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priation of $660,000 a year for 6 straight years, brought $33,000,000 in additional taxes into the Bureau of Internal Revenue. It handles all the fraud investigations of income-tax violators; it likewise investigates all the employees of the Treasury Department, where there is any complaint made in reference to their efficiency or their conduct. There is no other place that it can go without absolutely crippling its activities but where it is right now, because it is tied right in with the Bureau of Internal Revenue and the Treasury just exactly like the post-office inspectors tie up with the Post Office Department.
Mr. GULICK. The only point that has been made to us is that some of its activities might not be as intimately tied in with that Department. We made no investigation of it. We were satisfied that that was not within the program which was laid before us.
Representative COCHRAN. The importance of that Division seems to me to be such that I hope when you do look into it you will go into it very thoroughly before you come to any conclusion that it should be moved from where it is at the present time. The Government will lose plenty of money if you disturb it.
Mr. GULICK. I think we will have no occasion to make any suggestion that it should be moved or it should not be moved.
Senator HARRISON. Senator Byrd, did you ask him with reference to the Coast Guard ?
Senator BYRD. Yes; I did ask him that. It is my understanding that you said it would probably remain in the Treasury.
Mr. GULICK. I said, and I say again, you would have to investigate the thing to see whether it should remain. I remember Josephus Daniels had a very strong feeling that the Coast Guard should be consolidated with the Navy Department. We do not pass on those matters. Those are questions of detailed allocation which arise only after the framework is put up.
Senator BYRD. Would not you correct the testimony of yesterday, then? The question is this: You are transferring from the Comptroller General the audit control to the Treasury Department, where they will be self-auditing their accounts themselves. You said yesterday that the Treasury Department should be reduced as a spending agency. I am prepared to prove here that if your recommendations are accepted the spending in the Treasury Department will be greatly increased.
Mr. GULICK. Senator, it is not the amount of money that they spend that makes them a spending agency in the definition that I was using. The audit department, of course, has to be a spending agency. Anybody that hires anybody is spending money. The important principle to establish in the divisions that are responsible for fiscal control is that those departments shall be limited, as far as possible, to purely fiscal activities, so that extraneous activities will not be thrown in there which tend to make them spending-minded. Now, you cannot absolutely strip it down and have no spending at all.
Senator BYRD. That is true.
Mr. GULICK. The glaring illustration in the Treasury Department is the Health Service.
Senator BYRD. All right. Now let us see. The budget for the Treasury Department for the present year is $2,198,656,210. Now, you propose to strike out the Public Health Service.
Mr. GULICK. How much of that is debt?
Senator BYRD. Interest on the public debt, $896,000,000, and debt retirement, $582,000,000, should be deducted from this total.
Mr. GULICK. Leaving how much?
Senator BYRD. It leaves approximately $900,000,000. Now, you propose to take from that the Public Health Service, which is $20,753,000. The Bureau of Narcotics, you were doubtful about it, I understand. The Federal Alcohol Administration you propose to remove, $475,000. So, therefore, deducting it from the amount of approximately $900,000,000, you would deduct about $21,000,000.
Now, it would appear to me that the additional agencies that are going to be put under the Treasury Department by your plan would largely increase the total of the administrative expenses of that Department, which, under this plan, the Treasury Department would audit themselves and there would be no appeal to the Attorney General.
Mr. GULICK. The Treasury Department makes no audit under our plan.
Senator BYRD. It is the control audit.
Mr. GULICK. It is not audit. We try to distinguish sharply between “audit” and “control”, and to place audit in an independent officer who will have no connection with the administration.
Senator BYRD. You do not object to the word "control", do you?
Senator BYRD. In addition to the figures I have given you, the Treasury Department, Procurement Division, purchase of supplies, which is added to this total, so I am told, the appropriation for that last year was $22,000,000. In that event the Treasury Department would perform the audit control for their own purchases.
Mr. GULICK. Not audit.
Senator BYRD. Well, audit control, I will connect them together. So it would total $306,000,000. Under your plan, the definition of which is given in your report to the President, the new Treasury Department will have these activities to advise the President with regard to fiscal affairs, and the Congress on revenue bills, to handle the collection of revenues, administration of credit and debt, settlement of claims, and procurement of general supplies.
Now, carrying out your idea that every single activity of the Government must be headed by some department head, it would appear to me—and I want to ask you whether I am correct or not—that these new agencies would be put into the Treasury Department : the first would be the Reconstruction Finance Corporation, which has an administrative cost, according to the last Budget, of $11,945,308. Would that be in the Treasury Department under your plan?
Mr. GULICK. All of the lending agencies of the Government should be examined in the light of the work that they are doing to determine what is the best method of dealing with those agencies that are in liquidation, those agencies that are still going concerns, those agencies that are not to be continued for any length of time, and it should be determined whether it would be in the advantage of efficiency, and good administration, to tie them into presumably the Treasury Department, and if it should prove that it would be in
the advantage of efficiency, economy, and good administration then they would be tied into the Treasury Department for general supervision.
Senator BYRD. You definitely recommend that every single agency of the Government be tied into one of these 12 departments?
Mr. GULICK. That is right.
Senator BYRD. That is your recommendation; that is the basis of your reorganization plan.
Mr. GULICK. We believe that is necessary.
Senator BYRD. Where would R. F. C. go except in the Treasury Department ?
Mr. GULICK. I cannot think of any other place.
Mr. GULICK. It would be tied in, for general supervision, to the Treasury.
Senator BYRD. The administrative expense for that was $10,640,000.
Mr. GULICK. Senator, no one denies that if you bring the fiscal agencies of the Government together in some relation to the Treasury that there would be more spending carried on. The only point on which we seem to differ is as to whether that Department is thus turned into a division which is interested primarily in the spending of money, and whether that will cripple the effectiveness of the control which is set up under a separate division of the Treasury, which would correspond to the Comptroller General. We call' it the Division of Fiscal Affairs.
Senator Byrd. My inquiry is directed along this line: Yesterday you stated in your testimony that the Treasury Department would be reduced as a spending agency. I want to prove to you, by your own admission, that under your plan the Treasury Department would be increased as a spending agency, and would then have the audit control of a larger amount of money than it has now.
Mr. GULICK. My statement of yesterday was incorrect in using loosely the term "spending agency." What I intended to say was that the Treasury would be divested of its nonfiscal functions.
Senator BYRD. You have only divested it of three, though.
Senator BYRD. There are a number that are nonfiscal. The Secret Service, is that fiscal?
Mr. GULICK. The Congressman has just explained to us from his intimate knowledge that it is not. I do not know. It is not within our field to determine these matters.
Senator BYRD. Is the Bureau of Engraving and Printing fiscal! There are quite a number. Let me complete this statement.
Now, the Farm Credit Administration, which would be grouped in the Treasury Department, spent $10,640,000. The Federal Deposit Insurance Corporation would come under the Treasury Department under your plan. It spends $2,470,000. The Home Owners Loan would come under it, spending $29,000,000 for administration expense. The Federal Housing Administration would come under it, spending $8,500,000 for administration. The Government Print
ing Office I assume would come under it, would it not, because it says “For the procurement of general supplies”, and so forth-would that come under the Treasury Department under you plan?
Mr. GULICK. I should not think so. As I say, we did not devote ourselves to the detailed location of any of the activities.
Senator BYRD. I know; but, Mr. Gulick, you have made the statement that you have investigated this particular Department and you propose to reduce the spending activities in that Department.
Mr. GULICK. I did not intend to use the word “spending"'in that sense.
Senator BYRD. You used it in a number of cases.
Mr. GULICK. We were discussing spending in connection with the testimony that went before that, as I remember it, in reference to divisions that were engaged in other types of activities.
Senator BYRD. The Bureau of Procurement of General Supplies, that is purely a spending agency set up in the Treasury Department.
Mr. GULICK. In the purchase of supplies through central procurement you have really a man at the head who is interested in economy, who is interested in holding the departments down. That is, his mental attitude is not one of being loose with the requirements.
A man at the head of the functional department, who is dealing with construction of buildings for his own use, or the purchase of supplies for his own use, like a doctor or a director in some field of education, let us say, or agriculture, is generally interested in getting his job done, consequently he underestimates the necessity for keeping the brakes on. That tends to be the natural mental attitude.
Now, that natural mental attitude is a little different when you build a central purchase department because then that central purchase head is trying to make a good record on the thing. When he buys he is trying to get good bargains so he can claim in his annual report that he saved all this money. The central procurement has the function of putting on the brakes.
Senator BYRD. It is a spending activity, though.
Senator BYRD. Which, in your testimony, yesterday, you said would be eliminated.
Mr. GULICK. Senator, if you took out all the spending activities there would not be a single thing there.
Senator BYRD. Of course, some just spend money, but some spend money to collect money. That is a different situation from the purchase of general supplies. In your testimony yesterday, which I will read to you again, you say, “The Department must be built up as a brake on spending. That is one of the reasons why we suggest that there be moved out of the Treasury particularly such services as the Health Service, which represents a spending service which does not belong there, and which tends to influence the psychology of that Department."
Why don't you take out the procurement of supplies? It is more of a spending agency than the Health Service is.
Mr. GULICK. I was just going to say that a central purchase office tends not to be spending minded. It is really an agency for control.
Representative TABER. May I ask a question right there? I understand that the Department of Justice built a jail for $400,000. The
Procurement Division undertook to build the same size jail and they asked for $1,000,000. Does that look as if there was a tendency toward economy?
Mr. GULICK. I do not know anything about it. Your statement seems to answer itself.
Senator BYRD. Now, the Securities and Exchange Commission-I assume that would come under the Treasury Department under your plan, would it not?
Mr. GULICK. I suppose if it were found after a study that that was primarily a fiscal agency, that would be the logical place to bring it in, in a semiautonomous position.
Senator BYRD. I simply want to state that the Treasury Department will have the functions of the Comptroller General, will audit about 30 percent
Mr. GULICK (interrupting). I object to the word "audit."
Senator BYRD. Will have audit control of about 30 percent, excluding the debt service, of the total expenditures of the Government. There will be no appeal to the Attorney General, because there is no interested party to take the appeal from the Secretary of the Treasury to the Attorney General.
Senator BYRNES. What is your answer to that statement as to whether or not there would be an audit?
Mr. GULICK. The audit would be provided by the Auditor General. He would be a completely independent officer, appointed for 15 years, and responsible to the Congress under the program submitted.
Senator BYRNES. And who would have charge of the control?
Mr. GULICK. The control would be set up in the Division of Fiscal Affairs within the Treasury, under the direction of a director of that division, who would be the Comptroller of the United States.
Senator BYRNES. And what is your opinion as to whether it involves the expenditure of a greater or lesser amount? What is your opinion as to the wisdom of merging agencies of the Government so as to bring them within direct touch of the President or letting them
? Mr. GULICK. There can be no effective administration, no elimina- * tion of overlapping and duplication, no coordination of program without some more orderly set-up of the over 100 independent activities and agencies of this Government, both from the standpoint of congressional investigation and control, and from the standpoint of executive administration and management.
Senator BYRNES. Could the Chief Executive today secure very much information as to what is going on in a hundred different agencies without giving up his entire time to contact representatives from these agencies?
Mr. GULICK. That is impossible.
Senator BYRNES. It is your thought that if they group them then the President meeting with the heads of the various departments could ascertain something about what is going on in the executive department?
Mr. GULICK. Precisely.
Senator BYRD. I have no objection to that thought at all. What I am endeavoring to bring out, as I have said, is that we are transferring certain audit control duties from the Comptroller General to a department which is about one of the largest spending agencies