THE GENERAL ACCOUNTING OFFICE CONSIDERED AUDIT REPORTS ISSUED BY THE FOUNDATION'S AUDIT OFFICE AND OTHER AUDIT AGENCIES (PRIMARILY THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE'S AUDIT AGENCY) WHICH RESULTED FROM REVIEWS AT FOUNDATION GRANTEE AND CONTRACTOR LOCATIONS. FINDINGS SHOWED THAT THE FOUNDATION FAILED TO MONITOR THE AUDIT REPORTS TO ENSURE THAT RECOMMENDATIONS WERE IMPLEMENTED. MANY FINDINGS AND RECOMMENDATIONS DISPUTED BY RESPONSIBLE OFFICIALS WERE CLOSED WITHOUT RESOLUTION. ALSO, MANY REPORTS QUESTIONING COSTS CHARGED TO GRANTS AND CONTRACTS WERE EITHER CLOSED WITHOUT ACTION OR THE ACTIONS TAKEN WERE UNTIMELY. THE ESTABLISHMENT OF A FORMAL SYSTEM OF FOLLOWUP ON AUDIT REPORTS IS RECOMMENDED. THE SYSTEM ENVISIONED SHOULD PROVIDE FOR CONTROL AND ACCOUNTABILITY FOR AUDIT REPORTS, AND COORDINATION SHOULD BE IMPLEMENTED BETWEEN AGENCIES INVOLVED IN THE SAME AUDIT. WHEN OPERATING OFFICIALS DISAGREE WITH AUDIT FINDINGS AND RECOMMENDATIONS, DIFFERENCES SHOULD BE RESOLVED OR AN AUTHORITATIVE DECISION SHOULD BE MADE AT A HIGH MANAGEMENT LEVEL. THE RECOMMENDED FORMAL SYSTEM WOULD ALSO USE SCHEDULES TO ASSURE TIMELY RESOLUTION OF AUDIT FINDINGS AND FOLLOWUP ACTION WHEN IMPROVEMENTS ARE PROMISED, AND RECORDS OF ACTIONS TAKEN AND EVIDENCE TO SUBSTANTIATE THOSE ACTIONS SHOULD BE MAINTAINED. EVALUATION OF THE EFFECTIVENESS OF THE ACTIONS TAKEN TO IMPLEMENT AUDIT FINDINGS SHOULD ALSO BE CONDUCTED. FOLLOWUP REPORTS ON THE STATUS OF AUDIT FINDINGS AND RECOMMENDATIONS AND THE RESULTS OF ACTIONS TAKEN SHOULD BE PERIODICALLY PRESENTED TO TOP MANAGEMENT. THE APPENDIXES CONTAIN DETAILS OF STUDY FINDINGS AND NATIONAL SCIENCE FOUNDATION COMMENTS ON THE EVALUATION. (RCB)