FUNDS USED IN FINANCING COSTS

Mr. WHITTEN. The reason I asked that is that this is really the same people doing the work, but paid from two sources of funds. Mr. BEACH. They are paid from more than two sources of funds. Mr. WHITTEN. This is an age-old story of trying to see who gets charged with what on the books. But I do believe that we might bring this together here.

It might be well for us to have a table showing all sources of funds so we can get at this thing.

Mr. BEACH. For National, State, and counties?

Mr. WHITTEN. Yes.

Mr. BEACH. All right.

(The funds referred to are as follows:)

Transfers to local administration, sec. 388, Agricultural Adjustment Act of 1938 and administrative expenses, sec. 392, Agricultural Adjustment Act of 1938, from various appropriations and funds

Acreage reserve program..

Agricultural conservation pro

gram

ing quotas.

$4,091, 215 $4, 483, 595 $4, 483, 595 $19, 716, 385 $19, 564, 385 $19, 564, 385

gram

Commodity Credit Corporation

fund (storage and price-support programs)

Service charges to producers.
Removal of surplus agricultural
commodities.

Administrative expenses, Com-
modity Credit Corporation..
National Wool Act program.
Miscellaneous reimbursements..

Total.

19,641, 375 23, 958, 000 23,918, 000 135, 154, 915 152, 637, 557 128, 689, 267

Mr. WHITTEN. These are the same people who do several jobs and draw their expenses from several sources.

Mr. BEACH. Yes, sir, they carry out all of the commodity stabilization service programs plus agricultural conservation programs.

Mr. WHITTEN. At what place are these funds consolidated for purposes of actual payment?

Mr. BEACH. They are consolidated in the case of the county office funds in what we call a section 388 consolidated account.

Mr. WHITTEN. At the county level?

Mr. BEACH. They are allotted to counties at the State level-they are consolidated in Washington, and allotted to the States out of this consolidated account, 388, and then they are allotted by the States to the individual counties based on their overall need. Now 21494-58-pt. 8———35

the record of the individual funds actually used follows afterwards; in other words, it is on a time-recording or an assignment-recording basis.

Mr. WHITTEN. Mr. Beach, we have tried to understand that and you do a marvelous job of explaining it to us. But when you have 3 or 4 jobs, it is difficult to understand.

Mr. BEACH. We would be glad to put an explanation in the record, if you would like to have it.

Mr. WHITTEN. It might be included at this point.
Mr. BEACH. All right, sir.

(The explanation referred to is as follows:)

FUND CONTROL UNDER SECTIONS 392 AND 388

While the appropriation accounts referred to as "Administrative expenses, section 392," and "Local administration, section 388" were established by law to eliminate the necessity for the maintenance of separate accounting records for each administrative expense fund, the system of administrative control now in use maintains the integrity and identity of each fund making up such accounts to the extent practical.

ORGANIZATIONAL UNITS FINANCED

The organizational units financed solely through these accounts are the agricultural stabilization and conservation State and insular offices and the agricultural stabilization and conservation county offices. Some of the Washington divisions and offices of the Commodity Stabilization Service are financed in part through section 392, (1) for performing certain administrative services for ASC State and county offices and (2) for the administration of programs whose entire administration is financed through sections 392 and 388.

ACTIVITIES CURRENTLY FINANCED

Activities carried on by the ASC State and county offices in connection with carrying out the following programs are currently financed through sections 392 and 388.

Agricultural conservation program

Acreage allotment and marketing quota programs

Sugar Act program

Commodity Credit Corporation price support and storage programs

National Wool Act payments program

Soil bank programs

Potato diversion programs (sec. 32)

Emergency feed programs (disaster loans, etc., revolving fund)

ALLOCATIONS AND ALLOTMENTS

Funds under sections 392 and 388 are allotted in lump sums, as such, with no indication of the contributing appropriations or funds. However, for each section 392 allotment there is issued to each ASC State office, a separate "Advice of allocation" which indicates the fund makeup of the allotted total. Each allottee is instructed to plan his work so that the activities he carries out will be those which the individual funds were authorized to finance. Similar advices of allocation are issued to the ASC State offices for ASC county committee expenses showing the fund makeup of an amount equal to the sum of the section 388 funds allotted plus the unobligated bank balances in all county committee bank accounts in the State at the beginning of the fiscal year. These allocations are to be used as a guide for planning the operations of the county offices.

ASC State and county office allocations are determined by analysis of ASC State office estimates, prior year obligations, and workloads, estimated workloads for current years, changes in salary, per diem in lieu of subsistence, mileage, rental, etc., rates, unit costs as determined by continuing cost studies and various judgment factors particularly that of the area directors in the office of the Deputy Administrator, Production Adjustment, Commodity Stabilization Service, whose chief function is to supervise, advise, and assist the ASC State offices.

CONTROL AND DISTRIBUTION OF OBLIGATIONS

Section 392 funds are obligated in total, and obligations records are maintained by the State offices by object class. Section 388 funds are obligated in total when advances are made to the county offices, and for orders placed by State offices on behalf of the county offices. Advances are made quarterly for the first threequarters of a fiscal year and monthly for the last 3 months.

Section 392 funds are budgeted by the State office by positions and object class by funds, and personnel are assigned to activities in accordance with the advice of allocations. Total obligations are distributed by fund each month in accordance with a quarterly operating plan which is consistent with the operating budget for the fiscal year. Each month the distribution of obligations by program is reviewed and certified.

Section 388 funds allocated to the State offices are reallocated to the county offices. Each county office prepares an operating budget for the fiscal year which is consistent with its allocations and indicates its planned expenditures for salary, travel, and other expenses by programs. Five times a year or oftener county office expenditures are reviewed by the State office, and compared with the allocations, work assigned, and work accomplished. County office expenditures are distributed by fund each month by the county office manager in accordance with procedures prescribed by the Deputy Administrator, Production Adjustment. These procedures provide among other things that the county office manager shall distribute expenses on the basis of assignments, field reports, work records and such other reports and records as he needs to make proper distribution.

REPORT OF OBLIGATIONS BY FUNDS

Obligations by object class for section 392 and for personal services and in total by funds are reported monthly by the ASC State offices. Man-months of employment under each fund are also reported. These reports are based on the records and distributions described under "Control and distribution of obligations" above. The reports indicate at each month end the obligations under section 392 in total and by individual funds.

Expenditures from county committee bank accounts are reported monthly by programs or funds to the State offices. The State offices consolidate these reports and add obligations by funds as incurred by the State offices on behalf of the counties. The combined figures are reported to us so that expenditures from allocated funds are available at the end of each month.

In accordance with the objective for establishing sections 392 and 388 accounting records are maintained only in total, since legally the funds transferred into these accounts lose their separate identity upon such transfer. All records relating to the individual funds making up sections 392 and 388 which are maintained by State and county offices and others for the maintenance of the integrity and identification of the separate funds are administrative in nature since we do not regard the fund allocations as legal limitations for control purposes.

FLEXIBILITY PROVIDED

The allotment and obligation control system used in the budgetary administration of the ASC State and county offices is based on the flexibility provided by sections 392 and 388 of the Agricultural Adjustment Act of 1938.

Section 388 (b) of the Agricultural Adjustment Act of 1938 reads as follows: "(b) The Secretary is authorized and directed, from any funds made available for the purpose of the Acts in connection with which county committees are utilized, to make payments to county committees of farmers to cover the estimated administrative expenses incurred or to be incurred by them in cooperating in carrying out the provisions of such Acts. All or part of such estimated administrative expenses of any such committee may be deducted pro rata from the Soil Conservation Act payments, parity payments, or loans, or other payments under such Acts, made unless payment of such expense is otherwise provided by law. The Secretary may make such payments to such committees in advance of determination of performance by farmers."

Under this authorization the Treasury Department and the GAO established the appropriation account "Local administration, section 388." Thereafter, estimated amounts were transferred to this account for carrying out programs utilizing the services of county committees. All advances for expenses of county committees were then charged to this account.

In January 1942, Congress approved an amendment to section 392 (a) of the Agricultural Adjustment Act which made it read as follows:

"SEC. 392. (a) The Secretary is authorized and directed to make such expenditures as he deems necessary to carry out the provisions of this Act and sections 7 to 17, inclusive, of the Soil Conservation and Domestic Allotment Act, as amended, including personal services and rents in the District of Columbia and elsewhere; traveling expenses; supplies and equipment; lawbooks; books of reference; directories; periodicals; and newspapers; and the preparation and display of exhibits, including such dlplays at community, State, interstate, and international fairs within the United States. The Secretary of the Treasury is authorized and directed upon the request of the Secretary to establish one or more separate appropriation accounts into which there shall be transferred from the respective funds available for the purposes of the several Acts, in connection with which personnel or other facilities of the Agricultural Adjustment Administration are utilized, proportionate amounts estimated by the Secretary to be required by the Agricultural Adjustment Administration for administrative expenses in carrying out or cooperating in carrying out any of the provisions of the respective Acts."

The purpose of the amendment was to provide an appropriation account, against which to charge all National and State office administrative expenses, comparable to the one already established for expenses of county committees (sec. 388). This eliminated the necessity for making separate allotments and maintaining accounting records of obligations and expenditures by appropriations. House Report No. 1077, exhibit 1, dated July 30, 1941, states in part: "The bill amends section 392 of the Agricultural Act, as amended, so as to accomplish the following purposes: *** To provide for separate appropriation accounts for administrative expenses to be created from funds available to the AAA and thus do away with the requirement that all administrative expenditures be recorded and reported under separate appropriations."

Senate Report No. 960, exhibit 2, dated January 16, 1942, includes as exhibit A thereof a copy of a letter to Hon. E. D. Smith from the Department as explanation of the legislation, which reads in part:

"Under the proposed legislation each appropriation or fund available for administrative expenses would contribute its estimated share of such expenses to the appropriation account. All administrative expense disbursements would then be made from such an appropriation account, thereby permitting easier administrative control and eliminating much fiscal and accounting work."

Actual transfers to each of these accounts during the past fiscal year and anticipated transfers during the current and next fiscal years are shown by funds in the budget schedules. Transfers to each account from each fund are made in amounts not in excess of the current estimate of obligations to be incurred in carrying out the activity authorized to be financed from that fund. Transfers are made periodically during the year in accordance with approved apportionments of the contributing appropriations.

SUMMARY

In summary the system of fund control under sections 392 and 388 is designed to accomplish four purposes.

Use the flexibility provided by law to simplify budgeting and minimize recordkeeping in order to promote the more efficient use of all funds available.

Utilization of each fund only for the purpose for which it was made available. Utilization of each fund to the extent justified by work actually required to properly carry out the specific activity for which it was provided.

Utilization of each fund by each organizational unit in proportion to the work performed by that unit.

Mr. MARSHALL. I notice at page 243 of your justification that you estimate the cost of the agricultural conservation program of $19,564,384, and for 1959 you recommend the same amount of money. Is this in line with the recommendation of lowering the agricultural conservation payments?

Mr. BEACH. Yes, sir. This is for the fiscal year 1959 which carries out the authorization made last year for $250 million.

Mr. MARSHALL. That is all, Mr. Chairman.