CHAPTER I

Detail Statement

Covering the Audit of Accounts

and the Settlement of Claims

THE AUDIT OF PUBLIC ACCOUNTS

THE TERM "AUDIT" as defined by Webster means, "a formal or official examination and verification of accounts, vouchers, and other records." Broadly speaking, it may be said, that generally the purposes for which accounts and records are audited are as follows: (a) General verification of accounts to determine propriety of expenditures and fiduciary integrity of those in charge; (b) to determine whether a proper accounting has been made of all funds; (c) to determine costs, inventories, and other specific matters for various special purposes; (d) to detect errors in the accounts; (e) to detect fraud; (f) to determine extent of fraud already detected; (g) to deter fraud by the moral effect of audit upon accountable employees.

Based on the responsibility vested in the General Accounting Office to prescribe the forms of vouchers, collateral papers, accounts and systems of keeping and reporting, to countersign warrants, and to settle and adjust claims and accounts, the system of audit of public accounts assumes even a broader scope.

DUTIES OF GENERAL ACCOUNTING OFFICE

Among the duties imposed upon the General Accounting Office by the Budget and Accounting Act of 1921, are:

1. The prescribing of forms, systems, and procedure for administrative appropriation and fund accounting in the several departments and establishments, and for the administrative examination of fiscal officers' accounts and claims against the United States. (Title 31, sec. 49, U. S. Code.)

2. The countersigning of warrants issued by the Secretary of the Treasury for setting up appropriations for the payment or advancement of funds therefrom, for transferring funds from one appropriation to another, etc. (Title 31, sec. 76, U. S. Code.)

3. The approving or disapproving of requisitions for the advance of funds to disbursing officers and the settlement and adjustment of accounts of all accountable officers. (Title 31, secs. 71, 76, and 78, U. S. Code.)

4. The rendering of decisions at the request of disbursing officers and heads of executive departments and establishments on any question involving a payment to be made by them or under them. (Title 31, sec. 74, U. S. Code.)

5. The settling of all claims by or against the Government. (Title 31, sec. 71, U. S. Code.)

6. The superintending of the recovery of debts certified to be due the United States. (Title 31, sec. 93, U. S. Code.)

7. The investigation of matters relating to the receipt, disbursement, and application of public funds. (Title 31, secs. 53 and 54, U. S. Code.)

ACCOUNTING SYSTEMS, ETC.

The accounting and auditing procedure begins with the issuance by the Secretary of the Treasury of an appropriation warrant pursuant to an appropriation made by the Congress.

Pursuant to its responsibility to prescribe accounting forms, systems, and procedures, the General Accounting Office analyzes each appropriation, determines the purposes for which the amount appropriated may be spent, and prescribes account titles briefly descriptive of such purposes under which the appropriations shall be established on the books of the Government. It also prescribes a system of administrative and fund accounts which comprises appropriation con trols with subordinate budgetary accounts, administrative allotment accounts, receipt accounts, encumbrance accounts against which approved vouchers and disbursements are recorded, and other accounts to reflect asset acquisitions and operating costs. Such accounts are organized and designed to serve fully the administrative, budgetary, and accounting needs by reflecting under uniform classifications every financial transaction from the time an appropriation

is made to the final payment of expenditures authorized thereunder. The system embraces also subsidiary accounts for accountable officers and for compiling costs in those agencies where manufacturing, construction, operating, or other classes of cost finding is necessary or is desired.

WARRANTS

Title 31, section 147, United States Code, provides in part:

The Treasurer shall receive and keep the money of the United States, and disburse the same upon warrants drawn by the Secretary of the Treasury, countersigned in the General Accounting Office, and not otherwise.

Warrants are formal documents issued by the Secretary of the Treasury and countersigned in the General Accounting Office, and are classified as follows:

1. Appropriation warrants authorizing the setting up of appropriation accounts.

2. Transfer appropriation warrants authorizing the transfer of amounts under an appropriation from one department, bureau, or agency to another or from one appropriation to another.

3. Pay warrants:

(a) Accountable warrants authorizing the advance of money to disbursing officers.

(b) Settlement warrants authorizing the payment of direct settlements of the General Accounting Office.

4. Transfer and counter warrants authorizing adjustments between appropriations.

5. Covering warrants authorizing the covering of money into the Treasury.

Appropriation Warrants

The function of the appropriation warrant is to give notice to administrative agencies of the Government concerned that funds appropriated to do those things which have been authorized by law to be done have been set aside therefor on the books of the Government and also to furnish advice as to the account designations to be used.

The first step in the fiscal procedure of the Government takes place when the appropriation warrant is presented to the General Accounting Office for countersignature, at which time there is for consideration, (1) a determination that the establishment of the account is authorized, and (2) whether there appears on the warrant such information as is necessary properly to establish the accounting record.

Accountable Warrants

The next consideration in the accounting and auditing procedure occurs after the appropriation account has been established on the books of the Government in the manner heretofore described and the amount appropriated has become available to the department under the jurisdiction of which the money is authorized to be spent. Funds may be advanced to duly constituted disbursing officers on requisitions stated by the heads of the departments for which such officers disburse. On the requisition there is indicated the appropriation or appropriations out of which payments are to be made for obligations incurred or to be incurred by the department, and the amount to be advanced to the officer under each such appropriation. The General Accounting Office, under the authority conferred upon it to approve requisitions for advances of funds to disbursing officers, is required to disapprove the requisition if there is a delinquency in the rendition of accounts by the particular officer for whom an advance has been requested, or for other reasons arising out of the condition of the officers' accounts. Also, the general laws require that all disbursing officers, with certain exceptions, give bond in favor of the United States.

Thus, the second step in the fiscal procedure of the Government takes place when the requisition for advance of funds is received in the General Accounting Office for approval, at which time it is examined to determine: (1) That the advance is to a duly constituted disbursing officer, who is under bond in good standing; (2) that the appropriations under which advances are requested are available for use by the requisitioning officer; (3) that there are balances sufficient under each appropriation from which an advance is requested; (4) that the officer to whom advance is to be made is not delinquent in the rendition of his accounts; and (5) that there are no other reasons why, in the public interest, the advance should not be made.

If the requisition is approved, the funds are advanced to the disbursing officer upon an accountable warrant issued by the Secretary of the Treasury, which is reflected on the books of the Government as a charge to the appropriation accounts and as a credit in the disbursing officer's checking account.

APPORTIONMENTS AND ALLOTMENTS

Under the so-called antideficiency act (title 31, sec. 665, U. S. Code), the heads of the various departments and establishments are required to so apportion their appropriations at the beginning of the fiscal year as to prevent expenditures in one portion of the year which