Page images
PDF
EPUB

tinue to cooperate to the fullest possible extent with you and the members
of your staff.
Sincerely yours,

WILBER M. BRUCKER,
Secretary of the Army.

EXHIBIT No. 27

[ocr errors]

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, February 7, 1957. B-45101. The Honorable the SECRETARY OF THE ARMY.

DEAR MR. SECRETARY: This is in reference to your letter dated December 19, 1956, replying to our letter of October 9, 1956, which announced the expansion of our accounting and auditing programs in the Department of the Army. Our letter also asked that the necessary arrangements be established to make available the records and to otherwise facilitate the effective accomplishment of our work.

After careful consideration of your reply we believe that the arrangements which you propose would result in such limitations on the availability of documents, papers, records, and reports that the effective performance of the statutory responsibilities of the General Accounting Office would be seriously impaired. Accordingly, we would like to set forth our views in this matter and indicate the problems which we feel are inherent in the working relationships proposed in your letter.

In this connection we believe it important to recognize the comprehensive nature of our audit work and the general manner contemplated for its accomplishment as indicated in the legislative provisions which establish our statutory responsibility and authority and which require the departments and agencies to furnish information and access to their records.

Section 117(a) of the Budget and Accounting Act of 1950, provides for audits to be made by the General Accounting Office as follows:

“Except as otherwise specifically provided by law, the financial transactions of each executive, legislative, and judicial agency, including but not limited to the accounts of accountable officers, shall be audited by the General ACcounting Office in accordance with such principles and procedures and under such rules and regulations as may be prescribed by the Comptroller General of the United States. In the determination of auditing procedures to be followed and the extent of examination of vouchers and other documents, the Comptroller General shall give due regard to generally accepted principles of auditing, including consideration of the effectiveness of accounting organizations and systems, internal audit and control, and related administrative practices of the respective agencies."

This broad authority for the Com ler General to determine the scope and manner in which the audits will be conducted recognizes their comprehensive nature. It also imposes upon us a responsibility to conduct these audits in the best and most expeditious manner. You will note that we are specifically required, in determining our audit procedures, to consider among other things the "* * * internal audit and control, and related administrative practices * * *."

Section 313 of the Budget and Accounting Act of 1921 contains the legislative requirement for the departments and agencies to furnish information and grant access to their records as follows:

"All departments and establishments shall furnish to the Comptroller General such information regarding the powers, duties, activities, organization, financial transactions, and methods of business of their respective offices as he may from time to time require of them; and the Comptroller General, or any of his assistants or employees, when duly authorized by him, shall, for the purpose of securing such information, have access to and a right to examine any books, documents, papers, or records of any such department or establishment * * *.

The foregoing provisions and their legislative backgrounds clearly contemplate that the General Accounting Office shall conduct comprehensive audits and have free access to any information and records as may be required by the Comptroller General for this purpose. We believe you will also agree that the independent appraisal contemplated would require that all available information pertinent to any matter under study be considered. This information is necessary to assure that our findings and reports will be as complete, accurate, and objective as possible and will thus be of maximum usefulness to interested officials and agencies concerned. Your letter proposes that

(a) The Army not be asked to make available internal audit reports or related working papers until they have been analyzed by operating personnel, corrective action has been devised, and sufficient time has elapsed to permit the implementation of an orderly program of improvement or corrective action.

(b) Requests for audit reports and working papers be directed to your office rather than to field installations or activities and other staff elements

of the Army. Your last paragraph also requires that all official documents, records, and reports be cleared by your office before being made available for use in our audits.

We believe that the above procedures are not consistent with those contemplated in the law and which are necessary to effectively discharge our statutory responsibilities. They would preclude the independent and effective evaluations required of us and thereby materially lessen the usefulness of our work and reports both to the departments and age ies concerned and to the Congress.

The delay in making reports and workpapers available pending implementation of corrective action would result in important information not being available to us for long periods of time. As you know, the magnitude and complexity of your Department's activities sometimes require many months for recommended improvements to be evaluated, devised, and implemented. We cannot, of course, delay our examinations of important activities until such improve ments are effected. However, for the purpose of effective evaluation and objectivity, we believe it necessary to consider in our examination all of the information which has been developed pertinent to the subject and particularly the actions planned, in process, or partially completed to remedy situations requiring improvements. This is clearly in accord with the concept expressed in the law that in the conduct of our audits we must give due

to the internal audit and control and related administrative practices. These include all management evaluations and internal reviews regardless of the organizational units responsible for their performance. It is also compatible with the objectivity of our auditing and reporting processes.

As a practical matter, the lack of access to these reports and workpapers would probably mean that your latest and most significant information would not be available to us. This appears to be a particularly serious matter considering that much of your internal audit work is probably focused on the more important activities, as is true with our work. It is likely also that the larger and more important activities will frequently pose greater problems and require more time for corrective action. It is also clear that the lack of this information will preclude adequate recognition of your internal audit work when we are planning and carrying out our own audits. This will result in unnecessary duplication of audit effort and, in some cases, will impose a dual burden on the operating personnel, in having to undergo similar reviews by two groups of auditors. Normally we would utilize your internal audit work as well as other internal control work as much as possible and supplement them only to the extent we considered necessary. These internal control mechanisms and management appraisals, as well as the action on the findings and resultant recommendations, are themselves integral parts of the agency's financial management system. As such, they warrant particular consideration as contemplated in the Budget and Accounting Act of 1950.

We heartily endorse your stated and laudable objective of establishing a process which will provide for a careful study and formulation of plans for the implementation of internal audit findings and recommendations. We also appreciate the importance of the interrelationships between the operating officials and the internal auditors as well as the need for responsiveness of the operating officials to the auditors' recommendations. However, we also believe you will agree that sound and effective management must insist upon fairness and objectivity in the acceptance, as well as in the preparation, of operating evaluations. Re sistance to disclosure or other improper defensive measures or attitudes should not be permitted to impair accurate and expeditious appraisals nor the responsiveness of operating officials to recommendations.

The suggestion that audit reports and workpapers be requested only through your office and the requirement that clearance by your office be obtained prior to

making documents, papers, and records available, would seriously impair our audits. Even if immediate and complete access were granted, and such is unlikely if the clearance process is to serve any purpose, the mere processing of requests and approvals would result in a loss of audit time. Of even greater importance, however, is the fact that this control over the information to be made available is inconsistent with the concept of complete access to all pertinent information which is contemplated and is necessary for the independent and objective evaluations of the agency's activities required of us under existing laws.

We are convinced, irrespective of the legal requirements, that the proposed procedures would produce far more disadvantages than benefits. It appears that little purpose would be served by such restrictions under a cooperative effort to improve Government operations. The General Accounting Office has always recognized its responsibility to avoid the improper release of information, and has successfully fulfilled this responsibility without restrictions being placed by the agency under audit on the availability of any documents, papers, records, and reports needed in the conduct of its audit. As you know, draft copies of reports which result from our normal audit activities have in the past been made available to your Department for review and comment prior to their release. This procedure has been found to be satisfactory by various operating officials in your Department and has resulted in the expeditious consideration and adoption of many important recommendations. We expect to continue this process and it should afford ample opportunity to avoid inappropriate release of information.

Accordingly, in view of the statutory responsibilities of our respective agencies and the practical effects of the proposed procedure, we cannot agree that audit reports and workpapers, as well as other books, documents, papers, and records, should not be made available until after corrective action has been taken and clearance has been granted by your office.

We shall be glad to furnish, in accordance with your request, such additional copies of our report drafts as you consider desirable for the use of various organizational components. Our objective is to facilitate your review and obtain the comments of your Department as expeditiously as possible. We would suggest, howeve that you consider establishing a basis for expeditious coordination of the comments of all interested echelons of command and for the conduct of such discussions as may be desired in connection with the draft reports at a single point in your Department.

In view of the importance of this matter and the need for a more clearly defined policy in the Department of Defense relative to internal audit functions and the relationship of such activities and resulting reports and working papers to audits being conducted by the General Accounting Office, a copy of this letter is being forwarded to the Secretary of Defense for his information.

This is a matter of serious concern to me and I hope that it will receive your personal consideration and result in prompt action to facilitate and coordinate the necessary arrangements to insure the successful accomplishment of our respective responsibilities. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

EXHIBIT No. 28

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, August 13, 1957. Hon. JOHN L. MCCLELLAN, Chairman, Committee on Government Operations, U.S. Senate.

DEAR MR. CHAIRMAN : There has developed a situation between the Depart. ment of Defense and the General Accounting Office concerning the availability of records of the Department of the Army which has most serious implications.

Under date of October 9, 1956, we addressed a letter to the Secretary of the Army advising him that we intended to commence an audit of the OrdnanceTank Automotive Command, and requested the Secretary's cooperation in making available all official documents and reports in order to facilitate the audit.

By letter dated December 19, 1956, the Secretary of the Army proposed certain procedures under which the records of the Department of the Army would be

made available to the General Accounting Office for examination in the discharge of our statutory responsibilities. In brief, those procedures provided :

(a) The Army not be asked to make available internal audit reports or related working papers until they have been analyzed by operating personnel, corrective action has been devised, and sufficient time has elapsed to permit the implementation of an orderly program of improvement or corrective action.

(0) Requests for audit reports and working papers be directed to the Office of the Secretary of the Army rather than to field installations or active ities and other staff elements of the Army.

(c) Official documents, records, and reports be cleared by the Office of the Secretary before being made available for use in our audits. We replied to the Secretary concerning these proposed procedures on February 7, 1957. A copy of our reply was furnished to the Secretary of Defense on February 8, 1957. In our letter of February 7, we stated the proposed procedures of the Department of the Army were inconsistent with those contemplated in the Budget and Accounting Act of 1921, and the Accounting and Auditing Act of 1950, and precluded a proper discharge of our statutory responsibilities. We referred specifically to the impairment to an independent audit and to the usefulness of our work both to the departments and agencies and to the Congress. We also cited the delays in performance of our work, and the consequent loss of opportunity for current operating improvements based on our findings. On February 28, 1957, the Secretary of the Army acknowledged our letter and suggested that the Assistant Secretary of the Army (Financial Management) meet with us.

On March 26, 1957, a conference was held between Mr. George H. Roderick, Assistant Secretary of the Army (Financial Management), Mr. Robert King, Deputy Assistant Secretary, and representatives of the General Accounting Office to discuss a draft of proposed instructions concerning General Accounting Office access to records of the Department of the Army. This draft was not acceptable to the General Accounting Office in that it still raised the question as to whether we would have complete access to records by reason of the fact that the matter of “privileged" communications was set forth in detail, along with mention of the President's directive of May 17, 1954. On April 18, 1957, we were advised by Mr. King that since the matter of access to records would be applicable to all of the military services the question was being considered by the Department of Defense. In view of this development, we addressed a letter to the Secretary of Defense on May 2, 1957, again pointing up the problem, and requesting that remedial action be taken without further delay.

Since no reply was received from the Secretary of Defense, we wrote to him on June 5, 1957, and again on July 18, 1957. By letter dated July 23, 1957, the Assistant Secretary of Defense (Comptroller) advised us that it was his purpose to arrange for a meeting with us and the "Financial Vice Presidents" of the military departments just as soon as he could dispose of some of the problems arising out of the current conference on the Department of Defense Appropriation Act. The letter indicated that the meeting might be held within a week

We replied to Mr. McNeil's letter on July 24, 1957, suggesting a meeting on August 1, 1957. On the morning of August 1, 1957, Mr. McNeil's office called with the message that one of the "financial vice presidents” was not in town and the meeting could not be held on that day. We suggested that the meeting be held on August 2, 1957, but Mr. McNeil's office reported that it was not known whether the “financial vice president” would be back on that day.

The procedures proposed by the Department of the Army became operative, at least to some degree, in advance of the letter from the Secretary of the Army dated December 19, 1956—as early as August 1956, records were screened at the installation and Washington levels. Since that time, serious operating difficulties have been encountered and the effectiveness of our work has been impaired. In certain cases, our review of important programs and activities at defense contractors' plants and at Army commands and installations in the United States and overseas have been delayed, or have had to be undertaken without the availability of pertinent records.

Since we have been unable to resolve this matter with the Department of Defense, we are reporting it to your committee for such action as may be deemed appropriate.

There are attached (a) a chronology of events relating to this matter, and (0) copies of pertinent correspondence and memorandums. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

or so.

EXHIBIT No. 29

COMMITTEE ON GOVERNMENT OPERATIONS, U.S. SENATE,

August 15, 1957. Hon. CHARLES E. WILSON, Secretary of Defense, Washington, D.C.

DEAR MR. SECRETARY: The Comptroller General of the United States has submitted the attached report, in confirmation of recent consultations with representatives of the General Accounting Office, concerning a situation which has developed between the Department of Defense and the General Accounting Office relative to the availability of records of the Department of the Army, which the Comptroller General reports "has most serious implications."

As you know, the Legislative Reorganization Act vests Jurisdiction over all budget and accounting measures, other than appropriations, in this committee as well as the duty of receiving and examining reports of the Comptroller General of the United States and of submitting such recommendations to the Senate as it deems necessary or desirable in connection with the subject matter of such reports. In conformity with this responsibility, this committee initiated, during the 80th Congress, the joint accounting project, composed of the Comptroller General, the Director of the Bureau of the Budget, and the Secretary of the Treasury, and, in accordance with recommendations of these officials, drafted and recommended to the Congress legislation which resulted in the enactment of the Accounting and Auditing Act of 1950 to which the Comptroller General makes reference in his communication.

Accordingly, the committee is most anxious to develop all the facts relating to the difficulties that have been encountered in connection with certain accounting procedures which are being followed by the Department of Defense, particularly the Department of the Army. I will therefore appreciate it if you will advise me fully concerning the various points raised in the Comptroller General's letter, based on information which has already been developed by the Comptroller of the Department.

In view of the impending adjournment of the present session of Congress, I will appreciate it if you will forward a tentative report not later than Tuesday, August 20, 1957, based upon which the committee may make a determination as to whether it will be necessary to hold hearings to develop further essential facts before adjournment.

In view of the pressure of other matters, I know that it will be difficult to submit a complete and detailed report by August 20, but, in view of the interest the committee has manifested in matters of this kind in the past, I feel that it is incumbent upon me, as chairman, to submit a report setting forth the available facts before the Congress adjourns.

Thanking you in advance for your cooperation in attaining this objective, and with high regards, I am Sincerely yours,

John L. MCCLELLAN, Chairman.

EXHIBIT No. 30

THE SECRETARY OF DEFENSE,

Washington, August 20, 1957. Hon. JOHN L. MCCLELLAN, Chairman, Committee on Government Operations, U.S. Senate.

DEAR MR. CHAIRMAN : Reference is made to your letter of August 15, 1957, concerning a situation which has developed between the Department of Defense and the General Accounting Office relative to the availability of records of the Department of the Army.

As stated in Mr. Campbell's letter to you, this matter has been under discussion by representatives of his Office and the Department of Defense for the past several months. The unresolved points were finally resolved yesterday with the Comptroller General.

It is unfortunate that this matter was not resolved at an earlier date. However, personnel of the Department of Defense who were immediately concerned with this matter have been devoting practically their full time for the past month or more to problems of expenditure ceilings for fiscal year 1958, appor

« PreviousContinue »