Reports and Testimony: June 1996 (Other Written Prod., 06/01/96,
GAO/OPA-96-9).

GAO published its monthly digest of reports and testimonies issued in
June 1996.

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

 REPORTNUM:  OPA-96-9
     TITLE:  Reports and Testimony: June 1996
      DATE:  06/01/96
   SUBJECT:  Financial institutions
             Tax administration systems
             Reengineering (management)
             Cost control
             Military procurement
             Federal downsizing
             Health care programs
             Financial management
             Transportation operations
             Defense operations
IDENTIFIER:  IRS Tax System Modernization Program
             TSM
             Superfund Program
             DOD Future Years Defense Program
             DOD Bottom-Up Review
             Bibliographies
             
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Cover
================================================================ COVER


Office of Public Affairs

June 1996

REPORTS AND TESTIMONY:  JUNE 1996

GAO/OPA-96-9


Highlights

Federal Reserve

Among its other recommendations stemming from a review of the
operations of the Federal Reserve, GAO suggests that the Fed could do
more to improve cost consciousness and remedy inefficiencies that
have increased its costs for travel, personnel, building acquisition,
and contracting and procurement.  Page 10. 

Tax Systems Modernization

A year after reporting that the Internal Revenue Service's $8 billion
tax systems modernization (TSM) effort was plagued by pervasive
management and technical weaknesses, a new GAO review finds that IRS
has not made adequate progress in correcting TSM problems.  GAO
believes that Congress should consider limiting TSM expenditures. 
Page 20. 

Executive Guide

The Government Performance and Results Act of 1993 requires federal
agencies to set performance goals and to measure results.  GAO's
guide identifies steps that federal agencies can take toward
implementing the new law as well as a series of "best practices" that
can help make implementation a success.  Page 2. 

GAO/OPA-96-9



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

  BART - x
  DOD - x
  DOE - x
  EPA - x
  FAA - x
  FBO - x
  FDIC - x
  FTA - x
  FTS - x
  GATT - x
  HUD - x
  IPO - x
  IRS - x
  NPR - x
  OMB - x
  SEC - x
  SSA - x
  STE - x
  USDA - x
  USIA - x
  VBA - x
  VA - x

Inside Front Cover
=============================================================== INSIDE

ERRATUM

The summary of GAO's report on disability benefits (GAO/HEHS-96-62)
found on page 17 of the May "Monthly List" contains an error.  Cash
benefits provided to recipients in 1994 were reported as totaling $53
million.  The correct figure is $53 billion. 


REPORTS AND TESTIMONY:  JUNE 1996
=========================================================== Appendix 0


   SPECIAL PUBLICATIONS
--------------------------------------------------------- Appendix 0:1

Executive Guide:
Effectively Implementing the Government Performance and Results Act

GAO/GGD-96-118, June 1996 (56 pages). 

A consensus has emerged in recent years that the federal government
needs to be run in a more businesslike manner.  As companies are
accountable to their stockholders, the federal government is
accountable to taxpayers--and taxpayers are demanding as never before
that the dollars they invest in their government be managed and spent
responsibly.  The Government Performance and Results Act of 1993
requires federal agencies to set goals and measure performance.  To
help Congress and federal managers implement the legislation, this
guide identifies key steps that agencies need to take along with a
series of "best practices" that can help make implementation a
success.  GAO learned of these practices from organizations that have
successfully carried out initiatives similar to those required by the
act.  Several federal agencies have already put these practices to
use, and their efforts are described in case illustrations included
in the guide, which is a companion to an earlier GAO document
entitled Executive Guide:  Improving Mission Performance Through
Strategic Information Management and Technology (GAO/AIMD-94-115). 
That publication outlined information management approaches that
could help federal agencies improve their overall performance. 

GAO Reports:
Health, Education, Employment, Social Security, Welfare, and Veterans
Issues

GAO/HEHS-96-159W, June 1996 (23 pages). 

This monthly bibliography lists GAO documents on health, education,
employment, social security, disability, welfare, and veterans
issues.  One section summarizes reports and testimony issued during
the past month.  Another section lists the titles of all documents
published during the past four months, organized chronologically by
subject.  Order forms are included, as is a list of subject area
experts who can answer questions about specific reports. 


   BUDGET AND SPENDING
--------------------------------------------------------- Appendix 0:2

Impoundments:
Comments on Proposed Rescissions of Fiscal Year 1996 Defense Budget
Authority

GAO/OGC-96-10, June 10 (four pages). 

On April 12, 1996, the President submitted to Congress his sixth
special impoundment message for fiscal year 1996, which reports 10
proposed rescissions of budget authority affecting programs at the
Defense Department.  GAO reviewed the proposed rescissions and found
them to be in accordance with the Impoundment Control Act. 

Impoundments:
Comments on Revised Deferral of Foreign Military
Financing Funds

GAO/OGC-96-19, June 18 (three pages). 

On May 14, 1996, the President submitted to Congress his seventh
special impoundment message for fiscal year 1996, which reports one
revised deferral of budget authority affecting foreign military
financing funds.  GAO reviewed the revised deferral and found it to
be in accordance with the Impoundment Control Act. 

Addressing the Deficit:
Updating the Budgetary Implications of Selected GAO Work

GAO/OCG-96-5, June 28 (239 pages). 

This report is part of GAO's continuing effort to help Congress
identify options to reduce the deficit.  It updates GAO's previous
work in this area and systematically identifies the budgetary
implications of selected program reforms discussed in GAO's work but
not yet implemented or enacted.  In this year's report, GAO updates
96 of the 120 spending reduction and revenue gain options that
appeared in last year's report (GAO/OCG-95-2).  Under the Budget
Enforcement Act, the spending and revenue options included in this
report may be used either to reduce the deficit or to free up funds
for other programs.  GAO analyzes the following three options: 
reassess objectives (reconsider whether to terminate or change the
services and the programs provided), redefine beneficiaries
(reconsider a program's intended population), and improve efficiency
(reconsider how a program or a service should be delivered). 


      TESTIMONY
------------------------------------------------------- Appendix 0:2.1

Fiscal Year 1997 Budget Estimates for the U.S.  General Accounting
Office, by Charles A.  Bowsher, Comptroller General of the United
States, before the Subcommittee on Legislative Branch, Senate
Committee on Appropriations.  GAO/T-OCG-96-6, June 14 (21 pages). 

During the past year, GAO again demonstrated its worth to Congress
and the taxpayer.  Agency officials testified nearly 250 times before
congressional committees on issues ranging from budget savings, to
waste, fraud, and abuse, to proposals for reengineering the federal
government.  During fiscal year 1995 alone, GAO identified financial
benefits totaling nearly $16 billion--a return of more than $35 for
every dollar appropriated for GAO.  GAO's current staff of 3,700
employees--down from 5,325 in 1992--is the agency's lowest staffing
level since before World
War II.  GAO is meeting the challenge of doing a good job even
better--and doing it faster, at less cost, and with fewer people. 
The agency is constantly seeking to improve productivity, take
advantage of modern technology, and upgrade employee skills and
expertise.  Concerns have been raised, however, that a lack of
technical expertise could hamper GAO's ability to successfully carry
out its responsibilities under the Chief Financial Officers Act and
to support congressional efforts to reform the federal government's
financial management systems. 


   ECONOMIC DEVELOPMENT
--------------------------------------------------------- Appendix 0:3

Rural Development:
Steps Toward Realizing the Potential of Telecommunications
Technologies

GAO/RCED-96-155, June 14 (51 pages). 

Many rural areas today are struggling to overcome serious economic
and social problems, such as a lack of access to higher education,
sophisticated medical treatment, and business opportunities, that
have arisen because of remoteness from urban centers.  Although
improved roads were once seen as the key to a brighter future for
rural areas, experts now believe that telecommunications technologies
may prove much more crucial to fostering development.  Advanced
telecommunications technologies--the Internet, videoconferencing, and
high-speed data transmission--offer rural areas the opportunity to
overcome their geographic isolation, take advantage of expertise in
other communities, improve medical services, create new jobs, and
improve access to education.  This report (1) identifies federal
programs that rural areas can use to fund telecommunications
projects; (2) identifies lessons learned by rural areas that have
used these programs to establish such projects; and (3) provides the
views of experts, public and private officials, and program users on
whether changes to these programs are needed. 


   EDUCATION
--------------------------------------------------------- Appendix 0:4

School Facilities:
America's Changing Schools Report Differing Conditions

GAO/HEHS-96-103, June 14 (105 pages). 

Schools in unsatisfactory condition can be found in every part of the
country.  However, a GAO survey of schools nationwide found that
schools needing relatively greater repairs were those in inner
cities, schools in the West, schools with 50.5 percent or more
minority students, and schools with 70 percent or more poor students. 
More than 14 million children are being taught in school buildings
needing significant repairs to restore them to good overall
condition.  At the same time, GAO found that a new school in
excellent shape, conforming to all federal, state, and local
mandates, might be located only a few blocks from an operating but
deteriorated school building.  GAO found the greatest variations at
the state level.  For example, 62 percent of schools in Georgia
compared with 97 percent of schools in Delaware needed repairs to
restore them to good overall condition.  Virtually all communities,
even some of the wealthiest, are wondering how to balance school
infrastructure needs with other community priorities. 

School Facilities:
Profiles of School Condition by State

GAO/HEHS-96-148, June 24 (191 pages). 

This report profiles the condition of school facilities in the 50
states and the District of Columbia.  Each profile discusses the
condition of school buildings and building features, the adequacy of
environmental conditions, the extent to which facilities are meeting
the functional requirements of education reform and technology, the
range of funding needed to bring schools into good overall condition,
and the money needed to address federal mandates for managing and
correcting environmental hazards and providing access to programs for
the disabled. 


      TESTIMONY
------------------------------------------------------- Appendix 0:4.1

Higher Education:  Ensuring Quality Education From Proprietary
Institutions, by Cornelia M.  Blanchette, Associate Director for
Education and Employment Issues, before the Subcommittee on Human
Resources and Intergovernmental Relations, House Committee on
Government Reform and Oversight.  GAO/T-HEHS-96-158, June 6 (13
pages). 

The Department of Education runs a host of student financial aid
programs under title IV of the Higher Education Act of 1965.  Under
title IV, the federal government made about $35 billion available in
fiscal year 1995 to about seven million students pursuing
postsecondary education.  This testimony discusses "gatekeeping"--the
process of ensuring that only schools providing quality education and
training have access to title IV funds.  GAO (1) lays out an overview
of the regulatory framework for title IV programs and (2) provides
its preliminary observations on
proprietary schools. 


   EMPLOYMENT
--------------------------------------------------------- Appendix 0:5


      TESTIMONY
------------------------------------------------------- Appendix 0:5.1

Davis-Bacon Act:  Process Changes Could Address Vulnerability to Use
of Inaccurate Data in Setting Prevailing Wage Rates, by Carlotta C. 
Joyner, Director of Education and Employment Issues, before the
Subcommittee on Oversight and Investigations and the Subcommittee on
Workforce Protections, House Committee on Economic and Educational
Opportunities.  GAO/T-HEHS-96-166, June 20 (11 pages). 

The Congressional Budget Office estimates that in fiscal year
1996,the federal government will spend $42 billion on construction
contracts.  Given the magnitude of these expenditures, inaccurate
wage determinations could lead to excessive government construction
costs or to large numbers of workers being paid wages and fringe
benefits that are lower than required by law.  GAO testified that
vulnerabilities exist in the Labor Department's current wage
determination process that could result in wage determinations being
based on fraudulent or otherwise inaccurate data.  GAO urges Labor to
improve immediately its process to verify wage data submitted by
employers. 


   ENERGY
--------------------------------------------------------- Appendix 0:6

Energy Downsizing:
While DOE Is Achieving Budget Cuts, It Is Too Soon to
Gauge Effects

GAO/RCED-96-154, May 13 (14 pages). 

Recognizing the need for a smaller, less costly government, the
Energy Department (DOE) last year unveiled its Strategic Alignment
and Downsizing Initiative, which is intended to save $1.7 billion
over five years.  The savings planned under the Initiative are on
target.  By amending its fiscal year 1996 budget request and selling
excess assets, DOE will reach its goal of $221 million in savings
this year.  DOE is depending on process improvements and
reengineering efforts to fulfill its missions under the reduced
budgets called for by the Initiative.  It is too soon to know,
however, whether DOE will cut costs to the extent planned in its
budget reductions.  Moreover, some overly optimistic initial reports
of cost savings underscore the need for DOE to be vigilant in
validating such claims, lest managers believe that those savings are
occurring in specific activities when, in fact, targeted reductions
are being absorbed elsewhere.  Discussions with DOE officials
revealed opportunities to achieve further cost savings by more
broadly applying some aspects of the Initiative.  For example, DOE
could encourage its contractors to sell more of the agency's excess
assets by providing incentives and policies for the contractors to
identify and sell them.  GAO summarized this report in testimony
before Congress; see: 

Department of Energy:  Progress Made Under Its Strategic Alignment
and Downsizing Initiative, by Bernice Steinhardt, Associate Director
for Energy, Resources, and Science Issues, before the Subcommittee on
Energy and Power, House Committee on Commerce.  GAO/T-RCED-96-197,
June 12 (six pages). 

Nuclear Waste:
Greater Use of Removal Actions Could Cut Time and Cost
for Cleanups

GAO/RCED-96-124, May 23 (22 pages). 

Since 1989, the Energy Department (DOE) has received about $10
billion to clean up more than 10,000 waste sites nationwide that
contain everything from highly radioactive waste to common industrial
chemicals and solvents.  So far, much of the money has gone to study
waste sites and develop an approach for their remediation, rather
than for actual cleanup.  DOE has been criticized for its lack of
progress in remediation at the same time as its appropriations for
environmental restoration have declined.  In some cases, DOE has
successfully placed more emphasis on remediation and less on planning
by using "removal actions," which shorten or eliminate some of the
steps normally required before remediation can begin.  Removal
actions have been used for treating groundwater and surface water,
excavating and disposing of contaminated soil, and leaving waste in
place and covering it with a protective barrier.  Removal actions
have also been used at federal facilities to deal with emergencies,
such as removing leaking barrels that threatened to contaminate the
Columbia River.  GAO concludes that more extensive use of removal
actions would speed the planning process and allow DOE to devote more
environmental restoration dollars to site remediation.  GAO
recognizes that not every waste site is appropriate for the
abbreviated planning that takes place under removal actions; however,
the successful use of removal actions at a variety of environmental
restoration sites throughout the DOE complex suggests that additional
opportunities exist to employ this cost- and time-saving approach. 


      TESTIMONY
------------------------------------------------------- Appendix 0:6.1

Federal Downsizing:  Delayed Buyout Policy at DOE Is Unauthorized, by
Henry R.  Wray, Senior Associate General Counsel, before the
Subcommittee on Civil Service, House Committee on Government Reform
and Oversight.  GAO/T-GGD/OGC-96-132, June 11 (11 pages). 

The Federal Workforce Restructuring Act authorized federal agencies
to offer "buyouts" to employees who retired or resigned from the
government before April 1, 1995.  The legislation contained an
exception that allowed the payment of a buyout to an employee as late
as March 31, 1997, if the agency head determined that such a delay
was essential to the agency's mission.  The General Counsel at the
Department of Energy (DOE) concluded in a July 1995 memorandum that
the act did not preclude DOE from offering buyouts to employees who
had not applied for them before April 1, 1995.  He further stated
that a determination by the Secretary of Energy to "conditionally
approve" delayed buyouts for all DOE employees in broad job
categories who applied before April 1, 1995, was permitted to later
be amended to cover employees who had not filed buyout applications
before that date.  GAO disagrees with the General Counsel's position. 
GAO believes that the plain language of the act, as well as the
fundamental logic and underlying context of the statute, clearly
require that determinations to invoke the exception and permit
delayed separation must be made in conjunction with approval of the
buyouts themselves.  In GAO's view, the authority of agencies to
approve buyouts ended on March 31, 1995.  The legislative history of
the act supports this opinion. 


   ENVIRONMENTAL PROTECTION
--------------------------------------------------------- Appendix 0:7

Superfund:
Barriers to Brownfield Redevelopment

GAO/RCED-96-125, June 17 (15 pages). 

In recent decades, the decline of manufacturing in many cities has
left a legacy of abandoned and idled factories commonly known as
"brownfields," which are sometimes contaminated with hazardous
wastes.  The high cost of cleaning the sites up in accordance with
federal and state environmental laws has deterred some new businesses
from locating in brownfields, which, in turn, has deprived inner city
neighborhoods of tax revenue and employment opportunities.  Lenders
and developers are often wary of investing in such contaminated
property because under the environmental laws, they could be liable
for cleaning up the contamination.  Proposed legislation (S.  1285)
would encourage local governments to redevelop brownfields by
addressing two barriers to redevelopment:  liability under the
Superfund legislation and the costs to assess sites.  The bill would
protect lenders and property purchasers from some Superfund liability
and would help with the costs of assessing the sites by providing
interest-free loans of $100,000 per year, up to a total of $200,000
per site, that local governments would be permitted to use to cover
these costs.  This report discusses (1) what the universe of
potential brownfield sites is nationwide, (2) what legal barriers
Superfund presents for redeveloping brownfields, and (3) whether the
proposed loans to local governments are likely to be enough for
conducting site assessments. 

Chemical Accident Safety:
EPA's Responsibilities for Preparedness, Response, and Prevention

GAO/PEMD-96-3, June 27 (48 pages). 

More than a decade ago, a chemical spill in Bhopal, India, killed or
injured thousands and displaced many more from their homes and
businesses.  The magnitude of this event, along with the potential
for similar accidents in the United States, resulted in legislation
that gave the Environmental Protection Agency (EPA) a central role in
implementing chemical accident safety policy.  GAO found that EPA had
vigorous programs for accident preparedness and response.  Recent
legislation, however, has shifted the agency's primary focus to
preventing chemical accidents.  Through risk management planning, EPA
has undertaken several efforts to further the prevention of
accidents, including collaboration with industry and professional
associations.  EPA has developed a large repository of information on
accident prevention.  A major barrier to preventing accidents,
though, remains the relative lack of involvement of community
residents and some industry sectors.  To maximize the potential for
accident prevention, information that facilitates prevention must be
made available and used by industry and communities. 


   FINANCIAL INSTITUTIONS
--------------------------------------------------------- Appendix 0:8

Federal Reserve System:
Current and Future Challenges Require Systemwide Attention

GAO/GGD-96-128, June 17 (154 pages). 

The mission, the structure, and especially the finances of the
Federal Reserve System, the nation's central bank, make it unique
among government entities.  Unlike federal agencies funded through
congressional appropriations, the Fed is self-funded, deducting its
expenses from its revenue and transferring the remainder to the U.S. 
Treasury.  Although the Fed's primary mission is to support a stable
economy, not to maximize the amount transferred to the Treasury,
deductions from Fed revenues do represent a cost to taxpayers. 
Because of continuing federal budget constraints, Members of Congress
requested GAO to analyze the Fed's finances.  This report (1)
examines trends in the cost of Fed operations from 1988 to 1994 and
its controls over spending and operations, (2) identifies ways to
increase the Fed's efficiency without harming its effectiveness, (3)
discusses developments that could significantly affect the Fed's
mission and finances, and (4) assesses the Fed's strategic management
processes and identifies steps that it could take to meet future
challenges and ensure the efficiency and the effectiveness of its
operations. 

Initial Public Offerings:
Guidance Needed on Disclosure of Underwriters'
Disciplinary Histories

GAO/GGD-96-5, June 6 (23 pages). 

Initial public offerings (IPO)--the sale of a company's stock to the
public for the first time--are a major source of funding for new
companies seeking to raise capital.  According to the Securities and
Exchange Commission (SEC), companies raising money through IPOs
registered securities worth nearly $26 billion in 1994.  Companies
typically use underwriters to help them register the IPOs with SEC
and raise equity capital from the investment community.  The press
has reported instances in which underwriters gave some investors
preferential access to the IPO market and companies did not disclose
material information to investors, such as the criminal and
disciplinary histories of their underwriters.  This report discusses
(1) the factors that influence underwriters to sell IPO shares to
institutional investors or to individuals and (2) disclosure
requirements concerning the history of disciplinary actions taken
against underwriters.  GAO also discusses SEC rules governing the IPO
market. 


      TESTIMONY
------------------------------------------------------- Appendix 0:8.1

Housing Enterprises:  Potential Impacts of Severing Government
Sponsorship, by James L.  Bothwell, Director of Financial
Institutions and Markets Issues, before the Subcommittee on Capital
Markets, Securities, and Government Sponsored Enterprises, House
Committee on Banking and Financial Services.  GAO/T-GGD-96-134, June
12 (nine pages). 

Privatizing Fannie Mae and Freddie Mac could have a major impact on
these two government-sponsored housing enterprises, American
homebuyers and taxpayers, and mortgage markets in general. 
Privatization could (1) substantially increase the enterprises' costs
of operations and lower profits because of greater competition from
other financial firms; (2) raise interest rates on mortgages below
$207,000, with as much as $25 a month in additional payments on a
typical mortgage of $100,000 and relatively higher increases for
homebuyers representing higher default risks; (3) boost competition
in the mortgage markets, which GAO believes will likely prevent the
reappearance of significant regional disparities in mortgage credit;
and (4) decrease taxpayers' risk exposure to enterprise obligations. 
GAO also assesses several more-limited policy options, such as
imposing a fee on the enterprises to compensate taxpayers for their
risk exposure.  Each option entails benefits and risks that need to
be
carefully considered. 


Bank Mutual Funds:  Improvements in Risk Disclosure Needed, by James
L.  Bothwell, Director of Financial Institutions and Markets Issues,
before the Subcommittee on Capital Markets, Securities and Government
Sponsored Enterprises, House Committee on Banking and Financial
Services.  GAO/T-GGD-96-141, June 26 (13 pages). 

In recent years, sales of mutual funds through banks and savings and
loans have soared.  According to information reported to the Federal
Deposit Insurance Corporation (FDIC), about 2,800 banks sold more
than $40 billion in mutual fund shares during 1995 alone.  Because it
is well-known that bank and thrift deposits are federally insured,
customers buying investment products from banks and thrifts need to
understand the difference between FDIC-insured investments, such as
money market deposit accounts, and uninsured investments, such as
money market mutual funds.  In early 1994, FDIC, the Office of the
Comptroller of the Currency, the Federal Reserve, and the Office of
Thrift Supervision jointly issued guidelines to banks and thrifts
requiring that customers be fully informed of the risks of investing
in nondeposit investment products.  The guidelines also call for the
mutual fund sales areas in financial institutions to be physically
separated from the deposit-taking areas.  In 1995, GAO reported that
many banks and thrifts were not adequately informing potential
investors of the risks of investing in mutual funds.  GAO based this
conclusion on the results of its "secret shopper" visits to 89 banks
and thrifts in 12 cities in 1994.  GAO also found that more than
one-third of the institutions did not clearly separate the mutual
fund sales areas from the deposit-taking areas.  This testimony
focuses on FDIC surveys that reaffirm GAO's findings on banks' and
thrifts' inadequate disclosure of the risks associated with investing
in mutual funds. 


   FINANCIAL MANAGEMENT
--------------------------------------------------------- Appendix 0:9

Financial Management:
DOD Needs to Lower the Disbursement Prevalidation Threshold

GAO/AIMD-96-82, June 11 (22 pages). 

Because of continuing problems with disbursements, the Defense
Department (DOD) is now required to match disbursements above a
certain amount with the appropriate obligation in its accounting
records before making the disbursement--a process known as
disbursement prevalidation.  GAO found that prevalidation allowed DOD
to spot errors and prevent problem disbursements from being recorded
in its accounting records.  However, unless the $5 million threshold
is lowered at the Defense Finance and Accounting Service's center in
Columbus, Ohio, and the $1 million threshold is lowered at the other
payment centers, tens of billions of dollars in transactions will
continue to bypass this important control.  Until a detailed plan is
developed to ensure that all payments are properly prevalidated
before taxpayer dollars are disbursed, the full benefits of
prevalidations will not be realized.  More importantly, even at its
best, prevalidation will not solve the military's disbursement
problems, as evidenced by nearly $22 billion worth of new problem
disbursements that surfaced between October 1995 and January 1996. 
Prevalidation seeks to impose quality near the end of the
disbursement process.  As a result, it does not address the root
problems inherent in poor systems and processes, as well as failure
to use basic internal controls.  DOD needs to (1) overcome weaknesses
in control procedures that enable problem disbursements to occur and
(2) improve its contract pay, disbursing, and accounting processes
and systems. 


      TESTIMONY
------------------------------------------------------- Appendix 0:9.1

Financial Audit:  Actions Needed to Improve IRS Financial Management,
by Gregory M.  Holloway, Director of Governmentwide Audits, before
the Senate Committee on Governmental Affairs.  GAO/T-AIMD-96-96, June
6
(27 pages). 

This testimony discusses GAO's financial audits of the Internal
Revenue Service (IRS).  As part of a pilot program under the Chief
Financial Officers Act of 1990, IRS began preparing annual financial
statements on the results of its operations.  GAO's audits cover
fiscal years 1992-95.  Implementation of the legislation has (1)
given IRS top management greater understanding of the agency's
serious and pervasive accounting and reporting problems, (2) yielded
information on the magnitude of IRS' tax receivables collection
problems, and (3) underscored the need for stronger controls in such
areas as payroll operations.  The legislation has also spurred
efforts to improve IRS operations and address the major problems
cited by GAO financial audits.  However, GAO has been unable to
express an opinion on the reliability of IRS' financial statements
for any of the four fiscal years it has audited the agency.  This
testimony describes in detail the fundamental, persistent problems
that remain uncorrected and will prevent GAO from expressing an
opinion on IRS's financial statements in
the future. 

Financial Management:  Interior's Efforts to Reconcile Indian Trust
Fund Accounts and Implement Management Improvements, by Linda M. 
Calbom, Director of Civil Audits, before the Senate Committee on
Indian Affairs.  GAO/T-AIMD-96-104, June 11 (14 pages); and

Financial Management:  Interior's Management of the Indian Trust
Funds, by Linda M.  Calbom, Director of Civil Audits, before the
House Resources Committee Task Force on Indian Trust Fund Management. 
GAO/T-AIMD-96-111, June 18 (15 pages). 

Although the Interior Department has brought to a close its project
to reconcile the Indian trust funds, tribal accounts were never fully
reconciled because of missing records and the lack of an audit trail
in Interior's automated accounting systems.  In addition, the 1996
report package that Interior provided to each tribe on the
reconciliation results did not explain or describe the many changes
in reconciliation scope and methodologies or the procedures that had
been planned but were not implemented.  As a result, the limitations
of the reconciliation were not evident.  Also, because of cost
considerations and the potential for missing records, individual
Indian trust fund accounts were not included in the reconciliation
project.  Indian tribes have raised concerns about the scope and the
results of the reconciliation process.  The vast majority of tribes
have yet to decide whether to accept or dispute their account
balances.  If Interior cannot resolve the tribes' concerns, a
legislated settlement process could be used to settle disputes over
account balances.  Interior has taken steps during the past three
years to correct these long-standing problems with the accuracy of
the Indian trust fund accounts, but these efforts will take years to
complete.  Moreover, the existing trust fund management and
accounting systems cannot ensure accurate trust fund accounting and
asset management.  The appointment of a Special Trustee for American
Indians was an important step in establishing high-level leadership
at Interior for Indian trust fund management. 


   GOVERNMENT OPERATIONS
-------------------------------------------------------- Appendix 0:10

Concessions Contracting:
Governmentwide Rates of Return

GAO/GGD-96-86, Apr.  29 (44 pages). 

Under concessions agreements with federal agencies, private firms and
other entities, such as local governments, supply many of the
services and accommodations available to the public on federal
property.  Concessions services include food operations, vending
machines, retail shops, pay telephones, barber and beauty shops,
lodgings, marinas, and campgrounds.  This report discusses (1) the
extent of concessions operations in the federal government; (2) the
rate of return to the federal government from these operations and
the factors affecting the rate of return; (3) how the rate of return
from federal concessions compared with rates earned by other
governments; and (4) the extent of agencies' income-generating
operations that were not concessions and whether they offered
opportunities for the agencies to handle them as concessions.  GAO
provides detailed information collected from 75 federal agencies,
including one Defense Department component--the Department of the
Army Corps of Engineers. 

Management Reform:
Completion Status of Agency Actions Under the National Performance
Review

GAO/GGD-96-94, June 12 (83 pages). 

The National Performance Review (NPR)--the administration's central
management reform effort--issued a report in 1993 containing 384
recommendations intended to make the government "work better and cost
less." NPR later identified 1,203 action items needed to implement
these recommendations.  In a 1995 report, NPR said that nearly
one-third, or 380, of the action items had been completed.  GAO
verified that 294, or 77 percent, of the 380 action items had been
completed.  GAO also determined that 66 action items had not been
completed but that all but one of them had been partially implemented
or some steps had been taken to begin implementation.  GAO could not
make determinations for 20 of the action items because of a lack of
information. 

The Federal Judiciary:
Reviews of Court Operations Should Adhere to
Oversight Standards

GAO/GGD-96-114, June 17 (25 pages). 

As it seeks to reduce federal expenditures and balance the budget,
Congress expects all federal agencies to cut operating costs wherever
possible.  The effort to keep costs down has focused attention on
whether the federal judiciary is operating as efficiently and
effectively as possible.  This report reviews the internal oversight
of administrative operations within the federal judiciary, including
those of local courts.  Specifically, GAO examines how the
Administrative Office of the U.S.  Courts assessed the efficiency of
local court operations and promoted the use of efficient
administrative practices within the judiciary. 


      TESTIMONY
------------------------------------------------------ Appendix 0:10.1

Paperwork Reduction:  Burden Reduction Goal Unlikely to Be Met, by
Michael Brostek, Associate Director for Federal Management and
Workforce Issues, and Peter F.  Guerrero, Director of Environmental
Protection Issues, before the Senate Committee on Small Business. 
GAO/T-GGD/RCED-96-186, June 5 (26 pages). 

The paperwork burden that the federal government imposes on the
public has increased significantly since 1980.  Under the Paperwork
Reduction Act of 1995, the Office of Management and Budget (OMB) is
required to seek at least a 10-percent reduction in the
governmentwide paperwork burden in fiscal year 1996 and to set
reduction goals for each agency.  This testimony discusses the
following issues:  (1) what changes in the paperwork burden have
occurred governmentwide and at the Internal Revenue Service, the
Environmental Protection Agency, and the Occupational Safety and
Health Administration; (2) what OMB's responsibility to set goals for
reducing the burden is, and whether agencies will achieve the
reductions envisioned by the legislation; and (3) what actions each
of the three agencies has taken since the act's passage.  GAO also
discusses measurement issues that Congress should consider as it
assesses agencies' progress in reducing the
paperwork burden. 


   HEALTH
-------------------------------------------------------- Appendix 0:11

Cholesterol Treatment:
A Review of the Clinical Trials Evidence

GAO/PEMD-96-7, May 14 (107 pages). 

Clinical trials and other scientific studies have consistently shown
that cholesterol-lowering treatment benefits middle-aged white men
with high cholesterol levels and a history of heart disease.  Medical
research also shows that men with moderate-to-high cholesterol levels
and no history of heart disease have lower rates of nonfatal heart
attacks but no statistically significant reductions in death rates as
a result of cholesterol-lowering treatment.  Clinical trials
generally have not evaluated the value of cholesterol-lowering
treatment for several important groups, including women, the elderly,
and minorities.  Thus, they provide little or no evidence of benefits
or possible risks for these groups.  Two recent trials using a new
drug class--the statins--show greater reductions in heart problems
with their greater reductions in cholesterol and no increase in
fatalities from coronary heart disease.  One trial studied men and
women with coronary heart disease and found a significant reduction
in total fatalities; the other, which studied only men who did not
have coronary heart disease, showed encouraging but not statistically
significant reductions in fatalities from coronary heart disease. 

Cocaine Treatment:
Early Results From Various Approaches

GAO/HEHS-96-80, June 7 (34 pages). 

Three cognitive/behavioral approaches--relapse prevention, community
reinforcement/contingency management, and neurobehavioral
therapy--have shown positive results in the treatment of cocaine
addiction.  Preliminary findings show that clients treated with these
therapies remained abstinent and in treatment for long periods. 
These findings are particularly encouraging because initial
treatments used during the early 1980s were not very successful. 
Although too few studies have been done to draw definite conclusions
about the utility or the generalizability of any of these treatments,
more research should be completed within the next several years. 
Research experts agree that continued research and study are needed
to enhance and confirm--or deny--these early results. 

Health Insurance for Children:
Private Insurance Coverage Continues to Deteriorate

GAO/HEHS-96-129, June 17 (28 pages). 

Despite larger numbers of parents who work full-time, private health
insurance coverage for children is declining.  The number of children
without health insurance coverage reached 10 million in 1994--the
largest number since 1987.  In comparison, the number of adults who
have lost their health insurance coverage appears to have stabilized
during the past two years.  Meanwhile, although Medicaid provided
health coverage for 16 million children in 1994, more than 60 percent
of those children had a working parent.  This trend is straining
public resources:  Taxpayers end up paying either for Medicaid
coverage or for hospital subsidies to provide acute care for the
uninsured.  In response to rising Medicaid costs, state and local
governments are considering various program changes, some of which
have profound implications for health care coverage for children,
such as proposals to remove guaranteed eligibility.  Other changes
that strengthen the private insurance market may also significantly
affect children's future coverage. 


   HOUSING
-------------------------------------------------------- Appendix 0:12


      TESTIMONY
------------------------------------------------------ Appendix 0:12.1

Housing and Urban Development:  Comments on HUD's Fiscal Year 1997
Budget Request, by Judy A.  England-Joseph, Director of Housing and
Community Development Issues, before the Subcommittee on VA, HUD, and
Independent Agencies, House Committee on Appropriations. 
GAO/T-RCED-96-205, June 17 (20 pages). 

This testimony addresses the Department of Housing and Urban
Development's (HUD) fiscal year 1997 budget request.  By continuing
to improve its internal management and coming to closure on how and
when it will use the market to eliminate excess subsidy costs and
improve the poor physical condition of its public housing, HUD will
be in a better position to use additional appropriations and
implement new policy.  Although HUD recognizes many of its management
shortcomings and has budgeted funds to correct them, GAO views this
as a long-term effort that will continue into the foreseeable future. 
In particular, GAO discusses (1) HUD's multifamily reengineering
estimates, (2) proposed bonus pools for high-performing participants
in four of HUD's six proposed block grants to consolidate existing
programs, and (3) HUD's progress in addressing management
deficiencies cited in GAO's 1995 high-risk report. 
(See GAO/HR-95-11.)

Multifamily Housing:  HUD's Proposals for Reengineering Its Insured
Section 8 Portfolio, by Judy A.  England-Joseph, Director of Housing
and Community Development Issues, before the Subcommittee on Housing
Opportunity and Community Development, Senate Committee on Banking,
Housing, and Urban Affairs.  GAO/T-RCED-96-210, June 27 (17 pages). 

Proposals before Congress would reengineer about 8,600 properties
from the Department of Housing and Urban Development's (HUD)
multifamily rental housing portfolio.  These 8,600 properties, known
as the insured Section 8 portfolio, receive mortgage insurance from
HUD and Section 8 rental subsidies tied directly to the properties. 
This testimony discusses HUD's proposed resolution process.  In
addition to providing background information on the insured Section 8
portfolio, GAO discusses (1) problems currently affecting the
portfolio, (2) HUD's plans for addressing these problems, (3) a
HUD-contracted study by Ernst & Young LLP that estimates how the
properties are likely to be affected by HUD's reengineering proposal,
and (4) its preliminary assessment of the Ernst & Young study.  GAO
also comments on HUD's portfolio reengineering initiative. 


   INCOME SECURITY
-------------------------------------------------------- Appendix 0:13


      TESTIMONY
------------------------------------------------------ Appendix 0:13.1

Social Security:  Disability Programs Lag in Promoting Return to
Work, by Jane L.  Ross, Director of Income Security Issues, before
the Senate Special Committee on Aging.  GAO/T-HEHS-96-147, June 5 (16
pages). 

Each week, the disability insurance and supplemental security income
programs make more than $1 billion in cash payments to persons with
disabilities.  Although these payments provide a measure of income
security, they do little to enhance the work capacities and promote
the economic independence of recipients.  Societal attitudes have
shifted, and current law, such as the Americans With Disabilities
Act, promotes economic self-sufficiency among the disabled.  A
growing number of private companies are exploring ways to return
people with disabilities to the workforce.  Moreover, medical
advances and new technologies provide greater opportunities for
people with disabilities to work.  This testimony discusses how the
structure of the disability insurance and supplemental security
income programs impede return to work and how strategies used in
other disability systems could help restructure the programs to
encourage recipients to return to work. 

Social Security:  Union Activity at the Social Security
Administration, by Jane L.  Ross, Director of Income Security Issues,
before the Subcommittee on Social Security, House Committee on Ways
and Means.  GAO/T-HEHS-96-150, June 4 (17 pages). 

Union activities at federal agencies can range from representing
employees in complaints against management to bargaining over changes
in working conditions to negotiating union contracts with management. 
The government pays its workers' salaries and expenses for the time
they are allowed to spend on union activities; it also provides other
support, such as supplies and some travel expenses.  The Social
Security Administration (SSA), like other federal agencies and some
private sector firms, pays for approved time spent by its employees
on union activities.  To ensure accurate tracking of time spent on
union activities and the staff conducting them, SSA has developed and
is testing a new time-reporting system for its field offices and
teleservice centers.  GAO believes that the new time-reporting system
should be implemented agencywide, including at headquarters, program
service centers, the Office of Hearing and Appeals, and units now
using the less reliable manual reporting system.  With an improved
agencywide system, SSA should have better information on where its
resources are being spent. 


   INFORMATION MANAGEMENT
-------------------------------------------------------- Appendix 0:14

Tax Systems Modernization:
Actions Underway but IRS Has Not Yet Corrected Management and
Technical Weaknesses

GAO/AIMD-96-106, June 7 (29 pages). 

GAO reported last year that the government's $8 billion tax systems
modernization effort was plagued by pervasive management and
technical weaknesses.  Although the Internal Revenue Service (IRS)
has taken steps to overcome these shortcomings, none of these
actions, either individually or collectively, fully satisfy GAO's
recommendations, and it is unclear when these actions will result in
disciplined systems development.  The upshot is that IRS continues to
spend hundreds of millions of dollars on tax systems modernization
even though fundamental weaknesses jeopardize that investment.  IRS
now plans to used a prime contractor and increase its use of software
development contractors to develop tax systems modernization. 
However, its plans and schedules in this area are poorly defined and
cannot be fully understood or assessed.  Moreover, as the experience
with Cyberfile and the Document Processing System projects makes
clear, IRS does not have the mature processes needed to acquire
software and manage contractors effectively. 

Telecommunications:
FTS 2000 Cost Comparison

GAO/AIMD-96-95, May 31 (61 pages). 

This report identifies agencies that are using the Federal
Telecommunications System (FTS 2000) and compares telecommunications
costs of agencies that use FTS 2000 with those of agencies that do
not.  GAO focuses on four FTS 2000 services:  switched voice and
dedicated transmission, which constitute the bulk of FTS 2000 use,
and packet switched and compressed video transmission.  As of March
1996, 139 agencies and other government entities were using
telecommunications services provided under the FTS 2000 contracts. 
GAO's comparison of telecommunications costs incurred by a sample of
agencies that use non-FTS 2000 networks with what FTS 2000 would cost
produced mixed results, with some costs comparable, some less, and
others more. 

Software Capability Evaluation:
VA's Software Development Process Is Immature

GAO/AIMD-96-90, June 19 (34 pages). 

GAO reviewed the development of computer software at the Veterans
Benefits Administration (VBA) and at the Department of Veterans
Affairs' Austin Automation Center.  Neither VBA nor the Austin
Automation Center had satisfied any of the key process areas required
for a level 2 capability, as described by the Software Engineering
Institute's five-level software capability model.  Under a level 2
capability, basic project management processes are established to
track cost, schedule, and functionality.  Moreover, the necessary
process discipline is in place to repeat earlier successes on
projects with similar applications.  The upshot is that the
Department of Veterans Affairs (VA) has little assurance that (1)
investments in new software development will achieve their objectives
or (2) software will be delivered consistent with cost and schedule
estimates.  GAO recommends that VA delay any major investment in
software development beyond what is needed to sustain critical
day-to-day operations until the repeatable level of process maturity
is achieved.  VA should also obtain expert advice on how to improve
the ability of VBA and the Austin Automation Center to develop
high-quality software, develop a strategy to reach the repeatable
level of process maturity, implement that strategy quickly, and
ensure that any future contracts for software development require
that the contractor have a software development capability of at
least level 2. 


      TESTIMONY
------------------------------------------------------ Appendix 0:14.1

Veterans Benefit Modernization:  Management and Technical Weaknesses
Must Be Overcome If Modernization Is to Succeed, by Gene L.  Dodaro,
Assistant Comptroller General for Accounting and Information
Management, before the Subcommittee on Compensation, Pension,
Insurance, and Memorial Affairs, House Committee on Veterans'
Affairs.  GAO/T-AIMD-96-103, June 19 (15 pages). 

If the Veterans Benefits Administration is to reduce operating costs
and improve critical service to nearly 27 million veterans and their
dependents, it needs to streamline its business processes and take
more advantage of information technology.  However, VBA is
experiencing many of the classic management and technical problems
that have prevented federal agencies from reaping the benefits of
substantial investment in information technology.  This testimony
discusses the steps VBA needs to take in the following three areas to
improve its chances for success:  (1) creating a credible business
strategy and supporting an information resources management plan; (2)
developing a better investment strategy for choosing and managing its
portfolio of information technology projects in a more disciplined,
businesslike way; and (3) strengthening its technical ability to
develop software applications that are critical to its efforts to
control costs and improve service to veterans. 


   INTERNATIONAL AFFAIRS
-------------------------------------------------------- Appendix 0:15

U.S.  Information Agency:
Issues Related to Reinvention Planning in the Office of
Cuba Broadcasting

GAO/NSIAD-96-110, May 13 (27 pages). 

This report examines the operations of the Office of Cuba
Broadcasting and Radio Marti, which are part of the U.S.  Information
Agency (USIA).  GAO provides information on (1) the Office of Cuba
Broadcasting's reinvention plan, (2) the role and use of the Office's
research analysts, (3) the reasons for the resignation of Mr. 
Richard Lobo as Director of the Office, and (4) any progress that has
been made in monitoring Radio Marti's compliance with Voice of
America broadcast standards.  GAO also discusses key events and time
frames concerning USIA's Office of Inspector General investigation
into allegations of management reprisals in the Office of Cuba
Broadcasting. 

Canada, Australia, and New Zealand:
Potential Ability of Agricultural State Trading Enterprises to
Distort Trade

GAO/NSIAD-96-94, June 24 (80 pages). 

The agricultural agreements of the Uruguay Round of the General
Agreements on Tariffs and Trade (GATT) seek to establish a fair and
market-oriented agricultural trading system.  Through progressive
reductions in governmental support and export subsidies, conversion
of quotas to tariffs, lowering of barriers to import access, and
other reforms, member nations hope to reduce distortions in world
agricultural markets.  Some member states are using state trading
enterprises (STE) to regulate imports and exports.  STEs are
authorized to engage in trade and are owned, sanctioned, or otherwise
supported by the government.  Although STEs are legitimate trading
entities and are subject to GATT regulations, some U.S.  agricultural
producers are concerned that STEs, through their monopoly powers and
government support, may be able to distort worldwide trade in their
respective commodities.  This report reviews state trading
enterprises in Canada, Australia, and New Zealand.  GAO focuses on
the activities of the Canadian Wheat Board, the Australian Wheat
Board, and the New Zealand Dairy Board.  GAO discusses whether the
boards are capable of distorting world markets in their respective
commodities. 


      TESTIMONY
------------------------------------------------------ Appendix 0:15.1

State Department:  Millions of Dollars Could Be Generated by Selling
Unneeded Overseas Real Estate, by Benjamin F.  Nelson, Director of
International Relations and Trade Issues, before the Subcommittee on
International Operations and Human Rights, House Committee on
International Relations.  GAO/T-NSIAD-96-195, June 27 (13 pages). 

The State Department owns millions of dollars worth of overseas
properties that are unneeded or too expensive to maintain.  Proper
management of State's overseas property could generate considerable
revenue for higher priority uses.  GAO recommends that State convene
an independent panel to review and suggest the sale of excess
property.  In GAO's view, such a panel could help reduce the current
property inventory and ensure proper management in the future. 
Further, to expeditiously resolve disagreements between the Office of
Foreign Buildings Operations (FBO) and the embassies, GAO recommends
that State prepare annual reports identifying all excess properties
whose sale FBO and the embassies cannot agree on.  GAO also suggests
that State improve its accounting and reporting on the use of sales
proceeds. 


   JUSTICE AND LAW ENFORCEMENT
-------------------------------------------------------- Appendix 0:16

Drug Control:
Counternarcotics Efforts in Mexico

GAO/NSIAD-96-163, June 12 (29 pages). 

Hampered by declining U.S.  funding, staff cutbacks, and corruption
among key Mexican institutions, drug interdiction efforts in Mexico
have failed to stem the flow of illegal drugs reaching the United
States.  Mexico remains the primary transit route for cocaine,
heroin, marijuana, and methamphetamine smuggled into this country. 
U.S.  narcotics activities in Mexico and the transit zone have
declined since 1992.  U.S.  funding for counternarcotics efforts in
the transit zone and Mexico fell from $1 billion in fiscal year 1992
to $570 million in fiscal year 1995.  Moreover, since 1992, direct
U.S.  assistance to Mexico has been negligible because of Mexico's
1993 policy of refusing most U.S.  counternarcotics assistance. 
Staffing reductions in the State Department's Narcotics Affairs
Section at the U.S.  Embassy in Mexico City have limited monitoring
of earlier U.S.  assistance, mainly helicopters and spare parts. 
Since GAO's June 1995 testimony before Congress (GAO/T-NSIAD-95-182),
the U.S.  embassy has elevated drug control issues in importance and
has developed a drug control operating plan with measurable goals;
the Mexican government has indicated a willingness to develop a
mutual counternarcotics assistance program and has taken action on
important law enforcement and money laundering legislation; and the
United States and Mexico have created a framework for greater
cooperation and are expected to develop a joint counternarcotics
strategy by the end of the year.  Following through on these efforts
is critical to combatting drug trafficking in Mexico.  GAO summarized
this report in testimony before Congress; see: 

Drug Control:  Observations on Counternarcotics Efforts in Mexico, by
Benjamin F.  Nelson, Director of International Relations and Trade
Issues, before the Subcommittee on National Security, International
Relations and Criminal Justice, House Committee on Government Reform
and Oversight.  GAO/T-NSIAD-96-182, June 12 (10 pages). 

Sex Offender Treatment:
Research Results Inconclusive About What Works to
Reduce Recidivism

GAO/GGD-96-137, June 21 (23 pages). 

GAO's examination of the research literature found 22 reviews of the
effectiveness of treatment programs for sex offenders.  The reviews
discussed both treatment effectiveness and methodological adequacy. 
There was no consensus among the reviews as to what treatment works
to reduce the recidivism of sex offenders.  The cognitive-behavioral
approach was most often cited as promising, particularly with child
molesters and exhibitionists.  Because of methodological limitations
in the studies, however, a quantitative estimate of the impact of
cognitive-behavioral treatment on recidivism was not attempted in
these reviews.  Psychotherapy was generally viewed as ineffective
except, in some cases, when administered in combination with another
treatment approach.  Nearly all the reviews reported that definitive
conclusions could not be drawn because methodological weaknesses in
the research made inferences about what works uncertain.  There was
no consensus that more and better research was needed to demonstrate
the effectiveness of sex offender treatment. 


   NATIONAL DEFENSE
-------------------------------------------------------- Appendix 0:17

Concessions Contracting:
DOD Military Exchange Services' Rates of Return

GAO/GGD-96-108, May 9 (seven pages). 

This report provides information on concessions contracting in the
Defense Department's (DOD) three military exchange services. 
Concessions generally are businesses that use government property to
deliver services to the public or specific individuals and share the
profits with the government.  The military exchanges have a dual
mission:  they provide patrons with articles and services necessary
for their health, comfort, and convenience and are a source of
funding for DOD morale, welfare, and recreation programs.  GAO
discusses (1) the extent of centrally managed concessions operations
in DOD's military exchange services, (2) the rate of return from
centrally managed concessions operations and factors that affected
the rate of return, and (3) how the exchange services' rates of
return compared to other agencies or governments' rates of return
from concessions. 

Defense Infrastructure:
Costs Are Projected to Increase Between 1997 and 2001

GAO/NSIAD-96-174, May 31 (eight pages). 

GAO analyzed the infrastructure portion of the Defense Department's
(DOD) 1997 Future Years Defense Program, which covers fiscal years
1997-2001, and found that infrastructure costs are projected to rise
from $146 billion in 1997 to $155 billion in 2001.  Although the
infrastructure portion of DOD's budget is projected to decrease from
60 percent in 1997 to 57 percent in 2001, this is primarily because
the total military budget is expected to increase at a faster rate
than the infrastructure portion.  The installation support portion of
DOD's infrastructure budget is projected to decline between 1997 and
2001, but all other categories of infrastructure are projected to
increase.  The combination of operation and maintenance and military
personnel appropriations fund about 80 percent of infrastructure
activities that can be clearly identified in the Future Years Defense
Program.  The upshot is that DOD must look to these two
appropriations if it plans to spend less on infrastructure
activities. 

Operation and Maintenance Funding:
Trends in Army and Air Force Use of Funds for Combat Forces
and Infrastructure

GAO/NSIAD-96-141, June 4 (49 pages). 

The Secretary of Defense contends that the Defense Department (DOD)
must increase its procurement funding if it is to have a modern
future force.  The Secretary wants to reform the acquisition process
and streamline infrastructure to pay, in part, for force
modernization.  DOD now expects decreases in its operation and
maintenance account and increases in its procurement account
beginning in fiscal year 1998.  This report reviews how the Army and
the Air Force obligated their annual operation and maintenance
account funds and compares their obligations to what was requested in
the President's budgets.  GAO determines what part of total
obligations was used for infrastructure activities as opposed to
combat force.  The Navy is not included in this review because, at
the headquarters level, it does not maintain the level of budget
request and obligation data that GAO needed for its analysis. 

Navy Ship Propulsion:
Viability of New Engine Program in Question

GAO/NSIAD-96-107, June 7 (25 pages). 

Although the Navy has spent more than four years and nearly $225
million in a joint venture with the British and French to develop a
new gas turbine ship propulsion system, the effort has encountered
serious problems in development.  Navy officials have raised many
questions about the new engine, including the practicality of using
it in the DDG-51 destroyer.  They also have concerns about whether
the new engine will provide a viable and timely return on the large
investment to develop it.  GAO urges the Pentagon to reassess the
need for this program.  As the Navy restructures the engine
development program, it must decide how and if it will use the $5.4
million test facility that it built in Philadelphia.  The Navy now
plans to conduct almost all of its engine testing at a test site in
the United Kingdom.  The Navy must also decide whether to test the
engine at sea in a pilot ship.  The cost to do so is estimated as
high as $12.5 million. 

Basic Training:
Services Are Using a Variety of Approaches to Gender Integration

GAO/NSIAD-96-153, June 10 (13 pages). 

The military services are using various approaches to integrate men
and women during basic training.  These approaches range from using
the same program to instruct both sexes and integrating some training
units to using different programs of instruction and providing
separate training.  The costs associated with gender integration have
been low.  In fact, the Army is the only service that has incurred
expenses to accommodate gender-integrated basic training, spending
about $67,000 to modify barracks.  No staffing or curriculum changes
have been made to accommodate integrated basic training.  Studies of
the impact of gender-integrated units have been done for the Navy and
the Army.  A 1993 study done for the Navy reported no impact on
objective performance measures and improvement in teamwork measures
for both men and women training in gender-integrated units.  A recent
Army study found that the performance of women improved in
gender-integrated training units while the performance of men was not
degraded.  Although the Army introduced limited gender-integrated
basic training in the late 1970s and early 1980s, the Army has no
records from that period to compare with its current program. 

Defense Health Care:
New Managed Care Plan Progressing, but Cost and Performance Issues
Remain

GAO/HEHS-96-128, June 14 (20 pages). 

The Defense Department's (DOD) health care system, which costs $15
billion annually, is undergoing sweeping reform.  Through TRICARE,
its new managed health care program, DOD is trying to improve access
to care among its 8.3 million beneficiaires while containing costs. 
How well DOD implements and operates TRICARE may define and shape
military medicine for years to come.  Because of TRICARE's
complexity, scale, and impact on beneficiaries, GAO reviewed the
program, focusing on (1) whether DOD's experiences with early
implementation yielded the expected results, (2) how early outcomes
may affect costs, and (3) whether DOD has defined and is capturing
data needed to manage and assess TRICARE's performance.  GAO
concludes that despite initial confusion among beneficiaries arising
from marketing and education problems, as well as problems with the
compatibility of computer systems, early implementation of TRICARE is
progressing consistent with congressional and DOD goals.  However,
the success of DOD's efforts to implement resource-sharing agreements
and utilization management is critical to containing health care
costs.  DOD also needs to gather enrollment and performance data so
that it and Congress can assess TRICARE's success in the future. 

Navy Aviation:
F/A-18E/F Will Provide Marginal Operational Improvement at
High Cost

GAO/NSIAD-96-98, June 18 (98 pages). 

With a projected total cost of $63 billion, the Navy's program to
modernize its fleet of F-18 tactical aircraft ranks among the most
costly of military aviation projects.  Yet the planned F/A-18E/F will
deliver only marginal operational improvements over the current
F/A-18C/D model.  The operational deficiencies in the F/A-18C/Ds that
the Navy cited as a justification for developing the F/A-18E/F either
have failed to materialize or can be corrected with nonstructural
changes to the C/D.  Furthermore, E/F operational capabilities will
be only slightly better than those of the C/D model.  Given the
expense and the marginal improvements in operational capabilities
that the F/A-18E/F would provide, GAO recommends that the Pentagon
reconsider the decision to produce the F/A-18E/F aircraft and,
instead, consider procuring additional F/A-18C/Ds.  The number of
F/A-18C/Ds that the Navy would ultimately need to buy will depend on
when the next generation strike fighter becomes operational and the
number of those planes the Navy decides to purchase. 

Electronic Warfare:
Navy's New Radar Warning Receiver Needs More Testing

GAO/NSIAD-96-68, June 20 (11 pages). 

The Navy plans to begin low-rate production of new radar warning
receivers despite serious flaws in two earlier versions and
performance problems that surfaced during testing of the latest
version.  The receivers developed under the ALR-67(V)3 radar receiver
program are designed to sense the signals from hostile radars,
provide an audio warning to the pilot, and display the warning
information on a video screen in the cockpit.  GAO concludes that the
Navy risks acquiring a deficient system that may require expensive
changes if the receivers are to effectively alert pilots to
radar-controlled enemy weapons. 

Defense Ammunition:
Significant Problems Left Unattended Will Get Worse

GAO/NSIAD-96-129, June 21 (92 pages). 

The Defense Department (DOD) has poorly managed its huge stockpile of
ammunition--a legacy of the Cold War and Operation Desert Storm.  Of
an $80-billion inventory, an estimated $31 billion worth of
conventional ammunition, explosives, and missiles were surplus.  Much
of this was old and unusable.  For some types of ammunition, the
military had more than 50 times its stated needs.  The massive
quantities of ammunition that were returned to the stockpile as a
result of closed military bases in Europe and the end of the Persian
Gulf War--combined with decreases in budgets, staff, and storage
space--have severely taxed the military's ability to manage the
ammunition inventory.  Managers have difficulty (1) identifying
ammunition beyond what is needed for the military's stated
requirements, (2) sharing excess ammunition with military services
that may need it, and (3) disposing of excess ammunition that it no
longer makes sense to retain.  In addition, ammunition inspections
and tests have fallen so far behind that the military cannot
guarantee the usability or readiness of
the stockpile. 

Operational Support Airlift:
Analysis of Joint Staff Estimate of Military Wartime Requirements

GAO/NSIAD-96-157, June 21 (six pages). 

Operational support aircraft are used to meet short notice, generally
smaller cargo and passenger requirements that cannot be met by
regularly scheduled tactical resupply aircraft.  A study by the Joint
Chiefs of Staff found that the joint wartime requirement for
operational support aircraft is 391 planes, or about 100 less than
the fleet in existence at the time of the study.  In response to a
congressional request that GAO determine if the requirement for 391
aircraft was excessive, this report (1) recalculates the Joint
Staff's estimate using the same computerized model and (2) determines
how changes in the flight frequency assumptions affected the
calculation of aircraft requirements. 

Bottom-Up Review:
Analysis of DOD War Game to Test Key Assumptions

GAO/NSIAD-96-170, June 21 (19 pages). 

This report, an unclassified version of an earlier classified GAO
report, reviews the objectives, methodology, and results of the
Pentagon's war game Nimble Dancer, which assessed the ability of the
U.S.  armed forces to fight and win two nearly simultaneous major
regional conflicts.  GAO also discusses the assumptions and data used
in Nimble Dancer relating to several areas, such as readiness,
threat, and force availability.  GAO provides its observations on the
objectives, methodology, and results of the exercise.  It also
provides details on specific areas of interest. 

Environmental Compliance:
Continued Need for Guidance in Programming Defense Construction
Projects

GAO/NSIAD-96-134, June 21 (20 pages). 

Since GAO last reported on this subject in 1993 (GAO/NSIAD-94-22),
the military services have tried to improve the manner in which they
program and prioritize environmental compliance construction
projects.  However, Defense Department (DOD) policy still does not
specify how the military services should report costs for
environmental compliance construction projects and how they should
decide which appropriation account should provide the funds. 
Consequently, the military services and the Defense Logistics Agency
continue to differ in how they classify and prioritize projects and
how they determine their source of funding.  These inconsistencies
and lack of guidance inhibit congressional oversight and DOD program
management.  DOD's estimates for fiscal year 1997 environmental
compliance construction requirements fell from $257 million in
February 1995 to $84 million in April 1996.  Because of the lack of a
uniform approach to categorizing these projects, GAO cannot determine
the precise reasons for this drop in funding. 

Contingency Operations:
Update on DOD's Fiscal Year 1995 Cost and Funding

GAO/NSIAD-96-184BR, June 27 (22 pages). 

During fiscal year 1995, the Defense Department (DOD) participated in
contingency operations around the globe, including Haiti, Southwest
Asia, and the former Yugoslavia.  To help cover the incremental costs
of these operations, Congress provided DOD with a supplemental
appropriation.  In an earlier report (GAO/NSIAD-96-121BR), GAO found
that although DOD ended fiscal year 1995 with supplemental funding of
$12 million above its reported incremental costs, some of the
military services and defense agencies had reported costs that
exceeded their supplemental appropriations while other services had
reported costs below their supplemental appropriations.  GAO also
indicated that costs surged in September 1995.  This briefing report
provides information on (1) how the services that reported costs in
excess of supplemental funding covered their shortfalls and (2) why
the surge occurred. 

Weapons Acquisition:
Warranty Law Should Be Repealed

GAO/NSIAD-96-88, June 28 (44 pages). 

Requiring the use of warranties in weapon system acquisitions is
impractical and provides the government with few benefits.  GAO
estimates that the military spends about $271 million each year on
weapon system warranties, which return only about five cents for
every dollar spent.  Congress expected warranties to improve weapon
system reliability by providing a mechanism to hold contractors
liable for poor performance.  In practice, however, warranties have
proved an expensive way for the Defense Department (DOD) to resolve
product failures with contractors.  The government has traditionally
self-insured because its large resources make protection against
catastrophic loss unnecessary.  Further, it is often the sole buyer
for a product and cannot share the insurance costs with other buyers. 
Because a contractor cannot allocate the cost of insuring against the
risk of failure among multiple buyers, DOD ends up bearing the entire
estimated cost.  Moreover, DOD program officials said that warranties
do not motivate contractors to improve the quality of their products. 
GAO believes that the warranty law should be repealed and the
decision to obtain a warranty should be left to the program manager. 

Acquisition Reform:
Regulatory Implementation of the Federal Acquisition Streamlining Act
of 1994

GAO/NSIAD-96-139, June 28 (80 pages). 

The Federal Acquisition Streamlining Act of 1994 contained more than
200 sections changing the laws governing how agencies acquire nearly
$200 billion worth of goods and services annually.  The act sets
deadlines for publishing proposed and final implementing regulations,
prescribes a minimum 60-day period for public review and comment on
proposed regulations, and requires the drafters of such regulations
to make every effort to ensure that regulations are concise and
understandable.  This report (1) determines whether all regulations
necessary to implement the act were published in accordance with the
act's requirements and (2) describes the efforts made to make the
regulations concise
and understandable. 

Acquisition Reform:
Military-Commercial Pilot Program Offers Benefits but
Faces Challenges

GAO/NSIAD-96-53, June 28 (20 pages). 

Faced with substantial funding cuts for defense procurement, the
Pentagon has made acquisition reform a top priority.  The challenge
for the Defense Department (DOD) is to maintain technological
superiority and ensure a strong national industrial base while
reducing acquisition costs.  The need to reform the military's
acquisition system is well known; however, acquisition reform has
been an elusive goal.  DOD has on several occasions tried to
introduce a commercial-style procurement system that would take
advantage of commercial products and processes and, whenever
possible, eliminate contracting, technical, and accounting
requirements that are unique to the military.  According to DOD,
acquisition reform could cut costs by as much as 30 percent.  This
report discusses a pilot program, known as "Military Products From
Commercial Lines," set up by the Air Force with one of its
contractors.  GAO evaluates the pilot program to determine (1) its
potential for producing the benefits sought through reform and (2)
any barriers to achieving these benefits. 

Combat Air Power:
Assessment of Joint Close Support Requirements and Capabilities Is
Needed

GAO/NSIAD-96-45, June 28 (36 pages). 

During the next six years, the military plans to spend more than $10
billion on aircraft and other weapons to bolster its already
formidable close support capabilities.  This effort, however, comes
at a time of shrinking defense budgets, defense downsizing, and
increasing questions about the affordability of defense
modernization.  This report (1) discusses the overall capabilities of
the military services to provide close support and the extent to
which those capabilities continue to be modernized and enhanced and
(2) evaluates the processes that the Defense Department uses to
assess mission needs, capabilities, and modernization proposals for
the close support mission. 

Precision-Guided Munitions:
Acquisition Plans for the Joint Air-to-Surface Standoff Missile

GAO/NSIAD-96-144, June 28 (22 pages). 

The Air Force and the Navy are developing the joint air-to-surface
standoff missile to attack--day or night--high-value, well-defended
targets while allowing the launch aircraft to remain outside the
range of enemy defenses.  This report discusses (1) the Air Force's
plan to use a new acquisition process that balances capability and
affordability requirements for acquiring the missile, (2) schedule
and cost risks because of the immaturity of essential technology and
the complexity of integrating the missile with multiple aircraft, (3)
the Air Force's plan to acquire 35 pilot production missiles early in
development that may not be needed, and (4) the need to strengthen
the Navy's commitment to the program. 

Wartime Medical Care:
Personnel Requirements Still Not Resolved

GAO/NSIAD-96-173, June 28 (10 pages). 

Since 1994, the Defense Department (DOD) and the military services
have produced several estimates of wartime medical personnel
requirements.  The National Defense Authorization Act of 1996
requires GAO to study the reasonableness of the models each military
service uses to determine appropriate wartime medical personnel force
levels.  DOD recently embarked on, but has yet to complete, another
major wartime medical requirements study.  This study is expected to
modify the data contained in the service models and is intended to
produce a unified DOD position on medical requirements.  This report
addresses the service models' results, their methodologies, and their
inclusion of active duty and reserve medical personnel.  A separate
report will examine DOD's updated wartime medical requirements study
and, to the extent needed, address any remaining issues associated
with the service models. 


      TESTIMONY
------------------------------------------------------ Appendix 0:17.1

Combat Air Power:  Joint Mission Assessments Needed Before Making
Program and Budget Decisions, by Richard Davis, Director of National
Security Analysis Issues, before the Subcommittee on Military
Research and Development and Military Procurement, House Committee on
National Security.  GAO/T-NSIAD-96-196, June 27 (15 pages). 

Despite shrinking defense budgets and the diminished threat posed
since the collapse of the Soviet Union, the Defense Department (DOD)
continues to add new planes to its fleet of combat aircraft without
having assessed its existing capabilities or the areas that would
benefit most from improvements in air power.  DOD needs to seek the
greatest value in its investment given the projections for future
defense spending.  The question is whether, in the post-Cold War era,
the United States needs, or can afford, the current levels of overlap
in air power capabilities.  DOD requires better information to decide
how to prioritize competing programs, whether programmed investments
should continue to be funded, and whether new investments should be
made. 


   NATURAL RESOURCES
-------------------------------------------------------- Appendix 0:18

National Park Service:
Information on Special Account Funds at Selected Park Units

GAO/RCED-96-90, May 17 (26 pages). 

The national park system, which is run by the Park Service, manages
nearly 370 units, including parks, monuments, and historic sites.  In
additional to annual appropriations, individual parks are allowed to
keep money from in-park activities and accept other benefits from
park support groups or concessioners.  The funds going to the parks
from these activities are not always subject to the annual
congressional appropriations process.  This report discusses (1) the
sources and amounts of special account funds available throughout the
Park Service system and, for a sample of parks, the amount of special
account funds that were available to each of them and (2) whether the
expenditures of funds in special accounts were consistent with the
purposes for which those accounts were established. 

Public Timber:
Federal and State Programs Differ Significantly in
Pacific Northwest

GAO/RCED-96-108, May 23 (16 pages). 

The Bureau of Land Management and the Forest Service manage 12.5
million acres of timberland in Oregon and Washington.  This acreage
accounts for nearly 38 percent of the available timberland in those
states.  In recent years, the volume of timber sold and harvested
from these federal timberlands has fallen because of increased
efforts to protect habitat for threatened and endangered species and
to achieve a better balance of multiple resource uses.  The costs of
federal timber sale programs have not decreased proportionately,
however, and recent studies have suggested that some states run their
timber sale programs at less cost than do federal agencies.  This
report compares the timber sale programs of the two federal agencies
with those of the states.  GAO identifies (1) the major differences
among the timber programs of the Forest Service's Pacific Northwest
Region, the Bureau of Land Management, and Oregon and Washington and
(2) the effect of these differences on the agencies' planning
processes. 

Water Quality:
A Catalog of Related Federal Programs

GAO/RCED-96-173, June 19 (64 pages). 

This catalog provides information on federal programs and initiatives
to help states, municipalities, and individuals protect and improve
surface and groundwater threatened by pollution.  GAO identifies 72
federal programs and initiatives that either directly or indirectly
support water quality protection and enhancement.  According to
agency estimates, at least $4.6 billion was spent on these programs
in fiscal year 1995. 


      TESTIMONY
------------------------------------------------------ Appendix 0:18.1

Federal Land Management:  Streamlining and Reorganization Issues, by
Michael Gryskowiec, Director of Planning and Reporting in the
Resources, Community, and Economic Development Division, before the
Senate Committee on Governmental Affairs.  GAO/T-RCED-96-209, June 27
(15 pages). 

The responsibilities of the four major federal land management
agencies--the National Park Service, the Bureau of Land Management,
the Fish and Wildlife Service, and the Forest Service--have become
more similar and the management of federal lands more complex over
time.  These changes, as well as budgetary and ecological
considerations, suggest a basis for reexamining the current approach
to federal land management with an eye to improving its efficiency
and effectiveness.  Two basic strategies have been proposed to
improve federal land management.  One would streamline the existing
structure by coordinating and integrating functions, programs, and
field locations.  The other would reorganize the structure mainly by
combining agencies.  Although it is unclear which strategy would be
more effective, or whether a combination of the two would be more
appropriate, the effective implementation of either strategy will
require a solid consensus for change and the creation of identifiable
goals for managing commodity and noncommodity uses. 


   TAX POLICY AND ADMINISTRATION
-------------------------------------------------------- Appendix 0:19

Tax Research:
IRS Has Made Progress but Major Challenges Remain

GAO/GGD-96-109, June 5 (66 pages). 

The Internal Revenue Service (IRS) is changing its tax compliance
philosophy.  Although it will continue to use audits to catch tax
cheats, IRS is exploring methods other than enforcement to induce
compliance, such as assistance and education.  This new approach
involves researching ways to improve compliance for specific market
segments--groups of taxpayers who share characteristics or behaviors. 
The agency wants to boost total compliance to 90 percent by 2001 and
believes that its new compliance research approach will help meet
this goal.  Taxpayer compliance in paying taxes owed has remained
steady during the past 20 years at about 87 percent, and IRS
estimates tax losses from noncompliance at more than $100 billion. 
This report (1) reviews the lessons IRS has learned from past
compliance efforts in identifying factors most critical to the
success of its new compliance research approach and (2) analyzes the
status of the new approach and its ability to incorporate these
factors. 


      TESTIMONY
------------------------------------------------------ Appendix 0:19.1

Tax Administration:  Issues in Classifying Workers as Employees or
Independent Contractors, by Natwar M.  Gandhi, Associate Director for
Tax Policy and Administration Issues, before the Subcommittee on
Oversight, House Committee on Ways and Means.  GAO/T-GGD-96-130, June
20 (21 pages). 

To determine the social security and unemployment taxes they need to
pay on employee wages, employers must classify workers as employees
or independent contractors.  The Internal Revenue Service (IRS)
estimates that about 750,000 of the more than 5 million employers (15
percent) misclassified 3.4 million employees as independent
contractors in 1984.  Factors such as costs and confusion can
contribute to misclassification.  This testimony highlights the main
points raised in GAO work dating back nearly 20 years on the proper
classification of workers. 


   TRANSPORTATION
-------------------------------------------------------- Appendix 0:20

Emergency Relief:
Status of the Replacement of the Cypress Viaduct

GAO/RCED-96-136, May 6 (24 pages). 

The Loma Prieta earthquake struck northern California in October
1989, causing severe damage to the San Francisco and Oakland area. 
In Oakland, the earthquake caused a two-tiered portion of Interstate
880 know as the Cypress viaduct to collapse, killing 42 people. 
Because the viaduct was a key part of the area's transportation
system, its destruction resulted in severe congestion, mobility
problems, and financial losses.  Six and one-half years after the
earthquake, the replacement of the viaduct is still not complete. 
This report discusses the (1) status of construction, expected
completion date, and reasons for any delays; (2) estimated cost of
the project and reasons for any cost growth; and (3) guidance
governing the Federal Highway Administration's use of emergency
relief funds. 

Transportation Infrastructure:
Central Artery/Tunnel Project Faces Continued
Financial Uncertainties

GAO/RCED-96-131, May 10 (31 pages). 

At a cost of more than $1 billion per mile, the Central Artery/Tunnel
project--an Interstate Highway System project in Boston,
Massachusetts--ranks as one of the largest, most complex, and
expensive highway construction projects ever undertaken.  About $4.7
billion in federal and state money has been obligated so far, but
this amount is less than half of the more than $10 billion that will
likely be needed to complete the project.  To date, about 86 percent
of the funding for the Central Artery/Tunnel project has come from
federal sources.  This report evaluates (1) the estimated total cost
of the Central Artery/Tunnel project and (2) the plans of the
Commonwealth of Massachusetts for financing it. 

Los Angeles Red Line:
Financing Decisions Could Affect This and Other Los Angeles County
Rail Capital Projects

GAO/RCED-96-147, May 14 (19 pages). 

The federal government has agreed to pick up the tab for about half
of the $5.5 billion in final design and construction costs for the
Red Line subway project in Los Angeles.  The 23.4-mile Red Line
project consists of three segments, which are in varying states of
completion.  This report reviews (1) the project's estimated cost and
(2) the Los Angeles County Metropolitan Transportation Authority's
financing plans.  GAO also provides information on the Federal
Transit Administration's oversight of the project's quality control
and quality assurance practices. 

Mass Transit:
Actions Needed for the BART Airport Extension

GAO/RCED-96-176, May 31 (53 pages). 

The Bay Area Rapid Transit District (BART) intends to spend more than
$1.1 billion, including $750 million in federal funds, to extend mass
transit services to the San Francisco International Airport. 
Controversy over the project, which centers on concerns over the
project's environmental impact and cost, has resulted in two
redesigns of the project since 1992.  Before the Federal Transit
Administration (FTA) can provide BART with the requested funds, FTA
must ensure that BART complies with federal environmental laws and
develops a viable financing plan.  This report describes (1) the
actions that FTA must take before agreeing to fund the project; (2)
the project's current schedule and estimated cost and the factors
that could affect them; and (3) the project's finance plan, including
assumptions that could affect its viability. 

Northeast Rail Corridor:
Information on Users, Funding Sources, and Expenditures

GAO/RCED-96-144, June 27 (41 pages). 

The Northeast Corridor--the 460-mile railway route between
Washington, D.C., and Boston--serves more than 100 million passengers
each year and is a transportation linchpin for eight states and the
District of Columbia.  From 1988 through 1993, Amtrak and other users
spent $3 billion to maintain tracks, signal systems, and stations;
dispatch trains; and make capital improvements to commuter and
high-speed operations.  Despite these outlays, the corridor's
infrastructure has deteriorated, and Amtrak estimates that about $2.7
billion is needed to bring the corridor up to a state of good repair. 
This report describes the (1) relative use of the corridor by Amtrak
and the commuter and freight railroads, (2) sources of funding to
operate and maintain the corridor, and (3) annual funding required to
keep the corridor's infrastructure in a good state or repair and
continue capital improvements at their historical rate. 

Human Factors:
Status of Efforts to Integrate Research on Human Factors Into FAA's
Activities

GAO/RCED-96-151, June 27 (25 pages). 

Human error has been a factor in about 80 percent of all fatal
airplane crashes, according to the Federal Aviation Administration
(FAA).  The study of human factors, which tries to reduce the chances
for human error through better design of equipment and procedures and
improved training of pilots, air traffic controllers, and others, has
emerged as one of the most promising ways to improve aviation safety. 
This report describes FAA's (1) organizational structure for
incorporating the consideration of human factors in the agency's
acquisition of new systems and operation of other systems and (2)
aviation research on human factors, including FAA's processes for
identifying research issues, and methods for allocating and
coordinating resources for internal and external research on
human factors. 


   VETERANS AFFAIRS
-------------------------------------------------------- Appendix 0:21

Veterans' Compensation:
Evidence Considered in Persian Gulf War Undiagnosed
Illness Claims

GAO/HEHS-96-112, May 28 (13 pages). 

More than 700,000 men and women served in the Middle East during the
Persian Gulf War.  Some of these veterans began experiencing
symptoms, such as fatigue, weight loss, and skin conditions, that
could not be diagnosed or associated with a specific illness. 
Congress passed legislation in 1994 allowing the Department of
Veterans Affairs (VA) to pay compensation to veterans for undiagnosed
illnesses connected to their service during the Persian Gulf War.  As
of July 1995, VA had denied nearly 95 percent of the 4,144 claims
that it had processed for Persian Gulf veterans claiming such
disabilities.  In response to congressional concerns about the high
denial rate, GAO reviewed the procedures VA used to process Persian
Gulf War undiagnosed illness claims.  This report discusses (1) the
evidence standards that VA has established to process Persian Gulf
claims, (2) the evidence in the claim files that VA considered in
reaching its decisions, and (3) VA's reporting of the reasons for
denial. 


      TESTIMONY
------------------------------------------------------ Appendix 0:21.1

VA Health Care:  Opportunities to Reduce Outpatient Pharmacy Costs,
by David P.  Baine, Director of Health Care Delivery and Quality
Issues, before the Subcommittee on Hospitals and Health Care, House
Committee on Veterans' Affairs.  GAO/T-HEHS-96-162, June 11 (17
pages). 

The Department of Veterans Affairs (VA) allows its doctors to
prescribe over-the-counter products because concerns have been raised
that some veterans may lack the money to buy needed items.  VA
requires prescriptions as a way to control veterans' access to
over-the-counter products in VA pharmacies.  In fiscal year 1995, for
example, VA pharmacies dispensed analgesics, such as aspirin and
acetaminophen, nearly 3 million times.  The benefits package that
most VA facilities offer for over-the-counter products is more
generous than that available from other health plans.  VA also
provides other features, such as free over-the-counter product mail
service and deferred credit for copayments owed, that are not common
in other plans.  GAO makes several suggestions for reducing the
amount of money VA spends to dispense over-the-counter products. 
First, VA staff could more strictly adhere to statutory eligibility
rules.  Second, VA could more efficiently dispense over-the-counter
products and collect copayments.  Third, VA facilities could further
reduce the number of over-the-counter products available to veterans
on an outpatient basis.  Finally, Congress could expand copayment
requirements. 

Veterans' Health Care:  Challenges for the Future, by David P. 
Baine, Director of Health Care Delivery and Quality Issues, before
the Subcommittee on Hospitals and Health Care, House Committee on
Veterans' Affairs.  GAO/T-HEHS-96-172, June 27 (25 pages). 

With a budget of $16.6 billion and a network of hundreds of
hospitals, outpatient clinics, and nursing homes, the Department of
Veterans Affairs' (VA) health care system provides medical services
to more than 26 million veterans.  VA is seeking to fundamentally
change the way in which it runs its health care delivery and
financing systems.  It is also seeking authority to significantly
expand eligibility for health care benefits and to both buy health
care services from and sell health services to the private sector. 
This testimony discusses (1) changes in the veterans population and
the demand for VA health care services; (2) how well the existing VA
system, and other public and private health benefits programs, meet
the health care needs of veterans; (3) steps that could be taken
using existing resources and legislative authority to address
veterans' unmet health care needs and increase equity of access; (4)
how other countries have addressed the needs of an aging and
declining veteran population; and (5) approaches for preserving VA's
direct delivery system, alternatives to preserving the direct
delivery system, and combinations of both. 

*** End of document. ***