Restrictions confine the use of such an account to appropriated funds of the departments specifically available for the projects in question. In this way, control is retained by the Congress of projects as they were initially authorized. This procedure is helpful for operations such as joint amphibious maneuvers, the A-bomb tests at Eniwetok, and for administrative functions, such as a joint inspection service. Here, again, is authority which may be of real benefit to other agencies of Government, which have a rather complex organizational structure.

Another provision in title IV which is helpful is the section entitled "Adjustment of accounts." This section is intended to facilitate accounting and to provide for the transfer of funds from one appropriation to another, within the Department of Defense, when a function or activity is reassigned under authority of law.

The CHAIRMAN. May I inquire whether title IV, "Amendments to the National Security Act," gives authority to the Secretary to transfer funds within some percentage from one function to another, as is provided in the pending bill?

Mr. MCNEIL. It does not, sir.

The CHAIRMAN. The only authority you have on that is where you transfer a function or a service from one agency to another division, and you similarly transfer the funds that were appropriated.

Mr. MCNEIL. That is right, sir. Title IV, as it passed the Senate, also contained provision for 5-percent transfer authority between appropriations. That was stricken in the House. I was informed at the time that it was contrary to House practices and rules. I was also informed then that, if we thought we needed it, it should appear in the annual appropriation bill. Inasmuch as we felt it would be very helpful, we would like to have it. I think it is helpful to any agency which has to predict its operations 18 months to 2 years ahead.

The CHAIRMAN. You do not have it in the act that you are operating under. We do have to decide whether that provision is advisable in this bill. Do you state that it is, in your opinion, desirable not only to your Department but to any department to have that transfer authority in law?

Mr. MCNEIL. It would be desirable to us and, I am sure, to every department that has its work financed by a number of appropriations. The CHAIRMAN. Do you think this percentage, 5 percent, would be adequate for that purpose?

Mr. MCNEIL. I do. I think, in my opinion, it should not be great. Five percent, I think, would be satisfactory. If there were any greater deviations, I think there probably would be sufficient change in basic programs to require appearance before your committees and have it authorized. I think that 5 percent represents a fair balance. The CHAIRMAN. I did not really mean to interrupt your statement, but I knew that transfer provision was in this bill and I did not recall about title IV. I wondered whether you requested it or whether you thought it desirable in the Defense Department. It seems to me that your Department is one where it probably would be most desirable, because you have to meet changed conditions more rapidly, probably, than in any other department. It is more difficult for you to anticipate just where funds will need to be expended.

Mr. MCNEIL. That is correct, sir; and it is one thing that has helped the appropriation committees, the Bureau of the Budget, and the

Department of Defense, which have worked on that problem.

To give you an example, the Air Force might explain it better than anything I can think of at the moment. All of their funds for maintenance and operation of air stations and aircraft are in one appropriation. Within that appropriation their work is divided into about 190 programs. Inasmuch as the one appropriation is provided for 190 programs, there is automatically flexibility between them. So, only in the case of transfers between "Maintenance and operation of air facilities" and "Aircraft and procurement" would this authority now be used in the case of the Air Force.

The CHAIRMAN. May I ask you, after your study of the pending measure, if that transfer provision were enacted in this bill, would it be applicable to the Defense Department? In other words, would the provision in this bill be applicable to the Defense Department and grant the same authority to it that it does to other departments if this bill were enacted?

Mr. MCNEIL. May we include that in our report on the repeal provisions?

The CHAIRMAN. We should like to know that. You say it is desirable, and I am just wondering if the provisions of this bill would grant. you transfer authority if this bill were enacted.

Mr. MCNEIL. We shall give you our best views on that, sir.

(The information requested appears at the conclusion of Mr. McNeil's statement.)

Of concern only to the military departments is the section providing authority for the common use of the disbursing facilities of the respective military departments. Inasmuch as it is not applicable to other Government departments, I shall not for this reason discuss this section.

The last important provision of title IV is that calling for reports on property. This section authorizes the Secretary of Defense to require the three departments to maintain property records, so far as practicable, on both a quantitative and monetary basis. The property records are to include the real proprety, such as fixed installations and their equipment; items of equipment in use, such as aircraft, tanks, ships, weapons, and ammunition. Earlier I discussed the operation of inventories under working-capital accounts. In the military departments it is contemplated that these working-capital accounts will, for the present at least, be limited to standard-stock common-use items. Similar accounts, although not carried under working-capital funds, are to be established to include items such as technical equipment of a highly obsolescent nature or ammunition which may be considered as a war reserve. Under the operation of inventory accounts as contemplated under this section, it is possible to have a measure of the rate of consumption of this specialized type of material. Material items to be procured for such inventories will generally be those wherein specific identification of equipment will be made in a procurement program separately set out in the budget presentation.

The Navy has had considerable experience with this type of appropriation and property account. Tentative systems are now being tested at pilot installations of the Army and the Air Force. The experience gained from these tests, in conjunction with previous Navy experience, is providing the information necessary for the full and

adequate development of uniform property accounting policies and procedures in all three military Departments.

As we brought out in the hearings on title IV, the Office of the Comptroller General, the Treasury Department, and the Bureau of the Budget all participated in the development of these provisions and all concurred in the type and character of the fiscal and accounting framework to be established. This is pointed out as an illustration of the progress that can be made through the cooperative effort of the legislative and executive branches in the development and implementation of improved methods and procedures.

I would like to interpolate there, if I may, and say that, when I first had some experience in the executive branch, one thing that seemed to be lacking was teamwork and a cooperative approach. I think there is a great change in the last 3 or 4 years. One of the things that impressed me was the way the Comptroller General, the appropriations committees, the Armed Forces Committee here, the Department of Defense, Bureau of the Budget, and the Treasury all worked on the development of what we think is a very sound basic fiscal structure for our operation, which does cover a sizable portion of the Federal effort.

Our task of bringing order and clarity to the complex and diversified operations of the three military departments is far from complete. The pattern has, however, been established and real progress has been made. Some of the progress to date has already paid substantial dividends and has carried us part way toward our goal of maximum security at a minimum of expense.

The CHAIRMAN. Could you point out the amount of savings or indicate some idea of the amount of savings that you think have accrued or are accruing by reason of this change in the budgeting system?

Mr. MCNEIL. I would say that to break it down specifically by provisions I would have difficulty. However, the authority granted to us or to the Department of Defense in the National Security Act, the provisions that are the basic authority, and the change in the organizational structure, the provision of title IV and the action that has been taken-I don't know how to divide between the two-have resulted in substantial savings. Many of the benefits that we expect from title IV will come in the future as we get our industrial activities on a sound basis and when we commence to get this management concept all the way through the Department. We have a report ready for Congress, a portion of which at least will be available at the end of this week, which will identify savings, many of which can be attributed to the machinery provided by this act.

The CHAIRMAN. I am sure it hasn't reached its full development yet by any means, but have you progressed sufficiently far that you can state with assurance that great savings are going to result from this change?

Mr. MCNEIL. Sir, the minute that the report is available, if I may send this committee several advance copies, I think it may answer your question. I prefer, if I may, not to answer that question until the report is released.

The CHAIRMAN. I did not mean to ask you to give out the information prematurely, but I thought you might state in general terms that

you are convinced that considerable savings are resulting by reason of this change.

Mr. MCNEIL. That is correct, sir.

As Secretary Johnson stated earlier in this hearing, our experience thus far makes us certain that the full implementation of title IV will permit management improvement at all levels in the Department of Defense. We are confident that title IV will provide adequate and timely information for the Bureau of the Budget and congressional committees, which will permit them to have a much clearer picture of each military program, its content, its costs, its contemplated changes, and its rate of progress.

The CHAIRMAN. Mr. McNeil, I think you have been rather thorough in the presentation out of your experience under title IV of the amendments that were adopted last year to the National Security Act. I have only one or two questions that I wish to ask you. I think you have covered it rather thoroughly.

I should like to know whether you consider that the pending bill provides any particular advantages or benefits to the Department of Defense, in addition to those of title IV under which you are now operating, or if the enactment of this bill would in any way affect the Department of Defense adversely or subtract from the authority you now have or in any way interfere with the further development of the program that you are now pursuing.

Mr. MCNEIL. With the exception of the repeal provisions which the Secretary mentioned and excepting for a moment the provision for the Accountant General, I know of nothing else in the bill which would adversely affect it. Neither would the provisions help us unless we find that the five percent transfer authority might be helpful.

The CHAIRMAN. That is the only provision in the bill, if it is applicable to your department, that you think would be of some advantage or benefit, in other words, that would implement to your advantage title IV of the amendments to the Security Act?

Mr. MCNEIL. Because several provisions of this bill are word for word with title IV of the National Security Act.

The CHAIRMAN. Of course, you will check for us and give us a memorandum on these repeal provisions. You made reference there to the Accountant General provision. You have had considerable experience and have made many studies, I am sure, of governmental operations. Would you care to comment on title II of the bill, which is quite controversial, I may say, with reference to establishing an Accountant General's Office? You have pointed out in your testimony that there has developed-I do not know to what extent it did not exist before, but obviously there has now developed a spirit of cooperation between the legislative branch, as represented not only by Congress and the congressional committees, but by its agency, the Comptroller General-and the Treasury and the Budget and the National Defense Department. By reason of such cooperation you are actually able to resolve difficulties and solve your problems of budgeting, accounting, and so forth, very satisfactorily. Is that correct?

Mr. MCNEIL. Yes. We are making progress that 3 years ago I would not have dreamed possible. Three years ago I think-this is a personal view-I would have favored this or anything else which

would provide some direction toward improvement of accounting for management purposes.

The CHAIRMAN. Assume that title II does have real merit and its general objectives are highly desirable, from your observations and from your experience and from what you related with reference to the development of cooperation during the last 2 years, would you say to this committee that such legislation should be enacted now, in the midst of this program or effort that is now being put forth and apparently is making satisfactory progress? Or should legislation of this character be deferred for the present at least until you can determine definitely whether the voluntary procedures that are being adopted will be adequate. What would you say about that? Should we risk interfering with that now by enacting this legislation? That is what I am trying to determine.

Mr. MCNEIL. I would recommend, sir, that part II as to the establishment of the Accountant General be deferred at least at this time; kept in mind, perhaps, for some future time if the Congress finds that the cooperative approach is not producing tangible results.

The CHAIRMAN. In other words, do you consider that any greater progress could be made than is now being made if Title II were promptly enacted into law, or would you feel that it might rather retard the program that you now have under way rather than expedite it?

Mr. MCNEIL. I certainly do not think it would speed up the process. I should like to give you my reason for it, if I may.

The CHAIRMAN. I would be glad to have it.

Mr. MCNEIL. First, the cooperative approach, which is very satisfying in the progress that is being made, is under way with a full head of steam. The establishment of a separate office would disrupt that and I think cause come delays in the progress that otherwise has been made at this time. Second, I think a great deal of thought would have to be given to the location of such an office, if it were established, and making certain that its function was confined to being a focal point for the executive department and that the proper relationships with Congress had been clearly established. I think probably that adequate thought has not been given to that phase of the problem. I would have some doubts myself that it should be in any one department. The Treasury has some very competent people. They are working with us splendidly. I hope that we are reciprocating, because we realize we are just one agency of the Federal Government and that our end product must fit in with the end product of the others in order that the Treasury may know their position adequately and timely. But I do not think we should lose sight of one thing, and that is that accounting goes away beyond the keeping of our cash accounts. Secretary Johnson touched upon it earlier. Actually we want our accounting to show our costs of activities, what it is costing us to do business at posts, camps, stations, and ships.

The costs include many things that are not directly affected in the cash accounts; the use of property, for example. So I question whether an agency whose primary responsibilities are the carrying of the cash accounts of the Government are just by nature the ones to develop accounting for use of management, and that is really what we want accounting for.