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FISCAL, BUDGETING, AND ACCOUNTING

ACTIVITIES

Summary Report

Financial administration, involving the machinery and methods by which funds for the support of public services are raised, spent and accounted for, is at the very core of modern government. This is why the work of our task force covers one of the most important fields of inquiry and recommendation before your Commission.

Our study has shown that the fiscal machinery of the Federal Government is archaic in many respects, and that its financial methods and procedures are outmoded. The amazing thing is that the Government is able to carry on at all in the financial field, even though it does so at excessive costs, with much creaking of parts and overlapping and duplication of effort, and oftentimes with mediocre or worthless results from the standpoints of control and information. Considering the magnitude of the Government and the wide variety of its operations, especially since World War II, it seems to us that it is high time to take action-drastic and sweeping action—to remedy the situation.

We offer definite proposals for the modernization of the Government's fiscal machinery and processes. If these proposals are adopted, they will provide up-to-date budgetary, accounting, and auditing control over the financial operations of the Government which are so necessary to good management, and they will permit Congressmen, newspaper men, and citizens generally to appraise the results of these operations in terms of performance and cost. At the same time, they will go a long way toward insuring continuing facilities in the Government to carry on the work which has been temporarily assigned to your Commission.

The summary report, here presented, is expanded in detail in the three supporting reports attached hereto, namely: “The Reorganization of the Treasury Department,” prepared by A. E. Buck in collaboration with Daniel W. Bell and John W. Hanes: “The Accounting Needs of the Federal Government,” by the Accounting Policy Committee, under the chairmanship of T. Coleman Andrews; and “Federal Budgeting,” by A. E. Buck of the Institute of Public Administration. These three reports are of such caliber that they should be considered as the vital background for the recommendations made herein in only summarized form.

Treasury Department

It is recommended that the Department of the Treasury be so reorganized that it would be a real department of finance and responsible for the essential financial processes of the Federal Government, such as revenue administration and collection, the custody and disbursement of all Government funds, the management of the national debt, the maintenance of central accounts, the prescribing of accounts for all the agencies of Government, the preparation of general financial reports, the supervision of programs relating to banking and international finance, the liquidation of lending agencies of the Government, and the budgeting functions of the Bureau of the Budget. To accomplish this recommendation, there is involved (a) the transfer of nonfiscal units now in the Treasury to other departments, (b) the transfer of functions to the Treasury now performed elsewhere, and (c) a genuine reorganization of the Treasury along functional lines.

A. TRANSFER OF NONFISCAL UNITS FROM THE TREASURY

1. Transfer the Bureau of Federal Supply to another department in the Administration. This, I understand, has been recommended by your task force on Federal Supply.

2. Transfer the United States Coast Guard, including the marine functions of customs, to an operating department. Your task force on transportation, I understand, has recommended that it be put in the proposed Department of Transportation.

3. Transfer the Bureau of Narcotics, which is mostly regulatory, to the Department of Justice. - 4. Transfer the functions of the Secret Service to the F. B. I. in the Department of Justice, except those functions relating to suppression of counterfeiting, forging United States currency, securities, government checks, and transportation requests.

B. TRANSFER TO THE TREASURY OF FUNCTIONS Now PERFORMED ELSE

WHERE :

1. Transfer to the Treasury certain functions to make possible the establishment of the Accounting Service, discussed later. While much of this service as proposed is a new function, it involves transferring the functions of prescribing of administrative accounts and the settlement of claims from the General Accounting Office to the Treasury.

2. Transfer the budgeting functions of the Bureau of the Budget from the President's Office to the Treasury Department.

C. REORGANIZATION OF THE TREASURY ALONG FUNCTIONAL LINES . The following recommendations are considered necessary to accomplish the genuine reorganization which is needed to make the Treasury Department the central finance agency of the Government:

1. Top Staff

The Treasury Department should have a top management staff consisting of the following:

1. Secretary of the Treasury.
2. Under Secretary of the Treasury.
3. General Counsel.
4. Assistant Secretary in charge of Revenue.
5. Assistant Secretary in charge of Banking and International Finance.
6. Fiscal Assistant Secretary (career post).
7. Accountant General-Assistant Secretary (career post).
8. Budget Director-Assistant Secretary.

The Secretary and the Under Secretary should be relieved of all routine administrative duties so as to devote their time to high policy matters and the general administration of the department.

While the General Counsel should determine legal matters pertaining to high policy, and assign legal staff to other units of the Treasury, he should defer to the operating heads of the services or the advisory council therein on matters involving the administration of the services,

The Assistant Secretary in charge of Revenue should have as staff agencies the Division of Tax Research and the Office of Tax Legis lative Counsel, if this office is continued as a separate entity. He should, of course, have general supervision over the Revenue Service in the clearance of policy matters.

The Assistant Secretary in charge of Banking and International Finance should be a member of the Federal Reserve Board. He should have as a staff agency the Office of International Finance. He should have general supervision of the Office of Comptroller of the Currency, if it is to be continued in the Treasury.

The Fiscal Assistant Secretary, the Accountant General, and the Budget Director are heads of operating services, and are also members of the top management staff.

2. Revenue Service

A consolidated and integrated Revenue Service should be established in the Treasury, headed by a Commissioner of Revenue, appointed by the President with the approval of the Senate. This Service should

combine the present Bureau of Internal Revenue and the Bureau of Customs into a single unit. More efficient and economical operation should result from the union of the two bureaus. A general staff is proposed to carry on a continuous study of better operating methods. Modernization of existing accounting and statistical methods is proposed.

3. Fiscal Service

The Fiscal Service should be headed by an Assistant Secretary, who should be a career man, as at present. The Service should include general fiscal management, custody and disbursement of funds, management of the debt, research and statistics, and the operation of the Mint and the Bureau of Engraving and Printing. When the Accounting Service has been established, the remaining functions of the Bureau of Accounts can be integrated with other functions of the Fiscal Service. Most of the routine work of accounting, filing, and record keeping in connection with the issue and retirement of Government bonds and the payment of interest may be shifted to the Federal reserve banks where a substantial saving in operating cost is possible.

4. Accounting Service

We believe that the central accounting agency of the Government should be an integral part of the Treasury Department rather than an independent establishment. We therefore propose that this agency should be set up as an Accounting Service in the Treasury, under the direction of an Accountant General, a career service post.

The principal function of this new service would be to install and operate a central accounting system on the accrual basis, and to maintain centralized fiscal control through accounts kept in the operating departments and establishments. The auditing authority of the Government would cease to keep general accounts and would be relieved of all duties which are involved in executive and administrative determinations or decisions. A staff agency in the Accounting Service is suggested to study and revise the accounting methods of the various operating departments and establishments of the Government.

5. Budgeting Service i A return of the budgeting organization from the Executive Office to the Treasury Department is proposed in the interest of a unified finance department. It is understood, however, that this recommendation presumes that the previous suggestions with respect to Treasury reorganization will be carried out. Such being the case, budgeting becomes at once a necessary and important adjunct of the Treasury.

The return of budgeting to a reorganized and integrated Treasury assures continuing cooperation between the vital fiscal services in realizing the policies and programs of the President. It removes the rivalry for fiscal power now existing between the Budget Bureau located in the President's Office and the long-established Treasury Department.

The head of the Budgeting Service, the Budget Director, would continue to be appointed by and serve at the pleasure of the President. He would have the status of an Assistant Secretary of the Treasury, and would participate in the determination of high policy matters in the Treasury Department.

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