ACCORDING TO THIS GENERAL ACCOUNTING OFFICE (GAO) REPORT, NECESSITIES FOR THEIR DAILY OPERATIONS. ITS CREDIT RETURN PROGRAM IS SUPPOSED TO PROVIDE THESE AGENCIES WITH A MEANS OF RETURNING UNUSED MATERIAL TO THE GSA SUPPLY SYSTEM, THEREBY REDUCING GOVERNMENT COST. GSA LIMITS THE TYPE, QUANTITY, AND QUALITY OR MATERIAL AUTHORIZED FOR RETURN AND DETERMINES WHETHER IT IS ECONOMICAL TO SHIP IT TO ONE OF ITS THREE CREDIT RETURN ACTIVITIES. THE CUSTOMER IS CREDITED FOR 30 TO 80 PERCENT OF THE ITEM'S SELLING PRICE, AND THE MATERIAL IS THEN STORED PENDING FUTURE REQUESTS. HOWEVER, THE PRESENT GSA QUANTITY ACCEPTANCE CRITERION IS TOO RESTRICTIVE. THE SERVICE SHOULD BE ACCEPTING MORE RETURNED MATERIAL TO FILL REQUIREMENTS THAT ARE OTHERWISE SUPPLIED FROM COMMERCIAL SOURCES. INSTEAD, $561,000 WORTH OF GSA-REJECTED MERCHANDISE WAS TRANSFERRED TO PROPERTY DISPOSAL OFFICES, WHERE IT WAS SOLD AT A FRACTION OF THE COST OR DONATED. THE ARMY HAS ESTABLISHED A DUPLICATE SYSTEM TO REDISTRIBUTE ITS GSA-REJECTED MATERIAL. MANAGERS OF THE GSA PROGRAM ARE MORE CONCERNED WITH CONTROLLING GSA COSTS THAN WITH MAXIMIZING THE USE OF GOVERNMENT PROPERTY BY REDISTRIBUTION. MOREOVER, ECONOMIC RETENTION LIMITS SET BY GSA TO ANTICIPATE FUTURE DEMAND ARE TOO SHORT. THEY CONTRAST WITH GOVERNMENT REGULATIONS TO MAKE MAXIMUM USE OF LONG SUPPLY AND EXCESS INVENTORIES IN LIEU OF NEW PROCUREMENTS. GSA HAS EMBARKED ON POLICY CHANGES WITHOUT PRIOR JUSTIFYING EVALUATION AND DOES NOT RELY ON CURRENT REPORTS TO IDENTIFY SYSTEMWIDE PROBLEMS. RECENT CONSOLIDATION OF ALL PROCESSING OPERATIONS HAS SLOWED PROGRAM FUNCTIONS, CAUSING BACKLOGS AND CUSTOMER DISSATISFACTION. THE GAO REVIEW WAS CONDUCTED FROM DECEMBER 1977 TO JULY 1978 AND INCLUDED INTERVIEWS, DOCUMENT AND POLICY REVIEWS, AND DETAILED AUDITS OF A GSA CREDIT RETURN ACTIVITY AND THE FEDERAL SUPPLY SERVICE. TABULAR DATA ILLUSTRATE THE TEXT. RECOMMENDATIONS FOR IMPROVEMENTS ARE MADE AND GSA COMMENTS INCLUDED. (MRK)