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after transferred, retransferred, regrouped, consolidated, or segregated, under the provisions of title I of this Act;

(c) The term "abolished agency" means the National Resources Committee or any agency which is hereafter abolished under the provisions of title I of this Art;

(d) The term "receiving agency" means any agency to which a transferred agency or any function, or part thereof, of any abolished agency is transferred;

(e) The term "Managerial agency" means (for the purposes of both this Act and the Classification Act of 1923, as amended), the Bureau of the Budget, the Civil Service Administration, and the National Resources Board ;

(f) The term "functions” includes any rights, privileges, powers, duties, or functions, or any part thereof; and

(g) The term "federally owned and controlled corporation" means any corporation (whether incorporated by, or under the provisions of, an act of Congress, or under the laws of any State, Territory, or possession of the United States, including the Philippine Islands, or the District of Columbia), a majority of the stock of which is owned by the Federal Government and in which no members of the Board of Directors is elected or appointed by private interests.

Sec. 502. Such of the personnel and property of, or pertaining to, each transferred agency (including office equipment and official records on file therein or pertaining to the business thereof) as the President shall determine to have been employed or used in connection with such transferred agency, are transferred to the designated receiving agency, and thereafter all appointments to offices and positions in such transferred agency shall be made in accordance with the civil-service laws, unless the President by Executive order shall except any such offices or positions from the classified civil service under the authority of this Act: Provided. That the transfer of such personnel shall be without change in classification or compensation, except that this requirement shall not operate after the end of the fiscal year during which the transfer is made to prevent the adjustment of classification or compensation to conform to the duties to which such transferred personnel may be assigned: Provided further, That such of the personnel so transferred who do not already possess a classified civil-service status shall not acquire such status by reason of such transfer, except (a) upon recommendation by the head of the receiving agency within 1 year after such personnel have been so transferred, and certification within such period by such head to the Administrator that such personnel have served with merit for not less than 6 months prior to the transfer of such personnel, and (b) upon passing such suitable noncompetitive examinations as the Administrator may prescribe.

SEC. 503. Such portions of the unexpended balances of appropriations, or other funds available for each transferred or abolished agency are transferred to the designated receiving agency (including the National Resources Board) as the President shall deem necessary. Unexpended balances of appropriations or other funds available for a transferred or abolished agency, not so transferred pursuant to the President's determination under this section, shall be impounded and returned to the Treasury.

SEC. 504. All laws, rules, regulations, remedies, privileges, permits, or orders made, issued, or granted, in respect of any transferred agency, prior to the effective date of the transfer of such agency, shall continue in full force and effect, except insofar as directly in conflict with the provisions of this Act, and shall be applicable in the same manner and to the same extent as if such agency had not been transferred, until modified, superseded, revoked, or repealed.

SEC. 505. No proceedings, hearings, investigations, or other matters pending on the effective date of the transfer of any transferred agency shall abate by reason of such transfer, but shall be continued and brought to determination in the receiving agency.

SEC. 506. No suit, action, or other proceeding by or against any officer or employee of any transferred agency, in his official capacity or in relation to the discharge of his official duties, shall abate by reason of such transfer.

Seo. 507. The head of any receiving agency is authorized to delegate to any officer or employee to his agency any of the functions vested in and imposed upon such head or agency under title I of this Act.

SEC. 508. (a) In the case of an abolished agency, the Executive order providing for such abolition shall make such provisions as may be necessary (1)

for winding up the affairs of the abolished agency, and (2) for the transfer or other disposition of all personnel and property (including office equipment and official records on file therein or pertaining to the business thereof) of the abolished agency: Provided, That the transfer of any such personnel shall be subject to the provisions of section 502 of this title.

(b) In the event that any or all of the functions, or any part thereof, of an abolished agency are transferred to another agency, such functions, or part thereof, shall for the purpose of sections 502, 503, 504, 505, 506, and 507 of this title, be deemed to be a transferred agency.

SEC. 509. The powers conferred and imposed upon the President by this Act to transfer agencies and functions shall be construed to include the power to transfer agencies or functions relating to any of the Territories or possessions of the United States to an agency of the Territory or possession to which such agencies or functions relate or from an agency of such Territory or possession to an agency of the United States: Provided, That no such transfers shall be made without the approval of the Territory or possession concerned : Provided further, That the President may make applicable to any such transfers such of the provisions of this title relating to transfer or other disposition of personnel, property, and appropriations or other funds, as he may deem necessary.

SEC. 510. Subject to such regulations as the President may from time to time prescribe, the President and the heads of the executive departments and the managerial agencies of the Government and the Civil Service Board, for the purposes of consultation, investigation, and research in connection with the exercise of functions vested in and imposed upon them by law, or (in the case of the heads of executive departments and the managerial agencies of the Government and the Civil Şervice Board) for the purposes of conducting such investigation or research as may be required of them by the President, are respectfully authorized to appoint, without regard to the civil-service laws, such experts and consultants, for such temporary periods, as may be necessary, and to fix their compensation without regard to the Classification Act of 1923, as amended.

SEC. 511. The Director of the Bureau of the Budget is authorized in the District of Columbia and elsewhere, to assemble and disseminate to the agencies of the Government and the public, general information concerning all phases of Government activity; and generally to serve in a liaison capacity in the promotion of cooperative relationships between agencies of the Government, and in the cooperative development and administration of Federal, State, and local governmental activities.

SEO. 512. There shall be in each of the Departments of War, Navy, Commerce, and Labor, an Undersecretary, who shall be appointed by the President, by and with the advice and consent of the Senate, and such Assistant Secretaries in any of the executive departments, in addition to those Assistant Secretaries now authorized by law, as may be appropriated for from time to time by the Congress, who shall be appointed by the heads of their respective departments, and all of whom shall perform such duties as may be prescribed by the heads of their respective departments or required by law.

SEC. 513. Subject to the provisions of section 180 of the Revised Statutes, as amended, the Undersecretary of each executive department shall perform the duties of the head of such department in the case of the death, resignation, absence or sickness of both the head and the Undersecretary of any executive department other than the Department of Justice, the duties of the head of such department shall be performed by the head of such other department or such other officer in either department as the President shall direct.

SEO. 514. The head of any agency of the Government established under or affected by the provisions of this Act is authorized to make such expenditures in the District of Columbia or elsewhere, for personal services, travel expenses, including the expense of attendance at meetings then specifically authorized. contract stenographic reporting services, rental, supplies and equipment; pur. chase and exchange of law books, books of reference, directories, periodicals, newspapers and press clippings; purchase, operation and maintenance of motor propelled passenger carrying vehicles ; printing and binding; and such other expenses as may be necessary in the exercise of any functions vested in and imposed upon any such agency or head by or under the provisions of this act.

SEC. 515. There is authorized to be appropriated out of any money in the Treasury not otherwise appropriated such sums as may be necessary to carry out the provisions of this Act.

SEC. 516. If any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances shall not be affected thereby.

SEC. 517. Title I and II, except sections 202, 203, and 204 of title II, shall become effective upon the enactment of this Act. Sections 202, 203, and 204 of Title II shall become effective when the first Civil Service Administrator appointed under that title qualifies for and takes office. The provisions of title III and of parts 1, 2, and 3, and section 418 of part 4 of title IV, shall not become effective until, and except as, the President shall find and by Executive order declare it to be consistent with the public interest and the efficient operation of the Government that any of such provisions shall become effective on such date as he may specify in such order. Section 412 of title IV shall become effective upon the enactment of this Act. Sections 413, 414, 415, 416, 417 and 419 of title IV shall become effective when a majority of the members of the National Resources Board first appointed under the provisions of that title qualify for and take office. Title V shall become effective upon the enactment of this Act.

SEC. 518. This Act may be cited as the "Reorganization Act of 1937."




Washington, D.C. The joint committee met, Senator Robinson presiding.

The CHAIRMAN. The committee will be in order. Are there any further questions of Mr. Brownlow? Does any member of the committee wish to ask Mr. Brownlow any questions?

Senator TOWNSEND. Mr. Chairman, I was just able to get this bill this minute. After a study of the bill there might be some questions that I would desire to ask.

Senator McNary. I feel the same way, Mr. Chairman.
The CHAIRMAN. Mr. Gulick, will you come forward, please?

Mr. Chairman, I think that the major questions were covered yesterday by Mr. Brownlow in outlining the program presented by the committee and transmitted by the President to the Congress with his message on January 12.

I spoke very briefly yesterday on the subject of the financial provisions. Perhaps it would be well for me to present that in a more orderly and systematic fashion than I was able to do yesterday in the very brief period that we had on that topic.

The fiscal system of the United States was very extensively revised by the Budget and Accounting Act in 1921, starting with hearings that were organized by the Senate and House committees in 1919 and 1920. That revision represented the most important change in the fiscal system of the United States since the days of

ivil War when some changes in the general accounting system were carried through.

The first of the two elements of the change that took place with the Budget and Accounting Act was the establishment of the Budget system with the Budget Director, and that Budget Director was placed directly under the President, although for purposes of administration he is located in the Treasury.

Those of you who were in Congress at that time and in the Senate at that time will remember the discussions which took place which led to that arrangement. The Budget Office was set up at that time as a managerial arm of the Government directly under the President. That arrangement we have not disturbed. As a matter of fact, we have suggested that it should be strengthened and that the duties of the Budget Office should be made more effective and efficient in the interests of economy and good management, particularly through the strengthening of the efficiency research work placed under the Budget Office.

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When the Bureau of Efficiency and Economy was abolished the duties were transferred to the Budget Office. That we regard as an extremely wise action. That was really in the minds of those who drew the Budget and Accounting Act in 1920, and it was contemplated that it should be done.

If you will examine the act you will find that those duties were at that time set up in the Budget Bureau, but they were never developed. In the last Budget the appropriaton was such that there were only 17 people employed in the Budget Office to deal with the problem of efficiency research.

We know, from a study of Government organizations and from a study of business organizations, that there are always plenty of administrative officers who are interested in spending money. They are always eager to look for the things to do. A good administrator naturally does that. He is enthusiastic about his job and about getting things done, and he is not particularly concerned with the economies involved, he thinks of that as being someone else's responsibility-not his responsibility.

Consequently, to make Government or large-scale business effective and efficient it is necessary to provide within the structure of the organization brakes on useless expenditures or unwise expansion, or even on such expansion as would throw the program out of balance within itself. Therefore, within the structure of any large scale enterprise, be it public or private, it is necessary to include some bråkes on expenditure, some brakes on the enthusiasm of the administrative officers.

In the Budget system you have provided certain elements of this system of brakes upon executive enthusiasm, administrative enthusiasm for spending more money and taking on more services. What you do is to set up in the fiscal offices of the Government men who make their reputation by seeing that other agencies of the Government do not get too free and easy and too enthusiastic about expanding their services and spending more money, hiring more people, and all the rest of it.

Now, in the Budget Office you have the division which draws the plans in the development of their efficiency research. You have a division of the Government which will be continually alive to this problem of where can you spend less money, and every time those officials in the efficiency research division can develop better methods, can suggest better business methods, then it is a feather in their cap. That is, they make their reputation by suggesting methods of economy and efficiency within the Government service.

As Mr. Brownlow, the chairman of our committee, said yesterday, it was not within our function to make detailed studies of the operations of bureaus, divisions, and departments, therefore, we did not delve deeply into the business processes, but even touching them as lightly as we did in passing, and considering the larger elements of management, it became evident to us, from our contacts and became evident to us from the examination of studies which have been made by others, that there are in the United States Government at the present time very large opportunities for the improvement of the business methods of the divisions, bureaus, departments, and independent agencies merely if the existing agencies would accept the best

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