We have no quarrel with the Citizens Committee. But we do feel that they show an abysmal ignorance and lack of desire to learn about the Government's accounting system and about the progress that is being made today and has been made for several years, under the leadership of the Comptroller General, Mr. Warren, with the solid support, backed by law, of the Budget Bureau and the Treasury Department, and with the cooperation of every other agency in the Government. That progress, I believe, Mr. Chairman, would be amazing even to the Citizens Committee if they could just sit down with us some day and go over it.

We do not, frankly, like to have statements go out and be printed all over the country indicating that the Comptroller General, and the Director of the Budget, and the Secretary of the Treasury are die-hard stick-in-the-muds who want to do nothing, as Dr. Johnson's letter says. That is almost slanderous. Any public official desires to do his duty, and I defy you to find any three public officials more competent, capable, and qualified to do a job than Mr. Warren, the Comptroller General; Secretary Snyder; and Budget Director Pace.

The CHAIRMAN. At this point, particularly when Senator Smith was questioning Mr. McCormick a few moments ago, I was thinking that the Secretary of the Treasury and the Director of the Budget and the Comptroller General, the three collaborating and working together, could produce as efficient an accounting system, possibly, as any one Accountant General could produce. I may be wrong about it. As your statement emphasizes, we have three of the highest officials of the Government in the legislative branch and the executive branch now working on this problem. They claim that they are succeeding and that they are receiving splendid cooperation throughout all the agencies. If we undertake to legislate that effort out of the way and establish something else which would be somewhat experimental, we might be retarding the achieving of the objective that we all desire. I want to keep an open mind on this thing as far as I can all the way through, but I am trying to find out how setting up an Accountant General is going to solve this problem. That is what I want to find out as we go through these hearings. You may proceed.

Mr. WEITZEL. Mr. Chairman, I hope we can throw some light on that this morning, but I think you are absolutely right that the setting up of an Accountant General would only revive the jurisdictional arguments. You would have there a chief accounting officer for the executive branch who would assume the authority and the knowledge as to how accounting should be run. At the same time you would still have the requirement that the Comptroller General approve the systems and, as Mr. McCormick says, criticize those systems, the Comptroller General being likewise recognized as preeminent in the audit field even by the Citizens Committee, and having certain accounting responsibilities that he cannot escape as the agent of the Congress. That is what we are going to develop.

The CHAIRMAN. Is it your understanding that it is proposed by this legislation and by the Hoover recommendations and the Citizens Committee that they would divest the Comptroller General of those accounting powers which he now has under the law?

Mr. WEITZEL. They would divest, Mr. Chairman, the General Accounting Office of the function of prescribing accounting systems which the Comptroller General is now exercising and has exercised

throughout the history of the General Accounting Office, but is now exercising, we believe, far more effectively because of the joint cooperative program.

The CHAIRMAN. As the bill is written now it leaves what we may term a veto power over any system that the Accountant General might devise.

Mr. WEITZEL. That is correct, Mr. Chairman, but if the Accountant General should devise no system or if the Comptroller General should disapprove the system which the Accountant General provided, there would be no way that the Comptroller General could enforce on the executive branch a system which would give the Congress the information which it needs. I do not want to overemphasize that point because at the same time the joint accounting program is giving complete recognition to the fact that accounting is one of the fundamental tools of management. We want the departments and agencies, we want the executive branch, to have all the accounting that it needs, the right kind of accounting to serve its management purposes. But we also want to be in the position to require certain kinds of information to come up for Congress when and if it needs them in order that Congress can do a better job of appropriating and making other legislation which is Congress' duty, which it cannot divorce itself from.

The CHAIRMAN. It seems that we really get down to this issue, whether Congress is going to be influenced by or largely follow the recommendations of its three highest officials who are now working together, who are getting the job done, and say they need no legislation. Or shall we follow the recommendations of the Hoover Čommission and the Citizens Committee, who say that, irrespective of the cooperative effort or whatever is being accomplished, we proceed to this bill or a bill similar to this. That is about where we are right now. Mr. WEITZEL. I believe so, Mr. Chairman, and I should like to ask the committee to bear in mind that these agencies, the three top fiscal agencies in the Government, have a few experts of their own. Not all of the experts are outside of the Government. We have also taken advantage continuously of the thought of outside professional bodies and outside individual accountants, and we will always welcome those and continue to use them in weaving the best accounting system that can be devised for the Government.

The CHAIRMAN. I did not mean to interrupt you too much. You go ahead.

Mr. WEITZEL. Thank you, Mr. Chairman.

I should like to tell you briefly about the principles and objectives of the joint accounting program and its relation to the provisions of the bill S. 2054. The program is based upon the three following principles:

1. The maintenance of accounting systems and the producing of financial reports are and must continue to be functions of the executive branch.

2. There must be an audit independent of the executive branch which will give appropriate recognition to necessary features of internal audit and control. Properly designed accounting systems are a vital factor to the effectiveness of such independent audit.

3. Full opportunity is to be afforded to the executive branch for participation in the development of accounting systems as an essential

to meeting the needs and responsibilities of both the legislative and executive branches in the establishment of accounting and reporting requirements.

The whole program is aimed at giving the President better management in the executive branch, the Congress better information and bases for acting upon appropriations and other legislation, and the public a clearer picture of the financial condition and operations of the Federal Government. The major objectives of the program can be summed up in this way:

1. To provide a body of sound accounting and reporting principles and standards for general observance.

2. To improve the accounting organizations and the systems of accounting in the various departments and agencies.

3. To strengthen the facilities and accounting of the Treasury Department as the operating center for current accounting and overall financial reports of the Government.

4. To produce more informative financial reports at less accounting costs.

5. To improve, simplify, and strengthen the Government's system of audit and control in line with the increased effectiveness of accounting systems.

6. To coordinate and integrate budget, accounting, and reporting processes.

I would like to make clear right here that the joint accounting program is not purely a voluntary program based on the wishes and desires of the participants. It has a solid foundation in present law. The Comptroller General under the Budget and Accounting Act was given the definite responsibility and authority to prescribe the forms, systems, and procedures for administrative appropriation and fund accounting in the executive branch. He has further responsibility and authority now under the Federal Property Act of 1949 to prescribe principles and standards of accounting for property and cooperate with the Administrator of the General Services Administration and with the executive agencies in the development of property accounting systems. Likewise, the Treasury Department has responsibility and authority under existing law for keeping accounts of receipts and expenditures of public money and making an annual report to the Congress of receipts and expenditures during the last preceding year, designating the expenditures by each separate head of appropriation. The Bureau of the Budget also has important legal responsibilities for preparation of the budget. These responsibilities, while not exhaustive, are merely cited to show that there is a legal basis for the joint accounting program. The reason for adoption of the joint approach is that only by combining the resources of all three top Government fiscal agencies can a concerted attack be made on the problem of improving Government accounting with due regard to both legislative and executive needs. The problem in the past was not so much one of authority as of attitudes. It took statesmanship to bring about the beginning of the joint program, but the results being achieved from day to day are more than sufficient to justify and assure its continuance on that basis.

The Comptroller General is exercising his authority to prescribe systems in a way which will aid effective administration throughout the Government. It is his objective to prescribe requirements largely

in terms of standards, principles, and basic forms and procedures. A framework will thus be provided for development and approval of accounting systems consistent with sound principles, fitted to agency needs, and integrated with the central accounting and reporting facilities. Agencies are being encouraged and urged to develop and mold accounting in the light of their particular needs and from the standpoint of operating factors, so that agency accounting systems will be a responsive and dynamic aid to management.

Based upon our experience in the General Accounting Office, we feel strongly that this will be a much more fruitful approach than that in S. 2054, which would centralize to an unworkable degree the supervision of agency accounting operations.

With the committee's permission, I should like to insert in the record, if it has not already been done, a recent report of progress under the joint accounting program. That was prepared just a month ago, and I believe a reading of that will be the best indication of the progress which actually has been made.

Mr. Frese will later touch on particular instances of that.

The CHAIRMAN. I do not recall whether that is on file or not. If it has not been filed heretofore it may be made a part of the record. You may file it at this time.

Mr. WEITZEL. Thank you, Mr. Chairman.

(The information referred to follows:)

PROGRESS UNDER THE JOINT PROGRAM TO IMPROVE ACCOUNTING IN THE FEDERAL

GOVERNMENT

Under the Budget and Accounting Act, as supplemented, authority and responsibility for prescribing accounting systems in the executive departments and establishments of the Government is in the Comptroller General of the United States. However, the responsibility for the day-to-day maintenance of the accounting systems is and must be a responsibility of the various administrative agencies where the work and operations are performed. Moreover, the Treasury Department and Bureau of the Budget have important legal responsibilities, from the standpoint of fiscal administration of the Government, which have a definite relationship to the prescribing of accounting requirements and the operation of accounting systems. In order to coordinate all of these responsibilities and to make accounting, reporting, and bud geting more effective as instruments of fiscal control and management, on Januar 6, 1949, the Comptroller General of the United States, the Director of the Bureau of the Budget, and the Secretary of the Treasury approved the joint program containing the following as fundamental principles:

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

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

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.

At the same time, they announced the following as major objectives of the program:

To provide a body of sound accounting and reporting principles and standards for general observance;

To improve the accounting organizations and the systems of accounting in the various departments and agencies;

To strengthen the facilities and accounting of the Treasury Department as the operating center for current accounting and over-all financial reports of the Government;

To produce more informative financial reports, at less accounting costs; To improve, simplify, and strengthen the Government's system of audit and control in line with the increased effectiveness of accounting systems;

To coordinate and integrate budget, accounting, and reporting processes. The following summary, indicative of the kind of progress being made, was recently prepared by the joint working staffs for review by the Comptroller General of the United States, Director of the Bureau of the Budget, and Secretary of the Treasury:

ACCOUNTING PRINCIPLES AND TERMINOLOGY

A comprehensive statement has been prepared dealing with 42 subjects concerning accounting principles and practices and providing the framework for a common terminology. This tentative statement is receiving intensive joint review. Meanwhile, many of these principles are being embodied in the accounting systems of particular agencies, thus providing the benefit of practical experience. Based in part on a joint study and recommendations involving inventory control methods, a separate statement of tentative principles and standards for property accounting is being prepared for early consideration by all Government agencies as a step leading to the establishment of ultimate requirements under the provisions of the Federal Property and Administrative Services Act of 1949.

REPORTING OF BUDGETARY SPECIFICATIONS

Important developmental work has been done in connection with the concept of performance budgeting and the use of the accrual method of accounting so that adequate recognition may be given to assets, liabilities, and the true cost of performing work and services by functions or activities. This work has taken advantage of the installation of improved systems of accounting and reporting in such agencies as the Bureau of Reclamation (Interior) and Atomic Energy Commission. The Budget Director has approved in principle, the use of accounting results on the accrual basis for budgetary presentation subject to a full consideration of its practical implications in three large agencies (of which the Treasury Department is one) before deciding upon time schedules for the general use of data on such a basis for budgetary purposes. In addition, Budget-Treasury Regulation No. 1, dealing with apportionments and reports on the status of appropriations, is being completely revised but will need to be reviewed with agencies before making the revision effective. In this connection, separate reports to the General Accounting Office, relating to such data, are being eliminated. Real progress is being made, subject to the approval of Congress, toward improving the appropriation structure for certain agencies both as to reduction in number of appropriations and as to better budgeting and accounting results.

AUDITING CONCEPTS

In line with its present audit concepts, the General Accounting Office has set up a program for a comprehensive type of audit. This audit program recognizes that the accounting and internal control procedures of each agency are the basic points for effective control of the Government's financial operations. In line with this, it is the policy of the General Accounting Office to utilize audit processes based on an evaluation of accounting systems and the effectiveness of related internal checks and controls in the agencies at the site of operations, to the maximum extent practicable, as a means for fuller and more effective discharge of the Comptroller General's responsibility to the Congress. A new office subdivision has been set up in the General Accounting Office as a means of carrying out the comprehensive audit program. The United States Coast Guard (Treasury) and Maritime Commission have been placed on a comprehensive audit basis. is in addition to the hundreds of site audits being performed by the General Accounting Office. Various Government-wide requirements for the submission of documents or reports to the General Accounting Office have already been eliminated, and as the comprehensive audit program progresses such present accounting and auditing processes of the General Accounting Office, based on central review and processing of documents and reports originating with agencies, as are determined to be unnecessary or inappropriate will be eliminated or modified.

ORGANIZATIONAL AND STAFFING CONCEPTS

This

Progress has been made in the application by some agencies of improved organizational and staffing concepts for accounting performance. The importance of this has been recognized in the Department of Defense, Atomic Energy Commission, Economic Cooperation Administration, and General Services Administration.