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Financial audits are effectively used in all sectors of activity including business and Government. Also, many of these same organizations use management audits to examine the efficiency with which the various functions are being executed. Now we need socioeconomic audits for our governmental agencies to verify whether the resources put into a program are directed toward the true objectives of the program.
Regular socioeconomic auditing should be put into widespread use to serve as guidelines for officials with budgetary responsibility for the allocation of public resources and to keep the public informed.
The socioeconomic audit would provide a continuous assessment and reassessment of social performance. First, to assure that needs have been properly defined. Next, that goals have been formed in response to these needs. Finally, that goals are being met as projected and on schedule.
Historically, in the Government sector program action response has been stronger to symptoms than to studied human needs.
In an explosive environment something is always done. More policies are provided, more money is pumped in, more beds are made available, more guards are hired, more handouts are doled.
But at best crash action produces no more than temporary solutions, if indeed "solutions" is the word at all.
The socioeconomic audit on the other hand, properly designed and built into the system, deals with underlying causes, managerial frailties and human motivations. It delves to the root of problems, seeks to determine for what the money is spent, why men perform as they do, and what can be done to get better performance. It thus prevents crises from erupting and funds from being wasted.
In all budgetary and accounting control it is essential to determine that the right job is done. That the right need has been focused upon. That the right goal has been met. This is the role of the socioeconomic audit. The central focus is on the real human needs, on opportunities and deterrents. The technical-mechanical means of implementation take a secondary place.
Are the needs being met? That is the basic question.
Are youngsters being made employable? Prison inmates rehabilitated? Welfare recipients being made self-sufficient? Are patients getting the quality of health care they are requiring? Are students being educated to function more effectively in society?
These are the questions that none of our budgetary procedures attempt to answer.
What kind of standards are we setting and how well are we applying them?
Creating a structure which permits intelligent answers to these kinds of questions, seem to me to be essential if Congress is to be able to select its budgetary and spending goals priorities in a meaningful way.
In conclusion, what I have respectfully tried to say here today is that the present action for budgetary reform give consideration to two aspects now largely absent from the budgetary process:
(1) Require agency and program administrators to add qualitative reporting and documentation in support of their budgetary requests.
(2) Provide in the budgetary process a system of socioeconomic auditing
I thank you for your attention and for inviting me to present my views.
Mr. SCHNEEBELI (presiding). Chairman Ullman asked me to express his regrets. He had a 3 o'clock appointment, but he did read your whole statement and asked me to tell you that he was very impressed with the broad knowledge you bring and the fine recommendations you have made.
On my own part I believe this approach for qualitative reporting is similar to a program President Johnson tried to institute in 1965. I think it was known as program budgeting.
I assume President Nixon will also try to get a qualitative analysis of and reaction to the moneys being spent. This probably is the function of the OMB.
Certainly we want to know that the money that is being spent has an effective reaction.
Mr. LINOWES. I am intimately familiar with that program. What I am referring to is not a part of that.
The important distinction which I have been seeking to make is a qualitative one. PPBS still addresses itself to a quantitative output, and I think this is the dimension.
Mr. SHNEEBELI. I am glad I brought up that point, because otherwise there may be some thought in the minds of many people that it is the same thing.
Mr. LINOWES. It is completely different. If PPBS also applied a qualitative dimension then it would be fine. The problem is that they do not.
Mr. SCHNEEBELI. The problem is having a totally objective view. Mr. LINOWES. As I mentioned during the process of my prepared comments, Congressman Rees implied this when he indicated in California they have a legislative analyst who helps advise all parties which program should be carried on and which should be stricken.
To do that function in an effective way he must have a measurement standard that is meaningful.
The only kind that is meaningful would have to be a qualitative. Mr. SCHNEEBELI. Who would establish that?
Mr. LiXowes. This is the type of thing that should be established by an interdisciplinary committee. It could be established by Congress when they pass the legislation.
Mr. SCHNEEBELI. A nonpartisan group? Mr. LINOWES. Or a partisan one. If, for example, a $10 million appropriation should be made and all efforts should be made to make the indigent employable and self-sufficient, and whatever steps are appropriate should be taken to carry out this objective, then if this program is later monitored by an audit, it would be up to the monitoring agency, whether it is the executive branch or the legislative branch, to determine whether the funds are being so spent.
What is happening today is that a poverty administrator does not set out trying to train those who receive the welfare checks so that he is employable and can seek employment, but rather it is doled out to him.
Therefore, the accountability at the end of a reporting period never takes into consideration whether or not even one person was made self-sufficient for that expenditure of funds. This is a qualitative dimension.
Mr. SCHNEEBELI. It is going to be difficult for an agency in auditing its own operation, it is going to be difficult for it to criticize its own activity.
I think some independent group will have to do this audit.
Mr. LINOWES. A socioeconomic audit or general accounting audit can be carried on. There is no reason why Congress should not also build it into their appropriations. They report quantitatively and the question is, I am saying in effect, “Will you tell us how many people were made self-sufficient for the moneys spent on the poverty program, let you tell us how many convicts were rehabilitated last year for the moneys spent or what level of education was achieved by a particular school."
Mr. SCHNEEBELI. Thank you very much for your testimony.
Mr. JAMES BROYHILL. You have some excellent thoughts here. Of course, this is really getting into something I mentioned the other day. We could conceivably come up with a plan that would set some sort of spending ceiling and relate that to revenues and some mechanism or procedure to set priorities as we allocate funds to various programs That is a major change in the way we have been appropriating money.
I must agree with that, but I think we are going to have to face the fact that there are other varied major changes that would have to be made to really get the best from such a system, and that is what I would call evaluation of programs.
We really do a poor job of evaluating programs at the present time through either the appropriations or authorization committees. I am one of the few members on this committee that is a member of one of the legislative committees; the rest are members of the Ways and Means and Appropriations Committees.
We need to do a better job of oversight and establish a means to set priorities and assign dollar values to specific programs. We are going to be called upon to vote on amendments to provide funding increases, and there are always going to be more needs than present revenues can meet.
We will have to have more information on which to base a vote other than just political judgment.
So I agree with you, we have to do a lot of thinking along this line. It is going to cause a lot more change than just setting a spending ceiling
Mr. LINOWES. Yes, this is precisely it. As a matter of fact, I find it almost impossible, if I were to try to evaluate one program as compared to another program, as Congressmen constantly do, based on the reporting that comes out from the administration and the programs themselves, how to select one over the other. Because you really don't have anything that is meaningful in terms of accomplishment.
It just seems to me to fall into the realm of, as I indicated, a political decision. What has been happening increasingly with these massive sums of money and social sectors taking an increasingly important part of our gross national product, is that funds are being spent. There is not real accountability because there is no determina
tion as to how effective the dollars are being spent and as a result tremendous sums are being wasted and when there is an attempt at fiscal responsibility such as the present administration where arbitrarily programs are cut off, still without evaluation, granted there is quite a bit of waste.
Until we do build in a mechanism and we have to start somewhere, until we build in a mechanism to give us that kind of feedback, I don't see how any one can conceivably reach an intelligent judgment as to why we prefer one kind of poverty program over another.
Mr. JAMES BROYHILL. I think we are going to have to change the way we authorize programs.
For example, last week we passed the vocational rehabilitation program and the program to assist older Americans and both of them, as you know, were vetoed by the President.
Tremendous additional sums of money were authorized for both of these programs.
There is really no basis within the debate or within the committee report to say that we should be spending additional funds for this particular program as opposed to some other program.
That is why I say we are going to have to establish a better procedure of authorizing programs as well as appropriating funds. Mr. SCHNEEBELI. Thank you very much. The committee stands adjourned until 10 a.m. tomorrow morning.
[Whereupon, 3:10 p.m., the committee was recessed, to be reconvened at 10 a.m., Thursday, March 15, 1973.]
IMPROVING CONGRESSIONAL BUDGET CONTROL
THURSDAY, MARCH 15, 1973
Washington, D.C. The Joint Committee met, pursuant to notice, at 10:30 a.m., in room 2359, the Rayburn Building, Hon. Jamie L. Whitten, presiding.
Present: Representative Whitten, Davis, James Broyhill, and Burke. Chairman WHITTEN. The committee will come to order.
We have with us, first, Profs. David J. and Attiat Ott, Clark University. We are glad to have you with us. STATEMENT OF PROFS. DAVID J. AND ATTIAT F. OTT, CLARK
Prof. David Ott. It is a pleasure to have the opportunity to appear before you today to discuss measures to improve congressional control over the budget. Whatever one's position may be with regard to the overall fiscal posture and priorities reflected in the President's budget for 1974, we can all agree that the creation of this committee has been one positive result of the "battle of the budget." For the first time in almost 25 years, a serious effort is underway to improve congressional budgetmaking. Let us hope the result will at least match the strides made in the executive branch in preparation and submission of the budget.
You have undoubtedly received many proposals for detailed structural reform of congressional budget decisionmaking. Senator Proxmire, in a “town hall” meeting last week at the American Enterprise Institute, ticked off several specific proposals, including: (1) an overall congressional ceiling on outlays; (2) a ceiling on outlays by functional category; and (3) inclusion of so-called “tax expenditures in the budget.
At the same session your cochairman, Congressman Ullman, discussed the possibility of separate Committees on the Budget in each House—with a joint staff—which would initiate action early in each session on a congressional resolution on total outlays and total budget authority as well as outlays and authority by major programs. The resolution would then serve as the benchmark for Appropriations Subcommittee actions and as the basis for floor debate in each House.
Doubtless you will receive many more suggestions for structural reform of budget decisionmaking in the Congress. We shall not attempt to add further to your list of possible new committees and subcommittees and the rules by which they might play the “budget game.”