Comments on Army Hotel Construction and Renovation Projects in Vietnam

Pursuant to a congressional request, GAO commented on the propriety of the Army's construction and renovation projects at the Grand Hotel in Nha Trang, Vietnam. GAO noted that: (1) the Army used appropriated funds earmarked for construction and operations and maintenance (O&M) for the renovation projects, but in late 1965, it cancelled incomplete work and obtained assistance-in-kind (AIK) funds to cover costs not properly chargeable to the O&M account; (2) the construction, O&M, and AIK accounts financed the government-furnished materials used on the projects; (3) the Army used AIK funds for certain goods and services in accordance with the mutual defense agreement; (4) certain provisions of the Economy Act were not applicable to leases in a foreign country; (5) the Army's improvements to the privately-owned foreign property were necessitated by military requirements; (6) the Army's establishment of separate projects of less than $25,000 violated the spirit and purpose of the Army directive; (7) although the Army technically violated a directive restricting use of AIK funds to obtaining goods and services within Vietnam, there was no corrective action that could be taken; (8) it was still investigating violations of statutory spending limitations that required prior approval by higher officials; and (9) there was no basis for recovering AIK funds, since the government received the full benefit of such expenditures.