European Stars And Stripes (Newspaper) - August 18, 1978, Darmstadt, Hesse                                August 1978 the stars and stripes Page 19 audit report report on the comparative evaluation of the management policies and procedures of the military Exchange systems defense audit service consumer watch by Mary Neth i he claim of 20 percent savings in Mili tary Exchange stores has Long brought cries of Dis belief from Many now those doubts seem to be backed up by find Ings of a defense audit service Das report p one that claims Overall declining net income for the i study showed that customer Well below 20 were about the same for All three Exchange sys i percent for the army and air Force sex e system percent for the Navy s system office percent for the e corps Exchange system ording to the conducted during the year i january savings also varied greatly depend upon the Type of product we found customer savings ranged from virtually to savings for Candy and the sundries product i to More than 20 percent for housewares and for necessities and convenience items i As toiletries and savings were generic not As much As m our Price comparisons showed that cafes 1 the most savings for and the Oduol classes Nav Reso for clothing and i product classes and aces for Stair and housewares product i three Exchange systems offered no savings for a to products and about the same 11 per for i report also claims that service people attain Sig by lower savings in some geographical areas than for shopping at an Exchange in North i California might add up to percent saved where i Here might be Only a Price break of percent in the audit report was based on visits to overseas exchanges in Germany f Japan were aiding to the prices on the same items i Between the three exchanges and even from store More within a it concluded that these differ i resulted from different markup percentages on Randise having about the same committee made up of members from the three sex i has been studying the markup policies and is at in to prescribe More Standard markup the t j the time of our some new markups had i these changes appeared to be the markups on items to the level of that sex t having the highest this will tend to in 5 study was based on a Price comparison Analy no so necessity ton to All three Exchange the own Price surveys boast 20 percent took Ion to the audit study Choice of items and method they Felt that the audit team should have based their Choice of items on Dollar in they took exception to Exchange prices being compared against the lowest commercial Price in an area instead of the aver age the audit people note that they did not follow the same pricing Survey methods of the exchanges be cause we disagree in giving advantage to slow moving items which Are not the Day today Pur chases by an Exchange the cafes recognized that some Bias May exist in its surveys and has contracted with Neilson company to review their Survey he report allot the Exchange systems conceded they were not saving their customers 20 percent on the line items we they contend that if All Kerns sold in the exchanges were compared to com Mercial there would be a 20 percent according to the All agreed they were having a communication or Public relations problem in convincing Exchange custom ers that they were saving 20 the report it was a conclusion of the Das that the exchanges should improve their Price comparison surveys and be More realistic in claiming savings for their their Competition is primarily from discount not regular department and they do not save their customers 20 percent on most repetitive Purchase the principal reason for showing the percentage re sults of the the report went on to is not to debate whether the percentage should be 13 per cent or 20 our objective is to emphasize to management that there is Little room to increase prices to overcome the downward financial trend of Exchange of according to the Das there is danger that the financial aspects of the exchanges could change considerably be cause of increased interest in recent years by the con Gress to have the exchanges absorb some or All of the operating expenses currently paid for with appropriated funds instead of using profits to help support Wel fare and recreational programs of the at present the exchanges contribute about 75 percent of their profits to these the balance of prof its goes for new Exchange facilities and Das also notes that if the Randolph Sheppard communication or Public relations problem in convincing customers they were saving 20 which gives the Blind preference in operating vending machines on Federal is applied to the exit could reduce profits As much As million to for the year ending january the Exchange systems generated million in net How during a similar appropriated fund support of million was provided and there was an annual Bill of about million for civilian personnel according to the audit although the Exchange systems grossed More than billion in direct there were declines in earnings from these sales for All three earnings for cafes amounted to Only compared to and percent for Nav Reso and return on direct sales for cafes appeared to be marginal and reflected a continuing downward trend in earnings from direct a continually smaller portion of net income is result ing from direct with the greater portion Mil or percent generated from Concession and other the cafes stated it did not allocate an appropriate portion of its administrative expenses to con cession if this had been concessions and other income would be almost 60 percent of the net cafes has stated that because of management in earnings increased from the million in fiscal year 1977 to million in by and that fur ther increases Are expected this those in charge of the were seemingly stating we recognize that earn Ings for cafes increased in by 1178 Over but earnings were still percent of cafes and Nav Reso have had consistent sales growth Over the 10year period ending in but these increases in sales volume have not been sufficient to counter the effects of currency devaluations and increased operational reported aces sales have grown steadily but Are beginning to experience a slower rate of growth and were outpaced by the rate of inflation both in by 1976 and Das reports that As of january cafes vested liabilities exceeded pension assets unfunded vested liabilities by about the figure for Nav Reso was million As of january vested liabilities for aces were fully according to the unfunded vested liabilities could pose a question of potential liability to toe government should cafes and or Nav Reso cease operations or curtail segments of their potential claims by unappropriated fund employees could Forese Eamy outweigh the ability of cafes or Nav Reso to make the report the pension annuity contracts contain a disclaimer of liability on the part of the but the exchanges Are defined As instrumental ties of the the government might be construed to be legally responsible for according to the Das concluded its report by recommending Long Range goals for the Exchange by getting top priority were establishing uniform prices for the same item having Standard markups for All deciding whether customer percentage Sav Ings should be higher on necessity items than luxury and whether the exchanges should concentrate on better prices for customers or generating profits to welfare and recreation also deemed important was deciding How much appropriated fund support could be absorbed by the the possibility of eventually consolidating the three sys tems and of establishing a Standard retirement system and financial statement in their comments on the Nav Reso and aces Felt they have done about As much As they can to standardize and Mark they also Felt they have reduced prices about much As they can if they Are to remain viable organizations and still make contributions to the welfare and recreation none the exc blues Fen they Enow with reduced  Ted some try Dikty of Elf cutly reduced their Nat muoi to those pro they also Felt they should not be nonprofit organizations because the need to make profits for their building programs and other purposes contributed significantly to making the operations More the competitive aspects of haying three separate systems was used As an argument against