ANNUAL ACCRUED EXPENDITURE LIMITATIONS (PUBLIC LAW 85-759; 72 STAT. 852) The enactment of Public Law 85-759, approved August 25, 1958, climaxed one of the most controversial pieces of legislation on budget and accounting in many years. For over 2 years Congress considered, studied, debated, and finally passed legislation which contemplated placing a limitation on annual accrued expenditures. This was a compromise over the original version that the executive budget and congressional appropriations be in terms of estimated annual accrued expenditures as recommended by the second Hoover Commission and proposed by this committee in S. 3897, 84th Congress and S. 434, 85th Congress. Recommendation No. 7 of the second Hoover Commission's report on budgeting and accounting stated— that the executive budget and congressional appropriations The stating of appropriations on an annual accrued expenditure basis was strongly endorsed by the Secretary of the Treasury, the Director of the Bureau of the Budget, and the Comptroller General of the United States in testimony before this committee in the 84th and 85th Congresses. The President on four separate occasions recommended enactment of legislation to place appropriations on an annual accrued expenditure basis-a special message to the Congress, May 10, 1956; a statement when he signed Public Law 863, 84th Congress, August 1, 1956; his budget message to the 85th Congress, January 16, 1957; and a letter to the Speaker of the House of Representatives, April 18, In his letter to the Speaker of the House, he specifically urged the Congress to 1957. enact bills approved by the administration to implement *** Some Members of the House Appropriations Committee were opposed to stating appropriations on an annual accrued expenditure basis. Chairman Cannon and Representative Taber, the ranking minority member, submitted a joint letter and report to the chairman of the House Government Operations Committee expressing their opposition to the proposed legislation. Also, Representative Mahon, a Member of the Appropriations Committee, appeared before the House subcommittee and testified at length against the proposal. The major question that was raised during debate on this legislation was whether it gave Congress tighter control over Government expenditures. Many Members contended that it was the best way to obtain this control, which the Congress does not have. The proponents of the legislation cited the billions of dollars appropriated by Congress and carried over each year by the executive departments and agencies over which Congress has little or no control. Other Members, who opposed the legislation, contended that it would not provide the control needed by Congress, since contract authority would have to be substituted for the fund carried over each year, and the Congress would be in the same predicament as before. HOUSE APPROPRIATIONS COMMITTEE DISAPPROVES ACCRUED EXPENDITURE BASIS OF STATING APPROPRIATIONS (H. REPT. 216, 85TH CONG.) In March 1957, the House Committee on Appropriations issued a report (H. Rept. 216, 85th Cong.) on its study of the plan suggested by the executive branch to improve congressional control of the budget. While the plan itself did not specifically deal with the stating of appropriations on an annual accrued expenditure basis, it was included in the study since adoption of such a system would affect the budget and appropriations processes throughout the Government. In its report the House Committee on Appropriations set forth its reasons and conclusion why annual accrued expenditure method of stating appropriations should not be adopted. Following are excerpts from House Report 216, 85th Congress : Pending legislation would, if adopted, require estimates of appropriations to be stated on the so-called annual accrued expenditure basis. Similar legislation failed of adoption last year at the insistence of the House. In its simplest terms, annual accrued expenditures means stating appropriations on the basis of goods and services expected to be received during the year regardless of when obligated for, or when used, or when paid for. Under present practice, appropriations are stated on an obligation basis. They convey both authority to obligate and authority to disburse. What constitutes an obligation is comprehensively defined in law. Stating appropriations on the accrued expenditure basis would require supplementation in the form of contract authority for many programs. Changing over to the new basis would in no wise alter the operating realities or needs of the vast and complex programs of the Government. If operating necessities require advance commitment or obligating authority to permit of orderly program management and execution under present budgetary procedures, they will require similar authority under the accrued-expenditure method. Contract authority is a workable device but not the most economical. It is an old and familiar friend to the Committee on Appropriations and the Congress. It was used extensively for many years. It has been found wanting. It was generally abandoned in appropriation bills back in 1951, although its use is growing in substantive legislative bills. Far from contributing to economy and retrenchment, it tends to the opposite effect. It ties the hands of the President and the Congress in making up and considering future appropriation budgets by introducing undesirable rigidities into the budget picture. It is a snare and a delusion. Its "appeal" is one of its principal defects. It is often viewed as "merely an authorization," with the consequent tendency to pass over it more lightly, to fail to give it the same thorough examination as a direct appropriation. Psychologically, the situation can be likened to a charge account at the store-relatively easy to open because it is not necessary to have the cash in hand. Moreover, subsequent appropriation requests to pay the bills incurred under prior contract authority are frequently viewed as being beyond reach-the attitude that "we have no choice but to pay the bill." That has been the practical effect of using it in many instances. Recommendations leading to the proposed accrued-expenditure method lay great emphasis on necessity of the Congress regaining control of the purse strings and in support thereof cite the billions of unexpended carryover balances of appropriations at the end of a given fiscal year. The import of the suggestion seems to be that adoption of the new method automatically imparts to the Congress closer control of demands on the Treasury, with resultant substantial savings. It is true that large unexpended balances are in the hands of the departments each year and that in the annual appropriation bills the Congress does not now exercise direct annual control over their annual rate of disbursements ***. * * * * Carryover balances are pocketed in hundreds of separate appropriation and other accounts on the books of the departments. They are shown in detail throughout the budget. They vary in size from relatively insignificant amounts to billions of dollars. Regardless of size, determination of amounts of new obligating requests to be allowed requires concurrent consideration of the carryover in those programs where advance financing is necessary. That is the general procedure now followed by the Committee on Appropriations. In some instances only the unobligated portion is a pertinent factor, while in others the obligated portion is of equal importance in the determination. Such balances should be held to the absolute minimum, consistent with the varied needs of the individual program to which applicable. But so long as the scale of Federal programs remains of the present general magnitude carryover balances will continue to exist in terms of billions and billions of dollars. * * * * * For these and related reasons, it is the view of the subcommittee that the accrued-expenditure method should not be adopted. It has disadvantages and offers no improvement. This is not to infer that present methods and processes are perfect or the best. There may be a better way to present and process the Federal budget. The best system that can be devised ought to be employed, but the proposed accrued-expenditure method is not it. The point is, there is no simple shortcut, no magic retrenchment device. No budgetary system has a built-in guaranty of economy or efficiency. LEGISLATIVE HISTORY OF PUBLIC LAW 85-759 As had been set forth on page 93 of this report, this committee reported S. 3897 (S. Rept. 2265) in the 84th Congress, which contained a provision for stating appropriation estimates on an annual accruedexpenditure basis. The provision was stricken by the House of Representatives when it passed the bill in conference, when it became obvious that, because of the objections of the House, legislation implementing the other important Hoover Commission recommendations would not be enacted before the pending adjournment of the 84th Congress unless the Senate conferees accepted the House amendment. When the conference report (H. Rept. 2872, 84th Cong.) was agreed to in the Senate, spokesmen for the committee made it clear that the provisions stricken in conference would be given priority consideration upon convening of the 85th Congress. Early in the 85th Congress, two bills (S. 316 and S. 434) were introduced by committee Members and referred to this committee to require the executive agencies of the Government to present their budget estimates to Congress for each fiscal year on an annual accruedexpenditure basis, as recommended by the second Hoover Commission. S. 316 was introduced on January 7, 1957, by Senator Smith of Maine for herself and Senators Payne and Kennedy. S. 434 was introduced on January 9, 1957, by Senator Kennedy, for himself and 49 other Members of the Senate. Hearings were held on both bills in April 1957 and after amendment, S. 434 was reported favorably and passed the Senate on June 5, 1957. In its report to the Senate (S. Rept. 394, 85th Cong.) the committee stated: In summary, S. 434 gives the President authority to convert appropriation estimates, with the exception of those appropriations exempted, to an annual accrued-expenditure basis, where he deems appropriate in the interests of better financial management and better control of expenditures. It is fully recognized that if appropriations for long leadtime programs are stated on an annual accrued-expenditure basis it will be necessary for the Congress to provide contract authority in terms of the dollar amount required for orderly forward contracting beyond the budget year. The bill, as amended, provides that authority. The committee also recognizes the fact that the conversion of appropriation estimates to the expenditure basis is a revolutionary change in the Government's financial structure, the application of which by the executive branch will require the same thoughtful consideration that has been given to the granting of the authority by the Congress. As the Comptroller General has pointed out, the annual budget surplus or deficit is measured by the difference between annual receipts and expenditures. By establishing a direct correlation between appropriations and expenditures through the enactment of S. 434, the Congress provides not only itself, but the President as well, with greater opportu nity to control the level of governmental operations during a It is believed, moreover, the full implementation of this The House Committee on Government Operations held extensive hearings in March and April 1957 on 14 bills 10 which provided for improving Federal budgeting and appropriations processes. Nine of these bills related to accrued-expenditure basis of stating appropriations and the remaining five bills to other budget and accounting matters. Following these hearings, the committee reported a new bill, H.R. 8002 (H. Rept. 572, 85th Cong.), introduced by Representative Rogers of Florida on June 17, 1957, which contained substantially the same provisions as S. 434. In its report, the committee commented on the views expressed by Members of the House Appropriations Committee as follows: The committee gave intensive study and consideration, as always, to the views of the Committee on Appropriations as contained in a joint letter from Chairman Cannon and the ranking minority member, John Taber, and as so ably presented at the hearings by Congressman Mahon, the chairman of the subcommittee. We recognize the great service they are rendering to the Congress and the country by their meticulous scrutiny and analysis of all appropriation proposals. We agree with Mr. Mahon that there is no magic in the accrued-expenditures method. But the committee is convinced that the present dimensions of the Federal budget demand whatever improvements can be made in its process. We believe such a substantial improvement will be brought about to justify the passage of this legislation. No action was taken on the floor of the House until March 4, 1958, when Representative Wigglesworth of Massachusetts introduced an amendment " which eliminated all of the language after the enabling clause and substituted new language. This amendment was debated for two days and finally adopted by the House on March 6, 1958, as a substitute for the original provisions of H.R. 8002. H.R. 8002 was placed on the Senate Calendar, and, at the request of Senator Carl Hayden, Chairman of the Senate Committee on Appropriations, the bill was referred to the Committee on Appropriations for further study. Following hearings on July 8, 1958, H.R. 8002 was reported favorably by the Senate Committee on Appropriations. The report (S. Rept. 1866, 85th Cong.) contained the following statement relative to its position, the objectives of the bill, and the amendments: The bill as it passed the House would authorize the application of the accrued-expenditure system to all appropriations and fund accounts when the President determined 10 Nine bills containing accrued-expenditure provisions were: H.R. 758, 2494, 2780, 3379, 3961. 4117, 4443, 4500, and 5897. The five other bills were H.R. 40, 1170, 1171, 2000, and 5941. 11 Congressional Record, vol. 104, pt. 3, Mar. 4, 1958, p. 3421. |