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General Considerations and Recommendations
Measured in terms of the talent and experience of its staff, the number of top-flight members on its staff, and the total cost of its operation, the Budget Bureau is disappointing in its accomplishments with respect to the budget. As previously noted in this report, several basic tasks remain to be done in order to modernize the budget and the budgetary procedure of the Federal Government. One of the major difficulties in the way of the Budget Bureau accomplishing more, especially during the past 8 years when it has had ample staff, has been its internal organization.
The large part of the Bureau's staff, which devotes its time mainly to the budgetary processes, has been needlessly split up into divisions, sections, and groups. Bureaucratic lines have thus been set up which place difficult hurdles in the way of individual staff members when they seek collaboration in fields that cut across these lines. This is particularly true of the three divisions which provide the essential budget staff of the Bureau-the Estimates Division, the Administrative Management Division, and the Fiscal Division. The other two divisions—the Legislative Reference Division and the Statistical Standards Division-operate more or less on the fringes of essential budgetary work, and besides they are somewhat differently organized as noted earlier.
The three divisions which work on the preparation and execution of the budget have essentially a single task to perform which ought to be attacked by an integrated staff. To split up this staff, as it is at present, into three separate compartments, with numerous subcompartments, simply introduces organizational difficulties and staff rigidities into the budgeting work which cannot be overcome even by the most superior top-level management of the Bureau. Administratively speaking, no arrangement would appear less productive of results than this one—an arrangement under which three assistant directors jealously guard the domains of three separate segments of what is, or ought to be, essentially the same unified staff process. The wonder is that the Bureau has succeeded in producing a budget at all under these circumstances, to say nothing of its inability to introduce any basic improvements in the structure and operation of the budget. Bureau's Budgeting Processes Need Complete Overhauling
The answer to this situation seems rather obvious in view of the existing structure of the Bureau. The bureaucratic insulation which now exists between the Director and the working staff of the Bureau should be eliminated. The divisional lines, as between Estimates, Fiscal, and Administrative Management, should be obliterated, and the work now performed by these divisions redistributed on a functional basis.
Ten or a dozen functional groups should suffice to form the nuclei, or gravitational centers, around which the staff would operate in the formulation and execution of the budget. These groups might be designated as national defense, international relations, natural resources, social services (including Veterans' Administration), agriculture, labor relations, transportation and communication, civil works, Government lending, and general Government operations.
The nucleus of each group would consist of budget examiners, administrative and fiscal analysts, management specialists, and economists. The groups would be kept fluid enough at all times to take care of any unusual demands in the budget field. Responsibility for the scheduled work and output of each group would be fixed in the group head, who would report administratively to a single supervisor of all groups and functionally to a small general staff on fiscal policy. The policy staff would be the coordinating center for the budget and should not exceed a half dozen top-level members, of which the supervisor of estimates should be one. This staff would operate directly under the Budget Director, and he should sit in on its deliberations whenever possible. With the inauguration of program budgeting, such an organization ought to be able to delineate the President's budget policy much more clearly and expeditiously than it is now done.
Grouped around the Budget Director's office, there would also need to be perhaps five small, flexible staff units, working on the following: (1) The structure and preparation of the budget document and subsidiary reports, (2) budget execution and reporting of administrative agencies, (3) legislative reference matters and general publicity, (4) general administrative structure and performance, and (5) the Bureau's routine operating functions—these being sufficiently trimmed down so as not to give the impression that the Bureau exists largely to take care of its own housekeeping.
Such an overhauling of the Budget Bureau's present organization contemplates the elimination of the Field Service, the transfer of the Statistical Standards Division to another point in the general structure of the President's staff agencies to be set up for the management of the Government. It also assumes that much of the technical and routine work of budgeting, particularly with respect to the preparation of the estimates, may be pushed back to the budget staffs of the administrative departments and agencies. The Budget Bureau's
staff would then operate more on a general policy level, as it should, in determining the budget for the President. If this overhauling is carried out, it should ultimately mean a considerable reduction in the Bureau's present staff and a greatly improved budget process for the Federal Government. A number of the Bureau's staff should then be available for transfer to the budget staffs of the operating departments and agencies, as already suggested, thus greatly strengthening the departmental staffs.
RELATION OF BUDGETING TO THE OTHER FISCAL
PROCESSES OF THE GOVERNMENT
Among the essential fiscal processes of the Government are budgeting, accounting, auditing, and reporting. Taken together, these constitute a series of related steps which make up the general pattern of financial administration. This pattern, however, depends not so much upon the organization and operations of a single agency as upon the establishment and maintenance of definite relationships between agencies which exist separately. At the present time, for example, there are various departmental and agency budget and accounting offices, the Bureau of the Budget, certain units of the Treasury Department, and some divisions of the General Accounting Office—all concerned with the financial administration of the Federal Government.
Experience of State Governments Indicative
Before the adoption of the Budget and Accounting Act of 1921, there was considerable argument about the place of budgeting in the financial machinery of the Federal Government. While it was generally conceded that the President ought to be made responsible for the initial budget plan which was to be submitted to Congress, there was no agreement as to how he should be staffed for the preparation of this plan. Some of the State governments, which in those days furnished the bulk of American budget experience, had provided an integrated department of finance as the budget staff agency of the governor, while other States had set up a budget bureau or unit in the governor's office. Each type of budget organization had its proponents who argued at length for its superiority.
To some the integrated department of finance seemed to focus the financial functions in one organization to the great advantage of budgeting from the standpoints of uniform information and central controls. At the same time, the head of this department was a member of the governor's cabinet and one of his most important advisers. The director of finance, as he was usually called, had sufficient weight and influence because of his position to take up the cudgels for the governor on any budget issue either in the cabinet meetings or before the legislative committees.
To others the Budget Bureau or unit attached directly to the governor's office semed preferable. The head of this unit was the governor's personal representative in budget matters, serving at his pleasure. The governor assumed full responsibility for his budget and for its defense before the legislature.
As between the two approaches, it was largely a matter of whether the governor wished to give his personal attention to the problems of budgeting or to delegate this work to his key department where the fiscal processes were more or less integrated. The latter arrangement was more likely to succeed unless the governor showed great personal ability for budgeting and a broad understanding of its implications.
Location of Budget Bureau a Compromise
When the Budget and Accounting Act of 1921 was finally passed, it created a Bureau of the Budget under a Director and an Assistant Director, both appointed by and serving at the pleasure of the President. But instead of placing the Bureau in the Office of the President, it was located in the Treasury Department. This was the result of a compromise between the two houses of Congress. The McCormick bill, which was voted by the Senate, put the Budget Bureau in the Treasury Department and proposed to make the Secretary of the Treasury responsible for the formulation of the President's budget. The Good bill, which passed the House, made the Budget Bureau a staff agency of the President and placed it directly under his office. The conference committee, charged with adjusting the differences, practically accepted the House measure, but conceded to the Senate the location of the Budget Bureau in the Treasury Department. Although nominally independent of the Secretary of the Treasury, the Budget Bureau was, as a matter of law, under the Treasury Department. This anomalous situation continued until 1939 when the Bureau was transferred by Executive Order No. 8246 to the Office of the President.
During the 18 years that the Budget Bureau was located in the Treasury Department, it was regarded more or less as a stepchild by that department. There was considerable rivalry in the early days between the Treasury proper and the Budget Bureau, particularly while General Dawes and General Lord held the directorship of the Bureau. For example, every year at the time the budget was submitted to Congress by the President, the Secretary of the Treasury would also bid for front-page publicity by sending to Congress on the same day his annual report. Likewise, as the budget functions were being developed, the Treasury saw to it that revenue estimating remained with it, although the Budget and Accounting Act (sections 201 (b) and 202) quite clearly gave this important budgeting function to the President and presumably transferred the revenue estimating to the Budget Bureau.
The Treasury never really made an effort to accommodate the budget functions and to integrate them with its own fiscal work, not even