The telephone on her desk costs $5.25 at the start and $97.20 annually. And that rug covers the 150 square feet she would occupy in a Government constructed and operated Federal office building at a space cost, amortized over a period of 50 years, of $507 annually.

The initial cost of setting up this secretary then totals $1,492.25. The annual cost, including the depreciated value of furniture and equipment, plus space and telephone service for this one secretary, is $702.20.

The GS-5 secretary has to be paid, too, and her starting salary is $4,345. Adding that to the annual cost of housing this employee and furnishing her the tools to work with, the total is $5,047.20. These figures do not include the Government's contributions to the retirement fund, hospitalization premiums, and other important fringe benefits. It should be noted, too, that a GS-5 can receive increases, in that grade, which brings her salary up to $5,335, representing a possible percentage increase of almost 23 percent within that grade.

Sticking to round numbers, we divide the $821 taxpayer's average annual payment into that $5,047, and it is very plain that it takes six taxpayers to keep one GS-5 secretary on the Government payroll for 1 year.

Amortized annual cost for a GS-5 clerk is $424.88 and his annual base salary also is $4,345. It takes 5% taxpayers to keep him going.

TAKES 18 TAXPAYERS TO SUPPORT A GS-15

Then there is a typical GS-15, up the scale, in executive status. He gets 300 square feet of space, quality furniture, including a conference table, rug, and draperies. Amortized annual cost for this GS-15 is $1,010. His base salary is $13,730 and it takes 18 taxpayers to keep him on the job. The figure for a GS-15 does not include the secretarial help which almost always is assigned to executives of this pay scale sometimes clerks as well as secretaries.

So it is plain to see from these examples that it takes a lot of taxpayers to keep each Federal employee on the payroll. I believe it brings out emphatically the need to look most carefully at the work these civil service employees do and to be certain that it is essential. We were pleased to note during our investigation for this hearing that the Bureau of the Budget is thinking along these lines, too. Director David E. Bell now is launching a "productivity measurement" test on an experimental basis, not dissimilar from the methods used in private industry to measure employee productivity. If the tests prove helpful, I understand he hopes to make "productivity measurement" a major project in the Federal agencies.

We open our hearing today with the Department of Commerce, a department with 31,233 employees, as of June 30, 1962, an annual overall budget for 1962 of $3,822,205,900, and an average monthly payroll during 1962 of $17,229,782.

This Department, an important factor in our Nation's business community, is headed by a most distinguished Secretary, a man who has done exceptionally well in operating private business efficiently and who has expressed that same dedication toward efficiency in our Government and specifically in the Department of Commerce. Without further comment, I introduce the former Governor of North Carolina, our Secretary of Commerce, Hon. Luther H. Hodges.

89028-62-pt. 1—2

STATEMENT OF HON. LUTHER H. HODGES, SECRETARY OF COMMERCE; ACCOMPANIED BY HERBERT W. KLOTZ, ASSISTANT SECRETARY FOR ADMINISTRATION; JOHN H. PRINCE, DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION; DR. G. P. CRESSMAN, DIRECTOR, NATIONAL METEOROLOGICAL CENTER, WEATHER BUREAU; REAR ADM. H. ARNOLD KARO, DIRECTOR, COAST AND GEODETIC SURVEY; REX M. WHITTON, FEDERAL HIGHWAY ADMINISTRATOR, BUREAU OF PUBLIC ROADS; LAWRENCE E. IMHOFF, DIRECTOR, OFFICE OF BUDGET AND MANAGEMENT; JOHN R. DELMORE, DIRECTOR, OFFICE OF INTERNAL AUDIT; DR. S. N. ALEXANDER, BUREAU OF STANDARDS; WILLIAM I. MERKIN, DIRECTOR, OFFICE OF ADMINISTRATION, BUSINESS AND DEFENSE SERVICES ADMINISTRATION; AND ALFRED T. MESCHTER, ADMINISTRATOR, GREAT LAKES PILOTAGE ADMINISTRATION

Mr. HODGES. Thank you, Mr. Chairman, and gentlemen.

Before I start my very brief formal remarks I would like to thank you as a taxpayer for this analysis that you have made. I would hope that the newspapers would carry this all over America; particularly how much it takes to keep any of us here on the Federal payroll. I think that's one of the most significant figures I have seen. I know it has been applied to Congressmen; it certainly should be applied to the GS-5 and GS-15.

I commend you, sir, for bringing this out.

May I take an exception: So there will be no misunderstanding, when you say the Department of Commerce has an annual budget of $3.8 billion, that is technically correct; but it sounds like you have that much money for people. Three billion dollars plus is from a highway trust fund for allocation to States, so it would not be quite appropriate to set aside $3 billion. I don't know why anybody should set aside $3 billion in a Federal budget, but I think we would have a little different approach to what we are talking about. Even so, Mr. Chairman, it's a lot of money.

I welcome this opportunity to appear before your committee to discuss the operations of the Department of Commerce. Let me say first that I am aware of the deep interest of this committee in promoting effective and efficient government operations, and that I will welcome your suggestions and criticisms regarding Commerce operations. I would like to tell briefly what we have done, also what we propose to do to improve the organization and management of the Department. A number of significant changes have been made in our programs and our operating methods which I shall mention.

While I think we are making progress, we have much more to do. During my tenure as Secretary of Commerce, we will continue as forcefully as we can to increase the effectiveness of our organization. We will continue close scrutiny of each area of responsibility to measure its value in relation to the job to be done. We will particularly look for jobs started many years ago which may no longer be necessary or which can be modified to accomplish better our present requirements.

I feel that our employees as a whole are conscientious and desire to do worthwhile and effective tasks. Our task is to see that the program, leadership, and inspiration is given to them. Much of the difficulty of getting full efficiency from our employees comes from our failure to give proper leadership and direction.

For example, we are now making a systematic search of the Department for employees with demonstrated potential for management leadership and ability. We want to give these employees greater opportunities to make a contribution to what we think are useful and inspiring programs in the Department. I believe we will find some outstanding talent among these employees, Mr. Chairman. I looked over a list of those yesterday.

We need to give more attention to the development of production standards and work measurement methods. There are many areas readily susceptible to performance and production standards. In other areas it will be more difficult to apply standards. I believe all employees will welcome the opportunity to know more precisely what is expected of them and would respond to the challenge.

The Department has been working for some time in some of these areas, and we intend to accelerate our efforts. For example, the Census Bureau's production standards program is a dramatic success story: a gross savings of 64,000 man-hours valued at $128,000 in 1960. The program was stepped up last year with 239,000 man-hours saved and $452,000; and 249,000 man-hours saved and $554,000 in 1962. We will extend production standards to other areas as fast as practicable. The Department has been given many activities and heavy responsibilities, with a complexity of required skills. Within our 15 major bureaus and offices we have programs to promote industry, business, and economic growth of the Nation; we have programs and leadership responsibilities with respect to U.S. transportation requirements; and we also have a number of important responsibilities to fulfill in science and technology.

Last year, the Congress gave the Department two new programsthose carried out by the Area Redevelopment Administration and the U.S. Travel Service. We have made good progress in these two new

areas.

The Area Redevelopment Administration has already approved more than $32 million in loans and grants for 76 projects which promise to create more than 17,000 new jobs. Our program is now accelerating, since much of the local planning has been done.

The Travel Service, Mr. Chairman, is moving rapidly after the first few months of organization and staffing. Personnel in nine oversea areas, temporarily operating out of embassy or consulate space, are selling America to foreign tourists to help reduce the imbalance of our international accounts. Our gain in visitors from Europe in the first 4 months of 1962 has increased 21 percent over the same period of 1961. France is up 52 percent, Switzerland up 25, Brazil up 21, and Australia up 19 percent. We hired only 58 additional employees for this Travel Service, of whom 23 were hired abroad. It is interesting to note that we had over 2,500 applicants for our new U.S. Travel Service agency.

With respect to other programs, we are doing several things. First, with a very limited task force we are examining each old program to

ones.

see if it needs reorientation and updating, and we are starting new For example, we are desperately trying to help solve the U.S. balance-of-payments problem. This requires new and expanded efforts to boost U.S. exports. Mr. Draper Daniels, who was just recently appointed by the President as National Export Expansion Coordinator has been assigned to Commerce and is on the job to push export markets. He has a Government-wide responsibility for coordinating an imaginative export drive. Our goal for next calendar year is a $2 billion increase in exports, or about 10 percent over our present figures.

Another example of urgent priority and probably the most important single question facing the Department of Commerce today is that of promotion of economic growth of the United States. All bureaus and offices of the Department have been directed to find additional ways to advance this objective. There is on each of our desks a sign which asks: "Will it promote economic growth?" We want to do everything possible to reorient statistical and economic information to be of greater utility to business and industry in expanding their production and employment levels, and in turn promoting the Nation's economic growth. We are trying to assist in the resolution of problems of major industries, such as textiles, transportation, and other aspects of the civilian technology.

Mr. Chairman and gentlemen, we have in the past proposed to several committees of the Congress that efficiency and economy of Government could be aided if some leeway were given the Department of Commerce and I expect other departments feel the same way-to transfer, for example, say up to 10 percent, of salaries and expense funds available to the Department from one appropriation area to another. If this discretionary authority were given to a department, I am confident that we could save some money. As new requirements arise, or some programs need to be emphasized or expanded, and as we take a critical look at all of the Department programs and funds to judge their relative importance one to the other, we should then be able to shift limited amounts of funds to meet new program needs at the expense of lesser priority programs wherever found necessary or desirable. As it is now, adjustments can only be made if the activities are within one and the same appropriation. I believe this idea is worthy of consideration.

But even without more budget or appropriation flexibility we are doing some helpful things. For example, we have a new internal audit group which was set up last year with funds approved by the Congress. It is a small but topflight group of only five professional auditors and one secretary, but it is showing real results. Mr. Chairman, this is attached to the Secretary's office, not out in the agency.

Parenthetically, I believe in a strong and effective audit program. It can be very helpful to top management. One of its jobs is to look over the shoulders of individual bureau audit staffs to see that they are hiring and promoting only competent auditors, that they are making worthwhile comprehensive audits of operations, and are free to report objectively any deficiencies they may find.

The freedom to look for and report deficiencies is most important, because another job that the audit group in my office does is to review the bureau audit reports and to let the Secretary's Office know of any

major deficiencies that exist. We have found this to be a very effective tool in administering the Department's affairs. In less than a year the Audit Office has completed or has in process 11 separate examinations of the Department's activities to see if our bureaus and offices are meeting the goals set by the Congress and the President. A review of the audit and inspection operations of the Bureau of Public Roads revealed the need to strengthen their audit and inspection programs. As a result, we have realined the Bureau of Public. Roads audit organization to do a more effective job. This change will assure the independence of the auditors from those who are being audited, achieve greater objectivity in reporting and place greater responsibility in the audit group for program development, professional qualifications, and priority of effort.

Additionally, an Office of Rights-of-Way was set up to give increased attention to State practices in the acquisition of rights-of-way. I am sure you are aware, as we are, of the scandals that have occurred in the highway program, particularly those concerning right-of-way and construction inspection. We intend to do a much more thorough job with the realined audit and right-of-way set up at Public Roads to ferret out these situations faster so that timely and remedial action can be started.

Another example of the work of the audit group is the recent review they made of the internal audit function in the Maritime Administration. They found that the maritime audit program was limited to a narrow checking of the accounts and fiscal records of the Administration. Further, that a significant part of the time of some auditors was devoted to work assignments unrelated to audit functions. The Administration has been asked to broaden the audit program, improve organization to achieve independence and objectivity in audit reporting, and to strive for improved professional competence in the staff. The Administrator responded promptly and appropriately to our recommendations.

The internal audit staff is reviewing presently several organization components of the Department. The whole international area in conjunction with the Business and Defense Services Administration is being studied to make sure that we do not have any duplication or overlapping functions and that all the resources allocated to these organizations are being effectively used.

Finally, the audit staff, under the Assistant Secretary for Administration, has been asked to organize a program and borrow-and borrow the necessary staff within the Department to make a manpower study of all segments of the Department. We want to know, to the best of our ability, that all operations in the Department are serving an essential purpose and are being conducted in an efficient

manner.

Mr. Chairman, and gentlemen, this is a monumental task. We do not expect immediate or spectacular results, but, within the resources to do the job, we expect to satisfy ourselves that all employees in the Department are working on jobs that are needed to fulfill the missions and goals of the Department. Any job that is not needed will be abolished. Any employee who can be more usefully employed on some other job will be moved.