IMPLEMENTATION OF TITLE IV, NATIONAL SECUEITY ACT OF 1947, AS AMENDED TUESDAY, NOVEMBER 3, 1953 United States Senate, Washington, D. C. The subcommittee met, pursuant to adjournment, at 10: 30 a. m., in room 212, Senate Office Building, Senator Ralph E. Flanders (chairman) presiding. Present: Senator Flanders. Also present: Senator Lester C. Hunt; Fred B. Rhodes, chief counsel, and F. Bradford Morse, of the subcommittee staff. Senator Flanders. The hearing will come to order. Before we begin the business of the day and hear from Secretary Wilson, Secretary Anderson, and Assistant Secretary White, I would like to make a few comments on the hearings of yesterday. It was pointed out that this is not a simple problem, and I can understand that it might not have the popular appeal that characterizes some congressional hearings. It does have one very important appeal, though, and that is to the taxpayer whose money is being used. There is one point which I would like to emphasize. None of the Secretaries who will be here today and tomorrow could have been expected to take on a problem of this magnitude any earlier in their service. It would not have been fair to have asked any of these men to have come before this committee 6 months ago and to deal intelligently with the problem. It is most complex and it is but one of the many which each of these men faced in running this vast business. It seems to me it is most creditable that Secretary Wilson and Secretary Stevens have appointed groups to dig into this matter and advise them on how good business practices can be instituted in the Defense Establishment. This demonstrates that there is a healthy awareness of the need of a better system of doing business. I think that both deserve our thanks for taking action to get at the problem. One word further. It should be pointed out that this inquiry is not designed to delve into the many technical problems of management, but rather is directed at securing for Congress a complete understanding of what the problem is. We will look to those in charge for corrective action. In what appealed to me as being a most reasonable approach to the problem of whether there should be civilian or military comptrollers, former Secretary Robert A. Lovett stated that he felt that the services should take advantage of the military talent and should make use of military men as comptrollers. He said he felt that it would be a good idea for the Secretaries to have one assistant each who would be in charge of financial management. Under this office would be established a new corps or service specialty which might have at its head a man with three stars. He argued very effectively that these men should not have to report to both civilian and military bosses. Mr. Eberstadt and Mr. Schneider, who were both thoroughly acquainted with the problem, leaned to the idea of having this function performed by civilians at the top level and indicated that the law should be changed in this regard. In an inquiry of this sort, it is natural and in fact proper to have a division of opinion, and this was furnished by Secretary Stevens, who stated that he preferred a military comptroller responsible to both a civilian and a military boss, as the law now permits. The other witnesses took issue with this system and recommended a revision of the law which authorizes it. I say this by way of summary and leading up to what I hope we will accomplish today. It is my hope that the positions of the Navy, Air Force, and Department of Defense can be made clear on whether this legislation is effective and what can be done to bring about the sound management principles which title IV was designed to achieve in the Defense Establishment. We want each of the witnesses to be completely frank about this whole matter, as it affects each and as it affects the dealings they have with each other. We want all of the impediments to be discussed with candor. This morning I want to present to the Department of Defense and the three services a special request for information. I would like each to give me for the record a detailed statement of the education and experience of each of the comptrollers and their principal assistants. If our committee is to evaluate this problem fully, we must have this information. I would greatly appreciate it if the departments would have this information ready for the record by tomorrow morning's session. I say to the staff that we did not have this request for Secretary Stevens yesterday, and, as he is to come back to us tomorrow morning, perhaps word should be gotten to him so that he will be prepared on that question. All too frequently congressional committees have a tendency to get into a problem and then let it fall by the wayside, due to the pressure of other business. We do not propose to do that with this problem. We have been promised great things in savings of men and material if we institute better management in the departments. Title IV may not be the complete answer. If there is a better one, we want to know it. We approach this with an open mind. We want to see that this gigantic business is run efficiently. With that high purpose, we continue our deliberations. I have, Mr. Secretary, biographical data with regard to you which I assume is correct and which will be put into the record. It indicates a busy and useful life, and I presume that your lif« is still busy and I think useful. (The biographical sketch of Secretary Anderson is as follows:) Robert B. Andebson, Secretary Of The Navy Born, Burleson, Tex., June 4, 1910; graduated from Weatherford College in 1927; University of Texas, LL. B., in 1932; elected to Texas Legislature and later became assistant attorney general of the State; returned to the University of Texas in 1933 as professor of law; Texas tax commissioner, 1934; member of Texas Tax Board, 1934; appointed chairman and executive director of Texas Employment Commission in 1936; vice president of the Associated Refineries, Inc., during World War II; director and deputy chairman of the board of the Federal Reserve Bank of Dallas, Tex.; president of the Texas State Board of Education; officer and director of several corporations, public committees, and charitable organizations; trustee of Texas Wesleyan College, Forth Worth, and McMurry College, Abilene; received LL. D. degrees from McMurry College and Texas Christian University, Fort Worth, and Litt. D. from Mid-Western University, Wichita Falls, Tex.; formerly civilian aide to Secretary of the Army; Secretary of the Navy, February 4, 1953. Senator Flanders. Like: his colleagues, Secretary of the Navy Robert B. Anderson brings to the office a vast quantity of experience in the commercial world. His business experience, coupled with his earlier training and practice as an attorney, have enabled him since he was assigned to his office, to evaluate the budgetary, fiscal, and accounting procedures in the Navy Department. I am sure that Secretary Anderson's contribution to this inquiry will be a great one. Secretary Anderson has prepared a statement for the record, which we would appreciate his reading at this time. STATEMENT OF HON. ROBERT B. ANDERSON, SECRETARY OF THE WAVY, ACCOMPANIED BY UNDER SECRETARY THOMAS S. GATES, JR., COMPTROLLER OF THE NAVY; REAR ADM. E. A. SOLOMONS, DEPUTY COMPTROLLER; REAR ADM. E. W. CLEXTON, ASSISTANT COMPTROLLER (BUDGET AND REPORTS); AND N. P. CASSIDY, ASSISTANT COMPTROLLER (ACCOUNTING, AUDITING, AND FINANCE) Secretary Anderson. Mr. Chairman, I welcome this opportunity to appear before you to discuss problems of Navy financial organization and management. I strongly concur with the Hoover Commission's observation that "the budget and appropriation process is the heart of the management and control of the executive branch." As Secretary of the Navy, I have given, and shall continue to give, much of my attention to strengthening the budgetary processes and financial management in Navy. I have found title IV of the National Security Act amendments of 1949 to be an excellent piece of legislation. Everything possible has been done to implement its provisions, although further progress is both required and planned. The Navy was particularly fortunate in that, for a great many years prior to the passage of title IV, the importance of fiscal management had been fully recognized. Advances in this field facilitated implementation of the provisions of title IV. For example, budget preparation and execution had been an established function under the Office of Budget and Reports since 1941. The Navy, in collaboration with the Navy Appropriation Subcommittee of the House Appropriations Committee, had recommended to the Congress, as early as 1946, the adoption of a revised appropriation structure along program and performance lines. Likewise, coordination of the budget with progress and statistical reporting had been largely effected. Property accounting on both an item and dollar basis has been in existence for many years, except for a temporary interruption during World War II. Industrial- or commercial-type accounting, to the extent permitted by law, was also established at major activities prior to title IV. The Navy has been using a revolving stock fund to finance common usage items on an issue rather than initial procurement basis since 1893. These accomplishments in financial management are mentioned to point out that the primary tasks confronting the Department at the time of passage of title IV were concerned largely with (1) bringing together and integrating within one organization the various fiscal functions being performed at different organization locations throughout the Department; (2) implementing functions where relatively little progress had been made, such as internal auditing and the establishment of working capital funds at industrial or commercial-type operations; and (3) placing increased emphasis on improved policies and procedures in all areas of financial management. Establishment and organization of the Comptroller's office: The Secretary of the Navy, by charter of June 1, 1950, established the Office of the Comptroller of the Navy as required by title IV. Subject to the authority of the Secretary, the Comptroller is responsible for all budgeting, accounting, progress, and statistical reporting, providing financial assistance to defense contractors, internal auditing-, and for the administrative organizational structure and managerial procedures related thereto. Comptroller functions are organized in a manner consistent with the operations of the Office of the Comptroller, Department of Defense, as stipulated in title IV, and are in accordance with the Secretary of Defense directive of September 27, 1950, on Comptroller Functions and Organization. The Comptroller is assisted in performing his responsibility by a Deputy Comptroller and two Assistant Comptrollers. I would like to present for the record organization charts setting forth the comptroller's organization. Senator Flanders. They may be admitted. (The documents referred to are herewith inserted.) Secretary Anderson. The Under Secretary of the Navy, Thomas S. Gates, Jr., is the present comptroller. The first comptroller was the Assistant Secretary of the Navy for Air, John F. Floberg. His deputy was Rear Adm. H. G. Hopwood who, since 1946, had been Director of the Office of Budget and Reports. Rear Adm. E. A. Solomons, the present deputy comptroller, replaced Admiral Hopwood upon his assignment to duty with the fleet. The two assistant comptrollers, Rear Adm. E. W. Clexton and Mr. N. P. Cassidy, have been in those positions since inception of the comptroller organization and, in fact, have been in important positions of financial management for a number of years. Admiral Clexton was previously the Assistant Director of Budget and Reports, and Mr. Cassidy was formerly the fiscal director of the Navy. |