surplus publications expense when it
is determined to be excess.  The excessed inventory is then to be
held in the warehouse for a reasonable period while issuing agencies
are contacted to see if they want the excess publications.  Under the
Superintendent's revised procedures, the policy of offering issuing
agencies excess copies before their disposal cannot be waived. 

We pointed out that we saw no written statement in GPO's policies,
procedures, or guidance that specifically said that excessed
inventory does not have to be physically removed from GPO's warehouse
before it can be charged to surplus publications expense.  Both the
Superintendent of Documents and the Comptroller agreed that the lack
of such a written statement may have contributed to the
misunderstanding that took place in 1996.  In August 1997, GPO's
Comptroller prepared such a statement. 

Another action GPO has had in process for some time that could also
help prevent a recurrence of the problems of the September 1996
reduction is the development of a new Integrated Processing System. 
The Superintendent of Documents expects this new system, which GPO
plans to implement in October 1997, to provide his office with more
flexibility in tracking inventory and better information for making
decisions to excess publications.  According to the Superintendent of
Documents, the new system will (1) allow GPO to designate inventory
as excess without physically relocating it in the warehouse, and (2)
include a comment box where the IMS can indicate that a publication
is not to be excessed or make other appropriate notations about its
disposition.  Until the new system is implemented, notations
concerning holding copies indefinitely must be made on records that
are maintained manually. 

Finally, another dilemma GPO has faced in disposing of excess
inventory is the lack of authority to donate excess publications to
schools or similar institutions.  Under existing law and policy,
GPO's current options for disposing of excess publications are to
offer them to issuing agencies at no cost or to dispose of them as
scrap.  GPO is also precluded by statute and regulation from offering
publications to the public at discount prices except to those who buy
100 or more copies of the same publication or to book dealers who
agree to resell the books at GPO's prices--in which case, GPO can
only offer a maximum discount of 25 percent.  To address this
problem, in May 1997, as part of its recommended revision of title 44
of the U.  S.  Code, GPO forwarded a proposal to the Joint Committee
on Printing that would authorize the donation of excess publications
to schools or similar institutions if the copies are not wanted by
the issuing agency. 


      ALIGNING GPO'S PROCEDURE FOR
      CONSIDERING HOLDING COSTS OF
      PUBLICATIONS WITH ITS POLICY
---------------------------------------------------------- Letter :4.3

In a May 6, 1997, letter to Senator Byrd, the Public Printer said
that, on the basis of a study GPO had done, it was more
cost-effective to maintain an adequate inventory of sales
publications based on their projected life cycle and to reprint if
necessary, than to hold excess copies of publications in inventory. 
According to the Superintendent of Documents, who drafted the May 6
letter for the Public Printer, the study cited in the letter referred
to data supplied by the GPO's Comptroller in 1996.  These data showed
that, overall, GPO's inventory of excess publications was growing and
was contributing to increasing charges to surplus publications
expense.  These increased charges were, in turn, contributing to a
worsening financial situation for the sales program. 

To help remedy this problem, according to the Superintendent of
Documents, the Comptroller recommended that the Superintendent
identify as much excess inventory as possible in fiscal year 1996 to
improve the sales program's long-term financial situation.  According
to the Superintendent of Documents, the statement in the May 6 letter
pertained to the typical publication, which he said has a printing
and binding cost of about $2 per copy; it did not specifically
pertain to the Senate history volumes, which had a printing and
binding cost of $19 to $35 per copy. 

In this regard, we noted that the printing and binding cost of the
3,258 copies of the Senate history volumes disposed of was about
$83,000, and that GPO's estimated annual storage costs attributable
to these copies was about $2,500.  These figures can be compared to
GPO's estimated reprinting cost of about $210,000 should GPO reprint
the copies disposed of, which it has agreed to do if necessary. 

During our review of GPO's inventory management records, we also
noted that Form 3880, which IMS staff use to make recommendations and
supervisory personnel use to review actions on obsolete or excess
inventory, does not provide for inclusion of data on storage or
holding costs for publications.  This omission is inconsistent with a
memorandum, dated January 4, 1985, from the Chief, Sales Management
Division, to Documents Control Branch staff, which directed that
reasonable life cycles should be consistent with economic analysis of
the following factors:  expected trend, reprint costs, expected
revision date, and holding costs.  The memorandum also stated that,
when reviewing records to identify excess or consider extension of
the life cycle, the following factors should be considered: 
continued marketability, projected revenue, and estimated holding
costs. 

We discussed this inconsistency with the Superintendent of Documents
in August 1997.  He said storage or holding costs are usually not
significant, but he recognized that they should be considered in
making decisions on excess inventory.  He agreed to modify Form 3880
to incorporate consideration of such costs. 


   CONCLUSION
------------------------------------------------------------ Letter :5

To achieve its financial objective, GPO did not have to disregard
policy and procedures for notifying the issuing agencies of excess
publications.  Because of the erroneous belief of the Superintendent
of Documents, who heads GPO's sales program, that GPO had to
physically remove excess publications from the GPO warehouse by
September 30, 1996, in order to record them as an expense for fiscal
year 1996, and because of his express instruction to disregard
policies and procedures, GPO staff disposed of about 2,100 different
publications without first contacting the issuing agencies of those
publications.  As a result, 3,258 copies of the Senate history were
destroyed, even though the Senate Historian's Office had told a GPO
representative that it wanted any excess copies.  GPO has taken or
plans to take actions that, if effectively implemented, should
prevent this situation from recurring. 

We made various recommendations during the course of our work that
GPO agreed to and either implemented the corrective action or is in
the process of doing so.  Thus, we are making no further
recommendations. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

On September 5, 1997, we provided the Public Printer with a draft of
this report for comment.  We received his written comments, included
in their entirety in appendix IV, on September 10, 1997.  The Public
Printer said that the report fairly represents the events as they
occurred during the September 1996 inventory reduction.  He also said
that actions have been and are being taken to ensure that no sales
publications will be disposed of in the future without strict
adherence to applicable GPO policies and procedures. 


---------------------------------------------------------- Letter :6.1

We are sending copies of this report to the Public Printer of the
Government Printing Office and the Chairman and the Vice Chairman of
the Joint Committee on Printing.  We will make copies available to
others upon request.  Major contributors to this report are listed in
appendix V.  If you have any questions concerning this report, please
call me on (202) 512-4232. 

Bernard L.  Ungar
Director, Government Business
 Operations Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

As agreed with your offices, our objectives were to determine the
facts surrounding the September 1996 inventory reduction; whether it
followed existing policies and procedures; and the fate of the 3,258
copies of The Senate 1789-1989, a four- volume set written by Senator
Byrd, that were destroyed as part of that reduction. 

In order to obtain information on GPO's sales program and the
inventory reduction held in September 1996, we reviewed pertinent
documentation, such as GPO's inventory control records, policies and
procedures, memoranda, and financial records and reports.  We
interviewed the Public Printer, the Superintendent of Documents and
his staff who were involved in the reduction, the Comptroller and his
staff who are responsible for the financial records, and staff in the
Congressional Printing and Management Division who serve as the
liaison with the Senate Historian's Office for Senate publications,
including Senator Byrd's books.  We visited GPO's Laurel, Maryland,
warehouse where excessed publications are disposed of; reviewed its
inventory disposition records; and interviewed a representative of
GPO's contractor that had picked up GPO's excessed publications from
its Laurel warehouse in September 1996.  In addition, we reviewed
GPO's authority to donate surplus books.  We coordinated our review
with GPO's Office of Inspector General. 

The representative from GPO's contractor told us that his company did
not maintain any records that would specifically show that the 3,258
Senate history copies were shredded.  Therefore, we had to rely on
GPO's records and interviews with GPO staff and the contractor's
representative to determine what happened to the 3,258 Senate history
copies that were excessed.  Further, we did not verify GPO's
computerized inventory or financial records or do actual counts of
the remaining stock inventory of the Senate history volumes at the
Laurel warehouse. 



GOVERNMENT PRINTING OFFICE
ORGANIZATION CHART
========================================================== Appendix II



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


EXAMPLES OF PUBLICATIONS GPO
DISPOSED OF IN SEPTEMBER 1996
========================================================= Appendix III

In addition to the Senate history volumes, we selected the following
examples of excessed publications to provide a mix of publications
from both the legislative and executive branches and, in some cases,
to reflect publications having high dollar values. 

Biographical Directory of the United States Congress, 1774-1989,
 Bicentennial Edition
Black Americans in Congress
CPH3:  1990 Census Tract Maps, Washington, D.C.-MD-VA
Creating a Government That Works Better and Costs Less
Dictionary of Occupational Titles, Revised 4th Edition
Foreign Relations of the U.S.  1961-1963, Vol.3 Vietnam, Jan.  to
Aug.  1963
National Performance Review - Department of Defense
Our Flag
Senate Historical Almanac
Soviet Union:  Area Handbook
Standard Industrial Classification Manual, 1987
The Coast Guard and the Greenland Patrol
The Senate 1789-1989, Addresses on the History of the United States
 Senate, Volume One, Bicentennial Edition
The Senate 1789-1989, Addresses on the History of the United States
 Senate, Volume Two, Bicentennial Edition
The Senate 1789-1989, Classic Speeches 1830-1993, Volume Three,
 Bicentennial Edition
The Senate 1789-1989, Historical Statistics 1789-1992, Volume Four,
 Bicentennial Edition
The U.S.  Capitol - A Brief Architectural History
Understanding Federal Training and Employment Programs
U.S.  Government Purchasing and Sales Directory, Revised 1994




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE GOVERNMENT
PRINTING OFFICE
========================================================= Appendix III


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

GENERAL GOVERNMENT DIVISION

John S.  Baldwin, Sr., Assistant Director
Michael W.  Jarvis, Evaluator-in-Charge
Kiki Theodoropoulos, Senior Evaluator (Communications Analyst)

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION

Robert W.  Gramling, Director, Corporate Audits and Standards

OFFICE OF GENERAL COUNSEL

Victor B.  Goddard, Senior Attorney

*** End of document. ***