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and the general public who would be affected by such contracts. It further requested that the Department, before signing a major power contract or amendments thereto, prepare and publish a comprehensive summary of the engineering and economic features and effects of such contract under its proposed life, including an assessment of the impact of the contract on the Federal Government and on the existing and potential preference customers. The Department informed the subcommittee that although the Assistant Secretary's office does not have a formal contract review section, it does review power marketing policy decisions and major power contracts, and that the Department "as a matter of practice and informal procedure *** endeavors to inform preference customers and their organizations" about significant power contracts and major policy considerations, and to ask their views and suggestions before action is taken on the proposals. The Department stated that it will give careful consideration to "establishing a more formalized review and comment procedure."

(b) Estimated monetary and other benefits.-Power contracts, subjected to full and careful review by all parties affected, under formalized procedures, are better contracts and can produce substantial savings to public and private power agencies, their consumers, and the public generally.

FOREIGN OPERATIONS AND GOVERNMENT INFORMATION

SUBCOMMITTEE

FOREIGN OPERATIONS

1. Indian-American Binational Foundation.

(a) Summary of investigation.-One of the developments of the subcommitte's study of U.S. foreign currency holdings in India was the recommendation made in the report issued in March 1965: that a foundation be established under the direction of a binational board serving without pay to concentrate on problems of economic development and social change. Such a binational foundation in India could contribute greatly to the solution of two pressing problems:

(1) It would reduce the difficulties large and growing surpluses of excess U.S.-owned local currencies have created for the United States.

(2) It would improve the quality of education and science in India. This would help remove serious obstacles to rapid economic development which, in time, would make India increasingly self-supporting and thus make it possible for the United States to reduce drastically its enormous contribution to India's support and assistance.

On March 28, 1966, President Johnson formally proposed the establishment of an Indian-American Binational Foundation. The proposal was accepted in principle by the Indian Prime Minister, Mrs. I. Gandhi, and formal negotiations preparatory to the actual establishment of the Foundation are expected to begin in 1967.

(b) Estimated monetary and other benefits.-The cost of establishing the Foundation is estimated to be $300 million. Since the money to finance the Foundation will be provided out of rupees already held by the United States as excess foreign currency, it could be said that the United States will realize a savings of $300 million only if a Binational Foundation would have been financed by the United States even without its excess holdings of rupees. In any case, the establishment of the Foundation constitutes a more effective use of excess U.S. rupee holdings.

2. Study of Utilization of Excess U.S.-Owned Foreign Currencies.

(a) Summary of investigation. Following the studies which resulted in the report on U.S.-owned foreign currencies (I.A., supra), the subcommittee and the GAO examined the subject further and vigorously pushed dollar-saving possibilities. Recent reviews have pinpointed two specific areas where greater use of excess foreign currencies could be made with corresponding savings in dollar expenditures. These reviews showed that about $3.1 million annually was being expended in dollars instead of available foreign currencies for

international air travel and international transportation of personal property.

With encouragement from the subcommittee, some corrective action. in these areas was taken by the agencies concerned. For example, the Bureau of the Budget recently approved amendments to the Standard Government Travel Regulations. The subcommittee believes that further improvements are necessary and has recently apprised the State Department of its responsibility in this area.

(b) Estimated monetary and other benefits.-The GAO has estimated that annual savings resulting from the subcommittee's action could be in excess of $3.1 million. This amount is expected to increase as Government travel increases and as further improvements are made.

3. Investigation of MAAG Staffing Patterns.

(a) Summary of investigation.-The subcommittee has been carrying on an intensive study of the Military Assistance Advisory Group (MAAG) program since the issuance of a GAO report entitled "Inefficient Utilization of Personnel To Administer the Military Assistance Program in Western European Countries." This report charged that the MAAG's in Western Europe could either be drastically reduced in size or eliminated because of the decline of grant aid to these countries from $2.3 billion in 1953 to $190 million in 1962 (about 8 percent of the 1953 figure). Personnel in 1962 remained at about 56 percent of the 1953 level. The subcommittee staff has been and continues to be in constant communication with appropriate officials of the Department of Defense and the Department of State.

(b) Estimated monetary and other benefits.-Shortly after the subcommittee launched its investigation and study, the MAAG mission in England was discontinued. This resulted in a reduction of 14 military personnel, their dependents, and certain local employees. It is conservatively estimated that an average of about $16,000 per person is spent annually to support military personnel overseas. Therefore, the elimination of the 14 military personnel from the mission represents a potential decrease in expenditures for MAAG operations of almost one-quarter of a million dollars annually, not including the cost of dependents and local employees.

(c) Hearings.-The subcommittee chairman attended briefings and held hearings on the subject in Europe. Discussions at a staff level have also been held in Iran, India, and Japan. The transcripts of the hearings have not been printed. Further hearings are planned.

4. Foreign Affairs Programing System (FAPS).

(a) Summary of investigation.-The subcommittee began a study of the State Department's new foreign operations programing system, which is similar to the system created by the Department of Defense to plan and control the allocation of resources for the accomplishment of defense objectives. The objective of the State Department's effort is to improve control over the complicated activities of the various Government agencies which have responsibility for operations in foreign countries. The subcommittee held an informal hearing at

which senior representatives of the Department of State explained the program.

Since this hearing, the system has been extensively revised as a result of field tests conducted in 13 countries. In addition, the Secretary of State has appointed a high-level panel to advise him on the development of the FAPS. Further changes are planned and the subcommittee is maintaining close contact with the panel and with the Department of State. The subcommittee intends to pursue its investigation of this subject in the near future.

(b) Estimated monetary and other benefits.-It is not possible to say, at this time, what monetary benefits might result from the subcommittee's investigation.

5. Study of the Investment Guaranty Program.

(a) Summary of investigation.-The subcommittee conducted an intensive investigation into the operations of the U.S. investment guaranty program under section 221 of the Foreign Assistance Act of 1961, as amended (Public Law 87-195, 75 Stat. 424).

The U.S. investment guaranty program came into being in 1948 as part of the Economic Cooperation Act, designed to apply to the European recovery program countries. With the expiration of the ECA, the Congress included the program in the Mutual Security Act of 1961 (65 Stat. 384) and it was continued under subsequent Mutual Security Acts.

The present program allows for two types of guaranties, the socalled specific-risk guaranties under section 221(b)(1) of the act and the "extended-risk" guaranties under section 221 (b) (2). The specific-risk program was limited to $1 billion by the 1961 act. The present ceiling on all guaranties is $5 billion under the Foreign Assistance Act of 1965. The income from premiums for guaranties under both programs totaled $3.03 million in 1962, approximately $4 million in 1963, and $6.8 million in 1964. The subcommittee staff inspected files and records and met with top officials of the State Department and AID to discuss incidents of questionable management in the

program.

(b) Estimated monetary and other benefits.-Undetermined at this

time.

6. Study of Illegal Obligations of Appropriated Funds.

(a) Summary of investigation.-A recent GAO report revealed that the Department of State continued to obligate certain of its fiscal year 1964 appropriations well after the end of the fiscal year on June 30, 1964. A total of 296 purchase orders for a combined total of $512,163 were processed after the close of the fiscal year, backdated to June 30, 1964 or a prior date, and charged to fiscal year 1964 appropriations. These actions were illegal and violated provisions of the annual appropriations acts and related Federal statutes, regulations, and GAO decisions. Subcommittee staff investigators, working closely with officials of GAO, initiated a study which was instrumental in calling to the attention of high State Department officials the need for the creation of tighter management and audit controls.

(b) Estimated monetary and other benefits.-Not estimable.

7. Inquiry Into Overseas Transportation and Sales of Privately Owned Vehicles.

(a) Summary of investigation.-In many cases, U.S. Government agencies transport employees' private automobiles to overseas posts at Government expense. Costs of transportation in fiscal year 1966 were $34 million. In many cases, at the end of their tour of duty employees attempt to sell these automobiles to citizens of the host country, often at a very high profit. As a result, there have been instances that have caused embarrassment to the U.S. Government. For example, in a recent case in Brazil, two U.S. Government employees were called before local courts. Following the subcommittee's inquiry, a joint State/AID/USIA circular was issued on February 4, 1965, setting forth guidelines intended to curb, and if possible to eliminate, recurrences of this embarrassing problem.

(b) Estimated monetary and other benefits.-It is not possible to estimate the amount of money saved.

8. Investigation of AID Loan for Procurement of Locomotives for the Korean National Railways.

(a) Summary of investigation.-It was alleged that AID had acted improperly in calling for the rebid of one part of a contract to procure 49 diesel electric locomotives for Korea. The problem arose because the winning bidder deviated from one part of the specifications contained in the invitation to bid. The consultants to the Korean Railways recommended that the lowest bidder be awarded the contract despite this deviation. The high and only other bidder maintained that he should be awarded the contract because of the low bidder's deviation from the stated specifications. After consultation with the GAO, AID decided to call for a rebid of one part of the contract. The subcommittee found no evidence to substantiate the allegation that AID had acted improperly and concurred in AID's decision to request a rebid.

(b) Estimated monetary and other benefits.-No monetary benefits are directly attributable to this investigation.

9. Redefinition of Permissible Areas for the Purchase Overseas of Military Supplies With Non-Appropriated Funds.

(a) Summary of investigation. During its investigation of the U.S. economic and military assistance programs in Vietnam, the subcommittee noted that military post exchanges and commissaries were spending large sums of money for the purchase of foreign goods for resale by U.S. installations.

Although such purchases were theoretically limited to the "local market" area, the subcommittee found that a loose interpretation of this term was being used to justify the purchase of foreign goods from virtually all sources. As a result of the subcommittee's inquiries, the Department of Defense issued a new and more restrictive definition. of the term "local market."

(b) Estimated monetary and other benefits. Since the new definition was issued only a few months ago, it is not possible to obtain

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