addition, the subcommittee is currently conducting a review of the comptroller's organization in the Department of Defense and in the three military departments. CURRENT IMPROVEMENTS UNDER TITLE IV To determine the present status of improvements under title IV, for inclusion in this report, the Committee on Government Operations requested the Department of Defense, on October 5, 1959, to furnish a summary of the results accomplished to date under each provision of the title. The information submitted by the Department is found on pages 167-178 of this report. POST OFFICE DEPARTMENT FINANCIAL CONTROL ACT OF 1950 (PUBLIC LAW 81-712; 64 STat. 460)* The enactment of the Post Office Department Financial Control Act of 1950 was the result of several months of study and discussion between the Senate and House Committees on Post Office and Civil Service, staff members of these committees, representatives of the Post Office Department, the Bureau of the Budget, the Treasury Department, and the General Accounting Office. The act provided a solid foundation for modernization and improvement of the financial activities of the Post Office Department without adversely affecting any of the essential controls of the Congress. It provided the framework for a constructive and cooperative development within the Post Office Department of a system of accounting, financial reporting, and auditing. At the same time it gave full recognition to the Department's special status as a revenue-producing public-service organi zation. The enactment of this legislation carried out, in general, the objectives of the first Hoover Commission report relative to accounting and auditing for the Post Office Department. While the recommendation of the Commission that the Post Office be incorporated under the Government Corporation Control Act of 1945 was not carried out, it did supply the needed legislation to bring about accounting reforms and to provide flexibility in management, simplification of budgeting, accounting, and auditing. TRANSFER OF ACCOUNTING FUNCTIONS TO THE POST OFFICE DEPARTMENT Prior to the passage of the Post Office Department Financial Control Act of 1950, the General Accounting Office performed the administrative accounting for the Post Office Department. The records showed the assets, liabilities, revenues, appropriations, and expenditures of the Post Office Department and the postal service. Statements of the financial condition of the Department were prepared quarterly from these records and published in the annual report of the Postmaster General. The handling of the administrative accounting and reporting of the Post Office Department by the General Accounting Office was the result of laws enacted many years ago. Public Law 81-712 was codified and enacted as part of title 39, U.S.C., by Public Law 86-682, approved Sept. 2, 1960. (See app. E.) The 1950 act transferred to the Post Office Department all administrative accounting and reporting functions, including personnel and records, which were performed for the Department by the General Accounting Office pursuant to law, and placed the Department in a position of keeping its own accounts in a manner comparable to all other Government agencies. IMPROVED ACCOUNTING SYSTEM The act provided for an up-to-date system of accounting to be developed by the Postmaster General under principles and standards prescribed by and with the cooperation and subject to the approval of the Comptroller General. It further provided for the establishment of a system of internal control as determined by the Postmaster General to be best suited to the needs of the Department, as follows: (b) The Postmaster General shall establish and maintain adequate and efficient systems of accounting and of internal control which shall provide for: (1) adequate accounting and internal control over and accountability for all funds, property, and other assets for which the Department is responsible including appropriate provisions for internal audit; (2) assembling of financial information needed for management purposes; (3) full disclosure of the financial results of the operations of the Department. Such accounting system shall conform to accounting principles and standards prescribed by the Comptroller General of the United States. (c) The Comptroller General shall cooperate with the Postpaster General in the establishment of the accounting system provided for under subsection (b) and shall approve such system when he deems it to be in conformity with the accounting principles and standards prescribed by him under such subsection. AUDIT BY THE GENERAL ACCOUNTING OFFICE Section 5 of the Post Office Department Financial Control Act of 1950 provided for the audit and settlement of the accounts of the Department and of its accountable officers by the General Accounting Office. The accounts of accountable officers, contracts, vouchers, and other documents, which were required under previous laws to be sent to the General Accounting Office, are retained in the Department, and the audit is conducted at the place where the accounts are normally kept. The Comptroller General is directed to give due regard to the adequacy of the accounting system and internal controls maintained by the Department, as well as to generally accepted principles of auditing in the determination of the extent of the audit. This section enables the General Accounting Office to conduct a much more comprehensive examination of the Department's financial transactions utilizing modern audit techniques. OTHER PROVISIONS Other provisions of the 1950 act established a revolving fund for the Post Office Department; authorized the Postmaster General to collect debts due the Department; removed certain restrictions with regard to leases of real property; and repealed certain laws relating to financial control of the Post Office Department which were made obsolete by the 1950 act. FINANCIAL IMPROVEMENTS OF THE POST OFFICE DEPARTMENT Under date of October 6, 1959, the Postmaster General was requested to furnish the committee with a comprehensive report of the improvements made to date in accounting, auditing, and budgeting under the Post Office and Financial Control Act of 1950, the Budget and Accounting Procedures Act of 1950, and other financial legislation affecting the Department as well as those accomplished by administrative action. The information submitted by the Department is found on pages 178-193 of this report. BUDGET AND ACCOUNTING PROCEDURES ACT OF 1950 (PUBLIC LAW 81-784; 64 STAT. 832)5 LEGISLATIVE HISTORY An original Hoover Commission bill, S. 2054, drafted by counsel for the Commission to conform to recommendations in its report on "Budgeting and Accounting," was introduced in the Senate June 13, 1949, by Senator McCarthy, of Wisconsin, and referred to the Senate Committee on Expenditures in the Executive Departments. Companion bills, H.R. 5178 and H.R. 5823, were introduced in the House on June 15 and August 1, 1949. Hearings were held on S. 2054 from February 27 through March 7, 1950, at which time an opportunity was afforded qualified witnesses to present their views and suggestions relative to desirable amendments to overcome objections to certain of its provisions. It was the consensus of most witnesses that S. 2054 was unsatisfactory, and that extensive amendments would be necessary before the bill would be acceptable to the administration or to the Congress. Following the hearings on S. 2054, the staff of the Senate Committee on Expenditures in the Executive Departments, in collaboration with representatives of the General Accounting Office, the Bureau of the Budget, and the Department of the Treasury devoted a year to perfecting language which was incorporated in committee prints dated June 21 and 27, 1950, and introduced as a committee bill, S. 3850, on June 29, by Senator McClellan, chairman of the committee. Further committee consideration was given to the revised bill S. 3850, in executive session on July 10, at which time it was reported favorably by unanimous vote of the committee. The report was filed in the Senate on July 12, 1950 (S. Rept. 2031, 81st Cong.). See app. A, pp. 275-295, for full text of the Budget and Accounting Act, 1921, as amended and extended by the Budget and Accounting Procedures Act of 1950 and other enactments, through the 86th Cong. The House Committee on Expenditures in the Executive Departments took no action on the original bills until S. 3850 was introduced in the Senate, after which an identical bill (H.R. 9038) was introduced in the House on July 5, 1950, or 6 days after S. 3850 was filed. Hearings were held on the House bill on July 11, the day following Senate committee action reporting favorably S. 3850. The House committee, after deleting three sections of the bill (secs. 103, 201, and 203) reported H.R. 9038 on July 13, 1950. The House report (H. Rept. 2556, 81st Cong.), except for the deletion of analyses as to these sections, followed the Senate report in practically identical language. The House committee stated in its report that— H.R. 9038 and a companion bill, S. 3850, provide the complete The House passed H.R. 9038 with amendments, suggested by Members of the House Committee on Appropriations. The Senate, after amending S. 3850, passed H.R. 9038 by substituting the language of the Senate bill, as amended. The difference between the House and Senate version of H.R. 9038 was resolved in conference (H. Rept. 3030, 81st Cong.) and the bill was approved by the President as Public Law 81-784 on September 12, 1950. The Budget and Accounting Procedures Act of 1950 was the result of more than 3 years' study on the part of the staff of the Senate Committee on Expenditures in the Executive Departments, and representatives of the General Accounting Office, Treasury Department, and the Bureau of the Budget. In drafting the legislation, the committee also considered and examined carefully the recommendations of the first Hoover Commission in its report on budgeting and accounting. The Comptroller General, the Director of the Bureau of the Budget, and the Secretary of the Treasury appeared before the committee in support of the proposed legislation. The President, when he signed the bill, stated that "this is the most important legislation enacted by the Congress in the budget and accounting field since the Budget and Accounting Act, 1921, was passed almost 30 years ago." PROVISIONS OF THE ACT The Budget and Accounting Procedures Act of 1950 was in essence three acts in one. It encompassed new and improved features in the field of budgeting, accounting, and auditing. The act is divided into three titles. Title I deals with budgeting and accounting, title II with appropriations, and title III with repeals and savings provisions. Title I on budgeting and accounting includes two parts. Part I, on budgeting, clarifies and supplements the Budget and Accounting Act of 1921 to authorize the preparation of a performance budget with financial information in terms of functions and activities of the Government. Increased emphasis is placed upon the development by the President, through the Bureau of the Budget, of plans for the organization, coordination, and management of the executive branch with a view to providing efficient and economical services, and im • Congressional Record, July 26, 1950, p. 11160. provements in the gathering, compiling, analysis, and publication of statistical information by the executive branch. Part II of title I comprises a complete Accounting and Auditing Act. It sets forth the policy of Congress and embodies the principles and objectives of the joint accounting program which had been carried on since 1947 at the instigation of this committee by the Comptroller General of the United States, the Secretary of the Treasury, and the Director of the Bureau of the Budget to improve the Government's accounting, financial reporting, and auditing. The provisions of this part spell out clear-cut responsibilities and duties of the Comptroller General, the Secretary of the Treasury, and the head of each executive agency, while at the same time providing for the exercise of these duties and responsibilities in proper relationship and cooperation toward the common goal of making accounting, financial reporting, budgeting, and auditing of the greatest value. The auditing of the Federal Government's financial transactions. was continued under the Comptroller General of the United States as an agent of the Congress. Provisions were made for a more comprehensive and selective type of audit, to be developed in line with improved agency accounting systems, internal controls, and related administrative practices. Whenever possible, audits were to be conducted at the site where the agency normally keeps its financial records. Title II, relating to appropriation control, gave agency heads more authority with respect to submission of proposed legislation dealing with appropriations and provided that funds may be transferred within departments in case of a reorganization if such funds are used for the purpose for which appropriated. Title III repealed 106 acts or parts of acts which were obsolete or became obsolete when the act was passed. A summary and analysis of the various sections of the act follows: (1) Appropriations were defined as funds and authorizations to create obligations by contract (2) Provided that the President shall transmit to Congress during the first 15 days of each regular session of Congress the budget, which shall set forth his budget message, summary data and text, and supporting detail. Prior to this amendment, the budget was required to be submitted to Congress on the first day of each session. of Congress, which conflicted with the state of the Union message. This section provided that the budget be presented on a performance basis, under which primary emphasis is placed on functions and activities, and justifications are based to the maximum extent possible on workload and unit-cost data. The President was given authority to determine the form and detail to be set forth in the budget. This section required, however, that certain specific information be included, as follows: (a) functions and activities of the Government; (b) any other desirable classifications of data; (c) a reconciliation of the summary data on expenditures with proposed appropriations; |