ing 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.

Another 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

examination activities have required us to probe further into sensitive and highly costly programs of the major weapons systems and missiles. Although we have made some progress with the departments in regard to access to information and records generally necessary for us to carry out our statutory responsibilities, there are three areas in which the situation has not been satisfactorily resolved. These involve:

(1) information contained in procurement and other operating files concerning observations, opinions, evaluations and recommendations by subordinates and other matters considered in making decisions,

(2) information contained in internal reviews, such as staff studies, which are the bases for supply, logistics, and financial management determinations, and

(3) information concerning operations and program execution developed through departmental inspections, surveys, and examinations.

These types of information are characterized as being sensitive or privileged, and are considered by the departments as being limited to internal use.

Mr. SLAYMAN. Mr. Keller, would you pause a moment in reading your prepared statement?

Mr. KELLER. Yes, sir.

Mr. SLAYMAN. Mr. Chairman, may I ask a question here dealing with the Defense Department?

Senator ERVIN. Yes.

Mr. SLAYMAN. Are your auditors and investigators who deal with Defense Department matters cleared to see and handle "top secret" information?

Mr. KELLER. Yes. There is no question about that. They are cleared to see and receive classified information. We follow all the rules in handling classified information.

The denial of information in these areas has not been on the basis of security. It is on the basis of

Mr. SLAYMAN. It has never been a matter of security?

Mr. KELLER. No, sir. It is solely on the basis of privilege.

Mr. SLAYMAN. There has been no question, then, that military secrets are being improperly revealed or handled?

Mr. KELLER. No, sir.

Mr. SLAYMAN. Thank you.

Senator ERVIN. Proceed.

Mr. KELLER. The departments rely upon the provisions of Department of Defense Directive No. 7650.1, dated July 9, 1958, as the basis for their denying us access to these types of information and records. Notwithstanding the specific intent of the Congress and the provisions of law relating to our access to all books, documents, papers or records of the military departments, the Department of Defense, as previously mentioned, issued Department of Defense Directive No. 7650.1, dated July 9, 1958, which authorized the Secretary of each of the military departments to withhold or restrict particular information which we require in discharging our responsibilities. This presumed authority is contained in paragraphs III.B.3 and III.B.4 which read as follows:

Mr. Chairman, if you would like, I would be glad to place a copy of Department of Defense Directive No. 7650.1 at this point in the record.

Senator ERVIN. The committee will appreciate your doing that.

Mr. KELLER. Paragraphs 3 and 4 of this directive read as follows:

3. Budgets for any future fiscal year will not be released. Reports of nonDepartment of Defense agencies (including FBI reports) shall not be released unless the written consent of such agency has been obtained. Reports of the inspectors general and criminal investigation organizations shall not be furnished except upon approval of the appropriate departmental Secretary. Such reports may be summarized and the summaries, upon request, may be furnished with the approval of the appropriate departmental Secretary.

4. When the same considerations exist as raise a question as to whether particular information may be furnished to a Member or committee of the Congress, no refusal to furnish such information shall be made until the matter has been submitted to the Secretary of the military department concerned or the Secretary of Defense.

The practical effect of these provisions is that the various operation levels within the agencies screen the information to be made available to the General Accounting Office.

Senator ERVIN. It seems it might be possible at this time, Mr. Keller, for the directive to be made part of the record. Mr. KELLER. Yes, sir.

Senator ERVIN. Without objection, it is so ordered. (The directive referred to is as follows:)

DEPARTMENT OF DEFENSE DIRECTIVE

July 9, 1958 Number 7650.1

Subject: General Accounting Office Comprehensive Audits

References:

(a) DoD Directive 5200.1, "Safeguarding Official Information in the Interests of the Defense of the United States."

(b) DoD Directive 5400.4, "Provision of Information to the Congress"

I. PURPOSE

To explain the General Accounting Office comprehensive audit program and to prescribe policy for the guidance of representatives of the Department of Defense and components thereof in their relationships with General Accounting Office representatives engaged in carrying out the statutory audit responsibilities of the Comptroller General.

II. GENERAL ACCOUNTING OFFICE COMPREHENSIVE AUDIT PROGRAM

A. General scope

The General Accounting Office has broad authority for conducting audits and investigations in the executive departments and agencies. The purpose of this authority is to enable the Comptroller General, as an agent of the Congress, to determine how each agency under audit discharges its financial responsibilities. In this connection, the financial responsibilities of an agency are to be construed as including the expenditure of funds and the utilization of property and personnel in the furtherance only of authorized programs or activities in an effective, efficient and economical manner. Comprehensive audits will be directed only to the nontactical operations of the Department of Defense. Primarily, the effort by the General Accounting Office auditors will be for the purpose of evaluating the results of financial management within the Department of Defense and components thereof.

B. Basic statutory authority

Section 313 of the Budget and Accounting Act of 1921 (31 USC 54) provides that "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.

C. Performance of comprehensive audits

The General Accounting Office is performing as many audits as possible at the sites of operations. These audits, which are on a comprehensive basis, are performed by personnel from the various General Accounting Office regional offices, overseas offices, and the Defense Accounting and Auditing Division in Washington, D.C. and Dayton, Ohio. The regional offices are in 19 locations in the United States.

D. Approach to comprehensive audits

General Accounting Office audits are designed to provide a comprehensive review of Government agencies and their activities. The extent of detailed examination work in such audits is determined by the adequacy of the management control exercised by the agency under audit. In order to evaluate internal management controls, General Accounting Office personnel examine the history, purpose, authorities, organization, activities, policies, and procedures of an agency and its component activities, and then review the operating results in the light of the intended purpose and authorities. In making an evaluation of internal control, representatives from the General Accounting Office will necessarily perform various audit steps such as reviewing, analyzing, and testing accounting and operating data, property records, data in support of budgetary statements, and other supporting evidence covering the agencies' activities. The results of comprehensive audits will be covered by reports which will be made available to the head of the agency involved.

E. Evaluation of internal controls and internal review activities

Section 117(a) of the Accounting and Auditing Act of 1950 (31 USC 67) provides that, in the determination of auditing procedures to be followed and the extent of examination of vouchers and other documents, the Comptroller General shall give consideration to the effectiveness of accounting organizations and systems, internal audit and control, and related administrative practices of the respective agencies. Pursuant to the foregoing, the General Accounting Office audits will be conducted in full recognition of all internal review activities and will evaluate their effectiveness and eliminate the necessity for duplicating much of their efforts. The General Accounting Office intends, as part of its comprehensive audit procedure, to review the internal audit work accomplished within the Department of Defense. This review will serve to enable the General Accounting Office to evaluate the effectiveness of internal audit and control and thereby minimize its effort devoted to detailed review of installation activities. To the extent that the internal audit program has been the successful and effective aid to management which it is designed to be, a corresponding reduction in the disruption of normal operations at the installation or activity by the General Accounting Office should result.

III. POLICIES AND ACTION

A. Cooperation to be accorded representatives of the General Accounting Office Representatives of the General Accounting Office will inform the agency and installation concerned of any proposed audit and its contemplated scope. Officials of all levels within the Department of Defense and components thereof shall cooperate fully with the General Accounting Office representatives in order to facilitate the audit work. Care should be taken to assure that proper working space and facilities are provided, as well as timely assistance in making necessary information, records and personnel available.

B. Access to records and release of records and reports

1. In accordance with the provisions of the Budget and Accounting Act of 1921 (see II. B. hereof), authorized representatives of the General Accounting Office shall be given access to, and allowed to examine, such records as are necessary to permit them to carry out their duties and responsibilities.

2. Internal audit reports of the military department audit organizations and associated working papers shall be made available, as requested, to the General Accounting Office representatives by the audit agency where such reports and