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into this effort has been most impressive. He has given unstintingly of his time and effort and patience. During the course of the preparation of these amendments he has held all told a dozen separate conferences here in Washington, most of them lasting well into the evening and extending over week ends. The original drafting group was held extremely small in an effort to get first a definite proposal from which to work. When this had been done, Mr. Eberstadt and his associates held an informal conference with Senator Byrd, who tentatively approved the plan as a basis for further discussion and coordination with all interested departments. This final coordination has been completed, and the amendments are now in shape for consideration by the committee as a whole.

I feel that everyone on the committee will join me in expressing our very sincere appreciation to Mr. Eberstadt for the manner in which he has met our request of March 29.

I would like to add to that that as chairman, I feel especially grateful for having this expert approach and long experience brought to bear on the objective which we all have in mind, and I am very grateful that you have relieved the committee and the chairman of a lot of tedious and difficult work, which I am sure we could not have done so well without your help.

Now, Mr. Eberstadt, I should like to ask you to proceed from here on in your own way.

However, before you proceed, Mr. Eberstadt, I should like to submit for the record at this point, the committee print dated May 4, 1949, entitled, “Proposed amendments to S. 1269 prepared under the direction of Mr. Ferdinand Eberstadt at the request of the Senate Committee on Armed Services on March 29, 1949." (The committee print is as follows:)

[Committee print, May 4, 1949] PROPOSED AMENDMENTS TO S. 1269 PREPARED UNDER THE DIRECTION OF MR. FERDI

NAND EBERSTADT AT THE REQUEST OF THE SENATE COMMITTEE ON ARMED SERVICES ON MARCH 29, 1949

SEC. 10. The National Security Act of 1947 is amended by inserting at the end thereof the following new title:

"TITLE IV

"PROMOTION OF ECONOMY THROUGH ESTABLISHMENT OF UNIFORM BUDGETARY AND

FISCAL PROCEDURES AND ORGANIZATIONS

"COMPTROLLER OF DEPARTMENT OF DEFENSE (NATIONAL MILITARY ESTABLISHMENT)

"SEC. 401. (a) In order to implement the provisions of section 202 (a) conferring upon the Secretary of Defense authority and control over the military budget, there is hereby established in the Office of the Secretary of Defense an office to be known as the Office of Comptroller of the Department of Defense (National Military Establishment), which shall be headed by a Comptroller to be appointed from civilian life by the Secretary of Defense and who shall receive compensation at the rate of $

per annum. “(b) The Comptroller shall advise and assist the Secretary of Defense in performing such budgetary and fiscal functions as may be required to carry out the powers conferred upon the Secretary of Defense by section 202 (a) of this Act and by this title, including but not limited to those specified in this subsection. Subject to the authority and direction of the Secretary of Defense, the Comptroller shall

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(1) supervise and direct the preparation of the budget estimates of the Department of Defense (National Military Establishment) and of the three military departments, and “(2) establish, and supervise the execution of—

“(A) principles, policies, and procedures to be followed in connection with organizational and administrative matters relating to

“(i) the preparation and execution of the budgets;
“(ii) fiscal, cost, operating, and capital property accounting; and

“(iii) progress and statistical reporting; and
“(B) policies and procedures relating to the expenditure and collection
of funds administered by the Office of the Secretary of Defense and b'g'
the military departments, and, from time to time, make such audits as he

may determine; and “(3) establish uniform terminologies, classifications, and procedures in all such matters applicable to the military departments.

“MILITARY DEPARTMENT BUDGET AND FISCAL ORGANIZATION-DEPARTMENTAL

COMPTROLLERS

“SEC. 402. (a) The Secretary of Defense shall cause budgeting, accounting, progress and statistical reporting, and administrative organization structure and managerial procedures relating thereto in each of the military departments to be organized and conducted in a manner consistent with the operations of the Office of the Comptroller of the Department of Defense (National Military Establishment).

“(b) There is hereby established in each of the three military departments the Office of Comptroller. Subject to the authority of the respective departmental Secretaries, the comptrollers of the military departments shall be responsible for all budgeting, accounting, progress, and statistical reporting, and for the administrative organization structure and managerial procedures relating thereto. The Secretaries of the military departments may in their discretion appoint either civilian or military personnel as comptrollers of the military departments. Departmental comptrollers shall be under the direction and supervision of, and directly responsible to, either the Secretary, the Under Secretary, or an Assistant Secretary of the respective military departments. Where the departmental comptroller is not a civilian, the Secretary of the department concerned shall appoint a civilian as Deputy Comptroller.

"PERFORMANCE BUDGET

"SEC. 403. (a) The budget estimates of the Department of Defense (National Military Establishment) shall be prepared, presented, and justified, where practicable, and authorized programs shall be administered, in such form and manner as the Secretary of Defense, subject to the authority and direction of the President, may determine, so as to account for, and report, the cost of performance of readily identifiable functional programs and activities, with segregation of operating and capital programs. So far as practicable, the budget estimates and authorized programs of the military departments shall be set forth in readily comparable form and shall follow a uniform pattern.

“(b) In order to expedite the conversion from present budget and accounting methods to the cost-of-performance basis contemplated in this title, the Secretary of Defense, with the approval of the President, is authorized and directed, until the end of the second full fiscal year following the date of enactment of this Act, to make such transfers and adjustments within each military department between appropriations available for obligation by such department in such manner as he deems necessary to cause the obligation and administration of funds and the reports of expenditures to reflect the cost of performance of such programs and activities. Reports of transfers and adjustments made pursuant to the authority of this subsection shall be made currently to the President and the Congress.

“PROGRAM ADJUSTMENTS “SEC. 404. On and after the end of the second full fiscal year following the date of enactment of this Act, the Secretary of Defense, with the approval of the President, is authorized and directed to make transfers and adjustments between appropriations within each military department in order to provide maximum economy and efficiency in the operation of programs for which appropriations may be made from time to time, but no appropriation shall be increased or decreased thereby by more than 5 per centum. Reports of transfers and adjustments made pursuant to the authority of this section shall be made currently to the President and the Congress.

"AUTHORIZATIONS FOR APPROPRIATIONS

“SEC. 405. In order to provide the most effective control by the President and the Congress over the moneys in the Treasury not appropriated to specific purposes and to achieve economy and efficiency in matters arising out of the availability and expenditure of moneys which may, from time to time, be appropriated to the Department of Defense (National Military Establishment), no requests for legislation, which, if enacted, would authorize any appropriations to be made to any of the military departments, shall be transmitted to the Bureau of the Budget, the President, or the Congress by the military department concerned, or by the Department of Defense (National Military Establishment), without the prior approval of the Secretary of Defense.

ALLOCATION OF APPROPRIATIONS

"SEC. 406. In order to prevent overdrafts and deficiencies in any fiscal year for which appropriations are made, on and after the beginning of the next fiscal year following the date of enactment of this Act appropriations made to the DepartInent of Defense (National Military Establishment) or to the military departments, and reimbursements thereto, shall be available for obligation and expenditure only after allocations, or modifications thereof, approved by the Secretary of Defense: Provided, however, That nothing in this section shall affect the right of the military departments to incur deficiencies under any existing laws or prevent them from incurring deficiencies in order to meet the requirements of national interest or security arising out of emergencies which may be declared by the President to exist, and in such event to the extent that he may direct.

"WORKING CAPITAL FUNDS “SEC. 407. (a) In order more effectively to control and account for the cost of programs and work performed in the Department of Defense (National Military Establishment) and in the three military departments, the Secretary of Defense is authorized to require the establishment of working-capital funds in the Department of Defense (National Military Establishment) and in the three military departments for the purpose of

“(1) financing inventories of such stores, supplies, materials, and equipment as he may designate; and

“(2) providing working capital for such industrial-type activities, and for such commercial-type activities as provide common services within or among the departments and agencies of the Department of Defense (National

Military Establishment), as he may designate. “(b) The Secretary of the Treasury is authorized and directed to establish on the books of the Treasury Department at the request of the Secretary of Defense the working-capital funds established pursuant to the authority of this section. "(c) Such funds shall be

“(1) charged, when appropriate, with the cost of stores, supplies, materials, and equipment procured or otherwise acquired, manufactured, repaired, issued, and consumed and of services rendered or work performed, including administrative expenses; and

“(2) reimbursed from available appropriations or otherwise credited for the cost of stores, supplies, materials, or equipment furnished and of services

rendered or work performed, including administrative expenses. Reports of the condition and operations of such funds shall be made annually to the President and to the Congress.

"(d) The Secretary of Defense is authorized to provide capital for such working-capital funds by capitalizing inventories on hand and, with the approval of the President, bv transfer until December 31, 1954, from unexpended balances of any appropriations of the military departments not carried to the surplus fund of the Treasury: Provided, That no deficiency shall be incurred in any such appropriation as a result of any such transfer. To the extent that such methods do not, in the determination of the Secretary of Defense, provide adequate amounts of working capital, there is hereby authorized to be appropriated, out of any moneys in the Treasury not appropriated for other purposes, such sums as may be necessary to provide adequate working capital.

“(e) Subject to the authorty and direction of the Secretary of Defense, the Secretaries of the military departments shall allocate responsibility within their respective military departments for the execution of functions which each military department is authorized by law to perform in such a manner as to effect the most economical and efficient organization and operation of the activities and use of the inventories for which working-capital funds are authorized by this section.

"(f) No greater cost shall be incurred by the requisitioning agency for stores, supplies, materials, or equipment drawn from inventories, and for services rendered or work performed by the industrial-type or commercial-type activities for which working-capital funds are authorized by this section, than the amount of appropriations or funds available for such purposes.

“(g) The Secretary of Defense is authorized to issue regulations to govern the operation of activities and use of inventories authorized by this section, which regulations may, whenever he determines the measures set forth in this subsection to be required by the needs of the Department of Defense (National Military Establishment), and when they are authorized by law, permit stores, supplies, materials, and equipment to be sold to, and services to be rendered or work performed for, purchasers or users outside the Department of Defense (National Military Establishment). In such cases, the working-capital funds involved may be reimbursed by charges against appropriate appropriations or by payments received in cash.

"(h) The appraised value of all stores, supplies, materials, and equipment returned to such working-capital funds from any department, activity, or agency may be charged to the working-capital fund concerned and the proceeds thereof shall be credited to the current appropriations concerned; the amounts so credited shall be available for expenditures for the same purposes as the appropriations credited : Provided, That the provisions of this subsection shall not permit credits to appropriations as the result of capitalization of inventories authorized by subsection (d) of this section.

MANAGEMENT FUNDS

"Sec. 408. The Act of July 3, 1942 (56 Stat. 645, c. 484), as amended by the Acts of May 29, 1945 (59 Stat. 201), and of July 8, 1946 (60 Stat. 481), is hereby further amended to read as follows:

“(a) For the purpose of facilitating, within and among military departments, the economical and efficient conduct of operations which are financed by two or more appropriations where the costs of the operations are not susceptible of immediate distribution as charges to such appropriations, there are hereby established the Navy Management Fund, the Army Management Fund, and the Air Force Management Fund, each within, and under the direction of the respective Secretaries of, the Departments of the Navy, Army, or Air Force, as the case may be. There are authorized to be appropriated from time to time such funds as may be necessary to accomplish the purposes of the funds.

"(b) The corpus of the Navy Management Fund shall consist of the sum of $1,000,000 heretofore transferred to the Naval Procurement Fund from the Naval Emergency Fund (17X0300), which amount, and all balances in, and obligations against, any accounts in the Naval Procurement Fund, are hereby transferred to the Navy Management Fund; the corpus of the Army Management Fund shall consist of the sum of $1,000,000, which shall be transferred thereto from any unobligated balance of any appropriation available to the Department of the Army; the corpus of the Air Force Management Fund shall consist of the sum of $1,000,000, which shall be transferred thereto from any unobligated balance of any appropriation available to the Department of the Air Force; in each case together with such additional funds as may from time to time be appropriated to any of said funds. Accounts for the individual operations to be financed under the respective management funds shall be established only upon approval by the Secretary of Defense.

"(c) Expenditures may be made from said management funds from time to time for material (other than material for stock) and for personal and contractual services under such regulations as may be prescribed by the Secretary of Defense: Provided, (1) That no obligation shall be incurred against any such

fund which is not properly chargeable to available funds under an appropriation of the department within which the fund is established or, whenever necessary to effectuate purposes authorized by the National Security Act of 1947 (61 Stat. 495), as amended, to funds of another department or agency within the Department of Defense (National Military Establishment), and (2) that each fund shall be promptly reimbursed from the appropriate appropriations of such department for all expenditures properly chargeable thereto. Nothing herein or in any other provision of law shall be construed to prevent advances by check or warrant, or reimbursements to any of said management funds from appropriations of said departments on the basis of the estimated cost of a project, such estimated cost to be revised and necessary appropriation adjustments made when adequate data become available.

“(e) Except as otherwise provided by law, amounts advanced to the management funds under the provisions of this Act shall be available for obligation only during the fiscal year in which they are advanced : Provided, however, That nothing contained in this Act shall alter or limit the authorized period of availability of the funds from which such advances are made. Final adjustments of advances in accordance with actual costs shall be effected with the appropriate funds for the fiscal year.

“ (e) The portion of the Naval Appropriation Act, 1945 (58 Stat. 301, 310) (the Act of June 22, 1944), relating to the Naval Procurement Fund is hereby repealed.'

“ADJUSTMENT OF ACCOUNTS

“Sec. 409. (a) When under authority of law a function or an activity is transferred or assigned from one department or agency within the Department of Defense (National Military Establishment) to another such department or agency, the balances of appropriations which are determined by the Secretary of Defense to be available and necessary to finance or discharge the function or activity so transferred or assigned may, with the approval of the President, be transferred to, and be available for use by, the department or agency to which said function or activity is transferred or assigned for any purpose for which said funds were originally available. Balances so transferred shall be credited to any applicable existing appropriation account or accounts, or to any new appropriation account or accounts, which are hereby authorized to be established on the books of the Treasury Department, of the department or organization to which such function or activity is transferred, and shall be merged with funds in the applicable existing or newly established appropriation account or accounts and thereafter accounted for as one fund. Balances transferred to existing accounts shall be subject only to such limitations as are specifically applicable to such accounts and those transferred to new accounts shall be subject only to such limitations as are applicable to the appropriations from which they are transferred.

“(b) The number of employees which in the opinion of the Secretary of Defense is required for such transferred functions or activities may, with the approval of the Director of the Bureau of the Budget, be deducted from any personnel maximum or limitation of the department or agency within the Department of Defense (National Military Establishment) from which such function or activity is transferred, and added to any such personnel maximum or limitation of the department or agency to which such function or activity is transferred.

“AVAILABILITY OF REIMBURSEMENTS

“SEC. 410. To carry out the purposes of the National Security Act of 1947 (61 Stat. 495), as amended by this Act, reimbursements made under the authority of the Economy Act (31 U. S. C. 686), and sums paid by or on behalf of personnel of any department or organization for services rendered or supplies furnished, may be credited to authorized replacing or other accounts. Funds credited to such accounts shall remain available for obligation for the same period as the funds in the account so credited and each such account shall constitute one fund on the books of the Treasury Department.

“COMMON USE OF DISBURSING FACILITIES

"SEC. 411. To the extent authorized by the Secretary of Defense disbursing officers of the Departments of the Army, Navy, and Air Force may, out of accounts of advances available to them, make disbursements covering obligations arising

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