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studies completed by his Committee on Administrative Management in the Government of the United States, headed by Mr. Louis Brownlow. A major item would have transferred to the Treasury the authority of the Comptroller General to prescribe and supervise accounting systems, forms and procedures in the Federal establishment. The function of the settlement of claims by and against the Government was also to go to the Treasury, and the remaining purely audit work was to be handled by a new office under an Auditor General without power to make an independent and binding disallowance. In other words, an auditor without the means of exacting compliance with his decisions (S. Doc. 8, 75th Cong., p. 46). The resulting bills, principally S. 3331, Seventy-fifth Congress, failed of enactment (83 Congressional Record 5123).

(5) A year later a revised form of reorganization act designed to carry out many of the other recommendations of the President was enacted (act of April 3, 1939, 53 Stat. 561) but it specifically denied the President the power to act in any respect to transfer or abolish the General Accounting Office or its functions.

(6) Immediately after Pearl Harbor, the First War Powers Act was enacted (December 18, 1941, 55 Stat. 838) granting the President the widest authority to reorganize Government departments and agencies, but containing the following specific provision:“that no redistribution of functions shall provide for the transfer, consolidation, or abolition of the whole or any part of the General Accounting Office or of all or any part of its functions."

(7) Soon after VE-day, President Truman asked for a renewal of the reorganization authority enacted in 1939. The Congress approved the request (act of December 20, 1945, 59 Stat. 613) but specifically excluded the General Accounting Office and, perhaps to allay any further efforts to weaken its agency, inserted the following language:

the Comptroller General of the United States, or the General Accounting Office

are a part of the legislative branch of the Government.” President Truman did not object.

(8) The further renewal in 1949 of the reorganization authority repeats the exclusion of the General Accounting Office and the language as to its legislative status (Public Law 109, 81st Cong., approved June 20, 1949). President Truman proposed the exclusion.

(9) The bill establishing the Hoover Commission quite carefully restricts the. scope of its study and recommendations to agencies in the executive branch of the Government (act of July 7, 1947, 61 Stat. 246).

The foregoing summary shows how the Congress has beaten back previous attempts to transfer functions of the General Accounting Office to the executive branch. The accounting provisions of the present bill, S. 2054, represent a renewal of those attempts. The General Accounting Office, Bureau of the Budget, and Treasury Department are united in their opposition to those provisions.

We are not simply asking the committee to accept a do-nothing attitude on the important subject of better accounting in Government. Instead, we have brought to the attention of the committee the progress that is now being made under the joint accounting program of the three agencies. The committee is not asked to take anything on faith. Its attention has been directed to actual performance. As former President Hoover testified before the committee I could only wish that he had been present to hear the testimony of the Comptroller General, the fiscal assistant secretary of the Treasury, the Assistant Director of the Bureau of the Budget, and other representatives of the three agencies reporting that performance to the committee.

Mr. Hoover's conclusions as to what is wrong with Government accounting are based on the findings of his task forces. The difficulty is that in many instances, due to the progress made under the joint accounting program, those findings are out of date. In all the other instances the joint accounting program staff is well aware of the deficiencies cited and is working toward simplification and improvement, with due regard for the transitional problems.

Mr. Hoover quoted a number of statements from the appendix to the report of the Accounting Policy Committee of the Fiscal, Budget, and Accounting Task Force. Those statements were prepared by Mr. T. Jack Gary, Jr., research director for the Accounting Policy Committee. Mr. Gary testified on S. 2054 before you committee and expressed his vigorous opposition to the provisions of the bill which would set up an Accountant General. As reasons for his opposition, Mr. Gary stated that, in his opinion, the enactment of the legislation would retard progress and that any legislation on accounting should grow out of experience under the joint accounting program.

He said that the recommendations of the Hoover Commission as to objectives in the accounting field are already in the joint program as are 11 of 15 such recommendations of the task force. Your





committee also heard reference to Mr. Gary's recent testimony before the House Appropriations Committee, based on his actual experience with the operation of the joint accounting program, to the effect that he did not see how any more could be accomplished under an Accountant General than is being accomplished under the program.

To illustrate Mr. Hoover's apparent lack of information regarding the basic concepts of the joint accounting program, I would like to single out one paragraph from statements quoted by Mr. Hoover. That paragraph is as follows:

“No one person or agency is charged with the responsibility either to prescribe a complete plan of accounting for the Federal Government or to supervise its operation as a result

* accounting and over-all financial reporting is incomplete, inconsistent, duplicative, cumbersome, and based on certain accounting principles not generally accepted either in commercial or governmental accounting practice

The joint accounting program has brought together the resources of the Government's three top fiscal agencies, plus the accounting talent of every other agency in the Government, under the leadership of the Comptroller General. There is now no argument over jurisdiction, which would inevitably arise if the prescribing of systems were placed under an Accountant General and the approval of a part of those systems under the Comptroller General. The Government's accounting problem is being approached in its entirety with all the interested viewpoints represented. In this way duplicating and unnecessary procedures can be eliminated with proper understanding of the needs of all agencies having accounting and auditing responsibilities, and without sacrificing the ultimate power of the Comptroller General to exercise the requisite control for the Congress.

Mr. Hoover quoted statements from the report of the majority of his Commission indicating that freight-car loads of vouchers from all over the United States are hauled to Washington for individual examination in the General Accounting Office. Those statements are predicated upon a misconception of the majority, apparently still persisted in, that the Comptroller General “now requires administrative agencies of the executive branch to submit all expenditure vouchers and supporting documents for every individual transaction to the General Accounting Office for examination and settlement." Your Expenditure Committee has heard from several witnesses testimony as to the actual present practice and policies of the General Accounting Office under which site audits are being performed in hundreds of locations throughout the United States, and a comprehensive audit program is being developed to take advantage of internal checks and controls in the agencies under audit. The figures cited by Mr. Hoover are fantastically out of focus with the real situation. Of course, if the Congress desires the General Accounting Office to discontinue its independent audit, a considerable saving could be made in numbers and people and in dollars, in addition to those already made through improvements in procedures and adoption of new techniques. Inevitably, however, that saving would be a drop in the bucket compared to the losses which would result if the Comptroller General's hands were tied in the manner proposed under S. 2054.

The Comptroller General and I have set our course in the direction of decentralization of audits and comprehensive audits where it is found to be in the best interests of the Government, but no action short of legislative action wilı stampede us into abandoning our basic responsibility for seeing that expenditures conform to the will of Congress as expressed in appropriation acts and other legislation. As agency accounting systems are improved under the joint accounting program, it may be possible more and more to rely upon selective audit methods and, as has already been testified by representatives of the Office, if any further legislation should become necessary to clarify or give additional legislative sanction to this practice, it will be recommended under the joint accounting program.

Mr. Hoover quoted from his Task Force on the Federal Supply System. I would like to point out that much has already been accomplished under the legislation reported out by this committee last year and enacted as the Federal Property Act of 1949 in the direction of simplification and reduction of costs of Federal procurement transactions.

Mr. Hoover quoted from his Task Force on Lending Agencies concerning the necessity for accountability of management being commensurate with its responsibility and authority within a framework of broad accounting policy. This is a good statement, as far as it goes, of the objectives of the present joint accounting program.

Mr. Hoover quoted from his Commission's report on the Post Office. The General Accounting Office last year recommended legislation, subsequently introduced as S. 2509 and H. R. 6395, to modernize and improve the financial operation and control of the Post Office Department and to give the Postmaster General the flexibility he needs to do an effective job without abdicating essential control by the Congress. Under that legislation responsibility for all administrative accounting functions now being performed for the Department by the General Accounting Office, as required by existing law, would be transferred to the Department. Without waiting for action on that legislation or other proposed legislation intended to implement the Hoover Commission recommendations on the Post Office, the General Accounting Office is working with the Postmaster General under the joint accounting program on important phases of mutual accounting and auditing problems.

Mr. Hoover quoted from his Task Force on the Veterans' Administration on the need for simplification of accounting. Your committee has heard the steps already taken under the joint accounting program to adopt on an experimental basis, with a view to later Government-wide application if deemed appropriate, many simplified procedures, not only for disbursements but for collections as well.

Mr. Hoover quotes bis Task Force on Government Business Enterprises on deficiencies in the accounts of the Maritime Commission and the Bureau of Reclamation. Intensive work has been done in both of these agencies under the joint accounting program.

In the case of the Maritime Commission, I am confident that no more could have been done by anyone outside the Commission itself than has been done through the present cooperative effort. Definite accomplishments were reported to the Congress by the Comptroller General in his audit report of February 6, 1950, on the Maritime Commission for the fiscal years 1948 and 1949. As stated in that report, full benefits cannot reasonably be expected from the revisions adopted and those now in progress before fiscal year 1951, and much of the success of the new program will depend on the establishment and effective utilization by the Commission of a procedures and planning staff and an internal auditing staff. The Commission concurred in its need for such a staff in its presentation last month to the House Appropriations Committee.

In the case of the Bureau of Reclamation, the committee heard read into the record the statement of the Commissioner of Reclamation concerning the completion of installation of a new accounting system under the joint accounting program,

I have gone into some detail in commenting upon Mr. Hoover's illustrations in order to show the committee that the General Accounting Office, the Treasury Department, and the Bureau of the Budget are not just talking when they say they recognize the need for reforms in Government accounting. They have vigorously and unitedly attacked the problem and they have already, in cooperation with the operating agencies themselves, brought about needed changes which will give the agencies, the executive branch, the Congress, and the taxpayers better information as to how the public funds are being expended and as to the financial position of the agencies. A solid foundation is being laid for solution of the problem on a Government-wide basis.

There is no difference between the objectives of the joint program and those of the Hoover Commission. Those who are administering the joint program simply happen to believe that accounting improvements can best be brought about by a combination of the talents and experience of those most concerned with the problem, including those who must operate the agencies' systems, rather than by scrapping the cooperative effort and starting over again with a new philosophy, a new organization, and a new period of doubt and dissension.

In the long run, the job would have to be accomplished the way it is being done now, by marshaling the forces of the General Accounting Office, Treasury Department, Bureau of the Budget, and all other Government agencies. The important thing, we in the General Accounting Office believe, is that it is being accomplished now without sacrificing any essential control by the Congress over public expenditures.

(The following letters were received by the chairman from various individuals or organizations, expressing their viewpoints on S. 2054:) CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA,


Washington 6, D. C., March 6, 1950. Hon. John L. McCLELLAN, Chairman, Senate Expenditures Committee,

Senate Office Building, Washington, D. C. DEAR SENATOR MCCLELLAN: The Chamber of Commerce of the United States believes that improvement in budgeting and accounting methods is fundamental in the movement toward greater efficiency and economy in government. Adoption of a performance budget, as recommended by the Hoover Commission, should be an important step toward simplification and clarification. Revision of present law to fix responsibility for accounting practices and to assure adoption of a uniform system throughout the Government also is needed.

The chamber supported the provisions in the arms unification act which provided for a performance budget in the Department of Defense. Already, the new system has had beneficial effects with respect to both efficiency and economy. The outlook appears. bright for further accomplishments in that large segment of governmental activity.

The chamber also has viewed with approval the progress toward a performance budget which was made by the Bureau of the Budget in the preparation of the budget for the fiscal year 1951. The changes thus made should be helpful in centering attention upon the general character and relative importance of particular activities. It should be less difficult both for members of Congress and for the public to grasp the details of the complicated structure of government.

The chamber favors the general principle of the proposed legislation to give full power to the President to establish the performance budget throughout the various departments and agencies and to repeal numerous statutes which now stand in the way of complete adoption of the new system.

Without undertaking to pass upon the details of the legislation, the chamber believes that the parts of S. 2054 relating to the budget, with such amendments as are deemed to be desirable, should be enacted by the Congress at the present session. Accounting provisions, after being perfected, also should be approved.

The Hoover Commission has focused attention on unsatisfactory conditions which long have prevailed with respect to accounting. It is desirable that Congress should give careful consideration to this situation with a view to enactment of legislation in addition to or amendment of the present budget act, which will fix responsibility and lead to adoption of a uniform accounting system, Sufficient expert opinion is available for the guidance of the Congress in reaching a wise solution of a difficult problem. Cordially yours,

(Signed) Clarence R. Miles,

(Typed) CLARENCE R. MILES, Manager, Department of Governmental Affairs.


Harrisburg, Pa., March 8, 1950. Hon. John L. McCLELLAN, Chairman, Committee on Expenditures in the Executive Departments,

Senate Office Building, Washington, D. C. DEAR SENATOR MCCLELLAN: Thank you for sending us the copies of S. 2054 relating to Federal budgeting and accounting. Due to the press of work here we have been unable to accept your kind invitation to appear at the hearing on the bill, but would like to make the following comments.

The Pennsylvania Economy League confines its research and survey activities to the State and local levels of government. We have, however, studied and worked for improvement of budgetary and accounting procedures in our State executive department and in many of our city and county governments during the 18 years of our existence.

We believe that sound, workable budgeting procedures are beneficial to citizens and public officials alike. We are also cognizant of the careful study made by the Hoover Commission task force assigned to this subject.

Because of our confidence in the Hoover Commission recommendations and our interest in good budgetary and accounting systems for government, we would give our general endorsement to the principles underlying Š.2054. Thank you again for your courtesy in inviting us to appear at the hearings. Sincerely yours,

WELLES A. GRAY, Director, State Division.

URBANA, ILL., March 17, 1950. Senator John L. McCLELLAND,

United States Senate, Washington, D. C. DEAR SENATOR MCCLELLAND: I urge the favorable consideration of the Senate Committee on Expenditures of S. 2054, a bill to reorganize the accounting and auditing functions of the Government.

I enclose a copy of a review on this subject which I made in 1940 on behalf of the Committee on Governmental Accounting of the American Institute of Accountants.

A thorough reorganization of this phase of the Government's activities is long overdue. The proposed reorganization would not only aid the administrative divisions of Government in carrying out their responsibilities and keeping vital records, but would strengthen the Office of the Comptroller General, by making it possible for it to devote its efforts and time to an adequate program of independent audit. Responsibility for accounting is now in a divided state, and responsibilities of a diverse character placed on the General Accounting Office make it impossible for that Office to do an adequate and expeditious job of independent auditing and analysis. S. 2054 would pave the way for resolving these difficulties and weaknesses. Respectfully yours,


Certified Public Accountant. (The copy of the review referred to, entitled "Federal Accounting and Reporting," is on file with the committee.)

(The text of the Budget and Accounting Act, 1921, is inserted for convenient reference:)


(S. 1084) AN ACT To provide a national budget system and an independent audit of Government accounts, and

for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assumbled,


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SECTION 1. This Act may be cited as the “Budget and Accounting Act, 1921.' SEC. 2. When used in this Act,

The terms "department and establishmen;" and "department or establishment” mean any executive department, independent commission, board, bureau, office, agency, or other establishment of the Government, including the municipal government of the District of Columbia, but do not include the Legislative Branch of the Government or the Supreme Court of the United States;

The term “the Budget” means the Budget required by section 201 to be transmitted to Congress;

The term “Bureau” means the Bureau of the Budget;
The term “Director” means the Director of the Bureau of the Budget; and

The term “Assistant Director” means the Assistant Director of the Bureau of the Budget.

TITLE II.-THE BUDGET Sec. 201. The President shall transmit to Congress on the first day of each regular_session, the Budget, which shall set forth in summary and in detail:

(a) Estimates of the expenditures and appropriations necessary in his judgment for the support of the Government for the ensuing fiscal year; except that the estimates for such year for the Legislative Branch of the Government and the Supreme Court of the United States shall be transmitted to the President on or

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