in the accounting system and on the basis of stronger accounting get more accurate information.

Mr. HARVEY. A great deal of the expenditures in many of the departments are so-called housekeeping expenditures. Will the Public Law 152 and the activities of the General Services Administration be integrated effectively? Can they be integrated effectively with this new budgetary procedure?

Mr. LAWTON. Yes, they can be, and are being integrated. We have for the past 2 or 3 years been operating on the basis of staffing standards for certain housekeeping activities. Those housekeeping activities primarily considered so far are operations of personnel offices, payroll work, vouchering, certain parts of the procurement operation, warehousing, and things of that sort.

With the assistance of General Services Administration in the case of the property items and the Civil Service Commission in the case of the personnel items, we are attempting to establish and find out the definite costs that it ought to take to operate those activities that are common to all agencies, and if any of them are out of line, to dig in and find the reason why they are out of line and change them.

Mr. HARVEY. I have just one final question, and that goes back to that section that gives the 5-percent leeway.

Mr. LAWTON. Section 201, page 18.

Mr. HARVEY. It would be agreeable with you to eliminate that section, would it?

Mr. LAWTON. Yes.

Mr. HARVEY. That is all, Mr. Chairman.

Mr. KARSTEN. On that point, I would like to ask: Could you explain the reason why we do this today in some of the departments? It is my understanding if you have a program and it changes, the money is not available unless you would have a clause of this kind; is that correct?

Mr. LAWTON. Well, it varies. There is sometimes no real rhyme or reason to the appropriation structure, in the first place. Last year there were 56 appropriations in the Post Office Department, and now there are only 4. That is a real improvement because it separated transportation costs, segregated them into one fund. That is desirable because they are not under control, so far as the Post Office Department is concerned. ICC fixes the rates, and the Civil Aeronautics Board fixes the rates, and the Post Office pays them.

In the case of operations, they are also separated. So that in the Post Office Department, you would not now have cases there where you have the same necessity for transfers that you had when there were 56 appropriations.

Mr. KARSTEN. Could you transfer funds under the existing four appropriations without this authority?

Mr. LAWTON. No.

Mr. KARSTEN. If you needed additional money to transport the mail you would have to come to Congress and get permission to take it out of the funds for general operations or personnel for the transport of the mail, would you not?

Mr. LAWTON. The real operation function is embodied primarily in one appropriation. There is one for operations, one for overhead, one for claims, and one for transportation costs. The one for opera

tions is the huge one. Transportation costs are fixed by agencies outside of the Post Office Department. I think Congress wants to look at those separately; they usually have. It is not the kind of thing you would transfer. Since operations are together in one major appropriation, you can transfer between the operations of one post office and another post office, or between the purchase of equipment. If you need more trucks you can have them as against having the personnel. But in the Veterans' Administration where you have a single appropriation for the operation of the Veterans' Administration, you have all the flexibility you need.

Mr. KARSTEN. When you say flexibility, that is more flexibility than you have here, I suppose.

Mr. LAWTON. Yes, much more, sir.

When you come to Agriculture, where funds are segregated into a lot of departmentalized appropriations, they have the basic authority to make transfers.

Mr. KARSTEN. Where you have a general appropriation that may be used within the agency for any purpose you do not need the authority as you have here, do you?

Mr. LAWTON. The basis for this authority, as it originated in the Hoover Commission thinking

Mr. KARSTEN. This was a recommendation of the Hoover Commission, was it not, based on their report?

Mr. LAWTON. Their bills that were supposed to carry out their recommendations contained this transfer provision. But the philosophy behind that was that they were stating that there should be greater flexibility on the part of the head of the department to manage and operate his department.

To that extent, this limited transferability was supposed to be an ultimate advantage. It would also have the effect, as we would use it-and we have used such existing authority in connection with pay acts and things of that sort-to require transferring to offset additional requirements in one appropriation where they might have a little extra money in another.

We would use it for that purpose, I think, just as we have offset pay act costs by transfer between appropriations heretofore.

But in many of those cases the recommendation went to Congress to do it. With this provision, we could require the agency to take it away from one appropriation and give it to another, up to 5 percent. The CHAIRMAN. Are there any other questions?

Mr. DONOHUE. That is within the same agency, is it not?

Mr. LAWTON. Definitely.

Mr. DONOHUE. So this is not a performance budget or a segregated budget.

Mr. LAWTON. That transferability provision can operate under any form of budget, whether it is performance or not.

Mr. DONOHUE. But it is sort of general in scope. It is not related to the question of performance or activity schedules, as distinguished from object schedules.

Mr. HARDY. In the case of the Department of Defense, you might have appropriations switched from one arm of the service to another within the 5-percent limitation, under that provision, might you not? Mr. LAWTON. I would think this would apply in each of the departments. You see, each of those is still a department.

Mr. HARDY. They are still departments you say. Nobody knows quite what the status is.

The CHAIRMAN. Mr. Riehlman?

Mr. RIEHLMAN. Mr. Lawton, you referred to the Post Office Department. With respect to this past year when their request was made for funds, it was under four headings; is that correct?

Mr. LAWTON. That is right.

Mr. RIEHLMAN. The one I was interested in particularly was that dealing with transportation. The rates are set by the ICC and the CAB; is that correct?

Mr. LAWTON. That is correct.

Mr. RIEHLMAN. Under this new performance budget, would it be possible for the members of the Appropriations Committee to find out the exact cost or subsidy for the transportation of mails through the airlines and the railroads?

Mr. LAWTON. It could be done. You can do that with or without performance budgeting. There is a law pending now to separate mail pay from subsidy. But that sort of thing can be done. That is a matter of judgment rather than strict accounting because it really means an analysis of the carriers' operations, and it is an after-the-fact determination. A separate appropriation could be made for it. There is an independent bill before the Congress, which would separate the appropriations for subsidy from those for transportation and put the subsidy appropriations elsewhere.

Mr. RIEHLMAN. Under the present budgeting system, or under this performance budget, that is not broken down, is it?

Mr. LAWTON. There is an attempt made to break it down in an analysis, which we prepared in the budget, of the capital investment and other types of operations. This would get you into the position, I think, as soon as the accounting develops the reports and as soon as the difficult determination is made as to what actually constitutes a subsidy, of segregating operating from other programs.

Mr. RIEHLMAN. That would include the subsidy, of course.

Mr. LAWTON. Yes.

Mr. RIEHLMAN. Thank you.

The CHAIRMAN. I have here a statement from Mr. William Finan, who is Assistant Director of the Bureau of the Budget for Administrative Management.

STATEMENT OF WILLIAM F. FINAN, ASSISTANT DIRECTOR OF THE BUREAU OF THE BUDGET FOR ADMINISTRATIVE MANAGEMENT

The CHAIRMAN. Did you wish to read your statement, Mr. Finan, or to make a supplemental statement?

Mr. FINAN. I can read the statement, or leave it with the committee, whatever you decide.

The CHAIRMAN. I suggest that, since we have your printed statement, we can take that under consideration.

Would you like to make any verbal statement in addition to that. in the light of the testimony you have heard?

Mr. FINAN. I do not believe so, Mr. Chairman.

The CHAIRMAN. Thank you very, very much, gentlemen.

(The statement referred to follows:)

STATEMENT OF WILLIAM F. FINAN, ASSISTANT DIRECTOR OF THE BUREAU OF THE BUDGET FOR ADMINISTRATIVE MANAGEMENT

Mr. Chairman and members of the committee, I am pleased to have this opportunity to appear before your committee to discuss provisions of H. R. 9038. The Director of the Bureau of the Budget has expressed his general endorsement of H. R. 9038. In this statement, I will set forth in more detail the views of the Bureau of the Budget on part I of title I and on title II of the bill pointing out how they differ from present requirements and practice, and I will also speak briefly on those sections dealing with accounting, which are being covered in detail by representatives of the Treasury Department and the General Accounting Office.

Additional legislation, for the most part, is not needed to permit continued improvement of the budget process and the budget document along lines recommended by the Hoover Commission. On the other hand, H. R. 9038 brings up to date and clarifies various budget statutes, and includes desirable provisions dealing with recommendations of the Hoover Commission. As such, the bill gives strong backing to constructive budgetary improvements now under way.

The principal provisions of the first part of title I are those modifying slightly the date for submittion of the budget to Congress, giving statutory direction for the presentation of the budget on a performance basis and emphasizing the role of the Bureau of the Budget in assisting the President to improve agency statistical activities and Government organization and management. Other provisions serve merely to bring up to date and clarify a few sections of the Budget and Accounting Act of 1921 and one section of the Government Corporation Control Act of 1945.

The first section of this part, section 101, amends section 2 of the Budget and Accounting Act to add a definition of the term "appropriations,” making it clear that the term is intended to include, in appropriate context, funds and authorizations to create obligations by contract in advance of appropriations.

Section 102 includes amendments to eight other sections of the Budget and Accounting Act. The first of these revises section 201 of the Budget and Accounting Act to permit the budget to be transmitted to the Congress during the first 15 days of each regular session instead of on the first day as presently required. This provision gives the President desirable flexibility in timing the submission of the state of the Union message, the Economic Report, and the budget. This amendment also specifies certain kinds of information to be included in the budget. While the requirements presently set forth in section 201 of the Budget and Accounting Act are slightly amplified and modified, for the most part they are continued unchanged or are changed merely to clarify wording. Two new requirements would carry out recommendations of the Hoover Commission-one specifying that the budget document set forth functions and activities of the Government in order that the budget be presented on a performance basis, and the other requiring a segregation of operating and of capital and investment programs. Those requirements are in line with existing practice and with plans for further improvement of the budget document. One other added requirement calls for the inclusion of summary information that would permit reconciliation of expenditures with proposed appropriations. Such information would show the Congress the relationship between expenditures and the appropriations proposed in the President's budget. While not included in past budgets, information of this type has been presented to the House Appropriations Committee for the past several years.

The Bureau of the Budget concurs in the requirements as prescribed in this amendment.

We are also in agreement with other amendments to the Budget and Accounting Act set forth in six additional subsections of section 102.

Subsections (b) and (e), which amend sections 203 and 207 of the Budget and Accounting Act relating, respectively, to the submission by the President of proposed supplemental and deficiency appropriations and to functions of the Bureau of the Budget in preparing the budget and appropriation requests, do not change the present law except to clarify terminology and eliminate an obsolete provision relating to the alternative budget for fiscal year 1923.

Subsection (c), which amends section 204 of the Budget and Accounting Act, provides a desirable clarification with respect to the authority of the President to determine the contents, order, and arrangement of proposed appropriations and statements of expenditures included in the budget.

Subsection (d) amends section 205 of the Budget and Accounting Act to eliminate an obsolete provision pertaining to submission of the 1923 alternative budget and to substitute a requirement that the President submit to the Congress supplemental notes and tables whenever a basic change is made in the form of the budget. Such supplemental notes would be designed to show where various items embraced in the budget for the prior year are contained in the new budget. Subsection (f), which amends section 214 of the Budget and Accounting Act, makes the head of each department and establishment responsible for preparation and submission to the bureau of annual and supplemental or deficiency appropriation requests. This amendment brings provisions of the Budget and Accounting Act in line with recommendations of the Hoover Commission stressing responsibility of department heads for budget formulation.

Subsection (g) amends section 215 of the Budget and Accounting Act to permit the President to set the date for submission of departmental appropriation requests to the Bureau of the Budget instead of requiring their submission on September 15. This change is desirable in that it permits flexibility in setting the date for submission of departmental appropriation requests to the Bureau.

The final amendment to the budgeting provisions of the Budget and Accounting Act, contained in subsection (h), revises section 216 which requires departmental appropriation requests to be prepared and submitted in such form and detail as the President may prescribe. This amendment merely clarifies the language of the existing section.

Section 103 would permit a department head, during the two fiscal years following passage of the bill, to make such transfers and adjustments between appropriations available to his department as might be needed in effecting a conversion to the performance-type budget provided for in this bill. These transfers would be subject to the approval of the President and would be reported currently to both the President and the Congress. This section extends to civilian agencies of the Government authority vested in the Secretary of Defense by the National Security Act amendments of 1949. The Bureau has no objection to this provision. We do not anticipate that there will be extensive use of the authority inasmuch as the situation facing the Government as a whole is somewhat different from that involving the unification of the three military departments.

The Bureau endorses section 104, which authorizes the President, through the Director of the Bureau of the Budget, to develop programs and to issue regulations and orders for improving statistical activities in the executive agencies. The Bureau is also in agreement with section 105, which emphasizes the Bureau's role of assisting the President to improve the organization and management of the executive branch. These sections are in line with recommendations and findings of the Hoover Commission. We do not, however, interpret them to vest new functions in the Bureau of the Budget, nor as representing a substitution for existing authority of the President.

Section 106 amends the Government Corporation Control Act of 1945 to make its provisions relative to the date for submission of corporation budgets to the Bureau consistent with section 102 of this bill. This section is a desirable inclusion in H. R. 9038.

With respect to title II of the bill, it includes sections modeled after certain provisions of the National Security Act amendments of 1949 and other provisions designed to carry out recommendations of the Hoover Commission.

The Bureau has no objection to section 201, which would allow a 5-percent interchange among appropriations of any department or establishment. In view of improvements already made in the appropriation pattern and others that will be proposed, we feel, however, that there will be less need for interchange authority in the future than was the case in the past.

It is assumed that this provision does not supersede provisions of existing law which authorize transfers between appropriations of an agency under specified conditions. If this assumption is correct, we would suggest that the matter be clarified by an indication in the committee report.

Section 202 would require the approval by the head of an agency of requests by any unit of the agency for legislation which would authorize appropriations. This is in accord with the views of the President and the Hoover Commission on the responsibilities of department heads and is consistent with present practice.

Section 203 is intended to clarify the President's authority to promote economy and reduce expenditures through the establishment or modification of reserves from appropriations made to the executive branch, so long as he determines that the purposes intended by the Congress will be accomplished by the expendi