Briefly, the system provides for decentralization of detailed accounting to field offices, with central consolidation of reports and analyses for management purposes, use of site audits, and reduction of departmental post-audits and the development of sound cost information. Mr. Jack Gary, who is the special accounting consultant, will describe what has been accomplished in detail when he appears before you. Though less rapid progress has been made in the supply system, we were fortunate in obtaining through the cooperation of the Navy the services of Capt. J. H. Skillman, who has had a long and varied experience in the Navy in supply matters. Although retired, Captain Skillman agreed to return to active duty to assist the Coast Guard in solving its supply problem. Captain Skillman will describe what has been done in the supply program and future plans for improvement when he appears before you. But, briefly, the changes in supply are designed to- 4. Improve the distribution of available stock. To do this it is planned to establish a field distribution depot in each district, with a few exceptions. Existing facilities will be used, with necessary modifications. Because of similarity of material requirements, these district depots are satellites to the nearest Navy supply activity and will serve all shore and floating units in their respective districts. Along with these field developments, better central control of inventory and procurement, and central cataloging and specification activity are being developed. These improvements are being carried out using presently available personnel to a maximum extent, with reallocation of duties in many instances. However, in 1951 a net increase of field positions is necessary to complete the accounting and supply program. STATION SURVEY During the year a special board of officers made a detailed examination of the need for each lifeboat station, light station, and lightship operated by the Coast Guard to determine whether any of these units could be disestablished in the interest of economy without increasing maritime hazards. This survey has been most carefully conducted; and if it appeared that a unit might be disestablished, public hearings were held in the locality concerned. The results of the board are now being carefully evaluated, with the possibility that during the forthcoming year the Coast Guard may be able to discontinue some units no longer economically justified. COAST GUARD RESERVE TRAINING PROGRAM Funds are included in these estimates for the initiation of a training program for the Coast Guard Reserve. In the past much has been said about the need for this training program, and the need today is no less great than it was in the past. Before commenting on that need, however, I should like to clarify a misapprehension which may exist in the minds of some Members of Congress, and even of the Appropriations Committee. On several occasions it has been suggested to me that there was an impression that there was no legal authority for the Coast Guard Reserve and that the Coast Guard's request for funds for training purposes was subject to criticism for this reason. It should be emphasized that the Coast Guard Reserve is authorized by act of Congress and was so authorized before World War II. Further, Congress has reaffirmed that authorization in enacting title 14 in the last session of Congress through the enactment of Public Law 207, just referred to by me. Therefore, there is no question of the authority for this program, but simply a matter of the means to carry out the program directed by Congress. As you know, the Coast Guard must be ready to serve with the Navy in emergencies. Accordingly, the Navy has assigned certain specific duties to the Coast Guard. Those duties can only be discharged if the Coast Guard has a reserve force immediately ready for mobilization when needed. The Coast Guard Reserve has been in an inactive status since demobilization because no funds have heretofore been provided for its training. Without going into detail concerning the duties assigned by the Navy, I want to emphasize their importance to our national security and the fact that no other armed force is prepared to discharge those duties. There is no duplication of effort contemplated in the training of the Coast Guard Reserve and the need for funds for this program is urgent. OPERATING EXPENSES The 1951 estimates for operating expenses have been prepared on an activity basis, and for this purpose facilities have been grouped under three main activity headings: 1. Search, rescue, and law enforcement; 2. Operation of aids to navigation; and 3. Operation of ocean stations. The estimate for operating expenses for 1951 is requested under one appropriation title instead of the four previous titles. This consolidation is being made to simplify budget presentation and cost accounting and to facilitate the evaluation of performance by management. The increase for operating expenses is largely comprised of 1. Pay increases authorized under Public Laws 308, 351, and 429; 2. Additional funds to improve the maintenance of shore structures, which are in poor state of repair; 3. Additional field positions to complete the field installations for the new accounting and supply systems: and 4. Personnel and other expenses to operate 22 additional aircraft needed for search and rescue. ACQUISITION, CONSTRUCTION, AND IMPROVEMENT The amount requested for capital expenses under the heading of acquisition, construction, and improvement represents an increase of $18,979,000 above that provided for the current fiscal year. The major part of this increase is for the purchase of replacement aircraft and 22 additional aircraft. Nearly all of the Coast Guard's present aircraft are wartime-manufactured Navy and Air Force planes, which are rapidly approaching a state of obsolescence. Unless an orderly replacement program such as included in the 1951 request is carried out, the Coast Guard will soon have too few planes to carry on its search and rescue missions. The 22 additional aircraft are required because of the growth of air transportation over the water. You are undoubtedly aware of many recent instances in which rapid and sufficient air search was necessary to locate surviviors of aircraft in distress. The need for additional facilities has been set. forth by the International Civil Aviation Organization and has been carefully studied and approved by the Air Coordinating Committee. The increase included in this estimate will not meet all of the requirements, but will be deployed to the best advantage. The estimate also includes funds for construction of a loran chain of three stations in the Gulf of Alaska, which is also required by increasing aircraft transportation. As you know, aircraft on long flights over water depend heavily on this long-range aid to navigation, which is continually available in all types of weather. Other items in this estimate represent rebuilding or improvements to existing facilities to permit consolidation of activities or improvements in operating methods. The establishment of certain additional visual aids to navigation are included to mark changes in harbors and rivers accomplished by the United States Engineers. RETIRED PAY For retired pay, the increase requested is attributable to pay increases under Public Laws 351 and 435, and to expected additional retirements authorized by law Briefly, that covers the estimates before you. I have not attempted to cover, except in a general way, a number of points, nor to analyze the estimates themselves. The committee will, I am sure, desire to elaborate on these matters, and I have available here a number of my staff, who, like myself, will be happy to answer such questions as you may care to ask. However, before answering such questions, Mr. Chairman, I would like to extend my statement in regard to the accomplishments of the Ebasco report. Mr. GARY. Very well. EBASCO REPORT Admiral O'NEILL. As you know, during fiscal year 1948, Ebasco Services, Inc., made a comprehensive survey of the administrative management and fiscal policies of the Coast Guard. That study was very helpful to the Coast Guard in that it pointed up our strong and our weak links in our operations. Also, it provided a base on which we might gage our peacetime activities. I think it was also helpful to Congress and to this committee, in that it presented a realistic picture of the functions of the Coast Guard and the needs of the Coast Guard. The recommendations of Ebasco relative to accounting and supply will, as I mentioned in my statement, be elaborated on, if you so desire, by our supply and accounting consultants, who are with us today. As of today, of the 193 recommendations made by Ebasco, action has been completed on 120 of those. Forty-nine are in the process of being implemented; fifteen are contingent on additional funds, and nine are still under study. The Coast Guard will, of course, continue an active interest in these recommendations in order to derive the maximum benefit from them. It probably will not be necessary to make further report on these recommendations unless it is desired by this committee. Mr. GARY. Would you like to present the accounting and supply phases at this time? Admiral O'NEILL. Yes, sir. I think that this would be an opportune time to present them, and it would be quite agreeable to us. Mr. GARY. It might be a good idea to do that before we get into the detailed appropriations. Admiral O'NEILL. Mr. T. Jack Gary is here for the accounting, and Captain Skillman is standing by in room F-16 to be called. Mr. GARY. I would suggest he be called. In the meantime, we will be glad to hear from you now, Mr. Gary. DEVELOPMENT OF ACCOUNTING SYSTEM Mr. T. JACK GARY, Jr. Gentlemen, the past year has been spent on developing a plan of accounting for the Coast Guard. This included the determination of what the objectives of the accounting system should be and what principles and bases of accounting should be followed. It also included the development of internal controls for the accounting system, and provision for both internal and external auditing of the accounts. Finally, there was the design of the forms and the writing of the detailed procedure. Except for such changes that will be made on the basis of actual operation, this phase of our program is practically completed. We have practically completed the accounting manual which contains the procedures with the exception of a few additions that need to be made. In developing this manual of accounting, and also the detailed procedures in connection with it, we worked very closely, as you probably know, with the Treasury Department and the General Accounting Office. As a result of this cooperative effort, we have gotten permission to make certain deviations from established Federal accounting procedure, which will lead to simplification of the processes of keeping the accounts for the Coast Guard. To a large extent, some of these new procedures which we are putting into effect were approved on the basis of testing these procedures for application throughout the Federal Government generally. We believe that the simplification of procedures that can be accomplished will have a considerable effect eventually on the simplification of accounting in the Federal Government as a whole. At this point I would like to insert in the record two letters, one from the Secretary of the Treasury to the Comptroller General, and the other the Comptroller General's reply, in which are embodied the principal changes that we have obtained from the established Federal procedure. These letters are rather lengthy, and I do not presume you gentlemen would want me to read them. I would just like to have them inserted in the record at this point, and then explain briefly what they mean with relation to the accounting system. Mr. GARY. They will be inserted into the record at this point. (The letters referred to are as follows:) Hon. LINDSAY C. WARREN, Comptroller General of the United States, TREASURY DEPARTMENT, Washington, August 30, 1949. Washington, D. C. MY DEAR MR. WARREN: In the Fiscal Assistant Secretary's letter to you of May 25, 1949, there was presented for your consideration an expenditure classification for use by the United States Coast Guard beginning with the fiscal year 1950. This letter also advised you of the intention to present for your approval the principles and bases underlying the new accounting system as they were developed. In your reply dated May 26, 1949 (B-45109), you expressed satisfaction with the expenditure classification and your interest in the further development of the Coast Guard's accounting system. I understand that the accounting systems staff of the Coast Guard has been working closely with the Accounting Systems Division of your office and with the Bureau of Accounts of the Fiscal Service in this developmental work. I have followed with a great deal of inetrest the accounting improvement program of the Coast Guard. Aside from the fact that it is an agency within the Treasury Department for which I have administrative responsibility, I have the feeling that the work which is going on represents a real opportunity to obtain well-rounded application of the principles and policies for accounting improvement which will serve as a forerunner for wider application throughout the Federal Government. Moreover, the type of accounting organization which has been established in the Coast Guard, the quality of the staff which has been selected and the manner in which this staff has applied itself to the problem, gives assurance that there will be proper application of such principles and policies through the development of sound underlying procedures. A schedule for installation of the new accounting system provides for the first conversion to be made at Headquarters on October 1, 1949. There are, however, certain basic questions, affecting the operations of both the Treasury Department and the General Accounting Office which must be settled before preparations for the installation can be completed. These basic questions relate to the application of some of the announced objectives and policies of our program. They are (1) Provision for one-the-site audit by the General Accounting Office; (2) The depositing of collections by the Coast Guard directly with designated depositaries and elimination of the preparation of schedules of collections; and (3) Simplification of disbursement control, including revision of related warrant procedures. ON-THE-SITE AUDIT In the development of the new accounting system of the Coast Guard emphasis is being placed on the application of accepted principles and practices for internal control and internal audit. In this connection, it is intended that in addition to the features of internal control that are being built into the system a staff of competent accountants will be employed by the Coast Guard to make periodic internal audits. This is consistent with the policy of our program with respect to the concept of the responsibilities of operating agencies. Also, I believe it affords an excellent opportunity for developing the full potentialities of external audit which will give recognition to the effectiveness of internal control and internal audit in actual operation. |