lers of customs and the surveyor at New York. However, the Senate restored the funds for these positions and the House subsequently agreed to the restoration.

The CHAIRMAN. May I interrupt to ask if the Senate restored those funds upon the insistence of the Treasury?

Mr. GRAHAM. I was not there at that time, but it is my understanding that the Treasury did not urge the restoration.

The CHAIRMAN. I think somebody did. The funds were restored. Mr. GRAHAM. Therefore, no reduction in the number of political offices in the Customs Service resulted.

In considering the Customs appropriation for 1944, it was again proposed in Congress that the Presidential offices of comptroller of customs be abolished, but in the final enactment of June 30, 1943 (57 State. 256), only one such office was abolished, that of the comptroller of customs at San Francisco, which was then vacant.

As stated previously, the Congress authorized the Bureau of Cus-toms to contract for the services of a private firm of management engineers to study the Bureau of Customs. The report concluded that it was important to have all employees of the field offices thoroughly trained and experienced in the work and laws of customs. It recommended that this could be best accomplished by having career employees at all supervisory levels.

In 1949, the report of the Commission on Organization of the Executive Branch of the Government, with reference to the Treasury Department, recommended that all officials in the Treasury below the rank of Assistant Secretary, should be appointed from the career service.

This brief outline highlights the efforts, and the thinking, of the past 40 years on the subject. of appointment of certain customs field officers.

The President's Reorganization Plan No. 3 provides that incumbents of the offices may serve out their present terms of office. Vacant offices would be abolished on the effective date of the plan. Those incumbents whose terms have expired before the effective date, commonly referred to as hold-overs, and the appraiser, whose office has no prescribed term, would be permitted to continue in office until replaced by a civil-service appointee, but in no event later than January 1, 1953. The other offices would be abolished at such time as they become vacant or the term of office of the incumbent expires. If there are no vacancies created by resignation, or otherwise, before the terms of the incumbents expire, out of the total of 52 such offices in Customs, not over 35 would exist by the end of 1952; not over 19 would remain on December 31, 1953; not over 10 on December 31, 1954; and only 1 on December 31, 1955, which would be abolished not later than February 29, 1956.

The CHAIRMAN. You are not implying or trying to convey the impression that we are going to reduce the number of Federal employees or offices by that number? There can be two appointed to take their place to do the same work.

Mr. GRAHAM. I am afraid I miss your point.

The CHAIRMAN. You are emphasizing here that we are gradually getting rid of some offices.

Mr. GRAHAM. That is correct.

The CHAIRMAN. But not necessarily getting rid of that number of employees, just these offices that exist. The office itself will be eliminated, but employees to do the same work will have to be supplied.

Mr. GRAHAM. Sir, we propose, and I will touch on that later in my testimony, that in certain cases there will be no replacement, man for man, because we think some of the jobs can be consolidated into one person.

The CHAIRMAN. Would there be other instances of one job in one of these offices where the duties will be performed by two people instead of one?

Mr. GRAHAM. I think that is likely sir, at some of the large ports where you have a collector and you have an assistant collector. I think probably you will have the same number, but in some of the smaller ports where you abolish the collector, we think perhaps those duties could be combined into one man.

The CHAIRMAN. In other words, in some of these offices that are being abolished you can take the duties that both are now performing in the two separate offices, with different functions, and combine them and place them under one man?

Mr. GRAHAM. That is correct, sir.

At the

As stated previously, the primary objective of the plan is to improve efficiency. The proposed change in the method of appointment of such officials will enable the Bureau, at the smaller ports, to combine the present duties of the collector and the assistant collector into one position. By placing the functions of both offices under one incumbent, there will be savings in money and manpower. larger ports there will also be a combining of functions. However, depending upon the workload at each port, some of the positions of assistant collector will be retained and in others we may be able to shift those present duties to other senior members of the collector's office. We intend, wherever possible, to combine the existing duties into one position.

We believe that the proposed change in method of appointment will increase efficiency also by providing for clearer lines of accountability and responsibility direct from the Secretary and the Commissioner of Customs.

The CHAIRMAN. What is the confusion in the lines of responsibility now? You say it will provide clearer lines. What is the confusion that exists now in those lines of authority?

Mr. GRAHAM. Sir, I think that where you have a person appointed by the President, as he states in his message, and yet the Secretary is responsible for him, that by having him responsible solely to the Secretary or the Commissioner of Customs, it makes a clearer line of accountability. It is more a chain of command if you would use that word in a military sense.

The CHAIRMAN. I just ask that for the record. We all know what really is meant by it, but I have never quite agreed that, with respect to any one the President appoints and whom he can remove at the snap of his finger when he wants to, it is necessarily improving the lines of authority and responsibility by saying it has to go through someone else. I do not see that it strengthens it, but I know the general philosophy that is entertained by others who support this idea.

Mr. GRAHAM. Increased efficiency of operations will also result from that portion of the plan which would remove certain restrictive statu

tory prescriptions relating to accounting functions. These statutory functions are generally vested in the comptrollers of customs and require too much detailed review and checking. This results in repetitive accounts being maintained and duplications of certain accounting processes which are performed in the offices of collectors of customs. Moreover, existing customs' statutes are so restrictive that they preclude some of the procedures which should be part of a modern program of internal audit. Customs must continue to improve its system of internal audit and control.

The way has been paved for the further steps envisioned in the reorganization plan by two recent actions: First, in January 1949 the Comptroller General of the United States, the Director of the Budget Bureau, and the Secretary of the Treasury inaugurated the joint accounting program for the improvement of accounting in the executive branch of the Federal Government. A primary objective of this program is to strengthen financial control by management. This is being accomplished by improving the systems of accounting and internal control of various agencies in the Government through the application of modern methods and techniques of accounting and internal audit. As a part of this program, the accounting system of the Bureau of Customs was studied. The abolition of restrictive statutory provisions, as proposed in this plan, are consistent with this study.

Impetus to the joint accounting program in the executive branch of the Government was provided by the Eighty-first Congress through the passage of the Budget and Accounting Procedures Act of 1950. Under certain provisions of this act the Secretary of the Treasury, like the head of every other executive agency, is required to maintain an effective system of internal control, including appropriate internal audit procedures. The act also provides the Comptroller General with authority to conduct his external audits at the site of operations. Such audit would, of course, evaluate the effectiveness of the accounting system and the internal control of the agency being audited. This type of "site audit" has been instituted for the Bureau of Customs. Although the joint accounting program has been helpful to Customs, the removal of statutory restrictions, as proposed in this plan, will result in further substantial improvements. Of particular importance is the necessity to remove the statutory requirement that the comptroller of customs must verify all assessments of duties and draw-back claims which have been acted upon by the collector of customs. This constitutes, in effect, 100 percent vertification of documents regardless of the monetary size of either the entry or the draw-back claim. Moreover, there may be no money involved in the transaction, as, for example, when the merchandise is entitled to free entry under the law, or if the declaration of a returning resident is within the exemption limits set by law. We believe that 100-percent verification of such documents by the comptroller is not only an unnecessary duplication of the work previously performed by the collector's office but also that it is not needed for the protection of the revenue. We believe that a spot-check system can be developed which will provide adequate safeguards in our internal audit program.

We are attaching to this statement an index to the abolitions proposed which, with your permission, should be considered as part of the record. This index and the supporting documents previously furnished to your committee's staff indicates in some detail the statutory

duties which we recommend be abolished because they have become obsolete. Further, the supporting document indicates the procedures to be substituted for them under authority of the Budget and Accounting Procedures Act of 1950.

The CHAIRMAN. You speak about this spot checking. As I understand it, at present, every transaction had by the collector is checked by the comptroller.

Mr. GRAHAM. That is true today, sir.

The CHAIRMAN. That is true today?

Mr. GRAHAM. But we would propose that it be changed so that we could be on a selective basis or a spot-check basis to pick out the ones or the types, let us say, where you would need perhaps a verification of the amount.

The CHAIRMAN. Do you think a spot check has elements of superior efficiency to a complete check on every transaction?

Mr. GRAHAM. Yes, sir; that is our opinion. It would be sort of like a bank examiner, if you please, that would pick out the particular types that would need to be done, or even in the accounting field of private corporations, that you do not do 100 percent; you do it on a basis of where you need to put the emphasis.

The CHAIRMAN. I know doing it 100 percent is burdensome and also more expensive, but we do have a situation in the Revenue Bureau with respect to the spot-check system where we do not require every income return to be audited, where the spotting has been done on some of the smaller fellows and the bigger fellows who have been violating the law have not been spotted and have been getting by. I think the spot system, while it may be cheaper and may be all that we can afford, does afford greater opportunity for both inefficiency and corruption than does a complete audit. Do you not think so?

Mr. GRAHAM. I think the answer, Mr. Chairman, is that in the collector's office the checking has already been done and then the comptroller is the auditor, so to speak, doing it 100 percent again.

The CHAIRMAN. Of course, every comptroller or auditor is checking somebody else's action. The question is: Are you going to check all of his actions or are you going to spot-check them? Now, for economy purposes and workload purposes, the spot system may afford some relief. I do not think it could possibly prove more efficient than a 100-percent check, which the law now requires.

Mr. GRAHAM. Perhaps, Mr. Chairman, Mr. Strubinger could give you a little bit further detail.

The CHAIRMAN. Yes. Well, I will be glad to have some comment on it. This does not indicate I am opposed to this plan.

Mr. GRAHAM. I understand. We want to be as helpful as we can. The CHAIRMAN. But I do not see any greater virtue in a spot-check system as far as determining accuracy and efficiency and correctness of a transaction over a complete 100-percent check as the law now provides.

Go ahead, Mr. Strubinger.

Mr. STRUBINGER. The system we contemplate using would, of course, always be subject to review and criticism by the Comptroller General. As a matter of fact, the system we are working on is being worked out in conjunction with him. What it actually means is this: That though we would make spot-check audits of our accounts, the Comptroller General and his office would come in and would look over our

system and satisfy himself that our spot audits were all that were needed to maintain adequate control.

The CHAIRMAN. You do not mean that the Comptroller General would have authority, after this plan goes into effect, to order you to make more spot checks or fewer spot checks or do anything else?

Mr. STRUBINGER. He would not have authority to order us. He could, however, report that he did not think our system of internal controls was sufficient, and we would take action if we got constructive criticism in that respect.

The CHAIRMAN. I do not say, in view of the workload you have now, that the spot system is not advisable, but I cannot see that it can possibly produce greater efficiency.

Mr. STRUBINGER. Sir, the thing that we do that all of us think is unnecessary is that the comptroller offices in a great many instances maintain identical records to those in the collector offices.

The CHAIRMAN. In other words, you think one audit of the collector's records would be sufficient without keeping duplicate records and having both of them audited?

Mr. STRUBINGER. That is correct. The time and work and the manpower saved will be saved mostly in that field of eliminating duplicate records. In other words, why keep one record downstairs and one record upstairs.

The CHAIRMAN. In other words, your auditor would make spot checks from time to time of the collector's records.

Mr. STRUBINGER. In some instances it would be 100-percent audit of the collector's accounts; but in some other instances a sampling method, picking out certain documents, would be sufficient to provide necessary control to see that everything was going all right.

The CHAIRMAN. All right.

Mr. GRAHAM. Mr. Chairman, I ask your permission if we could have the index which is attached to the statement be made a part of the record. That just refers to the statutes.

The CHAIRMAN. It will be made a part of the record.

Mr. GRAHAM. Thank you, sir.

(The material referred to is as follows:)

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