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ternal review system. A thorough review and evaluation of the effectiveness of an internal control system is an essential part of any meaningful review of the efficiency and economy of activities. The need for such a review and evaluation is universally accepted by professional groups engaged in this type of work and was emphasized by the Congress when it enacted legislation requiring this Office to give due consideration to existing systems of internal audit and control in conducting our reviews of agency activities.
The function of internal review may be comprised of internal audits, inspections, surveys, or special management studies at all levels. Whatever it is called and irrespective of the type of organization or unit assigned the responsibility for it, it is a necessary management mechanism and from our point of view one of the more important ones. We are pleased that its importance is recognized in the Under Secretary's letter.
In the Department of the Navy the internal review or inspection system is diffused through many organizations. The Inspector General, in addition to his other duties, covers many aspects of installation management. Special groups from the Office of Naval Material devote considerable time studying procurement and supply management problems. The internal audit under the Comptroller of the Navy is concerned largely with budgeting, accounting, and related financial management problems.
The work of these groups represents practically the only means by which operating management can determine whether established policies are being followed, whether approved programs are accomplishing their purposes and, in general, whether the functions of the agency are being carried out effectively, efficiently, and economically.
In conducting our reviews we must appraise the performance of this very important segment of the total internal control system in the Navy. In making this appraisal we must be intimately familiar with the scope of work undertaken by these groups, the depth of their study, the extent of the review, the conclusions drawn, the recommendations made, and the agency action on findings and recommendations.
The material submitted in lieu of the report requested consists principally of background data and statistical information, much of which can be obtained from the MSTS Handbook, Organization Manual, MSTS Headquarters Proce dural Instructions, and financial and statistical reports. The material, as edited, does not include specific data as to the scope of review, nature of problem areas covered, extent of verification, conditions under which the procurements are made, evaluation of existing controls, or any factural information from which reasonable conclusions can be drawn. Omitted also are the opinions, conclusions, and recommendations of the Procurement Review Group as well as comments of MSTS management with respect to the findings and action taken on the report recommendations. Consequently, we find that the material, as submitted, is not an adequate substitute for our access to the full report and the data in support of the report.
Because of the importance of this matter and the congressional interests in any denial or delay in providing us access to such data, we must insist that an unedited copy of the subject report be made available without further delay. Additionally, I would urge that appropriate instructions be issued to the Naval Establishment directed toward eliminating restrictions as to information required in the performance of our work so as to avoid any other unnecessary incidents of this character. Your prompt consideration and action will be appreciated. Sincerely yours,
(Signed) JOSEPH CAMPBELL, Comptroller General of the United States.
DEPARTMENT OF THE NAVY,
OFFICE OF THE SECRETARY,
Washington, D.C., November 22, 1958. Hon. JOSEPH CAMPBELL, Comptroller General of the United States, General Accounting Office, Washington, D.C.
MY DEAR MR. CAMPBELL: This will acknowledge receipt of your letter of October 30, 1958, with regard to the report prepared by the Procurement Review Group, Office of Naval Material, entitled "Review of Procurement Activities in the Military Sea Transportation Service".
As indicated in our letter of October 17, management in the Navy must have the benefit of effective internal inspection and self-analysis in order to strive for self-improvement and internal reform. Thus persons such as the Inspector General and the Chief of Naval Material, in making their investigations must be able to obtain frank opinions, advice and criticism from persons at lower levels who are familiar with the facts and problems. If anything were to interfere with the obtaining of such frank and candid statements of view, our ability to work continually for self-improvement and internal reform would be substantially limited. Also, these frank statements of opinion, advice and recommendation sometimes conflict with others, and not all of them are accepted at higher levels. In any event, if we should release them outside the executive branch of the Government, in the future it would only be natural for persons familiar with the facts to soften criticism, avoid doubtful matter, and generally to be more restrained. Self-improvement and reform within the executive branch would then become much more difficult, and the results would certainly be less in the public interest.
We have, however, no desire to withhold any facts which you may require in this connection. A copy of the report in question, with recommendations, opinions, and conclusions omitted, was previously forwarded to you.
Also, the General Counsel of the Navy stated at the meeting with you on October 17, that if there should be any additional factual material which you might desire in connection with the subject report, we should be happy to furnish it. Your letter now states that the material previously forwarded to you did not include certain specific data as to the scope of review, the nature of the problem areas covered, and certain other information. As a result, the General Counsel has again reviewed the report, and a copy of the report is handed you herewith which contains, I am confident, everything which you may desire with the exception of opinions, conclusions, recommendations and other advisory matter. It presents a full factual picture of the MSTS operations described. Sincerely yours,
(Signed) THOMAS S. GATES. Mr. SLAYMAN. The next witness is Mr. Robert Keller, General Counsel of the General Accounting Office, appearing for the Comptroller General of the United States, accompanied by Mr. Lawrence Powers, Director of the Defense Accounting and Auditing Division of the General Accounting Office. He also has with him for consultation George H. Staples, Associate Director, the Civil Accounting and Auditing Division, Owen A. Kane, Legislative Attorney, Office of Legislative Liaison, and Hassel Bell, Assistant Director, Defense Accounting and Auditing Division.
STATEMENT OF ROBERT F. KELLER, GENERAL COUNSEL, GENERAL
ACCOUNTING OFFICE; ACCOMPANIED BY LAWRENCE J. POWERS, DIRECTOR, DEFENSE ACCOUNTING AND AUDITING DIVISION; GEORGE H. STAPLES, ASSOCIATE DIRECTOR, CIVIL ACCOUNTING AND AUDITING DIVISION; OWEN A. KANE, LEGISLATIVE ATTORNEY, OFFICE OF LEGISLATIVE LIAISON; AND HASSELL BELL, ASSISTANT DIRECTOR, DEFENSE ACCOUNTING AND AUDITING DIVISION
Mr. KELLER. Mr. Chairman and members of the subcommittee, we appreciate the invitation to appear before you today to discuss the cases where we have been denied access to information, records, and reports which are essential to the proper performance of our audits and reviews of the operations in the executive departments.
Before discussing the individual cases, however, we believe that a brief statement of the functions and statutory responsibilities of the
General Accounting Office would provide background which would facilitate the understanding of the significance of the specific cases of refusal of access to reports and records.
The General Accounting Office, which was established by the Budget and Accounting Act, 1921, (31 U.S.C. 1) is an agency in the legislative branch of the Government, completely independent of the executive branch. The audit work performed by the Office is done as an agency of the Congress. The Office of the Comptroller General, also established by the 1921 act, is unique in Government. The Comptroller General is appointed for a term of 15 years and is not eligible for reappointment. He can be removed from office only by joint resolution of the Congress or by impeachment. The purpose of so establishing the term and mechanics of removal was to insure the independence of the Comptroller General from any control by the executive branch.
(The text of the Budget and Accounting Act of 1921 is set forth as exhibit 5 at p. 282 of the appendix.)
Mr. KELLER. Section 312(a) of the Budget and Accounting Act, 1921, (31 U.S.C. 53) requires that we examine “all matters relating to the receipt, disbursement and application of public funds” and, in order to carry out such work, section 313 of the act (31 U.S.C. 54) provides:
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 the right to examine any books, documents, papers, or records of any such department of establishment * *
The legislative history of the Budget and Accounting Act, 1921, makes it clear that the provisions of sections 312(a) and 313 of that act contemplate that we are to examine and report on the economy, efficiency, and effectiveness of agency activities. Also, section 206 of the Legislative Reorganization Act of 1946 (60 Stat. 837) authorizes and directs the Comptroller General to make an expenditure analysis of each agency in the executive branch of the Government which in the opinion of the Comptroller General will enable the Congress to determine whether public funds have been economically and effectively administered and expended.
(Section 206 of the Legislative Reorganization Act of 1946 is set forth as exhibit 6 at p. 294 of the appendix.)
Mr. KELLER. Although the first Budget and Accounting Act enacted by the Congress was vetoed by the President on June 4, 1920 (H. Doc. 805, 66th Cong.). (see exhibit 7 at p. 294 of the appen, dix), because the Comptroller General was not subject to removal by the President, no question was raised in respect to the right of the Comptroller General and the General Accounting Office of access to all information required for the performance of
the responsibilities laid upon them by the enactment. The Budget and Accounting Act as eventually approved on June 10, 1921, made no changes in regard to the requirements for access to such information.
There is nothing in the legislative history with reference to limiting us in our access to the books, records, documents, et cetera, of the agencies as provided in the above quoted section 313 with the single exception of certain expenditures under 291 Revised Statutes involving expenditures by the State Department in carrying out treaties and intercourse with foreign nations which are authorized to be expended upon the certification of the Secretary of State.
With respect to the intent of the Congress in regard to the extent and scope of the need for access to information in order to discharge the functions of the General Accounting Office, it is interesting to note some of the comments made on the floor of the House of Representatives at the time the term “application” (of public funds) was added by amendment to the bill which became the Budget and Accounting Act, 1921.
REMARKS OF CONGRESSMAN ROBERT A. LUCE, MASSACHUSETTS * * * It is in this particular section that we can make this clear. The section was worded, I fear, in a way that might have led some occupant of this office to imagine that his functions were purely clerical; that is, the functions implied by the word "accountant.” The words used have the savor of the bookkeeper, of the cashier, of the treasurer, not of the investigator of the way the money is spent, not of the man who goes out and looks for trouble, not of the man who attempts of his own initiative to find places to save money. Therefore I make the suggestion that we add to the words of the cashier and the treasurer and the accountant, namely, "receipt and disbursement,” the word "application.” If there ever was presented on this floor a single word of amendment which might have a wider extent of usefulness to the people, it has not come to my knowledge.
The purpose, Mr. Chairman, is to make it sure that the Comptroller General shall concern himself not simply with taking in and paying out of money from an accountant's point of view, but that he shall also concern himself with the question as to whether it is economically and efficiently applied. (Vol. 61, pt. II, Congressional Record, p. 1090.)
Mr. KELLER. Congressman James William Good of Iowa, the chairman of the Select Committee on the Budget concerned with the bill had this so say about the amendment offered:
It was the intention of the committee that the Comptroller General should be something more than a bookkeeper or accountant; that he should be a real critic, and at all times should come to Congress, no matter what the political complexion of Congress or the Executive might be, and point out inefficiency, if he found that money was being misapplied—which is another term for inefficiency—that he would bring such facts to the notice of the committees having jurisdiction of appropriations. Therefore I have no objection at all to the gentleman's amendment. I think it will subserve a useful purpose. (Vol. 61, pt. II, Congressional Record, p. 1090.)
Senator O'MAHONEY. Mr. Chairman, may I suggest that it would be of value to those who read the record if the name of the author of the amendment and the name of the chairman of the committee were inserted at this point.
Mr. KELLER. I will be glad to supply that, Senator. As I recall it was Congressman Luce and Congressman Good, who was chairman of the Select Committee on the Budget of the House.
Senator O’MAHONEY. Thank you.
Mr. KELLER. In performing our audits and reviews we examine, analyze, and evaluate the policies, plans, procedures, and operations directly related to the activity involved for the purpose of determining whether the agency is carrying out only those activities or programs authorized by the Congress and is conducting them efficiently and in the manner authorized. Where appropriate, we also review whether the authorized activities or programs effectively continue to serve their originally intended purpose. Simply stated, in order
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for us to carry out the clear intent of the Congress for conducting independent and searching examinations, we must determine and report to the Congress and management officials any conditions or circumstances which exist which need attention and improvement so as to effectively accomplish the program and prevent the unnecessary expenditure of money, manpower, and material.
The value of such independent examinations is illustrated by our review of Air Force procedures for determining spare aircraft engine requirements and for controlling the related procurement. In 1955, we reported to the Congress that the Air Force had substantially overprocured two series of J-47 engines still in production and that arrangements were being made for procurement of 165 additional engines of another series for the military assistance program, although excess engines of a similar series were available. This situation was taken up with the Assistant Secretary of the Air Force and as a result of our finding an order for additional J-47 engines was terminated. The Air Force estimated that savings of $50 to $60 million resulted from cancellation of this order. Additional savings of $10 million resulted from the decision to abandon the purchase of more engines for the military assistance program.
Ånother illustration was our reviews of supply management and operations in the Far East which we reported on to the Congress and responsible management officials during 1958. We found both the Signal Corps and Corps of Engineers supply centers failed to properly discharge their responsibilities in regard to the determination of requirements. Incorrect requirements resulted in overstating orders from the United States. As the result of our reviews, $9 million of orders for materials were canceled. Additionally, the deficiencies disclosed during our review of the supply operation of the 8th U.S. Army, Korea, were of such scope and significance as to adversely affect efforts to provide an economical and efficient supply operation. The major deficiencies involved the improper determinations of needs, unreliable stock records, and inadequate review of orders from troop units. As a result of our examination, orders on supply centers amounting to over $3 million were canceled and recommendations were adopted which should assist in establishing improved controls and in preventing recurrence of the deficiencies noted.
More recently, we reported on February 4, 1959, to the Congress that our review of the physical movement of aircraft engines in the overhaul pipeline in the Department of the Navy and comparison with performance by the Department of the Air Force on similar engines suggests that a reasonable pipeline would be approximately 150 days as contrasted with the scheduled 210 days used by the Navy for computing requirements. On this basis, we estimated that at July 31, 1958, 793 aircraft engines costing about $68 millions are being procured in excess of the Navy's requirements. In addition, at that date, the Navy had planned requirements for 204 more of these engines estimated to cost $33 million. We reported that the Navy, by reason of applying a very liberal allowance for out-of-service time for aircraft engines, is investing very substantial sums of money in the procurement of these aircraft engines that are excess to its needs.
Obtaining access to the information and records of the Department of Defense and the military departments has been a problem which became acute during the fiscal year 1958, particularly as our audit and