tration will be promoted. The PHA stated, however, that it did not believe it would be authorized to apply the cost limit on a narrower basis than an entire project without congressional approval. This interpretation would not preclude construction of a part of a project in an uneconomical manner and the remaining part at a much lower cost. Accordingly, we recommended that the Congress consider amending the United States Housing Act of 1937 to require that, in cases where there are significant differences in the design or materials for different sections of a low-rent housing project, compliance with the room cost limitation prescribed in section 15(5) of the act shall be determined separately for the different sections of the project.

2. Federally aided or owned projects at one location had experienced vacancy problems for some time caused by a gradual decline in the need for housing in the area. The PHA concurred in our suggestion that a study be undertaken jointly by the interested Federal agencies, in coordination with the Bureau of the Budget, to determine the actual local need for housing under the various Federal programs and, if practicable, to reduce the number of dwelling units in excess of need through placing certain facilities in standby condition or making other disposition of them. The Deputy Administrator, HHFA, later told us that the study had been made. The study showed that vacancies had been reduced substantially at one of the projects due to increased activity at a Navy Yard, and that the Navy Department had removed from the housing market almost 40 percent of the units at another project and plans to dispose of the entire project by June 30, 1965.

3. Construction costs of certain projects in the area were increased because the PHA required construction contractors to carry earthquake coverage insurance during construction of low-rent housing projects. We noted that, generally, private lending institutions in the area do not require such insurance during construction of non-high-rise structures and the FHA does not require this insurance under its mortgage insurance programs. The PHA Commissioner agreed with our proposal that the PHA reexamine its policy of requiring contractors to carry earthquake insurance.

We also issued reports to responsible PHA regional directors on our reviews of selected phases of low-rent housing operations at 16 LHA's. In these reports we pointed out weaknesses which could be corrected by the LHA's or the PHA regional offices.

FEDERAL NATIONAL MORTGAGE ASSOCIATION

Our work in the Federal National Mortgage Association (FNMA) included principally an audit of FNMA's financial records and transactions for the fiscal year 1961. This audit was made under the Government Corporation Control Act and was carried out at the central office and at three agency offices.

In our report of January 1962 to the Congress on our audit of the FNMA, we expressed the opinion that FNMA's financial statements for the fiscal year 1961 presented fairly its financial position and the results of its operations for the year.

INTERSTATE COMMERCE COMMISSION

Our work at the Interstate Commerce Commission (ICC), done primarily at the Commission's headquarters office in Washington, D.C., included reviews at the request of a congressional committee, reviews of selected management operations, and selected payroll audits.

As requested by the chairman, Senate Committee on Commerce, we reviewed the processing of proceedings cases and certain changes in the Commission's organization. We submitted our report to the chairman in June 1962.

We started a review of ICC's administration of the loan guaranty program for railroads authorized by the Transporta. tion Act of 1958. We found it necessary, however, to suspend the review because the Commission denied us access to certain records and documents relative to one major guarantee. We believed these documents and records were essential to make an adequate, independent, and objective examination of the administration of this program. A report on this denial of access to records was submitted in July 1962 to certain interested committees and subcommittees of the Senate and the House of Representatives.

I

We completed a review of the management of selected field E operations and issued a report on this review to the Chairman of the ICC after the close of the fiscal year. Our review was concerned with (1) the anticipated benefits not being fully realized from the consolidation of all ICC activities related to the inspection of railroad operations into a Bureau of Safety and Service and of certain duties of the related field inspection staffs and (2) the use of privately owned automobiles by the Bureau of Safety and Service employees on a mileage reimbursement basis when Government-owned automobiles were idle, or were being used only to a limited extent.

NATIONAL AERONAUTICS AND SPACE
ADMINISTRATION

Our audit work at the National Aeronautics and Space Administration (NASA) during the fiscal year 1962 included reviews of management practices for research and development programs, negotiation and administration of research and development contracts, real property and equipment acquisitions, and other financial and administrative activities.

We did this work at the headquarters office in Washington, D.C., at several field installations, and at a number of contractors' plants where NASA was having work done.

During the year we reported to the Administrator on our examination of costs under a research and development contract and issued five reports to NASA space flight or research centers on reviews of administrative procedures and practices. In our report to the Administrator we commented that the contractor had transferred property from company-funded programs to the contract at a valuation inconsistent with the terms of the contract. We recommended that NASA determine the appropriate value of the property transferred and withhold from the contractor the amount charged in excess of such value. The agency informed us that it would take action to achieve an equitable agreement with the contractor. Among the findings reported to the space flight or research centers were inadequacies in accounting and physical controls over property

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and in the procedures for the reporting and usage of excess and disposal of surplus personal property.

Audit work in progress at the close of the fiscal year included a review of the Orbiting Solar Observatory Program involving extensive work at the Goddard Space Flight Center at Greenbelt, Md., and reviews of contracts with the principal contractor and of experiment contracts with a number of universities. We intend to appraise in this and other programs agency performance in planning, scheduling, and coordination, and to examine contractor selections, contract negotiations and administration, and cost reimbursements and other payments under the contracts. Also in progress at the close of the fiscal year was a review of the administration of employees' travel at the Space Task Group, Langley Field, Va.

During the year we discussed our audit work at NASA with the House Committee on Science and Astronautics.

NATIONAL SCIENCE FOUNDATION

Our work in the National Science Foundation (NSF) included completion of a review of selected activities of Associated Universities, Inc., the contractor for the construction and operation of the National Radio Astronomy Observatory at Green Bank, W. Va. In a report to the Director of NSF in September 1961 on this review, we commented on certain deficiencies in accounting for construction costs and in controlling funds, personal property, travel costs, and cafeteria operations, and on the purchase of household appliances and furniture at costs higher than would have been incurred if the items had been purchased from established Government supply sources. We recommended that the NSF require the contractor to establish well-defined written administrative, procurement, and financial policies and procedures for the guidance of Observatory personnel and that the policies and procedures be approved by the NSF. We recommended also that certain measures be taken to strengthen the controls over the cafeteria operations. The Director agreed with our recommendations and informed us that corrective action had been or would be taken.

A review of selected activities of the Association of Universities for Research in Astronomy, Inc., the contractor for the construction and operation of the Kitt Peak National Observatory at Kitt Peak, Ariz., was in progress at the end of the

!fiscal year.

We reviewed for a Member of the Congress and reported to him in June 1962 on the award of a contract by NSF for phase II of the deep crustal studies of the earth, commonly referred to as the Mohole project.

OFFICE OF CIVIL AND DEFENSE
MOBILIZATION

During the fiscal year 1962, we completed reviews of the administration by the Office of Civil and Defense Mobilization (OCDM) of the Federal contributions program and the program for the donation of surplus property for civil defense purposes. These programs, along with certain other civil defense responsibilities, were transferred to the Secretary of Defense effective August 1, 1961. Our report on the Federal contributions program, under which financial contributions are made to the States and their subdivisions for approved civil defense programs and projects was submitted to the Congress in December 1961. A report on the surplus property program was in preparation at the close of the fiscal

year.

We submitted a report to the Congress in May 1962 on our review of OCDM policies and procedures for disposal of excess stockpiled materials to other Government agencies. We submitted a report to the Congress in June 1962 on our review of the determination of the quantity of natural rubber needed in the strategic and critical materials stockpile. A report on the determination of the quantity and quality of copper needed in the stockpile was issued after the close of the fiscal year. These programs remained the responsibility of OCDM which was renamed the Office of Emergency Planning (OEP) on September 22, 1961.