(see p. 62 of rept. no. 5) to give the Budget Bureau independent status under the President. (b) Section 309 of the Budget and Accounting Act should be amended to (1) require concurrence of the members of the proposed interagency committee in accounting systems prescribed by the Office of Audit and Settlement, and (2) permit the Office of Audit and Settlement (subject to review by the interagency committee) to hold up an appropriation in the event that a prescribed system is not followed by an administrative agency. (c) Legislation would be advisable to transfer the budgetary apportionment and obligation records from the Division of Bookkeeping and Warrants, Treasury Department, to the Bureau of the Budget, since these records have authority for their present location in Executive Order 6226, of July 27, 1933, which has now become law. (d) Legislation would be advisable also to provide for developing an improved system of Treasury accounting to be prescribed, after study, by the Office of Audit and Settlement, with concurrence of the members of the interagency committee on problems of financial administration. * (e) Section 242 of title 31 of the United States Code (derived from 248 Revised Statutes) should be amended by deleting the clause "shall, from time to time, prescribe the forms of keeping and rendering all public accounts and making returns; * * Under our proposed plan this power would be exercised by the Auditor General under section 309 of the Budget and Accounting Act, as amended, to provide for joint concurrence of the proposed interagency committee. (f) Legislation appears to be necessary to effect the transfer of the Division of Disbursement to the office of the Treasurer of the United States. Its present location was provided by Executive Order 6166, of June 10, 1933, which has become law. (9) Legislation appears necessary to provide for the bonding of administrative officers. (See p. 76. Report No. 5.) (h) Amendment of section 302 of the Budget and Accounting Act should be considered to provide for two Assistant Auditors General -one to devote his attention primarily to the legal aspects of audit. and control and the other to devote his attention primarily to the accounting aspects. (i) In order that there be no doubt as to the question of account-ing statements for the Federal Government, the Office of Audit and Settlement should be required by law to render a comprehensive current statement of the financial condition and operations of the Government as a whole. (j) Legislation would not be required to establish the interagency committee proposed in our report, but it seems advisable, in order that ample authority could be given that committee to study the accounting and budgetary needs of the Government and to develop and maintain the most efficient system possible. (k) Legislation should be considered to clarify the laws relating to the audit of collections. (See pps. 91-93 of Report No. 5.) (7) Legislation should be considered to clarify the legal issues: involved in the approval of contracts and titles and the Attorney General's opinions relating to appropriations. (m) Legislation would be required apparently to transfer the research staff of the National Resources Committee of the Bureau of the Budget. (n) Legislation would also be required to transfer the functions of the National Emergency Council to the Bureau of the Budget. In answer to Senator Byrd's question as to the total amount of Federal expenditures since the enactment of the Budget and Accounting Act, the following figures are submitted: The Including expenditures from postal revenues the total is $80,168,000,000. amounts expended each year are shown in the following table prepared from the Annual Report of the Secretary of the Treasury for 1936, pages 392-393: [All figures in millions] The CHAIRMAN. The committee will adjourn, subject to the call of the Chair. REORGANIZATION OF THE EXECUTIVE DEPARTMENTS TUESDAY, APRIL 27, 1937 JOINT COMMITTEE ON GOVERNMENT ORGANIZATION, The joint committee met, Senator Robinson presiding. The CHAIRMAN. Gentlemen, I think we will proceed, if you are ready. At the last meeting of the committee the representatives of the Brookings Institution presented their views as to the differences between their recommendations and the plan of the President's committee, with respect to finance and accounting. It seems appropriate that the President's committee may now be heard in a statement of their views as to the material differences in the two plans. Mr. Gulick is present, and we will be glad to hear you, Mr. Gulick. STATEMENT OF LUTHER GULICK Mr. GULICK. I regret that Mr. Brownlow, who intended to be here this morning to present this, is under the weather and could not make it, so he got hold of me yesterday and asked me to come down and present very briefly the general position, because I am sure it must be clear to the members of the committee after all the talks that have been devoted to this discussion since we first commenced here. I want to present the ideas which we had under five very brief headings: First, dealing with the duties of the Auditor General; second, dealing with the Treasury functions as suggested under the program which we have presented; third, I wish to clear up the confusion which seems to have arisen with regard to the relationship of settlement to audit; fourth, I wish to turn to the question of underlying principles; and, fifth, to allude very briefly, not to bring up again the whole constitutional question but to allude very briefly to it and raise the question of the original intent of Congress. Now, as to the functions of the Auditor General under the program as suggested by the President's committee. These were listed as dealing with four activities: First, the postauditing of expenditures and revenues; second, the verification of accounts and financial statements; third, the investigation of financial matters for Congress; and, fourth, the reporting on findings to Congress. Under the first heading, the postauditing of expenditures and revenues, we have suggested that the functions of the Comptroller General should be as follows: To examine and audit all expenditure documents, that is, vouchers, pay rolls, contracts, and so forth, of any department or establishment of the Government, in whatever detail may be necessary to determine the legality and propriety of governmental expenditures. Second, to examine and audit all transactions relating to revenues and receipts. You remember Mr. Buck outlined in detail the need for expansion in the audit with reference to revenues and receipts. Third, to ascertain whether adequate checks and controls are maintained by the Treasury Department, and by the several spending departments over the expenditures of money and over the maintenance of stores. Fourth, to ascertain whether adequate checks and controls are maintained by the Treasury and by the revenue-producing bureaus over the revenues and receipts, and also to audit the securities owned by the Government, the funds held by the Treasury and by the mints, and so forth. Fifth, to ascertain the condition of all special or trust funds belonging to or under the supervision of the Government as assets and liabilities. Sixth, to examine the operations of the national debt, interest payments, provisions for retirement, sinking funds, and so forth. Seventh, to examine the operations of all Government loan and finance corporations, such as the R. F. C., F. C. A., and the H. O. L. C. That represents the audit functions. Second, there is the verification of accounts and financial statements. There we outline three specific tasks which would be entrusted to the Auditor General. Third, there is the investigation of financial matters for Congress in case of special investigations dealing with any of the activities and agencies reporting on their financial practices and procedures, and the investigation, at the direction of Congress, of the misapplication of funds or overexpenditure; then, fourth, there is the reporting on findings to Congress, and here we outline three specific tasks which are imperfectly performed under the existing system. What are the results that may be expected from this redesign of the duties of the Comptroller's Office as it is transformed into a genuine independent audit? In the first place, Congress and its financial committees will have the opportunity to become fully informed, through a disinterested agency, on how appropriations are expended, on financial practices, and on the general financial management of the executive. The effect of that we believe would be to place in the hands of Congress information over a broad range which it does not get now, and which cannot be secured through an officer who is himself making settlements and participating in the decisions on which the reports are made. The Congress will have the necessary information, through this impartial outside auditor, so that it can bring administrative offices to book; it will have the report on settlements, disagreements with reference to settlements; it will have that information obtained by a man who did not participate in the actual making of those settlements. The full import of that I think I can develop a little later. The second effect of this procedure would be on the administrative offices. The accounting officers who keep the records will be both in the departments and in the Treasury, and the spending officers will be primarily in the departments. These officers will be required to shoulder their own respective responsibilities for financial transactions. They cannot pass the buck to anybody. They will have to take the responsibility for the financial decisions that have been made, because the decision is made by them and the administration is carried out by them. They will not be able to escape the responsibility for the decisions that are made. In the third place, administrative officers, both accounting and spending officers, will consequently have to use greater care in their financial transactions, because they will know that the responsibility rests squarely upon them and that they will be called to account by a special committee of Congress, with full information presented there by the Auditor General. Therefore, we believe that the end result will be not only the establishment of a full, independent audit, covering all transactions of the Government, which cannot be had under the existing system, but at the same time to equip Congress with far more complete information with reference to the whole field of the fiscal management of the Government of the United States. Now, just turning for a moment to what is the job that comes into the hands of the Treasury-and on this point I think there has been some confusion because, perhaps, of the lack of clarity of the statement by ourselves in the early stages-what will the Treasury do under the plan that has been suggested? Well, the Treasury will exercise financial control functions which will be transferred to that office, and these are seven in number. First, the rendering of advance decisions to the heads of departments and establishments, and to disbursing officers regarding the uses of appropriations. Second, the countersigning of warrants issued by the Treasury Department, including the approval of requisitions of the several departments relating to the disposition of funds. Third, the maintaining of accounts relating to appropriations, and personal accounts of collecting and disbursing officers. Fourth, the settlement of personal accounts of collecting and disbursing officers. Fifth, the prescribing of systems of administrative appropriation and fund accounting in the several departments and establishments, including procedures concerning the administrative examination of claims and fiscal officers' accounts. Sixth, the settlement of claims against the United States and the certification of such claims to the Treasury; and Seventh, the recovery of debts due to the United States. Those will be the activities, the central control functions, that are now exercised by the General Accounting Office and which, under the plan suggested, would be transferred to the Treasury. When transferred to the Treasury, the functions of control which are involved here, the rendering of decisions, the settlement of accounts, all of these functions of fiscal control, will be exercised in a separate division or bureau of the Treasury set up on an independent status within the Treasury, very much as the Budget is set up on an independent status within the Treasury in order that that office may be in a position of considerable freedom and independent from interrelation with the other activities. It cannot be absolutely separated, for the reason that the Budget itself cannot be absolutely separated, because of the necessity of making use of accounting records which grow out of the transactions in other sections of the Treasury. 152419-37-24 |