and comprehensive fiscal and property audits in Federal departments and agencies. This 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 upon 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 basis for the fuller and more effective discharge of its responsibilities to the Congress. As the comprehensive audit program progresses, such present accounting and audit 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.

The Maritime Commission and the United States Coast Guard are already on a comprehensive audit basis. Veterans' insurance and the Bureau of Reclamation have recently been placed on the same basis. The Comptroller General recently sent to Congress our complete audit report on the Maritime Commission for 1948 and 1949. These comprehensive audits are in addition to the hundreds of site audits already being performed by General Accounting Office. Various Governmentwide requirements for submission of documents or reports to the GAO have already been eliminated and as further studies are made we do not doubt that there will be further eliminations.

The comprehensive audit program will include the discharge by the General Accounting Office of its responsibility under section 206 (c) of the Federal Property and Administrative Services Act of 1949 for auditing property accounts and transactions. This audit will be conducted to the extent practicable where the property or records of the executive agencies are kept and will include an evaluation of the effectiveness of internal controls and audit and a general audit of the discharge of accountability for Government-owned or controlled property based upon generally accepted principles of auditing. This activity will be coordinated with section 205 (b) of the same act which provides that the Comptroller General after considering the needs and requirements of the executive agencies shall prescribe principles and standards of accounting for property, cooperating with the Administrator of General Services Administration and with the executive agencies in the development of property accounting systems, and approve such systems when deemed to be adequate and in conformity with prescribed principles and standards, and that the General Accounting Office shall examine the property accounting systems established by the executive agencies, and the Comptroller General shall report to the Congress any failure to comply with prescribed principles and standards or to adequately account for property.

Also, there is provision in that section for examination of property accounting systems by the General Accounting Office and for report to the Congress by the Comptroller General when the agency systems do not meet the prescribed principles and standards. I would like to say here, Mr. Chairman, in answer to Senator Smith's query1 that in our opinion Public Law 152, the Federal Property Act of 1949, gives a most comprehensive coverage and was enacted after the most careful study had been made by this committee and the House Expenditures Committee of the needs of the executive branch and of

1 Page 180.

the Congress for inventory control, property utilization, and property accounting.

In connection with this joint accounting program Mr. Warren and Mr. Larson, of GSA, have entered into an agreement providing for the most effective and harmonious discharge of the functions of the two agencies under the Property Act. Mr. Larson and Mr. Warren believe that this joint approach to the property accounting problem will result in the development of adequate accounting controls of property transactions and inventories to protect and disclose the Government's investment in property and provide the information necessary to obtain maximum utilization of such property. Contemplated improvements in accounting for property will be tied in with the broad objectives of the over-all accounting improvement program including the development of performance budgeting, improved central accounting and financial reporting, and better information for management purposes.

Senator SMITH. Do you feel there is enough legal authority there to properly conduct that?

Mr. WEITZEL. Senator, I feel there is ample legal authority. There is responsibility in Public Law 152 for the executive agencies to maintain adequate inventory and accounting control in their own agencies. There is authority for the Administrator of GSA to prescribe policies of procurement and supply of property and policies to promote the maximum utilization of property by the executive agencies; to cooperate with them in the development of inventory levels; to establish a Federal supply catalog system; and to prescribe forms needed for supply and purchase activities. There is authority for the General Accounting Office to prescribe principles and standards of accounting for property and to cooperate with the Administrator and with the agencies in developing systems. I do not know, frankly, how the system set out in the law could be any more comprehensive, and I might say that we have gone right ahead under the authority in Public Law 152 with GSA and with the agencies, as a part of this joint accounting program which this very committee requested and endorsed when it was instituted, as the chairman will remember.

We have gone right ahead in the development of those standards. I might say, too, the budget, the Treasury, and the GAO cooperated in the development of those property accounting phases of Public Law 152, and that, we feel, is the way to approach this whole accounting problem.

The CHAIRMAN. Would this pending bill change that law in any respect or interfere with the authority there given?

Mr. WEITZEL. This bill, I feel, Mr. Chairman, would abrogate the authority of the Comptroller General in that legislation. It could certainly be interpreted and it is probably intended to abrogate the authority of the Comptroller General to prescribe principles and standards for property accounting and to cooperate in the development of the systems. It would substitute prescribing of systems by the Accountant General in the Treasury and approval of those systems by the Comptroller General, but under the language of sections 21 and 22 (b), it is doubtful that the approval power would extend to property

accounts.

I might say, too, that Mr. McCormick rendered very valuable assistance, as the committee knows, in the development of that

legislation and I am surprised that he still feels that we need further legislation to bring this $27,000,000,000 of property under accounting control.

Senator SCHOEPPEL. Mr. Chairman, might I ask the witness this. Also in that act there were provisions for an orderly transfer of property between the departments to prevent duplication of expense and duplication of accounting procedures, were there not?

Mr. WEITZEL. That is correct, Senator. The whole act is aimed at obtaining the best procurement methods, the best utilization methods, and the best disposal methods for Government property throughout the Government.

I should like, if the chairman would permit, to place a copy of that memorandum of agreement between Mr. Warren and Mr. Larson in the record at this point. It is not too long.

The CHAIRMAN. All right. That may be placed in the record at this point.

(The document referred to follows:)

MEMORANDUM REGARDING WORKING RELATIONSHIPS BETWEEN GENERAL ACCOUNTING OFFICE AND GENERAL SERVICES ADMINISTRATION

This memorandum outlines the general approach to be made in respect to the exercise of the responsibilities of the_General Services Administration and the General Accounting Office under the Federal Property and Administrative Services Act of 1949 (Public Law 152, 81st Cong.). It is based on preliminary discussions between representatives of the Administrator, General Services Administration, and of the Comptroller General, and is not designed to abrogate or change their legal responsibilities under Public Law 152, Eighty-first Congress, but to provide an initial foundation for the more effective and harmonious discharge of the respective functions of the two agencies under that law in terms of their interrelationships..

GENERAL PRINCIPLES

The working relationships between the two agencies will be based on the following general principles:

1. The property accounting responsibilities of the General Accounting Office will be discharged as a part of the broad joint accounting improvement program which is under way. The basic approach of this program to the over-all accounting problems of the Government will be applied to the property-accounting phases by providing ample flexibility for the executive agencies to develop and mold systems to fit their individual needs, by prescribing accounting requirements with respect to both property and other phases of the accounting program principally in terms of principles and standards, and by assisting and guiding the agencies in the development of the systems in conformity with such principles and standards. The General Accounting Office will afford maximum consideration to the primary management and operational interests in connection with the over-all accounting work being done with the agencies. Consideration also will be given to providing such financial data as is needed for central accounting and reporting in the Government.

2. Full recognition will be given to the performance budget and other budgetary, management, accounting, and financial reporting objectives and policies of the joint accounting program of the General Accounting Office, the Bureau of the Budget, and the Treasury Department and of the joint property study report entitled "A Federal Inventory Control System." In accordance with the intent, understanding, and terms of the joint accounting program, the Treasury Department and the Bureau of the Budget will participate with the General Accounting Office and the General Services Administration to the extent of their responsibilities and interests in the various areas encompassed in this memorandum.

3. The General Services Administration will participate and cooperate with the General Accounting Office, from the standpoint of its property management and operational interests, in the development of property accounting principles and standards, in the development of property accounting phases of the over-all agency accounting systems, and in the making of surveys of the accounting requirements of such agencies, including property accounting needs.

4. The General Services Administration recognizes that policy decisions relating to property management and operational phases normally have accounting and auditing implications and, in arriving at such policy determination, will give full consideration to these implications and accounting and audit requirements under Public Law 152 as well as previously existing laws.

It will be the joint policy of the General Services Administration and the General Accounting Office to have their representatives keep each other fully advised with regard to all action taken, or to be taken, within the respective jurisdictions under Public Law 152 not only in those areas in which cooperative development is prescribed by the act, but in all cases where the matter affects or may affect management and operational interests on the one hand, or accounting and audit responsibilities on the other.

ACCOUNTING RESPONSIBILITIES

Under the broad program to improve governmental accounting, the individual executive agencies are primarily responsible for the development and maintenance of over-all agency accounting systems to fit their needs, and this primary responsibility includes the development and integration of property accounting phases with such over-all agency accounting systems, consistent with the principles, standards, and basic requirements which are evolved under the joint accounting improvement program.

The General Accounting Office will assist and cooperate with the individual executive agencies in the development of property accounting as an integral part of their over-all accounting systems, under the general accounting improvement program, and in accordance with Public Law 152 and its primary responsibility for accounting matters generally under previously existing laws.

The General Services Administration will participate, in cooperation with the General Accounting Office, in the development of individual agency accounting systems with reference to the property accounting phases of such systems, as a basic requisite to the effective discharge of the over-all property management responsibilities of the administration.

The responsibility of executive agencies to develop and maintain property accounting as an integral part of their over-all accounting systems includes the requirement that appropriate accounting control be exercised over all property transactions and inventories. Underlying property records constitute subsidiary and supporting accounting records and the adequacy and integrity of the over-all accounting systems is largely dependent upon the accuracy and efficiency with which such underlying records are maintained and their integration with the general accounting system. Maximum consideration will be given to the over-all property-management responsibilities and the primary purpose of underlying property records as an efficient and economical management tool in integrating these records with the general accounting systems. Management policies in respect to all property transactions such as receipt, issue, use, transfer, and disposal require an effective control of property and, therefore, accounting and management policies must be developed hand in hand.

Property accounting systems will be submitted to the Comptroller General for approval upon completion of development or at various appropriate developmental stages, and recommendations of the Administrator, General Services Administration, will be ascertained by the Comptroller General prior to approval.

SYSTEMS EXAMINATIONS, INTERNAL CONTROL, AND AUDITS

Reports upon examinations by the General Accounting Office of accounting systems as they relate to property will be furnished the General Services Administration and necessary corrective action will be coordinated as in the case of the development of such systems. Systems examinations will be made to the fullest extent practicable as part of the audits of property accounts and transactions by the General Accounting Office. The scope and extent of property audits will be correlated with the degree of internal controls exercised and the adequacy and effectiveness of internal audits performed by the respective agencies, and copies of any audit reports will be furnished the General Services Administration. Where property audits are made as a part of comprehensive audits of executive agencies, property-audit data relevant to the responsibilities imposed on the General Services Administration under the act will be furnished the General Services Administration.

The establishment and maintenance of internal controls and performance of internal-property audits in General Services Administration which will be satis

factory from an accounting standpoint, as well as from the operational standpoint, will be stressed, and the General Accounting Office will furnish all possible assistance in the development of such internal controls and audits.

FORMS RELATING TO PROPERTY

Forms relating to property procurement, utilization, and disposal, insofar as concerns the mutual interests of the General Services Administration and the General Accounting Office under Public Law 152, fall into the following general categories:

(a) Forms designed solely for operational purposes and serving no accounting purpose, or being so remotely related thereto as to have no accounting significance. (5) Forms serving a primary operational purpose which likewise serve or can be made to serve essential accounting purposes.

(c) Forms designed solely for essential accounting purposes and serving no operational purpose, or being so remotely related thereto as to have no operational significance.

Forms falling within the first and last categories set out above will be standardized to the extent found desirable and when so standardized will be prescribed by the Administrator and the Comptroller General, respectively. However, in order to assure complete coordination, representatives of the General Services Administration or the General Accounting Office, as the case may be, will be kept currently advised of all developments and furnished copies of all such forms when prescribed. Representatives of the two agencies will cooperate with the executive agencies in the development of forms which serve, or can be made to serve, both operational and accounting purposes. Such forms will be standardized to the extent found desirable, and where so standardized will be prescribed with the joint approval of the Administrator and the Comptroller General.

EXCHANGE OF REGULATIONS AND DIRECTIVES

As a specific means of keeping the General Accounting Office informed of developments under the act, copies of all Presidential orders, General Services Administration regulations and directives, and changes in existing procedures, regulations, and orders relating to any of the agencies, bureaus, or functions which have been or are later transferred to or vested in the General Services Administration will be furnished the General Accounting Office. Likewise, and in accordance with existing procedures, the General Accounting Office will furnish the General Services Administration with copies of all General Regulations, Accounting Systems Memoranda, and other procedural releases affecting their operations which will assist the General Services Administration in the effective discharge of its duties.

REVISIONS

Periodically, the provisions of this memorandum will be reviewed by the General Services Administration and the General Accounting Office and modified, if necessary, in order to improve working relationships in the light of experience and thus further the objectives of Public Law 152 and achievements thereunder. LINDSAY WARREN,

JANUARY 17, 1950.

Comptroller General of the United States.
JESS LARSON,

Administrator, General Services Administration.

Mr. WEITZEL. Mr. Chairman, section 23 (a) of S. 2054 deals with the administrative examination of accounts after payment and the conduct of the Comptroller General's examination and audit. It authorizes agency heads to conduct such examinations, and authorizes and directs the Comptroller General so far as practicable to conduct his examination and audit, at the places where the accounts, vouchers, and supporting documents are kept. It provides specifically that such papers shall not be required to be transmitted to the General Accounting Office in Washington or, except upon the direction of the agency head, to such head.