I commend this legislation to the attention of every member of the committee, and wish to express the hope that early action will be taken on the measure in order that the budgeting, accounting, and auditing of the Government can be simplified, modernized, and made effective to the maximum extent possible.

It will provide the Congress and the President the information and the means of control they need for the management of our gigantic Federal fiscal structure, as well as give the taxpayers the information they are entitled to as to where their money goes.

There are officials of the General Accounting Office, the Treasury Department, and the Bureau of the Budget, present this morning who wish to be heard on the bill. I am sure they will be pleased to answer any questions which the members of the committee wish to ask. The CHAIRMAN. Thank you, Mr. Karsten.

Do you have any questions, Mr. Hoffman?

Mr. HOFFMAN. Just one.

I understood you to say that under title II funds would be transferred.

Mr. KARSTEN. That title authorizes a 5-percent transfer of funds between appropriations within the Department.

Mr. HOFFMAN. Which section of title II?

Mr. KARSTEN. I might say to the gentleman that there is some controversy about this particular section being contrary to existing procedures, and I understand some amendments may be suggested along the line to eliminate that proposed section and make the responsibility in the Congress rather than in the Department, where it properly belongs.

Mr. HOFFMAN. Where is the language which authorizes the transfer?

Mr. KARSTEN. Page 18, section 201.

Mr. HOFFMAN. Just what does that mean, say, the first nine lines? Mr. KARSTEN. It provides the authority for the transfers of funds within the Department, within that 5-percent limit.

Mr. HOFFMAN. For example, should we make an appropriation of a certain sum for the Department of Justice, can the head of that Department, with the approval of the President, under this language, transfer that to, say, the Department of Commerce?

Mr. KARSTEN. No; only transfers can be made within the Department. Not between departments.

Mr. HOFFMAN. Yes; but what I do not understand is why any department head should be given authority to transfer an appropriation made by the Congress to some other department. What is the reason for that?

Mr. KARSTEN. The bill does not contemplate transfers of funds between departments.

Mr. HOFFMAN. I know, but the Congress is supposed to appropriate the money. We appropriate a certain sum for a certain department. Under this language, if I understand you correctly, the head of that department, with the approval of the President, can take that money, at least within the limit here, 5 percent, and put it over to some other department.

Mr. KARSTEN. He may transfer within his own department only. Mr. HOFFMAN. He might use it for an entirely different purpose, might he not?

Mr. KARSTEN. Yes. But it is within his department, and for a related purpose.

Mr. HOFFMAN. Suppose you take the Interior Department and the appropriation has to do with, say, the national parks, and they transfer the money which we appropriate for parks to something else.

Mr. BONNER. It says: "In order to promote economy and efficiency." I do not know just what it means.

Mr. HOFFMAN. Somebody else spends it if they want to. That is to say, if the Department of the Interior finds that we gave them more money than they may need, they will take that money, whatever it may be, and spend it for some other purpose, but limit it.

Mr. KARSTEN. You have the same thing existing today in the State Department and the Department of Agriculture. I understand they have a 10-percent limitation rather than the 5-percent limitation mentioned in the bill.

Mr. HOFFMAN. Of course, I am familiar with that argument that we have been doing it for a long, long time. But it does not appeal

to me.

The CHAIRMAN. Mr. Bonner, do you have any questions?

Mr. BONNER. No.

The CHAIRMAN. Mr. Bolling?

Mr. BOLLING. NO.

The CHAIRMAN. Mr. Lovre?

Mr. LOVRE. Yes, Mr. Chairman.

That transfer is within the Department itself; is that correct?
Mr. KARSTEN. Within the Department itself.

As I understand, some amendments may be suggested that will eliminate the transfer authority and put it in the appropriation bill rather than in this bill.

Mr. DAWSON. Mr. Riehlman?

Mr. RIEHLMAN. I want to get this straight.

Do I understand they have been transferring up to 10 percent, and this provides only 5 percent?

Mr. KARSTEN. The State Department and the Agriculture Department have been operating on a 10-percent basis. The proposed section will limit all departments to 5 percent.

Mr. HOFFMAN. It is this conflict in the general theory that the Congress should appropriate money for a specific purpose rather than for a department or individual, or the head of an agency, to use as they would see fit.

Mr. KARSTEN. You are appropriating for a specific purpose in the Department of Agriculture; also in the State Department.

Mr. HOFFMAN. Yes, in a broad way. But, for instance say, in the Department of Agriculture, we may have an appropriation for footand-mouth disease, as we have had several times; and if they did not use that money they could switch it over to send out garden seeds or any purpose that came within their jurisdiction.

Mr. KARSTEN. Of course I do not think we have sent out any garden seeds.

Mr. HOFFMAN. Yes, that is true. But, you understand, they might do it for any purpose.

Mr. BONNER. Mr. Chairman?

The CHAIRMAN. Yes, Mr. Bonner?

Mr. BONNER. Let me ask you: What is the idea, what is the reason?

What do you want this for? Each division makes up its own budget, as I understand it, in the Department.

Mr. KARSTEN. That is correct.

Mr. BONNER. And that is approved and so forth and gone over, and then they come here and justify it, and the Appropraitions Committees give them the money.

The point is that I might be able to justify more than I know I am going to need so as to give you some later on.

Mr. KARSTEN. You could not transfer between Departments.

Mr. BONNER. I mean within the Department. You could transfer it from one Division of the Department to another Division.

Mr. KARSTEN. That would be assuming the budget officer was padding the roll a little bit in coming down here.

Mr. BONNER. But my question is: What is the intent of this?

Mr. KARSTEN. In all departments you need flexibility in operation. For example, many times a department is assigned additional duties by legislation which is passed subsequent to the annual appropriation act for such department.

The CHAIRMAN. For economy and efficiency.

Mr. LOVRE. Mr. Chairman, I have one more question.

The CHAIRMAN. Very well.

Mr. LOVRE. Will this eliminate any further deficiency appropriation bills?

Mr. KARSTEN. No, not entirely, but it should reduce the present number of deficiency bills.

The CHAIRMAN. Do you have any questions, Mr. Harvey?

Mr. HARVEY. I just came in, but certainly, from my background in this field, I would take a very dim view of that procedure. The CHAIRMAN. Of that provision of the bill?

Mr. HARVEY. Yes.

The CHAIRMAN. Thank you very much, Mr. Karsten.

Gentlemen, we are very fortunate, I believe, to have among us one who, I am sure, is known by all of you. He is known as the watchdog of the Congress. He is our right arm in matters of expenditures and accounting, and so forth.

The Honorable Lindsay Warren, Comptroller General of the United States, is with us.

Mr. Warren.

STATEMENTS OF HON. LINDSAY C. WARREN, COMPTROLLER GENERAL OF THE UNITED STATES; FRANK L. YATES, ASSISTANT COMPTROLLER GENERAL OF THE UNITED STATES; AND FRANK H. WEITZEL, ASSISTANT TO THE COMPTROLLER GENERAL OF THE UNITED STATES

Mr. WARREN. Mr. Chairman and gentlemen of the committee, I have a short prepared statement this morning. However, I think that Mr. Karsten has so well explained the purposes of the bill that, with your permission, I will forego reading of the statement and will talk informally and try to answer such questions as I can.

The CHAIRMAN. Very well. You can submit your statement for the record.

(The statement referred to follows:)

STATEMENT OF THE HONORABLE LINDSAY C. WARREN, COMPTROLLER GENERAL OF THE UNITED STATES, BEFORE THE COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS, HOUSE OF REPRESENTATIVES, ON H. R. 9038

Mr. Chairman and members of the committee, I am glad to come before you this morning to testify on H. R. 9038, the Budget and Accounting Procedures Act of 1950. It is always a pleasure to appear before your committee, which I have always looked upon as one of the great committees of the Congress and which has brought forth some of the most significant legislation enacted in recent years. I am particularly glad to speak on this bill introduced by Mr. Karsten, chairman of the Public Accounts Subcommittee, who has long been associated with accounting in the Government, both in his own right and as clerk of this committee and secretary to its former chairman, the late John J. Cochran. The bill before your committee represents the outcome of months of work on the part of all parties concerned in improving the budgeting, accounting, and auditing procedures of the Government. It provides a solid foundation for bringing and keeping those procedures up to date and upon enactment, will become, in my opinion, a legislative landmark comparable only to the Budget and Accounting Act of 1921. The bill is identical with a measure, S. 3850, introduced by 11 members of the Senate Expenditures Committee and reported unanimously yesterday. S. 3850 grew out of full hearings by the Senate Committee on Expenditures and able and thorough work by the staff of the Senate committee, and discussions with the staff of this committee. It takes into consideration all viewpoints, and the technical staffs of the General Accounting Office, the Treasury Department, and the Bureau of the Budget were called upon in drafting it.

The bill comprises three titles. Title I on budgeting and accounting consists of two parts. Part I on budgeting makes technical amendments to the budget provisions of the Budget and Accounting Act of 1921 to place emphasis on the preparation of the budget in terms of performance, setting out the functions and activities of the Government, with flexibility for the President to determine the manner in which budgetary information may best be formulated to present the Government's financial program in an understandable way. The bill stresses the development by the President through the Bureau of the Budget, of plans for better organization and management of the executive branch and improvements in the statistical work of that branch, pointing up the authority already exercised by the Bureau of the Budget in those areas.

Part II of title I constitutes a complete Accounting and Auditing Act of 1950. This part embodies the principles and objectives of the joint program now going on under the leadership of the Secretary of the Treasury, the Director of the Bureau of the Budget, and myself in collaboration with all other agencies to improve accounting, financial reporting, and auditing in the Government. The provisions of this part tie in closely with budgetary improvements provided for in other parts of the bill. The accounting and auditing provisions specify clearcut duties and responsibilities to be exercised in proper relationship toward the common goal of better accounting, financial reporting, budgeting. and auditing. The declaration of policy lays down a comprehensive congressional policy on accounting and auditing which is filled in by the specific provisions of this part. The careful placing of responsibilities on the Comptroller General, the Secretary of the Treasury, and agency heads is intended to bring about an integrated accounting system for the Government. Emphasis is placed on the development and use of agency accounting systems as the foundation for financial control and for the production of necessary financial information. Provision is made for progressive improvement and simplification of the present accounting of the Government without eliminating essential controls which Congress must maintain over the public funds. This legislation will make possible the maximum benefits from the work now being done under the joint accounting program and will lay a solid foundation for carrying out the policies and objectives of the program.

The accounting provisions place upon the heads of the executive agencies for the first time the clear responsibility for establishing and maintaining adequate and complete accounting systems. The Comptroller General is to cooperate with the executive agencies in the development of such systems under principles, standards, and related requirements prescribed by him, and to approve the

systems when proper. The Comptroller General must also cooperate with the Treasury Department in the development and establishment of the system of central accounting and reporting in the Treasury as contemplated by the bill. These provisions represent an extension of the principles and specifically continue in force the provisions of section 205 of the Federal Property and Administrative Services Act of 1949 which was the product of the efforts of this committee and its able subcommittee under the chairmanship of Mr. Holifield. The bill will provide authority for eliminating in an orderly manner duplicating and overlapping controls in accounting revolving around the present warrant and requisition system of making money available for disbursement. The Secretary of the Treasury and the Comptroller General, who now issue and countersign warrants as a means of control over receipts and disbursements will be authorized to waive the present requirements by joint regulations when they determine that sufficient safeguards are otherwise provided.

The auditing provisions of this part will provide clarification of authority as a basis for improving and simplifying the audit function of the General Accounting Office hand in hand with improvements in accounting and internal control in the agencies. Specific authority is provided for regulating the amount of detailed audit work to be done in the light of the systems of accounting and internal control in the agencies and the administrative application of statutes governing financial transactions. These provisions will enable progressive decentralization and refinement of General Accounting Office audits, including the making of audits not only more comprehensive in scope but on a selective basis as to individual transactions. Specific authority is provided for retention of accounts, contracts, vouchers, and other documents at the places where they are normally kept in the agencies. This will enable present arrangements between the Office and executive agencies under which site and comprehensible audits are performed to be placed on a permanent basis. Another important provision will enable adaptation or waiving of the administrative examination of accounts after payment, in the light of other accounting controls in the agencies, thus eliminating a lot of unnecessary paper work and handling and shipping of documents.

Title II of the bill authorizes transfers between appropriations up to a 5-percent limit within departments to promote economy and efficiency. It requires the prior approval of Department heads before submission to the Bureau of the Budget, the President, or the Congress of requests from departments for legislation authorizing appropriations. It also includes provisions specifically authorizing the President to set up budgetary reserves in the executive branch when he determines the purposes intended by the Congress will be accomplished by smaller expenditures. Further authority is provided for transfer of balances of appropriations in cases of reorganizations in the executive branch.

Title III repeals 106 acts or parts of acts dealing chiefly with such matters as compilation of the estimates and furnishing of certain financial data. Most of these laws have been superseded or outmoded by other existing laws, including the Budget and Accounting Act of 1921. Repeal of these provisions will clear the statutes of many requirements which, though they had a good purpose when enacted, are out of harmony with present conditions.

Now just a word on the relation of the bill to the recommendations of the Commission on Organization of the Executive Branch of the Government, generally known as the Hoover Commission. Boiled down, there is no difference between the objectives of the joint accounting program, as written into this bill, and the objectives of the Commission. While I have no pride of authorship, nor have my partners in the program, it is a matter of record that the program was established and operating before the Commission's report was ever thought of. In my opinion this bill meets every objective of the Commission in the field of budgeting, accounting, and auditing, and meets them in a more realistic and workable way. Its provisions are carefully worked out in the light of actual conditions and the proper division of responsibility in our three-branch Government. The only important difference is in the jurisdictional issue about the accountant general in the executive branch. That is a matter of the highest congressional policy beyond the jurisdiction of the Commission and one which has been settled by the Congress itself in no uncertain terms on every occasion when it has been brought up. It is inconceivable to me that the Congress would ever agree with the Commission on this point. This bill provides for the Comptroller General as the agent of the Congress to exercise responsibility for bringing about a sound basic accounting structure for the Government from the stand