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in carrying out service activities involving electronic supplies and equipment which are common to more than one military department. We expect that our field work will be completed in March or April and that a report on this review will be submitted to the Congress as promptly as possible thereafter.

The CHAIRMAN. I want to thank you for that, and we will watch and wait for it.

THE MILITARY ASSISTANCE PROGRAM

Mr. CAMPBELL. Under the military assistance program, authorized by the Mutual Security Act of 1954, as amended, the United States provides equipment, supplies, and service on a grant or reimbursable basis to other friendly nations and to international organizations. This assistance is provided to promote the foreign policy, security, and general welfare of the United States and to facilitate the effective participation of recipient nations in arrangements for individual and collective self-defense.

SCOPE OF PROGRAM

Expenditures for the military assistance program for the fiscal years 1957, 1958, and 1959 were approximately $2.4 billion, $2.2 billion and $2.4 billion, respectively. Expenditures for the fiscal year 1960 are estimated at $1.8 billion, or 2.4 percent of the total Federal budget.

We have directed our reviews primarily to operations involving the programing, procurement, and delivery of material to recipient countries. These activities account for approximately 88 percent of the annual expenditures for the military assistance program. To a limited extent, we also examined the administration of aid given for military construction which accounts for an additional amount of approximately 5 percent of total annual expenditures for military assistance.

IMPROVEMENTS NOTED

Recognition should be given to the continuing efforts of Defense officials to improve their administration of the programs, and we are not unaware of the substantial problems involved in the administration of this program or of the fact that economic and political considerations in the recipient countries have a real effect on policies and decisions.

CONTROLS NEEDED

However, we believe much remains to be done to strengthen controls over program development and implementation in order to eliminate waste and to provide a sound basis for good program administration.

In general, the administration of the military assistance program can be divided into three stages (1) program development, (2) pro

gram implementation, including the procurement and delivery of programed equipment, and (3) a continuing review of the utilization of delivered equipment and other phases of recipient country performances. While we do not propose at this time to relate details of the results of our reviews of the military assistance program, unless your committee should so desire, our findings and observations in these areas, stated in very general terms, follow:

1. The programing objectives established by the Department of Defense, expressed in terms of divisions of troops, squadrons of aircraft, etc., and other instructions do not provide all necessary guidance to operating officials. The program objectives have not been sufficiently refined to establish which countries and which military units shall first receive equipment and supplies or to distinguish between those forces which are justifiable on the basis of military roles and missions and those which must be equipped and maintained because of political and other considerations.

2. Estimates have not been developed and presented to the Congress of the aggregate costs of equipping, maintaining, and modernizing allied military forces approved for support or otherwise achieving U.S. objectives in the countries being supported. Likewise program objectives have not been systematically analyzed and found to be within the limit of available resources and not excessive for the accomplishment of U.S. purposes before these objectives are accepted as the bases for military assistance.

3. Lists of military equipment and supplies needed by recipient countries continue to be developed and used to support annual appropriation requests without sufficient knowledge, in many cases of (1) the real needs of the countries based on tables of organization and equipment established for their military units, (2) the equipment assets on hand, and (3) the countries capabilities to utilize the material planned for delivery.

4. Stocks excess to the military service which should be transferred to the military assistance program without charge, stocks which should be transferred at reduced prices because of condition and market value, and other categories of military equipment have been transferred at prices which have resulted in overcharges to military assistance appropriations. Defense regulations, procedures, and controls have been ineffective in preventing unauthorized reimbursements to the military services. Consequently the military departments may be receiving reimbursement for materiel furnished to the military assistance program to a degree not contemplated by mutual security legislation.

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5. In many countries, it has not been determined that funds. vided by the United States to support the military budget of these countries have been utilized for the purposes for which they were given. At the time of our reviews, the International Cooperation Administration and the Department of Defense had not agreed on which

agency would be responsible or on the procedures to be followed for the review of the utilization of military budget support assistance. Subsequently, on October 19, 1959, a joint State-Defense-International Cooperation Administration statement was issued providing that the military assistance advisory groups will be responsible for observing and reviewing the countries utilization of military budget support assistance.

RECOMMENDED IMPROVEMENTS

Appropriate recommendations have been made to the Department of Defense concerning the areas in which we felt that administration of the military assistance program could be improved. Some of our recommendations have been adopted and others are under consideration. We shall be glad to discuss the program more specifically should your committee so desire; however, such discussions may involve classified information.

CLASSIFIED REPORTS

The CHAIRMAN. Mr. Campbell, we read in the newspapers about the efforts of various House committees to obtain information about the military assistance programs in southeast Asia, and to have furnished to them copies of the reports which you made to the Department of Defense, the ICA and possibly the State Department, but the results have developed that the administration refused to submit those reports in the possession of these executive agencies to the Congress. Your General Accounting Office is the agent, not of the Executive, but of Congress, as I understand it. That is correct, is it not? Mr. CAMPBELL. Yes, sir.

The CHAIRMAN. Does this last sentence mean that you as an agent of Congress would be willing to transmit under proper security arrangements these southeast Asian reports?

Mr. CAMPBELL. Mr. Chairman, our reports, although classified, do go to Congress. I think that the report or reports that you mentioned are reports prepared by ICA itself.

The CHAIRMAN. I see.

Mr. CAMPBELL. In this particular case I believe it was the Foreign Relations Committee which asked for the report, and we also have asked for it. I will say that as a result of our feeling that these reports should not be withheld from me and from my staff, we have accomplished some progress, because we have received a copy of the report referred to. It has apparently been edited, but with very few deletions.

GAO REPORTS ON MILITARY ASSISTANCE

The CHAIRMAN. Would you subsequent to this meeting identify for the record the numbers of these reports which you have rendered to Congress? You do not need to do it now. You can do it subsequently. Mr. CAMPBELL. On military assistance or in total?

The CHAIRMAN. On military assistance.

Mr. CAMPBELL. I think we will have to submit it for the record, Mr. Chairman.

(The following was later received for the record:)

Hon. PAUL H. DOUGLAS,

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, February 8, 1960.

Chairman, Subcommittee on Defense Procurement, Joint Economic Committee, Congress of the United States.

DEAR MR. CHAIRMAN: In accordance with your request during the hearings of your subcommittee on January 28, 1960, we are furnishing a list of the General Accounting Office reports furnished to the Congress on reviews of the military assistance program:

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B-125028 Sept. 12, 1957

B-125078 Sept. 18, 1957
B-132913 Oct. 3, 1957
B-125099 Oct. 4, 1957
B-125097 Jan. 13, 1958

B-125087 Jan. 29, 1958

"Report on Review of the Military Assistance Program, Re-
distribution of Programed Excesses, December 1956."
"Report on Review of the Military Assistance Program for
Pakistan, Mar. 31, 1957."

"Report on Review of the Military Assistance Program for
Italy, Mar. 31, 1957."

"Use of Progress Payments in Offshore Procurement Con-
tracts Awarded by the Ordnance Procurement Center, U.S.
Army, Europe."

"Procurement of Energa Grenades by Ordnance Center, U.S.
Army, Europe."

"Report on Review of the Military Assistance Program for
Japan, Mar. 31, 1957."

"Report on Review of the Military Assistance Program for
Korea, Mar. 31, 1957."

"Examination of the Military Assistance Program Adminis-
tered by the Department of the Army."

"Report on Review of the Military Assistance Program for
Taiwan."

B-132953 Feb. 10, 1958 "Report on Examination of Special Defense Financing Pro

B-125078 July 22, 1958

gram for France, International Cooperation Administra-
tion, Department of State, June 30, 1957."

"Letter to Congress Transmitting Reply from Assistant Sec-
retary of the Army on Energa Grenades."

"Report on Review of the Military Assistance Program for
Greece."

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B-133055 Sept. 8, 1958

B-133085 Sept. 30, 1958

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B-133080 Oct. 30, 1958
B-133096 Nov. 26, 1958
B-133089 Dec. 3, 1958
B-133134 Jan. 9, 1959
B-133005 Apr. 20, 1959

B-133086 Aug. 26, 1959
B-133217 Dec. 18, 1959
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B-132913 Dec. 31, 1959
B-125090 Jan. 12, 1960

"Report on the Review of the Military Assistance Program
for Vietnam."

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"Report on Examination of the Program for Offshore Procure-
ment in Japan of Fast-Moving Vehicular Spare Parts.'
"Review of the Military Assistance Program for Iran.'
"Limited Review of Selected Offshore Procurement Con-
tracts, Air Materiel Force, European Area, Fiscal Years
1954-56."

"Review of Offshore Procurement of F-86 K Aircraft by the
U.S. Air Force under Contract No. AF (61(514)-547."
"Denial by Department of Defense of Access to Military As-
sistance Program Data."

"Examination of the Military Assistance Program Adminis-
tered by the Department of the Navy."

"Review of Supply Activities for the Military Assistance
Program, U.S. Army Logistical Depot, Japan."
"Review of the Military Assistance Program for Pakistan”.

Sincerely yours,

Secret.
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JOSEPH CAMPBELL,

Comptroller General of the United States.

OTHER ACTIVITIES

There are several activities of the Department of Defense, aside from those mentioned above, in which we believe that the management can be significantly improved.

NEED FOR IMPROVEMENT IN MSTS

Our reviews of the Military Sea Transportation Service have disclosed room for improvement in the management of transportation activities. For example, lack of a firm air-sea transportation policy leads to poor utilization of troop space on vessels. Notwithstanding the fact that this matter has been before the Department of Defense for more than 3 years, we observed no improvement in the coordination of transportation facilities and thus excessive costs continued

to mount.

We also found that failure to forecast Military Sea Transportation Service cargo space requirements accurately and to cancel reserved space promptly when changes of plans are known have resulted in unnecessary costs. In addition, certain rigid requirements relating to the use of refrigerator ships imposed by the shipper services have resulted in uneconomical operations. The Department of Defense has recognized the need for more economical planning of cargo shipment requirements and has agreed generally with our recommendations for corrective action. However, we have not had the opportunity to ascertain the extent of action taken or contemplated to implement our recommendations.

FAILURE TO NEGOTIATE WHERRY HOUSING CONTRACTS

In our review of the acquisition of Wherry housing by the Air Force, we found that, in the first 23 projects, vendors were offered the "formula price" which is the maximum price permitted by law. No attempt was made to negotiate, as required by law, a price lower than the maximum price. This practice was discontinued, however, in November 1957. Since that date price negotiations are conducted if the value of the property, determined by appraisal and otherwise, is found to be less than the formula price. We found, however, that generally the vendors were advised of the formula price prior to offer or negotiation of a purchase price. We recommended that the formula price be determined by the military departments as required by law without consultation or negotiations with the vendors on any elements of price to be included therein and without disclosure to the vendors. We found also that the formula price was frequently overstated by reason of inadequate deductions for repairs and replacements. The total of $1.7 million deducted for this purpose for 33 projects under review may be between $1.6 million and $4 million less than the amounts spent or to be spent by the military departments for repairs and replacements. We have recommended corrective action in these

areas.

The CHAIRMAN. Do you have any estimate as to the probable overcharge in these 23 Wherry housing projects?

Mr. CAMPBELL. Our report in this matter is B-133102, but we do not have an estimate of the overcharge.

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