tary departments shall be responsible for all budgeting, accounting, progress and statistical reporting, and internal audit in their respective departments and for the administrative organization Appointment. structure and managerial procedures relating thereto. The Secretaries of the military departments may in their discretion appoint either civilian or military personnel as comptrollers of the military departments. Departmental comptrollers shall be under the direction and supervision of and directly responsible to, either the Secretary, the Under Secretary, or an Assistant Secretary of the respective military departments: Provided, That nothing herein shall preclude the comptroller from having concurrent responsibility to a Chief of Staff or a Chief of Naval Operations, a Vice Chief of Staff or a Vice Chief of Naval Operations, or a Deputy Chief of Staff or a Deputy Chief of Naval Operations, if the Secretary of the military department concerned should so prescribe. Where the departmental comptroller is not a civilian, the Secretary of the department concerned shall appoint a civilian as Deputy Comptroller. Performance budget. Authority to Reports to the Performance Budget Sec. 403. (a) The budget estimates of the Department of Defense shall be prepared, presented, and justified, where practicable, and authorized programs shall be administered, in such form and manner as the Secretary of Defense, subject to the authority and direction of the President, may determine, so as to account for, and report, the cost of performance of readily identifiable functional programs and activities, with segregation of operating and capital programs. So far as practicable, the budget estimates and authorized programs of the military departments shall be set forth in readily comparable form and shall follow a uniform pattern. (b) In order to expedite the conversion from present budget and accounting methods to the cost-of-performance method prescribed in this title, the Secretary of each military department, with the approval of the President and the Secretary of Defense, is authorized and directed, until the end of the second year following the date of enactment of this Act, to make such transfers and adjustments within the military department of which he is the head between appropriations available for obligation by such department in such manner as he deems necessary to cause the obligation and administration of funds and the reports of expenditures to reflect the cost of performance of such programs and activities. Reports of transfers and adjustments made pursuant to the authority of this subsection shall be made currently by the Secretary of Defense to the President and the Congress. Deficiencies. Obligation Op Appropriation Sec. 404. In order to prevent overdrafts and deficiencies in any fiscal year for which appropriations are made, on and after the beginning of the next fiscal year following the date of enactment of this Act appropriations made to the Department of Defense or to the military departments, and reimbursements thereto, shall be available for obligation and expenditure only after the Secretary of Defense shall approve scheduled rates of obligation, or modifications thereof: Provided, That nothing in this section shall affect the right of the Department of Defense to incur such deficiencies as may be now or hereafter authorized by law to be incurred. Working-capital funds. Working-capital Funds Sec. 405. (a) In order more effectively to control and account for the cost of programs and work performed in the Department of Defense, the Secretary of Defense is authorized to require the establishment of working-capital funds in the Department of Defense for the purpose of— (1) financing inventories of such stores, supplies, materials, and equipment as he may designate; and (2) providing working capital for such industrial-type activities, and for such commercial-type activities as provide common services within or among the departments and agencies of the Department of Defense as he may designate. (b) The Secretary of the Treasury is authorized and directed to establish on the books of the Treasury Department at the request of the Secretary of Defense the working-capital funds established pursuant to the authority of this section. (c) Such funds shall be— (1) charged, when appropriate, with the cost of stores, supplies, materials, and equipment procured or otherwise acquired, manufactured, repaired, issued, and consumed and of services rendered or work performed, including applicable administrative expenses; and (2) reimbursed from available appropriations or otherwise credited for the cost of stores, supplies, materials, or equipment furnished and of services rendered or work performed, including applicable administrative expenses. Reports of the condition and operations of such funds shall be made annually to the President and to the Congress. (d) The Secretary of Defense is authorized to provide capital for such working-capital funds by capitalizing inventories on hand and, with the approval of the President, by transfer, until December 31, 1954, from unexpended balances of any appropriations of the military departments not carried to the surplus fund of the Treasury: Provided, That no deficiency shall be incurred in any such appropriation as a result of any such transfer. To the extent that such methods do not, in the determination of the Secretary of Defense, provide adequate amounts of working capital, there is hereby authorized to be appropriated, out of any moneys in the Treasury not appropriated for other purposes, such sums as may be necessary to provide adequate working capital. (e) Subject to the authority and direction of the Secretary of Defense, the Secretaries of the military departments shall allocate responsibility within their respective military departments for the execution of functions which each military department is authorized by law to perform in such a manner as to effect the most economical and efficient organization and operation of the activities and use of the inventories for which working-capital funds are authorized by this section. (f) No greater cost shall be incurred by the requisitioning agency for stores, supplies, materials, or equipment drawn from inventories, and for services rendered or work performed by the industrial-type or commercial-type activities for which workingcapital funds are authorized by this section, than the amount of appropriations or funds available for such purposes. (g) The Secretary of Defense is authorized to issue regulations to govern the operation of activities and use of inventories authorized by this section, which regulations may, whenever he determines the measures set forth in this subsection to be required by the needs of the Department of Defense, and when such measures are authorized by law, permit stores, supplies, materials, and equipment to be sold to, and services to be rendered or work performed for, purchasers or users outside the Department of Defense. In such cases, the working-capital funds involved may be reimbursed by charges against appropriate appropriations or by payments received in cash. (h) The appraised value of all stores, supplies, materials, and equipment returned to such working-capital funds from any department, activity, or agency, may be charged to the workingcapital fund concerned and the proceeds thereof shall be credited to the current appropriations concerned; the amounts so credited shall be available for expenditures for the same purposes as the appropriations credited: Provided, That the provisions of this Working- Reports to Limitation on deficiencies. Allocation of responsibility. Cost limitation. Authority of Secretary of Defense to govern activities. Credit for returned supplies and equipment. subsection shall not permit credits to appropriatiaas as the result of capitalization of inventories authorised by subscetioa (d) of this section. MiJjiaacErr Ftrvas Sir. 406. The Act of July 3. 1»C <5S Stat. 645. e. 484), as amended, is hereby farther amended to read a* follows: ~ < a i For the purpose of facilitating the ecoBotaical and <»««-i»-»t eondnct of operations in the Department of Defense which are financed by two or more appropriations where the costs of the operations are not susceptible of immediate distribution as charges to such appropriations, there are hereby established the Navy Management Fund, the Army Management Fond, and the Air Force Management Fund, each within, and under the direction of tie respective Secretaries of. the Departments of the Navy, Army, or Air Force, as the case may be. There are authorised to be appropriated from time to time such funds as may be necessary to accomplish the purposes of the funds. "' b i The corpus of the Xavy Management Fund shall consist of ti* ram of «.•>».<«■:» heretofore transferred to the Naval Proc-n-acect Fond from the Xaval Emergency Fund (17X09X), wi::i anyv-rt. ar.d a".: balances in. and obligations against, any accounts in the Naval Procurement Fund, are hereby transferred to the Navy Management Fund: the corpus of the Army Managerject Fnnd shall consist of the sum of $1,001X000. which shall be transferred thereto frctn any unobligated balance of any approjriati--c ava.iaile to the Department of the Army: the corpus of "ft At Fcree Management Fund shall consist of the sum of Sl-'»"■->"•>. wii:i si±H be transferred thereto from any nnoblizt'JA b&lizee of any appropriation available to the Department '- rift Air Fn-r»: in each case together with such additional t-^L-'i i£ -nay fr-: — time to time be appropriated to any of said f-n"*5s. A«o»iLts for tie individual operations to be financed •zzAtfz -it r^st^i-ive r-anage-nent funds shall be established only Sjkc ajc-r»jva: »sy the Secretary of Defense. Exp«r.-1". j-es may be made from said management funds ==ft to t3se fer material (other than material for stock) aa»2 for p»rse«a: and eontraorcal services under such regulations *s eaj be nreseribed by tie Secretary of Defense: rV&ridei, (1) Ttat -->: -<r 3--; snail be incurred against any such fend which i* ^>'s "r'.-^r:- tiarseable to available funds under an appropriati'c of tie dftparmt.~".r within which the fund is established or. ''■-f^j^-rfr r>«sws-sary to etrectnate purposes authorized by this Act V. fr^is of asonier department or agency within the Department '-* Defense, and f2i tiat each fond shall be promptly reimbursed fr*ra tie appropriate appropriations of such department for all eznft-yirrtires properly chargeable thereto. Nothing herein or in *"-T t-iftT provision of law shall be construed to prevent advances tT *i*«t or warrant, or reimbursements to any of said managelaest fnnds from appropriations of said departments on the '•■a.' » :'. tie estimated cost of a project, such estimated cost to be Tf^i ar.-i necessary appropriation adjustments made when adft-rtarte data become available. : • Except as otherwise provided by law. amounts advanced *'. tift —.-.nas^m-nt fnnds under the provisions of this Act shall be *vz"--*•>> for obligation only during the fiscal year in which they xrt advanced: Provided, That nothing contained in this Act shall alter or limit the authorized period of availability of the funds from which such advances are made. Final adjustments of advances in accordance with actual costs shall be effected with tie sjtrtriate funds for the fiscal year in which such funds are adva-jeed. **'e» The portion of the Naval Appropriation Act. 1M5 (58 Stat. 301. 310), relating to the Naval Procurement Fund is hereby repealed." Adjustment Of Accounts Sec. 407. (a) When under authority of law a function or an activity is transferred or assigned from one department or agency within the Department of Defense to another such department or agency, the balances of appropriations which are determined by the Secretary of Defense to be available and necessary to finance or discharge the function or activity so transferred or assigned may, with the approval of the President, be transferred to, and be available for use by, the department or agency to which said function or activity is transferred or assigned for any purpose for which said funds were originally available. Balances so transferred shall be credited to any applicable existing appropriation account or accounts, or to any new appropriation account or accounts, which are hereby authorized to be established on the books of the Treasury Department, of the department or organization to which such function or activity is transferred, and shall be merged with funds in the applicable existing or newly established appropriation account or accounts and thereafter accounted for as one fund. Balances transferred to existing accounts shall be subject only to such limitations as are specifically applicable to such accounts and those transferred to new accounts shall be subject only to such limitations as are applicable to the appropriations from which they are transferred. (b) The number of employees which in the opinion of the Secretary of Defense is required for such transferred functions or activities may, with the approval of the Director of the Bureau of the Budget, be deducted from any personnel maximum or limitation of the department or agency within the Department of Defense from which such function or activity is transferred, and added to any such personnel maximum or limitation of the department or agency to which such function or activity is transferred. Availability Of Reimbursements Seo. 408. To carry out the purposes of this Act, reimbursements made under the authority of the Economy Act (31 U. S. C. 686), and sums paid by or on behalf of personnel of any department or organization for services rendered or supplies furnished, may be credited to authorized replacing or other accounts. Funds credited to such accounts shall remain available for obligation for the same period as the funds in the account so credited and each such account shall constitute one fund on the books of the Treasury Department. Adjustment of accounts. Transfer of personnel, Accounting for. Reimbursements. Common Use Of Disbursing: Facilities Sec. 409. To the extent authorized by the Secretary of Defense, disbursing officers of the Departments of the Army, Navy, and Air Force may, out of accounts of advances available to them, make disbursements covering obligations arising in connection with any function or activity of any other department or organization within the Department of Defense and charge upon vouchers the proper appropriation or appropriations of the other department or organization: Provided, That all said expenditures shall subsequently be adjusted in settlement of disbursing officers' accounts. Reports Of Property Sec. 410. The Secretary of Defense shall cause property records to be maintained in the three military departments, so far as practicable, on both a quantitative and monetary basis, under regulations which he shall prescribe. Such property records shall Include the fixed property, installations, and major items of equipment as well as the supplies, materials, and equipment held in store by the armed services. The Secretary shall report annually thereon to the President and to the Congress. Disbursing facilities. Property records. Reports to the President and the Congress. Repealing And Saving Provisions Bepeal of in- Seo. 411. All laws, orders, and regulations inconsistent with iuwb!lordere tne provisions of this title are repealed insofar as they are inconand reguin-' slstent with the powers, duties, and responsibilities enacted heretlouB. by: Provided, That the powers, duties, and responsibilities of the Secretary of Defense under this title shall be administered in conformance with the policy and requirements for administration of budgetary and fiscal matters in the Government generally, including accounting and financial reporting, and that nothing in this title shall be construed as eliminating or modifying the powers, duties, and responsibilities of any other department, agency, or officer of the Government in connection with such matters, but no such department, agency, or officer shall exercise any such powers, duties, or responsibilities in a manner that will render ineffective the provisions of this title. Let me state that this law has been in effect duringa most turbulent period. Less than a year after its enactment, the Korean war came upon us. The size oi our budget jumped tremendously. It is fair to assume that any management changes which were effected should have reflected savings of some size in this period of expanding budgets. The need for good management is present in war and peace. Sometimes we have tended to excuse waste in war periods, but the Korean war was fought on the basis of partial mobilization, which made the need for good businesslike practices an absolute necessity. I might interpose here a remark that was not included in my prepared introduction. I think we would be unfair to the officers in the armed services if we assumed that they have been trained either in their original training or in active war service to think of economy in the same terms or with the same importance that you do in a business. In a business, economy is life and death. In war it may be a question of life and death to get there with the most materials first and to get there ''fustest with the mostest" men, as the Confederate general said. So the training of our officers in years past has not been such as to make the economy in operations stand out in their minds as the important thing. And we must recognize that. On the other hand, the situation we are now in, one of maintaining a posture of defense, as it is often called, is a new situation to which the armed services must and are endeavoring to adapt themselves. In this new situation of a continuous posture of defense, questions of economy become of vital importance and I think we are talking today about helping and suggesting to the armed services ways in which they can provide defense with economy in this new situation. Now, 4 years after enactment of title IV, we are gathered together to take stock of what has been done. We know that the witnesses will deal with this problem with frankness. If there have been failures and shortcomings, we rely on those whom we have called to point out these areas in the spirit of letting the chips fall where they may. Our earnest desire—m conducting this inventory of achievement and failure—is to examine the mistakes of the past calmly and fairly. Our goal is to make the way clear to improve our methods of doing business in the future. A. congressional committee cannot manage the business of running the Department of Defense. It cannot offer the detailed recommendations which Secretary Wilson's recently appointed advisory committee under the able chairmanship of Mr. Charles P. Cooper will make. |