pense not actually incurred by displaced persons as a result of Federal acquisitions, is inconsistent with the general purpose of section 802(a) of the bill, and, if the provision is retained in the bill, also consider, again in the interest of uniformity of treatment, whether such provisions should be broadened to include displaced persons who move from a dwelling. If the provision is retained, we recommend that the following be substituted for "B": "(B) if he disposes of personal property on moving his dwelling, or business or farm operation and replaces such property with comparable property at the new location at a price exceeding the sale price, the amount of the difference of such prices, not to exceed, however, the estimated cost of moving the property or its market value, whichever is less." Title IX of S. 698 would bring about major changes in Federal land acquisition laws, policies, practices, and procedures. Our comments are directed to certain specific provisions which we believe could be clarified or revised to good effect. Section 901(a)(3) provides that the head of an acquiring agency establish a fair and reasonable price for the property and make a prompt offer to the owner for the full amount so established. If it is the intent of this provision to require agencies to offer realistic prices, which if refused, could be subject to good faith bargaining, the provision would not be in conflict with GSA's present policy. GSA does not pay less than fair and reasonable prices for acquired property. On the other hand, if the provision was interpreted as establishing a oneprice policy which price could not be appropriately increased by the acquiring agency should the owner refuse to accept the fixed amount, the result would be to significantly increase the number of condemnation actions, a result clearly not intended by the bill. The flexibility afforded by our present policy has proven to be in the interest of both the Government and the landowner, and GSA would not favor the more restricted one-price policy. With respect to section 901 as a whole, we do not believe it is intended that the procedures and safeguards set forth therein are necessary or appropriate to voluntary leases obtained by the Government. In order, however, to clarify this point and provide for uniform interpretation by the various agencies concerned, it is recommended that there be inserted at the end of the section a subsection (c) to read as follows: "(c) As used in this section, the term 'interest in real property' shall not include any leasehold interest, acquired by the Government, except where such interest is acquired by condemnation." Section 904 would require the head of a Federal agency to reimburse owners for incidental expenses incurred in conveying their real property to the United States. Included is the payment of penalty costs for prepayment of a mortgage incident to such real property. GSA recommends that language be incorporated to require that the mortgage be in effect at or prior to the time public announcement is made of the project. This could be done by the insertion of a provision to that effect before the semicolon on line 14, page 55, of the bill. The Bureau of the Budget has advised that, from the standpoint of the Administration's program, there is no objection to the submission of this report to your Committee. Sincerely yours, LAWSON B. KNOTT, Jr.. Administrator. AGENCY REPORTS ON AMENDMENT 748 Hon. EDMUND S. MUSKIE, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Subcommittee on Intergovernmental Relations, Committee on Gorernment Operations, U.S. Senate. DEAR MR. CHAIRMAN: Your letter of May 2, 1968, requests our views on a proposed amendment in the form of Title X-Accounting, Auditing, and Reporting of Federal Assistance Funds to S. 698, the Intergovernmental Cooperation Act. Our views presented below are preliminary comments as suggested in your letter in order that you may have the reaction of our Office before the hearings which begin on May 9. Our Office and other interested governmental agencies have long recognized the growing complexity and serious problems in grant administration, including the areas of accounting, auditing and financial reporting. In recognition of this situation, a project somewhat similar in purpose to that stated in section 1003 (a) will be undertaken as an activity of the Joint Financial Management Improvement Program. An agreement to undertake such a project was reached at a meeting of the principals of this program, that is, the Secretary of the Treasury, the Director of the Bureau of the Budget, the Comptroller General, and the Chairman of the Civil Service Commission on April 29, 1968. The project agreed upon, while not of the breadth contemplated in section 1003 (a), involves a review of the requirements and procedures in effect for accounting, auditing, and reporting under grant programs and development of recommendations leading to simplification and better coordination of the financial aspects of these programs. The project team will be staffed by representatives from the three fiscal agencies the Bureau of the Budget, the Treasury Department, and the General Accounting Office and by representatives from the four largest agencies involved in grants to States and local governments. These agencies are the Department of Health, Education, and Welfare, the Department of Housing and Urban Development, the Department of Labor, and the Office of Economic Opportunity. The Assistant Secretary-Comptroller, Department of Health, Education, and Welfare, has strongly endorsed this project. Because of another pressing priority in this field, the project will not be started until probably sometime in June. In the meantime, we plan to have members of the project team visit with members of your subcommittee staff to explain in more detail the features of this project. Having made the decision to go ahead with such a project, we believe that a statutory requirement for such a joint study as outlined in section 1003 (a) is not needed at this time. Section 1003 (b) and (c) would lay upon the Comptroller General functions of management involving financial relationships between executive agencies and States and political subdivisions, which are the primary responsibility of the executive agencies in the administration of their programs. The assumption of these functions by the Comptroller General would, in addition, tend to negate the independence and detachment from operational responsibility which the Congress intended for him in the review and evaluation of agency performance. Thus in our view the concept of subsections (b) and (c) is inconsistent with the statutory role of the General Accounting Office. In a practical sense the requirement of subsection (b) to study and review the accounting and auditing systems of the many States and political subdivisions which are the recipients of Federal aid programs would be an undertaking beyond the resources of our Office, considering our other responsibilities. In addition, subsections (b) and (c) imply that the Comptroller General has prescribed principles, standards, and related requirements concerning accounting and auditing by the States and political subdivisions with respect to the expenditure of Federal aid funds. Such is not the case, and we do not believe that it would be appropriate for the Comptroller General to prescribe such standards and procedures for adoption by State and local agencies. These are matters which should be worked out by the executive agencies and the State and local bodies and made a part of the grant agreements entered into under individual programs. It is not clear what is intended in subsection 1003 (c) by the provision that executive agencies, upon certain determinations specified in the subsection, may substitute for their accounting and auditing the accounting and auditing performed by States and political subdivisions. Regardless of the acceptability of the accounting of the States and political subdivisions, each Federal agency must account separately to its management and to the Congress for its financial operations of which aid programs with States and political subdivisions are only a part. Moreover, in most if not all Federal agencies the accounts maintained for Federal aid programs are in summary form based on reports and documentation taken from the more detailed accounts of the States and subdivisions. As to auditing, it is doubtful that Federal agencies would or should accept auditing done by States and political subdivisions without periodic tests to provide reasonable assurance that the prescribed rules and regulations were being adequately followed. At the present time there is some movement in certain Federal agencies toward placing considerable reliance on audits performed by others, but with tests as to the adequacy of such audits. Also, to reduce the total manpower necessary to perform the audit function and to lessen the impact of Federal auditing on non-Federal organizations, many Federal agencies have entered into cross-servicing arrangements under which the agency having a predominant financial interest in Federal programs at an individual non-Federal entity, performs the audit function, particularly as to overhead rates, for the Federal agencies having a financial interest at that entity. Insofar as the term "auditing" as used in the proposed Title X relates to financial audits, the expanded use of such cross-servicing arrangements could serve to further reduce the audit problem, and would enhance the feasibility of developing model audit manuals in particular areas and determining the degree to which reliance might reasonably be placed on the grantee's system of internal control, including auditing. With regard to management-type audits, it is less likely that the Federal agencies would accept audits by States and political subdivisions since management-type audits go beyond the verification of expenditures and are concerned with matters of administration about which audits by States and political subdivisions might not be considered sufficiently objective. We shall be pleased to discuss the above views in further detail if you desire. Sincerely yours, FRANK H. WEITZEL, Assistant Comptroller General of the United States. COMPTROLLER GENERAL OF THE UNITED STATES, Washington, D.C., June 3, 1968. Hon. EDMUND S. MUSKIE, Chairman, Subcommittee on Intergovernmental Relations, Committee on Government Operations, U.S. Senate DEAR MR. CHAIRMAN: Subsequent to the issuance of our letter of May 8, 1968, presenting our views on the proposed amendment to S. 698 pursuant to your request of May 2, 1968, members of our staff spoke with Mr. Charles Smith, Staff Director of your Subcommittee, on the advisability of having an oral discussion of our views. Mr. Smith advised that there is no necessity for having a further discussion of this matter, but did request that we furnish the Subcommittee, for inclusion in the record, further details concerning the project mentioned in our May 8 letter to review the financial administration of grant programs. This letter is in response to Mr. Smith's request. As we explained in our earlier letter, the project to review the financial management of grants-in-aid was approved by the principals of the Joint Financial Management Improvement Program at their annual meeting on April 29, 1968. A copy of the project proposal considered by the principals is enclosed. After some discussion as to the objectives of the project, the principals approved going ahead with it with some limitations on the stated scope. The principals agreed that the project team should concentrate on financial matters and that after the team had obtained sufficient information to do so, it would develop a work plan defining in more detail the scope of the study and the priority of coverage. This plan would be subject to further review and approval. As mentioned in our May 8 letter, other priorities have required that the organization of the project team be delayed for several weeks. When the team is organized, I am sure that one of its first contacts will be with the staff of your Subcommittee to obtain such information and advice on problem matters and areas of concern as your staff may be able to offer. The project team will keep your staff advised of its progress and consult with them on its tentative conclusions. We believe this to be a very important undertaking but because of our inability to obtain specific information about the kinds and degrees of the problems, we are unable to even conjecture as to the detailed operations which would be involved in this study. The General Accounting Office will probably be assuming the lead in this project and we will arrange for you to receive periodic progress reports. Sincerely yours, FRANK H. WEITZEL, Assistant Comptroller General of the United States. [Enclosure] PROPOSED PROJECT ON REVIEW OF FEDERAL GRANT-IN-AID PROGRAMS 1. Project Title.-It is proposed that a project be initiated to be titled Joint Agency Study of Federal Grant-in-aid programs to State and local governments. 2. Background.-A large segment of public expenditures is represented by Federal grant-in-aid programs to State and local governments. BOB Special Analysis K estimates these expenditures for fiscal 1968 at $18.4 billion and for 1969 at $20.3 billion. In 1955 expenditures were only $3.3 billion. It is estimated that there are statutory authorizations for over 400 separate programs. It is further estimated that the programs are administered by 21 departments and agencies, and 150 bureaus and divisions. Many administrative problems have arisen from the fact that the programs have so proliferated and have originated from such various sources that the state and local governments are presented with multiple administrative and financial reporting problems. On March 17, 1967, the President sent a message to the Congress entitled "Quality of American Government" in which he called specific attention to the administrative problem of managing grants and in which he directed that steps be taken to remedy the situation. A task force was formed to develop a plan to do this. As a result of the work of this task force a bill was introduced into the 1st session of the 90th Congress on August 28, 1967, (H.R. 12631) to provide temporary authority to expedite procedures for pooling of grants at the State and local levels. Work on the bill was not completed in the 1st session. A similar bill has been introduced also in the second session on February 16, 1968, (S. 2981). The bill is entitled to "Joint Funding Simplification Act of 1968," and provides enabling legislation to permit pooling of funds from grants of more than one Federal agency. The bills currently are in the respective Committee's on Government Operations of the Senate and House. However, these bills deal with only a small part of the problem. Over the past several years, the Intergovernmental Relations Subcommittee, of the Senate Government Operations Committee, has studied the problem of Federal-local relations. This committee has called attention to the many problems existing in the Federal Grant system. The Advisory Commission on Intergovernmental Relations has also highlighted the needs for some simplification of the Federal grant program. 3. Project Objective.-The objective of the project would be to develop recommendations for improvement and simplification of the general administration and financial management of Federal grants-in-aid to State and local governments. This would include efforts to develop recommendations for grantee accounting procedures common to all granting agencies, single audit by a cognizant agency, and a reduction in reporting requirements through simplification, combination or elimination of existing reports. 4. Scope of the Study.-The study will cover the following eight agencies: Department of Interior Department of Labor Department of Agriculture Department of Commerce Department of Health, Education, and Welfare Department of Housing and Urban Development Department of Transportation Office of Economic Opportunity These agencies have the preponderance of the programs with grants-in-aid. The study will also cover a representative number of State and local governments to ascertain their problems as recipients of the grants. 5. Project Organization.—The project will be conducted under the sponsorship of the Joint Financial Management Improvement Program Steering Committee. The study team should probably include representatives from the following agencies: AGENCY REPORTS ON S. 735 AND S. 458 Hon. EDMUND S. MUSKIE, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Subcommittee on Intergovermental Relations, Committee on Government Operations, U.S. Senate. DEAR MR. CHAIRMAN: Your letter of February 28, 1967, transmitted a copy of S. 458, 90th Congress which has as its stated purpose "To provide for periodic congressional review of Federal grants-in-aid to States and to local units of government." This measure is identical with S. 2114, 88th Congress, as that bill was passed by the Senate on June 19, 1964. As indicated in the report of the General Accounting Office on S. 2114, as originally introduced, and the testimony of its representatives which appears at page 56 of the published Hearings before your Subcommittee on S. 2114, January 14, 15 and 16, 1964, the General Accounting Office was strongly in accord with the objectives of the bill and recommended that it be given favorable consideration with certain suggested changes which were adopted. These changes are incorporated in S. 458. We are strongly in accord with the objectives of S. 458, which would appear to be beneficial not only as an additional device for strengthing congressional control over Federal grants-in-aid but also as an additional means for acquiring current information as a basis for legislation in the complex and fast changing area of Federal-State-local relationships. We recommend that S. 458 be given favorable consideration. Sincerely yours, ELMER B. STAATS, Comptroller General of the United States. ADVISORY COMMISSION ON INTERGOVERNMENTAL RELATIONS, Hon. EDMOND S. MUSKIE, DEAR MR. CHAIRMAN: This is in response to your request of February 28 for the views and recommendations of the Commission with respect to S. 458, a bill "to provide for periodic congressional review of Federal grants-in-aid to States and to local units of government," and S. 735, the proposed “Federal Grant-in-Aid Review Act of 1967." These bills, as well as Title V of the proposed Intergovernmental Cooperation Act of 1967 (S. 698), would provide for a uniform policy and procedure for systematic Congressional review of any grant program established subsequent to enactment of the legislation. In addition, both provide that each such grant-in-aid program enacted without a designated termination date shall expire on June 30 of the fifth calendar year which begins after the effective date of the Act. Finally, both stipulate that each grant-in-aid program of three years or more, authorized in the 90th (S. 458 cites the 89th, but we assume this is a clerical error) or any subsequent Congress, shall be reviewed by the Congress during the two years preceding the date upon which such program is to be terminated. S. 458 differs from S. 735 essentially by its inclusion of Sections 4, 5, and 6 which, respectively, would provide (a) for studies of existing and future grantin-aid programs by the Comptroller General, (b) for studies by the Advisory Commission on Intergovernmental Relations of the intergovernmental aspects of programs subject to provisions of section 3 on request of Congressional Committees, and (c) that State and local units of government would be required to keep financial records of programs receiving support from Federal grants-in-aid and that these records be open for inspection and audited by the heads of Federal agencies administering the grants and by the Comptroller General. S. 458 is nearly identical to S. 2114, which was passed by the Senate in the 88th Congress, and to Title II of S. 561, as it passed the Senate in the 89th Congress. S. 735 does not include the three titles discussed above. In addition, it differs from S. 458 and Title V of S. 698 in two other respects. First, Section 4(b) (2) authorizes each standing committee of the Senate and House of Representatives to employ a review specialist to assist in carrying out the purposes of the legis lation. This provision further implements the recommendations of the Joint |