MILITARY DEPARTMENT BUDGET AND FISCAL ORGANIZATION—-DEPARTMENTAL COMPTROLLERS (SEC. 402) Each military department appointed a comptroller shortly after enactment of title IV, and these comptrollers have functioned in the manner required by the act in the same areas of budgetary and fiscal managment as required for the Comptroller of the Department of Defense. In the case of the Departments of the Army and Air Force, the Comptroller has been a general officer responsible, as a Deputy Chief of Staff, concurrently to the Chief of Staff of that military department, as well as directly to an Assistant Secretary of that department who has the top responsibility for the area of financial management. On the other hand, in the Department of the Navy, the Assistant Secretary responsible for financial management was also named Comptroller, but more recently, with the reduction in the number of Assistant Secretaries of each military department, the Under Secretary of the Navy has been named the Comptroller. The Deputy Comptrollers of the Army and Air Force have been civilians; the Deputy Comptroller of the Navy has been a rear admiral. As authorized by the act, there has been established in each of the three military departments a comptroller organization at each level below the military department headquarters, including headquarters of each major command, bureau, and technical service, and each of their major field installations. While it is possible that the results of both section 401 and section 402 might have been obtained administratively without the use of title IV, it is unlikely that all of the budgetary and fiscal functions would have been unified and integrated within this time period, and thus there would not have been as much progress as has been accomplished to date in performing these functions. From the standpoint of civilian control over the budgets and programs of the Department of Defense, the results of this legislation cannot be overemphasized. PERFORMANCE BUDGET (SEC. 403) This section of the act has provided the basis for important reforms in the presentation and justification of budget estimates of the Department of Defense in support of appropriation requests to the Congress and in support of requests for apportionment authority to the Secretary of Defense and Bureau of the Budget. These reforms have been important also in the preparation, review, and analysis of budgets at every level within the Department of Defense as a basis for budget approval and control through the funding process. Under the authority of this provision, the Appropriations Committees of the Congress accepted proposals of the Department of Defense, supported by the President and the Director, Bureau of the Budget, to completely revise the appropriation structure of the Departments of the Army and Navy. Such extensive changes were not required with respect to appropriations of the Department of the Air Force, which was newly created under the National Security Act of 1947, and its appropriation structure was cast initially in the pattern later developed for the Departments of the Army and Navy. Previously, most of the Army and Navy appropriations had been made individually for the technical services of the Army and thẹ bureaus of the Navy. In the main, each such appropriated fund provided for financing in a given technical area, research and development, procurement of equipment and materiel of all kinds, storage and distribution of materiel, and also operating and administrative expenses of the major commands of the Armed Forces as well as the respective bureaus and technical services. In the case of the Army Corps of Engineers and Navy Bureau of Yards and Docks, their appropriations included construction and maintenance of all facilities. Each appropriated fund was a 1-year appropriation; that is, it expired for obligation at the end of the budget year although it was available 2 more years for expenditure to liquidate obligations. Today the appropriations for each military department are made for that department as a whole without respect to any suborganizational identification. In this connection, operating and capital programs have been separated in the several appropriations into readily identifiable functional programs. The present uniform appropriation-account pattern for the three military departments and Office of Secretary of Defense is as follows: Military personnel: Reserve Forces. National Guard. Operation and maintenance: General. National Guard. Claims and contingencies. Research, development, test, and evaluation. Procurement and production (of capital-type equipment and Aircraft and related procurement. Other. In the Department of the Navy there are separate appropriations for the Marine Corps for military personnel, operation and maintenance, and procurement and production. Each of the foregoing five categories of appropriations is the subject of a separate specific section in the Department of Defense Appropriation Act for the fiscal year 1960, and this results in a procedure for justification and review of budgets whereby the similar functional programs of each service are reviewed in comparison with one another. Under this section of the act it is also required that the budget estimates for each separate appropriated fund should be prepared, presented, justified, and administered "so as to account for and report the cost of performance of readily identifiable functional programs and activities." Moreover, it is provided that so far as practicable the budget estimates and authorized programs of the military departments "shall be set forth in readily comparable form and shall follow a uniform pattern." Great progress has been made in the attainment of this goal under each of the appropriated funds, although in this respect further refinements are required, especially in budget presentations on a comparable basis and in the development of appropriate budget accounts for the operation-and-maintenance appropriations for the Navy and Air Force corresponding to the pattern developed for the operation-and-maintenance appropriation of the Army. Reform of the appropriation structure has also been most important in simplifying budgetary control through reduction of the number of allotments of funds to each operating unit. Formerly any one operating unit in the Army or Navy was financed under separate allotments from several technical services or bureaus. The appropriation reform has permitted each operating unit to have only one allotment from its own managing technical service, bureau, or command for each appropriated fund which finances a separate major program in which it is engaged. This permits streamlining the administrative channel of budget submissions, reviews, and approvals. Each operating unit is budgetarily responsible direct to its own operating agency-not to a number of "absentee landlords." From the standpoint of accounting and reporting, this section is important in establishing the same pattern as required for budgeting. And here further extensive development is required, especially upon the cost-basis or accrual basis of accounting, corresponding to the cost basis of budgeting. Further improvements in budgeting and accounting are being made under Public Law 84-8631 through a special program for improvements in financial management in Department of Defense with the complete support of the Director of the Bureau of the Budget and the Secretary of Defense. These improvements are being made for each individual appropriated fund area inasmuch as each area has its own individual problems. In this connection, reference is made to Department of Defense Directive 7040.1, "Program for Improvement in Financial Management in the Area of Appropriations for Operation and Maintenance," dated May 29, 1959. This directive established for the operation and maintenance area the policies and procedures to be followed in effecting further improvements and requires each military department to prepare and carry forward time-phased programs in terms of specific projects required to be accomplished. OBLIGATIONS OF APPROPRIATIONS (SEC. 404) In general, the Department of Defense controls the rates of obligations under appropriations based upon apportionment procedures required under section 3679, Revised Statutes, Antideficiency Act. This control is effected through review and approval or adjustment by the Secretary of Defense of budgets forwarded in support of apportionment requests to the Bureau of the Budget. However, on 1 Legislative history and provisions of Public Law 84-863 are found on pp. 92-97 of this report. a selective basis this section has been used to establish supplemental obligation controls within the amounts apportioned for obligation by the Bureau of the Budget. For example, in the area of operation-andmaintenance appropriations, separate obligation limitations have been established for each of the several major programs included under each of these broad appropriations. And in the case of procurementand-production appropriations, obligation limitations have been established for selected major items to be procured under those appropriations. Such supplemental administrative controls are sometimes important on a selective basis as a means of requiring observance of the terms of approved programs and budgets at every level in the Department of Defense. WORKING-CAPITAL FUNDS (SEC. 405) Working-capital funds authorized by section 405 are revolving funds of two types: (1) "stock funds" for financing inventories of consumable materiel, and (2) "industrial funds" for financing operations of industrial- and commercial-type activities. The extensive use of these working-capital funds has been effective in aiding implementation of section 403, "Performance Budget," as well as in directly facilitating better management of inventories of consumable materiel and industrial- and commercial-type activities. This is because the inventory managers and the managers of the industrial-fund activities have been enabled to operate more nearly like merchandising and industrial corporations, with selling of their goods and services to the using activities which are financed by allotments of appropriated funds. The using activities issue orders against their funds in the same manner as contracts and purchase orders are placed with independent commercial contractors. From the standpoint of the inventory managers, reimbursements for sales of materiel provide the means for replenishment of stocks. Dependence on reimbursements from sales requires inventory managers to do a good job of forecasting sales, maintaining adequate, balanced stocks for sale; effecting timely and orderly procurement; and avoiding dead stocks. From the standpoint of industrial-fund managers, reimbursements for the cost of goods and services produced requires them to be more efficient in order to satisfy their customers on price and service. Stock funds Four stock funds have been established-one for each service including the Marine Corps. The Navy had used a stock fund for many years. Section 405 merely extended authority for stock funds to the other services. The use of the stock fund has been extended in the Army, Navy, and Marine Corps to cover technical-type material such as spare parts, as well as common commercial-type materiel of a consumable nature such as clothing, food, and medical supplies. In the case of the latter examples, separate stock-fund divisions have been established under single-manager assignments wherein one agency is enabled to procure and "wholesale" all materiel for all of the services, resulting in elimination of duplicating procurement and a reduction in inventory-management functions. The status of stock funds in the military departments as of June 30, 1959, were as follows: The use of stock funds has resulted in better inventory management with substantial savings through use of stocks by reduction of inventories and elimination of procurement for replenishment of stocks which might have taken place otherwise. While it is impossible to estimate the amount of savings resulting from the use of stock funds, 235, 168 77, 353 53, 646 302 |