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ciable sum-do you remember the figure as to the total percentage of the Federal expenditures that go for administration?

Mr. SELKO. Here is the chart.

Mr. MERIAM. You can get that percentage stated there. Here is the chart [indicating].

Senator BARKLEY. Can you give it to me in figures ?

Mr. MERIAM. You are more familiar with the figures than I am, Mr. Selko.

Mr. SELKO. What we estimate to be the administrative expenses of the Government are somewhat less than $1,000,000,000 out of more than $7,000,000,000 which we are spending now, excepting the veterans' bonus.

Senator BARKLEY. Assuming here and there by lopping off something, by cutting out something, by denying the expenditures which Congress has appropriated if it is not done in the right way, assuming the maximum amount you can guess at would saved, do you regard that as being more important or less important than the consolidation and simplification of all the agencies of the Government in order to get more efficient service for the people?

Mr. MERIAM. Oh, no, sir. The two things generally to together. In certain instances you can actually save some money; in certain other instances you do not save any money but you give very much more rapid and very much more accurate service.

Senator BARKLEY. Where there are instances where the two theories conflict, and if, as a whole aggregation the two theories conflict, which do you prefer?

Mr. MERIAM. I do not think I quite follow you, Senator.

Senator BARKLEY. Well, if you could reorganize the Government so as to make it much more efficient without saving any money: would you prefer that or would you prefer to save a little money and not make it more efficient?

Mr. MERIAM. Well, in making this study under the terms of the resolution we have assumed that no question of policy is submitted to the Brookings Institution for consideration. If the Government at the present time is rendering a service to the publie, we have made no recommendations to change that service. That was clearly understood when our contract was drawn and the principle has been followed throughout. It is definitely understood that we were not retained to make any recommendations with respect to the economic, social, governmental policy as prescribed by the Congress.

Senator BARKLEY. I haven't asked you to express any opinion on it. I am talking about the mechanism of government, the agencies through which these policies are carried out.

Mr. MERIAM. I am going to give you a concrete illustration. We put automobile tags on cars; that is one of our revenue devices. Now, if we can go in and install a system whereby those tags can be put on the back of an automobile for 13 cents instead of for 75 cents, or a dollar, the amount the State has been spending, you would get not only economy, but, as a matter of fact, superior service to the public, because where it is done on the basis of costs of 13 cents it means it is done very rapidly and very efficiently. Now, there are cases like that.

I remember when I was working for the Congressional Joint Commission on Reclassification of Salaries in days when we had the five auditors and the Comptroller of the Treasury, we found remarkable differences between the offices of the five auditors. In the office of the auditor for the Navy all the figure-accuracy details were done by clerks using a comptometer, or adding machine, or other computing machines, and they had enough clerks to do that so that each voucher was checked as correct for figure accuracy before it went to the high-grade auditor who was competent to pass on the legality, regularity, and procedure. Now, in another office, side by side, they had nothing but high-grade auditors. Those fellows would sit down and work out for themselves all those figure-accuracy computations. They were relatively high-paid people. There was a very great discrepancy in the costs of those five auditing offices doing precisely the same thing.

I talked with Judge Warwick about that. He was then Comptroller of the Treasury. He told me that in his opinion the cheapest office, the one that was doing the work the cheapest, was also doing the work the best.

Now, unfortunately, these are all matters of detail, but if you study this Government of the United States in its far-flung services, and get down where the money is spent in the various bureaus, you find that often the real questions are details of procedure.

Senator BARKLEY. Of course, it is desirable to save money by eliminating duplication and getting better material for a lesser amount, if possible, but in the matter of automobile tags, if


find one department deciding on what the color should be for the background and another what color should be for the letters and figures, and still another one determining the question of size, and still another one the material, and still another one determining who shall make them, don't you think the consolidation of all of those into one agency would not only be more efficient but would be less expensive?

Mr. MERIAM. Not necessarily; because you have the color of the tags and certain other things determined by the Automobile License Bureau, then you have the tags manufactured in the penitentiary by an entirely different agency. It is very much cheaper.

Senator BARKLEY. That is of course an exceptional case. I am trying to get at a general rule. Mr. MERIAM. Well

, sir, I wish that I could give you a general rule, but all my life, since I have been working, has been connected with these things. Unfortunately we have to study the details in the operating department to understand what the situation is. You may discover two things that are very much alike and yet you discover that for some particular reason it is very advantageous to have the work done in different agencies.

There is a familiar story that goes around about the bears, as to how many different Government agencies we have that are concerned with bears. Some people have maintained that all the bears ought to be in one department. Now, we have the United States Forestry Service that has some bears. It is cheapest to have those bears taken care of by the Forestry Service. If you have some bears in Alaska it is cheaper to have those bears taken care of by the Government of Alaska. If there are some bears on Indian reservations it is cheaper to have those bears taken care of by the Indian

reservations; and the parks, the same thing. The bears out in the Zoo here occasionally get sick; the Zoo officials send down to the Bureau of Animal Industry and get the veterinarians from the Bureau of Animal Industry to come out and take care of the bears. If anybody wants to talk about putting all those bears into one department I do not think it makes for economy or efficiency, or good service.

The CHAIRMAN. Mr. Meriam, if I understand you correctly, your organization does not claim that the present system is a failure but you do claim that there are defects in the system that may be corrected ?

Mr. MERIAM. Yes, sir.

The CHAIRMAN. Now, that is a general statement, of course, and that does not differ from the position taken by the President's committee, does it?

Mr. MERIAM. As far as the statement of fact is concerned, the major difference is that they say it is a “total failure.”

The CHAIRMAN. As far as the general statement is concerned, there is no difference of opinion on the proposition that the system needs improvement ?

Mr. MERIAM. That the system needs improvement; yes, sir.

The CHAIRMAN. Yes. The general criticisms made by the President's committee, found at page 46 of document no. 8, are, first, that the General Accounting Office has failed to provide an adequate independent accounting system, and, second, that it has failed to supply Congress with the comprehensive information concerning the financial administration of the Government which an auditor should supply. Those are the two general criticisms, as I understand it, that the President's committee have made of the accounting system as it now exists.

Are you prepared to state, connectedly and briefly, what, in your opinion, are the important defects in the present financial and accounting system that may be corrected ?

Mr. MERIAM. Mr. Selko will answer that, Senator.

Mr. SELKO. If I may, Senator, I will just read from the summary of conclusions in our report.

The CHAIRMAN. You may answer it from any source you want to, if you are prepared to give it in a succinct, brief statement, as to the defect in the present system that needs correction.

Mr. SELKO. Yes, sir. Our study has revealed three defects which we consider fundamental in the existing system. First, that the budgetary system fails to provide the President with satisfactory implements for centralized budgetary and administrative management. We feel that there could be improvement, in other words, in the budgetary system.

Second, that the existing provisions for the final audit and settlement of accounts fail both to assure complete control by Congress of the collection, custody, and disbursement of public moneys, and to require the preparation of current statements of the financial condition and operations of the Government as a whole.

Third, we feel that the existing financial procedure results in unnecessary delay in the liquidation of obligations and the final settlement of accounts.

The CHAIRMAN. With respect to the last statement, are you convinced that the plan you have proposed would shorten delay?

Mr. SELKO. Yes, sir.

The CHAIRMAN. You do not think that a general postaudit, such as you and Mr. Meriam have described, would result in greater delay than now occurs?

Mr. SELKO. No, sir. We would not add to the delay in making the postaudit which is made at the present time, by our proposals, as I see it.

The CHAIRMAN. That is not quite responsive to my question. Perhaps the fact that the question may not have been clear is responsible for it. My question is whether to establish such a preaudit system as your report and recommendation contemplates, would increase or shorten delay?

Mr. SELKO. It is our opinion, Mr. Chairman, that it would greatly shorten delay. That is, it would hasten both the payment and the settlement of accounts for the administrative and disbursing officers to be able to avail themselves of advance information as to legality and regularity.

The CHAIRMAN. Your plan with respect to a preaudit is that any administrative officer, when in doubt, or when he desires to do so, could go to the General Accounting Office, or whatever other name the authority may be called, and have the proposal for expenditure passed upon and approved'in advance, so that subsequently there would be no necessity for a postaudit with respect to the matters that might be determined in the preaudit?

Mr. SELKO. Yes, sir. That is now the law.

The CHAIRMAN. Does the law authorize the administrative office to have his accounts preaudited ?

Mr. SELKO. Yes, sir.
The CHAIRMAN. What provision of the law do you relate that to!

Mr. SELKO. Title 31 of the code has a section in it which provides that specifically. I believe I read it here yesterday. That was provided by section 8 of the Dockery Act.

The CHAIRMAN. Of course, if this plan is agreed to it means a preaudit is to be relied on rather than a postaudit. Of course I understand that your plan does not contemplate dispensing with the postaudit, because it would be necessary to see that the terms of the preaudit were functioning, is that right!

Mr. SELKO. Yes, sir.

The CHAIRMAN. But in all cases where there is a likelihood of a controversy arising the officer who has the responsibility in the first instance would go to the General Accounting Office and have it passed upon before he spent the money?

Mr. SELKO. Yes, sir.

The CHAIRMAN. Then if he did that and the expenditure were approved that would determine all questions except whether the expenditure were made in conformity to the preaudit?

Mr. SELKO. Yes, sir.

The CHAIRMAN. And your theory is that, taken generally, that would shorten the accounting rather than draw it out?

Mr. SELKO. Yes, sir.

The CHAIRMAN. That, of course, means that in order to protect himself the executive officer, the disbursing officer would, in all cases where a probable doubt would arise, avail himself of the preaudit?

Mr. SELKO. Yes, sir.

The CHAIRMAN. It would enlarge very much the practice that is now being pursued of occasionally having preaudits ?

Mr. SELKO. Yes, sir.

The CHAIRMAN. In what cases, now, can you say, does preaudit occur, or is it of such a diffused nature that it is not possible to classify the cases ?

Mr. SELKO. It is possible to classify them. The preaudit occurs most generally in the case of transportation vouchers. A regulation of the General Accounting Office, regulation 13, contemplated doing away to a large extent with the necessity of a traffic audit in the administrative establishments, to speed up the settlement of the numerous detailed accounts with transportation companies. As you will recall, the law regarding travel of Government employees is greatly complicated by the existence of such things as the necessity for their taking a land-grant railroad when it is possible, to save money by that means, and this regulation was designed to shorten up the audit by having the transportation vouchers sent directly to the General Accounting Office for direct settlement.

However, the practice has been, in the majority of cases with regard to transportation vouchers, to have them handled by preaudit. That is, the vouchers are sent to the administrative establishment, the administrative establishment certifies the vouchers as to their authority, that the money was spent for authorized purposes, and that there was a balance available in their appropriation, and then they send that to the General Accounting Office for examination and approval, and the General Accounting Office examines the voucher for its regularity, accuracy, and legality, and then certifies it back to the administrative officer for payment by the disbursing officer.

The CHAIRMAN. So that when it passes the General Accounting Office disputes which might otherwise arise after the money is expended would be settled in advance ?

Mr. SELKO. Yes, sir. The CHAIRMAN. And only questions arising out of the manner of the expenditure, and as to whether it had been in conformity to the decisions of the preaudit, would arise ?

Mr. SELKO. Yes, sir. That can largely be taken care of by an examination of the total amount spent from the face of the check, and the face of the voucher.

The CHAIRMAN. Have you, during the course of your studies, or any of you, found evidences of fraud or dishonesty in the accounting system as now pursued ? Mr. SELKO. No, sir.

The CHAIRMAN. You think that a reorganization under the plan you have proposed would eliminate the defects that you have spoken of and summarized this morning ?

Mr. SELKO. Yes, sir.

The CHAIRMAN. And you think it can be better done in that way than it would be done under the plan proposed by the President's committee?

Mr. SELKO. Yes, sir.

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