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1. The maintenance of accounting systems and the producing of financial reports are and must continue to be functions of the executive branch.

"2. There must be an audit independent of the executive branch which will give appropriate recognition to necessary features of internal audit and control. Properly designed accounting systems are a vital factor to the effectiveness of such independent audit.

"3. Full opportunity is to be afforded to the executive branch for participation in the development of accounting systems as an essential to meeting the needs and responsibilities of both the legislative and executive branches in the establishment of accounting and reporting requirements.” 2

Due consideration will be given to the development of a system of central accounts in the Treasury Department on the basis of sound principles and standards, and for establishing a system of comprehensive financial reports covering the operations of all departments and agencies of the Government for the information of the President, the Congress, and others concerned, as contemplated in section 21 of S. 2054, page 7, lines 20-24.

Section 22 (a) would authorize the Secretary of the Treasury to issue from time to time for the guidance of disbursing and certifying officers, regulations and opinions as to the application, scope, and availability of appropriations made by Congress. It is to be noted, however, that such regulations and opinions would be issued only in consultation with the Comptroller General of the United States. Furthermore, under other provisions of law, notably sections 304 and 305 of the Budget and Accounting Act, all accounts and claims by the United States or against it are settled in the General Accounting Office, and the decisions of the Comptroller General with respect to the settlement of such accounts and claims are final and conclusive on the executive branch of the Government. Here again the bill contemplates a division of authority which, as I have already indicated, would not be in the interest of efficient and economical Government administration.

Section 22 (b) would amend section 309 of the Budget and Accounting Act. This relates primarily to a responsibility of the Comptroller General of the United States and, therefore, is the primary concern of that officer. The last two sentences of the section which refer to the Treasury Department, beginning on line 16, page 8, should be deleted, for the reasons mentioned in my comments on section 21.

Section 23 (a) deals with the administrative examination of accounts. The Treasury is highly in favor of an amendment to existing law which would not require disbursing officers' accounts to be sent to the seat of government for administrative examination in the various departments prior to their transmission to the General Accounting Office for audit and settlement.

In 1947, at the suggestion of the Treasury, a study of this subject was made by a joint committee of the Treasury Department, Bureau of the Budget, and General Accounting Office, in which the conclusion was reached by the committee that legislation should be requested whereby this requirement could be dispensed with by the head of the department or agency concerned upon concurrence of the Comptroller General of the United States.

It is this Department's view that in many cases the administrative examination of disbursing officers' accounts in Washington serves no useful purpose and involves an unnecessary expenditure of public money. It is believed that there should be no legal requirement for an administrative examination of accounts or vouchers in the administrative agencies after payments have been made. Such examinations of accounts and vouchers as need to be made in the administrative agencies should be made prior to payment, and the audits, verifications, and examinations by the General Accounting Office should be made after payment. In other words, the executive branch of the Government should be responsible for preaudit of disbursement vouchers and pay rolls, and the. General Accounting Office, as the independent agency of the Congress, should be responsible for the postaudit of accounts and vouchers. These are sound principles of financial management and are also in keeping with the principle of independent audit.

Section 23 (b) authorizes the Comptroller General of the United States to audit and settle accounts on the basis of spot checks, sampling, and other checking processes and to settle accounts and certify balances of accounts pursuant to audits made on such basis. The Treasury Department is in favor of the principle of auditing the accounts and records at the places where the accounting records are maintained. The Treasury would be very much in favor of a policy whereby

2 Joint announcement of the Comptroller General of the United States, Secretary of the Treasury, and Director of the Bureau of the Budget, dated January 6, 1949 (copy enclosed).


the General Accounting Office would make a comprehensive audit of accounts and records in the various administrative agencies and, to the fullest extent practicable, in the disbursing offices, rather than requiring the transmittal of all accounts and detailed supporting vouchers to Washington for audit.

The Treasury is also in favor of the establishment of internal controls within the various agencies, including the disbursing offices, so as to make unnecessary a detailed checking of each and every voucher paid by Government disbursing officers. For several years the General Accounting Office has made site audits of pay rolls in the Treasury Department with a great deal of success. This procedure has not only simplified the work but has brought the audit of the Treasury's pay rolls up to a more current status. The Treasury is therefore in agreement with the objective of section 23 (b), although some changes in wording may upon further study appear to be desirable.

Section 24 (a) would authorize the Secretary of the Treasury and the Comptroller General of the United States, with the approval of the President, to issue regulations prescribing procedures governing the drawing of moneys from the Treasury and of making disbursements of the public funds. It would also authorize these officers to prescribe procedures governing the receiving and holding of moneys in behalf of the United States, the covering of moneys into the Treasury, and prescribing liabilities, in respect of the foregoing, of officers made accountable under such regulations.

Section 24 (b) provides that these regulations would supersede existing laws, regulations, orders, and directives in respect of the matters described in subsection (a).

It is believed that the Congress should not completely surrender its authority over these important matters. There are certain statutes governing the requisitioning and accounting for appropriations which should be amended in the interest of economy and efficiency, but the Treasury would prefer to have these particular statutes specified rather than give the Secretary of the Treasury and Comptroller General blanket authority relating to the covering of moneys into the Treasury and the drawing of moneys therefrom. The Treasury believes that some desirable changes could be made under authority of existing law. It is also intended that under the joint program of the General Accounting Office, Treasury Department, and Budget Bureau to improve the accounting procedures, previously referred to, recommendations will be made to the Congress where legislation may appear to be appropriate and necessary.

Part III would repeal a number of existing laws relating principally to the submission of budget estimates. The Treasury has no objection to the repeal of these laws but calls attention to the fact that items 62 and 63 on page 20, lines 14-18, would discontinue reports to the Congress on moneys received by public officers which were not deposited in the Treasury.

The Treasury appreciates this opportunity to express its views on S. 2054. The Department is vitally concerned with proper accounting and reporting of the financial operations and condition of the Government and, therefore, would appreciate being given an opportunity to express its views on any changes which your committee may consider with respect to this matter.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee. Very truly yours,

E. H. FOLEY, Jr., Acting Secretary of the Treasury.



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In its discussion of governmental accounting the Commission states that good accounting is indispensable in the day-to-day management of the administrative affairs of the Government. Accounting, as the Commission indicates, reveals the status of appropriations, the extent that revenue estimates are realized, the progress of actual expenditures and collections, and the comparative operating and other costs. Furthermore, accounting enables the Government to fix responsibility for the handling and use of its funds, as the Commission points out.

Treasury would like to underline the importance of accounting in management. Any organization as large as the Federal Government must have sound accounting methods and systems to be effective in controlling and managing its affairs.

Recommendation No. 10 contains a proposal for the establishment of a new position in the Treasury known as an Accountant General, with authority to prescribe accounting procedures in the various departments and establishments, subject, however, to approval of the Comptroller General of the United States. It is not believed that such divided authority would be in the public interest. The lines of authority with respect to accounting and auditing in the Federal Government are of highly controversial character. The experience of the Treasury indicates that the most fruitful results can be achieved only through cooperation by the various agencies interested in and concerned with accounting. Accounting is primarily a tool of administration, but at the same time is an important instrument for the control of the public funds through executive direction and independent audit. Having in mind the multiple purposes of accounting, the Comptroller General of the United States, the Secretary of the Treasury, and the Director of the Bureau of the Budget have formally agreed on the basic principles to be followed in a joint undertaking to improve the accounting and auditing system of the Government. This program has been under way for about a year. As evidence of the progress thus far made, the Comptroller General, the Secretary of the Treasury, and the Budget Director have agreed on the following basic principles as the foundation upon which future accounting developments will rest:

1. The maintenance of accounting systems and the producing of financial reports are and must continue to be functions of the executive branch.

2. There must be an audit independent of the executive branch which will give appropriate recognition to necessary features of internal audit and control. Properly designed accounting systems are a vital factor to the effectiveness of such independent audit.

3. Full opportunity is to be afforded to the executive branch for participation in the development of accounting systems as an essential to meeting the needs and responsibilities of both the legislative and executive branches in the establishment of accounting and reporting requirements.

Recommendation No. 11 asks that the practice of sending millions of expenditure vouchers and supporting papers to Washington be stopped, as far as possible. Treasury has been aware of this problem for a considerable time and firmly believes that the potential of the site audit has not in the past been exploited to the full. Certainly the practice of submitting millions of expenditure vouchers to Washington is an expensive and tedious way of auditing. The Comptroller General has indicated, however, that his staff is vigorously pursuing new techniques in auditing. Treasury believes that the site audit of accounts is especially important and vigorously supports the adoption of it by the Federal Government. The accounting function tells much more of the management of Federal business than the auditing of expenditure vouchers. The Comptroller General, it may be noted, has been using the site audit with increasing frequency.

Recommendation No. 12 merely endorses the accrual basis of accounting for both revenues and expenditures, recommends simplification or elimination of the present warrant system, and proposes uniform practices, procedures, and nomenclature, as well as other improvements to reduce staff and improve efficiency. Treasury endorses all of these desirable objectives.


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

I believe that is a quorum call. I cannot consult other members at the moment, so I will take the liberty of recessing these hearings until Thursday morning at 10 o'clock.

(Whereupon, at 12 o'clock noon the hearing was recessed until 10 a. m., Thursday, March 2, 1950.)





Washington, D.C. The committee met, pursuant to recess, in room 357, Senate Office Building, Senator John L. McClellan, chairman of the committee, presiding

Present: Senators McClellan (chairman), O'Conor, Mundt, Smith, and Schoeppel.

Also present: Walter L. Reynolds, chief clerk.

The CHAIRMAN. The committee will come to order. We shall resume hearings on S. 2054 introduced by Senator McCarthy. I believe we have four or five witnesses scheduled for this morning. We shall do our best to accommodate all of you who have come expecting to testify today. I am sorry that we are getting started a little late, but the committee work here at this particular time in the Senate is heavy and we have to try to accommodate more than one committee each day, it seems.

Will Mr. T. Coleman Andrews please come forward, if he is present? Mr. Andrews, you may be seated if you like.

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& Co., CERTIFIED PUBLIC ACCOUNTANTS, RICHMOND, VA. Mr. ANDREWS. I do not have a prepared statement, sir.

The CHAIRMAN. Will you give us, then, your background and tell us whom you represent, what industry you represent or whom you are speaking for, government, business, or any organization or groups?

Mr. ANDREWS. Mr. Chairman and members of the committee, first as to my background. I am a certified public accountant. I have been practicing for more than 30 years. My experience has included 2 years and 3 months as auditor of public accounts of Virginia; 2 years as director of finance and comptroller of the city of Richmond; and 2 years and 4 months as organizer and first director of the Corporation Audit Division of the General Accounting Office. Each of these was a major organization or reorganization task. Under my direction, my firm, T. Coleman Andrews & Co., has handled many public administration engagements of one kind or another, principally in the field of accounting and finance.

I also was asked by the Hoover Commission to join the task force headed by Mr. John W. Hanes, to study and report upon the accounting and auditing of the Federal Government. At my suggestion this task was undertaken by the committee on Federal Government accounting of the American Institute of Accountants. I was chairman of that committee. Each of its members had had extensive experience with the accounting of the Government.

However, I am not here as a representative of the American Institute of Accountants. I suppose that I am here to represent the people who are interested in seeing the Hoover Commission's report adopted, specifically the Citizens Committee for the Hoover Report and, as I understand it, on the invitation of the chairman of the committee. I also appear in my own individual and professional capacity.

The CHAIRMAN. The reason the chairman asked you for that information is because so many times someone is speaking not only his own views, but represents other groups or organizations. I just wanted to get the record clear.

Mr. ANDREWS. I think, Mr. Chairman, that my views probably will be more my own than anybody else's, but they are shared, I believe, by the people whom I have mentioned. I want to make it very clear that the American Institute of Accountants has neither approved nor disapproved the findings of my committee. They have never been presented to the institute. However, I think it might be a fair assumption that, since our report was widely publicized and was published in the Journal of Accountants, which is the official publication of the American Institute of Accountants, that the members of the American Institute do not as a whole dissent from our views. Otherwise, we probably would have heard some objection to our report. But I wish to make it clear the institute itself has not acted upon our report as a body.

I believe that about covers the first part.
The CHAIRMAN. You may proceed, sir.

Mr. ANDREWS. Senator, and ladies and gentlemen of the committee: I find myself in a rather difficult position here this morning for several

In the first place, this bill does not represent by any stretch of the imagination the views of either myself or my colleagues of the group that studied the Government's accounting and auditing needs. In the second place, we are conscious of the fact that there are forces at work here in opposition to each other, some of which are clear, some of which are not. We find ourselves unhappily in the position of being on opposite sides with people with whom we have worked arm to arm, side by side, in a friendly and constructive way toward the same ends. We regret that because we had hoped that in this opportunity finally to put the accounting of the Federal Government on a basis that would command the respect of the people, we would be unanimous in our views. However, I am not here in any antagonistic sense. I regret our disagreements with our friends, particularly those in the General Accounting Office. We are all aiming at the same end; I think there is no question about that. But we disagree as to the manner of obtaining that end.

We think, of course, that our position is a sound one; and, now that the time has come to discuss it, I think that we have to be frank with this committee and speak out and tell you just how we feel about it and why. I hope that we may be able to express ourselves in a way that no one will take any personal offense, because I want to say



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