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In addition to that there were 13 recommendations of the accounting committee that were made to the Hoover Commission and of these, 11 I find to be in complete agreement as far as the joint effort is concerned, and the only two that there has been disagreement on as far as I know are the ones for the establishment of the accountant general and also the question of whether the Comptroller General should have the power of disallowance. I believe two of the previous witnesses have indicated that this question of power of disallowance is not a particularly important one and perhaps should be in the Comptroller General's office. Actually it seems to me that that point is not so much a question of who has the power as how the power is exercised. My experience has been during the last 2 or 3 years that the power of disallowance is being exercised by the Comptroller General in a very wise and liberal manner and in such a way that you are not having the irritations of the small exceptions to expenditures, which as Mr. Peloubet brought up, cost more to correct than the amount involved.

In the Coast Guard we have worked with the joint effort and have developed some of the changes to procedures for the Coast Guard which the joint effort supports and we believe that once they are tested out on a small scale, might have wider applicability to the Federal Government as a whole.

At this point I should like to insert into the testimony four documents. One is a letter from the Secretary of the Treasury to the Comptroller General and the second one is the Comptroller General's reply. These two letters approve, for the Coast Guard, changes in standard Government practices which would provide three things: First a comprehensive on-the-site audit for the Coast Guard. I feel very proud of the fact that the Coast Guard was the first agency in the Federal Government to be assigned to the new comprehensive audit subdivision which was recently created in the General Audits Division of the General Accounting Office.

Secondly, there is an approval of simplification of collection procedures which will eliminate a great deal of documentation which has been previously required on the basis that the accounting system which is being developed for the Coast Guard provides proper internal control over those things and also on the basis that the Comptroller General will make an audit on-the-site for the Coast Guard and can better audit these collections. There is also the program which deals with the simplification of disbursement procedures.

The CHAIRMAN. Is that a third letter?
Mr. GARY. No, sir.

The CHAIRMAN. Those letters to which you have referred and submitted will be printed immediately following your testimony.

Mr. Gary. Then I have a letter to the Director of the Bureau of the Budget from the Secretary of the Treasury which requests permission for the Coast Guard to present what we think is the maximum simplification of our appropriation structure. As you recall, one of the recommendations of the accounting project was that there be a simplification of the appropriation structure in order that the agencies could facilitate the coordination of appropriations with the production of cost accounting. That was approved by the Director of the Bureau of the Budget and the language is now before Congress in our appropriation bill.

The other document which I would like to insert is an introduction to the accounting manual of the Coast Guard because that, in broad terms, covers the basic changes that are being made in this new system from what now exists.

The CHAIRMAN. Do you want to insert that letter?
Mr. GARY. I should like to insert all four of these documents if I

may, sir.

The CHAIRMAN. They may be inserted at the conclusion of your oral testimony.

Mr. GARY. In summary, I should like to say that with these approvals that we have obtained, in my opinion we are free in the Coast Guard to develop exactly the kind of accounting system that the Hoover Commission requested. I feel that I am somewhat in a position to know what kind of system was recommended because as research director I wrote a report for the accounting project which became the appendix to their report. For that reason I feel that the problem that we have at the present time, the immediate problem, with regard to approved accounting in the Federal Government, is not the need for legislation because it seems to me that many of these objectives are being accomplished without the necessity of legislation.

The CHAIRMAN. Would this legislation, this pending bill, or similar legislation, facilitate the development of these accounting systems in the different agencies, do you think?

Mr. Gary. This specific legislation I think definitely would impede it rather than accelerate it for this reason.

The CHAIRMAN. You mean the pending bill?

Mr. Gary. Yes, sir; S. 2054. It would impede it for this reason, while I agree that there is no definite responsibility set for accounting in the Federal Government, it seems to me that this bill gives that responsibility to two people and I would think that it would be just as difficult to administer it when under the responsibility of two people as when there is no responsibility at all.

The CHAIRMAN. You mean it gives that responsibility and that it proposes to set up an Accountant General who must submit all of his plans to the Comptroller General for approval or disapproval?

Mr. GARY. Yes, sir. I think there is another item, too. This bill provides for setting up an Accountant General in the Treasury Department and it says nothing with regard to the fiscal assistant secretary who now has some responsibility for accounting under Reorganization Plan No. 3 and under Executive Order 8512 and, therefore, it seems to me that there would be a confused status with regard to two officers who were in the Treasury Department itself.

In addition to that, it does split the responsibility for accounting and the settlement of claims and the issuance of regulations with regard to the validity of expenditures and the issuance of regulations with regard to disbursing procedures between the Accountant General and the Comptroller General inasmuch as the bill provides that they shall be prescribed by the Secretary of the Treasury with the approval of the Comptroller General.

The CHAIRMAN. In other words, your view is that part II of this bill to establish the Accountant General would further confuse and confound the problem rather than clarify it and place a definite authority.

Mr. Gary. Yes, sir. I honestly believe so. I think I must have gotten just a little off the subject just now when you asked about whether legislation would accelerate this process. It seems to me that if all we had to deal with in this problem were the theories and principles of accounting I might well be inclined to agree with the previous witnesses as to setting up definite responsibilities for accounting. However, in the experience that I have had this work is about 50 percent accounting and about 50 percent public relations and personal relations, you have to deal with people. It seems to me that if this accounting job in the Government ever gets done it is going to get done by people rather than by laws. One of the biggest problems, as I see it, is to get enough personnel who are qualified to give the leadership to this program. I do not mean the clerks because there are in my experience fine clerical people in Government, loyal people who can be led to do an efficient job, but the problem is to get the people who develop the systems and install them and provide the administration of them. I think there would be difficulty in obtaining them whether we went outside and recruited them from private business or whether we tried to develop them within the Government. Actually I think we should do both. Even after we do both I think that we will find that we still do not have enough people because the magnitude of the job of an organization spending $40,000,000,000 a year is just hard to imagine. I am responsible at the present time for only a very small segment, which is the Coast Guard, where their appropriation requests this year are $188,000,000 and we feel that if we get an accounting system in the Coast Guard that operates properly within 3 years we have done a pretty good job.

When you apply that yardstick to the Federal Government spending $40,000,000,000 in various agencies and all sorts of activities, it seems to me that no matter what kind of organization you have, no matter if you can get the best brains in the country to work on this problem, and I certainly think we should, there is still a question of time. It is a long-range program and to me the personnel part of it is the biggest obstacle.

I think that any legislation, and I certainly feel that legislation will be needed, should come as a part of the experience with this joint effort operation and not precede the attack on this problem for the reason that the further we go into this thing the more we learn about it and I would say that there are far more problems to be solved than have been solved at the present time. It seems to me that after we have more experience with dealing with these problems we will be able to suggest legislation that will be more appropriate and more workable.

Senator SCHOEPPEL. Might I ask a question there?
Mr. Gary. Yes, sir.

Senator SCHOEPPEL. With a war that has just ended and a terrific spending, how much more experience do you think we ought to have?

Mr. GARY. The point is that I do not think we should stop. In other words, the thing that this joint effort offers us that the legislation does not is that this program is now being carried on and it is being carried on as rapidly as is humanly possible. I think that here is what would happen: "If you had a change in legislation that changed the organizational set-up you would lose the momentum that has already been created because it would be first necessary to determine who the Accountant General should be. It might be

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somebody who has not been familiar with the joint effort, it might be somebody who might have some different ideas and until it could be coordinated again it would seem to me you would lose that momentum, because as I see it, no matter what sort of legislation could be passed, there is still necessity for joint effort. Even with the proposal which was made by the previous witnesses that there should be set up an accountant general and he be given whole authority, you have this problem it seems to me.

First, the operation of the accounting system is undoubtedly a matter for the executive department. Secondly, the audit of the accounts of the Government, it seems to me, beyond question should be under control of the Comptroller General who is responsible to Congress. But when it comes to the point of designing systems and determining policies and principles, there is a joint responsibility and interest. The executive department has an interest in that from the standpoint of obtaining essential information for their management needs to assist them in management, but I think the Congress also has the responsibility that the accounting systems are so designed and the policies and objectives and principles are proper in order that the financial information which finally flows up to Congress is the kind of information that they should have.

I do not see under any kind of organization how Congress would want to be relieved of that responsibility. Therefore, it seems to me that in order to do the job, no matter what kind of organization you have, there still has to be a great deal of cooperation between the accounting officer who in effect represents the Congress, and the accounting officer who in effect represents the President.

It seems to me the reason that so little progress has been made for the last 100 years and certainly since the Budget and Accounting Act of 1921, is that the problem does not lie so much in the defects of legislation as it does in the fact that the three officers—the Comptroller General, the Secretary of the Treasury, and the Director of the Budgetnever got together before and worked this thing out on a joint basis. As soon as they did do that, we have seen tremendous progress.

The Chairman. Any further questions? Do you have any further comments, Mr. Gary?

Mr. Gary. I have one other comment and that is with regard to section 11 of the bill. I had the old bill with the insert; I assume that is the same section which permits during the two fiscal years following the enactment of this legislation, it permits the departments to make such adjustments in their appropriations as they feel appropriate in order to conform with their performance budgeting. My comment on that is that it seems to me that is a great deal of responsibility for the Congress to delegate to the agency. In the Coast Guard we had the problem of simplifying our appropriation language but we did it through the regular appropriation process by studying our problem and determining what we needed in the way of simplified appropriation and then we presented it to Congress as a part of our regular appropriation bill. It is now before them for approval. We think that that is what we need.

If Congress, on the other hand, feels that that is not what we need, then it is our responsibility to operate under whatever Congress decides.

This other matter of approach, it seems to me, lacks the kind of review and justification that an agency would give for doing that sort of thing

The CHAIRMAN. You do not have before you the committee print of the bill?

Mr. Gary. No, sir. I have been out of town.

The CHAIRMAN. I do not find the original section 11, what page is that on?

Mr. GARY. I had the bill and then another bill which was to be offered as this bill, called "Amendments."

The CHAIRMAN. There is in the committee print at present a section 11 but that section 11, as I interpret it here, is an amendment offered to the original bill.

Mr. Gary. I have not it here and I had understood that it was coming in and the bill had been revised accordingly and I had assumed it was.

I was out of town for the last 3 days. The CHAIRMAN. The letters which you submitted for the record will be inserted at this point. (The letters referred to follow:)

TREASURY DEPARTMENT,

Washington, August 30, 1949. Hon. LINDSAY C. WARREN,

Comptroller General of the United States, Washington, D. C. MY DEAR MR. WARREN: In the Fiscal Assistant Secretary's letter to you of May 25, 1949, there was presented for your consideration an expenditure classification for use by the United States Coast Guard beginning with the fiscal year 1950. This letter also advised you of the intention to present for your approval the principles and bases underlying the new accounting system as they were developed. In your reply dated May 26, 1949 (B-45109), you expressed satisfaction with the expenditure classification and your interest in the further development of the Coast Guard's accounting system. I understand that the accounting systems' staff of the Coast Guard has been working closely with the Accounting Systems Division of your office and with the Bureau of Accounts of the Fiscal Service in this developmental work.

I have followed with a great deal of interest the accounting improvement program of the Coast Guard. Aside from the fact that it is an agency within the Treasury Department for which I have administrative responsibility, I have the feeling that the work which is going on represents a real opportunity to obtain well-rounded application of the principles and policies for accounting improvement which will serve as a forerunner for wider application throughout the Federal Government. Moreover, the type of accounting organization which has been established in the Coast Guard, the quality of the staff which has been selected, and the manner in which this staff has applied itself to the problem, give assurance that there will be proper application of such principles and policies through the development of sound underlying procedures.

A schedule for installation of the new accounting system provides for the first conversion to be made at headquarters on October 1, 1949. There are, however, certain basic questions affecting the operations of both the Treasury Department and the General Accounting Office which must be settled before preparations for the installation can be completed. These basic questions relate to the application of some of the announced objectives and policies of our program. They are:

(1) Provision for on-the-site audit by the General Accounting Office;

(2) The depositing of collections by the Coast Guard directly with designated depositaries and elimination of the preparation of schedules of collections; and

(3) Simplification of disbursement control, including revision of related warrant procedures.

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