(The letters referred to are as follows:)

Hon. ROBERT S. MCNAMARA,

Secretary of Defense,

Department of Defense, Washington, D.C.

JULY 28, 1965.

DEAR MR. SECRETARY: I have reviewed with interest your memorandum for the President dated July 12, 1965, on the DOD cost reduction program.

As you know, I have contended for years that savings of this magnitude were possible in the DOD and have worked toward their attainment without decrease in effectiveness since coming to the House of Representatives in 1951. During my membership with the Bonner subcommittee plus my World War II experiences, I became convinced of the need for a many sided cost reduction program in the DOD. Subsequent work with the Ways and Means Committee and Joint Economic Committee confirm and strengthen this conviction. Your excellent leadership and strong action have been an encouragement to me.

It is noted, however, that some Members of the Congress, including those in key committees have from time to time questioned the validity of the reported savings and point to the fact that they have been verified only by internal DOD audit.

In view of this, I would like to know if you would agree to a verification of the savings by an outside agency, such as the General Accounting Office or the Bureau of the Budget? If so, I will present the mater to the proper office personally or through the chairman of the Subcommittee on Defense Procurement. I would appreciate your views on this matter.

Sincerely,

THOMAS B. CURTIS.

THE SECRETARY OF DEFENSE,
Washington, August 11, 1965.

Hon. THOMAS B. CURTIS,
House of Representatives,

Washington, D.C.

DEAR MR. CURTIS: I am grateful to you for your letter of July 28, 1965, in which you commend the efforts the Department of Defense has made in its cost reduction program. Your own efforts over a period of many years to encourage more efficient practices in the Department are, of course, well known to me and most appreciated.

You suggest in your letter that an outside agency, such as the General Accounting Office or the Bureau of the Budget, might verify the savings we have reported. As I am sure you know, I originally suggested to the Comptroller General that the General Accounting Office undertake the auditing task. For good and sufficient reasons he thought it would be inappropriate for his Office to do I, therefore, assigned the task to the Comptroller of the Department of Defense. Under his direction, some 200 man-years of auditing effort is devoted annually to the review and verification of the quarterly reports of savings submitted by the logistics managers. All claims of savings which do not meet the established criteria are eliminated before the final report is submitted to me.

So.

With respect to the Bureau of the Budget, you may know that the recently issued Bureau of the Budget Circular A-44 directs that savings are to be validated internally by an organization other than the claiming unit-in short, the practice followed by the Department of Defense in assigning the audit responsibility to the Department of Defense Comptroller.

In the light of these circumstances I am not sure there is anything to be gained at this point in asking either the General Accounting Office or the Bureau of the Budget to audit the cost reduction program. Let me say that every reasonable effort has been made to validate all reported savings. I have recently reviewed our auditing procedures and am satisfied that they are independent, thorough, and well designed to meet my objective of reporting as savings only those amounts that can be clearly substantiated.

Sincerely,

ROBERT S. MCNAMARA.

(The pages of the budget referred to, pages 48 and 49, table 8, in the 1965 budget, and pages 42 and 43, table 8, in the 1966 budget, are as follows:)

TABLE 8.-Relation of authorizations to expenditures
[In millions of dollars]

1 Excludes appropriations to liquidate contract authorizations: 1963, $804,000,000; 1964, $942,000,000; 1965, $1,350,000,000.

2 Less than $500,000.

NOTE. This table (administrative budget and trust funds) summarizes and brings into relationship totals from the various other tabulations.

TABLE 8.—Relation of authorizations to expenditures—Continued
[In millions of dollars]

3 Excludes appropriations to liquidate contract authorizations: 1963, $4,139,000,000; 1964, $4,482,000,000; 1965, $4,856,000,000.

1 Excludes appropriations to liquidate contract authorizations: 1964, $841,000,000; 1965, $1,227,000,000; 1966, $1,109,000,000.

2 Authority is recommended in 1966 to remove the deficiencies which occurred between 1956 and 1961. NOTE. This table (administrative budget and trust funds) summarizes and brings into relationship totals from the various other tabulations.

TABLE 8.-Relation of authorizations to expenditures--Continued

1966, $4,877,000,000.

Excludes appropriations to liqudate contract authorizations: 1964, $3,975,000,000; 1965, $4,591,000,000;

4 Less than $500,000.

Representative CURTIS. Is it possible for us to reproduce this?

Cochairman MONRONEY. Yes.

Representative CURTIS. I believe that we should have both of them. Cochairman MONRONEY. Very fine.

Representative CURTIS. That will make it clear then, when he is reading the record.

Cochairman MONRONEY. We will have a rollcall in about one-half minute. Could we have you come back, say, on Thursday morning? Mr. SCHULTZE. Could I check my calendar?

Cochairman MONRONEY. Yes, sir. We would like very much to finish up with this. It has been very instructive. You have been most cooperative and helpful to us in our understanding of this budget matter and the new plans that are being made.

The committee will stand in recess subject to the call of the Chair. (Whereupon, at 12:35 p.m. the committee recessed, subject to the call of the Chair.)