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stands, in Congress' own agency the General Accounting Office. I believe this committee is of that mind, because it was this committee that reported out the Federal Property Act of 1949, enacted since the Hoover report, and giving the General Accounting Office increased responsibilities in the field of property accounting, with proper recognition of the cooperative approach under the joint accounting program.

I am not going into a section-by-section analysis of the bill, but I have particular concern with section 22 (a) which authorizes the Secretary of the Treasury, in consultation with the Comptroller General, to issue for the guidance of disbursing and certifying officers regulations and opinions as to the application, scope, and availability of appropriations made by Congress.

This section, in my opinion, is one of the most dangerous in the whole bill. It would result in a wholly impractical division of responsibility and a watering down to the point of futility of the present control exercised by the General Accounting Office for the Congress over Government expenditures. This proposal is not even based upon a recommendation of the Hoover Commission, but apparently upon one of the task force recommendations which were repudiated even by the majority of the Commission. Its utter lack of feasibility suggests that those conceiving the proposal may have been unaware of its effect.

Under existing law, disbursing officers, certain certifying officers, and heads of agencies may apply for a decision of the Comptroller General upon any question involving a payment to be made by or under them. The questions raised and the decisions rendered by the Comptroller General in many instances involve availability of appropriations. Presumably, it is the purpose of this proposal in section 22 (a) to divest the Comptroller General of his authority to render binding decisions on at least this class of questions-if not all classes-and to supplant it with authority to consult on such matters with the Secretary of the Treasury, who is to issue regulations and opinions.

Aside from the utter impracticability of such an arrangement, one thing is certain. In actual operation, it would result in giving the executive branch full authority to determine according to its own ideas the objects for which appropriations may be expended. This authority is presently vested in the Comptroller General. If Congress is to retain any effective control over expenditures beyond the date when it appropriates money, the power of the Comptroller General to make legal determinations binding on the executive branch as to the availability of appropriations for expenditures should never be relaxed.

With respect to those provisions of title II dealing with administrative examination of accounts, the conduct of examinations and audits in the field, and the authority to audit and settle accounts on the basis of spot checks, sampling and so forth, all of these proposals have been under study as a part of our joint accounting program. It may well be that some legislation will be needed to accomplish our objectives in full. However, specific legislation that may be required is not completely worked out at this time. Mr. Yates, the Assistant Comptroller General; Mr. Weitzel; and Mr. Frese, who are here with me today, will be glad to give you further details as to what we are presently doing in these fields.

To sum up, I do not regard S. 2054 as the proper approach to worth-while improvements in the accounting systems or sound economies in the audit processes. Its result would be to cut away and surrender the power of the legislative branch. The joint accounting program has already demonstrated that acknowledged deficiencies in the Government's present accounting systems can best be worked out by the cooperative approach which has been undertaken. I strongly recommend that any legislation enacted with respect to Federal accounting be an outgrowth of the work now being done under the program rather than by stripping the Congress and its agent, the General Accounting Office, of one of the most effective means of enforcement of proper accounting for public expenditures.

Gentlemen, the legislative control of public funds is the basis upon which the fiscal policy of this Government is built. Checks and controls by the Congress itself and by its agent, the General Accounting Office, are means of enforcement. During the last 20 years a great deal of legislation has been enacted which, bit by bit, has the effect of removing the financial controls and checks of the legislative branch, leaving the executive free to do as it wills in its spending actions. This bill is another attempt of the same nature, differing only in that this time it comes from outside rather than inside the Government. Legislative control of expenditures is a control which should be jealously guarded. Any further encroachments upon it should be vigorously rejected. Once you give this control away, you will never, and I repeat, never, get it back.

GENERAL ACCOUNTING OFFICE,
Washington, September 23, 1949.

CHAIRMAN, COMMITTEE ON EXPENDITURES
IN THE EXECUTIVE DEPARTMENTS,

United States Senate.

MY DEAR MR. CHAIRMAN: Further reference is made to your letter of June 20, 1949, acknowledged by telephone on June 27, requesting my views on the provisions of S. 2054, entitled "A bill to authorize the President to determine the form of the national budget and of departmental estimates, to modernize and simplify government accounting and auditing methods and procedures, and for other purposes." It is understood that the bill purports to implement certain recommendations of the Commission on Organization of the Executive Branch of the Government concerning budgeting and accounting. As you indicate in your letter, the General Accounting Office is directly concerned only with part II of the bill, entitled "Accounting."

BUDGET

The main object of the provisions contained in part I (The Budget and the Office of the Budget) of the bill is to give the President complete authority over the form and contents of the budget. Also, the budget would no longer be required to be transmitted to the Congress on the first day of each regular session but could be transmitted anytime during the first 3 months of each regular session. These matters are of more direct concern to the President and the Bureau of the Budget. I have no recommendations to make with respect thereto except to point out that this bill would repeal most, if not all, existing provisions of law requiring specific items of information to be set forth in each budget. The President would be empowered to include only such details as he deemed advisable or necessary. It would be left to the Appropriations Committees to make specific requests for break-downs and explanations of items after the budget was sent to the Congress. While postponing the date of transmittal would undoubtedly benefit the President, it would, of course, leave the Congress with just that much less time to consider and enact the appropriations before the beginning of the ensuing fiscal year. Moreover, I am advised that considerable progress is being made by the Bureau of the Budget toward a performance budget under the provisions of existing law and that the Bureau itself may not consider any new legislation covering these matters necessary at this time.

There have been noted the amendments intended to be proposed by Senator McCarthy to the bill, S. 2054, referred to your committee August 1, 1949. Such amendments would incorporate in the bill provisions similar to those enacted for the National Military Establishment in title IV of Public Law 216, approved August 10, 1949, dealing with the performance budget and with transfers and adjustments of appropriations and personnel ceilings. They also include provisions similar to those approved by the Senate but not incorporated in the final enactment of Public Law 216, requiring clearance from department heads of requests for legislation which would authorize appropriations to be made to departments in the executive branch. In addition, the amendments would authorize alternative estimates and alternative budgets; would for the first time grant to the President specific authority to reduce expenditures under appropriations in the executive branch of the Government generally if, and to the extent, he determines that the purposes intended by the Congress will be accomplished by the expenditure of lesser amounts; and would require allocations approved by the President as a prerequisite to the availability for obligation and expenditure of appropriations made to any department or establishment and expendable reimbursements thereto. In connection with this latter provision, your attention is invited to the attached copy of my report of August 3, 1949, to you, concerning S. 2161, relative to expenditure reductions by the President.

Part III of S. 2054, as introduced, would specifically repeal numerous provisions of existing law requiring estimates for certain activities, or in certain form, or reports of certain expenditures, so as to leave the President a free hand in determining the form and content of the budget under part I.

ACCOUNTING

Part II (Accounting) deals largely with the recommendation of the majority of the Commission on Organization of the Executive Branch that an Accountant General be established under the Secretary of the Treasury, with authority to prescribe general accounting methods and enforce accounting procedures, subject to the approval of the Comptroller General within a restricted area, and with

other duties set forth in the report of the majority. That_recommendation was the subject of a strong minority report by Commissioner Manasco and yourself on the ground that, if there is to be any change in basic jurisdiction to prescribe accounting systems, it should be in the direction of strengthening the hand of the Comptroller General, but that the joint accounting program of the Comptroller General, the Secretary of the Treasury, and the Director of the Bureau of the Budget (the three agencies most concerned with Government accounting) had put aside the jurisdictional question, and this is no time to raise it again. The bill, S. 2054, incorporates further provisions based on the report of the Commission's task force, which was repudiated even by the majority of the Commission. By section 20 of part II the Secretary of the Treasury would be authorized to create in the Treasury Department a service to be known as the Accounting Service with an Accountant General at its head. The Accountant General would be appointed by the Secretary of the Treasury, who could provide for the performance by the Accountant General and the Accounting Service of the functions vested in the Secretary by the act.

The views of the General Accounting Office on this phase have reference directly to the functions to be performed by the proposed Accountant General and Accounting Service.

Subject to the authority of the Comptroller General under section 309 of the Budget and Accounting Act, 1921, as it would be amended and weakened by section 22 (b) of the bill, the Secretary of the Treasury would be authorized by section 21 to prescribe by regulation the “general accounting methods, practices, and procedures (including property and cost accounts and expenditure controls) to be followed by all agencies in the executive branch of the Government," and also would be authorized to supervise operations under such methods, practices, and procedures in all of such agencies. The regulations of the Secretary would provide for frequent reports to him from the agencies as to the status of their accounts. The Secretary would be directed to combine such reports into summary accounts and prepare financial reports covering all the accounting operations of the Government for the information of the President, the Congress, and the public. For all practical purposes, this section would transfer to the executive branch a vital and very substantial part of the accounting functions that the General Accounting Office now exercises. There should be no misunderstanding about that. Nor should the seemingly innocuous language of this section be permitted to hide the fact that this is but one more in a series of attempts through the years to deprive the Congress of a proper measure of control over the financial operations of the executive branch of the Government.

Commencing with the Treasury Act of 1789, which provided for an auditor and a comptroller in the Treasury Department, the Congress has relied upon the accounting officers of the Government to enforce, according to the legislative intent, the statutory provisions governing the spending of, and the accounting for, public funds. From time to time during the period 1789-1921, the status and functions of the accounting officers were reconsidered by the Congress, and on each occasion action was taken to strengthen the control and make more effective the operations of the accounting officers. In 1868, Congress declared that balances certified by the Comptroller of the Treasury should be final and conclusive upon the executive branch of the Government. In 1894, the Dockery Act effected some degree of centralization of supervision over the Government accounting system under the Comptroller of the Treasury, who was given broad appellate and revisionary powers over the other accounting officers. And then, by the final step in the process of evolving an accounting agency responsible directly to the Congress, the Budget and Accounting Act, 1921, created the General Accounting Office and made it completely independent of the executive branch.

But there always have been-and apparently still are-those who believe that in the operation of the Government it is for the Congress merely to appropriate the money and for the executive branch to spend it without interference, guidance, or control. This seems to be the theory of the Commission's Task Force Report on Fiscal, Budgeting, and Accounting Activities-a report which, as indicated above, subsequently was repudiated by the Commission itself. This report, supposedly representing an enlightened view of governmental accounting, does not contain a single significant proposal which had not been made theretofore. It is merely a rehash of the same doctrine presented to the Congress in 1923, 1932, and 1936. Each time the Congress saw through the theoretical arguments and realized, regardless of the basis alleged by the sponsors, that in the final analysis the measures were impelled by the desire to have the expenditure of public funds free from effective legislative control. The Congress must be alert to this new

assault.

The pattern is the same; the motives are identical. I do not question for a moment the soundness of the specific improvements in the Government's accounting which the proponents of this plan advocate. But, I feel that they do not give the proper recognition to the constitutional division of authority between the executive and the legislative branch and the resulting responsibility of the Congress over public funds. The specific improvements in accounting which they seek can, in my opinion, be best and most quickly attained, not by theoretical argument over jurisdiction, but by pooling the intellectual resources of both branches of the Government in a cooperative endeavor to satisfy the needs of both branches, as is being done now under the leadership of the three principal fiscal agencies of the Government.

The proposal to create an Accountant General in the executive branch with the functions prescribed by the bill is based upon a recommendation (No. 10, p. 39) by the majority of the Commission on Organization of the Executive Branch in its Report on Budgeting and Accounting. Such a recommendation, dealing as it does with the functions of the General Accounting Office, an agency in the legislative branch (sec. 7 of both the Reorganization Act of 1945, 59 Stat. 611, and the Reorganization Act of 1949, Public Law 109, approved June 20, 1949), went beyond the authority conferred by law upon the Commission. This is pointed out merely to show that even legislative prescriptions in clear and unmistakable terms do not thwart the persistence of those who, under the guise that that is the only way to effect improvements, would isolate the Congress and any agent of Congress from control over the financial transactions of the executive agencies. The sponsors of the proposal will say that accounting is an indispensable tool of management in administering the affairs of the Government, and that in order for the managers to do a good job they should be empowered to set up and supervise their own accounts. The first thesis is not denied-at least, not by the Comptroller General or by the General Accounting Office. In this connection, the following is quoted from the announcement of the Joint Program for Improving Accounting in the Federal Government, signed on January 6, 1949, by the Comptroller General of the United States, the Secretary of the Treasury, and the Director of the Bureau of the Budget:

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

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(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 deficiency in the basis for the proposal of the Commission's organization of the executive branch lies in the argument that management exclusively must design and supervise its own accounting systems. It is common practice in private business for public accounting firms to devise and install accounting systems in the offices of their clients and then conduct an independent audit of operations under such systems. Various businesses affected with a public interest, such as railroads and power companies, frequently are required by law to operate under accounting systems prescribed by governmental regulatory bodies. In such cases, the accounting system must serve in a dual role, first as an aid to management and, second, as a protection to the taxpaying public.

The restrictions and limitations which the Congress sees fit to impose upon departmental operations must generally be reflected in applicable accounts. Factors such as the proper classification of transactions and the establishment of proper internal controls are essential if there is to be conformance with the legislative will in the expenditure of funds. If the Comptroller General were deprived of all power to prescribe the structure of internal accounting systems the audit of the accounts would be made immeasurably more difficult. The Congress is cognizant of this interrelationship between the accounting systems and the audit function. The Independent Offices Appropriation Acts for 1948, 1949, and 1950 (Public Law 266, approved August 24, 1949) even go so far as to provide that no part of any appropriation or fund contained therein shall be available for installing or maintaining systems for administrative appropriation, fund, or inventory accounting, except such systems as are prescribed or approved by the Comptroller General.

Another recent expression of the will of the Congress is contained in the Federal Property and Administrative Services Act of 1949, Public Law 152, approved

June 30, 1949. Section 205 (b) provides that the Comptroller General, after considering the needs and requirements of the executive agencies, shall prescribe principles and standards of accounting for property, cooperate with the Administrator of General Services 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. Other provisions of that section and of section 206 (c) require examination by the General Accounting Office of established property accounting systems to determine the extent of compliance with prescribed principles and standards and approved systems, reports by the Comptroller General to the Congress of failure to comply therewith, and audit by the General Accounting Office of property accounts and transactions. These recent pronouncements of the Congress demonstrates clearly that the Congress desires its agency, the General Accounting Office, to have more, not less, authority over the basic requirements for accounting in the executive branch.

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There is every disposition on the part of the General Accounting Office to prescribe systems which will aid effective administration in the Government. There is really nothing inconsistent with the exercise of authority by the Comtroller General over basic requirements and the development of accounting by management to serve its own needs. It is my objective to prescribe requirements largely in terms of standards, principles, and basic forms and procedures. 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. Neither is there anything inconsistent between the exercise of the authority of the Comptroller General and the coordination of the accounting system for the executive branch as a whole, with composite reports based on the integration of agency and Treasury accounting results. The joint accounting program contemplates that this will be done through an operating center in the Treasury Department. The Congress should be under no illusions that it must take the drastic steps proposed in S. 2054 to bring about this result; nor, on the other hand, should it be under any illusions that the General Accounting Office claims the right to maintain the administrative accounting systems of the agencies. Such systems are and should be maintained by the agencies themselves.

Accounting developments and improvements cannot be devised, installed, and put into operation overnight. It must be a gradual process. Recognition of that fact forms the cornerstone of the joint accounting program, referred to above, which is now advancing steadily toward the goal of improved Federal accounting. That program, undertaken by the General Accounting Office, the Treasury Department, and the Bureau of the Budget, has been endorsed heartily by the President and enthusiastically received by the heads of practically all departments and agencies. It was on the basis of the existence of such a program that the Vice Chairman of the Hoover Commission dissented from the majority views on accounting. (See p. 71 of the Commission's Report on Budgeting and Accounting.) It was on that basis, also, that the Director of the Bureau of the Budget stated in his letter of July 5, 1949, to you, that the Bureau does not agree with the recommendations of the Commission concerning the establishment of an Accounant General. And, finally, the Commission itself referred to the joint program as a step in the right direction, although it was of the opinion that "more than voluntary correctives are needed."

For the reasons outlined above, the General Accounting Office is unalterably opposed to the proposal for the establishment in the executive branch of an Accountant General as proposed by S. 2054. That improvements are needed in the accounting systems and methods presently in operation in the Federal Government is recognized on all sides. But the way to work out the rough spots and obtain improvements is by cooperative, voluntary, and realistic efforts on the part of all the agencies concerned. Such efforts are now inherent in the joint accounting program.

By section 22 (a) of S. 2054 the Secretary of the Treasury would be authorized, in consultation with the Comptroller General, to issue from time to time, for the guidance of disbursing and certifying officers, regulations and opinions as to the application, scope, and availability of appropriations made by Congress.

This subsection is one of the most dangerous and unworkable in the whole bill. It would result in a wholly impractical division of responsibility and a watering down to the point of futility of the present control exercised by the General

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