CONTENTS Campbell, Hon. Joseph, Comptroller General of the United States; accompanied by George Staples, associate director, Civil Account- ing and Auditing Division; Frederick K. Rabel, assistant associate director, Civil Accounting and Auditing Division; and Robert F. Keller, assistant to the Comptroller General__ Hollister, Hon. John B., director, International Cooperation Admin- Murphy, John E., controller, International Cooperation Administra- Ohly, John H., Deputy Director for Program and Planning, Inter- Ohly, John H., Deputy Director for Program and Planning, Inter- Staples, George, associate director, Civil Accounting and Auditing Division, General Accounting Office_ Staples, George, associate director, Civil Accounting and Auditing Division; accompanied by Frederick K. Rabel, assistant associate director, General Accounting Office. Letters, statements, etc., submitted for the record by— Brownson, Hon. Charles B., a Representative in Congress from the Hardy, Hon. Porter, Jr., à Representative in Congress from the State of Virginia, and chairman, International Operations Subcom- mittee: Quotation from the House Appropriations Committee, Hollister, Hon. John B., Director, International Cooperation Admin- Meader, Hon. George, a Representative in Congress from the State of Ohly, John H., Deputy Director for Program and Planning, Inter- national Cooperation Administration: Information re Pakistan's contributions as of June 30, 1956__. International Cooperation Administration comments on example of overprograming listed in General Accounting Office memo- International Cooperation Administration's comments on General Accounting Office's presentation of status of selected major con- tinuing projects, for which funds were requested in 1957, as at International Cooperation Administration's comments with re- spect to General Accounting Office's suggestions on inclusion in the budget presentation of information on Public Law 480 International Cooperation Administration's comments on the International Cooperation Administration response to Gener Accounting Office proposal for separation of planning progra Letter from the Comp eral, to John B. Hollister. 97 79 48 126 114 111 14 Letters, statements, etc., submitted for the record by-Continued Submission of International Cooperation Administration comment- ing upon examples of logging projects as disclosed in prior General Accounting Office audit reports. Rabel, Frederick K., assistant to the associate director, Civil Ac- counting and Auditing Division, General Accounting Office: Presentation of the General Accounting Office- Reddan, John T. M., chief counsel, International Operations Sub- Excerpt from General Accounting Office memorandum re "Finan- Excerpt from General Accounting Office report of January 9, 1957 35, 153, 154 Excerpt from the General Accounting Office Report on Study of Obligating Bases and Related Administrative Practices, For- eign Operations Administration_. Excerpt of letter from George Staples, to J. E. Murphy, con- Excerpt of letter from Hon. John B. Hollister, to heads of divisions Foreign Operations Administration memorandum on examination International Cooperation Administration response to General Letter from George H. Staples, assistant director of audits, Gen- Letter from Hon. Joseph Campbell, Comptroller General of the United States, to Hon. John B. Hollister, January 9, 1957---- Letter from Hon. John B. Hollister, to Hon. Joseph Campbell, Letter from Hon. John B. Hollister, to the directors of United States operations missions, August 17, 1956.- Letter from John E. Murphy, controller, Foreign Operations Ad- 17 184 186 133 136 137 REVIEW OF THE BUDGET FORMULATION AND PRESENTATION PRACTICES OF THE INTERNATIONAL COOPERATION ADMINISTRATION THURSDAY, APRIL 4, 1957 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTERNATIONAL OPERATIONS OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D. C. The subcommittee convened at 10: 10 a. m., in room 304, House Office Building, Representative Porter Hardy, Jr., chairman of the subcommittee, presiding. Members present: Porter Hardy, Jr., Elizabeth Kee, John A. Blatnik, Charles B. Brownson, George Meader, and Victor A. Knox. Also present: John T. M. Reddan, chief counsel; Richard P. Bray, Jr., counsel; Walton Woods, staff investigator; Phyllis M. Seymour, clerk; and Maurice J. Mountain, consultant. Witnesses present: Hon. Joseph Campbell, Comptroller General of the United States; accompanied by George Staples, Associate Director, Civil Accounting and Auditing Division; Frederick K. Rabel, Assistant to the Associate Director, Civil Accounting and Auditing Division; and Robert F. Keller, Assistant to the Comptroller General. Mr. HARDY. Let the subcommittee come to order. I have a brief statement I want to make in the opening of our session. The Congress has charged this subcommittee with the duty, among others, of making examinations of our nonmilitary foreign-aid program. The purpose of these examinations is to determine how that program is being administered. We look at it rather critically from a standpoint of efficiency and economy. The most practical means I know of by which this subcommittee can measure the effectiveness of our nonmilitary aid program in carrying out the stated purposes of the Mutual Security Act, and determine whether ICA is functioning in an efficient manner, is by comparing the activities of that agency for a given year with its budget presentation for the same year. If that budget presentation does not contain adequate information, we cannot possibly make an intelligent appraisal. Until fiscal year 1956, ICA used what is known as the illustrative method of budget presentation. That method merely told us that for the coming year ICA needed funds for projects of certain types in various countries. I might say, for instance, if they expected to initiate an agriculture program in Egypt, or a housing program somewhere else, all these 1 presentations were expressed in generalities. Beginning with fiscal year 1957 there have been some presentations of budgets on the socalled project basis. As far as we have been able to determine, they haven't been much more informative than the old method which was called the illustrative method. One reason for that is that ICA hasn't considered itself to be bound by any of the specific projects or programs, or by the allocation or expenditure of specific amounts in accordance with the presentation. We are not going to be concerned directly with appropriations, or at least the responsibilities of the Appropriations Committee, but the Congress as a whole has a responsibility in connection with passing on appropriations, and unless we have adequate information, we can't do it intelligently. Thus, one of the purposes of this hearing is to try to see whether we can arrive at a procedure under which reasonably accurate, adequate information will be furnished so that we can know what we are doing when we vote on these appropriations meas ures. The subcommittee realizes there may be instances, that there frequently are instances, where aid is provided under circumstances which make advance planning difficult. But not all of the programs are in that category, and frankly I think that we have taken the position that too many of them are in that category in times past, and it is our purpose to try to see if we can't get as much out of the unplannable category as possible. In order to get our session started off this morning in proper perspective, I have asked the Comptroller General and members of his staff to give us the benefit of their experience in dealing with this problem over recent years. I am especially glad to have the Comptroller General, himself, with us this morning. Mr. Campbell, I want to welcome you and tell you how much we appreciate your presence. I believe you have a prepared statement, and I know that the committee will profit a great deal by the views you will express from your knowledge of what has been transpiring in this important field. Again, I want you to know how much we appreciate your presence, and you may proceed in just the way you prefer, if you will. STATEMENT OF HON. JOSEPH CAMPBELL, COMPTROLLER GENERAL OF THE UNITED STATES; ACCOMPANIED BY GEORGE STAPLES, ASSOCIATE DIRECTOR, CIVIL ACCOUNTING AND AUDITING DIVISION; FREDERICK K. RABEL, ASSISTANT ASSOCIATE DIRECTOR, CIVIL ACCOUNTING AND AUDITING DIVISION; AND ROBERT F. KELLER, ASSISTANT TO THE COMPTROLLER GENERAL Mr. CAMPBELL. Thank you, Mr. Chairman. Mr. Chairman, and members of the subcommittee, we are pleased to appear before you and to assist you and your staff in any way we can in your considerations of the mutual security operations as carried out by International Cooperation Administration. We understand that the purpose of this meeting today is to discuss the annual program presentation by ICA to the congressional committees for the nonmilitary mutual security program, and the recommendation contained in our report on Study of Obligating Bases and Related Administrative Practices, sent to the Congress in June 1955, that the Congress consider revision of the Mutual Security Act to authorize funds separately for plannable activities, and unforeseeable activities. The format and content of the annual program presentation to congressional committees has been a subject of keen interest to us in our audit of mutual security operations over the past several years. This interest derives primarily from our belief that the congressional committees having the responsibility for recommending authorization of agency programs and the appropriation of funds therefor should have before them programs stated in such clarity and completeness as to permit an understanding and evaluation in the limited time which the press of Government business allows for examination. Such an approach is basic to any agency presentation and in the case of the mutual security program it is particularly important for a number of reasons which have singular application to that program. In the first place, the program itself is unique as an activity of the Government embodying a series of relationships with other governments within which are carried out a wide variety of diversified activities designed to stabilize economic and political structures, promote technological development, and strengthen the defense capability of some 50 countries. Apart from the problems inherent in conducting such a large volume of varied activities dispersed throughout many areas of the world, their administration assumes further complexity through the very operation of these activities between the United States and the respective foreign governments, each of which is different in varying degrees from the other, and from the United States in laws, customs, traditions, and political, economic, and cultural advancement. Add to these things the fact that (1) the mutual security program in its concept and execution is intended as an instrument of the foreign policy of the United States, (2) the Mutual Security Act grants broad authority to the President in the scope of activities and the use of funds, and (3) the funds authorized are of substantial magnitude, and one gets a fair idea of the difficulty facing the congressional committees in evaluating the presentation submitted each year by the agency in support of its request for authorization and appropriation of funds. Yet, such an evaluation by the committees is necessary if any meaningful control of funds is to be exercised by the Congress. It has been in recognition of these conditions that the General Accounting Office has actively focused attention over the past several years on the need for improving the form and content of the annual presentation to facilitate the task of the congressional committees in making a considered judgment as to the reasonableness of the proposed program. Our interest in this subject has been manifested in our reports to the Congress and its committees concerned with mutual security affairs, and in more informal communications with the agency. In each of our annual reports to the House Committee on Appropriations, on significant findings developed in our audits, and other examinations; in our report to the Congress in June 1955 on our Study of Obligating Bases and Related Administrative Practices; and again last May |