Mr. STAUFFACHER. That is right, and we see nothing to be gained by creating by statute an Office of the Comptroller. We think the position should be provided.

I might say in addition, sir, that it seems to us section 402 (b), coming after section 402 (a), in effect tends to limit the discretion that you seem by section 402 (a) to give to the Secretary of Defense in organizing for the budget and fiscal matters.

The CHAIRMAN. You think that is wrong?

Mr. STAUFFACHER. I think that actually the statute would be better with just 402 (a) plus provision for a Comptroller.

The CHAIRMAN. Let me get this straight. You are suggesting that we might consider eliminating section 402 (b). Is that what it boils down to?

Mr. STAUFFACHER. That is correct, sir, unless the committee feels they should authorize the Secretaries to appoint a Comptroller. I think they could do so without statutory authorization. However, the committee may wish to specifically establish those positions.

If I could say one other word on this other matter at the back of the bill having to do with the reports of property, which was mentioned yesterday, the Budget Bureau certainly does not object to that section. The CHAIRMAN. Where is that?

Mr. STAUFFACHER. Section 412, sir.

The CHAIRMAN. Section 412?

Mr. STAUFFACHER. It is on page 15 of the bill, line 24 and line 25. The CHAIRMAN. Yes.

Mr. STAUFFACHER. It is our feeling that the words "on both a quantitative and monetary basis' could well be deleted and that the rest of the section could stay in.

The CHAIRMAN. You mean you would let him make the yardstick himself?

Mr. STAUFFACHER. That is right. They seem to give the implication that you want the pricing of certain things, which in our judgment may not have too much meaning.

I think also, Mr. Chairman, that six recommendations of the Commission on Organization of the Executive Branch should be inserted in the record to indicate their views on the subject of allowing the Secretary to determine the internal organization of a department. From the report on "the national security organization."

RECOMMENDATION NO. 1

The Commission, therefore, recommends:

(a) That full power over preparation of the budget and over expenditures as authorized by the Congress be vested in the Secretary of Defense, under the authority of the President.

RECOMMENDATION NO. 2

(a) That the principle of unified civilian control and accountability be the guiding role for all legislation concerned with the National Military Establishment and that full authority and accountability be centered in the Secretary of Defense, subject only to the President and the Congress.

(b) That all statutory authority now vested in the service departments, or their subordinate units, be granted directly to the Secretary of Defense, subject to the authority of the President, with further authority to delegate them as he sees fit and wise.

(g) That all administrative authority be centered in the Secretary of Defense, subject only to the President, including full and final authority over preparation of the military budget and over the expenditures of funds appropriated by the Congress.

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(n) * * * and that the Secretary of Defense be empowered to set up such personnel assistants to himself as he shall require to relieve him of day-to-day detail, to advise and assist him in planning and carrying out programs, and to organize this staff as he sees fit.

These specific recommendations relating to the national-security organization are in line with more general recommendations contained in the commission's report on general management of the executive branch.

Note particularly recommendation No. 20.

We recommend that the department head should be given authority to determine the organization within his department.

The CHAIRMAN. All right. Thank you very much.

Now we will be glad to have Mr. McNeil take the stand. Please give your name and affiliation.

STATEMENT OF W. J. MCNEIL, SPECIAL ASSISTANT TO THE SECRETARY OF DEFENSE

Mr. MCNEIL. My name is W. J. McNeil, special assistant to the Secretary of Defense. I was assigned by Secretary Johnson to assist Mr. Eberstadt and his group in developing certain of these recommendations.

The CHAIRMAN. So that the record will be complete, Mr. McNeil, you have really been sitting in all of these conferences to evolve title IV ever since the first proposals were considered?

Mr. MCNEIL. That is right, sir.

The CHAIRMAN. With Mr. Eberstadt, General Mudge, you have been with the committee, you have been with Senator Byrd, and you have conferred with me and, in other words, you have been in the picture from the very start.

Mr. MCNEIL. Yes, sir.

The CHAIRMAN. And this is the result of those combined conferences?

Mr. MCNEIL. Yes, sir.

The CHAIRMAN. We would be very glad to have you now pick up the ball and give us a run-down on these proposals and why you think they are advisable. Go right ahead.

Mr. MCNEIL. With the chairman's permission, I will take 6 or 8 minutes briefly to analyze the specific sections, and I have several charts which I can present if you would like a graphic picture of major problems and the proposals for solution.

The CHAIRMAN. So everybody will be familiar with it, we have two things before us: Title IV exactly as it is proposed to be put in the bill, and the other is title IV with an explanatory note; and so that members can follow you, if they have those two before them you can direct their attention to one or the other as you see fit.

Mr. MCNEIL. I shall follow the order of the committee print. Inasmuch as there was extensive discussion yesterday and briefly this morning on section 401 and section 402, as well as a brief dis

cussion this morning on the same subject, I shall start with section 403 on the performance budget.

The CHAIRMAN. What sections do you want to start with?

Mr. MCNEIL. Section 401 and section 402 cover the establishment of the comptrollers. There was extensive discussion yesterday and early this morning on this subject and unless you desire otherwise, I will go to section 403.

The CHAIRMAN. Go right ahead. We are at No. 403, the performance budget. Now, I notice there is no quotation mark after the word "budget", but there are quotation marks before the word "performance. Is that intentional? I suppose it is.

Mr. MCNEIL. I would have to defer to the legislative experts for the answer, sir.

The CHAIRMAN. Just make a note of it and see if it is right.

Mr. MCNEIL. Section 403 provides for the adoption of the performance budget in the Military Establishment. The Commission on Organization of the Executive Branch of the Government—

The CHAIRMAN. I beg your pardon?

Mr. MCNEIL. Section 403 provides for the adoption in the Military Establishment and the military departments of the performance type budget. The Commission on Organization of the Executive Branch of the Government recommended that this type of budget be adopted by the Federal Government.

Essentially it provides that all costs, to the extent that is practicable, of an identifiable program be included in a single estimate and be prepared, presented, and justified that authorized programs be administered after the appropriation of money, in a manner that clearly reflects the cost of performance of functions and activities.

It contemplates that there be a logical grouping of identifiable programs, that such grouping parallel so far as possible the organization and management structure, and that there be separation between capital and operating expenditures. In adopting the performance type budget, there is considerable work which must be done and, therefore, a conversion period is required.

Section 403 (b) provides that for 2 years the Secretary of Defense, with the approval of the President, would have authority to make internal adjustments or transfers in order to go from our present type of budget operation to the performance type budget basis.

That authority is limited to 2 years. The budget cycle of the Federal Government normally takes up 2 years before the planning and implementation of the performance budget could normally take place. This conversion authority should permit us to proceed as rapidly as possible to get on the performance budget basis in less than the normal 2 years.

Section 404 provides for program adjustments. The Commission on Organization of the Executive Branch of the Government made recommendations that there be limited authority granted to the Military Establishment to permit transfers up to 5 percent between major programs of the departments in order to promote efficiency and economy, inasmuch as the plans today, budget plans, have to be made some 18 months to 2 years prior to the year in which the operation takes place.

Senator BYRD. That is within each of the three branches?

Mr. MCNEIL. That is correct.

Senator BYRD. You have got to make the transfers within the Army, Navy, or Air Force?

Mr. MCNEIL. Within the Army, within the Navy, or within the Air Force, but no transfers between military departments are authorized.

Reports of those transfers must be made currently to the President and to Congress, and the transfers could only be made with the approval of the President in the first instance.

Section 405 provides that the Secretary of Defense shall approye all requests for legislation originating within the Military Establishment, which would later result in appropriation requests. From a long-range standpoint that type of control is essential. This plan is now in effect based on an administrative order. This section would make this procedure a permanent practice. It is now working satisfactorily.

Section 406, "Obligation of appropriations," essentially provides that the Secretary of Defense would be required to approve the scheduled rates of obligations of each of the three military departments before appropriated funds were obligated. The Commission on Organization of the Executive Branch of the Government stated that they felt that the present apportionment process, which has been in existence for the last 27 or 28 years, was inadequate and that corrective processes were necessary. The procedures contemplated by this section will not supplant the apportionment process, but are intended to make the apportionment process work as originally intended. Section 407 provides authority for working

Senator BYRD. Before you leave that section, what additional power does that give to the Secretary of Defense over the budget as compared to the bill that the Committee has now marked up?

Mr. MCNEIL. I do not believe it gives any additional power. It is possible this could be accomplished anyway. As I mentioned a moment ago, administratively we have proceeded along this line in the last 6 or 7 months under the legislative process, which I believe has been explained to your committee earlier and under the apportionment procedures which we have adopted. This section merely spells it out as a standard practice to be followed in the future.

Senator BYRD. This section relates to the authorizations for appropriations. Under present legislation does the Secretary have the right or is he required to approve authorizations for appropriations when they are requested of Congress?

Mr. MCNEIL. Section 405 is intended to cover basic legislative matters. An example is the bill authorizing public works construction, which later would result in appropriation requests.

Senator BYRD. We will be asked on the floor to what extent that will increase the power of the Secretary of Defense over the budget and over the request authorizations. I would like to have you, if you would, put in the record to what extent, if any, this particular amendment increases the authority of the Secretary of Defense, especially over the requesting of appropriations and authorizations.

Mr. MCNEIL. It clarifies his power over the whole appropriation process, because control over hasic legislation which later results in appropriation requests is an integral part of the appropriation process. Senator BYRD. I agree with you on that, and I think it may be made

very clear because an authorization is an integral part of the process of making appropriations.

Mr. MCNEIL. Yes, sir.

Senator BYRD. And he should have the same authority, in my opinion, over authorizations as in recommending appropriations.

Mr. MCNEIL. This in effect would provide the same authority over the legislative process as it would over the request for appropriations later.

The CHAIRMAN. I believe Mr. Eberstadt has a word to add.

Mr. EBERSTADT. Apropos of the question Senator Byrd asked, my impression is that 405 and 406 do not so much increase the general authority of the Secretary as they clarify his responsibility within that authority.

Mr. MCNEIL. That would be my interpretation.

The CHAIRMAN. In other words, he probably had the authority all the time, but we did not spell out the fact that with that auhority he had a responsibility. Now, in this particular section 405 and section 406 we are giving him the responsibility which, of course, automatically must carry a certain amount of authority to discharge that responsibility. It that right?

Mr. EBERSTADT. Yes. Do you concur, Mr. McNeil?

Mr. MCNEIL. I would, sir.

The CHAIRMAN. Really what you have done here is to fix the responsibility for the performance of a function, which is even more important, in my opinion, than to give him the authority, because he generally can find that.

Mr. MCNEIL. And to clarify the way in which it is carried out.
The CHAIRMAN. Yes.

Mr. MCNEIL. Shall I proceed with the next section, sir?

The CHAIRMAN. Senator Byrd, after you were called out both Mr. Eberstadt and Mr. McNeil dealt with section 405 and section 406, and stated that the real purpose of the section was to give no authority he probably did not already have but to give him responsibility. Senator BYRD. That was my understanding, but I wanted to be sure that is was in the record.

The CHAIRMAN. Are you ready for him to go ahead?
Senator BYRD. Yes.

The CHAIRMAN. All right, Mr. McNeil.

Mr. MCNEIL. Section 407 authorizes the establishment of working capital funds covering inventories of material, particularly standard stock or common use items and to provide working capital funds for industrial type or commercial type activities. It would put industrial type and commercial type activities on a business basis similar to private industry.

The CHAIRMAN. Give me an example just out of the sky of an industrial type activity.

Mr. MCNEIL. An industrial type activity would be a shipyard which is primarily a large job shop operation.

The CHAIRMAN. I understand.

Mr. MCNEIL. A commercial type activity would be a business operation such as a laundry which was performing common services to Army, Navy, and Air Force elements in a given area.

The CHAIRMAN. I understand.