PART I. BACKGROUND EARLY HISTORY The drafters of the Constitution, in their wisdom, realized the benefit of vesting in the Congress control over the financial affairs of the Federal Government. In article 1, section 8, the Congress is specifically given the power to lay and collect taxes, to borrow money on the credit of the United States, and to coin money. Further legislative control is found in section 9, clause 7, which provides that: ury, No money shall be drawn from the Treasury, but in conse- The meaning of this clause of the Constitution has never been in issue. It was explained long ago by the first Secretary of the TreasAlexander Hamilton, who was also a Founding Father, as follows: The design of the Constitution in this provision was, as I conceive, to secure these important ends, that the purpose, the limit, and the fund of every expenditure should be ascertained by a previous law. The public security is complete in this particular, if no money can be expended, but for an object, to an extent, and out of a fund, which the laws have prescribed.1 Commencing with the Treasury Act of 1789, which provided for an auditor and a comptroller in the Department of the Treasury, the Congress relied upon the discretion of accounting officers to enforce legislative provisions relating to the expenditure of public funds. Since the accounting officers were under the Department of the Treasury, then in the executive branch of the Government, and since Congress did not keep in close touch with or exercise close oversight jurisdiction over fiscal administration, there soon developed a relaxation of controls over Federal expenditures. The Congress, recognizing that fiscal controls were gradually being weakened, repeatedly enacted laws with the objective of correcting the situation. The act of March 3, 1809 (2 Stat. 535), required officers who received public money to account for it in accordance with appropriations, and to apply it solely to the purpose for which funds were appropriated. The act of March 3, 1817 (3 Stat. 366), required all claims against the United States to be settled in the Department of the Treasury. The act of January 31, 1823 (3 Stat. 723), prohibited the advance of public funds, except advances to disbursing officers made "under the special direction of the President," and regulated the rendition of accounts by public officers. To secure more 1 Powell, F. W., "Control of Federal Expenditures-A Documentary History" (Brookings Institution, 1939), p. 133. adequate review, the Congress, from time to time, altered the position of the comptrollers and added additional auditors to the Treasury staff and, in 1868, made the balances certified by the auditors in the settlement of accounts conclusive upon the executive branch. In 1893, Congress continued its efforts to find a satisfactory solution to the Government's financial situation by creating the Dockery Commission. This Commission's findings resulted in the enactment of the Dockery Act of 1894. Pertinent findings of the Commission and changes brought about by that act follow. DOCKERY ACT OF 1894 (28 STAT. 205) CREATION OF THE DOCKERY COMMISSION, 1893 The annual report of the Secretary of the Treasury for 1892 pointed to needed changes in methods of disbursing public moneys and the examination and settlement of public accounts, and suggested creation of a Comptroller General or Chief Comptroller of the Treasury. The act approved March 3, 1893, created the Dockery Commission, consisting of three Senators and three Representatives, with a directive to inquire into laws organizing the executive departments and agencies and subordinate units, their operations and the efficiency of their employees, and to determine whether existing laws could be modified to secure greater efficiency in Federal fiscal operations. The Commission was authorized to employ experts, and pursuant to this authority, the experts on Treasury bookkeeping assigned to the Commission recommended that The law requires, and should continue to require the signature of the Secretary of the Treasury upon all warrants for money advanced or expended out of, and upon all warrants for the covering of the revenue into, the General Treasury. This makes it necessary for him to be aware of the status of the accounts for which he signs warrants. He should continue to receive from his own office the information which he now receives as to appropriations, etc., and should also have knowledge and supervision of all public accounts. To provide for this, the Division of Warrants, Estimates, and Appropriations, which he now has to give him the required information, should be enlarged to take in the personal ledgers which are now kept in the offices of the Register of the Treasury and of the Second, Third, and Fourth Auditors, to be called the Division of Bookkeeping and Warrants. The one exception to the plan of bringing all accounts together in one office under one supervision is that of the Sixth Auditor of the Treasury, or Auditor for the Post Office Department. The post-office funds are kept separate from those of the General Treasury and are drawn upon by warrants of the Postmaster General, countersigned by the Sixth Auditor of the Treasury; and it therefore would seem advisable (at the present time) not to bring these accounts into the same office as that of the other accounts of the Govern ment, as the funds are not under the control of the Secretary Combining the books under one head, and that head the CHANGES BROUGHT ABOUT BY THE DOCKERY ACT The outcome of the work of the Commission was the enactment of the Dockery Act, approved July 31, 1894, which streamlined the prior financial system and effected some reforms which had been advocated for many years. The following principal changes were brought about by the act: (1) The Office of Comptroller of the Treasury was created. The several kinds of "comptrollers" which had mushroomed under previous laws were abolished, and centralized control was lodged in the Comptroller of the Treasury. (2) The six auditors were designated according to the departmental accounts they audited, the accounts to be examined by each were set forth, and the auditors were required to certify the balances on such accounts. (3) The departments were charged with the responsibility to make administrative examination of accounts before submission to the auditors. (4) Contracts were required to be deposited with the auditors. (5) Provisions were made for rendition by the Comptroller of decisions on the legality of proposed expenditures of public funds in advance of actual payments. (6) A Division of Bookkeeping and Warrants was established in the Office of the Secretary of the Treasury. To this Division was assigned the duty of maintaining the official appropriation accounts of the Government previously kept in the Register's Office and in the offices of the Second, Third, and Fourth Auditors. (7) The Secretary of the Treasury was required to render to Congress, on the first day of the regular session, an annual combined statement of the receipts and expenditures of all public money, including those of the Post Office Department. (Previously a statement of receipts and expenditures had been submitted to Congress each year under a standing order of the House of Representatives dated December 30, 1791). The act also continued the requirement of countersignature by the Comptroller on warrants for the advance of money, and reenacted the provision that the balances certified by the auditors were final and conclusive on the executive branch, subject to appeal to the Comptroller, whose decision was final on that branch but not on the Congress or the courts. In addition, the act contained various procedural provisions such as those relating to the time for rendition of accounts of accountable officers and special provisions for Post Office accounts. The changes brought about by the Dockery Act provided the Congress with better control than in the past. However, since the Comptroller and auditors remained executive officers, the Congress still lacked the independent review of the legality and propriety of expenditures of the executive branch essential to its effective exercise of the power of the purse. This was not accomplished until 27 years later when the Congress enacted the Budget and Accounting Act of 1921 creating the General Accounting Office and making it completely independent of the executive branch and responsible only to the Congress. BUDGET AND ACCOUNTING ACT OF 1921 2 (42 STAT. 20; 31 U.S.C. 1) The Budget and Accounting Act of 1921 made a number of important changes in the financial management of the Federal Government, many of which are still in operation. The most significant was the establishment of a national budget system by creating the Bureau of the Budget in the Department of the Treasury, administered by a Director responsible only to the President and, secondly, the establishment of the General Accounting Office under the administrative direction of a Comptroller General, responsible only to the Congress. The act provided for an independent audit of the Government's financial transactions by the General Accounting Office, with reports thereon to be submitted directly to the Congress. NATIONAL BUDGET SYSTEM Title II of the act provided that the President should transmit to the Congress at the beginning of each session a national budget, and authorized the President, at his discretion, to submit supplemental or deficiency estimates that are necessary on account of laws enacted after transmission of the budget or which are otherwise in the public interest. Specific information to be included in the budget was set forth in section 201 of the act. It was the purpose of the budget system to provide in financial terms for planning, information, and control. Through the budget the spending agencies were required to translate their work programs in 2 See app. A, pp. 275-295, for provisions of the act, as amended. advance into fiscal terms so that each activity might be brought into balance and proportion with all other Federal activities and with the revenues and resources of the Government, and in harmony with longrange and general economic policies. The budget not only was established to serve as the basis of information for the Congress and the public with regard to the past work and future plans of the administration, but also as the means of control of the general policy of the Government by the legislative branch and of the details of administration by the executive branch. CREATION OF THE BUREAU OF THE BUDGET 3 The Bureau of the Budget, headed by a Director was placed in the Department of the Treasury by section 207 of the 1921 act. The Bureau was charged with the responsibility of preparing the budget for the President, including any supplemental or deficiency estimates, with authority to assemble, correlate, revise, reduce, or increase the estimates of the several departments and establishments. The Bureau, when directed by the President, was given the power, under section 209, to make detailed studies of the departments and establishments for the purpose of enabling the President to determine what changes should be made in (1) the existing organization, activities, and methods of conducting the business of such departments or establishments, (2) the appropriations therefor, (3) the assignment of particular activities to particular services, or (4) the regrouping of services. Reports of such studies may be transmitted to Congress by the President with his recommendations. To enable the Bureau to discharge its responsibilities, section 213 directed the departments and establishments to furnish to the Bureau such information as it might from time to time require, and provided that employees of the Bureau, when duly authorized, should have access to, and the right to examine, any books, documents, papers, or records of such departments or establishments. The creation of the Bureau of the Budget was a major step in the direction of effective financial management in the executive branch of the Government. It placed upon the President responsibility for the preparation of a comprehensive annual budget and recognized the need for Executive discretion and leadership in preparing and submitting to the Congress a program for Federal expenditures. At the same time it provided the President with one of the primary instruments needed for effective overall management of the executive establishment. The Director of the Bureau is appointed by the President and reports directly to him. The Director is one of the few high-ranking policy officials in the executive branch who does not require confirmation by the Senate. The Bureau of the Budget was set up as an arm of the President for centralized fiscal management of the vast administrative machine thereby enabling him to submit regularly to the Congress a complete report on past activities and future programs for approval. Through its control over budgeting, the Bureau is in a key position to detect weaknesses in the organiza 3 The Bureau of the Budget was later transferred from the Department of the Treasury to the Executive Office of the President by Executive Order 8248, Sept. 8, 1939. |