IN FULFILLMENT OF ITS MANDATE TO INVESTIGATE THE EXISTENCE OF MISMANAGEMENT, INCOMPETENCE, AND CORRUPTION IN THE EXPENDITURE OF FEDERAL FUNDS, THE SENATE HELD HEARINGS ON THE OPERATIONS OF THE U.S. BUREAU OF ENGRAVING AND PRINTING (BEP). THE U.S. DOLLAR NOTES PRODUCED BY THIS SMALL AGENCY EMBODY THE FAITH OF AMERICANS IN THEIR GOVERNMENT, THEREFORE, THE BEP SHOULD BE OPERATED BEYOND REPROACH. THE INVESTIGATION WHICH LED TO THESE HEARINGS BEGAN AS A RESULT OF INFORMATION OBTAINED BY THE SUBCOMMITTEE REGARDING ALLEGEDLY HIGH PROFITS MADE BY THE AMERICAN BANK NOTE COMPANY, A PRIVATE FIRM, ON CONTRACTS WITH BEP TO PRINT FOOD COUPONS (FOOD STAMPS), AND THE ACQUISITION OF PRINTING PRESSES FROM THIS SAME PRIVATE COMPANY. THE INVESTIGATION REVEALED CERTAIN DEFICIENCIES IN THE OVERALL MANAGEMENT AND OPERATIONS OF BEP, ESPECIALLY IN ITS PROCUREMENT, ACCOUNTING, AND AUDITING PROCEDURES. IN ORDER TO FURTHER THESE INVESTIGATIONS, THE HEARINGS EXAMINED THE CONFLICT OF INTEREST ON THE PART OF FORMER GOVERNMENT EMPLOYEES WHO WERE HIRED BY PRIVATE COMPANIES, AND INVESTIGATED THE SHORTAGES AND DEFECTIVE EQUIPMENT AFFECTING THE BEP. TESTIMONY FROM STAFF INVESTIGATORS INDICATES THAT THE AMERICAN BANK NOTE COMPANY MADE ABNORMALLY HIGH PROFITS OF UP TO 38 PERCENT ON GOVERNMENT CONTRACTS. STATEMENTS FROM OFFICIALS OF THE BEP AND THE PRIVATE FIRM REVEAL THAT SOME OF THE INCREASED COSTS FOR THE BEP RESULTED FROM REDUCTION OF THE PLATE PRINTER LABOR FORCE AND THE PURCHASE OF MAGNA PRESSES. EXHIBITS INCLUDE THE BEP AUDIT REPORTS. TABULAR DATA IS PROVIDED. (TWK)