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Senator BYRNES. If it would be effective in the Federal Government's activities the same principle would be effective for the_government of Maryland or any other State; would you not say so? Mr. SELKO. I would; yes, sir.

Senator BYRNES. Let me ask you whether you think this a correct statement as to the difference between audit and control [reading]:

The function of an auditor is one pertaining to the legislative branch. The auditor should be wholly independent of the executive or administrative officer whose acts it is his function to review. This independence is secured by either his popular election or, as in some States, by his appointment by the legislature. Would you agree with that?

Mr. SELKO. I would agree with that; yes, sir.

Senator BYRNES (reading):

The functions of a comptroller, on the other hand, are the ordering of moneys to be covered into the State treasury, the issuance of pay warrants to issue money therefrom, the settlement of all claims and, as an incident to this, keeping the central accounts of the State, prescribing the branch accounting systems to be maintained by the departments and institutions, the rendering of annual and other financial reports, and as herein recommended, acting for the Governor in the drafting of the budget document to be submitted by the latter to the legislature. These involve purely administrative duties.

The settlement of claims and the matters referred to are purely administrative duties. Would you agree with that?

Mr. SELKO. No, sir; I would not.

Senator BYRNES (reading):

Strengthening the audit. Heretofore, the mixture of responsibility of the State auditor to perform the dual function of administrative accounting and settlement of claims, and the Department of Examiners of accounts of examining all State departments and institutions, has prevented the concentration of all audit functions of the State in the State auditor.

What I have read from is taken from the recommendation of the Brookings Institution for the State of Alabama, and your organization said this:

In Alabama, and the same is true in most of the States, great confusion has resulted through the failure to distinguish clearly between the functions of a comptroller and an auditor. The general tendency has been to impose the duties of both upon a single officer, usually known as an auditor. The primary functions of a comptroller are, as his title indicates, that of controlling the covering of money into the treasury and the issue of money therefrom, the settlement of all claims, the keeping of the central accounts, the rendering of annual and other financial reports and, generally, of exercising that central control over the administration of the financial affairs of the government that is essential if such operations are to be properly performed. The comptroller is, or should be, the chief financial officer of the administrative branch of the government. He should be, in effect, the right-hand man of the Governor in respect to all matters of financial administration. As such, he should be appointed by and hold office at the will of the Governor.

Now, that is what you recommended to the State of Alabama, is it not? I am reading from the report.

Mr. MERIAM. Yes, sir. I would like to make a statement in that connection.

Senator BYRNES. I will give you an opportunity, but I would like to make one or two other statements in connection with it.

Mr. MERIAM. All right, sir.

Senator BYRNES. That is for the State of Alabama. As to the State auditor, you said:

The State auditor should be relieved of all of his ex-officio duties in order that he may not be embarrassed by having to audit organization units in which he holds membership or over which he exercised administrative direction.. The State auditor should be relieved of all accounting duties, including the settlement of all claims and the drawing of all State warrants on the State treasurer, in order that he and his auditing staff may devote their entireefforts to making a real audit of all State departments, boards, institutions and agencies.

Now, again, you refer to the functions of a comptroller in the settlement of claims and say they involve purely administrative duties. Now, in Mississippi you made a recommendation for the reorganization of that State government and there, in the State of Mississippi,. you said there should be established a service of general administration, and you said:

The chief of this service will have as his subordinates the heads of the several bureaus dealing with the purely institutional activities that have been mentioned, the preparation of the budget, the settlement of claims, the keeping of the central or controlling accounts, the recruitment and handling of personnel, and the making of purchases and contracts.

You were urging that it should be centralized and you said, as to the difference between auditors' and comptrollers' functions, in a subhead of your report, under the heading "Distinction between the Auditor's and Comptroller's Functions:"

In keeping with the practice of most unreorganized State governments, Mississippi reposes in one officer the duties of both an auditor and an administrative comptroller, although the magnitude of work in both functions and the past neglect of auditing amply justify their separation. The general function of a comptroller is to determine what payments should be made to, or by, the Government, and recording them; while the duty of an auditor is to examine subsequently such payments to, or by, the Government to determine their propriety and the fidelity of accountable officers.

Another important principle that has been followed in our recommendations. is that of distinguishing between the functions of a comptroller and an auditor. This distinction which is definitely recognized in all well-organized private undertakings, has been discussed in the section dealing with financial administration, and needs no additional comment at this point.

Representative BEAM. Mr. Chairman,

Senator BYRNES. Just a moment. I would like to finish with this: Mississippi report.

In this report to Mississippi the heading is: "The auditor should have no administrative duties." It states:

He should be independent of and not a part of the executive branch in order that he may feel free to call the attention of the legislature to all violations of law and administrative regulations, and all instances wherein in his opinion the administrative staff has failed to conform to administrative law or regulations, where their expenditures have not come within the purview of appropriations, have been guilty of extravagance, or have failed to discharge their official functions in an efficient and economical manner. He will be, in fact, the eye and arm of the legislature in the exercise of the latter's function of general control.

The report goes on to say that the comptroller should be the arm of the executive and the auditor the arm of the legislature.

Representative BEAM. Senator, I was interested in listening to your analysis of the various duties of the comptroller and the auditor, and in referring to that Mississippi demarcation you stated that the functions of the auditor were to audit the accounts after the comptroller had approved them. I hesitated to interrupt you when you were reading that paragraph. I wanted to be certain in my

mind as to the function that you gentlemen want the Government to adopt, a postaudit or a preaudit.

Mr. SELKO. We feel that a postaudit should be made after payments have been made but before the balances in the accounts of the disbursing officers are finally settled.

Senator BYRNES. I can develop that. Do you regard a preaudit as an administrative function or a legislative function?

Mr. SELKO. I do not believe I can answer that question as it is put. If you mean the type of preaudit which I developed in the statement I read a few moments ago, that is a function of independent auditor.

Senator BYRNES. Answerable to whom?

Mr. SELKO. Answerable to the legislature, under our plan, or to Congress.

Senator BYRNES. Let me read what the Brookings Institution says about it.

Mr. SELKO. May I say at that point, Senator, that Mr. Meriam has a statement with respect to those statements that we made, and that our position now is that the distinction to be made is not between audit and control because therein lies, by combining those two functions, an opportunity for economy, but the distinction to be made is between budgetary control and accounting, or auditing control.

Senator BYRNES. Is not the distinction between preaudit and postaudit?

Mr. SELKO. No; we feel the distinction is between budgetary control and accounting control.

Senator BARKLEY. Did not you set forth in your recommendations, both to Alabama and Mississippi, the fact that to combine the control and auditing functions in the same person embarrasses them with respect to each function, that he was participating at the same time in the functions of an administrative officer and the legislative officer?

Mr. SELKO. Yes; I believe we did make such a statement.

Senator BYRNES. I will get Mr. Meriam to answer that. It will be useless to get it in in part.

I want to give you what the Brooking Institution says about the distinction between preauditing and postauditing.

Preauditing contemplates the administrative examination of a claim presented for payment to determine the legality of the expenditure presented.

I read that because a number of the Congressmen have been discussing it.

Mr. SELKO. May I interrupt a moment? We would call that administrative auditing. That is not the sense of the term as I used it here in my paper on preauditing.

Senator BYRNES. I was just going to read what you said, and then later you can make your speech.

Mr. SELKO. Yes, sir.

Senator BYRNES. We had been discussing for some time the difference between preauditing and postauditing, and I want to give you the idea of Brookings in illustrating it.

Preauditing contemplates the administrative examination of a claim presented for payment to determine the legality of the expenditure presented, the availability of funds with which to make payment, the authority for making the expenditure, and the mathematical accuracy of the claim.

That is the definition of preauditing.

Postauditing, on the other hand, contemplates the examination of the books and records of a department or establishment to determine if its finances have been administered efficiently and economically, in accordance with laws and regulations, if its books are properly kept, and if its reports are correctly stated. Preauditing is an administrative function, while postauditing is a function performed as an outside check on the administration. The agency

charged with the duty of postauditing should report to the legislature and to the public.

Now, further, in the "Conclusions and Recommendations", and these are the conclusions and recommendations to Iowa, to another State, you said:

In order that the Governor may exercise an effective control over finances there should be created an office of State comptroller to be directly attached to the office of the Governor and to be under the general direction, supervision, and control of the Governor.

Then the duties of the State comptroller thus appointed by the Governor and under his control are set forth by you as follows:

To preaudit all demands by or against the State and to issue proper warrants for the settlement of such demands; to prescribe all accounting and business forms and the systems of accounts and reports of all financial transactions by all agencies of the State government; to keep the central budget and proprietary accounts of the State government in accordance with the outlines previously submitted under "Accounting Procedure."

The State auditor should be relieved of all duties other than those of a strictly postauditing nature. His duties with respect to the preaudit of claims, the issuance of warrants, the keeping of accounts, and the reporting of financial transactions should be transferred to the comptroller

who is appointed by the Governor.

Now, in Oklahoma did not the Brookings Institution make this report:

To effect a better coordination of the financial organization and an improved administration of the financial affairs of the State, a comptroller's office should be established in the executive department; this office should be headed by a State comptroller appointed by the Governor without term, and directly responsible to him; and that this office be composed of the following divisions and sections:

Office of State comptroller.

Budget division.

Division of central accounting and reporting.

1. Pre-audit section.

2. Warrant section.

3. Bookkeeping section.

4. Reporting section.

The duties set forth in detail are that—

This division should take over the accounting and auditing duties now performed by the claim audit and bookkeeping sections of the State of public affairs; the preaudit of claims now performed by the State examiner and inspector's office; the settlement and audit of claims and bookkeeping work now performed by the pre-audit division, the warrant division, and the bookkeeping division of the present State auditor's office

That was to be under the jurisdiction of a comptroller by the governor. The duties of the State auditor are defined to be:

The duties of the State auditor should be restricted to postauditing and examination of the financial operations of all State departments, boards, commissions, agencies, and institutions of the State government, including the proposed State comptroller's office, and he should report his findings annually to the Governor and biennially to the legislature.

That is Oklahoma. I would like to ask you if those were your recommendations? If you have other views and explanations you may go ahead and make them.

Senator BYRD. May I just make this suggestion? What the Senator has read refers entirely to recommendations with respect to State governments. Have you ever made recommendations in regard to the Federal Government?

Mr. MERIAM. Yes, sir.

Senator BYRD. Which would be contrary to the position now taken?

Mr. MERIAM. The entire history of the Institute for Government Research with respect to the Federal Government has been uniformly in favor of the audit prior to settlement by the Comptroller General. Our Institute for Government Research participated in the drafting of the Budget and Accounting Act, and all our recommendations with respect to the Federal Government are absolutely contrary to the recommendations which we made in the States.

Senator BYRNES. Mr. Meriam, before you enter into any discussion on that question, I think that your associate will recall, or the stenographer can read, that he stated before I ever read one of them, that there was a difference between private business and government business; then I asked him if there was any difference between State governments and the Federal Government, or whether the same principle should not apply, and he said the same principle should apply.

Mr. MERIAM. Yes, sir.

Senator BYRNES. He did say that?

Mr. MERIAM. Yes, sir.

Senator BYRNES. All right. If it is admitted I do not want to have it read.

Senator BYRD. Mr. Chairman, it is not admitted.

Senator BYRNES. Then I will ask the stenographer to read the statement that he made.

Senator BYRD. It is not admitted by Mr. Meriam. Mr. Selko may have admitted it, but Mr. Meriam has not admitted it.

Senator BYRNES. Of course, I did not ask Mr. Meriam, because Mr. Selko was making the statement.

Mr. MERIAM. Mr. Selko's statement I think is correct. May I read my statement now?

Senator BYRNES. If it is correct then we have no differences. You say that the same principle applies?

Mr. MERIAM. Yes, sir; that is our present contention.

Senator BYRD. Just one second, Mr. Chairman. Do I understand the witness to say that exactly the same conditions apply with respect to a State government that applies to a Federal Government in regard to auditing? You just previously said that your recommendations with regard to States are exactly contrary to your recommendations with regard to the Federal Government.

Mr. MERIAM. Yes; but the point that Mr. Selko makes is that if today we were making recommendations to the States we would make the same recommendations that we now make with respect to the Federal Government.

Senator BYRD. The difference then is, so that we may understand it clearly, you have changed your opinion then with respect to the

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