Secretary Anderson. First, I would say I have no reservations about title IV being a very fine piece of legislation; secondly, I at this moment do not have any specific suggestions as to amendments that ought to be made. I will say that as the comptrollership function is expanded and as we are able to develop our procedures, there may from time to time be suggestions which we would want to make to the committee, but currently I have none which I would be prepared to say are required at this time.

I think title IV has made a real contribution toward our ability to operate the military departments efficiently.

Senator Flanders. Thank you and we will excuse you at this time. Whom shall we question?

Secretary Anderson. Senator, I will leave Admiral Solomons, who is the Deputy Comptroller. Mr. Gates is the Navy Comptroller and the Under Secretary, but Mr. Gates has been with us only a matter of a very few weeks. Because of that fact, I think Admiral Solomons will be more appropriate. Mr. Dillon is the administrative assistant, and any questions you would like to direct to him, both Mr. Dillon and Admiral Solomons will be glad to answer them.

Senator Flanders. We will question Admiral Solomons in the first instance and then, if he needs help, he knows where to go for it.

Secretary Anderson. I have enjoyed the meeting this morning, Senator.

Senator Flanders. Thank you.

Admiral, are the cost systems of those activities which are presently operating under industrial funds refined so as to permit comparisons of actual costs with standards and with budgets so that effective cost reduction can be accomplished?

I have been informed that that is the case, but maybe you can disillusion me.

Admiral Solomons. Senator, I believe that the present setup of the industrial-fund operations in industrial-type activities will be completely informative as to comparative costs, not only within the activity itself but as compared to a similar activity.

Our pattern of installation of industrial funds is as uniform as we are able to make it. Within two shipyards, as an example, the shipyards may have identically the same basic function, but they may also nave activities which differ between shipyards. But with the current industrial-fund accounting, we can compare them.

Senator Flanders. And you also obviously in that case can compare with the budget?

Admiral Solomons. That is correct, sir.

Senator Flanders. We have been told of a large number of deficiencies found to exist in the accounting procedures required to support title IV. What reason can you assign for these deficiencies, and again I ask the same question I asked the Secretary: Are there any shortcomings in title IV itself which would produce this situation?

Admiral Solomons. Senator, I do not think that I could answer that directly unless I knew what specific deficiencies were referred to. We have had no difficulty in that regard.

Senator Flanders. I am not prepared to deliver to you a bill of particulars at this moment. I am not a lawyer, so probably I am not using the right term. But that has been a general complaint. and unless and until we can give you a true bill, we will pass that question over—unless your conscience is at work on you.

Admiral Solomons. I will say this, sir, that we are not yet in the Navy in the position of having a complete integration of budget formulation and accounting. We are working toward that as rapidly as we can. We are making significant progress in that regard, and 1 would say that perhaps we are 70 percent along the way. But it is one of our No. 1 projects to have a complete cycle beginning with justification and appropriation and supporting cost accounting straight through.

Senator Flanders. That I think covers the question. Has any system been developed whereby a team of qualified professional accountants might install or supervise the installation of uniform accounting systems to support title IV at all echelons?

Admiral Solomons. We have given consideration, sir, and have actually had some contact with some civilian firms with the idea of interesting them in taking up the matter of assisting in the installation of industrial funds. At the present time we have had no very strong indication on the part of these firms that they would be interested, except in a minor way.

We feel, sir, that it is almost an essential that each industrial installation tie directly to every other one so that in the overall accounting in that area, that there will be a uniform pattern.

We have developed a group within the Office of the Comptroller who thus far have been the ones to go into the installation to make the initial survey, to write the handbook, and if possible, to stay with that activity during we will say the crawling stage. And when they are able to walk, then they are on their own, except for such advice as they may need.

Senator Flanders. In that respect you are following a different procedure than that outlined for us by the Secretary of the Army yesterday who is making large use of outside consulting firms.

Admiral Solomons. That is correct, sir.

Senator Flanders. You consider that your own procedure is producing satisfactory results, but perhaps at a little slower pace?

Admiral Solomons. That is correct, sir.

Senator Flanders. You belong with the tortoise rather than the hare contingent.

Admiral Solomons. We would prefer not to be considered as a tortoise, sir, and we are making progress as rapidly as we feel we can on a sound basis, unless we were given sufficient funds to increase the size of our group.

Senator Flanders. How much attention has been given to the value of timely, objective, analytical progress reports for use by the Secretary in evaluating progress of operation? I emphasize the word "progress" because it would seem to be essential that the Secretary know from time to time how things are getting on instead of waiting to the end of the fiscal year and having good or bad news suddenly dumped on his desk. How are you getting on in keeping the Secretary continuously informed?

Admiral Solomons. We feel, sir, that through a system of routine reporting on a monthly basis, plus a system whereby when any program deviates appreciably from the anticipated or planned program, that we can keep him reasonably well informed. The timeliness of reporting in the Comptroller area, I think, is one of the real cruxes of whether or not the system is good. We have, for instance, this document which is classified

Senator Flanders. I can look at the cover.

Admiral Solomons. You can look at the interior also, sir, but since we are in an open hearing I would prefer no quotations from it— in which we statistically report the major programs.

Senator Flanders. So that process is being taken care of, you feel?

Admiral Solomons. That is correct, sir.

Senator Flanders. It is our understanding that the contract audit functions of the Department of the Navy are not vested in the Assistant Comptroller of the Navy, although other audit responsibilities are so vested. Do you not feel that that situation is an incorrect one and ought to be changed?

Admiral Solomons. Senator, the Secretary has already stated in his basic statement that he intends to transfer to the Comptroller of the Navy the Cost Inspection Service, which is to a large degree, the contract audit.

Senator Flanders. Do you believe 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 the Department?

Admiral Solomons. There, Senator, I would prefer this to be entirely personal and in no way reflecting the ideas of the Secretary because I have not discussed this particular matter with him.

Senator Flanders. It will be so recorded.

Admiral Solomons. It is my feeling, sir, that in the implementation of title IV there are five major pillars, you might call them, of comptrollership. There are budgeting, progress and statistical reporting, accounting, finance, and audit.

The audit function, it is termed internal audit in title IV, and we define internal audit as audit which is conducted by the personnel of the establishment as differentiated in a way from external audit, such as might be done by the General Accounting Office or by a firm who you might hire to conduct an audit.

Senator Flanders. But still internal audit might either be done under the direction of officials in charge of the program or might be done by a group of men directly responsible to the Secretary. The word "internal" does not quite describe the possibilities. What is your personal feeling, without committing the Secretary or anyone else, as to the desirable form which that internal audit should take?

Admiral Solomons. I feel, sir, that with an Assistant Comptroller in charge of overall audit as a function, under the Comptroller, and in view of the Comptroller's responsibility directly to the Secretary of the Navy, that that is a perfectly practicable and desirable manner of carrying out internal audit within the Navy.

If the Comptroller was not responsible directly to the Secretary, then I would have a different feeling in the matter.

Senator Flanders. I think we may excuse you, Admiral. We thank you. Assistant Secretary White has graciously agreed to come again this afternoon. We will recess until 2: 30. This hearing is now recessed.

(Whereupon, at 11: 55 a. m., the hearing recessed until 2: 30 p. m.)

AFTERNOON SESSION

Senator Flanders. The hearing will come to order. We have with us this afternoon the Honorable H. Lee White. The Secretary of the A.XT- Force, Mr. Talbott, is unable to participate in our hearings due to tlie fact that his official duties have taken him to Europe until later in the month. He has deputized Assistant Secretary of the Air Force H. Lee White to appear for him.

Secretary White has been living with the problem with which we are concerned since his appointment. His experience gained since assuming office and brought with him from civilian life are sure to be of great assistance to us. His remarks on title IV, the remarks of a man responsible in one department for its operation, will necessarily be extremely cogent. Secretary White has a prepared statement for the committee, which at this time I will ask him to read. Before he reads his statement, however, we have a short biographical sketch of him which we will place in the record at this point. (The document referred to is as follows:)

TT Lee White, Assistant Secretary Of The Air Force (management)

Born, August 13, 1912, Oswego, N. Y. Graduated from Hamilton College with B. A., 1934; Cornell Law School, LL.B., 1937; associated with the United States Casualty Co., New York City, 1937-38; associated with law firm of Pearis & Resseguie in Binghamton, 1938-40; and with the law firm of Mangan & Mangan, Binghamton, N. Y., 1940-43; partner in the law firm of Mangan & Mangan, from 1941 until he resigned in 1943; military service from 1943 to 1947; associated with the law Arm of Cadwalader, Wickersham & Taft, New York City, 1947; partner, 1949 until his resignation to became Assistant Secretary of the Air Force on February 17, 1953.

STATEMENT OF HON. H. LEE WHITE, ASSISTANT SECRETARY OF THE AIR FORCE; ACCOMPANIED BY BRIG. GEN. WALTER I. MILLER, DIRECTOR OF ACCOUNTING; H. E. RAMSEY, JR., DEPUTY COMPTROLLER; AND HYDE GILLETTE, DEPUTY FOR BUDGETING AND PROGRAMING, OFFICE OF THE ASSISTANT SECRETARY OF THE AIR FORCE FOR MANAGEMENT

Mr. White. Mr. Chairman, you very kindly asked the Secretary to discuss with your committee the status of comptrollership in the Air Force. He has asked me to represent him and express his regrets that circumstances beyond his control make it impossible for him to be here. As you stated, he is in Europe with General Twining making an inspection of Air Force activities in that area.

Under section 402b of title IV, the Comptroller of the Air Force, whether civilian or military, is under the direction and supervision of and directly responsible to the Secretary of the Air Force. At this point I would like to mention that that concurrent responsibility to the Chief of Staff is only with the permission of the Secretary of the Air Force. In other words, under the statute, as I read it, if the Secretary felt that the concurrent responsibility damaged in any way his ability to perform his functions, he could stop it with a stroke of the pen.

88982—54 7

By secretarial order dated April 4, 1953, I, as Assistant Secretary of the Air Force (Management), have been delegated with responsibility of directing and supervising the Comptroller of the Air Force, including all of the functions assigned to or delegated to that office. This to me covers the formulation, review, and execution of plans, policies, and programs contemplated under title IV. To assist me in my function as a financial management Assistant Secretary, I have two deputies, each with experience in his particular area of responsibility. These deputies have the greatest authority to act for me and have assumed a large degree of responsibility for close supervision and control over their respective areas of responsibility.

These deputies are: For budget and program management, Mr. Hyde Gillette; and for accounting and financial management, Mr. Robert Benson. I also consider the Comptroller of the Air Force, Lt. Gen. Charles B. Stone, and all of his staff, as being part of my personal office; and we have worked together since I have been here on that basis. My financial deputies, Mr. Benson and Mr. Gillette, and my Comptroller, together with his principal assistants, are all capable men and are working full time in an attempt to assure that good financial practices are put into effect and followed by the Air Force.

At this point and to establish the background picture of the implementation of title rV in the Air Force, I would like to cover briefly the growth of the comptroller function in the Air Force. Air Force comptrollership preceded the legislative requirements by some 3 years. These requirements, as set forth in the 1949 amendments to the National Security Act of 1947, prescribed comptrollership in the military departments which closely followed the Air Force organizational pattern and the concept which it was designed to implement.

This concept, reduced to its simplest terms, was to centralize the collection, recording, and analysis of operating information to insure that the various "managers"' of the Air Force had the best possible facts in the best possible form to guide their decisions. The inclusion in the present comptroller family of management analysis, statistical services, budget, finance, accounting, and audit has created within a single organization the responsibility as well as the capacity for the provision of integrated management information and advice to command and staff at all levels. As is true of a large business organization, comptrollership in the Air Force includes not only the provision of data and the handling of purely monetary aspects of the organization, but also the analysis and evaluation of information and the creation of a basis for management control necessary for Air Force managers.

I would like at this time to take up a little bit about our military and civilian personnel who are in the Office of the Comptroller. In general we are fortunate that we have been able to get officers and civilians to build and operate the comptroller system. At this time we have a total of about 32.000 military and civilians assigned throughout the Air Force possessing comptroller-tvpe skills. These include approximately 3,800 officers. 13.000 airmen, and 15,000 civilians. Of these civilians, over 3,300 hold positions comparable to those held by officers. This includes at Headquarters, USAF, the Deputy Comptroller. Assistant Comptroller. Assistant to the Director of Statistical Services, Associate Director of Accounting, and Associate Director of Budget.