troller General's functions in respect to accounting systems and exercise of current controls should in no way interfere with the carrying out by the executive branch of programs authorized by the Congress. While it is the job of the Comptroller General to make an independent audit for the Congress, in a larger sense there can be no audit independent of the Government as a whole, since, after all, the Government, while divided into three branches, is still one Government. The legislative branch is no more outside the Government than the board of directors is outside a business corporation. Cogress has been compared to the board of directors of a corporation. In corporate organizations the Comptroller is sometimes made responsible directly to the board of directors. In this position of independence, he exercises control by a combination of prescribed accounting procedures and audits of such procedures. To limit the Comptroller General as the agent of Congress to the one method of control by post audit would be to lock the barn door after the horse was stolen.

With respect to former President Hoover's Executive order of December 9, 1932, which was quoted by Mr. Andrews, transferring certain account-prescribing functions of the General Accounting Office to the Bureau of the Budget, as the committee knows, that order was rejected by the Congress.

The important point now, though, is that the General Accounting Office today is not the same office it was in 1932. Not only have new duties and functions been added by the Congress, but the attitude of the Office has changed, particularly under the present Comptroller General. If there ever was any impediment to recognition of the needs of management in the prescribing of accounting systems by the Office, no such impediment exists today. The best evidence of this is in the attitude of the individual departments and agencies toward the work being done in cooperation with them under the joint accounting program. One of the projects under the joint accounting program has been the provision of a new, modern accounting system for the Bureau of Reclamation. I would like to read a short statement made by the Commissioner of Reclamation at the House hearings on the Interior Department appropriation for 1951 only a month ago concerning that accounting system

The CHAIRMAN. What are you quoting?

Mr. WEITZEL. I am quoting Commissioner Straus of the Bureau of Reclamation on the completion of the devising and installing of a complete system of accounts for the Bureau of Reclamation.

You are advised that the Bureau of Reclamation has completed the work of installing a new accounting system in the record time of 18 months. Since we were not at liberty to devise our own system purely for Reclamation's own needs, this was a joint endeavor carried out by the General Accounting Office, as agent for Congress, and in consultation with this committee's staff and with the full cooperation of the Bureau of the Budget and the Treasury Department. Many innovations have been made in Government accounting that will expedite the flow of Government business without sacrificing control. I would like the record to show the fine cooperation we received from Government agencies, this committee's representatives, and particularly from the General Accounting Office. In each instance, the help was of the highest order.

This committee heard Mr. Jack Gary, the accounting adviser to the commandant of the Coast Guard, at the last session on the improvements that have been made in the Coast Guard system under the joint accounting program. Mr. Gary, who served as research director

for the accounting policy committee under Mr. Andrews, likewise testified before the House Appropriations Committee that he did not see how we could accomplish any more under an Accountant General than was being accomplished under the joint accounting program, and that the General Accounting Office has gone all-out to give the Coast Guard every cooperation that they could have asked for. He said, and I am quoting now:

I would also like to state that there is no change that we have asked them for that we have not obtained. If there is anything that we do not have in this system that we should have, it is because we never thought of it and asked them for it, and not because they refused to give it to us.

I could multiply those examples considerably, but Mr. Frese will want, I am sure, to give you a few more. We cannot take the time to make an exhaustive list this morning, I am sure.

Finally, as to the report of the accounting policy committee, I would like to emphasize that this committee, while it included members of the American Institute of Accountants' committee on governmental accounting was not in any sense a committee of and did not represent the institute.

There is no difference between the objectives of the bill S. 2054 and of the joint accounting program in the area of improving the central accounting and reporting facilities of the Treasury Department and the administrative accounting by all Government agencies. The program includes the provision of improved central facilities in the Treasury for bringing together and producing information on the financial condition and operations of the Government. Development of properly coordinated systems of accounting in the Treasury Department will go hand in hand with agency developments, to accomplish integration of accounting results and provide the operating center for the Government's system of central accounting and reporting which will produce accurate, timely, and complete financial statements for the Government as a whole.

Nor is there anything inconsistent between the exercise of the authority of the Comptroller General and the coordination of the accounting system for the executive branch as a whole, with composite reports based on the integration of agency and Treasury accounting results. As just explained, the joint accounting program contemplates that this will be done through an operating center in the Treasury Department, very close, I might say, Mr. Chairman, to what was recommended in the minority report which you and Mr. Manasco submitted on the recommendations of the majority of the Hoover Commission. We think that that is the way to do it.

The Congress should be under no illusions that it must take the steps proposed in S. 2054 to bring about this result.

On the other hand, it should not be under any illusions that the General Accounting Office claims the right to maintain the administrative accounting systems of the agencies. Such systems are and should be maintained by the agencies themselves. An important part of the joint accounting program comprises the review of General Accounting Office audit and control methods in the light of increased effectiveness of agency and Treasury accounting systems.

The Comptroller General established in October 1949 a Comprehensive Audit Subdivision in the General Accounting Office to help administer an audit program designed to accomplish more effective

and comprehensive fiscal and property audits in Federal departments and agencies. This program recognizes that the accounting and internal control procedures of each agency are the basic points for effective control of the Government's financial operations.

In line with this, it is the policy of the General Accounting Office to utilize audit processes based upon an evaluation of accounting systems and the effectiveness of related internal checks and controls in the agencies at the site of operations, to the maximum extent practicable, as a basis for the fuller and more effective discharge of its responsibilities to the Congress. As the comprehensive audit program progresses, such present accounting and audit processes of the General Accounting Office, based on central review and processing of documents and reports originating with agencies, as are determined to be unnecessary or inappropriate, will be eliminated or modified.

The Maritime Commission and the United States Coast Guard are already on a comprehensive audit basis. Veterans' insurance and the Bureau of Reclamation have recently been placed on the same basis. The Comptroller General recently sent to Congress our complete audit report on the Maritime Commission for 1948 and 1949. These comprehensive audits are in addition to the hundreds of site audits already being performed by General Accounting Office. Various Governmentwide requirements for submission of documents or reports to the GAO have already been eliminated and as further studies are made we do not doubt that there will be further eliminations.

The comprehensive audit program will include the discharge by the General Accounting Office of its responsibility under section 206 (c). of the Federal Property and Administrative Services Act of 1949 for auditing property accounts and transactions. This audit will be conducted to the extent practicable where the property or records of the executive agencies are kept and will include an evaluation of the effectiveness of internal controls and audit and a general audit of the discharge of accountability for Government-owned or controlled property based upon generally accepted principles of auditing. This activity will be coordinated with section 205 (b) of the same act which provides that the Comptroller General after considering the needs and requirements of the executive agencies shall prescribe principles and standards of accounting for property, cooperating with the Administrator of General Services Administration and with the executive 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, and that the General Accounting Office shall examine the property accounting systems established by the executive agencies, and the Comptroller General shall report to the Congress any failure to comply with prescribed principles and standards or to adequately account for property.

Also, there is provision in that section for examination of property accounting systems by the General Accounting Office and for report to the Congress by the Comptroller General when the agency systems do not meet the prescribed principles and standards. I would like to say here, Mr. Chairman, in answer to Senator Smith's query1 that in our opinion Public Law 152, the Federal Property Act of 1949, gives a most comprehensive coverage and was enacted after the most careful study had been made by this committee and the House Expenditures Committee of the needs of the executive branch and of

1 Page 180.

the Congress for inventory control, property utilization, and property accounting.

In connection with this joint accounting program Mr. Warren and Mr. Larson, of GSA, have entered into an agreement providing for the most effective and harmonious discharge of the functions of the two agencies under the Property Act. Mr. Larson and Mr. Warren believe that this joint approach to the property accounting problem will result in the development of adequate accounting controls of property transactions and inventories to protect and disclose the Government's investment in property and provide the information necessary to obtain maximum utilization of such property. Contemplated improvements in accounting for property will be tied in with the broad objectives of the over-all accounting improvement program including the development of performance budgeting, improved central accounting and financial reporting, and better information for management purposes.

Senator SMITH. Do you feel there is enough legal authority there to properly conduct that?

Mr. WEITZEL. Senator, I feel there is ample legal authority. There is responsibility in Public Law 152 for the executive agencies to maintain adequate inventory and accounting control in their own agencies. There is authority for the Administrator of GSA to prescribe policies of procurement and supply of property and policies to promote the maximum utilization of property by the executive agencies; to cooperate with them in the development of inventory levels; to establish a Federal supply catalog system; and to prescribe forms needed for supply and purchase activities. There is authority for the General Accounting Office to prescribe principles and standards of accounting for property and to cooperate with the Administrator and with the agencies in developing systems. I do not know, frankly, how the system set out in the law could be any more comprehensive, and I might say that we have gone right ahead under the authority in Public Law 152 with GSA and with the agencies, as a part of this joint accounting program which this very committee requested and endorsed when it was instituted, as the chairman will remember.

We have gone right ahead in the development of those standards. I might say, too, the budget, the Treasury, and the GAO cooperated in the development of those property accounting phases of Public Law 152, and that, we feel, is the way to approach this whole accounting problem.

The CHAIRMAN. Would this pending bill change that law in any respect or interfere with the authority there given?

Mr. WEITZEL. This bill, I feel, Mr. Chairman, would abrogate the authority of the Comptroller General in that legislation. It could certainly be interpreted and it is probably intended to abrogate the authority of the Comptroller General to prescribe principles and standards for property accounting and to cooperate in the development of the systems. It would substitute prescribing of systems by the Accountant General in the Treasury and approval of those systems by the Comptroller General, but under the language of sections 21 and 22 (b), it is doubtful that the approval power would extend to property

accounts.

I might say, too, that Mr. McCormick rendered very valuable assistance, as the committee knows, in the development of that

legislation and I am surprised that he still feels that we need further legislation to bring this $27,000,000,000 of property under accounting control.

Senator SCHOEPPEL. Mr. Chairman, might I ask the witness this. Also in that act there were provisions for an orderly transfer of property between the departments to prevent duplication of expense and duplication of accounting procedures, were there not?

Mr. WEITZEL. That is correct, Senator. The whole act is aimed at obtaining the best procurement methods, the best utilization methods, and the best disposal methods for Government property throughout the Government.

I should like, if the chairman would permit, to place a copy of that memorandum of agreement between Mr. Warren and Mr. Larson in the record at this point. It is not too long.

The CHAIRMAN. All right. That may be placed in the record at this point.

(The document referred to follows:)

MEMORANDUM REGARDING WORKING RELATIONSHIPS BETWEEN GENERAL ACCOUNTING OFFICE AND GENERAL SERVICES ADMINISTRATION

This memorandum outlines the general approach to be made in respect to the exercise of the responsibilities of the General Services Administration and the General Accounting Office under the Federal Property and Administrative Services Act of 1949 (Public Law 152, 81st Cong.). It is based on preliminary discussions between representatives of the Administrator, General Services Administration, and of the Comptroller General, and is not designed to abrogate or change their legal responsibilities under Public Law 152, Eighty-first Congress, but to provide an initial foundation for the more effective and harmonious discharge of the respective functions of the two agencies under that law in terms of their interrelationships.

GENERAL PRINCIPLES

The working relationships between the two agencies will be based on the following general principles:

1. The property accounting responsibilities of the General Accounting Office will be discharged as a part of the broad joint accounting improvement program which is under way. The basic approach of this program to the over-all accounting problems of the Government will be applied to the property-accounting phases by providing ample flexibility for the executive agencies to develop and mold systems to fit their individual needs, by prescribing accounting requirements with respect to both property and other phases of the accounting program principally in terms of principles and standards, and by assisting and guiding the agencies in the development of the systems in conformity with such principles and standards. The General Accounting Office will afford maximum consideration to the primary management and operational interests in connection with the over-all accounting work being done with the agencies. Consideration also will be given to providing such financial data as is needed for central accounting and reporting in the Government.

2. Full recognition will be given to the performance budget and other budgetary, management, accounting, and financial reporting objectives and policies of the joint accounting program of the General Accounting Office, the Bureau of the Budget, and the Treasury Department and of the joint property study report entitled "A Federal Inventory Control System." In accordance with the intent, understanding, and terms of the joint accounting program, the Treasury Department and the Bureau of the Budget will participate with the General Accounting Office and the General Services Administration to the extent of their responsibilities and interests in the various areas encompassed in this memorandum.

3. The General Services Administration will participate and cooperate with the General Accounting Office, from the standpoint of its property management and operational interests, in the development of property accounting principles and standards, in the development of property accounting phases of the over-all agency accounting systems, and in the making of surveys of the accounting requirements of such agencies, including property accounting needs.