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The act was subsequently amended to permit the adjustment for losses incurred by the Post Office Department while acting as agent for the Treasury Department for the sales of revenue stamps, et cetera, for losses by banking institutions resulting from erroneous redemptions of savings bonds, and also losses resulting from erroneous redemption of armed forces leave bonds.

So far, there has been appropriated and transferred $793,803, and it is felt that for 1951, $150,000 additional will be required. That is broken down into $125,000 required for adjusting for losses in connection with redemption of savings bonds and $25,000 for losses in shipment of valuables and for Post Office losses in connection with their agency transactions for the Treasury Department.

Mr. Gary. What are your obligations for the first 6 months of this

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Mr. MAXWELL. To December 31, the obligations were $89,620. · Mr. Gary. What is your balance as of that date?

Mr. MAXWELL. The balance is $154,557.

Mr. Gary. Let us put into the record the table which appears on page 71 of the justifications.

(The table referred to is as follows:)

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Mr. CANFIELD. I have only the observation, Mr. Chairman, that while the total payments on this appropriation were fairly high in 1949, recoveries were quite high, or more than 50 percent.

Mr. MaxWELL. That is correct.

DIVISION OF DISBURSEMENTS

WITNESSES
PAUL D. BANNING, CHIEF DISBURSING OFFICER
R. W. MAXWELL, COMMISSIONER OF ACCOUNTS
J. F. CANNON, ASSISTANT CHIEF DISBURSING OFFICER
0. O. BRYANT, ASSISTANT CHIEF DISBURSING OFFICER
R. E. SMITH, BUDGET OFFICER

Mr. Gary. We have as witness for this item Mr. Paul D. Banning, the chief disbursing officer.

Mr. Banning, would you like to make a general statement at this time?

GENERAL STATEMENT Mr. Banning. Mr. Chairman, as indicated in our budget estimates for the fiscal year 1951, the Division of Disbursement is requesting an appropriation of $10,848,000, which is $619,900 under that for the current year.

As in the past, our next year's request is based on the volume of work to be handled for the civilian agencies served at established unit costs for each activity. The composite base unit cost as projected for 1951 would have been slightly less than that for the current year, were it not for the fact that a full year's effect has to be given in 1951 for the pay increase under the Classification Act of 1949, Public Law 429, Eighty-first Congress, whereas the increase will be effective for only 8 months during the fiscal year 1950, or since October 31, 1949.

The difference in unit costs between the two years, however, is slight. In 1950 the composite unit cost is budgeted at 6.34 cents per item, whereas in 1951 it is estimated at 6.36 cents. The rates apply to all work under direct appropriation.

FUNCTIONS AND ORGANIZATION The Division of Disbursement disburses appropriated, trust, and special funds for civilian agencies of the Government.

In addition, it also performs certain other functions, the more important of which include the accounting for and depositing of collections, handling claims of individual payees for reissuance of lost checks, and issuing savings bonds under pay-roll allotments.

The disbursing function is performed in a Washington office and 26 regional offices located in the principal financial centers of the United States, the Territories, and the Philippine Islands.

In all these offices the procedures and mechanics are virtually uniform, and all employees making disbursements, receiving cash collections, or handling securities are bonded for faithful performance of duty.

APPROPRIATION FOR FISCAL YEAR 1949

For the fiscal year 1949, the Division had an appropriation of $11,500,000. In addition, we received $518,838 from the transfer agencies served, making the total available $12,018,611.

A cost system is kept to determine the unit cost for each operation performed in writing a check, making a collection, or issuing a bond,

and the requirements for each class of work under each activity, that is, addressograph periodic payments, addressograph salary payments, miscellaneous typed checks, typed schedule payments, transfer posted checks, cash payments, the handling of collections, and the issuance of United States savings bonds.

In the fiscal year 1949, through scientifically applied production control, streamlined procedures, improved utilization of existing equipment, and introduction of certain new equipment, such as transfer posting machines and microfilming equipment, the Division held its expenditures to $11,215,307, with a resulting savings to the Treasury amounting to $803,304.

In that year, 183,925,581 items were processed, at an average unit cost of 60 cents per item which, incidentally, is the same unit cost as that used as the basis for the estimates for the fiscal year 1951.

Mr. Chairman, I have here a statement which shows the actual number of transactions, classified as to payments, collections, and savings bonds, from 1945 through 1949, and the estimated number of transactions for 1950 and 1951.

The statement also shows the average unit cost each year.

Subject to your approval, I should like to have the statement inserted in the record.

Mr. GARY. We will be glad to insert the statement into the record at this point.

(The statement referred to is as follows:)

Statement showing payments, collections, savings bonds, cost and unit cost, including

printing and binding, by fiscal years

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$4, 554, 624 $95, 057, 304 $6,018, 750
4, 137, 313 146, 730, 244 18, 520. 933
2, 970, 901 172, 488, 422 11, 002, 370
2, 257, 138 171, 555, 651 10.034, 622
2, 402, 927 183, 925, 581 11, 215, 534
2,350,000 1194, 732, 000 12, 136, 749
2,350,000 179, 781,000 11, 476, 148

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1 Includes cost of salary increases granted under Public Law 429.

Mr. Gary. You may proceed now, Mr. Banning.
Mr. BANNING. Yes, sir,

APPROPRIATION FOR THE FISCAL YEAR 1950

For the fiscal year 1950, the Division is operating under an appropriation of $11,467,900, together with authority to receive as a transfer, funds from the two agencies served amounting to $594,849.

In addition a further sum of $74,000 will be necessary in 1950 to defray the cost of the Classification Act of 1949, Public Law 429, Eighty-first Congress, which increased salaries by an average of $172 per employee since October 31, 1949.

I should like to point out that the amount requested, $74,000, for the pay increase this year does not represent the entire cost of the act.

A careful calculation made covering the 3,481 employees in all grades shows the total cost will be $411,778 during the fiscal year 1950.

· A large part of this requirement, or $337,778, will be defrayed as a result of the continuation in operations of the savings in 1949, upon which I have already briefly touched.

With the total funds provided and requested to be provided, in all amounting to $12,136,749 for 1950, the Division will process items 194,732,000 at an average unit cost of $0.06232540, or, in round figures, 6710 cents per item.

REFUNDING OF EXCESS PREMIUMS

In addition to its regular work, the Division now has in operation for the fiscal year 1950 a special program for refunding of excess premiums as a dividend on national service life insurance.

Early in 1949 the Veterans Administration began work on reviewing individual insurance accounts. It will complete the program this year, forwarding schedules of payees to the Division of Disbursement for payment during the last 6 months of the current year 1950.

This program requires the issuance of 14,225,000 checks in 4 or 5 months.

To meet production schedules, the Division has established a branch office to perform this operation. As a matter of comparison, the scheduled volume of work in the new office will be over three times that normally handled by the Washington regional office.

In an undertaking of this magnitude, likely some veterans will delay presenting their claims, but the number will be very small by June 30, 1950, and the scattered payments entailed thereon can be processed along with the other work of the Division.

APPROPRIATION ESTIMATES FOR 1951

For the fiscal year 1951, the Division is requesting an appropriation of $10,848,000, together with authority to receive funds to be transferred from the transfer agencies serviced, $628,148, which would make the total $11,476,148.

Recent estimates submitted by all departments and establishments served indicate that the Division will be required to process 179,750,000 items, for which we have projected the composite unit cost of $0.06383404, the rate being virtually the same as that in 1950.

No amount has been included in the appropriation estimates for any dividend payment on national service life insurance in the fiscal year 1951. The Division has been informally advised, however, that another NSLI dividend may be paid inasmuch as the current refunds are computed only through the 1948 anniversary date of each policy.

It is not improbable, therefore, that a second program may be inaugurated by the Veterans' Administration in 1951.

Probably the succeeding program, when initiated, will be smaller than the one now under way.

As no official information is available, the Division has not included in its 1951 estimates any amount for this work. If and when definite plans are made by the Veterans' Administration for such payments, the Division may have to request a supplemental appropriation.

INCREASE IN PRODUCTION The operations on writing checks, preparing certificates of deposit, and issuing bonds are highly mechanized. Throughout its existence the Division has continually strived to increase production by laborsaving devices, simplification of procedures, and utilizing principles of mass production. Year after year production has gone up.

A simple way to test the trend in production is to compute the number of items handled per employee per year, taking all employees, whether operative, supervisory, or administrative, and then by dividing that number into the total number of units processed. This rough calculation is, of course, affected by collateral factors, but, in general, it indicates the direction that production is moving.

In 1945, the total items handled per employee averaged 39,000 items a year. Through improved equipment, streamlined procedures, and particularly applied production scheduling and control, the a verage number of units per employee has been substantially increased.

One of the most recent savings may be attributed to use of the transfer posting method for writing checks on certain classes of onetime payments, such as income tax refunds, national service life insurance dividends to veterans, and so forth.

The use of this type of equipment, though very flexible, is restricted to payments of a nonrepetitive nature. At least, for the time being, we have not been able to use it advantageously in repetitive payments such as veterans' compensation, insurance, social security payments, civil service retirement, and other recurring types having identical information reproduced each month on the check.

So far as we have found, this latter type of payment can be more economically processed on addressing machines although preparation by electrical accounting equipment holds some promise.

Mr. Chairman, I have a table here which shows for the period from 1945 through 1949 the number of items processed each year, the cost of the salaries, number of employees, average annual salary, and the average production per employee. The table also contains the same information on an estimated basis for fiscal years 1950 and 1951.

With your approval, Mr. Chairman, I would like to have the table appear in the record.

Mr. Gary. The table may be inserted into the record. (The table referred to is as follows:)

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Mr. Banning. During the past 5 years production has gone up 39,000 items per employee to 54,000 per employee, an increase of 38 percent.

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