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 PAGENO="0002" 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 PAGENO="0003" 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 PAGENO="0004" PAGENO="0005" 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) PAGENO="0006" 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:) PAGENO="0008" 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. PAGENO="0012" 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 PAGENO="0013" 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, PAGENO="0014" 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. PAGENO="0015" 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. PAGENO="0016" 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. PAGENO="0035" 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 r~e~i .00 c'J ~00~ - CC)O Co C000 CO C~JLC) CO CC) 00 00 CO CO 00 C) = -o -~ 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 00 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. PAGENO="0068" 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. PAGENO="0069" 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. PAGENO="0073" 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. PAGENO="0074" 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: PAGENO="0075" 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 I 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" 24 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