as it becomes available. Evidence of this is the fact that two such releases have occurred at the Somerville depot and one at the Wilmington depot during the past 5 years.

It is assumed that this proposal is another aspect of the recommendation in the report on food and clothing that "the General Services Administration should assume responsibility for the procurement and distribution of food and common-use articles for consumption by all civilian agencies." The comment previously made on that recommendation will apply equally to the present proposal. The Veterans' Administration remains convinced that the General Services Administration cannot provide the service which the Veterans' Administration requires, in terms of either quality or delivery time, and that the General Services Administration cannot perform procurement and distribution functions for the Veterans' Administration as economically as the Veterans' Administration now does this for itself. The proposal should be rejected.

(d) The responsibility of the General Services Administration should include the storage and distribution of medical supplies for all civilian agencies, consistent with the recommendation of the Federal medical services task force. The recommendation of the medical task force referred to is as follows:

That there be established two systems within the Federal Government for integrated storage and distribution of medical supplies; that the military system comprise the Army, Navy, Air Force, Coast Guard, and Federal Civil Defense Administration; that the civilian system comprise all other Federal agencies and be administered by the Veterans' Administration on their behalf; and that both systems provide for ownership of medical materiel by the major using agency.

Proposal (d) is not "consistent with the recommendation of the Federal medical services task force." It is in direct conflict with it. Also worthy of note is the fact that the Commission did not adopt the recommendation of the medical task force, as it has not specifically adopted the recommendations of the depot utilization task force. The lack of consistency in the recommendations of the task forces may have been a factor in the Commission's withholding of endorsement in the present report.

It is the position of the Veterans' Administration that the purchase, storage, and distribution of medical supplies and food is a vital and essential part of the medical-care program of the Veterans' Administration. The Veterans' Administration does not believe that an agency burdened with responsibility for, and interested primarily in, supply or administrative activities, could provide the same specialized service to medical installations that can be rendered by an organization dedicated solely to that mission. The loss of direct control of so essential an element of medical care-control of the medical items and foods needed to make sick people well-can in the opinion of the Veterans' Administration, lead only to a most serious impairment of its ability to provide that care.

The Veterans' Administration does not believe that General Services Administration should absorb the Veterans' Administration or any other supply distribution system unless a factual showing is made that by so doing it is more economical and efficient and not detrimental to the agency's program. Congress is very clear on this point in Public Law 152, 81st Congress, as amended. The Veterans' Admin

istration has presented facts that prove the existing Veterans' Administration supply distribution system is by far the most economical and efficient way of supplying its hospitals. (See hearings before House Subcommittee on Independent Offices Appropriation for 1956, pt. 2, pp. 1019 to 1061.)

For the reasons enumerated, the Veterans' Administration is strongly opposed to the adoption of this proposal.

RECOMMENDATION NO. 2 (B)

"That the Congress give to the General Services Administration the necessary authority to integrate into its own control, or to compel coordination of, all civilian agency storage."

Comments of Veterans' Administration

This recommendation stems from the Commission's view, expressed elsewhere in the report, that General Services Administration does not have sufficiently clear and decisive authority under existing law to accomplish the purposes specified in the recommendation (see the discussion on p. 13 of the report and the footnote on p. 21).

The general administrative authority of the Administrator of General Services with respect to procurement, warehousing, and related activities, as set forth in section 201 (a) of Public Law 152, 81st Congress, is qualified as follows:

The Administrator shall, in respect of executive agencies, and to the extent that he determines that so doing is advantageous to the Government in terms of economy, efficiency, or service, and with due regard to the program activities of the agencies concerned

prescribe policies and methods of procurement and supply; operate, after consultation with the executive agency affected, or arrange for the operation by any executive agency of warehouses, supply centers, etc.; or procure and supply personal property and nonpersonal services for the use of executive agencies (italics added). This clearly expresses an intention that the Administrator of General Services should exercise the stated functions only upon a finding that it would be advantageous to the Government within the specific provisions of the statute as quoted above. A similar requirement appears in section 210 (e) of the act relating to assignment and reassignment of space in Government buildings.

The Veterans' Administration believes that the stated condition precedent to the exercise of these functions, including specifically the storage activities contemplated by the subject recommendation, is of vital importance and serves as a safeguard to prevent hasty and arbitrary action which might result in some instances in sacrifice of economy, efficiency, or service, and might have an injurious effect upon basic program activities of the agency concerned.

The practical implications of this recommendation of the Commission are such that the Veterans' Administration is unable to endorse it.

70372-55-8

Hon. OLIN E. TEAGUE,

Chairman, Committee on Veterans' Affairs,

NOVEMBER 4, 1955.

House of Representatives, Washington, D. C.

DEAR MR. TEAGUE: In accordance with your request, transmitted by Mr. Oliver E. Meadows, staff director, I am enclosing the comments of the Veterans' Administration on recommendations in the report of the Commission on Organization of the Executive Branch of the Government on the subject of budget and accounting.

Advice has been received from the Bureau of the Budget that there would be no objection to the submission of these comments to the committee for its consideration. The Bureau has requested that the committee be advised that the relationship of the views on the recommendations of the mentioned Commission expressed in the comments to the program of the President has not been determined, and that the comments should not be construed as a commitment regarding legislation which has been or may be proposed to carry out the recommendations of the Commission.

Sincerely yours,

H. V. HIGLEY, Administrator.

REPORT ON BUDGET AND ACCOUNTING

RECOMMENDATION NO. 1

"(a) That the Bureau of the Budget expand and make more effective the discharge of its managerial and budgeting functions;

"(b) That in order to do this, among other things, it should place in important agencies one or more well-qualified employees whose duties should include continuous year-round review, at the site of the agency, of agency budget preparation and administration and other facets of the Bureau's managerial responsibilities; and

"(c) If necessary, the Congress should increase the resources of the Bureau of the Budget for that purpose."

Comments of Veterans' Administration

The Veterans' Administration favors the strengthening of the Bureau of the Budget staff with the primary objective of reducing the time required for the various review and approval actions imposed upon the Bureau by law and regulation. In this connection, attention is invited to part X of the report which summarizes task-force suggestions as to timelag in the budgetary process without specific recommendation by the Commission.

With particular regard to recommendation No. 1 (b), various Bureau of the Budget employees are now assigned full time to VA matters and others also maintain substantially continuous contact with Veterans' Administration through the budget preparation and administration cycle. Veterans' Administration would have no objection to the full-time physical location of such Bureau representatives within the Veterans' Administration central office. However, it is believed that consideration should be given to the possibility that such an arrangement would result in some dilution of the sense of management responsibility on the part of agency officials, and that more active participation of Bureau representatives in the formulation of agency budgets

would prejudice the independent nature of the Bureau review of the appropriation estimates.

RECOMMENDATION NO. 2

"That the executive agencies report annually to the Bureau of the Budget on the conduct of their operations. On the basis of the agencies' reports and other available information, the Bureau should prepare for the President an annual report on performance for the executive branch as a whole."

Comments of Veterans' Administration

The present form of annual budget shows on a parallel basis: (1) Performance during the past year, (2) a revised plan of operations for the current year based on amounts appropriated and current conditions, and (3) the agency's proposed plans and estimated fund requirements for the ensuing year. It is the Veterans' Administration's belief that the objectives of the Commission may best be met by placing increased emphasis on the effectiveness of past year performance both in the agency presentation of its annual budget requests and in the Bureau of the Budget review. Such an approach might include the relating of cost and performance factors during the past year with those for earlier years, as well as explicit comparison of actual fund utilization during the past year with the projections for that year contained in the two previous budgets. The effectiveness of this approach would be increased by deferring the agency submission of the Budget requests as discussed under recommendation No. 1 in order to allow for more thorough analysis of past year performance.

The Veterans' Administration believes further than any system of annual performance reports separate and distinct from the annual budget requests not only would constitute a substantial duplication but also would divert attention from evaluation of the budget requests in terms of efficiency of performance as contrasted with total costs of past operations. However, it is anticipated that Veterans' Administration will be in a position to provide the Bureau of the Budget upon reasonable advance notice with whatever performance data may be required under either approach.

The Veterans' Administration would have no objection to the Bureau of the Budget preparing a report to the President on the performance of the executive branch as a whole, but feels that if interagency comparisons are to be included, the agencies should be advised of the proposed nature of such comparisons early during the year(s) to be covered by the report (s).

RECOMMENDATION NO. 3

"That for management purposes, cost based operating budgets be used to determine fund allocations within the agencies, such budgets to be supplemented by periodic reports on performance." Comments of Veterans' Administration

The Veterans' Administration has based fund allocations and allotments for operating appropriations on cost-type budgets since the activation of the integrated system of cost accounting at the beginning of fiscal year 1954. Periodic reports of performance have been

obtained in terms of both costs and work accomplishment, but the reporting structure has not yet been developed to the extent necessary to make readily available unit costs for all Veterans' Administration programs and operating locations. Further refinements are being made in the reporting structure with the ultimate objective of comparing operating budgets and performance at all levels in terms of (a) total costs, (b) work accomplished, and (c) unit costs when practicable and feasible.

RECOMMENDATION NO. 4

"That the executive budget continue to be based upon functions, activities, and projects adequately supported by information on program costs and accomplishment, and by a review of performance by organizational units where these do not coincide with performance budget classifications."

Comments of Veterans' Administration

The recommendation for continuation of an executive budget based on functions, activities, and projects in essence calls for carrying forward the type of presentation generally adopted following the first Hoover Commission recommendations for a performance budget. The Veterans' Administration had presented its budgets on substantially this basis for some years prior to the first Commission report and supports the recommendation accordingly.

The Veterans' Administration also endorses the provision that the budget be supported by information on program costs and accomplishment on the understanding that this provision calls for increased emphasis on total costs for the respective programs and activities, and for minimizing the emphasis heretofore placed on objects of expenditure such as personal services, supplies, et cetera. It is believed that the present emphasis on objects of expenditure not only complicates accounting and financial reporting processes unnecessarily, but also diverts management attention from the primary objective of providing services to veterans at the lowest possible cost considering the quality of service. As an example, undue emphasis on personal service costs can lead to totally erroneous conclusions concerning operations involving varying degrees of mechanization at different locations or over a period of time. This aspect of the problem will be of increasing importance as mechanization of operations proceeds through use of conventional office equipment and/or electronic data processing equipment.

The Veterans' Administration has no major organizational units which are not directly related to its performance budget classification. Consequently, the final provision of the recommendation would require no Veterans' Administration action.

RECOMMENDATION NO. 5

"That the agencies take further steps to synchronize their organizational structures, budget classifications, and accounting systems." Comments of Veterans' Administration

The Veterans' Administration has been able to maintain substantial synchronization between organizational structure, budget classifica