have any authority under the present law to say to that bureau: "You cannot spend this money as fast as that", as long as they were under the $150,000?

Mr. TULLOSS. No, sir.

Senator O'MAHONEY. You would have no authority at all?

Mr. TULLOSS. I would have to amend my previous statement on that.

Senator O'MAHONEY. I knew you misunderstood the previous question.

Mr. TULLOSS. As a matter of fact, I would like to bring out here that we have, in a case of that kind, no real control. The most which we could do would be to report it to the department, or to the Congress. In other words, we do not perform any executive function. We have no means of enforcing our decisions.

Senator O'MAHONEY. Do you participate at all in handing down these decisions which are requested from time to time with respect to the authority to make certain expenditures?

Mr. TULLOSS. Only indirectly. That is not my duty.

Senator O'MAHONEY. That is not part of your function?
Mr. TULLOss. No.

Senator BYRD. To what extent is the authority to countersign warrants something which gives you the power to enforce your decisions? Mr. TULLOSS. The warrants, in the Federal sense, are first the appropriating warrants, setting up the moneys available for an advance to a disbursing officer to begin a program under the appropriation.

Senator BYRD. But that money is not available until the warrant is countersigned?

Mr. TULLOSS. That money is not available until the warrant is countersigned; that is true.

Senator BYRD. So that that does give some control?

Mr. TULLOSS. The only condition precedent to the countersignature on an appropriation warrant is that the Congress has made such appropriation.

Senator O'MAHONEY. That is merely a bookkeeping transaction, is it not?

Mr. TULLOSS. Not exactly. Sometimes quite involved questions arise incident to the countersignature.

The CHAIRMAN. For instance, what kind?

Mr. TULLOSS. Whether there was such an appropriation.
The CHAIRMAN. That appears by reference to the law.

Mr. TULLOSs. Yes, sir.

The CHAIRMAN. Therefore they are entirely bookkeeping?

Mr. TULLOSS. They are sometimes quite complicated, because the administrative office sees in some law an interpretation which no one else may have thought of before. Maybe they are interpreting the law that Congress intended to appropriate certain receipts, not a definite sum but all receipts, derived from a particular source. We have to analyze that and determine whether there was such an appropriation of receipts.

Senator O'MAHONEY. That is not involved in the sense that it is an expenditure or an evidence of expenditure, but it is merely an evidence of the right of the department to issue vouchers against that particular sum?

Mr. TULLOSS. That is it, except the money is actually set up on the books.

Senator O'MAHONEY. Yes, sir.

Senator BYRD. In other words, if you have an appropriation, say, $1,000, it would be possible and likely that you might give monthly warrants, would it not?

Mr. TULLOSS. Generally an appropriation is set up in a lump sum. Senator BYRD. Not always, is it?

Mr. TULLOSS. But the money is not advanced.

Senator BYRD. I understand, but I am speaking of the actual signing of the allotment warrant. Is that a good expression?

Mr. TULLOSS. The allotment warrant is not an appropriation

warrant.

Senator BYRD. Suppose you had an appropriation of $1,000,000 covering the year's work of one department. Would you sign one warrant and set it up at once?

Mr. TULLOSS. That is the general rule. However, that work does not come under me, and I might be somewhat misinformed as to that detailed practice.

Senator BYRD. Which gentleman would know about that?
Mr. TULLOSS. Mr. Denit could answer that.

Senator BYRD. I will defer my questions until Mr. Denit is on. Mr. TULLOSS. I spoke of the functions of giving effect to the audit. That is in connection with investigations. When you set up the books and the accounts of the department, those same accounts are reflected on the books of the General Accounting Office. We pursue the matter further, as an aid to an effective audit, by a field examination of many of these accounts. One of the functions of investigation is not only to survey the administrative procedure and set up the books, but to examine those books, examine the accounts and records of the accountable officers and of the administrative officers, in the field.

Senator O'MAHONEY. Is there anything in this bill which would impair the efficiency of that sort of work?

Mr. TULLOSS. Yes, sir.

Senator O'MAHONEY. What?

Mr. TULLOSs. The bill would separate that function from the auditing and would transfer that function to the Treasury, and contemplates leaving the audit function in the Auditor General's office as to expenditures only.

Senator O'MAHONEY. Could not that function be performed as efficiently in the Treasury Department as in the General Accounting Office?

Mr. TULLOSS. It probably could, but it is destructive of the audit. Senator O'MAHONEY. On other words, if you were doing the work which you are now doing in the Treasury Department, instead of in the General Accounting Office, you could do it just as efficiently as you are doing it now?

Mr. TULLOSs. I imagine so. The only thing is that the audit function left to the Auditor General would be ineffectual. In other words, the Auditor General would be auditing with no accounts of control. He might audit 10,000 items, and if he did not have any manner of posting them to an account to see that those items total so

much and whether there was an exceeding of the appropriation, the audit would not be of any value.

In other words, it is fundamental that an auditor or a comptroller must indicate the accounts to be kept, if he is to make an effective audit. And it is important, too, that that function be exercised independently; that is, one department should not have an advantage over another department. The spending agency is primarily concerned in spending, and that agency should not be permitted to determine the precedent on which its program under the appropriation will be based. That should be done by an unbiased authority.

Senator O'MAHONEY. Should not be permitted to determine the program?

Mr. TULLOSS. What I mean is the precedent for spending. In other words, here is a department which wants to spend certain moneys. It determines that it is legal and proceeds. Now if that is the auditing agency, as well as the spending agency, naturally it is inclined to be liberal in its own determinations. In being liberal with its own program it sets up a precedent for every other agency which it is auditing. In other words, it pyramids its precedent.

Senator O'MAHONEY. But it is not necessary, under the law, for an agency to secure an advance opinion?

Mr. TULLOSS. It is not required; no, sir.

Senator O'MAHONEY. So that any agency, without having obtained the advanced opinion, may proceed and spend the money in the manner in which you have now described?

Mr. TULLOSS. Yes, sir. It is only subject to warrant on the appropriation end and on the advance or payment end. That is, there are two warrants. The appropriation is made available for an obligation by appropriation warrant and available for an expenditure by an accountable pay warrant.

Senator O'MAHONEY. So that to the extent that vouchers are not submitted for pre-audit, and the extent that expenditures are made without an advance opinion, the auditing is now conducted upon the basis or according to the plan which you say would be ineffective? Mr. TULLOSS. You mean under the proposed bill?

Senator O'MAHONEY. No; under the plan which is now operative. Mr. TULLOSS. There has been no change in the auditing practice of the Government, you might say, in its whole history, in that respect. They may have advance decisions or they may have preaudit. That has always been true, so far as I know, but that is a matter of administrative election. It is not required.

Senator BYRD. But it could be required?

Mr. TULLOSS. It could be required, and in many respects the preaudit has its advantages.

Senator BYRD. But there was no authority for preaudit unless it was asked for, until the Accounting Act of 1921 came in, was there? Mr. TULLOSs. Yes, sir.

Senator BYRD. You mean there was authority in the Comptroller General, or whoever the officer was, to put in a preaudit, regardless of any requests which might be made?

Mr. TULLOSS. I do not think the Budget and Accounting Act changed the law in that respect.

Senator O'MAHONEY. That was section 8 of the act of 1894

Mr. TULLOSS. Then the Post Office Department preaudit antedates that.

Senator BYRD. In the present act, it changes the authority of the Comptroller General in the matter of the preaudit?

Mr. TULLOSS. The proposed bill would change it and transfer the preaudit to the Treasury.

Senator BYRD. How long has that preaudit been in the control of the Comptroller General?

Mr. TULLOSS. The preaudit has been in the accounting office from the beginning, in my opinion.

Senator BYRD. And this pending bill makes a change?

Mr. TULLOSS. This would put it back in the Treasury. At one time the accounting offices were in the Treasury, and such preaudit as there was was in the Treasury.

Senator BYRNES. Prior to the Budget and Accounting Act?

Mr. TULLOSS. Yes, sir.

The CHAIRMAN. Whom do you suggest next, Mr. Elliott?

Mr. ELLIOTT. I suggest Mr. Denit, Chief of the Accounting and Bookkeeping Division.

ACCOUNTING

STATEMENT OF J. D. DENIT, CHIEF OF THE ACCOUNTING AND
BOOKKEEPING DIVISION OF THE GENERAL
OFFICE

The CHAIRMAN. Mr. Denit, have you any comments which you care to make with reference to the provisions of this bill?

Mr. DENIT. Mr. Chairman, Judge Elliott said in his remarks that we were not here with a prepared statement with respect to the bill, but I subscribe to practically every objection which has been stated in the letter presented to the committee with regard to this bill.

There are many angles to what is proposed which, in my judgment, would be harmful to the fiscal management and administration of the Government.

There are so many of those angles that, without a prepared statement, it would not be possible to present to you as intelligently as I would want just what my views with respect to them are.

But I assume, since the committee has been considering this matter for some time, that there are some questions which they would like to ask, or some matters as to which there may be some doubt in their minds.

The testimony here today has covered several angles and has been rather far reaching. For example, we have discussed in some detail the matter of preaudit. As I listened to the statements and questions, I have been impressed with the thought that there may be some misunderstanding of just what the preaudit by the General Accounting Office comprehends.

In 1850, or prior to 1850, rather, we had a situation, so far as disbursing officers of the Government were concerned, which was almost intolerable. Disbursing officers were required under the law to be bonded, and they were held personally responsible for all payments which they made under that bond. They had no relief from administrative pressure. They were subordinate to the administrative officers of the Government, and when they were directed to pay they could either pay or find employment somewhere else.

So that in 1850 it appears that Congress undertook to afford to disbursing officers some relief from that condition, and made it possible for them to apply to the then Comptroller of the Treasury for advance decision whenever there happened to be presented to them any voucher for payment, as to which they had some question of doubt regarding its legality.

Now under that provision of the law, this whole system of preaudit seems to have simply evolved naturally.

We had, in the first instance, a rather formal presentation of the matter for an advance decision. Now those presentations might come either from the head of a department or from a disbursing officer.

As time went on, the formality was lessened somewhat, and in more recent years disbursing officers and administrative officers, as well, in undertaking to avail themselves of advance decisions, have, in cooperation with the General Accounting Office, worked out the procedure which we now refer to as "preaudit."

Now preaudit of vouchers, as we are conducting it in the General Accounting Office today, does not in any sense impede administrative action. The expenditure is already made. There remains to be done only the payment of the cash. In other words, the administrative office has proceeded to the point of incurring an obligation. That may be for services or may be for materials. The materials have been delivered, the services have been rendered, the voucher has been stated. It is administratively examined and approved for payment. But before the payment of the cash is actually made, that voucher comes to the General Accounting Office for what we have described here as a "preaudit."

Senator O'MAHONEY. But it comes only when the disbursing officer voluntarily sends it?

Mr. DENIT. That is right. So that the whole advantage in the preaudit up to the present time has been on the side of the administrative officer.

We could discuss the matter of preaudit from several angles.

For example, I made a little study of the amount disallowed in the accounts of fiscal officers over a period, and I found that to be quite a large sum which averaged about $1,000,000 a year.

When you take into consideration that all of that amount disallowed had been paid out and the United States had been put to the expense of collecting it back, and in the meantime deprived of the use of that money, and required, because of the lack of that fund, probably, to issue short-term securities, and things of that sort, to finance its own operations, it appeared as though we were spending approximately $400,000 a year needlessly. I do not have those figures with me today, but I could make them available for the record.

They are based on the average cost of 10 percent to collect the money back, after it had been paid out illegally, plus an interest rate of 4 percent on the money during the time that it remains out of the Treasury. It averages around $400,000 a year. That is one angle to the preaudit which might be taken into consideration when we undertake to determine whether it is a good thing or a bad thing. At present the testimony will disclose that only about 31⁄2 percent of the accounts of the Government are being preaudited.

do you

Senator BYRD. Does that apply equally to the amounts as well as to the number of accounts, that is, the amount of money, think?