REORGANIZATION OF THE EXECUTIVE DEPARTMENTS

FRIDAY, MARCH 19, 1937

JOINT COMMITTEE ON GOVERNMENT ORGANIZATION,

Washington, D. C.

The joint committee met, Senator Robinson presiding.

The CHAIRMAN. The committee will please come to order. When the hearing was suspended on the former day Mr. Buck had presented the proposed plan contained in the report of the President's committee relating to finance and accounting, and he had been questioned at some length by members of the committee. It is contemplated this morning that he shall proceed to an explanation and discussion of the present plan, with a view to comparing the same with that which is proposed in the report of the President's committee. It is suggested that the rules heretofore agreed to by the committee for its procedure be carried out and observed—namely, that the witness shall complete his statement and then submit himself to cross-examination. Mr. Buck, you may proceed.

STATEMENT OF A. E. BUCK-Resumed

Mr. BUCK. You have before you here a chart entitled "Control of Expenditures", exhibiting the present system.

The CHAIRMAN. Will you identify that chart, please, sir?

Mr. Buck. It is marked at the top of it "Present." The other chart does not have anything except "Control of Expenditures." This chart gives you, upon the same basis as the one we talked about at the last meeting, the procedure as it exists at the present time in handling fiscal matters.

May I trace this, following what we call the pipe lines, very briefly with you? Starting with (1) we have the appropriations coming over from Congress to the Executive for approval; going from (2) to (3) for purposes of entering those appropriations on the accounts, in "Bookkeeping and Warrants", which is a division of the Treasury Department.

From (3) appropriation warrants are issued and those warrants go to the General Accounting Office at (4). Those warrants are countersigned and returned to "Bookkeeping and Warrants" in the Treasury Department at no. (5). A copy of each appropriations warrant is sent to the chief administrative officer in the department concerned— that is, from (5) to (6).

We are now over on the left-hand side of the chart. Then, in order to expend the money thus authorized the department must make a requisition for advance of funds to disbursing officers That you find by following the line from (6) to (7), the requisition going to the

152419-37-15

General Accounting Office for approval. When the requisition has been approved it goes to "Bookkeeping and Warrants" for record at no. (8), upon the basis of the approved requisition, an accountable warrant is then drawn, and this accountable warrant is sent back to the General Accounting Office at no. (9). When that accountable warrant has been approved by the General Accounting Office it then goes to the Treasurer of the United States, no. (10). It is then in the form of credit extended to the disbursing officer, and that notice of credit you will observe flows from (10) to (11), which is the central disbursing office, or any one of the regional offices under the central disbursing office.

In many cases the procedure halts there at (11) instead of going on to (12). In a few departments there is a notice that also flows to no. (12).

Taking it up at no. (12), we are now at an operating unit of a major department of the Government. As soon as financial obligations are entered into, vouchers are issued, or pay rolls are issued, and those, with certain checking and countersigning in the departments, then flow from (12) to (13); that is, to a regional disbursing office.

At (13) those vouchers and pay rolls are again examined, or rather audited, as to items and as to totals and checks are issued; that is, those checks are issued as soon as the disbursing officer has satisfied himself that the accounts are regular.

Those checks then go from (13) to (14), to the payee at (14). Of course, the payee then cashes the check and it goes to (15) through some commercial bank perhaps, and on into a branch of the Federal Reserve bank at (16). Then those checks are collected by the branches of the Federal Reserve, depository transcripts or summaries being attached to them, and they are then sent to the Treasurer of the United States in the Treasury Department at (17). When he has made certain cash entries on his books the checks then proceed from (17) to (18) for filing, and incidentally for any checking that may be necessary to disclose forgeries, at the General Accounting Office.

So we bring this procedure to a close at (18) on the chart showing the present procedure. The accounts are finally closed and the documents are filed away and there is no appeal from the decisions reached in the General Accounting Office, insofar as routine matters are concerned. Should the General Accounting Office make a mistake in checking these vouchers in a final settlement, that mistake no doubt would be filed with the documents. It is not probable or likely that we would ever know anything about it, because there is no further check of these documents. There is no audit of the work of the Comptroller General, although he acts largely in the capacity of a controlling officer rather than an auditor.

Now, there are a couple of dotted lines on the chart that we might note: First, there is the one coming from the General Accounting Office, which we observe down in the center of the chart at the regional disbursing office (13A), flowing by the "Bookkeeping and Warrants" and over into (15A). Once each month, in some cases each quarter, the vouchers that come into the regional disbursing offices are gathered together and a statement, or accounts current, which is nothing more than a summary, is made up and attached to the vouchers. Those vouchers are sent from the field into the central disbursing

office here at Washington, and then they are transmitted from (14A) over to the General Accounting Office. It is on the basis of those documents that a settlement is made with the disbursing officer by the General Accounting Office, and in course of auditing those vouchers-by a postaudit in most instances, as we discussed the other daycertain exceptions may be taken. In that event those exceptions flow back to (16A), which is the regional treasury disbursing office, or perhaps to the central disbursing office here in Washington, and then is sent by Mr. Allen to the regional office concerned, the idea being, of course, that responsibility lodges in the officer who disbursed the money, and, therefore, he is held accountable for clearing up any exceptions which may be taken by the General Accounting Office.

We discussed at some length the other day just how those exceptions might be cleared up by the Congress giving relief after they had gone on for a great while. We also mentioned the fact that exceptions were very much larger in the beginning than the items that were finally disallowed by the General Accounting Office, because usually the whole voucher is held up when only a few dollars in the voucher may have been excepted.

Representative ČOCHRAN. Well, is it not true that before. the General Accounting Office discovers that a mistake was made the money has already been paid?

Mr. BUCK. Yes; we said the other day that in 90 percent of the cases that was true.

Representative COCHRAN. Under your new set-up would that be prevented?

Mr. BUCK. Well, under the new set-up we would have a very thorough audit by the Bureau of Fiscal Control, in the Treasury Department, before the payment had been made.

Representative COCHRAN. At the request of the executive branch of the Government in the last Congress I introduced a bill to relieve disbursing officers of $750,000 in overpayments on C. W. A. That bill came to me through the Speaker of the House, being referred to me as the chairman of the Committee on Expenditures. It developed that we inaugurated the C. W. A. program overnight to take people off of the direct dole, to give them something to do so they would be able to hold up their heads, so that they would feel they earned money rather than that it was handed to them. They were put on every kind of conceivable project, raking leaves and everything else. Now, those men did not have anything to eat, their families did not have anything to eat unless they received some money. They had to have their pay on Saturday, and if they did not have their pay on Saturday you would have a riot in every big city in the country. So they had to prepare the checks starting with Wednesday or Thursday. That was the explanation. If a man was on the pay roll on Wednesday or Thursday he got paid for the full week, he got his check and cashed it, and it was weeks and weeks and maybe months before it ever reached the General Accounting Office, and then they discovered that the man had not worked the full week. He did not work Friday or Saturday so he was overpaid $1.50 or $3. There were so many cases like that that the total amount is $750,000.

Suppose that situation would develop again under your new system; do you mean to tell me you would hesitate and wait until the accounts were audited before you would give the man a check?

Mr. BUCK. No. Under the new system we would be able to handle it more rapidly than you would be able to do under this system. Representative COCHRAN. Assume the country got into that condition again where we would have to do the same thing, would not we have to duplicate that action?

Mr. Buck. No. Under the proposed system all of the necessary administrative audits could be performed immediately, or within a very short time, and the checks could be sent out. You could be reasonably assured, under that system, that you would not have pay. ments made which were not proper or legal.

Representative COCHRAN. Do you think you could check against the pay roll which you would not get until the week was over, going over possibly two or three million employees' records?

Mr. BUCK. The only audit you get at the present time is that now performed by the temporary branch of the Treasury that handles the emergency appropriations for 1935 and 1936. You certainly have no check from the General Accounting Office on anything of that kind. If you do not audit it before you pay it, you do not catch it at all. All that you catch at the present moment, you get in this emergency set-up under the Treasury Department.

Representative COCHRAN. I understood you to say if you do not catch it before, you do not catch it at all.

Mr. BUCK. Under this system, because what could you collectRepresentative COCHRAN (interrupting). Wait a minute. I will show you where you are wrong, because it was the General Accounting Office that notified the executive branch of the Government that they overpaid these men. They were the ones that caught it.

Mr. Buck. Then the disbursing officers came to you for relief because they could not collect it from a fellow who hasn't got anything. What I say is that if you do not do it by a preaudit, you do not do it at all.

Representative COCHRAN. The disbursing officers wanted the relief. I am saying it is impossible to do it by preaudit in an emergency of that character.

Mr. Buck. I am saying that under this proposed system it can be done, and can be done very effectively, within 48 hours.

Representative COCHRAN. You mean to say that 3,000,000 checks can be checked carefully within 48 hours?

Mr. Buck. I think so.

Representative COCHRAN. You mean to say you can have a preaudit of 3,000,000 checks within 48 hours? How many employees would it take?

Mr. BUCK. Of course, the checks are not the only things to audit. Representative COCHRAN. You understand you have a timekeeper on the job; here is a crew that is working on C. W. A. right here in this room, and I am the timekeeper; on Wednesday I put down our names and send those into the office, and I say, "These men are working at so much a day on this day." When the week ends they make up the check, and the checks are sent back and they are paid on Saturday. Now, they do not get the complete pay roll until the week is ended.

Mr. BUCK. You are anticipating that a man may leave his job before the end of the week.