accounting at base level next April. This will bring under financial control greater quantities of assets than could possibly have been accomplished by the use of stock funds limited to common-use items.

Question 10.—Do you believe that the installation of an independent audit system under civilian supervision responsible directly to the Secretary would make for efficiency and economy in the operation of your department?

Answer.—The location of the internal audit organization in the Air Force is currently under study and consideration by representatives of two international public-accounting firms employed by me on a consulting basis.

Question 11.—Do you approve the principle of title IV? Are there any reservations which you have about the legislation or about the procedures which it requires to be installed?

Answer.—We have no hesitancy about endorsing the principles set forth in title IV. We note, however, with some concern, that these questions have been directed only at a relatively small element of title IV, namely, the working capital funds provision. The basic concept of title IV, the establishment of the comptroller organization and centralizing under it of accounting, budget, finance, audit, statistical and progress reporting, which provide basic financial guidance for management were accepted by the Air Force and put Into operation prior to its becoming a separate department. The Air Force had working comptroller organizations not only at departmental level but in the field before the enactment of title IV and, in fact, before the investigative work, upon which that title was based, had begun.

Neither do we have any reservation regarding the use of working capital funds where appropriate. As we see it, the basic financial problem which they were designed to solve are corrected by the organizational and budget structure of the Air Force which was conceived for the specific purpose of avoiding segmented authority and financial responsibility. Where working-capital funds can simplify financial transactions or improve financial management we believe they should be adopted. Where thei* effect would be only to focus attention upon relatively small property areas from a point of view of value, we believe that other accounting devices should receive consideration. In summary, the Air Force considers that title IV basically confirmed what the Air Force had already begun in the area of financial management and give it the opportunity to use, where desirable, certain fiscal devices such as working capital and management funds.

Question IB.—In your opinion, to what extent, percentagewise, has title IV been implemented to date in the Department of the Air Force?

Answer.—Although we are unable to make percentage estimates of anything which is as difficult to sumarize as title IV, we feel that there is no element which we have not implemented. However, within each element there is a question of degree of implementation which can be determined only by looking at each subject. We feel that we are rapidly progressing to maximum implementation. We are proud of our pioneer record In military comptrollership. The complete acceptance of the comptroller by the Air Force at all echelons, and the reliance by all commanders upon their comptrollers for assistance in efficient management, both demonstrate clearly the truly great progress which has been made.

Senator Flanders. Won't you be seated, Mr. Secretary? We have a biographical sketch of you which I presume is taken from Who's Who and you have already seen it in that case. We will insert it into the record.

(The document referred to is as follows:)

Charles B. Wilson, Secretary Op Defense

Born, July 18, 1890, Minerva, Ohio; graduated from Carnegie Institute of Technology, E. E., 1909; electrical engineer with Westinghouse Electric & Manufacturing Co., 1909-10; chief engineer and factory manager, Delco-Remy Co., 1919-26, president, 1926-29; vice president, General Motors Corp., 1929-39, director, 1934-53, executive vice president, 1939-40, president, 1941-53, chief executive officer, June 1946-53; awarded Sc. D., Columbia University, 1949; appointed Secretary of Defense, January 28, 1953.

Senator Flanders. The Nation is indeed fortunate in having as the chief official of its Defense Establishment a man with an immense background in managerial and administrative matters, Charles E. Wilson. Nationally known as an authority on management practices and procedures, he perhaps as much as any man in the country is qualified to evaluate the title IV program and its operation in the Department of Defense.

Although Mr. Wilson and his departmental Secretaries have had an opportunity to observe title IV but for a few short months of its 4-year life, I am sure that he has formulated some opinions on the act and its operation, which will assist us in the task with which we are faced.

Mr. Wilson, do you have a prepared statement?

TESTIMONY OF HON. CHARLES E. WILSON, SECRETARY OF DEFENSE, ACCOMPANIED BY W. J. McNEIL, ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER), AND CHARLES P. COOPER, CHAIRMAN OF THE DEPARTMENT OF DEFENSE ADVISORY COMMITTEE ON FISCAL ORGANIZATION AND PROCEDURES

Secretary Wilson. No, Senator, I do not.

Senator Flanders. Do you wish to make a statement before I proceed with my questions, or do you think the questions give sufficient lead?

Secretary Wilson. I think it would be just as well if we went ahead with your questions.

Senator Flanders. All right, we will do it in that way. I may say that we have been very much pleased and encouraged that you have set up under Mr. Cooper this committee to examine the business practices in the Department. Mr. Cooper's committee will go beyond business practices; will it not?

Secretary Wilson. That is right, sir.

Senator Flanders. It covers a little bit more than the title IV legislation, or is it practically pro terminus with the title IV legislation?

Secretary Wilson. You scare me a little with that word. The Cooper committee are looking into all questions of fiscal management broadly, the kind of information, classification of accounts and accounting procedures, and compilation of facts in the financial area that will help the management, the commanders and executives, both military and civilian, to carry out their duties and know what is going on. I feel that we have a very fine committee working at it, a group of men who have great experience in business and industry. I felt particularly pleased and appreciative that of 10 men that I asked to serve on the committee, not one turned me down. They are the most experienced top people in the country.

Senator Flanders. That was good.

Secretary Wilson. I might add that Secretary McNeil and Secretary Thomas, of Logistics and Supply, in the Department itself are active members of the committee. But the committee is essentially a group of people with broad experience outside of the Defense Department. But these two men are on the committee to see that we get implemented recommendations and all of the special problems of the military are understood.

The working staff is also supplied by the three services: the Army, Navy, and the Air Force. So this is just a high-level effort of competent people to do a fine job for the country.

Senator Flanders. Now, Mr. Secretary, I might just briefly state one of the main interests of the Armed Services Committee in this investigation. "Investigation" of course can be a rather terrifying term, but there is no endeavor on our part to make it into an ordeal of any sort. But we have the experience of nearly $75 billion we appropriated to the Department of Defense before your arrival between the end of World War II and June 1950, and yet we went into Korea unprepared. Then we have had the experience in the course of Korea of satisfying ourselves through Senator Margaret Smith's committee that there were ammunition shortages even then.

So it is very strongly in our minds that the Congress needs to know what the Defense Department is providing for the funds made available to it. We have had this experience when there seemed to be almost nothing immediately useful that had been provided for those funds. We are happy to assume that things are different now, but with 8 or 9 months, we thought we would want to take a look at the situation and see whether we were going to find out—as one of the elements of our investigation—if we were going to be able to know from this point on or somewhere soon what we were getting for our money.

That is the performance budget type of inquiry to which we will refer in these questions.

There are other things as well which will come out in these questions. Will you define in terms of duties and responsibilities the concept of comptrollership which exists in the business world?

Secretary Wilson. The concept of a comptroller in the business world is a man who is competent and experienced in financial matters, who compiles the financial data and analyzes the figures and presents them in a form that will assist management to the greatest degree in carrying out its responsibilities in connection with the business.

Senator Flanders. To what extent does that involve the audit function? Is that quite separate? That is internal audit, not the external audit.

Secretary Wilson. I think usually the auditor in a company is responsible to the top financial officer, financial vice president, or sometimes the comptroller. Businesses all have in our modern days an annual audit by outside auditors, so-called outside auditors. Usually the board of directors pick out the outside auditor so that it is a completely independent audit of how the management is carrying out its responsibilities and whether the figures that are presented to the directors and the stockholders are accurate in line with modern accounting procedures.

Senator Flanders. However, the comptroller does have some res

Eonsibility for seeing to it that the figures with which he deals have een properly prepared and compiled?

Secretary Wilson. That is one of his responsibilities.

Senator Flanders. Calling on your personal experience, will you describe the duties and responsibilities of the comptroller of General Motors Corp., especially in relation to the comptroller organizations of the subsidiary companies such as Oldsmobile or Frigidaire? You have a comptroller for the company as a whole, doubtless.

Secretary Wilson. Yes; General Motors comptroller, and the comptrollers, the men who have the equivalent responsibilities for the divisions like Oldsmobile that you mentioned, those men are technically assistant comptrollers of the corporation. They report both to the manager of the Oldsmobile division and to the comptroller of the central organization.

In such duties or positions it is possible for a comptroller or a man having financial responsibility to report to more than one person because he deals with facts and figures and their analyses and his only responsibility is to have them correct. If they are correct, no one should criticize him for it even if he does report to two people.

It is when you report to two people and you tell them different things that you get into trouble.

Senator Flanders. He reports to two people, but does the line of authority come to him from these two directions or does it come solely from the parent company?

Secretary Wilson. You were asking me about General Motors and I am pleased to tell you about it. I do not mind talking about my old company for a change.

Senator Flanders. With which you have no further connection.

Secretary Wilson. As you well know. The assistant comptrollers in General Motors were always picked and appointed with the consent and agreement of both the manager of the local division and of the comptroller of General Motors or the vice president of General Motors in the financial end of the business.

The practice was that as far as his organization locally, we will say at Lansing in the case of Oldsmobile, he and his organization were under the ordinary personnel regulations and the procedures of the Oldsmobile division. But it was well understood that he kept no secrets from the comptroller of General Motors or the central organization and he was never criticized for factually telling the central organization the facts on the financial situation in the Oldsmobile Division.

That put everything on the table which was a very healthy thing.

Senator Flanders. The fact that he is reporting to the two officials did not bring about any difficulty at all in that respect?

Secretary Wilson. Not in my experience in my time. I might add that I understand in the beginning of it that there was a little question about it until everybody got used to it.

Senator Flanders. Do you believe that the inclusion among the responsibilities of the Assistant Secretary of Defense (Comptroller) of those usually associated with a budget director and an auditor in addition to those usually identified with management functions—that is, the progress of the undertakings and statistical reporting—is a desirable extension of responsibility, or on the other hand, do you feel that separate offices should be established for the performance of these separate functions?

Secretary Wilson. I would think that the Assistant Secretary of Defense (Comptroller) could cover the duties or have report to him anyone who had more of the audit functions in the organization rather than the narrower comptroller's responsibilities. He could have a man who was checking up on the procedures and their methods and the items of equipment they used, and so forth.

I think that the overall audit as business carries it out, with an outside firm, is a little different kind of a tiling. As I understand, our General Accounting Office more or less performs that function.

Senator Flanders. Yes; you have the outside audit, which even the directors of this great undertaking have nothing to do with. It is