Department of Agriculture (working capital fund), Farmers Home Administration and Rural Electrification Administration (both Agriculture), National Advisory Committee for Aeronautics, Veterans' Administration (both insurance and finance activities), District of Columbia, Housing and Home Finance Agency (Office of Administrator), Bureau of Standards (Commerce), and Selective Service System.

Work has also been or is being done with the following agencies involving the improvement of special phases of their accounting: Immigration and Naturalization Service (Justice), Geological Survey and Bureau of Indian Affairs (both Interior), Post Office Department, Bureau of Census and Civil Aeronautics Administration (both Commerce), Federal Security Administration, Interstate Commerce Commission, Smithsonian Institution, Federal Power Commission, and Bureau of Internal Revenue (Treasury).

It is impractical to list the many procedural improvements and simplifications which are being accomplished as a day-to-day proposition of dealing with the accounting problems and work of the various agencies of the Government under the influence and guidance of the policies and objectives of the program. Contacts reach into almost every accounting operation of the Government and hundreds of improvements and simplifications in forms and procedures are being accomplished as a normal course of business—to a considerable extent as the result of proposals originating with the various administrative agencies. A vigorous day-to-day attack is continuing on unnecessary red tape and antiquated methods.

SPECIAL ASPECTS OF ACCOUNTING

In connection with general developmental work under the program and the actual installation of improved accounting systems in particular agencies, considerable attention has been given to various aspects of accounting having Government-wide import. Their application is important in the interest of improved accounting results and the simplification of accounting processes.

Progress has been made in the practical application of accrual accounting. Such method of accounting results in having the accounts and reports of agencies reflect, classify, and analyze expenditures of appropriated money in terms of amounts of goods and services received-not simply contracted for or ordered. Expenditures under the accrual concept represent disbursements in combination with unpaid liabilities. Inventories acquired are taken up as assets and recorded as costs when they are applied to specific purposes. Accounts receivable and other controls over money due the Government are also factors. Actual experience is providing a basis for reviewing Government-wide application of accrual accounting to both expenditures and receipts. Development of accounting in this direction is leading to simplification of accounting for obligations and commitments and enabling the latter type of accounting better to perform its primary function of control to avoid overspending of appropriations or other limitations. These developments in accounting should ultimately make it possible for the Executive, the congress, and the ordinary citizen to have a much better idea of the actual costs of the work and services the Government performs.

The establishment of accounting control over Government property is a special and important phase of the application of the accrual method of accounting. A comprehensive joint study and report on the property-accounting problem was completed, in June 1949, by the Bureau of the Budget, Treasury Department, and General Accounting Office and was made available to all Government agencies after obtaining concurrence by the General Services Administration which was created by the Federal Property and Administrative Services Act of 1949. Further, cooperative working arrangements have been established with the General Services Administration in this area. The report reflects comments and suggestions of all Federal agencies and various outside professional groups (such as the Controllers' Institute, American Institute of Accountants, and others). It provided the basis for much of the work done in connection with the Federal Property and Administrative Services Act of 1949. It has also been used as a guide in specific work done in developing the property phases of accounting in certain agencies. A tentative statement of property-accounting principles and standards required to be established by the General Accounting Office under the afore-mentioned act is being prepared and will be issued to agencies for comment in the near future. Provision has been made for the assignment of staff of the Corporation Audits Division of the General Accounting Office to make surveys and initiate cooperative work with various agencies for the development of improvements in property accounting. This will be coordinated with other ac

counting systems work under the program and with the development of appropriate on-the-site property audits.

There has been much progress in decentralizing accounting operations to the points of operating responsibility in agencies so as to make accounting more useful for purposes of current management. This has been done by using "branch office" accounting techniques, common to business, and has resulted in substantial savings from elimination of duplicating and overlapping accounting records as bebetween central offices and field offices. In the systems used, each segment of the accounting system is interlocked into the system as a whole by means of reciprocal accounting relationships, thus providing an effective basis for internal control and for composite reports derived through consolidation of interlocking individual statements. Repetitive recording of transactions (either on a summary or individual transaction basis) and maintenance of many forms of memorandum records have been eliminated with resulting economy. Steps are being taken to obtain general adoption of this principle for the accounting structure of the entire Government.

One of the important objectives of the program is to effect proper integration between certain accounting of the Treasury Department and the accounting of other agencies. It is intended to accomplish this; first, by effecting reconciliations between the accounts of each agency and those of the Treasury Department pertaining to appropriations, disbursing funds, and receipts and repayments; second, by developing interrelated accounting processes which will avoid or simplify aspects of such reconciliations and establish necessary accounting relationships in the direction of coordinating central reporting for the Government as a whole. A start has been made on tying into the appropriation and receipt accounting of the Treasury Department the related accounting of other agencies through reconciliations of the records as they now exist. In line with this approach, provision has been made by the General Accounting Office for eliminating various present requirements for the submission of reports to that Office. Present requirements for the submission by agencies of transcripts of their appropriation accounts will be eliminated. Requirements for the submission of reports on the status of appropriations and trial balances have been eliminated for many agencies in which accounting systems have been developed and approved. Government-wide elimination of these latter reporting requirements has been approved in the General Accounting Office and will take effect shortly. Reporting requirements relating to disbursements according to appropriation limitations are being eliminated on an agency-by-agency basis wherever comprehensive or other site audit has been started or where determination has been made by the General Accounting Office that an adequate system of control over limitations is in effect in the agency and arrangements have been made for the periodic inspection of such system.

Cooperative work has been done and is continuing in developing hospital accounting in agencies on an appropriately integrated basis with reporting requirements of the Bureau of the Budget with respect to costs of various phases of hospital operations. This work is being done with a view to the needs of management for cost data in day-to-day administration.

Suggested forms and procedure for developing cost data in connection with the acquisition and operation of motor vehicles have been developed in collaboration with the Interdepartmental Motor Equipment Committee. These suggested forms and procedures have been distributed to agencies and are intended to be used as the basis for the cooperative development in each agency of appropriate procedures for accumulating needed management data as well as for reports to the Bureau of the Budget.

CENTRAL ACCOUNTING AND REPORTING

Joint work is now starting in framing the outlines of the central reporting system for the Government and such central accounting as may be necessary. This involves arriving at conclusions concerning the nature and principles of the central system, taking into consideration all work that is now being done in different fields under the joint program and the evolutionary implications of such work with regard to central reporting and accounting. This is a necessary first phase of one of the most important but challenging undertakings of the program. The conclusions reached are to be presented for policy consideration as to both scope and principles of the central system and a program for its development and installation. Certain of the projects previously mentioned have a special significance for the central system. The work under way on performance budgeting and the application of accrual accounting will have an important bearing. Interim changes which have been made in the principles underlying the preparation of the

daily Treasury statement have important implications, such as the new basis of accounting for expenditures for public debt interest as it becomes due and payable, the treatment of refunds as deductions from receipts, and the more current classification of expenditures on the basis of checks issued rather than checks paid. The installation or conversion of accounting systems in such places as the United States Coast Guard, Bureau of Reclamation, Department of Agriculture, and Bureau of Customs is providing a practical means of working out the necessary processes for reconciliation or integration of agency accounting with the central appropriation and cash accounting of the Treasury which is essential if over-all financial data is to be compiled on the proper basis.

Since a basic concern of this program is the improvement of accounting, the General Accounting Office has a leading role by virtue of the Comptroller General's legal responsibility for prescribing accounting systems. His staff, therefore, must bear the brunt of the work of the three central fiscal agencies involved in the Government-wide accounting field. This work, however, is so intertwined with the legal responsibilities and interests of the Treasury Department and Bureau of the Budget in related aspects of the program, having to do with operating accounting, budgeting, and fiscal administration, that appropriate participation in the accounting systems work and continual three-way exchange of views and technical consultation is essential.

One of the prime requisites of accounting in the Government is to develop reliable information and control in connection with the formulation, enactment, and execution of the financial program of the Government. Therefore, the active participation of the Bureau of the Budget is essential to the development of accounting requirements in proper relation to improved budget administration and the needs of management. Bureau of the Budget participation also contributes further to the program by providing assistance in connection with management problems which are related to accounting development.

The Treasury Department has a vital interest in the results to be achieved under the program. It is essential that the full potentialities of the Treasury Department's accounting and reporting be developed so as to enable the Department to fulfill its important fiscal responsibilities and furnish current financial information regarding the operations of the Government as a whole. The manner in which this is done will have an important bearing on the determination of general requirements to govern accounting and reporting by other agencies of the Government. It is significant that the Treasury Department has a dual role in participating in the program. By joining with the General Accounting Office and Bureau of the Budget in taking leadership in the program, the Department carries a degree of responsibility in seeing that the program goes along in the right direction and that everything possible is done to make it successful in terms of worth-while accomplishments. On the other hand, the Department is in the same position as any other operating agency of the Government. It is confronted with the same question of improving its accounting as a local matter. There is, however, this difference-by virtue of its dual role it behooves the Treasury Department to set an example in making a progressive attack on the problem of acquiring a model accounting system of its own. As a leader in the program there is no excuse for expecting other agencies with operating accounting responsibilities to do a better job than the Department itself is doing.

The heads of all departments and agencies in the executive branch have designated responsible representatives through whom arrangements for the effective and continuing participation of the various agencies in the program are handled. It is important to have such central points through which the viewpoints of each agency may be obtained and contact maintained. Much more, however, is needed. The success of the program depends a great deal on how seriously the individual departments and agencies of the Government take their responsibility for developing and maintaining efficient accounting organizations and systemsboth for their own purposes and to supply essential information for the budgetary and fiscal administration of the Government generally. Progress under the program will be measured in no small degree by the extent to which the necessary effort toward better accounting is generated by each individual department and agency itself.

Mr. WEITZEL. At this point I should like to comment briefly on Mr. T. Coleman Andrews' testimony before this committee advocating the recommendations of his accounting policy committee, which were repudiated even by the Hoover Commission itself. Without going into all the details of the committee's recommendations, the recom

mendation for transferring to the executive branch all accounting functions would remove from the General Accounting Office an integral part of the machinery which the Congress has provided for controlling the Government's financial activities. This is done on the premise that accounting is a responsibility of management a fact which no one denies, least of all the Comptroller General-and the erroneous conclusion that the Comptroller General because of his auditing functions as the agent of the Congress should have no authority over the accounting systems of the Government.

A report of a congressional committee is cited in support of that conclusion. That report was issued in the case of a Government corporation which had been granted unusual freedom from most controls, legislative and executive, which the Congress has seen fit to impose on Government agencies generally.

A member of the Hoover Commission was the chairman of the House Expenditures Committee which submitted the report_concerned, covering the Reconstruction Finance Corporation. I am sure he had no idea that that report later would be used as an argument for weakening the control of Congress over expenditures in the regular Government departments. The reason I am sure is that the chairman of that committee, Mr. Manasco, later joined you, Mr. Chairman, in presenting the strong opinion dissenting from the views of the majority of the Hoover Commission on accounting.

If I might digress for just a moment, Mr. Chairman, the act which gave rise to that report which Mr. Andrews mentioned was the Government Corporation Control Act of 1945. That act was developed to give the Government's regular fiscal agencies and the President and the Congress itself some measure of control, retaining sufficient flexibility for their operations, over the numerous Government corporations which had sprung up without any control by anyone, over their operations. It was recognized that the same measures of control which applied to regular agencies of the Government might not be suitable to the operations of the corporations.

However, I think that is does not at all follow that the same pattern must be applied to the regular agencies of the Government.

The General Accounting Office, the Budget Bureau, and the Treasury Department all participated in the development of the Government Corporation Control Act. At the same time, they all unanimously disfavor this proposal in S. 2054. There is a distinction which we would be glad to go into at greater length, but I would like to make the point that we cannot necessarily apply the procedures that are applied to the Government corporations, which are recognized to have a large degree of autonomy over their own operations, to all the Government agencies in general.

The CHAIRMAN. Let me ask you, Are all of the Government corporations now under the General Accounting authority?

Mr. WEITZEL. Yes, Mr. Chairman, and we are rendering audit reports on all of the corporations.

The CHAIRMAN. I think you had a little trouble with the practice for a while, did you not?

Mr. WEITZEL. We did, Mr. Chairman, but at the present time I don't think we are. I think we have accomplished very fine results with the cooperation of Congress and corporations, but I should like to point out that a report by the General Accounting Office on a Govern

ment corporation made to Congress requires action by the Congress to implement that report so that if Congress does not take action, as it fortunately did in the case of the RFC, there is nothing but the criticism there and nothing to enforce the suggestions of the General Accounting Office upon that particular corporation.

The CHAIRMAN. The Comptroller General has no enforcement powers over the corporations, but he can audit and report to Congress and point out the defects or whatever he finds that he thinks deserves criticism and also recommend to the Congress legislation that he thinks might be advisable to correct the conditions.

Mr. WEITZEL. That is correct, but I would not be able to say that based on our experience to date we feel that that sort of control is sufficient by itself to insure proper accounting throughout the executive branch. We are not discounting at all the value of the Government Corporation Control Act and we appreciate the support given by the Congress to our reports. However, we do not feel that that should be the only method of control in the case of the Government generally.

Notwithstanding the keeping of accounts is a function of management, it is common practice in private business for public accounting firms to devise and install accounting systems in the offices of their clients and then conduct an independent audit of operations under such systems. Mr. Andrews made the point that it is the management of the business which decides whether those systems are to be kept or not.

However, it is undeniable that the installation of such systems greatly facilitates the making of the audit when the time comes for that audit. Moreover, various businesses affected by the public interest, such as railroads and power companies, frequently are required by law to operate under accounting systems prescribed by governmental regulatory bodies under rule-making authority delegated by the legislature. Public policy demands that in such matters the unbridled interests of management not be permitted to overcome those of the people as a whole. It seems entirely appropriate that an agency of the Congress should prescribe the accounting systems under which the financial operations of the Federal Government are carried out. This is essential if the Congress is to preserve any real control over such operations.

Under our Constitution, some regulation and restraint in the use of public funds must be imposed by the Legislature in the interest of the citizens and taxpayers. The imposition of such restraints would be an empty gesture in the absence of an agency for their enforcement. Factors such as the proper classification of transactions and the existence of effective internal controls have a very important bearing upon the execution of external audit responsibilities. If the Comptroller General should be deprived of all power to prescribe the structure of internal accounting systems his job as the independent auditor for the Congress would be made immeasurably more difficult. In order to carry out its audit functions effectively, the General Accounting Office needs not only the power to see what documents shall be furnished to it in justification of expenditures, but to see that the entire accounting system of the agency is adequate and operating to give the Congress the information it needs in appropriating for the Government's financial program. Properly administered, the Comp