"Naturally, the installation of such a plan will raise transition problems. A necessary step would be the rescission of present large balances of unexpended appropriations and the substitution therefor of annual ‘accrued expenditures' appropriations supplemented by contracting authority. The initial contracting authority granted should be adequate to cover existing contracts with suppliers and thus avoid material revision in existing contracts.

"The proposal for an expenditure budget will not alter the protection afforded the Government's suppliers under present appropriation practices. Contractual provisions can be made under which suppliers would be assured payment of their high 'starting load' and 'tapering off' costs, so that in the event of a contract cancellation or cutback they would be protected against loss from such action on the part of the contracting authority. Suppliers, when dealing with the Government, would thus be placed in a position equivalent to that in which they are at present.

"Adoption of this proposal will require administrative changes in the Government's budgeting and accounting procedures, particularly in the Department of Defense, and will require education of those concerned with the budgetary process and the working out of the precise mechanics.

"The proposal for an annual accrued expenditure budget would assure annual review of past and proposed performance under long lead-time contracts. That this is important is indicated by the statement of the Director of the Budget in October 1953 that as of July 1, 1953, '$81 billion of unfinanced appropriations existed as a claim against current and future income or borrowing. The contracts and commitments made as a result of these appropriations became in effect c. o. d. obligations against the Government.'"

Commissioner Clarence J. Brown made the following separate statement:

"I cannot fully accept Recommendation No. 7 to convert the congressional appropriations structure to an estimated annual accrued expenditures basis. This is a radical departure from a long-standing fiscal policy which would require widespread changes in our entire appropriations process. I am, therefore, unwilling to give it a blanket endorsement without the benefit of further study by appropriate committees of the Congress."

Commissioner James A. Farley made the following separate statement: "Theoretically these recommendations may be desirable from an accounting point of view; but I am not certain that put into effect they will produce the desired objectives.

"This report has been approached from the viewpoint of a cost accountant operating in a private commercial enterprise, in which goods and services are produced and sold for the avowed purpose of providing a profit to those whose capital is invested. That may be an appropriate concept for certain governmental operations which are similar to private commercial ventures and, in fact, is currently in use by many such governmental organizations as stated in the report; it does not seem to me, however, to be appropriate across the board to all Government activities and operations. Even where cost accounting is used, it does not necessarily provide a measure of the effectiveness of programs which are not primarily related to profit but to the performance of proper governmental functions. The transition to 'cost basis' accounting will require tremendous expense and inconvenience, and there is insufficient evidence that it will be universally workable and worthwhile.

"I am hopeful that the appropriate congressional committees to which this report is referred will very carefully examine and explore the possible effects of these recommendations."

Commissioner Chet Holifield made the following separate statement:

"I am concerned about the potential effects of certain Commission recommendations in the report on Budget and Accounting and therefore make these qualifying observations.

"The report tends to exalt the role of the accountant in Government just as the Commission Report on Legal Services tends to exalt the role of the lawyer in Government.

"Not only is the Bureau of the Budget to be expanded and vested with active management functions, including the placement of Bureau agents in major Government agencies, but special emphasis is given to accounting organizations. A new office of Assistant Director of Accounting would be established in the Bureau of the Budget to develop and promulgate accounting methods.

"Comptrollers would be established in each principal agency, to be selected with the guidance of the Assistant Director of Accounting, who would also

help in the selection, training and retention of personnel in the accounting organizations of the various agencies.

"The basis for preparing Government budgets and for justifying appropriation requests would be drastically revised, with emphasis on cost and accrual accounting and presentation of budget requests in broad categories.

"Whether these technical recommendations actually would tighten congressional control of the public purse and bring about improvements in management and greater economies, as claimed, it is difficult to determine. Cost and accrual accounting may be useful in certain agencies engaged in procurement, lending and other business-type operations, but I do not see how these accounting techniques could be applied universally in the Government with beneficial results.

"Many Government operations and services do not lend themselves to commercial accounting treatment, nor can their value to the public always be measured by cost criteria. The Government is not a profit-making organization organized around sales to a market. The performance of its functions does not have the common denominator of dollar returns which can be compared with costs.

"The end result of the Commission's recommendations may be formal consistency in accounting principles rather than actual gains in economy and efficiency."

[H. R. 8002, 85th Cong., 2d sess.]

AN ACT To provide for improved methods of stating budget estimates and estimates for deficiency and supplemental appropriations

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 201 of the Budget and Accounting Act, 1921, as amended, is further amended by adding the following new subsections:

"(b) Whenever the President determines there has been established a satis factory system of accrual accounting for an appropriation or fund account, each proposed appropriation thereafter transmitted to the Congress for such account pursuant to the provisions of this Act shall be accompanied by a proposed limitation on annual accrued expenditures.

"(c) Whenever an appropriation is subject to a limitation on annual accrued expenditures, there shall be charged against the limitation the cost of goods and services and other assets received, advance payments made and progress payments becoming due, and the amount of any other liabilities becoming payable, during the fiscal year concerned.

“(d) At the end of the fiscal year concerned, any unused balance of the limita`tion on annual accrued expenditures shall lapse.

"(e) Any liabilities becoming payable during the fiscal year concerned but for which payment is not made during that year may be paid, if not otherwise contrary to law, in a subsequent fiscal year or years to the extent they are within the limitation on annual accrued expenditure for the fiscal year concerned.

"(f) Any obligations incurred during the fiscal year concerned or in prior fiscal years which do not result in liabilities becoming payable during the fiscal year concerned shall be charged against the limitation on annual accrued expenditures for any succeeding fiscal year in which such obligations may result in liabilities becoming payable.

"(g) Nothing in subsections (b) through (f) of this section shall be construed to change existing law with respect to the method or manner of making appropriations or the incurring of obligations under appropriations.”

SEC. 2. (a) It shall be in order to provide in any bill or joint resolution making appropriations, or in any amendment thereto, limitations on annual accrued expenditures covering amounts becoming payable as a result of obligations incurred both in the fiscal year concerned and in prior fiscal years, and provisions pertaining to the availability of any appropriations or funds previously made available.

(b) The provisions of subsection (a) of this section are enacted by the Congress

(1) as an exercise of the rulemaking power of the Senate and the House of Representatives, respectively, and as such they shall be considered as part of the rules of each House, respectively, or of that House to which they specifically apply; and such rules shall supersede other rules only to the extent that they are inconsistent therewith; and

(2) with full recognition of the Constitutional right of either House to change such rules (so far as relating to the procedure in such House) at any time, in the same manner, and to the same extent as in the case of any other rule of such House.

SEC. 3. This Act, and the amendments made thereby, shall cease to be in effect April 1, 1962.

Passed the House of Representatives March 6, 1958.
Attest:

RALPH R. ROBERTS, Clerk.

[Congressional Record, March 6, 1958]

Mr. WIGGLESWORTH. Mr. Chairman, I offer a substitute amendment for the amendment offered by the gentleman from New York [Mr. Taber].

The Clerk read as follows:

"Amendment offered by Mr. Wigglesworth as a substitute for the substitute amendment offered by Mr. Taber: Strike out all after the enacting clause and insert in lieu thereof the following: "That section 201 of the Budget and Accounting Act, 1921, as amended, is further amended by adding the following new subsections:

(b) Whenever the President determines there has been established a satisfactory system of accrual accounting for an appropriation or fund account, each proposed appropriation thereafter transmitted to the Congress for such account pursuant to the provisions of this Act shall be accompanied by a proposed limitation on annual accrued expenditures.

""(c) Whenever an appropriation is subject to a limitation on annual accrued expenditures, there shall be charged against the limitation the cost of goods and services and other assets received, advance payments made, and progress payments becoming due, and the amount of any other liabilities becoming payable, during the fiscal year concerned.

(d) At the end of the fiscal year concerned, any unused balance of the limitation on annual accrued expenditures shall lapse.

"(e) Any liabilities becoming payable during the fiscal year concerned but for which payment is not made during that year may be paid, if not otherwise contrary to law, in a subsequent fiscal year or years to the extent they are within the limitation on annual accrued expenditures for the fiscal year concerned.

**“(f) Any obligations incurred during the fiscal year concerned or in prior fiscal years which do not result in liabilities becoming payable during the fiscal year concerned shall be charged against the limitation on annual accrued expenditures for any succeeding fiscal year in which such obligations may result in liabilities becoming payable.

"""(g) Nothing in subsections (b) through (f) of this section shall be construed to change existing law with respect to the method or manner of making appropriations or the incurring of obligations under appropriations."

"'SEC. 2. (a) It shall be in order to provide in any bill or joint resolution making appropriations, or in any amendment thereto, limitations on annual accrued expenditures covering amounts becoming payable as a result of obligations incurred both in the fiscal year concerned and in prior fiscal years, and provisions pertaining to the availability of funds appropriated in prior fiscal years.

"(b) The provisions of subsection (a) of this section are enacted by the Congress

"(1) as an exercise of the rulemaking power of the Senate and the House of Representatives, respectively, and as such they shall be considered as part of the rules of each House, respectively, or of that House to which they specifically apply; and such rules shall supersede other rules only to the extent that they are inconsistent therewith; and

"(2) with full recognition of the constitutional right of either House to change such rules (so far as relating to the procedure in such House) at any time, in the same manner and to the same extent as in the case of any other rule of such House.

"SEC. 3. This Act, and the amendments made thereby, shall cease to be in effect April 1, 1962.'"

Mr. McCORMACK (interrupting the reading of the amendment). Mr. Chairman, this substitute has been printed in the Record, I understand. Is that correct?

Mr. WIGGLESWORTH. Yes; it was printed at page 3006 of the Record.

Mr. McCORMACK. Mr. Chairman, I ask unanimous consent that further reading of the substitute be dispensed with and that it be printed in the Record at

this point.

The CHAIRMAN. Is there objection to the request of the gentleman from Massachusetts?

There was no objection.

The CHAIRMAN. The gentleman from Massachusettts [Mr. Wigglesworth] is recognized for 5 minutes in support of the substitute.

Mr. BROWN of Ohio. Mr. Chairman, I ask unanimous consent that the gentleman from Massachusetts may be permitted to proceed for 5 additional minutes. The CHAIRMAN. Is there objection to the request of the gentleman from Ohio? There was no objection.

The CHAIRMAN. The gentleman from Massachusetts is recognized for 10 minutes.

Mr. WIGGLESWORTH. Mr. Chairman, as I stated yesterday, I offer this substitute amendment in the spirit of compromise, in the belief that every Member of the House today desires to obtain the best possible control over the obligations of this Government and the best possible control over the expenditures of this Government.

My amendment is designed to do three things:

In the first place, it eliminates completely from the picture the proposal in H. R. 8002, that, as far as obligations are concerned, we go back to the practice of contract authority which we abandoned some years ago as unsatisfactory.

In the second place, it accepts the balance of the proposal putting the Congress in a position, if it so desires, to place an annual limitation on expenditures in terms of accrued expenditure.

In the third place, it incorporates language to carry into effect the proposal just made by the distinguished gentleman from New York [Mr. Taber], which, in effect, waives points of order against rescissions, transfers, or reappropriations. I believe all of us feel that this is a very desirable thing.

In view of what has just been said, I would like to quote again two paragraphs, this time from an analysis of this amendment as distinguished from the original H. R. 8002, by the Bureau of the Budget.

Referring to subsection (d), to which the gentleman from New York referred, I quote as follows:

"Subsection (d) provides that the unused balance of the limitation on annual accrued expenditures"-that is, on accrued expenditures, not on obligations"shall lapse at the end of the fiscal year concerned. Receipt of goods and services under the same appropriation account in a subseqnent year would be subject to a new limitation which Congress would establish after reviewing performance for the prior year. The authority to receive goods and services and incur other liabilities would thus be controlled on an annual basis in a manner which would automatically entail a review by the Congress of unobligated balances of prior appropriations."

Referring to subsection (e), I quote as follows:

"Subsection (e) provides for making payment for goods and services received in a particular year but not paid for in that year. If such goods and services were within the limitation on annual accrued expenditures for the fiscal year in which they were received, they could be paid for in the next fiscal year without further congressional action, thus insuring that no contractor or supplier would be denied payment for goods and services actually delivered or rendered in accordance with the law and the terms of his contract."

Mr. Chairman, the Budget Bureau believes that any misgivings which contractors or suppliers may have had under the original bill, H. R. 8002, should be largely, if not wholly, eliminated if we adopt the proposed amendment.

I offer this amendment, Mr. Chairman, because I cannot feel that the proposal in the original bill, H. R. 8002, to go back to contract authority is satisfactory. It was discarded because it was believed to be unsatisfactory in the control of overall obligations.

I offer this amendment, Mr. Chairman, because I do not feel that the present system is satisfactory. I have long felt that it was unsatisfactory primarily because it had served to deprive the Congress of direct control over our annual expenditures to a very large extent.

As I pointed out yesterday, we are, in effect, making huge deposits in the name of this or that agency and then saying to the agency concerned, “You go ahead

and draw against this deposit whenever you want to, and to whatever extent you want to. The expenditure is in your hands. We wash our hands of it." Furthermore, there is the danger that some of these huge sums will be reprogramed without proper control either by the Congress or by the Bureau of the Budget.

The fundamental question, in my opinion, is the question: Shall the Congress of the United States control expenditures as well as appropriations? Shall it control expenditures as it always used to do until the time when we departed from the contract-authority practice, or shall we leave the control over about one-third of our expenditures to executive agencies of the Government?

I think we should be in a position to control expenditure, and I think we should impose a reasonable limitation in the absence of exceptional circumstances. This amendment has been carefully considered by the Bureau of the Budget, Mr. Chairman.

It is endorsed by the Bureau of the Budget. It is endorsed by the Comptroller General. It is endorsed by the Secretary of the Treasury.

It is supported, generally speaking, by the administration, and it is acceptable to the so-called second Hoover Commission that proposed this legislation originally.

In my opinion, it is a fair compromise for its consideration on this basis. Mr. FASCELL. Mr. Chairman, will the gentleman yield?

Mr. WIGGLESWORTH. I yield to the gentleman from Florida.

Mr. FASCELL. As I understand it, the gentleman's amendment would preserve the accrual system in the transmittal of the budget; is that correct?

Mr. WIGGLESWORTH. It conforms to the accrual basis of accounting, which is already called for by law and which, I understand, has already been put into effect in about 100 appropriations, or 20 percent of the total number that we have to deal with.

Mr. FASCELL. And it removes the contract authority which is in the basic proposal and substitutes in lieu thereof obligational authority as in the present system.

Mr. WIGGLESWORTH. As far as the making of appropriations or the incurring of obligations under appropriations is concerned, there is no change. The present practice is retained, and we thereby eliminate the principal objection which has been raised in the past by those most hostile to H. R. 8002.

Mr. FASCELL. And your amendment sets up and provides the mechanism by which annual limitations on expenditures could be placed.

Mr. WIGGLESWORTH. That is correct.

Mr. FASCELL. It also includes all of the things that the Taber amendment tries to do.

Mr. WIGGLESWORTH. It is designed to include fully the Taber proposals, which I strongly endorse.

Mr. FASCELL. I thank the gentleman. If the gentleman will yield further, I would like to announce that the proposed amendment has been considered by the committee bringing out the legislation, and I am authorized to say that it is accepted on this side.

Mr. WIGGLESWORTH. I thank the gentleman.

Mr. McCORMACK. Mr. Chairman, will the gentleman yield?

Mr. WIGGLESWORTH. I yield to the majority leader.

Mr. McCORMACK. This is simply permissive legislation.

Mr. WIGGLESWORTH. It is just as permissive and just as mandatory as the original H. R. 8002.

Mr. McCORMACK. Exactly.

Mr. WIGGLESWORTH. The Congress can work its will in the light of the proposals from the Executive.

Mr. McCORMACK. And if the President should send up a budget estimate based on this law, the Congress does not have to adopt it?

Mr. WIGGLESWORTH. That is my understanding.

Mr. McCORMACK. Like the chairman of the committee handling the bill, the gentleman from Florida [Mr. Fascell] I thoroughly agree with the amendment offered by the gentleman from Massachusetts [Mr. Wigglesworth]. I think it not only clarifies it, but strengthens the bill, and at the same time it strengthens the hands of the Congress to a very significant degree. I am in favor of the gentleman's proposal, and hope the amendment will be adopted, and then I also favor the passage of the bill.

Mr. WIGGLESWORTH. I thank the gentleman.