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the executive agencies in order that all information necessary for effective budgetary control might be contained in proper form in the administrative accounts.

Representative COCHRAN. I would like to ask a question on this budgetary control. You say now that the information is not available to the Director of the Budget as to the amount that has beer allotted to a certain office for expenditures. That is, he cannot get the information immediately. Do you want to infer that?

Mr. SELKO. No; I would not infer that. It is available at any time on request from the administrative officer.

Representative COCHRAN. Well, every Monday morning cannot you go to the records in the Treasury Department and find out just how much money is left in any given account?

Mr. SELKO. I am unable to answer that question offhand, but I do not believe so; no, sir.

Representative COCHRAN. I understand that in the Treasury Department the Treasury knows just exactly how much money is left, say, for instance, for the Bureau of Labor Statistics. They can tell right now, if you call up, how much has not been expended.

Mr. SELKO. They can tell you how much cash, which is appropriated to the Bureau of Labor Statistics, has not been disbursed from the Treasury, but they could not tell you offhand, if I am informed correctly, as to the exact amount of the obligations outstanding against the appropriation to the Bureau of Labor Statistics.

Representative COCHRAN. Well, when the obligation is made do they send a copy of it immediately to the Treasury?

Mr. SELKO. No, sir.
Representative COCHRAN. They do not?
Mr. SELKO. Not to my knowledge; no, sir.

Representative COCHRAN. Now, in reference to this budgetary control, there is one other thing that has always impressed me, and that is the amount of purchases that have been made by an executive officer in the last 30, 40, or 50 days of the fiscal year. In other words, if Congress has appropriated $200,000 for certain supplies and they have not needed those supplies, and they have not spent that money but only a portion of it, on the 30th of June that reverts to the Treasury, and I have always been impressed by the actions of the executive officers of putting in requisitions for supplies regardless of whether or not they were needed, so that they would be sure to spend that appropriation. Did you ever give any thought to that?

Mr. SELKO. Yes, sir; I have thought about that.
Representative Cochran. Don't be afraid to express your opinion.

Mr. SELKO. My opinion is that there should be a careful check-up on unused inventories in order that they might be subtracted from the next year's appropriation. I feel that that control could be exercised through the Bureau of the Budget very effectively.

Representative COCHRAN. In your investigation did you discover the situation that I have just called to your attention?

Mr. SELKO. We made no detailed investigation of that situation; no, sir: and have no way of telling how much the unused inventories would be.

Representative COCHRAN. But it has come to your attention sufficiently to know that the practice exists?


Mr. SELKO. The argument has come to my attention, I mean the statement has come to my attention just as you presented it; yes, sir.

The CHAIRMAN. You may proceed, Mr. Meriam.
Mr. MERIAM. I have a memorandum which I should like to present.

In compliance with the congressional resolutions under which we have worked, our objective has been to recommend the cheapest, most rapid, and efficient system of financial administration that we could devise, which would meet the three major requirements of good administration. These three essentials, as we see them, are:

(1) Adequate, detailed accounts in the operating units, such as the bureaus and the field establishments, so designed that the officers responsible for these subsidiary_units can have the necessary detailed data for efficient direction. In our judgment, the economy and the efficiency of the Government depend in large measure on economy and efficiency in the subsidiary operating units.

(2) Adequate financial records, based on summary reports from the departments and subsidiary units, kept in the Budget Bureau, to enable the President to exercise general managerial control over the entire executive branch of the Government.

(3) Adequate control accounts, necessary to prevent illegal or irregular payments, kept in an agency independent of all operating and spending agencies, and under an independent auditor who shall audit all accounts prior to final settlement and have power to suspend or disallow any illegal or irregular payments.

We believe that one unified system of bookkeeping and accounting can be devised which will meet these three essentials without duplication and overlapping. We recognize that in financial administration it is essential that both the responsible operating officer and the auditor who checks the expenditures of operating officers for legality and regularity examine the original expenditure documents and supporting statements and keep the necessary accounts to enable them to certify that

(1) The expenditure is authorized by law.

(2) If the Congress has passed laws governing such expenditures, or if administrative regulations governing such expenditures have been adopted in pursuance of law, the expenditure has been made in compliance with these laws or administrative regulations.

(3) The expenditure is within the appropriation or the appropriation limitation.

(4) All the facts and factors entering into determining the amount of the expenditures are correct, and the amount to be settled and entered on the control books is correct.

Because of the size of the National Government, its wide geographic distribution, and the hundreds of thousands of individual transactions that take place in a year, we regard unnecessary duplication of work in the examination of the original expenditure documents as a serious waste of public funds, a waste that can do no one any particular good, unless it be the employees who are paid salaries for doing unnecessary work. To prevent this unnecessary work we would have the expenditure documents go at the earliest possible moment to the representative of the independent auditing office, there to be examined in detail for final settlement.


For five reasons we are unable to favor having the control books, the examination for final settlement and final settlement itself made in the Treasury Department with a subsequent postaudit after settlement by an independent auditor representing the Congress.

(1) The Treasury Department is itself an operating agency making large expenditures for personnel, supplies, and construction. The Treasury would be passing upon and settling the Treasury's own accounts.

(2) In general, the legality and regularity of all administrative officers' expenditures would be settled finally on the basis of examination by dependent, not independent, officers. The administrative auditors would be auditing themselves.

(3) If the Congress gives to the administrative officers the power to settle accounts finally, the Congress will be bound by the acts of its duly authorized agents, and its power to recover moneys illegally or irregularly spent will be almost entirely eliminated. It cannot recover

on the bonds of the officers for the accounts will already have been finally settled.

(4) The proposal for a postaudit by a congressional auditor after final settlement has been made by administrative examiners means either

(a) A superficial audit that may not catch gross irregularities; or

(b) A thorough, comprehensive audit, which means the reexamination of the thousands of expenditure documents and the keeping or checking of the books to determine the accuracy of the entries and the fact that the expenditure did not exceed the balance of the appropriation or the appropriation limitation. A real postaudit after settlement will result in the employment of several thousands of persons who will be duplicating the work of the administrative auditors and doing it after illegal or irregular accounts have already been settled, when the Government has no effective way of recovering moneys already spent.

For these reasons we believe that a thorough comprehensive postaudit after final settlement would be an ineffectual means of preserving genuine control over the legality of expenditures; and it would add enormously to the costs. We are therefore opposed to a system which provides final settlement prior to independent audit and we recommend final settlement only after comprehensive independent audit.

Now, are there any questions on that, sir?

The CHAIRMAN. Mr. Meriam is ready to submit himself to questions. Does any member of the committee desire to question him?

Senator BYRNES. Mr. Chairman, I do not desire to ask any further questions of Mr. Meriam, but I would like to ask at this time to have printed in the record the recommendations of the Brookings Institute on this subject to various States. I do not think it would be very voluminous. It is really condensed. I ask to have printed only those recommendations from the various State reports as to this particular point.

The CHAIRMAN. Will you indicate what it is that you desire printed, Senator?

Senator BYRNES. Mr. Chairman, you were not here yesterday, but I asked yesterday as to the opinion of the Brookings Institution with reference to preaudit and postaudit in reports made to various States. There were two or three States to which I did not refer, and I simply want to put that into the record.

The CHAIRMAN. Is there any objection to the request of the Sen. ator from South Carolina ?

Representative TABER. Do you want to put the whole thing in at once rather than piecemeal, the way it was yesterday?

Senator BYRNES. Yes. I think, in justice to the Brookings Institution, they made suggestions sometimes in two or three paragraphs and I was reading only one paragraph, and I would rather put the whole report of the institution in as to this particular question.

The CHAIRMAN. You will have to indicate to the stenographer just what it is.

Senator BYRNES. Yes. I have given to the stenographer the manuscript.

Senator BYRD. In connection with that, Mr. Chairman, I asked Colonel Wren to ascertain how these different officials in these States that were referred to yesterday held their positions, whether they were elected or appointed; in other words, so as to get the comparison between the condition here at Washington and in the different States. Reference was made by Senator Byrnes to the fact that in these States the Brookings Institution made a different recommendation to what they had made to the Federal Government, and I would like Colonel Wren to include that in the hearings when he obtains that information.

Mr. WREN. I might say, in that connection, that at the suggestion of Senator Byrd, after the meeting I concluded, rather than to go to the statutes of the States for that information, to ask the States themselves for it, and I have done so. As soon as their answers come I will bring that to the attention of the committee, and it will then be disposed of.

(The information secured as reported by Mr. Wren is as follows:)

STATE OF IOWA Prior to Brookings survey : State auditor elected, preaudited all claims and issued warrants in payment.

There was no comptroller but the budget directed, apparently appointed, no showing as to by whom, postaudited all accounts.

Attorney general elected. His opinions were binding on the auditor and on other States officials.

Total annual expenditures of the State year prior to Brookings survey, $38,625,581.04 ; following year, $37,173,629.46.

After Brookings survey, budget director was abolished and a comptroller was appointed by the Governor who preaudits all claims and issue warrants in payment. Auditor, elected, postaudits. Attorney general's opinions continue to be binding on State authorities.


Information secured relates to present time only.

Auditor, constitutional officer, elected. All disbursements are made on warrants issued by the auditor, some of which are preaudited by him and some handled through disbursing accounts which are postaudited by him. He postaudits all State agencies except the State school commission.

The State has no comptroller but in 1929 the assistant director of the budget, appointed by the Governor, and the budget bureau, were given the approval of all budgets of all spending agencies and the control of expenditures by allotments.

The attorney general is a constitutional officer and is elected. He is the legal adviser of all State departments and agencies but his opinions are in the main advisory.


Information relates to conditions since Brookings Survey, in 1931.
State auditor elected. He had function of pre-audit and post-audit.
The State has no comptroller.

The attorney general is elected. The State auditor is not bound in official acts by the attorney general's opinion.

State expenditures in 1932 estimated at $14,000,000.


State auditor was and is elected. He had function of preaudit and settlement of claims. Also function of postaudit. After the Brookings Institution's survey, the State auditor was relieved of all duties in respect to the settlement of accounts and keeping of accounts, records, and the making of financial reports, but he retained the duty of post audit.

The office of comptroller was created after the Brookings Report as a part of the Governor's office and placed under the general direction, supervision, and control of the Governor. The duties given to him included those of auditing all demands by the State and preauditing all accounts submitted for the issuance of warrants. He was given control of the payment of all moneys into the treasury and of the payments from the treasury “by the preparation of appropriate warrants, or warrant checks, directing such collections and payments.” He was also made the chief budget officer.

The attorney general was and is elected. The auditor was not bound to follow his rulings and neither the auditor nor the comptroller are now so bound that if his rulings are so followed, the official doing so is protected from liability if in error.


Office of auditor was abolished in 1932, the year in which Brookings made survey. No showing as to how he was selected nor as to just what his duties


Upon abolition of State auditor, his duties were taken over by the comptroller, appointed by the Governor and council. The comptroller thereupon possessed function of preaudit and postaudit. Attorney general is appointed by the Governor and council.

The comptroller observes the opinions of the attorney general concerning his official acts. No showing as to whether, prior to Brookings Survey, auditor So observed.

State expenditures for year ending June 30, 1932, before the Brookings Survey, $12,433,357.13. Corresponding figure for succeeding year is $33,101,026.69.


State auditor elected. He has function of preaudit and settlement of claims against State.

The State had no comptroller.

The attorney general is elected. No showing as to whether his opinions controlled the auditor.

Senator BYRNES. Mr. Chairman, what I had asked was not what action the States had taken, whether they had approved or rejected the reports, but simply the recommendations of Mr. Meriam to those States.

The CHAIRMAN. Is there any objection to the request of the Senator from South Carolina ?

Representative GIFFORD. I wish he would tell us the purpose of his request, as to why he wants to do that.

Senator BYRNES. I have stated why, but I will be glad to state it again. I wish to have printed exactly what was said, and all that was said by the Brookings Institution in these various reports with reference to this question of postaudit and preaudit.

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