since the three audit agencies or their representatives, the Comptroller's office, the Budget Bureau, and the Treasury, have all gotten together and agreed on a working arrangement and have put it into effect, apparently all the executive agencies of the Government have caught the spirit of the thing. Is that correct? Where in the past you may have found resistance, now you are sort of embraced with a welcome and enthusiasm. Is that true?

Mr. WARREN. That is absolutely correct, Senator. We are receiving nothing but cooperation.

The CHAIRMAN. So continuation of the present program you think will get the results that everyone desires and get them much quicker? Mr. WARREN. Senator, I am absolutely convinced that it is the only possible way that we can do it.

In closing, Mr. Chairman, I should like to say that the staff of this committee has played an important part in the development of the joint accounting program and I wish to commend them for their fine efforts. We regard the committee as one of the real partners in this program.

The CHAIRMAN. Thank you very much.

The committee will stand in recess. This concludes the hearings unless something unforseen should develop. In the meantime, anyone wishing to file a statement for the information of the committee may do so.

(Whereupon, at 12 o'clock noon, the committee recessed, to reconvene at the call of the Chair.)

(Subsequently, the following statement regarding S. 2054 was received from Mr. Frank L. Yates, Assistant Comptroller General of the United States:)

STATEMENT OF FRANK L. YATES, ASSISTANT COMPTROLLER GENERAL OF THE UNITED STATES

During the hearings on the bill S. 2054 which began on February 27th, this committee has been concerned directly with the provisions of the bill and, with some exceptions, testimony has been limited to the bill. A notable exception was a witness who testified on the third day of the hearings and made very clear his dissatisfaction with the recommendations of the Hoover Commission and with part II of the pending bill because neither goes far enough to embrace all of his personal views or those of the Commission's task force of which he was a member. It seems to me he also made it abundantly clear, despite his professions to the contrary, that adoption of his theories, which he asserted were shared by many others, would seriously reduce the effectiveness of the General Accounting Office in the fields of both accounting and auditing and practically end all legislative control in these fields.

The incident of this particular testimony is mentioned only because it is indicative and strangely familiar. In this statement, I want to sound a grave warning that there is more behind the contents of part II of the bill than meets the eye. Though bad even in its present form, it would be only an entering wedge and a forerunner for still further theoretical and impractical proposals.

In the course of my service in the General Accounting Office in various capacities, dating from the beginning of that Office in 1921, I have watched the preparation and the launching of periodic assaults against the authority and the independence of the General Accounting Office and have at times participated in the furnishing of facts for use in repulsing these assaults. Some of these attacks have reached the Congress in the form of official proposals for legislative changes. But at other times in between, and with little cessation, they have taken the form of constant advocacy in certain forums and periodicals. There always have been some individuals and groups who believe the control of Congress over moneys of the Government should cease after it has exercised its appropriating authority and that the Congress should exercise no control, direct or indirect, over the accounting for or the audit of funds of the executive branch.

These critics of legislative control do not directly and openly attack the Congress or the principle of the control it retains. They attack, instead, the agency Congress has established to effectuate such control, the General Accounting Office. Their plan has varied slightly through the years but it still follows a familiar pattern. They would first remove from the Comptroller General authority to prescribe the forms, systems, and procedures for administrative accounting in the departments and agencies of the Government and transfer that authority to some place in the executive branch. They would remove from the General Accounting Office its authority for disallowing credit for illegal expenditures detected in the audit and for recovering the money. They would thus reduce the Office to a mere spotchecking and reporting office. They would also transfer the settlement of doubtful claims to the executive branch. And from time to time they have urged other things which would weaken legislative control of the uses of appropriated funds. For example, attempts have been made to convince the Comptroller General and me that we should join in recommending to Congress that it abandon entirely its long-followed policy of limiting the uses of appropriated funds by placing limitations in appropriation acts.

They overlook or disregard certain important considerations:

1, How can the General Accounting Office be certain that administrative accounts will disclose the information necessary to an accurate audit unless it has an effective control in the shaping and maintenance of such accounts? How can it determine the legality of the uses of public funds unless it can have an effective voice in establishing the forms, procedures, and supporting data necessary to evidence such uses?

2. If the audit made by the General Accounting Office were reduced to a mere checking and reporting of findings to the Congress without any authority to make disallowances of credit in the accounts or to collect by offset or otherwise, how would money erroneously expended be recovered? During recent years the annual collections by the Office have averaged more than $100,000,000 per year, and these annual totals have included many thousands of exceptions and of collection items. Certainly, the departments would agree with some of the findings and make some of the collections, but they would disagree in many cases. How could the Congress consider the thousands of disallowed items and how could the Congress move to make collections? As far back as the administration of Thomas Jefferson it was determined that committees of the Congress were entirely too busy with legislative duties to concern themselves with accounting items, and that it was wholly impractical to attempt to maintain a staff large enough for such purpose.

3. If the function of settling claims were removed from the General Accounting Office, what recourse would agencies and their certifying and disbursing officers have, in doubtful cases, for their protection and to what experienced and impartial tribunal could citizens take their disputed claims after rejection by administrative agencies, except to the courts or to the committees of the Congress? During the fiscal year 1949, the Office settled 563,794 claims, a large part of which would fall in the class of doubtful cases. 4. And what would be the ultimate result after a few years if the Congress should entirely abandon its practice of placing limitations in appropriation acts? To be sure, some money would be saved in accounting costs if no such limitations had to be observed and enforced, as it is frequently argued— but at what other costs? Few, if any, Members of the Congress will be without an answer to this question.

The perennial critics have assigned various reasons for the changes they have advocated. The reasons have varied with the backgrounds, experience, theories, and ingenuity of the critics. But they can be accurately summarized, generally, under two headings:

1. They say that when the Congress retains and exercises a share in the control of accounting and audit processes in the executive branch of the Government it is invading the field of the duties and prerogatives of that branch of the Government. We think the Congress may properly, and must, exercise such control.

2. They say control by an agency of the Congress, independent of the executive branch, conflicts with management of the executive branch; it is not done that way in business; in business, management controls accounting and employs its own auditors; and the pattern of Government should follow the pattern of business.

There is a great difference between the situations and the requirements in Government and those in business and marked differences in the purposes to be served by accounting and audit.

The existence of these differences was readily and honestly recognized by former President Herbert Hoover when he responded to a question during the course of his testimony before this committee on March 7. The plans of the Hoover Commission and the proposals of part II of the pending bill, S. 2054, do not appear to go quite as far as some proposals of the past. Mr. Hoover himself explained that they represent the results of compromise. But there is little basic difference, and the pending bill only reiterates in a different form what has been sought before. The familiar pattern of the past is still there. It is a pattern that has been time and again rejected by the Congress. Critical persons and groups have even converted to their views several Presidents who have chafed at the independence of the Comptroller General, but various Congresses, in their turn, have roundly rejected all proposals to change the relationship established by the Budget and Accounting Act.

Let's draw together the occasions of congressional rejection and take a look at them. Beginning with the Budget and Accounting Act itself, they are as follows: (1) The original Budget and Accounting bill (H. R. 9783, 66th Cong.) was vetoed by President Wilson in 1920 because, his message argues, the provision with respect to the removal of the Comptroller General and Assistant Comptroller General was unconstitutional. This section, while calling for appointment of those officers by the President, limited their removal to either a concurrent resolution of Congress or impeachment (H. Doc. 805, 66th Cong.). In effect, the section made those offices independent of the Executive by transferring the power of their removal from the Executive to the Congress. In the actual enactment of the Budget and Accounting Act of June 10, 1921, this section was changed only slightly by calling for a joint resolution (or impeachment) instead of a concurrent resolution. As so changed, the bill was approved by President Harding and became law, but the change was relatively small. While the President could participate in a joint resolution by approving or vetoing the measure, it could of course be passed over his veto. At the same time, the essential feature which President Wilson complained of remains; that is, that the President through his executive powers alone cannot effect the removal of the Comptroller General or the Assistant Comptroller General. In the light of the Rathbun case (295 U. S. 602) no doubt need be entertained as to the validity of that provision.

(2) In 1923 President Harding presented a sweeping reorganization plan recommended by him and his Cabinet, which called for the transfer to the Treasury Department of the General Accounting Office (S. Doc. 302, 67th Cong.). In the hearings on the resulting legislation (H. R. 9629, 68th Cong.) the then Secretary of the Treasury, Andrew W. Mellon, was outspoken in his opposition to the transfer of the General Accounting Office to the Treasury Department, saying (hearings on S. J. Res. 282, 67th Cong., pp. 200-203):

"* * * The Comptroller's office is essentially an independent office, and has no relation to the Treasury or to any of the other departments * * * "I have not observed in any way where there would be any advantage, or where there is an advantage in having it connected with the Treasury.

"There is no reason why it should be inside of the Treasury at all * * * 61* * * That is one bureau, you may say, that is logically an independent bureau."

The resulting bills, H. R. 9629 and S. 3445, Sixty-eighth Congress, omitted entirely the matter of the transfer of the General Accounting Office to the Treasury Department. (See H. Rept. No. 937, 68th Cong., p. 26.)

(3) In 1932, acting under the authority of the reorganization sections contained in the Economy Act of June 30, 1932, President Hoover, by Executive Order No. 5959, undertook to transfer to the Bureau of the Budget certain functions of the General Accounting Office, including those relating to designing, prescribing, and installing accounting forms, systems, and procedures. The act under which that action was taken conditioned the effectiveness of the reorganizations upon the failure of Congress within 60 days to overrule the President's action by vote of either House of Congress. Promptly upon the submission of that plan, House Resolution 334 was introduced to the effect that the Executive order referred to, and certain others, "are hereby disapproved." The committee handling the resolution reported (H. Rept. 1833, 72d Cong.) "what is proposed in this regard would defeat the very purpose of existing law, as it would break down the means of obtaining a uniform accounting system.' The resolution overruling the President's plan was adopted by the House of Representatives on January 19. 1933.

(4) In 1937 President Roosevelt proposed to the Congress a sweeping reorganization of executive agencies based, according to his letter, in great part on the

studies completed by his Committee on Administrative Management in the Government of the United States, headed by Mr. Louis Brownlow. A major item would have transferred to the Treasury the authority of the Comptroller General to prescribe and supervise accounting systems, forms and procedures in the Federal establishment. The function of the settlement of claims by and against the Government was also to go to the Treasury, and the remaining purely audit work was to be handled by a new office under an Auditor General without power to make an independent and binding disallowance. In other words, an auditor without the means of exacting compliance with his decisions (S. Doc. 8, 75th Cong., p. 46). The resulting bills, principally S. 3331, Seventy-fifth Congress, failed of enactment (83 Congressional Record 5123).

(5) A year later a revised form of reorganization act designed to carry out many of the other recommendations of the President was enacted (act of April 3, 1939, 53 Stat. 561) but it specifically denied the President the power to act in any respect to transfer or abolish the General Accounting Office or its functions.

(6) Immediately after Pearl Harbor, the First War Powers Act was enacted (December 18, 1941, 55 Stat. 838) granting the President the widest authority to reorganize Government departments and agencies, but containing the following specific provision: "that no redistribution of functions shall provide for the transfer, consolidation, or abolition of the whole or any part of the General Accounting Office or of all or any part of its functions."

(7) Soon after VE-day, President Truman asked for a renewal of the reorganization authority enacted in 1939. The Congress approved the request (act of December 20, 1945, 59 Stat. 613) but specifically excluded the General Accounting Office and, perhaps to allay any further efforts to weaken its agency, inserted the following language: 66* * * the Comptroller General of the United States or the General Accounting Office * * * are a part of the legislative branch of the Government." President Truman did not object.

(8) The further renewal in 1949 of the reorganization authority repeats the exclusion of the General Accounting Office and the language as to its legislative status (Public Law 109, 81st Cong., approved June 20, 1949). President Truman proposed the exclusion.

(9) The bill establishing the Hoover Commission quite carefully restricts the scope of its study and recommendations to agencies in the executive branch of the Government (act of July 7, 1947, 61 Stat. 246).

We are

The foregoing summary shows how the Congress has beaten back previous attempts to transfer functions of the General Accounting Office to the executive branch. The accounting provisions of the present bill, S. 2054, represent a renewal of those attempts. The General Accounting Office, Bureau of the Budget, and Treasury Department are united in their opposition to those provisions. not simply asking the committee to accept a do-nothing attitude on the important subject of better accounting in Government. Instead, we have brought to the attention of the committee the progress that is now being made under the joint accounting program of the three agencies. The committee is not asked to take anything on faith. Its attention has been directed to actual performance. former President Hoover testified before the committee I could only wish that he had been present to hear the testimony of the Comptroller General, the fiscal assistant secretary of the Treasury, the Assistant Director of the Bureau of the Budget, and other representatives of the three agencies reporting that performance to the committee.

As

Mr. Hoover's conclusions as to what is wrong with Government accounting are based on the findings of his task forces. The difficulty is that in many instances, due to the progress made under the joint accounting program, those findings are out of date. In all the other instances the joint accounting program staff is well aware of the deficiencies cited and is working toward simplification and improvement, with due regard for the transitional problems.

Mr. Hoover quoted a number of statements from the appendix to the report of the Accounting Policy Committee of the Fiscal, Budget, and Accounting Task Force. Those statements were prepared by Mr. T. Jack Gary, Jr., research director for the Accounting Policy Committee. Mr. Gary testified on S. 2054 before you committee and expressed his vigorous opposition to the provisions of the bill which would set up an Accountant General. As reasons for his opposition, Mr. Gary stated that, in his opinion, the enactment of the legislation would retard progress and that any legislation on accounting should grow out of experience under the joint accounting program. He said that the recommendations of the Hoover Commission as to objectives in the accounting field are already in the joint program as are 11 of 15 such recommendations of the task force. Your

committee also heard reference to Mr. Gary's recent testimony before the House Appropriations Committee, based on his actual experience with the operation of the joint accounting program, to the effect that he did not see how any more could be accomplished under an Accountant General than is being accomplished under the program.

To illustrate Mr. Hoover's apparent lack of information regarding the basic concepts of the joint accounting program, I would like to single out one paragraph from statements quoted by Mr. Hoover. That paragraph is as follows:

* * *

* * *

"No one person or agency is charged with the responsibility either to prescribe a complete plan of accounting for the Federal Government or to supervise its operation as a result accounting and over-all financial reporting is incomplete, inconsistent, duplicative, cumbersome, and based on certain accounting principles not generally accepted either in commercial or governmental accounting practice

* * * ""

The joint accounting program has brought together the resources of the Government's three top fiscal agencies, plus the accounting talent of every other agency in the Government, under the leadership of the Comptroller General. There is now no argument over jurisdiction, which would inevitably arise if the prescribing of systems were placed under an Accountant General and the approval of a part of those systems under the Comptroller General. The Government's accounting problem is being approached in its entirety with all the interested viewpoints represented. In this way duplicating and unnecessary procedures can be eliminated with proper understanding of the needs of all agencies having accounting and auditing responsibilities, and without sacrificing the ultimate power of the Comptroller General to exercise the requisite control for the Congress. Mr. Hoover quoted statements from the report of the majority of his Commission indicating that freight-car loads of vouchers from all over the United States are hauled to Washington for individual examination in the General Accounting Office. Those statements are predicated upon a misconception of the majority, apparently still persisted in, that the Comptroller General "now requires administrative agencies of the executive branch to submit all expenditure vouchers and supporting documents for every individual transaction to the General Accounting Office for examination and 'settlement'." Your Expenditure Committee has heard from several witnesses testimony as to the actual present practice and policies of the General Accounting Office under which site audits are being performed in hundreds of locations throughout the United States, and a comprehensive audit program is being developed to take advantage of internal checks and controls in the agencies under audit. The figures cited by Mr. Hoover are fantastically out of focus with the real situation. Of course, if the Congress desires the General Accounting Office to discontinue its independent audit, a considerable saving could be made in numbers and people and in dollars, in addition to those already made through improvements in procedures and adoption of new techniques. Inevitably, however, that saving would be a drop in the bucket compared to the losses which would result if the Comptroller General's hands were tied in the manner proposed under S. 2054.

The Comptroller General and I have set our course in the direction of decentralization of audits and comprehensive audits where it is found to be in the best interests of the Government, but no action short of legislative action will stampede us into abandoning our basic responsibility for seeing that expenditures conform to the will of Congress as expressed in appropriation acts and other legislation. As agency accounting systems are improved under the joint accounting program, it may be possible more and more to rely upon selective audit methods and, as has already been testified by representatives of the Office, if any further legislation should become necessary to clarify or give additional legislative sanction to this practice, it will be recommended under the joint accounting program.

Mr. Hoover quoted from his Task Force on the Federal Supply System. I would like to point out that much has already been accomplished under the legislation reported out by this committee last year and enacted as the Federal Property Act of 1949 in the direction of simplification and reduction of costs of Federal procurement transactions.

Mr. Hoover quoted from his Task Force on Lending Agencies concerning the necessity for accountability of management being commensurate with its responsi