trolling it, and appoint an assistant secretary to handle the work of the present commission? For instance, would he have the power to take the Federal Trade Commission and put it in the Department of Commerce, abolish the position of commissioners, and appoint an assistant secretary to look after the work of the Federal Trade Commission?

Mr. BROWNLOW. I could not answer that question technically. Representative COCHRAN. I am talking to you about the proposed.

bill.

Mr. BROWNLOW. I do not know whether it goes to that extent, but I think it does.

Representative COCHRAN. It does, in my opinion. It gives the President that power?

Mr. BROWNLOW. It would give him that power. In the case of some agencies perhaps that would be a power he would recognize. Of course, all this power would be exercised with due regard to responsibility. In the case of some very small agency perhaps it might go to the extent of putting the whole thing under his department. Even now, we have these regulatory functions under departments, Mr. Cochran, and they seem, so far as we are able to discover, to work about as well as in any other way.

Representative COCHRAN. I am not talking about the merits now, I am talking about the power in the proposed bill. In your set-up you provide for practically the abolition of the Comptroller General and the General Accounting Office, you provide that the settlement of claims shall go to the paying agency, the Treasury Department. Mr. BROWNLOW. Mr. Gulick, will you answer that?

Mr. GULICK. I have not heard the completed question. He has not finished his question.

Representative COCHRAN. You provide that the settlement of claims shall be transferred to the Treasury Department?

Mr. GULICK. That is correct.

Representative COCHRAN. That is the paying agency, and it is going to settle the claims.

Mr. GULICK. We provide that they shall settle the claims in the Treasury. The actual expenditure will be made in the spending department. The administrative audit will be conducted in the Treasury, in a single office, instead of in the offices of six auditors, as we had been doing up until 1921; that the audit will be made after the expenditure has been incurred under an independent auditor, the Auditor General.

Representative COCHRAN. Now, take for instance the case where the audit is going to be made after the money is paid. Assume that the Auditor General, or whatever you are going to call him, finds that the money was illegally spent and he reports that to the Congress; is the Congress going to be the collecting agency and get the money back? Who is going to get it back?

Mr. GULICK. It will be just as we did up to 1921.

Representative COCHRAN. You will have an auditor for each department? That is what we had in 1921.

Mr. GULICK. First, the Treasury will make the audit and if they have to go to court over it it will be handled by the law department of the Government.

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Representative COCHRAN. The report of the Comptroller General says that he has collected and placed into the Treasury, I think, some $65,000,000 that was illegally spent. You say the Treasury Department will get that money back?

Mr. GULICK. Yes.

Representative COCHRAN. The accounting records are going to be kept with the Auditor General?

Mr. GULICK. The accounting records will be kept in the Treasury. The auditor will be, under the plan which we suggest, precisely what the auditor is in any big business concern, where you have an independent check-out of the administration from the outside by an individual who has no conceivable part in the machinery of administration. It was the feeling, I think, of many at the time that the Budget Accounting Act was enacted that that was the objective which was sought in that act. I remember that the testimony shows that many of those who testified at that time said that this will work satisfactorily, provided we do not get mixed up between audit and control, but as things have worked out that office has developed more and more on the side of control.

Representative COCHRAN. Is it not a fact, when you speak of control, that the disbursing officer, under the terms of the act, goes to the Comptroller General and asks the Comptroller General, "Am I permitted, under the provisions of this law, to spend this money for this purpose?" The Comptroller General does not take control; he simply says, "Yes", or "No." If the law is not worded so it will permit the expenditure the Comptroller General will say so.

Mr. GULICK. I think, in practice, what has been developed in the Comptroller General's office is actually control, and many of the administrators will testify to that. Their methods of operation will indicate that that is the fact, that every department in Washington now mainains a diplomatic agency with a large crew of men that spend their time going over to the accounting office to get a prior decision. So, you have a department head making the decision; then you have the Comptroller General making the decision as to going ahead on a given proposition.

Representative COCHRAN. Congress set up the Accounting Office under the Comptroller General. It was set up as an agency of the Congress, not as an agency of the executive branch of the Govern

ment.

Mr. GULICK. That is right.

Representative COCHRAN. Therefore, your agency abolishes the agency of the Congress.

Mr. GULICK. No. There are a great many matters of accounting which are just as technical as you find matters in law, or in medicine. One of the highly technical problems in accounting is the relationship of audit and control. Every auditor and every commercial accountant, C. P. A., will agree that you cannot mix control and audit without utterly destroying audit in the process.

Just to put it in very simple terms, the man who inspects goods that are woven at a loom, to see whether the goods should pass and should be sent out, cannot stand beside the weaver and give him advice as to how to lay on the threads. The minute he does that he has participated in the weaving of the goods, and then he cannot come along later and inspect it.

The same thing applies to business in the matter of accounting. If you have a man set up there and say, "Yes; go ahead and spend this money," and then he is consulted on something else and he says, "Yes; go ahead and spend the money," or he says, "No; do not do that," he has assumed the responsibility for administration.

Representative COCHRAN. Let me ask you this: Is it not better for Congress to write a law not to suit a Government agency that wants to spend it as it sees fit, but to spend money as Congress desires it to be spent?

Mr. GULICK. On the broad questions of conditions that are to be laid down, yes; but once those conditions have been determined, once the Congress has acted on an appropriation, which it has every constitutional right to withhold under our system, once they have acted then comes the job of administration. You have got to decide to do this or not to do that, you have got to buy Government equipment, you have got to rent quarters, but then the process is administration.

Representative COCHRAN. You would not deny the Congress the right to limit appropriations?

Mr. GULICK. No.

Representative COCHRAN. When the Comptroller General limits the expenditure of a certain sum of money that Congress intended for a given purpose, why should not the Congress be criticized if you are going to criticize anyone? Congress laid down the law, not the Comptroller General.

Mr. GULICK. That kind of limitation the Congress cannot exercise constitutionally. There is a very interesting case in the New York State courts where the legislature endeavored to establish exactly that kind of control over the spending of money, and the Court of Appeals, by unanimous decision, held that was a violation of the American constitutional structure of the separation of powers. The legislature makes the appropriation, establishes the conditions for the carrying out of that thing, but this business of deciding from day to day what you are going to do, how you are going to do it, that is administration, and that is within the scope of the power which the Constitution covers when it says "The Executive power."

Representative COCHRAN. Do you feel that if we put a limitation upon an appropriation bill that this money should not be expended for the specific purpose, that the Congress is going beyond its powers?

Mr. GULICK. No.

Representative COCHRAN. Then, if the Comptroller General sees that that limitation is carried out he should not be criticized, but probably Congress should be criticized for putting the limitation on if criticism is justified.

Mr. GULICK. The making of day-to-day decisions in advance of the expenditure of money carries a man directly into administration. The increasing practice under the act which we now have has been for the Comptroller General's office to encourage all of the departments to come on over and get decisions on all of their points in advance. Now, a few departments, as you know, have refused. They said, "We cannot do that and carry on; we cannot carry on with the job when we have such delay. We have to postpone action.

We just cannot do our work if we have to consult the auditor on every decision that is made and get this type of approval."

The CHAIRMAN. Just a moment. The imposition of a limitation is a legislative act?

Mr. GULICK. That is correct.

The CHAIRMAN. Congress, within the necessary limits of the Constitution, can impose any limitation it sees fit with respect to the expenditure of funds, but after it has imposed the limitation the expenditure is an executive function and not a legislative function.

Mr. GULICK. And if there is an effort to confuse that, then the responsibility of the executive is lost; you cannot hold anybody responsible.

The CHAIRMAN. And the responsibility of the Congress is lost, too. Senator BYRNES. Has the plan that you suggest been administered of the States of the Union?

in
any
Mr. GULICK. Yes.

Senator BYRNES. What States?

Mr. GULICK. Massachusetts, Maine, and Virginia.

Senator BYRNES. The legislative branch of the government having this control over the auditing of the expendtures by the administration, within the limitations set forth in the law?

Mr. GULICK. That is right.

Mr. BROWNLOW. Illinois, also.

Senator O'MAHONEY. Now, let me ask you to give a specific example of the difficulty that you want to avoid.

Mr. GULICK. All right. Some months ago I cannot give you the exact date the Post Office Department needed quarters. The Treasury Department proceeded to get the quarters. Negotiations were carried on for the leasing of a private building for use by the Post Office. The original demand on the part of the owner was in excess of the 15 percent of the valuation of the property, as laid down by congressional rule with reference to the rental of properties, so the Treasury Department negotiated, got the amount down to a reasonable amount, which they considered was within the 15 percent of the capital value of the property. The contract was sent over to the Comptroller's office. The Comptroller said, "No; we do not agree with you as to what the full value of this property is; therefore you may not sign the lease." The basis of that was that they took the assessed value as it appeared on the assessor's books in this particular community, and I think you gentlemen all know there are few assessed values in the United States that show the value of the property, but that was held up for months while the Post Office Department was in need of quarters. Finally, 3 months after the period of the negotiations on the lease, the Comptroller's office said, "Yes; you can go ahead and sign it." Now, there was the case of the administrative officer, who knew the necessity for the space, making the investigation, exercising the judgment within the rules laid down by the Congress, namely, you must not pay more than 15 percent; he gathered the material, brought it in, but his decision was not enough; they had to have another decision from another man, and this other man studied the thing, he had no particular interest in the necessities of the Post Office Department, he did not have men in the field gathering this material, but, just on the basis of the slight information that he had, his decision had to be made.

Representative GIFFORD. Then if the Post Office Department procured a lease and afterward they themselves felt the lessors ought to be released because the Government did not pay enough for it, perhaps because of the growth of the community and that sort of thing, if the Comptroller General is out of the picture they could cancel that lease at will, could not they, under your plan?

Mr. GULICK. Yes.

Representative GIFFORD. The Comptroller General has held that the Government held an equity and forced them to live up to the provisions of the lease in all cases we know of. In the proposed legislation, in all cases where the Post Office Department may see fit, they may relieve lessors in the matter of contracts.

Mr. GULICK. Now, that release can be granted by the Comptroller; is that correct?

Representative GIFFORD. No; the Comptroller himself says, "The law is plain. The Government owns an equity."

Mr. GULICK. I was thinking of the case in Vermont in which the Comptroller granted $22,000 increase over a bid which had been made.

Representative GIFFORD. Yes; in the Post Office that is correct; I grant they get around it by building an addition in the Post Office Building and then increase the rent to such amount as the Comptroller will allow.

Mr. GULICK. Your question raises this point, which I would like to deal with: What would happen if the Post Office went ahead and signed that contract for an improper amount under this scheme which we suggest? Well, the Auditor General would be making a continuous audit. That is what we call in nontechnical terms a hot audit, as these transactions take place. He makes the audit on the spot. If he found that that individual lease was unsatisfactory, immediately that statement is made the Auditor General says, "I am going to report to Congress, to the congressional committees, that this lease is illegal."

Under my understanding of the law the spending officer will be notified, in this case the officer that made the contract, and they will go ahead, they will start occupancy, they will start using the property. Then the action will proceed from that point. I grant you there is a slight amount of money which they will not be able to get back again which might have been saved if the decision had been made in advance, but I am here also to say that there is a tremendous amount of loss now by the delays and the different negotiations that go on, by the division of responsibility that is introduced under the scheme we have now.

Representative GIFFORD. You answered my question that favoritism and cancelations could be indulged in, and that was the reason for the Comptroller's office being set up. Was that favoritism being indulged in before 1921?

Mr. GULICK. All governments do that, you know.

Representative GIFFORD. I am asking you whether it can be done under your plan.

Mr. GULICK. Of course, all of the expenditures of the United States up to 1921 were made under the scheme we suggest, minus the most important element, namely, an honestly independent outside post audit, such as you have in every business concern.