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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 il 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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Index to functions proposed to be abolished by Sec. 3

GENERAL ABOLITIONS

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Receive copies of entries... Examine and certify receipts and disbursements of money. Examine and certify receipts and disposition of merchandise Verify all assessments of duties and draw-backs... Keep accurate accounts of receipts and expenditures; send to General Accounting Office.

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