SUGGESTED AMENDMENTS ON S. 2054

(Committee print of February 23, 1950)

Page 2, lines 8-10: Strike the words "The President * * * the Budget" and insert the words: "The President shall, on the first day of each regular session of Congress, transmit to Congress the Budget. So far". Page 3, lines 3-11: Strike the words "The President budget."

* * * such alternative Page 3, line 12: Strike "(c)" and insert "(b)". Make similar corrections in "(d)" and "(e)".

Senator SMITH. I should like to ask, Mr. Chairman, if the clerk would prepare for the record something on the authority that the General Services Administration has concerning inventory, and how far that law goes on keeping inventories.1

The CHAIRMAN. I do not recall just what those provisions are, but I do know that we undertook to deal with it in that legislation. Mr. Reynolds, will you have the staff prepare a memorandum on that? (The memorandum follows:)

Section 202 (b) of the Federal Property and Administrative Services Act of 1949 provides as follows:

"Each executive agency shall (1) maintain adequate inventory controls and accountability systems for the property under its control * * * "" It further provides in section 205 (b) that

"The Comptroller General after considering the needs and requirements of the executive agencies shall prescribe principles and standards of accounting for property, cooperate with the agencies in the development of property accounting systems, and approve such systems when deemed to be adequate and in conformity with prescribed principles and standards. From time to time the General Accounting Office shall examine such property accounting systems as are established by the executive agencies to determine the extent of compliance with prescribed principles and standards and approved systems, and the Comptroller General shall report to the Congress any failure to comply with such principles and standards or to adequately account for peoprty."

From the foregoing it can be seen that each executive agency must maintain adequate inventory records and property accounting systems to account for all property under each agency's control. The type of accounts, and method of maintaining such accounts and inventory controls, are required to be developed from the standpoint of management or need of the agency, in cooperation with the Administrator of General Services, within such principles and standards established by the General Accounting Office.

In effect, the law requires the General Accounting Office to prescribe the principles and standards for property accounting and inventory control, and further requires it to cooperate with the Administrator of General Services and the executive agencies in developing and installing such systems.

This is a cooperative approach to the problem of designing, installing, and maintaining a system of property accounts that will fulfill the needs of management and at the same time conform with basic principles, standards, and guides promulgated by the General Accounting Office.

Senator SMITH. I should like to make another observation, if I may, Mr. Chairman.

I rather gather, Mr. McCormick, you feel the united effort we are hearing about is more of a gesture than actual; is that true?

Mr. MCCORMICK. No; I would not say that, Senator. My feeling is that these people are really pitching in and trying to do it, but we feel that the structural defects in the law will eventually prevent them from achieving success.

Senator SMITH. Would you not think that perhaps something added to the law that would make mandatory a united effort, perhaps setting up a coordinator who would have the complete authority and responsibility of checking the activities of the three agencies, would

1 See also statement of Mr. Frank H. Weitzel, pp. 197-198.

serve a better purpose than setting up an additional agency that might come from the compromise, and rather giving us the efficiency and economy we are looking for, more personnel and more expense? Mr. MCCORMICK. No; Senator. We feel that there would not be any more personnel or any more expense involved in tagging one fellow in the executive branch with that side of the job. Many of the same people would still be working on it. He would be definitely placed in a position where you could haul him on the carpet if the job were not done well.

Senator SMITH. I probably do not understand or follow you, but it seems to me it would bring about more duplication unless the bill were changed considerably than less.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator Hoey.

Senator HOEY. I am always interested in Senator Smith's observations, and when she mentioned coordination there occurred to me a story I heard about defining the real function of a coordinator. It was to take unorganized confusion and transpose it into organized chaosi The CHAIRMAN. If I had any responsibility in connection with Government accounts, that would be the result, I am sure. Thank you very much, Mr. McCormick.

Mr. MCCORMICK. Thank you, sir.

The CHAIRMAN. Tell Mr. Johnson we are very sorry he could not appear personally and at any time he wishes to appear before the hearing closes we would be very glad to hear him.

Mr. MCCORMICK. Thank you.

The CHAIRMAN. Mr. Frese and Mr. Weitzel, do you propose to testify together? I assume you gentlemen have your testimony organized now and know what you wish to say. So I will let you proceed according to your own pleasure.

The committee will be glad to hear you.

STATEMENT OF FRANK H. WEITZEL, ASSISTANT TO THE COMPTROLLER GENERAL, GENERAL ACCOUNTING OFFICE

Mr. WEITZEL. We appreciate the opportunity to be heard further for the General Accounting Office on the bill S. 2054. I have some notes from which I should like to take the liberty, if the Chair will so permit, to depart from time to time and answer one or two points which have come up during the hearing this morning.

The CHAIRMAN. Do you have a prepared statement to file here? Mr. WEITZEL. I have a statement which I should like to file, Mr. Chairman.

I should like to say at the outset, Mr. Chairman, that the General Accounting Office does not have the tremendous facilities for education and information that the citizens committee on the Hoover Commission recommendations has. We do not have the funds and we do not have the outlets and the means of influencing public opinion in the way that the Hoover Commission Citizens Committee has gone about it. I do feel, however, there is some obligation upon an independent committee of that sort in attempting to mold public opinion to inform itself of the facts. As Mr. Warren made plain and as I want to make plain, we have no quarrel with the Hoover Commission.

We have no quarrel with the Citizens Committee. But we do feel that they show an abysmal ignorance and lack of desire to learn about the Government's accounting system and about the progress that is being made today and has been made for several years, under the leadership of the Comptroller General, Mr. Warren, with the solid support, backed by law, of the Budget Bureau and the Treasury Department, and with the cooperation of every other agency in the Government. That progress, I believe, Mr. Chairman, would be amazing even to the Citizens Committee if they could just sit down with us some day and go over it.

We do not, frankly, like to have statements go out and be printed all over the country indicating that the Comptroller General, and the Director of the Budget, and the Secretary of the Treasury are die-hard stick-in-the-muds who want to do nothing, as Dr. Johnson's letter says. That is almost slanderous. Any public official desires to do his duty, and I defy you to find any three public officials more competent, capable, and qualified to do a job than Mr. Warren, the Comptroller General; Secretary Snyder; and Budget Director Pace.

The CHAIRMAN. At this point, particularly when Senator Smith was questioning Mr. McCormick a few moments ago, I was thinking that the Secretary of the Treasury and the Director of the Budget and the Comptroller General, the three collaborating and working together, could produce as efficient an accounting system, possibly, as any one Accountant General could produce. I may be wrong about it. As your statement emphasizes, we have three of the highest officials of the Government in the legislative branch and the executive branch now working on this problem. They claim that they are succeeding and that they are receiving splendid cooperation throughout all the agencies. If we undertake to legislate that effort out of the way and establish something else which would be somewhat experimental, we might be retarding the achieving of the objective that we all desire. I want to keep an open mind on this thing as far as I can all the way through, but I am trying to find out how setting up an Accountant General is going to solve this problem. That is what I want to find out as we go through these hearings. You may proceed.

Mr. WEITZEL. Mr. Chairman, I hope we can throw some light on that this morning, but I think you are absolutely right that the setting up of an Accountant General would only revive the jurisdictional arguments. You would have there a chief accounting officer for the executive branch who would assume the authority and the knowledge as to how accounting should be run. At the same time you would still have the requirement that the Comptroller General approve the systems and, as Mr. McCormick says, criticize those systems, the Comptroller General being likewise recognized as preeminent in the audit field even by the Citizens Committee, and having certain accounting responsibilities that he cannot escape as the agent of the Congress. That is what we are going to develop.

The CHAIRMAN. Is it your understanding that it is proposed by this legislation and by the Hoover recommendations and the Citizens Committee that they would divest the Comptroller General of those accounting powers which he now has under the law?

Mr. WEITZEL. They would divest, Mr. Chairman, the General Accounting Office of the function of prescribing accounting systems which the Comptroller General is now exercising and has exercised

throughout the history of the General Accounting Office, but is now exercising, we believe, far more effectively because of the joint cooperative program.

The CHAIRMAN. As the bill is written now it leaves what we may term a veto power over any system that the Accountant General might devise.

Mr. WEITZEL. That is correct, Mr. Chairman, but if the Accountant General should devise no system or if the Comptroller General should disapprove the system which the Accountant General provided, there would be no way that the Comptroller General could enforce on the executive branch a system which would give the Congress the information which it needs. I do not want to overemphasize that point because at the same time the joint accounting program is giving complete recognition to the fact that accounting is one of the fundamental tools of management. We want the departments and agencies, we want the executive branch, to have all the accounting that it needs, the right kind of accounting to serve its management purposes. But we also want to be in the position to require certain kinds of information to come up for Congress when and if it needs them in order that Congress can do a better job of appropriating and making other legislation which is Congress' duty, which it cannot divorce itself from.

The CHAIRMAN. It seems that we really get down to this issue, whether Congress is going to be influenced by or largely follow the recommendations of its three highest officials who are now working together, who are getting the job done, and say they need no legislation. Or shall we follow the recommendations of the Hoover Commission and the Citizens Committee, who say that, irrespective of the cooperative effort or whatever is being accomplished, we proceed to this bill or a bill similar to this. That is about where we are right now. Mr. WEITZEL. I believe so, Mr. Chairman, and I should like to ask the committee to bear in mind that these agencies, the three top fiscal agencies in the Government, have a few experts of their own. Not all of the experts are outside of the Government. We have also taken advantage continuously of the thought of outside professional bodies and outside individual accountants, and we will always welcome those and continue to use them in weaving the best accounting system that can be devised for the Government.

The CHAIRMAN. I did not mean to interrupt you too much. You go ahead.

Mr. WEITZEL. Thank you, Mr. Chairman.

I should like to tell you briefly about the principles and objectives of the joint accounting program and its relation to the provisions of the bill S. 2054. The program is based upon the three following principles:

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.

The whole program is aimed at giving the President better management in the executive branch, the Congress better information and bases for acting upon appropriations and other legislation, and the public a clearer picture of the financial condition and operations of the Federal Government. The major objectives of the program can be summed up in this way:

1. To provide a body of sound accounting and reporting principles and standards for general observance.

2. To improve the accounting organizations and the systems of accounting in the various departments and agencies.

3. To strengthen the facilities and accounting of the Treasury Department as the operating center for current accounting and overall financial reports of the Government.

4. To produce more informative financial reports at less accounting costs.

5. To improve, simplify, and strengthen the Government's system of audit and control in line with the increased effectiveness of accounting systems.

6. To coordinate and integrate budget, accounting, and reporting processes.

I would like to make clear right here that the joint accounting program is not purely a voluntary program based on the wishes and desires of the participants. It has a solid foundation in present law. The Comptroller General under the Budget and Accounting Act was given the definite responsibility and authority to prescribe the forms, systems, and procedures for administrative appropriation and fund accounting in the executive branch. He has further responsibility and authority now under the Federal Property Act of 1949 to prescribe principles and standards of accounting for property and cooperate with the Administrator of the General Services Administration and with the executive agencies in the development of property accounting systems. Likewise, the Treasury Department has responsibility and authority under existing law for keeping accounts of receipts and expenditures of public money and making an annual report to the Congress of receipts and expenditures during the last preceding year, designating the expenditures by each separate head of appropriation. The Bureau of the Budget also has important legal responsibilities for preparation of the budget. These responsibilities, while not exhaustive, are merely cited to show that there is a legal basis for the joint accounting program. The reason for adoption of the joint approach is that only by combining the resources of all three top Government fiscal agencies can a concerted attack be made on the problem of improving Government accounting with due regard to both legislative and executive needs. The problem in the past was not so much one of authority as of attitudes. It took statesmanship to bring about the beginning of the joint program, but the results being achieved from day to day are more than sufficient to justify and assure its continuance on that basis.

The Comptroller General is exercising his authority to prescribe systems in a way which will aid effective administration throughout the Government. It is his objective to prescribe requirements largely