« PreviousContinue »
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 comptrollerwho 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.
1. Pre-audit section.
4. Reporting section. The duties set forth in detail are thatThis 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. 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 States, and if you had further recommendations to make they would be in accordance with the recommendations you made with regard to the Federal Government?
Mr. MERIAM. Yes, sir.
Senator BARKLEY. Have you changed your views as to whether a preaudit is an executive, administrative, or legislative function?
Mr. MERIAM. Yes, sir.
Senator BYRNES. I just want to say, if you have changed your views, that the Oklahoma report was in 1935, 2 years ago.
Mr. MERIAM. Yes, sir.
Senator BYRNES. And since then you have changed your viewpoint?
Mr. MERIAM. Yes, sir.
Senator BARKLEY. Did all these legislatures adopt the plan that you submitted to them in your suggestions?
Mr. MERIAM. No, sir; I do not think they did.
Representative BEAM. Were auditors elected as executives in these various States that you have mentioned, or were they appointed!
Mr. MERIAM. I do not recall. A great many of them have elected auditors. The fact is that a good many writers on financial administration are in exactly the same boat with us. On the question whether final settlement of accounts should be under the executive or under an independent auditor responsible either to the legislature or directly to the people, they can be quoted on either side. The explanation is to be found in the evolution and development of public financial administration and executive management in the United States.
As we all know, our Colonial forebears were extremely distrustful of the executive because of their conflict with the crown. Colonial executives had represented the crown. Thus for more than a century our States followed in practice the pattern of a strong legislature and a relatively weak executive. In the meantime, the functions of government expanded, bringing about a large increase in the size of the administrative branch of government and in the diversity of its activities.
Early in the present century came the movement to strengthen the executive as the business manager of the administrative branch of the government. The central reform was the substitution of the executive budget for the legislative budget, which meant that the initial budget estimates and recommendations for the administrative branch should be drafted as whole by the Governor as his administrative program and not by legislative committees, acting on the uncoordinated recommendations of the various administrative agencies.
Practically all Government research agencies accepted this principle that the executive should be made the responsible general manager of the administrative machine. Surveyors of State administration almost invariably recommended the establishment under the executive of an office of financial control, a budget bureau. It was the agency through which the executive formulated the budget and exercised managerial control over the operating units in the execution of the administrative program as adopted by the legislature on executive recommendations.
Speaking now only for our own group at the Institute for Government Research, I think we should confess frankly that we did not, in our own discussions, distinguish sharply enough between (1) executive control for the purposes of efficient and economical management and (2) auditing control to prevent administrative officers from making an illegal payment. We did not take a stand on this issue as a matter of principle; rather we worked out each case individually. We saw clearly that the mechanical problems of organization and procedure are essentially different at the two levels of government. The States are relatively small and compact. The spending agencies are so close to the capital that there is little delay in getting financial documents to the center. The books of all fiscal officers, comptroller, treasurer, and auditor, are at least in the same city if not in the same building. It is a simple matter to devise a system that will give reasonably satisfactory results, without the decentralization in financial administration that is essential in the National Government.
We have now given the subject far more thorough consideration than we ever have before; and we have reached the conclusion that in principle there should be no distinction between the different levels of government, and that in a democracy which has a government based on the division of powers, audit for legality and regularity should precede final settlement, and that such audit should be made by an auditor independent of the executive, an auditor elected by the people or appointed or controlled by the legislature.
Senator BYRD. Mr. Meriam, as a matter of fact, there is a very vast difference between a State and a Federal Government. Time and time again in this hearing the question has been brought up that because States have done certain things, that because members of this committee, perhaps, have advocated certain plans for the States, that that plan would be perfectly satisfactory to operate with the Federal Government.
Now, I want to take the time of the committee very briefly, because Virginia has been mentioned in this matter time and time again by Mr. Gulick, claiming that the plan that he is advocating here is the same plan that we have in the State of Virginia. I want emphatically to disagree with that and point out great difference between the two plans.
The Virginia plan has a comptroller who is appointed by the Governor. They have an auditor of public accounts elected by the general assembly, who is absolutely independent of the Governor. The Governor does not appoint him; he is an entirely independent officer.
Then the attorney general of the State is elected by the people, and all decisions with respect to matters of appropriations and other things are decided by the attorney general. His decision has the full force and effect of law, unless he is reversed by a court, which gives another independent check on the executive.
Now, the plan that is proposed here
Representative Vinson. Senator, what is the function of the auditor?