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GAO reported on the status of two modified shipbuilding contracts for 5 landing helicopter assault ships and 30 Spruance class destroyer ships. The report covered the contractor's fiscal year ended August 3, 1980. After years of disagreement over shipbuilding claims filed by the contractor, the Navy and the contractor agreed to a settlement. GAO reviewed the contracts to ensure that funds authorized to provide relief in the claims settlement were being used only on the two contracts and that the prime contractor did not use such funds to realize any total combined profit. The GAO review included: (1) an update of a prior review of procedures and controls and a test of transactions for July 1980 to ensure that costs were properly charged to the individual contracts; (2) an examination of contract records and discussions with the contractor and Navy officials to determine the combined profit/loss status of the two contracts; and (3) an examination of progress payments and related costs to determine whether the funds were being used only on the two contracts as required.

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