B-198137(1),L/M, JUN 3, 1982

B-198137(1),L/M: Jun 3, 1982

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WAS TRANSFERRED TO GSA FROM THIS OFFICE UNDER THE PROVISIONS OF THE GENERAL ACCOUNTING OFFICE ACT OF 1974. THE DEPUTY ADMINISTRATOR STATES THAT CONSTRAINED RESOURCES AND A GROWING BACKLOG OF UNAUDITED CARRIERS' BILLS ARE THE BASES FOR PROPOSING TO CONTRACT WITH COMMERCIAL AUDIT FIRMS FOR THE PERFORMANCE OF THE AUDIT. EVEN IF THE AUDIT IS NOT CONTRACTED OUT. THE DEPUTY ADMINISTRATOR CONTENDS THAT THE PROPOSAL'S VALIDITY IS SUPPORTED BY (1) THE WIDE DISCRETION GENERALLY ENJOYED BY AGENCIES TO CONTRACT OUT. IT IS CONTENDED. THE FIRST QUESTION IS WHETHER THERE ARE "ANY STATUTORY OR OTHER AUTHORITIES WHICH PRESCRIBE OR LIMIT THE METHODS AND PROCEDURES EMPLOYED BY GSA IN CONDUCTING THE AUDIT OF PAID TRANSPORTATION BILLS UNDER 31 U.S.C.

B-198137(1),L/M, JUN 3, 1982

PRECIS-UNAVAILABLE

GERALD P. CARMEN, ADMINISTRATOR OF GENERAL SERVICES:

BY LETTER OF SEPTEMBER 8, 1981, THE DEPUTY ADMINISTRATOR RAISED QUESTIONS RELATING TO NEW PROPOSED METHODS FOR THE GENERAL SERVICES ADMINISTRATION (GSA) TO SATISFY ITS RESPONSIBILITIES FOR THE TRANSPORTATION AUDIT. AS HE POINTED OUT, THE ENTIRE TRANSPORTATION AUDIT, INCLUDING THE TECHNICAL EXAMINATION OF CARRIERS' VOUCHERS, PROCESSING OF OVERCHARGES, SETTLEMENT OF CLAIMS AND SETOFF ACTION, AMONG OTHERS, WAS TRANSFERRED TO GSA FROM THIS OFFICE UNDER THE PROVISIONS OF THE GENERAL ACCOUNTING OFFICE ACT OF 1974, 31 U.S.C. 244 (SUPP. III 1979) (HEREAFTER, GAO ACT OF 1974); 57 COMP.GEN. 157 (1977).

THE DEPUTY ADMINISTRATOR STATES THAT CONSTRAINED RESOURCES AND A GROWING BACKLOG OF UNAUDITED CARRIERS' BILLS ARE THE BASES FOR PROPOSING TO CONTRACT WITH COMMERCIAL AUDIT FIRMS FOR THE PERFORMANCE OF THE AUDIT. EVEN IF THE AUDIT IS NOT CONTRACTED OUT, YOUR AGENCY NOW SUGGESTS THAT IT WOULD LIKE TO CONSIDER DISPENSING WITH THE EXAMINATION OF INDIVIDUAL BILLS AND INSTEAD ENGAGE EMPLOYEES IN TRANSPORTATION MANAGEMENT ACTIVITIES, IF THAT APPEARS TO BE A MORE ECONOMICAL USE OF AVAILABLE RESOURCES.

THE DEPUTY ADMINISTRATOR CONTENDS THAT THE PROPOSAL'S VALIDITY IS SUPPORTED BY (1) THE WIDE DISCRETION GENERALLY ENJOYED BY AGENCIES TO CONTRACT OUT; (2) THE POSITION OF THIS OFFICE THAT NO PROVISION OF LAW PRESCRIBES THE PROCEDURAL DETAILS FOR THE TRANSPORTATION AUDIT; (3) OUR DECISION B-198137, APRIL 29, 1980, WHICH, IT IS CONTENDED, APPROVED THE CONCEPT OF CONTRACTING OUT THE TRANSPORTATION AUDIT; AND (4) 31 U.S.C. SEC. 65(E) WHICH STATES CONGRESSIONAL POLICY THAT "EMPHASIS BE PLACED *** ON THE ELIMINATION OF THOSE AUDITING REQUIREMENTS AND PROCEDURES WHICH INVOLVE DUPLICATION OR WHICH DO NOT SERVE A PURPOSE COMMENSURATE WITH THE COSTS INVOLVED."

IN CONNECTION WITH THIS PROPOSAL, YOUR DEPUTY ASKS FIVE QUESTIONS WHICH WE ANSWER BELOW.

THE FIRST QUESTION IS WHETHER THERE ARE "ANY STATUTORY OR OTHER AUTHORITIES WHICH PRESCRIBE OR LIMIT THE METHODS AND PROCEDURES EMPLOYED BY GSA IN CONDUCTING THE AUDIT OF PAID TRANSPORTATION BILLS UNDER 31 U.S.C. SEC. 244(A)."

WE ARE AWARE OF NO STATUTE WHICH PRESCRIBES IN DETAIL THE METHODS AND PROCEDURES WHICH GSA MUST EMPLOY IN THE AUDIT OF PAID TRANSPORTATION BILLS. WE BELIEVE THAT IT IS IMPLICIT IN THE LEGISLATIVE HISTORY OF THE GAO ACT OF 1974, HOWEVER, THAT CONGRESS CONTEMPLATED THAT A THOROUGH AUDIT OF TRANSPORTATION BILLS WOULD CONTINUE TO BE PERFORMED AFTER THE TRANSFER OF THAT FUNCTION FROM OUR OFFICE TO GSA. THIS IS ESPECIALLY IMPORTANT SINCE THE PREDECESSOR STATUTE OF 31 U.S.C. SEC. 244, SECTION 322 OF THE TRANSPORTATION ACT OF 1940, PROVIDES THAT CARRIERS' BILLS ARE TO BE PAID UPON PRESENTATION PRIOR TO AUDIT AND, UNDER 31 U.S.C. SECS. 82C AND 82G, CERTIFYING AND DISBURSING OFFICERS ARE RELIEVED OF LIABILITY FOR OVERPAYMENTS FOR TRANSPORTATION SERVICES WHICH OCCUR BECAUSE OF ERRORS IN RATES AND CLASSIFICATIONS. SINCE OVERCHARGES ARE NOT DEDUCTED BEFORE PAYMENT BUT MUST BE DETECTED AND RECOVERED BY THE GOVERNMENT AFTER PAYMENT, WE THINK ANY METHODS AND PROCEDURES WHICH GSA ADOPTS FOR THE AUDIT MUST SERVE TO INSURE THE INTEGRITY OF CARRIERS' BILLINGS.

NEXT WE ARE ASKED:

"IN LIGHT OF THE WIDE DISCRETION EXERCISED BY AGENCIES IN CONTRACTING OUT IN OTHER AREAS OF GOVERNMENT ACTIVITY, MAY GSA UTILIZE COMMERCIAL TRANSPORTATION RATE AUDIT FIRMS TO PERFORM ANY OR ALL OF THE FOLLOWING FUNCTIONS?

1. IDENTIFY OVERCHARGES RELATED TO BILLINGS ABOVE ESTABLISHED AUDIT MINIMA BELOW WHICH IT WOULD NOT BE ECONOMICALLY FEASIBLE FOR GSA TO AUDIT.

2.SEND NOTICES OF OVERCHARGE AND OTHER NOTICES TO CARRIERS ADVISING THEM OF SPECIFIC MISTAKES IN BILLING AND MAKE DEMAND FOR REFUNDS WITH PAYMENT TO BE MADE DIRECTLY TO GSA.

3. ANSWER CARRIERS' PROTESTS ON BEHALF OF GSA.

4. ISSUE SETTLEMENTS OF ACCOUNT RELATED TO THOSE PROTESTS.

5. REQUEST SETOFF ACTIONS AGAINST CARRIERS BY THE VARIOUS FINANCE CENTERS WITH PAYMENT TO BE EITHER RETAINED BY THE PARTICULAR FINANCE CENTER, WHERE APPROPRIATE, OR SENT DIRECTLY TO GSA.

6. COMMUNICATE WITH UNITED STATES ATTORNEYS AND REQUEST COLLECTION ACTIONS AGAINST DELINQUENT CARRIERS.

7. COMMUNICATE WITH UNITED STATES BANKRUPTCY COURTS AND PREPARE PROOFS OF CLAIM REGARDING CARRIERS WHO HAVE FILED UNDER EITHER CHAPTER 7 OR CHAPTER 11 OF THE NEW BANKRUPTCY ACT."

WHEN GAO HAD RESPONSIBILITY FOR THE TRANSPORTATION AUDIT, WE OCCASIONALLY RECEIVED PROPOSALS FROM COMMERCIAL FIRMS TO PERFORM THE TRANSPORTATION AUDIT FOR US. WE CONSISTENTLY REPLIED THAT THE TRANSPORTATION AUDIT HAD TO BE PERFORMED DIRECTLY BY US. SEE, FOR EXAMPLE, OUR LETTER TO SENATOR SYMINGTON, WHO FORWARDED SUCH A REQUEST TO US. B-183020, APRIL 4, 1975. WE ALSO STATED TO THE SENATOR THAT:

"*** THE SAME WILL HOLD TRUE FOR THE GENERAL SERVICES ADMINISTRATION, AS PUB.L. 93-604 TRANSFERS BY LAW THE FUNCTIONS AND RESPONSIBILITIES OF A TRANSPORTATION AUDIT TO THAT ADMINISTRATION, AND SUBSTITUTES THE NAME OF THAT ADMINISTRATION IN PLACE OF THE GENERAL ACCOUNTING OFFICE, WHERE APPLICABLE."

AS YOU POINT OUT, HOWEVER, MORE RECENTLY, IN B-198137, SUPRA, WE DID NOT OBJECT TO GSA'S PROPOSAL TO CONTRACT WITH A COMMERCIAL FIRM FOR THE LIMITED PURPOSE OF IDENTIFYING POSSIBLE OVERCHARGES ON PAID TRANSPORTATION BILLS INVOLVING SMALL AMOUNTS, PROVIDED THAT GSA WOULD CONTINUE TO ADJUDICATE CARRIER CLAIMS AND TO EFFECT ALL COLLECTIONS. THE PRESENT PROPOSAL IS MUCH MORE COMPREHENSIVE, BUT WE SEE NO LEGAL REASON WHY THE IDENTIFICATION FUNCTION MUST BE PERFORMED IN-HOUSE, SO LONG AS GSA RETAINS OVERALL RESPONSIBILITY FOR PERFORMING THE AUDIT.

SPECIFICALLY, WE THINK THAT GSA COULD PROPERLY CONTRACT OUT THE FIRST TWO OF THE SEVEN FUNCTIONS YOU HAVE LISTED. THESE MERELY INVOLVE IDENTIFICATION OF OVERCHARGES AND NOTIFICATION TO THE CARRIER OF THE OVERCHARGE. AS TO FUNCTION THREE, IT IS NOT CLEAR TO US WHETHER YOU INTEND THAT THE COMMERCIAL FIRM WOULD MERELY ANSWER CARRIERS' PROTESTS OR WHETHER THE ANSWERS WOULD BE BINDING ON GSA. IF YOU INTEND THE LATTER, THEN WE THINK THAT THIS WOULD BE UNAUTHORIZED SINCE GSA MAY NOT DELEGATE ITS AUDIT RESPONSIBILITY TO SOMEONE ELSE.

MOREOVER, FUNCTIONS FOUR THROUGH SIX CLEARLY APPEAR TO BE INHERENTLY GOVERNMENTAL FUNCTIONS, WHICH IT WOULD BE IMPROPER TO CONTRACT OUT. INDICATED IN B-198137, SUPRA, THE GOVERNMENT SHOULD CONTINUE TO ADJUDICATE CARRIER CLAIMS AND EFFECT COLLECTIONS. FINALLY, AS TO SEVEN, WE THINK THAT THIS IS ESSENTIALLY AN INFORMATIONAL FUNCTION WHICH COULD BE PERFORMED BY A CONTRACTOR ON BEHALF OF GSA.

NEXT, OUR VIEWS ARE REQUESTED AS TO WHETHER GSA MAY DISCONTINUE SELECTIVELY AUDITING THOSE BILLS WHICH FALL BELOW AUDIT MINIMA, ASSUMING THE VALIDITY OF THOSE MINIMA IS PERIODICALLY TESTED THROUGH A STATISTICAL SAMPLING TECHNIQUE.

WE BELIEVE THAT THIS IS A DECISION WHICH GSA IS FREE TO MAKE AS PART OF ITS MANAGEMENT RESPONSIBILITY FOR THE TRANSPORTATION AUDIT, SUBJECT ONLY TO THE OBSERVATION THAT IT IS GSA'S RESPONSIBILITY TO INSURE THE INTEGRITY OF CARRIERS' BILLINGS.

FOURTH, YOU STATE THAT ALTHOUGH GSA IS NOW USING STATISTICAL SAMPLING EXCLUSIVELY TO DETERMINE AUDIT MINIMA, AS WAS GAO'S PRACTICE, YOU MAY WISH TO USE OTHER CRITERIA AS WELL. IN THIS REGARD, YOU SUGGEST THAT THE USE OF GSA'S RESOURCES IN TRANSPORTATION MANAGEMENT FUNCTIONS, INSTEAD OF "AN ACTUAL AUDIT OF SOME OR ALL TRANSPORTATION MODES FOR A GIVEN PERIOD," MIGHT PRODUCE A GREATER ECONOMIC RETURN TO THE GOVERNMENT. SIMILARLY, YOU RAISE THE POSSIBILITY THAT A GREATER ECONOMIC RETURN MIGHT BE OBTAINED FOR THE GOVERNMENT BY USING YOUR RESOURCES "TO MORE THOROUGHLY AUDIT ONE OR MORE TRANSPORTATION MODES AND TO NOT AUDIT THE OTHERS." YOU ASK WHETHER CONSIDERATIONS SUCH AS THESE MAY BE USED IN ESTABLISHING AUDIT MINIMA.

AGAIN, WE THINK HOW TO ESTABLISH AUDIT MINIMA GENERALLY IS A DECISION FOR GSA TO MAKE AS PART OF ITS MANAGEMENT OF THE TRANSPORTATION AUDIT. NOTE, HOWEVER, THAT YOUR QUESTION INCLUDES THE POSSIBILITY THAT GSA SIMPLY MIGHT NOT PERFORM THE AUDIT FOR ONE OR MORE, OR EVEN ALL, TRANSPORTATION MODES FOR A PERIOD OF TIME IF IN GSA'S OPINION A GREATER RETURN TO THE GOVERNMENT COULD BE OBTAINED FROM OTHER USE OF ITS RESOURCES. WE QUESTION WHETHER IT WAS CONTEMPLATED BY CONGRESS AT THE TIME OF THE GAO ACT OF 1974 THAT LARGE PORTIONS, OR ALL, OF THE TRANSPORTATION AUDIT WOULD NOT BE PERFORMED. IT APPEARS TO US THAT CONGRESS INTENDED THE RESPONSIBILITY FOR A "DETAILED AUDIT" TO BE TRANSFERRED TO GSA. H.R.REP. NO. 93-1300, 93D CONG., 2D SESS. 4 (1974); S.REP. NO. 93-1314, 93D CONG., 2D SESS. 3 (1974). IN THIS REGARD, WE CALL YOUR ATTENTION TO 31 U.S.C. SEC. 65(E), WHICH PERMITS ONLY THE ELIMINATION OF AUDIT PROCEDURES WHICH ARE NOT WORTH THE COSTS INVOLVED IN PERFORMING THEM, AND 31 U.S.C. SEC. 82B-1, WHICH PERMITS USE OF A GAO-APPROVED SAMPLING PROCEDURE FOR VOUCHERS INVOLVING LOW DOLLAR AMOUNTS (CURRENTLY $500).

YOU ALSO REQUEST THAT 4 C.F.R. SEC. 51.2 BE AMENDED TO ELIMINATE THE REQUIREMENT THAT GSA CONSULT WITH OUR OFFICE BEFORE GSA PRESCRIBES STANDARD FORMS AND PROCEDURES PERTAINING TO PAYMENTS FOR TRANSPORTATION SERVICES. WE ACCEDE TO THIS REQUEST, BUT WOULD URGE GSA TO KEEP IN MIND THE NEED TO PRESERVE THE INTEGRITY OF CARRIERS' BILLINGS IN PRESCRIBING STANDARD FORMS AND PROCEDURES.

FINALLY, IT SHOULD BE NOTED THAT OUR LEGAL RESPONSE TO THE NEW PROPOSED METHODS OF CONDUCTING THE TRANSPORTATION AUDIT DOES NOT NECESSARILY INDICATE AN ENDORSEMENT OF THESE PROPOSALS. IN FACT WE NOTE THAT GSA HAS TRANSMITTED TO THE CONGRESS A DRAFT OF PROPOSED LEGISLATION DESIGNED TO AUTHORIZE THESE NEW METHODS. WE EXPECT TO FURNISH OUR VIEWS ON THE MERIT OF THESE PROPOSALS TO THE CHAIRMAN, SUBCOMMITTEE ON GOVERNMENT ACTIVITIES AND TRANSPORTATION, COMMITTEE ON GOVERNMENT OPERATIONS IN THE NEAR FUTURE.