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cash at the point of tax collection, and the other is an independent check on tax accruals from the time of assessment to the actual collection. Under the present practice the tax-assessing bureaus are virtually their own collectors and auditors. The same officers and staffs in customs and in internal revenue have charge both of the assessment and of the collection of taxes. This is literally true of customs, and for all practical purposes of internal revenue. In order to remedy this situation, it is suggested that arrangements be made whereby the actual receipt of checks and currency in payment of taxes in the offices of both the collectors of customs and of internal revenue should either be supervised directly or reported immediately to the Treasury unit in the new Fiscal Service. An effective independent check on tax accruals should also be provided through the proposed Accounting Service of the Treasury having authority to maintain accrual accounts of all tax receipts, involving a record of assessments, compromises, and adjustments of the major taxes.

Suggested New Fiscal Service

It is suggested that the existing Fiscal Service should be completely reorganized and integrated, particularly with respect to its scattered and duplicating accounting operations, and that some units transferred from other parts of the Treasury should be added. The general scope of the new Fiscal Service may be roughly indicated by the following outline.

Existing functions and units: 1. Financial management (small staff under the Fiscal Assistant Secretary). 2. Bureau of Accounts (except for the keeping of general and control accounts).

3. Bureau of Public Debt (greatly reduced in size by transfer of more routine work to the Federal Reserve banks).

4. Office of the Treasurer of the United States (completely realigned; include Chief Disbursement Officer; accounts reduced to record of receipts and disbursements).

Transferred agencies and units:
5. Office of the Technical Staff (Division of Research and Statistics).

6. United States Savings Bonds Division (eventually combined with Public Debt).

7. Bureau of the Mint.
8. Bureau of Engraving and Printing.

The reorganization and modernization of the Treasurer's Office should provide for the transfer and integration of disbursements, deposits, investments, and surety bonds, from the present Bureau of Accounts. This Bureau would then practically disappear when the proposed Accounting Service takes over its general and control accounts. The accounting procedure of the Treasurer's Office should provide simply for a cash record of receipts and disbursements. A collection unit should check on the cashiers now under the collectors of customs and of internal revenue.

Some have argued that the Bureau of Public Debt ought to be a major organizational unit of the Treasury Department, because of its wide expansion since World War II. But we believe that most of the routine work of debt management can be successfully shifted to the Federal Reserve banks at very little extra cost to the banks, provided the accounting, filing, and record-keeping systems are simplified and mechanized. A considerable shift in this direction has already taken

place. A further shift apparently does not even require statutory changes, but is merely a procedural matter. The United States Savings Bonds Division, a sales-promotion unit of the Treasury at the present time, should eventually be merged with the debt management organization.

Such an over-all realignment of the public debt organization of the Treasury should eventually effect a large reduction in the existing personnel, probably as many as 4,000 employees. At the same time, it would leave with the Treasury Department mainly the policy matters involved in the management of the debt-matters which the Treasury should properly keep. Inasmuch as the national debt will be a major fiscal problem of the government for many years to come (if not indefinitely), the Treasury should have the full cooperation with the Federal Reserve System in the management of the debt. This could be greatly promoted by having the Secretary, or the Under Secretary, or an Assistant Secretary (as suggested above) sit as a member of the Federal Reserve Board, and by having the Secretary and the Under Secretary attend board meetings whenever desirable.

The Office of the Technical Staff, formerly the Division of Research and Statistics, should be an integral part of the new Fiscal Service. It is now concerned almost exclusively with financing and public debt problems, which are entirely within the scope of the Fiscal Service.

As already stated above, the Bureau of Engraving and Printing and the Bureau of the Mint are tied up with Treasury functions through the issuance of metallic and paper currency, the production of bonds, notes, and other securities, and the printing of checks and revenue stamps for the Treasury Department. Since these operations have to be closely supervised and controlled by the Treasury, it would seem proper for the establishments to remain in the Treasury Department for which the bulk of their work is now being done.

1 See testimony of E. F. Bartelt in the hearings before the Subcommittee of the House Appropriations Committee, Eightieth Congress, second session, on the Treasury Department appropriation bill for 1949, part I, pp. 418-419.

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Suggested Accounting Service

The Accounting Service would be a new unit in the Treasury Department. Its principal function would be to establish and maintain a central accounting and reporting system for the whole Government. Such a system would consist of summary accounts kept on an accrual basis so far as possible, the detailed accounts being maintained in the departmental and field offices of the operating establishments. The system should be supported by completely revised legislation with respect to accounting. It should cover all revenues, receipts, funds, appropriations, expenditures, supplies, properties, and securities of the United States Government. It should produce promptly all the necessary accounting and budgetary statements for executive and congressional uses.

An appropriate and important function of the proposed Accounting Service would be to maintain accrual accounts of governmental revenues. The Service should receive copies of the assessment lists of internal revenue, principally of income taxes, from the collectors, so that an independent check may be established on the accrued revenue from such taxes. It should verify the assessment of duties and the allowance of draw-backs made by the several collectors of customs, now a function of the comptrollers of customs. It should likewise establish suitable checks over departmental and miscellaneous revenues, which are largely lacking at the present time.

The need has long existed for revenue controls which would operate independently of the two bureaus—the Bureau of Internal Revenue and the Bureau of Customs—which gather the bulk of the Government's taxes and other revenues. The principal accounting checks at present over the major sources of revenue are those exercised internally by these bureaus. It seems highly important that appropriate accounting checks should be provided independently of the bureaus which actually assess and collect the taxes, if satisfactory control is to be maintained.

The auditing authority of the Government should not maintain any general accounts, which are the main vehicle of financial supervision and information, or prescribe the administrative accounting procedure. The power of the Comptroller General to prescribe accounting for the administrative departments and establishments under section 309 of the Budget and Accounting Act of 1921, should be made a duty of the proposed Accounting Service. This authority is basic to reporting

and to administrative management and should be a part of the executive functions and should not be vested in an officer who normally reports only to Congress. Likewise, the exercise of the authority now vested in the Comptroller General to settle all claims and demands either for or against the Government is an appropriate power of the Executive, and should be exercised through the proposed Accounting Service. This Service would supervise the performance of a preaudit, that is, an audit before payment, which would be the accepted method of establishing control over the payment of all claims. Following payment, these claims would be reviewable on the spot by a legislative auditor, an agent of Congress, to ascertain if the preaudit had been properly made and if the claims were regular under the existing law. Any exceptions or irregularities noted by this auditor which could not be explained or rectified by the administrative agencies concerned or by the Treasury Department would be promptly reported to Congress for the attention of a special joint committee, which would recommend suitable action.

The proposed Accounting Service should be in a neutral position in the Treasury; that is, it should not be involved directly in operations that have to do with the assessment, collection, custody, and disbursement of public moneys. The head of the Service, the Accountant General, should be a career official, and should have the status of Assistant Secretary of the Treasury. His duties, however, should relate only to accounting and control methods and should not embrace policy questions beyond those pertaining to the administration of the accounting system.

There should be a well-staffed unit in the proposed Accounting Service to conduct continuous studies of the accounting methods and procedures of the various operating departments and agencies and of the central and field offices of the Treasury Department. This unit should have authority, with the approval of the head of the Service, to devise improved accounting and reporting procedures and to see that they are properly installed. It should also assist in the development of cost accounting, wherever appropriate, in the operating and business establishments of the Government.

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