would be such as to force the Secretary of the Treasury to properly evaluate the securities held-that is, if the Secretary of the Treasury reported to the Congress and the people that a building worth $1,000,000 had burned down, would they still carry $1,000,000 as assets?

You

Mr. BROWNLOW. Yes; they could do that. He could look at all of their books, which now does not happen, and to make reports. will see another section where either House of Congress, any appropriate committee of Congress, can call on him to make special investigations.

Representative GIFFORD. To make that illustration, just this one and I am through, for instance, if the Secretary of the Treasury says we have $160,000,000 worth of notes and loans, book value of $160,000,000, when perhaps they are not worth $30,000,000, what then?

Mr. BROWNLOW. The auditor could examine that and under our plan here the auditor also examines receipts as well as expenditures of the Government.

Representative MEAD. Mr. Brownlow, the auditor under existing circumstances can step in ahead of the expenditure and check the expenditure, but under your system he is going to make a postaudit and reveal irregularities in his judgment to the Congress after that? Mr. BROWNLOW. Most of his work is postaudit now, approximately 90 percent of it.

The CHAIRMAN. Gentlemen, it is necessary to suspend now. The two Houses will be meeting in a minute or two.

Mr. BROWNLOW. Mr. Gulick has a document he would like to file. Representative VINSON. Mr. Chairman, one question. What changes are made in the submitted drafts? It seems to me that would be helpful to the committee to have lines stricken and lines underscored and brackets used like we have in committees and then we can follow the matter so much better.

The CHAIRMAN. That would be much more convenient.

Mr. BROWNLOW. This one is now the only one that we have submitted. We withdrew the former one and this is merely our report. The CHAIRMAN. It has no official status.

Senator BYRD. Will this new draft be made part of the record? The CHAIRMAN. Yes, sir.

Representative WARREN. May I ask one question? Have you eliminated the salary increases from this new draft?

Mr. BROWNLOW. No; this draft is a summary of our report.

Representative TABER. Let us not put it in the record unless he

has.

The CHAIRMAN. I think we will not print it in the record unless there is insistence upon it. When will you meet again?

Mr. GULICK. Mr. Chairman?

The CHAIRMAN. Mr. Gulick.

Mr. GULICK. There was some question raised as to the actual provisions of law on audit and control and I believe it is included in my testimony on the 17th and 18th. In view of that fact, I would like to file for the record the exact statement of the provisions of law. It may be valuable.

The CHAIRMAN. Very well. You may discuss them later if any member of the committee desires you to do so.

(The statement submitted by Mr. Gulick is as follows:)

Inasmuch as this committee may proceed to the drafting of an act to deal with the matters submitted to the Congress by the President through his message of January 12, it would seem desirable that we should make available to your honorable body that part of the finance acts of the States of Maine, Massachusetts, and Virginia which bear directly upon the testimony which I presented on February 17 and 18. These are the only States which have within the past 10 years reorganized their systems of fiscal control on modern business principles. (See also recent Tennessee act similar in nature.)

II. STATE FINANCE ACTS

MAINE

Acts and resolves, chapter 216, article II, department of finance

SECTION 1. Organization of department: The department of finance shall be organized into three bureaus as follows:

1. Bureau of accounts and control, the head of which shall be the State controller.

2 Bureau of purchases, the head of which shall be the State purchasing agent.

3. Bureau of taxation, the head of which shall be the State assessor.

In connection with the department of finance, the Governor, with the advice and consent of the council, shall appoint a State budget officer, who may be the commissioner of finance.

SEO. 10. Powers and duties relating to accounting: The department of finance, through the bureau of accounts and control, shall have authority:

1. To maintain a system of general accounts embracing all the financial transactions of the State government.

2. To examine and approve all contracts, orders, and other documents, the purpose of which is to incur financial obligations against the State government, to ascertain that moneys have been duly appropriated and allotted to meet such obligations and will be available when such obligations will become due and payable.

3. To audit and approve all bills, invoices, accounts, pay rolls, and all other evidences of claims, demands, or charges against the State government; and to determine the regularity, legality, and correctness of such claims, demands, or charges.

4. To inquire into and cause an inspection to be made of articles and materials furnished or work and labor performed, for the purpose of ascertaining that the prices, quality, and amount of such articles or materials are fair, just, and reasonable, and that all the requirements, expressed and implied, pertaining thereto have been complied with, and to reject or disallow any excess. 5. To make monthly reports on all receipts and expenditures of the State government to the Governor and the State auditor; to make monthly reports on appropriaions, allotments, encumbrances, and authorized payments to the Government, to the State auditor, and to the head of the department or agency directly concerned.

6. To prescribe the forms of receipts, vouchers, bills, or claims to be filed by any and all departments and agencies with the department of finance.

7. To prescribe such subsidiary accounts, including cost accounts, for the various departments and agencies as may be desired for purposes of administration, supervision, and financial control.

8. To examine and approve the accounts of every department or agency receiving appropriations from the State.

9. To report to the attorney general for such action, civil or criminal, as he may deem necessary, all facts showing illegality in the expenditure of public moneys or the misappropriation of public properties,

10. To exercise the rights, powers, and duties heretofore conferred and imposed by law upon the State auditor insofar as these relate to financial administration and general accounting control of the State government involving the keeping of general accounts, the auditing before payment of all bills or vouchers, and the authorizing of all claims against the State for which appropriations have been made.

Chapter 216, article VI, department of audit

SECTION 1. Department of audit: A department of audit is hereby created and established. The State auditor shall be the head of this department. He shall be a certified public accountant or shall have had satisfactory experience as an auditor of public accounts. He shall be elected by the legislature by a joint ballot of the senators and representatives in convention and shall hold office for a term of 4 years, or until his successor is elected and qualified: Provided, That the present incumbent of the office of State auditor shall continue in this position until the expiration of his term. He shall exercise such powers and perform such duties as are set forth in the subsequent sections of this act. In case the office of State auditor shall become vacant during a period when the legislature is not in session, the appointment of a person to fill such vacancy shall be made immediately by the president of the senate, or, if that office be vacant, by the speaker of the house, said person to hold office until such time as the legislature shall meet in regular or special session and either confirm the appointment of said person or choose another person to fill the office during the unexpired term.

SEC. 3. General powers and duties: The department of audit shall have authority

1. To perform a post-audit of all accounts and other financial records of the State government, or any department, or agency thereof, and to report annually on this audit, and at such other times as the legislature may require.

2. To install accounting systems and to perform audits for cities, towns, and villages as required by chapter 5 of sections 97 to 106 of the Revised Statutes. 3. To serve as a staff agency to the legislature or any of its committees, or to the Governor, in making investigations of any phase of the State's finances. SEC. 4. Detailed requirements: The State auditor shall keep no accounts in the department of audit, but she shall conduct a continuous post-audit of the accounts, books, records, and other evidences of financial transactions kept in the department of finance, or in the other departments and agencies of the State government. He shall prepare and publish a report, setting forth the essential facts of such audit in summary form, within 2 months after the close of each fiscal year. If he shall find in the course of his audit evidences of improper transactions, or of incompetence in keeping accounts or handling funds, or of any other improper practice of financial administration, he shall report the same to the Governor immediately; if he shall find evidences of illegal transactions, he shall forthwith report such transactions both to the Governor and to the attorney general. All such evidences shall be included in the annual reports of the State auditor, and he may, at his discretion, make them public at any time during the fiscal year.

MASSACHUSETTS

Annotated laws of Massachusetts, volume 1, chapter 7

(Commission on administration and finance)

2. Commission on administration and finance: There shall be a commission on administration and finance, which shall serve directly under the Governor and council within the meaning of article LXVI of the amendments to the constitution of the Commonwealth.

3. Commissioners, appointment, salaries, etc.: The commission shall consist of four commissioners, one of whom shall annually be appointed for a term of 4 years by the Governor, with the advice and consent of the council. The Governor shall designate one of said commissioners as chairman. The chairman shall receive such salary not exceeding $7,000, and each of the other commissioners, such salary not exceeding $6,500, as the Governor and council may determine. Each commissioner shall devote his entire time to the duties of his office.

4. Comptroller, budget commissioner, State purchasing agent-Bureaus: Said commission shall be organized in three bureaus, namely, a comptroller's bureau. a budget bureau, and a purchasing bureau. Each bureau shall be in charge of a commissioner of the commission to be designated by the Governor, with the advice and consent of the council, and to be known, respectively, as the comptroller, budget commissioner, and State purchasing agent. Said purchasing agent shall give bond to the State treasurer in a sum to be fixed by the Governor

and council for the faithful performance of his duties and for the rendering of a proper account of all money entrusted to him for the use of the Commonwealth. Any commissioner designated as aforesaid shall be a person of ability and extended experience in the line of work required in his bureau.

13. Duties of comptroller, examination, and certification of certain accounts, etc., against Commonwealth: The comptroller shall examine all accounts and demands against the Commonwealth, excepting those for the salaries of the Governor and of the justices of the supreme judicial court, for the pay rolls of the executive council and members of the general court, and those due on account of the principal or interest of a public debt. He may require affidavits that articles have been furnished, services rendered, and expenses incurred as claimed. Such affidavit for any institution shall be made by the disbursing officer thereof. The comptroller shall make a certificate specifying the amount due and allowed on each account or demand so examined, the name of the person to whom such amount is payable; the law authorizing the same and the head of expenditure to which it is chargeable. If the general court, by express statute, authorizes a department or public officer to approve accounts or demands against the Commonwealth, and an appropriation therefore has been made, the comptroller shall, when such accounts or demands have been properly approved, promptly audit and certify such an amount, not exceeding the appropriation therefor, as he may deem correct; and if it appears to him that there are improper charges in said accounts or demands he shall report the same to the Governor and council with a separate certificate therefor. But he shall not certify any bill for printing incurred in violation of section 6 of chapter 5. He shall keep copies of all such certificates and transmit the originals to the Governor, who, with the advice and consent of the council, may issue his warrant to the State treasurer for the amount therein specified as due.

16. Same subject-Accounting system for Commonwealth: He shall design and install a new accounting system for the Commonwealth as provided by chapter 546 of the acts of 1922 and prescribe the requisite forms and books of account to be used by each department, office, commission, and institution of the Commonwealth. After such installation, no form or book of account, other than that prescribed as aforesaid, shall be used without the approval of the comptroller. He may revise such forms, books, or system from time to time. He shall prepare and distribute a book of instructions covering the use and application of said new accounting system for the guidance of the accounting personnel in the various departments, offices, commissions, and institutions of the Commonwealth.

17. Same subject-General books of account, systems of accounting, supervision of collection of revenue due Commonwealth: He shall keep all general books of account and determine the extent and character of subsidiary accounts to be kept by all departments, offices, commissions, and institutions of the Commonwealth. He shall have full authority to prescribe, regulate, and make changes in the method of keeping and rendering accounts. He shall establish in each such department, office, commission, and institution a proper system of accounts, which shall be uniform so far as is practicable, and a proper system of accounting for stores, supplies, materials, and products, and may provide where he deems it necessary for a continuing inventory thereof. shall proved such safeguards and systems of checking as will insure, so far as possible, the proper collection of all revenues due the Commonwealth; and, where he deems it necessary, shall provide that forms and receipts shall be numbered consecutively, making each such department, officer, commission, or institution responsible for their use or cancellation.

He

18. Same subject-Account of public receipts and expenditures, public property, etc. The comptroller shall keep a distinct account, under appropriate heads, of all public receipts and expenditures. He shall keep a like account of the school fund and of other public property and of all debts and obligations due to and from the Commonwealth; and for such purpose he shall have free access to the books and papers of the several departments, offices, commissions, and institutions.

20. Comptroller's bureau to furnish accounting statements, etc. The comptroller's bureau shall be properly equipped and shall furnish, when required, all accounting statements relating to the financial status, funds, reserves, appropriation control, and cost of operation of the Commonwealth at the end of the State fiscal year and at intermediate monthly period when such information is needed in effecting economies before appropriations have been exhausted, or for other purposes.

21. Records, etc., of bureau available for preparation of budget, etc.: In the exercise of the budget commissioner's functions, relative to the preparation of the budget, the records, resources, and full cooperation of the comptroller's bureau shall be available.

Volume 1, chapter 11, department of the State auditor

1. State auditor: There shall be a department to be known as the department of the State auditor under his supervision and control, organized as provided in this chapter. The State auditor shall receive a salary of $6,000 and shall give to the State treasurer a bond for the faithful performance of his official duties in a penal sum and with sureties approved by the Governor and council.

12. Auditing of accounts of certain departments, etc.: The department of the State auditor shall annually make a careful audit of the accounts of all departments, offices, commissions, institutions, and activities of the Commonwealth, including those of the income-tax division of the department of corporations and taxation, and for said purpose the authorized officers and employees of said department of the State auditor shall have access to such accounts at reasonable times and said department may require the production of books, documents, and vouchers, except tax returns, relating to any matter within the scope of such audit. The accounts of the last-named department shall be subject at any time to such examination as the Governor and council or the general court may order. Said department shall comply with any written regulations, consistent with law, relative to its duties made by the Governor and council. This section shall not apply to the accounts of State officers which the director of accounts of the department of corporatioons and taxation is required by law to examine. The department of the State auditor shall keep no books or records except records of audits made by it and its annual report shall relate only to such audits.

VIRGINIA

The Virginia Code of 1936, title 10B, chapter 31G

SEC. 585 (72). Auditor of public accounts: An officer to be known as the auditor of public accounts shall be elected by the joint vote of the two houses of the general assembly, as provided in section 82 of the constitution, and he shall receive such compensation as may be appropriated by law for the purpose; but such officer shall not perform any of the duties nor exercise any of the powers imposed or conferred upon the officer heretofore known as the auditor of public accounts, by any statute enacted prior to March 16, 1927, all such duties and powers being by this act imposed or conferred upon the comptroller, except as otherwise herein provided. The auditor of public accounts shall perform such duties and exercise such powers as have been heretofore imposed or conferred by law upon the State accountant, and the office of State accountant is hereby abolished. In addition thereto, the auditor of public accounts shall audit all of the accounts kept in the department of finance and all accounts of every other State department, officer, board, commission, institution, or any other agency in any manner handling State funds; and in the performance of such duties and the exercise of such powers he may employ the services of certified public accountants, provided the cost thereof shall not exceed such sums as may be available out of the appropriation provided by law for the conduct of his office.

The auditor of public accounts shall be the chief auditor and accountant of the auditing committee of the general assembly. If the auditor of public accounts should at any time discover any unauthorized, illegal, irregular, or unsafe handling or expenditure of State funds, or if at any time it should come to his knowledge that any unauthorized, illegal, or unsafe handling or expenditure of State funds is contemplated but not consummated, in either case he shall forthwith lay the facts before the Governor, the members of the auditing committee of the general assembly, and the comptroller.

The penalty of the bond of the auditor or public accounts shall be fixed by the Governor, but the same shall not be less than $5,000. Such of the employees in the office of the auditor of public accounts as, in the opinion of the Governor, should be bonded, shall be bonded, and the penalties of such bonds, respectively, shall be fixed by the auditor of public accounts, subject to the approval of the Governor. The premiums on the bond mentioned in this paragraph shall be paid out of the State treasury (1927, p. 113; 1928, pp. 347, 348).