Addressing the Deficit: Budgetary Implications of Selected GAO Work
(Letter Report, 03/14/97, GAO/OCG-97-2).

GAO provided updated information on options that could be used to reduce
the deficit, focusing on the budgetary implications of selected program
reforms discussed in GAO's work but not yet implemented or enacted.

GAO noted that: (1) clearly, Congress has many available options for
dealing with the deficit; (2) under the Budget Enforcement Act (BEA), as
amended, the spending and revenue options included in the report could
be used either to reduce the deficit or to free up funds for other
programs; (3) under the pay-as-you-go rules of BEA, savings from direct
spending programs (entitlement and mandatory programs) or revenue
options would reduce the deficit unless these savings were used to
offset either direct spending program expansions or tax cuts; (4) for
discretionary spending programs, savings from changes would contribute
to additional deficit reduction if BEA caps on discretionary spending
were lowered; otherwise, the savings would be available for use in other
discretionary programs; (5) although GAO derived the options from its
existing body of work, there are similarities with other deficit
reduction proposals; and (6) the analytical framework for considering
individual deficit reduction options focused on reassessing objectives,
redefining beneficiaries, and improving efficiency.

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

 REPORTNUM:  OCG-97-2
     TITLE:  Addressing the Deficit: Budgetary Implications of Selected 
             GAO Work
      DATE:  03/14/97
   SUBJECT:  Budget deficit
             Deficit reduction
             Fiscal policies
             Budget cuts
             Budget outlays
             Budget administration
             Spending legislation
             Cost control

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


Report to the Congress

March 1997

ADDRESSING THE DEFICIT - BUDGETARY
IMPLICATIONS OF SELECTED GAO WORK
FOR FISCAL YEAR 1998

GAO/OCG-97-2

Addressing the Deficit

(935213)


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

  AFDC - Aid to Families With Dependent Children
  AIP - Airport Improvement Program
  AOC - Administrative Office of the U.S.  Courts
  ARS - Agricultural Research Service
  AWIPS - Advanced Weather Interactive Processing System
  BBS - broad-based, sustainable
  BEA - Budget Enforcement Act
  BLM - Bureau of Land Management
  BRAC - Base Realignment and Closure
  BUR - bottom-up review
  CBO - Congressional Budget Office
  CERCLA - Comprehensive Environmental Response, Compensation, and
     Liability Act
  CDR - continuing disability review
  CFO - Chief Financial Officer
  CHAMPUS - Civilian Health and Medical Program of the Uniformed
     Services
  COP - continuation-of-pay
  CVP - Central Valley Project
  DBOF - Defense Business Operations Fund
  DFAS - Defense Finance and Accounting Service
  DFSC - Defense Fuel Supply Center
  DI - Disability Insurance
  DLA - Defense Logistics Agency
  DOD - Department of Defense
  DOE - Department of Energy
  DOT - Department of Transportation
  DUR - drug utilization review
  EDWAA - Economic Dislocation and Worker Adjustment Assistance
  EM - Environmental Management
  EOS - Earth Observing System
  EOSDIS - Earth Observing System Data and Information System
  EPA - Environmental Protection Agency
  FAIR - Federal Agriculture Improvement and Reform Act of 1996
  FAA - Federal Aviation Administration
  FAS - Foreign Agricultural Service
  FDIC - Federal Deposit Insurance Corporation
  FDSL - Federal Direct Student Loan
  FECA - Federal Employees' Compensation Act
  FEMA - Federal Emergency Management Agency
  FFEL - Federal Family Education Loan
  FHWA - Federal Highway Administration
  FSN - foreign service national
  FY - fiscal year
  GAO - General Accounting Office
  GPS - global positioning systems
  GSA - General Services Administration
  HACCP - Hazard Analysis and Critical Control Point
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  HMO - health maintenance organization
  HPSA - Health Professional Shortage Area
  HUD - Department of Housing and Urban Development
  IDB - industrial development bond
  IFAD - International Fund for Agricultural Development
  INS - Immigration and Naturalization Service
  IRS - Internal Revenue Service
  JCS - Joint Chief of Staff
  JCT - Joint Committee on Taxation
  JFMIP - Joint Financial Management Improvement Program
  JROTC - Junior Reserve Officers' Training Corps
  JTPA - Job Training Partnership Act
  LRIP - low-rate initial production
  MAP - Military Airport Program
  MIP - Medicare Incentive Payment
  MRI - magnetic resonance imaging
  MTMC - Military Traffic Management Command
  MWR - morale, welfare, and recreation
  NASA - National Aeronautics and Space Administration
  NOAA - National Oceanic and Atmospheric Administration
  NORAD - North American Aerospace Defense Command
  NTC - non-time-critical
  NWS - National Weather Service
  OCSE - Office of Child Support Enforcement
  OMB - Office of Management and Budget
  O&M - operation and maintenance
  OST - Office of the Secretary
  OTC - over the counter
  PASS - plan for achieving self-support
  PAYGO - pay-as-you-go
  PHS - Public Health Service
  PILT - Payment in Lieu of Taxes
  PMA - Power Marketing Administration
  RHC - Rural Health Clinic
  RCRA - Resource Conservation and Recovery Act
  RFA - Radio Free Asia
  RFE/RL - Radio Free Europe/Radio Liberty
  RHS - Rural Housing Service
  RTC - Resolution Trust Corporation
  SAA - state approving agency
  SBU - strategic business unit
  SSA - Social Security Administration
  SSI - Supplemental Security Income
  SSN - nuclear-powered attack submarine
  TANF - Temporary Assistance for Needy Families
  TDY - temporary duty
  TRICARE - DOD's managed health care system
  UI - unemployment insurance
  USAID - U.S.  Agency for International Development
  USDA - U.S.  Department of Agriculture
  USIA - United States Information Agency
  USTF - Uniformed Services Treatment Facility
  USTRANSCOM - U.S.  Transportation Command
  USUHS - Uniformed Services University of the Health Sciences
  VA - Department of Veterans Affairs
  VOA - Voice of America

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


B-274810

March 14, 1997

To the President of the Senate and
the Speaker of the House of Representatives

This report is part of our continuing effort to help the Congress
identify options that could be used to reduce the deficit.\1 It
updates our previous work in this area with new information and
systematically identifies in a single document the budgetary
implications of selected program reforms discussed in our work but
not yet implemented or enacted.  Where available, budgetary savings
estimates provided by the Congressional Budget Office (CBO) or the
Joint Committee on Taxation (JCT) are presented for each of the
options. 

This year's report contains 147 options.  Nearly half of these
options--71--are new to this year's report; the remainder are updated
versions of options that appeared in last year's report.  To update
last year's options, we reviewed and analyzed congressional and
agency actions taken over the past year that affected the substantive
content of the option and/or its likely savings.  In fact, some
options from last year's report were not included in this year's
report (see appendix IV) because the Congress has already addressed
the relevant issues.  The remaining options from last year's report
have been updated and modified to reflect recent congressional or
agency actions. 

All of the options are based on key findings and issues developed in
our audits and evaluations.  Some of the options reflect our
recommendations.  Others do not, but rather represent one way to
address, in a budgetary context, some of the significant problems
identified in our reviews of federal programs and activities.  The
Congress has many available options for dealing with the deficit. 
Inclusion of a specific option in this report does not mean that we
endorse it as the only or most feasible approach, or that other
options are not also appropriate for consideration by the Congress.\2

This report is divided into four appendixes.  Appendix I discusses
the conventions used to provide estimates of cost savings or
additional revenues.  As in our previous report, appendix II provides
for congressional consideration an analytical framework of individual
options.  This framework provides one set of criteria that may be
used to assess goals, scope, and approaches for delivering federal
programs.  It is organized around the following three broad themes: 

  -- reassess objectives, that is, reconsider whether to terminate or
     revise services and programs provided;

  -- redefine beneficiaries, that is, reconsider who pays for or
     benefits from a particular program; and

  -- improve efficiency, that is, reconsider how a program or service
     is provided. 

Appendix III presents narrative descriptions of the options,
organized by budget function and receipts.  As mentioned above,
appendix IV lists options from last year's report that were not
updated for this year's volume. 

Although we derived the options from our existing body of work, there
are similarities with other deficit reduction proposals.  For
example, some options contained in this report have also been
included in past editions of CBO's annual publication, Reducing the
Deficit:  Spending and Revenue Options, House and Senate Budget
Resolution proposals, and the President's annual budget submission. 

We are sending copies of this report to the appropriate congressional
committees and every Member of the Congress.  Copies will be made
available to others upon request. 


--------------------
\1 See Addressing The Deficit:  Updating the Budgetary Implications
of Selected GAO Work (GAO/OCG-96-5, June 28, 1996); Deficit
Reduction:  Opportunities to Address Long-Standing Government
Performance Issues (GAO/T-OCG-95-6, September 13, 1995); Addressing
The Deficit:  Budgetary Implications of Selected GAO Work for Fiscal
Year 1996 (GAO/OCG-95-2, March 15, 1995); and Addressing The Deficit: 
Budgetary Implications of Selected GAO Work (GAO/OCG-94-3, March 11,
1994). 

\2 Under the Budget Enforcement Act (BEA), as amended, the spending
and revenue options included in this report could be used either to
reduce the deficit or to free up funds for other programs.  Under the
pay-as-you-go (PAYGO) rules of BEA, savings from direct spending
programs (entitlement and mandatory programs) or revenue options
would reduce the deficit unless these savings were used to offset
either direct spending program expansions or tax cuts.  For
discretionary spending programs, savings from changes would
contribute to additional deficit reduction if BEA caps on
discretionary spending were lowered; otherwise, the savings would be
available for use in other discretionary programs. 


---------------------------------------------------------- Letter :0.1

This report was prepared under the direction of Paul L.  Posner,
Director for Budget Issues, who may be reached at (202) 512-9573. 
Specific questions about individual options may be directed to the
GAO contact listed with each option.  Major contributors to this
report are listed in appendix V. 

James F.  Hinchman
Acting Comptroller General
of the United States


EXPLANATION OF CONVENTIONS USED TO
ESTIMATE SAVINGS AND REVENUE GAINS
=========================================================== Appendix I

Cost estimates for many of our options were provided by CBO and JCT. 
As in last year's report, if specific estimates could not be
provided, a brief explanation is included with the option.  Where
estimates are provided, the following conventions were followed:\3

  -- For revenue estimates, the increase in collections reflects that
     which would occur, over and above that due under current law, if
     the option were enacted. 

  -- For direct spending programs, estimated savings show the
     difference between what the program would cost under the CBO
     baseline, which assumes continuation of current law, and what it
     would cost after the suggested modification. 

  -- For nondefense discretionary spending programs, two estimates
     are provided.  One estimate is of savings compared to the actual
     fiscal year 1997 appropriations increased for projected
     inflation.  A second estimate is of savings compared to the
     fiscal year 1997 appropriations in nominal terms (held constant
     for the next 4 years). 

  -- For defense discretionary spending programs, estimates are of
     savings compared to the 1997 Defense Plan that CBO uses for its
     defense discretionary estimates.  CBO uses this plan because it
     provides the programmatic detail necessary to estimate the
     effects of changes in force structures and weapons systems. 

Specific assumptions made in estimating individual options are noted
in the option narratives in appendix III. 

Subsequent savings and revenue estimates provided by CBO and JCT may
not match exactly those contained in this report.  Differences in the
details of specific proposals, changes in assumptions which underlie
the analyses, and updated baselines can all lead to significant
differences in estimates.  Also, a few of our options--involving
sales of real estate and other government-owned property--constitute
asset sales.  Under the Balanced Budget and Emergency Deficit Control
Act of 1985, as amended, proceeds from asset sales are not counted in
determining compliance with the discretionary spending limits or
PAYGO requirements.  In order to provide policymakers the fullest
possible picture of the budgetary implications of our work, we have
included those options which constitute asset sales.  They are
clearly identified as such. 

Finally, some of the options could not be scored by CBO or JCT under
current scorekeeping conventions.  Several of these involve
management improvements that we believe can contribute to solving the
deficit problem but whose effects are too indirect for estimation
purposes.  A few options are not estimated because they concern
future choices about spending that is not currently in the baseline
used to calculate annual spending and revenue.  In other cases,
savings are likely to come in years beyond the 5-year estimation
period that CBO uses. 


--------------------
\3 For a complete discussion of the uses and caveats of the CBO
estimates, see CBO's August 1996 report, Reducing the Deficit: 
Spending and Revenue Options. 


A FRAMEWORK FOR DEFICIT REDUCTION
========================================================== Appendix II

The history of deficit reduction efforts suggests that basing
decisions on explicit policy rationales, rather than considering
separate program-by-program assessments, may improve chances for
success.  A consistent and systematic framework can be an effective
means to formulate and package broad-based deficit reduction
proposals.  Also, this kind of approach can be used regardless of any
other budgetary control mechanism (for example, discretionary
spending limits or sequestration procedures) or any given level of
desired deficit reduction. 

GAO's deficit reduction framework consists of three broad themes: 
reassess objectives, redefine beneficiaries, and improve efficiency
and accuracy.  These three fundamental strategies are based on an
implicit set of decision rules that encourage decisionmakers to think
systematically, within an ever-changing environment, about

  -- what services the government provides or should continue to
     provide,

  -- for whom these services are or should be provided, and

  -- how services are or should be provided. 

By using a policy-oriented framework such as this, choices can be
made more clearly and the results become more defensible. 


   REASSESS OBJECTIVES
-------------------------------------------------------- Appendix II:1

The first theme within our deficit reduction framework focuses on the
objectives for federal programs or services.  Our premise is that
periodically reconsidering a program's original purpose, the
conditions under which it continues to operate, and its
cost-effectiveness, is appropriate.  Our work suggests three decision
rules which illustrate this strategy. 

  -- Programs can be considered for termination if they have
     succeeded in accomplishing their intended objectives or if it is
     determined that the programs have persistently failed to
     accomplish their objectives. 

  -- Programs can be considered for termination or revision when
     underlying conditions change so that original objectives may no
     longer be valid. 

  -- Programs can be reexamined when cost estimates increase
     significantly above those associated with original objectives,
     when benefits fall substantially below original expectations, or
     both. 

For example, the Public Law 480 Title I Food Aid Program allows U.S. 
agricultural commodities to be sold to developing countries on
long-term credit at below-market interest rates.  The current goal of
the program is to promote U.S.  foreign policy by enhancing the food
security of developing countries.  The program is also designed to
expand markets for U.S.  agricultural commodities.  However, multiple
and sometimes competing objectives, as well as contradictory program
requirements, have hampered the program, and its contribution to
long-term, foreign market development for U.S.  agricultural
commodities has not been demonstrated. 


   REDEFINE BENEFICIARIES
-------------------------------------------------------- Appendix II:2

The second theme within our deficit reduction framework focuses on
the intended beneficiaries for federal programs or services.  The
Congress originally defines the intended audience for any program or
service based on some perception of eligibility and/or need.  To
better reflect and target increasingly limited resources, these
definitions can be periodically reviewed and revised.  Our body of
work suggests four decision rules that illustrate this strategy. 

  -- Formulas for a variety of grant programs to state and local
     governments can be revised to better reflect the fiscal capacity
     of the recipient jurisdiction.  This strategy could reduce
     overall funding demands while simultaneously redistributing
     available grant funds so that the most needy receive the same or
     increased levels of support. 

  -- Eligibility rules can be revised, without altering the
     objectives of the program or service. 

  -- Fees can be targeted at individuals, groups, or industries that
     directly benefit from federal programs.  Also, existing charges
     can be increased so that a greater portion of a program's cost
     is shared by the direct beneficiaries. 

  -- Tax preferences can be narrowed or eliminated by revising
     eligibility criteria or limiting the maximum amount of
     preference allowable. 

For example, at a time when federal domestic discretionary resources
are constrained, better targeting of grant formulas offers a strategy
to bring down federal outlays by concentrating reductions on
wealthier localities with fewer needs and greater capacity to absorb
cuts.  Federal grant formulas could be redesigned to lower federal
costs by disproportionately reducing federal funds to states and
localities with the strongest tax bases and fewer needs, as shown in
GAO's option on formula grants. 


   IMPROVE EFFICIENCY
-------------------------------------------------------- Appendix II:3

The third theme within our deficit reduction framework addresses how
the program or service is delivered.  This strategy suggests that
focusing on the approach or delivery method can significantly reduce
spending or increase collections.  Our body of work suggests five
decision rules which illustrate this strategy. 

  -- Reorganizing programs or activities with similar objectives and
     audiences can eliminate duplication and improve operational
     efficiency. 

  -- Using reengineering, benchmarking, streamlining and other
     process change techniques can reduce the cost of delivering
     services and programs. 

  -- Using performance measurement and generally improving the
     accuracy of available program information can promote
     accountability and effectiveness and reduce errors. 

  -- Improving collection methods and ensuring that all revenues and
     debts owed are collected can increase federal revenues. 

  -- Establishing market-based prices can help the government recover
     the cost of providing services while encouraging the best use of
     the government's resources. 

As an illustration of this theme, GAO has identified over 150 federal
programs and funding streams providing employment and training
assistance.  These programs are spread across 15 departments and
independent agencies with a total budget of about $20 billion.  Many
of these programs have similar goals and provide the same services to
similar populations using separate, parallel delivery structures. 
Consolidating these programs where it is appropriate can reduce
administrative costs as well as increase efficiencies in service
delivery.  GAO's option illustrates how opportunities to improve
efficiency and flexibility in employment and training programs can
provide a basis for reducing program funding. 


OPTIONS FOR DEFICIT REDUCTION
========================================================= Appendix III

This appendix describes each of GAO's options for deficit reduction,
organized by budget function and receipts.  For each option, we
provide, when relevant, information about the authorizing committee,
appropriations subcommittee, primary agency, budget account, spending
type, budget subfunction, and framework theme.  We then provide a
summary and description of budgetary implications, which is followed
by an estimate (when available) of savings or revenue increase,
relevant GAO reports, and a GAO contact. 



   050 NATIONAL DEFENSE
------------------------------------------------------- Appendix III:1

  -- Defense Infrastructure Reform

  -- Fiscal Year 1998 Defense Operation and Maintenance Budget

  -- Continental Air Defense

  -- Carrier Battle Group Expansions and Upgrades

  -- Army's Comanche Helicopter Program

  -- F/A-18E/F Fighter

  -- F-22 Fighter

  -- Air Force Bomber Force Requirements

  -- Air Force Fighter Squadrons

  -- C-17 Strategic Airlift

  -- Nuclear Submarine Force Reductions

  -- Major Weapon System Warranty Law

  -- Base Alignment and Closure Accounts

  -- Defense Inventories Reform

  -- Defense Transportation Restructuring

  -- Depot Maintenance Program Excess Capacity

  -- Military Exchange Stores Consolidation

  -- Budgeted Civilian Personnel Requirements

  -- Convert Some Support Officer Positions to Civilian Status

  -- Attrition of Enlisted Personnel from the Military Services

  -- Army National Guard Divisions

  -- Junior Reserve Officers' Training Corps

  -- DOD's Acquisition Workforce

  -- DOD's Finance and Accounting Infrastructure

  -- DOD's Training Infrastructure

  -- DOD's Transportation Migration Systems

  -- DOD's Materiel Management Migration Systems

  -- DOD's Bulk Fuel Budgeting

  -- Navy Financial Management of Operating Materials and Supplies

  -- Copayments for Care in Military Treatment Facilities

  -- Administering Defense Health Care

  -- Uniformed Services University of the Health Sciences

  -- Uniformed Services Treatment Facilities

  -- Department of Energy's Procurement of Laboratory Testing
     Services



   OPTION:
   DEFENSE INFRASTRUCTURE
   REFORMDEFENSE INFRASTRUCTURE
   REFORM
------------------------------------------------------- Appendix III:2


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Although the Department of Defense (DOD) has in recent years
undergone substantial downsizing in funding, personnel, and force
structure, commensurate infrastructure support reductions have not
been achieved.  For fiscal 1997, DOD estimates that about $152
billion, or 60 percent of the Defense budget will still be needed for
infrastructure requirements which include installation support,
training, medical care, logistics, force management, acquisition
infrastructure, and personnel.  Despite progress in reducing excess
infrastructure through the Base Realignment and Closure (BRAC)
rounds, it is generally recognized that much excess capacity will
remain. 

Significant budget reductions could be achieved by streamlining the
command structure of the remaining forces; sharing medical facilities
and services; consolidating depots and shipyards; reforming
acquisition processes; consolidating and eliminating research,
development, and training facilities; using simulators for training
and exercises; and reducing dependence on government-owned housing. 

Savings for this option cannot be fully estimated until a
comprehensive consolidation and downsizing plan is specified. 
However, in an April 1996 report, GAO identified some specific
options for reducing defense infrastructure spending. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:2.1

Defense Infrastructure (GAO/HR-97-7, February 1997). 

Defense Acquisition Infrastructure:  Changes in RDT&E Laboratories
and Centers (GAO/NSIAD-96-221BR, September 13, 1996). 

Military Bases:  Update on the Status of Bases Closed in 1988, 1991,
and 1993 (GAO/NSIAD-96-149, August 6, 1996). 

Defense Infrastructure:  Costs Projected to Increase Between 1997 and
2001 (GAO/NSIAD-96-174, May 31, 1996). 

Military Bases:  Opportunities for Savings in Installation Support
Costs Are Being Missed (GAO/NSIAD-96-108, April 23, 1996). 

Military Bases:  Closure and Realignment Savings are Significant, but
Not Easily Quantified (GAO/NSIAD-96-67, April 8, 1996). 

Defense Infrastructure:  Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, April 4, 1996). 

DOD Training:  Opportunities To Reduce the Training Infrastructure
(GAO/NSIAD-96-96, March 29, 1996). 

Military Bases:  Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment (GAO/NSIAD-95-133, April 14, 1995). 

Defense Infrastructure:  Enhancing Performance Through Better
Business Practices (GAO/T-NSIAD/AIMD-95-126, March 23, 1995). 


      GAO CONTACT
----------------------------------------------------- Appendix III:2.2

David R.  Warren, (202) 512-8412



   OPTION:
   FISCAL YEAR 1998 DEFENSE
   OPERATION AND MAINTENANCE
   BUDGETFISCAL YEAR 1998 DEFENSE
   OPERATION AND MAINTENANCE
   BUDGET
------------------------------------------------------- Appendix III:3


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The military services' operation and maintenance (O&M) accounts are
used to fund a wide range of military and support activities
including training, purchasing spare and repair parts, and paying
civilian personnel. 

GAO analysis of selected O&M requests for fiscal year 1997 showed
that the budget for that year could have been reduced by $3.4 billion
without damaging defense operations and capabilities.  The largest
potential reductions, each for over $180 million, were associated
with improved inventory management, excess bulk fuel requirements,
excess unobligated funds, storage of unneeded aircraft, O&M
pass-throughs to the Defense Business Operations Fund (DBOF),
overstated civilian personnel requirements, and funds requested for
ground operation tempo that are not needed for training purposes.\4

Based on GAO's analysis regarding potential savings in the fiscal
year 1997 O&M budget, the Congress may wish to consider reductions of
a similar magnitude, $3.4 billion, when formulating fiscal year 1998
appropriations for O&M accounts.  It is important for the Congress to
be aware that savings for this option include savings for other
options involving the individual services' O&M accounts since the
problems GAO identified persist.  CBO estimated the following 5-year
savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                 3,400       0       0       0       0
Outlays                          2,530     677     112      37      17
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\4 Specific options related to bulk fuel (see "DOD's Bulk Fuel
Budgeting"), civilian personnel reductions (see "Budgeted Civilian
Personnel Requirements"), and Army spare parts (see "Defense
Inventories Reform") are contained in this report.  Therefore, the
projected savings from these specific options should not be added to
the $3.4 billion in potential savings shown here. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:3.1

1997 DOD Budget:  Potential Reductions to Operation and Maintenance
Programs (GAO/NSIAD-96-220, September 18, 1996). 

1996 DOD Budget:  Potential Reductions to Operation and Maintenance
Programs (GAO/NSIAD-95-200BR, September 26, 1995). 

1995 Budget:  Potential Reductions to the Operation and Maintenance
Programs (GAO/NSIAD-94-246BR, September 6, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:3.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   CONTINENTAL AIR
   DEFENSECONTINENTAL AIR DEFENSE
------------------------------------------------------- Appendix III:4


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The continental air defense mission evolved during the Cold War to
detect and intercept Soviet bombers attacking North America via the
North Pole.  The force that carries out that mission is within the
North American Aerospace Defense Command (NORAD), which is a joint
U.S.  and Canadian command.  As of the beginning of fiscal year 1997,
the force consisted of 150 primary aircraft (Air National Guard F-15
and F-16 aircraft in 10 dedicated units which stand alert for
NORAD).\5 The Air Force budgeted about $345 million in fiscal year
1997, to operate and support the continental air defense force. 

The former Soviet Union no longer poses a significant threat of a
bomber attack on the continental United States.  Further, internal
problems within Russia and other former Soviet Union countries have
extended the time it would take them to return to previous levels of
military readiness and capabilities.  Reflecting these changing
realities, the Chairman of the Joint Chiefs of Staff determined in
1993 that the United States no longer needed a large, dedicated air
defense force and that the dedicated force could be significantly
reduced or eliminated. 

Since the threat of a Soviet-style air attack against the United
States has largely disappeared, the air defense force now focuses its
activities on air sovereignty missions.  These missions provide
surveillance and control of territorial airspace, including
activities such as assisting aircraft in distress or intercepting
aircraft as part of antidrug smuggling efforts.  However, active and
reserve general-purpose and training forces could perform this
mission because they (1) have comparable or better aircraft, (2) are
located at or near existing air defense bases, and (3) have pilots
who possess similar skills or who could acquire the necessary skills
used by air defense and air sovereignty pilots. 

Based on our audit work, GAO has concluded that significant savings
could be achieved by dual-tasking the active, reserve, and training
forces.  If the dedicated continental air defense force were
eliminated, the following savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   153     314     322     331     341
Outlays                            126     278     309     322     333
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\5 DOD's 1997 plan reduced the number of dedicated continental air
defense Air National Guard aircraft from 150 to 90. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:4.1

Continental Air Defense:  A Dedicated Force Is No Longer Needed
(GAO/NSIAD-94-76, May 3, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:4.2

Richard Davis, (202) 512-3504



   OPTION:
   CARRIER BATTLE GROUP EXPANSIONS
   AND UPGRADESCARRIER BATTLE
   GROUP EXPANSIONS AND UPGRADES
------------------------------------------------------- Appendix III:5


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Operation and Maintenance, Navy
                                    (17-1804)
                                    Military Personnel, Navy (17-
                                    1453)
                                    Procurement-funded Replenishment
                                    Spares (17-1506)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Aircraft carrier battle groups are the centerpiece of the Navy's
surface force and significantly influence the size, composition, and
cost of the fleet.  The annualized cost to acquire, operate, and
support a single Navy carrier battle group is from $1.7 billion to $2
billion (in fiscal year 1996 dollars) and will continue to increase. 
The Navy is embarking on several costly carrier-related
programs--procuring another carrier, refueling existing carriers, and
replacing/upgrading combat aircraft. 

GAO's analysis indicates that there are opportunities to use less
costly options to satisfy many of the carrier battle groups'
traditional roles without unreasonably increasing the risk that U.S. 
national security would be threatened.  For example, one less costly
option would be to rely more on increasingly capable surface
combatants, such as cruisers, destroyers, or frigates, for overseas
presence and crises response.  If the Congress chose to retire one
aircraft carrier and one active air wing in 1998, the following
savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   350     710   1,170     900   6,580
Outlays                            260     580     690     840   1,190
----------------------------------------------------------------------
Note:  Estimate includes savings from not buying a new carrier in
fiscal year 2002. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:5.1

Navy's Aircraft Carrier Program:  Investment Strategy Options
(GAO/NSIAD-95-17, January 1, 1995). 

Navy Carrier Battle Groups:  The Structure and Affordability of the
Future Force (GAO/NSIAD-93-74, February 25, 1993). 


      GAO CONTACT
----------------------------------------------------- Appendix III:5.2

Richard Davis, (202) 512-3504



   OPTION:
   ARMY'S COMANCHE HELICOPTER
   PROGRAMARMY'S COMANCHE
   HELICOPTER PROGRAM
------------------------------------------------------- Appendix III:6


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Research, Development, Test and
                                    Evaluation, Army (21-2040)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Comanche helicopter is to replace the Vietnam-era scout and
attack helicopters that the Army considers incapable of meeting
existing or future requirements.  The Comanche's overall program cost
has grown to approximately $50 billion, with an estimated program
unit cost of about $39 million.  Anticipated cost increases and other
unresolved technical risks indicate that future cost growth is
likely.  In December 1994, the Secretary of Defense decided to
restructure the Comanche program, reducing program cost by about $2
billion for fiscal years 1996 through 2001.  This action extended the
development phase until 2006 and deferred the production decision
until then. 

Although light attack missions are part of the Army's plan for the
Comanche, its lethality is now expected to rival or surpass that of
the Apache--the Army's premiere attack helicopter.  In addition, as
the Army reduces its total helicopter fleet, it plans to modify many
that will remain to increase combat capabilities.  For example, the
Army is arming its scout helicopter, the Kiowa, and modifying 227
basic model Apaches with the Longbow system, which includes a fire
control radar with a radar detector and a Hellfire missile with a
radio-frequency seeker.  These actions, collectively, tend to blur
the distinction in roles among the Army's helicopter fleet. 

GAO's work has pointed to real and probable development cost
increases, uncertain operating and support cost savings, questions
about the role of the Comanche compared to other more affordable Army
helicopters, and deferral of the production decision.  If the
Congress would elect to terminate the program, the following savings
would be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   144     384     454     602     650
Outlays                             82     268     397     520     607
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:6.1

Comanche Helicopter:  Testing Needs To Be Completed Prior to
Production Decisions (GAO/NSIAD-95-112, May 18, 1995). 

Army Aviation:  Modernization Strategy Needs To Be Reassessed
(GAO/NSIAD-95-9, November 21, 1994). 

Comanche Helicopter:  Program Needs Reassessment Due To Increased
Unit Cost and Other Factors (GAO/NSIAD-92-204, May 27, 1992). 


      GAO CONTACT
----------------------------------------------------- Appendix III:6.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   F/A-18E/F FIGHTERF/A-18E/F
   FIGHTER
------------------------------------------------------- Appendix III:7


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Aircraft Procurement, Navy (17-
                                    1506)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
In 1992, the Navy justified the F/A-18E/F Fighter to correct
operational deficiencies that were projected to occur in its
F/A-18C/D aircraft.  As of December 1995, the total program cost was
projected to be almost
$81 billion in then year dollars.  In its fiscal year 1996/1997
Biennial Budget, the Navy requested $236.882 million and $306.344
million to cover long lead requirements for the procurement of 12
F/A-18E/F aircraft in fiscal year 1997 and 24 aircraft in fiscal year
1998.  An F/A-18E/F low rate initial production (LRIP) milestone
decision is scheduled for the first quarter of calendar year 1997. 

In a report issued in June 1996, GAO concluded that the need for the
F/A-18E/F is questionable.  Operational deficiencies that in 1992 the
Navy stated existed in the current F/A-18C/D either have not
materialized as projected or can be corrected with nonstructural
changes to the F/A-18C/D.  Furthermore, operational improvements that
the E/F will have over the C/D would be marginal. 

GAO also reported that DOD's $43.6 million (in fiscal year 1996
dollars) unit recurring flyaway cost\6 for the F/A-18E/F is
understated because E/F procurement cost estimates are based on
annual (72 aircraft) and total procurement (1,000 aircraft) levels
that are overstated.  The Congress has indicated that an annual
production rate of 72 aircraft is not possible in the current budget
environment.  Also, total production of 1,000 aircraft is overstated
by 340 aircraft--the number of Marine Corps E/Fs that are included in
the total buy but which the Corps has decided it will not procure. 
GAO estimated that lowering the E/F annual production rate to a more
realistic level of 36 aircraft and procuring a total of 660 aircraft
would increase F/A-18E/F unit costs by about $10 million to $53
million in fiscal year 1996 dollars.  This compares to about $29.6
million for the current F/A-18C/D. 

GAO further reported that procuring 660 C/Ds rather than the E/F
would save almost $17 billion (fiscal year 1996 dollars).  Savings
would be greater if fewer than 660 C/Ds are needed to maintain Navy
tactical aircraft inventories.  Near term savings associated with
procuring the C/D rather than the E/F would be significant.  Through
fiscal year 2002 the unit recurring flyaway cost of the E/F averages
about $99.6 million (then-year dollars), or more than three times the
$29.6 million unit recurring flyaway cost of the F/A-18C/D over this
same period. 

Because continued procurement of the less expensive F/A-18C/D would
provide the Navy a capable tactical aircraft, the Congress may wish
to reconsider the need to procure the F/A-18E/F.  CBO estimates that
canceling the program would achieve the following budget savings
during the next 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                 1,812   2,116   2,233   1,654   2,410
Outlays                            252     932   1,630   1,886   1,943
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\6 Recurring flyaway costs include costs related to the production of
the basic aircraft and do not include all procurement costs.  DOD
consistently maintains that these costs are the most appropriate to
compare the costs of different aircraft. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:7.1

Navy Aviation:  F/A-18E/F Will Provide Marginal Operational
Improvement at High Cost (GAO/NSIAD-96-98, June 18, 1996). 

Naval Aviation:  F/A-18 E/F Acquisition Strategy (NSIAD-94-194,
August 18, 1994). 

Naval Aviation:  Consider All Alternatives Before Proceeding With the
F/A-E/F (NSIAD-93-144, August 27, 1993). 


      GAO CONTACT
----------------------------------------------------- Appendix III:7.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   F-22 FIGHTERF-22 FIGHTER
------------------------------------------------------- Appendix III:8


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Aircraft Procurement, Air Force
                                    (57-3010)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Air Force's F-22 program was initiated in 1981 to replace F-15s
and to meet the evolving threat projected for the mid-1990s. 
Although the Department of Defense (DOD) procurement plans support
achievement of initial operational capability in 2004, our reports
issued in 1993 and 1994 indicated the need to replace F-15s with
F-22s was not urgent.  Our reports indicated that potential adversary
air forces are expected to include few fighters that have the
capability to challenge the F-15--a U.S.  frontline fighter. 

DOD is currently planning to procure a significant number of F-22s
before completing operational tests and evaluations, thereby
increasing the cost, schedule, and performance risks within the
system.\7 Initial operational tests and evaluations, which provide a
valid estimate of expected system operational effectiveness and
operational suitability, are not scheduled to be completed until
after the Air Force will have committed to procure 76 aircraft
involving an investment of nearly $11 billion.  Air Force plans call
for procurement of 4 aircraft a year, increasing to 12, 24, and 36 a
year before initial operational tests and their evaluation are
completed.  Many aircraft systems entering production before starting
operational testing have required major modification later, which is
often costly. 

Using DOD guidelines, F-22 program concurrency is high because the
F-22 program is scheduled to proceed into low rate initial production
well before any operational testing starts.  Furthermore, the F-22
program contemplates a higher commitment as a percentage of total
production prior to completion of initial operational testing than
most modern fighter programs. 

Since the need for the F-22 is not urgent, the Congress could choose
to restrict production of F-22s to six aircraft in 2000, eight
aircraft in 2001, and eight aircraft in 2002 until initial
operational tests and evaluations are completed in April 2002. 
Further, maintaining production quantities at eight or less aircraft
per year could defer the purchase of $282 million of production
tooling--$109 million in fiscal year 2000 to increase production to
12 aircraft per year, $116 million in fiscal year 2001 to increase
production from 12 to 24 aircraft per year, and $57 million in fiscal
year 2002 to increase production from 24 to 36 per year. 

If the Congress were to restrict funding in this way and restrict
procurement of tooling to limit production to eight aircraft a year,
the following budget savings could be achieved during the next 5
years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     0     127   1,340   2,608   3,810
Outlays                              0       8     114     527   1,332
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\7 In December 1996, the Air Force announced the results of a review
of the program by a joint cost estimating team.  Significant changes
to the program, including changes to the procurement plan, are being
considered as a result of that team's report. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:8.1

Combat Air Power:  Joint Mission Assessments Needed Before Making
Program and Budget Decisions (GAO/NSIAD-96-177, September 20, 1996). 

Tactical Aircraft:  Concurrency in Development and Production of F-22
Aircraft Should Be Reduced (GAO/NSIAD-95-59, April 19, 1995). 

Weapons Acquisition:  Low-Rate Initial Production Used to Buy Weapon
Systems Prematurely (GAO/NSIAD-95-18, November 21, 1994). 

Tactical Aircraft:  F-15 Replacement Is Premature as Currently
Planned (GAO/NSIAD-94-118, March 25, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:8.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   AIR FORCE BOMBER FORCE
   REQUIREMENTSAIR FORCE BOMBER
   FORCE REQUIREMENTS
------------------------------------------------------- Appendix III:9


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Bombers currently in the force, B-2s, B-1Bs, and B-52Hs, were
initially designed and procured by the Department of Defense (DOD)
primarily to meet nuclear war-fighting requirements.  Since the end
of the Cold War, DOD has placed increased emphasis on the role of
bombers in future conventional conflicts while reducing the number of
bombers significantly from a total of about 360 in 1989 to a planned
retention of 187 bombers through the early part of the next century. 

Senior DOD officials have said that DOD cannot afford all of the
services' stated requirements and difficult decisions must be made on
which investment programs to cancel so that DOD can develop and
implement a long-term, sustainable recapitalization plan.  While DOD
believes it needs a level of redundancy to provide commanders in
chief with a safety margin and flexibility, it may not need to
upgrade its capabilities to the extent currently planned.  GAO's
analysis shows that DOD has not made a compelling case to retain and
upgrade 187 bombers to support future war-fighting requirements. 
While there are a number of ways to reduce capabilities to strike
ground targets, a smaller bomber force may be one option to reduce
overlap that would result in an acceptable loss to DOD's overall
war-fighting capabilities. 

Because DOD's plans to modernize combat airpower may be prohibitively
expensive, DOD is seeking ways to reduce costs.  With this in mind,
GAO has identified three options to reduce or restructure the bomber
force that would achieve cost savings yet enable DOD to retain
extensive aggregate airpower capabilities.  The first two
options--retiring all or a portion of the B-1B fleet--would result in
a smaller bomber force than DOD currently plans.  Retiring or
reducing the B-1B force may result in an acceptable decrease in DOD's
existing capabilities.  The third option--increasing the number of
B-1Bs in the Air National Guard--would not result in a smaller force
but would achieve some cost savings because reserve units are less
expensive to operate than active units.  Options two and three are
not mutually exclusive.  The three options and their projected cost
savings are detailed below. 


      RETIRE ENTIRE B-1B FORCE
----------------------------------------------------- Appendix III:9.1

Retiring the entire B-1B force of 95 aircraft would reduce DOD's
aggregate conventional airpower capabilities somewhat but would yield
significant cost savings.  Eliminating the B-1B force would decrease
DOD's inventory of long-range airpower assets.  However, B-2s and
B-52Hs would still be available for missions requiring long-range and
large payload capabilities.  Retiring the B-1B force also would have
no adverse effect on DOD's nuclear mission.  The B-1B will no longer
have a nuclear mission once B-2s enter the force. 

If the Congress directed DOD to retire the B-1B force, CBO estimates
it would save about $6 billion in budget authority and about $5.2
billion in budget outlays for fiscal years 1998-2002 as shown in the
following table. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   750   1,190   1,220   1,300   1,490
Outlays                            430     950   1,130   1,290   1,440
----------------------------------------------------------------------
Note:  In estimating the cost savings of this option, CBO assumed
that the B-1B force would be retired over a 1-year period beginning
immediately, resulting in smaller savings for fiscal year 1998. 

Source:  Congressional Budget Office. 


      RETIRE 27 B-1BS IN
      RECONSTITUTION RESERVE
----------------------------------------------------- Appendix III:9.2

The Air Force currently has 27 B-1B aircraft in reconstitution
reserve that lack aircrews and funding for operations.  In fiscal
year 1997, the Air Force will begin reducing the number of unfunded
reconstitution reserve aircraft, will establish two new operational
B-1B squadrons using the aircraft that are currently in
reconstitution reserve, and will fund additional aircrews and flying
hours.  The Air Force has included the cost of upgrading
reconstitution reserve aircraft in the B-1B Conventional Munitions
Upgrade Program estimated to cost $2.4 billion from fiscal years 1996
through 2008. 

If DOD perceives that the risks to retire the entire B-1B fleet
outweigh the savings that could be realized, it could retire 27
reconstitution reserve B-1Bs and keep 68 B-1Bs in the force, 60 of
which would be funded for combat operations or training.  This option
would not result in as much loss in capability as retiring the entire
B-1B fleet.  If 27 B-1Bs were retired, DOD would still have numerous
other combinations of platforms and weapons to attack the types of
targets that the B-1B is planned to destroy.  Compared to retiring
all 95 B-1Bs, this option would provide commanders in chief with more
flexibility in planning air campaigns and basing aircraft in theater,
since B-1Bs would be based farther away from the theater of
operations and would not require refueling during a typical wartime
mission, unless operating from the United States. 

Retiring the 27 B-1Bs in reconstitution reserve would save about $750
million in budget authority for fiscal years 1998-2002. 
Reconstitution reserve aircraft place an increased maintenance
workload on the squadron and require the Air Force to authorize and
fund four additional maintenance personnel per reconstitution reserve
aircraft.  Savings in the near-term would reflect the immediate
termination of these positions.  Savings would increase significantly
in fiscal year 2000 because DOD would not establish two additional
operation squadrons and could eliminate the personnel and flying-hour
costs associated with these aircraft.  Retiring 27 B-1Bs also would
save procurement funds since DOD would upgrade only 68 B-1Bs for the
conventional mission instead of 95 B-1Bs.\8 If the Congress directed
DOD to retire the 27 B-1Bs in reconstitution reserve, CBO estimates
the following savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     2       4      80     270     390
Outlays                              2       4      64     230     350
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\8 According to CBO, savings from forgoing these upgrades would occur
after fiscal year 2002. 


      PLACE 24 ADDITIONAL B-1BS IN
      THE AIR NATIONAL GUARD
----------------------------------------------------- Appendix III:9.3

Placing more B-1Bs in the Air National Guard is an option that could
reduce the cost to operate DOD's bomber force while preserving the
war-fighting capability of DOD's planned bomber force.  By fiscal
year 1998, the Air Force will have 18 B-1Bs assigned to the National
Guard and fully trained in the conventional role.  B-1Bs will no
longer have a nuclear role in the near future, thus making the
transfer of B-1Bs to the Air National Guard somewhat easier than
transferring B-52s to the Air Force Reserve. 

Placing 24 more B-1Bs in the Air National Guard would save about $110
million in budget authority for fiscal years 1998 to 2002.  We
examined placing 24 more B-1Bs in the Air National Guard because this
would achieve a 50/50 active/reserve ratio when attrition and backup
aircraft are excluded and the Air Force has placed 50 percent or more
of some refueling and air mobility assets in the reserve component. 
Transferring additional B-1Bs to the Air National Guard is not likely
to degrade combat effectiveness or result in loss of war-fighting
capability.  Air Reserve combat units generally have readiness
similar to active-duty units and are required to be ready to deploy
within the same time as active units based in the continental United
States.  A major benefit of transferring bombers to the reserve
component is that reserve units traditionally are less expensive to
operate than active duty counterparts.  Air National Guard B-1B
squadrons will require fewer flying hours than active squadrons
because Air National Guard units are able to recruit more experienced
pilots who require less frequent training to maintain their
proficiency.  Also, in contrast to active duty units that rely
primarily on active military personnel, Air National Guard units rely
heavily on less costly civilians and part-time Guard personnel. 

If the Congress directed DOD to place an additional 24 B-1Bs in the
Air National Guard, CBO estimates cost savings of about $110 million
in budget authority for fiscal years 1998 through 2002 could be
achieved as shown in the table below. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     0       0      10      40      60
Outlays                              0       0       9      37      59
----------------------------------------------------------------------
Note:  One additional Guard unit would be started in fiscal year 2000
and two additional units would be started in fiscal year 2001. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:9.4

Air Force Bombers:  Options to Retire or Restructure the Force Would
Reduce Planned Spending (GAO/NSIAD-96-192, September 30, 1996). 

Embedded Computers:  B-1B Computers Must Be Upgraded to Support
Conventional Requirements (GAO/AIMD-96-28, February 27, 1996). 

B-1B Conventional Upgrades (GAO/NSIAD-96-52BR, December 4, 1995). 

B-1B Bomber:  Evaluation of Air Force Report on B-1B Operational
Readiness Assessment (GAO/NSIAD-95-151, July 18, 1995). 

Air Force:  Assessment of DOD's Report on Plan and Capabilities for
Evaluating Heavy Bombers (GAO/NSIAD-94-99, January 10, 1994). 

Strategic Bombers:  Issues Relating to the B-1B's Availability and
Ability to Perform Conventional Missions (GAO/NSIAD-94-81, January
10, 1994). 

Strategic Bombers:  Adding Conventional Capabilities Will Be Complex,
Time-Consuming, and Costly (GAO/NSIAD-93-45, February 5, 1993). 

Strategic Bombers:  Need to Redefine Requirements for B-1B Defensive
Avionics System (GAO/NSIAD-92-272, July 17, 1992). 

Strategic Bombers:  Updated Status of the B-1B Recovery Program
(GAO/NSIAD-91-189, May 9, 1991). 

Strategic Bombers:  Issues Related to the B-1B Aircraft Program
(GAO/T-NSIAD-91-11, March 6, 1991). 


      GAO CONTACT
----------------------------------------------------- Appendix III:9.5

Richard Davis, (202) 512-3504



   OPTION:
   AIR FORCE FIGHTER SQUADRONSAIR
   FORCE FIGHTER SQUADRONS
------------------------------------------------------ Appendix III:10


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Operation and Maintenance, Air
                                    Force
                                    (57-3400)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Air Force accounts for its fighter force structure in wing
equivalents that represent 72 aircraft.  At the end of the Air
Force's planned drawdown, the Air Force's active component F-15 and
F-16 communities will make up about 10 fighter wing equivalents.  The
Air Force plans to organize these aircraft in 37 squadrons at 17
bases in the United States and overseas.  Until recently, Air Force
fighter wings were predominantly organized in 3 squadrons of 24
aircraft.  However, the Air Force has decided to reduce its squadron
size to 18, which consequently reduced its wing size to 54.  This
change in unit size increased the number of wings and squadrons to
more than would have been needed had the squadron size stayed at 24. 

The Air Force has not demonstrated that it needs additional
squadrons.  Air Force officials believe that more squadrons are
needed to provide the Air Force with additional flexibility to
respond to numerous potential conflicts across the globe.  Although
the Air Force considers smaller fighter squadrons beneficial, it had
not performed any analysis to justify its decision.  Further,
according to Air Force officials, Commanders in Chief, who are
responsible for conducting these operations, developed plans based on
the number of aircraft that are needed to execute
missions--regardless of squadron size. 

Keeping more squadrons than are needed increases operating costs and
may result in more base infrastructure than the Air Force needs.  GAO
developed several notional basing plans that the Air Force could use
in considering how to consolidate its fighter force into fewer
squadrons.  Implementing these plans could eliminate not only between
two and seven squadrons, but also a wing and/or fighter base.  CBO
identified operating and support cost savings ranging between $38
million and $149 million annually (in 1997 dollars).\9 Recurring
savings resulting from a base closure are estimated at an additional
$40 million annually (in 1997 dollars).  However, these savings would
not begin to accrue until 3 to 4 years after the base closure
decision.  If the Congress chose to consolidate the Air Force's
fighter force into fewer squadrons by eliminating seven of them, the
following operating savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                    75     153     157     161     165
Outlays                             71     149     156     160     165
----------------------------------------------------------------------
Note:  Savings estimates do not include funds associated with the
base closure.  The savings could be significant depending on the base
selected for closure. 

Source:  Congressional Budget Office. 


--------------------
\9 The CBO savings estimate is based on GAO's personnel reduction
estimates.  Based on these reductions, GAO's work shows that
operating costs savings could range between $25 million and $115
million annually.  Differences between CBO and GAO estimates are
attributable to the larger infrastructure cost savings estimated by
CBO and not included in GAO's estimates. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:10.1

Air Force Aircraft:  Consolidating Fighter Squadrons Could Reduce
Costs (GAO/NSIAD-96-82, May 6, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:10.2

Richard Davis, (202) 512-3504



   OPTION:
   C-17 STRATEGIC AIRLIFTC-17
   STRATEGIC AIRLIFT
------------------------------------------------------ Appendix III:11


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Aircraft Procurement, Air Force
                                    (57-3010)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The C-17 jet transport is being manufactured for the Air Force by
McDonnell Douglas Corporation.  The Air Force originally planned to
acquire 210 C-17s; however, as a result of the Major Aircraft Review,
that number was reduced to 120.  In 1993, because of ongoing problems
with the C-17 program, the Department of Defense (DOD) explored the
possibility of acquiring a mixed fleet of C-17s and nondevelopmental
commercial transport aircraft, such as Boeing 747-400s.  In November
1995, as a result of an Air Force study which considered a number of
possible mixes of C-17s and non-developmental airlift aircraft and a
Defense Acquisition Board decision, DOD decided that the advantages
of a transport fleet with only C-17s outweighed the cost savings of
acquiring a mixed fleet.  Thus, DOD is planning to acquire 120 C-17s
to replace the C-141s that are being retired. 

An option not considered by the Defense Acquisition Board, which may
also satisfy airlift requirements, would be to acquire 100 C-17s and
no nondevelopmental airlift aircraft.  This option could save over $7
billion in life cycle costs.  Airlift needs could be met with this
reduced number of C-17s if DOD implemented other individual measures,
such as increasing, by a small amount, prepositioning; using training
aircraft that were assumed to be unavailable in the analyses
presented to the Defense Acquisition Board; increasing the use of the
Civil Reserve Air Fleet aircraft, extending slightly the time frame
for delivery, or a combination of these measures. 

Because of the potential for cost savings, the Congress may wish to
consider funding only 100 C-17s rather than the 120 that are
currently planned for acquisition.  If the Congress chose to fund
only 100 C-17s, CBO estimates that the following budget savings could
be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     0       0       0     240   2,974
Outlays                              0       0       0      15     242
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:11.1

Military Airlift:  DOD Could Meet Mobility Needs With Fewer C-17s and
Save Billions (GAO/NSIAD-97-38, December 30, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:11.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   NUCLEAR SUBMARINE FORCE
   REDUCTIONSNUCLEAR SUBMARINE
   FORCE REDUCTIONS
------------------------------------------------------ Appendix III:12


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Shipbuilding and Conversion, Navy
                                    (17-1611)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Nuclear-powered attack submarines (SSN) are the Navy's prime
antisubmarine warfare asset.  Today, faced with a changed world
threat and a new defense posture, the Navy is reducing the size of
its SSN fleet.  The Department of Defense's (DOD's) Bottom-Up Review
(BUR) determined that the Navy needed to maintain a force of 45 to 55
SSNs after fiscal year 1999 to meet the requirements of the defense
strategy, including both regional conflicts and peacetime presence
operations.  There are less costly alternatives than the approach the
Navy has chosen to maintain the required SSN force structure.  As we
have reported, these alternative approaches would save billions of
dollars and meet the Navy's force structure and threat requirements. 

In October 1994, we reported that there were less costly alternatives
than the Navy shipbuilding plan for maintaining DOD's approved attack
submarine force structure of 45 to 55 submarines.  Under two of the
three alternatives, the Navy could maintain a sustained low-rate
production, and under the third, the Navy could defer SSN
construction until early in the next century.  The Navy and the
Congress subsequently decided not to defer SSN construction. 

This alternative, would build only 25 SSNs through 2014, 6 fewer than
the Navy currently plans.  This alternative allows a force structure
of close to 55 submarines through 2014, before declining to 45 SSNs
in 2020.  The alternative would buy one submarine in each year from
1998 through 2002 and, eventually buy 3 submarines every other year
until 25 submarines are purchased.  If the Navy accepted this
alternative and bought 6 fewer submarines than currently planned, the
following savings would be achieved through 2002. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     0     160     240     170   1,730
Outlays                              0      10      50     110     220
----------------------------------------------------------------------
Note:  Estimate includes savings from not buying a new submarine in
fiscal year 2002. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:12.1

Attack Submarines:  Alternatives for a More Affordable SSN Force
Structure (GAO/NSIAD-95-16, October 13, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:12.2

Richard Davis, (202) 512-3504



   OPTION:
   MAJOR WEAPON SYSTEM WARRANTY
   LAWMAJOR WEAPON SYSTEM WARRANTY
   LAW
------------------------------------------------------ Appendix III:13


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Aircraft Procurement, Air Force
                                    (57-3010)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
During the 1970s and the 1980s, the Congress was faced with an
acquisition process that delivered weapon systems that often failed
to meet their military missions, were operationally unreliable, and
had defective and poor workmanship and material.  As a result, in
1984 the Congress passed legislation requiring the Department of
Defense (DOD) to obtain warranties on major weapon systems.  The
warranties were expected to improve weapon system reliability by
providing a mechanism to hold contractors liable for poor
performance.  Prior to the warranty law, DOD was permitted but not
required to obtain a warranty. 

GAO estimated that the military services spend approximately $271
million annually obtaining weapon system warranties.  GAO found that
none of the warranties reviewed, where claim and price data were
available, were cost-effective.  For example, for the warranties
reviewed, the government only collected $5 million after paying $94
million for these weapon system warranties. 

Despite DOD's efforts to address administrative weaknesses, such as
failing to file all warranty claims or making use of adequate
cost-benefit analyses, DOD continues to have fundamental problems
managing the warranty program.  The administrative problems appear to
be unintended consequences of the warranty law.  Attempts to
administratively correct the warranty law have not been successful. 
Because of the potential for cost savings, the Congress should repeal
the warranty law (10 U.S.C.  2403).  Savings under this option would
depend on the extent the military departments still obtain warranties
for some programs after the law is repealed, therefore, CBO is unable
to provide a savings estimate at this time. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:13.1

Weapons Acquisition:  Warranty Law Should Be Repealed
(GAO/NSIAD-96-88, June 28, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:13.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   BASE ALIGNMENT AND CLOSURE
   ACCOUNTSBASE ALIGNMENT AND
   CLOSURE ACCOUNTS
------------------------------------------------------ Appendix III:14


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Military Construction (Senate)
                                    Military Construction (House)

Primary agency                      Department of Defense

Account                             Base Realignment and Closure (97-
                                    0103)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Changing national security needs and the Department of Defense's
(DOD) recognition that its base structure was larger than required
led to a decision to close numerous bases around the country. 
Consequently, the Congress enacted legislation that instituted
closures of facilities identified by the Base Realignment and Closure
(BRAC) Commission as part of the base closure process. 

The Congress appropriates BRAC funds on a no year and lump sum basis. 
Funds can be used for a variety of purposes including construction,
family housing, and environmental restoration costs associated with
base closures and realignment.  Therefore, DOD is provided a
tremendous amount of flexibility to finance BRAC expenditures from
the BRAC account.  While DOD budget guidance directs services to
request only funds needed in the appropriation year, large
unobligated balances indicate the services have been requesting more
than necessary.  Because requirements lack the specificity of regular
DOD requirements, large unobligated balances represent funds the
Congress may wish to rescind.  The following savings represent a
rescission of the $148 million. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   148       0       0       0       0
Outlays                             46      53      28      15       2
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:14.1

Military Bases:  Potential Reductions to the Fiscal Year 1997 Base
Closure Budget (GAO/NSIAD-96-158, July 15, 1996). 

Military Bases:  Update on the Status of Bases Closed in 1988, 1991,
and 1993 (GAO/NSIAD-96-149, August 6, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:14.2

David R.  Warren, (202) 512-8412



   OPTION:
   DEFENSE INVENTORIES
   REFORMDEFENSE INVENTORIES
   REFORM
------------------------------------------------------ Appendix III:15


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Over 100 GAO reports have pointed out Department of Defense (DOD)
inventory management problems and have shown that DOD has accumulated
inventory that greatly exceeds its operational and war reserve needs. 
Systemic problems in determining requirements and inadequate
financial accountability and control have contributed to poor
inventory management practices.  Traditionally, DOD's culture has
emphasized overbuying and placed little value on economy and
efficiency, causing unneeded items to pile up in warehouses. 

DOD could be more aggressive in implementing private sector practices
that could reduce inventory costs.  DOD has implemented, in a limited
manner, certain commercial practices such as direct vendor delivery
for medical and food items.  However, these initiatives represent
only about 3 percent of the items for which this concept could be
used. 

Systemic reforms--such as improving the way inventory requirements
are determined, using commercial inventory management practices, and
changing financial management policies and practices--continue to be
needed to achieve further reductions in DOD's budget requirements. 
GAO estimates that, as of September 1995, only about half of DOD's
$69.6 billion in inventory had to be on hand to support current
operations and war reserves.  GAO's work has shown that several
private business have been able to reduce their on hand inventories
by more than 50 percent by implementing best practices. 

Unless DOD takes more aggressive actions, its inventory management
problems will continue into the next century.  We have identified
four specific inventory related options the Congress may wish to
consider for DOD budget reduction purposes. 


      USE PRIME VENDORS TO SUPPLY
      HIGH-VOLUME CLOTHING AND
      TEXTILE ITEMS
---------------------------------------------------- Appendix III:15.1

DOD spends over a billion dollars for clothing and textile items sold
to military service customers, primarily the services' 14 recruit
induction centers and over 300 military exchange stores.  GAO has
reported that while private sector companies are cutting costs by
minimizing inventories, DOD continues to store redundant levels of
clothing and textile inventories throughout its wholesale and retail
system.  Much of this inventory is aged; for about 26 percent of the
items, DOD had 10 years of supply on hand.  To maintain these stocks,
DOD employs a large operations infrastructure and thus incurs
unnecessary inventory storage and handling costs. 

Many private sector firms and some federal agencies with uniformed
employees are relying on prime vendors to manage their clothing
inventories.  Prime vendors provide timely and direct delivery
between customers and suppliers, and order additional stock from
manufacturers on short notice, with quick turnaround, to minimize
inventory holding costs and improve customer service.  GAO believes
that substantial opportunities exist to reduce DOD annual
expenditures on clothing and textile items by adopting best
commercial practices on a wide-scale basis.  For example, the
Congress may wish to direct DOD to adopt a primary vendor program for
supplying clothing and textile items to it's 14 recruit induction
centers.  Although CBO believes that initiating such actions would
save money, it was unable to calculate a savings estimate at this
time. 


      USE INNOVATIVE COMMERCIAL
      PRACTICES TO SUPPLY
      ELECTRONICS ITEMS TO
      MAINTENANCE AND REPAIR
      FACILITIES
---------------------------------------------------- Appendix III:15.2

The Defense Logistics Agency (DLA) manages over 1 million electronics
items such as resistors, fuses, and switches.  It stores this
inventory, valued at over $2 billion, at 28 distribution depots and
other storage locations.  This large level of inventory reflects
DLA's practice of buying and storing electronics supplies to ensure
they are available to customers--sometimes several years in advance
of when the supplies are actually needed.  The turnover of DLA's
electronics inventory is slow.  In fiscal year 1993, the wholesale
inventory of such items would turn over once every 4 years.  In
comparison, private sector suppliers often turn their stock over four
times a year. 

Many private sector companies have adopted modern inventory
management practices, including long-term relationships with
suppliers, direct delivery programs, and direct communication
channels between suppliers and end users.  With these practices,
companies do not store supplies at intermediate handling and storage
locations, as DOD does.  Instead, they arrange for suppliers to
deliver inventory items directly to the end user's facility at about
the time when the items are needed.  The result is a reduction in
inventories and related holding costs as well as improved customer
service. 

DLA has initiated several programs to adopt commercial practices for
electronics items, but overall progress is slow and projected results
are limited.  Substantial opportunities exist and significant savings
would result if electronics items were managed by adopting best
commercial practices on a wide-scale basis.  The Congress may wish to
direct DLA to adopt modern inventory management practices that would
result in a similar 50 percent decrease in electronics items
inventory.  Although CBO believes that initiating such actions would
save money, it was unable to calculate a savings estimate at this
time. 


      DOD SPARE AND REPAIR PARTS
      STORAGE LOCATIONS
---------------------------------------------------- Appendix III:15.3

The Army, Navy, and Air Force store the majority of their general
issue spare and repair parts inventories at a few locations with the
remaining inventory being stored at hundreds of other locations.  To
illustrate, over 95 percent of the Army's general issue inventory is
stored at 7 major locations and the remaining 5 percent is stored at
110 other locations.  The Navy stores 81 percent of its inventory at
6 locations and the other 19 percent at 52 locations.  The Air
Force's storage pattern is similar to that of the Army and Navy.  It
stores 96 percent of its inventory at 6 major locations and the other
4 percent at 105 locations. 

Most of the items stored at other than major locations had small
quantities of onhand inventory.  In fact, over 53 percent of the
items had onhand quantities of three or less, while only 25 percent
of the items had quantities of 11 or more.  Our analysis also showed
that many of the Army items\10 had infrequent issues over the 2-year
period ending August, 1996.  Over 53 percent of the inventory items
at other than major storage locations had no issues and, an
additional 33 percent of the items had less than five issues during
the same 2-year period.  The need for many of the items stored at
other than major locations is questionable. 

Maintaining inventory that is not needed is expensive and does not
contribute to an effective, efficient, and responsive supply system. 
Our analysis showed that $2.7 billion of the inventory was not needed
to meet the services' current operating and war reserve requirements. 
CBO agrees that DOD could save millions of dollars annually in
inventory holding costs by eliminating at other than major locations
inventory that is not needed to meet current operating and war
reserve requirements.  However, CBO could not provide a savings
estimate at this time. 


--------------------
\10 Information was not readily available from the Air Force and Navy
to determine the number of inventory issues on an item-by-item basis
at each storage location. 


      ARMY SPARE AND REPAIR PARTS
      BUDGET
---------------------------------------------------- Appendix III:15.4

The Army budget stratification reports which are used to determine
spare and repair parts budget requests are based on inaccurate data. 
When an item's available inventory is not sufficient to meet the
requirements, the item is considered to be in a shortage position,
and the aggregate value of shortage items is the basis for
determining the budget request. 

Our review of 258 items with a reported shortage value of $519
million showed that the shortage position for $211 million of the
items was incorrect.  If accurate requirements and inventory data had
been used, the inventory shortage for these items would have been $23
million rather than the $211 million reported.  As a result, the
fiscal year 1996 budget request included $188 million ($211 million
minus $23 million) for items that were not in a shortage position. 

Because corrective actions were not taken in time to affect the
fiscal year 1997 budget request, we believe the fiscal year 1997
request is also overstated.  Therefore, the Congress may want to
reduce the Army's fiscal year 1998 spare and repair parts budget
request by the $188 million it was overstated in fiscal year 1996. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   188       0       0       0       0
Outlays                            143      35       6       2       1
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:15.5

Defense Inventory Management (GAO/HR-97-5, February 1997). 

Defense Inventory:  Spare and Repair Parts Inventory Costs Can Be
Reduced (GAO/NSIAD-97-47, January 17, 1997). 

1997 DOD Budget:  Potential Reductions to Operation and Maintenance
Program (GAO/NSIAD-96-220, September 18, 1996). 

Navy Financial Management:  Improved Management of Operating
Materials and Supplies Could Yield Significant Savings
(GAO/AIMD-96-94, August 16, 1996). 

Inventory Management:  Adopting Best Practices Could Enhance Navy
Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156, July
12, 1996). 

Defense Logistics:  Requirement Determinations for Aviation Spare
Parts Need to Be Improved (GAO/NSIAD-96-70, March 19, 1996). 

Best Management Practices:  Reengineering the Air Force's Logistics
System Can Yield Substantial Savings (GAO/NSIAD-96-5, February 21,
1996). 

Army Inventory:  Budget Requests for Spare and Repair Parts Are Not
Reliable (GAO/NSIAD-96-3, December 29, 1995). 

Inventory Management:  DOD Can Build on Progress in Using Best
Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, August 4,
1995). 

Best Practices Methodology:  A New Approach for Improving Government
Operations (GAO/NSIAD-95-154, May 25, 1995). 

Commercial Practices:  DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994). 

Commercial Practices:  Leading-Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64, April 13, 1994). 


      GAO CONTACTS
---------------------------------------------------- Appendix III:15.6

David R.  Warren, (202) 512-8412

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   DEFENSE TRANSPORTATION
   RESTRUCTURINGDEFENSE
   TRANSPORTATION RESTRUCTURING
------------------------------------------------------ Appendix III:16


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In 1993 and again in 1996, we reported that the Department of
Defense's (DOD) current transportation processes are fragmented,
inefficient, and costly.  Beginning in 1949, various studies,
commissions, and task forces have recommended changes in the defense
transportation system organizational structure.  In 1987, after the
Goldwater-Nichols Act of 1986 urged that actions be taken to unify
transportation management, the Secretary of Defense established the
U.S.  Transportation Command (USTRANSCOM).  USTRANSCOM's own study
shows that little has changed since it was created and charged with
responsibility for unifying DOD's transportation infrastructure. 

Our work shows that opportunities exist to reduce defense
transportation infrastructure and improve efficiency of cargo traffic
management operations.  For example, combining common-user traffic
management functions and positions under the direct command and
control of a single manager, USTRANSCOM, would reduce overhead and
eliminate duplicative functions.  Moreover, nearly all defense
surface cargo moves by commercial carriers during peacetime and
noncontingency operations.  More outsourcing of the traffic
management functions related to shipments by commercial carriers is
possible and would further reduce transportation costs. 

Overall, fixing the organizational structure is a mandatory first
step to substantially reduce transportation costs.  One logical way,
though not the only one, as related to surface traffic management
functions, would be to (1) place the Defense Business Operations
Fund-Transportation staff of the Navy's Military Sealift Command
staff worldwide together with the staff of the Army's Military
Traffic Management Command (MTMC), thereby eliminating duplicative
staff and overlapping layers of management, (2) consolidate or
eliminate the resulting continental United States area command
offices thereby eliminating duplicate staff functions, (3)
consolidate or eliminate the resulting overseas area offices, and (4)
consolidate or eliminate the resulting port command and area offices. 

Although MTMC, because of the recommendations of the 1995 Defense
Base Closure and Realignment Commission to close the Military Ocean
Terminal at Bayonne, New Jersey, and California's Oakland Army Base,
has announced plans to consolidate the continental United States area
command staff in a new location, opportunities still exist to reduce
infrastructure and improve efficiency of traffic management
operations.  If the Congress chose to restructure the organization as
noted, the following civilian personnel savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                    16      33      51      70      73
Outlays                             16      32      50      69      73
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:16.1

Defense Transportation:  Reengineering the DOD Personal Property
Program (GAO/NSIAD-97-49, November 27, 1996). 

Defense Infrastructure:  Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, April 4, 1996). 

Defense Transportation:  Streamlining of the U.S.  Transportation
Command Organization Is Needed (GAO/NSIAD-96-60, February 22, 1996). 

Defense Transportation:  Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26, November 26, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:16.2

David R.  Warren, (202) 512-8412



   OPTION:
   DEPOT MAINTENANCE PROGRAM
   EXCESS CAPACITYDEPOT
   MAINTENANCE PROGRAM EXCESS
   CAPACITY
------------------------------------------------------ Appendix III:17


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Defense's (DOD) annual $15 billion depot
maintenance program provides for the repair and overhaul of military
parts, weapon systems, and equipment.  This work is accomplished by
commercial contractors as well as by DOD employees in large
industrial depots maintained by the military departments. 

Factors such as threat changes, new war-fighting plans, force
structure reductions, and increased reliability and maintainability
of many military systems have significantly reduced depot maintenance
requirements over the past few years.  Faced with substantial excess
depot capacity and high infrastructure costs, DOD has been struggling
to implement initiatives to more cost effectively (1) utilize
existing maintenance resources at depots and operational units, (2)
reduce excess depot maintenance infrastructure, largely by closing
depots as a part of the base closure and realignment process, and (3)
reallocate workload from closing depots.  At the same time, DOD has
embarked on the implementation of a depot maintenance strategy that
will privatize much of the depot maintenance workload without
determining whether privatizing specific depot workloads will result
in savings. 

In previous reports and as a part of our ongoing review of DOD depot
maintenance operations and management, GAO has identified the
following shortcomings in these initiatives and has highlighted other
actions that could be taken to improve the cost-effectiveness of the
DOD depot maintenance program. 

First, DOD has not been successful in achieving an optimal balance
between maintenance work performed at operational units and at
depots.  Cost-benefit evaluations of competing alternatives that
consider infrastructure, personnel, material, transportation, and
equipment tradeoffs could result in significant savings. 

Second, the services continue to rely largely on their own service
depots rather than maximizing interservicing opportunities by
consolidating similar maintenance operations at a single location. 
On many occasions, we have pointed out that this approach leads to
unnecessary duplication of resources.  A greater use of
cross-servicing could eliminate costly redundancies and excess
capacity. 

Third, DOD plans to privatize-in-place depot maintenance activities
without evaluating other alternatives such as public-private
competitions or interservicing.  Such privatization-in-place
initiatives will do little to resolve the extensive excess capacity
problem that currently exists in both public and private sector
industrial facilities and may not be the most cost-effective
solution.  An option that could result in substantial savings would
be to reallocate core workload to remaining military depots when
determined to be more cost-effective and use competitive procedures
to include public and private entities to determine the
source-of-repair for noncore workload. 

Fourth, DOD is reluctant to use competitions between the public and
private sector to ensure that the privatization of maintenance
workloads will result in savings.  While there are opportunities to
achieve cost savings by privatizing depot maintenance workloads which
have commercial counterparts and where there is a substantial private
sector competitive market, it is less likely the private sector will
be more cost-effective in an uncompetitive environment.  A greater
reliance on public-private competitions as a means of depot
maintenance workload reallocations could produce significant savings. 

Fifth, while the four previous base realignment and closure (BRAC)
rounds have resulted in the identification of four naval shipyards,
three naval aviation depots and two warfare centers, three Air Force
depots, and five Army depots for closure or realignment, significant
excess capacity will remain in the public depot system, particularly
if DOD proceeds with its privatization-in-place plans.  Additional
closures and/or realignments could reduce costly excess capacity and
produce significant savings. 

Sixth, we have reported that reengineering the processes and
procedures for organic workloads that have been subjected to
competition resulted in significant efficiency gains and productivity
improvements.  Similar reengineering initiatives for other organic
workloads should also result in significant savings. 

One option the Congress may wish to consider is to direct DOD, prior
to privatizing any depot workloads at depots identified by the BRAC
for closure or realignment, to complete cost analyses that consider
the savings potential of consolidating those BRAC-identified depot
maintenance workloads at other DOD depots.  Such analyses should
include determining savings that can be achieved for existing
workloads by reducing overhead rates through more efficient capacity
utilization of fixed overhead at underused military depots.  The
magnitude of savings would depend on the resulting structure and size
of the depot maintenance system and workload split between the
private and public sectors.  CBO agrees that savings would occur but
were unable to provide a savings estimate at this time. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:17.1

Defense Infrastructure (GAO/HR-97-7, February 1997). 

Air Force Depot Maintenance:  Privatization-in-Place Plans Are Costly
While Excess Capacity Exists (GAO/NSIAD-97-13, December 31, 1996). 

Depot Maintenance:  Opportunities to Privatize Repair of Military
Engines (GAO/NSIAD-96-33, March 5, 1996). 

Closing Maintenance Depots:  Savings, Workload and Redistribution
Issues (GAO/NSIAD-96-29, March 4, 1996). 

Navy Maintenance:  Assessment of the Public-Private Competition
Program for Aviation Maintenance (GAO/NSIAD-96-30, January 22, 1996). 

Depot Maintenance:  The Navy's Decision To Stop F/A-18 Repairs at
Ogden Air Logistics Center (GAO/NSIAD-96-31, December 15, 1995). 

Military Bases:  Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment (GAO/NSIAD-95-133, April 14, 1995). 

Aerospace Guidance and Metrology Center:  Cost Growth and Other
Factors Affect Closure and Privatization (GAO/NSIAD-95-60, December
9, 1994). 

Correspondence to the Chairman, Subcommittee on Readiness, Senate
Committee on Armed Services, follow-up to April 12, 1994, Depot
Maintenance Testimony (GAO/NSIAD-94-242R, July 28, 1994). 

Navy Maintenance:  Assessment of the Public and Private Shipyard
Competition Program (GAO/NSIAD-94-184, May 25, 1994). 

Depot Maintenance:  Issues in Allocating Workload Between the Public
and Private Sectors (GAO/T-NSIAD-94-161, April 12, 1994). 

Depot Maintenance:  Issues in Management and Restructuring To Support
a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:17.2

David R.  Warren, (202) 512-8412



   OPTION:
   MILITARY EXCHANGE STORES
   CONSOLIDATIONMILITARY EXCHANGE
   STORES CONSOLIDATION
------------------------------------------------------ Appendix III:18


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
GAO reviewed the morale, welfare, and recreation (MWR) program--a $12
billion dollar enterprise that provides service members, their
dependents, and eligible civilians with an affordable source of goods
and services like those available to civilians--and found that
revenue generated by the MWR activities is likely to decrease in the
1990's because of the downsizing of forces and increasing private
sector competition.  Appropriated funds--which now constitute 10
percent of MWR funding--are also expected to decline as overall
budgets decline. 

Exchange stores are the largest producer of MWR revenue.  The
Department of Defense's (DOD) decentralized approach to managing the
MWR program will not work well in this environment.  Since 1968,
studies by GAO, DOD, and others have recommended the consolidation of
exchanges into a single entity.  Each study predicted financial
benefits could be achieved through consolidation.  While the Army and
Air Force exchanges have been consolidated, the Navy and Marine Corps
retain independent exchanges.  Further consolidations could achieve
additional savings.  For example, consolidating the Navy and Marine
Corps exchange systems with the Air Force/Army exchange system would
eliminate entire headquarters operations and the corresponding
overhead costs.  The Congress may wish to direct DOD to consolidate
the Navy and Marine Corps exchange systems with the existing Air
Force/Army exchange system.  CBO estimated that the following 5-year
savings might be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                    40      60      60      60      60
Outlays                             30      50      60      60      60
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:18.1

Morale, Welfare, and Recreation:  Declining Funds Require DOD to Take
Action (GAO/NSIAD-94-120, February 28, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:18.2

David R.  Warren, (202) 512-8412



   OPTION:
   BUDGETED CIVILIAN PERSONNEL
   REQUIREMENTSBUDGETED CIVILIAN
   PERSONNEL REQUIREMENTS
------------------------------------------------------ Appendix III:19


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The services determined their civilian personnel requirements for
fiscal year 1997 based on the estimated end-strength for fiscal year
1996 adjusted for program changes that are expected to occur during
fiscal year 1997.  Once the beginning and ending strength for the
budget year are determined, the services compute the estimated work
years and multiply the result by the average civilian personnel
salary cost.\11 If fiscal year 1996 actual end strength was less than
budgeted, the beginning point for determining the fiscal year 1997
requirement was overstated. 

Based on the actual number of civilian personnel on board as of April
1996 for the Navy and other DOD agencies and as of May 1996 for the
Army and Air Force, we estimated that the actual end strength at the
end of fiscal year 1996--the beginning figure for fiscal year
1997--would be 7,331\12 less than the figure used by the services for
determining their fiscal year 1997 budget request.  Because the
services used a larger beginning figure, the number of work years
used in the budget request is also overstated by 3,665 work years
($185.5 million).  In addition, our comparison of the civilian
personnel requirements shown in the President's Budget to the
justification documents prepared in support of the budget request
showed that the budget request was overstated $60 million.  Thus, the
total overstated personnel requirements equate to about $245.5
million. 

In view of the overstated personnel requirements, the Congress may
want to reduce the services' fiscal year 1998 budget requests for
civilian personnel by the amounts of the overstatements; the Army's
by $33.3 million, the Navy's by $108.3 million, the Air Force's by
$70 million, and other DOD agencies by $33.9 million. 

CBO agrees that the differences in proposed versus actual reductions
in personnel creates windfall surpluses in personnel accounts during
a single budget year.  More accurate reporting and subsequent
tightening of the O&M budget may produce savings; however, CBO is
unable to estimate a five-year cost savings for this option. 


--------------------
\11 The average salary cost includes an estimate of funds needed for
severance pay and separation incentives purposes as well as for
compensation. 

\12 This equates to 3,665 work years. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:19.1

1997 DOD Budget:  Potential Reductions to Operation and Maintenance
Program (GAO/NSIAD-96-220, September 18, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:19.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   CONVERT SOME SUPPORT OFFICER
   POSITIONS TO CIVILIAN
   STATUSCONVERT SOME SUPPORT
   OFFICER POSITIONS TO CIVILIAN
   STATUS
------------------------------------------------------ Appendix III:20


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Commissioned military officers are required to provide leadership and
command military organizations.  The services use officers in such
warfighting positions as infantry commander and fighter pilot and
such support positions as civil engineer, personnel officer, and
veterinarian. 

Thousands of officers are staffing positions that could be converted
to civilian status without reducing operational forces.  GAO
evaluated about 32,000 officer positions in the Army, Air Force, and
Navy (about 30 percent of all officers in support positions), and
found that about 9,500 are performing work that could be performed by
civilians at lower cost.  Independently, the Army identified about
6,100 officer and enlisted positions that it believes could be
converted to civilian status and the Air Force found between about
15,200 and about 25,400 officer positions that it believes could be
converted. 

Savings can only be obtained if the military position is deleted from
end strength.  Also, the savings are partially offset by the need to
staff converted positions with civilian personnel, but GAO found that
civilians of roughly equal grade are less expensive than
corresponding military personnel.  GAO did not evaluate the potential
to use contractors rather than federal civilians in converted
positions although using contractors might produce greater savings. 

DOD is in the midst of an extensive drawdown of civilian personnel. 
Military to civilian conversions, however, do not necessarily
conflict with plans to reduce the size of government.  For example,
DOD currently plans to reduce civilian endstrength by 26 percent
between fiscal year 1993 and 2001.  If DOD reduced civilian
endstrength by about 25 percent (rather than 26 percent), it would
have enough civilian authorizations to replace the 9,500 officer
positions. 

If the Congress directed the Department of Defense to civilianize, at
a minimum, the 9,500 officer support positions identified by GAO and
then maintain the grade structure that existed prior to conversion,
the following budget savings could be achieved.  These savings assume
that the commissioned military officer positions are deleted from
DOD's force. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                    97     100     103     106     110
Outlays                             95     100     103     106     110
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:20.1

DOD Force Mix Issues:  Converting Some Support Officer Positions to
Civilian Status Could Save Money (GAO/NSIAD-97-15, October 23, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:20.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   ATTRITION OF ENLISTED PERSONNEL
   FROM THE MILITARY
   SERVICESATTRITION OF ENLISTED
   PERSONNEL FROM THE MILITARY
   SERVICES
------------------------------------------------------ Appendix III:21


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
For at least the last decade, about one-third of enlistees in the
military services have failed to complete their first tours of duty. 
A large percentage of this attrition occurs in the first 6 months of
enlistees' first terms, before they have reported to their first duty
stations.  For example, more than 25,000 of the 176,000 recruits who
were enlisted in fiscal year 1994 were separated before they had
completed 6 months of service.  In fiscal year 1994, the services'
enlisted attrition rates at the 6-month point were as follows:  15.7
percent for the Army, 15.7 for the Navy, 12.5 for the Marine Corps,
and 11.6 for the Air Force. 

Thousands of recruits are separated in their first 6 months of
service because the services do not adequately screen applicants for
disqualifying medical conditions or for preservice drug use.  One
reason that this screening is inadequate is that recruiters do not
have sufficient incentives to ensure that their recruits are
qualified.  Thousands of recruits also are separated who fail to meet
minimum performance criteria.  Recruits have problems meeting
performance standards because they are not physically prepared for
basic training and because they lack motivation.  At present, DOD
lacks consistent and complete information on the percentage of
attrition that is unnecessary.  DOD's primary database for managing
attrition does not allow it to adequately determine the reasons that
enlisted recruits separate and set appropriate targets for reducing
attrition. 

In our recently issued report, to reduce the attrition of enlisted
personnel during the first 6 months of their terms of enlistment and
ensure that only qualified personnel are enlisted, we recommended
that the Secretary of Defense direct the services to

  -- strengthen their recruiter incentive programs to encourage
     recruiters to thoroughly prescreen potential recruits with
     medical histories;

  -- link recruiting quotas to recruits' successful completion of
     basic training;

  -- require potential recruits to provide the names of their medical
     insurers and providers and allow the services access to past
     medical information;

  -- revise their forms for collecting information from recruits; and

  -- use a newly proposed DOD database of medical diagnostic codes to
     determine whether medical screening tests should be added to
     preenlistment examinations. 

The recommendations, if implemented would help the services meet
their goals to reduce attrition in the first 6 months. 

All the services agree that reducing early attrition is desirable. 
To this end, three services have attrition-reducing targets ranging
from 4 to 10 percent.  If the services reach their goals, they would
realize immediate short-term annual savings because they would be
transporting, feeding, clothing, and paying fewer recruits.  We
estimated short-term annual savings would range from around $5
million to $12 million.  Even greater dollar savings could be
realized over time as the services began to reduce the infrastructure
associated with recruiting and training enlistees.  We estimated the
services possible long-term infrastructure savings could range from
$15 million to $39 million.  However, these long-term savings
probably would not be proportional to the decrease in attrition.\13

CBO could not provide a 5-year cost savings that might occur if DOD
reduced enlisted attrition by at least 4 percent because of
limitations with DOD's and the services' attrition data.  However,
CBO was able to calculate an estimated cost savings that might result
if DOD and the services reduced those attritions that result from
inadequate medical screenings designed to identify pre-existing
conditions.  Those estimated cost savings are shown in the table
below. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     5       5       5       6       6
Outlays                              5       5       5       6       6
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\13 GAO's short-term cost savings are based on cost data provided by
the Navy and includes the cost to transport a recruit to basic
training; pay, feed, and house the recruit while at basic training;
provide the recruit's medical examination while at basic training;
and transport the recruit home after separation.  Long-term cost
savings are based on cost data provided by the Office of the
Secretary of Defense and includes the cost of recruiting and training
each new recruit up to the 6-month point in their first terms. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:21.1

Military Attrition:  DOD Could Save Millions by Better Screening
Enlisted
Personnel (GAO/NSIAD-97-39, January 6, 1997). 


      GAO CONTACT
---------------------------------------------------- Appendix III:21.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   ARMY NATIONAL GUARD
   DIVISIONSARMY NATIONAL GUARD
   DIVISIONS
------------------------------------------------------ Appendix III:22


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In March 1996, we reported that the Army National Guard's combat
structure, with 42 combat brigades, exceeds projected requirements
for two major regional conflicts, according to war planners and
Department of Defense (DOD) and Army studies.  Although the National
Guard has state missions in addition to its federal role, RAND
studied the use of Guard forces for state missions and concluded that
even in a peak year, such missions would not require a large portion
of the Guard and therefore should not be used as a basis for sizing
the Guard's force. 

In our report, we noted that the Army has a shortage of support
troops for a two regional conflict strategy and was studying
alternatives to redesign the Guard's combat structure to meet
critical shortages that the Army identified in its support
capabilities.  We recommended that the Secretary of Defense validate
the size and structure of all the Guard's combat forces and that the
Secretary of the Army prepare and execute a plan to bring the size
and structure in line with validated requirements.  We further
recommended that the Secretary of Defense consider eliminating Guard
forces that exceed validated requirements.  DOD's Commission on Roles
and Missions had similar recommendations in their report. 

In January 1997, we reported on the study to redesign the Guard's
combat structure.  We stated that the study developed an option that
provides for the conversion of some Guard combat and supporting
forces to fill needed, but unresourced, support requirements. 
However, neither this study nor other studies deal with the critical
issues of validating the need for the remaining Guard combat
structure or eliminating any excess forces.  As a result, substantial
Guard combat structure is left in place that has no valid war
fighting missions.  We recommended that the Secretary of Defense, as
he guides the Quadrennial Defense Review, direct that the Review
process validate any requirement for Guard combat structure.  We
further recommended that once this validation is complete, the
Secretary of Defense, in concert with the Secretary of the Army,
eliminate any structure beyond validated requirements. 

If the validation process determines that there is structure beyond
validated needs, savings could be achieved by eliminating those
excess forces.  For example, the following savings could be achieved,
if the equivalent of one division were eliminated from the force
structure. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   117     240     245     252     259
Outlays                            105     225     242     248     255
----------------------------------------------------------------------
Note:  For estimating purposes, CBO used the cost of an armored
division.  Since the Army has identified a shortage in its support
forces, this option would retain all support personnel indirectly
associated with the eliminated division.  The elimination of each
additional division would yield more or less savings, depending on
the type of division eliminated. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:22.1

Army National Guard:  Planned Conversions Are A Positive Step, but
Unvalidated Combat Forces Remain (GAO/NSIAD-97-55BR, January 29,
1997). 

Army National Guard:  Validate Requirements for Combat Forces and
Size Those Forces Accordingly (GAO/NSIAD-96-63, March 14, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:22.2

Richard Davis, (202) 512-4032



   OPTION:
   JUNIOR RESERVE OFFICERS'
   TRAINING CORPSJUNIOR RESERVE
   OFFICERS' TRAINING CORPS
------------------------------------------------------ Appendix III:23


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Operation and Maintenance--Army,
                                    Navy, Marine Corps, and Air Force

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The National Defense Act of 1916 established the Junior Reserve
Officers' Training Corps (JROTC) program for high schools and private
secondary schools.  The program's primary purpose was to disseminate
military knowledge among the secondary school population of the
United States.  The ROTC Vitalization Act of 1964 expanded the
program and required the Secretary of each military department to
establish and maintain JROTC units.  In the wake of the August 1992
Los Angeles riots, the President and the Chairman of the Joint Chiefs
of Staff made plans to double the size of the program within 5 years. 

The Army, Navy, Marine Corps, and Air Force Operation and Maintenance
(O&M) budget requests for fiscal year 1997 included $135.3 million
for the JROTC program.  This program was in place in over 2,300 high
schools in economically disadvantaged areas, affluent areas, private
schools, and Department of Defense (DOD) dependent schools at the
time of our review in 1996.  The program objectives are to teach
military and citizenship subjects.  The JROTC program is essentially
a "stay in school" program.  In addition, the Army runs a summer camp
and O&M funds are used to help pay instructors' salaries.  Service
officials emphasized that JROTC is not viewed as a recruiting tool. 

In our September 1995 report we stated that while the program may
provide worthwhile benefits to the community and the public in
general, the question is whether DOD should be involved in funding
this type program or if the program should be funded by a non-DOD
appropriation account.  Congress may wish to discontinue or phase out
the program.  If the program was eliminated, the following savings
could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   170     170     180     180     190
Outlays                            130     160     170     180     180
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:23.1

1996 DOD Budget:  Potential Reduction to Operation and Maintenance
Program (GAO/NSIAD-95-200BR, September 26, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:23.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   DOD'S ACQUISITION
   WORKFORCEDOD'S ACQUISTION
   WORKFORCE
------------------------------------------------------ Appendix III:24


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In November 1995, GAO reported that the Department of Defense (DOD)
had a combined acquisition workforce of about 464,000--398,000
civilians and 66,000 military personnel in fiscal year 1994.  The DOD
acquisition infrastructure consumes enormous resources that could
otherwise be utilized to meet modernization needs.  In 1994, DOD's
civilian acquisition workforce was 12 percent lower than in 1980;
however, these personnel reductions have not resulted in a
commensurate decline in civilian payroll costs.  This is due in part
to the significant decline in blue-collar workers and an increase in
white-collar workers.  In addition, DOD officials stated that
civilian payroll costs increased because of other factors, such as
the advent of locality pay and changes in grade structure. 

Despite declines in both the defense procurement budget and the
civilian workforce since 1990, the number of acquisition
organizations remains relatively constant.  Each acquisition
organization maintains similar occupational fields in common areas,
such as personnel, budgeting, computer specialists, and contracting,
and many of the duties performed in these occupations are not unique
to an acquisition organization's mission.  As a result, there are
significant opportunities to improve efficiencies in these areas,
such as consolidating, cross-servicing, and streamlining certain
functions. 

The National Defense Authorization Act for Fiscal Year 1996 contains
a provision (Title IX, section 906) that required DOD to provide a
plan to reduce the number of personnel (both military and civilian)
assigned to defense organizations by 25 percent, or 90,000 personnel
over a 4-year period.  The provision also required an actual
reduction of 15,000 personnel during fiscal year 1996.  In addition,
the Defense Authorization Act for 1997 reemphasized congressional
commitment to realizing significant reductions and increased
efficiencies from the defense acquisition infrastructure.  Although
the 1997 Act requires a specific reduction of 15,000 in the number of
personnel assigned to defense acquisition organizations during fiscal
year 1997, it also directs DOD to assess the impact of the reductions
prior to consideration of further cuts.  Stopping at the 30,000
person reduction level would amount to only one-third of the total
25-percent reduction required by Title-IX, section 906. 

The savings from a 90,000 person reduction in civilian personnel
salaries alone are estimated in the following table. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   805   1,657   2,556   3,513   3,636
Outlays                            781   1,631   2,529   3,485   3,633
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:24.1

Defense Acquisition Organizations:  Changes in Cost and Size of
Civilian Workforce (GAO/NSIAD-96-46, November 13, 1995). 

Defense Infrastructure:  Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, April 4, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:24.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   DOD'S FINANCE AND ACCOUNTING
   INFRASTRUCTUREDOD'S FINANCE AND
   ACCOUNTING INFRASTRUCTURE
------------------------------------------------------ Appendix III:25


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
After several false starts, in May 1994 the Department of Defense
(DOD) announced it would begin consolidating and reducing the size of
its finance and accounting infrastructure during fiscal year 1995. 
It plans to reduce the number of sites where finance and accounting
activities are conducted from over 300 to 26, which will result in a
major reduction in staff years.  The 26 sites are composed of 5 large
existing finance centers and 21 new sites that are called operating
locations.  To date, 16 operating locations have been opened. 

Despite these consolidation efforts, additional opportunities exist
to reduce the infrastructure and improve the efficiency of finance
and accounting operations.  In September 1995, we reported that the
process DOD used to identify the appropriate size and location of its
consolidated operations was flawed.  Not only would the planned
infrastructure be larger than necessary, but it would also perpetuate
the continued use of older, inefficient, and duplicative systems. 
With fewer people available to support the same operations and
systems at fewer locations, the consolidation could degrade, rather
than improve, customer service.  Moreover, DOD's plan does not
reflect leading-edge business practices and, therefore, may require
additional consolidations if business process reengineering
techniques are used to identify more productive business practices
for DOD finance and accounting operations. 

Because DOD's decision to open 21 new operating locations was not
based on current or future operating requirements, customer needs, or
leading-edge business practices, other consolidation alternatives
could produce substantial infrastructure savings.  The Defense
Finance and Accounting Service (DFAS) Consolidation Task Force showed
that savings could occur by retaining the 5 large centers plus 6, 10,
or 15 operating locations.  The Task Force concluded, however, that 6
new operating locations was the best alternative because it would
save more money and allow an optimum consolidation of finance and
accounting functions.  Based on this and other factors, we
recommended that DOD reassess the number of operating locations
needed to efficiently perform finance and accounting operations. 

DOD's subsequent reassessment concluded that 16 rather than 21
operating locations are needed to support its finance and accounting
operations.  Because of its interpretation of congressional intent,
however, DOD continues to support the opening of all 21 locations. 
In presenting this option, we relied on the analysis performed by the
DFAS Consolidation Task Force which identified 6 as the optimum
number of operating locations. 

Recognizing the costs DOD has incurred to open 16 centers, reducing
the number of operating locations from 16 to 6 could achieve savings
in several different ways.  First, a reduction in the infrastructure
would require fewer support and management personnel and related
items to operate the locations.  Second, military construction
funding for sites that would require extensive renovations would not
be necessary.  Third, in anticipation of the efficiencies and service
improvements that would be achieved under DOD's reengineering and
privatization efforts, annual funding could be reduced 10 to 15
percent.  If the Congress was to direct the Secretary of Defense to
reduce the existing 16 locations to 6, as recommended by the DFAS
Consolidation Task Force, the following savings could be achieved in
civilian personnel and military construction.  This represents the
optimum consolidation of locations according to the DFAS
Consolidation Task Force.  The savings estimate assumes that by
reducing the number of sites to six, 6,500 civilian personnel
positions would be eliminated.  This magnitude of personnel
reductions can only be attained if DOD achieves the productivity
gains it expects from reengineering and privatization/outsourcing
initiatives.  However, the Congress and DOD will need to reach an
agreement on the exact number of operating locations and reductions
in personnel.  Moreover, DOD may need to make investments in this
area to improve its financial management systems. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   174     299     369     382     395
Outlays                            171     295     367     381     395
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:25.1

Defense Financial Management (GAO/HR-97-3, February 1997). 

DOD Infrastructure:  DOD's Planned Finance and Accounting Structure
Is Not Well Justified (GAO/NSIAD-95-127, September 18, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:25.2

David R.  Warren, (202) 512-8412



   OPTION:
   DOD'S TRAINING
   INFRASTRUCTUREDOD'S TRAINING
   INFRASTRUCTURE
------------------------------------------------------ Appendix III:26


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Analysis of the Department of Defense's (DOD) end strengths, training
workloads, and overall training budgets between fiscal years 1987 and
1995 showed that end strengths and training workloads have decreased
at much greater rates than the training budget.  Between fiscal years
1987 and 1995, the number of Army, Navy, Marine Corps, and Air Force
active duty personnel decreased from about 2.2 million to about 1.5
million--a reduction of about 30 percent.  During the same period,
the training workloads for formal training and education programs
decreased from about 248,000 to about 178,000--a reduction of about
28 percent.  However, military personnel funding, which is used to
pay military students, instructors, and training support and
management personnel, decreased by only about 15 percent, and
operation and maintenance (O&M) funding, which is used to pay DOD
civilian and contractor instructors and to operate, maintain, and
support training facilities and equipment, increased about 30
percent. 

The cost of providing formal military training and education to
individuals increased significantly between fiscal years 1987 and
1995.  During this period, the training cost per student increased
from about $53,194 to $72,546.  (After considering the effects of
inflation, the cost per student increased about $4,200 a year.) This
cost differential when multiplied by the fiscal year 1995 training
workload shows that it cost about $745 million more to train students
in fiscal year 1995 than it would have taken to train the same number
of students in 1987, even after accounting for inflation.  Officials
told us that the primary reason that training had become more
expensive was the increased use of government civilian and
private-sector instructors and facilities rather than military
instructors. 

DOD and the services have completed several actions to reduce the
training infrastructure, and even more actions will be implemented
over the next several years.  The actions are intended to (1) reduce
the number of locations where a particular course is taught, (2)
increase interservice training, and (3) increase the use of private
sector instructors and facilities.  Also, actions by the Base
Realignment and Closure (BRAC) Commission to close and realign bases
where training is conducted are also expected to reduce the training
infrastructure.  However, an overall plan to guide and measure the
progress of reducing the training infrastructure is lacking. 

The lack of a management information system with reliable cost data
within the various training categories makes it difficult for DOD to
evaluate the overall effectiveness of alternate methods of providing
training and assess whether actions taken to reduce costs are
achieving the expected results.  The need for reliable data and a
system for evaluating it has become even more critical because excess
training infrastructure identified in the future will be difficult to
eliminate in the absence of a BRAC-like process. 

In view of the disparity between training workload and training
costs, Congress may want to cap the funding level for O&M-related
formal education and training at the fiscal year 1997 level until DOD
develops a management plan to guide and measure progress in reducing
the training infrastructure. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   144     300     461     635     818
Outlays                            130     281     441     615     797
----------------------------------------------------------------------
Note:  The savings shown in the above table represent the amounts
estimated for O&M-related formal education and training above the
fiscal year 1997 funding level. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:26.1

DOD Training:  Opportunities Exist to Reduce the Training
Infrastructure (GAO/NSIAD-96-93, March 29, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:26.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   DOD'S TRANSPORTATION MIGRATION
   SYSTEMSDOD'S TRANSPORTATION
   MIGRATION SYSTEMS
------------------------------------------------------ Appendix III:27


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
In April 1994, DOD developed a structured approach to identify,
select, and implement transportation migration systems.\14 However,
in its haste to meet a March 1997 deadline, DOD selected these
systems without fully analyzing alternatives, such as acquiring new
systems or contracting for services.  Further, in making a quarter of
its transportation migration system selections, DOD relied on
incomplete and unverified cost data.  Finally, DOD did not assess how
making significant changes to transportation operations--through
reengineering and outsourcing--will affect its migration systems.  By
relying on such inadequate analyses in making its system selections,
DOD essentially gambled that systems migration would achieve
anticipated savings and resolve problems with transportation business
processes.  As a result, its selections may turn out to be poor
investments and preclude the use of better commercial alternatives. 

DOD has little assurance that its selection of 28 transportation
migration systems is cost effective.  At a minimum, had DOD followed
its own regulations and calculated investment returns, it would have
found--based on data available when the migration systems were
selected--that two of the selected systems would produce a negative
return if implemented as migration systems.  The Air Loading Module
would lose 67 cents out of every dollar invested and the Cargo
Movement Operations Systems would lose 4 cents out of every dollar
invested. 

Before proceeding with its systems migration effort, DOD should
immediately establish current cost, benefit, investment return, and
schedule baselines and terminate the migration of transportation
systems for which migration is shown to be a poor investment.  For
example, if the Air Loading Module and the Cargo Movement Operations
Systems were not deployed as migration systems, the following savings
could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     3       0       0       0       0
Outlays                              2       1       0       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\14 A migration system is an automated information system which
replaces several systems that perform similar functions. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:27.1

Defense IRM:  Strategy Needed for Logistics Information Technology
Improvement Efforts (GAO/AIMD-97-6, November 14, 1996). 

Defense Transportation:  Migration Systems Selected Without Adequate
Analysis (GAO/AIMD-96-81, August 29, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:27.2

Jack L.  Brock, Jr., (202) 512-6240



   OPTION:
   DOD'S MATERIEL MANAGEMENT
   MIGRATION SYSTEMSDOD'S MATERIEL
   MANAGEMENT MIGRATION SYSTEMS
------------------------------------------------------ Appendix III:28


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Defense Business Operations Fund
                                    (97-4930)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
In December 1995, the Department of Defense (DOD) determined that its
goal of developing a standard suite of nine integrated systems to
improve various aspects of materiel management operations--including
asset management, requirements determination, and inventory
management--would cost much more than the $5.3 billion originally
estimated.  DOD abandoned its plan to deploy all nine systems as an
integrated suite across all inventory control points and now plans to
deploy the systems individually as they are developed at selected
sites.  It has also embarked on an accelerated deployment schedule to
provide these systems from fiscal year 1996 through 1999. 

As a result, DOD is embarking on a new strategy before taking a
number of steps to ensure that the hundreds of millions of dollars to
be spent on materiel management systems, as well as the monies
already invested, bring positive results.  Specifically, DOD did not
first conduct economic and risk assessments that would ensure its
strategy would be cost-effective.  DOD also did not incorporate
efforts to improve, consolidate, and privatize logistics operations
into its strategy.  Such changes will impact the processes the
systems are being developed to support.  Further, this strategy was
not justified within DOD's own oversight process, nor were documents
critical to defining the program's objectives, costs, goals, and risk
mitigation strategies prepared.  As a result, DOD decisionmakers were
not afforded an opportunity to thoroughly review the new program
before deploying new systems. 

Moreover, DOD is proceeding with deployments under the new strategy
without accommodating the time required for testing the new systems. 
This greatly increases the risk that DOD will experience problems
associated with shifting testing to system users and curtailing the
levels of testing normally done.  As a result, DOD is likely to incur
substantial additional costs to operate and maintain its current
systems and to correct deficiencies with the new systems. 

To provide more timely service, DOD made a major change in its
materiel migration system\15 policy.  In doing so, it is clearly on a
course to accelerate system deployments before critical steps are
taken that would help ensure that good business decisions are made
and that risks are minimized.  As a result, DOD is likely to deploy
systems that will not be significantly better than the hundreds of
systems already in place and could waste millions of dollars
resolving problems that result from the lack of developing and
implementing a clear and cohesive strategy.  Before proceeding with
any new strategy, it is imperative that DOD takes the necessary steps
to fully define its approach, plan for risks, ensure adequate
oversight, and complete testing of the new systems.  DOD must also
immediately establish current cost, benefit, investment return, and
schedule baselines and terminate materiel management migration
systems for which migration is shown to be a poor investment. 

Savings for this option cannot be estimated at this time.  The amount
of savings would depend on the outcome of DOD's review of its
systems. 


--------------------
\15 A migration system is an automated information system which
replaces several systems that perform similar functions. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:28.1

Defense IRM:  Strategy Needed for Logistics Information Technology
Improvement Efforts (GAO/AIMD-97-6, November 14, 1996). 

Defense IRM:  Critical Risks Facing New Materiel Management Strategy
(GAO/AIMD-96-109, September 6, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:28.2

Jack L.  Brock, Jr., (202) 512-6240



   OPTION:
   DOD'S BULK FUEL BUDGETINGDOD'S
   BULK FUEL BUDGETING
------------------------------------------------------ Appendix III:29


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Defense Fuel Supply Center (DFSC) has the primary responsibility
for providing the services with the fuel they need.  DFSC purchases
the fuel from commercial sources and sells it to the services. 
Although DFSC is the primary source, the services also buy a small
amount of fuel direct from commercial sources.  For fiscal year 1996,
the Army, Navy, and Air Force budget requests for bulk fuel totaled
$4.12 billion.  Of this total, the three services planned to buy $107
million, or 2.6 percent, from commercial sources.  Therefore, the
amount of funds requested to buy fuel from DFSC was about $4.01
billion. 

At the time that the Department of Defense (DOD) submitted its fiscal
year 1996 budget request, DFSC estimated that the services would
purchase about $3.68 billion of fuel in fiscal year 1996, or about
$330 million less than the amount requested.  During the
authorization and appropriation process, the Congress reduced the
budget request $100 million.  Based on historical usage data adjusted
for factors expected to occur in fiscal year 1996, DFSC estimated, in
February 1996, that the services' fuel purchases in fiscal year 1996
would be about $3.57 billion, or about $440 million less than the
amount the services requested in their budgets. 

For fiscal year 1997, the services have again requested more funds
for fuel than they will need.  The services budgeted for 117.8
million barrels of fuel at a cost of $3.796 billion.  However, DFSC
estimates that the services will buy 113.2 million barrels at a cost
of about $3.613 billion, or $183 million less than the services
estimate. 

Because the over budgeting for bulk fuel seems to be a recurring
practice, the Congress may want to reduce the services' fiscal year
1998 budget requests by the $183 million overbudgeted for fiscal year
1997. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   183       0       0       0       0
Outlays                            136      36       6       2       1
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:29.1

1997 DOD Budget:  Potential Reductions to Operation and Maintenance
Program (GAO/NSIAD-96-220, September 18, 1996). 

DOD Bulk Fuel:  Budgeting for Bulk Fuel and Other Operation and
Maintenance Activities (GAO/T-NSIAD-96-208, July 30, 1996). 

DOD Bulk Fuel:  Services' Fuel Requirements Could Be Reduced and
Funds Used for Other Purposes (GAO/NSIAD-96-96, March 28, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:29.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   NAVY FINANCIAL MANAGEMENT OF
   OPERATING MATERIALS AND
   SUPPLIESNAVY FINANCIAL
   MANAGEMENT OF OPERATING
   MATERIALS AND SUPPLIES
------------------------------------------------------ Appendix III:30


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Operations and Maintenance, Navy
                                    (17-1804)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Chief Financial Officers Act of 1990, as amended, requires that
each agency Chief Financial Officer (CFO) develop an integrated
agency accounting and financial management system that complies with
applicable principles and standards and provides for complete,
reliable, consistent, and timely information that is responsive to
the agency's financial information needs.  The act also specifies
that each agency CFO should direct, manage, and provide policy
guidance and oversight of asset management systems, including
inventory management and control. 

Our broad-based review of various aspects of the Department of the
Navy's financial management operations and its ability to meet the
management and reporting requirements of the CFO Act identified
numerous deficiencies.  These deficiencies can have significant
budgetary implications.  For example, we found that, because of
inadequate systems, Navy item managers did not have sufficient
visibility over $5.7 billion in operating materials and supplies on
ships and at 17 Navy redistribution sites.  About $883 million, 15
percent of the $5.7 billion, was excess to current operating
allowances or needs. 

Lacking adequate visibility, item managers incurred unnecessary costs
of approximately $27 million in the first half of fiscal year 1995 as
a result of ordering or purchasing items that were already on-hand at
operating locations and classified as excess.  Also, our analysis of
planned purchases through the end of fiscal year 1997 showed that the
Navy could incur an estimated additional $38 million in unnecessary
costs by procuring items which are already in operating level stock
as excess. 

We recommended that the Navy could achieve savings by providing item
managers with full visibility over such materials and eliminating
redundant or unnecessary redistribution sites.  Almost half of the
excess items were stored at the Navy's 17 redistribution sites. 
These sites are often located in the same general area as other DOD
suppliers.  Eliminating the 17 sites would reduce associated
operating costs by $3 million annually and could reduce redundant
supply operations and streamline visibility efforts. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                     3       3       3       3       3
Outlays                              2       3       3       3       3
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:30.1

Defense Financial Management (GAO/HR-97-3, February 1997). 

Navy Financial Management:  Improved Management of Operating
Materials and Supplies Could Yield Significant Savings (GAO/AIMD-
96-94, August 16, 1996). 

CFO Act Financial Audits:  Navy Plant Property Accounting and
Reporting Is Unreliable (GAO/AIMD-96-65, July 8, 1996). 

Financial Management:  Control Weaknesses Increase Risk of Improper
Navy Civilian Payroll Payments (GAO/AIMD-95-73, May 8, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:30.2

Lisa G.  Jacobson, (202) 512-9542



   OPTION:
   COPAYMENTS FOR CARE IN MILITARY
   TREATMENT FACILITIESCOPAYMENTS
   FOR CARE IN MILITARY TREATMENT
   FACILITIES
------------------------------------------------------ Appendix III:31


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Defense Health Program (97-0130)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
Numerous GAO reports and testimonies have documented the problems of
controlling costs in the military health service system.  In
particular, we have reported that currently care received by military
beneficiaries in military hospitals and clinics is free.  However,
when care must be obtained through civilian providers, military
beneficiaries share in the costs of the care they receive.  This
uneven system has led to confusion, uncertainty, and inequity among
beneficiaries as to what their health care benefits are.  Further,
research has shown that free care leads to greater (and unnecessary)
use and, therefore, greater costs. 

The Department of Defense (DOD) managed care system--TRICARE--is
intended to make health care benefits uniform regardless of venue,
but some cost sharing is still based on where patients receive their
care.  Under TRICARE, beneficiaries pay the same enrollment fees
whether they are enrolled with a military or civilian primary care
manager.  However, subsequent cost-sharing--in the form of copays for
visits--is still not required for care provided in military clinics
but is required for care from civilian providers. 

The Congress may wish to establish beneficiary cost-sharing
requirements in military facilities that are similar to the cost
sharing for care that beneficiaries receive from civilian providers. 
CBO estimates that such a change would result in the following
savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   305     300     302     305     307
Outlays                            258     292     298     303     305

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   305     300     302     305     307
Outlays                            258     292     298     303     305
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:31.1

Defense Health Care:  New Managed Care Plan Progressing, but Cost and
Performance Issues Remain (GAO/HEHS-96-128, June 14, 1996). 

Defense Health Care:  Despite TRICARE Procurement Improvements,
Problems Remain (GAO/HEHS-95-142, August 3, 1995). 

Defense Health Care:  DOD's Managed Care Program Continues to Face
Challenges (GAO/T-HEHS-95-117, March 28, 1995). 

Defense Health Care:  Issues and Challenges Confronting Military
Medicine (GAO/HEHS-95-104, March 22, 1995). 

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21, May 10, 1993). 

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24, April 7, 1992). 

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10, October 3, 1991). 

The Military Health Services System--Prospects for the Future
(GAO/T-HRD-91-11, March 14, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:31.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   ADMINISTERING DEFENSE HEALTH
   CAREADMINISTERING DEFENSE
   HEALTH CARE
------------------------------------------------------ Appendix III:32


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Defense Health Program (97-0130)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Each of the three military departments (Army, Navy, and Air Force)
operates its own health care system, providing medical care to active
duty personnel, their dependents, retirees, and survivors of military
personnel.  To a large extent, these systems perform many of the same
administrative, management, and operational functions. 

Since 1949 over 22 studies have reviewed whether a central entity
should be created within the Department of Defense (DOD) for the
centralized management and administration of the three systems.  Most
of these studies encouraged some form of organizational
consolidation.  A Defense health agency would consolidate the three
military medical systems into one centrally managed system,
eliminating duplicate administrative, management, and operational
functions.  No specific budget estimate can be developed until
numerous variables, such as the extent of consolidation and the
impact on command and support structures, are determined. 

DOD's implementation of a systemwide managed care program--
TRICARE--adds to the advantages to be gained by eliminating the
separate medical systems within the department.  DOD has divided the
country into 12 regions, each with its own administrative staff
headed by a Lead Agent.  These Lead Agents have the responsibility
for administering TRICARE in their regions.  However, because all of
the operational control over medical facilities is still with the
separate services, the Lead Agents do not have the command and
control authority to manage the medical care delivered directly by
DOD, which is most of the care received by military health care
beneficiaries.  Presumably, a single Defense health agency would
incorporate this new regional structure and give Lead Agents genuine
control over all DOD care in their regions. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:32.1

Defense Health Care:  New Managed Care Plan Progressing, but Cost and
Performance Issues Remain (GAO/HEHS-96-128, June 14, 1996). 

Defense Health Care:  Medicare Costs and Other Issues May Affect
Uniformed Services Treatment Facilities' Future (GAO/HEHS-96-124, May
17, 1996). 

Defense Health Care:  Effects of Mandated Cost Sharing on Uniformed
Services Treatment Facilities Likely to Be Minor (GAO/HEHS-96-141,
May 13, 1996). 

Defense Health Care:  Despite TRICARE Procurement Improvements,
Problems Remain (GAO/HEHS-95-142, August 3, 1995). 

Defense Health Care:  DOD's Managed Care Program Continues to Face
Challenges (GAO/T-HEHS-95-117, March 28, 1995). 

Defense Health Care:  Issues and Challenges Confronting Military
Medicine (GAO/HEHS-95-104, March 22, 1995). 

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21, May 10, 1993). 

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24, April 7, 1992). 

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10, October 3, 1991). 

The Military Health Services System--Prospects for the Future
(GAO/T-HRD-91-11, March 14, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:32.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   UNIFORMED SERVICES UNIVERSITY
   OF THE HEALTH SCIENCESUNIFORMED
   SERVICES UNIVERSITY OF THE
   HEALTH SCIENCES
------------------------------------------------------ Appendix III:33


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
With the end of the draft in 1972, the military services needed new
ways to obtain active duty physicians.  To address this need, Public
Law 92-426 established two complementary programs:  the Health
Profession Scholarship Program and the Uniformed Services University
of the Health Sciences (USUHS), a medical school operated by DOD. 

Under the scholarship program, DOD pays tuition and fees, plus a
monthly stipend for students enrolled in civilian medical schools. 
In return, the students incur an obligation to serve a year of active
duty for each year of benefits received, with a 2-year minimum
obligation.  Upon graduation, most scholarship program participants
go on active duty and begin graduate medical education (GME) in
military hospitals.  In 1994, 987 scholarship program participants
graduated from medical school. 

Students at USUHS enter active military service as medical students,
receive the pay and benefits of officers at the O-1 level, and incur
7-year service obligations.  In 1994, 155 medical students graduated
from the University.  Overall, USUHS graduates represent about 14
percent of military physicians on active duty. 

In the 2 decades since its legislative establishment, proposals have
been made to close USUHS.  Those who propose closing the University
assert that DOD's need for physicians can be met at a lower cost
using physicians educated at civilian medical schools under the DOD
scholarship program.  GAO's analysis shows that USUHS is a more
costly source of military physicians on a per graduate basis when
DOD's and total federal costs are considered.  With DOD education and
retention costs of about $3.3 million over the course of a
physician's career, the cost of a University graduate is more than 2
times greater than the $1.5 million cost for a scholarship program
graduate.  However, GAO estimates show that the annual costs of USUHS
graduates ($182,000) are comparable to scholarship graduates
($181,000) when total federal costs are amortized over the expected
years of military service because USUHS graduates are expected to
have longer military careers and the University receives less non-DOD
federal support than civilian medical schools.  USUHS graduates are
expected to serve for about 18.5 years, on average, while scholarship
program physicians serve for 9.8 years, on average. 

Those who propose retaining the University assert that it is needed
to provide a stable cadre of physicians trained to meet the unique
demands of military medicine.  GAO's analysis shows that USUHS
provides a medical education that compares well with that of other
U.S.  medical schools.  However, while USUHS graduates begin their
military medical careers with more readiness training than their
peers, the significance of the additional training is unclear. 

In addition, to help meet standards required for accreditation as an
academic institution, USUHS provides education and training for other
health care and related professions and engages in research,
consultation, and archival activities.  While these activities do not
directly contribute to the education of military physicians, they do
involve USUHS faculty and staff, and University officials believe
that DOD would continue to conduct these activities even if USUHS is
closed.  USUHS officials estimated the value of these activities to
be about $18.6 million--a figure that GAO did not validate. 

Given the changes in operational scenarios and DOD's approach for
delivering peacetime health care, new assessments of the military's
physician needs and the means to acquire and retain physicians are in
order.  If DOD continues to need a cadre of experienced career
physicians, alternative strategies, such as an additional scholarship
option with a longer service obligation, could be considered as a
potentially less expensive way to increase the length of selected
military physicians' careers. 

This option assumes that (1) the University would close at the end of
fiscal year 2000 after the current freshman class graduates, (2) the
scholarship program would be expanded to offset the loss of
physicians trained at USUHS, and (3) scholarship program participants
incur a 2-year service obligation for each year of benefits received. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 funding level
----------------------------------------------------------------------
Budget authority                    17      32      45      83      81
Outlays                             14      28      42      76      79

Savings from 1997 funding levels adjusted for inflation
----------------------------------------------------------------------
Budget authority                    19      37      53      94      94
Outlays                             16      33      49      86      92
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:33.1

Military Physicians:  DOD's Medical School and Scholarship Program
(GAO/HEHS-95-244, September 29, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:33.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   UNIFORMED SERVICES TREATMENT
   FACILITIESUNIFORMED SERVICES
   TREATMENT FACILITIES
------------------------------------------------------ Appendix III:34


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Defense Health Program (97-0130)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
In 1982, the Congress enacted legislation that designates nine former
Public Health Service hospitals now under civilian ownership as
Uniformed Services Treatment Facilities (USTF) and makes them part of
the Department of Defense's (DOD) health care system.  Between 1994
and 1997, DOD has spent over $1.3 billion on noncompetitive,
set-aside contracts with the USTFs to deliver health care to what now
totals about 124,000 beneficiaries.  This arrangement with DOD has
guaranteed the USTFs, in addition to their private health care
business, a stable revenue source by enabling them to provide care to
uniformed services beneficiaries.  The USTFs offer their members the
full Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS)\16 benefit package plus additional preventive services not
covered by CHAMPUS.  But unlike CHAMPUS, USTF members do not lose
their eligibility when they reach age 65 and become
Medicare-eligible.  At the beginning of fiscal year 1996, 22 percent
(about 27,000) of the USTF members were Medicare-eligible. 

GAO and others have reported that the USTFs are not as cost-effective
as alternative federal sources of health care.  The Institute for
Defense Analyses estimated that the USTFs cost the government $110
million more per year than what costs would be if the beneficiaries
had to rely on the current military health services system and
Medicare for their care.  Also, the Institute reported that high
numbers of USTF beneficiaries have private insurance coverage, and
GAO found that many are receiving Medicare services outside the USTF,
even though DOD has already paid the USTFs in advance for all USTF
members' care.  In response to GAO's recommendations, DOD and the
Health Care Financing Administration have recently estimated about
$33 million in unnecessary costs to the government from USTF members'
use of Medicare between October 1993 and December 1995. 

The Congress included reforms in the fiscal year 1997 DOD
authorization act to reduce the relative costliness of the USTFs
compared with alternative programs, such as military hospitals,
TRICARE, and Medicare.  However, before any savings can be realized,
DOD must complete new sole-source contract negotiations with each
USTF.  An immediate, cost-effective, and equitable option would be to
terminate the USTF program by repealing the hospitals' status as
designated, sole-source providers of DOD health care.  Instead,
former USTF beneficiaries would be treated the same way all other DOD
beneficiaries are treated under DOD's managed care support contracts
and direct care system.  Such beneficiaries would retain their
eligibility for Medicare-financed care, as well as DOD's direct care
system.  And, as noted above, a high number of such beneficiaries
already have private insurance.  Ending the USTFs' current
sole-source, noncompetitive contractual relationship with DOD would
remove their decided business advantage over other, competitive
TRICARE providers. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   118     107      95      81      71
Outlays                            118     107      95      81      71

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   121     122     123     128     128
Outlays                            121     122     123     128     128
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\16 CHAMPUS is a fee-for-service health insurance program that pays
for a substantial part of the health care that civilian hospitals,
physicians, and others provide to nonactive duty DOD beneficiaries. 
DOD is in the process of changing its military health services system
from the separate systems of direct care in military facilities and
CHAMPUS to TRICARE, a nationwide managed care program.  TRICARE
involves managing beneficiary care using all available military
hospitals and clinics, supplemented by contracted civilian services. 
TRICARE offers CHAMPUS-eligible beneficiaries choice between three
benefit plans--fee for service, preferred provider, and health
maintenance organization. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:34.1

Defense Health Care:  Medicare Costs and Other Issues May Affect
Uniformed Services Treatment Facilities' Future (GAO/HEHS-96-124, May
17, 1996). 

Defense Health Care:  Effects of Mandated Cost Sharing on Uniformed
Services Treatment Facilities Likely to Be Minor (GAO/HEHS-96-141,
May 13, 1996). 

Defense Health Care:  Uniformed Services Treatment Facility Health
Care Program (GAO/HEHS-94-174, June 2, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:34.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   DEPARTMENT OF ENERGY'S
   PROCUREMENT OF LABORATORY
   TESTING SERVICESDEPARTMENT OF
   ENERGY'S PROCUREMENT OF
   LABORATORY TESTING SERVICES
------------------------------------------------------ Appendix III:35


Authorizing committees              Energy and Natural Resources
                                    (Senate)
                                    Resources (House)
                                    Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)

Primary agency                      Department of Energy

Account                             Defense Environmental Restoration
                                    and Waste Management (89-0242)

Spending type                       Discretionary

Budget subfunction                  Atomic Energy Defense Activities

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Both the Department of Energy (DOE) and the Environmental Protection
Agency (EPA) are responsible for large environmental cleanup efforts. 
A major component of DOE's cleanup program involves analyses of toxic
and radioactive contaminants.  DOE has estimated that these analyses
may cost the federal government more than $15 billion over the next
30 years.  While both agencies analyze nonradioactive organic and
inorganic chemicals using some of the same testing methods, the
agencies procure these commonly-used analyses in a different manner. 
EPA centrally contracts for them while DOE employs a decentralized
procurement approach that relies heavily on its operating contractors
to subcontract for them through commercial laboratories. 

Under its procurement approach, DOE pays higher prices to its
commercial laboratories than EPA does for the same analyses and
methods, partly because decentralized purchasing practices do not
produce price competition, volume discounts, and compliance with one
standard contract format.  Also, DOE's decentralized approach to
procuring commonly-used analyses results in duplication of contractor
efforts in the award and management of commercial laboratory
subcontracts, which adds inefficiencies and increases administrative
costs.  GAO's analysis indicates that if DOE contracted for these
services through one central procurement function, similar to EPA's
approach, it would receive substantially lower prices from commercial
laboratories by consolidating its overall buying power and greatly
reduce the inherent duplication in contract award and oversight
activities.  DOE is currently attempting to contract for these
services on a regional basis. 

DOE estimated that laboratory analyses costs are at least 15 percent
of its cleanup costs, and in fiscal year 1997, DOE was appropriated
about $6 billion for Defense Environmental Restoration and Waste
Management.  While we believe savings could be achieved through
centralization, a 5-year savings amount is difficult to estimate for
several reasons, including the lack of current and complete data and
the extent to which DOE's prices would be affected by the potential
for radioactivity in DOE's samples. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:35.1

Nuclear Facility Cleanup:  Centralized Contracting of Laboratory
Analysis Would Produce Budgetary Savings (GAO/RCED-95-118, May 8,
1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:35.2

Victor S.  Rezendes, (202) 512-3841



   150 INTERNATIONAL AFFAIRS
------------------------------------------------------ Appendix III:36

  -- USAID's Housing Guaranty Program

  -- Excess Real Estate at Overseas Diplomatic Posts

  -- Overseas Diplomatic Posts

  -- State Department Functions and Activities

  -- State Department Support Functions

  -- TV Marti

  -- USIA Exchange Programs

  -- USIA Overseas Posts, Activities, and Cultural Centers

  -- International Broadcasting

  -- Risk-Based Exposure Fees for Export-Import Bank

  -- Export-Import Bank Programs



   OPTION:
   USAID'S HOUSING GUARANTY
   PROGRAMUSAID'S HOUSING GUARANTY
   PROGRAM
------------------------------------------------------ Appendix III:37


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Foreign Operations (Senate and
                                    House)

Primary agency                      Agency for International
                                    Development

Account                             Housing Guaranty Program Account
                                    (72-0401)

Spending type                       Discretionary

Budget subfunction                  International Development and
                                    Humanitarian Assistance

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Foreign Assistance Act of 1961, as amended, authorizes the U.S. 
Agency for International Development (USAID) to guaranty loans made
by U.S.  investors to borrowers in developing countries for
shelter-related projects.  With this authority, USAID operates the
Housing Guaranty Program.  A long-run goal of this program is to
increase shelter for low-income families in developing countries by
stimulating local credit institutions to provide the necessary
investment capital and other resources.  Since 1961, USAID has
guarantied over $2.7 billion in loans to 44 countries for home
construction, mortgages, home improvements, urban infrastructure, and
other shelter-related projects. 

In June 1995, GAO reported that USAID had not achieved the key
objectives of the Housing Guaranty Program despite over 30 years of
trying.  GAO's analysis showed that U.S.-sponsored housing
construction projects had not actually stimulated private investment. 
Nonetheless, USAID continued to guaranty loans for housing projects
under this program.  Furthermore, GAO found that USAID does not
always know whether the program is benefiting the poor target
population.  On the contrary, we found numerous instances where the
program was benefiting higher-income families.  We also reported that
many borrowers have defaulted on previous loan payments forcing
USAID, as guarantor, to make these payments for them.  The fees that
USAID charges borrowers do not generate sufficient income to cover
these costs. 

GAO recommended that the Congress terminate the program.  Although
defaults on outstanding loan balances could cost USAID in excess of
$1 billion, CBO estimates that terminating the Housing Guaranty
Program would produce $24 million in savings over 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     4       4       4       5       5
Outlays                              0       1       2       3       3

Savings from the 1997 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                     4       5       5       5       5
Outlays                              0       1       2       3       4
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:37.1

Foreign Housing Guaranty Program:  Financial Condition Is Poor and
Goals Are Not Achieved (GAO/NSIAD-95-108, June 2, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:37.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   EXCESS REAL ESTATE AT OVERSEAS
   DIPLOMATIC POSTSEXCESS REAL
   ESTATE AT OVERSEAS DIPLOMATIC
   POSTS
------------------------------------------------------ Appendix III:38


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      Department of State

Account                             Security and Maintenance of U.S.
                                    Missions (19-0535)

Spending type                       Discretionary

Budget subfunction                  Conduct of Foreign Affairs

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Department of State has millions of dollars invested in overseas
properties that may be unneeded or too expensive to maintain.  Proper
management of the sale of these assets could generate considerable
revenue.  State's process for selling unneeded real estate requires
weighing multiple factors presented by different groups with
competing interests.  Resistance from the host government can add
further to delays in selling these properties.  Resolving these
differences often stalls potential sales for years.  Furthermore,
State has the authority to retain and use the proceeds from real
estate sales for other facilities' needs without specific approval
from the Office of Management and Budget (OMB) or the Congress.  The
Congress did not appropriate funds for any new facilities in fiscal
year 1997; therefore, State will likely use sales receipts for that
purpose.  To reduce the deficit, the Congress would have to restrict
the proceeds from the asset sales from reverting to the State
Department. 

As of October 1995, State had a list of over 100 properties for
potential sale valued at $467 million, including high-value
properties in Manila, Paris, Singapore, and Bangkok.  In addition,
our review of State's records identified other properties not on the
list that potentially could be sold, including properties at closed
posts in Zanzibar, Tanzania, and Alexandria, Egypt; and properties
that are vacant or unsuitable for the purposes for which they were
acquired including high-value properties in Hamilton, Bermuda, and
Buenos Aires, Argentina. 

The 104th Congress endorsed our recommendation that the Department of
State establish an independent panel to review and recommend the sale
of real estate.  The panel could review the list identified by State
as well as properties identified in our report or by other sources. 
If State establishes a panel to review and sell only those properties
it has identified, and if the Congress specifically restricted the
proceeds from reverting back to the State Department, CBO estimates
that $150 million in assets could be generated and earmarked for
deficit reduction over the next five years.  We believe that
substantial additional revenues could be generated through the sale
of other assets, such as the property in Hamilton, Bermuda, and
Buenos Aires, Argentina. 

In addition, in 1995 we reported that certain high-value properties
in Tokyo are unneeded.  Our analysis demonstrated the feasibility
of--and identified options for--selling portions of this property. 
For example, selling the Deputy Chief of Mission residence and
constructing a less costly replacement residence on the
government-owned housing compound could generate proceeds that could
be used for deficit reduction.  The State Department has rejected
this option because the embassy desired to retain the facility for
representational purposes. 

The current sales value of the Tokyo property is uncertain.  There
has been no recent appraisal of the Deputy Chief of Mission
residence, but in 1990, it was valued at $92 million.  Embassy
information, based on Japanese government reports in September 1994,
shows that residential property values have declined about 30 percent
since 1990.  GAO assumes that the Deputy Chief of Mission residence
is valued at $40 million--less than 50 percent of its value in 1990. 
In preparing the following estimate, CBO assumes that the
construction of the new Deputy Chief of Mission residence on the
Mitsui compound would cost $4 million and that the sale of the old
residence would take place after the construction of the replacement
residence is completed.  The sale of the old residence for $40
million would count towards deficit reduction only if the Congress
specifically restricted the proceeds from reverting back to the State
Department. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Sell unnecessary real estate at overseas diplomatic
----------------------------------------------------------------------

Asset sale
----------------------------------------------------------------------
Budget authority                    30      30      30      30      30
Outlays                              9      17      24      29      30
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Sell high value property in Tokyo
----------------------------------------------------------------------

Asset sale
----------------------------------------------------------------------
Budget authority                    -4       0       0       0      40
Outlays                             -1      -1      -1      -1      40
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:38.1

State Department:  Options for Addressing Possible Budget Reductions
(GAO/NSIAD-96-124, August 29, 1996). 

Overseas Real Estate:  Millions of Dollars Could Be Generated By
Selling Unneeded Real Estate (GAO/NSIAD-96-36, April 23, 1996). 

Overseas Real Estate:  Inaction on Proposals to Sell High-Value
Property in Tokyo (GAO/NSIAD-95-73, April 7, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:38.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   OVERSEAS DIPLOMATIC
   POSTSOVERSEAS DIPLOMATIC POSTS
------------------------------------------------------ Appendix III:39


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      Department of State

Account                             Diplomatic and Consular Programs
                                    (19-0113)
                                    Salaries and Expenses (19-0107)

Spending type                       Discretionary

Budget subfunction                  Conduct of Foreign Affairs

Framework theme                     Reassess objectives
----------------------------------------------------------------------
In fiscal year 1995, State spent about $1.9 billion, or almost 70
percent of its budget, operating overseas posts.  State maintains a
diplomatic presence in 252 overseas locations, including countries
where the United States has limited interests.  Because overseas
posts consume such a large portion of State's operating budget,
closing posts or reducing their size offers the greatest potential
for achieving substantial budget reductions.  Balanced, thoughtful
decisions on closing and/or reducing the size of posts must be made
to ensure that U.S.  interests are well served overseas and Americans
are protected within available funding. 

In response to funding constraints in recent years, State has closed
and reduced the size of a number of posts and has proposed the
closure of additional posts.  However, it has made little headway
because of internal and external resistance to these changes.  In
GAO's August 1996 report, we suggested that one strategy to reduce
the controversy surrounding post closings would be to establish an
independent post closure panel like the Defense Base Closure and
Realignment Commission.  Such an approach would allow for
decision-making based on the need to support both State and non-State
activities, consistent with overall U.S.  policy interests and
priorities as well as available resources.  It would also have the
advantage of mitigating at least some of the pressures and parochial
interests that have historically operated to maintain a U.S. 
overseas presence in some locations. 

Reducing the number of overseas posts might be accomplished in any
number of ways.  For example, one option would be to use multiple
country accreditation in some regions, where an ambassador operating
from a regional post would "circuit ride" to several small,
neighboring countries, eliminating the need for permanent embassy
structures in each country.  Regional posts would allow consolidation
of staff and other resources, although cost reductions would be
offset to some degree by travel and other related expenses.  The
British government employs this approach in some African countries,
and the U.S.  Embassy in Bridgetown, Barbados, executes diplomatic
responsibilities for a number of countries in the eastern Caribbean. 
State could expand this approach to include other regions, such as
the Baltic States, Africa, and countries in South America.  The State
Department's financial management systems could not readily provide
post-specific operating costs and closing costs to estimate the
savings for this option.  However, we calculate that if State closed
20 small embassies and employed the "circuit rider" approach to cover
its diplomatic responsibilities in these countries, State could
reduce its costs by up to $40 million annually, after closing costs
have been dealt with and if the U.S.  direct-hire positions were
eliminated. 

A second option would be to reevaluate the need for State's 77
consulates and consulates general.  Although many consulates are
small or moderately sized, some are bigger and more expensive to
operate than major embassies.  Some believe that the end of the Cold
War, expanded media coverage, and improved information and
telecommunications technology make it possible for State to close
consulates and consolidate staff at embassies or other consulates
located in the same countries.  Our analysis has shown that if State
closed one of its largest consulate generals it could reduce its
annual operating costs by nearly $20 million, after closing costs
have been dealt with and if the U.S.  direct-hire positions were
eliminated. 

Another way to reduce costs would be to reduce overseas staffing--an
item that accounts for a large portion of overseas costs.  Large and
comprehensive posts understandably absorb a disproportionate share of
the total costs of U.S.  overseas posts and, therefore, represent a
significant opportunity in this regard.  In fiscal year 1995, the
cost of operating the posts in Germany alone totaled over $90
million.  The cost of operating the posts in Japan totaled over $54
million during the same period.  Although the cost reductions from
eliminating U.S.  direct-hire positions overseas vary by region and
post, using average costs, CBO estimates that $45 million could be
saved by eliminating 100 such positions through attrition over 5
years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Eliminating 100 overseas positions
----------------------------------------------------------------------

Savings from 1997 funding level
----------------------------------------------------------------------
Budget authority                     3       6       9      12      15
Outlays                              3       5       8      11      14

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     3       6       9      12      15
Outlays                              3       5       8      11      14
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:39.1

State Department:  Options for Addressing Possible Budget Reductions
(GAO/NSIAD-96-124, August 29, 1996). 

Overseas Presence:  Staffing at U.S.  Diplomatic Posts
(GAO/NSIAD-95-50FS, December 28, 1994). 

State Department:  Overseas Staffing Process Not Linked to Policy
Priorities (GAO/NSIAD-94-228, September 20, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:39.2

Benjamin F.  Nelson (202) 512-4128



   OPTION:
   STATE DEPARTMENT FUNCTIONS AND
   ACTIVITIESSTATE DEPARTMENT
   FUNCTIONS AND ACTIVITIES
------------------------------------------------------ Appendix III:40


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      Department of State

Account                             Diplomatic and Consular Programs
                                    (19-0113)
                                    Salaries and Expenses (19-0107)

Spending type                       Discretionary

Budget subfunction                  Conduct of Foreign Affairs

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of State's functional bureaus share responsibility
with several other U.S.  agencies on various overlapping policy
issues.  The involvement of many agencies in similar or related
functions does not mean the agencies unnecessarily duplicate
activities, but it does suggest the potential for consolidation or
transfer of some of State's duties.  For example, we identified
nearly 30 agencies and offices involved in trade policy and export
promotion, about 35 engaged in global programs, and over 20 involved
in international security functions.  For many of these functions,
several offices and bureaus within State headquarters and overseas
posts are involved. 

State's costs could be reduced by lessening the degree of its
involvement in functions that overlap with other agencies or by
lessening overlap within State's offices.  For example, CBO estimates
that if the 45 overseas labor attachï¿½ and 6 corresponding
headquarters positions were eliminated through attrition over five
years it would produce savings of $30 million.  According to several
officials at overseas posts, labor issues could be adequately covered
by political and/or economic officers.  In addition, several State
bureaus monitor labor issues.  State has proposed abolishing or
lowering the rank of some labor attachï¿½ positions in the past but has
encountered resistance from the Department of Labor and others. 

In addition, State could cut costs if some of its legislatively
mandated workload requirements were reduced.  In fiscal year 1996,
State was required to produce over 130 congressionally mandated
reports.  While some reports could be eliminated or curtailed, it is
not clear which are the best candidates because their cost and
relative value to the users are not known.  For example, country
reports on economic policy and trade practices, required by the
Omnibus Trade and Competitiveness Act of 1988, consume the equivalent
of 5 staff years at headquarters and 100 posts at an annual cost of
at least $500,000 and State Department officials indicated that the
information in the reports is available through other sources.  Since
the personnel and expenses involved in preparing these reports would
likely be reallocated rather than eliminated, CBO does not anticipate
any budgetary savings from this option. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Eliminating Labor Attachï¿½ and corresponding headquar
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     2       4       6       8      10
Outlays                              2       4       6       8       9

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     2       4       6       8      10
Outlays                              2       4       6       8       9
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:40.1

Foreign Affairs:  Perspectives on Foreign Affairs Programs and
Structures (GAO/NSIAD-97-6, November 8, 1996). 

State Department:  Options for Addressing Possible Budget Reductions
(GAO/NSIAD-96-124, August 29, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:40.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   STATE DEPARTMENT SUPPORT
   FUNCTIONSSTATE DEPARTMENT
   SUPPORT FUNCTIONS
------------------------------------------------------ Appendix III:41


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      Department of State

Accounts                            Diplomatic and Consular Programs
                                    (19-0113)
                                    Salaries and Expenses (19-0107)

Spending type                       Discretionary

Budget subfunction                  Conduct of Foreign Affairs

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In fiscal year 1995, State allotted $1.8 billion, or about 65 percent
of its budget, to domestic and overseas support operations.  These
funds provided support for both Department staff and employees from
other federal agencies.  Centrally funded operations account for
approximately $1.1 billion of the support budget and cover central
administration costs and the costs of running several regional
centers that provide financial and information management services to
overseas posts.  The geographic bureaus control the remaining portion
of State's support budget, which is largely used to fund the salaries
of those employees in support positions. 

Cost-cutting measures being considered by State include hiring more
U.S.  family members to fill overseas staffing positions, increasing
employees' payments for medical services, and increasing the length
of overseas tours.  Over the long term, State hopes to further reduce
its operating expenses through business process reengineering and the
outsourcing of certain support functions.  In both areas, however,
only limited progress has been made. 

GAO identified several additional options State could implement to
adjust to potential budget cuts as well as some of the potential
adverse consequences of these options.  These options include (1)
expanding the use of foreign service nationals (FSN) in support
positions at overseas posts, (2) reviewing employees' benefits and
allowances, and (3) reviewing support staff levels in headquarters. 

While cost-savings estimates for the last two options are not
available until reforms are specified, CBO estimates that expanding
the use of foreign nationals in selected posts could result in $165
million in savings over 5 years.  Specifically, State could increase
its use of FSNs to replace Foreign Service specialists working in
non-sensitive positions.  Employment of FSNs is far less costly than
the employment of Foreign Service specialists because FSNs do not
receive the benefits and allowances payable to Foreign Service
employees.  We estimate that State currently has 500 Foreign Service
specialists in six job categories it considers nonsensitive. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    11      22      33      44      55
Outlays                              9      20      30      41      52

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    11      22      33      44      55
Outlays                              9      20      30      41      52
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:41.1

Foreign Affairs:  Perspectives on Foreign Affairs Programs and
Structures (GAO/NSIAD-97-6, November 8, 1996). 

State Department:  Options for Addressing Possible Budget Reductions
(GAO/NSIAD-96-124, August 29, 1996). 

State Department:  Actions Needed to Improve Embassy Management
(GAO/NSIAD-96-1, March 12, 1996). 

State Department:  Widespread Management Weaknesses at Overseas
Embassies (GAO/T-NSIAD-93-17, July 13, 1993). 

State Department:  Survey of Administrative Issues Affecting
Embassies (GAO/NSIAD-93-218, July 12, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:41.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   TV MARTITV MARTI
------------------------------------------------------ Appendix III:42


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, and the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      U.S. Information Agency

Account                             Broadcasting to Cuba (67-0208)

Spending type                       Discretionary

Budget subfunction                  Foreign Information and Exchange
                                    Activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The U.S.  Information Agency (USIA) recognizes that although it
provides television broadcasts to Cuba through TV Marti, the
broadcasts are constantly and effectively jammed.  USIA's research
data shows that, mainly as a result of the jamming, the number of
Cubans who are able to watch the broadcasts is small.  Other factors
that decrease effectiveness of TV Marti include broadcast hours that
are not convenient to viewers and a broadcast signal that does not
reach much beyond the greater Havana area.  The U.S.  Advisory
Commission on Public Diplomacy has reported that TV Marti is not
cost-effective and has repeatedly recommended that it be terminated. 
In March 1994, the Advisory Panel on Radio Marti and TV Marti
concluded that TV Marti cannot be considered cost-effective and would
not be cost-effective unless the viewing audience in Cuba could be
substantially expanded.  TV Marti broadcasts daily from 3:30 am to 8
am, but Cuba jams the broadcasts.  In an attempt to overcome jamming,
TV Marti is converting from VHF to UHF transmission even though Cuba
could acquire equipment to jam the new signal at relatively little
cost.  Further, GAO has criticized controls over program quality and
objectivity, and according to the Advisory Panel, identified problems
do not appear to have been fully resolved. 

The Congress may wish to eliminate TV Marti given its persistent
problems and its limited ability to achieve its goals.  The savings
that could be achieved if TV Marti were eliminated are shown in the
following table. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     6      11      11      11      11
Outlays                              5      10      11      11      11

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     6      12      12      13      13
Outlays                              5      11      12      13      13
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:42.1

TV Marti:  Costs and Compliance With Broadcast Standards and
International Agreements (GAO/NSIAD-92-199, May 6, 1992). 

Broadcasts to Cuba:  TV Marti Surveys Are Flawed (GAO/NSIAD-90-252,
August 9, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:42.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   USIA EXCHANGE PROGRAMSUSIA
   EXCHANGE PROGRAMS
------------------------------------------------------ Appendix III:43


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      U.S. Information Agency

Account                             Educational and Cultural Exchange
                                    Programs (67-0209)

Spending type                       Discretionary

Budget subfunction                  Foreign Information and Exchange
                                    Activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The U.S.  Information Agency (USIA) manages a variety of exchange
programs to foster mutual understanding between the people of the
United States and other countries.  In 1994, USIA academic exchanges
accounted for less than 24 percent of all U.S.  government-funded
international exchange and training activities.  In fiscal year 1996,
these exchanges cost about $210 million plus approximately $29
million to manage them. 

In recent years, funding levels have not permitted USIA to maintain
the same number of exchanges it supported in the past.  Should
funding be further reduced, options to cut costs include eliminating
certain exchanges entirely, reducing the amount of funds USIA
allocates to each program, or obtaining more financial support from
the private sector or foreign governments.  The advisability of
implementing any or all of these options would need to be evaluated
along with the impact such actions might have on U.S.  bilateral
relationships and on the promotion of ties between private citizens
and organizations in the United States and abroad.  Whether the
federal government still needs to fund each exchange, whether the
exchange is targeted at the most appropriate countries, whether it is
unique and unavailable from the private sector, and whether it is
effective are questions requiring review if the budget for exchanges
is significantly cut. 

Savings resulting from reduced funding for certain programs would
depend on the specific programs and the level of cuts.  Likewise,
savings that result from obtaining more financial support from the
private sector would depend on specific negotiations with companies
and new bilateral agreements with other countries.  However, critics
of one program, USIA's high school exchange, argue that it is more
expensive and has less immediate impact than other programs.  For
example, in fiscal year 1995 USIA spent more than $56 million on the
Congress-Bundestag Program with Germany and the Freedom Support
Act/Newly Independent States and Support for East European Democracy
Act Programs that specialized in exchanges of secondary school
students and educators.  CBO estimates that $222 million in savings
over 5 years could be generated if these programs were eliminated. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    41      41      41      41      41
Outlays                             21      36      39      41      41

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    42      43      44      46      47
Outlays                             21      37      42      44      46
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:43.1

U.S.  Information Agency:  Options for Addressing Possible Budget
Reductions (GAO/NSIAD-96-179, September 23, 1996). 

Exchange Programs:  Inventory of International Educational, Cultural,
and Training Programs (GAO/NSIAD-93-157BR, June 23, 1993). 

Exchange Programs:  Observations on International Educational,
Cultural, and Training Programs (GAO/T-NSIAD-93-7, March 23, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:43.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   USIA OVERSEAS POSTS,
   ACTIVITIES, AND CULTURAL
   CENTERSUSIA OVERSEAS POSTS,
   ACTIVITIES, AND CULTURAL
   CENTERS
------------------------------------------------------ Appendix III:44


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (Senate and House)

Primary agency                      U.S. Information Agency

Accounts                            Salaries and Expenses (67-0201)
                                    Educational and Cultural Exchange
                                    Programs (67-0209)

Spending type                       Discretionary

Budget subfunction                  Foreign Information and Exchange
                                    Activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The mission of the U.S.  Information Agency (USIA) is to explain and
advocate U.S.  policy to foreign publics, provide information about
the United States, build lasting relationships and mutual
understanding, and advise U.S.  decisionmakers on foreign public
opinion and its implications for the United States.  In fiscal year
1996, USIA spent $310 million, or about 28 percent of its $1.1
billion budget, on personnel, infrastructure, programs and
headquarters activities to support its 199 overseas posts in 143
countries. 

Although U.S.  foreign policy objectives may have changed in light of
post-cold war needs, USIA has not determined if its organizational
structure and public diplomacy programs have outlived their
usefulness.  Agency officials believe it is difficult to link a
program to a desired result, and existing evidence of impact is
largely anecdotal.  However, such assessments are critical to USIA's
ability to remain viable while managing budgetary reductions. 

This option is divided into three parts:  eliminating some USIA
overseas posts, activities, and cultural centers. 


      POSTS
---------------------------------------------------- Appendix III:44.1

GAO reported in 1996 that USIA maintains overseas missions in
countries that are relatively less important to the U.S.  foreign
policy and retains overseas infrastructure and programs which may no
longer be relevant.  For example, in fiscal year 1997 at a cost of
about $29 million, USIA operated posts in more than 50 countries
where it believed the United States had limited public diplomacy
goals. 

Reducing or eliminating these posts or activities are options to
lower costs but actual savings will depend on the current costs of
the posts closed or reduced.  Based on fiscal year 1997 costs, CBO
estimates that closing these posts in countries where the United
States has limited public diplomacy goals would produce $148 million
in savings over 5 years. 


      ACTIVITIES
---------------------------------------------------- Appendix III:44.2

One activity we believe merits review is USIA's student advising
operation.  USIA spends about $2.6 million annually to subsidize more
than 400 educational advisory centers worldwide that provide
information about the U.S.  system of education.  Some of these
centers are housed in USIA offices and are fully funded by the U.S. 
government.  Others are operated by host country universities or U.S. 
nonprofit organizations and are partially funded by USIA.  An
additional $1.4 million is spent annually for training, materials,
and other activities. 

Proponents of the student advising operation believe that it is in
the best interests of the United States to support student advising
because international students spend nearly $7 billion a year in the
United States, contributing substantially to the U.S.  economy, and
American students are introduced to different cultures, enhancing
diversity.  Critics have concluded, however, that new worldwide
trends to internationalize higher education, advancements in
communication technology, and the increased sophistication of
non-U.S.-government-sponsored educational advising institutions
indicate that a guidance and oversight role for USIA is more
appropriate than an operational one.  They argue that the increase in
private sector counseling services, coupled with dwindling USIA
resources, suggest it is an appropriate time for USIA to turn over
its educational advising role to the private sector.  CBO estimates
that eliminating student advising operations would result in savings
of $15 million over 5 years. 


      CULTURAL CENTERS
---------------------------------------------------- Appendix III:44.3

USIA maintains more than 70 cultural centers, libraries, and branch
offices overseas.  Because they may not be colocated with an embassy
and require staff to deal directly with the public, they are often
expensive to operate.  In Germany, for example, the fiscal year 1995
cost to operate six cultural centers (called America Houses) was
nearly $9 million, which was for 77 staff and for activities such as
reference centers with online databases, student counseling
activities, and cultural events. 

USIA could cut costs by finding alternatives for its cultural
centers.  For example, critics of the cultural centers believe that
binational centers are a cost-effective alternative to cultural
centers.  Binational centers are private, autonomous institutions
established to promote mutual understanding between the United States
and host countries.  USIA may have only minimal or no funds invested
in the centers and may or may not assign staff.  USIA successfully
encouraged the formation of a binational center when funding
limitations forced it to close an America House in Germany.  The
agency collaborated with private industry and the local German
government to establish a German-American Institute to further
relations through cultural and educational events.  CBO estimates
that if USIA closed its cultural centers it could achieve $141
million in savings over 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Eliminate USIA posts
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    16      29      29      29      29
Outlays                             13      27      29      29      29

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    17      31      32      33      35
Outlays                             14      29      32      33      35
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Eliminate student advising operations
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     2       3       3       3       3
Outlays                              2       3       3       3       3

Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     2       3       3       3       4
Outlays                              2       3       3       3       4
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Eliminate USIA cultural centers
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    14      28      28      28      28
Outlays                             12      26      28      28      28

Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    15      30      31      32      33
Outlays                             13      27      31      32      33
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:44.4

U.S.  Information Agency:  Options for Addressing Possible Budget
Reductions (GAO/NSIAD-96-179, September 23, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:44.5

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   INTERNATIONAL
   BROADCASTINGINTERNATIONAL
   BROADCASTING
------------------------------------------------------ Appendix III:45


Authorizing committees              Foreign Relations (Senate)
                                    International Relations (House)

Appropriations subcommittees        Foreign Operations (Senate and
                                    House)

Primary agency                      U.S. Information Agency

Account                             International Broadcasting
                                    Operations (67-0206)

Spending type                       Discretionary

Budget subfunction                  Foreign Information and Exchange
                                    Activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The United States broadcasts over 1,600 hours of radio programming in
53 languages and over 400 hours of television in several languages
weekly to support U.S.  foreign policy objectives.  In fiscal year
1996, $405 million, or 38 percent of the U.S.  Information Agency's
budget supported the Voice of America (VOA) (47 languages), Radio
Free Europe/Radio Liberty (RFE/RL)(21 languages), Radio and TV Marti
broadcasts to Cuba, and Worldnet television broadcasts.  Also, Radio
Free Asia (RFA) began broadcasting to China in September 1996 and to
Tibet in December 1996.  VOA, RFE/RL, and RFA have different purposes
and therefore broadcast in some of the same languages.  VOA's mission
is to provide accurate and objective world news and present a
balanced portrayal of U.S.  institutions and policies.  In contrast,
RFE/RL's and RFA's mission is to present accurate news about
political, social, and economic developments within the countries
themselves in the absence of fully functional or free media. 

Funding for international broadcasting has dropped considerably since
fiscal year 1994 as VOA and RFE/RL consolidated functions such as
engineering, eliminated overlapping broadcast hours to the same
target audience, and cut 1,500 positions.  Further savings would
require changes in the number of language services and/or broadcast
hours.  Over the years, very few language services have been
terminated despite changing world conditions.  The Broadcasting Board
of Governors is developing a plan to review all language services and
broadcast entities to determine their continued need and
effectiveness.  This review may identify less necessary language
services that could be eliminated.  Estimated annual savings that
would result from reducing the number of broadcast languages would
range from $230,000 for VOA's Slovene language broadcast to $12.7
million for both VOA and RFE/RL's Russian language broadcasts. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:45.1

U.S.  Information Agency:  Options for Addressing Possible Budget
Reductions (GAO/NSIAD-96-179, September 23, 1996). 

International Broadcasting:  Downsizing and Relocating Radio Free
Europe/Radio Liberty (GAO/NSIAD-95-53, April 5, 1995). 

Voice of America:  Station Modernization Projects Need to Be
Justified (GAO/NSIAD-94-69, January 24, 1994). 

Voice of America:  Management Actions Needed to Adjust to a Changing
Environment (GAO/NSIAD-92-150, July 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:45.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   RISK-BASED EXPOSURE FEES FOR
   EXPORT-IMPORT BANKRISK-BASED
   EXPOSURE FEES FOR EXPORT-IMPORT
   BANK
------------------------------------------------------ Appendix III:46


Authorizing committees              Banking, Housing, and Urban
                                    Affairs (Senate)
                                    Banking and Financial Services
                                    (House)

Appropriations subcommittees        Foreign Operations (Senate)
                                    Foreign Operations, Export
                                    Financing, and Related Programs
                                    (House)

Primary agency                      U.S. Export-Import Bank

Account                             Export-Import Bank Program Account
                                    (83-0100)

Spending type                       Discretionary

Budget subfunction                  International Financial Programs

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The U.S.  Export-Import Bank's (Eximbank) fees are currently lower
than those charged by most foreign export credit agencies because
Eximbank has interpreted its broad congressional mandate to be "fully
competitive" by setting its sovereign fees as low or lower than about
75 percent of those offered by other major export credit agencies. 

Decision makers will need to address several trade and foreign policy
issues before making changes in Eximbank's programs.  Eximbank
officials said that any proposed fee increases need to be considered
within the broader context of current international efforts to
gradually reduce government export finance subsidies.  They also
stated that these options could make Eximbank programs less
competitive relative to foreign export credit agencies but
acknowledged that it would be difficult to determine the precise
trade effects of such actions. 

Using 1995 Eximbank transaction data, we estimated that the bank
could have saved about $84 million in fiscal year 1995 if it had
raised its fees to a level in the mid-range of fees charged by other
major export credit agencies of other nations.  Any fee increases are
likely to reduce demand for Eximbank financing and the savings
associated with such an increase would depend on its magnitude and on
other variables, such as the sensitivity of demand to the price
increase as well as the risk levels, terms, and conditions of future
transactions.  CBO estimates that changing the fee structure
accordingly could save more than $450 million over 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    90      90      90      90      90
Outlays                             10      24      36      46      56

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    92      95      97     100     103
Outlays                             10      25      37      49      60
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:46.1

Export-Import Bank:  Options for Achieving Possible Budget Reductions
(GAO/NSIAD-97-7, December 20, 1996). 

Foreign Affairs:  Perspectives on Foreign Affairs Programs and
Structures (GAO/NSIAD-97-6, November 8, 1996). 

Export Finance:  Comparative Analysis of U.S.  and European Union
Export Credit Agencies (GAO/GGD-96-1, October 24, 1995). 

Export Finance:  The Role of the U.S.  Export-Import Bank
(GAO/GGD-93-39, December 23, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:46.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   EXPORT-IMPORT BANK
   PROGRAMSEXPORT-IMPORT BANK
   PROGRAMS
------------------------------------------------------ Appendix III:47


Authorizing committees              Banking, Housing, and Urban
                                    Affairs (Senate)
                                    Banking and Financial Services
                                    (House)

Appropriations subcommittees        Foreign Operations (Senate)
                                    Foreign Operations, Export
                                    Financing, and Related Programs
                                    (House)

Primary agency                      U.S. Export-Import Bank

Account                             Export-Import Bank Loans Program
                                    Account (83-0100)

Spending type                       Discretionary

Budget subfunction                  International Financing Programs

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The U.S.  Export-Import Bank (Eximbank) was created to facilitate
exports of U.S.  goods and services by offering a wide range of
financing at terms competitive with those of other governments'
export financing agencies.  Eximbank is to absorb risks that the
private sector is unwilling or unable to assume.  Higher risk
markets, such as the Newly Independent States of the Former Soviet
Union, constitute a relatively small share of the Eximbank's total
financing commitments yet absorb a relatively large share of its
subsidy costs.  From fiscal year 1992 to 1996, Eximbank has used an
average of $750 million of its credit subsidy appropriation to
support an average of $13.3 billion in export financing commitments
(loans, loan guarantees, and insurance).  Eximbank's congressional
mandate is to supplement, not compete with, private capital.  Thus it
provides financing in a wide variety of markets, including more
markets in higher-risk categories than those of any of its major
competitors. 

The level and scope of the risks of the Eximbank's programs could be
reduced by several means, such as placing a ceiling on the maximum
subsidy rate allowed in Eximbank programs, reducing or eliminating
program availability offered in high-risk markets, and offering less
than 100-percent risk protection.  These changes would have only a
slight effect (less than 5 percent) on the overall level of U.S. 
exports supported with Eximbank financing.  However, these options
raise several trade and foreign policy issues that decisionmakers
would need to address before making any changes in Eximbank's
programs.  Eximbank officials noted that these options could
undermine U.S.  government efforts to provide support in some
higher-risk markets, such as the Newly Independent States of the
Former Soviet Union, that exhibit promising long-term potential. 

The specific level of savings resulting from these program changes
would be dependent on several factors, including the willingness of
exporters and participating banks to absorb increased costs and
risks, and the reaction of foreign export credit agencies.  We
estimated, based on 1995 transaction levels, that $157 million in
program subsidy savings could be achieved annually if Eximbank
provided only short-term cover in high-risk markets.  The following
CBO estimates are based on an increase in Eximbank transaction levels
in these markets. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   244     244     244     244     244
Outlays                             27      66      97     125     150

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   248     255     262     269     276
Outlays                             28      68     101     133     162
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:47.1

Export-Import Bank:  Options for Achieving Possible Budget Reductions
(GAO/NSIAD-97-7, December 20, 1996). 

Foreign Affairs:  Perspectives on Foreign Affairs Programs and
Structures (GAO/NSIAD-97-6, November 8, 1996). 

Export Finance:  Comparative Analysis of U.S.  and European Union
Export Credit Agencies (GAO/GGD-96-1, October 24, 1995). 

Export Finance:  The Role of the U.S.  Export-Import Bank
(GAO/GGD-93-39, December 23, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:47.2

Benjamin F.  Nelson, (202) 512-4128



   250 GENERAL SCIENCE, SPACE, AND
   TECHNOLOGY
------------------------------------------------------ Appendix III:48

  -- Space Station

  -- NASA's Earth Observing System Data and Information System



   OPTION:
   SPACE STATIONSPACE STATION
------------------------------------------------------ Appendix III:49


Authorizing committees              Commerce, Science and
                                    Transportation (Senate)
                                    Science (House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      National Aeronautics and Space
                                    Administration

Account                             Human Space Flight (80-0111)

Spending type                       Discretionary

Budget subfunctions                 Space Flight, Research, and
                                    Supporting Activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
In 13 reports and testimonies issued since 1991, GAO has expressed
concerns about various aspects of the space station, including rising
cost estimates that have prompted several redesigns since the project
was first funded in fiscal year 1985.  In 1993, the station was
redesigned again and Russia was brought in as a partner.  The
National Aeronautics and Space Administration (NASA) believed that
Russian participation would improve the station's capabilities and
reduce the estimated cost to complete its assembly.  Subsequently,
annual funding through completion of assembly was capped at about
$2.1 billion and the total project cost was capped at $17.4 billion. 

Since 1993, GAO has reported that NASA has made some progress on the
space station, but it still has considerable challenges to overcome,
including lower financial reserves and significant risk related to
the space shuttle's ability to support the space station's launch and
assembly schedule.  Most recently, in July 1996, GAO reported that
the cost and schedule threats have continued.  The cost threat is
particularly severe over the next few years, due to the limited
reserves for additional cost risks such as possible reduced Russian
participation. 

The Congress may wish to closely monitor NASA's efforts to manage
station development to enable it to act quickly should estimated
costs to complete the project increase substantially.  Such actions
could include acceptance of the cost increases, further reduction in
the project's scope, or terminating the project.  If the project were
terminated, the following savings would result. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                 1,449   2,149   2,149   2,149   2,149
Outlays                            947   1,884   2,136   2,148   2,149

Savings from the 1997 Defense Plan adjusted for inflation
----------------------------------------------------------------------
Budget authority                 1,503   2,263   2,323   2,385   2,450
Outlays                            982   1,976   2,289   2,362   2,426
----------------------------------------------------------------------
Note:  This estimate assumes termination costs of $700 million. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:49.1

Space Station:  Cost Control Difficulties Continue
(GAO/T-NSIAD-96-210, July 24, 1996). 

Space Station:  Cost Control Difficulties Continue (GAO/NSIAD-96-135,
July 17, 1996). 

Space Station:  Declining Budgets and Tight Schedules Could
Jeopardize Space Station Support (GAO/NSIAD-95-171, July 28, 1995). 

Space Station:  Estimated Total U.S.  Funding Requirements
(GAO/NSIAD-95-163, June 12, 1995). 

Space Station:  Plans to Expand Research Community Do Not Match
Available Resources (GAO/NSIAD-94-33, November 22, 1994). 

Space Station:  Update on the Impact of the Expanded Russian Role
(GAO/NSIAD-94-248, July 29, 1994). 

Space Station:  Impact of the Expanded Russian Role on Funding and
Research (GAO/NSIAD-94-220, June 21, 1994). 

Space Station:  Information on National Security Applications and
Cost (GAO/NSIAD-93-208, May 18, 1993). 

Space Station:  Program Instability and Cost Growth Continue Pending
Redesign (GAO/NSIAD-93-187, May 18, 1993). 

NASA:  Large Programs May Consume Increasing Share of Limited Future
Budgets (GAO/NSIAD-92-278, September 4, 1992). 

Space Station:  Status of Financial Reserves (GAO/NSIAD-92-279, July
20, 1992). 

NASA Budget:  Potential Shortfalls in Funding NASA's 5-Year Plan
(GAO/T-NSIAD-92-18, March 17, 1992). 

Questions Remain on the Costs, Uses, and Risks of the Redesigned
Space Station (GAO/T-NSIAD-91-26, May 1, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:49.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   NASA'S EARTH OBSERVING SYSTEM
   DATA AND INFORMATION
   SYSTEMNASA'S EARTH OBSERVING
   SYSTEM DATA AND INFORMATION
   SYSTEM
------------------------------------------------------ Appendix III:50


Authorizing committees              Commerce, Science and
                                    Transportation (Senate)
                                    Science (House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      National Aeronautics and Space
                                    Administration (NASA)

Account                             Space, Aeronautics, and Technology
                                    (80-0110)

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Reassess objectives
----------------------------------------------------------------------
NASA's Earth Observing System (EOS) is a comprehensive program to
study global change by gathering and analyzing data about how the
earth functions as a single, integrated system.  About a third of the
cost for EOS will go to the Earth Observing System Data and
Information System (EOSDIS), which will operate EOS satellites and
instruments and provide ground acquisition, processing, storage,
management, and distribution of the EOS data.  In addition to the EOS
data, EOSDIS will incorporate and make available data from previous
NASA missions, non-NASA systems, and atmosphere-, ocean-, and
land-based sensors.  Developing EOSDIS is a massive undertaking; its
intended scope far exceeds that of any previous civilian data
management system.  Over its lifetime, EOSDIS could accumulate
information comparable to more than 1,000 times the amount of text
stored in the Library of Congress.  A major objective of EOSDIS is to
make this enormous quantity of data easily accessible and usable to
many earth scientists. 

The bulk of EOSDIS development is being carried out under a single,
comprehensive contract, known as the EOSDIS Core System contract. 
The Core System contract was awarded to Hughes Applied Information
Systems in early 1993 and will cost NASA an estimated $930 million
through 2003.  Hughes is responsible for building and integrating the
major elements of EOSDIS, including hardware and software to be
installed at eight data centers around the country. 

In March 1995, GAO observed that NASA's emphasis on large-scale
development in the near term may be unwise and recommended deferring
full-scale development until technology and standards have further
advanced and user needs are better known.  Also, in 1995, the
National Research Council expressed its concerns about the EOSDIS
development effort and recommended a new approach to EOSDIS, which
would streamline some EOSDIS functions and transfer other functions
to a competitively selected federation of partners in government,
academia, and the private sector.  Since that time, NASA has been
changing its plans for EOSDIS to try to accommodate the vision of a
federation of partners recommended by the National Research Council. 
Given that these changes should lead to a less intensive near-term
systems development effort, it is reasonable to consider reducing
planned funding for EOSDIS.  However, GAO has not made a
determination of the exact size of the most appropriate reduction. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:50.1

Earth Observing System:  Funding Requirements for NASA's EOSDIS
(GAO/AIMD-95-153FS, June 8, 1995). 

Earth Observing System:  Concentration on Near-term EOSDIS
Development May Jeopardize Long-term Success (GAO/T-AIMD-95-103,
March 16, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:50.2

Jack L.  Brock, Jr., (202) 512-6240



   270 ENERGY
------------------------------------------------------ Appendix III:51

  -- Clean Coal Technology Funds

  -- Department of Energy's National Laboratories

  -- Use of Carryover Balances to Offset Future Budget Needs

  -- Department of Energy's Overtime Costs

  -- Department of Energy's Cleanup Studies

  -- Department of Energy's Contractors' Separation Benefits Package

  -- >Federal Exemption to Certain State Taxes for Department of
     Energy's Operating Contractors

  -- Nuclear Waste Disposal Fees

  -- Power Marketing Administrations Cost Recovery

  -- Federal Investment in Successfully Commercialized Technologies



   OPTION:
   CLEAN COAL TECHNOLOGY
   FUNDSCLEAN COAL TECHNOLOGY
   FUNDS
------------------------------------------------------ Appendix III:52


Authorizing committees              Energy and Natural Resources
                                    (Senate) Science (House)

Appropriations subcommittees        Interior and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Energy

Account                             Clean Coal Technology (89-0235)

Spending type                       Discretionary

Budget subfunction                  Energy Supply

Framework theme                     Reassess objectives
----------------------------------------------------------------------
A number of clean coal technology demonstration projects are
experiencing problems and difficulties in meeting cost, schedule, and
performance goals.  DOE has extended deadlines several times on some
projects to allow their sponsors to restructure the projects, find
suitable alterative project sites, and firm up financing commitments
to make the projects economically viable.  In April 1995, the
Congress rescinded $200 million of this program's budget authority
which DOE achieved by using unobligated funds associated with
projects that were subsequently terminated.  DOE's fiscal year 1997
budget request proposed an additional $325 million rescission, but
the Congress only rescinded $123 million.  As of October 1996, DOE
had achieved this rescission and also accumulated about $159 million
of unobligated funds in the clean coal reserve as a result of
terminated projects.  DOE expects additional savings ranging from
about $50 million to $100 million or more from combining or
terminating certain other ongoing projects.  DOE plans to use the
reserve funds to pay for program direction beginning in fiscal year
1998 through the end of the program (which DOE estimates could total
about $50 million) and to help pay for cost growth for selective
ongoing projects.  To the extent that the reserve funds are not used
for cost growth, about $160 million to about $210 million in
unobligated funds may be available for rescission.  If the Congress
chose to rescind $160 million in budget authority, the following
savings could occur. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   160       0       0       0       0
Outlays                              0       0      25      25      50

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   160       0       0       0       0
Outlays                              0       0      25      25      50
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:52.1

Fossil Fuels:  Lessons Learned in DOE's Clean Coal Technology Program
(GAO/RCED-94-174, May 26, 1994). 

Fossil Fuels:  Improvements Needed in DOE's Clean Coal Technology
Program (GAO/RCED-92-17, October 30, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:52.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   DEPARTMENT OF ENERGY'S NATIONAL
   LABORATORIESDEPARTMENT OF
   ENERGY'S NATIONAL LABORATORIES
------------------------------------------------------ Appendix III:53


Authorizing committees              Energy and Natural Resources
                                    (Senate) Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)

Primary agency                      Department of Energy

Account                             Energy Supply, R&D Activities
                                    (89-0224)

Spending type                       Discretionary

Budget subfunction                  Atomic Energy Defense Activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Department of Energy's (DOE) laboratory network is comprised of
approximately 30 labs, with a budget of about $8 billion and
employing over 25,000 scientists and engineers.  Recent shifts in
national priorities--principally, the dramatic reduction in the arms
race and proposed cutbacks in energy and nuclear research
funding--raise questions about the need for all these labs.  In
particular, DOE's three large defense labs, costing about $1 billion
annually, were created to design and test nuclear weapons, a role
which has greatly diminished over time.  Currently, these labs
allocate less than half their budgets to nuclear weapons design,
development, and testing--the principal reasons they were created. 
Yet, as GAO has reported, DOE still maintains a redundant structure
with respect to nuclear weapons work, an arrangement that may no
longer be the most efficient alternative for meeting defense
requirements. 

The 1995 Galvin Task Force, commissioned by DOE, also argued for more
focused missions for the national laboratories.  In addition, the
task force said that the national laboratory system is oversized for
its current mission assignments.  Several congressional bills have
been introduced in recent years calling for the creation of a
separate structure for determining the best way to streamline
national laboratories. 

Aside from deciding on the ideal number of labs, most experts GAO
consulted agree that the missions of the laboratories now need to be
clarified if their resources are to be used most effectively.  Some
are suggesting the current laboratory structure may not be the most
rational if the labs are to move into newer mission areas. 
Suggestions for restructuring range from converting some labs into
private or quasi-public entities, transferring labs to universities,
or assigning them to different agencies whose missions better match
lab strengths. 

In addition to supporting DOE's efforts to streamline individual
labs, the Congress should reconsider the role and mission of the
laboratories as a group, which could be restructured in various ways. 
For example, the Galvin Task Force examined a transfer of most of the
nuclear weapons functions of Lawrence Livermore to the Los Alamos
laboratory.  Los Alamos officials estimated that having both
facilities design weapons but only one engineer and test them would
eventually save about $200 million in annual operating costs.  The
table below reflects savings from phasing in such a consolidation
over a 5-year period. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    32      66     102     140     179
Outlays                             24      58      93     131     169

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    33      70     110     156     205
Outlays                             25      60     100     144     192
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:53.1

Federal R&D Laboratories (GAO/RCED/NSIAD-96-78R, February 29, 1996). 

National Laboratories Need Clearer Mission and Better Management
(GAO/RCED-95-10, January 27, 1995). 

DOE's National Laboratories:  Adopting New Missions and Managing
Effectively Pose Significant Challenges (GAO/T-RCED-94-113, February
3, 1994). 

Department of Energy:  Management Problems Require a Long-term
Commitment to Change (GAO/RCED-93-72, August 31, 1993). 


Nuclear Weapons Complex:  Issues Surrounding Consolidating Los Alamos
and Lawrence Livermore National Laboratories (GAO/RCED-92-98,
September 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:53.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   USE OF CARRYOVER BALANCES TO
   OFFSET FUTURE BUDGET NEEDSUSE
   OF CARRYOVER BALANCES TO OFFSET
   FUTURE BUDGET NEEDS
------------------------------------------------------ Appendix III:54


Authorizing committees              Armed Services (Senate)
                                    Energy and Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)
                                    Interior and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Carryover balances represent funding from prior years' budgets and
consist of both unobligated balances and uncosted obligations.  Each
fiscal year, the Department of Energy (DOE) requests obligational
authority from the Congress to meet the costs of running its
programs.  Once DOE receives this authority, it obligates funds by
placing orders or awarding contracts for goods and services that will
require payment during the same fiscal year or in the future. 
Unobligated balances represent the portion of its authority that the
Department has not obligated.  Uncosted obligations represent the
portion of the Department's authority that it has obligated for goods
and services but for which it has not yet incurred costs.  Uncosted
obligations may occur because goods and services have not yet been
provided or they may reflect amounts no longer needed because of cost
underruns, reductions in the projects' scope, or cancellation of
projects.  DOE's carryover balances are distributed among operating
activities, capital equipment procurement, and construction projects. 
At the beginning of fiscal year 1996, DOE's carryover balances
totaled $9.6 billion. 

Over the past several years, GAO has audited DOE's carryover balances
and found amounts that were no longer needed for their original
purposes, and thus, could be used to offset future funding
requirements.  For example, a 1994 GAO review of two DOE program
areas--Environmental Management and Defense Programs--identified over
$500 million in unneeded funds.  In its most recent review, GAO found
that while DOE programs need some carryover balances to pay for
commitments made in prior years that have not been completed, the
Department may have had as much as $2.1 billion in operating activity
and capital procurement carryover balances that were potentially
available to offset the Department's fiscal year 1997 budget request. 
Of this total, $1.6 billion was contained in the Energy Research,
Energy Efficiency, and Fossil Energy programs.  GAO also found that
the Department had $73.5 million in funding for construction projects
that was available.  Future appropriations could be reduced to
reflect these carryover balances. 

While GAO recognizes that the $2.1 billion in potentially available
balances represents a starting point from which to identify the
amount of balances that could actually be used to offset DOE's
budget, the Congress may wish to consider reducing fiscal year 1998
appropriations to reflect some portion of these available funds. 
Based on GAO's prior work, reducing appropriations by $500 million in
fiscal year 1998 could achieve the following savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 Defense Plan
----------------------------------------------------------------------
Budget authority                   500       0       0       0       0
----------------------------------------------------------------------
Note:  The budget authority reduction for this option is based on
GAO's estimate.  CBO does not estimate any corresponding reduction in
outlays for the five-year period as the carryover balance is reduced. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:54.1

DOE's Carryover Balances and Fiscal Year 1997 Budget
(GAO/RCED-96-239R, September 6, 1996). 

DOE Management:  DOE Needs to Improve Its Analysis of Carryover
Balances (GAO/RCED-96-57, April 12, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:54.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   DEPARTMENT OF ENERGY'S OVERTIME
   COSTSDEPARTMENT OF ENERGY'S
   OVERTIME COSTS
------------------------------------------------------ Appendix III:55


Authorizing committees              Armed Services (Senate)
                                    Energy and Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)
                                    Interior and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Energy's (DOE) direct overtime costs for its
federal employees increased from $15.5 million in 1989 to $26.5
million in 1993.  In 1995, overtime costs dropped to about $21.9
million. 

In the past, DOE's efforts to manage and minimize such costs have
been limited.  DOE has (1) incurred costs for questionable overtime
work, such as driving DOE officials to the airport from their homes
on weekends, (2) not fully utilized compensatory time as a less
costly alternative to paid overtime, and (3) not consistently planned
annual leave to minimize the use of overtime.  In order to better
manage overtime and minimize costs, DOE should (1) ensure that the
types of work driving overtime costs are essential, (2) increase the
use of compensatory time as an alternative to paid overtime, and (3)
ensure that annual leave is planned to minimize the use of overtime. 
The Congress may wish to reduce DOE appropriations in anticipation of
changes in DOE's direct overtime costs practices.  The following
table illustrates the savings that could be realized over 5 years if
DOE reduced its overtime expenditures annually by 6 percent. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     1       3       4       5       7
Outlays                              1       2       4       5       6

Savings from the 1997 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                     1       3       4       6       7
Outlays                              1       2       4       5       7
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:55.1

Energy Management:  Department of Energy's Efforts to Manage Overtime
Costs Have Been Limited (GAO/RCED-94-282, September 27, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:55.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   DEPARTMENT OF ENERGY'S CLEANUP
   STUDIESDEPARTMENT OF ENERGY'S
   CLEANUP STUDIES
------------------------------------------------------ Appendix III:56


Authorizing committees              Armed Services (Senate)
                                    Energy and Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)
                                    Interior and Related Agencies
                                    (House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Energy's (DOE) Environmental Management (EM)
program oversees and directs all aspects of the agency's nuclear
weapons complex cleanup.  DOE has been criticized for the high cost
of the program and for spending too much money studying sites, rather
than cleaning them up. 

Remediation activities at DOE's facilities are governed by the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) of 1980, as amended, and the Resource Conservation and
Recovery Act (RCRA) of 1976, as amended.  These laws lay out
requirements for identifying waste sites, studying the extent of
their contamination and identifying possible remedies, and involving
the public in making decisions about the sites.  CERCLA offers three
methods for determining how a waste site will be remediated:  the
full CERCLA process, interim remedial measures, and removal actions. 
Removal actions are the most abbreviated of the three processes. 

Removal actions save time and money and can provide other benefits,
such as quickly reducing continued risks to the environment.  For
example, GAO found that removal actions cost from 80 to 90 percent
less than the other approaches.  While DOE has a policy that
encourages the greater use of removal actions, DOE has made limited
use of removal actions for a variety of reasons, including
requirements in interagency agreements and contracts with DOE's
cleanup contractors that do not encourage the use of removal actions. 
GAO also found that while complete, reliable data on the number of
sites where removal actions could be used is not available, many of
DOE's cleanup sites share the same characteristics as the sites where
removal actions have been used.  For example, at DOE's Hanford
facility about 33 percent of all clean-up sites are similar to those
where removal actions were used. 

In fiscal year 1995, DOE spent about $845 million on studying cleanup
sites under CERCLA and/or RCRA.  Assuming that 25 percent of these
studies could be performed as removal actions and that cost
reductions of 85 percent could be achieved for these sites, the
Congress could require DOE's EM program to increase the use of
removal actions and reduce DOE's budget by about $190 million. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   190     190     190     190     190
Outlays                            143     190     190     190     190

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   195     200     206     211     217
Outlays                            146     199     204     210     216
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:56.1

Nuclear Waste:  Greater Use of Removal Actions Could Cut Time and
Cost for Cleanups (GAO/RCED-96-124, May 23, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:56.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   DEPARTMENT OF ENERGY'S
   CONTRACTORS' SEPARATION
   BENEFITS PACKAGEDEPARTMENT OF
   ENERGY'S CONTRACTORS'
   SEPARATION BENEFITS PACKAGE
------------------------------------------------------ Appendix III:57


Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
Since 1993, the Department of Energy (DOE) has spent nearly $600
million to provide benefits to contractor employees separated in
workforce restructuring and downsizing efforts at its facilities. 
About 88 percent of the costs were for enhanced retirement incentives
or severance pay.  Enhanced retirement programs typically added 3
years to age and service for the purpose of calculating pension
benefits.  Some enhanced retirement programs included an additional
incentive payment.  Other benefits included extended medical
insurance and help with retraining, relocating, and finding new jobs
for affected employees.  More than half of the workforce
restructuring plans provided more generous severance pay than would
have normally been provided by the contractors under existing
contracts, and all facilities provided other benefits not normally
provided by contractors.  Moreover, benefits provided under the
workforce restructuring plans exceeded those that would be provided
to federal employees in a reduction in force. 

As DOE continues to align its contractor workforce because of its
reduced defense mission and as it completes environmental cleanup
efforts, it will undergo further downsizing.  The Congress could take
action to bring separation benefits in line with existing DOE
contracts or with those benefits provided federal employees.  CBO
estimates such action would result in the following savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    26       4      10      15      10
Outlays                             26       4      10      15      10

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    27       4      11      17      12
Outlays                             27       4      11      17      12
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:57.1

Department of Energy:  Value of Benefits Paid to Separated Contractor
Workforce Varied Widely (GAO/RCED-97-33, January 23, 1997). 


      GAO CONTACT
---------------------------------------------------- Appendix III:57.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   FEDERAL EXEMPTION TO CERTAIN
   STATE TAXES FOR DEPARTMENT OF
   ENERGY'S OPERATING
   CONTRACTORSFEDERAL EXEMPTION TO
   CERTAIN STATE TAXES FOR
   DEPARTMENT OF ENERGY'S
   OPERATING CONTRACTORS
------------------------------------------------------ Appendix III:58


Authorizing committees              Armed Services (Senate)
                                    Energy and Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)
                                    Interior and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The federal government is exempt from paying certain state taxes,
such as gross receipts and use taxes.  However, the Department of
Energy's (DOE) contractor-operated laboratories and production
plants, although wholly government-owned and dedicated exclusively to
government programs, are subject to such taxes.  Because DOE has
fully reimbursable contracts with its operating contractors, DOE is,
in effect, paying these taxes.  The amounts reimbursed can be
significant.  For example, in fiscal year 1995, the contractors at
DOE's Oak Ridge and Sandia facilities were reimbursed almost $69
million for gross receipts, sales, and/or use taxes.  The Congress
could take action to designate DOE operating contractors as
"instrumentalities of the federal government." Such action would make
the contractors immune from state taxation and thereby eliminate this
expense. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    90      90      90      90      90
Outlays                             90      90      90      90      90

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    90      90      90      90      90
Outlays                             90      90      90      90      90
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:58.1

Energy Management:  DOE Controls Over Contractor Expenditures Need
Strengthening (GAO/RCED-87-166, August 28, 1987). 


      GAO CONTACT
---------------------------------------------------- Appendix III:58.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   NUCLEAR WASTE DISPOSAL
   FEESNUCLEAR WASTE DISPOSAL FEES
------------------------------------------------------ Appendix III:59


Authorizing committees              Energy and Natural Resources
                                    (Senate)
                                    Commerce (House)
                                    Resources (House)

Primary agency                      Department of Energy

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Utilities pay a fee to the Nuclear Waste Fund to finance the
development of storage and permanent disposal facilities for
high-level radioactive wastes.  The amount of this fee has not
changed since 1983, making the fund susceptible to future budget
shortfalls.  To help ensure that sufficient revenues are collected to
cover increases in cost estimates caused by price inflation, the
Congress should amend the Nuclear Waste Policy Act of 1982 to direct
the Secretary of Energy to automatically adjust for inflation the
nuclear waste disposal fee that utilities pay into the Nuclear Waste
Fund.  If the fee were indexed to inflation, the following additional
receipts could be expected. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                      16      33      51      69      88
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:59.1

Status of Actions to Improve DOE User-Fee Assessments
(GAO/RCED-92-165, June 10, 1992). 

Changes Needed in DOE User-Fee Assessments (GAO/T-RCED-91-52, May 8,
1991). 

Changes Needed in DOE User-Fee Assessments to Avoid Funding Shortfall
(GAO/RCED-90-65, June 7, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:59.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   POWER MARKETING ADMINISTRATIONS
   COST RECOVERYPOWER MARKETING
   ADMINISTRATIONS COST RECOVERY
------------------------------------------------------ Appendix III:60


Authorizing committees              Energy and Natural Resources
                                    (Senate) Resources (House)

Primary agency                      Department of Energy

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
Three of the Department of Energy's (DOE) power marketing
administrations (PMAs)--the Southeastern Power Administration, the
Southwestern Power Administration, and the Western Area Power
Administration--market primarily wholesale power in 30 states
produced at large, multiple-purpose water projects.  The three PMAs
receive annual appropriations to cover operating and maintenance
(O&M) expenses and, if applicable, the capital investment in
transmission assets.  Federal law requires the PMAs to repay these
appropriations as well as the power-related O&M and the capital
appropriations expended by the operating agencies generating the
power. 

GAO identified five major power-related costs that have not been
fully recovered by one or more of the three PMAs through rates:  (1)
pensions and postretirement health benefits for current employees;
(2) construction costs for some power-generating and transmission
projects; (3) construction and O&M costs that have been allocated to
irrigation facilities at the Pick-Sloan Program that are incomplete
and infeasible; (4) costs of mitigating the environmental impact of
certain water projects; and (5) certain O&M costs and interest
expense payments due from the Western Area Power Administration.  In
some cases, the PMAs are not required to recover these costs because
of legislation or DOE policy.  GAO estimated that these unrecovered
costs amounted to about $83 million for fiscal year 1995 and
cumulatively as much as $1.8 billion as of September 30, 1995.  GAO
has also determined that financing of power-related capital projects
is subsidized by the federal government and estimates that the
financing subsidies were about $200 million in fiscal year 1995.  GAO
estimates that the cumulative financing subsidy over the last 30
years has been several billion dollars. 

The Congress and/or the Secretary of Energy may wish to consider
directing the PMAs to more fully recover power-related costs or
revising DOE's policy on high-interest debt repayment.  For example,
changes could be implemented to recover the full costs to the federal
government of providing postretirement health benefits and pensions
for current employees and operating agency employees engaged in
producing and marketing the power sold by the PMAs.  CBO estimates
that such action would result in the following savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                      16      16      17      17      18
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:60.1

Power Marketing Administrations:  Cost Recovery, Financing, and
Comparison to Nonfederal Utilities (GAO/AIMD-96-145, September 19,
1996). 

Federal Power:  Outages Reduce the Reliability of Hydroelectric Power
Plants in the Southeast (GAO/T-RCED-96-180, July 25, 1996). 

Federal Power:  Recovery of Federal Investment in Hydropower
Facilities in the Pick-Sloan Program (GAO/T-RCED-96-142, May 2,
1996). 

Federal Electric Power:  Operating and Financial Status of DOE's
Power Marketing Administrations (GAO/RCED/AIMD-96-9FS, October 13,
1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:60.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   FEDERAL INVESTMENT IN
   SUCCESSFULLY COMMERCIALIZED
   TECHNOLOGIESFEDERAL INVESTMENT
   IN SUCCESSFULLY COMMERCIALIZED
   TECHNOLOGIES
------------------------------------------------------ Appendix III:61


Authorizing committees              Energy and Natural Resources
                                    (Senate) Science (House)
                                    Commerce (House)

Appropriations subcommittees        Energy and Water Development
                                    (Senate and House)
                                    Interior and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Department of Energy (DOE) and the private sector are involved in
hundreds of cost-shared projects aimed at developing a broad spectrum
of cost-effective, energy-efficiency technologies that protect the
environment, support the nation's economic competitiveness, and
promote the increased use of oil, gas, coal, nuclear, and renewable
energy resources.  In June 1996, GAO reported that DOE generally does
not require repayment of its investment in technologies that are
successfully commercialized.  GAO's review identified only four DOE
programs that require industry repayment if the technologies are
ultimately commercialized.  The offices in which GAO focused most of
its work planned to devote about $8 billion in federal funds to
cost-shared projects over their lifetime, of which about $2.5 billion
is subject to repayment. 

GAO's report discussed the advantages and disadvantages of having a
repayment policy and pointed out that many of the disadvantages can
be mitigated by structuring a flexible repayment requirement with the
disadvantages in mind.  It also discussed the types of programs and
projects that would be the most appropriate or suitable for repayment
of the federal investment. 

Because opportunities exist for substantial repayment in some of
DOE's programs, requiring repayment under a flexible policy would
allow the government to share in the benefits of successfully
commercialized technologies that could amount to hundreds of millions
of dollars.  The potential for repayment can be illustrated by
assuming that if only 50 percent of the $5.5 billion planned for
projects that are currently not subject to repayment lend themselves
to repayment and if about 15 percent of research and development
funds result in commercialized technologies (which DOE officials say
is about average), then about $400 million could be repaid to the
federal government.  However, a 5-year savings estimate cannot be
developed at this time because new repayment provisions would only
apply to future technology development projects not yet negotiated
with industry. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:61.1

Energy Research:  Opportunities Exist to Recover Federal Investment
in Technology Development Projects (GAO/RCED-96-141, June 26, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:61.2

Victor S.  Rezendes, (202) 512-3841



   300 NATURAL RESOURCES AND
   ENVIRONMENT
------------------------------------------------------ Appendix III:62

  -- Federal Land Policies

  -- Collaborative Federal Land Management Approach

  -- Federal Timber Sales

  -- Fair Market Value for Natural Resources

  -- Recreation Fees at Federal Sites

  -- Hardrock Mining Royalties

  -- Natural Resources Revenue Sharing

  -- Federal Water Policies

  -- Water Transfers

  -- Pollution Fees and Taxes

  -- Hazardous Waste Cleanup Cost Recovery

  -- Non-Time-Critical Removals in Superfund Cleanups

  -- Excess Funds in Superfund Contracts

  -- Weather Service Modernization Project



   OPTION:
   FEDERAL LAND POLICIESFEDERAL
   LAND POLICIES
------------------------------------------------------ Appendix III:63


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Energy and
                                    Natural Resources (Senate)
                                    Agriculture (House)
                                    Resources (House)
                                    Transportation and Infrastructure
                                    (House)

Primary agencies                    Department of the Interior
                                    Department of Agriculture

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The federal government owns and manages about 650 million
acres--nearly one-third of the U.S.  landmass.  For many years, these
lands have been sold or otherwise made available for a variety of
purposes to private citizens, corporations, and state and local
governments.  In many cases, the rate of return received by the
government for the sale or use of these valuable natural resources
has fallen far below reasonable market-based levels. 

This option has two components:  increased fees for patenting
hardrock mining claims and higher fees for concessionaires operating
on federal lands.  Descriptions of each component follow. 


      INCREASED FEES FOR PATENTING
      HARDROCK MINING CLAIMS
---------------------------------------------------- Appendix III:63.1

The Mining Law of 1872 allows holders of economically minable claims
to obtain all rights and interests to both the land and the minerals
by patenting them for $2.50 or $5.00 an acre--an amount that
approximated the fair market value for western grazing land and
farmland in 1872.  Over the last 124 years, the federal government
has sold about 3.2 million acres of public lands, or an area about
the size of Connecticut, under this patent provision.  As a result,
some patent holders have reaped huge profits at the government's
expense.  At the time of GAO's 1989 study, 265 patent applications
were pending for more than 80,000 acres of public land.  At just 12
of these sites, if all the land applied for was patented, the
government would have received about $16,000 for land appraised in
1988 at between $14.4 million and $47.1 million. 

The 104th Congress considered several bills that address patenting of
hardrock mining claims.  Two companion bills (H.R.  1580 and S.  506)
would have repealed the current congressional moratorium against new
mining patents.  Four other bills (H.R.  357 and its companion S. 
504, as well as H.R.  721 and H.R.  3102) would have eliminated
patenting of mining claims.  Under a seventh bill (S.  639),
patenting would have granted the claimholder title to the mineral
only. 

Revising the patent fees for hardrock mining claims could take many
forms (assuming the current moratorium on patenting is lifted).  For
example, fees could be set to recover the agency's administrative
costs to process the patents, or the fees could be set to capture the
fair market value of selling the land and/or the mineral resources. 
The amount of additional receipts from increased fees would depend on
the specific proposal implemented.  In any case, estimating savings
is difficult because of the large variation in surface land values,
the lack of essential data about the mineral resources on current
claims, and the lack of multiple bidders on any claim to allow a
competitive process.  CBO cannot develop a 5-year estimate of
additional receipts due to increased fees for patenting hardrock
mining claims at this time. 


      HIGHER FEES FOR
      CONCESSIONAIRES OPERATING ON
      FEDERAL LANDS
---------------------------------------------------- Appendix III:63.2

The federal government enters into agreements with concessionaires to
provide key services in parks, forests, and other recreation areas. 
In 1991, GAO reported that concessionaires generated about $1.4
billion in gross revenues and paid the government about $35 million
in concession fees--an average return to the government of about 2
percent.  The Department of the Interior's follow-on report to the
Vice President's National Performance Review concluded that receipts
from concession franchise fees must be actively pursued by the
National Park Service, estimating that substantial revenue could be
generated by promoting competition, expediting contract
renegotiations, and boosting the government's return. 

The 104th Congress considered several bills that would reform
concession policies.  All of these bills were intended to increase
the return to the government by limiting preferential rights of
renewal, thus increasing competition.  H.R.  773 and S.  309 focused
only on the National Park Service and would have allowed the agency
to keep increased fee revenue.  H.R.  2028, which was included in the
fiscal year 1996 omnibus budget reconciliation bill (H.R.  2491),
would have increased fees for several land management agencies. 
Under H.R.  2028, fees up to a minimum amount would have been
credited to the U.  S.  Treasury and fees above that level would have
stayed within the agencies. 

CBO cannot provide a savings estimate for higher fees at this time. 
The Park Service has recently renegotiatied many of its existing
agreements with concessionaires.  Therefore, some of the savings from
this option may occur beyond the year 2002. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:63.3


         LAND OWNERSHIP
-------------------------------------------------- Appendix III:63.3.1

Land Ownership:  Information on the Acreage, Management, and Use of
Federal and Other Lands (GAO/RCED-96-40, March 13, 1996). 


         HARDROCK MINING PATENTS
-------------------------------------------------- Appendix III:63.3.2

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Federal Land Management:  The Mining Law of 1872 Needs Revision
(GAO/RCED-89-72, March 10, 1989). 


         CONCESSIONAIRES OPERATING
         ON FEDERAL LANDS
-------------------------------------------------- Appendix III:63.3.3

Federal Lands:  Concession Reform Is Needed (GAO/T-RCED/GGD-96-223,
July 18, 1996). 

NPS Projected Returns From Concessionaires (GAO/RCED-96-48R, November
28, 1995). 

National Parks:  Difficult Choices Need to Be Made About the Future
of the Parks (GAO/RCED-95-238, August 30, 1995). 

Federal Lands:  Views on Reform of Recreation Concessionaires
(GAO/T-RCED-95-250, July 25, 1995). 

National Parks:  Difficult Choices Need to Be Made About the Future
of the Parks (GAO/T-RCED-95-124, March 7, 1995). 

Federal Lands:  Little Progress Made in Improving Oversight of
Concessionaires (GAO/T-RCED-93-42, May 27, 1993). 

Forest Service:  Little Assurance That Fair Market Value Fees Are
Collected From Ski Areas (GAO/RCED-93-107, April 16, 1993). 

Federal Lands:  Improvements Needed in Managing Concessionaires
(GAO/RCED-91-163, June 11, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:63.4

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   COLLABORATIVE FEDERAL LAND
   MANAGEMENT
   APPROACHCOLLABORATIVE FEDERAL
   LAND MANAGEMENT APPROACH
------------------------------------------------------ Appendix III:64


Authorizing committees                  Agriculture, Nutrition, and
                                        Forestry (Senate)
                                        Energy and Natural Resources
                                        (Senate)
                                        Agriculture (House)
                                        Resources (House)

Appropriations subcommittees            Interior and Related Agencies
                                        (Senate and House)

Primary agencies                        Department of the Interior
                                        Department of Agriculture

Accounts                                Multiple

Spending type                           Discretionary

Budget subfunction                      Conservation and Land
                                        Management

Framework theme                         Improve efficiency
----------------------------------------------------------------------
The responsibilities of the four major federal land management
agencies--the National Park Service, Bureau of Land Management (BLM),
Fish and Wildlife Service within the Department of Interior, and the
Forest Service within the Department of Agriculture--have grown more
similar over time.  Most notably, the Forest Service and BLM now
provide more noncommodity uses, including recreation and protection
for fish and wildlife, on their lands.  In addition, managing federal
lands has become more complex.  Managers have to reconcile
differences among a growing number of laws and regulations, and the
authority for these laws is dispersed among several federal agencies
and state and local agencies.  These changes have coincided with two
other developments--the federal government's increased emphasis on
downsizing and budgetary constraint and scientists' increased
understanding of the importance and functioning of natural systems
whose boundaries may not be consistent with existing jurisdictional
and administrative boundaries.  Together, these changes and
developments suggest a basis for reexamining the processes and
structures under which the federal land management agencies currently
operate. 

Over the last 26 years, two basic strategies have been proposed to
improve federal land management:  (1) streamlining the existing
structure by coordinating and integrating functions, systems,
activities, programs, and field locations and (2) reorganizing the
structure by combining agencies.  The two strategies are not mutually
exclusive and some prior proposals have encompassed both. 

Over the last several years, the Forest Service and BLM have
collocated some offices or shared space with other federal agencies. 
They have also pursued other means of streamlining, sharing
resources, and saving rental costs.  However, no significant
legislation has been enacted to streamline or reorganize federal land
management agencies and the four major federal land management
agencies have not, to date, developed a strategy to coordinate and
integrate their functions, systems, activities, and programs. 

Without a specific restructuring proposal that would eliminate
certain programs or revise how the land is managed, CBO does not
estimate savings due to sharing resources between the four major land
management agencies.  Savings would depend on the extent of a
workforce restructuring and implementation proposal. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:64.1

Federal Land Management:  Streamlining and Reorganization Issues
(GAO/T-RCED-96-209, June 27, 1996). 

National Park Service:  Better Management and Broader Restructuring
Efforts Are Needed (GAO/T-RCED-95-101, February 9, 1995). 

Forestry Functions:  Unresolved Issues Affect Forest Service and BLM
Organizations in Western Oregon (GAO/RCED-94-124, May 17, 1994). 

Forest Service Management:  Issues to Be Considered in Developing a
New Stewardship Strategy (GAO/T-RCED-94-116, February 1, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:64.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   FEDERAL TIMBER SALESFEDERAL
   TIMBER SALES
------------------------------------------------------ Appendix III:65


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Agriculture
                                    (House)

Appropriation subcommittees         Interior and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Agriculture

Accounts                            National Forest System (12-1106)
                                    National Forest Service Receipts
                                    (12-9990)

Spending type                       Discretionary/Direct

Budget subfunction                  Conservation and Land Management

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Agriculture's Forest Service does not always
recover all of its timber-related costs from the sale of timber. 
Currently, the Service receives most of its timber funding from
timber sales and from appropriated funds linked primarily to timber
management and harvest. 

GAO estimated that in fiscal year 1990, under the most conservative
definition of costs, $35.6 million in Forest Service preparation and
administration expenses went unrecovered.  GAO's estimates ranged as
high as $112.2 million when all operating costs and payments to
states were considered.  According to the Forest Service's fiscal
year 1995 Timber Sale Program Annual Report, timber sale program
costs exceeded revenues by about $195 million when payments to states
are considered as costs of the program. 

The escalating costs of the Forest Service's timber sale program has
long been a concern of the Congress.  In response to this concern,
the Forest Service has taken efforts to achieve cost efficiencies and
is reviewing its policy regarding below-cost timber sales.  The
primary objective of some timber sales is to achieve forest
stewardship objectives such as forest health--generating revenues is
secondary.  However, notwithstanding these types of timber sales, at
some forests, the costs to prepare and administer timber sales still
exceed total receipts. 

The Congress may wish to cease all below-cost federal timber sales. 
For example, all future timber sales could be eliminated in three of
the Forest Service's nine regions where, on average over the last
decade, cash expenditures have exceeded cash receipts.  This also
would reduce Forest Service outlays for timber management,
reforestation, construction of logging roads, and other program
costs.  CBO estimates that the following net 5-year savings in
federal outlays could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    25      35      40      50      60
Outlays                             20      30      35      45      55

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    25      35      40      50      60
Outlays                             20      30      35      45      55
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:65.1

Forest Service:  Observations on the Emergency Salvage Sale Program
(GAO/T-RCED-96-38, November 29, 1995). 

Forest Service:  Distribution of Timber Sales Receipts Fiscal Years
1992-94 (GAO/RCED-95-237FS, September 8, 1995). 

Forest Service:  Status of Efforts to Achieve Cost Efficiency
(GAO/RCED-94-185FS, April 26, 1994). 

Forest Service Management:  Issues to Be Considered in Developing a
New Stewardship Strategy (GAO/T-RCED-94-116, February 1, 1994). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Comments on Below-Cost Timber Bills (GAO/RCED-92-160R, April 1,
1992). 

Forest Service Needs to Improve Efforts to Reduce Below-Cost Timber
Sales (GAO/T-RCED-91-43, April 25, 1991). 

Forest Service Needs to Improve Efforts to Protect the Government's
Financial Interest and Reduce Below-Cost Timber Sales
(GAO/T-RCED-91-42, April 24, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:65.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   FAIR MARKET VALUE FOR NATURAL
   RESOURCESFAIR MARKET VALUE FOR
   NATURAL RESOURCES
------------------------------------------------------ Appendix III:66


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Energy and
                                    Natural Resources (Senate)
                                    Agriculture (House)
                                    Resources (House)

Primary agencies                    Department of Agriculture
                                    Department of the Interior

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Implementing market-based incentives and management practices may
encourage more economically and environmentally sound use of federal
lands and resources.  The existing arrangement for use of the public
domain provides subsidies to users--such as grazers, miners, and
communication site lessees--that may encourage poor use of scarce
resources and/or deprive the government of revenues to which it is
entitled.  In addition, certain non fee-related provisions of the
governing laws may also encourage less than optimal use of those
lands and resources.  For example, currently livestock operators on
Forest Service lands are required to graze livestock on their
allotments or lose their permits.  Removing this "use-it-or-lose-it"
requirement would not only promote economically efficient use of the
resources, but also improve ecological conditions on Forest Service
lands since environmental groups may often outbid ranchers for the
permits in order to rest the land. 

Many proposals have been advanced to alter the existing arrangements
to stress better use of the lands and/or increased revenue to the
federal government including:  implementing new user fees for a
variety of uses; charging fair market value for goods and recovering
costs for services; opening certain uses to competitive bidding and
removing restrictions on how the land must be used; funding land
management units out of net receipts; and entering into partnership
arrangements with other governmental and non-governmental entities. 
Some of these ideas would require specific new statutory authority,
while others could be implemented under current authority. 

According to the Thoreau Institute, charging fair market value for
all uses, including timber, grazing, recreation, and minerals and
subsequently funding forests, parks, and public lands out of the net
income would save taxpayers more than $21 billion over 5 years.  No
more funds would be appropriated for these uses. 

In this report, GAO presents several specific options that illustrate
how market-based incentives could be implemented.  See the options
"Federal Land Policies," "Federal Timber Sales," "Recreation Fees at
Federal Sites," "Hardrock Mining Royalties," "Federal Water
Policies," and "Water Transfers."


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:66.1

Forest Service Management:  Issues to Be Considered in Developing a
New Stewardship Strategy (GAO/T-RCED-94-116, February 1, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:66.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   RECREATION FEES AT FEDERAL
   SITESRECREATION FEES AT FEDERAL
   SITES
------------------------------------------------------ Appendix III:67


Authorizing committees                  Agriculture, Nutrition, and
                                        Forestry (Senate)
                                        Energy and Natural Resources
                                        (Senate)
                                        Agriculture (House)
                                        Resources (House)
                                        Transportation and
                                        Infrastructure (House)

Primary agencies                        Department of the Interior
                                        Department of Agriculture

Spending type                           Direct

Framework theme                         Improve efficiency
----------------------------------------------------------------------
Improved pricing of user fees at recreational sites could help defray
direct costs to the government, shift the cost burden from the
taxpayers to the beneficiaries of the services, and alleviate
overcrowding at many sites.  Entrance and user fees are charged at
some sites, but the fees generally cover only a small portion of the
costs for services provided to visitors.  For example, in 1993, the
Department of the Interior's National Park Service spent an estimated
$230 million on services for visitors but recovered only an estimated
$90 million in fees. 

Interior's follow-on report to the Vice President's National
Performance Review concluded that reform in the nature, level, and
collection of fees in national parks could generate substantial
revenues. 

Fiscal year 1996 and 1997 appropriations legislation for the Park
Service, as well as some other land management agencies, included
language that permits these agencies to experiment with increased
entrance fees at a number of locations.  In addition, legislation was
introduced in the 104th Congress to permanently authorize higher fees
throughout the Park Service and several other land management
agencies. 

Requiring the Park Service to charge fees to cover direct as well as
associated costs and disallowing their use for increased park
spending would yield net new receipts over the fiscal year 1998
through 2002 period as shown in the following table.  Any spending
increases resulting from increased fees would be subject to future
appropriations action. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                     200     207     215     222     231
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:67.1

Comments on H.R.  2107 (GAO/RCED-96-189R, June 11, 1996). 

National Parks:  Difficult Choices Need to Be Made About the Future
of the Parks (GAO/RCED-95-238, August 30, 1995). 

National Parks:  Difficult Choices Need to Be Made About the Future
of the Parks (GAO/T-RCED-95-124, March 7, 1995). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Forest Service:  Difficult Choices Face the Future of the Recreation
Program (GAO/RCED-91-115, April 15, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:67.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   HARDROCK MINING
   ROYALTIESHARDROCK MINING
   ROYALITIES
------------------------------------------------------ Appendix III:68


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Energy and
                                    Natural Resources (Senate)
                                    Agriculture (House)
                                    Resources (House)

Primary agencies                    Department of the Interior
                                    Department of Agriculture

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The government receives no financial compensation for hardrock
minerals extracted from federal lands.  In 1990, hardrock minerals
worth at least $1.2 billion were extracted from federal lands, while
known, economically recoverable reserves of hardrock minerals
remaining on federal lands were valued at $64.9 billion. 

The 104th Congress considered several bills that would have imposed
royalties on hardrock minerals extracted from federal lands.  H.R. 
1580 and S.  506 would have imposed a royalty of 3 percent of the net
proceeds for mines grossing at least $500,000 annually.  Two other
bills (H.R.  721 and S.  504) would have imposed a royalty fee of 8
percent of the gross income.  H.R.  357 and H.R.  3102 would have
imposed a royalty of 8 percent of the net smelter return.  Another
bill, S.  639, would have assessed royalties for gold at 3 percent of
the gross value, and for minerals other than gold at 2 percent of the
gross value. 

Assuming that the Congress adopted an 8-percent royalty on gross
profits, CBO estimates that the following receipts would be gained. 
CBO's estimate reflects a reduction since 1990 in the expected amount
of hardrock minerals produced on federal lands as a result of
patenting. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                      12      55      39      39      39
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:68.1

Mineral Royalties:  Royalties in the Western States and in Major
Mineral-Producing Countries (GAO/RCED-93-109, March 29, 1993). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Mineral Resources:  Value of Hardrock Minerals Extracted From and
Remaining on Federal Lands (GAO/RCED-92-192, August 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:68.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   NATURAL RESOURCES REVENUE
   SHARINGNATURAL RESOURCES
   REVENUE SHARING
------------------------------------------------------ Appendix III:69


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Energy and
                                    Natural Resources (Senate)
                                    Agriculture (House)
                                    Resources (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Interior and Related Agencies
                                    (Senate and House)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agencies                    Department of the Interior
                                    Department of Agriculture

Accounts                            Multiple

Spending type                       Direct

Budget subfunction                  Conservation and Land Management

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The federal government collects fees from private interests for the
sale or use of natural resources on federal lands.  A percentage of
these fees is, under certain conditions, allocated to states and
counties as an offset for tax revenues not received from the federal
lands. 

Federal land-managing agencies typically do not deduct the full costs
of their programs from the gross receipts that the programs generate
before sharing the receipts with states and counties.  Sharing
federal receipts on a gross, rather than a net, basis often reduces
the federal government's share of the revenues. 

According to CBO, changing revenue sharing from a gross-receipt to a
net-receipt basis would reduce net federal outlays and produce the
savings shown as follows.\17



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   180     190     195     200     205
Outlays                            180     190     195     200     205

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   180     190     195     200     205
Outlays                            180     190     195     200     205
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\17 The projected savings do not include a potential federal cost
increase under the Payment in Lieu of Taxes (PILT) program.  Payments
under the discretionary PILT program would increase by about $30
million per year beginning in fiscal year 1999 if net program
receipts were shared and the Congress appropriated such an increase. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:69.1

Forest Service:  Distribution of Timber Sales Receipts Fiscal Years
1992-94 (GAO/RCED-95-237FS, September 8, 1995). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Rangeland Management:  Current Formula Keeps Grazing Fees Low
(GAO/RCED-91-185BR, June 11, 1991). 

Forest Service Needs to Improve Efforts to Reduce Below-Cost Timber
Sales (GAO/T-RCED-91-43, April 25, 1991). 

Mineral Revenues:  Collection and Distribution of Revenues From
Acquired Lands (GAO/RCED-90-7, August 2, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:69.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   FEDERAL WATER POLICIESFEDERAL
   WATER POLICIES
------------------------------------------------------ Appendix III:70


Authorizing committees              Energy and Natural Resources
                                    (Senate) Resources (House)

Primary agency                      Department of the Interior

Accounts                            Multiple

Spending type                       Direct

Budget subfunction                  Water Resources

Framework theme                     Improve efficiency
----------------------------------------------------------------------
This broad option has five components:  increased fees for subsidized
federal water to large farms, subsidized water to produce subsidized
crops, repayment of water project construction costs, recovery of
federal investment in hydropower facilities, and federal water
subsidies.  Descriptions of each of the components follow. 


      SUBSIDIZED FEDERAL WATER TO
      LARGE FARMS
---------------------------------------------------- Appendix III:70.1

Under the Reclamation Reform Act of 1982, as amended, some farmers
have reorganized large farming operations into multiple, smaller
landholdings to be eligible to receive additional federally
subsidized irrigation water.  The act limits to 960 the maximum
number of owned or leased acres that individuals or legal entities
(such as partnerships or corporations) can irrigate with federal
water at rates that exclude interest on the government's investment
in the irrigation component of its water resource projects.  However,
due to the vague definition of the term "farm," the flow of federally
subsidized water to land holdings above the 960 acre-limit has not
been stopped, and the federal government is not collecting revenues
to which it is entitled under the act. 


      SUBSIDIZED WATER TO PRODUCE
      SUBSIDIZED CROPS
---------------------------------------------------- Appendix III:70.2

The use of federally subsidized water to produce federally subsidized
crops results in the government paying double subsidies.  According
to the Department of the Interior, between 1976 and 1985, an average
of 38 percent of the acreage served by the Bureau of Reclamation
nationwide was used to produce crops that are also eligible for
subsidies through the Department of Agriculture's commodity programs. 
Estimates of the cost of federal water subsidies vary but are
substantial.  The Department of the Interior estimated that
irrigation subsidies used to produce subsidized crops throughout the
17 western states totaled $203 million in 1986; the Bureau of
Reclamation placed the figure at $830 million. 


      TIME FRAME FOR REPAYING
      WATER PROJECT CONSTRUCTION
      COSTS
---------------------------------------------------- Appendix III:70.3

By the end of fiscal year 1990, after receiving water from the
Central Valley Project (CVP) in California's Central Valley Basin for
over 40 years, irrigators had repaid only $10 million, 1 percent, of
the over $1 billion in construction costs that they owe the federal
government.  In 1986, the Congress required irrigators and other
users to pay their share of the federal investment in the CVP by
2030.  While construction costs ultimately may be recovered by 2030,
the dollars that eventually flow to the Treasury could be worth much
less than if they had been repaid sooner.  The Congress may wish to
accelerate the repayment schedule. 


      RECOVERY OF FEDERAL
      INVESTMENT IN HYDROPOWER
      FACILITIES
---------------------------------------------------- Appendix III:70.4

Under the current repayment criteria, approximately $454 million of
the federal investment in the Pick-Sloan Basin Program (a
comprehensive plan to manage the water and hydropower resources of
the Missouri River basin) is unrecoverable.  A portion of
Pick-Sloan's completed facilities were intended for use with
irrigation facilities that have not been completed and are no longer
considered feasible.  In addition, as the overall federal investment
in the other aspects of the completed hydropower facilities increases
because of changes such as renovations and replacements, the amount
of the federal investment that is unrecoverable will increase. 
Changing the terms of repayment to recover any of the $454 million
investment would require congressional action.  Consistent with
previous congressional action concerning the program, the Congress
could direct the Western Area Power Administration to recover the
investment through power revenues and to take action to minimize any
impact on power rates. 


      FEDERAL INTEREST SUBSIDIES
      FOR IRRIGATORS
---------------------------------------------------- Appendix III:70.5

Estimates of the current cost of federal water subsidies are
substantial.  For example, the Department of the Interior reported
that irrigation subsidies throughout the 17 western states totaled
$534 million in 1986, while the Bureau of Reclamation placed the cost
at $2.2 billion.  Estimates differ because of different definitions
of an irrigation subsidy, different interest rates used to calculate
the subsidies, and different methods for compounding unpaid interest. 
Much has changed in the West since the subsidies were established in
1902, and it is not known whether the subsidies are still warranted
or whether irrigators could pay more of the cost of the water
delivered. 

The added receipts shown in the tables below would be achieved if the
Congress collected the full cost of federally subsidized water to
large farms, required CVP irrigators to repay the costs of the CVP by
2020 (roughly two-thirds the time required under current law),
recovered the investment in the Pick-Sloan Basin Program, and/or
phased out the interest subsidy for western irrigators.\18



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Increased fees for subsidized water to large farms
----------------------------------------------------------------------
Added receipts                       4       8       8       8       8
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Time frame for repaying water project construction costs
----------------------------------------------------------------------
Added receipts                       0       3       8      11      11
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Recovery of federal investment in hydropower facilitie
----------------------------------------------------------------------
Added receipts                       0      18      18      18      18
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Federal interest subsidies for irrigators
----------------------------------------------------------------------
Added receipts                       0       4      11      14      14
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\18 Implementing some of these options would affect the potential
savings from the remaining options. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:70.6


         SUBSIDIZED FEDERAL WATER
         TO LARGE FARMS
-------------------------------------------------- Appendix III:70.6.1

Water Subsidies:  The Westhaven Trust Reinforces the Need to Change
Reclamation Law (GAO/RCED-90-198, June 5, 1990). 

Water Subsidies:  Basic Changes Needed to Avoid Abuse of the 960-Acre
Limit (GAO/RCED-90-6, October 12, 1989). 


         SUBSIDIZED WATER TO
         PRODUCE SUBSIDIZED CROPS
-------------------------------------------------- Appendix III:70.6.2

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Reclamation Law:  Changes Needed Before Water Service Contracts Are
Renewed (GAO/RCED-91-175, August 22, 1991). 


         TIME FRAME FOR REPAYING
         WATER PROJECT
         CONSTRUCTION COSTS
-------------------------------------------------- Appendix III:70.6.3

Water Subsidies:  Impact of Higher Irrigation Rates on Central Valley
Project Farmers (GAO/RCED-94-8, April 19, 1994). 

Reclamation Law:  Changes Needed Before Water Service Contracts Are
Renewed (GAO/RCED-91-175, August 22, 1991). 


         RECOVERY OF FEDERAL
         INVESTMENT IN HYDROPOWER
         FACILITIES
-------------------------------------------------- Appendix III:70.6.4

Federal Power:  Recovery of Federal Investment in Hydropower
Facilities in the Pick-Sloan Program (GAO/T-RCED-96-142, May 2,
1996). 


         FEDERAL INTEREST
         SUBSIDIES FOR IRRIGATORS
-------------------------------------------------- Appendix III:70.6.5

Water Subsidies:  Impact of Higher Irrigation Rates on Central Valley
Project Farmers (GAO/RCED-94-8, April 19, 1994). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:70.7

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   WATER TRANSFERSWATER TRANSFERS
------------------------------------------------------ Appendix III:71


Authorizing committees              Energy and Natural Resources
                                    (Senate) Resources (House)

Primary agency                      Department of the Interior

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Water transfers, in which rights to use water are bought and sold,
are a mechanism for relocating scarce water to new users by allowing
those who place the highest economic value on it to purchase it. 
Water transfers from irrigation to municipal and industrial uses can
increase federal revenues because municipal and industrial users pay
rates based on their full share of the project's construction cost
plus interest.  In contrast, many irrigators pay only a portion of
their share of the construction costs and are exempt from paying
interest.  However, increasing federal revenues will reduce the net
benefits to the buyers and sellers, thereby discouraging some
transfers.  Deciding how much the Bureau of Reclamation should charge
for transferred water involves balancing the increase in federal
revenues with retaining incentives for water transfers to occur. 

A 5-year estimate of additional receipts cannot be developed at this
time.  The difficulties of estimating the highest economic value of
water and which users are willing to pay that value inhibit
estimation. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:71.1

Water Markets:  Increasing Federal Revenues Through Water Transfers
(GAO/RCED-94-164, September 21, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:71.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   POLLUTION FEES AND
   TAXESPOLLUTION FEES AND TAXES
------------------------------------------------------ Appendix III:72


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Environmental Protection Agency

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
User fees, cost reimbursement mechanisms, and pollution taxes could
be designed as a way to control pollutants and harmful substances by
preventing their further generation, thus supplementing regulatory
efforts to meet the objectives of existing environmental laws.  These
mechanisms also produce significant revenues which could help defray
the costs of administering environmental protection programs or
ultimately reduce the budget deficit.  Based on audit work, GAO has
identified several specific areas where fees and taxes might be
effective, including, but not limited to (1) requiring states to
collect permit fees on industrial and municipal dischargers to
surface waters and (2) establishing a pollution tax on dischargers,
based on volume, toxicity, or both. 

Based on our work, an example of a pollution fee which the Congress
may wish to consider is an excise tax on toxic water pollutants. 
Savings below illustrate a tax on water pollution discharges whose
rate increases with the toxicity of the discharge, effective on
discharges of water pollutants made after December 31, 1997.  Rates
range from $0.65 per pound for the least toxic pollutant to $63.40
per pound for the most toxic pollutant.  Over time, revenue from a
pollution fee tax should decline since the intent of such a tax is to
provide an incentive to reduce the amount of pollutants generated. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                       0.2     0.2     0.2     0.2     0.2
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

Source:  Joint Committee on Taxation (JCT). 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:72.1

Environmental Protection:  Implications of Using Pollution Taxes to
Supplement Regulation (GAO/RCED-93-13, February 17, 1993). 

Hazardous Waste:  Much Work Remains to Accelerate Facility Cleanups
(GAO/RCED-93-15, January 19, 1993). 

Drinking Water:  Widening Gap Between Needs and Available Resources
Threatens Vital EPA Program (GAO/RCED-92-184, July 6, 1992). 

Water Pollution:  Stronger Efforts Needed by EPA to Control Toxic
Water Pollution (GAO/RCED-91-154, July 19, 1991). 

Environmental Protection:  Meeting Public Expectations With Limited
Resources (GAO/RCED-91-97, June 18, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:72.2

Peter F.  Guerrero, (202) 512-6111



   OPTION:
   HAZARDOUS WASTE CLEANUP COST
   RECOVERYHAZARDOUS WASTE CLEANUP
   COST RECOVERY
------------------------------------------------------ Appendix III:73


Authorizing committees              Environment and Public Works
                                    (Senate)
                                    Commerce (House)
                                    Transportation and Infrastructure
                                    (House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Environmental Protection Agency

Account                             Hazardous Substance Superfund
                                    (20-8145)

Spending type                       Discretionary

Budget subfunction                  Pollution Control and Abatement

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA), which created the Superfund program, requires that the
parties responsible for contaminating Superfund sites clean them up
or reimburse the Environmental Protection Agency (EPA) for doing so. 
However, through 1995, EPA had reached agreements with responsible
parties to recover only 14 percent of its costs.  Recoveries have
been low because EPA has narrowly defined which costs it will seek to
recover--excluding, for example, research and development costs.  As
a result, the agency has foregone any opportunity to recover over
$3.8 billion in indirect costs.  Moreover, CERCLA prevents EPA from
charging polluters hundreds of millions of dollars in additional
interest on the cost EPA incurs to clean up Superfund sites by
setting an interest rate significantly lower than commercial rates
and preventing the accrual of interest on costs until demand for
payment is made.  If EPA had been allowed to accrue interest at a
commercial rate from the date funds were expended, GAO estimates that
$105 million in interest could have been accrued in 1990 on the funds
EPA expended in fiscal year 1989 alone. 

EPA should amend its definition of recoverable costs to permit
greater recoveries.  The Congress should amend CERCLA to allow EPA to
recover from responsible parties more interest on the cost it incurs
to clean up Superfund sites. 

Savings could not be estimated due to EPA's varying success in
collecting the full amount of current penalty and interest charges. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:73.1

Superfund:  EPA Has Opportunities to Increase Recoveries of Costs
(GAO/RCED-94-196, September 28, 1994). 

Superfund:  More Settlement Authority and EPA Cost Controls Could
Increase Cost Recovery (GAO/RCED-91-144, July 18, 1991). 

Superfund:  A More Vigorous and Better Managed Enforcement Program Is
Needed (GAO/RCED-90-22, December 14, 1989). 


      GAO CONTACT
---------------------------------------------------- Appendix III:73.2

Peter F.  Guerrero, (202) 512-6111



   OPTION:
   NON-TIME-CRITICAL REMOVALS IN
   SUPERFUND
   CLEANUPSNON-TIME-CRITICAL
   REMOVALS IN SUPERFUND CLEANUPS
------------------------------------------------------ Appendix III:74


Authorizing committees              Environment and Public Works
                                    (Senate) Commerce (House)
                                    Transportation and Infrastructure
                                    (House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Environmental Protection Agency

Account                             Hazardous Substance Superfund (20-
                                    8145)

Spending type                       Discretionary

Budget subfunction                  Pollution Abatement and Control

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Superfund is the Environmental Protection Agency's (EPA) program for
cleaning up the nation's highly contaminated hazardous waste sites,
either through undertaking a cleanup action itself or compelling
responsible private parties to do so.  After spending more than 16
years and $15 billion on Superfund, cleanups have been completed at
only about 400 of the 1,300 sites currently on EPA's priority cleanup
list. 

EPA has two processes for conducting Superfund cleanups:  (1) the
removal process which is typically used to respond to urgent
situations, and (2) the remedial process which has traditionally been
used for conducting more comprehensive cleanup actions.  To
accelerate the cleanup of Superfund sites, EPA has begun expanding
the use of its removal process to conduct substantial nonemergency
cleanup actions.  These Non-Time-Critical (NTC) removals result in
equally protective but quicker cleanups than under the remedial
process because they streamline cleanup planning.  NTC removals can
be used to clean up at least a portion of almost any Superfund site,
particularly the highest risk portions. 

In April 1996, we reported on the 81 cleanup actions that EPA had
conducted under the NTC removal process.  We found that compared to
the remedial process, the NTC removal process accelerated cleanup
actions by an average of 2 years per action and, consequently,
reduced human health risks sooner and prevented the further spread of
contamination.  Using NTC removals also reduced the cost of the
cleanup actions, from $4.1 million to $3.6 million, on average, for a
savings of $500,000 per action. 

If NTC removals were consistently used, the backlog of contaminated
sites in the Superfund program could be more quickly addressed.  This
would reduce total costs over the life of the Superfund program but,
given the current backlog, could not be expected to yield short-term
savings. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:74.1

A Superfund Tool for More Efficient Cleanups (GAO/RCED-96-134R, April
15, 1996). 

Superfund:  Non-Time-Critical Removals as a Tool for Faster and Less
Costly Cleanups (GAO/T-RCED-96-137, April 17, 1996). 

Time and Cost Limits on Superfund Removals (GAO/RCED-96-195R, June
10, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:74.2

Peter F.  Guerrero, (202) 512-6111



   OPTION:
   EXCESS FUNDS IN SUPERFUND
   CONTRACTSEXCESS FUNDS IN
   SUPERFUND CONTRACTS
------------------------------------------------------ Appendix III:75


Authorizing committees              Environment and Public Works
                                    (Senate) Commerce (House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Environmental Protection Agency

Account                             Hazardous Substances Superfund
                                    (20-8145)

Spending type                       Discretionary

Budget subfunction                  Pollution Control and Abatement

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Environmental Protection Agency's (EPA) Superfund program, which
the Congress created in 1980, was intended to clean up those sites
considered to be the most serious of the hazardous waste sites
identified in the United States.  EPA is authorized to compel parties
responsible for causing the hazardous waste pollution to clean up the
sites.  If these parties cannot be found, or if a settlement with
them cannot be reached, EPA can hire contractors to conduct the clean
up.  EPA has reported spending over $10 billion for cleaning up
nonfederal Superfund sites. 

If EPA took more aggressive action in identifying and closing
completed contracts under the Superfund program, excess amounts could
be recovered and used for new Superfund work, obviating the need for
additional appropriations to perform such work.  During fiscal years
1990 through 1996, EPA obligated about $4.4 billion dollars for
Superfund contracts.  As the work is performed under these contracts,
the contractors are paid and EPA's obligations are liquidated.  For
various reasons, the amount of funds obligated for a particular
contract often exceeds the amount eventually paid to the contractor. 
In these circumstances, the unspent funds should be deobligated and
used for other Superfund activities, once the original contracts are
closed. 

In 1994, EPA's Office of Inspector General reported that contracts
awarded under the Superfund program had balances of over $100 million
in unspent obligated funds that were no longer needed for their
original purposes.  In the same year, an EPA task force was
established to develop guidance on and pursue the recovery of excess
funds.  However, in May 1996 we reported that substantial amounts
remained obligated for completed projects.  Using EPA data systems,
we identified $164 million in potential recoveries, and we encouraged
EPA to aggressively pursue these recoveries.  EPA's failure to take
aggressive actions in identifying and closing completed contracts in
the past has contributed greatly to its failure to recover unneeded
funds.  For example, in some cases, contracts had not been closed
when work had been completed many years ago. 

Our current work, which will be completed by May 1997, indicates that
similar excess funds could be available during fiscal year 1998. 
Accordingly, in considering EPA's fiscal year 1998 budget request,
the Congress may wish to consider reducing EPA's budget to encourage
the agency to aggressively seek recovery of such funds.  For example,
the Congress may want to reduce EPA's fiscal year 1998 appropriation
by $164 million to encourage greater recovery of funds. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   164       0       0       0       0
Outlays                             41      57      33      16       8

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   164       0       0       0       0
Outlays                             41      57      33      16       8
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:75.1

Environmental Protection:  Selected Issues Related to EPA's Fiscal
Year 1997 Appropriation (GAO/T-RCED-96-164, May 1, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:75.2

Peter F.  Guerrero, (202) 512-6111



   OPTION:
   WEATHER SERVICE MODERNIZATION
   PROJECTWEATHER SERVICE
   MODERNIZATION PROJECT
------------------------------------------------------ Appendix III:76


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Science (House)

Appropriations subcommittees        Commerce, Justice, State, and the
                                    Judiciary (Senate)
                                    Commerce, Justice, State, the
                                    Judiciary, and Related Agencies
                                    (House)

Primary agency                      Department of Commerce

Account                             Operations, Research and
                                    Facilities (13-1450)

Spending type                       Discretionary

Budget subfunction                  Other Natural Resources

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The National Weather Service (NWS) uses a variety of systems and
manual processes to collect, process, and disseminate weather data to
and among its network of field offices and regional and national
centers.  Many of these systems and processes are outdated, and
during the 1980s, NWS began modernizing its systems.  NWS' current
modernization project includes four new major system development
programs including the Advanced Weather Interactive Processing System
(AWIPS).  AWIPS is designed to integrate for the first time
satellite, radar, and other data to support weather forecaster
decision-making and communications.  NWS estimates that the AWIPS
workstations and network will cost $525 million and be fully deployed
in 1999. 

GAO reports and testimony note that NWS has not demonstrated that all
AWIPS capabilities will result in the promised mission improvements,
such as better forecasts, fewer field offices, and reduced staffing
levels.  Therefore, GAO recommended that NWS (1) expand ongoing AWIPS
requirements review activities to include validation that proposed
capabilities are justified on the basis of mission impact and (2)
implement only those capabilities that are validated.  NWS disagreed
with this recommendation stating that completed and ongoing
requirements reviews and risk reduction activities as well as
operational test and evaluation of each AWIPS software release are
sufficient to ensure that unneeded AWIPS capabilities are revised or
not implemented.  However, GAO believes that none of the NWS-cited
activities were or are intended to demonstrate the mission impact of
AWIPS capabilities. 

Recently, the Congress, in conference report language accompanying
the National Oceanic and Atmospheric Administration's 1997
appropriations bill, placed a cap of $525 million on AWIPS and
recommended that the Commerce Department delay a decision to deploy
AWIPS nationwide until it conducts more operational testing.  Unless
NWS validates AWIPS capabilities to measurable mission improvements,
it runs the risk of wasting taxpayers' money.  Savings could
potentially be achieved depending on the outcome of the capabilities
validation. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:76.1

Weather Forecasting:  Recommendations to Address New Weather
Processing System Development Risks (GAO/AIMD-96-74, May 13, 1996). 

Weather Forecasting:  NWS Has Not Demonstrated That New Processing
System Will Improve Mission Effectiveness (GAO/AIMD-96-29, February
29, 1996). 

Weather Forecasting:  New Processing System Faces Uncertainties and
Risks (GAO/T-AIMD-96-47, February 29, 1996). 

Weather Forecasting:  Radars Far Superior to Predecessors, but
Location and Availability Questions Remain (GAO/T-AIMD-96-2, October
17, 1995). 

Weather Service Modernization Staffing (GAO/AIMD-95-239R, September
26, 1995). 

Weather Forecasting:  Radar Availability Requirements Not Being Met
(GAO/AIMD-95-132, May 31, 1995). 

Weather Forecasting:  Unmet Needs and Unknown Costs Warrant
Reassessment of Observing System Plans (GAO/AIMD-95-81, April 21,
1995). 

Weather Service Modernization Questions (GAO/AIMD-95-106R, March 10,
1995). 

Weather Service Modernization:  Despite Progress, Significant
Problems and Risks Remain (GAO/T-AIMD-95-87, February 21, 1995). 

Weather Forecasting:  Improvements Needed in Laboratory Software
Development Processes (GAO/AIMD-95-24, December 14, 1994). 

Weather Forecasting:  Systems Architecture Needed for National
Weather Service Modernization (GAO/AIMD-94-28, March 11, 1994). 

Weather Forecasting:  Important Issues on Automated Weather
Processing System Need Resolution (GAO/IMTEC-93-12BR, January 6,
1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:76.2

Joel C.  Willemssen, (202) 512-6253



   350 AGRICULTURE
------------------------------------------------------ Appendix III:77

  -- Food Aid:  Public Law 480 Title I Program

  -- The Market Access Program

  -- Export Credit Guarantee Programs

  -- Agricultural Research Service Funding

  -- USDA Telecommunications and Information Systems



   OPTION:
   FOOD AID:  PUBLIC
   LAW 480 TITLE I PROGRAMFOOD
   AID:  PUBLIC LAW 480 TITLE I
   PROGRAM
------------------------------------------------------ Appendix III:78


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Commerce,
                                    Science and Transportation
                                    (Senate)
                                    Agriculture (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture

Accounts                            P.L. 480 Grants (12-2278)
                                    P.L. 480 Program (12-2277)

Spending type                       Discretionary/Direct

Budget subfunction                  Farm Income Stabilization

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Through the Public Law 480 Title I Food Aid Program, U.S. 
agricultural commodities are sold to developing countries on
long-term credit at below-market interest rates.  The current goal of
the program is to promote the foreign policy of the United States by
enhancing the food security of developing countries.  The Public Law
480 legislation specifies ways that agricultural commodities provided
under the program can support this goal, including their use to
promote broad-based, sustainable (BBS) development, and develop and
expand markets for U.S.  agricultural commodities. 

Title I's contribution to BBS development and long-term market
development for U.S.  agricultural goods is limited for many reasons. 
The value of foreign exchange a country might save through purchasing
Title I commodities on concessional terms--the vehicle through which
BBS development could occur--is small relative to the country's
development needs.  Also, the program provides the Department of
Agriculture (USDA) little leverage to influence development
activities or initiate policy reforms in the recipient country. 
Further, other competing objectives dilute whatever leverage might be
associated with the program. 

Title I's contribution to long-term, foreign market development for
U.S.  agricultural commodities has not been demonstrated.  Title I
commodities tend to be price sensitive; therefore, it is difficult to
transform the concessional market share established through the Title
I program into commercial market share, unless the United States can
offer competitive prices and financing. 

In addition, legislatively mandated program requirements
(particularly cargo preference rules and reexport restrictions)
impose constraints on recipients that undermine market development
efforts. 

Title II of the Federal Agriculture Improvement and Reform (FAIR) Act
of 1996 amended the Title I program to provide greater program
flexibility, make improvements in operations and administration, and
extend authority to enter into new agreements through 2002.  Notably,
the FAIR Act (1) authorized agreements with private entities in
addition to foreign governments, (2) eliminated the minimum repayment
period of 10 years for Title I concessional credits and reduced the
maximum grace period from 7 to 5 years, (3) permitted an agricultural
trade organization to carry out a project or program in a developing
country using funds derived from Title I sales if the organization
has a market development plan approved by the Secretary of
Agriculture, and (4) simplified the process by which the Secretary
determines the commodities eligible for the program. 

Despite these reforms, and the management streamlining required in
1990 amendments to the Title I program, multiple and sometimes
competing objectives, as well as contradictory program requirements,
continue to encumber the Title I program, making it difficult to
create and implement an effective program strategy.  Furthermore, the
reforms did not address primary concerns regarding the program's
level of effectiveness in developing long-term foreign markets and
achieving economic development.  Thus, from this perspective, the
Congress may wish to consider reducing or eliminating funding for the
Title I program.  The savings presented below assume that the program
authority would not be extended beyond fiscal year 1998.\19 The delay
would permit USDA to lower production through an increased acreage
set-aside in 1998 which would not build surpluses or otherwise affect
the budget. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     0     200     200     200     200
Outlays                              0     110     190     200     200

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     0     210     216     221     227
Outlays                              0     116     203     219     224
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\19 The savings include $14 million for ocean freight differential
costs for the shipment of agricultural commodities. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:78.1

Farm Bill Export Options (GAO/GGD-96-39R, December 15, 1995). 

Food Aid:  Competing Goals and Requirements Hinder Title I Program
Results (GAO/GGD-95-68, June 26, 1995). 

Cargo Preference Requirements:  Objectives Not Significantly Advanced
When Used in U.S.  Food Aid Programs (GAO/GGD-94-215, September 29,
1994). 

Public Law 480 Title I:  Economic and Market Development Objectives
Not Met (GAO/T-GGD-94-191, August 3, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:78.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   THE MARKET ACCESS PROGRAMTHE
   MARKET ACCESS PROGRAM
------------------------------------------------------ Appendix III:79


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Agriculture
                                    (House)

Primary agency                      Department of Agriculture

Accounts                            Commodity Credit Corporation Fund
                                    (12-4336)

Spending type                       Direct

Budget subfunction                  Farm Income Stabilization

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
Under the Agriculture Trade Title (Title II) of the Federal
Agriculture Improvement and Reform (FAIR) Act of 1996, the Congress
changed the name of the Market Promotion Program to the Market Access
Program.  The Market Access Program is an export promotion program
that subsidizes overseas promotional activities for U.S. 
agricultural products.  The program uses government funds to help
U.S.  producers, exporters, and trade associations finance cost-share
promotional activities for U.S.  agricultural products abroad.  The
Foreign Agricultural Service (FAS) operates the Market Access Program
through 65 not-for-profit associations that either run the programs
themselves or pass funds through to other entities. 

Adequate assurance does not exist to demonstrate that Market Access
Program funds are supporting additional promotional activities rather
than simply replacing company/industry funds.  Moreover, FAS has not
provided adequate guidance or oversight in targeting Market Access
Program funds to smaller and new-to-export industries which are less
likely to supplant them. 

Under Title II of the FAIR Act, the Congress cut annual program
funding from $110 million to $90 million for fiscal years 1996
through 2002.  The legislation also prohibits program funding for
direct assistance of branded promotions from being provided to
foreign companies for promotion of foreign produced products or to
companies that are not recognized as small business concerns under
the Small Business Act, with the exception of cooperatives and
nonprofit trade associations. 

Based on the examinations of the program since its inception, members
of Congress have asked GAO to continue monitoring this program to
ensure that executive and legislative branch reforms are effectively
and efficiently implemented, particularly those pertaining to funding
additionality, graduation of private companies out of the program,
and greater small company participation.  Because questions have been
raised as to whether continued substantial funding of large
cooperatives is consistent with the intent of the program, further
program funding reductions might be considered.  In addition, based
on graduation criteria effective in fiscal year 1999, some companies
may no longer be eligible for subsidies.  This could facilitate the
reduction of program funding levels.  For example, if the Congress
were to reduce the annual program funding to $50 million for fiscal
years 1998 through 2002, the following savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    40      40      40      40      40
Outlays                              3      31      40      40      40
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:79.1

Agricultural Trade:  Competitor Countries Foreign Market Development
Programs (GAO/T-GGD-95-184, June 14, 1995). 

Farm Bill Export Options (GAO/GGD-96-39R, December 15, 1995). 

International Trade:  Changes Needed to Improve Effectiveness of the
Market Promotion Program (GAO/GGD-93-125, July 7, 1993). 

U.S.  Department of Agriculture:  Improvements Needed in Market
Promotion Program (GAO/T-GGD-93-17, March 25, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:79.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   EXPORT CREDIT GUARANTEE
   PROGRAMSEXPORT CREDIT GUARANTEE
   PROGRAMS
------------------------------------------------------ Appendix III:80


Authorizing committees              Agriculture, Nutrition and
                                    Forestry (Senate) Agriculture
                                    (House)

Primary agency                      Department of Agriculture

Accounts                            Commodity Credit Corporation Loans
                                    Program Account (12-1336)
                                    Commodity Credit Corporation Fund
                                    (12-4336)

Spending type                       Direct

Budget subfunction                  Farm Income Stabilization

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Under the U.S.  Department of Agriculture (USDA), the Export Credit
and Intermediate Export Credit Guarantee Programs are major
agricultural export promotion programs.  The main objective of these
programs is to increase U.S.  agricultural exports.  Based on
legislative requirements, USDA is required to make a total of $5.5
billion in government loan guarantees available each year to foreign
country buyers of U.S.  agricultural commodities. 

Since the programs began in the 1980s, and as of January 1997, the
government had paid out approximately $7.8 billion in claims because
of loan repayment defaults and reschedulings by foreign country
buyers.  Past operations of the programs have incurred high costs
because USDA had provided a large amount of guarantees to high-risk
countries, such as Iraq and the former Soviet Union.  Guarantees had
been extended to such high-risk countries for market development
reasons and foreign policy considerations.  Extending guarantees and
increasing exposure to new and existing high-risk participants will
result in higher program costs. 

The Agriculture Trade Provisions (Title II) of the Federal
Agriculture Improvement and Reform Act of 1996 reformed the
operations of the Export Credit Guarantee Programs.  Notably, the
Act:  (1) authorized short-term supplier credit guarantees; (2)
listed criteria to be used by the Secretary of Agriculture in
deciding whether a country is creditworthy for intermediate-term
credit guarantees; (3) mandated annual program levels at $5.5 billion
through 2002 but allowed for flexibility in how much is provided for
each program; (4) clarified that the 1 percent maximum origination
fee is to be applied to the amount of short-term credit to be
guaranteed and removed the cap on the origination fee charged for
Commodity Credit Corporation Facilities Financing Guarantees; and (5)
permitted the use of credit guarantees for high-value products with
at least 90 percent U.S.  content by weight.  Minimum amounts of
credit guarantees will be required to be available for processed and
high-value products:  25 percent in 1996 and 1997; 30 percent in 1998
and 1999; and 35 percent thereafter.  Minimum requirements are not
applicable if they cause a reduction in total commodity sales under
the program. 

It is unclear that the export credit guarantee programs have resulted
in increased agricultural exports.  Also, there is a history of poor
management control of these programs, principally because USDA
officials viewed the export credit guarantee programs as "commercial"
programs that are subject to the normal controls that exist for
commercial sales transactions.  USDA is taking steps to improve
program management. 

The Congress may wish to reduce the programs' budgets.  For example,
reducing guarantees for sales to high-risk countries would permit
reductions in annual loan guarantees to about $3 billion, about $800
million less than current levels assumed in CBO's baseline.  The
Congress may also wish to consider whether such beneficiary countries
might be more appropriately assisted with food aid programs. 
However, this would offset some or all of the savings cited in the
following table. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   108     143     147     154     159
Outlays                            108     143     147     154     159
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:80.1

Farm Bill Export Options (GAO/GGD-96-39R, December 15, 1995). 

Former Soviet Union:  Creditworthiness of Successor States and U.S. 
Export Credit Guarantees (GAO/GGD-95-60, February 24, 1995). 

GSM Export Credit Guarantees (GAO/GGD-94-211R, September 29, 1994). 

U.S.  Department of Agriculture:  Issues Related to the Export Credit
Guarantee Programs (GAO/T-GGD-93-28, May 6, 1993). 

Loan Guarantees:  Export Credit Guarantee Programs' Costs Are High
(GAO/GGD-93-45, December 22, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:80.2

Benjamin F.  Nelson, (202) 512-4128



   OPTION:
   AGRICULTURAL RESEARCH SERVICE
   FUNDINGAGRICULTURAL RESEARCH
   SERVICE FUNDING
------------------------------------------------------ Appendix III:81


Authorizing committees              Agriculture, Nutrition, and
                                    Forestry (Senate) Agriculture
                                    (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture

Account                             Agricultural Research Service (12-
                                    1400)

Spending type                       Discretionary

Budget subfunction                  Agricultural Research and Services

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The U.S.  agricultural research system is decentralized and diverse,
spanning federal, state, and private institutions.  The Agricultural
Research Service (ARS), which was appropriated about $717 million for
its fiscal year 1997 research activities, conducts most federal
in-house agricultural research in laboratories located nationwide and
in several foreign countries.  ARS' role is to develop the knowledge
essential to solving technical agricultural problems that are broad
in scope and have high national priority. 

In June 1996, GAO provided information on ARS' fiscal year 1996
research projects that the Congress could use if it chose to reduce
ARS funding.  As of January 29, 1996, ARS had used about 91 percent
of its fiscal year 1996 research appropriations to fund 1,198
projects at an estimated cost of $648 million.  Of the projects, 495
(valued at $257 million) involved mostly nonbasic research.\20
Similarly, 432 projects (valued at $220 million) were outside the
high-priority research areas designated in ARS' 6-year implementation
plan.  GAO identified 148 projects valued at $78 million which fell
into both of these categories. 

Should the Congress wish to reduce nonbasic federal agricultural
research and/or research that is not high-priority, we believe the
ARS budget could sustain a commensurate reduction.  For example, the
Congress could eliminate the 148 projects which involved mostly
nonbasic research and were outside high-priority research areas. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    78      78      78      78      78
Outlays                             61      73      78      78      78

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    81      83      86      89      92
Outlays                             63      78      85      88      91
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\20 Nonbasic research is applied and developmental research, which
produces knowledge relevant to a technology or service and is
generally completed in a few years.  In contrast, basic research
creates new knowledge and may take years to complete. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:81.1

ARS' Research Activities (GAO/RCED-96-153R, June 14, 1996). 

Agricultural Research:  Information on Research System and USDA's
Priority Setting (GAO/RCED-96-92, March 28, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:81.2

Robert A.  Robinson, (202) 512-5138



   OPTION:
   USDA TELECOMMUNICATIONS AND
   INFORMATION SYSTEMSUSDA
   TELECOMMUNICATIONS AND
   INFORMATION SYSTEMS
------------------------------------------------------ Appendix III:82


Authorizing committees              Agriculture, Nutrition, and
                                    Forestry (Senate)
                                    Agriculture (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The U.S.  Department of Agriculture (USDA) and its 29 component
agencies spend over $100 million on telecommunications annually,
including more than $50 million for commercial telecommunications
services obtained from over 1,500 telephone companies. 

We have reported that USDA does not cost-effectively manage and plan
its telecommunications resources.  USDA agencies are spending
hundreds of millions of dollars continuing to develop their own
telecommunications networks that overlap and perpetuate long-standing
information sharing problems.  We also found that USDA agencies waste
millions of dollars each year paying for (1) unnecessary
telecommunications services, (2) leased equipment that is not used
and services billed for but never provided, and (3) commercial
carrier services that cost more than 3 times what they would under
the Federal Telecommunications System 2000 program.  In addition,
USDA pays tens of thousands of dollars each month for collect and
long-distance calls without knowing whether such calls are
appropriate.  We found that about 50 percent of all collect calls
accepted by USDA officials in the Washington, D.C., metropolitan area
over a 4-month period were from callers at correctional institutions. 
We also found that USDA wasted tens of thousands of dollars because
it had not established adequate procedures for reviewing bills to
verify the appropriateness of telephone charges made by private
vendors. 

Although the full extent of USDA's telephone fraud, waste, and abuse
problem is unknown, USDA officials have indicated that as much as $15
million to $30 million could be saved annually by eliminating
redundant commercial telecommunications services and by sharing
resources.  If our recommendations to the Secretary to take
aggressive action to improve USDA's management of telecommunications
and information systems were fully implemented, we believe
substantial savings could be achieved.  However, the amount of such
savings cannot be known with certainty until USDA takes action to
fully identify and eliminate spending on fraudulent and wasteful
telecommunications services. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:82.1

USDA Telecommunications:  More Effort Needed to Address Telephone
Abuse and Fraud (GAO/AIMD-96-59, April 16, 1996). 

USDA Telecommunications:  Better Management and Network Planning
Could Save Millions (GAO/AIMD-95-203, September 22, 1995). 

USDA Telecommunications (GAO/AIMD-95-219R, September 5, 1995). 

USDA Telecommunications:  Missed Opportunities to Save Millions
(GAO/AIMD-95-97, April 24, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:82.2

Joel C.  Willemssen, (202) 512-6253



   370 COMMERCE AND HOUSING CREDIT
------------------------------------------------------ Appendix III:83

  -- Rural Housing Loans Interest Recapture

  -- Use of Sampling for the 2000 Decennial Census



   OPTION:
   RURAL HOUSING LOANS INTEREST
   RECAPTURERURAL HOUSING LOANS
   INTEREST RECAPTURE
------------------------------------------------------ Appendix III:84


Authorizing committees              Banking, Housing, and Urban
                                    Affairs (Senate)
                                    Banking and Financial Services
                                    (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture

Account                             Rural Housing Insurance Fund (12-
                                    2081)

Spending type                       Direct

Budget subfunction                  Mortgage Credit

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Housing Act of 1949, as amended, requires the U.S.  Department of
Agriculture's Rural Housing Service (RHS) to recapture a portion of
the subsidy provided over the life of direct housing loans it makes
when the borrower sells or vacates a property.  The rationale being
that because taxpayers paid a portion of the mortgage, they are
entitled to a portion of the property's appreciation. 

In a recent report, we pointed out that because recapture is not
mandated when homes are refinanced, RHS' policy allows borrowers who
pay off direct RHS loans but continue to occupy the properties to
defer the payments for recapturing the subsidies.  As of June 30,
1995, RHS' records showed that about $119 million was owed by
borrowers who had refinanced their mortgages but continue to occupy
the properties.  RHS does not charge interest on the amounts owed by
these borrowers. 

Legislative changes could be made to allow RHS to charge market rate
interest on recapture amounts owed by borrowers to help recoup the
government's administrative and borrowing costs.  CBO's estimate of
the savings for this option is presented on a net present value basis
as required by the Federal Credit Reform Act of 1990.  Actual savings
could differ depending on how this proposal would affect the rate at
which homes are sold. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Budget authority                    50       0       0       0       0
Outlays                             50       0       0       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:84.1

Rural Housing Programs:  Opportunities Exist for Cost Savings and
Management Improvement (GAO/RCED-96-11, November 16, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:84.2

Judy A.  England-Joseph, (202) 512-7631



   OPTION:
   USE OF SAMPLING FOR THE 2000
   DECENNIAL CENSUSUSE OF SAMPLING
   FOR THE 2000 DECENNIAL CENSUS
------------------------------------------------------ Appendix III:85


Authorizing committees              Governmental Affairs (Senate)
                                    Government Reform and Oversight
                                    (House)

Appropriations subcommittees        Commerce, Justice, State, and the
                                    Judiciary and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Commerce

Account                             Periodic Censuses and Programs
                                    (13-0450)

Spending type                       Discretionary

Budget subfunction                  Other Advancement of Commerce

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Since 1992, GAO reports and testimonies have identified opportunities
to reduce the cost of the 2000 Decennial Census without decreasing
accuracy.  The Census Bureau estimated that using the 1990
census-taking approach without modification could cost about $4.8
billion in current dollars for the 2000 Decennial Census. 

GAO believes the Census Bureau should pursue several cost-saving
options currently being evaluated by the Bureau.  Census Bureau
estimates suggest that the use of these options could result in
savings for the 2000 Decennial Census.  These options are as follows: 

  -- Promoting a higher mail response rate by simplifying and
     streamlining the census questionnaire and using a strategy of
     multiple mail contacts.  A simplified, more user-friendly
     questionnaire could promote better response rates by reducing
     the time and effort needed for respondents to understand and
     complete the form.  Additionally, tests have shown that the use
     of multiple contacts, such as targeted reminder cards and second
     mailings, improves response rates. 

  -- Using the Postal Service to identify vacant and invalid
     addresses during the mailing of questionnaires to avoid costly
     and unnecessary follow-up efforts.  In order to maximize
     savings, the Census Bureau must ascertain the earliest point at
     which vacant and invalid housing units are accurately classified
     to eliminate futile follow-up on them. 

  -- Gathering data on only a sample of those households not
     responding by mail, rather than attempting to contact them all
     in person.  Savings estimates would vary according to the
     initial percentage of households responding by mail and the
     sampling rate and method selected. 

The Census Bureau estimates that it could have saved between $700
million and $800 million of the $2.6 billion that it spent on the
1990 Decennial Census if it had incorporated the procedures listed
above.  Almost all of these savings would have occurred in fiscal
year 1990.  With inflation and workload adjustments, this figure
should be somewhat higher for fiscal year 2000. 

In addition, by eliminating or reducing costly labor-intensive
address list operations through greater reliance on the Postal
Service and local communities, the Census Bureau estimates that it
could save as much as $188 million for the 2000 Census.  This
cooperative effort will be permissible under 1994 legislation (P.L. 
103-430).  To realize these savings, the Census Bureau estimated in
1995 that it would incur costs of about $5.1 million in fiscal years
1995, 1996, and 1997.  However, thereafter, the Bureau will generate
net savings of $13.5 million in fiscal year 1998, between $129.4
million and $179.4 million in fiscal year 1999, and another $10.8
million in fiscal year 2000. 

The dollar amounts above are Census Bureau estimates.  The Census
Bureau will have to spend several million each year to prepare for
the change.  However, the Census Bureau should require less in budget
authority to accomplish the 2000 Decennial Census than it would
without implementing this proposal.  Because of the unique nature of
the census, a cyclical program with the majority of spending
occurring once every 10 years, estimates against an interim year
baseline would be inappropriate. 

To illustrate the potential savings, CBO estimates that using
sampling for nonresponse follow-up for the 2000 Decennial Census
could result in the following savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Budget authority                     0       0     500       0       0
Outlays                              0       0     395     105       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:85.1

Decennial Census:  Fundamental Design Decisions Merit Congressional
Attention (GAO/T-GGD-96-37, October 25, 1995). 

Decennial Census:  1995 Test Census Presents Opportunities to
Evaluate New Census-Taking Methods (GAO/T-GGD-94-136, September 27,
1994). 

Decennial Census:  Promising Proposals, Some Progress, but Challenges
Remain (GAO/T-GGD-94-80, January 26, 1994). 

Decennial Census:  Test Design Proposals Are Promising, but
Fundamental Reform Is Still at Risk (GAO/T-GGD-94-12, October 7,
1993). 

Decennial Census:  Focused Action Needed Soon to Achieve Fundamental
Breakthroughs (GAO/T-GGD-93-32, May 27, 1993). 

Decennial Census:  Fundamental Reform Jeopardized by Lack of Progress
(GAO/T-GGD-93-6, March 2, 1993). 

Transition Series:  Commerce Issues (GAO/OCG-93-12TR, December 1992). 

Decennial Census:  1990 Results Show Need for Fundamental Reform
(GAO/GGD-92-94, June 9, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:85.2

L.  Nye Stevens, (202) 512-7824



   400 TRANSPORTATION
------------------------------------------------------ Appendix III:86

  -- State Share of State-Supported Intercity Rail Passenger Service

  -- Amtrak Subsidies

  -- Military Airport Program Funds

  -- Cargo Preference Laws

  -- Fees Paid by Foreign-Flagged Cruise Ships

  -- Department of Transportation's Oversight of Its University
     Research

  -- Fees for Certification of New Airlines

  -- Fees for Registering Aircraft



   OPTION:
   STATE SHARE OF STATE-SUPPORTED
   INTERCITY RAIL PASSENGER
   SERVICESTATE SHARE OF
   STATE-SUPPORTED INTERCITY RAIL
   PASSENGER SERVICE
------------------------------------------------------ Appendix III:87


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Appropriations subcommittees        Transportation (Senate)
                                    Transportation and Related
                                    Agencies (House)

Primary agency                      Department of Transportation

Account                             Grants to National Railroad
                                    Passenger Corporation
                                    (69-0704)

Spending type                       Discretionary

Budget subfunction                  Ground Transportation

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
Section 403(b) of the Rail Passenger Service Act authorizes Amtrak to
initiate and/or operate intercity rail services, in addition to its
basic system, when such services are financially supported by the
states.  As of January 1996, Amtrak had contracts with 11 states to
operate such service over 15 routes.\21 These operations account for
about 15 percent of Amtrak's ridership.  Under the provisions of the
Rail Passenger Service Act, the states contribute at least 45 percent
of section 403(b) service operating losses in the first year of
operation and 65 percent of these losses in subsequent years.  For
service that began prior to 1989, states reimburse Amtrak for
short-term avoidable losses, while for service that began after 1989,
states reimburse Amtrak for long-term avoidable losses.  Although
long-term avoidable losses are a larger amount than short-term
avoidable losses, they are only about 55 percent of losses that are
based on fully allocated costs--including capital costs.  The states
do pay 50 percent of the capital equipment costs (primarily
depreciation and interest) associated with section 403(b) service. 

In fiscal year 1994, Amtrak sustained about $82.2 million in losses
on section 403(b) services and this increased to $88.2 million in
fiscal year 1995.  The states receiving section 403(b) services
contributed $32.6 million in 1994 and $35.7 million in 1995.  These
amounts are consistent with Amtrak's experience in recent years. 
However, Amtrak is planning to substantially increase the share of
section 403(b) service losses that the individual states will bear. 
In fiscal year 1996, Amtrak planned to collect $72.6 million in state
contributions to cover section 403(b) losses.  However, it actually
collected $64.2 million.  Amtrak plans to eventually recover the
fully allocated losses from section 403(b) services, but has not yet
secured the states' agreement. 

The Congress could require that the states reimburse Amtrak for the
fully allocated costs of providing section 403(b) services.  While
this is Amtrak's goal, supporting legislation would pave the way for
fully allocated loss reimbursement.  Currently, Amtrak must negotiate
reimbursement with each state and the state contributions vary
widely.  On the basis of Amtrak's experience in recent years (as
opposed to its plan for the current year), the following savings
would apply if federal subsidies were reduced by the estimated 403(b)
losses that Amtrak now must absorb. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    46      46      46      46      46
Outlays                             46      46      46      46      46

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    47      48      50      51      52
Outlays                             47      48      50      51      52
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\21 These states were Alabama, California, Illinois, Michigan,
Missouri, New York, North Carolina, Wisconsin, Oregon, Washington,
and Vermont. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:87.1

Amtrak's Strategic Business Plan:  Progress to Date (GAO/RCED-96-187,
July 24, 1996). 

Northeast Rail Corridor:  Information on Users, Funding Sources, and
Expenditures (GAO/RCED-96-144, June 27, 1996). 

Intercity Passenger Rail:  Amtrak's Financial and Operating
Conditions Threaten Its Longterm Viability (GAO/RCED-95-71, February
6, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:87.2

John H.  Anderson, Jr., (202) 512-2837



   OPTION:
   AMTRAK SUBSIDIESAMTRAK
   SUBSIDIES
------------------------------------------------------ Appendix III:88


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Appropriations subcommittees        Transportation (Senate)
                                    Transportation and Related
                                    Agencies (House)

Primary agency                      Department of Transportation

Account                             Grants to National Railroad
                                    Passenger Corporation
                                    (69-0704)

Spending type                       Discretionary

Budget subfunction                  Ground Transportation

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Amtrak's financial condition has deteriorated rapidly in the first
half of the decade, seriously threatening Amtrak's ability to provide
high-quality passenger rail service nationwide.  The time has come
for Amtrak and the federal government to make key long-term decisions
concerning the quality and extent of passenger rail service and the
government's commitment to subsidize such operations.  Recognizing
Amtrak's need for financial support, the Congress has provided
significant funding since Amtrak began operating in 1971.  Since
1990, however, Amtrak's federal subsidy has not covered the gap
between operating expenses and revenues.  Total operating deficits
had exceeded federal operating subsidies by $175 million.  This
imbalance occurred because passenger revenues have been lower than
projected while expenses have been higher than expected. 
Furthermore, between 1990 and 1994, Amtrak steadily reduced its
working capital by $254 million.  Although Amtrak's working capital
position improved in fiscal year 1995, current liabilities still
exceeded current assets by $149 million. 

Over the next few years, Amtrak will face difficult and costly
challenges that could impede its financial recovery.  At the same
time, Amtrak faces few opportunities to substantially increase
revenues.  The challenges include (1) maintaining its aging passenger
cars, (2) modernizing the Beech Grove, Indiana, repair facility,
which services all equipment used outside the Northeast Corridor, (3)
modernizing its locomotive and passenger car fleet, acquiring
high-speed trains, and continuing rail improvements in the Northeast
Corridor, (4) negotiating new operating agreements with the freight
railroads, which own about 97 percent of the track over which Amtrak
operates, (5) negotiating labor issues and work rules with Amtrak's
union employees, and (6) incurring higher costs for employee health
benefits and environmental clean-up. 

To address its financial and operating problems, Amtrak has developed
a strategic and business plan that is designed to eliminate the need
for federal operating subsidies by the year 2002.  To facilitate the
proposed changes, Amtrak has been reorganized into strategic business
units (SBU) which are responsible for different "product lines." The
West Coast SBU is responsible for operations in California,
Washington, and Oregon; the Northeast Corridor SBU is responsible for
the Metroliners and other operations between Washington and Boston;
and the Intercity SBU has responsibility for the remaining rail
passenger operations.  The parent SBU in Washington, D.C., handles
the corporate operations, such as legal affairs and national
advertising, that transcend the geographic areas covered by the SBUs. 
Amtrak believes that decentralization of authority and
responsibility, combined with route, service, and fare changes, will
allow it to achieve operating self-sufficiency.  However, Amtrak's
plan is predicated on continued availability of federal funds for
capital improvements, greater state support for 403(b) services, and
significant productivity savings.  While Amtrak continues to work
toward eliminating federal operating subsidies by the year 2002, it
remains to be seen whether it can achieve self-sufficiency if its
assumptions are not wholly fulfilled. 

If substantially increasing the level of federal funding for Amtrak,
especially for capital investments, is not possible in today's
budgetary environment, now may be the time for the Congress to
consider refocusing Amtrak's efforts and reducing its current route
system, retaining service in locations where Amtrak can carry the
largest number of passengers in the most cost-effective manner.  The
Congress could consider establishing a temporary commission similar
to the military base closure commission to restructure Amtrak's
operations and reduce the route network so that efficient and quality
service can be provided within the available funding from all
sources--federal, state and local, and private. 

Savings estimates cannot be made until specific proposals are
developed regarding changes in Amtrak operations and routes.  These
estimates cannot be made because restructuring proposals would affect
the amount of the reduction in federal funding for Amtrak's capital,
operating, and Northeast Corridor activities. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:88.1

Amtrak's Strategic Business Plan:  Progress to Date (GAO/RCED-96-187,
July 24, 1996). 

Northeast Rail Corridor:  Information on Users, Funding Sources, and
Expenditures (GAO/RCED-96-144, June 27, 1996). 

Intercity Passenger Rail:  Amtrak's Financial and Operating
Conditions Threaten Its Longterm Viability (GAO/RCED-95-71, February
6, 1995). 

Amtrak:  Key Decisions Need to be Made in the Face of Deteriorating
Financial Condition (GAO/T-RCED-94-186, April 13, 1994). 

Amtrak:  Deteriorated Financial Condition and Costly Future
Challenges (GAO/T-RCED-94-145, March 23, 1994). 

Amtrak:  Financial Condition has Deteriorated and Future Costs Make
Recovery Difficult (GAO/T-RCED-94-155, March 17, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:88.2

John H.  Anderson, Jr., (202) 512-2834



   OPTION:
   MILITARY AIRPORT PROGRAM
   FUNDSMILITARY AIRPORT PROGRAM
   FUNDS
------------------------------------------------------ Appendix III:89


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Primary agency                      Department of Transportation

Account                             Grants-in-Aid for Airports
                                    (Airport and Airway Trust Fund)
                                    (69-8106)

Spending type                       Discretionary/Direct

Budget subfunction                  Air Transportation

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Airport Improvement Program (AIP), the nation's multibillion
dollar program for planning and improving its airport infrastructure,
includes legislatively established funding categories for specific
uses.  One such category--the Military Airport Program (MAP)--was
established in 1990 to assist current and former military airports
located in congested metropolitan areas in converting to viable
civilian airports. 

However, 9 of the 12 airports selected by the Federal Aviation
Administration (FAA) to participate in MAP do not meet key
legislatively established program goals.  Five of the airports are
not located in congested air traffic areas and are unlikely to
increase capacity, either in major metropolitan areas or systemwide. 
Nine airports selected had already been operating as joint or
civilian airports for 10 or more years, and many of these already had
the types of facilities in place that the program was designed to
develop. 

The Congress could suspend participation in MAP or further limit
participation.  In extending authorization for the AIP in 1996, the
Congress reduced from 15 to 12 the number of airports that could
participate in MAP during a fiscal year.  The Congress retained the
criteria that to participate in MAP an airport would reduce
congestion at airports experiencing 20,000 hours of annual delays in
their commercial passenger traffic.  Also, the Congress revised the
criteria to allow MAP designation for recently closed and realigned
military airfields under the Defense Base Closure and Realignment
Acts that could be classified as civil commercial or reliever
airports.  The Congress also could limit participation to those
airports where first civilian use occurred after the 1988 and later
base closure and realignment processes.  If the Congress did not wish
airports participating in MAP to receive AIP funding in lieu of MAP
funding, it would need to specify this.  However, because any or all
of these actions could result in a redirection rather than a
reduction in AIP spending, the Congress also would need to reduce the
contract authority and obligation limitation for the AIP to achieve
savings.  Given past problems in selecting airports that meet
legislatively-established criteria, one option the Congress could
consider is eliminating MAP as shown in the table below. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    19      19      19      19      19
Outlays                              3      11      15      17      18

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    19      19      20      21      21
Outlays                              3      11      16      18      20
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:89.1

Airport Improvement Program:  The Military Airport Program Has Not
Achieved Intended Impact (GAO/RCED-94-209, June 30, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:89.2

John H.  Anderson, Jr., (202) 512-2834



   OPTION:
   CARGO PREFERENCE LAWSCARGO
   PREFERENCE LAWS
------------------------------------------------------ Appendix III:90


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Appropriations subcommittees        Multiple

Primary agency                      Multiple

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Water transportation

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Cargo preference laws require that certain government-owned or
financed cargo shipped internationally be carried on U.S.-flagged
vessels.  This guarantees a minimum amount of business for the U.S. 
merchant fleet.  This promotes other sectors of the maritime industry
because U.S.-flagged vessels are required by law to be crewed by U.S. 
mariners, are generally required to be built in U.S.  shipyards, and
are encouraged to be maintained and repaired in U.S.  shipyards.  In
addition, U.S.-flag carriers commit to providing capacity in time of
national emergencies. 

However, because U.S.-flagged vessels often charge higher rates to
transport cargo than foreign-flagged vessels, cargo preference laws
increase the government's transportation costs.  For fiscal years
1989 through 1993, four federal agencies--the Departments of Defense,
Agriculture, and Energy and the Agency for International
Development--were responsible for more than 99 percent, by tonnage,
of government cargo subject to cargo preference laws.\22 Cargo
preference laws increased these federal agencies' transportation
costs by an estimated $578 million per year in fiscal years 1989
through 1993 because U.S.-flagged vessels generally charge more to
carry cargo than their foreign-flagged counterparts.  The average was
about $710 million per year when the costs associated with the
Persian Gulf War were included.  In an October 1996 letter to GAO,
the Maritime Administrator claimed that CBO's estimate\23 of savings
from the elimination of cargo preference laws was too high but agreed
that savings would occur. 

The effect of cargo preference laws on the U.S.  merchant marine
industry is mixed.  On one hand, the share of international
oceanborne cargo carried by U.S.  vessels has declined despite cargo
preference laws because most oceanborne international cargo is not
subject to cargo preference laws.  On the other hand, these laws
appear to have a substantial impact on the U.S.  merchant marine
industry by providing incentive for vessels to remain in the U.S. 
fleet. 

If the Congress eliminated cargo preference laws, federal agencies
would save hundreds of millions of dollars yearly, but the U.S. 
fleet would be significantly smaller and shipboard jobs would be
lost.  If the laws were eliminated, the following savings could be
achieved.\24



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   216     266     317     367     418
Outlays                            154     238     295     346     397

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   221     279     341     406     477
Outlays                            157     250     315     381     450
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\22 Currently, the Departments of Defense and Agriculture, the Agency
for International Development, and the Export-Import Bank are
responsible for most of the payments made to shippers under cargo
preference laws. 

\23 See Addressing the Deficit:  Updating the Budgetary Implications
of Selected GAO Work (GAO/OCG-96-5, June 28, 1996) for CBO's previous
estimate of savings for this option. 

\24 The termination of cargo preference requirements for all
government-sponsored cargoes would probably cause additional defaults
on outstanding loans guaranteed by the Maritime Administration.  CBO
estimates that such defaults would increase mandatory spending by
between $2 million and $20 million over the next several years. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:90.1

Management Reform:  Implementation of the National Performance
Review's Recommendations (GAO/OCG-95-1, December 5, 1994). 

Maritime Industry:  Cargo Preference Laws--Their Estimated Costs and
Effects (GAO/RCED-95-34, November 30, 1994). 

Cargo Preference:  Effects of U.S.  Export-Import Cargo Preference
Laws on Exporters (GAO/GGD-95-2BR, October 31, 1994). 


Cargo Preference Requirements:  Objectives Not Significantly Advanced
When Used in U.S.  Food Aid Programs (GAO/GGD-94-215, September 29,
1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:90.2

John H.  Anderson, Jr., (202) 512-2834



   OPTION:
   FEES PAID BY FOREIGN-FLAGGED
   CRUISE SHIPSFEES PAID BY
   FOREIGN-FLAGGED CRUISE SHIPS
------------------------------------------------------ Appendix III:91


Authorizing committees              Judiciary (Senate and House)

Primary agency                      Department of Justice

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The multibillion dollar passenger cruise market in the United States
is almost exclusively served by foreign-flagged cruise vessels.  With
the exception of two, there are no oceangoing U.S.-flagged cruise
vessels of any substantial size.  Access to the U.S.  market is,
therefore, a very lucrative privilege, which is made even more so
because the vessels and their crews pay virtually no corporate or
personal U.S.  income tax. 

To ensure adequate shoreside facilities, the safety of U.S. 
passengers and property, and enforcement of immigration laws, the
federal government has enacted laws and dispersed responsibility for
their administration and enforcement throughout several departments
and agencies of the federal government.  This raises the question of
whether the foreign-flagged cruise vessels, which are enjoying
substantial profits as a result of their monopoly, are paying their
fair share of the cost to the federal government of ensuring that
this extremely valuable U.S.  market operates safely and in
accordance with our laws and regulations. 

Seven agencies provide services to foreign-flagged cruise vessels. 
For fiscal year 1993, we found that all but two agencies--the Coast
Guard and the Immigration and Naturalization Service (INS)--charged
fees for these services that were about equal to or exceeded their
costs to provide the services.  In 1996, the Congress authorized the
Coast Guard to begin collecting fees for its inspection services. 
However, INS is still not collecting fees that recover the cost of
passenger inspections because passengers are exempt from its fee when
arriving at a port of entry in the United States on a cruise
originating in Canada, Mexico, a territory or possession of the
United States, or any adjacent island.  If the Congress lifted this
exemption, the following savings would occur. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                      37      37      37      37      37
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:91.1

None


      GAO CONTACT
---------------------------------------------------- Appendix III:91.2

John H.  Anderson, Jr., (202) 512-2834



   OPTION:
   DEPARTMENT OF TRANSPORTATION'S
   OVERSIGHT OF ITS UNIVERSITY
   RESEARCHDEPARTMENT OF
   TRANSPORTATION'S OVERSIGHT OF
   ITS UNIVERSITY RESEARCH
------------------------------------------------------ Appendix III:92


Authorizing committees              Commerce, Science and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Appropriations subcommittees        Transportation (Senate)
                                    Transportation and Related
                                    Agencies (House)

Primary agency                      Department of Transportation

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Ground, Air, Water, and Other
                                    Transportation

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Transportation (DOT) conducts a variety of research
to enhance safety, mobility, environmental quality, efficiency, and
economic growth in the nation's transportation system.  The results
of DOT's research programs include prototypes of systems, new
operating procedures, data used to focus policy decisions, and
regulations.  Within DOT several offices are responsible for the
oversight of research and development activities.  In addition, each
of DOT's operating administrations is responsible for reviewing and
monitoring its own research to ensure that the university awards'
objectives are met and the costs are appropriate. 

While DOT's spending on research at universities has grown
significantly between fiscal years 1988 and 1993, DOT does not have
an integrated plan to ensure that sponsored research is needed to
meet departmental goals.  In addition, a lack of oversight on some
university awards led to overcharges of almost $450,000 and unpaid
cost-sharing totaling $3 million in a sample of awards reviewed in
detail.  More effective planning and management of the research
program could reduce costs by limiting duplicate research and
ensuring that recipients follow award guidelines on allowable costs
and cost sharing. 

As GAO recommended, DOT has completed the development of a
departmentwide database to track the purpose and costs associated
with each university research award.  GAO continues to recommend that
DOT evaluate the operating administrations' processes to ensure that
they have adequate policies and procedures to carry out their
responsibilities for monitoring awards. 

CBO does not disagree that improved monitoring and oversight of DOT's
university research can reduce outlays.  GAO findings of overcharges
and unpaid cost sharing for a sample of grants suggest that the
Congress could slow DOT's university research spending by reducing
appropriations until improvements in necessary planning and
management processes are made.  However, savings from this option
would depend on which among many small accounts are reduced and the
amounts of these reductions. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:92.1

Department of Transportation:  University Research Activities Need
Greater Oversight (GAO/RCED-94-175, May 13, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:92.2

John H.  Anderson, Jr., (202) 512-2834



   OPTION:
   FEES FOR CERTIFICATION OF NEW
   AIRLINESFEES FOR CERTIFICATION
   OF NEW AIRLINES
------------------------------------------------------ Appendix III:93


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Primary agency                      Department of Transportation

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
To obtain the necessary certification to begin operations, applicants
currently pay nominal fees to the Department of Transportation's
(DOT) Office of the Secretary (OST) but nothing to the Federal
Aviation Administration (FAA).  The fees that applicants currently
pay represent only a small fraction of what it costs the government
to conduct certification activities.  For example, applicants that
completed OST's and FAA's certification processes paid an average fee
of $760 for certification, less than 1 percent of the government's
average estimated cost of $154,000 to certify each applicant. 

Department of Transportation officials said that a portion of the
certification costs is recouped from ticket and fuel taxes paid by
the operating airlines.  These taxes are deposited into the Airport
and Airway Trust Fund.  Even so, applicants do not pay into the fund
until they begin operations; therefore, applicants that never begin
operations never contribute to the fund.  For example, 80 of the 180
applicants that filed applications with OST between January 1990 and
July 1995 never began operations and thus had never contributed to
the fund. 

OST and FAA officials recognize that the existing fees are
insufficient to cover certification costs but have not yet determined
the appropriateness of the current fee structures.  OST has recently
undertaken a review of all fees it charges for aviation licensing
activities, which were last updated 10 years ago, and plans to issue
a notice of proposed rulemaking to update the fees.  According to the
Deputy Director of the Flight Standards Service, FAA plans to examine
all services, such as new airlines, pilot training, and aircraft
inspection requiring certificates and to review the existing fee
structures to determine the extent to which the government's costs
have been or should be recouped.  Legislation introduced in the 104th
Congress would have allowed FAA to charge fees for various aviation
services, including new airline certification fees. 

If the Congress were to direct OST and FAA to fully recover the costs
of airline certification from applicants, the following revenue could
be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                       3       3       3       3       3
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:93.1

Certification of New Airlines:  Department of Transportation Has
Taken Action to Improve Its Certification Process (GAO/RCED-96-8,
January 11, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:93.2

John H.  Anderson, Jr.  (202) 512-2834



   OPTION:
   FEES FOR REGISTERING
   AIRCRAFTFEES FOR REGISTERING
   AIRCRAFT
------------------------------------------------------ Appendix III:94


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Primary agency                      Department of Transportation

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
In 1977, the Congress amended the Federal Aviation Act and identified
three categories of aircraft owners--U.S.  citizens, resident aliens,
and U.S.-based foreign companies--that may register aircraft in the
United States.  To register an aircraft, an eligible owner submits a
$5 fee.  As of the end of fiscal year 1996, 307,503 aircraft were
registered in the United States.  From fiscal year 1993 to 1996, the
number of registrations processed annually has ranged from about
45,000 to 49,000. 

In 1993, we reported that the Federal Aviation Administration (FAA)
was not fully recovering the cost of processing aircraft registration
applications and estimated that, by not increasing fees since 1968 to
recover costs, FAA had foregone about $6.5 million in additional
revenue.  In 1993, we recommended that FAA accelerate implementation
of rules it proposed in 1990 for increasing aircraft registration
fees.  FAA now expects that a Notice of Proposed Rulemaking will be
issued in November 1997, with an effective date of January 1998.  The
Congress may want to encourage FAA to meet these milestones in order
to avoid any further losses in revenues. 

If FAA recovered the full cost of processing aircraft registration
applications, the following additional revenue could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                       1       1       1       1       1
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:94.1

Aviation Safety:  Unresolved Issues Involving U.S.-Registered
Aircraft (GAO/RCED-93-135, June 18, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:94.2

John H.  Anderson, Jr.  (202) 512-2834



   450 COMMUNITY AND REGIONAL
   DEVELOPMENT
------------------------------------------------------ Appendix III:95

  -- Eligibility for Federal Emergency Management Agency Public
     Assistance



   OPTION:
   ELIGIBILITY FOR FEDERAL
   EMERGENCY MANAGEMENT AGENCY
   PUBLIC ASSISTANCEELIGIBILITY
   FOR FEDERAL EMERGENCY
   MANAGEMENT AGENCY PUBLIC
   ASSISTANCE
------------------------------------------------------ Appendix III:96


Authorizing committees              Environment and Public Works
                                    (Senate) Transportation and
                                    Infrastructure (House)

Appropriations subcommittees        VA, HUD and Independent Agencies
                                    (Senate and House)

Primary agency                      Federal Emergency Management
                                    Agency

Account                             Disaster Relief Fund (58-0104)

Spending type                       Discretionary

Budget subfunction                  Disaster relief and insurance

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Federal Emergency Management Agency's (FEMA) Public Assistance
Program helps pay state and local governments' costs of repairing and
replacing eligible public facilities and equipment damaged by natural
disasters.  It also pays other disaster-related costs, such as debris
removal, emergency protective measures, and the administrative costs
of managing the recovery effort.  Many private nonprofit
organizations, such as schools, hospitals, and utilities are also
eligible for assistance.  The cost of the Public Assistance Program
has increased dramatically in recent years--in constant 1995 dollars,
FEMA obligated over $6.5 billion in public assistance for 246
disasters and emergencies declared during fiscal years 1989 through
1994, as compared with about $1 billion for 151 disasters and
emergencies declared during the preceding 6 fiscal years.  Although
much of this is due to increased disaster activity, changes in the
amount and types of assistance provided and eligible recipients of
assistance have also been a factor. 

In a May 1996 report, GAO presented a number of options identified by
public assistance program officials in FEMA's 10 regional offices
that, if implemented, could reduce the cost of the program.  Among
the options recommended most strongly were:  placing limits on the
appeals process; eliminating eligibility for some facilities that
generate revenue, lack required insurance, or are not delivering
government services; and limiting the impact of codes and standards. 
Savings for all of these options could not be estimated because it is
difficult to isolate the effects of fluctuating disaster activity
versus changes in eligibility and because FEMA's data base does not
enable the separation of costs related to some of these options. 
However, CBO estimates that eliminating eligibility for all private
nonprofit organizations--many of which are revenue-generating
facilities such as utilities, hospitals, and universities--would
yield the following savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    52      52      52      52      52
Outlays                             10      23      34      42      47

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    53      55      56      58      59
Outlays                             11      24      36      45      51
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:96.1

Disaster Assistance:  Improvements Needed in Determining Eligibility
for Public Assistance (GAO/RCED-96-113, May 23, 1996). 

Disaster Assistance:  Improvements Needed in Determining Eligibility
for Public Assistance (GAO/T-RCED-96-166, April 30, 1996). 


      GAO CONTACT
---------------------------------------------------- Appendix III:96.2

Judy A.  England-Joseph, (202) 512-7631



   500 EDUCATION, TRAINING,
   EMPLOYMENT, AND SOCIAL SERVICES
------------------------------------------------------ Appendix III:97

  -- Consolidation of Student Aid Programs

  -- Consolidation of Employment and Training Programs



   OPTION:
   CONSOLIDATION OF STUDENT AID
   PROGRAMSCONSOLIDATION OF
   STUDENT AID PROGRAMS
------------------------------------------------------ Appendix III:98


Authorizing committees              Labor and Human Resources
                                    Committee (Senate)
                                    Economic and Educational
                                    Opportunities Committee (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    Education, and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Education

Account                             Student Financial Assistance (91-
                                    0200)

Spending type                       Discretionary/Direct

Budget subfunction                  Higher Education

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Education provides loans and grants to students to
help finance their higher education.  The federal government's role
in supporting higher education is contributing about 50 percent of
its education budget to postsecondary education programs and
activities, most of which are for student financial aid.  The largest
programs provide federally insured loans and Pell grants for
students.  The Federal Family Education Loan (FFEL) and Federal
Direct Student Loan (FDSL) programs compose the largest source of
federal student financial aid.  FFEL and FDSL programs are
entitlements, but Pell grants, the largest federal grant-in-aid
program, are awarded to the most needy eligible students, dependent
on the availability of appropriated funds. 

Although the student loan and Pell grant programs provide the
majority of federal financial aid to students for postsecondary
education, another 22 smaller programs are targeted to specific
segments of the postsecondary school population.  These programs were
collectively funded at $1.1 billion for fiscal year 1995.  The
programs fund remedial and support services for prospective students
from disadvantaged families, programs to enhance the labor pool in
designated specialties, grants to students for volunteer activities,
and grants to women and minorities who are underrepresented in
graduate education. 

These smaller grant programs may be considered candidates for
consolidation.  They could be consolidated with other larger programs
or among themselves.  For example, programs directed to attracting
minority and disadvantaged students could be consolidated into one
program.  Or a certain amount of funds could be provided to states
through a single grant, in lieu of several smaller grants, to cover
some or all of the purposes of several small grant programs.  In
1995, we identified 22 programs that could be candidates for
consolidation.  In anticipation of the administrative savings that
could be achieved through consolidation, funding for these programs
could be reduced 10 percent each year as part of the consolidation. 
Since all savings achieved through consolidation would be
administrative in nature, we assume that there would be no adverse
impact on students' access to postsecondary education--a principal
objective of the enabling legislation, the Higher Education Act of
1965, as amended. 



                           Five-year Savings

                         (Dollars in millions)

                                 FY 98   FY 99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 funding level
----------------------------------------------------------------------
Budget authority                   101     101     101     101     101
Outlays                             12      81      99     100     101

Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   104     107     110     113     116
Outlays                             12      84     105     108     112
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:98.1

Department of Education:  Information on Consolidation Opportunities
and Student Aid (GAO/T-HEHS-95-130, April 6, 1995). 

Department of Education:  Opportunities to Realize Savings
(GAO/T-HEHS-95-56, January 18, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:98.2

Carlotta C.  Joyner, (202) 512-7002



   OPTION:
   CONSOLIDATION OF EMPLOYMENT AND
   TRAINING PROGRAMSCONSOLIDATION
   OF EMPLOYMENT AND TRAINING
   PROGRAMS
------------------------------------------------------ Appendix III:99


Authorizing committees              Multiple

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agencies                    Multiple

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunction                  Training and Employment

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The challenges posed by increased global competition and a changing
economy call for a renewed commitment to invest in the American
workforce.  The federal government's effort to meet this commitment
has been to increase investment in a wide array of programs that
target people experiencing barriers to employment and to add other
new programs that target particular groups.  Since 1992 GAO has
issued numerous reports and testimonies commenting on federal
employment and training programs.  Most recently, GAO identified more
than 150 federal programs and funding streams providing employment
and training assistance.  These programs are spread across 15
departments and independent agencies with a total budget of about $20
billion. 

GAO's analysis of programs that target the economically disadvantaged
showed that those programs had similar goals, often served the same
categories of people, and provided many of the same services using
separate, yet parallel, delivery structures.  This overlap can add
unnecessary administrative costs at each level of
government--federal, state, and local. 

In the 104th Congress, the House and the Senate passed bills that
would consolidate many of the federally funded employment training
programs.  The House bill would have created three block grants by
consolidating 74 employment training programs and eliminating 52
higher education programs.  The Senate bill would have consolidated
83 programs into a single block grant.  Although final passage was
not accomplished before the Congress adjourned, it is likely that
this issue will reemerge in the 105th Congress. 

The amount of any savings from consolidating programs will depend on
how many programs are included, the degree and kind of reductions,
and the level of federal involvement.  To illustrate the potential
for savings from consolidating employment and training programs, one
option would be to consolidate the following programs for the
economically disadvantaged:  Job Training Partnership Act (JTPA) IIA
Training Services for the Disadvantaged Adult, JTPA IIA State
Education Programs, JTPA IIA Incentive Grants, Food Stamp Employment
and Training, Family Self-Sufficiency Program, Vocational
Education--Basic State Programs, Educational Opportunity Centers, and
Student Literacy and Mentoring Corps.  A second option could
consolidate the following programs for dislocated workers:  JTPA
Economic Dislocation and Worker Adjustment Assistance (EDWAA)
(substate allotment), JTPA EDWAA (governor's discretionary), JTPA
EDWAA (Secretary's discretionary), JTPA Defense Conversion Adjustment
Program, JTPA Clean Air Employment Transition Assistance, JTPA
Defense Diversification, Trade Adjustment Assistance--Workers,
Vocational Education--Demonstration Centers for the Training of
Dislocated Workers, and the Transition Assistance Program. 

Consolidating similar employment and training programs would result
in administrative efficiencies to the states as well as improved
opportunities to reduce fragmentation and increase effectiveness in
service delivery.  In consolidating programs, the Congress would also
want to consider the implications for federal agency workloads and
responsibilities.  In anticipation of the benefits states will
receive, funding for the programs included could be reduced 10
percent each year as part of the consolidation.  Savings from the
consolidations are shown in the two sets of tables that follow, which
separately identify direct and discretionary spending. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Disadvantaged adults
----------------------------------------------------------------------

Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   195     195     195     195     195
Outlays                             14     168     193     196     196

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   199     205     211     216     222
Outlays                             15     173     203     211     217
----------------------------------------------------------------------
Note:  The Family Self Sufficiency Program did not receive an
appropriation for fiscal year 1997. 

Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Dislocated workers
----------------------------------------------------------------------

Direct spending
----------------------------------------------------------------------
Budget authority                     9       8       8       8       8
Outlays                              3       7       8       8       8
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Dislocated workers
----------------------------------------------------------------------

Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   133     133     133     133     133
Outlays                              9      94     127     133     133

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   136     140     144     148     152
Outlays                              9      97     132     143     147
----------------------------------------------------------------------
Note:  JTPA Defense Conversion, JTPA Clean Air, JTPA Defense
Diversification, and Vocational Education Demonstration Centers did
not receive appropriations in fiscal year 1997. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:99.1

Employment Training:  Successful Projects Share Common Strategy
(GAO/HEHS-96-108, May 7, 1996). 

Block Grants:  Characteristics, Experience, and Lessons Learned
(GAO/HEHS-95-74, February 9, 1995). 

Multiple Employment Training Programs:  Major Overhaul Is Needed to
Create a More Efficient, Customer-Driven System (GAO/T-HEHS-95-70,
February 6, 1995). 

Multiple Employment Training Programs:  Major Overhaul Is Needed to
Reduce Costs, Streamline the Bureaucracy, and Improve Results
(GAO/T-HEHS-95-53, January 10, 1995). 

Multiple Employment Training Programs:  Basic Program Data Often
Missing (GAO/T-HEHS-94-239, September 28, 1994). 

Multiple Employment Training Programs:  Overlap in Programs Raises
Questions About Efficiency (GAO/HEHS-94-193, July 11, 1994). 

Department of Labor:  Rethinking the Federal Role in Worker
Protection and Workforce Development (GAO/T-HEHS-95-125, April 4,
1994). 

Multiple Employment Training Programs:  Major Overhaul Is Needed
(GAO/T-HEHS-94-109, March 3, 1994). 

Multiple Employment Training Programs:  Most Federal Agencies Do Not
Know if Their Programs Are Working Effectively (GAO/HEHS-94-88, March
2, 1994). 

Multiple Employment Training Programs:  Overlapping Programs Can Add
Unnecessary Administrative Costs (GAO/HEHS-94-80, January 28, 1994). 

Multiple Employment Training Programs:  Conflicting Requirements
Hamper Delivery of Services (GAO/HEHS-94-78, January 28, 1994). 

Multiple Employment Programs:  National Employment Training Strategy
Needed (GAO/T-HRD-93-27, June 18, 1993). 

Multiple Employment Programs (GAO/HRD-93-26R, June 15, 1993). 

Multiple Employment Programs (GAO/HRD-92-39R, July 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:99.2

Carlotta C.  Joyner, (202) 512-7002



   550 HEALTH
----------------------------------------------------- Appendix III:100

  -- Prescription Drug and Medicaid Fraud

  -- Medicaid:  States Use Illusory Approaches to Shift Program Costs
     to the Federal Government

  -- Medicaid Formula:  Fairness Could Be Improved

  -- Automated Drug Utilization Reviews

  -- Payments to Rural Health Clinics

  -- Public Health Service Commissioned Corps

  -- Unified Risk-Based Food Safety System



   OPTION:
   PRESCRIPTION DRUG AND MEDICAID
   FRAUDPRESCRIPTION DRUG AND
   MEDICAID FRAUD
----------------------------------------------------- Appendix III:101


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grants to States for Medicaid
                                    (75-0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Medicaid program typically includes prescription drugs in its
covered services, and diversion of these medications has been a
problem for at least a decade.  Such diversion can involve
pharmacists routinely adding drugs to legitimate prescriptions and
keeping the overage for themselves or for sale to others; clinics
providing inappropriate prescriptions to Medicaid recipients who
trade them for cash or merchandise or have them filled and then sell
the drugs themselves; and individuals who provide recipients with
abusable drugs in exchange for subsequent illicit use of their
Medicaid recipient numbers.  Participants in drug diversion schemes
therefore frequently face added charges of fraud, false claims, or
other related violations of state or federal law. 

The financial incentives for diverting drugs are substantial and
apply to both controlled and noncontrolled substances.  Legal
controlled drugs--those with significant potential for physical or
psychological harm--are appealing because they are relatively cheap
and chemically pure compared to illicit drugs.  Profits from street
sales can amount to several thousand percent of initial investment. 
One drug costing the pharmacy less than 50 cents per pill sold on the
street for $85 per pill.  Noncontrolled drugs, also, have recently
become popular targets for diversion because they are comparatively
easier to obtain and are particularly desirable if obtained under an
insurance program--such as Medicaid--requiring little or no
copayment.  With no or minimal outlay on the part of the recipient,
the street price--while typically lower than the pharmacy price and
thus attractive to buyers--is entirely profit. 

Medicaid accounts for 80 percent of all federal spending on
prescription drugs.  In fiscal year 1995, Medicaid's drug benefit
cost more than $10 billion.  While precise dollar losses due to
diversion--as with all fraud--are impossible to identify, New York
State officials estimate that in 1990, these losses represented about
10 percent of the state's total Medicaid spending for prescription
drugs. 

States have various initiatives under way to curb Medicaid
prescription drug diversion but are hampered by insufficient
resources, lengthy and frequently unproductive investigations, and
the prevalence of repeat offenders and resilient schemes.  GAO
believes that the Health Care Financing Administration should assume
an active leadership role in orchestrating and encouraging states'
efforts and fostering the development and implementation of
preventive measures.  The Department of Health and Human Services
(HHS) generally agrees with the GAO findings and recommendation, but
believes it is not feasible unless new staff resources can be
identified and allocated. 

The Congress should encourage HHS to take a stronger role.  If states
curbed these losses by even a small percentage, future Medicaid costs
would be reduced substantially.  However, CBO cannot develop an
estimate for this option until specific strategies are identified. 
Moreover, savings would be net of the additional resources required
to curb fraudulent activities. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:101.1

Prescription Drugs and Medicaid:  Automated Review Systems Can Help
Promote Safety, Save Money (GAO/AIMD-96-72, June 11, 1996). 

Medicare and Medicaid:  Opportunities to Save Program Dollars by
Reducing Fraud and Abuse (GAO/T-HEHS-95-110, March 22, 1995). 

Prescription Drugs:  Automated Prospective Review Systems Offer
Significant Potential Benefits for Medicaid (GAO/AIMD-94-130, August
5, 1994). 

Medicaid:  A Program Highly Vulnerable to Fraud (GAO/T-HEHS-94-106,
February 25, 1994). 

Medicaid Drug Fraud:  Federal Leadership Needed to Reduce Program
Vulnerabilities (GAO/HRD-93-118, August 2, 1993). 

Medicaid Prescription Drug Diversion:  A Major Problem, but State
Approaches Offer Some Promise (GAO/T-HRD-92-48, July 29, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:101.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   MEDICAID:  STATES USE ILLUSORY
   APPROACHES TO SHIFT PROGRAM
   COSTS TO THE FEDERAL
   GOVERNMENTMEDICAID:  STATES USE
   ILLUSORY APPROACHES TO SHIFT
   PROGRAM COSTS TO THE FEDERAL
   GOVERNMENT
----------------------------------------------------- Appendix III:102


Authorizing committees              Finance (Senate)
                                    Commerce (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grant to States for Medicaid
                                    (75-0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Reassess objectives
----------------------------------------------------------------------
GAO raised a concern that in fiscal year 1993, Michigan, Texas, and
Tennessee used illusory financing approaches to obtain about $800
million in federal Medicaid funds without effectively committing
their share of matching funds.  Under these approaches, facilities
that received increased Medicaid payments from the states, in turn,
paid the states almost as much as they received.  Consequently, the
states realized increased revenue that was used to reduce their state
Medicaid contributions, fund other health care needs, and supplement
general revenue funding.  For the period from fiscal year 1991 to
fiscal year 1995, Michigan alone reduced its share of Medicaid costs
by almost $1.8 billion through financing partnerships with medical
providers and local units of government.  GAO's analysis of
Michigan's transactions showed that even though legislation curtailed
certain creative financing practices, the state was able to reduce
its share of Medicaid costs at the expense of the federal government
by $428 million through other mechanisms. 

The practices that involve payments to state-owned facilities are
restricted by Omnibus Budget Reconciliation Act of 1993 provisions
that limit such payments to unreimbursed Medicaid and uninsured
costs.  However, states can continue to make payments to local
government-owned facilities, including payments that exceed costs,
and have the facilities return the payments to the states.  States
are not required to justify the need for increased reimbursements,
nor is the Health Care Financing Administration required to verify
that moneys are used for the purpose for which they were obtained. 

GAO believes that the Medicaid program should not allow states to
benefit from illusory arrangements and that Medicaid funds should
only be used to help cover the costs of medical care incurred by
those medical facilities that provide the care.  GAO believes the
Congress should enact legislation to minimize the likelihood that
states can develop arrangements whereby providers return Medicaid
payments to the states, thus effectively reducing the state's share
of Medicaid funding.  This legislation should prohibit Medicaid
payments that exceed costs to any government-owned facility. 

Savings are difficult to estimate for this option because national
data on these practices are not readily available.  In addition,
Medicaid spending is influenced by the use of waivers from federal
requirements, which allows states to alter Medicaid financing
formulas.  Future requests and use of waivers by states are
uncertain. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:102.1

State Medicaid Financing Practices (GAO/HEHS-96-76R, January 23,
1996). 

Michigan Financing Arrangements (GAO/HEHS-95-146R, May 5, 1995). 

Medicaid:  States Use Illusory Approaches to Shift Program Costs to
the Federal Government (GAO/HEHS-94-133, August 1, 1994). 

Medicaid:  The Texas Disproportionate Share Program Favors Public
Hospitals (GAO/HRD-93-86, March 30, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:102.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   MEDICAID FORMULA:  FAIRNESS
   COULD BE IMPROVEDMEDICAID
   FORMULA:  FAIRNESS COULD BE
   IMPROVED
----------------------------------------------------- Appendix III:103


Authorizing committees              Finance (Senate)
                                    Commerce (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grant to States for Medicaid
                                    (75-0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Medicaid program provides medical assistance to current
beneficiaries of the Temporary Assistance for Needy Families (TANF)
program who qualified under their states' pre-reform AFDC plans,
low-income people who receive Supplemental Security Income, and
certain other low-income individuals.  The federal government and the
states share the financing of the program.  Under current law, the
federal commitment is open-ended:  federal outlays rise with the
costs and use of Medicaid services.  The federal share of the program
costs varies with the per capita income of the state.  Consequently,
high-income states pay a larger share of the benefits than low-income
states.  By law, the federal share can be no less than 50 percent and
no more than 83 percent. 

Since 1986, GAO has issued numerous reports and testimonies that
identify ways in which the fairness of federal grant formulas could
be improved.  With respect to Medicaid, GAO believes that the
fairness of the matching formula in the open-ended program could be
improved by replacing the per capita income factor with three
factors--the number of people living below the official poverty line,
the total taxable resources of the state, and the differences in
health care costs across states--and by reducing the minimum federal
share to 40 percent.  These changes could reduce federal
reimbursements by reducing the federal share in states with the most
generous benefits, the fewest low-income people in need, and the
greatest ability to fund benefits from state resources.  These
changes could redirect federal funding to states with the highest
concentration of people in poverty and the least capability of
funding these needs from state resources. 

To illustrate the savings that could be achieved from changes in the
Medicaid formula, CBO estimates that if the minimum federal share
were reduced to 40 percent, the following savings could be achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 7,040   7,590   8,210   8,880   9,630
Outlays                          7,040   7,590   8,210   8,880   9,630
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:103.1

Medicaid:  Matching Formula's Performance and Potential Modifications
(GAO/T-HEHS-95-226, July 27, 1995). 

Medicaid Formula:  Fairness Could Be Improved (GAO/T-HRD-91-5,
December 7, 1990). 


      GAO CONTACT
--------------------------------------------------- Appendix III:103.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   AUTOMATED DRUG UTILIZATION
   REVIEWSAUTOMATED DRUG
   UTILIZATION REVIEWS
----------------------------------------------------- Appendix III:104


Authorizing committees              Finance (Senate)
                                    Commerce (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grants to States for Medicaid
                                    (75-0512)

Spending type                       Direct

Budget subfunction                  Health Care Services

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Amendments to Title XIX of the Social Security Act required that
states implement drug utilization review (DUR) programs in their
Medicaid programs by January 1, 1993.  Under DUR, states must review
Medicaid prescriptions to (1) determine whether they are appropriate,
medically necessary, and not likely to result in adverse medical
reactions and (2) identify fraud, waste, and abuse.  Reviews must be
performed prospectively (before prescriptions are filled) and
retrospectively (on a quarterly basis after prescriptions are
filled). 

The amendments encourage, but do not require, states to use statewide
automated systems to conduct prospective reviews.  However, use of
these systems by some states shows significant potential to both
improve patient safety and reduce Medicaid program costs.  Automated
prospective DUR systems operated by five geographically diverse
states--Maryland, Missouri, New Mexico, Oregon, and
Pennsylvania--together cancel hundreds of thousands of Medicaid
prescriptions annually that represent potential inappropriate drug
therapy or instances of waste, fraud, and/or abuse.  Moreover,
additional cancellations result from companion on-line screening
capabilities that ensure recipients are eligible for Medicaid
benefits at the time a prescription is presented.  During 12-month
periods for these five states, automated prospective DUR systems
cancelled prescriptions totaling over $30 million due to drug
overutilization and Medicaid ineligibility.  In contrast, the total
one-time costs to install these systems was only $1.9 million. 
Although these results are impressive, the greatest potential savings
for the Medicaid program would result from avoiding hospitalizations
due to inappropriate drug therapy (estimates of which range from 3
percent for the general population to 28 percent for the elderly). 
With Medicaid's fiscal year 1995 inpatient hospitalizations totaling
about $42 billion, even a limited implementation of automated
prospective DUR systems could have a significant impact. 

Most states have currently implemented or plan to implement automated
prospective DUR systems, however, states implement these systems
differently.  The absence in some states of some types of drug
therapy reviews, such as those for pregnancy conflict (use of
prescribed drug is not recommended during pregnancy) and
underutilization (an indication of noncompliance with a prescribed
drug regimen), could have dramatic effects on patient safety.  Also,
whether or not states automatically deny early refill claims (request
for prescription refill before a predetermined amount of a drug--such
as 75 percent--has been consumed) can substantially affect the
relative amount of the savings and the prevention of potential waste,
fraud, and abuse. 

Responsible for overseeing the states' implementation of DUR
programs, the Health Care Financing Administration (HCFA) has
encouraged the use of statewide automated prospective DUR systems
through such statutorily-required efforts as conducting a
demonstration project and issuing guidance to the states on
prospective DUR cost and benefit reporting.  However, given both the
substantial safety benefits that can accrue to Medicaid recipients
and savings to the Medicaid program through the effective use of
automated prospective DUR systems, HCFA could more actively
facilitate states' coordination and sharing of experiences and best
practices for the effective implementation and use of these systems. 

GAO work shows that the use of automated prospective DUR systems in
five states saved millions of dollars by cancelling prescriptions
which could have been inappropriate or fraudulent or where the
recipient was not eligible for Medicaid benefits.  The following
table shows potential annual savings that would result from operating
automated prospective DUR systems in all states for fiscal years 1998
through 2002. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    10      40      80     110     120
Outlays                             10      40      80     110     120
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:104.1

Prescription Drugs and Medicaid:  Automated Review Systems Can Help
Promote Safety, Save Money (GAO/AIMD-96-72, June 11, 1996). 

Prescription Drugs and the Elderly:  Many Still Receive Potentially
Harmful Drugs Despite Recent Improvements (GAO/HEHS-95-152, July 24,
1995). 

Prescription Drugs:  Automated Prospective Review Systems Offer
Potential Benefits for Medicaid (GAO/AIMD-94-130, August 5, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:104.2

Joel C.  Willemssen, (202) 512-6253



   OPTION:
   PAYMENTS TO RURAL HEALTH
   CLINICSPAYMENTS TO RURAL HEALTH
   CLINICS
----------------------------------------------------- Appendix III:105


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Accounts                            Federal Supplemental Insurance
                                    Trust Fund Account (20-8004)
                                    Grants to States for Medicaid (75-
                                    0512)

Spending type                       Direct

Budget subfunction                  Health Care Services and Medicare

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
In 1977, the Rural Health Clinics (RHC) program was established to
provide Medicare and Medicaid reimbursement to health clinics in
underserved rural communities.  Today, Medicare and Medicaid continue
to reimburse RHC providers on the basis of their actual costs of
providing care, while most other providers receive lower Medicare and
Medicaid payments limited by set fee schedules.  RHCs continue to
receive cost-based reimbursement out of recognition that a fee
schedule approach does not help ensure financial viability of low
volume rural health care providers.  Since 1989, the number of RHCs
has grown by over 30 percent a year to nearly 3,000, with total
Medicare and Medicaid payments to them expected to be over $1 billion
annually by the year 2000. 

We found that contrary to its purpose, the RHC program is generally
not focused on serving populations that have difficulty obtaining
primary care in isolated rural areas.  Rather, our work suggests that
the additional Medicare and Medicaid funding provided to RHCs each
year (estimated at $295 million in 1996) increasingly benefits
well-staffed, financially viable clinics in populated areas that
already have extensive health care delivery systems in place.  For
example, almost half of the RHCs are located in areas with a nearby
population of over 25,000.  The program's broad eligibility criteria
entitles RHCs to be reimbursed at cost, even if they are already
financially viable using standard Medicare/Medicaid payment methods. 
Further, once designated as an RHC, the clinic remains eligible for
cost reimbursement indefinitely, even if the area no longer qualifies
as rural or underserved. 

We recommended that the Congress eliminate cost-based reimbursement
to RHCs unless they are located in areas with no other Medicare and
Medicaid providers or can demonstrate that existing providers will
not accept new Medicare and Medicaid patients and that the funding
would be used to expand access to them.  Assuming such improvements
in the targeting of payments, the following savings could be
achieved. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Medicaid (Outlays)                  20      30      30      30      30
Medicare (Outlays)                  30      40      40      40      50
======================================================================
Total                               50      70      70      70      80
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:105.1

Rural Health Clinics:  Rising Program Expenditures Not Focused on
Improving Care in Isolated Areas (GAO/HEHS-97-24, November 22, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:105.2

Bernice Steinhardt, (202) 512-7119



   OPTION:
   PUBLIC HEALTH SERVICE
   COMMISSIONED CORPSPUBLIC HEALTH
   SERVICE COMMISSIONED CORPS
----------------------------------------------------- Appendix III:106


Authorizing committees              Labor and Human Resources (Senate)
                                    Commerce (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    Education, and Related Agencies
                                    (Senate and House)

Primary agency                      Department of Health and Human
                                    Services

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunction                  Health Care Services

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Commissioned Corps of the Public Health Service (PHS) was
established in the late 1800s to provide medical care to sick and
injured merchant seamen.  Over the ensuing years, the Corps'
responsibilities have grown, and Corps officers today are involved in
a wide range of PHS programs, such as providing medical care to
Native Americans at tribal and Indian Health Service facilities,
psychiatric, medical, and other services in federal prisons, and
health sciences research.  As the result of their temporary service
with the armed forces during World Wars I and II, members of the
Corps were authorized to assume military ranks and receive
military-like compensation, including retirement eligibility (at any
age) after 20 years of service.  Corps officers continue to receive
virtually the same pay and benefits as military officers, including
retirement. 

GAO found that the functions of the Corps are essentially civilian in
nature, and, in fact, some civilian PHS employees carry out the same
functions as Corps members.  Further,

  -- the Corps has not been incorporated into the armed forces since
     1952, and the Department of Defense (DOD) has no specific plans
     for how the Corps might be used in future emergency
     mobilizations;

  -- generally, the Corps does not meet the criteria and principles
     cited in a DOD report as justification for the military
     compensation system; and

  -- other than Corps officers who are detailed to the Coast Guard
     and DOD, Corps members are not subject to the Uniform Code of
     Military Justice, which underlies how military personnel are
     managed. 

Corps officials maintained that uniformed Corps members are needed as
mobile cadres of professionals who can be assigned with little notice
to any location and function, often in hazardous or harsh conditions. 
However, other agencies, such as the Environmental Protection Agency,
the National Transportation Safety Board, and the Federal Emergency
Management Agency, use civilian employees to respond quickly to
disasters and other emergency situations that could involve both
hazardous or harsh conditions. 

GAO's analysis showed that, based on 1994 costs, when all of the
components of personnel costs--basic pay and salaries; special pay,
allowances, and bonuses; retirement; health care; life insurance; and
Corps members' tax advantages--are considered, PHS personnel costs
could be reduced by converting the PHS Corps to civilian status.  The
amount of any cost reductions would depend on various factors,
including the method by which any changes are implemented, the
accuracy of the data PHS and DOD provided GAO, the applicability of
1994 costs to future years, how closely GAO's underlying assumptions
match actual relationships between Corps and civilian personnel
costs, and the manner in which any transition to civilian employment
would be carried out. 

Any decision to convert the Corps could be implemented in a number of
ways, including

  -- requiring all officers to immediately convert to civilian
     employment;

  -- allowing all current officers to remain in place until
     retirement or other separation and requiring all new entrants to
     be civilian employees;

  -- allowing all officers with a specific number of years in the
     Corps to continue in the Corps until retirement or other
     separation; or

  -- retaining a permanent smaller Corps to provide medical services
     in areas that are difficult to staff with civilian employees. 

The Congress may wish to refer to this information when considering
the merits of converting the PHS Commissioned Corps to civilian
status.  If the Congress does in fact choose to convert the Corps,
the following savings could result, depending upon the factors
mentioned above. 

To illustrate the savings that could be achieved through conversion
to civilian status, CBO estimated that if officers with less than 15
years of service were converted to civilian status effective January
1, 1998, the following savings would apply. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    15      23      26      28      31
Outlays                              9      18      24      26      29
----------------------------------------------------------------------


                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Direct spending (Retirement Fund)
----------------------------------------------------------------------
Agency contributions (Outlays)      18      27      30      34      37
----------------------------------------------------------------------


                           Five-Year Revenues

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Change in revenues (Retirement Fund)
----------------------------------------------------------------------
Employee contributions              -1      -2      -2      -2      -3
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:106.1

Federal Personnel:  Issues on the Need for the Public Health
Service's Commissioned Corps (GAO/GGD-96-55, May 7, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:106.2

L.  Nye Stevens, (202) 512-8676



   OPTION:
   UNIFIED RISK-BASED FOOD SAFETY
   SYSTEMUNIFIED RISK-BASED FOOD
   SAFETY SYSTEM
----------------------------------------------------- Appendix III:107


Authorizing committees              Agriculture, Nutrition, and
                                    Forestry (Senate) Agriculture
                                    (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Consumer and Occupational Health
                                    and Safety

Framework theme                     Improve efficiency
----------------------------------------------------------------------
GAO has issued 14 reports and testimonies on food safety issues. 
This work leads us to conclude that the federal system to ensure the
safety and quality of the nation's food--at an annual cost of over $1
billion a year--is inefficient and outdated and does not adequately
protect the consumer against food-borne illness.  GAO has reported
that as many as 12 different agencies administering over 35 different
laws oversee food safety.  As a result, the current food safety
system suffers from overlapping and duplicative inspections, poor
coordination, and inefficient allocation of resources. 

To improve the effectiveness and efficiency of the federal food
safety system, GAO has recommended the consolidation of federal food
safety agencies and activities.  Specifically, GAO has recommended
(1) consolidating food safety activities under a single, risk-based
food safety agency with a uniform set of food safety laws, (2)
establishing a Hazard Analysis and Critical Control Point system
(HACCP) which emphasizes building safety into food production, and
(3) placing responsibility for the system's implementation on the
industry, with the government retaining an oversight role.  Since
December 1995, federal rules and regulations have been revised to
move the seafood and meat and poultry industries under a HACCP-based
system.  The seafood industry is required to adopt and implement
HACCP systems by the end of December 1997, and all meat and poultry
plants are required to implement HACCP systems by 2000.  While HACCP
may eliminate the need for some food safety inspectors, resulting in
government cost savings, no move has been made to consolidate these
activities in a single food safety agency which would further reduce
costs. 

A 5-year estimate of savings from consolidating food inspection
programs cannot be developed at this time.  The amount of any savings
will depend on how many programs are included, the degree and kind of
reductions, and the level of federal involvement.  In addition, the
amount of savings will depend on the extent to which administrative
cost savings are used to offset overall program costs. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:107.1

Food Safety:  Reducing the Threat of Foodborne Illnesses
(GAO/T-RCED-96-185, May 23, 1996). 

Food Safety:  Information on Foodborne Illnesses (GAO/RCED-96-96, May
8, 1996). 

Food Safety:  New Initiatives Would Fundamentally Alter the Existing
System (GAO/RCED-96-81, March 27, 1996). 

Food Safety:  Fundamental Changes Needed to Improve Monitoring of
Unsafe Chemicals in Food (GAO/T-RCED-94-311, September 28, 1994). 

Food Safety:  Changes Needed to Minimize Unsafe Chemicals in Food
(GAO/RCED-94-192, September 26, 1994). 

Food Safety:  A Unified, Risk-Based Food Safety System Needed
(GAO/T-RCED-94-223, May 25, 1994). 

Meat Safety:  Inspectors' Ability to Detect Harmful Bacteria is
Limited (GAO/T-RCED-94-228, May 24, 1994). 

Food Safety:  Risk-Based Inspections and Microbial Monitoring Needed
for Meat and Poultry (GAO/RCED-94-110, May 19, 1994). 

Food Safety:  Risk-Based Inspections and Microbial Monitoring Needed
for Meat and Poultry (GAO/T-RCED-94-189, April 19, 1994). 

Meat Safety:  Inspection System's Ability to Detect Harmful Bacteria
Remain Limited (GAO/T-RCED-94-123, February 10, 1994). 

Food Safety:  A Unified Risk-Based System Needed to Enhance Food
Safety (GAO/T-RCED-94-71, November 4, 1993). 

Food Safety:  Building a Scientific, Risk-Based Meat and Poultry
Inspection System (GAO/T-RCED-93-22, March 16, 1993). 

Food Safety:  Inspection of Domestic and Imported Meat Should Be
Risk-Based (GAO/RCED-93-10, February 18, 1993). 

Food Safety and Quality:  Uniform, Risk-Based Inspection System
Needed to Ensure Safe Food Supply (GAO/RCED-92-152, June 26, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:107.2

Robert A.  Robinson, (202) 512-5138



   570 MEDICARE
----------------------------------------------------- Appendix III:108

  -- Teaching Hospitals' Medicare Payments

  -- Medicare Program Safeguards

  -- Medicare Payments for High Technology Procedures

  -- Medicare Rate-Setting Methods for HMOs

  -- Medicare Incentive Payments in Health Care Shortage Areas



   OPTION:
   TEACHING HOSPITALS' MEDICARE
   PAYMENTSTEACHING HOSPITALS'
   MEDICARE PAYMENTS
----------------------------------------------------- Appendix III:109


Authorizing committees              Finance (Senate)
                                    Commerce (House)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Hospital Insurance Trust
                                    Fund Account (20-8005)

Spending type                       Direct

Budget subfunction                  Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Medicare's Prospective Payment System pays hospitals with graduate
medical education programs at rates higher than those other hospitals
receive for treating the same conditions.  The higher payments are to
compensate for the higher costs teaching hospitals incur, which are
thought to be due to such factors as increased diagnostic testing,
increased number of procedures performed, and higher staffing ratios. 
The teaching adjustment is based on the ratio of interns and
residents per bed and currently is set at a 7.65-percent increase in
payments for each 0.1 increment in the ratio. 

In 1989, GAO found that the present adjustment factor was too high
because it did not explicitly consider all relevant teaching hospital
costs and did not accurately measure all cost factors.  Based on its
analysis, GAO found that the adjustment should be no higher than 6.26
percent and could be as low as 3.73 percent.  The 6.26-percent rate
would better measure factors explicitly recognized by the current
formula.  The 3.73-percent rate expands on the current formula to
reflect additional factors that affect teaching hospital costs. 

CBO's analysis of Medicare's indirect medical education payments
discusses rates of 6 percent and 3 percent.  Savings for those rates
are reflected in the following table. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Reduce to 6-percent adjustment factor
----------------------------------------------------------------------
Outlays                            910     970   1,040   1,120   1,120

Option: Reduce to 3-percent adjustment factor
----------------------------------------------------------------------
Outlays                          2,560   2,740   2,920   3,150   3,400
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:109.1

Medicare:  Indirect Medical Education Payments Are Too High
(GAO/HRD-89-33, January 5, 1989). 


      GAO CONTACT
--------------------------------------------------- Appendix III:109.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   MEDICARE PROGRAM
   SAFEGUARDSMEDICARE PROGRAM
   SAFEGUARDS
----------------------------------------------------- Appendix III:110


Authorizing committees              Finance (Senate)
                                    Commerce (House)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Health and Human
                                    Services

Accounts                            Federal Hospital Insurance Trust
                                    Fund (20-8005)
                                    Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)
                                    Program Management (75-0511)

Spending type                       Discretionary/Direct

Budget subfunctions                 Health and Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Medicare receives over 800 million claims for reimbursement each
year.  When Medicare pays contractors to process claims, one of the
contractors' responsibilities is to ensure that Medicare only pays
claims for covered services that are medically necessary and
appropriate and for which Medicare is the primary payer.  Such
activities are referred to as program safeguards. 

Recently GAO reported that the funding contractors receive to review
each claim has declined since 1989 by over 20 percent.  In response,
contractors apply fewer or less stringent payment controls, and
claims are paid that otherwise would not be.  Historically, payment
safeguards have returned $10 in savings for each dollar expended on
them.  GAO believes additional program safeguard funding is necessary
to better protect the program against erroneous payments. 

The Health Insurance Portability and Accountability Act of 1996
increased funding to Medicare for program safeguards--a substantial
reversal of the prolonged decline in funding per claim for those
activities.  CBO estimated a net savings of over $3 billion from
increased resources--for Medicare as well as for the HHS Office of
Inspector General and Federal Bureau of Investigations--to identify
and pursue individuals or entities that defraud federal health care
programs.\25 However, the recently enacted increase in Medicare
program safeguard funding alone--8.5 percent, or $34 million, for
fiscal year 1997--must be spread over a volume of claims rising in
recent years 5 to 8 percent annually.  Coupled with inflation, this
growth in the number of claims will erode part of the effect of the
funding increase enacted for future years.  While the Congress has
provided safeguard funding substantially above 1996 levels, fiscal
year 2002 funding, adjusted for projected inflation and claims
growth, is projected to be about 10 percent below the 1991-96
average.  Consequently, GAO believes that the potential exists for
further funding increases to yield net savings. 


--------------------
\25 In prior years, CBO did not score increases in such funding
because the proposals violated rules (established in the conference
report on the Omnibus Budget Reconciliation Act of 1993) that
preclude attributing changes in mandatory spending to changes in
discretionary funding for program administration.  That prohibition
did not apply to this legislation, however, because it establishes
long-term mandatory appropriations to cover all of the enforcement
activities proposed. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:110.1

Medicare (GAO/HR-97-10, February 1997). 

Funding Anti-Fraud and Abuse Activities (GAO/HEHS-95-263R, September
29, 1995). 

Medicare:  High Spending Growth Calls for Aggressive Action
(GAO/T-HEHS-95-75, February 6, 1995). 

Medicare Claims (GAO/HR-95-8, February 1995). 

Medicare:  Adequate Funding and Better Oversight Needed to Protect
Benefit Dollars (GAO/T-HRD-94-59, November 12, 1993). 

Medicare:  Further Changes Needed to Reduce Program and Beneficiary
Costs (GAO/HRD-91-67, May 15, 1991). 

Medicare:  Cutting Payment Safeguards Will Increase Program Costs
(GAO/T-HRD-89-06, February 28, 1989). 

Medicare and Medicaid:  Budget Issues (GAO/T-HRD-87-1, January 29,
1987). 


      GAO CONTACT
--------------------------------------------------- Appendix III:110.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   MEDICARE PAYMENTS FOR HIGH
   TECHNOLOGY PROCEDURESMEDICARE
   PAYMENTS FOR HIGH TECHNOLOGY
   PROCEDURES
----------------------------------------------------- Appendix III:111


Authorizing committees              Finance (Senate)
                                    Commerce (House)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)

Spending type                       Direct

Budget subfunction                  Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
When new medical technologies first come into use, providers' unit
costs often are high because of large capital expenditures and low
initial utilization rates.  When Medicare sets its payment rates for
these new technologies, the rates typically are based on the high
initial unit costs.  Over time, providers' unit costs decline as
equipment improves, utilization increases, and experience with the
technology results in efficiencies.  However, Medicare does not have
a process for routinely and systematically assessing these factors
and adjusting its fee schedule payment rates to reflect the declining
unit costs. 

The Congress has reacted to the identification of specific overpaid
procedures and services by legislatively reducing rates.  For
example, payments have been reduced for overpriced surgeries,
selected items of durable medical equipment, magnetic resonance
imaging (MRI) scans, and intraocular lenses. 

The Health Care Financing Administration (HCFA) has three projects
underway which may help bring some Medicare payment rates more in
line with actual costs and market prices.  First, by January 1, 1998,
HCFA expects to implement revisions to the Medicare Fee Schedule that
will take into account the actual cost of staff, equipment, and
supplies associated with medical procedures, rather than past charges
submitted for those procedures. 

Second, in October 1995, HCFA initiated a project to review 100 items
of medical equipment and supplies to identify and address any
excessive Medicare payments.  Under current law, this review requires
the use of a lengthy "inherent reasonableness" process, and the
project is expected to take at least 2 years. 

Third, a HCFA demonstration project will evaluate a competitive
bidding process to set Medicare payment levels for some medical
equipment and supplies.  Delays have postponed project implementation
at the first of three proposed sites until August 1997. 

These projects may eventually bring some Medicare payment rates more
in line with actual costs and market rates, but none of the three
projects specifically targets expensive, evolving technologies.  GAO
believes significant program savings would result from an ongoing,
systematic process for evaluating the reasonableness of Medicare
payment rates for new medical technologies as those technologies
mature. 

Savings have not been estimated because revising the Medicare Fee
Schedule potentially encompasses all procedures, and any savings
would depend on the particular technologies for which Medicare
payment rates are reduced. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:111.1

Medicare Spending:  Modern Management Strategies Needed to Curb
Billions in Unnecessary Payments (GAO/HEHS-95-210, September 19,
1995). 

Medicare:  High Spending Growth Calls for Aggressive Action
(GAO/T-HEHS-95-75, February 6, 1995). 

Medicare:  Excessive Payments Support the Proliferation of Costly
Technology (GAO/HRD-92-59, May 27, 1992). 

Medicare:  Further Changes Needed to Reduce Program and Beneficiary
Costs (GAO/HRD-91-67, May 15, 1991). 


      GAO CONTACT
--------------------------------------------------- Appendix III:111.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   MEDICARE RATE-SETTING METHODS
   FOR HMOSMEDICARE RATE-SETTING
   METHODS FOR HMOS
----------------------------------------------------- Appendix III:112


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)

Spending type                       Discretionary/Direct

Budget subfunction                  Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Hoping to take advantage of the potential cost savings associated
with health maintenance organizations (HMO), the Congress created the
Medicare risk contract program.  Under this program, Medicare pays
HMOs a fixed amount (or capitation rate) for each beneficiary
enrolled.  Capitation rates are set at 95 percent of the estimated
average cost of beneficiaries in Medicare's fee-for-service program. 
These rates are adjusted based on enrollees' demographic traits: 
age, sex, Medicaid eligibility, working status, and whether the
enrollee is in a nursing home or other institution.  These
adjustments, known as "risk adjustments," are designed to reduce
HMOs' ability to benefit from "favorable selection"--the tendency of
HMO enrollees to be healthier and less costly to care for than
fee-for-service beneficiaries. 

The risk contract program has not achieved its goal of reducing
Medicare costs for two reasons.  First, the Health Care Financing
Administration's (HCFA) risk adjustment methodology has proved
insufficient to prevent HMOs from benefiting from favorable
selection.  Consequently, Medicare has paid HMOs more than it would
have if HMO enrollees had received fee-for-service care because the
HMO enrollees are healthier and less costly to treat--by more than 5
percent--than comparable fee-for-service beneficiaries.  GAO has
estimated that, for counties containing 36 percent of risk contract
HMO enrollment, Medicare excess payments to HMOs in 1995 were about
$1 billion.  Excess payments are likely to increase as enrollment
rates in the risk contract program continue to rise.  Second, in many
areas, Medicare's 5-percent "discount" from fee-for-service costs is
too modest.  By failing to reflect local market conditions and
greater HMO efficiencies, the capitation rate causes Medicare to
overpay HMOs. 

GAO has suggested that Medicare address the problem of excess
payments to HMOs by pursuing a number of strategies, including
fostering price competition among HMOs through competitive bidding,
introducing more accurate risk adjusters, and modifying the current
formula for HMO rates to reflect market competition and HMOs' local
health care costs.  These strategies should be pursued concurrently
since barriers exist to the development and implementation of each
strategy, and any one strategy may not emerge as feasible or best for
all areas. 

A 5-year estimate of savings from these strategies cannot be made at
this time.  Available data are insufficient to permit determining the
effect of many proposed alternate payment strategies on Medicare
spending and on HMO participation in the risk contract program. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:112.1

Medicare HMOs:  HCFA Could Promptly Reduce Excess Payments by
Improving Accuracy of County Payment Rates (GAO/T-HEHS-97-78,
February 25, 1997). 

Medicare Managed Care:  Growing Enrollment Adds Urgency to Fixing HMO
Payment Problem (GAO/HEHS-96-21, November 8, 1995). 

Medicare:  Changes to HMO Rate Setting Method Are Needed to Reduce
Program Costs (GAO/HEHS-94-119, September 2, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:112.2

William J.  Scanlon, (202) 512-7114



   OPTION:
   MEDICARE INCENTIVE PAYMENTS IN
   HEALTH CARE SHORTAGE
   AREASMEDICARE INCENTIVE
   PAYMENTS IN HEALTH CARE
   SHORTAGE AREAS
----------------------------------------------------- Appendix III:113


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Supplementary Insurance
                                    Trust Fund (20-8004)

Spending type                       Direct

Budget subfunction                  Medicare

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Medicare Incentive Payment (MIP) program was established in 1987
amid concerns that low Medicare reimbursement rates for primary care
services caused access problems for Medicare beneficiaries in
underserved areas.  To encourage physicians to locate and serve
Medicare beneficiaries in such areas, physicians receive an
additional 10-percent payment from Medicare for the services they
deliver in urban and rural Health Professional Shortage Areas (HPSA)
designated by the Department of Health and Human Services (HHS).  In
1995, a HCFA representative stated this program provided about $107
million in bonuses to physicians in HPSAs, an amount 16 percent
higher than the previous year.  Our work leads us to question the
appropriateness of the program for the following reasons. 

  -- The premise on which the program was created may no longer be
     valid because the basis for Medicare reimbursement has changed
     since 1987.  In fact, recent surveys of Medicare population show
     that neither provider shortages nor low Medicare reimbursement
     rates were causing wide spread access problems. 

  -- The basis on which MIP funds are targeted is inadequate to
     assure that they are directed to improve access to care.  While
     nearly two-thirds of the U.S.  counties have HPSAs, we found
     that at least one-third of these designations are outdated or
     erroneous.  Furthermore, the HPSA designation system itself is
     not an appropriate vehicle to target MIP funds as it does not
     lend itself to directing program resources to those providing
     primary care services to the medically underserved.  HHS said
     they do not have an alternative system that would effectively
     allocate funding under this program. 

  -- Evidence suggests that the MIP program did not play a
     significant role in physician decisions to practice in
     underserved areas.  For example, the median payment to urban and
     rural physicians in 1992 was about $1,239 and $869,
     respectively--an amount too low, according to an HHS Inspector
     General's report, to have a significant effect on physicians'
     practice location decisions. 

The savings estimate that follows assumes the Congress eliminates
funding for the Medicare Incentive Payment program beginning in
fiscal year 1998. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    40      70      80      90     100
Outlays                             40      70      80      90     100
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:113.1

Health Care Shortage Areas:  Designations Not a Useful Tool for
Directing Resources to the Underserved (GAO/HEHS-95-200, September 8,
1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:113.2

Bernice Steinhardt, (202) 512-7119



   600 INCOME SECURITY
----------------------------------------------------- Appendix III:114

  -- Fees for Non-Temporary Assistance to Needy Families (TANF) Child
     Support Enforcement Services

  -- Automated Child Support Enforcement Systems

  -- Funding for State Automated Welfare Systems

  -- Benefits for Retirement Eligible FECA Beneficiaries

  -- Workers' Compensation Cases Involving Third Parties

  -- Workers' Compensation Payments

  -- Resource Transfers to Qualify for SSI

  -- Return-to-Work Strategies for People with Disabilities

  -- Reporting of Federal Employee Payroll Data to State Unemployment
     Insurance Programs



   OPTION:
   FEES FOR NON-TEMPORARY
   ASSISTANCE TO NEEDY FAMILIES
   (TANF) CHILD SUPPORT
   ENFORCEMENT SERVICESFEES FOR
   NON-TEMPORARY ASSISTANCE TO
   NEEDY FAMILIES (TANF) CHILD
   SUPPORT ENFORCEMENT SERVICES
----------------------------------------------------- Appendix III:115


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Family Support Payments to States
                                    (75-1501)

Spending type                       Direct

Budget subfunction                  Other Income Security

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The purpose of the Child Support Enforcement Program is to strengthen
state and local efforts to obtain child support for both families
eligible for Temporary Assistance to Needy Families (TANF) and
non-TANF families.  The services provided to clients include locating
noncustodial parents, establishing paternity, and collecting ongoing
and delinquent child support payments.  From fiscal year 1984 through
1995, non-TANF caseloads and costs have risen about 390 percent and
810 percent, respectively.  States have exercised their discretion to
charge only minimal application and service fees and, thus, are doing
little to recover the federal government's 66-percent share of
program costs.  In fiscal year 1995, for example, state fee practices
returned $33 million of the $1.4 billion spent to provide non-TANF
services. 

Since 1992, GAO has reported on opportunities to defray some of the
costs of child support programs.  Based on this work, GAO believes
that mandatory application fees should be dropped and that states
should charge a minimum percentage service fee on successful
collections for non-TANF families.  Application fees are
administratively burdensome, and a service fee would ensure that
families are charged only when the service has been successfully
performed. 

If the Congress wishes to recover all of the administrative costs of
the program, states could charge a service fee of about 18 percent on
collections for non-TANF families.  The following savings assume
states would be able to implement this option beginning October 1,
1997. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   755     835     915   1,000   1,080
Outlays                            755     835     915   1,000   1,080
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:115.1

Child Support Enforcement:  Early Results on Comparability of
Privatized and Public Offices (GAO/HEHS-97-4, December 16, 1996). 

Child Support Enforcement:  Reorienting Management Toward Achieving
Better Program Results (GAO/HEHS/GGD-97-14, October 25, 1996). 

Child Support Enforcement:  States' Experience with Private Agencies'
Collection of Support Payments (GAO/HEHS-97-11, October 23, 1996). 

Child Support Enforcement:  States and Localities Move to Privatized
Services (GAO/HEHS-96-43FS, November 20, 1995). 

Child Support Enforcement:  Opportunity to Reduce Federal and State
Costs (GAO/T-HEHS-95-181, June 13, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:115.2

Jane L.  Ross, (202) 512-7215



   OPTION:
   AUTOMATED CHILD SUPPORT
   ENFORCEMENT SYSTEMSAUTOMATED
   CHILD SUPPORT ENFORCEMENT
   SYSTEMS
----------------------------------------------------- Appendix III:116


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Family Support Payments to States
                                    (75-1501)

Spending type                       Direct

Budget subfunction                  Other Income Security

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Health and Human Services' (HHS) Office of Child
Support Enforcement (OCSE) oversees states' efforts to develop
automated systems for the Child Support Enforcement Program. 
Established for both welfare and non-welfare clients with children,
this program is directed at locating parents not supporting their
children, establishing paternity, obtaining court orders for the
amounts of money to be provided, and collecting these amounts from
noncustodial parents.  Achievement of Child Support Enforcement
Program goals depends in part on the effective planning, design, and
operation of automated systems.  The federal government is providing
enhanced funding to develop these automated child support enforcement
systems by paying up to 90 percent of states' development costs.  The
states have spent about $2.7 billion to develop these systems,
including over $2 billion from the federal government. 

The 90-percent funding participation rate was initially discontinued
at the end of fiscal year 1995, the congressionally mandated date for
the systems to be certified and operational.  However, the Congress
subsequently extended the deadline for these systems to the end of
fiscal year 1997.  Therefore, the 90-percent funding participation
rate was continued for states that had an approved funding plan for
systems development at the end of fiscal year 1995.  In addition, the
federal government will continue to reimburse states' costs to
operate these systems at the 66-percent rate established for
administrative expenses.  Finally, The Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (P.L.  104-193)
authorized $400 million (with an 80-percent federal funding
participation rate) for the states to meet new systems requirements
under this law.  The 66-percent federal funding participation rate
was continued for systems operation and administrative expenses. 

HHS estimates that the operation of these state automated systems
will cost about $213 million in fiscal year 1997, including about
$140 million in federal funds.  The Congress could choose to reduce
the federal funding participation rate for operation of the automated
child support enforcement systems from 66 percent to the 50-percent
rate now common for such costs in welfare programs.  CBO estimates
that doing so would produce the savings shown in the following table. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    65      70      80      85      95
Outlays                             65      70      80      85      95
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:116.1

Child Support Enforcement:  Timely Action Needed to Correct System
Development Problems (GAO/IMTEC-92-46, August 13, 1992). 

Child Support Enforcement:  Opportunity to Defray Burgeoning Federal
and State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:116.2

Joel C.  Willemssen, (202) 512-6253



   OPTION:
   FUNDING FOR STATE AUTOMATED
   WELFARE SYSTEMSFUNDING FOR
   STATE AUTOMATED WELFARE SYSTEMS
----------------------------------------------------- Appendix III:117


Authorizing committees              Agriculture (Senate and House)
                                    Finance (Senate)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    Education and Related Agencies
                                    (Senate)
                                    Agriculture (House)

Primary agencies                    Department of Agriculture
                                    Department of Health and Human
                                    Services

Account                             Multiple

Spending type                       Discretionary/Direct

Budget subfunction                  Food and Nutrition; Other Income
                                    Security

Framework theme                     Improve efficiency
----------------------------------------------------------------------
We reported that, from 1984 to 1992, federal agencies contributed
over $6.8 billion, and $1.8 billion prior to 1984, to help fund
development and operation of automated information systems for
welfare and welfare-related programs.  These programs included:  Aid
to Families with Dependent Children, Medicaid, Food Stamps, Child
Support Enforcement, Job Opportunities and Basic Skills Training,
Child Care, and Child Welfare Services and Foster Care/Adoption
Assistance.  The Department of Health and Human Services (HHS)
administers all of these programs except Food Stamps, which the
Department of Agriculture (USDA) administers.  As part of their
program administration responsibilities, these departments are to
monitor the development of automated information systems to ensure
that the systems meet federal requirements. 

We reported that ineffective oversight of state-developed systems had
led to millions of dollars being spent on systems that did not work
and/or did not meet federal requirements.  For example, one state
spent $51 million on a system that could not be implemented as
planned because important user requirements were not incorporated
into its original design.  Moreover, even though millions of dollars
have been spent on state-developed systems, the benefits of these
systems in reducing administrative costs and mistakes have not been
determined. 

Many states operate separate systems for separate programs even
though the welfare clients the programs serve are often the same. 
The Personal Responsibility and Work Opportunity Reconciliation Act
of 1996, (P.L.  104-193) changed the nation's welfare system into one
that requires work in exchange for time-limited assistance.  This law
affects many existing programs that have traditionally operated
individually, but now must function together to achieve the
legislative mandate.  The federal government continues to provide
support for the operation of these automated systems.  However,
states now have more responsibility for funding these welfare
programs as well as the automated systems needed to allow them to
function.  In addition, many states are now in the process of
upgrading or replacing existing systems or developing or planning to
develop new systems, which they estimate could cost at least $2.2
billion from 1993 to 1999. 

Savings could be achieved and the usefulness of state automated
systems improved if problems were identified and corrected early in
the system development process.  In addition, more of these systems
could be integrated, with the federal government providing model
systems to further reduce development costs.  If it chooses, the
Congress could slow HHS' and USDA's development funding to reflect
the anticipated savings resulting from early detection of problems in
the system development process, greater system integration, and
greater use of models to guide state development efforts.  However, a
savings estimate for this option cannot be developed at this time
because yearly data on states' future spending for automated systems
development in the affected welfare and welfare-related programs are
not available. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:117.1

Automated Welfare Systems:  Historical Costs and Projections
(GAO/AIMD-94-52FS, February 25, 1994). 

Welfare Programs:  Ineffective Federal Oversight Permits Costly
Automated System Problems (GAO/IMTEC-92-29, May 27, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:117.2

Joel C.  Willemssen, (202) 512-6253



   OPTION:
   BENEFITS FOR RETIREMENT
   ELIGIBLE FECA
   BENEFICIARIESBENEFITS FOR
   RETIREMENT ELIGIBLE FECA
   BENEFICIARIES
----------------------------------------------------- Appendix III:118


Authorizing committees              Labor and Human Resources (Senate)
                                    Economic and Educational
                                    Opportunity (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Labor

Account                             Multiple

Spending type                       Direct/Discretionary

Budget subfunction                  Other Income Security

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Federal workers who continue to be disabled as a result of a
work-related injury receive tax-free workers' compensation benefits
under the Federal Employees' Compensation Act (FECA).  These benefits
could continue for life and would generally be greater than amounts
these workers would receive as retirement benefits.  FECA benefits
are 75 percent of salary for a disabled employee with a dependent;
Civil Service Retirement System benefits for a 55-year old employee
with 30 years of service are 56 percent of salary.  We reported that
60 percent of the approximately 44,000 long-term FECA beneficiaries
were at least age 55, the age at which some federal employees are
eligible for optional retirement with unreduced retirement benefits. 
Proponents for changing FECA benefits for older beneficiaries argue
that an inequity is created between federal workers who retire
normally and those who, in effect, "retire" on FECA benefits. 
Opponents of such a change argue that reducing benefits would break
the implicit promise that injured workers have exchanged their right
to tort claims for a given level of future benefits. 

We identified two prior proposals for reducing FECA benefits to those
who become eligible for retirement.  One would convert compensation
benefits received by retirement-eligible disabled workers to
retirement benefits.  However, this approach raises complex issues
related to the tax-free nature of workers' compensation benefits and
to the individual's entitlement to retirement benefits.  The second
proposal would convert FECA benefits to a newly established FECA
annuity, thus avoiding the complexity of shifting from one benefit
program to another. 

To reduce benefits for retirement-eligible FECA beneficiaries, the
Congress could consider converting from the current FECA benefit
structure to a FECA annuity.  The following savings estimate assumes
that such an annuity would equal two-thirds of the previously
provided FECA compensation benefit and the annuity would begin
following the disabled individual's eligibility for retirement
benefits.  The CBO estimate assumes that changes in benefits would be
made prospectively.  Additional savings could be achieved if changes
were made to affect individuals who were already receiving FECA
benefits. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Direct spending
----------------------------------------------------------------------

Savings from the 1997 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                     4       8       9       9       9
Outlays                              4       8       9       9       9
----------------------------------------------------------------------


                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     1       3       9      15      22
Outlays                              1       3       9      15      22
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:118.1

Federal Employees' Compensation Act:  Issues Associated With Changing
Benefits for Older Beneficiaries (GAO/GGD-96-138BR, August 14, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:118.2

L.  Nye Stevens, (202) 512-8676



   OPTION:
   WORKERS' COMPENSATION CASES
   INVOLVING THIRD PARTIESWORKERS'
   COMPENSATION CASES INVOLVING
   THIRD PARTIES
----------------------------------------------------- Appendix III:119


Authorizing committees              Labor and Human Resources (Senate)
                                    Economic and Educational
                                    Opportunity (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Labor

Account                             Multiple

Spending type                       Discretionary

Budget subfunction                  Other Income Security

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Federal Employees' Compensation Act (FECA) authorizes federal
agencies to continue paying employees their regular salaries for up
to 45 days when they are absent from work due to work-related
traumatic injuries.  In cases in which third parties are responsible
for employees' on-the-job injuries (e.g., dog bites or
automobile-related injuries), the Department of Labor may require
that employees pursue collection actions against these parties. 
However, based on current interpretations of FECA by the Employees'
Compensation Appeals Board and a federal appeals court, the federal
government has no legal basis to obtain refunds from third parties
for the first 45 days of absence from work (called the
continuation-of-pay (COP) period).  Recoveries from third parties
continue to be allowed for payments of compensation benefits
following the COP period and for medical benefits. 

Based on the current interpretation of FECA, employees can receive
regular salary payments from their employing agencies and
reimbursements from third parties--in effect, a double recovery of
income for their first 45 days of absence from work due to an injury
for which a third party was responsible.  We recommended that the
Congress amend FECA to expressly provide for refunds of amounts paid
as COP when employees receive third party recoveries.  CBO estimates
that the following savings could be achieved if the Congress
redefined COP so that it could be included in amounts employees are
required to reimburse the government when they recover damages from
third parties. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     1       1       1       1       1
Outlays                              1       1       1       1       1

Savings from the 1997 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                     1       1       1       1       1
Outlays                              1       1       1       1       1
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:119.1

Federal Employees' Compensation Act:  Redefining Continuation of Pay
Could Result in Additional Refunds to the Government (GAO/GGD-95-135,
June 8, 1995). 

Workers' Compensation:  Selected Comparisons of Federal and State
Laws (GAO/GGD-96-76, April 3, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:119.2

L.  Nye Stevens, (202) 512-8676



   OPTION:
   WORKERS' COMPENSATION
   PAYMENTSWORKERS' COMPENSATION
   PAYMENTS
----------------------------------------------------- Appendix III:120


Authorizing committees              Labor and Human Resources (Senate)
                                    Economic and Educational
                                    Opportunity (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Labor

Account                             Multiple

Spending type                       Discretionary/Direct

Budget subfunction                  Other Income Security

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Federal workers who experience job-related injuries are entitled to
workers' compensation benefits authorized under the Federal
Employees' Compensation Act (FECA).  Our review identified three
major ways in which FECA differed from other federal and state
workers' compensation laws and which resulted in relatively greater
benefits under FECA. 

First, FECA authorizes maximum weekly benefit amounts that are
greater than those authorized by other federal and state workers'
compensation laws.  As of January 1, 1995, maximum authorized weekly
FECA benefits were equal to $1,274, 75 percent of the base salary of
a GS-15, step 10.  The maximum weekly benefit authorized under the
other workers' compensation laws was $817 in Iowa.  FECA also
authorizes additional benefits for one or more dependents equal to
8.33 percent of salary.  Only seven states authorize additional
benefits for dependents, ranging from $5 to $10 per week per
dependent, with total benefits not exceeding maximum authorized
benefit amounts.  Finally, FECA provides eligible workers who suffer
traumatic injuries with their regular salary for a period not to
exceed 45 days.  Compensation benefits for wage loss begin on the
48th day, after a 3-day waiting period.  All other federal and state
workers' compensation laws provide for a 3- to 7-day waiting period
following the injury before paying compensation benefits.  In either
case, if employees continue to be out of work for extended periods of
time ranging from 5 to 42 days, depending on the jurisdiction,
retroactive benefits to cover the waiting period would be paid. 

Reducing FECA's authorized maximum weekly benefit to make it
comparable to other compensation laws would have little effect on
compensation costs because very few federal workers receive maximum
benefits.  However, CBO estimates (1) eliminating augmented
compensation benefits for dependents and (2) placing a 5-day waiting
period immediately following the injury, and before the continuation
of pay period, would produce savings, as shown in the table below. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------

Option: Eliminate augmented dependent compensation benefits
----------------------------------------------------------------------
Budget authority                     2       2       7       8       8
Outlays                              2       2       7       8       8

Option: 5-day waiting period
----------------------------------------------------------------------
Budget authority                    11      11      12      12      12
Outlays                             11      11      12      12      12
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Direct spending
----------------------------------------------------------------------

Savings from the 1997 funding level adjusted for inflatio
----------------------------------------------------------------------

Option: Eliminate augmented dependent compensation benefits
----------------------------------------------------------------------
Budget authority                     5       5       *       *       *
Outlays                              5       5       *       *       *
----------------------------------------------------------------------
*Savings of less than $500,000

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:120.1

Workers' Compensation:  Selected Comparisons of Federal and State
Laws (GAO/GGD-96-76, April 3, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:120.2

L.  Nye Stevens, (202) 512-8676



   OPTION:
   RESOURCE TRANSFERS TO QUALIFY
   FOR SSIRESOURCE TRANSFERS TO
   QUALIFY FOR SSI
----------------------------------------------------- Appendix III:121


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Social Security Administration

Account                             Supplemental Security Income
                                    Program (28-0406)

Spending type                       Direct/Discretionary

Budget subfunction                  Other Income Security

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Supplemental Security Income (SSI) program is the country's
largest cash assistance program for the poor and one of the fastest
growing entitlement programs.  Program costs grew 20 percent annually
from 1991 through 1994.  In 1995, more than 6 million SSI recipients
received nearly $25 billion in federal and state benefits.  Recent
growth in the SSI program has increased congressional interest in
ensuring that the SSI program focuses on individuals who have no
resources with which to meet their needs and that to the extent
possible, individuals rely on their own resources before turning to
the SSI program for support. 

Currently, the law does not prohibit people from transferring
resources to qualify for SSI benefits.  In a recent review, we found
that the 3,505 SSI recipients who transferred resources between 1990
and 1994 transferred cash, houses, land, and other items valued at an
estimated $74 million.  However, we noted that the total amount of
resources transferred was likely to be larger than our estimate
because the Social Security Administration (SSA) is not required to
verify the accuracy of resource transfer information, which is
self-reported by individuals. 

Without a transfer-of-resource restriction, the 3,505 SSI recipients
who transferred resources to qualify for benefits would receive about
$7.9 million in SSI benefits in the 24 months after they transferred
resources.  Although administrative costs may be associated with
SSA's implementing a transfer-of-resource restriction, in our
analysis we estimated that from 1990 through December 1995, $14.6
million in program expenditures could have been saved with an SSI
transfer-of-resource restriction similar to Medicaid's long-term care
provision.  In addition, an SSI transfer-of-resource restriction
could increase the public's confidence in the program's integrity by
ensuring that individuals use their own resources for self-support
before receiving SSI. 

In light of the potential for reduced program expenditures and
increased program integrity, the Congress may wish to consider an SSI
transfer-of-resource restriction.  The restriction could be
calculated in a way that takes into account the value of the resource
transferred so that individuals transferring more valuable resources
would be ineligible for SSI benefits for longer periods of time than
those who transfer less valuable resources.  The CBO estimate that
follows is based on this assumption. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    \a       2       4       6       8
Outlays                             \a       2       4       6       8
Administrative costs                -1      -1      -1      -1      -1
 (discretionary)
----------------------------------------------------------------------
\a Less than $1 million

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:121.1

Supplemental Security Income:  Some Recipients Transfer Valuable
Resources to Qualify for Benefits (GAO/HEHS-96-79, April 30, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:121.2

Jane L.  Ross, (202) 512-7215



   OPTION:
   RETURN-TO-WORK STRATEGIES FOR
   PEOPLE WITH
   DISABILITIESRETURN-TO-WORK
   STRATEGIES FOR PEOPLE WITH
   DISABILITIES
----------------------------------------------------- Appendix III:122


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Social Security Administration

Account                             Federal Disability Insurance Trust
                                    Fund
                                    (20-8007)
                                    Supplemental Security Income
                                    Program
                                    (20-0406)

Spending type                       Direct

Budget subfunction                  Multiple

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Social Security Administration (SSA) operates the Disability
Insurance (DI) and Supplemental Security Income (SSI) programs--the
nation's two largest federal programs providing cash benefits to
people with disabilities.  SSA data show that between 1985 and 1994,
the number of working-age people in these disability programs
increased 59 percent from 4 million to 6.3 million.  Such growth has
raised concerns that are compounded by the fact that less than half
of 1 percent of DI beneficiaries ever leave the disability rolls by
returning to work. 

We found that return-to-work strategies and practices may hold
potential for improving federal disability programs by helping people
with disabilities return to productive activity in the workplace and,
at the same time, reducing benefit payments.  Our analysis of
practices advocated and implemented by the private sector in the
United States and by social insurance programs in Germany and Sweden
revealed three common strategies in the design of their
return-to-work programs:  intervene as soon as possible after an
actual or potentially disabling event to promote and facilitate
return to work, identify and provide necessary return-to-work
assistance and manage cases to achieve return-to-work goals, and
structure cash and medical benefits to encourage people with
disabilities to return to work. 

In line with placing greater emphasis on return to work, the Congress
could direct the Commissioner of SSA to develop a comprehensive
return-to-work strategy that integrates, as appropriate, earlier
intervention, earlier identification and provision of necessary
return-to-work assistance for applicants and beneficiaries, and
changes the structure of cash and medical benefits.  The Commissioner
should also identify legislative changes needed to implement such a
change.  We believe that substantial savings could be achieved if SSA
were to develop such a program.  However, such savings would be
offset by program costs and any net savings would depend on the
program's participation rate. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:122.1

People With Disabilities:  Federal Programs Could Work Together More
Efficiently to Promote Employment (GAO/HEHS-96-126, September 3,
1996). 

SSA Disability:  Return-to-Work Strategies From Other Systems May
Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996). 

SSA Disability:  Program Redesign Necessary to Encourage Return to
Work (GAO/HEHS-96-62, April 24, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:122.2

Jane L.  Ross, (202) 512-7215



   OPTION:
   REPORTING OF FEDERAL EMPLOYEE
   PAYROLL DATA TO STATE
   UNEMPLOYMENT INSURANCE
   PROGRAMSREPORTING OF FEDERAL
   EMPLOYEE PAYROLL DATA TO STATE
   UNEMPLOYMENT INSURANCE PROGRAMS
----------------------------------------------------- Appendix III:123


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Labor

Account                             State Unemployment Insurance and
                                    Employment Service Operations (16-
                                    0179)

Spending type                       Direct

Budget subfunction                  Multiple

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Congress established the national unemployment insurance (UI)
system in the 1930s to provide partial income assistance to many
temporarily unemployed workers with substantial work histories. 
Today, UI is the major federal program providing assistance to the
unemployed.  Many workers covered by the UI system are also among the
1.1 million personnel currently participating in the National Reserve
forces (Army National Guard, Army Reserve, Naval Reserve, Marine
Corps Reserve, Air National Guard, Air Force Reserve, and the Coast
Guard Reserve). 

Most UI claimants are required to report the income they receive
while in the Reserves so that state UI programs can reduce their
benefits accordingly.  Our analysis of benefit and Reserve data from
seven states shows that some Reserve personnel are receiving improper
benefit payments from state UI programs.  In the seven states in our
analysis, we estimate that UI claimants who were active participants
in the Reserves failed to report over $7 milllion in Reserve income
in fiscal year 1994.  This led to UI benefit overpayments of
approximately $3.6 million, of which federal trust fund losses were
about $1.2 million.  We expect that the federal and state trust fund
losses from all UI programs are much greater because the seven states
we reviewed account for only 27 percent of all reservists. 

State officials cited various reasons why claimants may not be
reporting their Reserve income while receiving UI benefits. 
According to state officials, the claimants may not understand their
reporting responsibilities, are often not specifically informed of
these responsibilities, and may have incentives not to report all
Reserve income--incentives that are amplified by the states' limited
ability to detect nonreporting. 

To detect unreported Reserve income, the most frequently suggested
alternative by federal and state officials would be to require the
Department of Defense (DOD) to report Reserve payroll and personnel
data to states on a quarterly basis, as private-sector employers are
required to do, to permit verification of claimant income on a
regular basis.  The following CBO estimate assumes that such
reporting would result in a reduction of overpayments of $44 million
over 5 years.  It is noted that the nonreporting of claimant income
appears to be a broader problem involving all UI claimants who were
former federal civilian and military employees, rather than just
those participating in the Reserves.  Officials from many of the
state programs we analyzed reported general difficulties in
monitoring reported income from claimants who were former federal
employees. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    11      12      12      12      12
Outlays                             11      12      12      12      12
Reduction in receipts                0      -1      -3      -5      -7
Net effect on deficit               11      11       9       7       5
----------------------------------------------------------------------
Note:  UI trust fund receipts are dependent on prior year benefit
outlays.  CBO estimates that, in addition to the savings, this option
would have the effect of reducing trust fund receipts in the out
years. 

Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:123.1

Unemployment Insurance:  Millions in Benefits Overpaid to Military
Reservists (GAO/HEHS-96-101, August 5, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:123.2

Carlotta C.  Joyner, (202) 512-7014



   650 SOCIAL SECURITY
----------------------------------------------------- Appendix III:124

  -- The PASS Work Incentive Program



   OPTION:
   THE PASS WORK INCENTIVE
   PROGRAMTHE PASS WORK INCENTIVE
   PROGRAM
----------------------------------------------------- Appendix III:125


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Social Security Administration

Account                             Federal Disability Insurance Trust
                                    Fund (20-8007)

Spending type                       Direct

Budget subfunction                  Social Security

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Social Security Administration's (SSA) plan for achieving
self-support (PASS) work incentive program was established in 1972 as
part of the Supplemental Security Income (SSI) program to help
disability benefit recipients return to gainful employment.  PASS
program applicants submit plans outlining their employment goals,
which are reviewed by staff in 1 of the more than 1,300 SSA field
offices that administer SSI.  An approved PASS plan allows disabled
individuals to exclude any non-SSI income or resources they have,
including Disability Insurance (DI) benefits, from the determination
of the amount of their SSI benefits. 

While the PASS program is currently small--only about 10,300
individuals participated in December 1994--the number of PASSes has
increased more than fivefold between 1990 and 1994 as awareness of
the provision has grown.  Millions more DI and SSI beneficiaries are
eligible to participate.  About 40 percent of PASS program
participants, largely DI beneficiaries, would not be eligible for
federal SSI payments if some of their income was not disregarded
under PASS.  Additionally, nearly all DI beneficiaries who had
participated in the PASS program received their full benefits in May
1995.  We estimate the cost of additional SSI payments to all program
participants to be $2.6 million for January 1995, or about $30
million annually. 

We found that SSA has not translated the Congress' broad goals for
the PASS work incentive into a coherent program design, provided
adequate criteria or guidance to field offices charged with
administering the program, or adequately addressed internal control
weaknesses that have left the program vulnerable to abuse.  The
Congress may wish to consider whether individuals otherwise
financially ineligible for SSI because their DI benefits or other
income exceed the eligibility threshold should continue to gain
eligibility for SSI through the PASS program.  Also, SSA needs to
make major improvements in the management of the program, including
clarifying the program's goals, deciding whether fees paid to third
parties should continue to be disregarded when calculating benefit
payment amounts and whether the amount of disregarded fees should be
capped, and strengthening internal controls. 

The following savings estimate is based on the assumption that the
Congress takes legislative action to restrict individuals from
gaining access to SSI through the PASS program when their DI benefits
or other income exceed the eligibility threshold. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     5      10      15      15      15
Outlays                              5      10      15      15      15
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:125.1

PASS Program:  SSA Work Incentive for Disabled Beneficiaries Poorly
Managed (GAO/HEHS-96-51, February 28, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:125.2

Jane L.  Ross, (202) 512-7215



   700 VETERANS BENEFITS AND
   SERVICES
----------------------------------------------------- Appendix III:126

  -- Veterans' Disability Compensation for Nonservice Connected
     Diseases

  -- Approving Education and Training Programs for Veterans

  -- Cost Sharing for Veterans' Long-Term Care

  -- Effective VA Hospital Preadmission Certification

  -- Construction of Veterans' Medical Facilities

  -- Underused VA Hospitals

  -- VA's Medical Care Account Growth Rate

  -- Enrollment in VA Health Care System

  -- Outpatient Pharmacy Costs

  -- Sunset Date of VA's Income Verification Program



   OPTION:
   VETERANS' DISABILITY
   COMPENSATION FOR NONSERVICE
   CONNECTED DISEASESVETERANS'
   DISABILITY COMPENSATION FOR
   NONSERVICE CONNECTED DISEASES
----------------------------------------------------- Appendix III:127


Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Primary agency                      Department of Veterans Affairs

Account                             Compensation (36-0153)

Spending type                       Direct

Budget subfunction                  Income Security for Veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
During 1986, the Department of Veterans Affairs (VA) paid
approximately $1.7 billion in disability compensation payments to
veterans with diseases neither caused nor aggravated by military
service.  In 1996, CBO reported that about 230,000 veterans were
receiving about $1.1 billion annually in VA compensation for these
diseases.  GAO's study of five countries shows that those countries
do not compensate veterans under such circumstances.  The Congress
may wish to reconsider whether such diseases should be compensated as
service-connected disabilities.  If disability compensation payments
to veterans with nonservice connected, disease-related disabilities
were eliminated in future cases, the following savings would apply. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    15      48      82     118     156
Outlays                             14      44      87     105     151
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:127.1

Disabled Veterans Programs:  U.S.  Eligibility and Benefit Types
Compared With Five Other Countries (GAO/HRD-94-6, November 24, 1993). 

VA Benefits:  Law Allows Compensation for Disabilities Unrelated to
Military Service (GAO/HRD-89-60, July 31, 1989). 


      GAO CONTACT
--------------------------------------------------- Appendix III:127.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   APPROVING EDUCATION AND
   TRAINING PROGRAMS FOR
   VETERANSAPPROVING EDUCATION AND
   TRAINING PROGRAMS FOR VETERANS
----------------------------------------------------- Appendix III:128


Authorizing committees              Veterans Affairs (Senate and
                                    House)

Appropriation subcommittees         VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Account                             Readjustment Benefits (36-0137)

Spending type                       Discretionary

Budget subfunction                  Veterans Education, Training and
                                    Rehabilitation

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Veterans Affairs (VA) contracts with state
approving agencies (SAA) to assess whether schools and training
programs offer education of sufficient quality for veterans to
receive VA education assistance benefits when attending them.  SAAs
perform this "gatekeeping" or approval function by evaluating course
quality, school financial stability, and student progress.  In fiscal
year 1994, VA paid more than
$1 billion in education assistance benefits to more than 450,000
beneficiaries and spent about $12 million for SAA gatekeeping
services. 

Other federal agencies--particularly the Department of Education and
the Department of Labor--also perform gatekeeping by determining
whether postsecondary educational and training programs and
institutions meet federal requirements for student loans and grants,
apprenticeship assistance, and other forms of federal support. 

An estimated $10.5 million of the $12 million paid to SAAs in 1994
was spent to conduct assessments that overlapped those of the
Department of Education.  These assessments involved reviews of
academic and vocational schools that were already accredited by
Education-approved agencies.  SAA efforts costing another $400,000 in
1994 may have overlapped assessments of apprenticeship programs done
by Labor, though the data were not available to determine if overlap
was indeed occurring.  The remaining SAA assessment activity--costing
about $1.1 million--did not overlap activities of other agencies
because it involved on-the-job training programs and unaccredited
schools, neither of which Education or Labor assessed. 

The substantial amount of overlap that occurred between SAA and other
gatekeepers' efforts raises questions about whether SAA efforts
should continue at their current level.  An estimated 87 percent of
the approval effort expended by SAAs related to schools and programs
also subject to accreditation by Education-approved entities.  Also,
in a review of six jurisdictions, 93 percent of the accredited
schools were also certified by Education to participate in Title IV
student aid programs.  School certification involves applying
standards that are similar to those used by SAAs.  On its face, an
SAA review of courses of study at an Education-certified school would
appear to add only marginal value.  An opportunity exists for
reducing federal expenditures by over $10 million annually through
elimination of overlapping SAA gatekeeping efforts. 

The following CBO savings estimate is based on the assumption that
the Congress directs VA to discontinue contracting with SAAs to
review and approve educational programs at schools that have already
been reviewed and certified by Education. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 funding level
----------------------------------------------------------------------
Budget authority                    10      10      10      10      10
Outlays                             10      10      10      10      10

Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    10      11      11      11      12
Outlays                             10      11      11      11      12
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:128.1

VA Student Financial Aid:  Opportunity to Reduce Overlap in Approving
Education and Training Programs (GAO/HEHS-96-22, October 30, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:128.2

Carlotta C.  Joyner, (202) 512-7002



   OPTION:
   COST SHARING FOR VETERANS'
   LONG-TERM CARECOST SHARING FOR
   VETERANS' LONG-TERM CARE
----------------------------------------------------- Appendix III:129


Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
State veterans' homes recover as much as 50 percent of the costs of
operating their facilities through charges to veterans receiving
services.  Similarly, Oregon recovers about 14 percent of the costs
of nursing home care provided under its Medicaid program through
estate recoveries.  In fiscal year 1990, the Department of Veterans
Affairs (VA) offset less than one-tenth of 1 percent of its costs
through beneficiary copayments. 

Potential recoveries appear to be greater within the VA system than
under Medicaid.  Home ownership is significantly higher among VA
hospital users than among Medicaid nursing home recipients, and
veterans living in VA nursing homes generally contribute less toward
the cost of their care than do Medicaid recipients, allowing veterans
to build larger estates. 

The Congress may wish to consider increasing cost sharing for VA
nursing home care by (1) adopting cost-sharing requirements similar
to those imposed by most state veterans' homes and (2) implementing
an estate recovery program similar to those operated by many states
under their Medicaid programs.  If VA recovered either 25 percent or
50 percent of its costs of providing nursing home and domiciliary
care through a combination of cost sharing and estate recoveries, the
savings shown in the following table would apply. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------

Option: Recovery of 25 percent of costs
----------------------------------------------------------------------
Budget authority                   678     678     678     678     678
Outlays                            678     678     678     678     678

Option: Recovery of 50 percent of costs
----------------------------------------------------------------------
Budget authority                 1,359   1,359   1,359   1,359   1,359
Outlays                          1,359   1,359   1,359   1,359   1,359
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------

Option: Recovery of 25 percent of costs
----------------------------------------------------------------------
Budget authority                   703     727     752     778     805
Outlays                            703     727     752     778     805

Option: Recovery of 50 percent of costs
----------------------------------------------------------------------
Budget authority                 1,408   1,456   1,507   1,559   1,614
Outlays                          1,408   1,456   1,507   1,559   1,614
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:129.1

VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68, July 27, 1993). 

VA Health Care:  Offsetting Long-Term Care Cost By Adopting State
Copayment Practices (GAO/HRD-92-96, August 12, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:129.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   EFFECTIVE VA HOSPITAL
   PREADMISSION
   CERTIFICATIONEFFECTIVE VA
   HOSPITAL PREADMISSION
   CERTIFICATION
----------------------------------------------------- Appendix III:130


Authorizing committees              Veterans' Affairs (House and
                                    Senate)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (House and Senate)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Department of Veterans Affairs (VA) hospitals too often serve
patients whose care could be more efficiently provided in alternative
settings, such as outpatient clinics or nursing homes.  In 1985, we
reported that about 43 percent of the days of care that VA medical
and surgical patients spent in the VA hospitals reviewed could have
been avoided.  Since then, several studies by VA researchers and the
VA Office of Inspector General have found that over 40 percent of VA
hospitals admissions and days of care were not medically necessary. 

Private health insurers typically require their policyholders (or
their physicians) to obtain authorization from the insurer or its
agent prior to admission to a hospital.  Failure to obtain such
preadmission certification can result in denial of insurance coverage
or a reduction in payment.  For example, all fee-for-service health
plans participating in the Federal Employees Health Benefits Program
are required to operate a preadmission certification program to help
limit nonacute admissions and days of care. 

We have recommended that VA establish an independent preadmission
certification program.  Although VA agreed to establish such a
program, it has provided no time frame for completing development and
implementation of the program.  In addition, it has not indicated how
compliance with the findings of external reviews will be enforced. 
Because VA facilities currently incur no financial risk from
providing inappropriate care, external preadmission certification
requirements may not be effective unless coupled with a financial
penalty for noncompliance with review findings. 

CBO estimates that if VA were to establish precertification
procedures similar to those used by private health insurers which
result in a 40-percent reduction in admissions and days of care, VA's
Medical Care spending could be reduced by $8.4 billion over 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 1,655   1,670   1,682   1,693   1,703
Outlays                          1,490   1,652   1,681   1,692   1,702
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:130.1

VA Health Care:  Issues Affecting Eligibility Reform Efforts
(GAO/HEHS-96-160, September 11, 1996). 

VA Health Care:  Opportunities for Service Delivery Efficiencies
Within Existing Resources (GAO/HEHS-96-121, July 25, 1996). 

VA Health Care:  Opportunities to Increase Efficiency and Reduce
Resource Needs (GAO/T-HEHS-96-99, March 8, 1996). 

VA Health Care:  Challenges and Options for the Future
(GAO/T-HEHS-95-147, May 9, 1995). 

Better Patient Management Practices Could Reduce Length of Stay in VA
Hospitals (GAO/HRD-85-52, August 8, 1985). 


      GAO CONTACT
--------------------------------------------------- Appendix III:130.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   CONSTRUCTION OF VETERANS'
   MEDICAL FACILITIESCONSTRUCTION
   OF VETERANS' MEDICAL FACILITIES
----------------------------------------------------- Appendix III:131


Authorizing committees              Veterans Affairs (Senate and
                                    House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Account                             Construction (36-0110)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Department of Veterans Affairs' (VA) health care system comprises
one of the nation's largest networks of direct delivery health care
providers, including 173 hospitals, 376 outpatient clinics, 133
nursing homes, and 39 domicilaries.  These facilities provided care
to about 2.2 million veterans at a cost of about $16 billion in
fiscal year 1995.  For fiscal year 1996, VA medical centers proposed
to headquarters more than $3 billion in funding requests for major
construction projects.\26 In the fiscal year 1996 budget request, the
President asked the Congress to appropriate $514 million for nine
projects.  The projects range in size from $9 million to renovate
nursing units in one hospital to $211.1 million to build a new
medical center at Travis Air Force Base in California. 

Long-term commitments for any major construction or renovation of
predominantly inpatient facilities in today's rapidly changing health
care environment are accompanied by high levels of financial risk. 
VA's recent commitment to a major realignment of its health care
system magnifies such risk by creating additional uncertainty.  In
addition, we believe that analyzing such alternatives in connection
with the other major construction projects in VA's budget proposal is
entirely consistent with VA's suggested realignment criteria. 
Delaying funding for these projects until the alternatives can be
fully analyzed may result in more prudent and economical use of
already scarce federal resources. 

The potential savings of delaying funding for VA hospital
construction are uncertain in the absence of an assessment of VA's
needs based on its own realignment criteria.  However, we have
recently reported that VA officials did not rigorously consider
available alternatives to construction of two major new hospital
facilities:  Brevard Hospital in Brevard County, Florida, and Travis
Hospital at Travis Air Force Base in northern California.  The
Congress directed VA to forgo construction of Brevard Hospital for
savings totaling $155 million and develop lower cost alternatives to
meet veterans' needs. 

Additionally, we found that construction of additional hospital beds
and an outpatient clinic as large as VA proposes at Travis Air Force
Base is unnecessary.  Although significant changes have occurred in
the health care marketplace and in the way VA delivers health care in
the 4 years since the project was planned, VA plans have not been
revised accordingly.  These changes alone have resulted in over 3,300
unused hospital beds in northern California hospitals, including beds
in VA, Air Force, and community hospitals.  In addition, the veteran
population in the service area is expected to drop by about 25
percent between 1995 and 2010.  We also found that VA has not
considered the likely negative effects the additional beds could have
on other hospitals in northern California, particularly those
community hospitals in the Solano County area surrounding Travis Air
Force Base that have occupancy rates of around 40 percent. 

CBO estimates that if the Congress did not approve funding of any
major construction projects until after VA has completed its
realignment, savings totaling more than $1.2 billion could be
achieved over 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 funding level
----------------------------------------------------------------------
Budget authority                   219     219     219     219     219
Outlays                             21      36     104     168     207

Savings from 1997 funding levels adjusted for inflation
----------------------------------------------------------------------
Budget authority                   224     231     237     243     250
Outlays                              1      37     108     175     220
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\26 Major projects are those costing $3 million or more. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:131.1

VA Health Care:  Travis Hospital Construction Project Is Not
Justified (GAO/HEHS-96-198, September 3, 1996). 

VA Health Care:  Effects of Facility Realignment on Construction
Needs Are Unknown (GAO/HEHS-96-19, November 17, 1995). 

VA Health Care:  Need for Brevard Hospital Not Justified
(GAO/HEHS-95-192, August 29, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:131.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   UNDERUSED VA HOSPITALSUNDERUSED
   VA HOSPITALS
----------------------------------------------------- Appendix III:132


Authorizing committees              Veterans' Affairs (House and
                                    Senate)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (House and Senate)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Although the Department of Veterans Affairs (VA) took over 50,000
hospital beds out of service between 1970 and 1995, it did not close
any hospitals based on declining utilization.  With the declining
veteran population, new technologies, and VA's plans to emphasize
outpatient care, significant further declines in demand for VA
hospital care are likely.  While closing wards clearly saves some
money by reducing staffing costs, the cost per patient treated rises
because the fixed costs of facility operation are disbursed over
fewer patients.  At some point, closing a hospital and providing care
either through another VA hospital or through contracts with
community hospitals may become less costly than simply taking beds
out of service. 

Potential savings from hospital closures are difficult to estimate
because of uncertainties about which facilities would be closed, the
increased costs that would be incurred in providing care through
other VA hospitals or contracts with community hospitals, and the
disposition of the closed facilities.  VA is currently developing
strategic plans to assess veterans' future health care needs that
could provide a basis for decisions regarding which hospitals to
close. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:132.1

VA Health Care:  Opportunities for Service Delivery Efficiencies
Within Existing Resources (GAO/HEHS-96-121, July 25, 1996). 

VA Health Care:  Opportunities to Increase Efficiency and Reduce
Resource Needs (GAO/T-HEHS-96-99, March 8, 1996). 

VA Health Care:  Challenges and Options for the Future
(GAO/T-HEHS-95-147, May 9, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:132.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   VA'S MEDICAL CARE ACCOUNT
   GROWTH RATEVA'S MEDICAL CARE
   ACCOUNT GROWTH RATE
----------------------------------------------------- Appendix III:133


Authorizing committees              Veterans' Affairs (House and
                                    Senate)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (House and Senate)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Department of Veterans Affairs' (VA) health care system was
established in 1930, primarily to provide for the rehabilitation and
continuing care of veterans injured during wartime service.  VA
developed its health care system as a direct delivery system in which
the government owned and operated its own health care facilities.  It
grew into the nation's largest direct delivery system.  Veterans'
health care benefits include medically necessary hospital and nursing
home care and some outpatient care. 

We found that VA's health care system should be able to significantly
contribute to deficit reduction in the next 5 years.  First, the
system may not need to expend the level of resources that VA had
previously estimated to meet the health care needs of veterans. 
These resources are overstated because (1) VA did not adequately
reflect the declining demand for VA hospital care in estimating its
resource needs and (2) eligibility for VA resources has been
reformed, which, according to VA, will allow VA to divert 20 percent
of its hospital admissions to less costly outpatient settings. 
Second, VA could reduce operating costs over the next 5 years by
billions of dollars by completing actions on a wide range of
efficiency initiatives.  Actions are planned or underway on many of
the improvements. 

The success of these efforts, however, depends on the extent to which
VA and its health care facilities are held accountable for how they
spend appropriated funds.  We recently recommended that VA provide
the Congress improved information supporting its budget request. 
Specifically, we recommended that VA provide the Congress information
on the savings achieved through improved efficiency.  Providing the
Congress with information on factors, such as inflation and creation
of new programs, that increase resource needs without providing
information on changes that could reduce or offset those needs leaves
the Congress with little basis for determining appropriate funding
levels.  VA, however, has been unwilling to provide the Congress such
information. 

In 1995, the Congress adopted a budget resolution providing VA
medical care budget authority of $16.2 billion annually for 7 years,
essentially limiting VA spending at the fiscal year 1995 level.  VA
estimated that such a limitation would result in a cumulative
shortfall of almost $24 billion in the funds it would need to
maintain current services to the veteran population through 2002. 
However, we reported that VA overestimated the potential budget
shortfall because it assumed that (1) the VA facility workload would
increase in fiscal year 1996 and that it would be sustained during
the entire 7-year period, (2) limited savings would be achieved
through improvements in the efficiency with which services are
provided by VA facilities, and (3) costs, workload, and staffing
would steadily increase due to opening or expanding facilities. 

Because VA facilities are essentially allowed to keep any funds they
generate through efficiency improvements and seek additional funds to
compensate for the effects of inflation, the true rate of increase in
VA's medical care appropriation is understated.  One way for the
Congress to respond to VA's unwillingness to provide information on
savings from improved efficiency and the overestimation of needs
would be to limit the VA medical care appropriation at the fiscal
year 1997 level for the next 5 years.  CBO estimates that this would
result in almost $9 billion in savings. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     0       0       0       0       0
Outlays                              0       0       0       0       0

Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   584   1,165   1,767   2,395   3,050
Outlays                            525   1,101   1,701   2,326   2,978
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:133.1

VA Health Care:  Opportunities for Service Delivery Efficiencies
Within Existing Resources (GAO/HEHS-96-121, July 25, 1996). 

VA Health Care:  Opportunities to Increase Efficiency and Reduce
Resource Needs (GAO/T-HEHS-96-99, March 8, 1996). 

Medical Care Budget Alternatives (GAO/HEHS-95-247R, September 12,
1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:133.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   ENROLLMENT IN VA HEALTH CARE
   SYSTEMENROLLMENT IN VA HEALTH
   CARE SYSTEM
----------------------------------------------------- Appendix III:134


Authorizing committees              Veterans' Affairs (House and
                                    Senate)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (House and Senate)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Department of Veterans Affairs' (VA) health care system was
initially established to meet the special care needs of veterans
injured during wartime and those wartime veterans permanently
incapacitated and incapable of earning a living.  Although all
veterans were eligible for hospital care, most veterans were eligible
for only limited outpatient services. 

Recently enacted legislation expands eligibility for health benefits
to make all veterans eligible for comprehensive inpatient and
outpatient services, subject to the availability of resources.  The
legislation also requires VA to establish a system of enrollment for
VA health care benefits and establishes enrollment priorities to be
applied within appropriated resources.  The lowest priority for
enrollment are veterans with no service-connected disabilities and
incomes that place them in the discretionary care category. 

However, VA does not currently provide the Congress the type of
information on VA's workload that would enable it to make informed
judgments about which portion of VA's workload to fund.  For example,
it provides the Congress little data on the extent to which its
resources are used to provide services to service-connected veterans,
to veterans with low incomes, and to veterans with higher incomes. 
Without information on the extent to which VA resources are used to
provide services to veterans in the priority categories established
under the new law, the Congress lacks the basic information needed to
guide decisions about what portion of VA's workload to fund. 

We found that about 15 percent of veterans with no service-connected
disabilities who use VA medical centers have sufficiently high
incomes that would place them in the lowest priority category under
the new patient enrollment system.  If the Congress funded the VA
health care system to cover only the expected enrollment of veterans
in higher priority enrollment categories, such as veterans with
service-connected disabilities and veterans without the means to
obtain public or private insurance to meet their basic health care
needs, CBO estimates that $1.7 billion in budget authority adjusted
for inflation could be saved over 5 years. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from 1997 funding level
----------------------------------------------------------------------
Budget authority                   280     280     280     280     280
Outlays                            252     277     280     280     280

Savings from 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   323     335     346     358     371
Outlays                            291     331     346     358     371
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:134.1

VA Health Care:  Issues Affecting Eligibility Reform Efforts
(GAO/HEHS-96-160, September 11, 1996). 

VA Health Care:  Opportunities for Service Delivery Efficiencies
Within Existing Resources (GAO/HEHS-96-121, July 25, 1996). 

VA Health Care:  Approaches for Developing Budget-Neutral Eligibility
Reform (GAO/T-HEHS-96-107, March 20, 1996). 

VA Health Care:  Opportunities to Increase Efficiency and Reduce
Resource Needs (GAO/T-HEHS-96-99, March 8, 1996). 

VA Health Care:  Issues Affecting Eligibility Reform
(GAO/T-HEHS-95-213, July 19, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:134.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   OUTPATIENT PHARMACY
   COSTSOUTPATIENT PHARMACY COSTS
----------------------------------------------------- Appendix III:135


Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and Medical Care for
                                    Veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The Department of Veterans Affairs' (VA) pharmacies dispense over
2,000 types of medications and medical supplies to veterans that are
available over the counter (OTC) through local retail outlets.  Such
products were dispensed more than 15 million times in 1995 at an
estimated cost of $165 million.  The most frequently dispensed
include aspirin, dietary supplements, and alcohol prep pads.  VA
physicians and others are concerned that veterans who need such
products may lack the resources to purchase them and, as a result,
not use them.  However, only a few VA pharmacies restrict which
veterans may receive OTC products or how many are provided.  While
many veterans shared a modest portion of the costs of the OTC
products, in most cases, the veterans paid no copayments and VA
absorbed the total costs of these OTC products. 

Unlike VA, other public and private health care plans cover few, if
any, OTC products for their beneficiaries.  These plans' coverage of
OTC products is more restrictive than all but a few of VA's
facilities.  In addition, VA facilities provide other features, such
as free prescription mail service, that are commonly not available
from other plans.  As a result, VA facilities devote significant
resources to the provision of OTC products that other plans have
elected not to cover. 

Our assessment of VA's operating practices suggests several ways that
budget savings could be achieved.  First, VA could more narrowly
define when to provide OTC products, reducing the number of OTC
products available to veterans on an outpatient basis.  Second, VA
could collect copayments for all OTC products.  CBO has estimated
that these steps would save the following amounts. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Restrict availability of OTC products at VA pharmacies
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                    60      60      61      61      62
Outlays                             54      59      61      61      62

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    62      64      67      70      74
Outlays                             55      64      67      70      73
----------------------------------------------------------------------


                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Option: Charge copayments on OTC products at VA pharmacies
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                     5       9      14      14      14
Outlays                              5       9      14      14      14

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     5       9      14      14      14
Outlays                              5       9      14      14      14
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:135.1

VA Health Care:  Opportunities to Significantly Reduce Outpatient
Pharmacy Costs (GAO/HEHS-97-15, October 11, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:135.2

Stephen P.  Backhus, (202) 512-7111



   OPTION:
   SUNSET DATE ON VA'S INCOME
   VERIFICATION PROGRAMSUNSET DATE
   ON VA'S INCOME VERIFICATION
   PROGRAM
----------------------------------------------------- Appendix III:136


Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Accounts                            Compensation (36-0153)
                                    Medical Care (36-0160)

Spending type                       Direct

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Veterans Affairs (VA) administers over $35 billion
annually in benefits and health care programs for veterans and their
dependents.  Eligibility for benefits and the level of benefits paid
are often income dependent.  VA uses self-reported income in
establishing eligibility for certain benefits.  In general, the lower
the reported income, the higher the benefits. 

In 1988 we recommended that the Congress amend the Internal Revenue
Code to give VA access to tax data to verify income reported by VA
pension recipients.  We estimated that VA made potential overpayments
of over $157 million in 1984 because it lacked access to tax data. 
Legislation was enacted in 1990 that gave VA access to Internal
Revenue Service (IRS) tax data and Social Security Administration
(SSA) earnings records to help VA verify incomes reported by
beneficiaries.  Since 1990, millions of dollars in savings have been
achieved as a result of VA's income verification program. 

However, the provision authorizing IRS and SSA assistance to VA in
verifying income will expire on September 30, 1998--its "sunset"
date.  If the provision is not extended, VA's outlays will be
unnecessarily higher. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Budget authority                     0      22      27      31      36
Outlays                              0      22      27      31      36
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:136.1

VA Health Care:  Verifying Veterans' Reported Income Could Generate
Millions in Copayment Revenues (GAO/HRD-92-159, September 15, 1992). 

Veterans' Benefits:  Millions in Savings Possible From VA's Matching
Program With IRS and SSA (GAO/HRD-92-37, December 23, 1991). 

Veterans' Pensions:  Verifying Income With Tax Data Can Identify
Significant Payment Problems (GAO/HRD-88-24, March 16, 1988). 


      GAO CONTACT
--------------------------------------------------- Appendix III:136.2

Stephen P.  Backhus, (202) 512-7111



   750 ADMINISTRATION OF JUSTICE
----------------------------------------------------- Appendix III:137

  -- Border Patrol Resources



   OPTION:
   BORDER PATROL RESOURCESBORDER
   PATROL RESOURCES
----------------------------------------------------- Appendix III:138


Authorizing committees              Judiciary (Senate and House)

Appropriations subcommittees        Commerce, Justice, State, and the
                                    Judiciary (Senate and House)

Primary agency                      Department of Justice

Accounts                            Immigration and Naturalization
                                    Service Salaries and Expenses (15-
                                    1217)
                                    Violent Crime Reduction Fund
                                    Programs
                                    (15-8598)

Spending type                       Discretionary

Budget subfunction                  Federal Law Enforcement Activities

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Drug smuggling and illegal immigration are serious threats along the
Southwest border.  Experts estimate that most of the cocaine and most
illegal aliens entering the United States enter from Mexico across
the Southwest border.  Unless border control efforts become more
effective, illegal immigration is expected to increase over the next
decade. 

The Department of Justice's Immigration and Naturalization Service
(INS) is responsible for enforcing the nation's immigration laws. 
The INS has 3 regional offices, 33 district offices, 21 Border Patrol
sectors with 145 Border Patrol offices, and 265 staffed ports of
entry.  The three principal divisions with enforcement
responsibilities include the Border Patrol, Investigations, and
Inspections. 

The Violent Crime Control and Law Enforcement Act of 1994 increased
funding for the Border Patrol to help stem the flow of illegal aliens
crossing the Southwest border.  The legislation authorized an
increase of 4,000 Border Patrol agents and support staff over four
years to carry out the INS' new border enforcement strategy of
"prevention through deterrence." Under this strategy, Border Patrol
agents are to be deployed on the border to discourage aliens from
entering illegally.  Previously, agents were deployed in border
areas, but their strategy was to apprehend aliens after they had
entered the United States. 

Nationwide, in fiscal year 1994, the Border Patrol reportedly spent
63 percent of its enforcement time preventing illegal alien entry. 
The remaining 37 percent was spent apprehending aliens who illegally
entered or violated the conditions upon which they entered.  The
activities of Border Patrol agents generally vary according to their
distance from the border.  Agents at most stations within 25 miles of
the border were principally engaged in patrolling the border to
prevent illegal entry of aliens.  In contrast, agents at stations
over 25 miles from the border were principally engaged in
apprehending illegal aliens after their entry. 

INS district offices and Border Patrol sectors geographically overlap
throughout the country.  In addition, some Border Patrol enforcement
activities parallel the enforcement activities of other INS
enforcement divisions.  Border Patrol and Investigations are both
responsible for identifying criminal and illegal aliens after they
enter the country and reviewing employers' records to determine
whether only authorized workers are employed.  The work in these
parallel areas is usually a lower priority for the Border Patrol. 

INS data indicates that it costs half as much to redirect existing
Border Patrol agents to the border than to hire and train new agents. 
Also, redirecting the time spent by agents at the 32 southwest border
stations from apprehending aliens after entry to patrolling the
border would decrease the number of new agents needed.  Furthermore,
relocating interior Border Patrol agents to the borders could result
in INS closing some Border Patrol stations and reducing some of its
lease costs.  In a recent example of how this type of redirection and
redeployment might be implemented, the Congress directed the Border
Patrol to redeploy 200 agent positions from interior stations to the
Southwest border.  Following this directive, INS set aside only 100
investigator positions to perform the activities that had previously
been performed by the 200 redeployed agents. 

The Congress could direct the INS to fully implement its new
enforcement strategy by redeploying additional Border Patrol agents
and closing Border Patrol stations that are not carrying out
operations designed to prevent the entry of illegal aliens.  Given
the emphasis that the President and the Congress have placed on
controlling the nation's borders, one possible approach would be to
redeploy resources to those border areas where there is an immediate
threat of illegal entry.  Although CBO could not provide an estimate
of savings at this time, under this approach Border Patrol stations
where agents spend less than, for example, 50 percent of their time
patrolling the border or less than 75 percent of their time
conducting traffic checks, might be closed and have its agents
redeployed.  Also, stations in close proximity to the Southwest or
Canadian borders where agents do not spend a minimum of, for example,
50 percent of their time patrolling the border or 75 percent of their
time conducting traffic checks, might have the activities of its
agents redirected to prevent entry of illegal aliens.  Further, the
redirection of agents' activities should reduce the number of new
agents the Border Patrol would need to hire to increase the amount of
time spent patrolling the border. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:138.1

Border Patrol:  Staffing and Enforcement Activities (GAO/GGD-96-65,
March 11, 1996). 

Border Control:  Revised Strategy is Showing Some Positive Results
(GAO/T-GGD-95-92, March 10, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:138.2

Norman J.  Rabkin, (202) 512-8777



   800 GENERAL GOVERNMENT,
   900 NET INTEREST, AND 999
   MULTIPLE
----------------------------------------------------- Appendix III:139

  -- General Services Administration Supply Depot System

  -- Judiciary's Long-Range Space Planning System

  -- The 1-Dollar Coin

  -- Commemorative Coins

  -- Federal Reserve Operations

  -- Premium Payments to Employees While on Leave

  -- Davis-Bacon Act Reform

  -- Formula-Based Grant Programs

  -- Federal Grants

  -- Federal Travel Processing



   OPTION:
   GENERAL SERVICES ADMINISTRATION
   SUPPLY DEPOT SYSTEMGENERAL
   SERVICES ADMINISTRATION SUPPLY
   DEPOT SYSTEM
----------------------------------------------------- Appendix III:140


Authorizing committees              Governmental Affairs (Senate)
                                    Government Reform and Oversight
                                    (House)

Primary agency                      General Services Administration

Account                             General Supply Fund (47-4530)

Spending type                       Direct

Budget subfunction                  General Property and Records
                                    Management

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The General Services Administration (GSA) has a multimillion dollar
supply system to help support federal agencies' mission needs.  As
part of this system, GSA buys and warehouses about 16,000 common-use
supply products and resells and ships them to federal agencies
through five depots.  An alternative method GSA uses is to have
supplies delivered directly from suppliers to federal agencies. 
Agencies pay less when supplies are delivered directly.  At the time
of GAO's most recent work, GSA marked up directly delivered products,
on average, 10 percent of product cost, while products stored and
shipped from GSA depots were marked up an average of 29 percent.  For
fiscal year 1996, GSA's markups had increased to 22 percent and 35
percent, respectively.  Although the cost difference between the two
delivery options has lessened in the intervening years for a variety
of reasons, including a changed methodology for calculating mark-ups
developed in fiscal year 1995, the difference is still significant
and reflects the higher costs associated with maintaining and
operating a large depot distribution system. 

In fiscal year 1992, GAO's review showed that GSA directly delivered
only an estimated $68 million of the estimated $800 million in sales
that had potential for direct delivery during the 12-month period
ending on February 14, 1991.  This means that over 80 percent of
depot sales had potential to be supplied in this way.  The remaining
depot sales were mostly low-value, small-quantity orders which may
have been uneconomical for GSA to handle--more specifically, it cost
them more to provide the materials than the customer paid.  Most of
these orders could have been purchased locally without going through
GSA.  If GSA increased direct delivery and encouraged agencies to
purchase low-value, small-quantity orders locally, it could
significantly reduce needed depot operations. 

Maintaining a large and costly depot distribution system may no
longer be a viable or necessary activity for the federal government. 
Consistent with this position, the Vice President's National
Performance Review recommended that supply inventories be reduced and
agencies be allowed to choose sources of supply.  In response, GSA is
studying its own and private-sector depot distribution costs to
identify where greater efficiency could be achieved.  In addition,
GSA (1) permits agencies to use supply sources other than depots for
purchases under $5,000, which GSA estimated includes 99 percent of
all potential purchases, (2) has actions to identify logistic models
that may provide other sources of supply capable of providing items
at reasonable costs, and (3) has increased the use of commercial
rather than government-specific item descriptions, which should
provide a clearer link between the items agencies need and those
available commercially.  To the extent that GSA's efforts result in
more economical and efficient ways for agencies to obtain needed
supplies outside the depot system, GAO believes that there will be
increased opportunities to reduce or possibly even eliminate GSA's
depot system. 

The Congress could consider requiring increased use of direct
delivery for high-dollar value supplies and only stocking items that
are profitable.  After these changes are implemented, GSA or the
Congress could phase out GSA depots that are no longer economically
justifiable or needed.  If all the depots were phased out, the
following savings would result. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    16      34      52      54      56
Outlays                             12      30      48      54      55
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:140.1

General Services Administration:  Increased Direct Delivery of
Supplies Could Save Millions (GAO/GGD-93-32, December 28, 1992). 

Transition Series:  General Services Issues (GAO/OCG-93-28TR,
December 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:140.2

J.  William Gadsby, (202) 512-8387



   OPTION:
   JUDICIARY'S LONG-RANGE SPACE
   PLANNING SYSTEMJUDICIARY'S
   LONG-RANGE SPACE PLANNING
   SYSTEM
----------------------------------------------------- Appendix III:141


Authorizing committees              Environment and Public Works
                                    (Senate) Transportation and
                                    Infrastructure (House)

Primary agency                      Administrative Office of the
                                    United States Courts

Account                             Federal Buildings Fund (47-4542)

Spending type                       Direct

Budget subfunction                  General Property and Records
                                    Management

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In 1988, the Administrative Office of the U.S.  Courts (AOC)
developed a long-range plan for space needs.  Based on 1992 space
projections by the AOC, GAO estimated that the total space
requirements for courts and related agencies would increase to about
36.9 million square feet over a 10-year period--a 97-percent
increase.  GAO found that AOC's planning process resulted in higher
estimates for court space than is warranted.  Using the judiciary's
$31 per square foot average cost for all court space, GAO showed that
the judiciary could save approximately $112 million annually, or $1.1
billion in constant dollars over a 10-year period, if the errors in
its planning process were corrected. 

The Congress should direct the judiciary to revise its planning
process for identifying long-range space needs.  Specifically, the
process should (1) treat all judicial districts consistently in terms
of assumptions between caseloads, staff, and space, (2) establish a
baseline of space needs for each district that reflects current
caseloads, and (3) increase the reliability of its estimates by using
an appropriate statistical methodology to project caseloads and by
reducing the level of subjectivity in the process.  Because of
uncertainty about the nature and extent of changes that might be made
to the planning process, a 5-year estimate of savings cannot be
developed for this option. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:141.1

Federal Courthouse Construction:  More Disciplined Approach Would
Reduce Costs and Provide for Better Decisionmaking (GAO/T-GGD-96-19,
November 8, 1995). 

Federal Judiciary Space:  Progress Is Being Made To Improve The
Long-Range Planning Process (GAO/T-GGD-94-146, May 4, 1994). 

Federal Judicial Space Follow-up (GAO/GGD-94-135R, April 22, 1994). 

Federal Judiciary Space:  Long-Range Planning Process Needs Revision
(GAO/T-GGD-94-1B, October 7, 1993). 

Federal Judiciary Space:  Long-Range Planning Process Needs Revision
(GAO/GGD-93-132, September 28, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:141.2

J.  William Gadsby, (202) 512-8387



   OPTION:
   THE 1-DOLLAR COINTHE 1-DOLLAR
   COIN
----------------------------------------------------- Appendix III:142


Authorizing committees              Banking, Housing, and Urban
                                    Affairs (Senate)
                                    Banking and Financial Services
                                    (House)

Appropriations subcommittees        Treasury, Postal Service, and
                                    General Government (Senate and
                                    House)

Primary agency                      Department of the Treasury

Account                             United States Mint Public
                                    Enterprise Fund (20-4159)

Spending Type                       Direct

Budget subfunction                  Central Fiscal Operations

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In 1993 and 1995, GAO reported on cost savings associated with the
1-dollar coin.  We said that because a dollar coin would have a
longer life and be more easily processed than a note, and because the
seigniorage\27 recognized reduces the amount of borrowing needed to
finance the deficit, substituting a dollar coin for a dollar note
would yield significant savings to the government.  Other countries
have demonstrated that public resistance to such a change can be
managed and overcome. 

The direct budgetary savings from this option, as scored by CBO, are
relatively small during the 5-year estimating period.  Additional
revenues, shown in the first table that follows, result from
increases in payments of earnings by the Federal Reserve Bank into
miscellaneous receipts of the Treasury due to the lower costs of
purchasing and processing these coins relative to dollar bills. 
Although not reflected in the table, there are other substantial
longer term savings due to the effects of seigniorage.  Seigniorage
is not considered part of the budget, but it does substitute for
borrowing from the public and, thus, lowers interest costs to the
government.  The second table shows that, initially, the U.S.  Mint's
costs would increase to cover the costs of research and development,
metals acquisition, storage for coins stockpiled before their
introduction into circulation,\28 and a public education campaign. 
CBO's estimate assumes that the Mint would pay for these costs by
borrowing from seignorage generated by coins already in circulation. 
These costs would be repaid when new dollar coins are deposited at
the Federal Reserve and begin generating their own seigniorage.  Over
time, the net effect on direct spending would be zero. 



                           Five-Year Revenues

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gains                        0       0       0      80     110
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                   Five-Year Direct Spending Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Budget authority                   -88    -278     212     142       2
Outlays                            -88    -278     212     142       2
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\27 Seigniorage is the difference between the face value of the coin
and its cost of production, which includes the value of the metals
contained in the coin and the U.S.  Mint's manufacturing and
distribution costs. 

\28 CBO's estimate assumes 30 months of lead time for the U.S.  Mint
to produce and stockpile new dollar coins before their introduction
into circulation. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:142.1

A Dollar Coin Could Save Millions (GAO/T-GGD-95-203, July 13, 1995). 

1-Dollar Coin:  Reintroduction Could Save Millions If It Replaced the
1-Dollar Note (GAO/T-GGD-95-146, May 3, 1995). 

1-Dollar Coin:  Reintroduction Could Save Millions if Properly
Managed (GAO/GGD-93-56, March 11, 1993). 

National Coinage Proposals:  Limited Public Demand for New Dollar
Coin or Elimination of Pennies (GAO/GGD-90-88, May 23, 1990). 


      GAO CONTACT
--------------------------------------------------- Appendix III:142.2

J.  William Gadsby, (202) 512-8387



   OPTION:
   COMMEMORATIVE
   COINSCOMMEMORATIVE COINS
----------------------------------------------------- Appendix III:143


Authorizing committees              Banking, Housing and Urban Affairs
                                    (Senate)
                                    Banking and Financial Services
                                    (House)

Primary agency                      Department of the Treasury

Spending type                       Direct

Budget subfunction                  Net Interest

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In 1996, GAO reported that if the Congress authorized the United
States Mint to produce circulating commemorative coins, which are
coins with distinctive designs that are issued at face value, the
government could generate about $225 million in additional
seigniorage annually.  Seigniorage is the difference between the face
value of the coin and its cost of production and distribution. 
Seigniorage is not considered part of the budget, but it does
substitute for borrowing from the public and, thus, lowers interest
costs to the government.  Generating $225 million in additional
seigniorage annually would result in about $16 million in interest
savings on the national debt each year. 

GAO concluded that because the quarter is the highest denomination
and the largest in size of the widely circulating coins, it would be
likely to generate the most seigniorage.  GAO reported that in 1976,
when the Mint produced a circulating quarter commemorating the
Bicentennial, the Mint produced 83 percent more quarters
commemorating the Bicentennial than its average annual production
from 1971 to 1981.  GAO based its 1996 estimate on the assumption
that the demand for quarters would increase 50 percent over the 1995
production levels for the quarter.  CBO did not provide an estimate
of the savings from producing a circulating commemorative quarter
since it involves interest savings only. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:143.1

U.S.  Mint:  Commemorative Coins Could Be More Profitable
(GAO/GGD-96-113, August 7, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:143.2

J.  William Gadsby, (202) 512-8387



   OPTION:
   FEDERAL RESERVE
   OPERATIONSFEDERAL RESERVE
   OPERATIONS
----------------------------------------------------- Appendix III:144


Authorizing committees              Banking, Housing and Urban Affairs
                                    (Senate)
                                    Banking and Financial Services
                                    (House)

Primary agency                      Federal Reserve Board

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Federal Reserve is responsible for conducting monetary policy,
maintaining the stability of financial markets, providing services to
financial institutions and government agencies, and supervising and
regulating banks and bank-holding companies.  The Federal Reserve is
unique among governmental entities in its mission, structure, and
finances.  Unlike federal agencies funded through congressional
appropriations, the Federal Reserve is a self-financing entity that
deducts its expenses from its revenue and transfers the remaining
amount to the U.S.  Department of the Treasury.  Although the Federal
Reserve's primary mission is to support a stable economy, rather than
to maximize the amount transferred to Treasury, its revenues
contribute to total U.S.  revenues and, thus, can help reduce the
federal deficit. 

From 1988 to 1994, the Federal Reserve's annual revenue averaged $22
billion and greatly exceeded its average annual expenses and other
deductions of $2.5 billion.  Consequently, the annual amount returned
to the Treasury during this period ranged from about $16 billion to
$24 billion.  The cost of Federal Reserve operations over this period
increased steadily and substantially.  Specifically, operating
expenses for the Board and Reserve banks increased by about 50
percent, with the greatest increases occurring in the areas of bank
supervision, personnel costs, and data-processing modernization.  The
costs of providing services for which banks are charged have been
rising faster than the corresponding revenues received. 

With the current budgetary climate, the Federal Reserve could do more
to increase its cost consciousness and ensure that it is operating as
efficiently as possible.  GAO has identified several inefficiencies
in the Federal Reserve's policies and practices that have increased
the cost of providing its current services, including its costs for
travel, personnel benefits, building acquisition, and contracting and
procurement.  For example, personnel benefit packages varied among
Reserve banks and certain benefits--such as leave policies and
savings plans--were generous compared to those of federal financial
regulatory agencies with similar personnel requirements.  We have
also identified opportunities for the Federal Reserve to strengthen
internal controls over financial reporting and safeguarding of
assets. 

The Federal Reserve could better control costs and increase
efficiencies through management with a more systemwide focus.  Such
management would include reducing or eliminating benefits that are
not necessary to attract and retain a quality workforce and managing
other benefits on a systemwide basis, using the combined bargaining
power of the 12 Reserve banks.  The internal controls of all Reserve
banks should be independently assessed annually to ensure reliable
financial reporting, safeguarding of assets, and compliance with laws
and regulations. 

In addition, the Federal Reserve's revenue, and hence its return to
taxpayers, would be enhanced by charging fees for bank examinations. 
The Federal Reserve Act authorizes the Federal Reserve to charge fees
for bank examinations, but the Federal Reserve has not done so,
either for the state-member banks it examines or the bank-holding
company examinations it conducts.  Thus, taxpayers in effect bear the
cost of these examinations, which totaled $368 million in 1994.  If
fees were assessed similar to those charged national banks with a
credit allowed for fees paid to state regulators, the following
savings could be achieved.\29



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Added receipts                      72      75      78      82      86
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\29 CBO also assumes that the Federal Deposit Insurance Corporation
(FDIC) begins to charge for bank examinations at the same rate;
however, the effect on FDIC's budget is not included in its estimate. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:144.1

Federal Reserve System:  Current and Future Challenges Require
Systemwide Attention (GAO/T-GGD-96-159, July 26, 1996). 

Federal Reserve System:  Current and Future Challenges Require
Systemwide Attention (GAO/GGD-96-128, June 17, 1996). 

Federal Reserve Banks:  Inaccurate Reporting of Currency at the Los
Angeles Branch (GAO/AIMD-96-146, September 30, 1996). 

Federal Reserve Banks:  Internal Control, Accounting, and Auditing
Issues (GAO/AIMD-96-5, February 9, 1996). 


      GAO CONTACT
--------------------------------------------------- Appendix III:144.2

Thomas M.  McCool, (202) 512-8678



   OPTION:
   PREMIUM PAYMENTS TO EMPLOYEES
   WHILE ON LEAVEPREMIUM PAYMENTS
   TO EMPLOYEES WHILE ON LEAVE
----------------------------------------------------- Appendix III:145


Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agency                      Multiple

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Office of Personnel Management has directed all federal agencies
to pay employees who are scheduled to work on Sundays at the Sunday
premium pay rate even if the employees take leave on Sunday.  The
directive became effective on May 27, 1993, and was based on a U.S. 
Claims Court interpretation of federal leave statutes that prohibit
an employee's pay from being diminished due to taking leave.  Prior
to this time, employees who took leave on Sunday were paid at their
basic pay rate for the leave rather than the Sunday premium rate of
the base rate plus 25 percent.  GAO reviewed five agencies--the
Federal Aviation Administration, the Customs Service, and the
Departments of Defense, Justice, and Veterans Affairs--which are
among the most frequent payers of Sunday premium pay in the federal
government.  Using leave information provided by these five agencies
for fiscal year 1994, we estimated that $17.9 million of the $146.1
million in Sunday premium pay was paid to employees on leave. 

The Departments of Commerce, Justice, State, the Judiciary, and
Related Agencies Appropriations Act of 1997 included a provision that
precluded all the relevant agencies from paying premium pay for
Sundays not actually worked.  GAO addressed this issue governmentwide
in a 1995 report.  We suggested that to preclude federal employees
from receiving Sunday premium pay while on leave and to reduce
governmentwide employment costs, the Congress may wish to consider
requiring that all agencies' employees actually must work on Sunday
to receive Sunday premium pay. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:145.1

Sunday Premium Pay:  Millions of Dollars in Sunday Premium Pay Are
Paid to Employees on Leave (GAO/GGD-95-144, May 19, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:145.2

L.  Nye Stevens, (202) 512-8676



   OPTION:
   DAVIS-BACON ACT
   REFORMDAVIS-BACON ACT REFORM
----------------------------------------------------- Appendix III:146


Authorizing committees              Labor and Human Resources (Senate)
                                    Economic and Educational
                                    Opportunities (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Labor

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunctions                 Multiple

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Davis-Bacon Act requires that workers on federally funded or
federally assisted construction projects be paid wages at or above
levels determined by the Department of Labor to be prevailing in an
area.  The current dollar threshold for projects covered by
Davis-Bacon is $2,000, an amount that has not changed since 1935. 
Critics of the act believe that it inflates federal construction
costs because the wage rates set are actually higher than those
prevailing in an area.  Supporters say it sets a basic responsibility
for federal construction contractors to pay wages typical in an area,
not lower wage rates in order to receive a contract.  They also argue
that savings from lower wage rates would be offset by the higher
total project costs and also from government revenue losses as a
result of reduced tax collections. 

In 1979, GAO expressed major concern about the accuracy of the wage
determinations and the impact of the inaccurately high wage rates on
federal construction costs.  Since that time, Labor has made changes
that have improved the administration of the Davis-Bacon Act and made
it less likely that the wage rates would be artificially high.  For
example, Labor has revised its criteria to require that 50 percent,
rather than 30 percent, of the workers included on survey projects
must receive the same wage for that rate to be considered the
prevailing wage.  This made it less likely that the collectively
bargained wage rate in an area would be used to set the prevailing
wage and, as of 1995, less than 30 percent of all of Labor's wage
determinations were set in that way.  In 1996, Labor also implemented
recommendations to reduce the potential for its wage determinations
to be based on erroneous wage data.  There is still an absence of
current data, however, on the accuracy of wage rates set. 

In the past, CBO has noted that repealing the Davis-Bacon Act or
raising the threshold for projects it covers would allow
appropriators to reduce funds spent on federal construction.  In
addition, either action would increase the opportunities for
employment of less skilled workers.  However, such changes would
lower the earnings of some construction workers.  In 1997, CBO
estimates that repeal of Davis-Bacon would allow appropriators to
reduce funds for construction with a resulting discretionary outlay
savings of about $2.8 billion between fiscal years 1998 and 2002. 
CBO assumes that the currently suspended helper regulations will be
reinstated beginning after the first quarter of fiscal year 1998. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Direct spending
----------------------------------------------------------------------

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    32      26      24      24      23
Outlays                             28      27      25      24      24
----------------------------------------------------------------------
Note:  CBO has identified some direct spending savings from the
repeal of the Davis-Bacon Act, including a reclassification of about
$1.6 billion in federal aid to highways in fiscal year 1996. 

Source:  Congressional Budget Office. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                   799     777     777     777     777
Outlays                            196     458     602     683     734

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   826     854     877     901     926
Outlays                            196     463     625     739     816
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:146.1

Information Regarding the Davis-Bacon Act, Correspondence to
Representative Pete Hoekstra, (GAO/HEHS-97-30R, October 30, 1996). 

Information Regarding Davis-Bacon Wage Determinations, Correspondence
to Representative Pete Hoekstra (GAO/HEHS-96-177R, July 17, 1996). 

Davis-Bacon Act:  Process Changes Could Address Vulnerability to Use
Inaccurate Data in Setting of Prevailing Wage Rates
(GAO/T-HEHS-96-166, June 20, 1996). 

Davis-Bacon Act Job Targeting Programs, Correspondence to
Representative William M.  Thomas (GAO/HEHS-96-15R, June 3, 1996). 

Davis-Bacon Act:  Process Changes Could Raise Confidence That Wage
Rates Are Based on Accurate Data (GAO/HEHS-96-130, May 31, 1996). 

Davis-Bacon Act, Correspondence to Senator Larry Craig and
Representatives Charles Stenholm, William Goodling, Tim Valentine,
and Thomas Petri (GAO/HEHS-94-95, April 27, 1996). 

Changes to the Davis-Bacon Act Regulations and Administration
(GAO/HEHS-94-95R, February 7, 1994). 

The Davis-Bacon Act Should Be Repealed (GAO/HRD-79-18, April 27,
1979). 


      GAO CONTACT
--------------------------------------------------- Appendix III:146.2

Carlotta C.  Joyner, (202) 512-7002



   OPTION:
   FORMULA-BASED GRANT
   PROGRAMSFORMULA-BASED GRANT
   PROGRAMS
----------------------------------------------------- Appendix III:147


Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agencies                    Multiple

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunctions                 Multiple

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
GAO has issued many reports over the past decade showing that the
distribution of federal grants to state and local governments is not
well-targeted to those jurisdictions with greatest programmatic needs
or lowest fiscal capacity to meet those needs.  As a result, program
recipients in areas with relatively lower needs and greater wealth
may enjoy a higher level of services than is available in harder
pressed areas, or the wealthier areas can provide the same level of
services at lower tax rates than harder pressed areas. 

At a time when federal domestic discretionary resources are
constrained, better targeting of grant formulas offers a strategy to
bring down federal outlays by concentrating reductions on wealthier
localities with comparatively fewer needs and greater capacity to
absorb the cuts.  At the same time, redesigned formulas could hold
harmless the hardest pressed areas, which are most vulnerable. 

Cuts in federal grants to states could be targeted by
disproportionately reducing federal funds to states with stronger tax
bases and fewer needs.  Cuts in federal grants to local governments
could be targeted by either concentrating cuts on areas with the
strongest tax bases or by changing program eligibility to restrict
grant funding only to those places with lower fiscal capacity or
greatest programmatic needs.  As an example, during the debate in
1986 over the termination of General Revenue Sharing, GAO reported
that a better targeted formula and restricted eligibility could
achieve a 50-percent cut in total outlays, while maintaining or
increasing federal funds to harder pressed jurisdictions.  An example
that illustrates the potential savings from this option is a
10-percent reduction in the aggregate total of all closed-ended or
capped formula grant programs exceeding $1 billion.\30 The dollar
value for programs exceeding this threshold would include over 60
percent of the dollars for such programs.  The savings achieved
through this option could serve as a benchmark for overall savings
from this approach but should not be interpreted as a suggestion for
across-the-board cuts.  Rather, the Congress may wish to determine
specific reductions on a program-by-program basis, after examining
the relative priority and performance of each grant program. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Discretionary spending
----------------------------------------------------------------------

Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                 2,903   2,903   2,903   2,903   2,903
Outlays                          1,055   3,256   4,110   4,483   4,659

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 3,079   3,281   3,486   3,705   3,937
Outlays                          1,086   3,413   4,446   5,085   5,532
----------------------------------------------------------------------


                           Five-Year Savings

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Direct Spending
----------------------------------------------------------------------

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 4,228   4,238   4,308   4,369   4,433
Outlays                          1,612   1,811   1,809   1,816   1,825
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\30 In the transportation budget function, several very small
closed-ended grants could not be easily isolated in the baseline and
these are included in the estimate. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:147.1

Federal Grants:  Design Improvements Could Help Federal Funds Go
Further (GAO/AIMD-97-7, December 18, 1996). 

Public Health:  A Health Status Indicator for Targeting Federal Aid
to States (GAO/HEHS-97-13, November 13, 1996). 

Highway Funding:  Alternatives for Distributing Federal Funds
(GAO/RCED-96-6, November 28, 1995). 

Ryan White Care Act of 1990:  Opportunities to Enhance Funding Equity
(GAO/HEHS-96-26, November 13, 1995). 

Department of Labor:  Senior Community Service Employment Program
Delivery Could Be Improved Through Legislative and Administrative
Action (GAO/HEHS-96-4, November 2, 1995). 

Rural Development:  USDA's Approach to Funding Water and Sewer
Projects (GAO/RCED-95-258, September 22, 1995). 

Medicaid:  Matching Formula's Performance and Potential Modifications
(GAO/T-HEHS-95-226, July 27, 1995). 

Older Americans Act:  Funding Formula Could Better Reflect State
Needs (GAO/HEHS-94-41, May 12, 1994). 

Medicaid:  Alternatives for Improving the Distribution of Funds to
States (GAO/HRD-93-112FS, August 20, 1993). 

Mental Health Grants:  Funding Not Distributed According to State
Needs (GAO/T-HRD-91-32, May 16, 1992). 

Maternal And Child Health:  Block Grants Funds Should Be Distributed
More Equitably (GAO/HRD-92-5, April 2, 1992). 

Remedial Education:  Modifying Chapter 1 Formula Would Target More
Funds to Those Most in Need (GAO/HRD-92-16, March 28, 1992). 

Drug Treatment:  Targeting Aid to States Using Urban Population as
Indicator of Drug Use (GAO/HRD-91-17, November 27, 1990). 

Block Grants:  Proposed Formulas for Substance Abuse, Mental Health
Provide More Equity (GAO/HRD-87-109BR, July 16, 1987). 

Local Governments:  Targeting General Fiscal Assistance Reduces
Fiscal Disparities (GAO/HRD-86-113, July 24, 1986). 

Highway Funding:  Federal Distribution Formulas Should Be Changed
(GAO/RCED-86-114, March 31, 1986). 

Changing Medicaid Formula Can Improve Distribution of Funds to States
(GAO/GGD-83-27, March 9, 1983). 


      GAO CONTACT
--------------------------------------------------- Appendix III:147.2

Paul L.  Posner, (202) 512-9573



   OPTION:
   FEDERAL GRANTSFEDERAL GRANTS
----------------------------------------------------- Appendix III:148


Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agency                      Multiple

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Intergovernmental grants are a significant part of both federal and
state budgets.  From the first annual cash grant under the Hatch Act
of 1887, the number of grant programs rose to more than 600 in 1995
with outlays of $225 billion, about 15 percent of total federal
spending.  Grants serve many purposes beyond returning resources to
taxpayers in the form of state services.  For example, grants can
serve as a tool to supplement state spending for nationally important
activities.  However, if states use federal grant dollars to reduce
(i.e., substitute for) their own spending for the aided program
either initially or over time, the fiscal impact of federal grant
dollars is reduced. 

Public finance experts suggest that grants are unlikely to supplement
completely a state's own spending, and thus some substitution is to
be expected in any grant.  Our review of economists' most recent
estimates of substitution suggests that every additional federal
grant dollar results in less than a dollar of total additional
spending on the aided activity.  The estimates of substitution showed
that about 60 cents of every federal grant dollar substitutes for
state funds that states otherwise would have spent. 

Our analysis linked substitution to the way in which most grants are
designed.  For example, many of the 87 largest grant programs did not
include features, such as state matching and maintenance-of-effort
requirements, that can encourage states to use federal funds as a
supplement rather than a replacement for their own spending.  While
not every grant is intended to supplement state spending, proponents
of grant redesign argue that if some grants incorporated more
rigorous maintenance-of-effort requirements and lower federal
matching rates, then fewer federal funds could still encourage states
to contribute to approximately the same level of overall spending on
nationally important programs.  Critics of this approach argue that
such redesign would put a higher burden on states because they would
have to finance a greater share of federally aided programs. 

The savings that could be achieved from redesigning grants to
increase their fiscal impact would depend on the nature of the design
changes and state responses to those changes.  For example, faced
with more rigorous financing requirements, states might reduce or
eliminate their own financial support for the aided activity.  The
outcome will be influenced by the tradeoff decisions that the
Congress makes to balance the importance of achieving each program's
goals and objectives against the goal of encouraging greater state
spending and lowering the federal deficit. 

We were unable to precisely measure the budgetary impact of
inflation-adjusted maintenance-of-effort requirements because current
state spending levels are not reported consistently.  However, it was
possible to estimate the impact of changes in the matching rates on
many close-ended federal grants.  For example, many such grants do
not require any state or local matching funds.  The federal share of
these programs could be reduced modestly, from 100 percent to 90
percent--a reduction unlikely to discourage states from participating
in the program.  CBO estimates that the introduction of a 10 percent
matching requirement on some of the largest federal discretionary
grant programs that are currently 100 percent federally funded and a
corresponding ten percent reduction from the authorized grant levels,
would reduce outlays by $20 billion over 5 years.  If such a change
in match rates were combined with inflation-adjusted
maintenance-of-effort requirements, states that choose to participate
in the program would have to maintain the same or increase levels of
program spending in order to receive federal funding. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Savings from the 1997 funding level
----------------------------------------------------------------------
Budget authority                 3,740   3,740   3,740   3,740   3,740
Outlays                          1,120   2,810   3,550   3,670   3,740

Savings from the 1997 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 3,830   3,940   4,040   4,150   4,260
Outlays                          1,150   2,910   3,750   3,970   4,150
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:148.1

Federal Grants:  Design Improvements Could Help Federal Funds Go
Further (GAO/AIMD-97-7, December 18, 1996). 

Block Grants:  Issues in Designing Accountability Provisions
(GAO/AIMD-95-226, September 1, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:148.2

Paul L.  Posner, (202) 512-9573



   OPTION:
   FEDERAL TRAVEL
   PROCESSINGFEDERAL TRAVEL
   PROCESSING
----------------------------------------------------- Appendix III:149


Authorizing committees              Governmental Affairs (Senate)
                                    Government Reform and Oversight
                                    (House)

Appropriations subcommittees        Multiple

Primary agency                      Multiple

Account                             Multiple

Spending type                       Discretionary

Budget subfunction                  Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In fiscal year 1994, the federal government reported travel
obligations for individuals of about $7.6 billion--about $5 billion
for the Department of Defense (DOD) and about $2.6 billion for the
civilian agencies.  This amount was for direct costs (i.e., costs
directly related to travel, such as transportation, lodging, and
rental cars) related primarily to two types of travel--temporary duty
(TDY) and permanent relocation.  The General Services Administration
(GSA) currently negotiates some of these direct rates with travel
vendors, at significant savings to federal agencies.  The indirect
costs for arranging and processing travel can be significant as well. 

GAO recently reviewed a number of private-sector companies that have
set themselves apart from other organizations, both public and
private, by streamlining and automating their travel processes and
adopting a common set of best practices.  These organizations
achieved improvements by consolidating travel management and
processing centers, eliminating unnecessary review layers,
simplifying the travel process, streamlining and automating the
expense reporting process, and integrating travel processing with
their financial management systems.  In doing so, these organizations
have saved millions of dollars in administrative costs. 

DOD has recognized the need to improve travel management and has
efforts underway to adopt industry best practices and reengineer its
travel processing to reduce costs.  In anticipation of savings
related to DOD's travel reengineering efforts and based on GAO
recommendations, the Appropriations Conference Committee reduced
DOD's operations and maintenance (O&M) funds for fiscal year 1996 by
$128.5 million. 

A handful of federal agencies, such as the Departments of State,
Energy, and Transportation, have also begun to implement best
practices and reduce costs.  In addition, the Joint Financial
Management Improvement Program (JFMIP) travel improvement task force,
made up of representatives from several agencies across government,
has assessed both TDY and permanent relocation travel and estimated
that hundreds of millions of dollars could be saved by implementing a
number of key recommendations.  JFMIP's recommendations mirror many
of the best practices we found at leading organizations, including
requiring the use of a corporate charge card and consolidating and
automating travel data. 

CBO does not disagree that savings could be achieved if agencies were
able to streamline their travel processing operations.  However, the
amount of savings would depend on each agency's current costs and
future streamlining actions. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:149.1

Governmentwide Travel Management:  Federal Agencies Have
Opportunities for Streamlining and Improving Their Travel Practices
(GAO/T-AIMD-96-60, March 8, 1996). 

Business Process Reengineering:  DOD Has a Significant Opportunity to
Reduce Travel Costs by Using Industry Practices (GAO/T-AIMD-95-101,
March 28, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:149.2

Jack L.  Brock, Jr., (202) 512-6240



   RECEIPTS
----------------------------------------------------- Appendix III:150

  -- Tax Treatment of Health Insurance Premiums

  -- Information Reporting on Forgiven Debts

  -- Administration of the Tax Deduction for Real Estate Taxes

  -- Corporate Tax Document Matching

  -- Tax Treatment of Interest Earned on Life Insurance Policies and
     Deferred Annuities

  -- Federal Agency Reporting to the Internal Revenue Service

  -- Independent Contractor Tax Compliance

  -- Deductibility of Home Equity Loan Interest

  -- Internal Revenue Staff Utilization

  -- Collecting Gasoline Excise Taxes

  -- Computing Excise Tax Bases

  -- Industrial Development Bonds Targeting

  -- Highway User Fees on Heavy Trucks

  -- Taxation of Additives to Diesel Fuel

  -- Electronic Filing of Tax Returns



   OPTION:
   TAX TREATMENT OF HEALTH
   INSURANCE PREMIUMSTAX TREATMENT
   OF HEALTH INSURANCE PREMIUMS
----------------------------------------------------- Appendix III:151


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The current tax treatment of health insurance gives few incentives to
workers to economize on purchasing health insurance.  Employer
contributions for employee health protection are considered
deductible, ordinary, business expenses, and employer contributions
are not included in an employee's taxable income.  Some analysts
believe that the tax-preferred status of these benefits has
contributed to the overuse of health care services and large
increases in our nation's health care costs.  In addition, the
primary tax benefits accrue to those in high tax brackets who also
have above average incomes. 

Placing a cap on the amount of health insurance premiums that could
be excluded--that is including in a worker's income the amount over
the cap--could improve incentives and, to a lesser extent, tax
equity.  Alternatively, including health insurance premiums in income
but allowing a tax credit for some percentage of the premium would
improve equity since tax savings per dollar of premium would be the
same for all taxpayers.  Incentives could be improved for purchasing
low-cost insurance if the amounts given credits were capped. 

One specific option the Congress may wish to consider would be to tax
all employer-paid health insurance, while providing a refundable tax
credit of 20 percent of all premiums, with eligible premiums capped
at $350 and $170 per month for family coverage and individuals,
respectively.  This option recognizes the gain from changing the
treatment of insurance only for the individual income tax, not the
payroll tax.  The option is effective for payments of health
insurance premiums paid after December 31, 1997. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                      10.2    15.7    17.6    19.7    22.0
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:151.1

Tax Policy:  Effects of Changing Tax Treatment of Fringe Benefits
(GAO/GGD-92-43, April 7, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:151.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   INFORMATION REPORTING ON
   FORGIVEN DEBTSINFORMATION
   REPORTING ON FORGIVEN DEBTS
----------------------------------------------------- Appendix III:152


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Internal Revenue Code requires taxpayers to report forgiven debts
as income except under certain circumstances.  GAO reviewed taxpayer
compliance in reporting the Federal Deposit Insurance Corporation's
(FDIC) and Resolution Trust Corporation's (RTC) forgiven debt with
and without information reporting by these corporations to IRS. 

Information reporting increased taxpayer compliance.  For example,
without information reporting, 1 percent of taxpayers voluntarily
reported FDIC forgiven debts.  With reporting, 48 percent voluntarily
reported their forgiven debts.  With the information reports, IRS was
able to detect that another 20 percent had failed to report their
forgiven debts, yielding 68 percent of taxpayers eventually
complying. 

In 1993, the Congress required information reporting on forgiven
debts by FDIC, RTC, the National Credit Union Administration, credit
unions, certain banks, and federal agencies.  In 1996, IRS began
receiving these required information returns for tax year 1995 and
has been matching them to tax returns.  The Congress could consider
extending the requirement to other lending institutions.  Revenues
for this option are difficult to estimate due to uncertainties about
its effect on lending institution reporting practices.  However, to
illustrate potential savings from this option, if the requirement
were extended to finance companies, JCT estimates revenue gains of
under $50 million, assuming an effective date of January 1, 1998. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                        \a      \a      \a      \a      \a
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:152.1

Tax Administration:  Information Returns Can Improve Reporting of
Forgiven Debts (GAO/GGD-93-42, February 17, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:152.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   ADMINISTRATION OF THE TAX
   DEDUCTION FOR REAL ESTATE
   TAXESADMINISTRATION OF THE TAX
   DEDUCTION FOR REAL ESTATE TAXES
----------------------------------------------------- Appendix III:153


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
IRS audits show that individuals overstated their real estate tax
deductions by about $1.5 billion nationwide in 1988.  GAO estimates
that this resulted in a nearly $300 million federal tax loss, which
would increase to about $400 million for 1992.  However, this may
understate lost revenues because GAO's review also found that IRS
auditors detected only about 29 percent of $127 million in overstated
deductions in three locations GAO reviewed.  Revenues could be lost
not only for the federal government, but also for the 31 states which
in 1991 tied their itemized deductions to those used for federal tax
purposes. 

Two changes to the reporting of real estate cash rebates and real
estate taxes could reduce noncompliance and increase federal tax
collections.  First, the Congress could require that states report to
IRS, and to taxpayers on Form 1099s, cash rebates of real estate
taxes.  Second, the Congress could require that state and local
governments conform real estate tax statements to specifications
issued by IRS that would separate real estate taxes from
nondeductible fees, which are often combined on these statements. 
For estimation purposes, the proposals would be effective for rebates
issued after December 31, 1998, and for amounts reported on tax bills
after December 31, 1999.  Together, the proposals would increase
federal fiscal year revenues as shown in the table below. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                         0      \a     0.1     0.2     0.2
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:153.1

Tax Administration:  Overstated Real Estate Tax Deductions Need To Be
Reduced (GAO/GGD-93-43, January 19, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:153.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   CORPORATE TAX DOCUMENT
   MATCHINGCORPORATE TAX DOCUMENT
   MATCHING
----------------------------------------------------- Appendix III:154


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Internal Revenue Service (IRS) data show that corporate compliance
with tax laws has declined to an alarming degree.  IRS' document
matching program for payments to individuals has proven to be a
highly cost-effective way of bringing in billions of dollars in tax
revenues to the Treasury while at the same time boosting voluntary
compliance.  However, unlike payments to individuals, the law does
not require that information returns be submitted on most payments to
corporations. 

Generally using IRS' assumptions, GAO estimated the benefits and
costs for a corporate document matching program that would cover
interest, dividends, rents, royalties, and capital gains.  Assuming
that a corporate document matching program began in 1993, GAO
estimated that for years 1995 through 1999, IRS' annual costs would
be about $70 million and annual increased revenues about $1 billion. 
This estimate did not factor in compliance costs and changes in
taxpayer behavior.  Given continuing deficits, increased corporate
noncompliance, and declining audit coverage, the Congress may wish to
require a corporate document matching program. 

JCT has not developed an estimate of revenue gains from this
proposal.  JCT agrees that this option will result in increased
revenues, but those revenues will depend heavily on the scope of
coverage under an expanded information reporting system. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:154.1

Tax Administration:  Benefits of a Corporate Document Matching
Program Exceed the Costs (GAO/GGD-91-118, September 27, 1991). 


      GAO CONTACT
--------------------------------------------------- Appendix III:154.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   TAX TREATMENT OF INTEREST
   EARNED ON LIFE INSURANCE
   POLICIES AND DEFERRED
   ANNUITIESTAX TREATMENT OF
   INTEREST EARNED ON LIFE
   INSURANCE POLICIES AND DEFERRED
   ANNUITIES
----------------------------------------------------- Appendix III:155


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Interest earned on life insurance policies and deferred annuities,
known as "inside buildup," is not taxed as long as it accumulates
within the contract.  Although the deferred taxation of inside
buildup is similar to the tax treatment of income from some other
investments, such as capital gains, it differs from the policy of
taxing interest as it accrues on certain other investments like
certificates of deposit and original issue discount bonds. 

Not taxing inside buildup may have merit if it increases the amount
of insurance coverage purchased and the amount of income available to
retirees and beneficiaries.  However, the tax preference given life
insurance and annuities mainly benefits middle- and upper-income
people.  Coverage for low-income people is largely provided through
the Social Security System, which provides both insurance and annuity
protection. 

The Congress may want to reconsider granting preferential tax
treatment to inside buildup, weighing the social benefits against the
foregone revenue.  The Congress may wish to consider taxing the
interest earned on life insurance policies and deferred annuities. 
The table below reflects the estimated savings from this option,
effective for life insurance policies and annuities purchased after
December 31, 1997. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                       7.8    19.1    21.5    23.7    25.9
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:155.1

Tax Policy:  Tax Treatment of Life Insurance and Annuity Accrued
Interest (GAO/GGD-90-31, January 29, 1990). 


      GAO CONTACT
--------------------------------------------------- Appendix III:155.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   FEDERAL AGENCY REPORTING TO THE
   INTERNAL REVENUE SERVICEFEDERAL
   AGENCY REPORTING TO THE
   INTERNAL REVENUE SERVICE
----------------------------------------------------- Appendix III:156


Authorizing committees              Governmental Affairs (Senate)
                                    Finance (Senate)
                                    Government Reform and Oversight
                                    (House)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
According to Internal Revenue Service (IRS) data, corporate tax
compliance decreased by 20 percentage points between 1980 and 1987. 
Information returns--reports provided to IRS by payers of interest,
dividends, or other tax-related information--have proven to be highly
cost-effective in generating billions of tax dollars from individual
taxpayers.  However, no such program exists for payments to
corporations.  IRS matches information return data to individuals'
tax returns, which induces individuals to voluntarily report income
and helps to identify those who do not.  Similar results might be
obtained from corporations. 

Federal agencies could help increase corporate tax compliance by
reporting their payments made to corporations for services.  Federal
agencies paid corporations about $61 billion for service contracts of
more than $25,000 in 1990. 

JCT has not developed an estimate of the revenue gains for this
proposal.  JCT does not disagree that improved reporting could
increase compliance. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:156.1

Tax Administration:  Federal Agencies Should Report Service Payments
Made to Corporations (GAO/GGD-92-130, September 22, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:156.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   INDEPENDENT CONTRACTOR TAX
   COMPLIANCEINDEPENDENT
   CONTRACTOR TAX COMPLIANCE
----------------------------------------------------- Appendix III:157


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Common law rules for classifying workers as employees or independent
contractors are unclear and subject to conflicting interpretations. 
While recognizing this ambiguity, the Internal Revenue Service (IRS)
enforces tax laws and rules through employment tax examinations. 
Since 1989, 90 percent of these examinations had found misclassified
workers.  From October 1987 through December 1991, the average IRS
tax assessment relating to misclassified workers was $68,000. 

Establishing clear rules is difficult.  Nevertheless, taxpayers
need--and government is obligated to provide--clear rules for
classifying workers if businesses are to voluntarily comply.  In
addition, improved tax compliance could be gained by requiring
businesses to (1) withhold taxes from payments to independent
contractors and/or (2) file information returns with IRS on payments
made to independent contractors constituted as corporations.  Both
approaches have proven to be effective in promoting individual tax
compliance. 

During 1993, the Congress considered but rejected extending current
information reporting requirements for unincorporated independent
contractors to incorporated ones.  Thus, independent contractors
organized as either sole proprietors or corporations would have been
on equal footing, and IRS would have had a less intrusive means of
ensuring their tax compliance. 

In recent years, various proposals on clarifying the definition of
independent contractors and improving related information reporting
emerged.  Congressional hearings dealt with some of these bills.  As
of January 1997, the Congress had not acted on any of them. 

JCT did not provide an estimate for this option.  Estimating the
revenue gains from this option is difficult.  A previous estimate by
the JCT showed that the proposal increased revenues by about $400
million over 5 years.  In contrast, the Department of Treasury's
Office of Tax Analysis estimated a 5-year gain of about $5 billion. 
Estimates can vary widely depending on the definition of independent
contractor, the scope of coverage under an expanded information
reporting or withholding system, and assumptions about how much more
unreported income could be captured. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:157.1

Tax Administration:  Approaches for Improving Independent Contractor
Compliance (GAO/GGD-92-108, July 23, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:157.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   DEDUCTIBILITY OF HOME EQUITY
   LOAN INTERESTDEDUCTIBILITY OF
   HOME EQUITY LOAN INTEREST
----------------------------------------------------- Appendix III:158


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of the Treasury

Spending type                       Direct

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The term home equity borrowing or financing is usually applied to
mortgages other than the original loan used to acquire a home or to
any subsequent refinancing of that loan.  Interest is deductible on
up to $100,000 of home equity indebtedness and $1 million of
indebtedness used to acquire a home.  Home equity financing grew at
an average annual rate of about 20 percent between 1981 and 1991. 
Home equity financing is not limited to home-related uses and can be
used to finance additional consumption by borrowers. 

Use of mortgage-related debt to finance nonhousing assets and
consumption purchases through home equity loans could expose
borrowers to increased risk of losing their homes should they
default.  Equity concerns may exist because middle- and upper-income
taxpayers who itemize primarily take advantage of this tax
preference, and such an option is not available to people who rent
their housing. 

One way to address the issues concerning the amounts or uses of home
equity financing would be to limit mortgage interest deductibility to
the first $300,000 of indebtedness for the taxpayer's principal and
second residence.  Assuming an effective date of January 1, 1999,
this option would generate the following revenues. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                         0     1.9     2.7     2.9     3.1
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:158.1

Tax Policy:  Many Factors Contributed to the Growth in Home Equity
Financing in the 1980s (GAO/GGD-93-63, March 25, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:158.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   INTERNAL REVENUE SERVICE STAFF
   UTILIZATIONINTERNAL REVENUE
   SERVICE STAFF UTILIZATION
----------------------------------------------------- Appendix III:159


Authorizing committees              Appropriations (Senate and House)
                                    Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The allocation of IRS' collection staff has not been based on the
relative productivity of its collection programs.  Some of the more
productive programs, such as IRS automatic call sites, have not
reached their full potential because staff are assigned to less
productive field collection activities.  The productivity of
collection staff also varies greatly among collection locations. 

More emphasis on contacting delinquent taxpayers early using
telephone collection techniques and allocating staff based on
productivity should increase collections.  A rough GAO estimate
indicated that the reassignment of about 1,000 staff from field
collections--the least productive use of staff--to telephone
collections could increase collections by about $1.2 billion per
year. 

IRS' fiscal year 1997 budget included a decrease of 1,341 full-time
equivalent positions in tax enforcement job categories, such as field
revenue officers and revenue agents, that engage in face-to-face
audit and collection activities.  IRS' budget stated that although
"these positions still comprise the lion's share of IRS enforcement
efforts, they also represent, on the margin, the least efficient use
of IRS resources."

On the other hand, because of other budget decisions, IRS targeted
its telephone collection activity for a significant staff reduction
in fiscal year 1997.  IRS officials subsequently decided that the
impact of this staff reduction would be too severe.  As a result,
they negotiated with the National Treasury Employees Union to allow
for the temporary transfer of about 300 revenue officers and other
compliance staff to telephone collections for at least 1 year. 

Although CBO does not disagree that better utilization of IRS staff
can increase revenues, it does not make budget estimates of such
increases.  This is because it is difficult to establish a clear
connection between changes in staff allocations and revenue gains. 
In addition, even if such a connection can be established, the
magnitude of such gains attributable to reallocation is not certain
enough for budget scorekeeping purposes. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:159.1

Tax Administration:  New Delinquent Tax Collection Methods of IRS
(GAO/GGD-93-67, May 11, 1993). 

Tax Administration:  Improved Staffing of IRS' Collection Function
Would Increase Productivity (GAO/GGD-93-97, May 5, 1993). 

Internal Revenue Service Receivables (GAO/HR-93-13, December 1992). 

Tax Administration:  IRS' System Used in Prioritizing Taxpayer
Delinquencies Can Be Improved (GAO/GGD-92-6, March 26, 1992). 

Tax Administration:  Efforts To Prevent, Identify, and Collect
Employment Tax Delinquencies (GAO/GGD-91-94, August 28, 1991). 


      GAO CONTACT
--------------------------------------------------- Appendix III:159.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   COLLECTING GASOLINE EXCISE
   TAXESCOLLECTING GASOLINE EXCISE
   TAXES
----------------------------------------------------- Appendix III:160


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Although reliable statistical data do not exist to estimate gasoline
excise tax evasion, the Department of Transportation estimated in a
report to the Congress that such evasion amounted to about $500
million annually.  From a tax administration perspective, moving the
collection point for gasoline excise taxes from the terminal to the
refinery level may reduce tax evasion because (1) gasoline would
change hands fewer times before taxation, (2) refiners are presumed
to be more financially sound and have better records than other
parties in the distribution system, and (3) fewer taxpayers would be
involved.  However, industry representatives raise competitiveness
and cost-efficiency questions associated with moving the collection
point. 

In a May 1992 report, GAO suggested that the Congress explore the
level of gasoline excise tax evasion and, if it was found to be
sufficiently high, move tax collection to the point at which gasoline
leaves the refinery.  The amount of revenue that would be generated
from moving the collection point for gasoline excise taxes would
depend on the accuracy of the $500 million estimate of evasion and
how well the move curbed such evasion. 

JCT agrees that this option has the potential for increased revenue
but has not developed estimates of revenue gains. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:160.1

Tax Administration:  Status of Efforts to Curb Motor Fuel Tax Evasion
(GAO/GGD-92-67, May 12, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:160.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   COMPUTING EXCISE TAX
   BASESCOMPUTING EXCISE TAX BASES
----------------------------------------------------- Appendix III:161


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Federal excise taxes are sometimes set at a fixed dollar amount per
unit of taxed good.  For example, alcoholic beverages are taxed at a
set rate per gallon or barrel, with the rate varying for different
types of beverages and differing concentrations of alcohol.  When set
in this manner, the real dollar value of the tax falls with
inflation. 

The real dollar value of these taxes can be maintained over time if
the tax is indexed for inflation or set as a percentage of the price
of the taxed product or service.  Tax policy issues would need to be
considered, and administrative difficulties may be encountered, but
they are not insurmountable.  Of the five excise taxes GAO studied in
1989, alcohol and tobacco taxes yielded over 99 percent of the
increased revenue that indexing would have generated.  The Congress
may wish to consider indexing excise tax rates for alcohol and
tobacco.  The table below reflects the estimated savings from this
option with an effective date of January 1, 1998. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                       0.2     0.5     0.7     1.1     1.3
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:161.1

Alcohol Excise Taxes:  Simplifying Rates Can Enhance Economic and
Administrative Efficiency (GAO/GGD-90-123, September 27, 1990). 

Tax Policy:  Revenue Potential of Restoring Excise Taxes to Past
Levels (GAO/GGD-89-52, May 9, 1989). 


      GAO CONTACT
--------------------------------------------------- Appendix III:161.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   INDUSTRIAL DEVELOPMENT BONDS
   TARGETINGINDUSTRIAL DEVELOPMENT
   BONDS TARGETING
----------------------------------------------------- Appendix III:162


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of the Treasury

Spending type                       Direct

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The interest earned on certain bonds used by private entities is
tax-exempt because the activities financed are considered to produce
public benefits.  The "private activity bonds" are issued by state
and local governmental authorities who provide the proceeds to
private entities to finance, among other things, the creation or
expansion of manufacturing facilities.  Such private activity bonds
are commonly referred to as Industrial Development Bonds (IDBs). 

Critics of IDBs argue that the benefits from private activity caps
are ill-defined.  While IDBs clearly provide benefits to the private
companies and to investors, there is no clear consensus on whether
the bonds achieve public benefits.  Proponents of the bonds argue
that IDBs can indeed achieve public benefits, such as creating jobs,
assisting economically distressed areas, fostering start-up
companies, and keeping manufacturing firms in the country.  However,
IDBs do not appear to be targeted to states with large concentrations
of communities in fiscal distress and possibly greatest need for bond
market intervention.  The Tax Reform Act of 1986 imposed a limit
(volume cap) that restricts the amount of bonds a state may issue to
the greater of $50 per state resident or $150 million. 

This option illustrates three ways in which the Congress could choose
to reduce the tax losses associated with IDBs.  If reductions in the
cap were targeted, states with highest concentrations of fiscal
stress could be spared the cuts while the deepest cuts were applied
to states with the lowest concentration of communities in fiscal
stress.  For example, this approach would cut 25 percent from the cap
in a state with a majority of communities in fiscal stress and 75
percent from the cap in states with low concentrations of communities
in fiscal stress.  This approach would reduce the caps by 23 percent
for net revenue gains of $800 million over 5 years. 

Another approach would simply be to reduce the cap proportionally
across all states.  The 1995 cap was allocated to all states in such
a way as to ensure a minimum of $150 million.  Many states received
more than $150 million, however no states received less than this
amount.  If the minimum allocation were reduced by $50 million and
proportionally reduced in all states that received more than $150
million, the total cap would be reduced by 48 percent. 

Still another approach would be to both reduce the cap proportionally
across all states and to target additional cuts to states with low
concentrations of communities in fiscal stress.  Such an approach
would yield a 56 percent reduction in the caps. 

JCT estimates that the first option, targeting reductions in the cap
for bonds issued after December 31, 1997, would result in the
following revenue gain. 



                           Five-year Revenues

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                        \a     0.1     0.2     0.2     0.3
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:162.1

Industrial Development Bonds:  Achievement of Public Benefits Is
Unclear (GAO/RCED-93-106, April 22, 1993). 


      GAO CONTACTS
--------------------------------------------------- Appendix III:162.2

Paul L.  Posner, (202) 512-9573
Judy A.  England-Joseph, (202) 512-7631



   OPTION:
   HIGHWAY USER FEES ON HEAVY
   TRUCKSHIGHWAY USER FEES ON
   HEAVY TRUCKS
----------------------------------------------------- Appendix III:163


Authorizing committees              Commerce, Science, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Primary agency                      Department of Transportation

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
To develop and maintain highways, the Federal Highway Administration
(FHWA) collects user fees.  In fiscal year 1993, FHWA collected over
$18.5 billion from four user fees:  fuel taxes, a heavy vehicle use
tax, a new vehicle excise tax, and an excise tax on heavy tires.  In
1982, FHWA reported that heavy trucks underpaid by about 50 percent
their fair share relative to the pavement damage that they caused. 
FHWA also reported that lighter trucks were overpaying by between 30
and 70 percent (depending on weight), and automobiles were overpaying
by 10 percent. 

To increase highway revenues and to respond to the FHWA study, the
Congress in 1982 passed the first major increase in federal highway
use taxes since 1956.  To increase revenues, the Congress raised
gasoline and diesel taxes from 4 cents to 9 cents per gallon.  To
improve equity, the Congress mandated that the ceiling for the heavy
vehicle use tax be increased from $240 a year to $1,900 a year by
1989.  In response to the concerns of the trucking industry about the
new tax structure, the Congress again revised the system in the
Deficit Reduction Act of 1984.  Under the act, the ceiling for the
heavy vehicle use tax was lowered from $1,900 to $550 a year.  To
ensure that this action was revenue neutral, the Congress raised the
tax on diesel fuel from 9 cents to 15 cents per gallon. 

As we recommended in June 1994, FHWA is conducting a formal cost
allocation study to determine whether all highway users are paying
their fair share of federal highway costs.  FHWA plans to complete
this study by early 1997.  If this study finds that heavy trucks
underpay their share, one solution could be to base the truck's fees
on vehicle weight and distance traveled--a method currently employed
by six states.  The precise revenue gain from this action would
depend on the type and amount of user fee increases.  Increasing fuel
taxes, the heavy vehicle use tax, the new vehicle excise tax, and the
excise tax on heavy tires would generate additional revenues.  For
example, in fiscal year 1994, heavy truck operators paid about $620
million in heavy vehicle use taxes.  Raising the ceiling on this fee
from $550 to $1,900 per user could raise between $800 million and $1
billion. 

JCT does not disagree that this option could yield revenue.  However,
an estimate of revenue gains is not available at this time. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:163.1

Highway User Fees:  Updated Data Needed To Determine Whether All
Users Pay Their Fair Share (GAO/RCED-94-181, June 7, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:163.2

John H.  Anderson, Jr., (202) 512-2834



   OPTION:
   TAXATION OF ADDITIVES TO DIESEL
   FUELTAXATION OF ADDITIVES TO
   DIESEL FUEL
----------------------------------------------------- Appendix III:164


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The federal government generally imposes an excise tax of 24.4 cents
per gallon on diesel fuel that is used on highways.  Diesel fuel for
off-highway use, such as home heating, is not taxed.  In addition,
certain entities, such as state and local governments, are exempt
from paying tax on diesel fuel they use on highways.  This excise tax
is collected at the fuel terminal and any diesel fuel removed from a
terminal for tax-free use must be dyed. 

Diesel fuel additives, primarily kerosene, may be added to tax-paid
diesel fuel after it leaves the terminal where taxes are collected. 
Fuel excise taxes are intended to be collected on each gallon of fuel
used on the highway, including any additives, so that the tax
revenues can be used to maintain and improve the highway system. 
Under current federal excise tax regulations, kerosene is not treated
as a diesel fuel and is generally neither taxed nor dyed when removed
from the terminal.  However, undyed tax-free kerosene can be used in
blending schemes that could result in excise tax evasion.  For
example, a dishonest retailer could take two gallons of tax-paid
diesel fuel and mix it with one gallon of undyed kerosene on which no
tax has been paid.  The retailer now has three gallons of
"cocktailed" diesel fuel, but has only paid tax on two gallons of the
product. 

In January 1996, GAO reported that under current IRS regulations,
kerosene is not treated as a diesel fuel and is generally neither
taxed nor dyed when removed from the terminal, although it may
ultimately be used as a highway fuel.  Other uses of kerosene, such
as for home heating, complicate its taxation.  Nevertheless, in July
1995, the Treasury Department expressed support for subjecting
kerosene to the same dyeing requirements as those applied to diesel
fuel.  The Congress may wish to consider dyeing nontaxed kerosene in
order to improve and increase collection of fuel excise taxes.  The
table below reflects the estimated revenues from this option with an
effective date of July 1, 1998. 



                           Five-Year Revenues

                         (Dollars in billions)

                                  FY98    FY99    FY00    FY01    FY02
------------------------------  ------  ------  ------  ------  ------
Revenue gain                        \a      \a      \a      \a      \a
----------------------------------------------------------------------
Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 

Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:164.1

Tax Administration:  Diesel Fuel Excise Tax Change (GAO/GGD-96-53,
January 16, 1996). 

Tax Administration:  Status of Efforts to Curb Motor Fuel Tax Evasion
(GAO/GGD-92-67, May 12, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:164.2

Lynda D.  Willis, (202) 512-9110



   OPTION:
   ELECTRONIC FILING OF TAX
   RETURNSELECTRONIC FILING OF TAX
   RETURNS
----------------------------------------------------- Appendix III:165


Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Electronic filing sends data directly on-line to Internal Revenue
Service (IRS) computers, thereby eliminating manual handling of
paper, disks, computer tapes, and cartridges, which significantly
reduces processing time and cost.  For example, electronically filed
information returns can be fully processed and entered into IRS'
computers within 2 days compared with an average of 58 days for
magnetic media shipments.  Math errors on electronic returns are
identified by the system and corrected by the taxpayer before IRS
accepts the return.  Electronic returns also avoid the error-prone
manual data entry system IRS uses to process paper returns.  Fewer
errors mean fewer notices to taxpayers and less time spent with the
resulting telephone calls and correspondence. 

Electronic filing can enhance IRS' compliance efforts.  However, of
the 777 million nonwage information returns IRS processed in 1994,
only 12.6 million (1.6 percent) were filed electronically.  Of the
118 million individual income tax returns filed in 1996, only 15
million (12.7 percent) were filed electronically.  Electronic filing
of information returns would enable IRS to match more of these
documents sooner to tax returns.  For example, matching information
returns on partnership income (Schedule K-1) to individual tax
returns has been a cost-effective means of detecting and assessing
taxes on unreported partnership income.  But few Schedule K-1s have
been matched.  For tax year 1991, GAO estimated that had IRS been
able to match all Schedule K-1s, it could have assessed about $220
million in additional taxes.  Similarly, with electronic returns, IRS
can more effectively and efficiently validate social security
numbers--a key control against refund fraud--because up-front filters
prevent the submission of electronic returns with invalid social
security numbers.  IRS cannot identify invalid social security
numbers on paper returns until after the returns are filed, and the
number of problem cases it can work is limited by the amount of
available staff. 

Not only is the number of electronic returns relatively low, but the
returns being filed electronically are generally those that
contribute least to paper-processing workload and operating costs. 
For example, on the basis of IRS' 1993 service center processing cost
estimates, it cost IRS $4.53 to process a paper Form 1040, $3.95 to
process a paper Form 1040A, and $3.36 to process a paper Form 1040EZ. 
The most costly of the three (Form 1040) accounted for about 59
percent of all individual returns (paper and electronic) processed in
1994, yet Form 1040 accounted for only about 20 percent of the
individual returns filed electronically. 

To reduce processing costs and increase compliance revenues, IRS
needs to develop and implement a strategy for significantly
increasing the number of returns filed electronically.  We have
recommended that IRS identify those groups of taxpayers who offer the
greatest opportunity to reduce IRS' paper-processing workload and
operating costs if they were to file electronically and develop
strategies that focus IRS' resources on eliminating or alleviating
impediments that inhibit those groups from participating in the
program, including the impediment posed by the program's cost.  No
cost savings or revenue enhancement estimates can be made until IRS
develops these strategies. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:165.1

Tax Administration:  Electronic Filing Falling Short of Expectations
(GAO/GGD-96-12, October 31, 1995). 

Tax Administration:  IRS' Partnership Compliance Activities Could Be
Improved (GAO/GGD-95-151, June 16, 1995). 


      GAO CONTACT
--------------------------------------------------- Appendix III:165.2

Lynda D.  Willis, (202) 512-9110


OPTIONS NOT UPDATED FOR THIS
REPORT
========================================================== Appendix IV

The following table provides information on options from last year's
report\31 that were not updated due to congressional or agency action
or other factors. 

Option                                   Comments
---------------------------------------  ---------------------------------------
Improved Material Management Can Reduce  See new option on Navy financial
Shipyard Costs                           management of operating materials and
                                         supplies.

Reduce Army's Unfilled War Reserve       See new option on defense inventories
Requirements by Using Other Inventory    reform.
Items

MK-48 Advanced Capability Torpedo        Since the time this option was included
Propulsion System                        in last year's report, the Navy has
                                         purchased the MK-48 propulsion
                                         improvements.

Reassess Defense Conversion Spending     The Congress terminated funding for the
                                         centerpiece of the defense conversion
                                         initiative--the Technology Reinvestment
                                         Project.

Improve Controls Over Payments to        In our 1997 high-risk series,\a we
Defense Contractors                      pointed out that DOD has recognized
                                         problem disbursements as a major area
                                         of concern and is working hard to
                                         reduce them. However, we also noted
                                         that our preliminary work on DOD's
                                         reporting on problem disbursement data
                                         indicates that reported amounts are
                                         substantially understated and raises
                                         concerns over whether DOD has
                                         sufficient, reliable information to
                                         determine the extent to which
                                         disbursement problems have been
                                         reduced. We have several ongoing
                                         reviews directed at identifying
                                         opportunities for additional corrective
                                         actions.

Negotiate More Realistic Environmental   The Department of Energy's
Agreements                               Environmental Management Program is in
                                         the process of developing a new 10-
                                         year plan that will represent a more
                                         national approach to the cleanup and
                                         should result in more realistic cleanup
                                         agreements.

U.S. Contribution to the International   The United States has committed to pay
Fund for Agricultural Development        $30 million to the Fund in six
                                         installments, beginning in 1997, and
                                         may make additional contributions on a
                                         voluntary basis. However, the United
                                         States has decided that it will not
                                         participate in any future Fund
                                         replenishments.

Shortwave Radio Modernization Program    The Voice of America (part of the U.S.
                                         Information Agency) has either
                                         completed or scaled back all projects
                                         in the modernization plan. The only new
                                         construction currently planned is for a
                                         facility on Tinian Island to support
                                         Radio Free Asia.

Privatize Uranium Enrichment Program     As a result of recent amendments to the
                                         Energy Policy Act of 1992, CBO assumes
                                         that the United States Enrichment
                                         Corporation will be privatized in
                                         fiscal year 1998. We continue to
                                         recommend that the Secretary of the
                                         Treasury consider ways to ensure that
                                         the government is protected from an
                                         undervalued sale when the Corporation
                                         is sold.

Privatize the Naval Petroleum Reserve-   The Defense Authorization Act (Public
1                                        Law 104-106) established a schedule for
                                         selling the reserve by February 1998,
                                         unless DOE and OMB determine that
                                         selling the reserve is not in the
                                         interest of the United States or the
                                         proceeds are unlikely to reflect the
                                         reserve's fair market value. CBO's
                                         baseline assumes the reserve will be
                                         sold in fiscal year 1998.

Consolidate Strategic Petroleum Reserve  In fiscal year 1996, the Congress
                                         required DOE to sell enough oil from
                                         the strategic petroleum reserve to pay
                                         for the cost of operating the reserve.
                                         CBO assumes that this funding mechanism
                                         will continue to be used. As a result,
                                         mothballing a storage site would reduce
                                         the reserve's operating costs but would
                                         also alleviate the need to sell a
                                         requisite amount of oil. Therefore,
                                         mothballing would conserve the
                                         reserve's oil but would not contribute
                                         to deficit reduction.

National Oceanic and Atmospheric         Based on a series of reports on the
Research Fleet Modernization             National Oceanic and Atmospheric
                                         Administration's (NOAA) fleet
                                         modernization, including prior GAO
                                         reports, the Inspector General of the
                                         Commerce Department issued a March 1996
                                         report recommending that the entire
                                         NOAA fleet be eliminated.

Consolidation of U.S. Department of      The Personal Responsibility and Work
Agriculture Food Assistance Programs     Opportunity Reconciliation Act of 1996
                                         consolidates two food assistance
                                         programs--the Emergency Food Assistance
                                         Program and Soup Kitchens/Food Banks.
                                         Consolidating these programs should
                                         give states greater flexibility to more
                                         effectively target resources to
                                         alleviate hunger and help streamline
                                         federal, state, and local
                                         administration of USDA's distribution
                                         of these commodities.

Social Security Continuing Disability    The Contract with America Advancement
Reviews (CDRs)                           Act of 1996 increased authorized
                                         funding for CDRs to almost $3 billion
                                         by 2002. With this and other funding
                                         earmarked from its administrative
                                         budget, SSA plans to eliminate the
                                         backlog of CDRs for disabled workers
                                         under age 59. While we believe that the
                                         program could be administered more cost
                                         effectively and that SSA's plan
                                         excludes some beneficiaries in the
                                         backlog, this option was not included
                                         because the potential for additional
                                         budget deficit reduction is not
                                         significant.

Justice's Use of Private Counsel to      The Omnibus Consolidated Rescissions
Collect Civil Debt                       and Appropriations Act of 1996 gives
                                         the Attorney General permanent
                                         authority to hire private debt
                                         contractors to collect a nontax debt or
                                         claim owed to the United States. The
                                         Department of Justice currently has
                                         contracts in 13 judicial districts.

Global Positioning System (GPS)          In our report on global positioning
Technology                               systems (GPS), we recommended that the
                                         Office of Management and Budget develop
                                         a stronger coordination mechanism for
                                         managing future federal GPS activities.
                                         Consistent with our recommendation, in
                                         March 1996, a Presidential Decision
                                         Directive established DOT as the lead
                                         agency for all federal civil GPS
                                         matters.

Federal Agency Credit Management         The Debt Collection Improvement Act of
Programs                                 1996 provided agencies with several new
                                         debt collection tools. Treasury is
                                         developing plans for, and beginning to
                                         implement, the requirements of the act.

Improving Compliance of Sole             The Internal Revenue Service has
Proprietors                              created a tracking system to manage its
                                         sole proprietor compliance projects and
                                         has been using its Taxpayer Compliance
                                         Management Program data to help
                                         identify projects that would address
                                         the most noncompliant sole proprietors.
                                         The agency has also reached an
                                         agreement with the trucking industry
                                         that should improve the industry's tax
                                         recordkeeping.
--------------------------------------------------------------------------------
\a See the high-risk series reports Defense Financial Management
(GAO/HR-97-3, February 1997) and Defense Contract Management
(GAO/HR-97-4, February 1997). 


--------------------
\31 Addressing the Deficit:  Budgetary Implications of Selected GAO
Work for Fiscal Year 1996 (GAO/OCG-96-5, June 28, 1996). 


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

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Thomas M.  James, Assistant Director
Claudia J.  Dickey, Senior Evaluator
Laura E.  Hamilton, Senior Evaluator
Bill J.  Keller, Senior Evaluator


*** End of document. ***