PAGENO="0001"
4
SURVEY OF GOVERNMENT OPERATIONS ~
PART 8--CIVIL AERONAUTICS BOARD
i~ DOC~
HEARING
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON
GOVERNMENT OPERATIONS
HOUSE OF REPRESENTATIVES
NINETIETH CONGRESS
SECOND SESSION
MAY 7, 1968
Printed for the use of the Committee on
98-391
iSu 7/~/pe1~
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 1968
~1c3'MS
Operations
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COMMITTEE ON GOVERNMENT OPERATIONS
WILLIAM L. DAWSON, Illinois, Chairman
CHET HOLIFIELD, California
JACK BROOKS, Texas
L. H. FOUNTAIN, North Carolina
PORTER HARDY, Ja., Virginia
JOHN A. BLATNIK, Mimsésota
ROBERT E. JONES, Al~bama
EDWARD A. GARMATZ, Maryland
JOHN E. MOSS, California
DANTE B. FASCELL, Florida
HENRY S. REUSS, Wisconsin
JOHN S. MONAGAN, Connecticut
TORBERT H. MACDONALD, Massachusetts
J. EDWARD ROUSH, Indiana
WILLIAM S. MOORHEAD, Pennsylvania
CORNELIUS E. GALLAGHER, New Jersey
WILLIAM J. RANDALL, Missouri
BENJAMIN S. ROSENTHAL, New York
JIM WRIGHT, Texas
FERNAND J. ST GERMAIN, Rhode Island
CHRISTINE RAY DAvIs, Staff Direct or
JAMES A. LAWmAN, General G~ounsel
MILES Q. ROMNEY, Associate General C~ounsel
J. P. CARLSON, Minority eJounsel
WILLIAM IL C0PENHAvER, Minority Professional Staff
GOVEI~NMENT ACTIvITIEs SUBCOMMITTEE
JACK BROOKS, Texas, C~hairman
WILLIAM S. MOORHEAD, Pennsylvania OGDEN R. REID, New York
WILLIAM J. RANDALL, Missouri FLETCHER THOMPSON, Georgia
DANTE B. FASCELL, Florida MARGARET M. HECKLER, Massachusetts
ERNEST C. BAYNARD, Staff Administrator
WILLIAM M. JONES, Counsel
IRMA REEL, C'lerk
LYNNE HIGOINBOTHAM, Clerk
(II)
FLORENCE P. DWYER, New Jersey
OGDEN R. REID, New York
FRANK HORTON, New York
DONALD RUMSFELD, Illinois
JOHN N. ERLENBORN, Illinois
JOHN W. WYDLER, New York
CLARENCE J. BROWN, JR., Ohio
JACK EDWARDS, Alabama
GUY VANDER JAGT, Michigan
JOHN T. MYERS, Indiana
FLETCHER THOMPSON, Georgia
WILLIAM 0. COWGER, Kentucky
MARGARET M. HECKLER, Massachusetts
GILBERT GUDE, Maryland
PAUL N. McCLOSKEY, JR., California
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CONTENTS
Statement of John H. Crooker, Jr., Chairman, Civil Aeronautics Board;
accompanied by Charles F. Kiefer, Executive Director; Irving Roth,
Director, Bureau of Economics; Joseph B. Goldman, General Counsel;
Harold R. Sanderson, Assistant Executive Director and Secretary;
John B. Russell, Assistant Executive Director for Operations; Thomas
L. Wrenn, Chief Examiner; Warner H. Hord, Director, Bureau of Ac-
counts and Statistics; Joseph C. Watson, Director, Bureau of Inter-
national Affairs; Robert Burstein, Director Bureau of Enforcement;
Alphonse M. Andrews, Director, Bureau of operating Rights; John W.
Dregge, Director, Office of Community and Congressional Relations;
Marvin Bergsman, Director, Office of Personnel and Security; and
Oscar C. Disler, Comptroller
EXHIBITS
Exhibit A-Fact sheets-Salary and expenses and payments to air
carriers-Combined programs
Exhibit B-Organization chart, Civil Aeronautics Board
Exhibit C-Program structure, Civil Aeronautics Board
Exhibit D-Fact sheet-Management support program
Exhibit E-Fact sheet-Awards of operating authority ~
Exhibit F-Fact sheet-Regulation of rates and fares ~
Exhibit G-Fact sheet-Enforcement of applicable laws and regulations
program
Exhibit H-Fact sheet-Support of air service through subsidy payments
program
Exhibit I-Fact sheet-Regulation of agreements and interlocking
relationships program
Exhibit J-Fact sheet-~egulation of air carrier accounting and reporting
program -
TOPICAL INDEX
Part 1~-Overall agency operations
A. General support ~
B. Budget ~
C. Accounting system ~
D. Management information system
E. Internal audit system
F. Automatic data ~
G. Personnel ~
H. General Accounting Office reports
I. Freedom of ~
Part 2.-Program review
A. Awards of operating authority program
B. Regulation of rates and fares program
C. Enforcement of applicable laws and regulations program
D. Support of air service through subsidy payments program
E. Regulation of agreements and interlocking relationships program.
F. Regulation of air carrier accounting and reporting ~
APPENDIX
Written responses of the Civil Aeronautics Boards to questions submitted
by the subcommittee
(~)
Page
2
4
8
8
9
34
38
41
45
47
49
~j .3
~ 8
12
13
13
15
28
29
29
29
33
33
38
40
45
47
49
51
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SURVEY OF GOVERNMENT OPERATIONS
PART 8-CIVIL AERONAUTICS BOARD
TUESDAY, MAY 7, 1968
HousE OF BEPRESENTATIVES,
GOVERNMENT ACTIVITIES SUBCOMMITTEE
OF THE COMMITTEE ON GOVERNMENT OPERATIONS,
Wa$hingtoii, D.C.
~ile subcommittee met at 10 a.m. in room 2247, Raybum House
Office Building, Washington, D.C., Hon. Jack Brooks (chairman of
th~ subcommittee) presiding.
Present : Representatives Jack Brooks, William S. Moorhead, Dante
B. Fascell, Fletcher Thompson, and Margaret M. Heckler.
Also present : Ernest C. Baynard, staff administrator ; William M.
Jones, counsel ; Irma Reel, clerk ; Lynne Higginbotham, clerk ; and
William CopenhaVer, minority staff.
Mr. BROOKS. The Government Activities Subcommittee, having been
duly organized under the Rules of the House of Representa~tives, the
meeting is her~by called to order.
The CAB is a small Federal agency with a huge responsibility. Con-
venient air service, linking locul communities to business and indus-
trial centers and other parts of the Nation, is essential to industrial
development and business growth. The economy of many local corn-
munities is deeply affected by CAB decisions as business and indu's-
trial leaders consider the adequacy of air service in selecting locations
for new plants and facilities.
The CAB was chartered by Congress to coordinate the economic
development of our Nation's `airlines and to oversee the fixing of routes
and rates to assure that an adequate, well-balanced air transportation
system is maintained.
The issues facing the CAB are often charged with emotion. They
range from the issuance of South Pacific route certificates worth mil-
lions of dollars to the imposition of a $2 charge on in-flight movies.
The CAB must consider the interests not only of `the airline industry,
but also the community, business, `and the traveling public. The impact
of the CAB's rulings is felt throughout the economy of this Nation.
Not only do we need `a modern network of air terminals, a safe and
effective air traffic control system, and modern, efficient aircraft, but
these elements must be coordinated into an economic, efficient, and
effective air travel system to serve our Nation to its fullest. Thi's is the
job of the CAB. Safe, efficient, and convenient air service linking
thousands of American communities is `an absolute must if our overall
program toward progress and a greater society is to become a reality.
There have been suggestions that the procedures of the CAB are
(1)
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2
antiquated and in need of an overhaul. The CAB handles millions of
dollars a year in dispensing direct subsidies and in issuing route cer-
tificates. We cannot afford waste or inefficiency. Our effort in the sub-
committee is to determine whether the CAB is in fact carrying out its
responsibilities with effectiveness and efficiency.
We have with us today the Chairman of the CAB, Mr. John H.
Crooker, Jr. Mr. Crooker was appointed by the President only a couple
of months ago. He well understands the important role which the CAB
plays in the national economy.
Chairman Crooker graduated from Texas schools, graduating with
distinction from Rice Institute a few years ago. He is also ~ graduate
with highest honors from the University of Texas Law School, and
is a knowledgeable, intelligent, honorable lawyer that I feel will do
an excellent job at the CAB. He has 6 years to do it in.
Mr. MOORHEAD. A longer tenure than we have.
Mr. BROOKS. I was going to say I have to be up to bat three times
before they can get to him.
Mr. Chairman, these hearings are being conducted `on a program-by-
program basis. The subcommittee wants to review each `of the CAB's
programs to `determine what the taxpayer ~s getting in return for his
dollar. We will first go into the general management of the agency
as a whole, and we will then look at each of your programs individu-
ally. We on the subcommittee realize that you have headed the Board
for a relatively short time, and if you want to refer some questions
to your `assistants we would certainly understand.
If you would at this time, I would appreciate your introducing the
officials of the CAB who have `accompanied you down here today.
STATEMENT 0]? JOHN H. CROOKEB, 311, CHAI1tKAN, CIVIL AERO-
NAUTICS BOARD, ACCOMPANIED BY CHARLES P. KIEPER, EX-
ECUTIVE DIRECTOR; IRVI}TG ROTH, DIRECTOR, BUREAU OP
ECONOMICS; IOSEPH B. GOLDMAN, GENERAL COUNSEL; HAROLD
:a. SANDERSON, ASSISTANT EXECUTIVE DIRECTOR AND SECEE-
TARY ; JOHN B. RUSSELL, ASSISTANT EXECUTIVE DIRECTOR FOR
OPERATIONS ; THOMAS L WRENN, CHIEF `EXAMINER ; WARNER
H. HORD, DIRECTOR, BUREAU OP ACCOUNTS AND STATISTICS;
JOSEPH C. WATSON, DIRECTOR, BUREAU OF INTERNATIONAL
AFFAIRS; ROBERT BURSTEIN, DIRECTOR, BUREAU OP ENFORCE-
MENT; ALPHONSE M. ANDREWS, DIRECTOR, BUREAU OP OPER-
ATING RIGItTS; JOHN W. DREGGE, DIRECTOR, OFFICE OF COM-
MUNITY AND CONGRESSIONAL RELATIONS; MARVIN BERGSMAN,
DIRECTOR, OFFICE OP PERSONNEL AND SECURITY ; AND OSCAR
C. DISLER, COMPTROLLER
Mr. CROOKER. Chairman Brooks, first let me express appreciation for
your very generous personal remarks about me. There may be in-
stances when I would like to have some staff person answer some in-
ouiry. inasmuch as I have been at the Board for only 2 months. The
Board's Executive Director, Mr. Charles Kiefer, is at the table with
me, as is the Assistant Director of Operations, Mr. John Russell.
PAGENO="0007"
3
The other persons will probably address themselves to questions in
the second half of your inquiry, Mr. Chairman, as to the various pro-
grams.
Mr. BRooKs. We have a number of detailed questions, Mr. Chair-
man, on the various aspects of the management of your agency which
we would like to submit to you for written responses to be placed in
the record.
(The written responses of the CAB to questions submitted by the
subcommittee are in the appendix.)
PART 1.-OVERALL AGENCY OPERATIONS
Mr. BROOKS. At this time we would like to discuss some of those
management concepts in general terms.
Do you have a fact sheet indicating the total funds available to
your agency as a whole for fiscal 1968?
Mr. CROOKER. We have such a fact sheet. I will say for salaries and
expenses, for fiscal 1968, we have an appropriation of $8,983,000 and
an anticipated supplemental appropriation of $99,000 for the pay raise
cost. We estimate reimbursement from `other Government agencies of
$40,000, for a total of $9,1~2,000 for salaries and expenses.
So far as the so-called subsidies are concerned, "Payments to air
carriers," there is an appropriation of `$52,500,000 for fiscal 1968, and
cash brought forward from fiscal 1967 of $12,091,000, or `a total of
$64,591,000 available for payment to air carriers, that is, subsidy, in
fiscal 1968.
Mr. BROOKS. Without objection we will place in the record exhibit A
relating to this combined program; exhibit B, the organizational
structure; and exhibit C, the program budgeting breakdown.
(Exhibits A, B, and C follow:)
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ExHmTT A-FACT SHEETS-SAlARY AND EXPENSES AND PAYMENTS TO An~
CARRIERS-COMBINED PROGRAMS
600
610
~20
£30
£40
650
660
p100
500
310
311
320
821
830
831
340
841
350
351
360
361
370
871
380
381
DEPARTMJ~NTORAGENCY ~ PROGRAM ~ ~ ~
P~h~t~d f ~ ~f H~n~ G ~ ~ A~ti~ities S~b~mm~ttee Chai~an Jack Bcaokc
~:J' Excludes $1~O reimbursements.
I
4
100
200
300
CODE
CODE
400
500
510
511
Uccbligatcd
FISCAL YEAR 1968
~ ~.a ~ 11carac~
512
513
Appccpciaticc cc C ccccnt
Yca~ Rcq~ccct
Tetal
Atailabta
Tetci Obltgatcd
cc Ecpcadcct
521
322
blot
324
530
340
341
542
550
Supplies and Consum-
able Materials
Uapital Jtquipment
Land and Structures
Additional Investment
12~
1. Output
2. Input
Prior Ftsoal
Year
3. Output
4. Input
4. Outnut
5. Input
5. Output
7. Input
7. Output
8. Input
8. Output
PAGENO="0009"
5
500
510
511
512
513
520
521
522
523
524
530
540
541
~42
550
600
610
620
630
640
650
660
`700
800
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
Expenses:
Grants
. Input
8. Output
Psistsd ssss, sf Hssss C sesssxss S Asth'itis~ Ssbsss,xittes, Chshusss Jask Bsssks
!J Excludes ~1IO reimbursements,
100
200
300
400
DEPARTMENT OR AGENCY PROGRAM SUBPROGRAM
Civil Aeronautics ~oard Salaries arid E~enses
CODE CODE CODE
ANALYSIS AND CONTROL CODES -
vISCAL YEAR i~68
(4fl thnlLee~nrTh ~ -nrlars)
Ussblignted
C n~ry~sr
AppropHntiex or C noun
Yx~ R,u~,t
t Tutsi
Asnilnbts
Tutsi Obligstsd
nr Espssd,d
"In house" inputs
Personnel:
Printing
123
Supplies and Consum-
able Materials
Capital Equipment
228
Land and Structures
Additional Investment
-
~
-
-
Rents
Total
Total
Total
Input-output ratio
1. Input
1. Output
Psior Fissol
Your
98-391-68-pt. 8-2
PAGENO="0010"
100
200
300
DEPARTMENT OR AGENCY
PROGRAM
GITEPROGRAM
Civil iteronuu~ico Board
CODE
Paymonto to Air Carriçr~
CODE
CODE
ANALYSIS AND CONTROL CODES
400
300
010
511
512
513
520
521
522
523
524
530
540
541
542
550
600
610
620
630
640
650
660
700
..In souse" inputs
Personnel:
Comp.
Expenses:
Supplies and Consum-
able Materials
Unebligated
FISCAL YEAR
~.-~---~ ~-- Th ~f
Appeupriatios or Caeratt
~g~g Requmt
Tetet
Aeatlebe
Petor Fisest
Yme
T~tnl Obtigaiei
or Eepe~dnl
6
- lnput.output ratio
1. Input
1. Q
2. Ii
2. Output
~: Input
3.
4. 1
A~ Output
800
810
811
820
821
830
831
340
841
850
851
860
861
870
871
880
881
Output
Peistsd fmum gf Husse G seem nest Aetiritim Sabguamittee. Chairmas Jsek Bestks
PAGENO="0011"
FISCAL YEAR1968
App~opri~ti~ C~ent
Y~ Req~t
!/ Reimbursements: National ~ransportation. Safety Board - CAB furnished
mail and messenger service, secretariat services, teletype service and
personnel support to NTSB for first half of fiscal year 1968. Also
CAB to furnish ADP services , printing plant services and supplies frczn
stockroom for entire fiscal year 1968.
DEPARTMENTORAGENCY PROGRAM ~
~9v11 ~---------~-~-- 1~rv~w1 ~
T~t.I ObUg~t,d
Supplies and Consum.
able Materials
Psintod f ssu,~ nf Hsu,e G soes. nu.~t A.tloities Subcommittee Chakman Jack B.osk.
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8
ExHIBrr B-ORGANIZATION CHART-CIVIL AERONAUTICS BOARD
BXHIBIT C-PROGRAM STRUCTURE-CIVIL AERONAUTICS BOARD
~JIVIL AERONAUTICS BOARD-PROGRAM STRUCTURE-MAJOR PROGRAM CATEGORIES
1. Awards of operating authority.
2. Regulation of rates and fares.
3. Enforcement of applicable laws and regulations.
4. Subsidy support of air service.
5. Regulation of agreements and interlocking relationships.
6. Regulation of air carrier accounting and reporting.
Mr. BROOKS. Would you give us the total number of employees in
the agency, Mr. Chairman?
Mr. CROOKER. The Board's authorized position level in fiscal year
1968 is 669 positions. Average employment is estimated at 650.
Mr. BROOKS. They are located where geographically?
Mr. CROOKER. Thirty are located outside of Washington. These are
field auditors; 11 in New York City, 13 in San Francisco, six in
Miami. All other employees of the Board are here in Washington.
A. GENERAL SUPPORT PROGRAM
Mr. BROOKS. Under your program budgeting breakdown, do you
have a support program covering the operations of sour office and
other policymaking personnel not directly attributable to a program
function?
Mr. CROOKER. Yes, sir. We call this management support. It covers
the functions that facilitate the work of the Board members and the
program staff. These would include personnel management, budgeting
and accounting, management analysis, payrolling, providing supplies,
CIVIL AERONAUTICS BOARD
BUREAU OF ~
ACCOUNTS AND STATISTICS
REGULATIONS AND REPORTS
DIVISION
COST AND STATISTICS DIVISION
FIELD AUDITS DIVISION
DATA PROCESSING DIVISION
BUREAU OF ECONOMICS
RATES DIVISION
LOCAL SERVICE DIVISION
PLANNING, PROGRAMMING
AND RESOARC0]
BUREAU OF ENFORCEMENT
LEGAL SIVISION
INVESTIGATION DIVISION
CONSUMER COMPLAINT
SECTION
OUREAU OF
INTERNATIONAL AFFAIRS
GEOGRAPHIC AREAS
PROLECT DEVELOPMENT STAFF
[- BUREAU OF
OPERATING RIGHTS
LEGAL DIVISION
STANDARDS DIVISION
LICENSING LINIOU
.. SUPPLEMENTARY SERVICES
DIVISION
AGREERENOS DIVISION
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Expenses:
Transp
Printing
Supplies and Consum-
able Materials
MANAGEMENT SUPPORT
Work performed by the Management Support Offices that cannot be directly
related to one or more Board programs is included in the management support
program. Work that is directly related to or an integral part of one or more
of the Board's programs such as receipt, filing and maintenance of the docket
records and the review audit and certification of subsidy claims are charged to
the program(s) involved.
9
equipment, space, messenger services, central files, distribution of pub~
lications, and payment of bills for operating expenses.
Mr. BROOKS. Without objection we will place exhibit D on general
support in the record at this time.
(Exhibit D follows:)
ExHmIT D-FACT SHEET-MANAGEMENT SUPPORT PROGRAM-CAB
100
200
300
400
DEPARTMENT OR AGENCY PROGRAM SUBPROGRAM
Civil Aeronatxtics Board ~nngement Supporb
CODE CODE CODE
ANALYSIS AND CONTROL CODES
FISCAL YEAR 19613
t~n~thoonandn p~ u1~1ar~:) _____________
"In house" inputs
Peroonnel:
Usobligstnl
Apposoolatise or Coeoeot
Yesr Reqocot
Travel
Totsi
A~siIsbIe
Commt
Totsi Obligotod
Os Espeodod
Capital Equipment
2
000
610
511
512
513
520
521
522
523
524
530
54~l
141
542
550
600
610
620
630
640
650
660
`zoo
200
810
811
820
821
830
831
240
841
850
851
860
861
870
871
880
281
Total
Tothl
Input-output ratio
. Input
. Output
Poise Fisosi
Ys a
7. Input
8. Output
Printed f sea,, of Hss,~ 5 seem snot Aetieiti~s Osbsosjssitt,s, Choisnon Jock Brssk,
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I. FinanciaZ requirements
10
Actual, 1967
Estimate,
1968
Estimate, Increase
1969
Permanent positions
Average employment
Obligations
64
60. 8
$686, 768
59
59. 2
$644, 159
59
59. 2
$664, 366 $20, 207
II. Program and justification of staff requirements
A. Personnel and training
The purpose of this work is to maintain a personnel program for the selection,
development and retention of the best qualified personnel to enable the Board
to fulfill its statutory functions.
The work performed includes providing management and supervisory per-
sonnel with advice and assistance in meeting specific personnel problems, estab-
lishing and administering agency policies and procedures consistent with law
and regulation generally applicable to Federal agencies in the fields of recruit-
ment and placement, position classification and salary administration, perform-
ance rating and employee recognition, leave and retirement, employee training
and development, maintenance of records and compilation of required reports.
Also, activities involved in the conduct of the Board's personnel and physical
security program are included.
B. Management analysis
This work consists of providing Board-wide management assistance through
reviewing the organization, methods and procedures of the Board to develop im-
provenients ; conducting management studies and surveys ; providing technical
management advice and assistance to the operating components, reviewing forms
and reports for improvements in design and content ; maintaining the CAB
manual (the official statements of the Board's organization, functions, and ad-
ministrative policies and procedures) ; and performing other management
services.
ci. Budget and fiscal
The work in this area includes (1) budget administration, including the devel-
opment and implementation of budgetary policies and procedures, review and
analysis of staff budget submissions, preparation of the Board's formal budget
estimates, development of fiscal plans reflecting the allocation of appropriated
funds and staff resources, control of appropriated funds through apportionments
and allotments, review and analysis of expenditures, financial and budgetary
reporting, liaison with other agencies on budgetary matters, and advice and
assistance to the operating bureaus on financial and related matters ; (2) ad-
ministrative accounting services, including the maintenance of the formal books
of account, preparation of payrolls and payroll records.
It is estimated that approximately $400,000 will be collected annually by the
CAB in connection with filing and lic~vnse fees. Revenues resulting from charges
for supplying Board publications on an annual basis and furnishing of special
services, such as copying, certifying, and searching Board records totaled $67,700
in 1967 and are estimated to increase to $90,000 in 1968 and $100,000 in 1969.
Receipts for the collection of filing and licensing fees and revenues from supply-
ing Board publications and services are estimated to total $500,000 in fiscal year
1969.
D. Administrative services
This work involves proeurement, storage and issue of furniture, furnishings,
supplies and equipment, communications and transportation, mail and messenger
service, building and equipment repairs and maintenance, space management,
issuance and control of credentials and passes, and required recordkeeping and
reporting. The central files work involves the receipt, filing, and servicing the
records needs of the Board's staff except for formal docket and public reference
materials maintained in the Office of Secretary, and working papers and con-
venience records maintained in the operating bureaus and offices. Files, records,
and associated materials are provided to operating personnel as needed. This
function also includes files management and disposal procedures and practices.
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11
Total, management support_
WORKLOAD
Workload item
Items completed
or processed
Actual
1967
Estimate
1968
Estimate
1969
Increase
1. Personnelandtrainlng
2. Management analyses
3. Budget and fiscal
4. Administrative services______~____.____~________~__
5,194
265
17, 514
956, 704
3,900
200
18, 309
941, 300
4,150 250
200
~ 19, 017 708
940, 800 (500)
DISTRIBUTION OF MAN-YEARS BY
ORGANIZATION
Man-years
Actual, 1967
Estimate, 1968
Estimate, 1969 Increase
Bureau of Accounts and Statistics 0 4 0 4 0 4
Assistant Executive Director for Operations (overall
direction) 2 0 2 0 2 0
Office of Personnel and Security 7 7 8. 6 8. 6
Office of Comptroller 16 9 16 4 16 3 (0 1)
Office of Management Analyses 5. 0 3. 2 3 5 .3
Office of Administrative Services 28. 8 28. 6 28. 4 (2)
608 592 5~2
I
The officials responsible for the operation of this program:
John H. Crooker, Jr., Chairman
Charles F. Riefer, Executive Director
John B. Russell, Assistant Executive Director for Operations.
Mr. BROOKS. Will you give US a brief justification on the size and
extent of this support program as to money available in fiscal year
1968?
Mr. CROOKER. All but about 14 percent of the total CAB manpower
is directly assignable to one or more of the Board's programs. Only
in the offices of the members, and this includes the Office of the Execu-
tive Director and so on, will there be maiipower that cannot be identi-
fled with specific programs. In these latter instances it is necessary
to make some allocation of man-years to program areas. The alloca-
tion of certain personnel to specific programs leaves approximately a
total of $644,000 available in fiscal 1968 for expenditures under this
general support program-management support program.
It might be that Mr. Kiefer, the Executive Director, would care to
enlarge upon that statement if the chairman of the subcommittee would
be willing, sir.
Mr. BROOKS. Mr. Kiefer.
Mr. KIEFER. Mr. Chairman, the category of management support
comprises in 1968 some 8 percent of the total positions available to the
Civil Aeronautics Board. We have made quite a little study of the
relationship of management support to the program areas of the
Board, and I might say, sir, that this relationship, whether it is ex-
pressed in terms of dollars or positions or man-years, has been coming
down in the last 2 or 3 years. So, what we have been seeking to dis-
cover is the right relationship in our own experience between the num-
ber of people and the number of dollars that are required to service
the program areas of the Board, including the members, in the most
effective and economic way.
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12
B. BUDGET PROCESSES
Mr. BROOKS. Would you outline briefly and give us a status report
on the efforts of your agency on the implementation of the program
budgeting?
Mr. CROOKER. If I undei~stand your question, Mr. Chairman, as far
as management support is concerned, we have sought to reduce year
by year, both in dollars and persons. and man-hours or man-years the
amount neectect tor support of * specific programs hoping that through
efficiencies and the use of APP equipment and so on to cut down the
cost of operation in the general management support area.
~ ~ I could give figures percentagewise of the programs and manage-
ment support, having been 10.5 percent of total in fiscal 1966 and prob-
ably being only 8.8 percent in total in fiscal 1969. If I have missed the
specific question directed by the chairman, I will be happy to amplify
if you will point out what your inquiry is to me, sir
Mr BRooi~s Actually, Mr Chairman, what we are primarily con
cerned with is the status of your program budgeting , that is, the
budgeting of your funds by function. This procedure is sometimes
approved by the Bureau of the Budget ; some~imes it is fully imple-
mented within an agency , sometimes it is just a dream within an
agency , sometimes the agencies are not for it , sometimes it is pretty
well integrated with their entire budgetary process. That is what we
are interested in. Itmay be that Mr. Kiefer is more familiar with this
concept, and you might put him to work if you want to
~ Mr. CROOKER. I understand that our program breakdown has been
approved by `the Bureau of the Budget and fiscal 1969 budget esti-
mates submitted to the Bureau last fall were based on this program
structure. The budget justification submitted to the Congress was also
on this basis.
Now, if Mr. Kiefer would like to amplify on that, I would be happy
to have him do so.
Mr. KIEFER. That is essentially correct, Mr. Chairman. The Civil
Aeronautics Board has been excluded by the Bureau of the Budget
from formal compliance with the rigors and the strictures of PPB.
We on our side have not been unresponsive to the essential desires of
the President and the Bureau of the Budget and indeed our colleagues
elsewhere to modernize and adjust our own system, since as you have
mentioned, sir, we are a small agency and what we have done is `to
recast our older financial process system into a , program structure
which you have before you today and which has been presented to the
committees of `the Congress and ha's been `approved by `the Budget
Bureiau. We `think this represents for our small `agency a mode~t par-
ticipation in this effort.
Mrs. HECKLER. Mr. Chairman?
Mr. BROOKS. Yes, Mrs. Heckler.
Mrs. HECKLER. I just wondered, Mr. Kiefe;r, why it is your agency
is not listed in this Bureau of the Budget Bulletin 68-9 ~ which lists
those agencies that have PPB systems. Do you happen to know?
Mr. KIEFER. I wish I could give you n specific answer. We have won-
dered about that ourselves. Some of our sister regulatory agencies
have been included. I think the principal thrust has been `to the larger
departments of the Government and perhaps on a more restricted and
PAGENO="0017"
13
experimental way to `some of the smaller agencies to g~t,1franIdy, an
experience in the smaller agency of the requirements of this system.
In our own case, Mrs. Heckler, we have not found it necessary to
add any additional people. We have adjusted internally the operations
~nd the processes of our budget formulation within this new revised
structure which I like to think we would have done whether we had
PPB or not.
Mr. BRooKs. I would add at this point that this committee about a
year ago, when it , was obvious that some agencies were not included
under the PPB programing concept-were not mandatorily in.
cluded-we wrote all those agencies and suggested that they consider
the utilization of this concept in their budgeting. The CAB has done
so and a good many of the other agencies not mandatorily under this
system have tried to adapt this concept to upgrade their own budget
processes.
Mrs. HECKLER. You think it is more or less an oversight?
Mr. KIEFER. No, I don't believe it is an oversight. I believe it is a
deliberate decision in the Bureau of the Budget to give us the benefit
perhaps of the experience that may be gathered in other smaller agen-
cies before the mandatory aspect really falls on us.
Mrs. }IECKLEIt. I see.
Mr. BROOKS. I think that the problem that the Bureau of the Budget
was concerned about was getting some kind of a handle on the bigger,
larger, more massive agencies. BOB felt that the smaller agencies with
more specialized responsibilities and fewer personnel were able mdi-
vidually, through their personnel offices or through their Chairman or
Board members, to keep a pretty good grasp of the entire operation.
I think that was their basis for excluding some agencies, not that
they didn't think the application of it could not be utilized in smaller
agencies.
Any further questions, Mrs. Heckler?
Mrs. HECKLER. Not at this time, Mr. Chairman.
0. ACCOUNTING SYSTEM DEVELOPMENT
Mr. BROOKS. Mr. Chairman, would you outline the work that your
agency is doing regarding your accounting system development?
Mr. CROOKER. First I might comment, Chairman Brooks, that the.
GAO has given its approval to our accounting system. This was ap-
proved by the Comptroller General by letter of January 18, 1968, which
I believe your committee has. The accounting system is basically estab-
lished in terms of accrual costs, as the GAO and this subcommittee
have recommended. They are maintained in acordance with the Budget
and Accounting Procedures Act of 1950 and the standards and prin-
ciples prescribed by the Comptroller General.
D. MANAGEMENT INFORMATION SYSTEM
Mr. BROOKS. There are some other questions on that which I am sure
you can answer when submitted in detail.
What is the st~tus of your management information system, Mr.
Chairman.
Mr. CROOKER. The Board's management information system com-
prises both formal and informal procedures. It is composed of three
98-891--OS-pt. S-8
PAGENO="0018"
14
basic components : environmental data, technieaJ. data, and internal
data.
, Under environmental data we have economic, political,. social sub-
sections. of that sort of data.
Under technical data we have industry statistics. We have analyses,
research, and studies.
So far as internal data are concerned, we have financial informa-
tio~, workload data, manpower data, and organization data.
The Bureau of Economics contains the principal economic advisory
and research staff. It provides economic assistance to the Board in con-
sidering and deciding cases, `and through its division of planning, pro-
graming, and research, it has `the responsibility for looking into the
future `and anticipating new developments which nre likely to be of
consequence for `the air transportation system. Hopefully, this results
in anticipating potential critical problems in time to avert crises.
Research outputs ure used to develop some policy guidelines which
enable the Board to deal effectively with routine and novel air trans-
portation systems. As a result of research and planning in the CAB,
we feel we have a better understanding of the air transport industry
as it exists, and with this we are better able to foresee changes that `are
likely to occur in the industry.
Our research `and evaluation outputs of the existing airline market
structure and industry performance are designed to provide nnswers to
such questions `as presen:t passenger and cargo market characteristics;
whether there are deficiencies in the existing route structures causing
inadequate air service for the public, whether current rates and fares
meet the requirements of expanding industry and anticipated changing
consumer markets ; what the current financial conditions and operating
characteristics are of the industry `and selected carrier groups such as
local service carriers, for example ; and what i's the interrelationship of
air transport to other transportation modes and to general economic
conditions.
Based on these outputs and understandings, our research is directed
to `answer questions such as whether present passenger and cargo de-
mand trends ~ciill persist, and what economic problems will the CAB
have to deal with because of new `aircraft technology.
We have, as you pointed out initially, `a relatively small staff `and
some limited sources for research `and planning, but the very highest
priority i's given to applying research data to the day-to-day `operat-
ing problems of the Board.
I think, Mr. Chairman, that `at least would constitute `an initial
sta)tement as to our mnnagement information system.
Mr. BRooKs. Mr. Chairman, `apparently the CAB does not have a
fully coordinated computer-based MIS system, aithough you have a
good number of `the segments that would maJ~e up such a system ; is
that apparently the status?
Mr. CROOKER. I understand, Mr. Chairman, that we don't have a
fully `automated system of the dBtails on our machine. I would be
pleased for Mr. Kiefer to answer in more deitail, if you will, sir.
Mr. BROOKS. You understand what I am concerned about? You do
not yet have an `agencywide computer-based information system that
you can operate, `although you have some of the components, app~r.
ently. I don~t know how you have them correlated.
PAGENO="0019"
15
Mr. KIEpEi~. We `have the form 41, which coP1~ains the basic statistics
ttnd data on the performance of the airline indus~ry ; and then we have
the data banks, both in this area and in the area of passenger origin
and destination, and these are in the data banks of the oomputer in the
Board.
These are coordinated. They are Board-wide in their u'~e and app1i~
cation. As ~ byproduc~t of this capability with the computer we have
our manpower and our financial management and our payroll systeni
working on the computer at the same t~ime.
In the sense of a fully blown sophi~ticated larger scale mai~agement
information system as might be found in some other large private ~d
public agencies, we neither have the need r~or, may I say, sir, the
resources to mount such an effort.
Mr. BROOKS. D~ you feel that yours is coordinated as well as could
be done from the standpoin~t of an efficient operation?
Mr. KIEFJ~R. Yes, sir. We operate the computer today more than on~
shift, very often two shifts. The work on the computer is principally
program work of the Board.
As I said earlier, the time and manpower required to do the internal
financial-managerial aspect of the Board at this time is much less oon~
sequential but no less important.
E. INT1~RNAL AtDIT 5YST1~M
Mr. BROOKS. Mr. Chairman, would you describe briefly your internal
~ auditing system?
Mr. CROOKER. An internal audit function was estabjished at CAB
during this fiscal year. Only part of a man-year was allocated to this
function in fiscal 1968 beeause of the rela~flvely small size of the Board.
The capability was allocated from the Field Audits Division which
~ is in Our Bureau of Accounts and Statistics. We do have an internal
~ audit staff made up of persons with experience in accounting and
auditing because the entire technical staff of the Field Audits Division
is comprised of qualified accountants, qualified academically and by
experience, fully meeting the requirements of the Civil Service Corn-
mission relating to professional accountants.
In connection with the scope of review by the internal aucth staff
being limited, ~t `has been limited not by management direction but
merely because of limited manpower resources.
As a first step in the institution of `this internal `audit p~ograrn, the
audit work has been limited to a review of the agenoy~s payroll system
and procedures, including the applicstion of automatic data processing
to payroll preparation and related output.
I think as far as the question of all reports and recommendations
of the internal `audit staff being handled properly within the Board,
the initial `report is nearing `completion, and it will be `submitted to the
I Chairman. The `audit staff is responsible only to the Chairman and
not `to `any person who might `also be primarily responsible for au
activity which might be audited. So we believe the auditor i's a'de-
quately `protected from any possible arbitrary personnel `actions that
might be taken by any particular superior or other official or em-
ployee of the Board.
I `th'ink, in general, Mr. Chairman, that `discusses the internal audit~.
1 ing procedure so far as the CAB is concerned.
PAGENO="0020"
16
Mr. BROOKS. That ~ is a good delineation of whact you have now. I
think it indicates thait you assign from your external audi~ pool, per-
sonnel t1o work for a given period of time in your `own internal audit.
But this is the checking of check stubs and vouchers and aotual cx-
penses. It is pretty muoh of a ~raight audi~t opera~ion as distinguished
from a management concept audit which might give the management
ait the CAB a more objective evaluation of the programs and the func-
thions and the execution of orders and directives of your own manage~
ment, as well as congressional directives.
I think that internal audits shsuld reflect something other than just
~n account of the money and the travel. I think sometimes the concept
of what is being done and `an evaluation `of what the results arc in a
given expenditure of `time and effort would be helpful to any Ohair-
man of the Board and to any member of the Board. I think such an
evaluation via an internal auditor with a little more authority and
vision could give you, as Chairman of the Board, or any chairman
of any agency, a better grasp of just how your various department
heads are doing.
If that were submitted to the Chairman, it would give you an oppor-
tunity to evaluabe them without having to check i~t through the in-
numerable deputies that are in every agency. Occasion!ally you might
want to get a less oriented view of just how that agency is operating.
I think there is great merit in an internal audit that reflects both the
way that the effort is functioning and what kind of results you are
getting. I think you ought to consider that. I think it would be worth-
while for you. You have plenty of time to appoint a couple of auditors
and work on that. It would be sort of refreshing to look at an analysis
of what was done without having the official responsible approve it
or disapprove it first.
Mr. CRoo~R. Mr. Chairman-
Mr. BROOKS. It might inspire them a little more toward max~imum
efficiency and productivity.
Mr. CROOKER. We shall certainly take most seriously your
suggestions.
If I might respond for a moment, I will say that in these past 6 or 7
weeks I have tried to take a personal interest in ascertaining what
workload really faces each of our Bureaus. I have spent a great deal
of time with the executive director and with persons in each of the Bu-
reaus, to ascertain some of these things, not at the level of an auditor
making the inquiry, because sometimes an auditor will perform the
more restricted function of adding up 2 and 2 to see whether the
answer is 4, but we have compared the number of tariffs that have
been filed in the last 12 months versus the number filed in a preceding
~2 months, the number of new dockets filed in econoniic proceedings.
We are in every possible way studying the workload in our Bureau of
Operating Rights, both so far as domestic matters are concerned and
international matters. We are doing the same thing with our Bureau
of Enforcement, and, of course, we will give serious consideration to
having one of our auditors who is placed in this position of doing in-
ternal audit work-whether that is temporary additional duty or a
permanent duty for one-to likewise make a very impartial check of it.
But I want to assure this committee that even if that be done, both
the Cha~irman and the Executive Director of this agency take that t::~
PAGENO="0021"
17
very seriously as one of the duties and obligations to see that we per-
form effeotively.
Mr. FASCELL. Mr. Chairman, may I inquire ?
Mr. BRooKs. Yes, sir.
Mr. FASCELL. I would like to find out, Mr. Chairman, what the use
and relationship of your computer is to internal auditing and to pro-
graming. For example, regulation of air carrier accounting.
Mr. CRdOKER. As I understand it, Mr. F~ascell, the `air carriers sub-
mit their traffic and economic data, and we process that on our corn-
puter. lit is of great use to the Board-extremely necessary use to the
Board in terms of a proper rate of return industrywide, thither for the
trunklines, the local service carriers or all the certificated carriers.
Mr. FASGELL. May I interrupt you right there?
Some of the carriers, `of course, are on computers. Are the systems
compatible ? They can pull a statement each hour on the hour. When
do you run yours?
Mr. CROOKER. Most of these summaries are run on a monthly basis,
sir, and we are doing everything possible to have the material sub-
mitted by them submitted in the simplest form that will work into
our own automatic data processing, so that you won't have the anoma-
bus, situation of them sending us punchcards and then having a re-
qui'rernenit at the Board of running pundhcards onto a magnetic tape
with an extra process.
We have even talked, since I came there, Mr. Fascell, about aban-
doning the printing of some of our reports and trying a duplicating
process from the so-called IBM run sheets so that you won't have
this. triple play of punchcards to magnetic tapes and' then someone
reading those off and setting them in print, but so that you abandon
the punchcards on the front end and abandon the printing on the final
~ end. You mer&ly have the magnetic tapes punching out a run sheet
which in turn will be duplicated. We are making every effort in this
I direction.
` ` Mr. FASCELL. What is the use in relationship of your computers-S
again with emphasis on internal audits-with respect to decision-
I making?
Mr. CROOKER. Mr. Fascell, so far as I now know, I doubt that the
computers get into decisionmaking by the Board in either area of
awards of operating authority or rates. There has been much dis-
cussion during the past 7' weeks `about guideline formulas for rates,
and to a certain extent our formulas today are historical formulas.
But the Bureau of Economics-
Mr. FASOELL. You lost me.
Do you mean there is no relationship between one decision and a
previous decision?
Mr. CROOKER. No, I am not implying that there is no relationship
there. There was a basis of rates set up back in 1962, and the differ-
ences from 1962 to the present have probably not fully taken into
account differences in cost of providing service with new types of
planes that have come out.
But the Bureau of Economics is currently far along on a study that
relates fares to cost of service furnished rather than merely a historic
base of some 5 or 6 years ago when there were other types of planes
being used.
PAGENO="0022"
18
. So, I think the computer is furnishing the five Board members with
information from which those members make their decisions, but I do
~ot think-whether this is good or bad, I don't think we are at the
pointi-
Mr. FASGELL. OK, how about operating awards, for example ? Are
examiner's decisions laid down in a computer?
Mr. OROOKER. No, sir.
Mr. FASOJ~LL. Board decisions?
Mr. CROOKER. They are not. Neither `the examiner's decisions nor the
Board's decisions.
Mr. FASCELL. Rules and regulations?
Mr. CRooKEE. I don't know of any rules and regulations that come
out of the computer, sir.
Mr. Ki~rER. May I say a word, Mr. Ohairman?
Mr. CRoo~R. Let me comment on one other thing. It goes without
saying on your origin and destination studies the examiner has the
benefit of this information from the computer and the Board members
have the benefit of this information.
But the iiiterpretation of the data of origin and destination-
Mr. FASOELL. IS hi's alone.
Mr. CRooiu~n. Sir?
Mr. FASCELL. It is his interpretation, but `he reduces it to writing.
Mr. CROOKER. Yes, sir.
Mr. FASOELL. And the Board reviews it?
Mr. CR00KER. Yes, sir.
Mr. FAS0ELL. This is what I have reference to.
Mr. CROOKER. Yes, sir.
Mr. FASCELL. And none of that is now in the computer ? This is th
whole point.
Mr. CROOKI~R. No, sir ; the awards of operating authority and the
fixing of the rates are not now on the computer, and frankly, sir, I
don't foresee that they are going to `be on it.
Mr. FASOELL. I understand. It is a question `of how much discretion
you want without the computer, and I would daresay the computer
might prove embarrassing.
Mr. CRooici~u. It is often said, thr, if the computer is going to make
the decision, `all I want to be is the programer.
Mrs. HEcKLER. Along those lines, on your chart the Data Processing
Division is under the Division of Accounts and Statistics. Is this the
most efficient arrangement ? Would `it not operate more effectively as a
part of central management, or does it actually in practice?
Mr. CROOKER. Let me answer briefly and have Mr. Kiefer elaborate,
`if I may. Except for the offices of the members, the Office of the Execu..
tive Director, the secretary of the Board, and some other small func~
tions, we do have our personnel assigned to the different Bureaus, and
the Bureau of Accounts and Statistics is the office which now processes
all these figures from the carriers `and gives u's this information.
We have assumed that this was a logical internal division of work,
but, of course, Mr. Kiefer has been there substantially longer than I
have and he may wish to speak to the question also, if you would
permit.
Mrs. HEc1u~R, Certainly.
PAGENO="0023"
19
~ Mr. Rii~i~i~. Mrs. Heckler, w~ are not unaware of the view that the
closer to the top in an organization the eompi~tter ~nd its arrays are,
the alleged greater effectiveness ensues therefrom.
We feel that the essential statisti~a1 gftthering dat~ manipulation
function is properly housed in th~ Bureau of Ao~ount~ and Sth~tistie~.
This is headed by Mr. Warner Hord, Director of the Bureau, who
shares fully with the Executive Director, and indeed the members of
the staff, this responsibility.
The Data Processing Diviskrt, whkh is housed there because of its
central program linkage to the program work of the Board for which
Mr. lord and his associates are responsible, is umier the closest review
from the Chairman's office at all times. We regard this as a boarciwicle
func~tion, even though it is housed in that Bureau.
Mrs. fl~c~Li~i~. So, this pi~toriaI representation on your chart is a
p little misleading.
Mr. KIEFER. Perhaps, it is. We might adjust that when we k~ok at
it again for the record.
Mr. MOORHEAD. I WOUkI like to get a clear pkture of th~ function
of the Board in operatiu~ authority awards.
When you make a decision concerning existing service, for example,
that airline X shall aleo be permitted to serve betweeu cities A and B,
do you also make a determmation as to how many flights they may
have?
Mr. CRoom~R. We do not make a decision as to the frequencies, the
equipment which they fly, or their scheduling.
Mr. MOORrn~ATh. Who makes this determination?
Mr. CRooi~n. Except for the safety function which would come
under the FAA, it is in the private sector of the economy. This is a
management decision. Let me say with respect to your subsidized car-
riers, of course, if there are subsidy-eligible operations, there would
normally be two flights per day. But I am talking about the truiikliries
which have no subsidies whatsoever and those services provided by
local service carriers which are subsidy ineligible.
So only in connection with the rather limited number of instances
of subsidy-eligible carriers is there any sOrt of persuasion at all about
running two flights a day, and past that thsre is none whatsoever.
Mr. MOOItm~AD, Do you get reports from your computers or other-
wise from the intraetate earn ers?
Mr. CROOKER. I don't believe those come to us. We kuow that üi some
of the larger and more populous States-California, I believe, has two
intrastate carriers of some size-there is a proceeding going on in
Texas now involving the proposed establishment of an intrastate
carrier.
Mr. MOORm~An. Does this present any problem to the Board in mak-
ing an award ? For instance, I can easily see where a city that is right
on the border of a State that has intrastate service would clearly be
either in competition with other carriers or be considered surplus ca-
pacity because of an intrastate and an interstate service. Does this
cause the Board any difficulty?
Mr. Cnoo~n. When I am answering, I am not stating Board policy,
but I will give you a personal view.
That is not the biggest question. The point that concerns me most
is that local service carriers are now providing service to a number of
PAGENO="0024"
20
smaller cities and towns in an effort to reduce subsidies as the Congress
obviously wants us to do.
We have embarked upon a program of route strengthening for these
local service carriers so that they might operate between two fairly
large. population centers in the geographical area they serve.
But if au intrastate carrier comes in and seeks to take only the cream
of service in that geographical area, running only between city A and
city B and competing there with one of our local service carriers but
making no effort to serve the smaller cities ~nd towns, then it is a mat-
ter of some concern to the Board because he is competing with our
carrier in the best market and doing nothing to build a fine system
of air transportation for the Nation.
I don't know that we have solved the problem yet of how you can
keep an intrastate line from running from Los Angeles to San Fran-
cisco, `and indeed they are doing a very outstanding job and carrying
a great many passengers.
Mr. MOORHEAD. At least under your regulation, they don't have to
go to some of the smaller towns in California.
Mr. CROOKER. No, sir ; they skip the smaller towns that our local
service carrier serves.
Mr. MOORHEAD. In this connection-and we have touched on sub-
sidy-what has been the trend in total subsidy payments over the past
few years and what do you project in the future?
Mr. CROOKER. The peak was about 4 years ago, and since that time
subsidy has been dropping. There are now no trunkliftes on subsidy.
The Hawaiian lines are off subsidy. In the fiscal year ahead of us, there
will be a subsidy for the Alaskan lines in the range of $5 to $6 million
and probably ~ a susbidy in the range of $49 million for all the local
service carriers in the 48 contiguous States.
If the total drop in subsidy has been in `the range of $5 million per
year, it is possible that it will continue at `this rate.
At the Senate appropriations hearing a week ago today we sug-
gested that a drop of three-slightly more than $3 million a year-in
total subsidy might be in order in the years just ahead, Mr. Moorhead.
Mr. MOORIJEAD. For international rate setting, you don't have the
final say. Am I correct that this is set by international agreement?
Mr. CR00KER. If I might have Mr. Roth, the `Chief of our Bureau of
Economics, give you a statement on `that, I am sure he could be much
more precise than I would be.
Mr. MOORHEAD. Yes, sir.
Mr. ROTH. I am Irving Roth, Director of the Bureau of Economics
of the Civil Aeronautics Board.
The Board does not have any direct jurisdiction over the reasonable-
ness of the international rates and fares. However, the air carrier rate
agreements are filed with the Board and must be approved by the
Board before becoming effective as tariffs of the air carriers.
`This gives the Board a form of effective veto power over the inter.
national rates and fares, but the Board has no direct power whatever
to prescribe, with or without a hearing, what the rate or fare should be.
In other words, through the Board's control over the reasonableness
of rate agreement as opposed to the rates and tariffs as such, the Board
has achieved an indirect control and influence over the rates, but it is a
negative type of control rather than positive.
PAGENO="0025"
21
Mr. MOORHEAD. Do you participate `in the negotiations leading up*
4to those international rate agreements or does some other arm of gov~
~rnment do that?
Mr. ROTH. The arm of government that supervises the whole ma-
chinery is the `Civil Aeronautics Board. The U.S. Goveniment repre-
sentatives normally do not participate in the negotiating sessions of
the air carriers directly.
However, we have staff consultations with representatives of the
US. air carriers before each worldwide traffic conference. For example,
the next traffic conference will take place this `September. Only this
week our staff is preparing a communication to the U.S. carriers to
inquire about the matters they intend to raise at the next traffic con-
ference which will deal with rates and fares all over the world for the
2-year period beginning next April 1.
Then, normally the Board will have an informal meeting with offi-
cials of the U.S. carriers in the summer, either in July or August, &nd
the Board would have an opportunity for an informal exchange of
views with the U.S. carriers and make known whatever sort of infor-
mal instructions-expressions of opinion by the Board-the Board
wishos to~ pass on.
But `once those instructions `are passed on to the `air carriers, the
Board and the U.S. Government are n~t represented at the conference
as such `at all. We are kept `advised about the progress during the course
of the negotiations.
Mr. MOORHEAD. Thank you, Mr. Roth.
Mr. THOMPSON. Does the Board have any means of regulating the
~ rates which charter operators use and flying clubs who' may have an
~ old DC-7 or something of this `sort `and make trips to and from
Europe?
Mr. CROOKER. If I may again make a brief statement and then have
Mr. Roth implement that.
Mr. Thompson, there have been criticisms, of course, of some of
these inclusive tour charters and the Board has followed a general
policy of requiring that the `amoux~t charged be `at `least 110 percent or
more of the lowest scheduled air fares so that no one would use one of
these `so-called inclusive tours as `a `sham to take the transportation just
for a regular trip.
As to the details, `though, I would appreciate your letting Mr. Roth
comment on your question.
Mr. ROTH. The general `authority of the Board over rates and fares
is `the same with respect to charter rates as rates for individually
ticketed passenger services or individually billed `airfreight. That
means in the `international area the Board does not have direct author-
ity over the reasonableness of a charter rate `set forth in a charter
tariff.
Each `air `carrier `authorized to perform charter services by the
Board must file a tariff setting forth what the charges and related
conditions are. Bift in the international `area the Board could not sus-
pend that tariff nor could the Bo'ard after a rate hearing find that the
rates are unreasonable.
In the domestic area the Board does have jurisdiction with respect
to the reasonableness of the charter tariff and the Bo'ard would have
98-391---68-pt. 8-4
PAGENO="0026"
22
the authority to suspend a ehart~r rate if it felt that i~ates were un-
reasonable.
Because of the ~trong oompetition that exists, bo~th within the
United States among the various carriers interested in the charter
market as well as in the intern'ational area between both scheduled
U.S. carriers and the supplemental air carriers and the irarious foreign
air carriers, there is a good deal of competition. This tends to cause an
air carrier not to charg~ exorbitant rates because of the competitive
implications and what thetraffic will bear.
Theoretically, it is possible to have a charter rate war that could be
disastrous, but in recent years we have not had any serious problem in
terms of either rate wars or any accusations of unreasonable rates.
Qixite a few years ago, the Board had considerable occasion to inter-
fere with the charter rates, but in recent years our activity is esse~tia1ly
confined to military charter rates for which there is a separate pro-
gram.
Mr. TEIOMPSON. May I follow with one more question dealing with
the charter `operators. Are they required to meet the same general
safety etandarcis `as are th.e certificated `carriers so far as their equip-
ment is concerned?
Mr. KIErrn~. We rely ~i the Departmen~t of Transportation and the
Federal Aviaition Adminietration to admin'ieter those parts `of the law
applicable ~o safety. The safety function from-
Mr. THOMPSON. The NTSB now has complete investigating
authority?
Mr. KIEFER. That i's correct.
Mr. THOMPSON. Should there be `any question `as to whether they are
complying with the reguia~tions for safety, `an action would have ~o be
brought `by the `CAB, would it not, charging them with failure to
comply?
Mr. KIEFER. If the purpose of the action was to remove or terminate
their `authority-might I ask `our General Counsel, Mr. Goldman, to
reply to your question, `Mr. Thompson?
`Mr. THOMPSON. Yes.
Mr. GOLDMAN. in the field `of safety vi'ol'atio~s, normally the charges
would be brought by the Federal Aviation Administration and ulti-
mately `determined by the Naiti'onal Transportation Safety B'~ard.
The Civil Aeronautics Board does `have a `certain amount of respon-
sibility with regard `to the economic viability of the `supplemental car-
riers to insure that they remain `in a `sufficienitiy healthy `state ~o that
economics will not `have a `bearing on poor `safety records. Buth the direct
safety responsibility in terms `of compliance is `not with the Board.
Mr. THOMPSON. May I `ask you `another question-I was `a little late,
I `apologize for being delayed-but what are the total number of em-
ployces in the CAB ? You may have given this in your initial state-
ment.
Mr. CROOKER. The `authorized position level `in fiscal 1968 is 669.
Mr. THOMPSON. You have 669 employees?
Mr. CROOKER. The actual average `employment is 650.
Mr. THOMPSON. How many offices do you have? Do you operate only
from Washington?
Mr. CROOKER. There arc 30 persons who are `outside Washington. All
of these are field `auditors, ii `in New York City, 13 in San Francisco,
and six in Miami, Fla. Actually, we do not `have an office `in Miami.
PAGENO="0027"
23
Those `men operate regally out of their homes for their field aud~ting
work, but there are small `offices in the other two o~ties. Then, every-
one else w~th the Board is here in Washington.
Mr. THOMPSON. May I ask you one other question ~ When you award
a new operating authority to an airline going to a city that may already
have servioe by another air carrier, do you take in±o consideration-
obviously you do-~the economics of the situation, but just `how much
of a part does `this play in trying ~o maintain a healthy situation be-
tween the `airlines and the `ability of the `airline to `carry `out the
operation ?
I am thinking of the Northeast decision going into Miami. You
weren't with the Board `at that time, but it was a rather `ticklish situ'a~
tion that developed. How' much consideration in your deliberations do
you give in making `a decision that this carrier is going to be able `to
fly from "X" to "Y" `and the impact that it is going to have so far as
the financial `stability of that carrier is concerned?
Mr. CROOKER. I think `a great deal of consideration is given to the
economics of the matter. We discussed a `moment ago service to some of
the `small cities, `and `there `are many places where service by more than
one airline would not be economically sound.
Obviously, wherever a particulnr market will deserve two or more
airlines serving, competition does a great deal for the public. When
you get to the larger markets, `of `course, there will be more than two
carriers `serving New York to Los Angeles, for example.
Mr. THOMPSON. Then, would it be `a policy of the Board to attempt
to strengthen existing carriers by `awarding them routes which may be
financially rewarding `to `that carrier?
Mr. CROOKER. We discussed `a moment ago, Mr. Thompson, the policy
of trying to strengthen `some `of `the local `service carriers for this reason
because it is essential that the total amount `of subsidy paid be reduced
in future years. So the Board `some 2 or 3 years `ago embarked on a
I deliberate policy of route strengthening for the local service carriers.
With respect to the :trunklin'es which are not on subsidy, I `think our
purposes `are largely two : Furnishing `adequate and reasonable air
transportation to the public, but at the same time trying to provide for
`the industry an appropriate rate of return on investment. The traffic
between any two points would have a good deal `to do with that.
Mr. THOMPSON. For example, in your Pacific case wherein you just
rnad~ `an `award, did this have any bearing, for example, `on Eastern's
being awarded the southern route to Australia, say, over Delta or some
of the other `airlines?
Mr. `CROOKER. Let me say `that the examiner's decision was rendered
in the middle of April. The Board has set that matter for oral
argument the week ~f June 10.
Of course, `the Board decision will then be sent to the White House
for approval because this is an international matter. In view `of the
fact that it is `a pending case, I hate to use it `as `an example because
we still have a judicial function to perform in that particular one.
I think that in past cases the matter of route `strengthening for
profit t'o `a carrier would have less to do with an `award in a trunkline
case than it would in `a local service carrier case.
Mr. THOMPSON. Thank you very much.
Mr. FASOELL. I might just add, if I could, `I am sure there will be
plenty of evidence to satisfy everyone on the economics of it, partic.
PAGENO="0028"
24
ularly since Delta `is allegedly `in a high category on profits, and East~
em is headquartered in Miami.
Mr. BRooKs. Mr. Fascell, you had a question, sir.
Mr. FASOELL. Yes, Mr. Chairman. I want to address myself for a
moment to one of the worst customer inconveniences that exists as far
as I am concerned, and that is overticketing.
I want to know where that comes in with respect to the question of
the retention of a certificate as `it applies to enforcement by the Board.
Mr. CROOKER. We have, as you know, Mr. Fascell, a Bureau of En-
forcement, and Mr. Burstein, I am sure when we get into the various
programs, will comment on this. There has been overticketing in the
past.
Mr. FASOELL. There still `is.
Mr. CROOKER. There still is. I believe possibly not quite as much
since the airlines have gone to the standby fares because the airlines
found that there would be a certain number of no-shows and they did
not want to give up the profitability of running with a full load.
So, `if experience taught that there would be 10 percent no-shows,
they might overbook by 5 percent. And then the day everybody came,
you would have the worst sort of `situation where the passenger with a
ticket would be unable to get on the plane. Our Bureau of Enforce-
ment i~s very aggressive about these matters, and I am sure Mr. Bur-
stein will comment on `it during the last half of this committee hearing
But I think in general the standby fares have helped reduce the
instances of overbooking by lines because they still feel they may be
able to fill up the space with standbys. `So they are not tempted to over-
book and play the averages on no-shows.
Mr. BROOKS. `Mr. Fascell, we will discuss this with Mr. Burstein, but
it is my understanding that he has two full-time investigators to handle
all these problems. I am sure `they work hard. If they check them all,
they are working 24 hours a day. I hardly believe they are cutting it
that thin.
Mr. FASOELL. I just wondered about it, Mr. `Chairman. Since all
ticketing `is on machines now, `it wouldn~t seem to me to be a very big
problem to check `it thoroughly.
Some airlines are selling tickets and not reserving seats and also
keeping standbys. If there are five or six oversold tickets in addition,
you have one big, messy problem at an airport. I don't know whether
overselling should be strictly a management decision. That is the
reason I raise the question.
Mr. BROOKS. It might not be too difficult for the CAB to monitor
the `current APP equipment on which they make all these reserva-
tions. They put it on machines now. It may very well be the CAB
could monitor that or spot check it with adequate machinery to' get
a much clearer understanding and pinpoint where these problems are.
Mr. FASCELL. If they are responding to complaints, Mr. Chairman,
of course, that is essential-but I am not sure that is the way to get
at this thing because I am convinced that you will find problem areas
in specific carriers.
Mr. CROOKER. Mr. Chairman, we understand what you suggest. It
seems like an exceptionally worthwhile suggestion. We talked a
moment ago about programing on `computers. It would be interesting
for our Bureau of Enforcement to know whether any trunkline's
PAGENO="0029"
25
computer is programed to give 103 percent of the space away on firm
reservations. ~
On standbys, of course, there will be standbys disappointed many
times.
Mr. BROOKS. Any further questions, Mr. Fascell?
Mr. FASCELL. No questions.
Mr. BROOKS. Mrs. Heckler.
Mrs. HRCKLER. I have a question on the international air traveL
Maybe you would like to have Mr. Roth answer. What percentage of
foreign passenger travel is carried by U.S. carriers?
Mr. CROOKER. For the exact percentages, I am sure Mr. Roth would
be more informed than I am.
Mr. ROTH. Your question is-
Mrs. HECKLER, What percentage of international travel is carried
by U.S. carriers?
Mr. ROTH. It varies in the different geographic regions. On the
heaviest traffic which is across the North Atlantic, I believe the two
U.S. carriers carry roughly 43 percent or so of the total traffic. I be-
lieve the range has been between 42 and 44 percent or thereabouts.
There are some other regions where the U.S. ratio is probably closer
to 50 percent. I would say other than the North Atlantic, my impres-
sion is it is approximately 50-50. On the North Atlantic we have less
than 50.
Mrs. HECKLER. Are you making any effort to `increase the percentage
of this trade for the U.S. carriers?
Mr. CROOKER. When you talk about efforts, of course, the lines
themselves I am sure are doing their best promotionally to encourage
both our own citizens and others to fly Pan American and TWA.
The only way in which we could come into the picture, I suppose,
would be in grants of further operating authority, and we have some
~ dockets that are already filed, some which are being expedited for
Board consideration. Service such as Miami-London is receiving rather
expedited consideration by the Board. There may be other airlines cer-
tificated into European countries.
Mrs. HECKLER. Mr. Chairman, last year before the Interstate and
Foreign Commerce Committee, your predecessor, Mr. Murphy, stated
that, "Foreign countries are usually more prompt than the United
States in designating carriers `to serve agreed-upon routes. This is
largely because of the time required by our proceedings to determine
the competing or conflicting interests of U.S. carriers. The result is
that foreign carriers are frequently able to begin service earlier than
U.S. carriers over routes covered by the same agreement."
Do you discern the same situation?
Mr. CROOKER. What I discern is our answer to that situation, I be-
lieve. In the agreement between the United Kingdom and the United
States for the Miami-London route, it was agreed that service would
not begin until a day early in 1970, as I recall, and that is on Miami-
London, and that is one of the major reasons for our expediting our
own proceeding so that we can pick the carrier or carriers to be cer-
tificated and so that the U.S.-flag carriers can commence service on
the same day BOAC may commence service.
Mrs. HECKLER. Within the last year, have you taken steps to expe-
dite these proceedings which in the past have really discriminated
against the U.S. carriers?
PAGENO="0030"
26
Mr. ~Ji~ooi~ii. I don't think we have solved all the problems, but at
least we are working on it.
Mrs. H~OKLI3~R. How deeply has your agency become involved in the
SST program~
Mr CROOKER I don't think we have become involved in the SST
program very deeply.
Of course, in our economic forecasts, gazing in the crystal ball to
some extent, we wonder what the impact will be on travel, either
domestically or across the oceans.
The SST will probably have as its initi'ai logical routes transatlantic
and transpacific service, and it is of interest to us to try to forecast
what the traffic may be.
But so far as other problems are concerned, safety or aircraft noise,
I don't know that we have yet had a major role in coping with those
problems that the SST may raise.
Mrs HECKLER Have you in your economic forecasts determined the
profitability of the SST , whether or not it will be profitable for rega
lated airlines or whether they will break even, how long it will take
them to make a profit and so forth?
Mr. CEOOK~R. I :am sure that the Bureau of Economics is studying
all this. I would suppose the factors are going to be how many hours
per day can the SST be kept in the air, will there be unre~vsonable
delays in takeoffs or as you approach the destination point in circling
and awaiting `a time for landing. It will be a costly piece of equip-
ment to leave idle or leave circling. I suppose our economists are trying
to consider all these factors and determine what the economics will be.
This, in `turn, may affect what the rates will be when we have to face up
to those rate problems in 1970 or so.
Mrs. HEC~LI3~R. The statements which have been made show the cost
of the SST to be truly astronomical.
The cost of the pilot alone is phenomenal. I understand it is not
impossible for a pilot flying the SST to earn something like $100,000
a year. Wouldn't it be wise to assess some of these problems in advance
so that we can determine whether or not this is a project that should
go forward on an economic basis?
Mr. CRooi~ER. Mrs. Heckler, from what little I know about the
matter, I assume that the Department of Defense may be giving con-
sideration to the SST for purposes other than mere civil air trans-
portation.
So far as civilian air travel is concerned, I don't know what amounts
will be paid to employees or what the lines that own these new pieces
of flight equipment will find as to operating costs. I would imagine
that with reasonably capable carrier management in the private sector
of the economy they will be doing their best to make civil air trans-
portation a profitable thing.
I don't see how they can price themselves out of the market ratewise
even if they should get all necessary governmental approvals in order
to save ~ hours between New York and London So I don't know
whether a pilot will be making $100,000, but it seems to me they might
rewrite the formula so he will be making somewhat less.
Mrs. HECKLER. It is encouraging, Mr. Chairman. Thank you.
Mr. FASCELL (presiding). What is the status of your fiscal
budget?
1970
PAGENO="0031"
27
Mr. CR00KER. For fiscal 1970 we have sent a memorandum to the
Directors o~f all `our Burcaus.
Mr. FASCELL. In other words, you have already started?
Mr. CROOKER. Yes, sir.
Mr. FASCELL. When do you fithsh from a department standpoint?
Mr. CROOKER. September.
Mr. FASCELL. Then you go to the Bureau of the Budget in September.
Mr. Cnooi~iat. Yes.
Mr. FASOELL. So your cycle is 18 months ~
Mr. OR00KER. That is right.
Mr. THOMPSON. Mr. Chairman, whenthe Department of Transporta..
tion legislati'o~n passed ai~d, of o&urse, the NTSB was se~ up, I assume
there were some transfers of people out of the CAB into the Depart-
ment of Transportation. Do you have any idea as to what the size of
the CAB ~as prior to this act?
Mr. CROOKER. I can tell you, Mr. Thompson that as of 5 years ago
the number of persons at the CAB exclusive of the safety group was
just about the same as it is today.
Mr. THOMPSON. The safety group went out?
Mr. CROOKER. The safety group went out, and the number of people
there 5 years ago exclusive of safety was about the same as it is today
even `though the industry has grown at a ra~te of 14 to 17 percent per
year and our filings have increased substantially.
Mr. THOMPSON. Let me follow up just a little bit with the question
Mrs. Heckler `made. Your Board in no way aittempts to set salaries or
wages for the airline industry, and you make no effort to establish `a
rate structure which would require or allow a certain salary level be
paid to employees, do you?
Mr. CRooi~R. We obviously make no effort wh~tsoever to set salaries.
In trying to fix rates that provide a reasonable rate of rsturn on invest-
ment, it is always conditioned on our judgment as to sound and pm-
dent fiscal management of the individual company.
Mr. THoMPsoN. But at the same time you would not go iiito an air
carrier and say `we think frankly you a re paying your pilot too much
or your accountants too much or your other personnel, the salaries are
too high-or would you?
Mr. CRoo~n. Not in those instances, Mr. Thompson. But let me say
there is `one area of some slight concern to some of the individitais at
the CAB. When you get into the subsidized airiines~-
Mr. THOMPSON. I can understand that.
Mr. CRooi~n (continuing) . And you take a look at the amounts
spent for advertising and business promotion, it may well be that a
very critical look will be taken in the year ahead because it would be
pretty diffi~cuit to tell Mrs. Heckler a~nd you gentlemeu that `you sh~uJd
approve a certain amount for subsidies if unreasonably h~gh amounts
were `being `spent for such thingsas ad'~vcrtising.
Mr. THOMPSON. I certainly can ui~dcrstand that and oertain~yconcur
with your `thoughts. I think that ic a proper area. I do not feel it will
be proper for the `CAB to go to ~ns4rcarri~r and try to set wage sched-
ules and so forth. This is a matter of the internal operations of the
company. As I see it, it has nothing to do with the regulatory authority
of the CAB. I just wanted to clear up that point.
PAGENO="0032"
28
Mr. CROOIcER. I think, Mr. Thompson, we have much more confidence
in the ability of management in this area than we would have confi-
dence in ourown ability to set such things.
F. AUTOMATIC DATA PROCESSING
Mr. BRooKS (presiding) . Mr. Chairman, do you have a single or-
ganization responsible for APP management within your agency?
Mr. CROOKER. We have the Bureau of Accounts and Statistics, Chair-
man Brooks, that is responsible for APP management.
Mr. BRooKS. Would you describe its functions?
Mr. CROOKER. This Bureau is the Board's factfinding arm7 we might
say. It is responsible for collecting, validating, and processing the in~
formation to be used in the performance of CAB functions.
Mr. BROOKS. What do you consider to be the most pressing problem
in your computer operations, Mr. Chairman?
Mr. CROOKER. One such problem results from the necessity of fund~
ing, simultaneously, resources adequate to program and apply APP
on a recurrent service basis to the regulatory processes of the Board;
and, at the same time, to the further development of the ~utomatic data
processing systems and system technologies and data banks which are
prerequisites to broad application of APP to these processes.
One aspect relates to providing adequate APP technical resources
for developing system technologies and system designs.
Another aspect relates to providing adequate knowledgeable re~
sources in addition to those required for Board work programs to per.
form underlying substantive analyses that have to precede these regu~
latory proceedings.
The Board is trying to meet these problems in part by simplifying
programing and improving communications between the substantive
analysts and the computer through use of the Mark IV file manage.
ment system presently in its implementation stage.
As you know far better than we, the Mark IV `system is a general
purpose file maintenance and data retrieval system similar to but of
a higher level of generality than has been available heretofore through
such APP languages as Fortran or `Cobol.
Mr. BRooKs. Who head's up your data processing section?
Mr. CROOKER. Mr. Warner Hord is the director of our Bureau of
Accounts and Statistics.
Mr. BRooKs. What is his background ?
Mr. CROOKER. Mr. fiord is here. I would be happy for `him to state
briefly his biographical summary.
Mr. fiORD. I have been with `the Board for `about 24 years. I have
done rate work and `accounting work. I u~ed to be in the teaching pro~
fession for some years.
We introduced the d~ta processing project `or facility along about
1960 in the form of `a 1401 computer. That was `about `the earliest date
at which we could have done it. We did ut largely with `an idea `of
processing the massive data that was `coming `in from the carriers `to~
the Board.
it was used for the carrier reports `and primarily `one `other project `of
major importance which we `call the origin and destina~tion passenger
survey of traffic taken periodically on a sample basis for the ei~tire ]n~
dustry.
PAGENO="0033"
29
That survey in itself right now includes about 70,000 computer
pages. So we have used the facility largely as `a basis `of communicating
data from the industry to the Board `and processing that body of data
which constitutes largely the body of facts used by the Board in its
regulatory process.
Mr. BROOKS. What type of computer do you operate mow?
Mr. fiORD. IBM 360, model 30.
0. PERSONNEL MANAGEMENT
Mr. BROOKS. Thank you very much.
Mr. Chairman, would you describe for the subcommittee the ele-
ments `of your personnel management program?
Mr. CROOKER. The Executive Director has the basic planning re-
sp'o'nsibili'ty here ; and `he relies on the heads of the offices `and the bu-
reaus to develop estimates, and the controller `and director `of personnel
to assist him in evaluating these needs.
Manpower requirements for fi'scal 1969 total 688 positions. These re.
quiremenThs `are determined primarily through the budgetary process
in which `these offices `and bureaus estimate their workload and their
needs.
The `executive `director has `critically reviewed these programs, `dis-
cussed `objectives and requirements in meeting with `each `of the bureau
and `office representatives, `and he `submitted his proposal's `on fiscal 1969
to the prior chairman, Mr. Charles Murphy.
And, `of course, he `and I have begun to talk about fiscal 1970, `though
it `will be June before we have the reports from `our bureaus `and offices
to even start work on 1970.
H. GENERAL ACCOUNTING OFFICE REPORTS
Mr. BROOKS. On General Accounting Office reports, have `any `audit
reports been issued `on the `overall operation `of your agency?
Mr. CROOKER. No, `sir.
I. FREEDOM OF INFORMATION
Mr. BROOKS. How i's your agency carrying out the provisions of the
Freedom `of Information Act recently passed by the Congress?
Mr. CROOKER. The Board issued a number of regulations, the prin-
cipal one being part 310 of the Board's procedural regulations which
sets forth rules concerning inspection and copying of the Board's
records.
The material generally made available by the Board is listed in
appendix A to part 310 of these regulations.
Appendix B lists the types of records which are generally not avail-
able for inspection. Most of the material listed in appendix A to part
310 was made available to the public generally before the Freedom of
Information Act became effective. There were, though, certain excep-
tions and qualifications as we will try to describe briefly.
The Board now displays in its public reference room a copy of all
those portions of the Civil Aeronautics Board manual that affect the
public, and this was not done before `the rreedom of Information Act
98-391-68-pt. 8-5
PAGENO="0034"
30
became effective, although before that time a person could request and
recei~ e p'~rmission to inspect individual iôsu'rnces in the manual
As to transcripts of conferences between the CAB and other per-
soils, before the effectiveness of the Freedom of Information Act these
transcripts were available only to what we called interested persons.
This qualification doesn't now apply.
The Board now keeps for the public's use a single list describing
all forms used in dealing with the public together with the forms
themselves. While the basic information was ava'ilable before, it had
not been assembled in this convenient form before the Freedom of In-
formation Act.
Before the act became effective, the Board's minutes were available
only to persons properly and directly concerned with the subject
thereof. This qualification doesn't now apply.
. The Board now displays in its public reference room copies of
opinions of its General Counsel which are contained in numerous let-
ters prepared over the years and an index of these opinions is
displayed.
The Board didn't do this before the act became effective, although
response would have been given prior to that time to an inquirer as
to individual matters of interest.
With the effectiveness of the Freedom of Infoimation Act, there has
been prepared and maintained for the public in our public reference
room an index of all materials available to the public In the 9 months
from July of last year through March of this year, there have been
13,360 requests for inspection of the Boai d's recorth
Our records show there have been five instances where the records
were not made available in response to those requests, and in none of
those five cases was an appeal taken to the Board's Executive Directoi
or to the Board. Two of these cases involve requests for material from
Board investigative files and the other three of the five involved infor-
matioñ received from air carriers under circumstances where we felt
the information was to be considered privileged.
In addition to those five cases out of 13,360 where we have n~t made
a disclosure, there wa~ one other instance where the staff officially de-
nied a request but on appeal ~o the Board's Executive Director, the
staff decision was overturned and the record wa~ made avai1~able
Mr. BRooKs. Mr. Chairman, how would n question of continuation
of a route certificate arise, and has such an occasion come about?
Mr CROOKER If authority has been given temporarily, of course,
there would be an application by the carrier for a renewal of the
authority.
Mr. BRooKs. Wha~t if it was given as a regular certification ? They
have had a certificate for 10 years to fly from A to B. Does that have
to be renewed on a regular basis, or is it a perpetual grant of that
authority?
Mr. CROOKER. No, sir ; I will check with Mr. Goldman, the General
Oounsel, or Mr Andrews, but I apprehend thaft in the majority of
these matters there has been no termination date fixed.
Mr. GOLDMAN. In most instances the certificates are of inde~finite
duration. In common parlance they are called permanent certificates
s~ibject to the provisions of the act which empower the~ Board to alter,
amend, modify, or suspend if the public convenience and necessity
require it.
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31
Mr. BROOKS. IFFaS that been done on many occasions, on any occasion?
Mr. GOLDMAN. On very limited occasions.
Mr. BROOKS. HOW many?
Mr. GOLDMAN. I wouldn't have that statistically.
Mr. BROOKS. Would you get that for the record, the number of
times that the CAB has taken a permanent certificate and made an
inquiry as to whether or not it should be continued?
Mr. GOLDMAN. Yes.
Mr. BROOKS. On the basis of original facts.
Mr. GOLDMAN. I will be happy to do that, sir. I can say there have
been many instances in which the Board has deleted ceitain points
from certificates. For example, in Alaska we did a fair amount of re-
examination of the route structure and deleted various points from the
carriers' certificates.
Mr. BROOKS. Was this for public convenience and necessity, or were
they not making any money and war~ted to dump those points like the
railroads have been doing?
Mr. GOLDMAN. Public convenience and necessity embraces any num-
ber of factors.
Mr. BROOKS. Their public convenience and necessity, their profits?
Mr. GOLDMAN. That is a factor that the Board would consider. The
Board would consider, among other things, the needs of the traveling
public. There is now pending before the Board today the South Amer-
ican route investigation which includes questions as to what points
might properly be deleted from the certificates of Pan American and
Braniff, the two major carriers going to South America.
For example, there are points that haven't been served. There are
even issues as to whether or not there is a duplication of service and a
question of whether one carrier should be suspended.
Mr. BROOKS. One further question. Why don't you determine fo~ us
how many cases arose where the airline was an adverse party to the
determination of a fixed point of operation or a longer route?
Mr. GOLDMAN. I am sure we can check that and supply it.
Mr. BROOKS. It will be intsresting.
(The information to be furnished follows:)
NUMBER OF CASES INVOLVING SUSPENSION OR DELETION OF PERMANENT
CERTIFICATE AUTHORITY
Since its inception in 1938, the Board has had the question of amending,
suspending, or deleting permanent certificate authority placed in issue before
it in at least 191 cases.
Years Number of cases ~
August 1938 to May 1955 _ 89
June 1955 to April 1960 28
May 1960 to May 1965 2 69
July 1967 to present 5
Total - 191
1 Source: Civil Aeronautics Board Reports.
~ The cases for the period from June 1965 to June 1967 have not yet been Indexed.
I~
PAGENO="0036"
18
20
0
32
TABLE OF SUSPENsIONS AND DELETIONS
Total points involved 583
Points not suspended 104
Points suspended
Suspension cases by applicant
Civil Aeronautics Board 63
Carrier 58
City 3
Total 124
Nonsuspension cases by applicant
Civil Aeronautics Board
Carrier
City
Total 38
The number of cases resulting in suspension (124) and nonsuspension (38)
adds up to 162. The remaining 29 cases (191-162==29) involved questions of
amending permanent certificate authority and therefore are not classified as
either suspension cases or nonsuspension cases.
Mr. CR00KER. I want your committee to know that many thoughts
are being given to the future as to how to provide proper service to
smaller communities where it is not economical for even a Convair
440 or a DC-3 to serve.
There are air taxi operators in many places, but these people have
no obligation to provide service. If a certificated carrier were taken
out of a market because an air taxi operator is there now, the air
taxi operator might cease his service next week.
But there are presently instances that may come before us in which
a certificated carrier may propose a contractual arrangement with an
air taxi operator, and our permission to let the certificated carrier out
of the market may be conditioned on the air taxi operator furnishing
that service and the carrier's permission to stay out may end if the
air taxi operator doesn't continue to perform the service.
So, we are doing our best to avoid the very difficult dilemma that
you have `ably presented. We are trying to keep the service to the com-
munities and still not run the carriers, especially the local service
carriers, to the wall financially by insisting on service where there may
be two or three passengers per day.
Mr. THOMPSON. Mr. Chairman, if I may inject something at this
point, the Post Office Department currently is awarding a number of
contracts to air taxi operators for transportation of mail from one city
to another. Is any effort being made to try to coordinate this with the
CAB so as to also provide passenger service to these areas in conjunc-
tion with the transportation of the mail by the air taxi operators?
Mr. CROOKER. Yes, Mr. `Thompson. Mr. Fred Batrus of the Post
Office Department has visited extensively with us, and you will find in
many instances these air taxi operators carry passengers by day and
mail by night. In that way rather effective use `is being made of their
equipment.
Generally speaking, on the normal post office use of this equipment,
they may be gathering the mail at a small town at 5 :30 or 6 o'clock in
the afternoon, bringing it to one of the regional centers, and then
feeding mail that comes in there back out to the small town by 11 or
11 :30 at night.
PAGENO="0037"
U
33
Mr. THOMPSON. And there is cooperation between the Post Office
Department and the CAB so as to make possible passenger utilization
as well as freight utilization of these aircraft to provide a service to
the people of the community?
Mr. CROOKER. Yes. As I pointed out, most of the passenger traffic
in this sort of plane is daytime traffic.
Mr. THOMPSON. Mr. Chairman, may I follow up with a question I
wanted to ask originally?
I wonder if we could have the Chairman give a very brief review of
the judicial functions of the Board now that we have the NTSB, par-
ticularly as it has appellate jurisdiction as far as FAA hearings are
concerned. Is there any appellate jurisdiction with the Civil Aero-
iiautics Board on airmen certificates now that we have the new
organization?
Mr. CROOKER. No ; we have no functions to perform in the area of
certificates to individuals who are operating aircraft.
Mr. THOMPSON. I am thinking of the violation of your Federal air
regulations or airmen's certificates. There is no appellate jurisdiction
any lonoer in the CAB in this area ; is that correct?
Mr. d'ROOKER. In the area Ito which you refer, there is no jurisdiction
in the CAB.
Mr. THOMPSON. Does the CAB have the authority as original juris-
diction to commence any actions other than economic actions as set
forth in the 1958 act ? Is only economic jurisdiction remaining in the
CAB?
Mr. CROOKER. Yes, sir. I quess the thought I am struggling with `is,
are you trying to imagine a situation where some person holding
authority from us would have such a terrible record in employment of
personnel that-
Mr. THOMPSON. I am trying to clear up in my own mind as to how
the Department of Transportation legislation and the NTSB figure
in. Several years ago, of course, the FAA would write an action. They
would have a hearing. You could appeal this hearing to the CAB
which would in effect be in the form of an appellate jurisdiction in
this matter dealing with airmen's certificates and the like. Has this
all been transferred completely to the-
Mr. CROOKER. The Department of Transportation.
Mr. THOMPSON. And you are `only involved with economic functions?
Mr. CROOKER. Yes, sir.
PART 2-PROGRAM REVIEW
Mr. BROOKS. Thank you, Mr. Chairman.
Would you now call on your various program directors?
A. PROGRAM CATEGORY 1-AWARDS OF OPERATING AUTHORITY
Mr. CROOKER. Mr. Andrews, the Director of the Bureau of Operating
Rights.
Mr. BRooKs. You may revise your remarks later if you are a little
concerned with the exact wording. I will submit, without objection,
exhibit E on awards of operating authority.
(Exhibit E follows:)
PAGENO="0038"
I
34
100
ExHIBrr E-FACT SHEE~T-AWARDS OF OPERATING AUTHORITY PRoGRAM-CAB
200
300
400
1)EPARTMENT OR AGENCY
PROGRAM
Awards
of I
SUBPROGRAM
Civil Aeronautics Board
CODE
CODE
Operating
Authorit~
CODE
ANALYSIS AND CONTRO L"~ ~
"In house" inputs
Personnel:
UsobligeNd
Csnyooso
FISCAL YEAR 1968
(in thounands o~ dollars)
Appoopoistiso or C osoos
Ysos Roqoest
t Tots!
Aosilsb!t
Total Obtigstsd
or Eopoodsd
Travel
Printing
Supplies and Conoum-
able Materials
50
11
28
500
510
511
512
513
520
521
522
523
524
530
540
541
542
550
600
610
620
630
640
650
660
700
800
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
Total
Funds distributed
Contracts
Grants
Loans
Benefits
Other
Total
Total
--- Input-output rstio
1_ Input
7
Peior Fiscal
Yc a
2. Output
`3_ Input
3- c
4. 0
4. Output
5_ Input
5_ Output
6. Input
j~- Output
7. Input
7_ Output
8. Input
I
8. Output
F~ist~d ars,s ef Bss~ G OONO orot Acticitin Bsbsooodttss, Chsiross Jock 5csok~
AWARDS OF OPERATING AUTHORITY
The Federal Aviation Act of 1958 specifies that air carriers, to engage in air
transportation within the United States or to and from the United States require
a certificate of public convenience and necessity or a permit or an exemption from
the Civil Aeronautics Board authorizing such air transportation Air taxi services
are covered by exemptions and services by foreign air carriers are covered by-
foreign air carrier permits. Intrastate carriers are not subject to Board authority.
The normal activities involved in cairying out this program include
(1 ) The processing of applications for air transportation operating author-
ity or modification of authority either by hearing or nonhearing procedures;
(2) The conduct of investigations initiated by the Board involving:
operating authorities;
PAGENO="0039"
Workload item
Items completed or processed
1967 actual 1968 estimate 1969 estimate Increase
1. Regular route authorizations
2. Cargo and charter licensing
3. Examiners decisions issued
4. Negotiations/consultations
5. Informal intergovernment discussions
299
409
1,273
77
1, 170
78
15
18
7
7
510
1,197
85
19
101
27
The officials responsible for the operations of the program:
John H. Crooker, Jr., Chairman,
Charles F. Kiefer, Executive Director.
Alphonse 1\/E. Andrews, Director, Bureau of Operating Rights.
Mr. ANDREWS. I will try tO be brief and indicate what I believe to
be the thrust of the Board's present program.
As the Chairman mentioned earlier, one of the basic objectives that
we spend a considerable amount of time on right now is strengthening
the subsidized route carriers. We attempt to give them access to the
larger markets. We try to lift restrictions on their operating rights at
the moment. The thought behind it all is to attempt to reduce subsidy
for these carriers.
There `have been some mergers in `this field, both in the Alaska area
and in the local `service area, which have a favorable impact on subsidy.
A second program that I think is fairly distinctive is the improve-.
ment of route licenses where markets have grown `and there i's now the
possibility of `a single-plane service, for example, in a market where
previously there had been `only connecting service or there i's oppor-
tunity for competitive service where previously the market had in-
volved `only a `monopoly carrier. We have `several cases like that. The
Gulf States-Midwest points case, the Pacific ~`orthwest-Southwest case
and the Southern tier case are examples.
A third kind `of objective which the Board has in mind is getting
more effective use of the ground facilities now `available. I think we are
concerned there primarily with the congestion that exists in major
airports `such as New York, Los Angeles, and Chicago. Some `of our
route proceedings are designed to permit traffic flows which avoid such
places as these. We have possibly a half `dozen important cases de'.
signed to get the most `out of `the limited ground facilities which now
exist.
Internationally, `the Board's program is designed to take a look at
broad geographical areas that `have not been reviewed for some period
of time where possibly now with technological advances in aircraft we
can provide flights `to interior poin'ts-overflying gateways. We believe
the traffic has grown `and the prospects `are good for additional com-
petitive services. We are in the process of looking at the South Amen-
`can situation, the Caribbean area, and, of course, `the Trans-Pacific
35
(3) International aviation work involving obtaining, granting, or exchang-
ing of operating authority with foreign countries generally through bilateral
agreements, and the handling of day-to-day operating problems with foreign
governments and airline officials;
(4) The issuance of foreign carrier permits ; and
(5) The necessary studies, forecasts `and analyses not related to proces'sing
a specific case or application.
The estimated and actual outputs in terms of workload items are:
area.
PAGENO="0040"
36
We also have to take reciprocal actions in relation to licenses of
foreign airlines. They permit our carriers to fly into their countries
and on a reciprocal basis we have tO take steps to grant similar author~
ities to them.
~ In the nonroute area we have granted fairly broad licenses to sup~
plemental carriers `to engage in charter flights, primarily group tours
and `all-expense tours, `inclusive tours, which the Chairman previously
mentioned.
For the air taxi operators, there are blanket rights permitting them
to `operate when `and where they please and charging what rates they
please, and `there is a program in conjunction with the Post Office to
permit the tran'spor~tion `of mail. This i's `a growing program.
Also, we have relatively free entry into airfreight forwarding. These
are compathes which do not operate aircraft. Rather, they consolidate
cargo and utilize space provided by the airlines.
In summa;ry, I would say the Board's `attitude in providing `adequaite
service to `the public i's really based upon providing oompe~ti'tion where
competition `is eoonomk~a1ly feasible. That is ~ts means, its basic means,
of providing good service to the public.
That i's `a very sketchy statemen±.
Mr. BROOKS. How many people `are in your Bureau?
Mr. ANDREWS. In my `own Bureau `there `are 90 `authorized position's.
Mr. BROOKS. Ninety?
Mr. ANDREWS. Yes.
Mr. BROOKS. Mr. Wrenn is your chief hearing examiner?
Mr. CROOKER. Yes.
Mr. BROOKS. I w'amt to ask him, how long `are the hearing reports ? I
understand that `in some `of the hearings the exhibits `and so forth are
as tall as `this `room.
Mr. WRENN. Mr. Cha;irm'an, in the Trans-Pacific case I `suspect thait
is probably an accurate ~tatement, but `there were 18 `applicants in that
case. They presented their exhibits in bound i~olume form. Some of
them had a `couple of bound volumes. If you take a volume or two
several inches thick `and `take 18 carriers, their direct and their rebuttal
exhibits, I expect `it would `approxima~te the height you have indicated.
Mr. BROOKS. Have you re'ad `all that?
Mr. WRENN. I `didn't.
Mr. BROOKS. Did any `one person in this whole world ever read it
`all?
Mr. WRENN. I believe I can tell you that Examiner P'ark, who ren-
dered `his decision in `about the middle `of April, looked `at everything in
there.
Mr. BROOKS. Do I interpret "looking `at" as "reading" `or `do you just
say he looked `at that `stack?
Mr. WRENN. No. Let me `clarify this. The `text he read ; the figures he
looked `at. I don't know how much of `them `he read.
Mr. BROOKS. Has any effort been made to consolidate those appli-
cations in some way? Has any effort been made to explain to the
`advocates that they might present their bes't case in more concise form?
`Mr. WRENN. Yes, sir, Mr. Ohairman, there `has `been. I have con-
stantly passed that word to other examiners, `and they urge them at the
prehearing `conference to rn,ake `as precise presentations `as they can and
to consolidate presentations where they can.
I
PAGENO="0041"
37
Also, where a ciity and ía chamber of commerce intervene in a pro-
ceeding, we urge them ~o niake one oonci~e presenitiat;ion.
Mr. BRooKs. Do the examiners just accept ~t for the record when it
is possibly redundant and it is long and drawn out and doesn't eon-
tribute much to the real evaluation of their own ease?
Mr. WRENN. Mr. Chairman, rather than forget it, I think I would
say they give very little weight to it.
Mr. BROOKS. Are the ones that win the ones that have the biggest,
fattest material submitted?
Mr. WRENN. No, sir.
Mr. BROOKS. I think that would be a ease in point that the lawyers
would understand. If you just load them up with exhibits it doesn't
necessarily help.
Mr. CROOKER. I would like to comment, Mr. Chairman.
Mr. BROOKS. Before you comment, let me add that these long records
that are very involved and complicated don't necessarily better rep-
resent the various applicant's position ; instead, I think they rather
obscure the basic issues that the Board later will verify or approve.
It is difficult for an independent applicant to compete with a full draft
presentation of printed and bound volumes of statistics and exhibits.
Mr. CROOKER. Since the Trans-Pacific decision by the examiner, Mr.
Wrenn and I have talked about possible method of simplification.
We used the printed sheet that the Internal Revenue Service sends out
on which you put capital gains and losses as an example of one sheet
that points up a problem. We talked about whether we should have a
sheet that invited carriers `to state very succinctly the flight equipment
they would use if they got the operating authority they sought, the
number of frequencies, even their scheduling. We even discussed the
possibility of summarizing statistics about particular cities, popula-
tion, utility connections, bank deposits, building permits, and then
stopping. We do not want to cut off counsel for a carrier to try to in-
terpret those statistics and to say, "Oh, yes, they have only so many
people, but this is a more well-to-do town-more people travel here
because there is a university or there is a State capital." Mr. Wrenn
and I have met on more than one occasion since Mr. Park's decision to
try to get to the very point that you ably suggest : simplifying and
shortening exhibits in future matters.
Mr. BROOKS. I think this is highly desirable because it is obvious
`that every member of the Board can't read a stack of volumes like
that. It is probably not necessary that he read them or look at all those
exhibits. You are just asking for the impossible if you think every
member of the Board and the General Counsel are going to read them
all. They wouldn't have time `to do anything else, Mr. Wrenn. I think
it merits some real serious thought, because the only way the Board or
an examiner can `reach a decision is to have usable facts. Facts that you
can't e~tract readily for consideration are unnecessary.
I think that is a fine idea, Mr. Chairman. It takes brains to do it in a
short sentence, but anybody can do i't in 10 pages. I think the lawyers
should draw `their pay on the basis of how short and concise and to the
point their statement is rather than how long and verbose and how
many exhibits they have or how many bound volumes and how many
statemer~ts they have from the chamber of commerce in every city in
that State.
PAGENO="0042"
Mr. BROOKS. Cou'd we move on to the nex~t program now
Mr. CROOKER. Mighl w~ now present Mr. Roth, whom the committee
has already met, to discuss the Bureau of Economics.
Mr. BROOKS. Yes, sir. I wai~t to put in the record at this point, ex-
hibit F, without objection.
(Exhibit F follows :~)
EXHIBIT F-FACT SHEET-REGULATION OF RATES AND FARES PROGRAM-CAB
PROGRAM
* ~-~---.-~. -- Bci~rd ~egu1ation of Rates and
SUBPROGRAM
500
510
511
512
513
520
021
522
023
524
530
540
541
542
550
600
610
620
630
640
650
660
700
800
810
811
820
8~1
830
831
840
841
850
851
860
861
870
871
880
881
P~i~t~d f ~ I Ron.. G ~ ..~t A~th'it~ Subo..~~ittR, Ch~irRan Jack B~ook.
38
B. PROGRAM CATEGORY 2-REGULATION OF RATES ANfl FARES
100
200
CODE
300
ANALYSIS AND CONTROL
CODE
400
CODE
"In house' inputs
Personnel:
Unobligatni
I n ~ 1~6Q . .
Apprepeistion no Cureent
Y,sr Rnqueut
Tetni
Aentisbis
Totsi Ohliguted
nr Enpnndnd
Supplies and Consum-
able Materials
Capital Equipment
Land and Structures
Total
Funds
Contracts
Grants
Loans
Benefita
Other
Total
Input-output
.. Input
ratio
Output
Seine Final
Year
Output
Input
Output
Input
Output
Input
Output
REGULATION OF RATES AND FARES
The Board is authorized by the Federal Aviation Act of 1958 to regulate rates,
rate structures and related practices and services of domes1~ic air carriers. This
PAGENO="0043"
. 39
includes the fixing of service mail rates paid by the Post Office Department and
rates paid by the Department of Defense for military traffic carried by commer-
cial airlines.
The activities involved in carrying out this program include:
( 1 ) Review of domestic and overseas passenger and cargo rate tariffs to
determine those rates and fares that should be permitted to become effective
without investigation, those that should be permitted to become effective but
at the same time investigated, and those that should be suspended pending
investigation;
(2 ) Review of complaints against air carrier rates filed by competing car-
riers or by users of those services to determine whether such complaints war-
rant a formal investigation of the provisions complained of;
(3) The conduct of formal (hearing process) investigations of those rates,
fares, rules, or related tariff provisions that the Board has found may be
unlawful or contrary to the public interest;
(4) Establishment of minimum rates applicable to foreign, overseas, and
domestic charter services performed by the civil air carriers for the Military
Airlift Command (MAC), on the request of the carriers or the Department of
Defense, or the Board's initiative, so as to maintain these services on a sound
economic footing;
(5) Review of petitions for the establishment or revision of service mail
rates filed by the air carriers or the Post Office Department ; and
(6) The necessary studies, forecasts, and analyses not related to processing
a specific case or application.
The estimated and actual program outputs in terms of workload items are:
Workload item
Items complete
d or processed
Actual, 1967
Estimate, 1968
Estimate, 1969 Increase
1. Passenger and property rates:
a. Review of tariff filings
b. Special tariff permission applications
c. Free transportation tariffs
d. Processing tariff referrals and complaints
e. Passenger and property rate investigations.._ -
f. Passenger and property rate exemptions
2. Government rates: Service mail rates
47,616
1, 599
1,635
956
19
225
10
50, 000
2, 000
1,700
1, 000
18
225
25
52 000 2, 000
2', 100 100
1, 700
1, 100 100
25 7
250 25
28 3
The officials responsible for the operation of this program:
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Irving Roth, Director, Bureau of Economics.
Mr. Ro~rii. Sir, on the subject of rates and fares, the statute leaves
the initiative with air carrier management for the initial determina-
tion of rates and fares through the filing of tariffs setting forth
domestic rates and fares for the passenger and property services offered
to the ge~era1 public. The carriers must file the tariffs and they are
obligated by law to comply with the terms of the tariff.
In the domestic area they are required to publish rates that are just
and reasonable and without unjust discrimination. The Board has
wide latitude to suspend tariffs before their effective date in connec-
tion with domestic and overseas air transportation but not in connec-
tion with international air transportation. The power of the Board to
suspend a domestic tariff is limited to 180 days, during which time the
Board is obligated to conduct a formal hearing. If the hearing process
is not completed in the 180 days, the carrier is free to have the sus-
pended rate become effective. Normally, tariffs are filed on either 30
or 45 days' notice, and the Board must review that tariff and make a
policy determination whether to suspend before the effective date of
the tariff. Once the tariff becomes effective, the Board cannot ]awfully
suspend the rate. The Board can only institute a formal rate hearing,
which frequently will take a few years to complete, and it is only after
PAGENO="0044"
40
the completion of that hearing process-usually time consuming-that
the Board can order that an air carrier change an already effective
rate.
This means that in the ordinary sense of reviewing tariffs there is
no such thing as a backlog. In other words, by virtue of the statutory
concept the tariff becomes effective on its intended effective date unless
the Board issues a rate order suspending the effectiveness of the tariff.
In situations where there is a major policy problem for the Board
to resolve, where there is a complaint either by a member of the gen-
eral public, by an air shipper, by a competing airline, or sometimes by
a travel agent, very little time is afforded for the Board to resolve the
facts and get at the bottom of the problem because of the very limited
time in advance of the effective date for the tariff to be filed.
Complaints must be filed within 12 days and the filing carrier has
only 1 week within which to file an answer. The Board is therefore
under extreme pressure to act with dispatch.
I believe, sir, we covered earlier the general question of international
rates and fares. The Board is getting into that through the approval
of agreements between air carriers.
There is just one other area I will touch on for I minute-the matter
of Government rates in two separate categories. The Board must pre-
scribe, by section 406 of the statute, the rate of mail compensation to
be paid by the Postmaster General to each carrier for the service of
transporting the mail that goes by air. This is not a rate initiated by
a carrier tariff filing and reviewed by the Board. It is a rate established
by the Board in proceedings established for that purpose. These pro-
ceedings do not usually go to hearing ; however, rather informal pro-
cedures are adopted `in which the views of the various parties are ad-
vanced and through negotiation a rate is e~tablished, thus avoiding the
time-consuming nature of a public hearing.
The rates are generally based on costs, primarily on costs, and where
there are competing carriers the Board has usually prescribed the same
rate for each carrier so that the Post Office Department is free to select
the most desirable carrier without any financial penalty.
Finally, the Board has had a very active program in the last 7 or 8
years for an annual determination of the rates to be paid to the civil
air carriers by the Air Force, the Military Airlift Command for mil-
itary charter services. This has become a very substantial volume ac-
tivity. I believe the estimate was something in excess of $600 million
for military charter services a year ago.
Those are the highlights of the rate and fare program of the Board.
c. PROGRAM CATEGORY 3-ENFORCEMENT OF APPLICABLE LAWS AND
REGULATIONS
Mr. CROOKER. You heard from Mr. lord, the Director of our Ac-
counts and Statistics Bureau, during the earlier presentation, and we
discussed subsidy at some length. I wonder if in view of the time `in-
volved you would like to hear briefly from the Director of our Bu-
reau of Enforcement, Mr. Burstein.
Mr. BROOKS. I think that would be an excellent suggestion. Without
objection, I will insert exhibit G at this point.
(Exhibit G follows:)
PAGENO="0045"
500
510
511
512
515
520
521
522
523
524
530
540
541
542
550
600
610
620
630
640
650
660
700
800
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
DEPARTMENT OR AGENCY PROGRAM Enforcement of Appi
Civil Aeronautics Board ORbie IRME ~ Regulations
CODE CODE CODE
ANALYSIS AND CONTROL CODES
FISCAL YEAR 1968
in thousands of tollars)
UD~bIigR~d
C ~
ADDRPdEtiR~ D~ C ~n
~ R~q~t
t T~thI
A~&1~bN
T~t~I ObIigR~d
~ E~D~d~d
Benefits
Communications
31
22
`~-
Transportation
Printing
2
6
Additional Investment
Rents
Total
Funds distributed
Benefits
3
Total
1o90
Psistsd f msse of Hsuss 0 seers ssst Astieitis~ Ssbcsmmlttss, Chatnuss Jsck Brooks
ENFORCEMENT OF APPLICABLE LAWS AND REGULATIONS
The Board's enforcement program seeks to obtain compliance with the economic
provisions of the Federal Aviation Act and with all of the regulations, orders,
certificates, permits, exemptions, and other requirements issued thereunder;
preventing improper claims for subsidy and unfair, deceptive, and restrictive corn-
petition and practices ; protecting the public from unjust discrimination and mis-
treatment by air carriers and their agents ; and improving the quality and
dependability of air transportation service, thereby promoting the sound growth
and development of air transportation.
Within the Board's jurisdiction and purview are included 48 certificated air
carriers, 131 foreign air carriers, 13 supplemental air carriers, 145 authorized
domestic and international air freight forwarders, almost 3,000 air taxi operators
41
EXHIBIT G-FACT SHEET-ENFORCEMENT OF APPLZ[CABLE LAWS AND
REGULATIO~PS-CAB
100
200
300
400
2. Input
Prior Flooni
Yon
6. Input
7. Output
8. Input
8. Output
PAGENO="0046"
42
Workload item
1. Formal actions
2. Informal actions__________._~_____________________
3. Court cases____~___________~_____________________
4. Investigations______________~_____________________
5. Consumer complaints
who are subject to some degree of economic regulation, a number of intrastate and
commercial operators who become involved in interstate or foreign common car-
riage, and thousands of travel agents who are subject to section 411 of the act.
The activities involved in carrying out this program include:
(1) The handling of passenger and shipper complaints;
(2 ) Investigation of alleged or suspected violations of the economic pro-
visions of the Federal Aviation Act and with all of the regulations, orders,
certificates, permits, exemptions, and other requirements issued thereunder;
(3) The taking of enforcement action and the achievement of compliance
`by informal (nonhearing) enforcement action, formal (hearing) administra-
tive proceedings, and the prosecution of enforcement cases in the courts.
The estimated and actual program output in terms of workload items are:
Items completed
Actual, 1967 Estimate
1968
or processed
Estimate, Increase
1969
26 28 38 10
421 441 450 9
2 0 2 2
260 254 284 30
2,561 3,000 3,250 250
The officials responsible for the operation of this program:
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Robert Burstein, Director, Bureau of Enforcement.
Mr. THOMPSON. May I ask a question?
Mr. BROOKS. Yes.
Mr. THOMPSON. Mr. Roth, how is it that the fare differs slightly
from carrier to carrier ? I am going on personal experience that from
here to Atlanta and return, tourist with one airline is about $82 and
with another airline about $85. Why is this ?
Mr. ROTH. This is almost the exception that proves the rule. In all
the years I have been involved with the Board's rate program, I would
say in 999 out of 1,000 instances the competing carrier meets the fare
of the lowest priced carrier.
There is, however, a situation where Eastern Air Lines in the past
3 to 31/2 years is competing with other trunkline :5 with respect to fares
below $50 where the Board, about January 1965, because Eastern was
then in a very heavy loss position, authorized Eastern to raise the fares
below $50 simultaneously with a decrease in fares above $50 ; in other
words, to increase the taper of the fare structure.
Eastern~s competitors reduced all of their fares that were above
$50 to match Eastern's fare reduction, but Eastern's competitors did
not attempt to raise the fares that were below $50 to Eastern~s level.
In fact, there is substantial doubt whether the Board would have per-
mitted the highly profitable competitors to raise their fares had they
sought to do so.
In just about every instance I can recall in the period of more than
20 years, after a reasonable period of months in which the carrier
with a higher fare than his competitors would see how traffic develops,
the invariable practice is for the higher priced carrier to reduce his
fare to meet the competition I would say this is the one exception to
prove the rule I can think of in the last few decades
Mr. THOMPSON. I think one of the reasons is there are a limited
number of flights that can come into Washington National. So you are
fortunate to get on any flight, whether it is an Eastern or a Delta or a
United or whatever `it may be.
PAGENO="0047"
43
Mr. CRooKER. Mr. Bursteiii, the Direetor of the Bureau of Enforce-
ment, will make a brief statement about the work of his Bureau.
Mr. BROOKS. Would you include in that statement how many people
you have?
Would you also include in your comments how you are dthng on your
freight forwarding program. Also, what kind of volume you have had
in complaints from passengers. If you don't have it pinpointed, put it
in the record and submit it to us.
Mr. BTIRSTEIN. Mr. Chairman, we have a staff of 32 people. The
staff hasn't gone up. In the last 6 or 7 years it has really gone down.
In 1961 we had 36 people and now we have 32 people.
I `think that some of it is due to the fact that we have `improved our
efficiency `in our investigative and enforcement techniques.
I just want to mentionbriefly the scope of the Board's enforcement
responsibilities and the number of entities over whom the Board has
enforcement jurisdiction.
We have 48 U.S.-cei~ifioated air `carriers, 131 foreign air carriers, 13
supplemental air carriers, about 150 domestic and international air-
freight forwarders, about 3,000 air taxi operators over whom we have
limited jurisdiction or limited regulation.
There are also a number of intrastate and commercial operators
with whom we get `involved in enforcement problems, and then there
are thousands of travel agents who are subject to section 411 of the
Federal Aviation Act. This is the one dealing with unfair or deceptive
practices or unfair methods of competition.
So the area is broad, and we can't do a perfect job with the staff we
have. What we try to do is concentrate on important areas.
I will just briefly enumerate the `important areas that we go into. We
try to enforce violations of conditions `in terms of certificates and per-
m'its. We try to enforce unauthorized air transportation by unauthor-
ized carriers. We try to get into various passenger and cargo tariff
violations, such as indirect and direct rebates.
We try to cope with various forms of discriminatory practices. We
get into situations of unauthorized interlocks or control relationships.
We try to enforce section 411 which is comparable to section 5 of the
Federal Trade Commission Act : unfair and deceptive practices and
unfair methods of competition such as misleading advertising and
anticompetitive practices.
We get `into accounting v~iolations, violations of our accounting reg-
ulations7 which may have an impact on subsidy, or improper claims
for subsidy. Also, we enforce reporting violations.
We do the best we can with the staff we have. We try to emphasize
voluntary and informal compliance rather than punitive enforcement.
Nevei~theless, there are situations in which we have to take formal
action, punitive action, `if I may mention two or three examples.
Recently we had filed complaints against six foreign air carriers
charging them with giving indirect rebates to freight forwarders. We
found that our freight forwarders were giving most of their business
to foreign air carriers, and this may have been the reason the for-
warders gave them this business because they got rebates. This, of
course, has an `impact on the balance-of-payments problem.
In the case `of another major foreign air carrier, we discovered a
pract~ice for `a number `of years of giving rebates to passengers. It was
really a system `set up `through a separate bank account. We settled this
PAGENO="0048"
Increase (64 percent)
44
1,442
case by one of the biggest civil penalties, certainly in the Board's his-
tory if not in the case of other regulatory agencies The amount was
$75,000.
In another case it was necessary for us to file a complaint for revoca-
tion against a big airfreight forwarder, because we found it was en-
gaged in wholesale violations of the tariff regulations, particularly
excessive charges to shippers.
Mr BROOKS The shipper was the Government, wasn't iit~
Mr. BURSTEIN. In one case it was the Government, and the Govern~
ment is now reviewing these shipments~ I don't know what the status
of their review is.
As I say, we try to be selective , we have to be selective If we tried
to do a complete enforcement job, we would probably need twice as
many people.
Turning to the consumer area, we have a consumer complaint see-
tion that handles complaints from passengers and shippers. The rate
of complaints has increased considerably
In 1967 we had twice as many complaints as in 1966 It rose from
1,500 to 3,000. ~ As a result of that, the Board instructed the Bureau
of Enforcement to make a consumer survey, to go to all the airlines,
see how they handle their complaints, see what the causes of the com
plaints are We did this, and we hope as a result of it service will be
improved and we will get fewer complaints As a matter of fact, it
appears now that the rate of increase will be less in 1968 and 1969
than it was in 1967.
Mr. BRoolis. Will you give us those figures compared to the volume
of passenger traffic totals ~ You can do this for the record, if you will
Mr CROOKER We will supply that, Mr Chairman
(The information fumi'~hed follows:)
The latest traffic statistics available are for the month of February 1968.
Therefore, we have used the 12 months to the end of February as a basis for
comparing consumer complaint receipts and revenue passenger enpianements.
Number of consumer complaints received:
March 1, 1967 to February 29, 1968, inclusive 3, 696
March 1, 1966 to February 28, 1967, inclusive 2,254
Revenue passenger enpianements for total certificated route air
carriers :
March 1, 1967 to February 29, 1968, inclusive 145, 8~5, 000
March 1, 1966 to February 28, 1967, inclusive 120, 816, 000
25, 049, 000
Increase (20.7 percent)
It should be noted that approximately 10 percent of the complaints received
involved air taxi operators, supplemental air carriers, foreign air carriers, travel
agents or unauthorized operators rather than certificated route air carriers or
pertained to carriage of cargo. The ratio of complaints to passengers enpianed
increased from 1 to 536,000 for the year ended February 28, 1967, to 1 to 395,000
for the year ended February 29, 1968.
Mr. BUR5TEIN. I might say, Mr. Chairman, that the complaints we
get are just the peak of the iceberg, because the carriers themselves
get many more complaints than we get. These are the highlights.
D. OTHER PROGRAMS
Mr. CROOKER. Mr. Chairman, we will submit for the record the re-
quested program statement on support of air service through subsidy
PAGENO="0049"
45
600
610
Ult)
630
640
050
600
70))
800
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
payments-it was probably covered pretty well in the questions you
previously asked-and also the program statement on regulation of
agreements and interlocking relationships along with the other infor-
mation you requested.
Mr. BROOKS. And on the regulation of ~ir carrier accounting and
reporting.
We will put in exhibits H, I, and J, on those programs, without
objection.
(Exhibits H, I, and J follow :)
EXHIBIT H-FACT SHEET-SUPPORT OF AiR SERVICE THROUGH SUBSIDY PAYMENTS
PROGRAM-CAB
100
200
300
400
DEPARTMENT OR AGENCY
Qiijil Aeronautics Board
300GRAM SUBPROGRAM
bupport of Air Service
Through Subsidy Payments
CODS
CODE CODE
ANALYSIS AND CONTROL CODES
FISCAL YEAR 1968
(athousands oT ~11ars)
U~bIig&Md
C~rIy~~
~~~____
App~p~1&tM~ ~ C~r.Dt
Ya~ ReQDst
T~thI
A~iIabI,
T~t~I ObIig~td
~ E~p~d~d
"In house' inputs
Personnel:
~~_643
Benefits
Travel
Expenses:
Communications
500
510
511
512
513
520
521
522
523
524
530
540
541
542
550
109
Supplies and Consum-
able Materials
A
CapItal Equipment
12
Land and Structures
Additional Investment
10
29
Total
5
)utBUt ratio
1. Output
2. Input
~7-7O
Prior Fisosi
Yes
3. Output
4. Input
4_ Output
5_ Input
FOoted I scum sf Ross. C moss oust Astinitis. Subssmuitt.s, Chuinosn Jssk Brssks
PAGENO="0050"
46
SUPPORT OF AIR SERVICE TEROUGII SIThSIDY PAYMENTS
The Civil Aeronautics Board administers subsidy under the Federal Aviation
Act. U.S. carriers, certificated for carriage of U.S. mail, are entitled to service
mail pay, and are generally eligible for subsidy in those situations where the
carrier demonstrates a statutory need for subsidy. The dollars of subsidy in each
case consist of an amount to cover the carrier's operating loss Incurred under
honest, economical, and efficient management and to provide it an opportunity to
earn a fair return on the investment used and useful in its air transportation
services to the communities.
The activities involved in carrying out this program include:
(1) The processing of subsidy rate cases by hearing or nonhearing pro-
cedures, including the class subsidy rate for the local service carriers;
(2) The necessary studies, forecasts, and analyses not related to proc-
essing a specific case or application;
(3) The provision of economic assistance to Board components on cases
with subsidy implications;
(4) Making recommendations to the Secretary of Transportation as to
the Government guarantee of private loans to air carriers for the purchase
of more modern aircraft; and
(5) The verification of subsidy claims submitted by the air carriers.
The estimated and actual program outputs in terms of workload items are:
Workload item
Items complete
d or processed
Actual, 1967 Estimate,
1968
Estimate,
1969
Increase
1. Subsidy analyses and policy assistance
2. Subsidy rates
3. Guaranteed loan matters
4. Verification and payment of subsidy claims
51
56
18
1,634
50
50
18
1,756
50
50
18
1,767 11
The officials responsible for the operation of this program:
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Irving Roth, Director, Bureau, of Economics.
PAGENO="0051"
47
:100
200
200
EXHmIT I-FACT ShEET-REGULATION OF A~UIEEMENTS AND INTERLOCKING
BEt~&TIoNsrnPs PROGRAM-OAE
D0PAR~0M~NT OR AGENCY ~RQGRM0 ~ . SUBPROGRAM
~oeguLation ~of Agreements &
Civ1~]~ ~ ~ ~ ~ , ~ -.-- ~ ~
-400
:ooo
-510
511
~512
"In house" inputs
Personnel:
~-~- ~ ~ ~ - ~
CODE CODE CODE
ANALYSIS I~ND CONTROL CODES . . -
FISCAL YEAR 1968
1.n_ thousands of ~o11ars)
SJeebIig~tod
C o
App:o~:int4 n or C cress
Y 0
S ToNI ~
A Ibi
TotolOlOigoted
E Ud
Expenses:
513
520
-521
522
523
-524
-540
541
-550
~4-~31
36
l~
Supplies and Consum-
able Materials
Capital Equipment
`I
Land and Structures
4100
-610
8
16
Grants
Loans
Benefits
4320
-630
-640
*650
4160
`700
Other
Total
Total
`361
-800
210
811
820
221
830
831
840
841
810
851
Pets, Fiscal
Toar
860
861
870
871
880
881
Peisted f sssss of buss 0 toots oust Acthitios Subestsstittse, Chsisstss Jock B,ssks
REGULATION OF AGREEMENTS AND INTERLOCKING RELATIONSHIPS
In accordance with the Federal Aviation Act of 1958, the Civil Aeronautics
Board has approval jurisdiction over all consolidations mergers, and acquisitions
of control between or among air cari~iers and any other common carrier, or any
person engaged in any other phase of aeronautics This jurisdiction also includes
agreements under which U S flag carriers participate in the International Air
Transport Association (IATA) JATA s activities cover relationships with travel
agents and many other matters including agreements on international rates and
fares The authority to approve or disapprove these agreements gives the Board
a voice, In an indirect way, in the determination of international rates and fares.
PAGENO="0052"
48
The Board's basic objective In administering this program Is to insure that
agreements, interlocks, and other forms of control involving air carriers are con-
sistent with the public interest and do not involve conflicts of interest which may
be detrimental to the development of air transportation.
The activities involved in carrying out this program include:
(1) The review and approval or disapproval of applications requesting:
Board approval of consolidations, mergers, and of acquisitions of control, ap-
plications for approval of route transfers and interlocking directorates, and
agreements between air carriers and any other common carrier affecting air
transportation;
(2) Review and approval of agreements on rates and fares under which
ILS.-flag carriers participate in the International Air Transport Association
(IATA).
The estimated and actual program outputs in terms of workload items are:
Workload item
Items complete
d or processed
Actual, 1967
Estimate,
1968
~-
Estimate, Increase
1969
1. Acquisitions and interlocking directorate matters
2. Intercarrier rate agreements (IATA)
2, 357
861
2, 229
1, 050
2, 231
1, 300
2
2515
The officials responsible for the operation of this program:
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Alphonse M. Andrews, Director, Bureau of Operating Rights.
PAGENO="0053"
49
EXHIBIT J-FACT SHEET-REGULATION OF ATE CARRIER ACCouNTING AND
REPORTING PROGRAM-CAB
~Oo
510
511
512
513
520
521
522
523
524
530
540
541
542
~50
600
610
~620
630
640
650
660
`700
800
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
"In house" inputs
Personnel:
Travel
Transportation
Printing
Supplies and Consum-
able Materials
Capital Equipment
Land and Structures
Additional Investment
Rents
Total
Other
Total
Total
Unob5gated
Peis~ed C senss of iioue 6 sosso snot Acticitiss 5ubcs~ssuttoo, Chsinsss Jask Benks
REGULATIoN OF Ans CARRIER ACCOUNTING AND REPORTING
The purpose of this program is to provide, in accordance with section 407 of
the Federal Aviation Act of 1958, for the collection and maintenance of a body of
facts required in the regulatory processes of the Board. The Board's program for
maintaining air carrier accounting and reporting is essential to effective regula-
tion of the air carrier industry.
The activities involved in carrying out this program include:
(1) The design, prescription, and administration of uniform systems of
accounts and reports;
(2) Substantiation of carriers conformance with prescribed accounting and
reporting regulations through desk analysis of carriers reports;
:100
200
300
DEPARTMENT OR AGENCY ~ ~ROG~M1~ ~ Air Carrier I
Civil Aeronauties Board I ~ 5. ~ I
400
CODE CODE CODE
ANALYSIS AND CONTROL CODES
FISCAL YEAR 1968
(in thousands~ aoilars)
Appeopeiatios cc Coceest
Y,s~ Roquost
TotoI
Acailablo
Total Obligated
or Enpgndsd
~o-
~~-~--
18
17
22
Input-output ratio
Input
i,eioe Fi,eal
Yooe
8. Output
PAGENO="0054"
50
(3) Preparing special analyses and ewtluations of air carrier financial
data;
(4) Field audit of carrier's books, records, and reports; and
(5) Performance of special financial and accounting factfinding services
in the field.
The estimated and actual program outputs in terms of workload items are:
Workload items
Items complete
d or processed
Actual, 1967
Estimate, 1968
Estimate, 1969 Increase
1. Regulation of carrier accounting and reporting systems_
2. Policing and conformance of carrier reports
3. Accounting and financial analysis
4. Field audit of air carriers:
867
2,063
143
874
2,297
123
900 26
2,270 (27)
135 12
a. Audit of subsidized carriers
12
19
19
b. Audit of nonsubsidized route carriers
6
15
19
c. Special examination
22
38
45 7
The officials responsible for the operation of this program:
John H, Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Warner H. Hord, Director, Bureau of Accounts and Statistics.
Mr. BROOKS. Any further questions, Mr. Thompson?
Mr. THOMPSON. No further questions.
Mr. BROOKS. I want to thank you, Mr. Chairman, for a very pleasant
and informative morning and thank you and your staff for being here
and cooperating. We look forward to seeing you again.
The committee is adjourned.
(Whereupon, at 12:15 p.m., the subcommittee was adjourned.)
I
PAGENO="0055"
APPENDIX
WRITTEN RESPONSES OF THE CIVIL AERONAUTICS BOARD TO QUESTIONS
SUBMITTED BY THE SUBCOMMITTEE
I. GENERAL QUESTIONS AFFECTING THE AGENCY AS A WHOLE
A. Justiflcatio~ of Personn~ Not fjhctrgeabZe to Speo~flo Programs
1_. What are the total funds available to your agency as a whole for fiscal 1968?
For salaries and expenses (an appropriation of $8,~83,OOO, an antici-
pated supplemental appropriation of $99,000 i~or pay raise costs
and estimated reimbursements from other Government agencies of
$40,000) $9,122,000
For payments to air carriers (an appropriation of $52,500,000 and
cash brought forward from fiscal year 1967 of $12,~91,000) 64, 591, 000
Total funds available for fiscal 1968 73, 713, 000
2. How many employees does your agency employ?
The Board's authorized position level in fiscal 1.68 is 609 positions. Average
employment is estimated at 650.
3. What is the geographical extent of your operations?
Of the 669 authorized positions 639 are here in Washington. There are 30 field
auditors of which 11 are located in New York City, 13 in San Francisco, and six
in Miami, Fla.
The Board's jurisdiction is worldwide. Through bilateral agreements with
foreign nations throughout most of the world, U.S. air carriers are licensed to
operate in foreign countries and carriers of foreign countries are licensed to
operate in the United States.
4. Under your program budgeting breakdown, do. you have a support program
covering the operations of your office as well as other policymaking personnel?
Yes. This we call management support. It covers those functions that facilitate
the work of the Board members and the program staff. These services include
personnel management, budgeting and accounting, management analysis, pay-
rolling, providing supplies, equipment, space, messenger services, central files,
distribution of publications, and payment of bills for operating expenses.
5. How much money is available in fiscal 1968 for expenditures under this sup-
port program?
A total of $644,159.
6. Briefly justify expenditures for the support program in terms of the nature
and extent of your operations and responsibilities.
(51)
PAGENO="0056"
52
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CO C~JLC) CO
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00
00
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CO 00
C) =
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-~ E~o
~ )
0.0
OC
0.
0.
E
00
0~
CC)
CC)
00
-J
C-)
C')
U!
C')
0
0~
C,
0
0~
CO
0
C-)
U-
CO
CO
00
>-
00
C')
>-
U-
0
0
00
C')
CO
00 r~ C~4 0) CC)
C~J ~C)CC~ COCC)
CO 00CO00~
00
0
0
0.
IL,
0.
0
00
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C-)
I-
PAGENO="0057"
CAB ANALYSIS OF PROGRAM AND MANAGEMENT SUPPORT SERVICES IN TERMS OF MAN-YEARS, POSITIONS,
AND COSTS
PROGRAM AND MANAGEMENT SUPPORT-POSITIONS AS PERCENT OF TOTAL
Estimate Increase
- or
1968 1969 decrease
Program operations 89. 4 90. 2 91. 2 91. 4 0.2
Management support 10. 6 9. 8 8. 8 8. 6 (.2)
Total 100.0 100.0 100.0 100.0
PROGRAM AND MANAGEMENT SUPPORT-MAN-YEARS AS PERCENT OF TOTAL
Program operations 89. 5 90. 3 90. 8 91. 2 0.4
Management support _-___-_______-_____-._______ 10 5 9~ 7 9. 2 8. 8 (. 4)
Total 100. 0 100. 0 .100. 0 100. 0
PROGRAM AND MANAGEMENT SUPPORT-COSTS AS PERCENT OF TOTAL
Costs
Man-years
1 :11
1:9
Program operations
Management support
557
66
Total
623
MAN-YEARS
Program operations
Management support___________~~_
540. 6
63. 6
565. 4
60. 8
586. 3
59. 2
611. 3 25. &
59. 2
Total
604. 2
626. 2
645. 5
670. 5
250
COSTS
(THOUSANDS)
Program operations
Management supporL______..._.~_________
$7, 252. 3
671. 1
$7, 969. 4
686. 8
$8, 437. 8
644. 2
$9, 035. 6
664. 4
$597. S
20.2
Total
7,923. 4
8, 656. 2
9, 082. 0
9, 700. 0
618. 0
Eo,pla~ation of Methoi TJ~tei~1 in Distribution of Man-Yec&rs by Program Purpose
All but about 14 percent of the total CAB manpower is directly assignable to
one or more of the Board's programs. Only in the case of the Office of Members
(including the Office of the Executive Director, Office of Community and Con-
gressional Relations, and the Office of Information) , and the statistics and cost-
finding and ADP activities of BAS, where manpower cannot be identified with
specific programs, is it necessary to make an allocation of man-years to program
areas.
For the Office of Members the basis of allocation is direct program man-years
of BE, BOR, BIA, BHE and OGC. To derive man-years by program of the Office
of Members, the percentage distribution of the manpower of these bureaus to the
six economic programs was applied to the total man-years in the Office of Mem-
berm.
The allocation of the statistics and cost-finding activity was made in basically
the same manner, except that no part of the activity is spread to the enforcement
program. .
53
I
Actual
1966 1967
Program operations 91. 5 92. 1
Management support 8. 5 ?. 9
Total 100. 0 100. 0
RATIO OF MANAGEMENT SUPPORT SERVICES TO PROGRAM
1:12
1:9
590
64
654
92.9 93.2 0.3
7.1 6.8 (.3)
100.0. 100.0
OPERATIONS
1:13 1:14
1:10 1:10
610 629 19
59 59
669 688 19
PAGENO="0058"
54
The ADP alloeation was made on a 50-percent fixed, 50-percetit variable basis.
Half of the total man-years used in the APP function were allocated on a fixed
percentage basis, 12.5 percent to the regulation of accounting and reporting prorn
gram and 37.5 percent equally to the other four economic analysis programs. The
remaining 50 percent was spread on a variable basis (metered hours) , with the
portion allocated to the regulation of accounting and reporting program being re-
allocated to the four programs on the same percentage distribution basis used to
allocate the statistics and cost-finding activity.
Eceplanation of Method of IK*trilnition of Dollars to Programs
For all bureaus and offices, except EAS and OS, the distribution of dollars
to programs was made on the basis of each bureau's average cost per man-year
applied to the number of man-years In each program.
To illustrate, the amounts shown by program for the Bureau of Economics were
calculated `by applying an average cost of $15,022.59 per man*year ($1,99~OOO
divided by 132.8 man-years) to BE's man-years by program as 1~ollows:
Man-years Multiplied
by $15,022.59
164
74.9
6.3
342
1.0
-
$246,370
1,125,192
94,642
513,773
15,023
132.8
1,995,000
For the assignment of BAS costs to programs a two-part allocation method
was used. First, an average cost per man-year was obtained for BAS excluding
the Data Processing Division and all ADP supplies, equipment, and rental costs.
This unit cost was then applied to the non-ADP man-year distribution of pro-
gram man-years. For the second allocation, the automatic data processing man-
year cost, including supplies, equipment, and rental costs, was applied to the
ADP man-year distributions by program.
The following tabulation shows the man-year costs of BAS for the years
1967-69. The increase in the ADP average `cost in 1969 is to provide for increased
usage of the equipment, new components and exchange of components to increase
the system's effectiveness to meet the data information needs of the BOard.
1967
1968
1969
BAS excluding ADP:
Costs
Man-years
Av&age cost.
ADP activity:
Costs
Man-years
Average cost .
Total BAS:
Costs
Man.years
Average cost
$1,960,177
126. 1
$15, 545
$1,479,601
98.6
$1,621,800
108.5
$1,701,000
111.6
$15,006
$14,947.47
$15,241.94
$480,576
27.5
$491,100
31.0
$546,600
31.3
$17,475
$15,841.94
$17,463.26
$2, 112, 900
1395
$2, 247, 600
142.9
$15, 146. 24
$15,728.48
The 05 program cost distribution follows the same method used for the other
bureaus except that the cost of the bound volumes of Board reports are dis~
tributed only to the awards of operating authority and regulatIon of rates and
fares programs. The distribution is made on the basis of the relationship of
material in the volumes to these two programs.
B. Bs4get Processes
7. ilas your program breakdown been approved by the Bureau of the Budget?
Yes. The fiscal year 1969 budget estimates submitted to the Bureau of the
Budget last fall were based on the program structure. The budget justifications
submitted to the Congress for 1is~ai 19~39 were also on this baais~
8. Does your program structure flow generally along functional lines of the
agency?
Awards of operating authority
Regulation of rates and fares.
Regulation of agreements and interlocking relationships
Subsidy support of air service
Regulation of air carrier accounting and reporting
Total, BE
PAGENO="0059"
55
The program structure 1~o11ows the functional lines of the Board.
9. Has the program budgeting concept been fully implemented within your
agency as yet in operational terms?
The program budgeting concept has been implemented within CAB in opera-
tional terms to the extent we know how to do so. We are going through a period
of learning and expect through experience to be able to improve on what we now
have and be able to make better use of it.
10. To what extent do you believe that your new budget concept will improve
the efficiency of agency operations?
I am unable at this time to determine the full extent to which the new budget
concept will Improve the efficl~ncy of CAB operations. We have already been
able to reduce the amount of work and time involved in preparing the budget,
and we have not had to employ more people. I can see advantages of this con-
cept in establishing objectives by program and allocating resources to programa
This year, for the first time, Board plans, resources, and output have been ex-
pressed on a program basis. Actual performance will also be expressed on this
basis. After some experience with the program budget concept we will be better
equipped to more fully evaluate the benefits to CAB.
C. Accounting S~ystems Development
11. Has the GAO given its approval of your accounting system?
Yes. The Board's entire accounting system was approved (without qualifica-
tions) in its entirety by the Comotroller General on January 18, 1968, letter
reference, B-161-885.
12. Is the accounting system basically established in terms of accrual costs
as the GAO and this subcommittee have recommended?
Yes. The Board's books of aec~unt are maintained on the accrual basis of
accounting in accordance with the Budget and Accounting Procedures Act of
1950, as amended, and the standards and principles prescribed by the Comp-
troller General of the United States.
13. What is the target date for completely implementing an accrual accounting
system throughout the Agency?
It is already implemented. The Agency's accounting system has been on an
accrual basis since 1962 and on July 1, 1967, accrual accounting procedures were
amended and implemented to conform with the requirements of the Comptroller
General as reflected in the approved accounting system.
14. Is your accounting system output oriented so that it will be on the same
basis as budgeting and planning?
Yes. The accounting system fully supports the Board's operating budget and
provides data on both a fully accrued expense basis and an obligation basis.
Expenditures and obligations are recorded and controlled on an organizational
(responsibility) basis which Is capable of conversion to reflect the costs of the
Board's programs.
15. What basis do you use for establishing the charges for products or services
provided to other agencies, and how are these handled in your accounting
system?
Charges to other agencies are generally based on out-of-pocket costs pursuant
to interagency agreements and are recorded as earned, on the accrual basis, in
the Board's books of accounts
16. Are capital assets, such as building and equipment items, formally recorded
in the accounting system, and upon what basis are they depreciated?
~ The Board's capital assets are recorded In the accounting system on an ac-
erual basis and are depreciated on the basis of the estimated life of major classes
of assets
17. Are the costs of the agency's physical assets considered In establishing
the charges for services to other agencies?
Cost of the agency's physical assets are not included In charges to other Fed#
eral agencies for services furnished by CAB. These costs, however, together with
all other costs, are considered In establishing charges for services furnished to
others outside of the Federal Establishment.
18. Are agency accounting reports used regularly in program management?
Yes. Each month, financial statements are prepared for each organizational
(responsibility) center showing the operating budget, accrued costs to date, and
accrued projections to the end of the period, for controllable costs. Overall fi-
nancial statements, which include all accrued costs, obligations, and the oj~eratlng
budget are also prepared for the Board as an entity. These statements are used
by management to follow the utilization of funds in relation to the budget so
PAGENO="0060"
56
that significant varianees from plan may be investigated and corrective action
taken as may be found necessary. Further, oral discussions and reviews with
respect to the financial statements are held periodically with the Executive
Director, Comptroller's staff and responsible program officials.
19. Are agency accounting policies summarized in an accounting manual with
which your staff accountants must comply?
Yes. An accounting manual has been prepared and has been distributed to all
persons concerned with the applicable policies and procedures.
D. Management In~formation ~y$tem
The Board's management information system comprises both formal and in~
formal procedures and is composed of three basic components:
1. Environmental data:
(a) Economical.
(b) Political.
(c) SociaL
Technical data
(a) Industry statistics.
(b) Analyses.
(c) Research.
(d) Studies.
Internal data
(a) Financial.
(b) Workload.
(c) Manpower.
(d) Organization.
The following statements and chart will allow one to see how the information
is fed into and utilized in the Board's management and decisional processes.
2.
3.
Management Information System (Environmentai Data)
The Bureau of Economics contains the principal economic advisory and re~
search staff. In addition to providing economic assistance to the Board in con-
sidering and deciding cases, the Bureau of Economics through its Division of
P'anning, Programing, and Research also has the responsibility for looking into
the future and anticipating new developments which are likely to be of conse-
quence for the air transportation system, hopefully anticipating further poten-
tial critical problems in time to avert avoidable crises.
Research outputs are used to develop a body of policy guidelines which enable
the Board to deal quickly and effectively with both routine and novel air trans-
portation situations as they develop. Development of such guidelines represents
. improvement over past practice under which, of necessity, the Board dealt with
matters coming before it on an extemporaneous or ad hoc basis.
As a result of effective research and planning in the CAB, we have a clearer
picture and better understanding of the air transport industry as it exists today.
With this understanding we are better able to foresee the changes that are likely
to occur in the industry in the future. Our research and evaluation outputs of the
existing airline market structure and industry performance are designed to pro-
vide answers to questions such as:
(1) What are the present passenger and cargo market characteristics?
(2) Are there deficiencies in the existing route structures causing made-
quate air service for the public?
(3) Do the current rates and fares meet the requirements of an expanding
industry and of anticipated changing consumer markets?
(4) What are the current financial conditions and operating character-
Istics of the airline industry, of carrier groups, and of selected carriers?
(5) What is the interrelationship of air transport to the other transport
modes and to general economic conditions?
Based on the outputs and understanding from the above analysis our present
research is directed to answer the following questions:
(1) Will present passenger and cargo demand trends persist?
(2) What economic problems will the CAB have to deal with because of
new aircraft technology?
(3) What will be the future financial requirements of the airlines prior to
and during the acquisition of new aircraft and related equipment facilities?
Due to the relatively small staff. and limited resources for . the research and
planning activities we have established rigid priority criteria. The highest prior-
Ity is given to applying research data to the day-to-day operating problems of the
PAGENO="0061"
57
Board. The second priority is given to research. which leads to the development of
guidelines for Board policy. The following current listing of manpower priority
assignments in the division to specific projects illustrate thesepriorities.
Studies and projects in priority order
1. Quarterly Airline Industry Economic Report.
2. Balance of Payments.
3. Impact of New Large Jets and SST's on the U.S. Transportation . Systems
1970-72.
4. Airline Profitability.
IS. Study of Traffic, Fares, and Competition in City-Pair Markets.
More detailed descriptions of the research and planning studies and projects
follow:
(1) Quarterly Air~ine Inds~stry Economic Report.-This Report pulls together
quarterly and annual traffic and financial data for the major segments of the
airline industry on a timely basis.
(2) Balance of Payments.-This Study measures the impact on the balance of
payments of the sale of U.S. and foreign built aircraft and international travel.
This Study will update the prior one dated April 1965.
(3) Impact of New Large Jets and ~ST's on the U.S. Transportation system,
1970-72.-The objective of this Study is to project the range of possible economic
effects on the air transportation system resulting from the introduction of these
large aircraft ; to develop policy guidelines to deal with the potential impact on
passengers, shippers, stockholders, labor, and taxpayers ; to define potential prob-
1cm areas both domestic and international which would be of concern to the Board
and to provide alternative solutions in keeping with the Board's promotional and
regulatory responsibilities.
(4) Airline Profltc&bility.-This Study is an attempt to isolate and measure those
factors most closely related to, and responsible for, the changing level of profit-
ability of the domestic trunkline carriers.
(5) $tudy of Traffic, Fares, and Competition in City-Pair Markets.-This study
is analyzing the difference in economic and traffic characteristics of those markets
with competitive airline service and of those without such competition. Some of
the characteristics are being studied over the time period 1960-435 to see if there
have been differential rates of change in these characteristics in the competitive
markets.
Management Information system (TechnicaZ Data)
20. Do you have an automated management information system for your
agency?
No. The Board has a tier of coordinate systems which in composite serves its
mission directed and administrative information needs. Some are automated,
others are not.
21. In general, what functional areas are included in the management informa-
tion system? (Examples : financial, planning, and program budgeting, inventory,
personnel, etc. )
In general, automated information system components exist with respect to the
environmental, technical, and internal information required by the Board.
22. Briefly describe the state of development of your system and how it
operates.
The CAB is a very small agency for which an elaborate, automated internal
administrative information system is neither required nor economically sup-
portable. Primary emphasis is placed upon those functions which will contribute
most to performance of the Board's regulatory responsibilities. A program there-
fore exists for disseminating basic air transport statistics through a system of
internal and external reference reports and for maximum utilization of APP
directly for meeting detailed informational needs of the regulatory processes. The
major bodies of air carrier statistics have been largely mechanized and are in
process of upgrading through a continuing 5-year plan for more effectively ex-
ploiting the potentials of APP in both information collection and application
processes. Mechanization of administrative information systems have been to date
limited, largely on a "byproduct" basis, to payroll and closely associated recur-
rent or special reports covering such matters as staffing plans, financial activities,
employee distributions by categories, and employee leave analyses. Upgraded or
new mechanized systems are projected for: (a) Payroll, personnel, and position
control; (b) property control and accounting; and (o) docket status control.
r
PAGENO="0062"
58
23. Did you perform a "requirements" analysis &f the entire agency, or just
selected areas? ~ ~ ~
Requirement analyses are performed, as a matter of practice, for the entire
agency with reference to each integral automated and nonautomated information
system component under development.
24. To what extent have you considered the need of ~ ether agencies for ex-
changing information with your agency in the development of your system `~
With respect be technical information systems, continual liaison is' maintained
with other transportation agencies generally with the objective of maximizing
coordinate actions Similarly in developing internal administrative information
systems close adherence to standards `and practices', as well as needs of the Civil
Service Commission is maintained to the extent feasible
25. Are you developing a standard data base of information for the entire
agency?
As a matter of objective each system component as implemented is directed at
the development of a standard or general information base for the entire agency.
2U. In reporting ,S~!tiStj~1 information, what standards for coding are you
using?
In the technical information systems codes prevailing within the air carrier
industry are generally used. Such codes are largely promulgated' `by the Board
or FAA imtially In the administrative area codes promulgated by the Civil
Service CommIssion are used
27 Have you explored all of the information requirements common to your
agency which might exist within the data base of other agencies?
To the extent feasible. Utilization of economic information maintained `by INS
and the Bureau of Census are two specific examples.
28. Are you performing the work in-house, or are you utilizing contractor per-
soimel?
The work is performed in-house, supplemented very infrequently by external
contract.
29. What main benefits do you feel your management Information system will
provide in the management of your agency's activities?
Enhances both the quality and timeliness of necessary regulatory actions and
additional administrative decisions.
30. What is your estimated dollar cost for the completion and operation of the
basic parts of your management information system?
Unquantifiable at this point.
31. At what level is the determination made concerning what is needed in `the
management information system?
Needs of the Board's management information system are determined on a
concerted basis by the Executive Director, his immediate staff and the head of
each Board program concerned.
CXVI!~ AERONAUTICS BOARD'
MANAGMENT SYSTEM _____________
I PLANNINà]
HESTORICAL & FORECAST INFORMATION'
~.f ENVIRONMENTAL DATA
* ECONOMIC
* POLITICAL
L SOCIAL
DECISION
PLAINIIIE J.-ø.. EXECUTION' REVIER/C~i"I
I * OET'VBJELTIAES * MEASURE
I * FORMULATE PERFORMANCE
I STRATEGY * ISOLATE VAVIAIRCES
-~1 OECIOLANONS * AID IN REPLAIINING
ALTERNATIVES &EEPROGRRMMING
4: £
2rIECNNICAL DATA
* IRDUSTRY
STATISTICS
* ANALYSIS
* RUSEARCII
* STUDIES
* FINANCIAL
* AORILLSAS' b
* NARPOWER
LT 00T~'50'T,5~,J
REVIEW' /cONT,R~j
INFORMATION
ENVIDNRMENIAL DATA ~
* ECONOMIC
* POLSTICAL
* SOCIAL
TECHNICAL DATA 2.
* INDUSTRY
STATISTICS
* ANALYSIS
* RESEARCH
* * 5TUSIES
INTERNAL DATA
* FiNANCIAL
* WSRIILSAD
* NARPSWER
* DRSRRIZATIOM
FEEDBACK
Economic, Social and Polilical ASPECtS *I the OIYOAIR in which IAn DRaItOperaleS.
2. CVIIRYRARCE, Aclinilies and Plans stAll Carrier OAR related IRARUIIIOS,
3. Internal OperalinE information of the C. A. 0.
PAGENO="0063"
59
~ Mcs~na9erne~vt Information System (In~termca Data)
The ]3aard. utilizes ~t variety o1~ ~n~thoda fair ini~ormiug iuauagement and review-
ii~g precess and accomp1ishineuts.~ The ~re~ent system 1~as beei~ 1ev~opecI over the
past several years and is compatible with the nature of the Board's w~w1~ and
metho~ of operation.
Beca~~e. the Board ia small in size and nearly all o1~ the operating bureaus and
offices are located in one buIlding a reasonable amonni of r~portb~g and review
is pertormed or~ an oral and inforrn*j basis. This is considered to be both e~tecttve
and efficient in managing the regulatory programs and administrative actlvitie~
of the J3oard.
The reporting system is generally comparative in nature. The ~ompariseu is
actual progress or accomplishment in relation to the ~perating budget, target
dates, time-phased projects or other standards or bemchmarks~
The management information system includes these components :
A. Chairman's weekly staff meetings.-The Chairman's weekly sta~ meetings
with Bureau and office heads and. their deputies serve as a means of communi-
cating both up and down the line of command and across organizational lines on
major or important items of work or events affecting the Board's work or work
plans.
B. Monthly management report.-This report, which is distributed monthly tn
all persons in managerial positions, is one of the more important vehicles o~ mau~
agement information in the Board. It includes, by responsibility center, a narra-
tive report en accomplishments during the past month and plans f~r the months
ahea~d, quantitative reports on selected workload items, and progress reports on
particular bureau or office cases and projects.
The report for the last month of each calendar quarter includes quantitative
reports on all significant workload items.
This report serves the purpose of informing management of the accomplish-
ments during the past month, the plans for the month ahead, a coordinating device
between responsibility centers, accountability for progress on cases and projects
with completion dates, report of work receipts and accomplishments, and work
on hand.
C. Monthly financial statements.-Each month, financial statements are pre-
pared for each responsibility center showing the operating budget, costs to date,
and projections to the end of the period, for controllable costs. Overall financial
statements, which include `all coats, are also prepared for the Board as an entity.
These statements are used by executive and program management to follow
the utilization of funds in relation to the budget so that sfgnificant variances from
plan may be investigated and corrective action taken as may be found necessary.
Oral discussions and reviews with respect to the financial statements are held
with the Executive Director, Comptroller's staff, and responsible officials as the
need arises.
D. Quarterly reviews.-After the close of each calendar quarter the head of
each responsibility center with his top level supervisors review with the ~xeeutive
Director and the Comptroller's staff operations during the past quarter and the
plans and outlook for the ensuing quarter.
As a result of these quarterly reviews, program and budgetary adjustments
are made as may be required.
B. ~peciai reports-Special reports both oral and written may result during
any reporting period because of unusual or unanticipated problems or events.
These vary widely as to nature and frequency and are submitted as required.
B. Internal Auditing
32. Do you have a centrally organized internal audit system within your agency
which operates independently of department and agency operations?
An internal audit function was established In cAB this fiscal year. However,
because of the relatively small size of the Board and the limited resources avail-
able, only part of a man-year was allocated to this function in fiscal year 1968.
The capability was allocated from our Field Audits Division which Is located in
the Bureau of Accounts and Statistics and is concerned predominantly with the
external audits of airlines.
33. Is your internal audit staff made up of persons with experience in account-
ing and auditing?
Yes, the entire technical staff of the Field Audits Division is comprised of
qualified accountants. These accountants, qualified academically and by experi-
ence, fully meet the requirements of the Civil Service Commission relating to the
PAGENO="0064"
60
professional accountants and auditors series. All internal audit work is done by
professional auditors.
34. Is the scope of review by the internal audit staff limited iii any way?
The scope of internal audit has been limited ; not by management direction,
but basically . because of limited manpower resources. As a fivst step in the insti-
tution of the internal audit program, the audit work has been limited to a review
of the agency's payroll system and procedures, including the application of ADP
to payroll preparation and related output.
35. Are all reports and recommendations of the internal audit staff submitted
in full directly to the head of the agency?
The initial report under the internal audit program is nearing completion. The
audit report will be submitted to the Chairman of the Board.
36. Is the audit staff rosponsible to or subject to direction by any official who is
also primarily responsible for an activity which might be audited?
The auditor assigned to do internal ~ audit work will report directly to the
Chairman of the Board.
37. Are the personnel assigned to the internal audit function adequately pro-
tected from recriminations and arbitrary personnel action that might result from
an adverse effect of their reports upon other agency employees?
We believe the auditor is adequately protected from any recriminations and
arbitrary personnel actions that might result from an adverse effect of his reports
upon other agencies, employees or officials.
38. Are all reports and recommendations of the Internal audit staff available
to the Comptroller General and to appropriate congressional committees?
Yes. It is expected that the Internal CAB audit reports will facilitate the work
of the GAO auditors and others authorized to have access to such reports.
F. Automatic Data Processing
39. Do you have a central organization in your agency which is responsible for
ADP management?
Yes. The Board's Bureau of Accounts and Statistics, which reports directly to
the Executive Director.
40. Will you describe its functions?
The Bureau of Accounts and Statistics is the Board's fact-finding arm. It is
responsible for the collection, validation and processing of bodies of information
to be generally used in the performance of CAB mission-directed functions.
41. Who has the responsibility for deciding whether or not the use of a corn-
puter for a particular function within your agency is justified?
The Executive Director, in concert with the Director, Bureau of Accounts and
Statistics, and ADP liaison staff of all operating Bureaus involved. The initial
decision to install a computer was approved by the Chairman.
42. On what basis is the decision made? Are there documented systems studies
available for review in all cases?
The CAB has only one computer installation. It was installed following a
documented systems study. Where new applications are sufficiently material, or
novel, afurther documented study is made.
43. Can you cite instances in which a request for a computer system was dis-
approved for lack of adequate justification?
Prior to selecting equipment for the Board's present single installation, a nurn-
ber of staff suggestions for computer installation were turned down by the Di-
rector, Bureau of Accounts and Statistics, for lack of adequate justification.
Disapproval of an IBM RAMAC system is one such specific example.
44. Assuming the use of a computer has been fully justified by a proper study,
are there procedures for determining whether the requirement can be satisfied by
using (sharing) equipment already installed in your agency? Will you describe
the procedure?
All suggested computer applications are referred to the Bureau of Accounts and
Statistics. A review is made as to the feasibility of application ; the relative econ-
omy of alternative processing modes, either on the Board's central facility, facil-
ities of another Government agency or new Board facilities ; and a recommenda-
tion on a course of action is made to the Bureau concerned and Executive
Director.
45. To what extent have you been successful in getting the users to share equip-
ment instead of acquiring their own?
The Board has no multiple computer installations acquired by Individual users.
On the basis of a study, per item 44, a time-sharing terminal utilizing a commer-
cial GE computer facility was acquired, as an alternative to a request for individ-
ual electronic calculator facilities and as a supplement to the Board's centralized
PAGENO="0065"
61
computer to serve directly the small-scale computational needs of all operating
Bureaus.
46. Do you review the GSA lists of available excess equipment before going to
the open market to acquire equipment?
GSA lists of excess equipment are reviewed as they are received to keep in~
formed of any equipment available which the Board could economically use.
47. Who makes the determination that excess equipment can or cannot do the
job?
ADP equipment is acquired only infrequently by the Board. When equipment
is acquired, the action is a significant event in whkth the Executive Director,
Comptroller, and ADP liaison staff of the operating Bureaus participate in deci-
sions based upon recommendations of the Director, Bureau of Accounts and
Statistics, reflecting technical staff analyses of alternatives available-including
the potentials of excess equipment.
48. What has been your experience in making use of excess equipment?
Under the limited equipment acquisition experience of the Board, but little
opportunity has existed to make use of excess equipment. At such times as equip-
ment has been acquired, however, it has been our experience that excess equip-
ment listed by GSA has characteristically been either of a scale or so specialized
that they could not be economically adapted to the Board's work.
49. Assuming it is necessary to acquire equipment from the commercial market,
do you normally invite all qualified suppliers to submit proposals? What are the
exceptions?
In initially selecting ADP equipment for the Board's single installation, a de-
tailed study was made by staff of the characteristics of equipment offered by
qualified suppliers in terms of Board needs and overall economy ; qualified man-
ufacturers were invited to and in fact submitted specific proposals ; and an
independent equipment selection study was made by an external contractor.
Similar procedures have been followed in subsequent upgradings of the initial
system except that studies have not been made by external contract.
50. Who makes the final selection of equipment, and on what basis is the dcci-
sion made?
The Executive Director in concert with the Comptroller, the Director, Bureau
of Accounts and Statistics, and heads of involved operating Bureaus. Decisions
are made on the basis of ADP technical studies of projected applications and the
tradeoffs involved in costs and benefits as between alternative courses of action
reflected in recommendations by the Director, Bureau of Accounts and Statistics.
51. Describe your program for evaluating the actual results of computer use
against the results anticipated when the use of the computer was approved.
The actual uses of the computer in relation to those originally intended is re-
viewed recurrently and modified as necessary to conform with changes in empha-
sis of the Board mission-oriented objectives. Review is made each quarter gen-
erally and, in depth, annually by the Executive Director in concert with the
Director, Bureau of Accounts and Statistics as part of a continuing review of
work performance and control of annual budgets.
52. In general, have your computers produced the benefits that were expected?
In general, progressive application of the computer has been proceeding in
accordance with a continuing 5-year plan. The plan is updated in conjunction with
the annual budget review, directed at optimum computer production of informa-
tion end-products. Emphasis is being placed initially upon the Board's major two
statistical systems used in performance of its mission objectives. These applica-
tions are proceeding about as expected.
53. How many computers do you now have, and how many of these are
purchased?
The Board has but one in-house computer installation supplemented by one
GE-Dartmouth time-sharing terminal. Neither facility has been purchased.
54. Who makes the decision on whether computers are purchased or leased?
On what basis are the decisions made?
The Executive Director, in concert with the Comptroller and Director, Bureau
of Accounts and Statistics. Standards of measurement outlined by the Bureau of
the Budget and Comptroller General are used as a basis for decision ; namely,
cumulative purchase versus lease cost over the expected use period considering
interest, maintenance, and residual values in measuring relative costs.
55. Is your agency now using any leased ADP equipment? If so, how much
longer do you expect to use it?
Except for supporting EAM equipment, which has been purchased in large
part, all of our ADP equipment is leased. It was expected, when acquired, largely
PAGENO="0066"
62
in 1966, that the computer would be used about 5 years. This expectation has not
changed.
~ 56. Have you made use of ~ third-party leasing arrangements. If so, what has
been your experience with these arrangements?
No use has been made of third-party leasing arrangements. Our experience with
such arrangements has been restricted to negotiations with GSA concerning the
various avenues available for most economically funding particular equipment
acquisitions. Negotiations commenced about a year ago to join with other Fed-
eral agencies through GSA in soliciting a third-party leasing arrangement but
were suspended upon inquiry from GSA concerning the potential purchase of such
equipment through the Government APP revolving fund It is understood the
policy for assigning a purchase position with respect to the fund has not been
fully formulated. .
Our agency has previously proposed (for example November 12 1966 report
of APP accomplishments to the Bureau of the Budget) that present Government
policy which inhibits the use of installment purchase arrangements might well be
re-examined with a view to developing standards for the employment of com-
mercial sources as a means of funding equipment acquisitions and of minimizing
a significant one tune impact on the budget of a small scale Government agency
57 To what extent have you developed standard systems or applications which
are used by your computer installations ~
Since the Board has but one computer installation the problem of coordinating
multiple installations does not exist Emphasis is being placed upon general
purpose systems design and programing and the use of common APP languages
particularly Fortran RPG and now Mark IV instead of Assembly Lan
guage," as means of optimizing coordination and use of data applications through-
out the Board
58 Will you describe the steps you have taken for the development of standard
data elements for use by your Pepartment under the program recently estab
hshed by Bureau of the Budget Circular A-86 `~
~ The Board has held consistently to the poilcy of adhering to such standards
as may be promulgated to facilitate the exchange of information between Govern
ment agencies However to date the Boai d has not been involved in any sig
nificant intra Government information exchange does not have multiple installa
tions between which information is internally exchanged but is continuously
engaged in the exchange of information with the air carrier industry subject to
its regulation The general policy has therefore carried the necessary reserva
tion that internal Board standards must be consistent with prevailing air carrier
standards We are not aware of any conflicts with the general policy to date
however inasmuch as the standards being used for exchange of information be
tween the Board and air carriers have largely originated either directly with
the Board or indirectly with the Federal Aviation Administration and are already
used on a fairly universal basis
59 What do you consider to be the most pressing problems that need to be
overcome for you to make better and more efficient use of computers in your
agency9
All specific problems revolve around the need for additional highly skilled
manpower to meet the increasing demands of
( 1 ) Third generation computer environment;
(2) Peveloping and applying new APP systems ; and
( 3 ) Maintaining operational systems
G Personnel Management
60. Where is the responsibility placed for manpower planning?
The Executive Pirector has the basic manpower planning responsibility He
relies on the heads of offices and bureaus to develop estimates of manpower needs
and on the Comptroller and Pirector of Personnel to assist him to evaluate these
needs Staff action in this area is subject to approval of the Chairman and of the
Board members
61 What manpower requirements are forecast for your agency and how are
these determined?
Manpower requirements are determined primarily through the budgetary proc-
ess in which the offices and bureaus estimate their workload and their manpower
needs, which are evaluated by the Comptroller and the Pirector of Personnel. The
II
-l
I
PAGENO="0067"
63
Executive Director then critically reviews and discusses program objectives and
manpower requirements in meetings with bureau and office representatives, after
which he submits his proposals to the Chairman for approval.
Turnover figures for recent years are analyzed and the impact of factors such
as the draft and the changes in retirement eligibility are studied. Thereupon
recruiting programs for attorneys, accountants/auditors, economists, and air
transport analysts are projected.
62. Is the work organized with some consideration of the effect on position
classification so that the mission can be accomplished with the minimum numbei~
and cost of positions?
Salary cost is one of the major factors in considering internal organization.
Other considerations relate to the established principles of organization which
also serve the objective of economy of operations.
63. Is the classification of positions in accordance with applicable civil service
standards?
Except for 11 positions specifically exempted from the classification provisions
of law by the Federal Aviation Act of 1968, as amended, all other positions in the
Board are classified in accordance with the applicable Civil Service Commission
standards. The most recent Civil Service Commission inspection found the Board
to be in full compliance with all legal and regulatory requirements with respect
to position classification, as well as other aspects of personnel management.
64. Has the agency established career possibilities to assist in development
and advancement of employees?
While career ladders have not yet been formally described and publicized, there
are established and recognized "lines of promotion" to assist in the development
and advancement of employees. Most of the Board's upper level positions have
been filled by promotion from within.
65. Describe the means used to recruit quality persons.
The Board makes positive efforts to recruit high quality persons to fill vacancies
at all levels to fill entrance level jobs. We interview on college campuses, occa-
sionally talk to student organizations, utilize Civil Service Commission registers,
and draw a few employees from private industry to fill jobs above the entrance
and we promote qualified persons from within to the maximum extent. To fill
jobs for which we have no qualified persons we recruit from other agencies and
from the private sector.
66. Does your agency emphasize promotion of employees on the basis of merit?
Almost all vacancies above the entrance level are advertised among all em-
ployees and selection is made from the best trained and experienced people avail-
able to us without regard to race, creed, sex, national origin, marital status, politi-
cal affiliation, physical handicap, or age.
67. How does your agency consider complaints, grievances, and appeals?
These matters are considered in accordance with the procedures prescribed by
the Board pursuant to Civil Service Commission regulations. These procedures
are predicated on the premise that the employees have the right to have their com-
plaint, grievance, or appeal aired fully, fairly, and promptly without fear of
reprisal in any form and the resultant "airing" is beneficial to efficiency.
68. Is personnel management considered to be an integral part of the agency?
A comprehensive, positive personnel management program is considered
essential to the effective, efficient, and economical accomplishment of the Board's
mission. Top management supports, and operating officials welcome, such a
personnel program.
69. How do you treat equal employment opportunity and employment of the
handicapped?
We consider that these two programs support and strengthen our efforts to
accomplish our mission effectively, as well as being consistent with the right
of qualified citizens to seek a career in the Federal service.
II. GAO Audit Reports
70. Has the General Accounting Office issued any audit reports on the overall
operations of your agency, that is, reports not directed at a functional program
of the agency, but rather at the management and administration of the agency?
No.
71. If so, to what extent have the recommendations contained in these reports
been carried out?
Not applicable.
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64
II. QUESTIONS ON AGENCY OPERATIONS AT THE PROGRAM LEVEL
A. Awards of Operating Authority
. 1. What is the nature of and authority for this program?
The Federal Aviation Act of 1958 specifies that air carriers, to engage in
air transportation within the United States or to and from the United States,.
require a certificate of public convenience and necessity, or a permit or an
exemption from the Civil Aeronautics Board authorizing such air transportation.
Air taxi services are covered by exemptions, and services by foreign air carriers
are covered by foreign air carrier permits. Intrastate carriers are not subject to
Board authority.
2. Who is the person primarily in charge of this program at the operative
level (name and title)?
The officials responsible for the operations of this program:
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Alphonse M. Andrews, Director, Bureau of Operating Rights.
3. How much money and capital equipment is available under this program~
for fiscal 1968?
$3,734,000 is available under this program, primarily for payment of salaries
and expenses. Capital equipment includes the normal office furniture, type-
writers, and office machines. This program is served by the Board's centrailned,.
rented ADP equipment.
4. Would you describe the output generated by this program?
The output is in the form of written decisions issued in some instances by the
Board and .j~ others by the staff (under authority delegated by the Board). The
decisions are responsive to various kinds of applications filed by U. S. domestic
and international air carriers, as well ~ as by foreign airlines serving the United
States. In general, the actions of the Board and its staff serve to approve or deny
requests which for example seek new air routes authority to suspend service
permission to operate as an air freight forwarder or a license to operate one or
more special charter flights.
5 Can you quantify this output in any way ~
The licensing program as a whole is comprised of perhaps 60 hearing cases
processed annually plus determinations as to recommended courses of action to
follow in many more In addition several hundred decisions are reached through
informal (nonhearing) means Extensive use is made of authority delegated to
the staff by the Board. The preponderance of all eases acted on involve some de-
gree of business urgency for example the opportunity to conduct a charter flight
requiring special authority `from the Board will be lost unless a decision is
reached promptly by the Board In view of the high volume the turnover of cases
necessarily must be extremely rapid Specific output are quantified below
Output
Items
completed or processed
Actual, 1967
Estimate,1968
Estimate, 1969
1 Regular route authorizations
2. Cargo and charter licensing
3. Examiners decisions issued
299
1,273
77
409
~ 1, 170
78
510
1, 1.97'
85~
4. Negotiations/consultations
5 Informal intergovernment discussions
15
7
18
7
. 19
7
6. Would you describe the principal operations that are involved in producing'
this output? * .
The principal operations involved. in carrying out this program include : "
(1) The processing of applications for air transportation operating author-
ity or modification of authority either by hearing or nonhearing procedures
(2) The conduct of investigations initiated by the Board involving operat-
ing authorities
(3) International aviation work involving obtaining, granting, or
changing of operating authority with foreign countries generally through
bilateral negotiations and agreements, and the handling of day-to-day operat-
ing problems with foreign governments and airline officials ; *
(4 ) The issuance of foreign carrier permits ;
( 5 ) The necessary studies, forecasts, and analyses not related to processing
a specific case or application.
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65
7. How many employees are involved in the program and in what general type
of employment categories do they fall?
There are approximately 257 man-years involved in this program and their
employment categories include.-accountants, lawyers, hearing examiners, indus-
try economists, air transport analysts, and a proportionate number of clerical
support types.
8. What is the grade structure and how many supergrade-quota and non-
quota-are invelved?
Positions with designated grades including supergrades are assigned to each
organizational unit of the Board. The time of employee's filling these positions
is charged to the programs on which they work on a man-year basis and an
employee's time may be charged to more than one program. Therefore, the grade
`structure of a program would not be meaningful as the aggregate of positions by
grade would exceed the total number of agency positions. An organizational chart
showing the number of positions in each organizational component by grade is
attached as an exhibit. The Board has no nonquota supergrades.
9. What capital equipment, such as ADP, if any, do you rely upon to' fulfill
this program?
None-except the usual office equipment and the output from the Board's
centralized, rented ADP equipment services this program.
10. Do you expect the expenditures or the benefits of the program to' grow
appreciably in the future?
The resources of the Board necessary to maintain adequate output and to keep
pace with new developments undoubtedly will expand. A growth of 10 percent
in the immediate future probably will be required.
There should be significant increased benefits to the traveling and shipping
public, measured in such terms as available capacity and added markets enjoying
lirst single-plane service or additional competitive service. Continued reduction
in Federal subsidy is a general benefit.
11. At what level are the personnel responsible for the various parts of the pro-
gram coordinated to determine if the program as a whole is being efficieiitly
~carried out? ` ` .`
At the Board, Chairman, and Executive Director levels. Lateral coordination
is also carried out at the office and bureau level.
12. Is there a continual program review within the agency, other than the an~
nual budgetary review, to determine if the program as a whole is being efficiently
carried out?
The Board's review process is an integral part of its management system as
presented on the chart and text in exhibit D. The major components, both formal
`and informal, include Chairman's staff meeting, monthly management report,
monthly financial statements, quarterly reviews, and special studies and reports.
13. To your knowledge, does this program duplicate or parallel work being
~done by any other agency?
No.
14. Is your organizational structure such that the program is being carried out
most efficiently and effectively?
Yes.
15. Are there any outstanding GAO reports on this program? If so, what is the
`status of the GAO recommendations the report contains?
No.
16. What significant problems, if any, are you facing in accomplishing the
~program objectives?
In the immediate future, particular attention will be focused on the following:
A. Developing techniques to expedite important route cases so as to shorten
`the time between initial applications and final decision;
B. Handling of cases so as to alleviate problems at the most congested air-
ports, while encouraging operations at satellite airports and underutilized
facilities ; and
C. The developing cost squeeze resulting from inflationary pressures
affecting the industry generally.
17. Do you administer any grants, loans, or other disbursed funds related to this
program? If so, is the size of your administrative staff commensurate with the
magnitude of the outlays?
No loans or grants `are administered under this program.
18. If your appropriations were reduced, how would you absorb the cut-by an
overall reduction, or by cutting or curtailing certain activities?
PAGENO="0070"
.~ ~ 66
By an overall reduction in the level of effort, which would result hi a general
slowdown in the processing of applications. Most activities perfOrmed under this
program are prescribed by law and cannot be suspended
19 If additional funds were available what would you do with the new money~
A. Increase the manpower of this program in order to achieve substantial
reduction in subsidy additional funds would be used to accelerate the Board s
route improvement activities for subsidized carriers. Twelve additional posi~
tions are requested in the Board's budget for fiscal year 1969.
B Attainment of a current docket in route application matters
C Attainment of a current docket in cargo licensing matters
D. Economic analysis of individual carrier performance to be used in the
Board's decisional processes.
E. Economic evaluation of the degree of success by the Board in reaching
its objectives in specified areas and markets This information can be used
to help determine future Board decisions.
F. Assessment of the role of supplemental carriers.
G. Economic impact of air taxi operators.
H Analysis of the distributive characteristics of international air passenger
movement involving U.S. carrier participation.
I Analysis of technical assistance provided by American carriers to for
eign carriers, `and the record of experience and results.
J. Analysis of aircraft leasing in the international aviation field : nature,
developments trends and prospects with special reference to U S Interests
B. Regulation of Rate$ a~ad Fares
1. What is the nature of and authority for this program?
The Board Is authorized by the Federal Aviation Act of 1958 to regulate rates,
rate structures, and related practices and services of domestic air carriers. This
includes the fixing of service mail rates paid by the Post Office Department and
rates paid by the Department of Defense for military traffic carried by corn
mercial airlines.
2. Who is the person primarily in charge of this program at the operative level
(name and title)?
John H. Orooker, Jr., Chairman.
Charles F Kiefer Executive Director
Irving Roth Director Bureau of Economics
3. . How much money and capital equipment Is available under this program
for fiscal 1968?
$1,658,000, primarily for salaries and expenses of the personnel `associated with
this program There is no capital equipment except the usual office equipment
4and 5. Would you describe the outputgenera't~d by this program?
Can you quantify this output in any way?
Items completed or processed
Output
Actual, 1967 ~ Estimate, Estimate,
1968 1969
A. Passenger and property rates:
(1) Review of tariff filings 47, 616 50, 000 52, 000
(2) Special tariff permission applications 1 599 2 000 2 100
(3) Free transportation tariffs 1 635 1 700 1 700
(4) Processing tariff referrals and complaints 956 1, 000 1, 100
(5) Passenger and property rate investigations 19 18 25
(6) Passenger and property rate exemptions 225 225 250
B. Government rates: Service mail rates ~ 10 25 28
6. Would you describe the principal operations that are involved in producing
this output? ~
The principal operations involved in carrying out this program include:
(A) Review of domestic and overseas passenger and cargo rate tariffs to
determine those rates and fares that should be permitted to become effective
without investigation those that should be permitted to become effective
but at the same time investigated, and those that should be suspended pend-
ing investigation;.
(B ) Review of complaints against air carrier rates filed by competing car
riers or by users of those services to determine whether such complaints
warrant a formal investigation of the provisions complained of
PAGENO="0071"
67
( C) The conduct of formal (hearing process) investigations of those rates,
fares, rules, or related tariff provisions that the Board has found may be
unlawful or contrary to the public interest;
( D) Establishment of minimum rates applicable to foreign, overseas, and
domestic charter services performed by the civil air carriers for the Military
Airlift Command (MAC) , on the request of the carriers or the Department of
Defense, or the Board's initiative, so as to maintain these services on a
sound economic footing;
(E) Review of petitions for the establishment or revision of service mail
rates filed by the air carriers or the Post Office Department ; and
(P) The necessary studies, forecasts and analyses not related to processing
a specific case or app1ication.
7. How many employees are involved in the program and in what general type
of employment categories do they fall?
Man-years totaling 114 are authorized for this program for fiscal year 1968.
The general type of employment categories are air transport analysts, industry
economists, attorneys, and clerical positions.
8. What is the grade structure and how many supergrades-quota and non-
quota-are involved ?
Positions with designated grades, including supergrades, are assigned to each
organizational unit of the Board. The time of employee's filling these positions is
charged to the programs on which they work on a man-year basis and an em-
ployee's time may be charged to more than one program. Therefore the grade
structure of a program would not be meaningful as the aggregate of positions by
grade would exceed the total number of agency positions. An organizational chart
showing the number of positions in each organizational component by grade is
attached as an exhibit. The Board has no nonquota supergrades.
9. What capital equipment, such as ADP, If any, do you rely upon to fulfill
this program?
Output from the Board's centralized, rented ADP equipment and the usual
office equipment.
10. Do you expect the expenditures or the benefits of the program to grow
appreciably in the future?
It is expected that both expenditures and benefits of the program will grow
appreciably as described more fully in question No. 16.
11. At what level are the personnel responsible for the various parts of the
program coordinated to determine if the program as a whole is being efficiently
carried out?
At the Executive Director and Chairman level. Lateral coordination is also
carried out at the office and bureau level.
12. Is there a continual program review within the agency, other than the
annual budgetary review, to determine more effective and efficient ways to
achieve these program objectives?
The Board's review process is an integral part of Its management system as
presented on the chart and text in exhibit D : Management Information System.
The major components, both formal and informal, include the Chairman's staff
meetings, the management report, monthly financial statements, quarterly re-
views, and special studies and reports.
13. To your knowledge, does this program duplicate or parallel work being
done by any other agency?
No.
14. Is your organizational structure such that the program is being carried
out most efficiently and effectively?
Yes.
15. Are there any outstanding GAO reports on this program? If so, what is the
status of the GAO recommendations the report contains?
No.
16. What significant problems, if any, are you facing in accomplishing the
program objectives?
Problems in accomplishing program objective. The workload in all areas is
expected to increase during the next several years reflecting increased use of air
transportation and additional complexity of rate problems. Carrier expansion
of equipment will require significant expenditures which are expected to bring
pressure for fare increases. Continued surveillance will be required to prevent
unwarranted increases as well as achieve appropriate adjustments in the fare
structure. In this regard, the domestic fare structure study now in process will
PAGENO="0072"
68
provide a basis for structure improvements. Implementation of structural im~
provements will constitute a significant workload during the future period.
Air cargo is growing rapidly in volume, but continues marginal economically.
Domestic cargo tariffs, complaints, and informal proceedings are expected to
Increase in this area.
Mail rate activity is expected to grow in volume and complexity. The Post
Office Department is considering basic changes in the mail distribution which will
require revision of currently effective service mail rates. This Department is now
expanding the use of air taxi operators for the carriage of mail, necessitating
numerous service rates for these operators.
The Department of Defense now requires an annual full scale review of the
minimum charter and other rates applicable to civil air carrier service for the
military establishment. To meet the Department's requirements such proceeding
must be telescoped into a few months' time and must be supported by an effective
audit program.
17. Do you administer any grants, loans, or other disbursed funds related to
this program ? If so, is the size of your administrative staff commensurate with
the magnitude of the outlays?
There are no grants or loans under this program.
18. If your appropriations were reduced, how would you absorb the cut-by
an overall reduction, or by cutting or curtailing certain activities?
By overall reduction in the level of effort. The Board has very little discretion
as to processing the work of this program. Most of the work must be processed
within statutory deadlines. The quality of the work would be affected.
19. If additional funds were available, what would you do with the new money?
A. Increase the manpower of this program progressively in future years to
process the growing volume of work in the two main categories of work-Gov-
ernment rates and passenger fares and property rates. Five additional positions
are requested for this work in the Board's fiscal year 1969 budget.
B. Study international fare and rate structures in order to provide a better
basis for the Board's decisional process and provide increased service to the
public.
C. Study the effect of promotional fares on the movement of traffic, carrier
revenues, and on the public and government as consumers. This information will
be used in the Board's decisional process and provide better service to the public.
C Enforcement of' Appiwable Laws and Regulatwns
1. What is the nature of and authority for this program?
~ The Board's enforcement program seeks to obtaincompliance with the economic
provisions of the Federal Aviation Act and with all of the regulations, orders,
certificates, permits, exemptions, and other requirements issued thereunder;
preventing improper claims for subsidy and unfair, deceptive, and restrictive
competition and practices ; protecting the public from unjust discrimination and
mistreatment by air carriers and their agents ; and improving the quality and
dependability of air transportation service, thereby promoting the sound growth
and development of air transportation.
Within the Board s jurisdiction and purview are included 48 certificated air
carriers, 131 foreign air carriers, 13 supplemental air carriers, 145 authorized
domestic and international air freight forwarders, almost 3,000 air taxi opera-
tors who are subject to some degree of economic regulation, a number of intra-
state and commercial operators who become involved in interstate or foreign
common carriage, and thousands of travel agents who are subject to the act.
2. Who is the person primarily in charge of this program at the operative level?
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Robert Burstein, Director, Bureau of Enforcement.
3. How much money and capital equipment is available under this program
for fiscal 1968?
$490,000 primarily for salaries and expenses of the personnel associated with
this program. There is no capital equipment except the usual office equipment.
Outputs are being developed for this program on the Board's centralized, rented
ADP equipment.
4. Would you describe the output generated by this program?
The output generated by the enforcement program includes reprimand letters,
civil penalties and Board proceedings which may result in cease-and-desist orders
or suspension or revocation of authority In addition there is a large amount of
correspondence with complainants and carriers in connection with consumer
complaints.
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5. Can you quantify this output in any way?
The estimated and actual program output are:
Output
69
Items
completed or processed
Actual,
1967
Estimate,
1968
Estimate,
1969
A. Formal actions
B lnformalactions
26.
421
28
441
38
450
C. Court cases
0. Investigations
E. Consumer complaints
2
260
2, 561
0
254
3, 000
2
284
3,250
6. Would you describe the principal operations that are involved in producing
this output? .
The principal operations involved in carrying out this program include ; ~
A. The handling of passenger andshipper complaints ; .
B. Investigation of alleged or suspected violations of the economic pro-
visions of the Federal Aviation Act and with all of the regulations, orders,
certificates permits exemptions and other requirements issued thereunder
~C. The taking of enforcement action and the achievement of compliance by
informal (nonhearing) enforcement action formal (hearing) administrative
proceedings and the prosecution of enforcement cases in the courts
7. How many employees are involved in the program and in what general type
of employment categories do they fall'?
There are approximately 34 man years authorized for this program in fiscal
year 1968 and the employment categories are air transport analysts, attorneys
and the clerical support required.
8. What is the grade structure and how many supergrades-quota and non-
quota-are involved?
Positions with designated grades including supergrades are assigned to each
organizational unit of the Board. The time of employees filling these positions is
charged to the programs on which they work on a man-year basis and an em-
ployee's time may be charged to more than one program. Therefore the grade
structure of a program would not be meaningful as the aggregate of positions
by grade would exceed the total number of agency positions. An organizational
chart showing the number of positions in each organizational component by
grade is attached as an exhibit The Board has no nonquota supergrades
9 What capital equipment such as ADP if any do you rely upon to fulfill this
program?
None-except the usual office equipment.
10. Do you expect the expenditures or the benefits of the program to grow
appreciably in the future'?
The results of this program are productive and salutary Expenditures are not
expected to increase although berfefits from this program should continue to grow
1_i. At what level are the personnel responsible for the various parts of the
program coordinated to determine if the program as a whole is being efficiently
carried out?
At the Board, Chairman, and Executive Director level. Lateral coordination is
also carried out at the office and bureau level.
12. Is there a continual program review within the agency, other than the
annual budgetary review, to determine more effective and efficient ways to
achieve these program objectives?
The Board s review process is an integral part of its management system as
presented on the chart and text in exhibit D. `The major components, both formal
and informal, include Chairman's staff meeting, monthly management report,
monthly `financial statements, quarterly `reviews, and special studies and reports.
:13 To your knowledge does this program duplicate or parallel work being
done by any other agency,? `
No.
14. Is your organizational structure such that the program is being carried
out most efficiently and effectively ? `
Yes.
1_S. Are there any outstanding GAO reports on th'is.program?
No.
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70
16. What significant problems, if any, are you facing in accomplishing the
program objectives?
The program objectives can only be realized to the extent that legal and in~
vestigative manpower is available to implement the objectives. Thus, the accom-
plishment of the program objectives is dependent upon the manpower available
to the Bureau.
17. Do you administer any grants, leans, or other disbursed funds related to
this program?
No.
18. If your appropriations were reduced, how would you absorb the cut-by an
overall reduction, or by cutting or curtailing certain activities?
By an overall reduction. There is no particular activity which could be reduced
or eliminated without affecting the overall quality and quantity of the work of
this program.
19. If additional funds were available, what would you do with the new money?
Increase the manpower of this program in order to insure a climate of corn-
pliance. Particularly significant is the necessity to check compliance with cease-
and-desist orders of the Board.
D. ~pport of Air Service Through Subsidy Payments
1. What is the nature of and authority for this program?
The Civil Aeronautics Board administers subsidy under the Federal Aviation
Act. U. S. carriers, certificated for carriage of II. S. mail, are entitled to service
mail pay, and are generally eligible for subsidy in those situations where the
carrier demonstrates `a statutory need for subsidy. The dollars of subsidy in each
case consist of an `amount to cover the carrier's operating loss incurred under
honest, economical, and efficient management and to provide it an opportunity to
earn a fair return on the investment used and useful in its air transportation
services to the communities.
2. Who is the person primarily in charge of this program at the operative
level?
The officials responsible for the operation of this program are:
John II. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Irving Roth, Director, Bureau of Economica
3. How much money and capital equipment is available under this program for
fiscal 1968?
$778,000 primarily for salaries and expenses of the personnel associated with
this program. There is no capital equipment except the usual office equipment.
Outputs from the Board's centralized, rented ADP equipment also serve this
program. The local service and Alaskan carriers will earn an estimated $59
million in subsidy for fiscal year 1968.
4. Would you describe the output generated by this program?
This program generates the following output:
A. Board orders establishing subsidy payments to be made to eligible air
carriers pursuant to section 406(b) of the 1~deral Aviation Act.
B. In some cases these orders require refunds of subsidy by the carriers
`to the Board where the carrier's rate of return would otherwise exceed pre-
scribed limits.
C. Recommendations to the Board as to policy and program objectives in
the field of subsidy payments to subsidized air carriers'.
5. Can you quantify this output in t~nyw'ay?
Outputs
Items c
ompleted or processed
~
Actual, 1967
Estimate, 1968 Esti
mate, 1969
A. Subsidy analyses and policy assistance
B. Subsidy rates
C. Guaranteed loan matters
0. Verification and payment of subsidy claims
51
56
18
1,634
50
50
18
1, 756
50
50
18
1,767
6. Would you describe the principal operations that are involved in producing
this output?
The principal operations are:
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71
A. Continuing review and analysis of each subsidized carrier's reports
to the Board, including scheduling, traffic, expense, revenue, and investment
data.
B. Review of staff field audit reports as to each subsidized carrier.
C. Determination, by various yardsticks, as to whether in significant areas
the carrier is or is not meeting the "economical and efficient" standard of
the statute, and ascertainment as to whether each particular carrier cannot
conduct adequate and safe operations with reduced levels of subsidy support.
D. Preparation of memorandums to the Board presenting the above data,
staff analyses, recommendations as to whether subsidy can be further re-
duced, and necessary orders and related documents for implementing the
staff recommendation and/or the Board's action.
7. How many employees are involved in the program and in what general type
of employment categoHes do they fall?
Approximately 53 man-years are authorized for this program in fiscal year
1968. The general type of employment categories are air transport analysts,
industry economists, attorneys, and the required clerical support positions.
8. What is the grade structure and how many supergrades-quota and non-
quota-are involved?
Positions with designated grades, including supergrades, are assigned to each
organizational unit of the Board. The time of employee's filling these poaltions
is charged to more than one program. Therefore the grade structure of a pro-
gram would not be meaningful as the aggregate of positions by grade would ex-
coed the total number of agency positions. An organizational chart showing the
number of positions in each organizational component by grade is attached as
an exhibit. The Board has no nonquota supergrades.
9. What capital equipment, such as APP, if any, do you rely upon to fulfill this
program?
Only the usual office equipment. Output from the Board's centralized, rented
computer also serves this program.
10. Do you expect the expenditures or the benefits of the program to grow
appreciably in the future?
The expenditure for subsidy accruals for fiscal 1968 is currently estimated
at $59.3 million, which is some $28 million less than in the peak year 1963. It is
anticipated that the future expenditures for subsidy will continue to decline.
The 1969 estimate is $4.6 million less than for 1968. Program expenditures for
salaries and expenses have also declined.
11. At what level are the personnel responsible for the various parts of the
program coordinated to determine if the program as a whole is being efficiently
carried out?
At the Board, Chairman, and Executive Director levels. Lateral coordination is
also carried out at the office and bureau level.
12. Is there a continual program review within the agency, other than the
annual budgetary review, to determine more effective and efficient ways to
achieve these program objectives?
The Board's review process is an integral part of its management system
as presented on the chart and text in "Exhibit D, Management Information Sys-
tern." The major components, both formal and informal, include the Chairman's
staff meetings, the management report, monthly financial statements, quarterly
reviews, and special studies and reports.
13. To your knowledge, does this program duplicate or parallel work being
done by any other agency?
No.
14. Is your organizational structure such that the program is being carried
out most efficiently and effectively?
Yes.
15. Are there any outstanding GAO reports on this program? If so, what is
the status of the GAO recommendations the report contains?
No.
16. What significant problems, if any, are you facing in accomplishing the
program objectives?
The basic problem being faced is the continuation in subsidy reduction, despite
a deterioration in the financial position of the local service industry (accounting
for 90 percent of the subsidy) in 1968 due essentially to the lag between the
introduction of the larger type jet aircraft on both old and new routes and the
buildup of traffic to make operation with such aircraft more economical. To meet
PAGENO="0076"
72
the problem the Board is continuously reviewing and revising the subsidy pay-
ment formula for the carriers and adopting techniques for making their operat-
ing authority more flexible so as to enable them to profit from the better routes
in order to cut down the subsidy required for their system operations. These
carriers, of course, serve many cities where the traffic is simply not large enough
to enable other than loiss operation and, without subsidy support, these cities
would not have the benefits of air services.
17. Do you administer any grants, loans, or other disbursed funds related to
this program ? If so, Is the size of your administrative staff commensurate with
the magnitude of the outlay?
Subsidy accruals for fiscal 1968 are currently estimated at $59.3 million, which
is some $28 million less than in the peak year 1963. It is anticipated that the
future expenditures for subsidy will continue to decline. The 1969 estimates is
$4.6 million less than for 1968. Expenditures for salaries and expenses have also
declined.
18. If your appropriations were reduced, how would you absorb the cut-by
an overall reduction, or by cutting or curtailing certain activities?
By overall reduction. The Board has very little discretion as to processing the
work of the program. The quality of work would be affected if certain activities
were curtailed.
19. If additional funds were available, what would you do with the new money?
The Board intends to decrease expenditures of this program in the future.
E. Regulation of Agreements a~uZ Interlocking Relationships
1. What is the nature of and authority for this program?
In accordance with the Federal~ Aviation Act of 1958, the Civil Aeronautics
Board has approval jurisdiction over all consolidations, mergers, and acquisitions
of control between or among air carriers, and any other common carrier, or any
person engaged in any other phase of aeronautics. This jurisdiction also includes
agreements under which IJ.S.-flag carriers participate in the International Air
Transport Association (IATA) . IATA's activities cover relationships with travel
agents and many other matters, including agreements on international rates and
fares. The authority to `approve or disapprove these agreements gives the Board a
voice, in an indirect way, in the determination of international rates and fares.
The Board's basic objective in administering this program is to keep agree-
ments, interlocking relationships, and other forms of control from contravening
the antitrust laws, and to prevent co:nflicts of interest that might be detrimental
to the development of air transportation and the public interest.
2. Who is the person primarily in charge of this program at the operative level
(name and title)?
` The official responsible for the operations of this program:
John H. Crooker, Jr., Chairman.
Charles F. Kiefer, Executive Director.
Alphonse M. Andrews, Director, Bureau of Operating Rights.
3. How much money and capital equipment is available under this program for
fiscal 1968?
$561,39Q, primarily for `salaries and expenses of the personnel associated with
this program. There is no , capital equipment except the usual office equipment.
Outputs from the Board's centralized, rented APP equipment , also serve this'
program.
4. Would you describe the output generated by this program?
The output chiefly takes the form of orders (decisions) issued by the Board
disposing of intercarrier agreements and formal applications for approval of
relationships involving the acquisition of control of one company by another and
interlocking directorates between air carriers and other companies. Staff advisory
service is also provided to the Board on matters involving agreements and other
forms of interlocking relationships.
5. Can you quantify this output in any way?
The estimated and actual program outputs are:
Items completed or processed
Outputs
Actual, 1967 Estimate, Estimate,
1968 1969
A. Acquisitions and interlocking directorate matters
B. Intercarrier rate agreements (IATA)
2,357
861
2,229
1,050
2,231
1, 300
I
PAGENO="0077"
73
6. Would you describe the principal operations that are involved in producing
this output?
The principal operations involved in carrying out this program include:
~&. The review, analysis and approval or disapproval of applications re~
questing Board approval of acquisitions of control, applications for approval
of interlocking directorates, and agreements between air carriers and any
other common carrier affecting air transportation;
B. Review and approval of agreements on rates and fares under which
U.S-flag carriers participate in the International Air Transport Association
(IATA).
7. How many employees are involved in the program and in what general type
of employment categories do they fall?
Approximately 39 man-years are authorized for this program for fiscal year
1968. The general type of employment categories are air transport analysts, at~
torneys, industry economists and the required clerical and administrative support
positions.
8. What is the gra~e structure and how many supergrades-quota and non-
quota-are involved?
Positions with designated grades including supergrades are assigned to each
organizational unit of the Board. The time of employee's filling these positions is
charged to more than one program. Therefore the grade structure of a program
would not be meaningful as the aggregate of positions by grade would exceed
the total number of agency positions. An organizational chart showing the num-
ber of positions in each organizational component by grade is attached as an
exhibit. The Board has no nonquota supergrades.
9. What capital equipment, such as ADP, if any, do you rely upon to fulfil]
this program?
None except the usual office equipment. Outputs from the Board's centralized,
rented ADP equipment also serve this program.
10. Do you expect the expenditures or the benefits of the program to grow
appreciably in the future?
We do not expect the expenditures to grow. The benefits are those which flow
from maintaining a competitive system in the light of anti-trust principles.
11. At what level are the personnel responsible for the various parts of the
program coordinated to determine if the program as a whole is being efficiently
carried out?
At the Board, Chairman, and Executive Director level. Lateral coordination
is also carried out at the office and bureau level.
12. Is there a continual program review within the agency, other than the
annual budgetary review, to determine more effective and efficient ways to achieve
these program objectives?
The Board's review system is an integral part of the management system as
presented on the chart and text in Exhibit D-Management Information System.
The major components, both formal and informal, includes the Chairman's staff
meetings, the management report, monthly financial statements, quarterly reviews
and special studies and reports.
13. To your knowledge, does this program duplicate or parallel work being
clone by any other agency?
No.
14. Is your organizational structure such that the program is being carried out
most efficiently and effectively?
Yes.
15. Are there any outstanding GAO reports on this program? If so, what is the
status of the GAO recommendations the report contains?
~ No.
16. What significant problems, if any, are you facing in accomplishing the pro-
gram objectives?
Based upon experience in the recent past, the complexity of cases involving
acquisitions of control and interlocking relationship is expected to increase in
coming years. Thus, there are indications that air carriers may begin to diversify
their activities by acquiring `businesses engaged in fields related to air transporta-
tion, such as aircraft maintenance companies and distributors of general aviation
equipment. Similarly, many interlocking relationships submitted for approval
in the recent past have posed significant regulatory problems. As in such cases,
it may be that carriers increasingly will select as their officials persons who, be-
cause of experience and reputation, are officers and directors of large corporations
subject to section 409 of the act.
PAGENO="0078"
74
During 1968 major emphasis will continue to be placed on multilateral agree~
ments constituting concerted action by air carriers and foreign air carriers
through their trade associations. Such agreements generally present the more
complex and difficult issues. Also, particular attention will be given to other sig-
nificant agreements involving important antitrust or other public interest consid-
erations. Thus, a careful review will be made of trade association agreements
relating to regulation of the activities of travel agents. These agreements are ex-
pected to include questions of compensation, bonding, and criteria for the selection
and retention of agents. Otherwise, multicarrier agreements, such as the renewal
of the seven-carrier mutual aid pact, will require substantial effort.
Additionally, emphasis will be given to a review of the articles of associathn
and `bylaws of the various trade associations to determine whether their activities
continue to be consistent with the public interest.
17. Do you administer any grants, loans, or other disbursed funds related te
this program ? If so, is the size of your administrative staff commensurate with
the magnitude of the outlays?
No loans or grants are administered under this program.
18. If your appropriations were reduced, how would you absorb the cut-by an
overall reduction, or by cutting or curtailing certain activities?
By overall reduction in the level of effort which would result in a general slow-
down in procesaing of applications. Most of the work of this program is pre-
scribed by statute.
19. If additional funds were available, what would you do with the new money?
The Board's present funding level is considered sufficient to carry on this proW
gram. Only the increased cost of maintaining the present staff level will be
required.
F. Regulation of Air Ua~rrier Accoi~tntin~g and Reporting
1. What is the nature of and authority for this program?
The nature of this program is to provide, in accordance with section 407 of
the Federal Aviation Act of 1958, for the collection and maintenance of a body
of facts required in the regulatory processes of the Board. This is done through:
the design, prescription, and administration of uniform systems of accounts and
reports, substantiation of carrier conformance with prescribed accounting and
reporting regulations through desk analysis of carrier reports ; field audits of
carriers' books, records, and reports ; `and the performance of special financial and
accounting factfinding services.
2. Who is the person primarily in charge of this program at the operative
level?
John H. Orooker, Jr., Chairman.
Charles F Kiefer, Executive Director.
Warner H. lord, Director, Bureau of Accounts and Statistics.
3. How much money and capital equipment is available under the program
for fiscal 1968?
$1,313,000 primarily for salaries and expenses of the personnel associated with
this program. Of this amount, $162,000 is related to the rental of ADP capital
equipment, with the exception of minor supporting EAM equipment which was
purchased.
4. Would you prescribe the output generated by this program?
The output of this program is varied. For example, with respect to the col-
lection and maintenance of the body of facts required in the regulatory process
of the airline industry, this Board receives, examines, and evaluates periodic
financial and statistical reports. As a result of field examinations, details valida-
tion and verification reports are prepared. These reports often result in sub-
stantial revision and modifications of carrier reporting and accounting practices.
These reports result from the audit of subsidized, as well as nonsubsidized
carriers and special examinations required by the Civil Aeronautics Board.
The data processing activities continue to be directed toward increasing the
Civil Aeronautics Board's productivity and maximum economies through the
maximum extension of data processing techniques, while at the same time
collating, and summarizing practically all of the summary traffic and financial
publications of the Civil Aeronautics Board.
Also, the Board has continually sought to improve its cost-finding program
to meet the boardwide needs for cost analysis and information; develop new
and improved ~ystem~ of expended coverage of ~tati@tical information eoneern~
ing the airline industry; and to implement and monitor origin-destination
I
PAGENO="0079"
75
passenger traffic surveys. The products of these efforts are primarily reports and
briefings.
5. Can you quantify the output in any way?
The estimated and actual program outputs are:
Items completed or processed
Outputs
Actual, 1967 Estimate, 1968 Estimate, 1969
A. Regulation of carrier accounting and reporting systems
B. Policing and conformance of carrier reports
C. Accounting and financial analysis
D. Field audit of air carriers:
867
2, 063
143
874
2, 297
123
900
2,270
135
1. Audit of subsidized carriers
12
19
19
2. Audit of nonsubsidized route carriers
3. Special examination
6
22
15
38
19
45
6. Would you describe the principal operations that are involved in producing
this output?
The principal operations involved In carrying out this program include:
(1 ) The design, prescription, and administration of uniform systems of
accounts and reports;
(2 ) Substantiation of carriers conformance With prescribed accounting
and reporting regulations through desk analysis of carriers reports;
(3) Preparing special analyses and evaluations of air carrier financial
data;
(4) Field audit of carrier's books, records, and reports;
(5) Performance of special financial and accounting factfinding services
in the field.
7. How many employees are involved in the program and in what general type
of employment categories do they fall?
Approximately 89 man-years are authorized for thl~ program for fiscal year
1968. The general type employment categories are accountants, auditors, air
transport analysts, industry economists, statisticians, professional computer ana~
lysts and programers, and the required clerical support positions.
8. What is the grade structure and how many supergrades-quota and non~
quota-are involved?
Positions with designated grades including supergrades are assigned to each
organizational unit of the Board. The time of employee's filling these positions is
charged to the programs on which they work on a man-year basis and an em-
ployee's time may be charged to more than one program. Therefore, the grade
structure of a program would not be meaningful as the aggregate of positions
by grade would exceed the total number of agency positions. An organizational
chart showing the number of positions in each organizational component by grade
Is attached as an exhibit. The Board has no nonquota supergrades.
9. What capital equipment, such as ADP, if any, do you rely upon to fulfill this
program?
With the exception of some purchased EAM support equipment, this program
relies on the availability of leased ADP equipment to fulfill the needs of not only
this program but also the entire Civil Aeronautics Board.
10. Do you expect the expenditures or the benefits of the program to grow ap-
preciably in the future?
It is not anticipated that expenditures will Increase significantly in the future.
However, by revising, modifying, or changing reporting procedures there is every
indication that more detailed and valuable outputs will accrue to the Board in
the foreseeable future.
11. At what level are the personnel responsible for the various parts of the
program coordinated to determine if the program as a whole is being efficiently
carried out?
At the Board, Chairman and Executive Director level. In addition there is
lateral coordination among office and bureau heads.
12. Is there a continual program review within the agency, other than the
annual budgetary review, to determine more effective and efficient ways to achieve
these program objectives?
The Board's review process is an integral part of its management system as
presented in the chart and text of exhibit D-Management Information System.
The major components, both formal and informal, includes the Chairman's staff
PAGENO="0080"
76
meetings, the inanagenient report, monthly financial reports, quarterly reviews
and special studies and reports.
13. To your knowledge, does this ~)rOg1am (TU1)li(flte or parallel work heiiig
done by any other agency?
No.
14. Is your organizational structure such that the ~)r(gr;~fl1 is being Cal1i((1 out
most efficiently and effectively?
Yes.
1~i. Are there any outstanding GAO reports on this program? If so, what is the
status of the GAO recommendations the report contains?
No.
16. \Vliat significant I)rOi)lems, if any, are you facing in accomplishing the
program objectives?
There are no operational problems or other significant problems which impede
the accomplishment of the program objectives.
17. Do you administer any grants, loans, or other disbursed funds related to
this program? If so, is the size of your administrative staff commensurate with
the magnitude of the outlays?
No loans or grants are administered under this program.
18. If your appropriations were reduced, how would you absorb the cut-by
an overall reduction, or by cutting or curtailing certain activities?
Considering the tasks that must be performed by the Bureau of Accounts and
Statistics, this year and within the next 2 years, a reduction in appropriations
would have to be absorbed by curtailing activities across the board.
The acceleration of changes in the airline industry (mergers, changeover to
larger subsonic aircraft, the imminence of supersonic aircraft aiid the increased
activity and concern over accounting principles and financial reporting ) all result
in a requirement to operate even more efficiently now and in the future. This
Board has every intention of meeting these increased requirements with minimum
staff. f~or the above reasons, therefore, a reduction in appropriations would have
to be translated into a curtailment of activity.
1.9. If additional funds were available, what would you do with the new money?
Additional funds are needed to give more adequate audit coverage to the non-
subsidized carriers and to extend accounting and reporting regulations to air
freight forwarder carriers and to a lesser extent to air taxi operators. Neither
of these groups of carriers is presently subject to accounting and reporting regula-
tions and review. The field audit staff is too small to cover the entire industry
effectively although improve~' techniques have been developed for maximizing
the efficiency of the audit staff. The data processing workload is growing at a
pace which will essentially require further expansion of staff. This activity tends
to improve productivity on a boardwide basis.
1
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0
*1
PAGENO="0081"
I~oc*
SURVEY OF GOVERNMENT OPERATIONS
PART 9-POST OFFICE DEPARTMENT
HEARING
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON
GOVERNMENT OPERATIONS
HOUSE OF REPRESENTATIVES
NINETIETH CONGRESS
SECOND SESSION
MAY 21, 1968
Printed for the use of the Committee on Government Operations
.i
I, ~
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 1968
L~,9SS
/yC~
PAGENO="0082"
CHEP HOLIFIELD, California
JACK BROOKS, Texas
L. H. FOUNTAIN, North Carolina
PORTER HARDY, JR., Virginia
JOHN A. BLATNIK, Minnesota
ROBERT E. JONES, Alabama
EDWARD A. GARMATZ, Maryland
JOHN E. MOSS, California
DANTE B. FASCELL, Florida
HENRY S. REUSS, Wisconsin
JOHN S. MONAGAN, Connecticut
TORBERT H. MACDONALD, Massachusetts
J. EDWARD ROUSH, Indiana
WILLIAM S. MOORHEAD, Pennsylvania
CORNELIUS E. GALLAGHER, New Jersey
WILLIAM J. RANDALL, Missouri
BENJAMIN S. ROSENTHAL, NeW York
JIM WRIGHT, Texas
FERNAND J. ST GERMAIN, Rhode Island
CHRiSTINE RAY DAVIS, Staff Director
JAMES A. LANIGAN, General Counsel
MILES Q. R0MNEY, Associate General Counsel
J. P. CARLSON, Minority Counsel
WILLIAM H. COFENHAVER, Minority Professional Staff
GOVERNMENT ACTIVITIES SUBCOMMITTEE
JACK BROOKS, Texas, Chairman
WILLIAM S. MOORHEAD, Pennsylvania OGDEN R. REID, New York
WILLIAM J. RANDALL, Missouri FLETCHER THOMPSON, Georgia
DANTE B. FASCELL, Florida MARGARET M. HECKLER, Massachusetts
ERNEST 0. BAYNARD, Staff 4dministrator
WILLIAM M~. JONES, Counsel
IRMA REEL, Clerk
LYNNE HIGGINBOTHAM, Clerk
COMMITTEE ON GOVERNMENT OPERATIONS
WILLIAM L. DAWSON, Illinois, Chairman
FLORENCE P. DWYER, New Jersey
OGDEN R. REID, New York
FRANK HORTON, New York
DONALD RUMSFELD, Illinois
JOHN N. ERLENBORN, Illinois
JOHN W. WYDLER, New York
CLARENCE J. BROWN, JR., Ohio
JACK EDWARDS, Alabama
GUY VANDER JAGT, Michigan
JOHN T. MYERS, Indiana
FLETCHER THOMPSON, Georgia
WILLIAM 0. COWGER, Kentucky
MARGARET M. HECKLER, Massachusetts
GILBERT GUDE, Maryland
PAUL N. McCLOSKEY, JR., California
(II)
PAGENO="0083"
Statement of Hon. W. Marvin Watson, Postmaster General; accompanied
by Frederick C. Belen, Deputy Postmaster General; William M. Mc-
Millan, Assistant Postmaster General, Bureau of Operations ; Frederick
E. Batrus, Assistant Postmaster General, Bureau of Transportation;
Ralph W. Nicholson, Assistant Postmaster General, Bureau of Finance
and Administration; Amos J. Coffman, Deputy Assistant Postmaster
General, Bureau of Facilities; Dr. Leo S. Packer, Assistant Postmaster
General, Bureau of Research and Engineering; Henry B. Montague,
Chief Postal Inspector; A. C. Anteroinen, Director, Division of Internal
Audit, Bureau of the Chief Postal Inspector; James R. Thomason,
Deputy Assistant Postmaster General and Controller, Bureau of Fi-
nance and Administration; Woodrow G. Doak, Assistant Controller for
Budget and Programs, Bureau of Finance and Administration; Eu-
gene R. Feagan, Director, Budget Division, Bureau of Finance and
Administration; and Adam G. Wenchel, Assistant General Counsel,
Legislative Division, Office of the General Counsel
EXHIBITS
A-Summary-Total funds available
B-Organization chart
C-Program structure breakdown
D-General postal support:
PART I-Program category VII-Administrative support
PART TI-Program category VIII-Logistical support
E-Highlights of the Post Office Department personnel management sys-
tern (Civil Service Commission)
F-Summary of GAO report on ownership versus leasing of postal facilities
(September 1963)
G-Summary of GAO report on practices for acquiring control of sites for
leased postal facilities (May 1968)
H-Program category I: Direct services to mailers___
I-Summary of GAO report on the modernization of the postal field
service (December 1967)
J-Summary of GAO report on the need for revising costly procedures for
remitting cod. collections (August 1964)
K-Program category II: Mail ~
L-Program category III: Delivery services___________________________
M-Summary of GAO report on the furnishing of uniform items in lieu of
allowances (September 1966)
N-Summary of GAO report on the use of Government instead of personal
vehicles by rural mail carriers (January 1968)
0-Program category IV: ~
P-Program category V: Enforcing postal laws and regulations
Q-Program category VI: Research, development, and ~
R-Summary of GAO report on the use of contractor personnel (January
1966)
TOPICAL INDEX
Part 1.-Overall agency operations
A. General support program (program category 7)
B. Budget processes
C. Accounting system development
D. Management information system
E. Internal audit system
F. Automatic data processing
G. Personnel management
H. General Accounting Office reports
(nI)
CONTENTS
Page
2
12
15
16
17
22
33
34
34
37
39
40
41
44
45
46
47
50
53
56
7
16
24
25
25
30
31
32
33
PAGENO="0084"
*1
`V
I
Page
Part 2.-Program review _ 36
A. Program category 1-Direct services to mailers 36
B. Program category 2-Processing of mail 40
0. Program category 3-Delivery services 43
D. Program category 4-Transportation 46
E. Program category 5-Enforcing postal laws and regulations 50
F Program category 6-Research, development, and engineering 53
G Program category 8-Logistical postal support 56
H Program category 7-Administrative postal support 65
APPENDIX
Written responses of the Post Office Department to questions submitted
by the subcommittee
67
I
I
I
PAGENO="0085"
SURVEY OF GOVERNMENT OPERATIONS
PART 9-POST OFFICE DEPARTMENT
TUESDAY, MAY 21, 1968
HOUSE OF REPRESENTATIVES,
GOVERNMENT ACTIVITIES SUBCOMMITTEE
OF THE COMMITTEE ON GOVERNMENT OPERATIONS,
Washington, D.C.
The subcommittee met ~t 10 a.m., in room 2247, Rayburn House
Office Buildrng, the Honorable Jack Brooks, chairman of the sub-
committee, presiding.
Present : Representatives Jack Brooks, William S. Mo'orhead, Ogden
R. Reid, Fletcher Thompson, and Margaret M. Heckler.
Also preseilt : Ernest C. Baynard, staff administrator ; William M.
Jones, counsel ; Irma Reel, clerk ; Lynne Higginbotham, clerk, and
William Copenhaver, minority counsel.
Mr. BROOKS. The Government Activities Subcommittee, having been
duly organized under the rules of the House of Representatives and a
quorum being present, the meeting is hereby called to order.
The subcommittee today is reViewing the operaitions of the Post
Office Department. We welcome the recently appointed Postmaster
General, Marvin Watson, and other officials representing the Depart-
ment here today.
The Postmaster General brings a broad background in business
experience and, more directly, the benefit of long hour's of applied
management at the White House with our very distinguished Presi-
dei~t Lyndon Johnson. If he indoeti~inates the Post Office staff with
those same hours they will be doing the 35-hour workweek by ~aoh
Wednesday.
The postal system is one of the oldest and most fundamental Gov-
ernmen't services, `having been provided for in the Constitution itself.
lit is alsO one of the largest businesses in the world, employing hun-
dreds of thousands `and serving millions. It is the Government agency
with which the citizens of `this Nation have the most direct and fre-
quent contact.
Just as a dependable, efficient postal service was of prime concern
in the 18th century, `it remains so today. American business relies
heavily on the Post Office Department. An inefficient, slow, outdated,
inadequate postal service could paralyze the growth of the national
economy.
The Post Office Depaitmenit has had to move from the horse and
buggy days through the era of mechanization `and now seeks to `apply
the most modern `techniques in `handling the mammoth volume of mail
which `is increasing annually. It is mandatory that the Post Office use
the resources `available to it in `the most efficient manner if it is to meet
the needs of the Nation during the coming years. An effective postal
service i's essential to the continued progress of this Nation.
On August 27, 1962, this subcommittee held hearings on the effective-
ness `and efficiency of the Post Office Department's procedures in han-
dling large shipments of currency. On the evening of August 14, 1962,
two postal employees in a panel truck were stopped by hijackers on
Route 3 ne'ar Plymouth, Mass. An hour or so later they were bound,
blindfolded, `and gagged, and mailbags containing a sum of money in
unmarked currency were taken. A gang of six to eight criminals ap..
parently was involved.
(1)
PAGENO="0086"
2
The subcommittee made cei~tain recommendations relating to the
shipment of large sums of currency in a report adopted by the House
Government Operation's Committee on April 10, 1963 (H. Rept. 207,
88th Congress) . Several copies were forwarded to the then Postmaster
General for the `special attention of Inspector Montague. First let me
say, General Watson, I realize you have just come in down there, but
knowing your assiduous interest in updating yourself on all the prob-
lems `that the Post Office Dep'ai~tment ha's faced and is facing, I am
sure you have heard about this one. However, if any of the questions
on this or other matters require `more detail than you have readily
available, I would want you to call on the appropriate bureau heads
for full explanation.
IN~ow, we understand th~It the Federal ~tatu'te of limitations has now
run on this robbery. First, without mentioning any names or identi-
fying `any particular individuals, I wondered if you or your staff,
possibly Mr. Montague, could give the subcommittee a reconstruction
of `the Plymouth mail robbery on the basis of the informaiti'on that you
`and your team of inspectors turned up during the 6 years of the Post
Office Department's investigation. You might characterize your re-
marks to a hypothetical case if you so `desire.
Second, I would like for you, for the record, to furnish for us a
report on the extent to which the subcommittee's recommendations
issued at that time, in 1963, were accepted and whether or not they
have been followed. Could you give us a statement on that?
STATEMENT OP HON. W. MARVIN WATSON, POSTMASTER GEN-
ERAL; ACCOMPANIED' BY PREDERICX C, BELEN, DEPUTY POST-
MASTER `GENERAL; WILLIAM~ M. MoMILLAN, ASSISTANT POST-
MASTER GENERAL, BUREAU OP OPERATIONS; PREDERICK E.
BATRUS, ASSISTANT POSTMASTER GENERAL, BUREAU OP TRANSN
PORTATION; RALPH W. NICKOLSON, ASSISTANT POSTMASTER
GENERAL, BUREAU OP FINANCE AND ADMINISTRATION; AMOS
;r. COPPMAN, DEPUTY ASSISTANT POSTMASTER GENERAL, BU-
BEAU OP FACILITIES ; DR. LEO S. PACKER, ASSISTANT POST-
JYIASTER GENERAL, BUREAU OP RESEARCH AND' ENGINEERING;
HENRY B. MONTAGUE, CHIEF POSTAL INSPECTOR; A. C.
ANTEROINEN, DIRECTOR, DIVISION `OP INTERNAL AUDIT, BU-
BEAU OP THE CHIEF POSTAL INSPECTOR; JAMES R. THOMASON,
DEPUTY ASSISTANT POSTMASTER `GENERAL AND CONTROLLER,
BUREAU OP FINANCE AND' ADMINISTRATION; WOODROW G.
DOAK, ASSISTANT CONTROLLER POR BUDGET AND' PROGRAMS,
BUREAU OP FINANCE AND ADMINISTRATION; EUGENE B.
PEAGAN, DIRECTOR, BUDGET DIVISION, BUREAU OP FINANCE
AND ADMINISTRATION; AND ADAM G. WENCHEL, ASSISTANT
GENERAL COUNSEL, LEGISLATIVE DIVISION, OFFICE OP THE
GENERAL COUNSEL
Mr. WATSON. Mr. Chairman, I am familiar with the recommenda-
tions made by your committee and the Post Office to prevent or avoid
any reoccurrence of the situation that did take place some 7 years
I
PAGENO="0087"
3
ago this summ~r. I understand that your committee has been advised
of certain safeguards by the Post Office Department. Your committee
has been advised in executive session.
Publicly, I can state that we know of much better programs, we
believe, and that the men with the responsibilities in the Post Office
Department are much better trained, we hope and we believe, in the
use of firearms. I think Plymouth was a costly lesson for all of us,
but I trust that it was a lesson and we have gained much insight into
what we need to do in the Post Office Department so' we might do a
good job.
Mr. BRooKs. You will recall, at the time we examined the guards,
we asked them `if they carried a pistol. They said, "yes, we sure do."
We asked them if they had ever fired it ? "No, sir, I never fired it."
This was pretty much of a shock because a man carrying a pistol who
has never fired it is more dangerous than a man without anything
just sitting there-to himself, his friends, other employees-and a
minimum danger to somebody who would assault him and maybe take
it away from him.
Mr. WATSON. Yes, sir ; I do recall that lesson.
Mr. BROOKS. You were not involved in that, and I know you are
well aware of the use of firearms yourself.
Mr. WATSON. Yes, sir. I think for a fuller explanation on this sub-
ject I would like to refer to Mr. Henry Montague.
Mr. MONTAGUE. To go back to the Plymouth case, Congressman, the
investigation continued until-
Mr. BROOKS. Would you like to move up here and sit at the table?
Mr. MONTAGUE. The investigation continued until an indictment
was returned July 31, 1967. That covered three persons. The trial
started on November 6, 1967. One of the three persons, Thomas R.
Richards, was missing on the day the trial started. The trial of the
other two persons continued, and they were acquitted. The third per-
son, Richards, who was under `indictment. and still is, has not been
found. Therefore the prosecution features have not yet been finished.
While the Federal statute runs for 5 years, the State statute runs
for 10 years. Therefore it is still possible to get further prosecutions
in this case if further evidence is developed.
With regard to the recommendations made by this subcommittee
on the handling of valuable shipments, Postmaster General Gronouski
addressed a letter to you in December 1963, wherein he commended
the recommendations of this subcommittee and stated `that they had
been put into effect to a great degree, and he found them to be bene-
ficial. I have a copy of the report-
Mr~ BROOKS. Did you concur in that `letter, Mr. Montague?
Mr. MONTAGUE. Yes, sir. I have a copy of your report dated April 10,
1963, with me. In that report you list five recommendations and all of
those recommendation's have been followed `in full `or in part. When I
say in part, I `mean that the Post Office Department went as far as it
thought advisable and feasible to go with regard, for instance, to
the use of armored veihicies.
PAGENO="0088"
4
Concerning the firearms training program, however, a's `stated by
Postmaster General Wathson, ut bias be~n gr~t1y improved. Anyone who
`is soh~du1ed ~o use a fir~arm on a p~rrnaner~t basis or `on a reguliar un-
stheduled ba~is-w'hen I ~ay 1Ih~aAt I mean ~tho is nc~t `on a regular
schedule but who may use it from time to time-is required to qualify.
They are required ~o requ:aiify every year. Part 859 of the Po's~al Man-
ual contains full instructions on the use of firearms in the Post Office
Departmeut.
Mr. BROOKS. Do you know what the sta~tii~s of reoommemdation "E"
was that Federal Reserve (and Treasury Department officials study and
review possible means by which liooal banks could devalue worniout
currency prior to shipment ? In other words, in some w;ay stamp it or
clip it or void it in soim.e fashion so that when shipped it would be
easily identified and known to be valueless rather than of a tremendous
market ~viaJue?
Mr. MONTAGuE. The Federal Reserve and Treasury Department tells
us th'ait it would `be ~oo expensive to put a system of thait sort into ef-
fect. However, shipmei~ts of great value which we have `been receiving
from two specific points are being mutilwted by punching holes in the
bills. These happen to be the shipments which are of the greatest value
today.
In addition to that, there has been a diversion `of `about one-third of
the valu~able `shipments. That is, one-third of those th'ait were oarried
in the mail in 1963 `have been transferred to armored ear `service `at the
preserilt time. So more of it is being carried in the armored ~ar servic&-
plus these twio points which I mei~tioned from which the hills are bthng
mutilated. .
Mr. BROOKS. One thing more. I noticed that you had indicted only
three people. Would you reconstruct this crime ? I thought there were
fourito seven people `involved. How wiasith'at setup?
Mr. MONTAGUE. We `thought and still `do think there were six `or
eight people. However, three `was the number `on which we had evi-
`deuce `enough to ~btain an indictment an'd to go `to trial. This `doesn't
mean thait we feel ,th~t there were no more involved.
When I previously meutioned the statute of limitations still runs for
at least 4 y~ars as far `as the State is concerned, there ~re possibilities.
This case quite closely parallels the Brinks holdup which was a simi-
lar amount of money occurring in the same neighborhood and on
which `an indictment wasn't returned until 6 years after the crime. In
that case they had hundreds of rumors and thousands of le~ads~ they had
to investigate. We had the same difficulties in this investigation. Be-
fore `the end `of 5 years we did come up with three indictments. That
doesn't mean that we feel thaJt these people are the only ones who were
involved or that it is not po~sible that some further `action might not be
taken.
Mr. BROOKS. What do' you think happened to the money?
Mr. MONTAGUE. It was hidden, no doubt, right after the crime. We
think that it has been used. A considerable `amount of it `at any rate has
been used. Whether it has all been used we don't know.
PAGENO="0089"
5
Mr. BRooKs. We recov~r&1 none of it ?
Mr. MONTAGTXE. Correct.
Mr. BROOKS. Do you have any idea where this man you indicted has
escaped to or vanished to ? Do you think he is alive?
Mr. MONTAGUE. There has been some speculation that he is no longer
alive but it is only speculation. As far as we are concerned he is a
fugitive from justice and we are looking for him.
Mr. BROOKS. When they indicted him, was he picked up?
Mr. MONTAGUE. He was arraigned ; yes, sir, and released on bail.
Mr. BROOKS. How much bail?
Mr. MONTAGuE. $25,000 bail.
Mr. BROOKS. A million and a half cash missing and $25,000 bail. He
could afford to leave. [Laughter.]
Why did they set the bail so low ? It seems a bit low for that type of
loot running around somewhere.
Mr. MONTAGUE. As you are aware, this is ~ome~hing out of our juris-
diction. I don't know.
Mr. BRooKS. Does it seem low to you?
Mr. MONTAGUE. Well, apparently the commissioner thought that
having attorneys and being known, that $25,000 would be enough to
make them available on the date the trial was to ~tart or whenever
they might be needed.
Mr. BROOKS. The commissioner knew of course that the items stolen
were `ain unmarked million and n half in cash.
Mr. MONTAG~tYE. Yes, sir.
Mr. BROOKS. How many postal inspectors are now assigned to this?
Mr. MONTAGUE. At the present moment the case is assigned to our
Boston division. We have one inspector who devotes all his time to it.
Others are used as necessary.
Mr. BRooKS. Do you still have some hope of recovering that money?
Mr., MONTAGUE. We never lose hope, Congressman. Since the statute
still has4 years to run, the State statute, we do have hope.
Mr. BROOKS. Thank you very much.
General, I wanted to ask you about a matter that is a sticky one
for all of us. I . receive letters from constituents objecting. to having
received unsolicited `advertisements `of an obviously obscene nature.
A few weeks ago a constituent forwarded me such `an advertise-
ment that was so revolting as to be indescribable. The advertisement
hadn't been solicited by the recipient and he was pretty much con-
cerned about the possibility of it falling into the hands of his young
son. With `all the legal problems the Post Office might encounter in
this area, is there anything that can be done and is `anything being
done to prohibit the transmission of such material by the postai
service?
Mr. WATSON. To my knowledge there is not anything being done
to prohibit this type of mail going ~in the mail except in this par-
ticular type of case, a new law went into effect April 14 of this
year which will allow this lady to notify her postmaster that she
no longer wishes to receive correspondence from the person or firm
sending this type of mail and `therefore she will no longer receive
it.
PAGENO="0090"
I
6
Mr. BROOKS. This would be a pretty involved probli~m for the dis-
tribution people, wouldn't it?
Mr. WATSON. Yes, sir.
Mr. THOMPSON. May I interject ? Actually does not the law pro-
vide that the Postmaster General would notify the mailer to remove
this person from his mailing list?
Mr. WATSON. Yes, sir.
Mr. THOMPSON. So it would not be incumbent upon the local post-
master to remove this as it is sent. The mailer, the person sending
the mail, is instructed to remove this person from the list and if he
refuses to, then you have authority, do you not, to obtain an injunction
against this individual under this act?
Mr. WATSON. Yes ; that is the way I understand it. The postmaster,
as such, is just the middleman involved.
Mr. BROOKS. I get three or four of these `letters every year, `and I
guess other Congressmen do. A couple of the recipients might have
ordered an exerciser one time of some soit-I don't know bow they
get on those lists but maybe half of those who write m~ in some way
have inadvertently `and unknowingly gotten `on such a list. I guess half
are totally innocent.
It seems there ought to be some `way to prosecuite the mailers, ~o make
them have a signed request. I don't know w~ether there `should be
some new legislation that would strengthen the authority-the courts
seem pretty general in `afEl'owing you to send almost a~nything you want
to send-~and I wonder if maybe your counsel mig~ht not think about the
possibility of some stronger legislation that might be passed by Con-
gress that would give you full authority to `either enjoin or fine or
restrain in some way the people who h!abiftu!ally make it a practice to
send out this kind of ma~eri'al.
Mr. WATSON. Yes, sir. We will make a study of th~ait, Mr. Chairman.
I believe the President has a `commission now appointed to make a
study of this sittxation. Also, Mr. Adam Wenchel is here from (the Office
of the Genera~l Ooun~el, who might shed more light on this.
Mr. BROOKS. Mr. Wen~he1?
Mr. WENCHEL. Yes. Under the present legislation we can get a cease-
and-desist order. After a person has complained, the postmaster notifies
the sender tic remove from the mailing li~t this person's name as well
as names of members of his family. If there us a further `violaition of
that order (then we are `authorized to have the Dep'aiitment of Justice
seek a cease-and-desist order, and if that is violated, of course you have
puni:shmei~t under the contempt powers of the court. Since this law
bias only gone into effect in April we have not seen too much in the
w(ay of actual results yct.
Mr. BROOKS. You p~an to operMe then `on `a basis of written requests
to (the Postmaster General-or to the local postmaster forwarded to
the General-and then under his signature he will write and ask the
mailer to remove Mr. (and Mrs. Joe Doaks.
Mr. WENCHEL. That is `correct. While we don't require the use of a
form, we have `de~ised `a `simple form which may be used `for (that
request.
Mr. BROOKS. We will see `how bh~t `operates. I(t might be helpful.
Mr. Thompson?
Mr. THOMPSON. May I ask one further question? Of course this is
trying to do something about the problem after the mail, the (Obscene
PAGENO="0091"
7
litei~iiture, has a1r~ady been dis~ributhd. I ~m famili'ar with cer~in
rulings of the Supreme Coui~t and apparently this is the ordy pro-
cedure we can use in view of the Court ruling. Do you have any idea
wh~her or not there is a means by which we clan set sband~rds to (de-
termine obscenity on items that would be handled by the Post Office
Department and not run `afoul of these decisions of the Court which
basically allow you to send anything in the world you w~ai~t ~o send?
Mr. WENOHEL. We have struggled with this problem for years and
we just have not been `able to come up with anything satisfactory. The
problem is that when you attempt `by 1egisl~tion to define some~hing as
obscene you run into the question of whether the courts will allow that
definition to stand.
Mr. TJio~fPsoN. Courts usually require each item to stand on its own,
do they not?
Mr. WENOHEL. That is correct.
Mr. THoMPsoN. And that you can't prejudge something by a set of
standards as to whether it is obscene or not. You have to have that par-
ticular item transmitted and then the decision can be made ? .
Mr. WENCHEL. That is correct. Of course, a good deal of this mate-
ri'al passes through the mails `a's first-class mail and obviously it is not
subject to inspection.
Mr. THoMPsoN. One further question. With ~he decision's that have
been handed down by the Court, for all intents and purposes the Con-
gress is powerless to do anything about handling obscene mail other
than what we have' done with this present law. Would that be a fair
statement of fact?
Mr. WENCHEL. In my opinion, Congress could not redefine obscenity
to make it broader than the; courts believe is the constitutional stand~
ard for it.
Mr. THoMPSoN. So' we have in effect done what we can do by simply
making known to the public that if they do receive some unsolicited or
obscene mail they want to stop-they don't want to receive any more
from this particular mailer and it has to be that particular mailer-
they can notify their postmaster and the Postmaster General will ask
`this mailer to remove them from the mailing list. If they fail to, an.
injunction can be obtained against that person from sending any fur-
ther mail?
Mr. WENCHEL. Yes. There is one further provision in the law. That
is, a person is not `only not to send `anything further himself, but he is
not supposed to sell the mailing list with that name on it.
PART 1.-OVERALL AGENCY OPERATIONS
Mr. BROOKS. The subcommittee today is looking at the programs of
the Department to determine if it is operating efficiently and effec-
tively. We plan to look first at the overail management of the D~part~
ment. Then we will want to look at `each of your programs with par-
ticular emphasis on how much it is costing, how much i's being per-
formed, what the postal user, the taxpayer, is getting in r~turn.
General, would you be so kind as to initroduce the officials accom-
panying you here ~it this time?
Mr. WATSON. I have Mr. Belen, Deputy Postmaster General; Raip'h
Nicholson, finance officer; Mr. Amos C'offman, facilities; Dr. Packer,
PAGENO="0092"
8
research and engineering ; Mr. Fred Batrus, transportation ; and Mr.
MeMillan of operations.
Mr. BROOKS. General, I understand that you have a commitment that
you hope to make shortly. We have a number of detailed que~tions con-
cermng various aspects of the management of your age~ncy which we
would like to subitht to you for written responses to be placed in the
record.
At this time what we would like to do is discuss some of these man-
agement K~oncepts in general that have to do with internal auditing,
personnel praGtices, et cetera. We will go through those briefly and
then have a layout by each of your program directors of generally
what they do, backed up by the detailed qu8stions on the status of their
efforts. We will then have a pretty good idea of where they stand.
I would ask you one question and then I think we could, if the corn-
mittee members have no further questions of you, l~t you make your
previous appointmei~t without being delayed.
The one thing I wanted to nsk you about is this : In the program
brc~akdown of the major divisions of work in the Post Office Depart-
menit-which seem fairly reasonable as to distribution and so forth-
but on the breakdown of your schematic diagram of the organization,
they don't seem to correlate. I wonder if you would talk with your
budget people and with your staff to see if this really makes sense. We
have a few other agencies with this same problem. The schematic on
the chain of command is very interesting but seems somewhat un-
related to the program budgeting areas. You have seven or eight pro-
grams in the Post Office Department and as I went over this last night
I had trouble picking out each of the programs and seeing where it fit
in this chain of command. I am sure you are wrestling with that prob-
lem yourself right now.
As you go over this agency and evaluate how it operates~ I wish you
would see if there really is a reason for the programs beino' on one set
of facts and apparently the chain of command system and t~ie schernat-
ic diagram on another-I guess they could change those squares but
what it says in the squares doesn~t correlate to the programs. There
are more squares than programs. The division is a little tricky. I think
that it might simplify the operation of that very involved agency. Not
only would it be simpler for you as the new Postmaster General, it
would be simpler for everybody in the Department who is dedicated
to delivering the mail efficiently and effectively as most of them are.
Do you have aa~y questions, Mrs. Heckler?
Mrs. HECKLER. Just one question.
General, I think we are terribly presumptuous in even having you
come today because you have hardly had a chance to master your own
Department. I am impressed that you know those gentlemen's names
since you have just recently assumed this very important post. My
question however is a general one.
I ~am sure that considering your previous responsibilities you were
aware of all the popular ooncep~s which have been :aidvanceid in general
and particularly in regard to the postal service. One has caught the
fancy of the people and the press, and I personally `am very initrigued
by it. I wonder what your `opinion is `on the proposal advanced by your
predecessor regarding bringing in public enterprise or private ei~ter-
prise `or the establishment of `a p'o~tal `service ~orpioration. What is your
PAGENO="0093"
9
a~it~tu'de toward this oono~pt in gen~ra1 as th i'tis fe~siM1i~y, applica.
bility to the p'r~sent manpower of ~he Depai1tm~t and so ~or~h?
Mr. WATSON. Mrs. Heckler, I will be very inter~gted in readin~ the
Kappel report as `it is oommonly referred `to, the Commission `appointed
by the Presidenth to make a study of this `type. It was discussed `several
times in general terms by Postmaster General Larry O'Brien. Basically
I think if this Commission does give us some new ideas of management
techniques and `solutions to problems `that we find in the pos~a1 sy~tem,
obviously I will adopt them.
Often, `so ~t seems to me, we `can plan and we can, in `our mind and
maybe `on paper, put down ~n ideal situation. To make that id~a1 s~itua-
tion work `and make it a rea~iity sometimes `is a `little more `difficult.
A's you `and the committee know, the Post Office Depaitment is con-
trolled by Congress. Any thoughts or any programs we might `develop
obviously will be presented to the appropriate committees for their
oon'si'der~ti'on and recommendations. I `am `sure the K~appel report find-
ings will fcd'l'ow in that same category. I `have not `seen the report as yet
and have not had an opportunity to study it. I understand that it is in
~ts final phase `of drafting for piresentation to `the President so I join
with you `in looking forward to seeing exacdy what they have in mind.
Mrs. HECKLER. No further question's.
Mr. THOMPSON. A's you have ~ greather volume `of mail, mec'h'aniza-
ti'on `seems to be `coming more into the picture. Have you had `an op-
portunity to `discuss `with your sub'ord'inaites whether `or not there `are
going to `be additional positions `creathed `for the p~op'le handling the
machines that `are gioing to `be sorting the `~ail and distributing the
mail or w'h~ther there will be a decrease in `employment in the Post
Office Department. in `other word's, ~hou'l'd we mechanize to a much
greater `degree ? What `wilithis `do to the `salary `level `and the experience
level of the post `office employees ? What is going `to be required of them?
Will we need more `empkyees or fewer `employees?
Mr. WATSON. Mr. Thompson, I have not gone into specific details
of that type with the idea `of mechanizing the Post Office. All my staff,
all the people I have met with in the field `and here in headquarters
have convinced me that they `are 100 percent in favor of new ideas and
new machines to be developed and put into the Post Office. I think
it `is not only desirable but I think it is a necessity `as we look at the
trend `of mail volume. It has to' be this way.
Basically, as I see the thing that I might be `able to contribute to the
Post Office Department in the way `of a program which Congress
would have to study, is that we must have more `than buildings. We
do not have more than buildings in most places. We have one little
plan that is `so obvious. We must double the space we now `occupy in
the next 5 years if we `are to maintain our `existing position.
I `do not think that new modern management techthques have been
brought forth in the Post Office Department. There `are many reasons
for this but we `are going to try to find some solutions to these two
problems through financing and through management techniques.
Mr. THOMPSON. Then basically you will be looking into the question
of whether `or not the budget of `the Post Office Department has pro-
gramed an adequate amount of money for research and `development
of these machines for your new facilities, and further, when you will
have new machines, you will require certain skills of post office em-
PAGENO="0094"
10
ployees that have not been required before, as to whether or not these
people should fall inbo a special category and what their relation
would be to the other post office employees.
Mr. WATSON. I have no doubt in my mind that existing post~al em-
ployees, when jobs are lost `because of the machines, they can be brought
back in through a training program and remain a parth of the postal
system. My background Of some 10 years ago in wafrhing people being
trained to do a job that they may not have known existed 2 years
before and then watching the success of that leads me to believe that
obviou'sly it would be true in :thep;ostal system.
Mr. THOMPSON. Thank you very much.
Mr. BROOKS. I think the increase in the Postal Department's re-
quest for money for research was 55 percent. Is that correct?
Dr. PACKER. Fifty-five and a half percent ; yes, sir.
Mr. WATSON. I must point out, however, that if Congress granted
the entire amount requested by the Department for research and devel-
opment-which the House didn't-but if we received all of it, we
would still have only 3 percent of our investment based on our income
in research which in the utility business is a very small amount.
Mr. BROOKS. One other thing-on facilities, it has long been estab-
lished that it is cheaper to buy the land, build the building, pay for it
all out of public money, and use it for 10 years, 30 years, or 40 years.
The difficulty has been that for some years now Congress has refused
for budgetary reasons to appropriate enough money for the Post Office
Department to meet the need for new facilities. They have not even
come close. As a result of this, we have taken-I say this very sadly-
the pennywise, dollar-foolish system of leasing facilities all over the
country.
In your district and in mine we lease `them for 5 years, renew it for
5 and they are paid out. We have nothing left. We don~t own the
building. We don't own the land. We still have the requirement. The
next 1~0 or 20 years is strictly gravy to the owner at additional cost to
the Federal Government. This is the problem the Post Office Depart-
ment is facing. We will go over it and get the facts outlined but the
real problem is with `the Congress in not facing up to the necessity.
Right now we are trying to cut everything but every time you cut you
don't always save money. This is an excellent example of the foolish-
ness of failing to spend the money that `is necessary to maintain the
facilities that the country has to have.
We certainly appreciate your testimony here, General Watson. We
are honored to have you and delighted you could come. Is there any~
thing further you want to add?
Mr. WATSON. I thank you. The other committee members might
want to know why I feel it necessary to leave for this prior commit-
ment. We are unveiling a research center and `the "Register and Vote"
stamp today. It is nonpartisan `and so I thought that maybe we could
get `a few more people to vote in your districts and it would be helpful
to you individually.
Thank you very much.
Mr. BROOKS. Thank you very much, General.
PAGENO="0095"
11
Mr. Belen, we have a number of de~ai1ed questions concerning van-
outs aspects of the `management of youn agency which we would like
to submit for you to have wnitten responses placed in the record as I
explained.
( The written responses of the Post Office Department are in the
appendix.)
Mr. BRooKs. At this time we would like to discuss some of those man-
agement concepts in general terms and I wish you would handle them.
If you have any hesitancy about it or think it appropriate, ask your
agency head to do it directly.
Mr. BELEN. Thank you.
Mr. BROOKS. At the conclusion of these general questions wewill go
to your program people and g~t a thumbnail analysis from each one of
them.
Mr. BELEN. All right.
Mr. BROOKS. To begin the questions, do you have a fact sheet indicat-
ing the total funds available to your agency as a whole for fiscal 1968?
Mr. BELEN. Yes, sir. For fiscal 1968 we will have a total of $6,954,-
493,000 available. This includes reimbursements of $156,816,000 which
we get from the departments and agencies.
Mr. BROOKS. Without objection, I will submit for inclusion in the
record, exhibits A, B, and C.
(Exhibits A, B, and C follow:)
PAGENO="0096"
500
510
511
512
513
~20
521
522
523
524
~ 530
540
541
542
550
600
610
620
630
640
650
660
`700
800
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
12
EXHIBIT A-SUMMARY-TOTAL FUNDS AVATLABLE
100
~00
300
400
DEPARTMENT OR AGENCY ~
Post Office Deiartnient
PROGRAM
Suimnary
S6JBPROGI~AM ~ ~ ~ ~ ~
CODE
CODE
CODE
ANALYSIS AND CONTROL CODES
U~bIig,t,d
FiSCAL YEAR 1968
Y,~ R~q~
T~t~1
A~iI,bk
To1 ObIig~t~d
~
"In house" inputs
Personnel:
Comp
Be~of
Travel
Expenses:
Coromunicat
Transportation
Printing
Supplies and Cansum-
able Materials
Capital Equipment
Land and Structures
Addition
Rents
Totsl
152, 349
Totsl
Total
Input-output ratio
Input
1. Output
2. Input
2. Output
5. Input
Pcior Fi,csl
`. Osiput
8. Input
8. Output
Printed S urn,, of Non,, C sns:on,u t Aetiriti,, Snbsnno,itt,o Chninonn Jn:k O,ssks
PAGENO="0097"
Increase
Item 1967 actual 1968 estimate 196
Amount Percent
Increase
9 estimate
Amount Percent
FINANCIAL AND STATISTICAL SUMMARY, 1967-69
ciL~ [In thousands of dollarsJ
L~ Administration and regional operation $94,528 $107,521 $12,993 13.7 $120,231 $12,710 11.8
Research, development, and engineering 16,397 23,396 6,999 42.7 36,386 12,990 55.5
Operations ~, 010, 836 5, 492, 285 481, 449 9. 6 5, 720, 000 227, 715 4. 1
Transportation 634, 503 650,000 15,497 2.4 684,000 34, 000 5.2
Building occupancy 163,921 185,889 21,968 13.4 210,000 24,111 13.0
Supplies and services 76,855 93, 556 16,701 21. 7 110,000 16, 444 17. 8
Plant and equipment 136, 409 195, 030 58,621 43. 0 225,000 29,970 15. 4
Postal public buildings 50,000 50,000 88,252 38,252 76. 5
Amounts included above for Public Law 90-206 costs (261, 590) ~(350,747)
Absorption in "Operations"_ (-49, 181)
Total obligations 6, 133, 449 6, 797, 677 664, 228 10. 8 7, 193, 869 396, 192 5.8
Net revenue ~, 962, 702 2 -5, 642, 090 679, 388 13. 7 a -6, 287, 552 645, 462 11. 4
New obligational authority used 1, 170, 747 1, 155, 587 -15, 160 -1, 3 906, 317 -249, 270 -21. 6
Net change in selected working capital -29, 562 -86, 732 -57, 170 145, 274 58, 542
Budgeted expenditures 1, 141, 185 1, 068, 855 -72, 330 -6. 3 761, 043 -307, 812 -28. 8
Cost basis:
New obligational authority used 1, 170, 747 1, 155, 587 15, 160 4. 3 906, 317 249, 270 21. 6
Adjusted to accrued cost -23, 703 -120, 507 -96, 804 -208, 039 -87, 532
Accrued net expense 1, 147, 044 1, 035, 080 111, 964 9. 8 698, 278 336, 802 32. 5
Loss on public service -556, 800 -604,700 -47,900 -624,578 -19,878
Revenue deficiency accrual basis 590,244 430, 380 -159, 864 -27. 1 73,700 -356, 680 -82.9
Volume of mail-pieces (thousands) 79, 165, 000 82, 159, 000 2,994, 000 3. 8 83,966,000 1,807,000 2.2
Special service-transactions (thousands) 600,000 576,000 -24, 000 -4. 0 591,000 15, 000 2. 6
Employment (man-years) 675,849 703,748 27,899 4. 1 713,854 10,106 1.4
Positions 716,603 741,922 25, 319 3. 5 762,532 20,610 2. 8
1 Does not include $280,000,000 for Public Law 90-206 costs and transportation public law adjust- a Includes $873,800,000 full-year revenue due to rate increase effective Jan. 7, 1968. $70,000,000
ments of $4,500,000 which will be a part of a Bureau of the Budget supplemental. increase in parcel post rates and $15,300~00O fee increases all as a result of Public Law 90-206.
Includes $380,900,000 part-year revenue due to rate increase effective Jan. 7, 1968, and $7,600,000
fee increases all due to Public Law 90-206.
PAGENO="0098"
14
SUMMARY OBLIGATIONS
[In thousands of dollars]
Category I-Direct Services to mailers 1, 358, 534
Category 11-Processing ot mail 1, 530, 061
CategGry 111-Delivery services 2, 092, 797
Caeegory TV-Transportation 781, 516
Category V-En~orcirig postal laws and regulations 28, 211
Category VT-Research, development, and engineering 22, 495
Category Vu-Administrative postal support 326, 808
Category VITI-Logistical postal support 814, 071
Total (gross) 6, 954,493
Less reimbursements -156, 816
Total (net) 6, 797, 677
SUMMARY i'OSITIONS
Category I-Direct services to mailers
Category IT-Processing of mail
Category ITT-Delivery services
Category TV-Transportation
Oategory V-Enforcing postal laws and regulations
Category VT-Research, development, and engineering
Category Vu-Administrative postal support
Category VITI-Logistical postal support
186,415
216,462
271, 571
2,083
470
35, 119
29,802
741, 922
Total
PAGENO="0099"
EXHIBIT B-ORGANIZATION CHART
POST OFFICE DEPARTMENT
LEGEKD
- ~ Di~t,*~
F.W ~
RELATIONSHIPS
HEADOUARTERS AND FIELD ORGANIZATIONS
PAGENO="0100"
16
EXHIBIT C-PROGRAM STRUCTURE BREAKDOWN~
POST OFFICE DEPARTMENT PROGRAM STRUCTURE
I. Direct services to mailers
A. Combined postal services at small offices.
B. Window and/or vending services.
C. Collection service.
X. Logistical postal support (non-add).
II. Processing of mail
A. Combined mail processing.
B. Platform operations.
C. Mail preparation.
P. Mail distribution.
X. Logistical postal support (non-add).
III. Delivery services
A. Government vehicle service mail transportation.
B. Preparation of mail for delivery.
0. City delivery.
P. Special delivery.
E. Rural delivery services.
X. Logistical postal suppori (non-add).
IV. Transportation
A. Intercity transportation.
B. International transportation.
C. Other transportation-funded functions.
X. Logistical postal support (non-add).
V. Enforcing postal laws and reg'ulations
A. Postal crimes and prohibited mailings.
B. Administrative compliance.
X. Logistical postal support (non-add).
VI. Research, develOpment, and engineering
A. General research.
B. Applied research and development.
C. Engineering.
X. Logistical postal support (non-add).
VII. Administrative postal support
A. Departmental thiministration.
B. Regional and intermediate level administration.
C. Post Office Administration (large offices WMS).
P. Management information systems (non-add).
E. Special administrative support projects.
x. Logistical postal support (mon-add).
VIII. Logistical postal support
A. Capital investment.
B. EXpense.
C. Depreciation and related items (non-add).
Mr. BROOKS. Would you give us the total number of employees in the
agency and the geographical extent of your operations?
Mr. BELEN. At `the `end of April of this year the Post Office Depart-
ment had 711,6~O employees. We have 30,000 post offices thait extend
~o every part of the country and the geographic opera~tion is actually
worldwide.
A. GENERAL SUPPORT PROGRAM
Mr. BROOKS. Under your budg~t breakdown, do you have `a support
program covering the operations of your office `and other policymaking
per'~onnel not directly attributthle to a program fundtion?
PAGENO="0101"
17
Mr. BELEN. Yes, tha~t would be oaitegory 7, Administrathive Postal
Support, whioh provides for the execu~iv~ dire~ti~on of the adrthnistra-
tion of the ei~tire p'os~tai seririce and ir~eh~des a1'l bure~aus. it ~ncludes
only the administrative portion `of the Bure~au `of Engineering. It `also
includes the Washington ~ headquarters, 15 regional offices, and six
postal data centers. It includes the~ headquarters staff.
Mr. BRooKs. I would submit e~hibit D at this time.
(Exhibit D follows:)
ExuuinT D-PART I-PROGRAM CATEGORY Vu-ADMINISTRATIVE POSTAL SUPPORT
500
510
511
512
511
520
521
522
523
524
530
540
541
550
600
610
620
630
640
650
660
P700
000
810
811
820
821
830
831
840
841
850
851
860
861
870
871
880
881
Benefits
3. Output
4. Input
4; Output
5~ Teput
~. Output
~. Input
~. Output
~. Tenut
,. Output
~. Input
101
72I~ 808
100
200
300
DEPARTMENT OR AGENCY PROGRAM ~ suTePeotnAn
Post Office Department Administrative Postal Sup3~ort
400
CODE CODE V V CODE
vu
ANALYSIS AND CONTROL CODES
"In house" inputs
Ueebligsted
FISCAL YEAR
Eeoc Req~,st
TeNt ObIigntel
cc EspeedeA
Cumenunicatiunu
Transportatiun
V Printing
Supplies and Cunsuno-
able Materials
PS
It. lo4°
Capital Equipment
Land and Structures
Fusds distributed
Contracts
Grants
Loans
Benefits
Other
~Ols 7GB
Total
Total
2 110
Input-output ratio
Peloc Fiscal
7 Output
Feiseed C sense of Hoses C oeeen cent Aeeieiftes Tesbenoeeeittee, Chaieose Jock Beseks
PAGENO="0102"
I
18
VII. ADMINISTRATIVE POSTAL SUPPORT
A. Description
This program category eovers-(1) The Postmaster General and Deputy Post-
master General executive direction and administration of the Post Office Depart-
ment, the functions o~f their offices and headquarters services. (2) The technical
direction and functions `of the Bureaus of Operations, Transportation, Finance
and Administration, Facilities, Personnel and Chief Inspector and `the Office of
General Counsel. (3) The `administration functions of the Bureau of Research
and Engineering. (4) The functional responsibilities `of the 15 regional office's. (5)
The administrative functions `of the Field Inspection Divisions. (6) The operations
of the six Postal Data Centers. (7) The operations of the Postal Service Institute.
(8) The operation of the two Automatic Data Processing Centers and four tele-
concentrator sites ef the Postal Source Data System. (9) The operation of area
supply centers, mailbag depositories and repair centers, the envelope agency,
and work performed `by `area equipment `specialists. (10) The executive direction
and administration support functions `of WMS post office's.
B. services provided
Program category VII provides for `the administration of the postal service at
the departmental, regional, and local level, `through the offices of `the Postmaster
General, the Deputy Postmaster General, bureaus `and offices, advisory and plan-
fling boards, regional directors and their staffs `and postmasters and their im-
mediate staffs.
This category provides direction `and guidance for the handling and `tran's-
porta'tion of mail, the appointment `and `administration `of personnel, the manage-
ment of its finances, the procurement of operating `supplies and equipment `and the
promulgation of rules and regulations for its operations. In `addition to his ad-
ministrative duties, the Postmaster General maintain's liaison with the Congress,
appoints postmasters `at fourth-class `offices `and submits nominations to' the Presi-
dent on `appointments for other class offices.
The Bureau of Operations : (a) provides functional direc'tio'n for the execution
of policies and programs goveriiing the operational activities of the postal service
which involve the `admissibility, classification, collection, processing, dispatch and
delivery `of mail ; (b) directs the establishment `and discontinuance of mail han-
dllng faciJi'ties ; (c) determines `the establishment, change, and disc'o'ntinu'ance
`of city and rural routes ; (d) determines `space, mechanization, and equipment re-
quirements for postal installations ; (e) determines `staffing standards, maintains
personnel complement controls, and directs the work measurement program ; and
(f) promotes a patron relations program.
The Bureau of Transportation : (`a) provides functional direction for the exe-
cution of policies and programs governing the transportation activities of `the
postal service which involve the distribution, routing, and dispatch of outgoing
and `transit mail ; (b) prescribes the regulations governing `the selection of trans-
portation media and the procurement of `transportation from and supervision of
service performance by mail carriers ; (c) determines establishment and discon-
`tinu'ance of mobile post offices, airport mail facilities, `transfer offices `and `truck
terminals, and issues standards for `their staffing ; and ( d) effects operating ar-
rangements for `the exchange of mail with other countries.
The Bureau of Finance `and Administration : (`a) develops `and administers the
Departmen't"s financial management program including the handling `of funds `and
accountable paper, budget formulation and execution, accounting, costing and cost
ascertainment, postal rate and fee development, postal economics, money order
systems and financial and ~ta'tistieal reporting ; (b) serves `as financial `adviser
`to `the Postmaster General ; (e) `develops and directs programs to improve the
organization and performance of the P'ost Office Department ; (d) develops policy
for application, `operation, and `administration `of `automatic data processing ; (e)
directs preparation `and distribution of official orders and regulation's ; and (f)
designs `and develops statistical programs `and provides professional staff services
in applying mathematical and statistical principles `and `techniques to the solution
of financial management and operating problems.
The Bureau of Facilities : (`a ) formulates `and administers policies and pro-
grams governing `the `acquisition, management, maintenance, improvement, and
disposal `of `real property occupied by the Post Office Department, and of utilities,
opera'ting equipment and supplies, and vehicles used in the postal service; (b)
directs operation of the supply system, the production, repair, and storage of mail-
bags, production of key's and locks, and the production, distribution `and control
PAGENO="0103"
I
19
of bulk lots of accountable paper supplies ; and (c) exercises procurement author-
ity, including personal and real property and services.
The Bureau of Personnel : ( a) formulates and administers policies and pros
grams required to develop and maintain an effective personnel management pro-
gr~tm ; (b ) acts on personnel management matters relating to industrial relations,
compensation administration `and employee training ; (c) represents the Post-
master General in dealing with employee organizations ; (d) administers the
incentive awards pregram ; (e) provides technical `assistance in the preparation
and administration of negotiated contracts ; `and (f) has responsibility for equal
opportunity in the postal service.
The Bureau of Research and Engineering : (a) directs research, development,
and engineering `activities of the pestal service ; (b) provides new concepts, sys-
tems, and techniques for the preces~sing, movement, and delivery of mail and the
related machinery and equipment to transform the concepts into efficient operating
tools ; and (c) `assists the Bureau of Operations in development and analysis of
basic planning data, in designing and `supervising construction of facilities in-
eluding utilities and mechanization, and conducts postinstall'ation audits to evalu-
ate prior planning and pliant and equipment design and arrangement.
The Bureau of the Chief Postal Inspector directs the execution of policies, regu-
lations, and procedures governing `all `investigations, including presentation of
evidence to the Department of Justice in `those of `a criminal nature, and directs
operating inspections and audits for the postal service.
The Office of the General Counsel : (a ) serves `as legal adviser to the entire
Postal Establishment and acts as legislative officer for the Department by drafting
bills, preparing reports on proposed legislation, and representing the Department
in hearings and conferences on legislative matters ; (b ) acts for the Postmaster
General in the settlement of personal injury or property damage claims ; and (c)
initiates and prosecutes mailability proceedings under laws prohibiting the mail-
ing of fraud, lottery, obscene, subversive, extortive, or threatening matter and
firearms.
The 15 regional directors : (a ) administer the execution of policies, regulations,
and procedures governing, and takes final action within his delegated `authority
on, matters relating to management, operations, transportation, finance, engineer-
ing, equipment, supply, facilities and personnel ; (b) `are responsible for the
efficient management, utilization, and control of manpower, allotted funds, facili-
ties, and equipment ; and (c) provides guidance and specialized assistance to post
offices on mail processing, mail movement methods, and other postal operations.
The six postal data centers : (a) provide ADP support to the 15 regional offices;
(b) issue U.S. Treasury checks for all payments made, including biweekly pay-
rolls for over 700,000 employees, and U.S. savings bonds ; (c) maintain general
and subsidiary ledgers ; (d) examine postmasters' statements of account and (e)
examine and settle claims.
Field units of the Bureau of Facilities, including the stamped envelope agency,
mail equipment shops, . mail bag depositories and area supply centers, provide
specialized logistical support to the more than 30,000 post offices and other field
installations of the postal service.
Postal source data system comprises two automatic data processing centers and
four teleconcentrators linked together by telephone lines to receive and process
information on mail volume, work in process, vehicle utilization, manpower dis-
tribution, time and attendance, and inventory from the 75 largest post offices
through 1968. Data Is transmitted back to the originating office in the form of
management information reports of a real time early turnaround type.
The Postal Service Institute, located in Bethesda, Md., provides a centralized
training facility oriented strongly toward career development of about 70,000
postal managers through personal attendance, extension centers throughout the
Nation and through correspondence courses.
Postmasters at large post offices provide executive direction and administer the
operations, transportation, controller, personnel, facilities, and engineering pro-
grams in their respective post offices.
C. Financing
Funds for administrative postal support are provided by the appropriations.
"Administration and regional operations," "Operations," "Transportation," "Fa-
cilities," and "Research, development, and engineering." For 1968, it is estimated
that the aggregate of these portions of the above appropriations will total $31~.-
686,000, including transfers and supplementals.
PAGENO="0104"
20
D. Employment
Grade or level:
Administration and regional operation:
Executive direction:
Professional:
LevelI
Level III -
LevelIV
LevelV
GS-18
GS-17
GS-16
GS-15
GS-14 -
GS-13
Subtotal - - - 638
Technical:
GS-12 and below
Industrial wage board -
Lithographic wage board
Temporary employees
Reimbursable employees
Subtotal 1, 412
Total executive direction 2, 050
Field inspection service:
Professional:
PFS-20
PFS-19
PFS-18
Subtotal
Technical: PFS-13 and below
Total field inspection service
Regional operation:
Professional:
PFS-21
PFS-20
PFS-19
PrS-18
PFS-17
PFS-16
PFS-15
PFS-14
83
15
15
19
132
107
468
630
412
Subtotal 1, 798
Technical: PFS-13 and below 1, 412
Total regional operation 3, 210
Postal Data Center:
Professional:
PFS-19
PFS-18
PFS-17
PFS-16
PFS-15
PFS-14
6
6
6
19
54
39
Subtotal 130
Number
1
1
6
1
11
21
51
145
191
210
1, 204
11
24
170
3
6
20
15
41
42
PAGENO="0105"
21
Grade or level-~Continued
Administration and regionil operation-Continued
Postal Data Center-Continued
Technical: PFS-13 and below 1, 399
Total Postal Data Center 1, 529
Total administration and regional operation 6, 872
Research, development, and engineering:
Professional:
Level IV
GS-17
GS-16
GS-15
GS-14
GS-13
Subtotal
Technical: GS-12 and below
Total research, development, and engineering
Operations:
Professional:
PFS-20
PFS-19
PFS-18
PFS-17
PFS-16
PFS-15
PFS-14
1
1
1
8
11
27
41
68
8
23
59
104
28~
55~
Subtotal 1, ~
Technical: PFS-13 and below 26, O2~l
Total operations 06&
Supplies and services:
Professional: PFS-15 4
Technical: PFS-13 and below 1, 10~
Total supplies and services 1, 113
Total-Category VII 35, iic~
E. Statutory authority
Title 39, United States Code
Section 301. Post Office Department.
Section 302. Postmaster General.
Section 303. Seal.
Section 304. Deputy Postmaster GeneraL
Section 305. Assistant Postmaster General.
Section 306. Advisory Board.
Section 307. General Counsel.
Section 308. Judicial officer.
Section 309. Delegation of authority.
Section 501. General duties of the Postmaster General.
Category Manager, Mr. Ralph W. Nicholson, Assistant Postmaster GeneraL
Bureau of Finance and Administration, coordinates for the Postmaster General
and the Deputy Postmaster General the activities of developing plans for thia
category.
PAGENO="0106"
22
EXHIBIT D-PART 11-PRoGRAM CATEGORY Vill-LOGISTICAL POSTAL SUPPORT
PROGRAM SUBPROGRAM
T--~-~-~--' P(OPf~R1 ~
.~URibSACRi _ __ ~__ ~
CODE CODE ~ CODE
VIII
ANALYSIS AND CONTROL CODES
VIII. LOGISTICAL POSTAL SUPPORT
A. Descriptio~&
This category describes the capital investment and expense expenditures re-
4luired by the Post Office Department. By means of four appropriations, supplies
and services, building occupancy, plant and equipment, and postal public build-
ings, the land, buildings, supplies, services, vehicles and equipment necessary to
keep the postal service functioning is procured. In addition, corresponding mainte-
nance and vehicle service expense is included. Funding is allocated by essential
purpose, such as, capital investment or expense ; while a third subcategory in-
cludes depreciation and related items. The investment allocation includes funds
for facilities, mail processing equipment, vehicles, customer service equipment,
information processing and accounting equipment, administrative, maintenance
and general support equipment, and the capitalized activities and output of the
mail equipment shops. Within the expense allocation are funds for building occu-
pancy, supplies and services, maintenance and vehicle service.
I
I
Post Offios
100
200
200
400
"In hous
Uosbligstsd
Personnel:
- Comp.
Benefits
FISCAL YEAR 1968
ADpeoDrioUsn s~ Coeesnt
Yone Reqoost
Travel
Expenses:
Tottt
A~'aEabls
Communicatiom
500
510
511
512
513
520
521
522
523
524
530
540
541
542
550
Totol Obligated
Transportation
Printing
Supplies and Conss~sq-
able Materials
Capital S
Land and
Additional Investment
Idents
2Qo86
Total
0
1 ~
. Funds distributed
Contracts
600
010
020
630
~40
050
660
Benefits
`700
Total
Input-output ratio
. Input
Pcisr Ftsesl
800
810
.811
820
821
830
831
840
841
850
£51
860
861
870
871
880
£81
Input
Output
Pnntsd 5 sesso~e C Rouse 0 sssesuus t A:tieitio~ 5ubssu~uj5t,,, Chuiruus Jock Brooks
PAGENO="0107"
23
B. Services provided
Within the capital investment subcategory, funUs are used for : site, design and
construction of Federal postal facilities required for Post Office purposes ; ex-
tension and modernization, air conditioning and other alterations to federally
owned buildings, and leasehold improvements and minor alterations for leased
facilities ; fixed mechanized systems, nonfixed mechanized and other mail han-
dung equipment ; vehicles for carrier motorization, bulk transfer of the mail
and for other uses ; lobby, window and self-service equipment to serve the postal
patron ; information processing and accounting equipment for the Department's
data processing and office activities ; nonexpendable administrative, maintenance
and general postal support equipment ; and the capitalized industrial operation
of the mail equipment shops. Within the expense subcategory, funds are used for:
rental of postal space, heat, utilities, communications and moving expenses;
supplies and contractual technical services ; general housekeeping of buildings
and grounds under the control of and operated by the Post Office Department,
such as cleaning, guard service and general building maintenance ; maintenance
of Government-owned vehicle fleet by Post Office personnel and vehicles under
contract, and the procurement of vehicle operating and maintenance supplies and
materials. The third snbcategory, depreciation, includes those activities that place
logistical postal support on an accrued cost basis ; included are such itenis as
depreciation of post office buildings and equipment, of GSA buildings occupied
by postal installations, building services provided by GSA and expendable equip-
inent written off. With the use of this third subcategory, current and prior
capital investments are converted into operating expense compatible with labor,
material, and services.
U. Financing
Funds for logistical support are provided by the appropriations "Operations,"
"Building occupancy," "Supplies and services," "Plant and equipment," and
"Postal public buildings." For 1968 it is estimated that the applicable portions
of these appropriations will total $802,820,000, including transfers and
supplementals.
D. Employment
Grade or level:
Professional : Number
PFS-15 1
PFS-14 1
Technical : PFS-13 and below 29, 800
Total 29, 802
B. Statutory authority
Authority for these activities is found in the following:
Title 39, United States Code ; operation and administration of the postal
service.
Title 5, United States Code, section 5901 ; procurement of supplies and services,
including uniforms, stamps, and accountable paper and postal supplies.
Postal Public Buildings Act of 1959, 73 Stat. 479, section 15 ; GSA delegation
to the Postmaster General for the design and construction of postal facilities.
Title 39, United States Code, 2102, 2103 ; 20-year leasing authority and 30-year
leasing authority including lease-purchase and authority for condemnation.
F. Allocation of other categories
The capital costs in this category are allocated to the other program cate-
gories as follows:
I-Direct service to mailers $26, 688
IT-Processing of mail 90, 967
Ill-Delivery services 55, 793
TV-Transportation 4,456
V-Enforcing postal laws 5, 212
VI-Research and development
Vu-Administrative postal support 11, 914
Total 195, 030
Category manager-John L. O'Marra, Assistant Postmaster General, Bureau
of Facilities.
PAGENO="0108"
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Mr BROOKS Mr Bel&i, would you give us the estimate of the total
number of pieces of mail handled annually by the Department ~
Mr BFLEN Yes We will handle this year about 80 billion pieces
of mail and it increases by about 3 billion pieces of mail annually
Mr BROOKS How much ~
Mr HELEN Three billion is the increase There are 80 billion pieces
currently, and it moreases about 3 billion pieces each year
Mr BROOKS Would you give us a brief justification for the size
and extent of your support program ?
Mr BELEN Category 7, Administrative Postal Support, basically
provides the executive direction and administration of the entire postal
service This direction flows from headquarters through the regions to
the post offices and is essential in an operation as diverse and complex.
as that of the Post Office Department which has over 700,000 em
ployees, over 32,000 post offices, and a budget of almost $fr7 billion
Intensive effort is continually required to assure the most efficient
use of these resources It is only through very effective management
that the Post Office Department can continue to cope with the con
stantly increasing mail volume and it is the personnel in this category
who provide his management.
B. BUDGET PROCESSES
Mr. i3Rooics. Mr. IBelen, would. you outline i)riefly and give us a
status reI)Ort On the efforts of your Department. in the implementation
of ~)rogra.in budgeting?
Mr. BE1:~EN. I would like to call on Mr. Nicholson to answer that
l)a1~dci1lar questi on, if lie would.
Mr. NICi-IoLsoN. Mr. Chairman, we have recently revised our pro-
gram structure and it has i)een approved by tue Bureau of the Budget
just ]ast April on the revisect form.
This ~rogram structure does, as you indicated, in some ways follow
lines different from the organizational chart. 1-lowever, the program
structure itself is basically on functional lines aiid those functional
lines, in the case of our largest. single category of activity, do follow
the organizatiofl al lines iii the Bureau of Operations.
We are iii the process of ex~)andmg and improvii~g our program
budgeting operation, but during the last two aiicl a half years we feel
we have made very substantial ~)rOgre.Ss in this direction. lYe have.
established an Office of Planning and Systems Analysis to give leader-
Slill) tO both short- and long-range piaiining. WTe have established
a Division of Programing, a Programing Division is the proper title.
to admiiiister the Department's ~)rogra.1mng system. We have e.stab-
lished ~)rogram category ]nanagers for each of our major activities.
In the 1969 budget justifications we broke out our conventional ap-
I)rOPriatioli l)resentations by program categories and in 1970 we will
prepare the budget on program hues. We have installed test installa-.
tions in 54 post offices of an operating budget that extends the useful-
ness of this `system to the field. And we have established a task force to
develop a na~tionwide management information `system to support pro-
gram budgeting throughout the postal service.
I
I
PAGENO="0109"
25
C. ACOOtINTING SYSTEM DEVELOPMENT
Mr. BRooKs. Wh a' t, Mr. Belen, is your `agency doing regarding the
aceouniting system development?
Mr. BELEN. Well, we `have received `approval of the General Account-
ing Office for several important segments of our ~ooounting `system.
Mr. BROOKS. Have they turned any sugge~ion's down?
Mr. BELEN. Oh, yes. It took us 3 or 4 years to get three or four seg-
ments of our accounting system approved. It was just about a year ago,
I believe, when we had a top level meeting with Mr. Staats, the Comp-
troller General, shortly `after he had been appointed. As a result of that
meeting we have had several segments approved.
The Post Office Department's Financial Control Act of 1950 requires
that the Department's system `of `accounting `and internal control con-
form to the principles, standards, and related requirements prescribed
by the Oomptroller General.
One of these requirements is that accounting manuals describe the
system in detail, display the forms used, state the procedural steps,
illustrate the reports issued, `and be adequate for day-to-day use by
accounting and other personnel in the actual maintenance of `the sys-
tern. This requirement is proving to be administratively difficult to
fulfil.
The Post Office has a comprehensive system of accounting manuals.
We have a division in the Bureau of Finance `and Administration,
which is Mr. Nicholson's bureau, whose primary responsibility i's to
develop `and implement improved financial management procedures.
Mr. BRooKs. Mr. Belen, pardon me. Is the whole Department going
to be on a cost accrual basis ? Is that the gist of this new program you
have had approved by GAO?
Mr. BELEN. `This `is what we `are moving toward.
Mr. BROOKS. Moving toward. How far along would you say you are
from zero to 100 on `that movement forward?
Mr. NICHOLSON. In the conversion to accrued costs, we `are practically
complete. There are one or `two details that are still in discussion be-
`tween us `and the General Accounting Office. They have `to do, for
example, with the time at which we expense material thwt has been
ordered but not yet received. We are making ~n `adjustment on a cost
basis on a quarterly basis `and an annual `basis. There is still discussion
whether or not we should do it on an accounting period or monthly
basis. But except for those one or two very small detail's, we `are totally
on an accrued cost basis.
Mr. BRooKs. Good. Mr. Belen, is there anything you want to `add on
that?
Mr. BELEN. No, sir.
D. MANAGEMENT INFORMATION SYSTEM
Mr. BROOKS. What is the status of your management information
system?
Mr. BELEN. We have a series of management informa;tion activities.
One is our work measurement program which measures the perform-
ance of about 480 million hours of work a year. We have `a cost ascer-
tainment system which is a costing system. We have various means
PAGENO="0110"
26
of testing the pi~rformance of our activities and we also have a number
of imternal communications.
The management information system for the Post Office Depart-
menit involves the exchange of information and provision of manage-
ment control for a world-wide postal system. The management infor-
mation system is based upon three levels `of management in the postal
system : national (`headquarters) , regional `and local post offices. The
postal `service is `administered by the headquarters through the regional
`offices.
One of the most important aspects of management information is
the regularly `scheduled `monthly meetings which the Office of Regional
Administration holds with the regional `directors. The Department's
telephone `system, especially the telecon, is `also a vital part `of the
information system. The tel'econ permits headquarters to convey infor-
mation not `only to regional directors but `to all regional staff's promptly
`and at the same time. Postal Bulletins, issued weekly, provide manage-
mont information as do a variety `of routine directives which are sent
from headqu'arters to the regions and from `the regions to the post-
masters `of local post offices.
Mr. BROOKS. All postmasters ~
Mr. BELEN. Yes, `sir.
Mr. BROOKS. In an effort to update them on the current status `of
your `management program?
Mr. BELEN. Yes. And it also is a very popular item with the large
mailers. it `allow's them to learn `of our administrative procedural
changes.
Mr. REID. Mr. `Chairman?
Mr. BROOKS. Mr. Reid.
Mr. REID. Mr. Belen, I would like to welcome you `and your asso-
ci'ates warmly here this morning. I `am `Sorry I wasn't here earlier.
On this point of `management, might I just `ask what you are doing
vi's-a-vis the morale `of the postal clerks and carriers, because I think
the morale is getting relatively low in `some `area's.
One `specific `suggestion th'at h'as been made to' me is whether it would
be possible for someone after a relatively brief period as a carrier to
reach the top level. Many tell me now that to get to whatever grade
it `is, is a `matter of `a number of years, whereas this is no longer the
case, we will `say, in the New York City Police Department `or Fire
Department or other areas.
As a result a number are not now going into the postal service. In
terms of `overall management, I just wondered how you feel you are
faring around the country `on attracting the kinds of career ability
`that is so important.
Mr. BELEN. Of course, the postal clerks and carriers are paid based on
the way the pay schedules are `set up. Congress goes into `some detail
on that through `another committee. The employee leader's `are the ones
who prefer this kind of `stratification or `development based `strictly
on seniority or time in service. The only other way would be an oppor-
tunity for promotion.
We have tried several promotion plans. We are now trying a rBgion-
wide promotion plan whereby everybody in that region can be con-
sidered for a promotion, but that in itself creates a lot o'f controversy,
since the people in a particular post office know when someone plans
PAGENO="0111"
27
to retire and they all have ththr eyes on that job. When we move some-
body else in from an~th~r office, it creates some problems.
As far as morale is concerned, we have done many, many things in
the past 7 years to improve the morale, not the leas~t of which is con-
gressional approval of comparability of pay scales with private in-
dustry.
We have set up one of the largest or the largest of labor-management
programs. We have some 600,000 employees who are covered by uniOn
contracts. In 1963 we had the largest labor-management election ever
held, around 385,000 votes, all cast by mail. We now have 24,500 in-
dividual bargaining units. We have signed our fourth national agree-
ment with them. It covers all kinds of things that should improve
morale, such as the manner in which employees will select prime Va-
cation time and many m~ters concerning working conditions.
We have a presidentially appointed board which just concluded a
study on motivation.
But, when you do have such a large group of people, all at level ~,
which is the level now, it is very difficult to make everybody happy.
It is also difficult to get people, let's say college students who want to
be a supervisor shortly, since they get bogged down in the promotion
practice which gives, and I think necessarily so, some consideration
to seniority.
Mr. REID. I have long supported the principle of comparability and
I appreciate the various steps you have taken and are taking.
Am I correct that there is now a relatively serious morale problem
among the carriers, for example, particularly in the East-
Mr. BELEN. You have a problem when you have-
Mr. REID. Versus comparable areas of potential employment ? I have
always thought the postal service was one of the most important in
the sense that it was the service that was directly in touch most fre-
quently with the American people, and the carriers are ambassadors,
if you will.
But I increasingly hear comments that disturb me, because many are
not now as anxious to become a carrier as they used to be.
Mr. BELEN. The problem exists where there is a national pay scale
as against a regional pay scale, which is bound to be not quite as corn-
parable, let's say, in a high pay area as it would be in a lower pay area.
The jobs would become much more desirable in a small community.
Mr. REID. Would you favor cost of living differentials to meet that?
Mr. BELEN. I think that might be rather difficult to administer.
Mr. REID. Is there a morale problem among the clerks and carriers
in certain parts of the country?
Mr. BELEN. People say there is. As I drive to the office sometimes in
the winter with snow all over the Northeast I realize that the postal
worker is as handicapped by the weather as a farmer. I find in the
postal business that just putting chains on our trucks costs a lot of
money-
Mr. REID. We used to in the newspaper business, too.
Mr. BELEN. When I realize there are tens of thousands of carriers
going out and delivering that mail, I think we have the greatest
morale of any organization.
Mr. REID. Perhaps I haven't been clear. I think the morale is mag-
nificent `among the carriers in the main. But what the `older men are
PAGENO="0112"
28'
telling me is that the new men are not coming in and that some come
in oii a temporary basis and do not stay in. There are greater lures,
advantages, career opportunities in other areas, so tIIa~ the service `is
no longer competitive.
Mr. BELEN. The older employee has a sort of built-in reason to stay
because of the retirement program. But I think every industry will
tell you-~and we are light industry in a sense-that there is a high
rate of turnover in the new hires.
Mr. REm. What is that rate ~
Mr. MOMILLAN. Regular empioyees, it is only 8 or 9 percent. In the
temporary category, it ran as high as 80 percent `at one time.
Mr. BELEN. And lots of times, you know, when new employees enter
the postal service, they find it is a tough job, being a carrier is `a tough
job, and being a mail handler is a tough job. It is a materials-handling
kind of operation. I know even some of the summer people have been
surprised at bow hard they have had to work to move this 200 million
plus pieces of mail. Much of it is heavy.
One example : Last December 20 to January 20 we moved 58 million
pounds of catalogs, coming in from just five firms.
Mr. BROOKS. Mr. Belen, did you say 200 million pieces ? Didn't you
mean 80 billion?
Mr. BELEN. 200 million a day.
Mr. BROOKS. Oh ; pardon me.
Mr. REID, I thank the chairman for yielding. I would just `have one
final question. I `am aware that the `other committees have interests
in this ; `but what, Mr. Belen, would you `suggest that would be imagi-
native and `creative that would make `a substantial difference to this
morale question ? If you could just `speak `in broad terms of what y~u
would like to see, what do you think would be of `most help here to
really `start to build up certain areas where you do have `this turnover
rate?
Mr. BELEN. In my judgment one of the greatest things for morale
is supervisory consideration. This is `something that postmasters and
supervisors and Postmasters General just have to give. I can tell you
that Mr. Watson, on his weekends off, has been going around to post
offices and meeting employees. As he did in Cincinnati last Saturday.
All of our officials do that. We go to employee conventions. We try to
be responsive to the things that concern them.
But what you are talking about I think has to be done by the local
post office leadership.
Mr. REID. I think it goes a little deeper if I may `say so. I think it
relates partly to the conditions of employment and career oppor-
tunities.
I am sure you are doing what you say, and I think that is very
helpful ; but there is no substitute for making a service competitive
with private industry. What I suspect is that, increasingly in certain
areais of the postal service, they are not cOmpetitive in career terms.
What I would ask you is not what you can do in a public relations
sense, but what structurally could you do that would make a major
difference?
Mr. BELEN. Of course, what you spoke about, acceleration, going to
the top of the grade is not the solution. Once the top step of a grade
is reached, there is the problem of the man with 25 years of service
saying "I have been in the same grade for 20 years."
1
PAGENO="0113"
29
I don't think you can say there is going to be an opportunity under
our present situation for new people coming in to become supervisors
in a matter of a year or two. There could be an `odd promotional situa-
tion, or circumstauces where an employee is promoted because no one
else is available. But in an organization such as those in New York, it is
very difficult to move. I understand that it is a very difficult situation;
but to try to solve it just seems to create other problems.
Mrs. HECKLER. Would the gentleman yield?
Mr. REID. Certainly.
Mrs. HECKLER. Mr. Belen, I understand that you have recently in-
creased the number of women carriers in the postal service. Is this true
and what are your figures on it?
Mr. BELEN. We don't have very many women carriers, but they do
have the opportunity to be a letter carrier if they wish. But, the carrier
pack is 35 pounds and is difficult to carry. Most of our women em-
ployees go into the clerk part. Of course, we also have a lot of lady
postmasters and they do a tremendous job, I might `say.
Mrs. HECKLER. Do you have any women carriers?
Mr. BELEN. Yes. I am told it is about 3,800 out of a total of 215,000.
Mrs. HECKLER. Isn't it possible for women who would be interested
in this kind of work to have some kind of a cart rather than merely
carrying the mail as the men do?
Mr. BELEN. We have lots of vehicles of all kinds. Of course, they
can have carts, and I believe they do have.
Mrs. HECKLER. Do you have more women mail carriers in certain
sections of the country than in others?
Mr. BELEN. Most of these are in large cities, as far as I know.
Mrs. HECKLER. Why is it that women are becoming interested in
this ? is it because there aren't enough men?
Mr. BEIJEN. I would say pay is one of the factors. Probably another
reason they take the carrier job is because of the hours. When you go
into the postal service as a clerk, you have to take the least desirable
tour since that is based on seniority too. And so they come on the late
night tour, and it just doesn't work out familywise and in other ways.
That would be one major reason I imagine, since the clerks' jobs seem
to be more adaptable to women than the carriers' jobs.
Mrs. HECKLER. Isn't the number of women, or the very fact that
women have become carriers, `a recenth phenomenon?
Mr. BELEN. We did not encourage women to come into the service
urthl recently.
Mrs. H1~CKLER. How recently?
Mr. BELEN. Well, itt has been a national program for how long?
Mr. MCMILLAN. We had an Executive order, Mrs. Heckler, about 4
years ago, I believe, that said that there would be no discrimination
because of sex. However, we have had some women ~mployees even on
carrier routes for 20 to 25 years.
At one time back in the past we had separate registers for men and
women. In `other words, this was because there were only certain duties
in `a post office that we then felt women were ~ap~able `of performing.
The registers were combined `a number `of years ago, 20 or 25 years ago,
and since that `time `there has been no bar to employment `of women
except the physical limitations of the work.
98-551-68----3
PAGENO="0114"
30
But at this time mail-handling work is perhaps our most arduous
`task, and we have hundreds and thousands `of women mail handlers,
particularly in Chicago and New York.
Mr. BELEN. That `involves lifting sacks up to 80 pounds.
Mrs. HECKLER. Well, I `am glad you have taken a ~tep in the direc-
tion of emancipation `of women.
Mr. BELEN. As I say, we have probably more women managers than
any ~ther organization you will find, `and `they make very fine post-
masters. We `are very proud `of them. They make fine employees gen-
erally ; we have no complaints.
Mrs. HECKLER. Thank you, Mr. Belen.
Mr. BROOKS. Mr. Belen, do you contemplate a uniform Department-
wide computer ba~sed management inform'a~ion system?
Mr. BELEN. Yes ; we do.
Mr. BROOKS. Do you have one now?
Mr. BELEN. We are in `the process `of developing `source data. Of
course we `have it in our data centers where we prepare our paychecks,
and we are in `the process `of `setting up `a `$32 million `operation which
will provide initial payroll information in 74 large offices, `to relate
hours to volume of mail. This system will also be useful eventually for
mail forecasting. That is, offices dispatching large quantities of mail to
other offices will use the system to advise receiving post offices `of quan-
tity `and cl'a'ss `of mail so `that the proper manpower can `be `scheduled.
We have a management `information `system `made up of many in-
terel'aited `subsystems, `as far as we are `concerned, organized to provide
all `of the `daita processing and information `services necessary for our
efficient operation.
Financial planning, program budgeting, can all be described as inter-
related `subsystems `to the framework. A's I `said, an `outstanding p'art of
this would be the source data system which we `are now developing.
Mr. BROOKS. it is a `pretty `broad field, and you `are just `starting into
that?
Mr. BELEN. That is correct.
Mr. BROOKS. And you `are starting with what you think `i's the most
critical `area?
Mr. BELEN. That is right. And it will have various systems that will
be related.
E. INTERNAL ATJDIT SYSTEM
Mr. BROOKS. In 1963 this subcommittee in cooperation with the
Comptroller General promulgated the essential criteria for effective in-
ternal audits in Federal departments and agencies. The subcommittee
is very interested in determining whether or not your agency has ac-
cepted the recommendations made at that time. I have talked with `the
Postmaster General specifically about this, and I hope that you will
bring `this to his attention as being of particular pertinence to the new
management.
I wonder if you would describe briefly your internal audit system?
Mr. BELEN. Yes. Responsibility for internal auditing, Mr. Chairman,
in the Post Office Department has been delegated to the Chief Postal
Inspector. He advises the Postmaster General, myself, and other prin-
cipal assistants on the conditions and needs of the service and directs
the execution of policies, regulations, and procedures governing all
investigations, inspections, `and audits of the postal service.
PAGENO="0115"
31
The postal inspectors conduct audit inspections `of post `offices, sta-
tions, branches, mobile units, mail handling facilities, et cetera. These
onsite inspections are used for determining and reporting the effective-
ness of operations and use of resources in compliance with policies,
regulations, and procedures.
I might say that these inspection reports get a very good follow-
through alt the regional level, at Mr. McMillan'is level, and at my own
level.
The Internal Audit Division, as distinguished from the inspectors,
makes audits and evaluations of systems, methods, and controls em-
ployed in the programs and operations at headquarters, the regional
offices, data centers, and other installations.
Audi't rep'orts provide a systematic means of focusing attention of
management at all levels on problem areas and of recommending cor-
rective action. Normally, when `these reports are received, I personally
review them and send them to the appropriate `official in headquarters
or the region, whichever may be concerned, for followup.
The authority to establish and the responsibility to maintain a sys-
tern of internal auditing is contained in section 2208, title 39, TJni'ted
States Code. The Financial Control Act of 1950, which governs our
internal auditing, parallels that of the Budget Accounting Act of the
same year.
Mr. BRooKs. Mr. Belen, generally then the analyses of the programs,
the evaluation of them by the inspectors, go through the Internal Audit
Division directly to you, or go to him first and then to you.
Mr. BELEN. That is right, the internal audit reports come to me
first. The auditing at the post office level goes primarily to Mr. Mc-
Millan unless there is something unusual to which they direct my
attention.
Mr. BROOKS. Do they send information copies of `those internal audits
to the Postmaster General?
Mr. BELEN. Well, this is really for him. I function for him. When I
get `those `audits, I give him a daily report `of what came in, what it
was `about.
Mr. BRooKs. So, `in effect, the people who make an internal audit have
accesls to the Postmaster General?
Mr. BELEN. Oh, yes. If there i's something serious, then it will appear
in `my `daily report. If he wishes to follow through, more information
will be provided. Although I really haven~t `had `anything of this
nature, if it were serious, I would go to him `and `Say "Here is some-
`thing we have to get on right now." In `any event, he is aware of the
report.
F. AUTOMATIC DATA PROCESSING MANAGEMENT
Mr. BROOKS. Do you `have `a central organization responsible for
ADP management in your `agency?
Mr. BELEN. Yes. That comes under `our Bureau of Finance and that
is under Mr. Nicholson.
Mr. BROOKS. Would you describe the `functions, Mr. Nicholson?
Mr. NICHOLSON. I would be glad `to, Mr. Chairman.
This central unit, which is the ADP Management Division, develops
the policy recommendations and the plans for `the `application `of `auto-
maitic d'aita processing.
PAGENO="0116"
32
Secondly, it administers the design and the development and im-
plementation Qf the ADP systems in the Department and the field
service.
Thirdly, it administers and operates the headquarters data process-
ing unit.
Fourth, i:t provides technical guidance to the six postal data centers
located in the field on matters relating to their use of data processing.
Fifth, it develops the budget for departmental `and field APP pro-
grams.
Sixth, it determines the departmental and field service expenditures
for the equipment `and the `supplies.
Further, it directs `and reviews and evaluates both departmental and
field operation's. lit administers the APP research program. It directs
an APP standards program. It selects equipment for procurements `and
approves the release of unnecessary equipment.
So it is `a total management facility in the `area of policy, develop-
mental work, operations, and technical guidance.
Mr. BRooKs. Mr. Nicholson, what do you consider to be `the most
pressing problems `that need to be `overcome for you to make `a better
and more efficient use of the computers in your `agency in the execution
of your responsibilities?
Mr. NIcuoLsoN. Mr. chairman, I believe it is still in the area of s'taff.
The `ability to get qu'alified people in this rapidly expanding tech-
nology, `to retain `them for substantial periods of time `and to get `them
in satisfactory numbers in order `to undertake the magnitude of the
work in this area.
Mr. BROOKS. Have you got a training program for your programers
and for your puncheard operators?
Mr. NICHOLSON. Yes, sir ; we do. We have put `through `several groups
now. We have surveyed the field, have asked people from all through
the postal service, the clerks and carriers and all personnel, and those
that qualify on the basis of an initial screening are put through courses
and quite `a few of those have made very excellent trainees and pro-
gramers.
Mr. BELEN. The Bureau of Transportation is also presently using
a computer and automatic data processing in the preparation of both
air and surface schedules in establishing the transportation network
`for routing intercity mail, In addition, programs have been established
by which air and rail payments to transportation companies are proc-
essed by the computer. Quality control programs are maintained for
mail transported by rail.
Procedures are being completed for expanding the use of computers
for the routing of both first class and airmail, for establishing a quality
control program for mail transported by highway, and for maintaining
the inventory of our mail equipment.
In the planning stage there are programs which will permit us to
route all classes of mail, establish a quality control program for all
mail transported by air, and to maintain full control of routing mail
under adverse conditions due to weather or mechanical failure.
0. PERSONNEL MANAGEMENT
Mr. BROOKS. Mr. Belen, would you describe for the subcommittee
the elements of your personnel management program?
PAGENO="0117"
33
I will submit exhibit E, the Civil Service Commission's "Highlights
of the POD Personnel Management System."
(Exhibit E follows:)
EXHIBIT E-HIGHLIGHTS OF POST OFFICE DEPARTMENT PERSoNNEL MANAGEMENT
SYSTEM (CIVIL SERVICE CoMMISSIoN)
Background information-Post Office Department
The Commission's inspection of personnel management programs and opera~
tions in Federal agencies inc1ude~ the Post Office Department. Inspections were
completed in 111 postal installations in fiscal year 1967 and 150 inspections are
programed for fiscal year 1968. Inspection coverage is limited primarily to corn-
pliance with Civil Service regulatory requirements, plus a review of personnel
management programs. Some general findings can be drawn from these
inspections.
1. There is a great deal of variatinn among local post offices. Much depends
on the managerial ability of the individual postmasters.
2. The program for promotion to first level supervisory positions now in effect
is regarded generally as an improvement over previous methods of selection.
Candidates are ranked on a combination of written test scores and seniority.
Selection may be made from among candidates in the zone of consideration, which
varies with the size of the register. The zone is the top 15 percent of the register,
except that a larger proportion is used when the register is smalL The maximum
number of eligibles who may be included in the zone is 100. The employee organi-
zations, nevertheless, are definitely interested in restricting selection to the top
ranking candidate.
3. Performance evaluation is not being used effectively as a management tool
to identify either unsatisfactory or superior postal clerks. Scheme examinations
have fixed passing ~scores, and the employee's capability is thus clearly established.
There is no standard of performance on the job, however, which may be used to
measure in terms of quantity or quality the degree to which the clerk is utilizing
his skill.
4. The incentive awards program in `both its aspects (suggestion awards `and
performance `awards) suffers from the same problem : fear `that an `award will be
looked upon `as evidence of favoritism. Contributing to the problem is the ab-
sence of an objective, systematic approach to performance evaluation. Another
factor is the recurring shortage of funds, which prevents the granting of `awards
even though they have been approved.
5. Training in `the art of `sttpervision is in need of great expansion. Offices with
fewer `than 500 employees are not authorized any training positiou~ as such, and,
the training effort is a secondary responsibility for, perhaps, the personnel clerk.
The Post Office Department region~tl offices should `assume leadership in training
programs to coordinate `the effort and provide thorough and progressive training
for all supervisors.
Mr. BELEN. The primary objective of this program is to encompass
virtually all aspects of personnel administration. We have an Assistant
Postmaster General in charge of the Bureau of Personnel.
We also include in the Bureau of Personnel the safety program and
the labor-management program that I described earlier.
H. GENERAL A000IXNTING OFFICE REPORTS
Mr. BRooKs. Has the General Accounting Office `issued any audit
reports on the overall operations of your agency, that is, reports not
directed at a functional program of the agency, but rather to the' man-
agement and adffiinistrat~on of the agency?
Mr. BELEN. To my recollection, sir, no. They have all been directed to
a specific program like buildings or rural carriers' allowance.
Mr. BROOKS. We have exhibits F and G which I will submit for the
record. These are summaries of GAO reports on ownership versus
leasing of public facilities, a problem we touched on earlier.
PAGENO="0118"
34
Mr. BELEN. Yes. I would class that as a specific category, rather
than overall.
(Exhibits F and G follow:)
EXHIBIT F-SUMMARY OF GAO REPORT-COMPARISON OF FUND REQUIREMENTS
FOR LEASE AND GOVERNMENT OWNERSHIP AND OTHER MATTERS RELATING TO
LEASING OF SMALL-SIZE AND MEDIUM-SIZE POSTAL FACILITIES (B-145650,
SEPT. 30, 1963)
Problem
GAO's comparison showed that the total costs of leasing 91 small-siZe and
~nedium-size postal facilities f~r a basic 10-year period would be about $610,000
less than the total estimated coats under Government owner~hip. Under Govern-
inent ownership, however, the Department would have title to land originally
costing $745,000, and to buildings with remaining useful lives of 30 or 40 years
which were estimated to cost about $4.5 million to construct. If the Department
exercised its renewal options for 5 or 10 years beyond the basic 10-year lease
terms, the costs of leasing these facilities at `the end `of 15 and 20 years would
exceed the costs of Government ownership by about $2.1 million and $4.9 million,
respectively.
Reeommen&z~tio~
GAO recommended that the Department determine on an individual facility
basis whether `to acquire postal space by leasing or through Government owner-
ship rather th'an follow a general policy of leasing.
Agency response
The Postmaster General disagreed with certain statements in our report and
therefore disagreed with the `specific amounts by which the c'osts of leasing would
exceed, over certain periods `of time, the costs of Government ownership'.
Current status
This recommendation has not been adopted. GAO is currently making a follo'wup
review in this area.
EXHIBIT 0-SUMMARY OF GAO REPORT-REVISED PRACTICES NEEDED FOR ACQUIR-
ING CONTROL OF SITES FOR LEASED POSTAL FACILITIES (B-153129, MAI~ 1, 1968)
Problem 1
The Department had initiated actions to acquire facility sites earlier than
it probably would have initiated Such actions if the funds for site acquisition
would have remained available after the end of the fiscal year. Some of these
early actions had resulted in additional costs, and in a few cases the Depart-
ment may not have made sufficient studies before initiating action to acquire
facility sites.
Recommendation
GAO recommended that the Congress give consideration to amending exist-
ing legislation to (1) authorize, and provide the Post Office Department with,
a revolving fund of an appropriate amount to finance the acquisition of sites
and the planning of leased postal facilities and (2) require the Postmaster
General to include, in his annual report to the Congress, data regarding the
activitieS of the revolving fund, including the investment in sites for proposed
new facilities.
Agency response
The Department wholeheartedly agreed with the recommendation for estab-
lishing a revolving fund but did not agree that legislation to require inclusion
of data regarding the activities of the revolving fund in the Postmaster Gen-
eral's annual report was necessary because a request by any committee of the
Congress would be sufficient to elicit the desired information.
Problem 2
The Department had not established criteria for studies of the feasibility
and costs of facilities on alternative sites and had previously made only three
such studies. GAO's review of one of these studies revealed several omissions
and probable errors in the Department's computations, and its review of an-
other of these studies revealed that the Department might not have given
PAGENO="0119"
35
sufficient consideration to the lower overall costs, indicated by its study, for a
facility constructed on an alternative site.
Recommendation~
GAO recommended that, to insure implementation of the policy of constructing
facilities on sites which adequately meet operational needs at the lowest possible
costs, the Department establish (1) guidelines as to when studies should be
made of the feasibility and costs of acquiring and operating facilities on
alternative sites and (2) specific criteria regarding the factors to be taken into
consideration in making and using such studies.
Agen~cy response
The Department did not concur with GAO's recommendation. The Deputy
Postmaster General stated that the Department bad followed a cQnsistent policy
of making economic feasibility studies in all instances where any serious ques-
tions of such feasibility existed and that the Department did not believe further
specific criteria or guidelines for making studies of the feasibility and costs of
acquiring and operating facilities on alternative sites were necessary, desirable,
or practicaL GAO does not agree with these conclusions.
Problem 3
The Department's procedures for selecting and acquiring control of sites for
new postal facilities do not conform to practices commonly used by other Federal
agencies and may not provide adequate internal controL
Recommendations
GAO recommended that the Department revise its policies and procedures to
provide for (1) obtaining complete and fully documented appraisals of the fair
market values of potential facility sites, which are based on consideration of all
appropriate techniques for estimating market values, and requiring the regional
or headquarters offices to determine the adequacy of the appraisals before select-
ing the sites to be used or attempting to negotiate purchase options on the
properties involved ; (2) assigning the functions of making appraisals and nego-
tiating purchase options to different individuals ; (3) instructing the regional
real estate officers in the techniques and requirements for making appraisals and
preparing appraisal reports ; and (4) obtaining a second appraisal, by either
an independent real estate officer of the Department or an outside professional
appraiser under contract, in each case where the initial estimate of the value of a
selected site exceeds a specified amount and, by the outside professional appraiser
under contract, in each case where the owner of a selected site has declined to
grant the Department an option to purchase the site for an amount at or below
the fair market value estimated by the first appraiser.
Agency response
The Department did not concur in the first two of the recommendations and
concurred only in part with the fourth recommendation. Concerning the third
recommendation, the Deputy Postmaster General stated that the Department
would attempt to make its instructions and requirements for making appraisals
and preparing appraisal reports more specific.
Problem 4
The Department's regulations precluded publicity regarding site requirements
before commencing actions to acquire control of sites. The Department agreed
with GAO's conclusion that, with adequate publicity, some property suitable for
use as sites for new postal facilities might be offered to the Department at prices
lower than those which would otherwise be obtained and stated that the Depart-
ment's manuals and other instructions would be revised to require such publicity.
Publicity releases issued subsequent to this change in policy, however, had not
provided sufficient details regarding the site requirements to have encouraged
property owners to offer purchase options to the Department.
Recommendation
GAO recommended that the Department include in each future publicity an-
nouncement relating to authorized construction of new postal facilities (1)
information regarding the site size requirements and, to the extent known, the
specific area of the city in which the new facility is to be located and (2) an
invitation for property owners in the selected area to submit offers of purchase
options to a designated postal representative.
PAGENO="0120"
36
Current status
The Department has not revised its regulations to authorize publicity before
commencing site control proceedings and, its publicity releases generally have
not provided sufficient details regarding site requirements to have encouraged
property owners to offer purchase options to the Department.
Problem 5
The Department had not specified detailed requirements for reviews of regional
real estate files and, in many cases, reviewers at regional and headquarters levels
had reached decisions or made recommendations without requiring real estate
officers to supply complete and adequate data in support of proposed real estate
actions.
Recommendation
GAO recommended that, to insure implementation of the policy that real estate
actions not be approved unless there is complete and convincing support for the
actions proposed, the Department develop guidelines for reviews of real estate
files by officials at regional and headquarters levels.
Agency response
The Deputy Postmaster General stated that the Department would take action
to develop guidelines for management reviews of real estate files. He stated also
that, so that more complete attention could be given to regional reviews, con-
sideration would be given to providing additional personnel to review regional
real estate files and cases. Neither of these actions has yet been taken by the
Department.
Mr. BROOKS. There is also a GAO report on sites, and otm on internal
auditing `and rela~ted activities, which is a management function, I
would think. It is a new report. Mr. Nicholson ; you probably have just
received it in thelast'couple of weeks.
Mr. NIcHoLSON. Yes, sir. MY recollection. of the reading of it is they
found our internal audit operation satisfactory and there were no
specific recommendations that I recall.
I think it was `an excellent report. It gave us a great deal of satis-
faction to find we did receive such a clean bill of health.
Mr. BROOKS. That is heartening.
PART 2.-PROGRAM REVIRW
Turning now to the program breakdown, Mr. Belon, I would ~ ap-
preciate a brief explanation of what each of the programs is and how
it i's performed. You may want to ask your program directors or `the
Assistant Postmasters General in the various categories that `administer
these specific programs to respond to this.
We have `about 35 `minutes. I would like `to wrap this up at 12 noon,
so they will have 4 or 5 minutes `to give us `a thumbnail sketch. How do
you w'ant to start?
A. PROGRAM CATEGORY 1-DIRECT SERVICES TO MAILERS
Mr. BELEN. The first category i's direct services `to mailers. That has
some subcategories-combined postal services `at `small offices, window
vending services, `collection services, `and logistical postal `support. The
manager i's Mr. McMill'an and I would ask him `to describe it briefly.
Mr. BROOKS. We want to welcome you to the hearing, Mr. McMillan,
as `a distinguished and longtime public `servant. We are delighted to
have you here. I want to put exhibit H in the record. It is `a fact sheet
on `this program.
(Exhibi't H follows:)
PAGENO="0121"
I. DIRECT SERVICES TO MAILERS
A. Description
This category provides all services where initial contact is made with postal
customers and includes the acceptance Leature of mail when it is first entered
in the mail service. All types of postal transactions handled over windows or
through postal vending equipment is included. All postal activity at small offices
is grouped and reported in this category.
B. Bervices provided
Sale of stamps and stamped paper.
Advises postage rates for mail in accordance with its class and destination.
Accepts and collects mail at post office windows, stations, and branches, from
street letter boxes and from chutes located on premises of business establishments.
Provides vending equipment and self~service postal units for sale of limited
postal commodities to improve customer service.
37
100
ExHIBIT H-PROGRAM CATEGORY I-DIRECT SERVICES TO MAILERS
200
300
400
DEPARTMENT OR AGENCY PROGRAM EUBPROGRAM
Post Office Department Direct Services to Mailers
CODE ~ CObE CODE
ANALYSIS AND CONTROL CODES
"In house" inputs
FISCAL YEAR 1968
ID.bIig.tsd
500
510
511
512
1313
520
521
522
App~~pOsti~ ~ CGDSGt
ThtslObIigs~~1
523
524
1, 235, 711
100_ ~42
Supplies and Consum-
able Materials
c_ ~12fl
Gapital IEqulpment
530
540
541
542
550
Land and Structures
stnsent
Total
600
610
620
610
640
. 650
660
700
7_ 077.
1 7hcc1t~
13. 018
i~,oi8
ScM
Prior Fi~caI
500
810
811
8213~
821
830
831
840
841
850
851
860
861
870
871
880
881
. Input
L. Output
P~iet~d fec an .1 Hess. C ~ee~n e~est Aeti~ities Ssbesnuttlse, Chsicose Jsck Basks
PAGENO="0122"
38
Provides special services for the protection and benefit of mailers (Insurance,
c.o.d., registered, etc.).
Issues and pays domestic and foreign money orders.
Provides selected services for other Government agencies which are in the
national interest and which can be handled more economically by the postal
service (issuance of alien address forms, sale of U.S. saving stamps, etc.).
Provides for special processing of quantity of mail on mailers' premises, and
on platforms of post offices.
Delivers mail to patrons through lock boxes and by general delivery.
U. Finanoing
Funds for direct services to mailers are provided by the appropriation, "Opera-
tions." For 1968 it is estimated that this appropriation will total $5,495,863,000,
of which $1,358,534,000 will be required to provide direct services to mailers,
including transfers and supplementals. Some of the window services are provided
on a reimbursable basis, amounting to $2,004,000.
D. Bmployment
Grade or level:
Professional : PFS-14 and above None
Technical' : PFS-13 and below 186, 415
1 Includes postmasters at the non-WMS post offices.
E. statutory authority
Title 39, United States Code.
Category manager-Mr. William M. MclVEillan, Assistant Postmaster General,
Bureau of Operations.
Mr. MOMILLAN. Thank you, Mr. Chairman. This category is exactly
what the title indicates. This includes all services where we make
initial contact with the customers : the collection routes, office buildings,
hotels, et cetera. Also, the transactions we handle through the window
like the sale of stamps, money orders, et cetera. It also covers the vend-
ing equipment, self-service postal units and the special services that we
provide like c.o.d. and insurance. And of course it includes issuance,
as I indicated, and payment of domestic and foreign money orders.
This also includes all types of service in smaller post offices ; that is
the fourth, third, second and the smaller first-class post offices. In this
category we have some $1,358,000 plus allocated to this particular
category.
Mr. BELEN. The next category, the next two in fact, are also Mr.
McMillan's-
Mr. BROOKS. Pardon me a moment, Mr. Belen. Mr. McMillan while
we are on this, it is my understanding that the Post Office Department
has embarked on a program of installing electronic stamp machines at
certain choice locations in office buildings and shopping centers, which
may be in competition with some long-established small businessmen
in the stamp-vending business.
Would you comment on the Post Office Department's activities in
this area, and is it feasible for the Post Office to assume responsibility
for this kind of service ? Is it a loss operation ? What are you doing to
protect the small vending operators who might be displaced by this
activity?
Mr. MOMILLAN. I assume, Mr. Chairman, that you are referring
primarily to the activity in the Washington, D.C., area. We did pur-
chase some 50 machines with the thought of putting them in public
buildings or places used by the public within the District of Columbia.
We have 10 of these machines, I believe, at National Airport and
some nine others located in some other buildings throughout the city.
I don't recall the names of all of them. This is 19 out of 50.
PAGENO="0123"
39
Now we do not plan any extensive use of this type of equipment at
this time. And your question might enoompa~s this also : we do have
numerous self-service postal units in major shopping c~nters through-
out the country.
Mr. BRooKs. I distinguished between those, yes.
Mr. MOMILLAN. These, of course, are most `times in lieu of a con-
tract or a classified branch. We only puJt those in areas where we would
have to have some type of service.
But I think most of the criticism or the comment that has arisen is
out of the 19 stamp vending machines that we now have locaited in the
District of Columbia.
We do not feel that we could ever completely substitute for, nor
would we desire to substitute them for, the private enterprise in this
area, be~ause obviously we couldn't afford to have one of these ma-
chines and have our employees service `them in a corner drugstore, for
example.
Mr. BELEN. Part of it, Mr. Chairman, is that there have been com-
plaints about the markup, and some Members of Congress have corn-
plained about the higher rate charged for the stamps `and they blame
the Post Office for it since the machines have been identified `so that it
almost looks like `they belonged `to the Federal Government. I think
even the people `themselves recognize they may have gone a little too
far in `causing `the Government to be criticized, when really it is a
private activity.
Mr. BROOKS. And `they `are selling stamps `at `a markup ~
Mr. BELEN. That is correct. When we `sell `stamps, we sell them for
the exact arnoumt.
Mr. BROOKS. All right. I will submit exhibits I and .J for the record.
These `are sumrn'ari~s `of GAO repoi~ts related `to this program. Proceed.
(Exhibits I and J follow:)
EXHIBIT I-SUMMARY OF GAO REPORT-POTI~NTIAL ECONOMIES AND IMPROVEMENTS
IN SERVICE THROUGH MODERNIZATION OF THE POSTAL FIELD SERVICE (B-114874,
DEC. 7, 1967)
PROBLEM
There are presently about 33,000 independent post offices which, with few
exceptions, collect, postmark, sort, and dispatch their own mail. This fragmented
operation precludes the Department from realizing the full benefits of mechaniza-
tion processes which require large volumes of mail for economical operation.
Except in the largest post offices, therefore, operations are still conducted much
as they were in the 19th century.
RECOMMENDATION
GAO recommended that the Department move toward complete consolidation
of mail processing and administrative functions of post offices into about 550 see-
tional center offices. To obviate the routing of each piece of mail through one of
the 33,000 post offices for postmarking before going to one of the 550 sectional
center offices for sorting and dispatch. GAO also recommended the elimination of
city and community names from postmarks. GAO recommended that the Congress
consider amending the law to eliminate certain restrictions against the consolida-
tion of post offices and to provide the Department with support for a program of
consolidation in the interests of efficiency and economy.
AGENCY RESPONSE
The Department indicated general agreement with the desirability of con-
solidating the processing of outgoing mail and of centralizing administrative
functions. Although it indicated that eliminating community names from post-
PAGENO="0124"
40
marks would present no operational problems, it disagreed with the desirability
of doing so. Subsequently, in a letter dated January 11, 1968, to the House Com-
mittee on Government Operations, the Department raised certain new objections
to consolidating the processing of incoming mail and stated that elimination of
community names from postmarks would hamper the criminal investigation work
of postal inspectors. GAO answered these objections in a letter dated April 1, 1968,
to the committee.
EXHIBIT J-SUMMARY or GAO REPORT-NEED ron REVISING COSTLY PROCEDURES
FOR REMITTING C.O.D. COLLECTIONS AND OTHER FINANCIAL PROCEDURES AND
PRACTICES (B-114874, AuG. 20, 1964)
PROBLEM
GAO found that substantial savings could be realized if the Department revised
its procedures to provide for consolidation of payments when remitting to
shippers, proceeds from C.O.D. collections.
RECOMMENDATION
GAO recommended that the Department's procedure for remitting proceeds
from C.O.D. collections at larger first-class post offices be revised to require
the issuance of a single money order or Treasury cheek daily or weekly to each
shipper having multiple C.O.D. collections instead of issuing a separate money
order for each C.O.D. collection. GAO also recommended that the Department pre-
scribe criteria for consolidating COD. payments at certain smaller post offices.
AGENCY RESPONSE
The Deputy Postmaster Qeneral Informed us that, while the Department agreed
that C.O.D. remittance procedures should be revised to reduce costs, it did not
agree that our recommendation was practical or would result in reduced costs.
He further stated that the Department was studying improved procedures for
C.O.D. remittances.
CURRENT STATUS
The Department has advised that the study has not been completed due to
personnel staffing problems, and there has been no change in procedures for
remitting C.O.D. collections.
ESTIMATED SAVINGS
$600,000 per year. (Estimate made in 1964.)
Mr. BELEN. The next two categories are Mr. McMillan's processing
of mail and delivery services.
B. PROGRAM CATEGORY 2-PROCESSING OF MAIL
Mr. MCMILLAN. Mr. Chairman, processing of mail of eourse is the
aotivity within the post offices. This is primarily the clerk and mail
handler crafts. It is the distribution, tying out of mail, putting the
mail in pouches, getting the mail ready for transportation.
We separate first the mail by priority ; th~ait is, special delivery, air-
mail, preferential mail, and then the ~`cond third, and fourth class.
Then in this area we also `separate mail in a manner-~and this is the
scheme the clerks have to learn-necessary to distribute most efficiently
to meet the transportation paittern, to insure, for example, that a first-
class letter mailed here today hopefully will be delivered in Houston
`or Dallas or Beaumont tomorrow.
We have some other important duties in this particular area. That
is checking fo see that proper postage has been paid, and if not, rating
it up postage due.
it also includes the processing of mail such as forwarding when it
is necessary or returning `to sender when it is required.
PAGENO="0125"
41
This funotion is funded by a billion and a half dollars. It is one
of our larger arcas of responsibility.
The third category, "Delivery services"-
Mr. BROOKS. Pardon inc. This, inc~denta1ly, has a total ~ost of what?
Mr. MOMILLAN. A billion and `a half.
Mr. BROOKS. Which, while it is a lot of money, seems to be a fairly
minor part of the percentage of the toI~al expenditures of the Post
Office Department, and it indicates they `have that one worked down
pretty well. We will put exhibit K on this program in the rec~rd.
(Exhibit K follows:)
Supplies and Consum-
able Materials
Fends disitibuted
Input-output ratio
. Input
Output
Input
. Output
. Input
. Output
.1
-(
. Input
. Output
100
EXHIBIT K-PROGRAM CATEGORY 11-MAIL PBOOESSXZ~G
200
300
400
DEPARTMENT OR AGENCY PROGRAM SUSPROGRAM
Post Office Department u-uueebnAxs~ of Mail ~ ~
CODE CODE ~ CODE
A~NALYSIS AND CONTROL CODES
II
"In house"
Personnel:
inputs
Ueubligutsd
Comp.
FISCAL YEAR 1968
Benefits
App:np,iatiuu ur Current
Yenr Rrqe..t
Totol
Aeoitnble
uoo
510
511
512
511
520
521
522
523
524
530
540
541
542
550
TotNObtiguted
Capital Euuipment
Total
Loans
600
610
620
630
640
650
660
700
] - c1n~ (~1
Total
Prier FisenI
Yen
800
810
855
820
521
830
831
840
841
850
851
860
861
870
871
880
881
. Input
Output
8. Input
8. Output
P,iot,d In. asu of Boo,, G eesro:~,g 5 Agti'iti.. Sabeonstltt.e, CI:uireun turk Brooks
PAGENO="0126"
42
II. PROCESSING OF MAIL
A. Description
This category provides for processing of mail in postal plants, railway post
offices, and highway post offices.
B. $ervices provided (process 82:2 billion pieces of mail)
SeparateSmail by class for priority hand~ing (special delivery-airmail-etc.).
Provides for the most efficient method of distribution by destination iii order
to advance delivery. Applies mechanized procedures where volume warrants and
~avings can be effected.
Schedules the movement of mail to and from all transportation media.
Cheeks postage affixed to mail and established amount due, if Insufficient.
Processes mail requiring forwarding, return to sender, or of incorrect address.
Provides for the temporary storage of sacks of mail and outside pieces moving
in-transit bet~een*po~ ~ffiees;
C. Financing
Funds for processing of mail are provided by the appropriation, "Operations"
For 1968 it is estimated that this appropriation will total $5,495,863,000, of
which $1,530,061,000 will be required to provide processing of mail, including
transfers and supplementals. Some of the mail handling activity is provided on
a reimbursable basis, amounting to $1,574,000.
D. Employment
Grade or level : Number
Professional : PFS-14 and above None
Technical1 : PFS-13 and below 216, 462
1 ThIs basically includes clerks, mail handlers, and first-line supervisors.
E. statutory authority
Title 39 United States Code.
Category manager-Mr. William M. McMillan, Assistant Postmaster General,
Bureau of Operations.
~ Mr. MOMILLAN. WE~11, my operating budget is approximathly $5½
billion this year. So it is a little more than 25 percent of the total,
of my total operating budget. There are about 216,000 employees en-
gaged in this particular program category activity.
Mr. BELEN. As an answer to your question, I do believe we have
made a lot of progress in the mail processing area. I have here a chart
which shows that, if we were processing mail at the same rate that we
were in 1961, when I became Director of Operations, it would have
cost us, this year, $331 millkn more in this area. So there has been an
increase there in performance.
Mr. BRooKs. May we have this for the record, this chart with the
comparison of the improvements ~n that particular section?
Mr. BELEN. Yes, sir.
(The `chart ref erred to follows:)
POST OFFICE DEPARTMENT
ESTIMATED SAVINGS DUE TO PRODUCTIVITY GAINS 1961-69
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Volume
(thousands)
1961
productive
rate
Derived
man-years
Compara-
tive
man-years
Man-years
saved
Cost per
man-year
current
year
Amount
saved
(thousands)
1961 64,932,859 112,438 577,498 577,498 $7,358
1962 66,493,190 112,438 591,376 584,200 7,176 7,415 $53,210
1963 67,852,738 112,438 603,468 591,505 11,963 7,805 93,371
1964 _~--_~~___~ 69,676,477 112,438 619,688 601,918 17,770 8133 144,523
1965 71,873,166 112,438 639,225 610,079 29,146 8,495 ~ 247,595
1966 75, 607, 302 112, 438 672, 435 639, 090 33, 345 8, 809 293, 736
1967(actual) 78,367,000 112,438 696,980 675,849 21,131 9,075 191,764
1968(estimate) 82,159,000 112,438 730,705 703,746 26,957 9,694 2G1, 052
1969 (estimate) 83, 966, 000 112, 438 746, 776 713, 854 32, 922 10, 078 331, 788
1, 617, 039
PAGENO="0127"
43
Mr. MCMILLAN. Mr. Chairman, it might be of interest to know that
this is the area where we expect to receive maximum benefits from
mechanization-in the processing of maiL
C. PROGRAM CATEGORY 3-DELIVERY SERVICES
The third category is delivery services and here again the title is
fully descriptive of the work involved. This is the delivery of all types
of mail by all methods. That is city delivery, rural delivery, special
delivery, et cetera. And on our rural routes we accept mail, sell stamps,
sell money orders, et cetera.
It also includes the transportation of mail when Government ye-
hides are used between post offices and intercity mail movements be-
tween stations and branches and `also transfers to railroad depots and
airmail 1~elds and truck terminals when Government vehicles are
used.
The cost of this category is tied directly to the growth of the
Nation. In other words, the additional houses that are built, the ex-
pansion of the metropolitan areas, and it includes an allocation of
some $2,092,000,000 and some 271,000 employee's.
Mr. BROOKS. Thank you, Mr. McMillan. Exhibit L is the fact sheet
on this program. I will `also submit exhibits M and N which are sum-
maries of GAO reports on activities in this program, Mr. Belen?
(Exhibits L, M, and N follow:)
PAGENO="0128"
:rii. DELIVERY SERVICES
A. Description
This eategGry provides for the delivery of mail to residences and business
estab1is~hments. It provides also £~r the intracity `and intercity movement of mail
in vehicles operated by postal employees.
B. Services provi&xZ
Delivery of all classes of mail ~o businesses and private residences in city
delivery territory.
Provides the most expeditk~us delivery of special delivery mail at all post
offices.
44
100
200
p(~gt flffi~P fl~artvnent
EXHIBIT L-PROGRAM CATEGORY 111-DELIVERY SERVICES
300
fle1t~rerv Servfees
CODE
400
III
SUEPROORADI
U~b~ig th
FISCAL YEAR 1968
Comp.
Beoefits
.5 1)10 ~ ~tiOO o~ C 0!
Yoo~ Doooo~~
`Iravel
Supplies aod Coosurn-
able Malerials
ic1s~tc1sc
Capital Equipment
500
510
511
. 512
513
520
521
523
524
530
540
541
542
550
60,0
610
620
630
640
050
660
700
.~
Funds distributed
Contracts
Grants
Loans
Benefits
Other
nO~ 707
Total
Total
Iuput-uutput ratio
toput
(too 707
Pin Foeot
Output
toput
800
810
811
820
821
830
831
840
841
850
851
8130
861
87t)
871
880
88t
Output
Input
Output
Input
Output
101)511
Output
;. Input
5. Otstptst
Pintd to as at Hoas 15 noons i trtiiti Suboonltt~~. Chuinun Jut Bask.
PAGENO="0129"
45
On rural routes, accepts and delivers mail, handles special services, sells
postage stamps and U.S. savings stamps and arranges for the purchase of money
orders.
1~rovides for transportation of mail in Government-owned vehicles between post
offices, and in the Intracity mail movement between stations, branches.
Transfers mail to railroad depots, air mail field~, and truck terminals.
Workload-City delivery and specictZ del4very service
Possible deliveries ~ 544, 000
Possible delivery stops 42, 906, 000
Square miles served 66, 972
Special delivery articles 94, 088, 000
Work1oad-~RUraI delivery sevvice
Number of routes ~
Thtal length of routes June 30 1, 972, 495
Average length of routes 63. 7
Miles traveled annually ~ 600, 296, 000
C. Financing
Funds for delivery services are provided by an appropriation, "Operations."
F~or 1968 it is estimated that this appropriation will total $5,495,863,000 of which
$2,092,797,000 will be required to provide deliv~r~ ser~4ces, including transfers
and supplementals.
13. Employment
Grade or level : . Number
Professional : PFS-14 and above None
1 : PFS-13 and be1~w 271, 571
1 This basically includes city carriers, rural carriers, and special delivery messengers.
E. statutory authority
Title 39, United States Code.
Oategory Manager.-Mr. William M. McMillan, Assistant Postmaster General,
Bureau of Operations.
EXHIBIT M-SUMMARY OF GAO REPoRT-SAVINGS AVAILA1~Lt IF UNIFORM ITEMs
ARE FURNISHED TO POSTAL EMPLOYEES IN LIEU OF ALLOWANCES (B-124597,
SEPT. 27, 1966)
PROBLEM
GAO expressed the opinion that substantial savings could be achieved if the
Department discontinued the uniform allowances granted to window clerks, car-
riers, and other employees, and entered into procurement contracts for the furnish-
ing of the authorized uniform items.
RECOMMENDATION
GAO proposed that the Department consider furnishing uniforms in lieu of
providing uniform allowances after making a detailed study to determine the most
practicable `and economical means of furnishing and `distributing uniform items
to employees.
AGENCY RESPONSE
The Postmaster General initially agreed with GAO's proposals, with certain
qualifications. Subsequently, however, he advised the Director of the Bureau
of the Budget that certain provisions in the Federal Salary and Fringe Benefits
Act of 1966 (Public Law 89-504) precluded the Department from making any
change in its current system for providing uniforms to postal employeeS.
GAO has been informed, however, that the Department now believes that it has
the authority to discontinue the uniform allowance, but that certain problem's,
su~h au fitting, associated with furnishing uniforms in lieu of an employee uniform
allowance may render such a plan infeasible.
98-551-68---4
PAGENO="0130"
46
CURRENT STATUS
PROBLEM
RECOMMENDATION
AGENCY RESPONSE
In February 1968, the Department awarded a contract for `the procurement of
uniforms for a certain group of empioyees (about 4,93~) who had not previously
been required `to wear uniforms. Phi's .procure~nent was an experiment to' determine
~whetber furnishing uniforms is more advantageous than giving employees a lint-
form allowance.
EXHIBIT N-~SUMMARY OF GAO REPORT-SIGNIFICANT SAVINGS POSSIBLE IF RURAL
MAIL CARRIERS USE GOVERNMENT INSTEAD OF PERSONAL VEHICLES (B-161392,
JAN. 4, 1968)
On the basis