B-133201, NOV 24, 1959

B-133201, NOV 24, 1959

PRECIS-UNAVAILABLE

HONORABLE SAM RAYBURN SPEAKER OF THE HOUSE OF REPRESENTATIVES:

DEAR MR. SPEAKER:

ENCLOSED IS OUR REPORT ON THE REVIEW OF MANAGEMENT OF LEASED PRIVATE LINES TELEPHONE FACILITIES IN THE DEPARTMENT OF DEFENSE AND SELECTED CIVIL AGENCIES.

THE GOVERNMENT HAS BEEN INCURRING EXCESSIVE COSTS AMOUNTING TO POSSIBLY MORE THAN A MILLION DOLLARS ANNUALLY IN THE LEASING OF PRIVATE LINES TELEPHONE FACILITIES. THESE EXCESSES HAVE BEEN THE RESULT OF (1) THE ERRONEOUS APPLICATION OF CERTAIN RATES AND (2) INEFFICIENT ADMINISTRATIVE PRACTICES ON THE PART OF THE GOVERNMENT DEPARTMENTS AND AGENCIES. BECAUSE OF THE HIGHLY COMPLEX NATURE OF THE PROBLEMS WHICH WOULD BE INVOLVED IN DEVELOPING AN ACCURATE PROJECTION OF THE TOTAL EFFECT OF THESE UNECONOMICAL PRACTICES, WE ARE NOT IN A POSITION TO MAKE A FIRM PREDICTION AS TO THE TOTAL AMOUNT OF SAVINGS THAT COULD BE ACCOMPLISHED BY THE CORRECTIVE ACTIONS WHICH WE ARE RECOMMENDING HEREIN.

PART OF THE EXCESSIVE COSTS WHICH HAVE BEEN AND ARE BEING INCURRED CAN BE ATTRIBUTED TO THE FACT THAT THE AMERICAN TELEPHONE AND TELEGRAPH COMPANY (AT&T) HAS NOT FULLY APPLIED TARIFF FCC NO. 231, WHICH IS IN EFFECT A DISCOUNT FOR VOLUME SERVICE, TO THE ELIGIBLE CIRCUITS OF EACH GOVERNMENT DEPARTMENT AND AGENCY. IN OUR LIMITED REVIEW, WE IDENTIFIED ANNUAL SAVINGS OF APPROXIMATELY $73,000 WHICH HAVE SINCE BEEN REALIZED BY THE APPLICATION OF THE LOWER RATES AVAILABLE UNDER THIS TARIFF. ALSO, IN OUR OPINION, AT&T IS REQUIRED TO APPLY TARIFF FCC NO. 231 RETROACTIVELY, TO THE DATE EACH GROUP OF CIRCUITS OF EACH DEPARTMENT AND AGENCY BECAME ELIGIBLE, AND TO MAKE REFUNDS ACCORDINGLY. AT&T DOES NOT AGREE WITH OUR INTERPRETATION OF THIS TARIFF.

ON THE BASIS OF THE SPECIFIC TELEPHONE CIRCUITS INCLUDED IN OUR REVIEW, WE HAVE DETERMINED THAT THE GOVERNMENT IS ENTITLED TO REFUNDS TOTALING AT LEAST $95,000. WE ARE INFORMING THE DEPARTMENTS AND AGENCIES OF THE GOVERNMENT THAT ACTION SHOULD BE TAKEN TO DETERMINE WHETHER THE MULTIPLE CHANNEL TARIFF RATES HAVE BEEN APPLIED TO THE ELIGIBLE GROUPS OF CIRCUITS ORDERED BY EACH. WHERE THE APPLICABLE RATES WERE NOT APPLIED FROM THE TIME SUCH GROUPS OF CIRCUITS BECAME ELIGIBLE UNDER THE MULTIPLE CHANNEL TARIFF, WE ARE DIRECTING THE DEPARTMENTS AND AGENCIES TO INITIATE CLAIMS FOR THE AMOUNT OF ANY OVERCHARGES ARISING FROM THE IMPROPER APPLICATION OF SUCH RATES.

MOREOVER, THE DEPARTMENTS AND AGENCIES, BECAUSE OF THEIR CURRENT PRACTICE OF DEALING WITH AT&T INDEPENDENTLY AND ON A MULTIPLE CUSTOMER BASIS, HAVE PAID MORE FOR SERVICE IN A NUMBER OF INSTANCES THAN WAS NECESSARY UNDER EXISTING TARIFFS. A SUBSTANTIAL NUMBER OF ADDITIONAL PRIVATE LINE CIRCUITS CAN BE MADE ELIGIBLE FOR THE LOWER MULTIPLE CHANNEL TARIFF RATES IN THE FUTURE IF ACTION IS TAKEN TO ESTABLISH THE GOVERNMENT AS A SINGLE CUSTOMER. OUR LIMITED STUDY IDENTIFIED ALMOST $66,000 WHICH CAN BE SAVED EACH YEAR ON THIS BASIS.

WE ARE RECOMMENDING THAT THE SECRETARY OF DEFENSE AND THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, TAKE COORDINATED ACTION WITH AT&T TO INITIATE A STUDY WITH THE OBJECTIVE OF SIMPLIFYING BOTH THE GOVERNMENT'S AND THE TELEPHONE INDUSTRY'S PROCEDURES IN ORDER TO REDUCE ADMINISTRATIVE COSTS AND TO SECURE THE NECESSARY REGULATORY CHANGES TO ESTABLISH THE GOVERNMENT AS A SINGLE CUSTOMER FOR RATE APPLICATION PURPOSES.

THE DEPARTMENT OF THE AIR FORCE HAS FAILED TO TAKE FULL ADVANTAGE OF TARIFF PROVISIONS WHICH PERMIT LOWER RATES WHEN INTRASTATE CIRCUITS ARE ORDERED CONNECTED WITH INTERSTATE CIRCUITS BY SWITCHING ARRANGEMENTS. REVIEWED ALL THE TELEPHONE CIRCUITS OF THE AIRCRAFT CONTROL AND WARNING SYSTEM, JOINTLY WITH AIR FORCE AND TELEPHONE COMPANY REPRESENTATIVES, TAKING INTO CONSIDERATION ONLY THOSE SWITCHES WHICH WOULD IMPROVE SERVICE NOW OR IN THE EVENT OF A NATIONAL EMERGENCY, AND IDENTIFIED $1.1 MILLION OF POTENTIAL ANNUAL SAVINGS WHICH MIGHT BE ACHIEVED BY THE AIR DEFENSE COMMAND'S ORDERING SWITCHING ARRANGEMENTS. WE ARE RECOMMENDING THAT THE SECRETARY OF THE AIR FORCE TAKE ACTION WHICH WILL INSURE THE PROMPT IDENTIFICATION OF SPECIFIC AIR FORCE INTRASTATE CIRCUITS WHICH ARE APPROPRIATE FOR REORDERING AS INTERSTATE CIRCUITS AT LOWER RATES AND THAT THESE CIRCUITS BE SO ORDERED.

THE GOVERNMENT'S MANAGEMENT OF LEASED PRIVATE LINE CIRCUITS HAS FAILED TO KEEP PACE WITH THE TREMENDOUSLY INCREASED REQUIREMENTS OF EACH DEPARTMENT AND AGENCY. WE FOUND AN ALMOST TOTAL LACK OF COORDINATION BETWEEN DEPARTMENTS AND AGENCIES AND, IN THE CASE OF THE MILITARY AGENCIES, EVEN WITHIN THE DEPARTMENTS; A LACK OF ADEQUATE CONTROLS WITHIN ALL THE DEPARTMENTS AND AGENCIES WE REVIEWED; AND A FAILURE IN INTERNAL AUDIT PROGRAMS TO RECOGNIZE AND DEAL WITH THE PROBLEMS IN THIS AREA. WE ARE RECOMMENDING TO THE SECRETARY OF DEFENSE AND TO THE ADMINISTRATOR, GENERAL SERVICES OVER THE MANAGEMENT OF LEASED PRIVATE LINES COMMUNICATIONS IN THE MILITARY DEPARTMENTS AND CIVIL AGENCIES, RESPECTIVELY.

THIS REPORT IS ALSO BEING SENT TODAY TO THE PRESIDENT OF THE SENATE. COPIES ARE BEING SENT TO HEADS OF DEPARTMENTS AND AGENCIES AS APPROPRIATE INCLUDING THE SECRETARY OF DEFENSE; THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION; AND THE ADMINISTRATOR, FEDERAL AVIATION AGENCY.

COMPTROLLER GENERAL OF THE UNITED STATES ..END :