REORGANIZATION OF THE EXECUTIVE DEPARTMENTS

WEDNESDAY, MARCH 31, 1937

JOINT COMMITTEE ON GOVERNMENT ORGANIZATION,

Washington, D. C. The joint committee met, Senator Robinson presiding. The CHAIRMAN. The committee will please come to order. All right, Mr. Meriam.

STATEMENT OF LEWIS MERIAM AND DANIEL T. SELKO-Resumed

Senator BYRD. I think Mr. Meriam was discussing this preaudit proposition. Mr. Cochran asked him at the last meeting the question as to whether he preaudited everything.

Representative COCHRAN. I asked, as we adjourned the last meeting, if all the expenditures-I could not conceive that you really meant a preaudit of all the expenditures.

Mr. MERIAM. Dr. Selko has a memorandum on the historical basis for the preaudit in which I think he makes that point clear. Dr. Selko will put that in the record.

Representative COCHRAN. Let him make the statement, then, if he will clarify it.

Mr. SELKO. Section 8 of the Dockery Act of 1894, continued in effect under the Budget and Accounting Act, provides that

Disbursing officers, or the head of any executive department, or other establishment not under any of the executive departments, may apply for, and the Comptroller General shall render, his decision upon any question involving a payment to be made by them or under them, which decision, when rendered, shall govern the General Accounting Office in passing upon the account containing said disbursement.

I might say that came from the United States Code, title 31, section 74. As originally enacted that read, instead of "Comptroller General", "Comptroller of the Treasury."

It is from this provision of the statute that the preaudit service has sprung. Administrative officers requesting advance information relating to the legality or regularity of a proposed expenditure_had at first no uniform procedure for submitting their requests. Moreover, under the old disbursing system the disbursing officers who were attached to the administrative departments made frequent requests for advance decisions to relieve them of the responsibility of deciding against their administrative superiors on a question of law or procedure. First, the Comptroller of the Treasury and later the Comptroller General were obliged to make regulation governing the submittal of matters for their decision in order that they might have all the necessary information at hand. These regulations became

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formalized with use and have finally been simplified so that the advance decisions called for by the statute quoted are rendered for the most part on the basis of certified vouchers with their supporting documents submitted by administrative officers for examination prior to the disbursement of funds.

The preaudit service has thus been the outgrowth of the desire of administrative and disbursing officers for advance information in regard to the legality and regularity of a proposed payment. The preaudit service has never been imposed upon any administrative or disbursing officers of their proper and legal responsibilities.

In our proposals for extending the preaudit service we likewise do not propose its imposition on any administrative officer, nor do we propose that it shall become the means of relieving administrative officers of their proper responsibility. We do propose, however, that administrative officers be bonded in order that the disbursing officers of the Government may not be required to bear the entire burden of protecting the Government from financial loss. We expect, therefore, that as the financial responsibility of administrative officers is increased there will be increased demand for preaudit and advance decisions. Accordingly, we recommend that provision be made for providing this increased service.

Representative COCHRAN. Your analysis and your viewpoint in no way answers my question. You leave it as is except in bonding the administrative officer. You feel then that the administrative officer, as well as the disbursing agent, is going to come in and ask for a preaudit?

Mr. SELKO. Yes, sir.

Representative COCHRAN. Now, we have a postaudit?

Mr. SELKO. Yes, sir.

Representative COCHRAN. It is my understanding that we are months and months behind in the postaudit, and we have increased the number of employees in the General Accounting Office over 100 percent in the last 2 or 3 years, due to the expenditures that have been made.

No preaudit has ever been made except where the disbursing officer asked for it, and therein lies the situation complained of in reference to the Comptroller General. If the disbursing officer had not asked for it, there would have been no dispute. Do you see the point? Every decision that the Comptroller General has rendered in the form of a preaudit he rendered it at the request of the administrative officer or the disbursing officer.

Mr. SELKO. Yes, sir.

Representative COCHRAN. In some instances, when his decision was not suitable to the officials, they secured an opinion from the Attorney General, and I know of cases where they abided by the opinion of the Attorney General rather than the opinion of the Comptroller General.

To try to make a preaudit of all governmental expenditures, why you would have to have 50,000 employees in order to get out the checks without any delay.

Mr. SELKO. As you would gather from my statement, we do not propose a preaudit of all expenditures. We do not propose, in the first place, to impose a preaudit on the administrative officers; we

propose to allow them, as at present, to make requests for advance decisions and preaudits.

We do feel that if we bond the certifying officers, in order that they may share the responsibility for the legality and regularity of the expenditures that they make, that they will ask for advance decisions and preaudits, and we might as well be prepared to supply that service. But we do not expect that service to go into the preaudit of every expenditure. It would be unnecessary for an administrative officer to ask for an advance decision on a question on which an advance decision or a post decision had already been made.

Representative COCHRAN. Now, when you say you are going to bond the administrative officer, do you mean you are going to start at the top and go all the way down?

Mr. SELKO. I think it would be up to Congress to decide as to which administrative officers are to be bonded. The administrative officers, under the present law, have the authority to designate certain. of their subordinates as certifying officers. If we stop with bonding the certifying officers alone, then they would be more or less in the position that the disbursing officers were under the old law, in that if the administrative officer told them to make a payment, or certify a payment, they would be the ones responsible under the bond for the payment, if it were subsequently disallowed.

Representative COCHRAN. Would the certifying officer then complain, “I am acting under the orders of my superior. Why not bond "I him?" Then the superior will say, "Why don't you hold the Secretary responsible?"

Mr. SELKO. I think that is an argument which might be raised. I think it might be well to start bonding at the top.

Representative COCHRAN. Starting at the top and come all the way

down?

Mr. SELKO. Yes.

Representative COCHRAN. We will be busy, then, collecting these illegal expenditures all the way from the Secretary down until we find who is the one that is really responsible.

Senator BARKLEY. You may be busy, but you will not be busy collecting.

Representative GIFFORD. May I inject something along that line, along the line of what you said, that you do not recommend giving the Comptroller General power to forgive or to set aside liability.

I want to remind the committee that I am informed that we have a small army now in the Comptroller General's Office auditing and settling with disbursing officers on the C. W. A. troubles of 4 years ago, and the papers are so voluminous now that those of more than a year ago are in offices even in Alexandria, to find some place where they can put them. Now, as the report comes to me these auditors from the Comptroller General's Office are settling accounts. That is the way it was presented to me.

Now, from what I have read of your statement, you do not give any such authority, they do not have any opportunity of settling the accounts, do they?

Mr. SELKO. Not on the preaudit; no, sir.

Representative COCHRAN. Now, we have a postaudit?

Mr. SELKO. This statement that I read was to explain the development of the preaudit.

Representative TABER. Mr. Selko, I do not think you understood Mr. Gifford's question. I think there isn't any question but what the Comptroller General, in a postaudit, at the present time has the power to settle accounts.

Mr. SELKO. Yes.

Representative COCHRAN. I can clarify your question. The recommendation came to our committee, and, if I am not in error, Mr. Gifford, you joined with me in reporting the bill to relieve them of $750,000 overpayment.

Representative GIFFORD. I told you I would give you backhanded support. Don't you remember?

Representative COCHRAN. I remember. You were very kind as far as you agreed to go.

Senator BYRNES. May I ask a question along the line that the Congressman asked? As I understand your position, you do not require a compulsory preaudit?

Mr. SELKO. No, sir.

Senator BYRNES. You hope to accomplish a general preaudit by reason of the bonding of officials that you have described as administrative officials?

Mr. SELKO. I think it might be more accurate to state that we would provide for a system of a more general preaudit so that administrative officers, when bonded, might avail themselves of a more extensive system than exists at present.

Senator BYRNES. But you still leave it to the administrative official to determine whether or not he desired a preaudit?

Mr. SELKO. Yes, sir.

Senator BYRNES. And the Auditor General then, when requested, would make the preaudit?

Mr. SELKO. Yes, sir.

Senator BYRNES. The Auditor General, under your plan, would be the agent of the legislative body?

Mr. SELKO. He would be an agent independent of the Executive in any case.

Senator BYRNES. Well, he would be appointed by whom?

Mr. SELKO. He would be appointed by the President, with the advice and consent of the Senate. We prepose no change in that method of selection.

Senator BYRNES. As I recall, you emphasize in your report, though, that he should be the agent of the Congress, "so it shall be definitely understood that the Auditor General would be the agent of the Congress vested with the power of financial control through the auditing and settlement of accounts"; is that correct?

Mr. SELKO. Yes, sir; that is our position.

Senator BYRNES. Is it your belief that by doing that you would effect economies?

Mr. SELKO. Yes, sir.

Senator BYRNES. And you would not interfere with the efficient administration by causing delays?

Mr. SELKO. No, sir.

Mr. MERIAM. Mr. Chairman, I have a memorandum on that particular subject.

Senator BYRNES. I would like to ask a few questions, and then you may submit the memorandum.

Mr. MERIAM. All right.

Senator BYRNES. Ordinarily would you consider the exercise of control the function of the executive or the legislative branch of the Government ?

Mr. SELKO. I should say our position, from the statement you have there and from the statement Mr. Meriam read on Monday, would be clearly that we support the idea that financial control should be a matter of legislative responsibility which is consonant with legislative authority to make appropriations.

Senator BYRNES. I simply want your viewpoint in order to ask some other questions.

Mr. SELKO. Yes.

Senator BYRNES. When you say the ultimate object is to have a more general preaudit, you do not think it would delay the administrative officials of the Government in the administration of their duties?

Mr. SELKO. No, sir.

Senator BYRNES. And you believe it would save money?

Mr. SELKO. Yes, sir; I believe it would expedite both the payment and the settlement of accounts.

Senator BYRNES. Now, we have had some discussion as to whether or not, in the absence of a preaudit, if money is spent illegally, or irregularly, say, $1,000,000, whether it could be recovered for the Government.

Mr. SELKO. Under our plan the administrative officer, when in doubt as to the legality or regularity of a payment, would, as at present, ask for a preaudit of that payment. If then the Comptroller General, or the Auditor General, as we propose to call him, were to say that payment is illegal or irregular it would indicate that he expected to suspend or disallow that item, providing the law remained the same, when that item came to him for final settlement of the disbursing officer's account, through which the disbursement was made.

Senator BYRNES. The statement has been made by someone who testified that ordinarily the duty of control has been separated from the duty of auditing in private business. Is that your general understanding?

Mr. SELKO. Yes; I think that is true in private business. Ordinarily in private business the comptroller is a representative, an agent of the private business firm, and the auditor is called in from the outside, ordinarily a person who has no proprietary interest in the business, to make an examination of the books of the comptroller and of the treasurer, or other bookkeeping representatives of the company, against all of the papers which they show as evidence for the entries in their books, to certify that their balances are correct according to the evidence submitted. Now, in government the situation is somewhat different in that the Government is in the position of a fiduciary rather than a proprietary entity.

Senator BYRNES. That would stand, I suppose, as to Federal and State Governments?

Mr. SELKO. Yes, sir.