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work. It is further contended that the system can be installed
and operated without disturbing the continuity of payment,
without creating a new Government agency, and with a re-
duction in payroll employees.

In conducting its study the staff learned that the payroll plan had been presented to several departments and agencies of the Government and to a number of committees of the Congress, without convincing evidence that substantial savings or improvements would be attained, and that not a single agency had made a pilot installation or trial run to ascertain its feasibility. In view of the many imponderables, changes in accounting, delegations in responsibility for delivery and cashing of Government checks, some of which would require changes in law, and other considerations, serious doubt existed as to the feasibility of the proposal. The staff recommended that before the plan was adopted, the Bureau of the Budget (in cooperation with the head of the agency) should be requested to send out questionnaires to obtain the information necessary to develop factual answers to the following:

(1) The actual percentage of employees who would desire to participate in the plan;

(2) The names and locations of banks that would handle the accounts of the participating employees and the number of accounts to be carried in each bank;

(3) Whether such banks would agree to the plan and, if so, the amount of fees or service charges, if any, which would be levied by the banks;

(4) If fees or service charges would be levied by the banks, whether the participating employees would agree to bear the costs of such fees or service charges; and

(5) The amount of estimated net savings, or additional costs, as the case may be, which would accrue in the administrative agency, the disbursing office, and the Office of the Treasurer of the United States if the plan were adopted.

In 1959, the Comptroller General took under advisement regulations of the Air Force which provided for issuing Government checks, covering salary payments of civilian employees, in favor of banks for deposit to the individual accounts of employees concerned, rather than issuing checks to each employee at the Air Force Accounting and Finance Center, Denver, Colo. On November 12, 1959, the Comptroller General issued a decision (B-141025) to the Secretary of the Air Force citing the applicable laws relating to the subject matter and concluded by ruling as follows:

Accordingly, it must be held that the procedure set forth in Air Force Manual 173-50, paragraph 70401.1, for issuing Government checks, covering salary payments of civilian employees, in favor of banks, for deposit to the individual accounts of employees concerned, rather than issuing checks to each of the individual employees is in contravention of the law. Therefore, the practice of the disbursing officer of the Air Force Accounting and Finance Center, Denver, Colo., of issuing a single check to a bank each pay period when a sufficient number of civilian employees request that their salary checks be mailed to such bank for deposit should be discontinued.

PART V. IMPROVEMENTS IN BUDGETING AND

ACCOUNTING, GOVERNMENT-WIDE, 1948-60

At the request of Senator McClellan, chairman of the Committee on Government Operations, representatives of the General Accounting Office, the Department of the Treasury, and the Bureau of the Budget, representing the joint financial management improvement program, compiled the following information on the status and activities of the program for inclusion in this report.

GENERAL

Budget and accounting improvements fall into two categoriesthose which relate broadly over the entire Government and those which relate specifically to individual executive agencies. The broad or Government-wide improvements are best evidenced by actions taken by the central agencies responsible for prescribing budget, accounting, and related requirements to be observed by the administrative agencies. The other improvements are evidenced by the actions taken by the executive agencies to improve their own internal financial management practices within the framework of applicable laws enacted by the Congress and the regulations issued by the central agencies.

The Government-wide responsibilities in accounting and budgeting may be summarized as:

General Accounting Office.-Responsible for prescribing the accounting principles, standards, and related requirements to be observed throughout the Government; cooperates with the executive agencies in the development of their accounting systems; and reviews the accounting systems of the executive agencies from time to time and reports thereon. The accounting systems of the executive agencies must be approved by the Comptroller General. In addition, to the extent he deems necessary, the Comptroller General has authority to prescribe the forms, systems, and procedures for administrative appropriation and fund accounting in the several departments and establishments.

Other responsibilities, affecting accounting and budgeting practices throughout the Government in significant degrees, include audit of the financial transactions of each executive, legislative, and judicial agency; settlement of the accounts of accountable officers; and settlement of claims by and against the United States.

Treasury Department.-Responsible for preparing Government-wide reports covering the results of the financial operations of the Government, and responsible for maintaining a system of central accounts that will provide a basis for consolidation of accounting results of other executive agencies with those of the Treasury Department. As a part of its total fiscal responsibili

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ties, prescribes, with the approval of the Comptroller General, forms, procedures, and reports to be observed in the fiscal processes throughout the Government.

Bureau of the Budget.-Responsible for assisting the President in the preparation and administration of the Federal budget, and in the development of improved plans for organization, coordination, and management of the executive branch.

These central or Government-wide responsibilities in accounting, budgeting, and reporting in many respects are interrelated. The accounting maintained throughout the Government must be used in developing and controlling the budget and in accumulating data needed in Government-wide reports. The Government-wide budgetary and central reporting requirements, by the same token, impose conditions on the type of accounts and accounting procedures to be maintained by the several agencies. Because of this interrelation of responsibilities, the joint financial management improvement program was established to provide a vehicle by which the individual statutory responsibilities in Government financial management matters could be discharged on a coordinated basis.

Improvements accomplished during the period 1948-60 in the practices and requirements of the three central agencies in discharging their Government-wide accounting, budgeting, and related responsibilities follow.

GENERAL ACCOUNTING OFFICE

ACCOUNTING RESPONSIBILITIES

Prior to 1948 the General Accounting Office devoted a good part of its accounting effort to the maintenance of appropriation, expenditure, limitation, receipt, and personal ledger accounts which, in fact, duplicated bookkeeping performed by the Treasury Department and operating agencies. Under authority granted in the Budget and Accounting Procedures Act of 1950 and the Post Office Financial Control Act of 1950, these duplicating bookkeeping functions were promptly abolished. The General Accounting Office is no longer a bookkeeping office.

The bookkeeping is now performed at the locations where it is necessary and appropriate the Treasury Department and each individual operating agency. To assure adequate central and agency accounting systems, the General Accounting Office (1) prescribes accounting principles, standards, and related requirements to be observed by the agencies, (2) assists the agencies (including the Treasury Department with respect to the central accounting system) in their development of accounting systems, and (3) reviews and approves the adequacy and conformity of such systems to prescribed principles.

Accounting principles, standards, and related requirements to be observed by the agencies, consistent with the budget and accounting legislation enacted by the Congress, have been prescribed by the Comptroller General. These issuances are contained in chapters 1100 and 1200 of title 2 and chapter 3000 of title 6 of the "General Accounting Office Policy and Procedures Manual for Guidance of Federal Agencies." The principles and standards were developed by the General Accounting Office in collaboration with the agencies, the

Treasury Department, and the Bureau of the Budget under the joint financial management improvement program. Revisions and additions to these accounting principles and standards will be prescribed from time to time on the basis of experience with the agencies and developments in financial management.

The General Accounting Office assists the several agencies in their development of accounting systems as a part of the continuous performance of its responsibilities in accounting and auditing by staffs located at the various agencies. These staffs work with the agencies in the solving of technical problems and requirements, and review the accounting systems of the agencies in connection with the comprehensive audits made by them. In addition, as required, the General Accounting Office provides staff for joint projects with agency and Bureau of the Budget personnel to isolate the problems and develop programs for improved financial management systems in particular agencies. This type of intensive effort has occurred several times in the past and, at the present time, joint projects of this nature are being conducted in connection with the financial operations of the Department of State and the Department of Defense.

As of June 30, 1960, the Comptroller General had approved complete accounting systems of 39 major subdivisions of Cabinet departments or of independent agencies or other executive offices. Since some of these 39 systems were approved prior to enactment of Public Law 84-863 (which requires the use of accrual accounting and costbased budgeting by the agencies), they must be reexamined in relation to the requirements of that law. The accounting systems of the majority of the agencies have not as yet been approved by the Comptroller General-principally because they have not been developed to the point where the agencies have been ready to request such approval.

EXPANSIONS OF COMPREHENSIVE AUDITS

The audit function of the Office, with which the accounting function is integrated, has likewise been modernized. Prior to 1948 the General Accounting Office discharged its audit responsibilities principally by "desk audit" of financial documents shipped to the General Accounting Office by the agencies. The practical result of these desk audits was determination of the legality of receipt and expenditure transactions in relation to applicable laws. While this type of audit resulted in the recovery of substantial amounts of funds improperly expended, it was only incidentally conducive to an analysis of the effectiveness and economy of the management of the agencies.

Based on experience gained in making audits at the site of operations of Government corporations in accordance with the principles and standards applicable to commercial corporate transactions, as provided in the Government Corporation Control Act of 1945, the General Accounting Office expanded comprehensive audits at the site of operations of other agencies to replace the desk audit of documents. This improved method of site audit on a comprehensive basis was authorized in the Budget and Accounting Procedures Act of 1950 and have been progressively extended throughout the Government. Results have been (1) more complete and useful audit services for the Congress and agency management and (2) substantial reductions in

the number of the audit personnel of the General Accounting Office, particularly in the clerical or nonprofessional grades.

This modernization of the audit methods of the General Accounting Office has resulted in a very substantial reduction in redtape procedures in the processing of accounting documents without any diminution of congressional control and surveillance, in increased opportunity of the General Accounting Office to observe accounting deficiencies of the agencies, and in the increased availability of General Accounting Office personnel to work with the agencies in developing the systems and procedures necessary to overcome these deficiencies. The progress that has been made in auditing the financial transactions and activities of the Federal Government is presented in the committee's report of February 23, 1956, entitled "Review of Audit Reports of the Comptroller General" (S. Rept. 1572, 84th Cong.). As reported therein, the audit reports submitted by the Comptroller General to the Congress have expanded substantially in scope of coverage and number of reports each year. The continuity of this progress is shown by the fact that while 56 audit reports were submitted to the 80th Congress, 227 reports on audits or investigations were submitted to the Congress or its committees during fiscal year 1960. An additional 551 reports were addressed to officials of the departments and agencies during that fiscal year, copies of which in many cases were furnished to congressional committees or to interested Members of Congress.

ADDITIONAL IMPROVEMENTS

Inherent in the activities of the General Accounting Office during the last 10 years to obtain more economical and effective financial management organizations and methods throughout the Government was that Office's readiness to consolidate, streamline, or abolish functions performed by it. An example was the development of an electronic data processing system in the Treasury Department which integrates the check payment and reconciliation processes. Prior to the development of this system, the check payment function was performed by the Treasury Department and the detailed operations involving check reconciliation were performed by the General Accounting Office. Under the new system, the check payment and reconciliation are performed by the Office of the Treasurer of the United States and the General Accounting Office makes test audits at the site of the operations. The new system was developed jointly by the General Accounting Office, the Treasury Department, and the Bureau of the Budget. It has resulted in annual cost reductions of over $1,900,000 in the General Accounting Office and $1,400,000 in the Federal Reserve System with an increase of less than $400,000 annually in the Treasury Department. The overall savings from this improvement is about $3 million per year.

Another example is the action taken by the General Accounting Office following the enactment of Public Law 84-798, approved July 25, 1956. This act provides that (1) agencies which incurred obligations would be responsible for liquidating such obligations without preliminary review by the General Accounting Office unless doubtful questions of law or fact were involved, and (2) unpaid obligations would be under agency accounting control as long as they were legally

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