The general supply fund was made available for financing the establishment, maintenance, and operation of motor pools and systems and the furnishing of vehicles, equipment, and related services. Billings to using agencies are at prices set by GSA so as to recover all elements of costs, including among other things the cost of amortizing the purchase price of motor vehicles and other equipment. Costs are required to be determined in accordance with the accrual accounting method and reports prepared on such basis. The act also requires an analytical justification for the establishment of each motor vehicle pool or system including cost comparisons to show expected savings. Cost records are required to be maintained to show the cost of establishment, maintenance, and operation to provide a basis, among other things, for determining the feasibility of continuing any pool. Where experience over a reasonable period, not exceeding two successive fiscal years, fails to demonstrate savings the system is required to be discontinued, and comparable vehicles and equipment returned to the transferring agencies.

The act requires reimbursement of fair market value where vehicles, equipment or supplies taken over have been acquired by the owning agencies through expenditures from any revolving or trust fund authorized by law. When reimbursement is not required the capital of the fund may be increased or decreased by the value of vehicles, equipment or supplies taken over or returned by the fund.

Results of operations. Forty-eight interagency pools were in operation at the end of December 1959. Nearly 15,000 vehicles were assigned to these pools with equipment value approximating $17 million. The establishment of such pools generally results in a significant reduction in the number of vehicles required to handle the requirements of the participating agencies and a reduction of approximately 3.5 cents in cost per mile. Fiscal year 1959 savings were estimated at $4.6 million.

Separate accounts and records are maintained on the accrual basis for each pool which produces, for each of nine classes of vehicles, such major elements of cost as operating expense, maintenance expense, depreciation, and indirect expense, and in addition, the cost of providing supplemental services such as drivers, shuttle and radio cars, and service station supplies. Reimbursements obtained from using agencies are similarly classified and reported, permitting a determination as to whether rental rates established for each class of vehicle or charges for other type of service are in line with costs.

From these accounts and records reports are produced for each pool-in a summary form monthly and detailed form semiannuallywhich disclose income, expense of major cost elements, net profit or loss, costs per mile, and various statistical data. In addition to these reports prepared for internal GSA management, data are obtained from the system for preparation of GSA's portion of the annual motor vehicle report and for submission of external budget justifications.

The financial data provided by the system facilitates the preparation of the analytical justifications and cost comparisons for purpose of determining savings which are required by the act in connection with the establishment and continuation of each pool or system.

Examination by Comptroller General of books, documents, papers, and records of contractors

Subsection 304 (e) was added to section 304 by Public Law 245, 82d Congress, and requires that all contracts negotiated without advertising shall include a clause to the effect that the Comptroller General of the United States or any of his duly authorized representatives shall, until expiration of the 3 years after final payment, have access to, and the right to examine any directly pertinent books, documents, papers and records of the contractor or any of his subcontractors engaged in the performance of and involving transactions related to such contracts or subcontracts.

SUMMARY OF GSA'S OVERALL FINANCIAL OPERATIONS

OTHER LEGISLATIVE AND ADMINISTRATIVE REQUIREMENTS

In addition to the Federal Property and Administrative Services Act of 1949, as amended, there are other laws and administrative actions which have affected the financial operations of GSA. The more significant of these are:

(a) Budget and Accounting Act of 1921, as amended.

(b) Strategic and Critical Materials Stockpiling Act (58 Stat. 811), as amended, and related laws dealing with strategic materials. (c) Public Buildings Act of 1949.

(d) Budget and Accounting Procedures Act of 1950, as amended. (e) Defense Production Act of 1950 (additional functions assigned GSA by Executive orders and OCDM directives).

(f) Abaca fiber program, Public Law 81-683 (program transferred from RFC to GSA by Executive Order 10539, January 22, 1954).

(g) Reactivation and expansion of the Government-owned Nicaro nickel plant in Cuba.

(h) Public Buildings Act of 1959.

(2) Transfer to GSA of the Federal Facilities Corporation from the Department of the Treasury (Executive Order 10720, effective July 1, 1957). Also RFC liquidation pursuant to Reorganization Plan No. 1 of 1957.

FINANCIAL MANAGEMENT IMPROVEMENTS

The financial operations of GSA have necessarily been expanded to meet these additional responsibilities. However, constant improvement and simplification of procedures have resulted in lower unit costs for handling the growing volume of GSA's activities. Employment in financial services has decreased from a high of 1,440 in 1952 to 1,273 as of June 30, 1959. Highlights of progress made in improving financial operations of GSA during the past 10 years are as follows:

(a) An integrated accounting system has been established covering all program operations and the accrual basis for accounting adopted. This system was designed for integrating budget, accounting, and reporting procedures in which increased emphasis is placed upon the accrued expenditures of each activity. Financial data is thereby provided internal management which focuses on all resources applied

to programs and activities rather than only those resources obtained from current appropriations. It also provides needed information on the value of resources available for future operations.

(b) Accounting and budget classifications are synchronized with each other and with organizational units and each budget activity. directly supported by the accounts. This system, which provides a consistent pattern for recording and reporting financial data, permits management at all levels to compare actual performance with previous budget estimates and provides adequate accounting support for current budget estimates.

(c) Accounting has been decentralized to the regional offices underthe direction of regional comptrollers and branch office accounting, techniques are utilized.

(d) Monetary property accounts have been established as an integral part of the accounting system and physical inventories placed on regular time schedules. Accounting control over capital assets facilitates the maintenance of accurate detail property records and promotes efficiency in the management and utilization of Government property.

(e) The appropriation structure and allotment systems have been simplified and the level of allotments raised to the highest practicable level. This has resulted in the elimination of many hundreds of detail allotment accounts.

(f) The audit program has been expanded to include appraisal and review, on a progressive basis, of GSA operations generally. Significantly, this is beyond its past emphasis on GSA financial management activities and those of its contractors.

(g) Comprehensive performance analysis systems relating costs to production and covering all staff and program activities have been developed and placed in operation.

(h) Conversion of accounting records to electric accounting machines is practically complete. In addition, medium scale electronic computers have been installed in 5 of GSA's 10 regional offices. The computers are being utilized for (1) the FSS stores operation and related accounting and (2) payroll.

(i) A financial reporting system has been developed and con-. tinued emphasis is placed on refinement and improvement of methods to provide useful and timely financial data for both GSA internal management and external requirements.

FUTURE PLANS FOR IMPROVEMENT

Inasmuch as GSA has achieved the basic objectives of the financial management improvement program, future efforts will be directed toward further refinement and improvement of operating procedures. Particular emphasis will be given to the extension of automatic data processing installations and further conversions from manual to punched card procedures. Emphasis will be continued on employee training and development and the recruitment of trainees under a GSA-Civil Service Commission training agreement. The training program is designed to increase technical competency and accelerate the growth and development of management talent in order to insure continuity of sound, efficient financial management.

Over 100 specific projects have been established for fiscal year 1960 which are aimed at achieving further improvement in the financial operations. A few of these in each area of financial operations are listed below:

Accounting

(a) Functional and organizational realinements in financial operations will be made to increase efficiency and provide better service to management.

(b) Several projects have been established which will improve methods and procedures in the following areas: (1) Examination, processing, and payment of invoices and payrolls; (2) property accounting; (3) accounts receivable and billing; (4) cash controls; and (5) cost accounting.

(c) A system is in its final stages, and programing has started, for a fully integrated FSS stores, inventory management, and related accounting application on a large scale computer in region 3. The system should become operational in the latter half of fiscal year 1961. In addition, a systems study has been started looking toward a completely integrated data processing operation for the benefit of buildings management activities in PBS.

Audits

(a) Develop and disseminate to all operating levels of GSA, information regarding the objectives of the expanded audit program and its relationship to all levels of management. In addition, a periodic publication of a "Digest of Audit Findings and Recommendations" will be issued for use of management in evaluating regional and central office operations and procedures.

(b) Develop a program designed to promote the growth and effectiveness of the professional staff.

Budget

(a) Continue study to simplify, standardize, and strengthen budget presentation.

(b) Develop sound basis for determining comparative regional performance for financial operation for purpose of determining adequacy of staffing and areas of strength and weaknesses.

(c) Analyze and make desirable simplifications and improvements in the allotment pattern and budgetary cost accounts.

(d) Study paperwork, document flow procedures, and report formats in order to minimize paperwork and to increase the effectiveness and efficiency of methods involved in the budget processes,

Credit and finance

(a) Development of procedures for handling delinquent accounts receivable in order to improve control and coordination with contracting services and speed up collections.

(b) Study certain supply contracts to ascertain possibilities of improving Government's position in such matters as stockpile sites, set-aside for small business, and obligations to purchase contractor's production. During the 3 fiscal years 1958 to 1960 inclusive, these efforts to which financial operations contributed substantially resulted in the accomplishment of negotiated contract cancellations and contract reductions totaling over $374 million for the purchase of

strategic and critical materials no longer considered necessary for meeting defense requirements.

Reports

(a) Increased emphasis will be given to the development of more effective, timely and useful reports for internal management, Bureau of the Budget, and the Congress.

FINANCIAL RESULTS ACCOMPLISHED UNDER TITLE IV OF THE NATIONAL SECURITY ACT AMENDMENTS OF 1949

(PUBLIC LAW 81-216; 83 STAT. 578)

ESTABLISHMENT OF COMPTROLLER OF THE DEPARTMENT OF DEFENSE

(SEC. 401)

Section 401 of the National Security Act Amendments of 1949 authorized the establishment of a Comptroller in the Department of Defense. The Comptroller, who is one of the Assistant Secretaries of Defense, advises the Secretary of Defense in budgetary and fiscal matters and performs the following functions:

(1) Supervises and directs the preparation of the budget estimates of the Department of Defense; and

(2) Establishes and supervises the execution of—

(a) Principles, policies, and procedures to be followed in connection with the organizational and administrative matters relating to

(i) the preparation and execution of the budgets; (ii) fiscal, cost, operating, and capital property accounting;

(iii) progress and statistical reporting;

(iv) internal audit;

(b) Policies and procedures relating to the expenditure and collection of funds administered by the Department of Defense; and

(3) Establishes uniform terminologies, classifications, and procedures in all such matters.

In addition, there have been included among the functions discharged the supervision of policies and procedures in contract financing and contract auditing, and, in connection with the latter, the function of advising the Assistant Secretary of Defense (Supply and Logistics) with respect to cost accounting and other matters related to contract pricing.

The Department of Defense, late in 1959, reorganized the Office of the Assistant Secretary of Defense (Comptroller) into three major suboffices each headed by a Deputy Comptroller: i.e., (1) Deputy Comptroller (Budget), (2) Deputy Comptroller (Accounting, Finance, and Audit Policy), and (3) Deputy Comptroller (Financial and Operating Management). In addition, functions pertaining to economic analysis and estimates continued to be the responsibility of a separate division reporting directly to the Assistant Secretary. This reorganization will bring about better correlation and direction of closely related or allied functions under a minimal number of supervisory officials immediately below the Assistant Secretary.

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