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incurred during any one of the 3 separate years and eliminates the need for tying costs to each individual fiscal year account. During the past 11 years, the merged appropriation authorization with respect to “Operating expenses" and "Reserve training” accounts has proved most effective and beneficial in achieving improved financial management.

The purpose of this bill is to provide permanent authority for this merger process and to extend it to the annual appropriation for "Retired pay," thereby bringing all Coast Guard annual appropriations under the merger principle on a permanent basis.

It is emphasized that the proposed bill would not destroy the identity or integrity of the individual appropriations or in any way diminish existing controls over expenditures. As in the past the Coast Guard would be required to keep its expenditures within the limits of these individual appropriations and to maintain detailed internal accounting records reflecting this. The bill would merely provide that the Coast Guard pay all obligations from a single appropriations account, regardless of the nature of the obligation or the year in which it was incurred. This will provide a permanent basis for accrual type accounting in the Coast Guard and permit the maximum advantages to be derived from that system.

It would be appreciated if you would lay the proposed bill before the House of Representatives. A similar proposed bill has been transmitted to the President of the Senate.

The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this proposed legislation to the Congress. Sincerely yours,

DOUGLAS DILLON.

THE GENERAL COUNSEL OF THE TREASURY,

Washington, D.C., July 3, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN : This letter refers to H.R. 73 to authorize the merger of certain Coast Guard appropriations, a bill currently on the Consent Calendar of the House.

The Coast Guard has been advised by the House Appropriations Committee that certain amendments to this bill are desired by that committee.

Attached to this letter is a comparative type showing the changes proposed in H.R. 73 by the House Appropriations Committee. There is also attached a draft of the bill as it would appear if these amendments were made.

The Treasury Department has studied the suggested amendments and would have no objection to their incorporation into H.R. 73. Sincerely yours,

G. D'ANDELOT BELIN,

General Counsel. Enclosures.

A BILL To authorize the merger of certain Coast Guard appropriations Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That chapter 17 of title 14, United States Code, is amended by adding the following new section : ug 657. Annual Coast Guard appropriations

"Whenever it may be so provided in applicable appropriation acts, amounts equal to the obligated balances outstanding at the beginning of each fiscal year against any annual Coast Guard appropriations for the two preceding fiscal years shall be transferred to and merged with the Coast Guard appropriations for the corresponding purposes for the current fiscal year and, except for accounting purposes of the Coast Guard, each merged appropriation shall be available as one fund for the payment of obligations properly incurred against these prior year appropriations and the corresponding appropriation for the current year."

SEO. 2. The analysis of chapter 17 of title 14, United States Code, is amended by adding the following new item : "657. Annual Coast Guard appropriations.”

COMPARATIVE TYPE SHOWING CHANGES PROPOSED IN H.R. 73 A BILL To [provide for] authorize the merger of certain Coast Guard appropriations

[for operating expenses, Reserve training, and retired pay] 8 657. Annual Coast Guard appropriations

[At the beginning of each fiscal year,] Whenever it may be so provided in applicable appropriation acts, amounts equal to the obligated balances outstanding at the beginning of each fiscal year against [the] any annual Coast Guard appropriations [for "Operating expenses”, “Reserved training”, and “Retired pay'] for the two preceding fiscal years shall be transferred to and merged with the Coast Guard appropriations for [“Operating expenses", "Reserve training”, and “Retired pay'] the corresponding purposes for the current fiscal year and, except for accounting purposes of the Coast Guard, each merged appropriation shall be available as one fund (under each title] for the payment of obligations properly incurred against these prior year appropriations and the corresponding appropriation for the current year.

Sec. 2. The analysis of chapter 17 of title 14, United States Code, is amended by adding the following new item :

"657. Annual Coast Guard appropriations."
Mr. CLARK. We will now have Captain Hyslop.
It is nice to have you with us, Captain Hyslop.

STATEMENT OF CAPT. JAMES A. HYSLOP, ASSISTANT COMPTROLLER;

ACCOMPANIED BY HENRY M. TENNEY, FISCAL ASSISTANT TO THE COMPTROLLER, U.S. COAST GUARD

Captain Hyslop. Good morning, Mr. Chairman. I am Capt. James A. Hyslop, Assistant Comptroller of the Coast Guard.

I would like to introduce Mr. Henry Tenney, who is the Fiscal Assistant to the Comptroller.

I appreciate the opportunity to be here and speak to you about H.R. 73.

H.R. 73 would amend chapter 17 of title 14, United States Code, by adding a new section to accomplish two purposes:

(1) Enact as permanent law merger authorizations which have appeared in annual Coast Guard appropriations for "Operating expenses” and “Reserve training” for the past 11 years.

(2) Extend the merger authorization to the Coast Guard appropriation for "Retired pay,” thereby bringing all annual Coast Guard appropriations under the merger principle.

În the fiscal year 1951, the Coast Guard adopted a system of accrual accounting for the purpose of developing more meaningful and current financial management information on the operating costs of units and programs. Under this system, operating costs are distributed to units and programs in the accounting period in which the goods and services are received whether or not payments have been made or invoices have been received. The accrual accounting procedures are simplified by the authorization to merge the current year appropriation with the outstanding obligated balances of the two preceding years appropriations brought forward on July 1 under each title.

Operating costs under each title are distributed to units and programs in the proper accounting period without relating the cost information to the specific annual appropriations which financed the expenditures.

Disbursements are authorized to be made from a single appropriation account under each title for obligations properly incurred during any one of the three separate fiscal years instead of maintaining 3 separate fiscal year appropriation accounts under each title.

During the past 11 years, the merged appropriation authorization with respect to the "Operating expenses" and "Reserve training” accounts has proved most effective in achieving improved financial management,

It is emphasized that the proposed bill would not destroy the identity or integrity of the individual fiscal year appropriations or in any way diminish existing controls over expenditures. As in the past, the Coast Guard would be required to keep its expenditures within the limits of these individual fiscal year appropriations and to maintain detailed internal accounting records reflecting the financial status of each fiscal year appropriation.

This bill is strongly recommended. It will provide a permanent authorization for the appropriation merger provisions and permit the maximum advantages to be derived from the accrual accounting system of the Coast Guard. Thank

you very much.
That is the end of my statement, Mr. Chairman.
Mr. CLARK. Thank you very much, Captain.
Mr. Lennon, do you have any questions of the Captain?

Mr. LENNON. Captain, does what you are proposing here exist in the other branches of the armed services?

Captain HYSLOP. I do not believe it does.

Mr. LENNON. Did our people from the General Accounting Office leave? I had hoped they would be here on this legislation because I would like to get their view with respect to the proposal for a change in the system of computation for one of the services which does not exist in the others.

The gentlemen from the General Accounting Office just left.

I wanted to know if you are proposing something which is existing in other services?

Captain Hyslop. This would not apply particularly to Armed Forces, armed services, any more than any other Federal agency, sir.

Mr. LENNON. In what other agencies does the system that you propose here exist?

Captain Hyslop. I am not sure what language the other agencies do have in their appropriations, but I do not believe that this is a general procedure in the Federal accounting system. It is something that the Coast Guard put in back in 1951 when we were the guinea pig, so to speak, on accrual accounting in the Federal Government.

Mr. LENNON. I notice that you have the Treasury Department's and, of course, you are the Treasury Department—approval. I wonder what the General Accounting Office says about this?

Mr. TENNEY. Sir, there is nothing printed here but the G ral Accounting Office approves or did not object to our proposal. I will put it that way.

Mr. LENNON. It would be helpful, Mr. Chairman, if it could be put in the record that the General Accounting Office, which will ultimately have a look-see at these accounts, has said that they thought this was a good approach.

Mr. TENNEY. I will say, sir, that the Coast Guard has been under General Accounting Office audit on sight for these past 13 years and

they have never interposed any objection to this language which has appeared in our annual appropriation acts.

Mr. LENNON. This legislation will give you permanent or statutory authority to do what you have been doing all the time.

Captain Hyslop. Extend it to one other appropriation, sir. Mr. TENNEY. It has been in our appropriation each year and this will eliminate that annual language and make this permanent.

Mr. LENNON. It would be helpful to be to know if the General Accounting Office approved of this legislation.

Captain Hyslop. We feel that it would be advantageous to any agencies under accrual accounting. We have been very satisfied with it. It has worked excellently and, as far as we know, has interposed no problem to the General Accounting Office in assuring the integrity of our accounts.

Mr. LENNON. When you talk to the average congressional committee you know you are not talking to fiscal experts. That is why you came here and not the Commandant because you are a fiscal expert and we are not. That is why I would like to have that statement from the General Accounting Office.

How would this affect your position before the Appropriations Committee

Captain Hyslop. It would simplify the appropriation language but this language has never been challenged after, I believe, the first 2 years when there were considerable questions asked as to the validity of this system, but since then it has posed no problem at all in budgetary procedures.

Mr. LENNON. You have used this system, both operating expenses and Reserve training, for the past 11 years without protest on the part of anyone, is that true?

Captain Hyslop. Yes, sir.
Mr. LENNON. Why do you not extend it to the retired

to the retired pay without statutory authority?

Captain Hyslop. We could do that by putting it in the appropriation language for retired pay.

Mr. LENNON. In other words, I take it, then, that the legislation you are requesting is not essential to your operation. You are doing everything that you ask for statutory authority to do now, are you not, except for the retired pay?

Captain Hyslop. Retired pay presents a very simplified problem in subsequent years and it has not been considered too critical in this area but in operating expenses and Reserve training we have a much wider vouchering problem, much more delayed payments after the end of a

Mr. LENNON. Captain, if I understand you correctly, you actually have in operation today and have had for 11 years this system that you are now asking statutory authority for. Right?

Captain Hyslop. That is correct, sir.

Mr. LENNON. Could you not install the same system for retired pay without statutory authority?

Captain Hyslop. We could put it in an appropriation language; yes, sir.

fiscal year.

Mr. LENNON. In other words, what you are asking for is not essential at all. You just want to have it firmed up with statutory authority. Is that in substance what your approach is?

Captain Hyslop. We feel that it is essential to our effective management under this accrued accounting system for the appropriation where we have it.

Mr. LENNON. You mean you will have statutory authority to do something which you have been doing without protest for 11 years?

Captain Hyslop. Each year we have to put it in the appropriation language to be able to do it.

Mr. LENNON. With this amendment to the code you would not have to do that-is that the point!

Captain Hyslop. That is correct, sir, and in doing it we decided we might as well include all of our annual appropriations to be consistent, admitting that under retired pay it does not pose anywhere near the problem that it poses under operating expenses.

Mr. LENNON. We have a uniform system of accounting in the other agencies of the Federal Government where this would be helpful, do we?

Captain Hyslop. I believe we do, now, yes. In 1956, the accrued accounting theory was broadened and applied to other Federal agencies.

Mr. LENNON. Do they have existing statutory authority to do what you now are requesting?

Captain Hyslop. To the best of my knowledge, they do not, sir. I am not positive on that point.

Mr. LENNON. If it is a good system for the Coast Guard, would it be a good system for some of our other agencies? Captain Hyslop. We feel it would.

Mr. Lennon. We do things piecemeal up here. It would seem to me that what you gentlemen are projecting is essential for good management and for records of accounting and the recommendation ought to come down from the General Accounting Office to the various legislative committees to apply this principle to all of our agencies and bureaus and departments of Federal Government.

Is that a fallacious statement on my part?
Captain Hyslop, I would agree with you, sir.

Mr. LENNON. I think it is a hopeless thing to ever get such a recommendation.

Mr. CLARK. Thank you very much. We will ask for a report.
Mr. Goodling?
Mr. GOODLING. I have no questions, Mr. Chairman.
Mr. CLARK. Mr. Tupper?
Mr. TUPPER. I have no questions.
Mr. CLARK. Mr. Grover?
Mr. GROVER. I have no questions.
Mr. CLARK. Mr. Morton ?
Mr. MORTON. I have no questions.
Mr. CLARK. Thank you very much.
Captain Hyslop. Thank you, Mr. Chairman.
Mr. CLARK. That concludes the hearings on H.R. 73.

(Whereupon, at 10:35 a.m., the subcommittee proceeded to other business.)

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