Accounting Office for the Congress over Government expenditures. Indeed, this proposal is not even based upon a recommendation of the Commission on Organization. Its utter lack of feasibility-aside from the absence of any sound basis for the changes in law it would involve suggests to the General Accounting Office that those conceiving the proposal may have been wholly unaware of its connotations and effect.

Under existing law, disbursing officers, certain certifying officers, and the head of any department or agency may apply for, and the Comptroller General is required to render, a decision upon any question involving a payment to be made by or under them, and such decision when rendered is binding upon the General Accounting Office in passing upon the account containing the disbursement. By far the most important, and by no means the fewest numerically, of the questions submitted for decision are those involving the application, scope, and 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 on all classes-and to supplant it with authority to consult on such matters with the Secretary of the Treasury, who is to issue the regulations and opinions.

At present, there are approximately 100 attorneys in the Office of the General Counsel of the General Accounting Office. One of their functions is to prepare, for consideration by the Comptroller General or the Assistant Comptroller General, drafts of decisions in response to all questions submitted by heads of departments, disbursing officers, and certifying officers. These questions are of every nature and type conceivable. They may involve the particular appropriation language of every agency in the Government. They may involve, also, the statutes and regulations applicable to every kind of an expenditure made by the Government. During the fiscal year 1948, the Office of the General Counsel prepared over 2,100 drafts of decisions for rendition to heads of departments, disbursing and certifying officers alone, as well as more than 10,000 other drafts of decisions and reports to claimants, to the Attorney General, to the Congress, etc. I refer to these practical matters to show how impractical the proposal here made would be. Is the Comptroller General to "consult" personally with the Secretary? If not-and certainly no one would sanely suggest that each time a question involving the application, scope, or availability of an appropriation arose a consultation would be required-how would the system contemplated by the proposal operate? Without attempting to speak for the Secretary, the proposal seems to me to be just as unfair to him as to the Comptroller General—and just as unworkable.

One thing is sure. The actual operation of any such system would inevitably result ultimately in giving the executive branch full authority to determine, according to its own ideas, the objects for which an appropriation legally may be expended. The present law vests in an agent of the Congress, the Comptroller General, authority to construe appropriation language. If the Congress is to retain any effective control over expenditures beyond the date when it appropriates the money, the power of the Comptroller General to make legal determinations binding on the executive branch as to the objects for which appropriations. have or have not been made available by the Congress should never be relaxed. Section 309 of the Budget and Accounting Act, 1921, provides that the Comptroller General shall prescribe the forms, systems, and procedure for administrative appropriation and fund accounting in the several departments and establishments, and for the administrative examination of fiscal officers' accounts and claims against the United States. Section 22 (b) of the present bill would amend said section 309 so as to subject the Comptroller General's authority to prescribe such forms, systems, and procedure to the specific requirements set out in section 23 of said present bill relative to administrative examination of accounts in the

field.

Section 22 (b) also would direct the Comptroller General to examine the regulations issued by the Secretary of the Treasury under section 21 covering general accounting methods, practices, and procedures, and would confer upon the Comptroller General power to approve, or withhold approval of, the issuance of such regulations insofar as they prescribe forms, systems, or procedures for administrative appropriation and fund accounting. To the extent such regulations were not approved they would not be effective. This latter provision seems particularly impracticable since a disagreement of the Comptroller General with particular regulations could result in operations being conducted without regulatory guidance of any kind. The same situation would result as to phases of accounting control where no draft of regulations were initiated and presented to the Comptroller General because he would have no opportunity either to approve

or disapprove, and the section gives him no authority to initiate a regulation. While this power to approve or disapprove regulations ostensibly might indicate control in the Comptroller General, any failure of the parties to agree could result in complete lack of control and a chaotic situation. If the Comptroller General is to have control in this matter, as he should, then that control can best be realized by letting him retain the authority he now has under said section 309the independent authority to prescribe.

Moreover, subsection 22 (b) is closely allied with section 21 of the bill and the comments made with respect to that section apply here. For the reasons previously outlined, the General Accounting Office is opposed to enactment of the subsection.

Subsection 23 (a) would authorize the head of each agency to conduct his administrative examination of the accounts in the field where the accounts, the vouchers, and supporting documents, regularly are kept. It also would authorize and direct the Comptroller General to conduct his examination, so far as practicable, in the field.

With respect to the administrative examination of accounts after payment, this problem has been examined under the joint accounting program and legislative recommendations are now under consideration.

The desirability of making on-the-spot audits to the extent practicable and feasible has been recognized by the General Accounting Office. The prompt and effective audit of the tremendous expenditures incident to World War II could not have been accomplished otherwise. The Office is making decentralized and site audits today to an extent which is not generally realized. During the past year audits were performed at agency offices and installations or at projects sites in 281 locations outside of Washington. Field or decentralized audits presently being performed include audits of payments under cost-reimbursable contracts having an estimated dollar value of $7,476,000,000; examinations at Veterans' Administration offices and training institutions concerning financial transactions under the Servicemen's Readjustment Act; audits of books of contractors engaged in operating concessions under agreements providing revenue to the Government; audit of revenues and expenses incident to the operation of Government-owned or chartered vessels operated by agents of the United States Maritime Commission; audits of the financial transactions of the Atomic Energy Commission, Farmers Home Administration (Department of Agriculture), Bureau of Land Management (Department of the Interior), and phases of the Economic Cooperation Administration; audits of payments of salaries to civilian employees of the Government in Washington and in 27 area centers outside of Washington; audits of payments under the Soil Conservation and Domestic Allotment Act, the Sugar Act of 1948, and other programs of the Agricultural Conservation Program Branch, Production and Marketing Administration of the Department of Agriculture; and the audit of substantially the entire accounts of the Army, Navy, and Air Force disbursing officers.

I am convinced that much can be gained by the further adoption of site audits in certain types of the Government's operations. It is my announced policy to extend site audits whenever it is to the best interests of the Government. But no new legislation has been found necessary yet to accomplish this result. Should this be the case it will be recommended as a part of the joint accounting program. I object particularly to the policy of this subsection that the department head may direct accounts and vouchers to be transmitted to Washington but the General Accounting Office shall not do so. This is an unconscionable interference with the performance of the duites of the General Accounting Office as the independent auditor for the Congress.

Section 23 (b) would authorize the Comptroller General, notwithstanding any other provision of law, to audit and settle accounts on the basis merely of spot checks, sampling, and other checking processes and to settle accounts and certify balances of accounts pursuant to audits made on such basis. Aside from the unfortunate wording of this subsection, which stresses mere "spot checks," and is not calculated to induce confidence in the results of the audit, the desirability of a selective audit has been recognized here, and steps have been taken to determine the types of accounts in which, and the extent to which, such an audit process will afford a satisfactory result. However, it should be pointed out that the extent to which the General Accounting Office as auditor must examine the accounts of the administrative agencies depends to a considerable degree upon the adequacy of administrative accounting and other administrative controls and practices. As the joint accounting program continues toward its goal of establishing sound and efficient systems within the agencies in the executive branch, it may be possible, more and more, for the General Accounting Office to rely safely upon a selective

type of audit. If any clarification or legislation on this phase of the problem proves desirable, it will be developed as part of the joint accounting program.

Section 24 contemplates the issuance of regulations, prepared jointly by the Secretary of the Treasury and the Comptroller General, prescribing procedures for the drawing of moneys from the Treasury and the making of disbursements, as well as for the receipt, custody, and deposit of public money. The essential feature of this proposal is its recognition of the need for elasticity in these matters-that is, a freedom obtainable under a regulatory authority that is difficult to prescribe by statute. Unless all the hopes and expectations which the sponsors and others have for the joint accounting program are misplaced, the objective sought to be attained by section 24 necessarily will be achieved through the steps that now are and for some time have been in progress, including recommendations for any new legislation necessary to improve and simplify the existing system.

In sum, I do not regard the bill S. 2054 as the proper approach to worth-while improvements in the accounting systems or sound economies in the audit processes. The joint accounting program has already demonstrated that deficiencies in the Government's present accounting systems can best be worked out by the gradual and cooperative approach which has been undertaken. And, as has already been pointed out, there are no legislative obstacles to the adoption of many changes in the accounting and audit procedures which have been found to be practicable and economical, and at the same time have been designed to accomplish a satisfactory result in protecting the interests of the United States and enforcing the control of the Congress over expenditures.

I strongly recommend that any legislation enacted with respect to Federal accounting be an outgrowth of the work now being done by the General Accounting Office, the Treasury Department, and the Bureau of the Budget on a cooperative basis with all Government agencies to effect basic improvements in accounting from the standpoints of individual agency management, the executive branch as a whole, and the needs of the Congress and the public for adequate and accurate disclosure of financial results.

New legislation would, of course, be necessary to accomplish the aims of those who would divest the Congress of all effective check upon the expenditure of public funds. Under existing law, the General Accounting Office acts as the right arm of Congress and stands as the last bulwark for the protection of the taxpayer against illegal and extravagant spending. Any weakening of that arm is a weakening of the Congress itself. And the first step toward relinquishing financial control over the accounting and expenditure of funds is one that will be difficult to retrace. Once the opening wedge is driven, the attack upon the remaining vestiges of control will be intensified.

Sincerely yours,

LINDSAY C. WARREN, Comptroller General of the United States.

The CHAIRMAN. At this time, I should like to have inserted in the hearings immediately following the testimony of Comptroller General Warren the minority report on the Hoover Commission's recommendations with reference to the establishment of an Accountant General. The minority report was signed by myself and by former Congressman Manasco, a member of the Commission. This is done so that this record may be complete. For those who are interested in it, I should like to have the views of the dissenting members of the Commission be printed in the record.

RESERVATIONS OF COMMISSIONERS JOHN L. MCCLELLAN AND CARTER MANASCO TO HOOVER COMMISSION REPORT No. 7 ON BUDGETING AND ACCOUNTING We disagree with the recommendation of the majority of the Commission 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 the powers conferred upon him by the Congress-to give technical guidance to a chief accountant on the staff of each department head, and to combine agency accounts on a report basis into the summary accounts of the Government.

Instead of recommendation I (a) and (b), and other similar proposals in the Commission's report on this point we recommend that:

(a) An operating center be established under the Secretary of the Treasury for an up-to-date system of central accounting and reporting.

(b) Each department be responsible for maintaining detailed accounting records under the direction of a chief accountant in each department who should be charged with developing accounting to meet the needs of agency management within the framework of general requirements laid down to meet over-all executive and legislative needs.

(c) The Treasury Department should, on a report basis, combine agency accounts into the summary accounts of the Government for the information of the Chief Executive, the Congress and the public.

(d) The summary accounts of the Treasury and the detailed accounts of the agencies should be properly integrated to provide a maximum of consistency and a minimum of overlapping and duplication.

We have been reluctant to present minority views, preferring to be in the position of supporting and facilitating action on the Commission's recommendations. But when the Commission goes afield of its jurisdiction and makes recommendations and attempts changes in an agency of the Congress, we are compelled to dissent. The majority contends that there is no inherent conflict, but the adoption of its recommendations would require legislation transferring the function of prescribing administrative appropriation and fund accounting systems from the General Accounting Office to the Treasury Department.

We do not believe the Congress will consent to the stripping of its agency of effective authority over accounting systems. A similar proposal was a major factor in bringing about the defeat of the entire Reorganization Program in 1937. This renewed effort to have the Congress shirk its constitutional duty and relinquish its authority over public expenditures to the executive branch of the Government by transferring general accounting functions from its own agency to an office in the executive branch may again adversely affect the entire reorganization program.

Aside from the jurisdictional defect, the recommendation of the majority is premised upon the erroneous assumption that the Comptroller General has authority or interest only with respect to appropriation and fund accounts and not with respect to property accounts and cost accounts; and the further assumption that both the administrative or departmental accounts and the fiscal or general accounts should be prescribed by the same authority so as to have an integrated system. The report suggests that with some of the accounts prescribed by the Treasury and others by the Comptroller General it has not been possible to work out a satisfactory system.

It is true that the Budget and Accounting Act of 1921 requires the Comptroller General to prescribe appropriation and fund accounts and that there is no such general requirement as to accounts of other classes. However, for the past 2 years the independent offices appropriation act has included language designed to insure that all the independent agencies of the Government have accounting systems not only for appropriations and funds, but for property inventories, prescribed or approved by the Comptroller General. This requirement is coupled with the further requirement that all agencies for whose activities provision is made in the act maintain fiscal accounting control of all inventories of supplies materials, or equipment. Among the agencies included in the act, or made subject to these provisions by other legislation, are the Atomic Energy Commission, Federal Works Agency, Maritime Commission, and Veterans' Administration. In view of the vast responsibilities of such agencies as these for property, and the work the Comptroller Genral has done to provide means to carry them out, it is neither correct nor fair to say that he has not been "particularly concerned" with property accounts. Neither is it fair to imply that the Comptroller General does not concern himself with the form of the over-all fiscal accounts or the contents of the reports made from them, or with cost accounts, in view of the specific provisions which have been made for cooperative work of the General Accounting Office, the Treasury Department, and the Bureau of the Budget in these and all other areas of Government accounting under their joint accounting program, of which the Commission has taken cognizance.

As to the general accounts in the Treasury, Mr. Manasco in his letter of December 14, 1948, to the Commission's members stated:

66* * * The Comptroller General has not prescribed the Treasury's accounting system for its central fiscal activities, there being question in some quarters about his jurisdiction in that field. That jurisdictional question has now been shoved aside and as part of his broad program, the Comptroller General is working with the Treasury to simplify and improve its accounting and make it a real center for bringing together adequate and useful reports for the Government's operations

as a whole. This independent viewpoint should assist rather than slow down needed simplification and economy while also taking care of coordination with other accounting in the Government, basic integrity from the independent viewpoint of Congress and an effective basis for improving independent audit * * * "" As to the prescribing of agency systems generally by the Comptroller General, Mr. Manasco stated:

11* * * I understand that many public accounting firms welcome the opportunity to design and install accounting systems for their clients which they later audit. I am sure that one reason for this is to enable them to make a better and more efficient audit while, at the same time, taking care to see that management needs are satisfied and that the system provides for full disclosure of the corporation's financial condition for the benefit of the board of directors and stockholders.

"The analogy to comptrollers in big and far-flung corporations might even be more to the point, since after all the Government, while divided into three branches, is still one Government. The legislative branch is no more outside the Government than the board of directors is outside a business corporation. In fact, I think Congress comes pretty close to being comparable to a board of directors. I am told that in many of our big corporations the comptroller is responsible directly to the board of directors and in this position of independence exercises control by a judicious combination of prescribed accounting procedures and audits of such procedures."

The following excerpts from the Comptroller General's annual report for 1948 should dispel any possible doubts as to the scope of his interest and of the joint accounting program now under way:

16* * * It was constantly apparent to me that the accounting needs of many, if not all, of the departments and establishments of the Government might extend beyond the scope of my authority to prescribe, and indeed, that the accounting information needed by the Treasury Department and the Bureau of the Budget and at times by the committees of the Congress, might require extensions of accounts and accounting practices beyond such scope. In this connection the Congress had evidenced a special interest in the provision for property accounting as shown by section 109 of the Independent Offices Appropriation Act, 1948, approved July 30, 1947. It was my desire that the General Accounting Office be useful also in studying this field with a view to adding its requirements to the systems and procedures prescribed under section 309 of the Budget and Accounting Act and coordinating the two. To make our efforts in the field of Government accounting more helpful I sought the active assistance and cooperation of the Secretary of the Treasury and the Director of the Bureau of the Budget, which I have received.

"I then created on January 6, 1948, a new division in my immediate office, the Accounting Systems Division, to concentrate on and pursue this entire project which would be limited only by the accounting needs of the Government, including the bases for furnishing reliable financial data to the Treasury Department, Bureau of the Budget, and the Congress.'

"While significant progress has been made in improving Government accounting and financial reporting in particular areas, it is my conviction that improvements of this nature can contribute far more if conceived and developed as part of an interrelated program. It seems clear to me that the combined efforts of all concerned are essential to the success of a program of this nature. The ultimate effect of the program upon which we have embarked will be to give the executive branch and the Congress much better information as to the operations of the Government and means of control of its financial affairs. I regard it as inherent in my responsibility to the Congress to see that the accounting requirements and machinery of the Government make their full contribution to intelligent and informed legislative consideration."

The Comptroller General's observations on the need for cooperative effort would be just as valid even if an Accountant General were to be set up in the Treasury. However, the recommendation of the majority, if adopted, would weaken the participation of the Comptroller General in the development of accounting systems to the point where he would have no authority to require anything. His function would be limited to approving or disapproving what was presented to him. This would in no way insure the development of an accounting system incorporating features needed by the General Accounting Office for external control and audit, and by the Congress in the form it requires to disclose the results of the Government's financial operations.