in getting the executive and legislative branches pointed in the same direction in respect to the budgetary processes.

The second question to which this memorandum is addressed is whether at this time we can spell our performance budgeting. Part I of the original bill, as I understand it, amends the Budget and Accounting Act in such a way as to facilitate and to evoke the transition of the budget document from its present form, which is mainly an accumulation of legal impedimenta and political debris that has been picked up for over a period of over 30 years, and to make out of it a book of estimates put together on the basis of the way the Government actually operates, and to secure appropriation language that expresses executive and eventually congressional policy with respect to the way the Government operates, or at least with respect to the way it ought to operate.

The original version of the bill, it seems to me, makes quite clear that the President has large discretion in the control of the form and content of the departmental estimates and the form and content of the budget document submitted to the Congress. That discretion is an essential of the successful development of performance budgeting. There will be inevitably a period more or less lengthy in which the staff of the Budget Bureau and in which the staff of the Congress will be occupied in determining the extent to which performance indicators, satisfactory performance indicators, can be worked out for the multitudinous activities in the executive department.

Moreover, some activities are much better presented and much better controlled by business-type budgets which are built up on basic concepts differing rather fundamentally from performance budgets.

I am very definitely of the opinion that more acceptable budgeting will ensure from a realistic case-by-case study of the applicability of a concept that, despite its worthy historical foundations and the fact that it has been rather extensively bandied about recently by experts, administrators, and politicians, is still very fuzzy around the edges.

The bill provides that the President may submit the budget during the first 3 months after the opening of Congress. This is a very nice gesture in the direction of the executive branch, but I doubt very seriously if Congress can in the future do in 3 or 4 months what it has not in the past been able to do in 7 or 8 months. Of course, if Congress were willing to confine its consideration and review of budget estimates to the essential control points instead of participating, may I say, in a number of very minor and rather unimportant decisions, 3 months might be adequate; but certainly, if business continues to be transacted the way it is at the present time, it seems to me that this shortening of the period of congressional consideration of the estimates is a luxury that Congress cannot afford.

With respect to transfers and adjustments, section 11 deals with transfers and adjustments among appropriations within departments or establishments during the transitional biennium.

The CHAIRMAN. Will you permit an interruption at this point?
Dr. EGGER. Yes, sir.

The CHAIRMAN. You are speaking about the difficulty the Congress would then have trying to pass the appropriation bills in only 3 months' time, after the budget is submitted, whereas we have not been able to do that in 6 or 8 months' time in the past. Would it help the Congress any in your opinion to have the President submit, along

with his budget, an alternate budget showing a balance of expenditures and receipts?

Do you think that would be very helpful to the Congress in passing on the requests for expenditures?

Dr. EGGER. Well, of course, the question of whether the President submits a balanced or an unbalanced budget is a fundamental question of fiscal policy. If Congress tells him to submit a budget and then tells him what sort of budget to submit, it is not the President's budget.

The CHAIRMAN. The Congress would not be telling the President that he could not submit the kind of budget he wanted to submit. I wish my point of view was clearly understood. If we have to continue deficit spending by an unbalanced budget, an alternate balanced budget giving the President's viewpoint of what cuts must be made in essential expenditures to balance the budget would help the Congress, which has to take the blame for this deficit spending, to inform their constituents and to educate the country upon why it is necessary in this period of time or at any time for the Government to spend more than its revenue.

Dr. EGGER. The President has applied the principle of ceilings to the departments, and in effect your question is directed to whether the Congress might not be justified in applying the principle of ceilings to the President. That, sir, is a question of high political policy, not to mention strategy. I see no technical reason why it could not be achieved, Mr. Chairman.

The CHAIRMAN. I do not mean to take up a great deal of your time, but I thought it might refresh your views in passing.

Dr. EGGER. If I may, I should like to go into this problem of transfers because it relates back to the appropriation structure. I do not think the problem can be solved except in relation to the appropriation structure.

Now in section 11 of S. 2054 and then a little later in part III you come along to permanent provisions with respect to transfers. As Senator Schoeppel has pointed out, part III transliterates a good many of the provisions incorporated in the amendments to the National Security Act of last year into the environment of general budgeting.

I would like to say two things: In the first place, the problem of appropriation adjustment which faces the National Government, considered in the whole, is rather different from the problem of appropriatior adjustment facing the component empires of the Military Establishment. I would like to enter a caveat to the notion that these provisions can be transferred as literally as the amendments to S. 2054 indicate.

In the second place, I would like to point out that transfers as between appropriations is a legislative function and that there are constitutional limitations with respect to the delegability of that function. The provisions of part III of the act, and for that matter the provisions of section 11, establish no standards whatever for the guidance of the President's discretion in making transfers between appropriations and in making adjustments of appropriations. Frankly, I think the Congress delegates in these provisions more power than the Court will permit it to delegate, although I am not qualified as a constitutional lawyer.

The CHAIRMAN. The power that is being delegated here is substantially the same as the powers that would have been delegated to him if we passed the resolution which I introduced in the last session of Congress directing the President to make cuts in the appropriations of 5 to 10 percent; is that not correct? The principle is the same and the power is the same.

Dr. EGGER. The instructions to a President in a particular and defined set of circumstances to make a cut in an appropriation is something rather different from instructing him, in fairly nebulous circumstances, to pick and choose among appropriation items for the purpose of making a reduction. This is the essential point, Senator. If Congress is to delegate and is to achieve its objectives with respect to appropriations and adjustments-and I think it is extremely important that this be done and done successfully if we are to have effective performance budgeting-then it has to rewrite the appropriation structure.

Now it seems to me that certainly 18 or 20 major control appropriations are all the executive branch needs. Below these control appropriations the Congress might legitimately indicate its wishes and instructions with respect to allotments and establish a legal differential between the right transfer between appropriations, which is in effect the right to amend an act of Congress, and the right to make adjustments between allotments which could properly be made an executive function. For that reason I take a very dim view, frankly, of the provisions of part III, as well as section 11, which grant rather more power than I think Congress ought to grant as a matter of policy and rather more power I think than it can legally grant.

Section 31, which holds the feet of department and agency heads to the fire in sending up legislation authorizing additional appropriations, is in my judgment an excellent provision; it conforms to and reinforces present Budget Bureau practice.

The CHAIRMAN. What section is that?

Dr. EGGER. That is section 31. It should be adopted.

Section 32 incorporates the resolution to which the Senator referred with respect to reductions and adjustments in appropriations by the President when, if, and to the extent that he determines that the purposes intended by the Congress will be accomplished by the expenditure of amounts less than the amounts appropriated. This is a wholly proper and legitimate requirement in respect to appropriations for activities to which objective performance standards are applicable to a degree accounting for virtually the entirety of the appropriation, and after performance standards have been developed and applied in the appropriation. But a lot of water has to flow over the dam before the Congress is in the position to tell the President to reduce if the objectives of the Congress can be obtained by the expenditure of less than the appropriation. There, again, an essential requisite of delegation is lacking. There are no standards.

I think performance budgeting will eventually supply the Congress with adequate standards for a large part of the administrative establishment; but, like anything else, it will have to have a period in which to justify the Congress in making the delegation.

Part IV of the bill is a list of 85 specific repealers of acts or parts of acts inconsistent with the purport of S. 2054. I have not had an

opportunity to check the completeness of the list but I urge in the strongest terms that it be made more inclusive by the repeal of the provisions of the Federal Employes Pay Act of 1945, as amended, which require the establishment and administration of personnel ceilings.

If the processes of fiscal budgetary control cannot control the obligated rate of expenditures for personal services, then something is fundamentally wrong with the general processes of budgetary control and their failure to control the obligated rate of expenditure for personal services is merely a symptom of something far more fundamentally deficient.

That concludes my remarks.

The CHAIRMAN. Senator Smith?
Senator SMITH. No questions.

The CHAIRMAN. Senator Schoeppel?
Senator SCHOPPEL. No questions.

The CHAIRMAN. Thank you very much, Doctor. I shall read your full statement because I think you are able to give us some good advice.

We appreciate your appearing and giving us your views.

Dr. EGGER. Thank you.

The CHAIRMAN. Next, we have Mr. Gary.

STATEMENT OF T. JACK GARY, JR., CERTIFIED PUBLIC
ACCOUNTANT, STATE OF VIRGINIA

Mr. GARY. Mr. Chairman.

The CHAIRMAN. Do you have a prepared statement, Mr. Gary? Mr. GARY. No, sir; I just have some notes.

The Chairman. If you would give the reporter your professional background, we would appreciate it very much.

Mr. GARY. Mr. Chairman, and ladies and gentlemen, my name is T. Jack Gary, and I am a certified public accountant of the State of Virginia.

I was employed for 8 years in a firm with Mr. T. Coleman Andrews, who was a witness yesterday. In that capacity I specialized in governmental accounting work, primarily the design and installation of accounting systems for cities and counties and advisory accounting matters with the State governments.

I have for the past 7 years been employed with the Government. I came with the Government as an accounting officer in the National Housing Agency. Later I transferred to the Public Housing Authority which was at that time the Federal Public Housing Administration, as special assistant to the Comptroller, and in that capacity I was responsible for the design and installation of a new accounting system for that agency. I later transferred back to the office of the Administrator which was then named the Housing and Home Finance Agency for a short period of time. I was employed as executive assistant and research director for the accounting project of the Hoover Commission. Upon completion of that study I went with the Coast Guard as accounting advisor to the Commandant. I have been with the Coast Guard since last November a year ago, designing and developing for the Coast Guard an accounting system that reflects many of the concepts that have been discussed during these hearings.

I should like to make it clear, however, that I do not represent either the Treasury Department or the Coast Guard. Whatever value my testimony might be to the committee stems primarily from the fact that I have had the opportunity of being associated both with the Hoover Commission study and for the past year or so have been very closely connected with the joint program of the Comptroller General, the Secretary of the Treasury, and the Director of the Bureau of the Budget for improving accounting in the Federal Government, working cooperatively with them to produce an accounting system for the Coast Guard.

I do not intend to discuss with this committee the principles and objectives of accounting for the Federal Government, because I feel that two of the previous witnesses whom you have heard are eminently better qualified than myself to discuss these points. Besides, I find myself in complete agreement with the principles and objectives, with regard to the kind of accounting the Federal Government should have, and I believe that with respect to that phase of the subject the joint effort is in rather complete accord also.

I had intended to discuss in some detail the individual recommendations of the Hoover Commission and indicate to what extent this joint program and objectives of it, as I understand them, are in agreement. However, since time is short I will not go into details. The CHAIRMAN. We will continue until 12 o'clock.

Mr. GARY. It is hard to judge how much time I need but I would like to cover it briefly and say that in the Hoover Commission there were seven recommendations. Being a Commission for the reorganization of the Government, the recommendation on organization was given the most prominent place and the most discussion. However, of the other six recommendations I can find them actually in the program, the joint program, which has been promoted for improvement of accounting in the Federal Government.

The CHAIRMAN. You do find them?

Mr. GARY. Yes, sir. I would like to name them if I may.

First, is the preparation of over-all financial reports. Two, on-thesite audit on the sampling basis. Three, adoption of the accrual basis of accounting. Four is simplification or elimination of the present warrant systems. The next one is provision of uniform departmental practices and procedures and nomenclature. I happen to know that the General Accounting Office and the joint effort now have done some work on that and are developing principles and policies and objectives for uniform application throughout the Government. The other recommendation was that there be better inventory and public debt accounting. I happen to know, not by my connection with the Coast Guard, but because I have become rather closely associated with the representatives of the joint effort, that there is now being undertaken a change in the accounting system for public debt and there is also being conducted a joint effort for improvement in accounting for inventories in the Government through, as I understant it, working cooperatively with the General Services Administration. The only point, as I see it, in which there is a disagreement is what type of organization we have to do the job and not what should be done.

My concern in the Government is not so much under what auspices we work but the question of whether we are getting the job done.