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regulations. Without the additional funds, the Commission felt its ability to function effectively and efficiently as an independent administrative agency was seriously undermined.

With respect to the system of accounts, the Commission stated that it was willing to hold in abeyance its request for the $710,000 pending further discussion of the matter with the Governors. In return, the Governors promised their full cooperation in resolving this matter.

In replying to the Commission's request for a further adjustment in the fiscal year 1976 budget, the Board of Governors, on July 10, 1975, stated:

"Having in mind the pendency of the current rate case
and the inadvisability of detailed discussions between
the Commission and the Governors while the rate case
is before the Commission, the Governors have concluded
that it would be best to keep your request for
further adjustment under advisement. We will give
further consideration to this matter at a later date.
In the meanwhile, the approved budget will continue
to be $2,779,000."

On October 7, 1975, the Governors approved a revised budget for the Commission for fiscal year 1976 in the amount of $3 million.

Although we do not disagree with the Governor's decision concerning the system of accounts, accounts, we believe that the scope of the activities of the Commission should not be subject to the perceptions of the Governors or the state of the Service's financial condition.

The scope of our review did not include an examination of the justification of the Commission's fiscal year 1976 budget. We cite the events of the Commission's budget approval as support for our conclusion that, while there is no indication that the independence of the Commission in its recommended decisions has been affected by the budget procedures, it is unusual for the funds of a regulatory agency to be under the control of the regulated agency. This could provide a means for limiting the scope of the Commission's activities. Furthermore, the budget approval procedure is another illustration of the confusion (see ch. 2) that exists as to the respective roles of the Commission and the Postal Service under the Postal Reorganization Act.

We believe the Commission's expenses should be met from the Postal Service Fund, with the Congress reserving the right to review any changes by the Governors to the original request.

RECOMMENDATION TO THE CONGRESS

GAO recommends that the Congress amend the Postal Reorganization Act by redesignating section 3604 of Title 39 U.S. Code as section 3607 and amending subsection (d) thereof to read as follows:

"S 3607

"(d) (1)

Administration

The Commission shall periodically prepare and submit to the Postal Service a budget of the Commission's expenses, including but not limited to, expenses for facilities, supplies, compensation and employee benefits. The budget shall be considered approved-

"(A) as submitted if the Governors fail to act in
accordance with subparagraph (B) of this paragraph; or
"(B) as adjusted if the Governors holding office, by
unanimous written decision, adjust the total amount
of money requested in the budget" and such adjustment
is approved by the Congress. 1/

"Subparagraph (B) shall not be construed to authorize the
Governors to adjust any item included within the budget.
"(2) Expenses incurred under any budget approved
under paragraph (1) of this subsection shall be
paid out of the Postal Service fund established
under section 2003 of this title."

POSTAL RATE COMMISSION COMMENTS

The Commission stated that it appreciates the reasoning leading to the recommendation that certain control of the Commission's budget be taken from the Governors of the Postal Service and lodged in the Congress, although the present simple system, with the exception of the one instance, has worked satisfactorily. The Commission agrees that the further review we recommended would be appropriate, if it were deemed feasible by the Congress.

The Commission, however, is concerned that since its budget is so small and the funds are derived from the Postal Service's Fund, it might be needlessly burdensome for the

17 Underlined portion is language to be added to

present law.

Congress to expend valuable time reviewing and approving an exceedingly minor matter. Accordingly, it suggests the alternative of limiting the Governor's authority to disallow any funds by requiring the concurrence of the Director of the Office of Management and Budget in such a decision.

We still believe congressional concurrence in Commission budget adjustments is preferable. (See p. 43.)

POSTAL SERVICE COMMENTS

The Postal Service stated that on prior occasions it had not opposed the Commission being funded directly by the Congress rather than through the Service, and its position remains unchanged. However, it believes that a recommendation that the Congress reserve the right to review any change by the Governors muddles rather than clarifies the budget approval process, and the Commission should shoulder directly the burden of obtaining approval of its budget rather than work through an awkward process which shifts the burden of justification for budget action to the Governors. (See p. 53.)

The Postal Service also states that we overstate the case regarding the Postal Rate Commission budget. It believes that a review of the statute and of the history of the Commission budget requests and actual expenditures of prior years indicates that the alleged problem is not a problem at all. (See p. 53.)

The central issue is that the budget of the regulatory agency ought not to be under the control of the regulated agency. Whether in the past the Postal Rate Commission did or did not spend the full amount of funds approved by the Governors is irrelevant. The events surrounding the 1976 Postal Rate Commission budget request merely illustrate the inadvisability of retaining the present budgetary process, and this procedural problem ought not to be dismissed as insignificant.

We believe our recommendation would be curative and would not be awkward in operation, since it would necessitate congressional involvement and action only in those instances where a dispute arises between the Governors and the Commission over over a budget adjustment.

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For some time now I have been deeply concerned about the growing volume of consumer complaints regarding the quality of mail service being provided by the U. S. Postal Service, and the apparent ineffectiveness of the Postal Rate Commission. I em, therefore, requesting the assistance of the General Accounting Office in these two areas.

I should like the General Accounting Office to undertake an intensive review of the quality of mail service within the State of New Mexico, comparing delivery performance in New Mexico with regional and national performance and reporting its findings and conclusions on problems affecting the service and GAO's recommendations for their solution.

With regard to the Postal Rate Commission, I request that the GAO study include data on its cost, functions, continuity of management and an evaluation of its performance.

Should you or your staff require any help on these matters, do not hesitate to contact my office which will be pleased to assist you.

I much look forward to receiving from you comprehensive reports resulting from these studies.

With best wishes.

Sincerely,

JMM/Ld

th Shontoya

Joseph M. Montoya
Chairman, Subcommittee on

Treasury, Postal Service
and General Government

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