May I comment on that paragraph? I would regard Mr. Hoover's own expressions as to the proposed title IV as pretty good authority on whether it fell within the views of his Commission or not. As you know, Mr. Hoover has authorized me to state that the title has his approval.

With certain of the language of that paragraph, I certainly am in agreement. The way things stand today, functions are diffused all over among bureaus, and technical services, and so forth, but I think there might be some danger in going completely to the other extreme and simply saying that the Secretary of Defense shall be authorized to run the department with such organization and in such manner as he sees fit. This is the argument ad absurdum of their approach. Of course, they do not go that far [reading]:

A number of the provisions of sections 401 and 402 of the May 3, 1949, draft of a proposed amendment to S. 1269, are inconsistent with the recommendations of the President for amendments to the Security Act and with the findings and recommendations of the Commission on Organization of the Executive Branch with respect to departmental management generally.

I have just said that I would be willing to accept Mr. Hoover's authority as to whether title IV is consistent with his recommendations or not. He is a better authority than I am on that:

Section 401 (a) would establish by statute in the Office of the Secretary of Defense, an office to be known as the Office of the Comptroller. I recommend that, in lieu of establishing this office by statute, language be used which will authorize the Secretary of Defense to appoint a comptroller. The creation of an "Office of Comptroller" or other suitable internal organization arrangements could then be accomplished by administrative action.

My response to that would be to ask why it has not been done [reading]:

Section 401 (b) would place statutory duties upon the Comptroller of the Department of Defense. We recommend that the bill be worded in such a way as clearly to place those duties in the Secretary of Defense and authorize him, in his discretion, to have the Comptroller advise and assist him in carrying out those duties. Suitable language to accomplish that purpose would be language parallel to that which now appears in S. 1269 which describes the relationship between the Secretary of Defense and the Munitions Board, the Research and Development Board, and the Joint Chiefs of Staff.

Comments which I have made heretofore apply to that. I think simply to set up this title A alternative or optional and wholly discretionary may not be going far enough. Of course, the authority must be in the Secretary. There is no question about that. He must have the final and principal authority, and the comptroller must operate under his authority and direction. But I would question somewhat the wisdom of an arrangement quite so loose as they propose [reading]:

Section 402 (a) would require that budgeting, accounting, and related activities in the military departments be organized and conducted in a manner consistent with the operation of the Office of the Comptroller of the Department of Defense. I recommend that reference to "the Office of the Comptroller" be deleted and that "Office of the Secretary of Defense" be substituted.

Section 402 (b) contains provisions with respect to the organization for budgeting, accounting, and related activities in the military departments which are even more detailed and restrictive than is section 401 with respect to the Office of the Secretary of Defense. This section would establish by statute an Office of Comptroller in each military department. It would place authority and responsibility for all budgeting, accounting, and related activities in the departmental comptrollers. It would require that the comptroller of each military department report directly to either the Secretary, the Under Secretary or an

Assistant Secretary of that Department: I recommend that section 402 (b) be rewritten to authorize the Secretary of each military department to appoint a comptroller; to place authority and responsibility for budgeting, accounting, and related matters in each departmental secretary who, in his discretion, could have the comptroller advise and assist him in performing those duties; and, finally, to include no provision which would prevent the secretaries of the military departments, subject to appropriate direction by the Secretary of Defense, from organizing their staffs in a manner which, in their judgment, will best equip them to discharge their responsibilities.

That deals with the same point, and I suggest, Mr. Chairman, also that you might want to hear the Comptroller General on this point, because they feel quite differently from the people in the Bureau of the Budget. Their views are the same as our own views, perhaps even somewhat stronger than our own views [reading]:

Section 409 (b) would authorize the Secretary of Defense with the approval of the Director of the Bureau of the Budget, to adjust the civilian personnel strengths of the three military departments when functions or activities are transferred among them. At the present time there is a fixed statutory ceiling upon civilian employment in the Navy Department and a similar ceiling upon civilian employment in the Air Force Department. It is not clear whether the effect of section 409 (b) would be to supersede the existing law fixing the numerical ceilings for personnel referred to above or whether adjustments would have to be made within those ceilings.

I might say that the intention of the language is that adjustments be made within those ceilings. If a function is shifted, the department which loses the function should reduce its personnel; whereas, the department which receives the function should be credited with the right to take over a corresponding number of personnel.

The CHAIRMAN. The workmen go along with the contract, more or less.

Mr. EBERSTADT. That is what we had in mind. The language may not accomplish that, but I think it does.

Senator BYRD. Your amendment does not disturb the ceilings essentially. If they are transferred, they are transferred with the ceiling? Mr. EBERSTADT. That is correct. It does not make the ceiling an inflexible barrier to adjustment, but it permits adjustments within the ceiling.

Senator BYRD. That is one of the things on the ceilings, but it has not accomplished what we thought, but I would not want to see it set aside.

Mr. EBERSTADT (reading):

I believe this point should be clarified and would have no objection to the elimination of this statutory personnel limitation. Another alternative would be the establishment of one ceiling for the entire Department of Defense.

We did not deal with those aspects of the matter. We accepted the law as it is today, and said that if you move a function from one place to another, you can carry the necessary people to perform that function along with the function, but you must take them off where the function has been eliminated [reading]:

Section 412 would authorize the Secretary of Defense to cause property records to be maintained in the three military departments, "so far as practicable on both a quantitative and monetary basis," under regulations which he would prescribe.

The CHAIRMAN. That is really an accountability of inventory, is it not?

Mr. EBERSTADT. Using the terms very broadly, Senator, it is an accountability of inventory, fixed property, installations and equipment in monetary and quantitative terms, so far as practical, and subject to such regulations as the Secretary lays down.

The CHAIRMAN. I am sure that the reason you have suggested this is to put a feeling and a sense of responsibility that property is not to be viewed lightly, but there is a certain sovereignty within the responsible head, which he has over it to keep it, not lose it, and keep it in good condition. Is not that the thought you have held there?

Mr. EBERSTADT. I think that is true. Of course, we recognize the tremendous size of this job. It is a very difficult job, and it cannot be attenuated or it will break down, but it seemed to us that in broad detail the stating of accounts once a year in such form perhaps as the accounting officer himself would approve, would be a very healthy review from the point of view of the services and would offer very valuable information to the Congress in, for example, consideration of such matters as military aid under the Atlantic Pact. In that case, I think it would be of great assistance to the Congress if they were in a position to have a reasonable list of the material at the disposal of the services. It is not intended to turn the Military Establishment into an accounting operation; nor would we recommend pushing it to too fine a point, but it is intended to lay on the Secretary certain sensible and reasonable obligations and to recognize expressions of congressional intent that these people are responsible for the custody of very large amounts of public property.

Shall I proceed with the letter?

The CHAIRMAN. Go ahead.

Mr. EBERSTADT (reading):

It is not known at the present time the extent to which quantitative and monetary data should be maintained covering the property of the Department of Defense. I would suggest, therefore, that the phrase "so far as practicable on both a quantitative and monetary basis" be deleted from this section.

Well, it is very difficult to accept part of this title IV and not the other parts, because they are pretty closely related. You have an ef fort here to put the Defense Establishment on what is generally regarded as a sound accounting basis, any accounting which fails to account for property or for installations or equipment certainly is not sound. I could not concur with the Bureau of the Budget in their objections to that section, and I think the Comptroller General, the Treasury people, the Department of Defense people concur and join with us in recommending strongly a provision along those lines. To continue [reading]:

It is my understanding that the proviso in section 413 is intended to insure that the provisions of this title, in no way infringe upon the Government-wide budgetary, accounting, reporting and related responsibilities of the President, the Bureau of the Budget, the Treasury Department or the Comptroller General. While this title makes certain provisions for the handling of budgetary and fiscal matters for the Department of Defense, it does not affect budget and accounting affairs which are the responsibility of any officer or agency not a part of the Department of Defense.

I would like to say that in those views I fully concur and because of the fact that this letter deals with only the objections, I would not like to give the impression that the Bureau of the Budget has either failed to assist or support our effort or fails to concur in most of it.

They have been of great help, and I think when you hear from them, you will find they are strong advocates for a lot of it, but by necessity I have had to comment on certain points to which they have objected. The conclusion is [reading]:

I appreciate the opportunity to comment upon these proposed amendments to S. 1269.

Senator BYRD. Mr. Eberstadt, the situation, then, is that three of the departments-the Treasury Department, the Comptroller General, and the Defense Department-have approved the amendment and one has not; the Budget people suggest certain amendments.

Mr. EBERSTADT. Senator, I think that the Comptroller General and the Treasury, judging from their letters, and from the impression I received in conferring with them-and I might add, that it would be very valuable to the committee to get their views directly-I think those two agencies concur fully in the purpose and the language of the amendment. I think the Bureau of the Budget concurs in the objectives but has reservations on those certain points which are covered in their letter.

I think the Secretary of Defense is rather warm toward the proposal, but I believe that he does not want to tie his hands until he has had a chance to weight carefully certain questions which the three military departments have raised, and I think those questions should be weighed, and I think the committee will want to weigh those questions. Senator BYRD. I have been in touch with Mr. Eberstadt during these negotiations and he has done a colossal work and a very splendid work, getting these different agencies to agree, with the exception of the Budget, and we will consider their suggestions carefully.

I have one further point. As I understand it, Mr. Eberstadt, the Hoover Commission thinks there can be economy in the armed services of our defense expenditures of about one and a half billion.

Mr. EBERSTADT. That figure has been used, Senator.

Senator BYRD. And this is the first step, to lay the ground work, to make that economy possible.

Mr. EBERSTADT. I would think so.

The CHAIRMAN. What was that observation, Senator?

Senator BYRD. Mr. Hoover testified that he thought it was possible. to save $1,500,000,000 in our present defense expenditures. Am I correct about that?

Mr. EBERSTADT. I think so. I think the question has been used in the alternative: Either to save a billion and a half, or to get a billion and a half more value for what is being spent.

Senator BYRD. I think he made the specific statement that a billion. and a half could be saved. Of course, if you could make that go further and you had to have additional defense expenditures, that would have the same effect, but Mr. Hoover further testified, as I recall, that unless this preliminary action was taken to give a sound. budgetary system to these defense agencies, that the saving would not be possible, he did not think; is that correct?

Mr. EBERSTADT. I think so. Without these preliminary steps you are working in the dark. It is impossible to move with assurance, You could, of course, indulge in a denial of funds.

Senator BYRD. In your judgment, as one who has carefully investigated this, you think this is the first step that should be taken to effect

great economies and efficiency in the military branch of the Government?

Mr. EBERSTADT. Most definitely.

The CHAIRMAN. The reason I suggested that Senator Byrd interrogate Mr. Eberstadt first is because he has been intimately identified, more or less, with the development of these procedures, and I thought the committee would like to hear Senator Byrd clear up any points he had.

Now, I would turn the meeting over to further questioning of Mr. Eberstadt, but I would like to say we have representatives from the Budget, from the Treasury, from the Office of the Comptroller, and if you desire to ask Mr. Eberstadt further questions, we ought to let the other witnesses go. If you are satisfied to let Mr. Eberstadt go now, we can put on some of the other witnesses. What is the pleasure of the committee?

Senator BALDWIN. May I ask just one or two questions, Mr. Chairman?

The CHAIRMAN. Yes.

Senator BALDWIN. Is it not true, Mr. Eberstadt, that in setting up this organization here with the comptroller that you have combined in the office of the comptroller in each department here the functions of a budget director, coinptroller, and auditor, as well?

Mr. EBERSTADT. That is right. We have tried to.

Senator BALDWIN. In other words, that language here that says that the comptrollers of the military departments shall be responsible for all budgeting, accounting, progress, and statistical reporting, means that the comptroller is the fiscal officer under the direction of the Secretary in that particular department. He combines all three of those functions?

Mr. EBERSTADT. He is the financial managing officer. He combines those functions.

Senator BALDWIN. In connection with that, do you anticipate that there will be set up under the comptroller an auditing department or will we have to rely upon the General Accounting Office as we do now!

In other words, under this comptroller will there be an auditing department? Do you conceive that to be a necessary part of the structure?

Mr. EBERSTADT. Senator, the bill, of course, purports to give him the right to make such audits as he wants, but this structure has to fit into the general structure of our Government, and we have not attempted to preempt for the Defense Establishment functions which belong to the Comptroller General.

Senator BALDWIN. Yes.

Mr. EBERSTADT. I think the whole question of auditing will come before Congress in some form or another, but the pattern which we have here, which gives the Comptroller the authority and lays upon him the duties in auditing are not in conflict with the duties of the Comptroller General, nor do they purport to relieve him of the authority.

Senator BALDWIN. One other question. On line 16, on page 3, you

say:

Subject to the authority of the respective departmental Secretaries, the comptrollers of the military departments shall be responsible