What do you want this for? Each division makes up its own budget, as I understand it, in the Department.

Mr. KARSTEN. That is correct.

Mr. BONNER. And that is approved and so forth and gone over, and then they come here and justify it, and the Appropraitions Committees give them the money.

The point is that I might be able to justify more than I know I am going to need so as to give you some later on.

Mr. KARSTEN. You could not transfer between Departments.

Mr. BONNER. I mean within the Department. You could transfer it from one Division of the Department to another Division.

Mr. KARSTEN. That would be assuming the budget officer was padding the roll a little bit in coming down here.

Mr. BONNER. But my question is: What is the intent of this?

Mr. KARSTEN. In all departments you need flexibility in operation. For example, many times a department is assigned additional duties by legislation which is passed subsequent to the annual appropriation act for such department.

The CHAIRMAN. For economy and efficiency.

Mr. LOVRE. Mr. Chairman, I have one more question.

The CHAIRMAN. Very well.

Mr. LOVRE. Will this eliminate any further deficiency appropriation bills?

Mr. KARSTEN. No, not entirely, but it should reduce the present number of deficiency bills.

The CHAIRMAN. Do you have any questions, Mr. Harvey?

Mr. HARVEY. I just came in, but certainly, from my background in this field, I would take a very dim view of that procedure. The CHAIRMAN. Of that provision of the bill?

Mr. HARVEY. Yes.

The CHAIRMAN. Thank you very much, Mr. Karsten.

Gentlemen, we are very fortunate, I believe, to have among us one who, I am sure, is known by all of you. He is known as the watchdog of the Congress. He is our right arm in matters of expenditures and accounting, and so forth.

The Honorable Lindsay Warren, Comptroller General of the United States, is with us.

Mr. Warren.

STATEMENTS OF HON. LINDSAY C. WARREN, COMPTROLLER GENERAL OF THE UNITED STATES; FRANK L. YATES, ASSISTANT COMPTROLLER GENERAL OF THE UNITED STATES; AND FRANK H. WEITZEL, ASSISTANT TO THE COMPTROLLER GENERAL OF THE UNITED STATES

Mr. WARREN. Mr. Chairman and gentlemen of the committee, I have a short prepared statement this morning. However, I think that Mr. Karsten has so well explained the purposes of the bill that, with your permission, I will forego reading of the statement and will talk informally and try to answer such questions as I can.

The CHAIRMAN. Very well. You can submit your statement for the record.

(The statement referred to follows:)

STATEMENT OF THE HONORABLE LINDSAY C. WARREN, COMPTROLLER GENERAL OF THE UNITED STATES, BEFORE THE COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS, HOUSE OF REPRESENTATIVES, ON H. R. 9038

Mr. Chairman and members of the committee, I am glad to come before you this morning to testify on H. R. 9038, the Budget and Accounting Procedures Act of 1950. It is always a pleasure to appear before your committee, which I have always looked upon as one of the great committees of the Congress and which has brought forth some of the most significant legislation enacted in recent years. I am particularly glad to speak on this bill introduced by Mr. Karsten, chairman of the Public Accounts Subcommittee, who has long been associated with accounting in the Government, both in his own right and as clerk of this committee and secretary to its former chairman, the late John J. Cochran. The bill before your committee represents the outcome of months of work on the part of all parties concerned in improving the budgeting, accounting, and auditing procedures of the Government. It provides a solid foundation for bringing and keeping those procedures up to date and upon enactment, will become, in my opinion, a legislative landmark comparable only to the Budget and Accounting Act of 1921. The bill is identical with a measure, S. 3850, introduced by 11 members of the Senate Expenditures Committee and reported unanimously yesterday. S. 3850 grew out of full hearings by the Senate Committee on Expenditures and able and thorough work by the staff of the Senate committee, and discussions with the staff of this committee. It takes into consideration all viewpoints, and the technical staffs of the General Accounting Office, the Treasury Department, and the Bureau of the Budget were called upon in drafting it.

The bill comprises three titles. Title I on budgeting and accounting consists of two parts. Part I on budgeting makes technical amendments to the budget provisions of the Budget and Accounting Act of 1921 to place emphasis on the preparation of the budget in terms of performance, setting out the functions and activities of the Government, with flexibility for the President to determine the manner in which budgetary information may best be formulated to present the Government's financial program in an understandable way. The bill stresses the development by the President through the Bureau of the Budget, of plans for better organization and management of the executive branch and improvements in the statistical work of that branch, pointing up the authority already exercised by the Bureau of the Budget in those areas.

Part II of title I constitutes a complete Accounting and Auditing Act of 1950. This part embodies the principles and objectives of the joint program now going on under the leadership of the Secretary of the Treasury, the Director of the Bureau of the Budget, and myself in collaboration with all other agencies to improve accounting, financial reporting, and auditing in the Government. The provisions of this part tie in closely with budgetary improvements provided for in other parts of the bill. The accounting and auditing provisions specify clearcut duties and responsibilities to be exercised in proper relationship toward the common goal of better accounting, financial reporting, budgeting, and auditing. The declaration of policy lays down a comprehensive congressional policy on accounting and auditing which is filled in by the specific provisions of this part. The careful placing of responsibilities on the Comptroller General, the Secretary of the Treasury, and agency heads is intended to bring about an integrated accounting system for the Government. Emphasis is placed on the development and use of agency accounting systems as the foundation for financial control and for the production of necessary financial information. Provision is made for progressive improvement and simplification of the present accounting of the Government without eliminating essential controls which Congress must maintain over the public funds. This legislation will make possible the maximum benefits from the work now being done under the joint accounting program and will lay a solid foundation for carrying out the policies and objectives of the program.

The accounting provisions place upon the heads of the executive agencies for the first time the clear responsibility for establishing and maintaining adequate and complete accounting systems. The Comptroller General is to cooperate with the executive agencies in the development of such systems under principles, standards, and related requirements prescribed by him, and to approve the

systems when proper. The Comptroller General must also cooperate with the Treasury Department in the development and establishment of the system of central accounting and reporting in the Treasury as contemplated by the bill. These provisions represent an extension of the principles and specifically continue in force the provisions of section 205 of the Federal Property and Administrative Services Act of 1949 which was the product of the efforts of this committee and its able subcommittee under the chairmanship of Mr. Holifield. The bill will provide authority for eliminating in an orderly manner duplicating and overlapping controls in accounting revolving around the present warrant and requisition system of making money available for disbursement. The Secretary of the Treasury and the Comptroller General, who now issue and countersign warrants as a means of control over receipts and disbursements will be authorized to waive the present requirements by joint regulations when they determine that sufficient safeguards are otherwise provided.

The auditing provisions of this part will provide clarification of authority as a basis for improving and simplifying the audit function of the General Accounting Office hand in hand with improvements in accounting and internal control in the agencies. Specific authority is provided for regulating the amount of detailed audit work to be done in the light of the systems of accounting and internal control in the agencies and the administrative application of statutes governing financial transactions. These provisions will enable progressive decentralization and refinement of General Accounting Office audits, including the making of audits not only more comprehensive in scope but on a selective basis as to individual transactions. Specific authority is provided for retention of accounts, contracts, vouchers, and other documents at the places where they are normally kept in the agencies. This will enable present arrangements between the Office and executive agencies under which site and comprehensible audits are performed to be placed on a permanent basis. Another important provision will enable adaptation or waiving of the administrative examination of accounts after payment, in the light of other accounting controls in the agencies, thus eliminating a lot of unnecessary paper work and handling and shipping of documents.

Title II of the bill authorizes transfers between appropriations up to a 5-percent limit within departments to promote economy and efficiency. It requires the prior approval of Department heads before submission to the Bureau of the Budget, the President, or the Congress of requests from departments for legislation authorizing appropriations. It also includes provisions specifically authorizing the President to set up budgetary reserves in the executive branch when he determines the purposes intended by the Congress will be accomplished by smaller expenditures. Further authority is provided for transfer of balances of appropriations in cases of reorganizations in the executive branch.

Title III repeals 106 acts or parts of acts dealing chiefly with such matters as compilation of the estimates and furnishing of certain financial data. Most of these laws have been superseded or outmoded by other existing laws, including the Budget and Accounting Act of 1921. Repeal of these provisions will clear the statutes of many requirements which, though they had a good purpose when enacted, are out of harmony with present conditions.

Now just a word on the relation of the bill to the recommendations of the Commission on Organization of the Executive Branch of the Government, generally known as the Hoover Commission. Boiled down, there is no difference between the objectives of the joint accounting program, as written into this bill, and the objectives of the Commission. While I have no pride of authorship, nor have my partners in the program, it is a matter of record that the program was established and operating before the Commission's report was ever thought of. In my opinion this bill meets every objective of the Commission in the field of budgeting, accounting, and auditing, and meets them in a more realistic and workable way. Its provisions are carefully worked out in the light of actual conditions and the proper division of responsibility in our three-branch Government. The only important difference is in the jurisdictional issue about the accountant general in the executive branch. That is a matter of the highest congressional policy beyond the jurisdiction of the Commission and one which has been settled by the Congress itself in no uncertain terms on every occasion when it has been brought up. It is inconceivable to me that the Congress would ever agree with the Commission on this point. This bill provides for the Comptroller General as the agent of the Congress to exercise responsibility for bringing about a sound basic accounting structure for the Government from the stand

point of effective financial control and independent audit. At the same time this responsibility must and will be exercised in a manner completely consistent with the proper development of accounting and financial reporting in the executive branch as an essential arm of management.

H. R. 9038 has my unqualified and wholehearted support. I believe it embodies the factors needed for simplifying and modernizing budgeting, accounting, financial reporting and auditing in the Government and giving them maximum effectiveness. The bill will provide a basis for furnishing the Congress and the President the information and means of control they need for the management of our Federal fiscal structure, and the taxpayers with full disclosure of the financial operations of the Government. Yet it in no way lessens the control exercised by the Congress over public expenditures. I urge that this committee and the Congress take early action to enact H. R. 9038.

Mr. WARREN. I will address myself primarily to the accounting and auditing provisions of the bill. I feel that I should very briefly give this committee some of the background of the bill.

In 1947 the Secretary of the Treasury, who I see has just come in, the then Director of the Budget, Mr. James Webb, and myself, had many conferences, with a view to improving the accounting in the Government.

I might say that this is the first time in history, so far as I know, that those three officials ever sat down together for a mutual purpose. It is needless to say that prior to then there had been distrust and backbiting between the agencies, and the General Accounting Office was just as much to blame as any of them were. All of us were to blame.

We came together and said that we were going to enter into an agreement with no fingers crossed, and we were going to try to do something constructive and outstanding for the Government and for the Congress. We evolved then what was known as the jointaccounting program, and during the last 3 years there has been a perfect understanding and the finest coordination among the three agencies.

Notable results have already been achieved.

This matter came up on one of the Hoover proposals before the Senate, and that committee, the Senate Committee on Expenditures, has been working on this matter almost daily for the last 6 or 8 months.

This bill now before you, with possibly some amendments, is the byproduct of that understanding, and it has drawn into legislative language the principles of the joint-accounting program.

For the first time it spells out and specifies the functions of the three agencies involved. This bill is presented due to the splendid work of the individual members of the Senate committee and its fine staff, who have also been in consultation with the staff of this committee.

I might tell you that of the 13 members of the Senate Expenditures Committee, with 1 of them ill and absent and therefore in all probability not being consulted, 11 of the remaining 12 members introduced this bill. Yesterday, after culmination of hearings that extended over 6 months, it was unanimously reported favorably by the Senate committee.

I say to you gentlemen seriously-and I know that the Secretary of the Treasury and the Director of the Budget will say the same thing-that this is the most outstanding bill of its nature that has been presented or has been considered by the Congress, certainly

in the last 29 years or since the passage of the original Budget and Accounting Act.

I might say, in passing, gentlemen, that the traditional control of Congress over appropriated funds is not only maintained, but is actually strengthened by the provisions of this bill. The jointaccounting program, which is the genesis of this bill, has met with the enthusiastic endorsement and approval of all of the agencies of the Government.

So far as I know, this bill, which merely carries into effect the policies and objectives of that program, again meets with the approval of everyone that I know of.

To my mind, it is the finest piece of sincere cooperation, objective cooperation, that I have witnessed during the 10 years that I have been Comptroller General.

After all, the primary purpose of this bill, Mr. Hoffman, is full disclosure; full disclosure, if you please, to the Executive; full disclosure, if you please, to the Congress, and again, if you please, full disclosure to the American taxpayer. That is the primary purpose of the accounting provisions of this bill.

The auditing provisions are progressive and in line with modern thought.

But it will take this bill, gentlemen, for us to accomplish this program, and I urge this committee to expedite its passage. I can say to you what I said to the Members of the Senate yesterday. They have a policy over there, that many Senators can introduce a single bill. We do not have that policy over here in the House. But I can say to you that if this bill becomes the law, every member of this House committee can in the future point with pride to the fact that he sat on the committee and helped to get through the most constructive measure of its kind that we have had in a long time.

I will be glad to answer any questions, if the committee has any. Something was said about the Hoover Commission. Of course, this joint program started before the Hoover Commission was even formed or organized. It so happens that the objectives of the Commission and the objectives of the joint program are embodied to a remarkable extent in this bill. When, as Mr. Karsten has already said, it comes to Congress relinquishing its power and creating in the executive branch of the Government an accountant general, that is utterly impossible. It was overwhelmingly defeated in 1932 when proposed by Mr. Hoover by Executive order. It was overwhelmingly defeated in 1936 when Mr. Roosevelt attempted it by legislation.

I think if there is one thing that Congress is jealous of, and ought to be jealous of, it is its control over the appropriations that it makes. That proposal of the Commission is outmoded, Mr. Chairman. That is matter over the mill dam. You hear theorists going around saying what the accounting system and the auditing system of the Government should be.

I will tell you that this bill is a practical measure, based on long experience, and it will work. It is the best measure of its kind that can be evolved, and it has thoroughly and fully protected the Congress. As your agent, I would not be here advocating it were that not true. The CHAIRMAN. Mr. Karsten?