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Organization in the Executive Branch that an Accountant General be established under the Secretary of the Treasury, and that the Secretary be given authority to prescribe general accounting methods and enforce accounting procedures, subject to the approval of the Comptroller General within a restricted area. The Commission was split wide open on this recommendation. The chairman of this committee and Commissioner Manasco strongly dissented on the ground that, if there is to be any change in basic jurisdiction to prescribe accounting systems, it should be in the direction of strengthening the hand of the Comptroller General. They expressed the belief that the joint accounting program of the Comptroller General, the Secretary of the Treasury, and the Director of the Bureau of the Budget (the three agencies most concerned with Government accounting) had put aside the jurisdictional question, and this is no time to raise it again. In this last belief they were joined by Vice Chairman Acheson.

Before going any further, I would like to tell you briefly about the joint accounting program, which was commended not only in the minority but in the majority report of the Hoover Commission.

Under the Budget and Accounting Act, the Comptroller General was made responsible for prescribing systems of administrative appropriation and fund accounts for use by the executive departments and establishments. However, there was nothing in the law requiring the agencies to use those systems after they were prescribed. During the heavy war years, we in the General Accounting Office adopted the policy of prescribing systems only for those agencies which requested them and showed a disposition to use them. On the day after the surrender of Japan, I called a meeting of my staff and told them the No. 1 problem in the General Accounting Office from that date was improvement of accounting in the Government. Because of the legal responsibilities and interests of the Treasury Department and the Bureau of the Budget, from the standpoint of fiscal administration in the Government, I felt it was imperative to have their full participation in any such program. Because the day-to-day maintenance of accounting systems is the responsibility of the various administrative agencies their cooperation was just as important. Conservations were initiated by me with the Secretary of the Treasury, John W. Snyder, and the Director of the Bureau of the Budget, then James E. Webh; and, as a result, we inaugurated in December 1947 what is known as the joint accounting-improvement program.

In so doing, we recognized and later formalized in documents signed by all of us our complete agreement that:

1. Current accounting and financial reporting are proper functions of the executive branch. Accounting systems prescribed by the Comptroller General should be in recognition of this as a fundamental principle.

2. Audit, independent of the executive branch, is an essential and proper function of the General Accounting Office. Properly designed accounting systems are a vital factor to the effectiveness of such independent audit.

3. Accounting systems should be developed as a cooperative undertaking as an essential to meeting the needs and responsibilities of both the executive and legislative branches of the Government.

We submitted our program to every agency of the Government. As I recall, without exception they enthusiastically endorsed it. They have all appointed representatives to work with the three top fiscal agencies to bring about needed accounting reforms. The program has been strongly endorsed by both the President and congressional committees, and we have kept the committees advised of progress. I want to mention here especially that great credit is due to this very committee for the suggestions given prior to setting up the program, for the support of the program, and for the participation in some of our work by staff members of the committee.

To spearhead the program, I set up in the General Accounting Office, in January 1948, an Accounting Systems Division to provide a small staff of leaders and technical advisers who could guide the agencies in the development of their accounting systems. To head up our work, we were fortunate in obtaining the services of Mr. Walter Frese, a certified public accountant, with experience in both the Budget and the Treasury as well as outside the Government. A fundamental part of the program has been to get the agencies themselves to take the initiative in molding their own accounting systems to meet their management needs. At a recent meeting between Secretary Snyder, Budget Director Pace, and myself, the joint staff presented a report of progress to date, which even exceeded our expectations. I am going to leave it to others to give more details of that progress. At present I would like permission to place that report in the record. But let me say emphatically that our experience has convinced me even more firmly that this cooperative approach is the only true solution to the Government's accounting problems.

The establishment of an Accounting Service in the Treasury Department with authority to prescribe by regulation the general accounting methods, practices, and procedures to be followed by all agencies in the executive branch of the Government, as well as the authority to supervise operations thereunder, would transfer to the executive branch a vital and very substantial part of the accounting functions that the General Accounting Office now exercises. There should be no misunderstanding about that. Nor should the seemingly innocuous language in the bill be permitted to hide the fact that this is but a reflection of the series of attempts through the years to shift control over the financial operations of the Government from the Congress to the executive branch.

This issue was thought to be settled once and for all by the Budget and Accounting Act, but there always has been a school of thought which believes that in the operation of the Government it is for Congress to merely appropriate the money and for the executive branch to spend it without further checks. This seems to be the theory of the Commission's Task Force report on fiscal, budgeting, and accounting activities. That report does not contain a single significant proposal which had not previously been made and rejected by the Congress. It is a restatement of the same doctrine presented to and turned down by the Congress in 1923, 1932, and 1937, resulting in the last case in the defeat for the time being of President Roosevelt's whole reorganization effort.

I am an old hand at this thing called Government reorganization, going back to 1932. Following the recommittal of President Roosevelt's reorganization bill in the House in 1938, I personally polled every Member and found the reasons for the opposition. Based on what I found-and I say this with all due modesty—I was the author of the 1939 Reorganization Act, passed after the elimination of the objectionable features, the main one of which was the provision for abolition of the General Accounting Office. As finally passed, the 1939 act specifically exempted the General Accounting Office from the reorganizing authority granted to the President. The 1945 Reorganization Act went even further and declared that the term “agency” as used in the act "does not include the Comptroller General of the United States or the General Accounting Office, which are a part of the legislative branch of the Government.” The same provision was included in the draft of reorganization legislation sent down by the President last year and was enacted as part of the Reorganization Act of 1949. I was the first witness before this committee last year in its consideration of that act, and I want to quote the following statement from my testimony at that time:

“My own agency, the General Accounting Office, is exempted by the terms of the pending bill not because it is sacrosanct or any more angelic than the rest, but in recognition that it is the creature and agent of Congress, by law a part of the legislative branch. I would invite—not oppose—any studies and legislation undertaken by the Congress looking toward improvement of the General Accounting Office. Anytime it cannot justify its worth by its accomplishments in the opinion of Congress, it ought to be abolished or drastically changed.”

On this point, I would like to point out in passing that the act setting up the Hoover Commission expressly states that the Commission shall study and investigate agencies of the executive branch. The commission's authority did not extend to the study or making of recommendations concerning an agency of the Congress itself.

I have no quarrel with the Commission. I have favored many of its recommendations, and helped in the enactment of some of them into law. Nor do I question the soundness of the specific improvements in accounting which the Commission desired. In many areas there is little difference between the Commission's objectives and those of the joint accounting program. The point I want to drive home is this: It is a great mistake to assume that these improvements can be achieved only by stripping the agency of the Congress of effective authority over the determination of accounting requirements. These specific improvements can be and are being attained right now without the old arguments over jurisdiction, through the cooperative approach under the joint accounting program. Under that program we are avoiding the confusion, delay, and disruption that would result from a drastic change in placement of responsibilities. At the same time we are working toward full disclosure of what has happened to the public funds, for the benefit of executive management, the Congress,

and the taxpayers. Without impugning in the least the integrity of any official of the executive branch, and entirely on principle, I say that the surest guaranty that the Congress will always have such full disclosure of accounting information which it wants and needs is to leave the ultimate prescribing function where it stands, in Congress' own agency the General Accounting Office. I believe this committee is of that mind, because it was this committee that reported out the Federal Property Act of 1949, enacted since the Hoover report, and giving the General Accounting Office increased responsibilities in the field of property accounting, with proper recognition of the cooperative approach under the joint accounting program.

I am not going into a section-by-section analysis of the bill, but I have particular concern with section 22 (a) which authorizes the Secretary of the Treasury, in consultation with the Comptroller General, to issue for the guidance of disbursing and certifying officers regulations and opinions as to the application, scope, and availability of appropriations made by Congress.

This section, in my opinion, is one of the most dangerous in the whole bill. It would result in a wholly impractical division of responsibility and a watering down to the point of futility of the present control exercised by the General Accounting Office for the Congress over Government expenditures. This proposal is not even based upon a recommendation of the Hoover Commission, but apparently upon one of the task force recommendations which were repudiated even by the majority of the Commission. Its utter lack of feasibility suggests that those conceiving the proposal may have been unaware of its effect.

Under existing law, disbursing officers, certain certifying officers, and heads of agencies may apply for a decision of the Comptroller General upon any question involving a payment to be made by or under them. The questions raised and the decisions rendered by the Comptroller General in many instances involve availability of appropriations. Presumably, it is the purpose of this proposal in section 22 (a) to divest the Comptroller General of his authority to render binding decisions on at least this class of questions—if not all classes—and to supplant it with authority to consult on such matters with the Secretary of the Treasury, who is to issue regulations and opinions.

Aside from the utter impracticability of such an arrangement, one thing is certain. In actual operation, it would result in giving the executive branch full authority to determine according to its own ideas the objects for which appropriations may be expended. This authority is presently vested in the Comptroller General. If Congress is to retain any effective control over expenditures beyond the date when it appropriates money, the power of the Comptroller General to make legal determinations binding on the executive branch as to the availability of appropriations for expenditures should never be relaxed.

With respect to those provisions of title II dealing with administrative examination of accounts, the conduct of examinations and audits in the field, and the authority to audit and settle accounts on the basis of spot checks, sampling and so forth, all of these proposals have been under study as a part of our joint accounting program. It may well be that some legislation will be needed to accomplish our objectives in full. However, specific legislation that may be required is not completely worked out at this time. Mr. Yates, the Assistant Comptroller General; Mr. Weitzel; and Mr. Frese, who are here with me today, will be glad to give you further details as to what we are presently doing in these fields.

To sum up, I do not regard S. 2054 as the proper approach to worth-while improvements in the accounting systems or sound economies in the audit processes. Its result would be to cut away and surrender the power of the legislative branch. The joint accounting program has already demonstrated that acknowledged deficiencies in the Government's present accounting systems can best be worked out by the cooperative approach which has been undertaken. I strongly recommend that any legislation enacted with respect to Federal accounting be an outgrowth of the work now being done under the program rather than by stripping the Congress and its agent, the General Accounting Office, of one of the most effective means of enforcement of proper accounting for public expenditures.

Gentlemen, the legislative control of public funds is the basis upon which the fiscal policy of this Government is built. Checks and controls by the Congress itself and by its agent, the General Accounting Office, are means of enforcement. During the last 20 years a great deal of legislation has been enacted which, bit by bit, has the effect of removing the financial controls and checks of the legislative branch, leaving the executive free to do as it wills in its spending actions. This bill is another attempt of the same nature, differing only in that this time it comes from outside rather than inside the Government. Legislative control of expenditures is a control which should be jealously guarded. Any further encroachments upon it should be vigorously rejected. Once you give this control away, you will never, and I repeat, never, get it back.

GENERAL ACCOUNTING OFFICE,

Washington, September 23, 1949. CHAIRMAN, COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS,

United States Senate. MY DEAR MR. CHAIRMAN: Further reference is made to your letter of June 20, 1949, acknowledged by telephone on June 27, requesting my views on the provisions of S. 2054, entitled "A bill to authorize the President to determine the form of the national budget and of departmental estimates, to modernize and simplify government accounting and auditing methods and procedures, and for other purposes. It is understood that the bill purports to implement certain recommendations of the Commission on Organization of the Executive Branch of the Government concerning budgeting and accounting. As you indicate in your letter, the General Accounting Office is directly concerned only with part II of the bill, entitled “Accounting.”

BUDGET

The main object of the provisions contained in part I (The Budget and the Office of the Budget) of the bill is to give the President complete authority over the form and contents of the budget. Also, the budget would no longer be required to be transmitted to the Congress on the first day of each regular session but could be transmitted anytime during the first 3 months of each regular session. These matters are of more direct concern to the President and the Bureau of the Budget. I have no recommendations to make with respect thereto except to point out that this bill would repeal most, if not all, existing provisions of law requiring specific items of information to be set forth in each budget. The President would be empowered to include only such details as he deemed advisable or necessary. It would be left to the Appropriations Committees to make specific requests for break-downs and explanations of items after the budget was sent to the Congress. While postponing the date of transmittal would undoubtedly benefit the President, it would, of course, leave the Congress with just that much less time to consider and enact the appropriations before the beginning of the ensuing fiscal year. Moreover, I am advised that considerable progress is being made by the Bureau of the Budget toward a performance budget under the provisions of existing law and that the Bureau itself may not consider any new legislation covering these matters necessary at this time.

There have been noted the amendments intended to be proposed by Senator McCarthy to the bill, S. 2054, referred to your committee August 1, 1949. Such amendments would incorporate in the bill provisions similar to those enacted for the National Military Establishment in title IV of Public Law 216, approved August 10, 1949, dealing with the performance budget and with transfers and adjustments of appropriations and personnel ceilings. They also include provisions similar to those approved by the Senate but not incorporated in the final enactment of Public Law 216, requiring clearance from department heads of requests for legislation which would authorize appropriations to be made to departments in the executive branch. In addition, the amendments would authorize alternative estimates and alternative budgets; would for the first time grant to the President specific authority to reduce expenditures under appropriations in the executive branch of the Government generally if, and to the extent, he determines that the purposes intended by the Congress will be accomplished by the expenditure of lesser amounts; and would require allocations approved by the President as a prerequisite to the availability for obligation and expenditure of appropriations made to any department or establishment and expendable reimbursements thereto. In connection with this latter provision, your attention is invited to the attached copy of my report of August 3, 1949, to you, concerning S. 2161, relative to expenditure reductions by the President.

Part III of S. 2054, as introduced, would specifically repeal numerous provisions of existing law requiring estimates for certain activities, or in certain form, or reports of certain expenditures, so as to leave the President a free hand in determining the form and content of the budget under part I.

ACCOUNTING

Part II (Accounting) deals largely with the recommendation of the majority of the Commission on Organization of the Executive Branch that an Accountant General be established under the Secretary of the Treasury, with authority to prescribe general accounting methods and enforce accounting procedures, subject to the approval of the Comptroller General within a restricted area, and with other duties set forth in the report of the majority. That recommendation was the subject of a strong minority report by Commissioner Manasco and yourself on the ground that, if there is to be any change in basic jurisdiction to prescribe accounting systems, it should be in the direction of strengthening the hand of the Comptroller General, but that the joint accounting program of the Comptroller General, the Secretary of the Treasury, and the Director of the Bureau of the Budget (the three agencies most concerned with Government accounting) had put aside the jurisdictional question, and this is no time to raise it again, The bill, S. 2054, incorporates further provisions based on the report of the Commission's task force, which was repudiated even by the majority of the Commission.

By section 20 of part II the Secretary of the Treasury would be authorized to cieate in the Treasury Department a service to be known as the Accounting Service with an Accountant General at its head. The Accountant General would be appointed by the Secretary of the Treasury, who could provide for the performance by the Accountant General and the Accounting Service of the functions vested in the Secretary by the act.

The views of the General Accounting Office on this phase have reference directly to the functions to be performed by the proposed Accountant General and Accounting Service.

Subject to the authority of the Comptroller General under section 309 of the Budget and Accounting Act, 1921, as it would be amended and weakened by section 22 (b) of the bill, the Secretary of the Treasury would be authorized by section 21 to prescribe by regulation the “general accounting methods, practices, and procedures (including property and cost accounts and expenditure controls) to be followed by all agencies in the executive branch of the Government,” and also would be authorized to supervise operations under such methods, practices, and procedures in all of such agencies. The regulations of the Secretary would provide for frequent reports to him from the agencies as to the status of their accounts. The Secretary would be directed to combine such reports into summary accounts and prepare financial reports covering all the accounting operations of the Government for the information of the President, the Congress, and the public.

For all practical purposes, this section would transfer to the executive branch a vital and very substantial part of the accounting functions that the General Accounting Office now exercises. There should be no misunderstanding about that. Nor should the seemingly innocuous language of this section be permitted to hide the fact that this is but one more in a series of attempts through the years to deprive the Congress of a proper measure of control over the financial operations of the executive branch of the Government.

Commencing with the Treasury Act of 1789, which provided for an auditor and a comptroller in the Treasury Department, the Congress has relied upon the accounting officers of the Government to enforce, according to the legislative intent, the statutory provisions governing the spending of, and the accounting for, public funds. From time to time during the period 1789–1921, the status and functions of the accounting officers were reconsidered by the Congress, and on each occasion action was taken to strengthen the control and make more effective the operations of the accounting officers. In 1868, Congress declared that balances certified by the Comptroller of the Treasury should be final and conclusive upon the executive branch of the Government. In 1894, the Dockery Act effected some degree of centralization of supervision over the Government accounting system under the Comptroller of the Treasury, who was given broad appellate and revisionary powers over the other accounting officers.

And then, by the final step in the process of evolving an accounting agency responsible directly to the Congress, the Budget and Accounting Act, 1921, created the General Accounting Office and made it completely independent of the executive branch.

But there ays have been-and apparently still are—those who believe that in the operation of the Government it is for the Congress merely to appropriate the money and for the executive branch to spend it without interference, guidance, or control. This seems to be the theory of the Commission's Task Force Report on Fiscal, Budgeting, and Accounting Activities—a report which, as indicated above, subsequently was repudiated by the Commission itself. This report, supposedly representing an enlightened view of governmental accounting, does not contain a single significant proposal which had not been made theretofore. It is merely a rehash of the same doctrine presented to the Congress in 1923, 1932, and 1936. Each time the Congress saw through the theoretical arguments and realized, regardless of the basis alleged by the sponsors, that in the final analysis the measures were impelled by the desire to have the expenditure of public funds free from effective legislative control. The Congress must be alert to this new

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