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Previously known asJoint Accounting
-----..The
mprovement Program
ILLUSTRATIVE HIGHLIGHTS FROM THE
FISCAL YEAR
1959
ANNUAL REPORT OF THE
JOINT FINANCIAL MANAGEMENT IMPROVEMENT PROGRAM
This year's annual report marks a change iii the name of the cooperative
Governmentwide improvement effort heretofore known as the Joint Accounting
Improvement Program. The nature of the program itself is unchanged--it will
continue as a mutual and cooperative effort of all Federal agencies toward
improved and more efficient financial management practices. In more appropriate recognition of the scope of its activities, however, it will henceforth be known as the Joint Financial Management Improvement Program.
A..
~counting
wstems
Tabular information furnished by the agencies in Part II of the report
is generally indicative of progress in the trend toward accrual accounting
practices throughout th~ Government., The systems employed, however, presently
range all the way from (1) those organizations in which certain types of financial transactions are accrued only at year end, to (2) those in which all
aspects of accrual concepts are an intrinsic part of day-to-day financial
operations. As the program moves forward, it is to be expected that many
agencies now employing minimal degrees of accrual techniques will find it in
their own best interests to broaden the scope of coverage and timeliness of
application. Increasing attention will be given to this matter by the central
agencies, in terms of their respective statutocy responsibilities, in working
with the agencies.
Examples of improvements in accounting systems for fiscal year 1959:
Installed accrual accounting and improved cost accounting in the 16
Public Hea~th Service hospitals.
Accrual accounting achieved through use of cost distribution registers
and document files in Federal Coal Mine Safety_ Board of Review and
Indian Claims Commission ..
Developed accrual system and reduced number of allotments from 50 to 10
in National Labor Relations Board..
Adopted improved inventocy control methods and discontinued 5,000 warehouse bin record cards and 900 nonexpendable property record cards in
Agricultural Research Service ..
Established single property administration for Government property in .
possession of Defense, contractors in Department of Defense, which
reduced costs and eliminated impact of several different systems on
contractors.
established self-service center systems for low cost Engineer
supplies, streamlining accounting and paperwork ..
~
- 2 -
Repair parts valued at $245 million capitalized in
~
Ordnance Stock
FUnd.
Progress made by Post Office De2artment in its property accounting program. Test inventories disclosed considerable excess and unserviceable
equipment which will permit better utilization and better property management.
Accountability transferred from Gener~l Services Administration to using
agencies for i'urniture--valued at $JO million--in the custody of such
.
agencies.
Statistical sampling techniques utilized by General Services Administration in computing quantities of rubber and fiber stored at military depots, thus avoiding costly movement of the material.
Bo
Bu~gets
based on costs
Cost-based budgeting has been evolving over the last few years, in keeping with the development of accounting on the accrual basis. There were only
four appropriation requests on this basis in the Budget DocUlnent for 1957•
In the 1960 Budget there were 135. For the 1961 Budget more than 200 additional appropriation requests are to be presented on the cost basis. With
these new conversions, more than half the accounts in the Budget Document,
embracing annual budget expenditures of about $29 billion and another
$12 billion of trust fund expenditures, will be covered.
'rhese cost-budget presentations are not regarded as ends in themselves;
they are only generally indicative of the progress being made throughout the
Government toward management use of better datae These data are produced by
systems which, through coordinated accounting, reporting and budgeting practices, will provide adequate control of both funds and costs, and a basis
for measuring performance against established goalse
c.
Special developments toward
inte~rated
financial management systems
Bureau of Public Roads (Commerce) moved forward with an extensive im'provement program embracing financial management organization and staffing;
internal accounting systems~ including cost accounting; relationships with
accounting systems of the State highway departments, and auditing of Federal
payments; application of automatic data processing equipment; and personnel
training.
DeQartment of Defense established principles and policies generating a
comprehensive, time-phased program for improvement of financial management in
the military departments in the area of operation and maintenance. Coordinated action initiated toward similar programs in the areas of militacy construction; procurement and production; researcht development, test and evaluation; and military personnel costs. Unifonn system prescribed for financing,
funding, accounting, and reporting for sales of material and services under
Militar.v Assistance Program.
- 3 DeEertment of State created a Joint Advisory Group on Financial Management to spearhead improvement program. Time-phased projects established following completion of a broad review of the financial control system employed
on departmental programs in Washington and at selected foreign service posts.
Intensive work underway toward establishing framework of principles and
policies for improvement of financial system. Time-phased improvement program also established in Department of Labor.
D. Automatic Data Processing Systems
1. Elec~ronic application~. The strong trend toward use of electronic
equipment in Government operations continues. Virtually all agencies with
large volumes of data to process, or large-scale recordkeeping operations,
have been affected. About 200 electronic computers are now in use in the
business and management control systems of the agencies, of which about 70
percent are in Department of Defense.
The Department of Defense has established an automatic data processing
management program with staffs in military departments and in the Office of
the Secretary of Defense. Proposals for new installations are reviewed for
compliance with established policy and criteria as well as readiness for
economical installation.
Significant developments are underway in connection with certain installations planned next year whereby magnetic tape record output of certain agencies will become direct input for operations of other agencies involved in a
series of interagency functions. Increasing attention is also being given to
expanding the automatic interchange of magnetic tape records between industry
and Government.
a. Automatic data processing systems that utilize electronic equipment
ranging from the small to the large-scale variety were adopted or extended
during fiscal year 1959 for the following purposes:
For payroll system in Bureau of Public Roads.
For general and cost accounting in Coast and Geodetic
s~.
For centralized inventory control accounting in l1arine Corps.
Annual savings of $175,000 realized by application to the procedure for
testing the retirement status of beneficiaries under the old;..age and
survivors insurance program in B~au of Old-Age and Survivors Insurance.
For payroll, power billing, and property accounting in two offices of
Bureau of Reclamation.
·
Annual salary savings of about $JO,OOO in an application to payroll,
leave accounting, cost distribution and personnel reporting in
Geological Survey.
- 4 For payroll, leave accounting, and personnel statistics in two more regional offices (now covering 7 of 15 regions) in Post Office Depa;-tme!'!!:.•
For accounting and servicing of inquiries in issuance and retirement of
Series E savings bonds in punched card form in Bureau of Public Debt.
Completed program for maximum utilization of certain high speed electronic checkwriting equipment in Bureau of Accounts&
Gover.nmentwide savings of over $2 .. 9 million a year (exceeds original estimates by over $700,000) obtained through completion of system for payment and reconciliation of Government checks in Office of Treasurer of
the United States,.
Computer facilities at the Federal Reserve Board utilized by the Office
of the CofilEtroller of the Currency for developing statistical data from
financial reports of national banks ..
Existing system extended to cover 13 additional operations, including
application of monthly payments of mortgage interest and principal, in
!ederal Housing Administration.
Existing system extended by application to routine processing of irregular loan payments in Small Business Administration.
-
-
b. Preliminary work is underway in the .following organizations incident
to .ADP systems involving electronic equipment installations scheduled for the
near future :
Plans include extension of facilities to cover accounting, certification
and related payment procedures for disability rolls of Bureau of Old.Age and Survivors In51?-r~qe ..
Pl.8.ns completed to program weapon stockpile inventories in Atomic Energy
Connnission.
Existing operation in one region to be installed in two additional
regional offices of General S~istration.
Plans underway for application to earnings accounts, certification of
service and compensation data, and statistical data in Railroad Retirement Board.
Conversion of insurance premium billing and accounting to electronic
computer planned in VeterfilJ.J! Admin.i~t~.. Planned installation of
data processing equipment will permit conversion to magnetic tape of
about J.7 million National Service Life Insurance accounts in Philadelphia, to be .followed by 2.1 million accounts in Denver and St. Paul-offices will be linked to Philadelphia conrputer by a data transmission
network. Accountihg and statistical functions for Veterans Administration disability and death benefits programs will be centralized in data
- 5 processing center at Hines, lllinois~ which will also provide magnetic
tape for checktvriting in Treasury Department ..
Plans underway for computer system for checkwriting in Chica.go regional
disbursing office of Bureau of Accounts., This is coordinated with
Veterans Administration plans at Hines, Illinois, from which magnetic
tape records for about
5 million benefit checks a month will be fur-
nished by Veterans Administration..
Four million other periodic checks
issued at the Chicago disbursing office will be prepared with the same
equipment. Magnetic tape output of the disbursing system will be used
as input in the check payment and reconciliation operations of the
Treasurer of the United States,.
c. ADP (electronic) system feasibility studies are in process or are
under consideration in such agencies as the Bonneville Power Administration;
Bureau of Indian Affairs; Internal Revenue Service, for a corr.prehensive system of tax return processing; ~ Hous~_ A9!_~~~' with respect to
mortgage insurance application processing; Civil Service Commission, with respect to processing the retirement annuity rolls; General Services Administration, for stock replenishment, purchase~ distribution, inventoryll and financial
accounting functions involving stores stock items and General Supply Fund; and
Veterans Administration, for mortgage loan accounting.,
2. Electric accotmting rna<?!}~~~ti~. Data processing systems
utilizing electric accounting equipment were installed or extended during
fiscal year 1959 for the follow:ing purposes:
For payroll and loan accounting in Rural Electrification J,dministration ..
For National Institutes of Health payroll operations in Public Health
manpower savings a.nd improved reporting.
Servi~--produced
For Uashington payroll operations :in Department of State--first step
toward possible use of electronic equipment ..
For processing postmasters' requisitions for bulk quantities of postage
and savings stamps--coordinated system in Post Office Dffoartment and
Bureau of Engraving ~nd Printin[•
For centralized payroll operations of western regional offices in
Internal Revenu.§_l..§ervice--resulting in anpual savings of 24 man-years.
Existing system extende~ to processing mortgage purchases and related
statistical reporting :in Federal KationaJ. Mortgage Associati?n.,
For recording allotments, obligations and disbursements in Public Housing Administration--perrnittjng quarterly conversion to accrual basis
with a minimum of effort ..
For payroll system and reports on building space utilization and assignment in General Services .Administration.. Transfer of payroll operations
- 6 -
to Region 3 resulted in annual savings of 7 employees for central office.
In Region 3, mechanization produced annual savings of $59,000.
For payroll, general accounting, and reporting in Interstate Connnerce
Connnission--produced three man-years savings in payroll and monthly reports made available eight days earlier.
For retail stores and service centers in Panama Canal Compapy.
For domestic allotment accounting and cost distributions in three offices of u.s. Info~tion Age~,SE.·
Previously tested mechanized mortgage loan accounting system in Veterans
Administration installed at stations with greatest workload. System for
benefit payment accounting extended and now 75 percent complete.
E. other Improvements
Finance procedures of .f:£!!sL for disbursements and collections streamlined;
improved invoice processing in Quartermaster Corps caused reduction of 145,000
vouchers and 5,590 man hours each year. Navy developed better reporting to ·
top management with respect to price changes in procurement, construction, and
research and development programs.. Air Force made considerable progress in
integrating disbursement and allotment accounting and the accounting and finance functions.
In the Treasury Dew,rtment_, the Bureau of Account~ carried forward technological improvements of disbursing operations in the Division of Disbursement, and integration of operations with agency accounting systems, all resulting in additional annual savings of over $500,000; U,.S,. Coast Guard
established improved militar,y pay procedures ..In the Department of Healt~ Educationa and W~lfare, the Social Security
Administration, Bureau of Old....A_ge and, Survivors Insurance realized annual
savings of $120,000 by better procedures for certification of earnings for
old-age and survivors' claims, and $100 11 000 by improvements in handling about
)50,000 inquiries a year .from individuals concerning their insured status under the Program.
Public Housing Admi.nistrati2£ of the Housing and Home Finance Agency
. adopted improved budget procedures, reducing related paperwork by 80 percent.
United_§tates Information AgenSY., adopted procedure for overseas shipments
which reduces nunlber of bills of ladlng by almost 90 percent.
SEC RE TAR Y OF THE TREASURY
DIRECTOR, BUREAU OF THE BUDGET
COMPTROLLER GENERAL OF THE UNITED STATES
December 15, 1959
TO THE HEADS OF DEPARTMENTS AND ESTABLISHMENTS
SUBJECTt Annual report of the Joint Financiai Management
Improvement Program for fiscal year 1959
Fiscal year 1959 marked the beginning of the second decade of
a Program in which all Government agencies are joined in an effort
to promote the use of effective financial management practices
throughout the Federal Government.
Initially, the Joint Accounting Improvement Program gave primary emphasis to accounting needs in the Federal Government, but
it soon became apparent that coordinate improvements were also necessary in the related fields of programing, budgeting, and reporting-all with the objective of most effectively providing for the financial
management needs of the agencies.
This year we give official recognition to its scope by the adoption of a new name- -the Joint Financial Management Improvement
Program.
·
The accompanying annual report, under the new name, presents
significant accomplishments made during fiscal year 1959. It also includes statements submitted by the various agencies containing their
appraisals of the status of their financial management improvement
programs at the end of the fiscal year and some information about
future plans.
We join in urging you to take full advantage of the benefits which
can be obtained in your agencies through effective use of the improved
financial management systems developed under the Program. With
your active support the progress that has been made can be converted
into even greater management improvement benefits in the future.
~~
Secretary of the Treasury
Director, Bureau of the Budget
Comptroller General of the United States
ANNUAL REPORT
OF THE
JOINT FINANCIAL MANAGEMENT IMPROVEMENT PROGRAM
TABLE OF CONTENTS
PART I
FINANCIAL MANAGEMENT DEVELOPMENTS OF GOVERNMENTWIDE SIGNIFICANCE DURING FISCAL YEAR 1959
Modernization of Agency Financial Management Systems • • • • • •
3
Cabinet Presentation ••••••••••••••••••••••••••• •..........
4
Development, Review, and Approval of Agency Accounting
Systems •••••••••••••.••••••••••••••.••••• ·• • • • • • • • • • • • • •
4
Accounting Principles, Standards, and Related Requirements..
6
Central Accounting and Related Procedures • • • • • • • • • • • • • • • • •
7
Central Reporting•••••••••••••••••••••••••••••••••••••••••
7
Agent-cashier and Imprest-fund Procedures ............. •....
8
Automatic Data Processing in Government Business and
Management Control Systems ••••• • • • • • • • • • • • • • • • • • • • • • • •
8
Prope rtg Accounting •••••••••••••••••••• ·• • • • • • • • • • • • • • • • • • •
10
Position Classification and Qualification Standards for
Accountants •• ••.......................................
11
Cost Principles for Research Projects • • • • • • • • • • • • • • • • • • • • • •
11
Committee on Federal Budgeting and Accounting • • • • • • • • • • • • •
12
Annual Accrued Expenditure Limitations • • • • • • • • • • • • • • • • • • • •
12
Financial Management Institute
12
o • • • • • • • • • • • • • • ., • • • • • • • • • • • •
PART II
AGENCY FINANCIAL MANAGEMENT IMPROVEMENT PROGRAMS-STATUS, ACCOMPLISHMENTS, AND PLANS
Foreword
•••••••••••••••••••••••••••••••••••••••••••••••
15
De;eartm.ent of AfJriculturt;
Status Tabulation • .. • • • .. • • • .. • .. • • • • • • • • • • • • • • • • • • • • • • • • •
Agricultural Marketing Service • ., • .. • • • • • • • • • • • • • • • • • • • •
Agricultural Research Service • • • .. • • • • • • • • • • • .. • • • • • • • • •
Commodity Stabilization Service • • • • • • • • • • • • • • • • • • • • • • •
Farmers Home Administration • • • • • • • • • .. • • • • • • • • • • • • • •
Federal Crop Insurance Corporation •••••• •............
Forest Service ................... .,. ...... .;. • • • • • • • • • • • • • • •
Office of the Secretary .. • • • • .. .. • • • • • • • • • • .. • • • • • • • • • • • •.• •
Rural Electrification Administration ••••• ., • • • • • • • • • • • • •
Soil Conservation Service •••••• ., • • • • • • • • • • • • • • • • • • • • • •
17
19
20
21
21
Zl
22
23
23
24
Department of Commerce
Status Tabulation ... ., ...................................... .
Bureau of the Census ......................... ri . . . . . . . . • • • . . . . •
'Bureau of Public Roads .................................... .
Coast and Geodetic Survey ........... ,, ................... .
Maritime Administration ................. ~ ............... .
National B.ureau of Stand a rd s ........................... .
Office of the Secretary ..................... ·••••••••••••
Patent Office • , .•••..•••••••.•••••••.••••••••••••••••
Weather Bureau ......................... ., .................... .
25
26
26
29
30
31
33
34
34
De;eartment of Defense
Status Tabulation ........................... • • • • • • • • .. • • • • • • • • •
Department of the Army .................. ,. • .. • • • • • • • • • • • • •
Department of the Navy ............................... • ...... •
Department of the Air Force .... ,. • .. • • • • • • • • • • • .. • • • • • • • •
~e;eartment
of Health, Ed,ucation, and
36
45
49
.52
Welfar~
Status Tabulation ..................... ,. • • • • • • • • • • • • • • • • •
Food and Drug Administration ••• ., ..... ~ ., ., • • • • • • • • • • • • • •
Office of Education • .. .. .. .. • .. • • .. • .. .. .. • • .. .. • • • • • • • • • • .. • • • • • •
Office of Vocational Rehabilitation •••••••• ., • • .. • • • • • • • • •
Public Health Service ..................... •................
Saint Elizabeth's Hospital ... ,. ............ ~..............
Bureau of Old Age and Survivors Insurance • • • • • • • • • • .. • •
Bureau of Public Assistance .. • • • • • • • • • • .. • • • • • • • • • • • • • • •
55
59
60
61
62
65
66
68
Department of the Interior
Status Tabulation • .. • .. .. • • • • .. • • • • • • • • • • • • • • • • • • • • • • .. • • •
Bonneville Power Administration • • .. • .. • • .. • • • • • • • • • • • • • •
Bureau of Indian Affairs ••••• ,. •• .,.......................
Bureau of Land Management • • • • • • • • • • • • • • • • • • • • • • • • .. • •
Bureau of Mines •••••••••••••••••••••••••••••••••••••
. 71
72
74
75
76
Department of the Interior (continued)
Bureau of Reclamation .. .. • .. • • • .. .. .. • .. .. • .. • • • • • • • • • • • • • • • • •
Geological Survey..................................................
National Park Service ........ ., ................. •.............
·Office of the Secretary ......... ., ................. ., • • • • • • • • •
Office of Territories....................................
Southeastern Power Administration .. • .. • • • .. • • .. .. • • • • • • • • •
Southwestern Power Administration .......... ., .......... ~..
U. s. Fish and Wildlife Service .... ., • .. • • • • • • • • • • .. • .. • • • • ..
77
79
79
80
81
81
82
83
Department of Justice
Status Tabulation ••••••••••••••••••••••••••••••••••••
Federal Bureau of Investigation ............................ .
Federal Prison System ..................... ., •••••••••••••
Immigration and Naturalization Service •• •.• •• ., .......... .
Legal Activitfes and General Administration ............ .
87
88
88
89
89
Department of Labor
Status Tabulation • • • • • • • • .. • • • • • • • • .. • • • • • • • • • • • • • • • • • •
Office of the Secretary • .. • • • • • • • .. • • .. • • • • • • • • .. • • .. • • • • • • •
Bureau of Employment Security •••••••••••• ., .......... ., •
91
93
94
Post Office Department
Status Tabulation
••••••••••••••••••••••••••••••••••••
95
Status Tabulation • • • .. .. .. • • • • • • • • .. • • • • • • • • • • • • • • • • • • • • •
Departmental and Other Programs ...................·••.•
International Cooperation Administration • • • • • • • • • • • • • • •
101
102
103
De;eartment of State
Department of the Treasury
Status Tabulation ••••••••••••• •.. • • • • • • • • • • • • • • • • • • • • •
Bureau of Accounts .. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Bureau of Custo'ms ........................ ·•••••••••••••••
Bureau o~ Engraving and.Pr~nting ••••••••••••••••••••••
Bureau of the Mint ............................. ., • • • • • •
Bureau of Narcotics ...................... ., ., • • • • • • • • .. • •
Bureau of Public Debt ............................ ., • • • • • •
Internal Revenue Service .......................... ~......
Office of Administrative Services •••••• ,. •••• ., • • • • • • • • • •
Office of the Treasurer of the United States•••••••••••••
United States Coast Guard•••••••••••••••••••••••••••••
United States Secret Service ................. ,. .. • • • • • • .. • • •
109
111
112
112
113
114
114
115
117
117
117
118
Housing and Home Finance Agency
Status Tabulation • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Federal Housing Administration • • • • • • • • • • • • • • • • • • • • • • •
Federal National Mortgage Association •••••••••• ~\......
Office of the Administrator • .. • • • • • • • • • • • • • • • • • • • • • • • • • •
Public Housing Administration • • • • • • • • • • • • • • • • • • • • • • • •
119
120
121
121
123
Other Agencies
Status Tabulation ••••••••••••••••••••••••••••••••••••
American Battle Monuments Commission • ~ •••••••••••••
Atomic Energy Commission •••••••••· ••••••••••••••••••
Bureau of the Budget ................................. .
Civil Aeronautics Board ................................ .
Civil Service Commission ••••••••••••••••••••••••••••
District of Columbia Government ••••••••••••••••••••••
Farm Credit Administration •••••••••••• ~ •••••••••••••
Federal Aviation Agency ••••••••••••••••••••••••••••••
Federal Coal Mine Safety Board of Review •••••••••• " ••
Federal Communications Commission ••••••••••••••••••
Federal Mediation and Conciliation Service •••••••••••••
Federal Power Commission •••••••••••••••••••••••••• .,
Foreign Claims Settlement Commission ••••••••••••••••
General Services Administration •••••••••• ,. •••••••••••
Indian Claims Commission ••••••••••••••••• ·• •••••••••
Interstate Commerce Commission •••••••••••••••••••••
National Aeronautics and Space Administration ••••••••••
National Labor Relations Board •••••••••••••••••••••••
National Mediation Board ,. ••••••••••••••••••••••••••••
National Science Foundation •••••••••••••••••••••••••••
National Security Council •••••••••••••••••••••••••••••
Office of Civil and Defense Mobilization ••••••••••••••••
Panama Canal Company and Canal Zone Government •••••
Railroad Retirement Board •••••••••••••••••••••••••••
Renegotiation Board •••••••••••••••••••••••••••••••••
Saint Lawrence Seaway Development Corporation ••••••••
Securities and Exchange Commission ••••••••••••••••••
Small Business Administration ••••••••••••••••••••••••
Smithsonian Institution •••••••••••••••• ~ ••••••••••••••
National Gallery of Art •••••••••••••••••••••••••••
Subversive Activities Control Board •••••••••••••••••••
U. s. Information Agency •••••••••••••••••••••••••••••
U. S. Soldiers Home • o • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Vete,rans Administration •••••••••••••••••••••••••••••
129
132
132
134
134
135
135
137
137
140
140
141
141
141
141
145
145
146
147
148
148
149
149
151
152
153
153
154
154
155
156
156
157
159
159
PART I
FINANCIAL MANAGEMENT DEVELOPMENTS
OF GOVERNMENTWIDE SIGNIFICANCE
DURING FISCAL YEAR 1959
- 1 -
FINANCIAL MANAGEMENT DEVELOPMENTS
OF GOVERNMENTWIDE SIGNIFICANCE
The development of adequate financial management practices in the
Federal Government involves improvements of broad scope affecting all
agencies,, and improvements of particular scope specifically affecting individual operating agencies. This part covers subjects or areas under the
Joint Program during fiscal year 1959 which were of broad applicability
throughout the Government. Part II of this report covers financial management improvement efforts of individual operating agencies during the yearo
The broad or Governmentwide aspects of the Joint Program are related to specific or general responsibilities and activities of the General
Accounting Office, the Bureau of the Budget, and the Treasury Department.
These three central agencies, together with the General Services Administration in connection with property matters, have developed close working
arrangements under the Joint Program in the coordination of their respective
responsibilities. The material in this part has been prepared by the central
agencies on this coordinated basis.
Modernization of A ency Financial Mana ement S stems. Under the
Joint Program, t e central agencies advise and assist individual operating
agencies in their development of adequate financial management practices,
coordinate and guide the progress being made by all agencies, and, in general, serve as a ~!earing house fof problems and stimulating action. These
responsibilities have been recognized in the working arrangements of the
Joint Program since it was started in 1948 and much has been accomplished.
Efforts were accelerated starting in 1956, after enactment of Public Law
84-863, by an organized, time-phased program aimed at comprehensive revision of agency financial management systems.
This accelerated Program has involved an evaluation by each agency
of its existing practices, and the conduct of agency improvement programs
aimed at the establishment of modernized financial management systems that
incorporate, among other things, accrual accounting and cost-based budgeting techniques. This work has been carried on in a framework of broad executive branch policies and instructions issued by the Bureau of the Budget,
the central accounting and reporting requirements of the Treasury Department, and the accounting principles and standards established by the General
Accounting Office.
Reports by the operating agencies, which are set forth in the tabulations included in Part II of this report, indicate that progress has been made
in bringing agency systems in line with current concepts and legislative requirements. It is also clear, however, that much still remains to be done.
This applies in many of the agencies and especially in the larger, more complex agencies, where size, world-wide decentralization, or other factors
cause difficult and complicated problems.
- 3 -
As one indicator of the progress being made under this Program, the
use of cost-based budget presentations in the Budget Document has grown
consfderably over the past few years. The number of appropriation requests
shown on this basis has increased from four in the 1957 Budget to 135 in the
1960 Budget. Consideration is being given to the development of about 200
more cost-based presentations for the 1961 Budget, which would bring this
total to more than half of all the accounts in the Budget Document. With
these conversions, cost-based budgets would be presented for programs that
annually result in budget expenditures of about $29 billion, as well as trust
fund expenditures of almost $12 billion.
In the final analysis, the modernized financial management systems
contemplated under the Joint Program are of value to the operating agencies
to the extent that the data developed by such systems are used for management purposes in the day-to-day operations of the agencies. Preliminary
reviews by the central agencies of some of the existing accrual accounting
systems and of the use of cost-based budgets internally by some of the operating agencies indicate that further work is needed toward attainment of
that objective. For effective operation, the total agency system should include a sound financial organization that appropriately c~ordinates budgeting
and accounting; consistent classifications and simplified financing structures
that recognize as signed responsibilities; operating budgets that provide adequately for control of both funds and costs; and financial reports and other
internal controls that will assist in management evaluation of performance
against established goals.
Cabinet Presentation. As part of the continuing effort toward modernization of agency financial'management systems, a series of charts concerning the Joint Program was developed for presentation to the President
and his Cabinet. The Director of the Bureau of the Budget presented these
charts to the Cabinet meeting held on July 31, 1959. The Secretary of the
Treasury joined in the presentation and subsequent discussion of the subject.
The charts used before the Cabinet explained the background and
nature of the Program, identified its goals, and outlined some of the benefits
gained as a result of this joint endeavor. The presentation also included a
general picture of the status of the executive agencies in carrying out the
Program. This discussion was later supplemented by letters from the
Budget Director to the heads of the agencies represented at the Cabinet
meeting. These letters discussed more specifically the significant elements
of the improvement program underway in each of the agencies.
Emphasis was placed on making effective management use of the improved financial data produced by the revised systems. The agency heads
were urged to continue the top-level support needed for effective improvement action, and to take steps that would insure full realization of the potential benefits.
Development, Review, and Approval of Agenc Accountin Systems.
Executive agencies, ot er than corporations and agencies su ject to the
Government Corporation Control Act, are required to submit formal requests
- 4 -
to the Comptroller General for approval of their accounting systems. During fiscal year 1959 the Comptroller General issued a letter to all agencies
with guidelines for the submission of such requests. The General Accounting Office also distributed an outline of the major accounting principles and
standards to be used as a guide in determining whether the systems are in
conformity with the prescribed principles and standards. The outline is
keyed to the General Accounting Office Policy and Procedures Manual for
Guidance of Federal Agencies. ·Additional procedures were developed for
coordination with the Bureau of the Budget and the Treasury Department to
ascertain whether the systems provide information needed by these central
agencies.
The instructions state that it is preferable to submit requests for approval of the entire accounting system of a department, agency, bureau,
service, or other major organizational entity, but that requests for approval
of segments of a system will be considered, such as property accounting,
payroll accounting, or accounting for operations financed primarily by revolving funds. Seventy-nine letters of approval or partial approval had been
issued to executive agencies by the Comptroller General up to June 30, 1958,
and eight additional approval letters were issued during fiscal year 1959.
Thirty-eight of these approvals covered the complete accounting systems of
major subdivisions of Cabinet departments (bureaus, offices, etc.} or of
certain independent agencies and other executive offices. The balance covered segments of systems used in the various organizations such as payroll
accounting, property accounting, etc., and qualified approvals of complete
accounting systems.
These 38 approvals were issued over the last 10 years. In some
cases, the systems approved were developed prior to the enactment of Public Law 84-863 and other recent budget and accounting legislation, or may
be otherwise outdated by progress in Government accounting concepts and
techniques, and should be reexamined. For these reasons, while 38 complete accounting systems of the executive agencies may be classified as
having been approved by the Comptroller General, such approvals are not
intended to signify that the systems should remain unchanged in all respects.
As explained in the Comptroller General 1 s letter to the executive agencies,
continuing efforts should be devoted by each agency to the development of
improvements and the institution of necessary changes to keep the system
adapted to current needs and conditions.
The particular bureaus, offices, etc. , of the Cabinet departments
and the independent agencies and other offices in the executive branch whose
complete accounting systems have 'been approved by the Comptroller General are shown in the tabulations included in Part II of this report.
In addition to review and approval of the accounting systems of executive agencies, the General Accounting Office, upon request, reviews the
accounting systems of organizations in the legislative and judicial branches
of the Government. Eleven letters of approval or partial approval were
issued by the Comptroller General during the last ten years, covering complete systems or segments of systems used by these organizations. Five
- 5 -
of the approvals covered complete accounting systems of organizational
entities and the balance covered parts of the systems or particular procedures of other organizational entities.
Accountin Principles, Standards, and Related Requirements. This
portion o the enera Accounting Office Policy and Procedures Manual for
Guidance of Federal Agencies was further developed during fiscal year 1959.
Principles and standards for accounting for real property acquired
under lease-purchase contracts were issued as Accounting Principles Memorandum No. 4 and were included in the Manual at 2 GAO 1284. They provide that acquisition of buildings under lease-purchase contracts are purchases on the installment plan and the total purchase price included in the
contract should be capitalized as a fixed asset upon acceptance of the building from the contractor, rather than periodically as payments are made or
when title vests in the Government. A lial:>ility should be recorded in the
amount of the purchase price at the time the building is accepted by the
agency. The portion of the liability payable each year is an obligation
against the appropriation in each year. Additional points covered include
accounting for (l} uncompleted buildings accepted by the agency, (2} costs
to be capitalized prior to and during construction, (3} interest payable during and after construction, and (4} prepayment premiums. Financial reporting and depreciation accounting applicable to lease-purchase transactions are also discu'ssed in this section.
A property accounting chapter (chapter 7000} was added during 1959
to the illustrative accounting procedures published in Part 2 of Title 2 of the
Manual. The accounting procedures for materials and supplies and for
fixed assets are discussed. Journal entries are illustrated for the physical
inventory and perpetual inventory methods and an example of a perpetual
inventory record is given. Factors and standards to be considered in establishing criteria for capitalization of fixed assets are included. Accounting
procedures are described for the acquisition of person!ll and real fixed assets through purchases, transfers between agencies with and without reimbursement, and other means. Depreciation accounting and methods of computation are briefly. explained.
Ten chapters of illustrative accounting procedures have been issued
to June 30, 1959, and five additional chapters were in process at the end of
the fiscal year. One, covering adjusting and closing entries, was issued to
the agencies in July 1959. The other four chapters cover classification of
funds, financial reports, integrated accounting for an agency financed by
general fund appropriations, and accounting for the agency financed by a revel ving fund.
Revisions were made in Title 7 of the GAO Manual during the year
covering improved methods and techniques in documenting and processing
fiscal transactions having Governmentwide application. Changes approved
subsequent to the initial release of Title 7 were added and other material
in the several chapters of Title 7 was clarified and simplified.
Many questions as to the proper application of accounting principles
and standards in particular circumstances were considered in this fiscal
- 6 -
year. Some of the subjects were the use of revolving funds to finance agency
operations, accounting for uncollectible accounts receivables, property accounting, annual leave liability, actuarial costs and liabilities, the use of
depreciation recoveries for financing equipment replacements, and reporting depreciation in water resources projects.
The Comptroller General decision (B-136318) on the question of financing equipment replacements with :r.ecoveries for depreciation charges
has widespread application since many agencies perform work for other
agencies on a reimbursable basis under the authority contained in section 601
of the Economy Act. In reply to an inquiry from the Secretary of Commerce,
the Comptroller General advised that the financing of replacements should
not be geared to depreciation accounting or to the amount of depreciation
charges included in billings to other agencies. The replacement of equipment, the depreciation expense to be recorded each year, and the amount to
be billed for depreciation are not all based on the same factors.'
The decision pointed out that the primary purpose of depreciation accounting is to distribute costs of fixed as sets to the periods and activities
benefiting from their use. In this connection, it emphasized that all significant costs, including depreciation, even though not financed from current
appropriations, should be recognized in an agency's accounts. However,
where reimbursable work is performed by one agency for another agency,
the buying and selling agencies are to agree to prices to be billed within a
maximum of all costs and a minimum of "out-of-pocket" costs. Charges for
work performed for private industry or the public should include all costs,
including depreciation.
Central Accounting and Related Procedures. Joint study by the Treasury Department, Bureau of the Budget, and General Accounting Office, in
consultation with the departmento and agencies, culminated in the establishment of a revised classification of general fund rec~ipt accounts presc:.:ibed
by the Treasury for Governmentwide use. The new chart of receipt accounts,
which was effective July 1, 1959, established a number of changes in the respective classifications of receipts and reduced the number of prescribed
accounts from 346 to 175, or about 50 percent.
Further refinements were adopted in the system of central accounting
for cash operations, including simplification of accounting for small differences disclosed in the reconciliation of deposits reported by accountable officers and the accounts of the Treasurer of the United States, and simplification in the preparation and handling of certificates of deposit for customs
receipts.
Central Reporting. Section 21 O(a) of the General Government Mat-·
ters Appropriation Act, 1960 (Public Law 86-79, approved July 8, 195 9),
removed the requirement for agencies to submit certified annual reports to
the Congress covering appropriation and fund balances (section 1311 reports). A new form of annual report was developed by the Treasury Department to obtain data formerly available from the section 1311 report and to
serve other needs that had been supplied by other reports and procedures.
- 7 -
The new report will serve (1) as the Treasury's trial balance of the central
appropriation and fund accounts, (2) as the agencies' requests for transfers
and withdrawals under the act of July 25, 1956, and (3) as the agencies'
analyses of appropriation and fund balances in terms of availability, for use
in publishing the annual Combined Statement of Receipts, Expenditures and
Balances of the United States Government.
The Combined Statement for fiscal year 1958 included, for the first
time, a section devoted to foreign currency accounts and transactions providing information similar to that furnished for dollar appropriation accounts. A uniform system of exchange rates for the conversion of foreign
currency transactions and balances to U.S. dollar equivalents has been accomplished in Treasury reports.
A cohesive presentation of trust fund balances was made in the 1958
Combined Statement by revising the tables to include, for each 1;rust fund
account, the related balances of unappropriated receipts and the investments.
There was also included a comprehensive statement on congressional authorizations to expend from public debt receipts from 1932 through 1958.
Continued progress is being made in the development of comprehensive statements of assets and liabilities. A total of 115 agency organizational units furnished complete balance sheets, as of June 30, 1958, which
is 29 more than the previous year. Increased coverage is expected with respect to reports as of June 30, 1959.
Agent-cashier and Imprest-fund Procedures. The Treasury Department, General Services Achninisfrat:i.on, General Accounting Office, and
Bureau of the Budget concluded a joint study concerning agent-cashier and
imprest-fund cashier procedures, as a result of which a unified cashier
procedure is being established. New regulations were issued early in fiscal
year 1960.
Automatic Data Processing in Government Business and Management
Control Systems. During the past year there has been a continuation of the
trend toward development of automatic data processing systems in Government operations. Almost every major activity of the Government which has
large volumes of data to process, or large-scale paperwork recorc:llceeping
operations, has been affected in some degree by the introduction of electronic systems. A total of approximately 2 00 electronic data processing
machines are in use in the business and management control systems of the
agencies, of which about 70 percen.t are in Department of Defense installations.
Indicative of the growth in the development of these systems is the
experience of the Treasury Department in this ·area during the last year.
Fiscal year 1959 was the first year in which the new electronic payment and
reconciliation system was used for all checks in the Office of the Treasurer.
Based on a comparison with fiscal year 1956 costs (the last year completely
on the old system) 3 a final estimate has been developed indicating annual recurring savings of over $Z. 9 million 3 compared with the previous estimate
- 8 -
of $2. 2 million. The productive capacity of the system has been increased
substantially, reaching a volume of over 41 million checks in some months,
compared with the original estimate of 30 million monthly. Further improvements are expected when the present equipment is replaced by later
models early in fiscal year 1961. In October 1958 the Bureau of the Public
Debt began a full-scale automatic data processing system for its accounting
and auditing of Series E savings bonds issued in punched card form, including magnetic tape file maintenance of detailed alphabetic registration records and numeric issue and retirement records. The Office of the Comptroller of the Currency has converted from manual methods to the use of a
computer in developing statistical data from reports of condition and earnings and expenses of national banks. The Federal Reserve Board is providing its facilities for this purpose. Substantial reductions in time lag of reporting are expected, along with ultimate economies. The Internal Revenue
Service has begun studies of automatic data processing potentials with respect to tax return processing.
Another example, which involves interagency coordination, is the
planning between the Veterans Administration, the Treasury Department,
and the Post Office Department with respect to veterans benefit payments.
This stems from plans of the Veterans Administration to adopt an automatic
data processing system, centralizing its benefit payment accounting and
statistical functions. in the Chicago, Illinois, area during 1960. Payment
data produced in the VA system will provide data in machine processable
form to the Treasury Department's regional disbursing office in Chicago
which will operate with compatible electronic equipment for all periodic
payments handled in that office (e.g., social security benefits and public
debt interest as well as veterans benefits). The Treasury system will produce VA benefit checks from updated magnetic tape files. Also, the checks
will be sorted mechanically according to basic geographical codes carried
in the tap records, thereby eliminating .much manual sorting in the Post Office Department. As part of this integrated systems development, it is
planned to use the magnetic tapes produced in the checkwriting process to
automatically record individual check-disbursement data in the Treasury
electronic banking system in Washington, D. C., which controls the payment
and reconciliation operations for all U.S. Treasury checks. These developments are reported more extensively by the Veterans Administration and
the Treasury's Division of Disb"t+rsement in Part II.
An important development receiving increasing attention is the auto matic interchange of records between industry and Government. Millions
of transactions flow between indust.ry and the Federal Government each
year. More and more of these transactions are being recorded on magnetic
tapes by industry for its own use, and automatic transcription and subsequent automatic processing of these transactions for Government purposes
are possible through the use of these tapes. Only limited interchange of
data in this manner has taken place to date. For example, wage records
are reported on tapes to the Social Security Administration by a small number of companies and arrangements have been made for exchange of data on
magnetic tapes between the Department of Defense and some private firms.
The potential savings in this area are large, through elimination of
the need for manual transcriptions of detailed records with correspondingly
- 9 -
fewer errors and lower transcription costs. A joint and coordinated effort
in this area will be needed in developing workable programs with industry
and the individual agencies to accomplish this objective.
Coincident with these developments, a manpower survey in the automatic data processing field in the Federal Government was.undertaken upon
recommendation of the Interagency Committee on Automatic Data Processing.
This study was made by a private consulting firm, which submitted a final
report to the Bureau of the Budget in May 1959. Copies of this report were
furnished the departments and agencies with a request for their views prior
to establishing an official position on the report.
A project was undertaken by the Bureau of the Budget to identify the
Governmentwide functions to be performed in this field, and to propose assignments of these functions to specific agencies. At the conclusion of this
study, comments were obtained from the departments and agencies, and a
final draft of a report was being prepared at the end of the fiscal year.
Property Accounting, The transfer of accounting and accountability
for furniture and fixtures from the General Services Administration and the
Post Office Department to their tenant agencies was accomplished during
the year. Beginning with fiscal year 1960 each agency will also budget for
all of its furniture requirements.
The annual inventory report of federally owned real property as of
June 30, 1958, and its companion report of real property leased to the United
States as of June 30, 1958, were published by the General Services Administration. These reports furnish a comprehensive presentation of all real
property holdings of the United States. The report on real property owned
covers approximately 14, 000 installations costing approximately $45. 6 billion, with a total acreage of 770 million acres. This cost figure does not
include valuation for 719 million acres of public domain land included in the
total acreage. The report on real property leased covers approximately
48, 000 leases with an annual rental of $150. 2 million. In combination with
other available data, these inventories are being used throughout the Government in planning space needs, in promoting fuller utilization of available
properties, in conducting property management and property accounting
surveys, and in the evaluation of budgetary requests for acquisition of real
property.
·
The House Committee on Government Operations released, in December 1958, its fourth inventory report of real and personal property as a Com:mittee Print. The report covers the property of the Government in the continental United States, in the territories, and overseas, as of June 30, 1958.
In compiling this report, the Committee again utilized the real property in.ventory data developed by General Services Administration and personal
and real property data obtained from civilian agencies and the Department
of Defense with the assistance of the Treasury Department. This report
lists personal property of $195. 3 billion and real property of $66. 7 billion,
which includes $14. 4 billion for public domain acreage (including mineral
resources) and $6. 7 billion for construction in process and other items.
- 10 -
The report also contains supporting schedules which show classifications of
the property holdings and gives considerable information by agency and location~
·
An inventory on the jurisdictional status of Federal properties, as of
June 30, 1957, is being prepared by the General Services Administration.
This is the first comprehensive inventory of this nature ever undertaken. It
is one phase of the program recommended by the Interdepartmental Committee for the Study of Jurisdiction Over Federal Areas Within the States, and
concurred in by the President, which is aimed at restoring to the States, insofar as practicable, such jurisdictional authority now vested in the United
States.
Continued progress was made during the year in the establishment of
adequate property accounting systems throughout the Government. Developments in individual agencies are covered in Part II of this report.•
Position Classification and Qualification Standards for Accountants.
A committee composed of representatives of the central agencies and of
several key operating agencies continued discussions.with the Civil Service
Commission during the year on the development of position classification and
qualification standards for professional accountants in the Government. Interest in this subject is based upon recognition of the fact that it is essential
to have qualified accounting personnel in the operating agencies in order to
achieve improved financial management in the Government.
On February 18, 1959, the Civil Service Commission approved qualification standards for professional accounting positions at the GS-5 and GS-7
levels in the college recruitment program.
Representatives of the joint committee advised with the Commission
during the year on distinctions between professional and nonprofessional accounting positions, and in June 1959, the Commission issued criteria in the
GS-500 Accounting and Budget Group Series to describe the distinguishing
characteristics. The introduction to the criteria emphasizes the chief characteristics of modern accounting sponsored by the Joint Accounting Improvement Program.
The Commission is in the process of completing a revised draft of
the GS-510 professional accounting position classification standards. The
revised draft will be reviewed by the joint committee, after which it will be
circulated to all agencies. Among .the most significant aspects to be considered are the extent to which recognition should be given in the standards
to present and projected financial management developments and the establisl,u:nent of an appropriate grade structure.
Cost Principles for Research Projects. Bureau of the Budget Circular No. A-21 on "Principles for costing research and development under
grants and contracts with educational institutions'' is now being applied by
the agencies to new agreements and, in some cases, to existing agreements.
Suggestions for amendment were invited by the Bureau, to be submitted
after the colleges and universities, and the agencies, have had a sig:nificant
- 11 -
amount of experience with the provisions of this Budget Circular.
gestions are to be submitted by June 30, 1960.
Such sug-
Committee on Federal Bud eting and Accountin • Indicatrve of the
strong continuing pu ic interest in the deve opment and application of improved financial management practices throughout the Government is the establishment, in November of 1958, of the American Institute of Certified
Public Accountants' Committee on Federal Budgeting and Accounting. This
Committee is composed of Mr. Percy Rappaport, former Assistant Director.
of the Bureau of the Budget (Chairman), and Messrs. Karney Brasfield of
Touche, Niven, Bailey & Smart, Walter Frese of Harvard University,
J. Harold Stewart of Arthur Young & Company, and Kenneth Tiffany of the
Burroughs Adding Machine Company. All of the members of the Committee
have had extensive experience in the Federal service.
This Committee was set up by the American Institute to serve in an
advisory capacity to the Federal Government on the development of Federal
financial management practices. Its basic purpose is to provide counsel and
advice on broad problem areas as they are encountered, and thus make more
effective the cooperative efforts of the Joint Program. Representatives of
the Bureau of the Budget, the General Accounting Office, and the Treasury
Department attended meetings of the Committee during the year for discussion of subjects of current interest. ·
During the year the Committee undertook various studies and held a
number of meetings with members of Congress to review and discuss ·the
advantages of cost-based budgeting.
Annual Accrued Expenditure Limitations. On August 25, 1958, Congress enacted Public Law 85'-759 which provides that, whenever the President determines an agency has established a· satisfactory system of accrual
accounting, requests for subsequent appropriations shall be accompanied by
a proposed limitation on annual accrued expenditures. Appropriation requests of four agencies containing six such proposed limitations were submitted to Congress in the 1960 budget. None of the proposed limitations was
adopted by the Congress.
Financial Management Institute. In April 1959 the Civil Service Commission published a digest of the proceedings of the Financial .Management
Institute held in the fall of 1958. Plans for conducting another Financial
Management Institute in fiscal year 1960 were initiated in June 1959.
- 12 -
PART II
AGENCY FINANCIAL MANAGEMENT
IMPROVEMENT PROGRAMS
AGENCY REPORTS OF -- Status as of June 30, 1959
-- Accomplishments in Fiscal Year 1959
- - Future Improvement Plans
- 13 -
FOREWORD
During fiscal year 1959, the operating agencies continued work toward
modernization of their financial management systems as part of an organized
Government-wide effort under the Joint Accounting Improvement Program.
This Program--to be known henceforth as the Joint Financial Management
Improvement Program--is aimed at the basic objective of improving the systems
in a manner that will satisfy the management needs of the executive and legislative branches and existing legal requirements. As such, it is broad in scope,
encompassing all elements of financial management.
Progress under the Joint Program has varied among the operating organizations involved, due in part to the complexity of the operations and the financial
management problems of individual agencies. To measure this progress on a
Government-wide basis, the Bureau of the Budget issued Bulletin No. 59~9 in
June 1959, asking each agency to submit information concerning current
improvement efforts.
This Bulletin, developed with the assistance of the General Accounting
Office and the Treasury Department, requested data on the status of the major
goals of the agency improvement plans as of June 30, 1959; the significant
accomplishments during fiscal year 1959; and the agency plans for further improvements. The responses to the Bulletin are summarized in this part of the
annual report. They are set forth in the form of a tabulation that reflects status
in terms of the installation of accrual accounting and cost-based budgeting
practices--techniques which are essential to the ultimate objectives of this
Program; and in the form of narrative statements on accomplishments and
future plans--to the extent that such information has been submitted by the
individual agencies.
In the tabular material shown on the following pages, the agencies generally furnish target dates for work still to be done. Dates are also provided with
respect to Comptroller General approval of the accounting system, showing
either the date of approval or the date of submission for approval. In this connection, the word "Partial" is used in some cases where the accounting system
has been approved either in part or ...yith qualification.
In the other columns,
wherever work on the identified improvement is considered by the agency to have
been completed, the word 11 Complete 11 is used to indicate respectively that accrual
accounting and internal cost-based budgeting procedures have been i:q.stalled to
the extent considered necessary by the agency; and that the agency budget has
been presented on a cost basis in the Budget Document beginning at least for
fiscal year 1960. Preliminary review by the central agencies of some of the
accrual accounting and cost-based budgeting systems reported as "Complete, 11
however, indicates that further work is necessary before these improvements
can be considered to be adequate.
- 15 -
With respect to the accomplishments ·reflected in Part II, it should be recognized that these do not necessarily include all the financial management improvements installed by the agencies during the past fiscal year. They are illustrative
only and were selected on the basis of significance or interest to other agencies.
In line with the individual agency's responsibility for development of their own
financial management systems and procedures, these accomplishments basically
are attributable to the efforts of agency staff. In some instances, staff of the
central agencies have participated in the agency improvement efforts, but gen•
erally such assistance has been limited to providing guidance.
The summarized data in this part of t,he report are shown essentially
as submitted by the operating agencies. The reported information has not been
independently verified or comprehensively evaluated by the three central agencies except that where an agency reports that its accounting system has been
approved, this statement has been verified by the General Accounting Office;
and where budget presentations are reported to be on a cost basis, this statement has been verified by the Bureau of the Budget. The adequacy of the
reported improvements in all agencies will be reviewed by the central agencies
in due course in the regular exercise of their respective responsibilities, coordinated through the workin~ arrangements of the Joint Program.
- 16 -
DEPARTMENT OF AGRICULTURE
Financial Management Improvement Program
Agency Report>!< of Status as of June 30, 19 59
Accounting System
Cost-Based Budgeting
Organization
Accrual . 'Approved byl Submission
Used
'Budget Pre_ _ _ _ _ _ _ _ _ _ _......___B_as_i_s_.......,_ Comp.Gen. !for Approval Internally sentation
Agri. Marketing Service
Complete
12/59
Complete
1961
Agri. Research Service:
Working Capital Fund
Complete
3/59
Complete
Complete
Complete
12/59
Complete
1961
Complete
Complete
Complete
1961
Complete
Complete
Other Funds
2/58
Commodity Exchange Auth.
Complete
Commodity Stabilization
Service (incl. Agri.
Conservation Program)
Complete
Farmer Coop. Service
Complete
Farmers Home Ad.min.
Complete
12/59
Complete
1961
Fed. Crop Ins. Corp.
Complete
12/59
Complete
Complete
Fed. Extension Service
Complete
10/54
Complete
1961
Foreign Agri. Service
Complete
9/56
Complete
1961
Forest Service
Complete
6/60
Complete
1961
Library
Complete
12/58
Complete
Complete
Office of Gen. Counsel
Complete
8/54
Complete
Complete
Office of Information
Complete
9/56
Complete
Complete
Office of the Secretary
Complete
Complete
Complete
Rural Electrification
Administration
Complete
Complete
1961
Soil Conservation Service
Complete
Complete
1961
*
1/58
6/55
6/60
8/51
6/60
This tabulatiqn reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does not
necessarily signify that the General Accounting Office, the Bureau of the Budget,
and the Treasury Department agree with those representations·. The dates represent
either an agency target for attainment of an objective, or the date on which the
indicated action was taken.
- 17 -
Conduct of improvement program. A review of each agency•s program
for improvement in financial management was completed during the year.
This review was prompted by specific agency problems and the apparent need
for refinements and clarification of concepts and terminology revealed through
the review of the agencies' financial statements and reports for the previous
year. As a result of these discussions with agency budget and accounting
representatives, all Department agencies are in a position to convert their
general accounts for appropriations to an accrual basis as of the end of each
fiscal year, and to prepare financial and budgetary reports from such accounts.
Accounting systems. The accounting systems of all agencies of the
Department provide for the development of information on the cost of
resources sonsumed, revenues earned, and the amount of resources available, as well as full disclosure of all assets and liabilities. Provision has
also been made for development of accruals for costs under foreign currency
operations of the Foreign Agricultural Service.
The systems for several of the agencies in the Department are undergoing final review in preparation for submission to the Comptroller General.
By the end of fiscal year 1960 it is planned to have all agency accounting systems approved or before the Comptroller General for his consideration.
Cost-based budgeting. Budget schedules for all agencies of the Department are being prepared for inclusion in the 1961 Budget on a cost basis. For
corporate and revolving funds the accounts are being maintained currently on.
a cost basis. For appropriations, the constituents have developed their procedures to provide cost data in the accounts as of the end of each fiscal year,
and at such other intervals as required by the individual agencies. Primarily
because of the requirements of the Anti-deficiency Act, allotments of appropriations, per~· as well as operating plans, are being made in terms of
obligations. Cost information is being used, however, to the extent practicable as a management tool in determining the level of allotments and other subdivisions of funds. In most appropriation accounts of the Department, the
differences between obligations and costs are negligible. For those accounts
involving loan and construction activities, where such differences can be
material, periodic reports on costs are being obtained for use in managing
the programs.
·
Internal auditing. Emphasis is being placed on increasing the usefulness and effectiveness of internal audit activities in the Department. Attention is being given to such items as determining potential audit areas, revising
audit programs, expanding the scope of review, and improving audit techniques and report preparation. Because of a simplified audit procedure and
increased auditor familiarity with program operations, the agency audit
staffs released more reports in fiscal year 1959 than in any other year.
- 18 -
Certain of these agency staffs are undertaking broad program studies in
order to provide management with information and recommendations leading
to more efficient operations. In several agencies, the auditors have expanded
their examinations to include areas not previously subject to audit. Revisions
in audit programs are being made in order to further enhance internal audit
effectiveness by placing emphasis in areas which will provide greater assistance and value to management officials.
Financial reporting. The Department conducts a continuing review of
financial reporting, including both internal and external reports. Following
a survey of such reports, particularly those for external use, discussions
are under way with the central agencies of the Government in an effort toward
elimination of certain reports and improvements in others. The principal
success in this area has been less frequent submission of the standard reports
on budget status.
AGRICULTURAL MARKETING SERVICE
1959 Accomplishments
Accounting system. Major developments in the accounting system
included (a) formulation, for installation in July 1959, of revised general
ledger accounts featuring a new numbering system and accounts required for
accrual accounting purposes; (b) decentralization of general ledger cash control to the three Area Administrative Divisions; and (c} preparation of a manual
documenting the accounting system in preparation for submission to the Comptroller General for approval.
The use of a procedural type of authorization for travel and other expenses
has been placed in effect in the Service on a limited basis. When this new concept of authorizing travel is installed Service-wide, the need for hundreds of
individual letters of authorization will be eliminated.
Internal audit. The Internal Audit Division has initiated a complete review
of all the agency's programs in order. to develop a schedule of potential audit
work. The results will assist in determining the desired frequency of audits
and direction of audit plans~ and in establishing an organizational and staffing
pattern more consistent with immediate and long-range audit programs.
Employee training. In furthering the education and training of its employees, the Service conducted a top-level Management Workshop for approximately
35 employees, primarily to identify and evaluate management problems and
enlighten the employees on improved management techniques; instituted a series
- 19 -
of nation-wide workshops among first level supervisors of specific operations;
and conducted a series of six administrative-clerical workshops, each of
three quarters of a day's duration, which were attended by approximately 200
field clerks.
School lunch and m~lk fund procedures. Procedures developed for use by
the States in furnishing an annual report of school lunch and special milk funds
result in more accurate year-end estimates, reduction in the amount of excess
funds remaining in the States, and more expeditious return of unused balances
by the States. Cash advances to the States were changed from a quarterly to a
monthly basis, resulting in substantial savings of interest to the Federal Government by reducing the amount of outstanding cash.
Leave reporting. A revised time and attendance report was developed and
approval for its use obtained from the General Accounting Office. This eliminates the use of six other forms, reduces the work of operating divisions, and
simplifies the audit of time and attendance records.
Future Plans
Future plans for improvement of accounting operations include mechanization of the payrolling process, development of a simplified system for the
distribution of charges to funds in certain program divisions, and development
of an improved system of cost analysis for use in establishing adequacy of fees
or charges.
AGRICULTURAL RESEARCH SERVICE
1959 Accomplishments
Accounting system. Procedures were developed to provide improved
and simplified property accounting at the Agricultural Resef;trch Center.
Through improved inventory control methods, the maintenance of over 5, 000
warehouse stores bin record cards and over 900 nonexpendable property
record and depreciation cards was discont.inued. The new systems will provide more efficient stores operation and property control, better utilization
of manpower, and will result in reduced cost to the activities served through
the Center's Working Capital Fund. Other improvements include the establishment of composite depreciation rates for capitalized personal property,
utilization of punch cards in the preparation of billings and job cost sheets, and
a reduction of cost centers from 37 to 19.
- 20 -
The appropriation accounting system of the Service is undergoing final
review prior to submission for approval. Instructions were issued to provide
for recording the value of all real property holdings in the general ledger as
of the end of June 1959, based on physical inventories. Subsidiary real property
records, controlled by the general ledger, will be established to assure proper
financial control and accountability of all real property.
COMMODITY STABILIZATION SERVICE
1959 Accomplishments
A revised cost accounting system . (primarily a cost finding system) was
installed in the aerial photography laboratories for use in determining prices
to be charged for photographs sold to Government agencies and the public.
FARMERS HOME ADMINISTRATION
1959 Accomplishments
Internal audit activities were strengthened by improvements in the development of field annual audit plans, revision of audit programs, training of auditors, and development· of procedures for guidance of field audit offices. These
improvements contributed to a large extent in enabling the Internal Audit Division, for the first time, to complete its annual quota of State and county audits.
Increased attention will be given to reviewing operations to determine whether
they are carried out efficiently and economically. Where necessary, audit
programs will be revised to accomplish this purpose.
FEDERAL CROP INSURANCE CORPORATION
1959 Accomplishments
The accounting system was revised during the year to provide accounts
and fund control procedures for an integrated budget and accounting system
for appropriated funds. It is now undergoing final review prior to submission
to the Comptroller General for approval.
- 21 -
FOREST SERVICE
1959 Accomplishments
Accounting system. Handbooks have been developed and issued covering
specialized areas of fiscal and accounting operations, such as accounting
reports, verification of timber operation costs, assistant disbursing offi ...
cer functions, and examination of concessionaire accounts.
During the year fire cache tool inventories were recorded in general
ledger accounts. This completes the recording, in such accounts, of all
inventories of the Service subject to capitalization.
Conversion of major segments of fiscal and accounting operations to
punched card processes was completed. New applications are being developed
encompassing both financial and program operating activities. Specialized
accounting services, such as the review of timber operators' and concessionaire~• accounting systems, were furnished to the program divisions. In
addition, a continuing review is being made of management's need for additional financial data.
The Working Capital Fund of the Service was expanded to include the
aircraft fleet activities.
Budget planning. A complete revision of the planning phase of budget
execution was prepared for use by regional offices, national forests, and
ranger districts. This was issued for use in budget development for fiscal
year 1960.
Internal audit. The internal audit staff completed its first year of operations as an independent unit. It is anticipated that by the end of this calendar
year, the staff will have completed its first audit cyCle of all major field offices.
As a result of the experience gained, an internal audit manual was prepared.
Plans are being developed to extend the audit program to include a review of
Washington operations.
Future Plans
It is planned to include nursery and camp subsistence operations under
the Service 1 s Working Capital Fund. Also, it is planned to review the functional
classification system to effect simplification, efficiency, and economy in accounting operations. The fiscal and accounting operations at field installations will
be reviewed for the purpose of arranging work assignments, and developing
training procedures and supervisory methods that will facilitate more economical performance.
- 22 -
OFFICE OF THE SECRETARY
1959 Accomplishments
The manual for the accounting system, exclusive of the Working Capital
Fund, is undergoing final review prior to submission to the Comptroller General
for approval. The accounting system for the Working Capital Fund was revised
and is being tested prior to submission to the Comptroller General for approval.
RURAL ELECTRIFICATION ADMINISTRATION
1959 Accomplishments
Accounting system. On the basis of a comprehensive study of the payrolling operations, the following improvements were adopt~d: (a) the number of
controls was reduced from three to one; (b) this control is supported by detailed
punched card listings which eliminates hand processes; (c) the Disbursing Offfoe
uses the punched cards prepared by the Administration to prepare the salary
checks; and (d) the lists of savings bonds to be purchased, including codes for
mailing and delivery, are prepared from punched cards.
:Hand posted records of loans by States were replaced by a machine process
utilizing punched cards. This produced man-hour savings in elimination of the
hand posting process, and facilitates the preparation of reports.
The method of authorizing field employees to travel was revised to provide
one blanket authorization at the beginning of each fiscal year to cover the travel
of all field employees. The authorization provides for travel within broad limitations as directed by immediate supervisors. This change eliminates issuing over
250 travel authorizations and amendments each year.
Borrower audits. Meetings were held with certified public accountants who
audit or are interested in auditing telephone borrowers (private telephone companies and cooperatives serving rural areas). These meetings were planned to promote better understanding of the minimum standards established by the Administration for the audit of such borrowers; to outline the accounting requirements
for telephone utilities; and to provide the certified public accountants with an
understanding of the relationship between the Administration and the borrower.
Borrower reports. An annual statistical report being developed for telephone companies and cooperatives will contain information in summary form
both by State and national totals on the operating progress and financial status
- 23 -
of these borrowers. This report will eliminate the need for numerous special
reports presently used in managing the program and in filling in special
requests for information.
Future Plans
The Administration has approximately 1, 580 active electric and telephone
borrowers. A separate account is established for each note executed by a borrower, which results in about 15, 000 accounts. A committee has been established to consider the possibility of having only one account for all the notes of
each borrower.
SOIL CONSERVATION SERVICE
Future Plans
Review of the accounting system will be undertaken in preparation for submission for approval by the Comptroller General. Procedures for analysis of
time reports in terms of t;he work activity and budget activity breakdown are
being developed. These procedures, which utilize centralized machine processes,
should be in operation beginning with fiscal year 1961.
- 24 -
DEPARTMENT OF COMMERCE
Financial Management Improvement Program
Agency Report>:• of Status as of June 30, 19 59
Organization
Cost-Based Budgeting
Accounting System
Approved
by
Used
dget PreSubmission
Accrual
Internall
sen
ta ti on
Com
.Gen.
for
A
roval
Basis
Bureau of the Census
Complete
12/59
Complete
1961
bureau of Public Roads:
Administrative and
Depot Operations
Federal Aid and
Other Programs
Complete
12/60
12/60
1963
7/60
12/60
12/60
1963
Coast & Geodetic Survey
Complete
5/58
Complete
Complete
Maritime Administration:
Federal Maritime Board
and Administration
Complete
Partial
6/60
7/60
1962
Insurance Funds
Complete
3/55
Complete
Complete
Vessel Operations Fund
Complete
Partial
Complete
Complete
National Bureau of
Standards
Complete
2/53
Complete
1961
Off ice of the Secretary
Complete
3/51
7/60
1961
Patent Office
Complete
6/58
Complete
1961
Weather Bureau
7/60
7/60
1962
*
6/60
5/60
This tabulation reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does
not necessarily signify that the General Accounting Office, the Bureau of the
Budget, and the Treasury Department· agree with those representat,ions. The
dates represent either an agency target for attainment of an objective, or the
date on which the indicated action was taken.
- 25 -
Conduct of improvement program. The financial management improvement
program in. the Department of Commerce is being directed by the Office of the
Secretary through a systems accountant assigned to the Office of Budget and
Management. Staff assistance in such areas as cost-based budgeting and staffing
of budget and accounting positions is provided by the budget and management
divisions. A staff of one or :more persons is responsible for the program in
each bureau. The efforts of such staff in the bureaus and in the Office of the
Sec.retary are being coordinated toward attainment of the objectives of the Joint
P rogra:rn.
\
The results of these improvement efforts in the Department of Commerce
are set forth below in the developments reported for each of the constituent
bureaus.
BUREAU OF THE CENSUS
1959 Accomplishments
The finance organization was merged with the Budget and Management Division as of October 1958, with the aim of obtaining better coordination of financial
management activities. Intensive management studies were initiated to review,
improve, and document internal procedures.
Future Plans
Plans for further improvement include completing documentation of the accounting system and obtaining the approval of the Comptroller General, extending
mechanized accounting procedures so as to reduce operating costs, improving
methods and the basis for allocating indirect and joint service costs, and im ...
proving accounting reports to management in order to achieve greater utilization
of accounting data by management.
BUREAU OF PUBLIC ROADS
Status
It is planned to submit the payroll accounting system for approval by the
Comptroller Gt(neral in December 1959 as a separate part of the total system.
Submission of the balance of the accounting system is planned for December 1960.
- 26 -
1959 Accomplishments
Organization and staffing. The Finance Division was reorganized during
fiscal year 1959, ·in order to more effectively carry out its primary responsibilities under the accelerated highway construction program, and to give appropriate recognition to accounting and auditing requirements as established by
law. The new organizational structure is designed to permit staffing of key
positions with personnel capable of directing and exercising technical jurisdiction over all accounting and auditing programs of Public Roads. Staffing of key
positions was completed during fiscal year 1959 and considerable progress was
made in the establishment of positions below these levels.
Just prior to the end of the fiscal year the organization of the Office of the
Assistant Commissioner for Administration was expanded to include provision
for a sma.11 but highly qualified staff to provide for direction of the financial
management activity. Three top level accountants were recruited for this staff.
Accounting systems manual. A formal single package accounting manual
was issued during the year to all regional, divisional, and other comparable
components of Public Roads. The manual was prescribed for implementation
in July 1959, and plans are underway for further expansion. This is a major
step in the Public Roads financial improvement program, and the manual is
proving to be valuable for effective financial administration. One of the major
beneficial effects will be the lessening of detailed accounting problems referred
to key administrative personnel.
State highway accounting systems. The American Association of State
Highway Officials issued a uniform manual of accounting during the year for the
guidance of all State highway departments. This manual contains a basic chart
of accounts and appropriate descriptions--along with collateral procedural instructions. When implemented, it should materially assist the Bureau in obtaining uniform accounting information from the States, and thereby contribute to
more effective financial administration of the Bureau's programs. The Bureau
cooperated in this project, contributing funds and other .resources.
External auditing. Decentralization of final fiscal review of State voucher
claims for reimburseme.nt covering Federal participation pursuant to the FederalAid Highway Act was completed in fiscal year 1959. This action, begun in fiscal
year 1957, completes the program of decentralizing accounting and auditing functions to the level commensurate with delegations of management responsibilities.
Automatic data processing. Electronic equipment was applied to the payroll
operations conducted by the Washington office. This involves machine computation of wages, production of punched cards for use by Treasury in the issuance of
payroll checks, maintenance of payroll records, and preparation of payroll reports.
- 27 -
Future Plans
Organized improvement program. The financial management improvement
program in the Bureau of Public Roads is receiving new emphasis under the
direction of recently engaged staff in the Office of the Assistant Commissioner
for Administration. This staff is reviewing what has already been done, what
has to be accomplished, and how to effect its timely completion. Goals established
include substantial completion of the program by July 1961, with many actions to
be placed in effect by July 1960.
Organization and sta'ffing. Plans include the strengthening of field accounting
personnel by raising the requirements of the regional accountant positions, and
staffing those ·positions with persons qualified in the professional accounting field.
In the central office the plan is to strengthen the systems staff in the Finance
Division by the addition of several accountants in the professional series, with
diversified skills and experience. This staff will develop more comprehensive
descriptions of the basic accounting processes for inclusion. in the accounting
manual, and will begin a program of periodic visits to field offices to provide assistance at the site, including continuous orientation of field accounting personnel.
Accounting Systems manual. Expansion of certain areas of the accounting
manual, namely the principles and standards and the basic accounting procedures
relating to administrative expenses and equipment depot operations, is planned
in the near future. At the same time, provision will be made for accrual accounting in the various road construction programs in two general categories: the
Federal-aid program--primary, secondary, urban, and interstate highways; and
the direct construction programs--fores t highways, public lands highways, parkways, and other miscellaneous road work financed by direct. appropriations and
appropriation transfers.
In the Federal-aid area, the plan is to promptly revise and expand the m·anual
for audit of reimbursements to the States. The manual will set forth the audit
criteria and uniform procedures to be observed in the various areas of audit inquiry, such as right~of-way acquisition, construction, and utility relocations.
Each revised section of the manual will be issued to field personnel as it is
completed.
Cost-based budgeting. Plans include the development of a cost accounting
system integrated with general ledger accounts, in which the accrued costs of
construction and administration will be obtained by function and organizational
unit. Such a system is expected to be in operation at the beginning of fiscal year
1961. Ori the basis of this experience, costs will be available for use as the
basis for internal budgetary control about the middle df that fiscal year. Upon
the successful completion of these plans, the Bureau will be in position to submit cost-based budgets for fiscal year 1963.
- 28 -
Financial reporting. Beginning in the second quarter of fiscal year 1960, it
is planned to make an extensive analysis of the Bureau's reporting requirements
in terms of the uses to be made of various reports and the types of information
required by the users of the reports. This will involve evaluating existing reporting patterns in terms of management needs and the adequacy and timeliness
of the data being furnished; and refining the existing report patterns, or developing new ones, to provide management with better reports.
Education and training. Plans are underway to intensify the training of accountants and auditors in both the central and field offices. The program will
stress initial indoctrination of accounting and auditing personnel, and recurring
orientation in the broad aspects of financial management on an area basis or
nation-wide, as appropriate.
State highway accounting system. The Bureau plans to continue assisting
the American Association of State Highway Officials in implementing the recently
issued uniform manual of accounting. Also, the Bureau contemplates more
active work with individual States, beginning about January 1960, in improving
and maintaining their accounting sys terns and collateral processes.
COAST AND GEODETIC SUR VEY
Status
The accounting system was submitted to 'the Comptroller General for approval
in May 1958. Approval of the system has been delayed by the General Accounting
Office pending final determinations on the cost accounting practices and the use of
depreciation information. These are currently under review with the agency.
1959 Accomplishments
Financial reports. During fiscal year 1959 the financial reporting system
has been improved. Several monthly and quarterly reports for management were
either rescheduled fo:r more rapid release or initially instituted.
In order to facilitate the transition from obligations to costs, a management
report has been developed and is being used to reconcile and compare amounts in
the fiscal plan with actual results by divisions, and in summary for the bureau.
Automatic data processing. The financial reports prepared with automatic
data processing equipment are: (a} monthly and cumulative costs by project,
cost center, object class and other distributions, and outstanding undelivered
orders; (b} special cost summaries by function and object class for the Chart
- 29 -
Division and its branches; (c) a monthly and year-end reimbursable report for
the bureau showing prior year cost, outstanding undelivered orders, total obligations, and contract amounts; and {d) an itemized list of outstanding undelivered
orders by fiscal year and division. Reports still prepared on a manual basis include: (a) a summary of functional costs reconciled to obligations, by divisions
and in summary for the bureau; (b) mess report summarizations that include an
analysis of the average cost per man-day for vessel personnel; and (c) the cost of
producing charts and maps.
Future Plans
Plans include a complete revision of the Finance Manual, with a codification
and incorporation of information now disseminated in a large number of Survey
Circulars; and the conduct of a middle-level supervisory cross-training program
for accountants in fiscal year 1960.
MARITIME ADMINISTRATION
Status
Approval of accounting system. With respect to the partial approval of the
Administration's accounting system, the principles and standards upon which the
system was based were approved by the Comptroller General in March 1955--with
the understanding that the submission of the system for review and approval was
not intended to include the area of inventories and property accountability, since
certain phases of this area were still under study and in the process of being
developed.
Allotment simplification and synchronized classifications. The present allotment system will be continued as long as the budget is on an obligation basis.
However, as soon as conversion is made to a cost-based budget system, it will
be possible to substitute "cost-authorizations" for many of the allotments, thereby decreasing the number of allotments. In addition, there are a few areas in
which expense accounts are still to be fully synchronized with the budgetary categories of obligations and expenditures.
1959 Accomplishments
Cost-based budgeting. Staff studies were completed and three internal management orders were drafted to implement the conversion to an internal costbased budget system that is planned to begin in fiscal year 1961.
- 30 -
Financial management studies in the regulatory area. The principal projects undertaken included {a) studies and recommendations relating to the
private financing of commercial ship construction with the aid of Government
insurance of loans and mortgages; (b) drafting instruments such as the form of
Trust Agreements, and revisions of regulations to effectuate Public Law
85-637--under which subsidized ship operators may invest a portion of their
capital and special reserve funds in common stocks in accordance with current
sound business practices; and (c) revision of instructions and regulations relating to subsidized ship operators, including amendments to the chart of accounts and the form of the balance sheet, and adjustments for such items as
depreciation, retirement plans, retroactive wage payments, and revised dividend reporting requirements.
External auditing. Continued efforts were made to improve auditing procedures and the quality of work performed, including the addition to the
Comptroller's Manual of Procedures of a new section covering audit of construction contracts. One of the noteworthy results was the aq::eleration of settlements
of the Government's liability at the close of a 10-year recapture period under
operating-differential subsidy contracts. Audits of 11 subsidized shipping companies covering 55 subs_idy periods through 1955 resulted in speeding up final
payments of accrued operating-differential subsidies for each of these periods,
and in placing appropriation requests for subsidy funds on a more current basis.
Future Plans
Accounting and synchronized classifications. Accounting principles and
s.tandards with respect to the area of inventories and property accountability will
be codified and submitted to the Comptroller General for review and approval.
Action will also be taken toward appropriate modification of the budget and accounting classifications,
Cost-based budgeting, Present draft procedures will be issued as regulations and tested at selected offices. For appropriated funds, financial operations
below the allotment level will be controlled throughout Maritime through cost
budgets, accounting, and reporting beginning in July 1960.
NATIONAL BUREAU OF STANDARDS
Status
The synchronization of budget, accounting, and organizational classification
was completed by approval of a revised activity classification for the 1960
Budget.
- 31 -
1959 Accomplishments
Property accounting. Cost accounting procedures were installed for the production of standard samples, providing for storeroom unit and monetary control
over standard samples inventories, and enabling comparison of cost of sales with
revenue.
Internal audit practices. The Internal Audit Division extended the scope of
its audit activity to include reviews of the administrative activities of technical
divisions. These reviews have resulted in recommendations to management in
the areas of time-keeping and leave practices, utilization and control of assets,
and division organization. Internal audit activities also included the review of
actions taken by the Bureau's Property Review Board to assure compliance with
Department and Bureau policy. As a result of this activity, a plan for reviewing
vehicle accidents was implemented.
Internal cost-based budgeting procedures. Revised accounting reports provide information for review and control of both accrued cost and current year
obligations. The Working Capital Fund cost accounting system provides for all
projects to be on an accrued cost basis for the significant elements of personal
services and leave, storer.oom inventories, capital equipment, and overhead.
The only items charged to projects on an obligation basis are contractual services and materials purchased directly from vendors. Projects financed on an
accrued cost basis are carried out under accrued cost operating budgets. Projects financed on an obligation basis are authorized on that basis and accrued
cost information is developed for pertinent consideration in program management
and review, such as budget office comparisons with cost budgets. This arrang~
ment provides the benefits of accrued cost information with the simplest and most
effective financial control mechanism.
A new system of reporting on the cost of internal work orders for repair,
maintenance, and other plant services permits the charging of fixed prices for
these services to benefiting projects. These changes permit more exact financial planning by the sponsoring project leader where the performance is not under
his direct control, and promote better management of plant operations, maintenance, and repair programs.
Internal project cost reports were redesigned and consolidated to permit
more rapid report processing and to provide information on accrued costs and
current year obligations.
Future Plans
Property accounting. Depreciation rates for capital equipment, which are
involved in the pricing of services rendered, will be reviewed to assure that they
- 32 -·
are based on realistic esitimates of life expectancy. The review and revision of
depreciation rates will be undertaken in a manner intended to minimize the effort required for future periodic review of the rates.
New punched card accounting equipment will be used in a revised system of
storeroom inventory control which will produce as a by-product the punched cards
needed for cost distribution and general ledger accounting.
Internal audit practices. The internal audit activity is expected to continue
its review of technical divisions. Once a cycle has been completed, the problems identified as common to a majority of the divisions will be given priority
for solution on a bureau-wide basis. Followup will be maintained with all divisions to assure satisfactory action on all exceptions. It is expected that this
activity in the future will give greater attention to compliance with policies and
regulations, and the identification of activities requiring revisions in procedures.
Education and training. A training course in elementary accounting will be
provided for promising Accounting Division employees who do not have an accounting education.
OFFICE OF THE SECRETARY
Status
This Office maintains the accounting systems for the Business and Defense
Services Administration, the Bureau of Foreign Commerce, and the Office of
Business Economics.
1959 Accomplishments
Accounting system. A major rev1s1on was made in the accounting procedures
for the Trade Fair program. The revision provides for complete synchronization
of programming, budgeting, accounting, and reporting. Under the revised system, meaningful elements of cost have been established for each project, and
these are used consistently in budgeting, accounting, and reporting at the project
level and by organizational units hav~ng responsibility for budget execution. This
results in better utilizati<m of resources by management. This procedure was
installed in July 1959.
Property control. A mechanized procedure was developed to account for
personal property used in the Trade Fair program. The system encompasses
property loaned to the Government by business concerns for display purposes as
well as Government-owned property used in the Trade Fair program. There is
- 33 -
wide dispersion of the property since it may be located at an active fair, en route
to a fair or warehouse, or stored in a warehouse overseas; or it may be held
pending disposition either by sale at a foreign location or by return to the lender.
The procedure was installed in May 1959, and will materially assist management
in programming equipment needs, and in assuring proper return of equipment or
sale proceeds to the business concern lending the equipment.
Future Plans
A study of the economies that might result from mechanizing the payroll system is planned. It is intended to investigate the practicality of- adapting the Bureau
of Public Roads automatic data processing payroll system to our needs. If found
practical, time will be rented on the Bureau of Public Roads equipment to process
the payroll.
PATENT OFFICE
1959 Accomplishments
The accounting system approved by the Comptroller General in June 1958,
was installed and operated during the fiscal year 1959 with a view to producing
accrual information that would serve as a foundation for adapting to the costbased concepts in the 1961 Budget estimates. Operation of the system has served
to identify numerous items of cost and accrual which need a determination concerning their proper association with the "cost centers 11 in the accounting system.
Future Plans
Action is under way to correct the identified problems relating to the appropriate treatment of numerous costs by "cost center"--as distinguished from a
single organizational treatment which has long prevailed--in order to make the
resulting data more useful internally for planning, operating, and reporting.
purposes at the "cost center" level.
WEATHER BUREAU
Status
There has been a substantial reduction in the number of allotment accounts
during fiscal year 1959. A study was also made to develop a more informative
activity structure and determine logical cost centers. Further simplification of
- 34 -
the allotment structure and the development of accounting support for both
budget activities and organization are being correlated with the development of
internal cost-based budget procedures scheduled for installation in fiscal year
1961.
1959 Accomplishments
Accounting system. Plans were formulated for the maintenance of accounts
on the accrual basis. A complete revision of the general ledger accounts was
studied and a draft of a new system of accounts is now in process.
Budget classifications. A study was made of the Bureau's activity classifications for the purposes of aligning them more closely with the Bureau's
enabling legislation, and establishing a better framework for accrual accounting and cost-based budgeting.
Future Plans
Future plans include the continued development of the accrual basis of accounting, further study of general ledger accounts, and preparation of a manual
of accoun,ting together with a detailed chart of accounts and entities.
- 35 -
DEPARTMENT OF DEFENSE
Financial Management Improvement Program
Agency Report of Status as of June 30, 1959
DEPARTMENT AL POLICIES AND GUIDELINES
Improvement Area
Functional Appropriations:
Operation and Maintenance
Fact-finding Directive -· Directive
Study
Drafted
Issued
Directive
Im lemented
Complete
Complete
Complete
Indefinite
Military Construction
Complete
Complete
6/60
Indefinite
Procurement and Production
Partial
by 6/60
-----------
Indefinite
----------
Research and Development
6/60
Indefinite
Military Personnel
6/60
---------------------
-------------------
Working Capital Funds:
Industrial Funds
Stock Funds
Indefinite
---- Not Applicable ---- Complete
Complete
---- Not Applicable ---- Complete
Complete
- 36 -
D E P AR T ME N T 0 F
DE F E NS E
(cont 1 d)
Financial Management Improvement Program
Agency Report>!< of Status as of June 30, 1959
STATUS OF MILITARY DEPARTMENTS
Improvement Area
Army
Navy
Air Force
Partial
Partial
Partial
Partial
Partial
Partial
Partial
Complete
Partial
Accounts Payable:
Operation & Maintenance
Complete
Indefinite Partial
Military Construction
Comple'te
Complete
Partial
Procurement & Production
Partial
Indefinite
Partial
Research and Development
----------
Indefinite
--------
Military Personnel
-----~---- Indefinite
--------
Property Accounting:
Real Property
Civil Works
Complete
Other Material and Equipment
Other Accruals:
Accounts Receivable
Accounting System:
Approved by Comptroller General
Complete
1/55
Submission for Approval
----------
Indefinite --------
Complete
--- Indefinite ----
Military Construction
Complete
Complete
Partial
Procurement and Production
Partial
Partial
Partial
Research and Development
-----------------___ ...., ______
Internal Cost-Based Budgeting:
Operation and Maintenance
Complete
...
Military Personnel
Cost-Based Budget Presentation
for Appropriation Requests
-11-
Other
Complete
-------Indefinite -------Indefinite -------Indefinite
This tabulation reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does
not nscessarily signify that the General Accounting Office, the Bureau of the
Budget, and the Treasury Department agree with those representations. The dates
represent either an agency target for attai:r:unent of an objective, or the date on
which the indicated action was taken.
- 37 -
DEPARTMENT OF DEFENSE
1959 Accomplishments
Organized improvement program. Representci.tives of the Department of
Defense, the Bureau of the Budget, the General Accounting Office, and the
Treasury Department have jointly undertaken to prepare recommendations to
the· Assistant Secretary of Defense (Comptroller) for guidance to all components
of the Department in the establishment of time-phased programs for improvement that would meet the objectives of Public Law 84-863 and the requirements
of Bureau of the Budget Bulletin No. 57-5. This work has been undertaken
through the Committee for Defense Participation in the Joint Accounting Improvement Program.
As of June 1959, a Department of Defense directive was issued for the area
of operation and maintenance, which requires each military department and the
Office of the Secretary of Defense to establish a formal time-phased program for
improvement of financial management in that area pursuant to the principles and
policies set forth in the directive. These programs are required to be submitted
to the Assistant Secretary of Defense (Comptroller) by December 1959, for approval before implementation.
A proposed directive has been drafted for the area of military construction.
This is similar in content, including the requirement for the establishment of
time-phased improvement programs in that area. This paper has not yet been
coordinated within the Office of th.e Secretary of Defense, th.e Bureau of the
Budget, the General Accounting Office, or the Treasury Department-.-a prior
requirement before undertaking coordination with the military departments. This
area, however, is less controversial than operation and maintenance, and much
has been accomplished toward meeting the ultimate objectives, especially
through the collaboration of the Office of the Secretary of Defense (Comptroller)
and the Bureau of the Budget in the development of revised procedures for apportionments, operating budgets, and reporting in this area.
Action has been initiated toward the preparation of similar directives for
the remaining areas of appropriated funds, i.e., procurement and production;
research, development, test, and evaluation; and military personnel costs.
Joint project teams are making fact-finding studies in each of these areas as a
means of providing the Co:tnmittee with necessary additiona.l facts. As of June
1959, these stu~ies were about. one-third complet~.
Operation and maintenance directive. This directive defines the scope of
operation and maintenap.ce programs and approp:d,atio:q.~ 1 and pl'ovides that there
should be only one appropdatiort for this purpose 'iti. ~.a~h military department.
It also indicates that the Secretary of Defense will specif~cally authorize the
- 38 -
Assistant Secretary of Defense (Comptroller) to establish the budget account
structure under the operation and maintenance appropriation of each of the
military departments, based upon the principles set forth. Among the more
significant principles and policies in the directive are the following:
-- Operating budgets are specifically required in addition to the
President's budget. Such operating budgets are to be revised currently during the year in the reprogramming process.
Budgets will be prepared on the basis of costs as well as obligations,
and funded costs will be distinguished from unfunded costs, showing
the appropriation sources of unfunded costs.
There will be control of total costs by means of limitations {not subject to Section 3679 of the Revised Statutes) as well as fund limitations
{subject to Section 3679) on funded costs and obligations. All cost
and fund limitations will be based upon operating budgets after review
and approval at the appropriate level.
Fund limitations. are required to be established below the appropriation level and observed in fund control throughout the military departments in terms that are consistent with apportionment action, which ·
is presently in terms of budget programs generally.
An operating unit is defined as a basis for making allotments in a
manner that is understandable and acceptable to each of the military
departments considering the way they are organized and administered.
While allotments are minimized on the basis of one allotment for each
operating unit from the command or management agency to which it is
responsible, further fund limitations below that level are required for
each budget account which is subject to apportionment limitation.
Suballotments are barred except to an operating unit which is subordinate to the one which makes it, and all citations of funds are eliminated.
Reimbursable methods would be required.in both cases.
It is required that there be one system of accounts for purposes of pro ..
gramming, budgeting, accounting, and reportingi and that obligations
and accrued expenditures be budgeted and accounted for in terms of the
budget account structure for which obligation limitations are established.
This is presently in terms of budget-program accounts.
.....
The principles of b{idget account structures (includi~g activity or project
accounts) and subordinate cost account structures are set forth.
- 39 -
-- Cost accounts, in terms of funde~ costs, and accounts on the accrual
basis for all fund resources and all unpaid obligations are required to be
built within the framework of allotment accounting.
The principle of distribution of installation-support costs by budgetactivity accounts has been established.
A sy,stem of reimbursements is required to be established for orders for
work or services, or for locally-funded materiel financed under the appropriations for operation and maintenance. This system includes reimbursements between operating units which are financed under the same
appropriation.
Accounting for increases or decreases in inventories of consumable
materiel, as cost accounts under the allotment accounting system, is
required to the extent inventories are funded under the operation and
maintenance appropriations. This is expected to be limited to locallyfunded inventories.
The kinds of financial reports which will be required at every level are
specified, and it is indicated that even the lowest allotment reports must
serve as feeder reports for the preparation of higher level reports.
It is required that the accounting records be designed so as to permit
summarization of financial transactions in a manner required to produce
efficiently, accurately, and timely in one system of accounts the data
required for preparation of budgets and financial reports and such day-today data as may be required in financial administration. In addition, the
records must be so designed a~d maintained as to facilitate audit. Thus,
the report structure to be prescribed from this level will establish the
specific requirements for the accounting system and eliminate the disorderly development of accounting that has been experienced up to now.
Budgeting and 'accounting for appropriated funds. Changes in the presentation of the Department of Defense budget and appropriation structure for fiscal
year 1960 were made to facilitate the presentation and consideration of the budget
on a functional and more uniform basis. ,Two major improvements were made.
The coverage of appropriations for procurement and production and for research,
development, test, and evaluation has been redefined to differentiate more clearly
between the two areas. The second major improvement was the consolidation of
a number of Navy operation and maintenance appropriations into one, except for
a separate Marine Corps appropriation for this purpose. This change gives Navy
a structure and flexibility similar to that of the Army and Air Force.
- 40 -
Regulations governing the use of project orders on a quasi-contractual basis
in procuring work or services from Government-owned and operated establishments were completely revised and issued. The revised regulations will facilitate and simplify the procurement of such work or services and the accounting
therefor.
Financial reporting, The Department of Defense has prepared a brochure
bn the subject of "Production of Financial Reports for Appropriated Funds in the
Department of Defense with Illustrations for the Area of Operation and Maintenance, " for the guidance of all conc.erned in planning and developing the technical aspects of the Department of Defense
program for improvements in
financial management.
Forms for reporting costs by budget accounts reconciled to obligations were
developed for use by the military departments in the area of operation and maintenance appropriations. The Department of the Army is presently the only
military department reporting on a cost basis.
Property
emption from
budgeting and
for test in the
accounting. With the approval of the Bureau of the Budget, exapportionment was granted and methods were developed for
controlling operations under stock funds at base ("retail") level
Army and Air Force,
Department of Defense instructions were issued requiring contractors to
price deliveries of military supply items to provide financial data for property
accounting. Stock fund regulations were revised to provide for improved procedures in selected areas.
During the year, Armed Forces Procurement Regulations were published to
require single property administration for Government property in possession of
defense contractors as a means of reducing personnel costs and eliminating the
impact of several departmental accounting systems on the contractors.
Industrial funds. Revised Department of Defense regulations governing
operation of industrial funds were published. Since the basic policies established by the original regulations in July 1950 had been proved sound by the successful experience of nine years, the revised regulations contained no major
changes in concept or principle. In a number of areas, however, the directive
was expanded to clarify b.asic principles, to state objectives more specifically,
and to provide more adequate policy guidance in the greater variety of activities
which are now operating with industrial funds.
The revision of the Defense regulations governing the use of project orders
serves to strengthen and encourage the "contractual" relationship between ordering agencies and performing activities that is essential in creating incentives for
- 41 -
improved management in the industrial fund system. Under the revised regula ..
tions, provision was made for the use of fixed-price project orders in addition
to the customary cost-reimbursement project order previously authorized.
Treatment of project orders as fund limitations, i.e., like allotments within the
meaning of Section 3679 of the Revised Statutes, was prohibited.
Instructions on Departme~t of Defense requirements for financial reports of
industrial funds were developed and ready for publication at the fiscal year-end.
Accounting and reporting for the Military Assistance Program. A Department of D:fense instruction was issued prescribing a uniform system of financing,
funding, accounting, and reporting for sales of materiel and services under
authority of Section 103(c) of the Mutual Security Act, as amended.
I
Auditing. The Department of Defense participated extensively in development of the uniform set of cost principles for research and development contracts with educational and non-profit institutions, which was issued by the
Bureau of the Budget for Government-wide application. An audit instruction has
been issued providing uniform guidance to contract auditors of the military departments with respect to .the application of these cost principles.
Arrangements have been made whereby the audit agencies of the Department
of Defense will, upon request, furnish contract audit service to any Government
agency. This 1ncludes necessary assistance to procurement personnel incident
to contract financial matters.
A comprehensive set of contract cost principles for Defense industrial contracts was completed after extensive discussions with representatives of industry
and other Government agencies. It is anticipated that these principles will be
published in the near future. In addition to being applicable to cost-type contracts,
they will fill a long standing need for uniform and definitive guidance on cost·
matters in the negotiation and administration of flexible fixed ... price contracts.
With the approval of the Comptroller General, the Department of Defense
has shortened from six years to three years the period of time during which contractors are required to retain financial and other operating records pertaining
to cost-reimbursement type contracts.
Working under the direction of the Assistant Secretary of Defense
(Comptroller), an integrated arid comprehensive Defense-wide audit of the Military Assistance Program was performed by the departmental audit agencies.
The audits were performed under a master audit plan and uniform guidelines issued by the Office 0£ the Assistant Secretary of Defense (Comptroller). The overall audit covered all organizational elements involved in the administration of the
program, including the Office of the Secretary ~f Defense, the military
- 42 -
department headquarters and field activities, the unified commands, and the
Military Assistance Advisory Groups established in countries receiving military assistance. The audit included examination of operations at 86 activities
within the Department of Defense. Sixty-three separate audit reports (including consolidated reports) were or will be issued to various management levels.
This was a major accomplishment in that it represented the first time an integrated Defense-wide audit of a major program had been performed in this
manner.
Automatic data processing. In the Department of Defense, automatic data
processing systems are beginning to have an effect upon the attainment of some
of the objectives of the Joint Program. As a powerful new management tool,
this type of a processing system has developed more rapidly than our ability to
utilize it most effectively. Realizing the danger of this lag, the Department of
Defense has established an automatic data processing management program with
staffs in the military departments and in the Office of the Secretary of Defense.
Under this program, proposals for new installations of such systems are reviewed for compliance with established policy and criteria as well as readiness
for economical installation.
Reports and statistics. A Defense directive issued in July 1958 established
Statistical Services Center in the Office of the Assistant Secretary of Defense
(Comptroller) to serve directly all components of the Office of the Secretary of
Defense. This directive spelled out the pertinent responsibilities of the
Assistant Secretaries of Defense, the Secretaries of the military departments
and the Statistical Services Center.
µ
During the fiscal year, an intensive review was made of all recurring re ..
porting requirements of the Office of the Secretary of Defense. As a result,
there were only 128 such requirements as of the end of June 1959 .. -a net reduction of 2 7. In addition, a reduction in frequency and in detail was made for many
of the 128 recurring reporting requirements.
Toward the end of the fiscal year, a program was initiated to improve the
timeliness of reports. This program will be implemented through a joint effort
of appropriate staff of the Office of the Secretary of Defense and the three mili ..
tary departments. It is recognizec;:l that one of the most significant factors in
improving the effective utilization of statistical and related information is the
timeliness of reports. It is hoped that the implementation of this program will
provide all management levels of the Department of Defense with more up-to-date
information on which to base decisions, formulate policy and take necessary
actions.
- 43 -
Future Plans
Budgeting and accounting for appropriated funds. During the next several
years, the Department of Defense, in cooperation with the Bureau of the Budget,
the General Accounting Office, the Treasury Department, and the military departments, expects to concentrate its major efforts toward implementing the
program for improvement of financial management as provided for in the directive issued for the operation and maintenance area. The proposed Department
of Defense directive covering a similar program in the military construction
area is expected to be issued during fiscal year 1960. It is also expected that
the fact-finding studies in the areas of military personnel cos ts, and research,
development, test, and evaluation will be finished and the proposed directives in
these two areas either completed or substantially completed. The fact-finding
phase with respect to the area of procurement and production will be completed
for aircraft programs, but the study of the missile programs is expected to be
still in progress.
Budgeting and accounting for foreign currency funds. It is planned to issue
during the next year a comprehensive instruction covering uniform procedures
to be followed in budgeting., control, and accounting for foreign currency funds.
Property accounting. Future plans in this area include publication of instructions to provide for simplified but comprehensive accounting for supplies
and foreign excess materiel in process of disposal; publication of more effective
supply system inventory-status reporting requirements; and issuance of uniform
procedures to be followed in budgeting, funding, and accounting for return of
materiel from using activities to stock funds. Field studies will be continued to
obtain information to develop simplified methods and procedures for inventory
accounting.
· Indus trial funds. Work has been undertaken with respect to Navy shipyards
and Army arsenals, and their respective customers, to establish practices which
will create a more effective "buyer-seller" relationship and the attendant economies and efficient operations--the major objectives of the industrial fund concept. These efforts are expectf;!d to continue.
A study is also in process to develop improved practices for uniform application in the requesting, billing, a.nd payment for transportation services of the
Military Air Transport Service, the Military Sea Transportation Service, a;nd
the Army Terminal Commands.
Accounting and reporting for the Military Assistance Program. Action will
be initiated to improve the present system of ordt;!ring under the Military
Assistance Program in ac.cordance with recommendations devefoped by the Office
of the Assistant Secretary of Defense (Comptroller).
- 44 -
DEPARTMENT OF THE ARMY
19 59 Accomplishments
Budgeting and accounting for appropriated funds. The system of reporting
cost and performance data reconciled to obligations incurred, which has been in
effect at levels below headquarters for appropriated funds in the operation and
maintenance area, was expanded to include the headquarter 1 s level. Reports
were revised to incorporate necessary data to reflect quarterly revisions in
programs and operating budgets, and estimated requirements for an additional
three-months period.
The Ordnance Command Management System was reviewed and steps have
been taken to develop an Ordnance Corps accounting manual, which is scheduled
for publication early in fiscal year 1960,
A new unit "Medical Care Composite Work Units" was developed to permit
a more comprehensive and accurate evaluation of resource utilization in hospitals
and dispensaries. It is currently used for programming, analyses of costs, and
personnel utilization, and it is planned for eventual use in budgeting. The new
unit represents a weighted or composite measure comprising beds occupied, admissions, births, and dispensary and clinic visits and examinations. The unit
reflects the major elements of workload and is therefore more directly related
to resource utilization.
Military pay system. A new military pay voucher system was installed in
January 1959. This system provides for more timely and more inclusive expenditure data at the departmental level, and affords a distinct advantage over
the former system in the areas of budget, management, and administrative control of the Army military personnel appropriation. Under the voucher system,
the tax withholding and insurance deduction procedures have been simplified, and
the total charges to the pay appropriation for taxes and their transfer to the
Internal Revenue Service are more timely. Limited tests to develop mechanized
procedures are being conducted and will be evaluated in fiscal year 1960. The
system is designed primarily, however, to reduce the expense of paying military
personnel and to facilitate payments during emergency conditions.
Finance procedures. Elimination of the requirement for preparation and
submission of schedules pf disbursements and collections by installation~, which
was made effective in May 19 59 following approval by the General Accounting
Office, relieved all installations of a substantial reporting burden.
The Quartermaster Corps developed a new form, "Voucher and Schedule of
Payments, " for use in lieu of the prescribed voucher in those cases inv'olving
extensive consolidation of invoices for payment purposes. Use of the new form,
- 45 -
which has been approved by the General Accounting Office, resulted in a reduction of approximately 145, 000 vouchers and 5, 590 man-hours each year throughout the Military Subsistence Supply Agency.
Automatic data processing systems. The testing of automatic data processing systems, and installation of such systems where they were warranted, con ..
tinued during the fiscal year in each technical service of the Army, as well as in
the· Continental Army Command.
Organization and staffing. Further progress was made in the integration of
accounting and finance functions during the fiscal year. Regulations were changed
to prescribe that all accounting shall be under the operational control of the
finance and accounting officer even though, under exceptional circumstances,
certain elements are separated physically from the finance and accounting office.
A manual de~cribing the organization and functions of finance and accounting offices at each level of command was developed and will be published early in
fiscal year 1960.
Property accounting. Effective in July 1959, certain inventory categories,
plus engineer repairs and utilities supplies, were capitalized in the Zone of
Interior Installations Division of the Army Stock Fund. This stock fund division
is to be operated initially at nine installations in the Third Army. In approving
the charter for this division, the Bureau of the Budget exempted it from apportionment. It is believed that this will result in more effective supply and financial management at the operating level than if the inventories· were financed
under the several technical service divisions; such other divisions are more
appropriately limited to financing the depot stocks of the technical services.
The establishment of this stock fund division also facilitates and simplifies
budgeting, funding, and accounting for the operating forces involved.
The establishment of a self-service-center type of issue for engineer repairs and utilities supplies costing three dollars or less per item has resulted
in simplified supply practices and inventory accounting through reduction in
paperwork involved in issuing and accounting for supplies. Quartermaster sales
store accounting was also simplified through the elimination of item accountability for inventory on the sales floor and reliance on monetary accounting.
Army directives were developed to implement the Department of Defense
policy of establishing single. property administration for defense property in.
possession of contractors. Army 'is participating fully with the other military
departments in such single assignments, working toward the objectives of reducing personnel costs and relieving the impact of different accounting requirements on the contractors.
- 46 -
Industrial funds. During fiscal year 1959 operation under the Army Industrial Fund was extended to depot maintenance in the Lexington Signal Depot at
Lexington, Kentucky, and coverage expanded in the Army Ordnance Missile
Command at Redstone Arsenal, Alabama.
An Army task force conducted a comprehensive examination of operations at
five installations to appraise the progress being made in effective use of the industrial fund system, and to identify specific areas where improvements were
needed, A summary report is being prepared, identifying existing improvements
and proposing specific actions for further improvement in management and financial control under the Army Industrial Fund at the installation, mid-management,
and general management levels. Action is expected to consist of revising Army
regulations and instructions, and testing recommended improvements.
Auditing. In January 1959, auditor interns hired from the June 1958 college
graduating classes completed their six-months formal training program and
entered upon regular auditing assignments with the Army· Audit Agency. Since
this program began in fiscal year 1954, 734 auditor interns have been hired; of
these 324 ( 44%) remained with the Agency as of the end of the third quarter of
fiscal year 1959. Included in the losses were 298 drafted into the military
service, less 104 who later returned to the Agency as civilians, and 37 who returned as military auditors. The fact that after five years nearly half of all the
graduates of the program have remained with the Agency and are achieving
notable success in auditing careers is evidence of the contribution the Auditor
Intern Program has made to auditing in the Army. A substantial number of the
trainees' that are no longer with the Agency have transferred to other departments
of the Federal Government.
During the fourth quarter of fiscal year 1959, an Audit Management Training
Course was added to the supervisory training program. This course is designed
to strengthen the management abilities of all supervisory auditors. The course
utilizes the case study approach and emphasizes sound technical knowledge, effective supervision, and keen understanding of human relations as basic requirements for audit team leadership.
A brochure entitled "The Contracting Officer and the U. S. Army Audit
Agency--Available Advisory Audit Services" was developed and distributed to
contracting officers and other interested personnel. Concurrent with its distribution, discussions were .held with officials of all major purchasing offices to
further explain areas in which the Army Audit Agency is prepared to provide advisory services and to answer questions by procurement personnel regarding
such services. The interest displayed by procurement personnel in the subject
matter of the brochure and in related discussions represents significant steps
forward in improvement of procurement-audit relations.
- 47 -
During fiscal year 1959, the use of statistical sampling was initiated, where
appropriate, as an approved audit technique. Test audits utilizing sampling
methods satisfactorily demonstrated the economy and validity of the process in
audits within the Army, particularly where large masses of documentation are
involved. Subsequent directives on the subject will cover the measurement of
sampling risk and the determination of sizes of samples in order to achieve
various levels of accuracy.
Future Plans
Budgeting and accounting for appropriated funds. A comprehensive review
of the Army Management (Account) Structure will be made in fiscal year 1960
to determine what additional condensation can be made of program and budget
data for departmental-level management. This action is intended to reduce re-.
porting requirements. In turn, subordinate command levels will conduct similar reviews. The overall objective is to emphasize decentralization of
management responsibilities to the levels of command where resources are
consumed, and to manage at higher levels of command on the basis of the minimum summary information that is appropriate for executive decision purposes,
A project will be initiated to simplify and improve present methods of
financing and accounting for transactions between operating units of the Army,
regardless of source of financing.
Military pay system, It is planned to convert the Army Reserve to a modified military pay voucher system in latter part of fiscal year 1960. The Army
National Guard is also studying and testing the use of a similarly modified
system.
Property accounting. Army plans to review policies prescribed by higher
authority and procedures for stock fund and financial inventory accounting to develop specific areas in which simplification of accounting and reporting should
be ef~ected consistent with the needs of management. Plans are under way for
establishing self-service-center type of procedures for issue of ordnance low
cost parts similar to those established for engineer materiel.
Industrial funds. It is planned to extend operation of the Army Industrial
Fund during fiscal year 1960 to the remainder of the depot maintenance activities. If the legislation introduced in the 86th Congress proposing sale of the
Alaska Communication System should f,ail, the Army plans that this activity will
adopt a modified "industrial-type" revolving fund which would provide for completely integrated planning, programming, and budgeting, including provision
for depreciation and capital improvement.
- 48 -
Accounting and reporting for Military Assistance Program. A project will
be undertaken to improve and simplify the administration, programming,
budgeting, funding, accounting, and reporting for the Military Assistance Program. Known problem areas will be studied and solutions developed. Existing
functions and procedures will be reviewed and analyzed with the objectives of
improving organizational and functional concepts and devising more efficient and
effective methods.
·
DEPARTMENT OF THE NAVY
1959 Accomplishments
Budgeting and accounting for appropriated funds. For fiscal year 1960, the
Navy received from the Congress a single operation and maintenance appropriation in lieu of the separate appropriations for each bureau and office--except
for the Marine Corps, which continues to have a separate appropriation for this
pupose.
There was also established a new research, development, test, and evaluation appropriation of wider scope than in the past. Transferred to this appropriation from procurement and production and other appropriations were those items
which are clearly of a research and development nature, and related minor items
of the test and evaluation programs. Certain major test and evaluation items
such as missiles or aircraft, and major items of facilities primarily for production remain in the production and procurement appropriations but are separately
identified.
For many years, naval stations under the management control of the Chief
of Naval Operations have been multiple sponsored and funded which resulted in
the possibility of the commanding officer receiving as many as eight allotments
from as many appropriations in order to perform his function of furnishing
logistic support. The Office of the Comptroller has been actively engaged in
trying to change the system to eliminate the difficulties created by this situation.
A decision was made to convert to single funding beginning with fiscal year 1960.
Necessary instructions were prepared .and actual implementation was made in
time for the system to become effective in July 1959.
Property accounting. Ordnance repair parts valued at some $245 million
were capitalized in the stock fund as of July 1959. With the exception of aviation spares, which are now under study for stock fund financing, there are no
other major categories of materiel eligible for stock funding.
- 49 -
Stock fund financing was extended to seven additional stores' ships. To test
the feasibility of extending the fund to finance materiel carried aboard tenders
and repair-type vessels, the fund was also extended to two supply tenders and
two repair ships.
A centralized Marine Corps inventory control accounting system utilizing
automatic data processing equipment was installed to improve requirements determinations, stock control, and financial inventory accounting.
Industrial funds. During fiscal year 1959, operation of the Navy 'Industrial
Fund was extended to the Public Works Center at Pearl Harbor, Hawaii; the
Naval Weapons Station at Yorktown, Virginia; and the Overhaul and Repair Department of the Naval Air Station at Quonset Point, Rhode Island.
Navy has developed an accounting handbook for Naval Air Station overhaul
and repair departments to provide guidance for uniform accounting and reporting at all such activities.
A Navy team has also developed and tested at the Charleston Naval Shipyard
a "flexible budget'' technique for use in controlling overhead expense of the production departments. A report on this program was published and approved by
the Chief of the Bureau of Ships, and the Comptroller of the Navy. It is planned
to apply this method to control of production department overhead at all naval
shipyards, and to develop and test a similar t.echnique for use in controlling expense of other shipyard departments.
Reports and statistics. Electronic data processing equipment has been applied to the financial reporting system for the development of the monthly accounting for obligations of appropriated funds. By the application of a computer
this report can be prepared with approximately four hours of key-punch time and
less than one-half hour of tabulation time. Other financial reports are now u~der
study, and it is anticipated that the same type of processing will be applied to
them shortly.
A reporting system has been developed for price changes in procurement,
construction, and research and development programs. in order to provide top
management of the Navy with earlier advice of changes in program costs so that
the immediate and long-range effects can be weighed properly and an opportunity
can be provided for timely and appropriate action. The system provides for reporting within ten days program price changes of over $2, 000, 000, and establishes a quarterly report explaining price changes of over $500, ·ooo.
The Office of the Comptroller and the Office of Analysis and Review are
working together in the preparation of a pilot presentation of top management
reporting as part of the Navy Program Progress Report, which will coordinate
- 50 -
financial and program data. This effort is part of the implementation of the
recommendations of the Committee on the Organization of the Department of
the Navy.
Auditing. Continued attention was given to the improvement of internal
auditing so that its assistance to management in achieving greater effectiveness
in the conduct of naval activities would be more pronounced. A management determination was made that the internal audit review will cover not only supply
and fiscal matters, but would also c.o.ver operating and other supporting organizational entities. This will permit appraisal of such things as the utilization of
labor and materials, the reliability of records and reports, and the property
control procedures employed.
Continuous internal audit assignments were institued at six additional major
naval activities. These assignments now total 31. The extension of internal
audit activities in the Navy continues to be hampered by the shortage of qualified
personnel.
Future Plans
Funding practices. The present method of funding medical and dental costs
in facilities under the management control of Navy bureaus other than the Bureau
of Medicine and Surgery will be revised in fiscal year 1961. In that year, financial responsibility for medical and dental costs will be assigned to the bureaus
responsible for all operation and maintenance costs of these facilities.
Stock funds. Extension of stock fund financing for materiel afloat will be
held in abeyance until a thorough review is made of the results of the test being
conducted on the two tender and two repair ships.
Ordnance plants. To improve management control in the Navy ordnance
plants, plans are under way for development and test of a system of standard
cos ts and flexible budgeting at the Naval Ordnance Plant at York, Pennsylvania.
Indus tr.ial funds. It is planned to extend operation of the Navy Industrial
Fund during fiscal year 1960 to the Naval Air Station overhaul and repair departments at Alameda, California, and San Diego, California; the Naval Torpedo
Station at Keyport, Washington; the Naval Ammunition Depot at Concord,
California; and the Public Works Center at Guam, and at Su.hie Bay in the
Philippines.
- 51 -
DEPARTMENT OF THE AIR F'ORCE
Integration of ailotment and disbursement accounting. Considerable p;i•ogress
was made by the Air Force in the integration of disbursement .and allotment accounting under 'appropriated funds. The systems improvements which were installed during fiscal year 1959 provide the means of identifying, controlling, and
reconciling differences between the disbursements shown in appropriated and
other fund reports with the disbursements reported by the finance network. The
improved system will also eliminate mu.ch of the duplication involved in the
processing of transactions at the departmental level.
Integration of accounting and fi.na.nce functions. Further progress was made
during the· fiscaTyear in the integration
accounting and finance functions. As
of June 1959, the accounting and finance functions were integrated at the bases
of five major commands. The issuance of new accounting and finance manuals
is substantially complete.
of
Procurement and production improvement.s. The "Plan for Improvement of
Program· Management" in the area of proc-ureiTient and production was started in
July 1958. This plan had, as one objective, the relocation of the accounting and
finance function from the point of contract:ual action to the point of contract management. As of July 1958, the esl:ablishment of merged accounting and finance
functions had been accomplished at the Air Procurement District Offices and the
Air Force Plant Representative Offices. Between that date and December 1958,
the transfer of all funds and all completely reconciled contracts was completed.
The procedures for straight~li.ne document processing, as developed at the pilot
installation, were in.stalled at each of the 32. locations involved. An additional
phase of revised accounting procedures continued to be developed and evaluated
with a target date for completion by July 1961; this phase covers the accounting
and reporting for materiel procured from the time of establishment of "due-in"
assets through acceptance, in-transit controls, central warehousing, and ship ..
ment to consumption points.
Stock funds. In accordance with a plan approved by the Department of Defense and the Bureau of the Budget, the Commissary Division of the Air F'orce
Stock Fund commenced operations for the fiscal year 1960 under ~ system of
mcai;:iital control. This provides greater flexibility- in inventory- and financial
resources management and control than the annual apportionment and fund allotment procedures previously used.
Industrial funds. During fiscal year 1959, operations of the Air Force Industrial Fund were extended to include the airlift operations of the Military Air
Transport Service. Under this sytem all defense agencies responsible for generating such airlift pay for the service based upon prescribed tariff rates •.
- 52. -
Future Plans
During fiscal year 1960, the Comptroller will proceed with the implementation of the Comptroller Systems Program that was initially developed during
fiscal year 1957. This program covers all systems development work of the
Comptroller, establishes a priority schedule for the work, and provides a basis
for evaluating and reporting progress. It outlines a new Comptroller manual
structure which will provide comprehensive, integrated coverage of Comptroller
systems and procedures. The objective of the program is to improve and simplify the accounting and finance systems and reports for all types of funds. In
this connection, the Defense directive for improvement in financial management
in the area of appropriations for operation and maintenance is presently being
reviewed and evaluated for its impact on the present Comptroller Systems Program. The Comptroller Systems Program will be amended and revised to bring
it into consonance with the Department of Defense program in this area.
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DEPARTMENT OF HEALTH, EDUCATION,
AND WELFARE
Financial Management Improvement Program
Agency Report>:' of Status as of June 30, 19 59
Organization
Food and Drug
Administration
Accrual
Basis
7/60
Accounting System
Cost-Based Budgeting
Approved
Submission
Used
'Budget PreComp.Gen. for Approval Internally sentation
byl
'
Partial
Indefinite
7/60
1961
Office of Education
Complete
Partial
Indefinite
Complete
1961
Office of the Secretary
Complete
Partial
Indefinite
Complete
Complete
Office of Vocational
Rehabilitation
Complete
Partial
Indef1.nit.e
Complete
1961
Public Health Service
Complete
Partial
Indefinite
7/59
1961
St. Elizabeths Hospital
Complete
Partial
Indefinite
Complete
1961
Social Security
Administration:
Bureau of Federal
Credit Unions
Complete
Partial
Indefinite
Complete
Complete
Bureau of Old Age and
Survivors Insurance
Complete
Partial
Indefinite
Complete
1961
Buree1.u of Public
Assistance
Complete
Partial
Indefinite
Complete
1961
Children 1 s Bureau.
Complete
Partial
Indefinit.e
Complete
1961
·ll-
This tabulation reflects the agency's own evaluation of tho degree to which :tt
has attained accrual accounting and 'cost-based budgeting objectives,- but does
not necessarily signify that the Gene:t"al Accom1ting Office, the Bureau of the
Budget, and the Treasury Department agree with those representations. The
dates represent either an agency target for attainment of an objective, or
the date on which the indicated action was taken.
- 55 -
Conduct of imp:r;ovement program. Leadership in the financial management
improvement program is provided by the Office of Financial Management in the
Office of the Secretary. Efforts are being directed toward the development of
Department-wide policies and procedures of a financial management nature that
are issued in manual form for the guidance of constituent units. These guidance
materials provide the framework within which the operating agencies of the
Department develop their own instructions and procedures.
Departmental financial management studies of individual operating agencies
are also made as required, with appropriate follow-up to determine progress and
insure implementation. The improvement efforts of a departmental .nature as
. well as those in the operating agencies are set forth below.
Status
Accrual accounting. Conversion of the Department's accounting systems
to the accrual basis has been carried out along the following. lines.
--Revolving funds in .the Department are on a full-time accrual basis.
--For administrative-type appropriations, the accounts are converted to
an accrual .basis at year end.
--~n
grant appropriations, it has been concluded that for all intents and
purposes there is no difference between obligations and accruals.
Consideration is being given to refining procedures to recognize
receivables arising out of transactions with grantees.
- -A cost accounting system was installed in the Public Health Service
hospitals in July 1959. A similar system was in operation in St. Elizabeths Hospital during fiscal year 1959. Based upon the experience gained
in these installations, it is planned to extend such cost systems to other
hospital and patient care activities.
--The greater part of funds available for construction are transferred to
other Federal agencies, and information is furnished the Department on
an accrual basis. Consideration is being given to refining procedures to
recognize work in progress with respect to the Indian health construction
facilities account.
Approval of accounting systems. The Comptroller General approved basic
property accounting principles for the Department in October 1953, and the
Department's payroll system in March 1957. Developmental work is underway
and planned on other departmental manuals and operating agency procedures, in
preparation for obtaining the approval of the Comptroller General as soon as
practicable.
- 56 -
Cost-based budgeting - internal procedures. Most organizations have
completed action to provide for management use of the additional data developed
on costs and available resources. This response is based on the following considerations.
--With respect to revolving funds, planning, operating budgets, and
financial reports are based on applied costs and other accrual information.
--Although obligation data for administrative-type appropriations are used
as the basic budgetary tool for interna.l management purposes, the difference between obligation and accrual data is evaluated in annual budget
planning,
--In grant appropriations, where the approval of the grant (the
obligation) is considered to be a liability, obligations are used for
budget management purposes.
--In other program operations, including construction, accrual and cost
data provide significantly improved financial data for management
purposes.
1959 Accomplishments
Department-wide policy and procedure manuals. During the fiscal year
continued attention was given to development and maintenance of departmental
manuals on a current basis. Portions of a departmental Budget Manual were
drafted. This manual will include a framework of policies and procedures
intended to provide for more effective budget planning and implementation,
Expenditure estimating. A program was initiated late in the fiscal year
to provide for more effective expenditure forecasts. This includes an analysis
of fund availability, obligations, and expenditures for each appropriation during
a three-year period. The analysis is intended to disclose trends, patterns,
and other indicators which will facilitate and improve expenditure forecasts,
Timing of grant payments. At. the suggestion of the General Accounting
Office, a study was instituted throughout the Department for the purpose of
(a) identifying the grant payments for which payments in advance are made lesi?
frequently than monthly, (b) determining the estimated interest savings that
would accrue if the payments were made more frequently, (c) estimating the
additional administrative cost that would result from more frequent payment,
(d) identifying the changes in law or regulation that would be needed to convert
to more. frequent payment, and (e) identifying the problems that would be
created within the States as a result of making smaller payments more frequently,
- 57 -
Internal audit. Initial fiscal audits were made of the Bureau of Public
Assistance, the Children's Bureau, the Social Security Administration, and
five departmental ;regional offices. As a result, recommendations aimed at
streamlining procedures, strengthening internal control, improving compliance
with reporting requirements, and increasing efficiency were either approved or
are currently being implemented.
An audit was initiated (a) to review the Office of Education 1 s financial
management activities and grant allocation processes; and (b) to determine
the types of audits needed, and the placement of the audit function within the
Department, for grants and loans made under the National Defense Education
Act.
Study of fiscal operations. In cooperation with the Bureau of the Budget,
a study of the financial management activities of Gallaudet c·ollege was begun.
The objective is to develop a system of general ledger and cost accounts which
will be more useful to the College, to the Department, and t.o the Bureau of the
Budget.
Study of automatic data processing. A study to determine the feasibility
of providing centralized au.tomatic data processing services to the various
organizations of the Department was concluded by a committee set up for the
purpose. The committee recommended that a system utilizing electronic equipment should not be considered for work presently performed on electrical accounting machines in the existing central processing unit. The comn1ittee noted certain
areas in both the program and administrative fields where improved, integrated
systems of data processing, whether using conventional or electronic equipment,
would be of considerable benefit. They recommended that management officials
should take . an active part in instituting educational programs, so that the concepts necessary to successful application of such techniques will be familiar to
those who have data processing requirements; and that a systems analysis of
present and potential data requirements throughout the organization should be given
consideration at the top management levels. A plan is being developed for the
analysis and improvement of data processing in the Department, including the
development, compilation, utilization, and publication of data.
Future Plans
Department-wide policy and procedure manuals. It is planned to develop and
issue a basic Department Administrative Accounting Manual. This manual will
include, in addition to a chart of general ledger accounts and pro forma entries,
a framework of policies for accrual accounting and financial reporting within
which each operating agency of the Department will, to the extent necessary,
issue its own accounting instructions a'nd procedures. This manual is planned
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to be ready for submission to the Comptroller General for approval during
fiscal year 1961, and the procedures of operating agencies will be submitted
as soon thereafter as practicable.
Manuals covering specific fiscal operations such as time and leave,
travel, and voucher audit, which have not received formal approval by the
Comptroller General, will be submitted for that purpose during the fiscal
year 1960.
It is also planned to complete a substantial amount of the work on development of the Budget Manual during fiscal year 1960.
Completion of studies. During the fiscal year 1960, action will be taken
to complete the studies in progress on expenditure estimating, the timing of
grant payments, and the fiscal operations at Gallaudet College.
Internal audit. After completion of the audit in t;h.e Office of Education,
an intensive review and evaluation of the adequacy and scope of the other audit
functions within the Department is planned. This will include the internal
audit programs in the Public Health Service and in the Bureau of Old-Age and
Survivors Insurance,· and the grant-in-aid audit program in the Office of the
Secretary.
Formalization of budget and accounting responsibilities. During fiscal
year 1960, the responsibilities of the Division of Budget and the Division of
Fiscal Policy and Procedure of the Office of Financial Management, Office of
the Secretary, will be formalized and issued in the Department's Organization
Manual.
FOOD AND DRUG ADMINISTRATION
1959 Accomplishments
Effective in July 1959, fund control for services such as duplicating,
health room, tabulating, and telephone has been decentralized, with each
bureau and division being given a primary allotment. In this way, both the
Budget and the Fiscal Operations Branches of the Administration will be able
to obtain more accurate financial information for these services. Furthermore,
since the bureaus and divisions are responsible for their own allotments, they
will be able to make more accurate estimates of their budgetary needs, and
will be able to plan and carry out their financial program more effectively.
- 59 -
Future Plans
.Allotment system. Control of personal service funds (72% of the current
budget) continues to be exercised through a centralized allotment. The Administration has elected to follow this practice for at least another year in recognition of the need for maximum flexibility in the control of such funds during a
period of marked staff expansion. However, it contemplates the eventual decentralization of such fund control (perhaps effective in fiscal year 1961) to existing
allottees; thus completing the planned program of improvement in the allotment
system that was begun the past fiscal year.
Certification study. In order to provide information for more effective
financial management of the certification programs, a comprehensive study has
been inaugurated with the primary objectives of evaluating present practices and
preparing recommendations for the future financial management operations,
including specific proposals dealing with accounting practices, methods, and
systems.
Program planning and appraisal. Program planning plays an important
role in the conduct of the Administration 1 s enforcement activities. Over the
years a system of planned regulatory programs has been developed to insure
uniform coverage of commodities and industries. Work is now underway toward
improving program planning, particularly from the standpoint of workload identification and measurement and improved methods of appraising operations.
While most of this effort is directed toward improved industry coverage and
enforcement action, it should, at the same time, contribute to better financial
management by improving the data used in the budgeting, distribution, and control
of funds.
Internal reporting. During fiscal year 1960, it is planned to install a new
system of internal financial reports. This is receiving particular attention .fo
connection with the current study of financial management of the certification
programs. In the latter case, emphasis is being placed on reports to the user
industries.
OFFICE OF EDUCATION
1959 Accomplishments
The financial management function was reorganized by establishing
separate sections for budget and fiscal operations and by establishing a new
General Services Section. These changes have resulted in more effective coordination of activities, s'implification of fiscal procedures, and improvement
of internal control.
- 60 -
Future Plans
Property accounting. Asset acquisition accounts are being planned to
provide for better control over capit,alization of equipment acquired, accounts
payable for equipment, and reconciliation with the budget object classification.
Data processing. Orders have been placed for equipment which will
produce punched cards as a byproduct of allotment ledger postings, by means
of punched paper tape.
Certain data of the National Defense Education programs are being processed by use of punched card equipment, and plans are in progress to make a
greater use of electrical accounting facilities for reporting purposes during the
year.
Recordkeeping survey. A review will be made of the relationship of the
system of recordkeeping in the program divisions with. that in the accounting
organization with a view to eliminating any unnecessary duplication of effort.
OFFICE OF VOCATIONAL REHABILITATION
1959 Accomplishments
Certain of the recommendations made after the survey last year of this
office 1 s financial management activities by the Department's Office of Financial
Management, have been implemented in whole or in part. Under the December
1958 reorganization of the Office of Vocational Rehabilitation, the responsibilities of the former Budget Division were broadened to include the functions of
budget execution, accounting, auditing, and payroll. More efficient utilization
of the Budget and Fiscal Division staff has been attained through the changeover
from a manual to a machine payroll operation. These and other changes related
to the Department's survey have brought about improvements in planning and
coordination of financial management activities within the Office of Vocational
Rehabilitation.
Future Plans
Survey proposals. The improvements recommended in the Department's
survey that will be implemented include simplification of the allotment pattern
to eliminate the need for controlling funds by purpose under the research and
training appropriation, and by including personal service funds as part of the
present salaries and expenses allotments; and revision of the accounting procedure for grant funds to eliminate unnecessary duplicate recordkeeping.
- 61 -
Reporting. In the corning fiscal year, an evaluation of all current financial reporting will be undertaken to improve the collection and summarization
of data and provide for better coordination of the financial management activities.
PUBLIC HEALTH SERVICE
1959 Accomplishments
Organization and staffing. A Cost and F'und Management Section was established in the Division of Finance, Office o.f the Surgeon General, to provide technical assistance and guidance involving extensive knowledge of commercial accounting. The need developed partly because of an increase in the use of cost-type
contracts for research activities. The determination of overhead rates for such
contracts involves negotiation with top financial rep:r.e:?entatives of universities
and industry. For protection of the Government's interest i.t is essential that
it be represented by well qualified negotiators. Two certified public accountants
have been recruited as part of the staff of the new section. Assistance also will
be rendered by this staff iJ!, adapting the accounting system of the Servic.e to the
requirements of cost-based budgets.
A series of reorganization studies is underway to develop ways and means
of improving financial management in t:he National Institutes of Health. The
present status of these studies is indicated below.
--Decentralization of budget management staff. .Action was taken in
May 1959 to dec.entralize the central b°Udget management ·staff to
the opera~ing programs. Previously, th-e budget staff was centralized in a single unit 8 but with the steady growth of the Institutes 1
programs, decentralization was essential to meet the need for closer
organizat:i.onal and supervisory relationships between the budget
technician and the program for which he performed services. Budget
staff were transferred to the program areas to. clearly establish the
budget technician's role as a staff assistant to line management; to
establish a stronger feeling of personal responsibility between the·
technician and program officials; to eliminate an arrangement in which
the .principal examiners w'ere financed and supervised through a central
organization, while auxiliary staff were financed and supervised through
the program organization; to dearly segregate costs chargeable to the
organizations served from those chargeable to the central budget management function; and to facilitate the strengthening of budget technical
staff by relating requirements _for such staff directly to the program
appropriations being served.
- 62 -
--Overall study of financial management organization. This study,
which is aimed at realigning the Institutes 1 financial and budgetary
functions for improved efficiency, is near completion. Proposals
will be made for additional staff where needed to strengthen deficient areas. Primary emphasis will be given to the provision of
more effective staff services to the Director and to the operating
programs, through improved accounting, financial reporting and
analyses; strengthened financial control mechanisms; and more
effective budgetary operations.
Accounting system. Plans and procedures were developed for the installation of full-time accrual accounting and improved cost accounting in the 16
Public Health Service hospitals. Approval of forms and procedures was obtained and details of the system were discussed with financial management
representatives of each hospital. Operation under the new system began in
July 1959.
Financing and control structure. A system of budget projects has been
established in the Bureau of State Services for use in planning and management
control of program activities. These budget projects constitute a basic source
of information for management at all levels on the application of resources in
relationship to program objectives. They facilitate the translation between program work plans and the budget justification, and are aimed at providing a
standard basis for effective i+nplementation of performance budgeting and management appraisal activities. The Bureau plans further refinements to enable
full integration of this project system with the accounting and reporting systems
of the Public Health Service.
Financial reporting. The mechanization of certain financial reports at the
National Institutes of Health has made it possible to furnish management with
more timely financial information. The primary advantages of this sytein are
more adequate fund control, more current and frequent reports to management,
weekly analyses of the cost of a variety of programs, and an ability to absorb
an increase in the work volume without additional help or delay in preparation
of financial reports.
The Bureau of Medical Service.s has developed and installed a monthly
chart reporting system on the Bureau's appropriations for executive staff use.
These charts compare cumulative monthly operating experience with th~ budgeted program for selected items of workload, fund usage, and employment.
The number of recurring reports required from field stations of the
Division of Hospitals has been reduced and others simplified. Indian health
field reports of subsistence data were reduced from monthly to quarterly basis.
- 63 -
Education and training. A conference of the Division of Hospit9.l's financial management officers was held to discuss various subjects :i.n bi.idget formulation and execution. These included the development of departmental budgets,
station reportingp General Accounting Office audits 3 the new accrued expenditure
and cost accounting system 0 and mechanized payrolls. The conference resulted
in a better understanding of the relative roles of the different pe'f sonnel in the
total program. Similarly, a conference of Indian health finandal management
officers was held to promote mutual understanding of problems of field and
headquarters staffs.
The Financial Management Branch of t;he Bureau of State Services has
started a series of seminars aimed at training the employees of the Branch,
particularly the junior budget analyst. These discussions cover the budget
process in general and other operations of the Branch. It is expected that the
material prepared for each session will form the basis of a manual of operations for the Branch.
Other improvements :i.n the l\l'ational Institutes of Health. The Accounting
Office.has installed a payment~p;;-~~dure which provides for issuing one consolidated check monthly to. an institution to cover all payments that may be
made within the mpnth. This procedure has resulted in a savings of man-hours
to the Institutes and to the Treasury Department as well as to grantee institu.tions.
The accounting program has provided for the development of systems
which will facilitate the financing of those activities which are susceptible to
cost analysis and which have a customer and buyer relationship. The "fee 11
system of financing provides the customer Institute with the flexibility of
using funds for those programs which are considered. most essential in addition to transferring emphasis to programs requiring immediate needs.
Payroll accounting has been completely mechanized. While it is still
too early to effectively evaluate the savings~ there has been a reduction in the
number of payroll clerks even though the number of employees paid has increased. In addition to dollar savings, the revised system provides for integration with the personnel records and the accounting records, which has
improved the quality of the reports furnis;h.ed management.·
Future Plans
Classifications and financing structure. Service-wide studies have been
initiat-;;d (a) r;-effect, to the maxlmum practical extent, synchronization of the
budget, accounting, and organizational structure; (b) to simplify, improve and
standardize activity classifications; and (c) to simplify and clarify the funding
of various organizational units. The first recommendations under this project
are expected to be made in the appropriation estimates for fiscal year 196~.
-64 ..
Inventory practices. An inventory control system is being developed at
the National Institutes of Health to provide for capitalizing the inventory of
maintenance materials and the inventory of various shops. More adequate
control of the inventory level, dollar-wise as well as quantity, will result
from the revised procedure. Financing of this activity will be placed under
the revolving fund in fiscal year 1961.
It is planned to extend revolving fund techniques to stores inventories
throughout the Service wherever amounts are substantial in relation to the
total program.
Payroll ope rations. In the Division of Finance of the Office of the Surgeon
General, payroll operations are to be converted to accounting machines. This
constitutes a change from a manual system in the case of commissioned officers' pay, and from a combined manual and punched card system in the case of
civilian pay.
Payment procedures. The simplified payment procedure of the National
Institutes of Health will be expanded to include consolidated payments to
vendors, which will facilitate the incorporation of the payment procedure with
the mechanized accounting system. It is expected that the system will be fully
developed and in operation by the end of the fiscal year.
Financial management study. The overall financial management study
in the National Institutes of Health will be continued during fiscal year 1960.
It is expected that the results obtained from this study will lead to more
effective financial administration of the Institutes' programs and activities.
SAINT ELIZABET HS HOSP IT AL
1959 Accomplishments
A system
each month end
cost accounting
and availability
of accounting under which accrual information is available at
was installed and in use during fiscal year 1959. Improved
procedures are to a. limited extent being developed as time
of personnel permit.
Future Plans
Efforts will be made during fiscal year 1960 to manualize accounting
procedures and to develop improved financial reports for use of management.
It is also planned to refine the existing cost procedures, with the objective of
publishing cost data on a more frequent basis for analysis and action by
management.
- 65 -
SOCIAL SECURITY ADMINISTRATION
BUREAU OF OLD-AGE AND SURVIVORS INSURANCE
1959 Accomplishments
Use of automatic data processing in certification and accounting for
disability insurance benefits. Procedures were prepared to convert the
accounting records of the Bureau's disability rolls to magnetic tape. The
creation of these tapes in fiscal year 1960 will effect changes in the accounting, certification, and related payment procedures extending to the preparation and release of the benefit checks. It will eliminate the necessity of maintaining a payee punched card file; permit all accounting, statistical, and
certification operations to be performed through the use of automatic data
processing; eliminate the manually maintained diary file; permit the processing
of many manual post-adjudication operations by electronic equipment; and eliminate in the Treasury Department an addressograph plate file used for the
preparation of benefit checks. Checkwriting media will be produced for this
purpose as a byproduct of the automatic data processing operations. Procedures
have been developed and cleared with representatives of the Treasury Department
to effect the elhnination of the addressograph file after the August 1959 checks
have been released to disabled beneficiaries.
Use of automatic data processing in policing the retirement test. Beneficiaries under the old-age and survivors 1 insurance program are limited by
law as to the amount of earnings they may receive while they continue to receive
benefits under the program. Earnings reports received for processing by the
Bureau are used for policing this retirement test. Beginning in 1959, these
policing functions were converted to an automatic data processing system.· The
conversion enabled the Bureau to limit the examination of earnings records to
those accounts which reflect earnings in excess of $1, 200 per annum, and made
it unnecessary to examine records for almost 1, 500, 000 accounts of individuals
in benefit status. In addition, valuable data and statistics, which were not
readily available heretofore, are being accumulated for study purposes. Apart
from the benefits which result from the elimination of a large clerically maintained card file, this system affords the assurance of accuracy and efficiency
not attainable by other means. Estimated annual savings resulting from this
change amount to $175, 000.
.
Revision of forms for certification of earnings. During 1959, forms used
for certification of earnings records for old-age and survivors' claims and for
disability claims were revised. These revisions and related procedural
changes, which eliminated the need for manual transcriptions in a large percentage of the cases, resulted in increased efficiency in the operations and a
- 66 -
reduction in claims processing time. Conservative estimates indicate that
these changes resulted in annual savings of at least $120, 000.
Processing requests for insured status. The Bureau processes approximately 350~ 000 requests each year from individuals who inquire about their
insurance status under the program. A new form was developed and used in
processing these requests. At least 25 percent of the cases under the new
procedure are completed entirely through the use of automatic data processing
equipment. In the balance of the cases the expenditure of clerk. time was substantially reduced through adoption of the new fo1'm, since it eliminated the
need for form and dictated letters. Estimated annual savings incident to
these changes are in excess of $100, 000.
.
•
Administrative accounting impl:'ovements. The Bureau has revised its
procedures to (a) strengthen the process for administrative control of funds;
(b) facilitate the year-end process for converting the salaries and expenses
appropriation accounts to an accrual basis; and (c) ch;;i.nge the general ledger
system by consolidating several accounts, improving the process for collection and deposit of reimbursable funds, and eliminating certain records
used to control travel advances. The effect of these procedural changes is
to reflect more accurate obligation data in 'the accounts and thus provide for
better fund ,pontrol, and to reduce the number 9f transactions necessary to
show the financial activity during the accounting period,
Future Plans
Accounting system. During 1960 a full .. sc~le i;iutomatic data processing
feasibility survey of the Bureau's administrative accounting system will be
conducted •. This study will be coordinated with similar studies of the use of
1
electronic e quipment in procurement, property control, personnel, and payrolling:' The ability to coordinate these related activities as an integrated
whole will have an effect upon the possible savings which can be realized
through the use of electronic equipment in these administrative activities.
Installation of advanced automatic data processing equipment, During
fiscal year 1960, two of the electronic machines in use will be replaced by
more advanced mode ls, and a third. machine of the advanced type will be added
for use in the Division of Accounting Operations. The new machines will have
several advantages over those presently in use, the two most important of
which are tJi.e increase in speed of input-output and of internal proces~ing.
These machines will be used to expedite processing individual earnings
reports and improve our file reference service. After installation of the
third machine, practically all earnings records operations following the
initial key punching of earnings will be performed by electronic equl.pment.
- 67 -
All programs for work now performed on the present machines are being
rewritten for conversion to th~ new models, and new programs will be developed for the file reference services. Use of the new equipment in the file
reference service will permit searching one-half the file each day in about
10 hours. Heretofore, one-third of the file was searched each day in about
the same length of time. Estimated annual savings resulting from this change
amount to $70, 000. During fiscal year 1960, further improvements are planned
which will permit the entire file to be searched in ten hours with reduced equipment rental costs.
Employer correspondence on reported earnings items. The Bureau 1 s
DiV'ision of Accounting Operations plans to send punched card form letters to
employers regarding earnings items which were reported incompletely or
incorrectly. This form will be used when the employers have four or less
items which require correspondence and will cover about 90 percent of all
employers to whom we send correspondence. The use of the punched card will
provide a form suitable for machine use, which will eliminate manual sorting
and pulling operations involved in processing the replies.
Study of use of automatic data processing in claims operations. The Bureau
will study the possible use of electronic equipment in the claims processing operations in the payment centers. A pilot installation is planned for the Chicago Payment Center early in fiscal year 1960 to determine whether this equipment will
facilitate the locating and control of claims folders in process.
BUREAU OF PUBLIC ASSISTANCE
1959 Accomplishments
Budget improvem·ents. Preliminary work began on a new procedure for
obtaining cost data for personal services by Division and by budget activity, and
a new budget card was developed for use in obtaining required information for
supporting the budget request. It is anticipated that the new procedure, which
more closely coordinates budget development with accounting and payroll on a
continuing basis, will facilitate the budget preparation process.
Property accounting. The Bureau system of controlling and accounting for
property was revised to comply with the Department's property principles. The
new system provides general ledger control over nonsensitive items and management control over sensitive items.
Other accounting improvements. Starting in July 1959, a new allotment
accounting procedure was installed in line with one of the recommendations made
- 68 -
by the Department's Division of Internal Audit. A worksheet has also been
developed for obtaining at the end of each month, cost data for each object
(other than personal services and related costs) by budget activity and division. This procedure will provide management with more useful data and
provide better support for the budget.
Future Plans
Internal operating instructions for the new budget procedures and for
the new system of controlling Bureau property -v;rill be developed and issued
during fiscal year 1960.
- 69 -
IDEPARTMENT OF THE INTERIOR
' .
' Financial Management Improvement Program
Agency Report:l< of Stattts . as of June 30, 1959-
Organization ·
Bonneville Power Ad.min.
Complete
Bureau of Indian Affairs
Partial
Bureau of Land
Complete
Manag~ment
Complete
Par tial
I
Complete
Partial
Complete
6/61
1962
Complete
Complete
Indefinite
Complete
Complete
7/61
7/61
1963
12/59
Complete
1961
6/60
Complete
Partial
l/6o
Bureau of Reclamation
Office of the Secretary
Complete
1/53
5/54
Nat.ional Park Ser vice
1/60
Part,ial
·12/59
Complete
Office of Territories :
Alaska Railr oad
Complete
Director's Office
?/60
9/57
12/60
1962
Compl,ate
Complete
1963
. 1963
Govt. 0f American Samoa
Trust Territory of
Pacific Islands
Complete
7/52
7/62
7/62
Complete
3/54
7/61
1962
Virgin Islands Corp.
Complete
Complete
Complete
Southeastel:'n Power Ad.min.
Complete
7/52
Complete
Complete
Southwestern Power Admin.
Complete
11/52
Complete
Complete
1
--- Not Applicable
u.s.
Fish and Wildlife
Ser vice:
Bur~au of Connnercial
Fisheries
Bureau of Sport
"Fisheries arid Wildlife
1
8/59
Complete
1
l
Accounting System
Cost-Based Budgeting ,
Used
!Budget Prej.A.pproved by' Submission
Comp.Gen. for Approval Internally sentation
Bureau of Mines
Geological Survey
l
Accrual
Basis
*
7/61
7/61
7/62
1963
7/60
7/61
7/6~
1962
This tabulation reflects the agency's own evaluation of the degree to which it has
attained accrual accounting and cost~based budgeting objectives, but does not neces sarily signify that the General Accounting Office, the Bureau of the Budget, and
the Treasury Department agree with those representations. The dates represent
either an agency target for a t~ainment of an objective, or the date on which the
indicated action was taken . ·
- 71 -
Organized improvement program. The Department of the Interior recognizes the management benefits that are derived from an integrated system of accounting, budgeting, programming, and reporting, and is working toward
improvement in these and other areas of management. While the Department
has made some significant accomplishments in the conduct of the financial management improvement program, it ~ecognizes that departmental staff must continue to work with the bureaus, the General Accounting Office, and the Bureau
of the Budget in a cooperative manner to provide financial management systems
best suited to the specific needs of the various operations of the Department,
with continued followup for refinements and the application of new methods and
concepts.
Allotment simplification. The Department has been giving consideration to
simplifying its policy of controlling bureau funds at the activity level. This
policy has been examined on several occasions, keeping in mind the Department's
responsibilities under the Anti-Deficiency Act, and its commitment to the House
Appropriations Subcommittee that programs will be executed and funds expended
in accordance with the intent of Congress. However, the Department intends to
again review this policy, considering both the above factors and the objective of
Public Law 84-863 that allotments be maintained at the highest practicable level.
BONNEVILLE POWER ADMINISTRATION
1959 Accomplishments
Manual improvements. The accounting system manual was completed and
submitted to the Comptroller General for approval. The budget procedures were
reviewed, rewritten, and issued in formal manual releases.
Internal audit. The internal audit staff was transferred from the Branch of
Finance and Accounts to the Office of the Director of Administrative Management,
to produce more independence and broaden its scope of coverage.
Financial reporting. Proposals for improvements in financial reporting for
the Columbia River Power System have been worked out with the Bureau of
Reclamation and submitted to the Department of the Interior for consideration.
Payout schedules. Revised payout schedules were prepared for each Corps
of Engineer project for which Bonneville Power Administration is the power
marketing agent, The schedules show actual historical data through June 1958,
and forecasts · through fiscal year 1965. Agreement on the schedules was
reached at the staff level, but formalization of the agreement at higher levels
may be deferred until definitive cost allocations are available for the projects.
- 72 -
Future Plans
Automatic data processing. At present, all entries to the general ledger
are recorded by transfer posting. At the end of each month it is necessary to
prepare a trial balance by typing all of the accounts and their balances. In the
coming fiscal year it is proposed to keep the general ledger through automatic
data processing by the use of punched cards, which can also be used to prepare
the trfal balance. This change in procedure will save considerable time in the
maint~·nance of the general ledger and the preparation of the trial balances.
Studies are underway covering the use of electronic equipment to compute
wholesale power bills for the Administration. The studies will cover all accounts metered by digital meters. The punched tapes from these meters can be
used to produce punched cards showing each half hour coincidental demand and
other information needed for billing purposes. A program is being prepared so
that the punched cards can be processed through the computer, which will produce the required billing information in a minimum amount of time and with
savings in manpower.
Settlement of accounts. The Administration is considering plans for the
settlement of accounts with its customers on a net balance basis. Under the pro ..
posal, the non-Federal utilities would bill the Administration for wheeling power
over their lines, and the Administration would bill the non"Federal utilities for
power supplied and wheeling of power over the Administration's lines. The nonFederal utility or the Administration, as the case may be, would then remit to
the other party the net balance in money dµe for the billing period.
Transmission system payout procedures. Studies are continuing with respect
to the basis for computing and reporting payout for the Bonneville transmission
system, for the method of reporting the financial results for the power system
as a whole, and for presenting the status of repayment of the generating projects.
Objectives sought include simplification, the elimination of multiple sets of data,
and the use of official data acceptable to all agencies involved in the operation.
Appropriation language revision. Language proposed for the operation and
maintenance appropriation in fiscal year 1961 will contain a provision to author ...
ize transfer of consigned stock to maintenance expense accounts. Transfer of
these materials from construction inventory to maintenance accounts will permit
simplifications in accounting procedures.
Revolving fund legislation. S. 2311 was introduced in the 86th Congress to
establish a revolving fund for the Bonneville Power Administration. This involves
use of revenues for operation, maintenance, and replacement costs, while appropriations would be used for construction costs. Business-type budget statements
to be used with the revolving fund have been worked out and agreed upon by staffs
of the Bureau of the Budget and of the Department of the Interior.
- 73 -
BUREAU OF INDIAN AFFAIRS
Status
The Bureau's accounting system, approved by the Comptroller General in
January 1953, provides for the daily accrual of supplies, materials, equipment,
and certain contractual services on a received basis. Other objective classifi ..
cations, such as personal services, travel, and transportation, are accrued
generally on a voucher basis except for the end of each fiscal year--when predetermined representative amounts are accrued insofar as they are bona fide
obligations and are applicable to the operations of the fiscal year co:ilCerned.
Changes in the allotment pattern are required to place control of obligations at
the highest practical level, and further attention must be given to the development of costs on a functional basis to aid in the management of activities.
1959 Accomplishments
Accounting system. Cost accounts for the subactivity Operation of Schools
were revised to provide for systematic cost measurement of tentatively approved
standards developed by the Branch of Education. These cost classifications coincide functionally with the major aspects of the subactivity and provide objective
data against which the tentative standards will be measured. This revision,
placed in effect for fiscal year 1960, will materially improve the fiscal data
available for program management and budgetary analyses.
Effective in July 1958, accounting offices were instructed to accumulate the
cost of Federal contributions to employee benefits tinder a separate cost classification in relation to the financing activity allotment account, except where
separate work orders or specific projects are involved. In the Bureau activities
from which the vast majority of personnel are paid, this saved time in both the
payroll sections and operating accounts units by eliminating the necessity for
computing and recording the contributed amount with respect to each employee.
It also provides better budgetary data,
Common services. Effective in July 1959, the Branch of Plant Management
assumed responsibility for providing common plant and facilities services. Each
of the ten common services involved is accounted for costwise as an operating
expense feature of a consolidated clearing account initiallX' financed from a
s'i.:ngle allotment account. F~rmerly, these services were either singly or in
selected groups financed on a clearing account basis under various activity accounts or wholly as a cost of the dominant program of a particular installation,
depending upon individual circumstances. This procedure is consistent with the
plan of synchronizing budgetary and fiscal classifications with program supervisory responsibilities. The benefits expected to accrue include concentration
of cost data for improved program management and budgetary analyses, more
- 74 -
accurate reflection of full operational costs for the benefiting program activities,
and reduced reporting workload for the accounting staff.
Futu:r'e Plans
Automatic data processing. Plans for fiscal year 1960 .include a study to de. termine the feasibility of integrating the Wind River Irrigation Project billing and
recordkeeping procedure with the Arapahoe-Shoshone monthly per capita roll,
utilizing electronic equipment available at a private service bureau in Salt Lake
City, Utah. A problem in this operation involves the collection of irrigation
operation and mainte~ance assessments from Indian land owners by means of
offsets from their monthly per capita payments. ,Since an individual normally
owns undivided interests in several different tracts of land, and the individual
heirship interests vary in degree, automatic data processing appears to be a
solution to the workload problem. The plan envisions a "packaged" multiple
purpose oper.ation which would include (a) preparation of the monthly per capita
roll; (b) preparation of bills for annual assessments by owner. listing each heirship interest; (c) posting bills to water users ledgers; (d) preparation of monthly
receipts for offsets against per capita entitlement; (e) posting monthly offsets to
water users ledgers, bqth by tract and by individual owner in said tract; and (f)
providing "run" reports to reflect such actions.
Plans for fiscal year 1960 include installation of a Bureau-operated automatic data processing office to serve the Gallup Area. The proposed installation is intended to serve other purposes besides those directly related to financial
management, and feasibility studies concluded in May 1958 indicate estimated
annual savings of $34. 000' based upon economic data current as of that time.
The feasibility study included such financial management activities as payroll and
inventory control, and other operations of a statistical nature.
BUREAU OF LAND MANAGEMENT
Status
Action toward the simplification of allotments and better synchronization of
the budget, accounting, and organization classifications is to a degree dependent
upon the decision on a request now before the Department for simplification of
the Bureau's activity structure.
1959 Accomplishments
Capitalization program. During 1959 the Bureau made good progress in its
program to capitalize it~ timber access roads in Oregon. A value of approximately
- 75 -
$26, 000, 000 was capitalized and put under accounting control in the general
ledger and supported by individual road records.
Financial reporting. The operating officials of the Bureau are required to
submit quarterly reports which show physical progress on the annual work plan.
A quarterly financial report related to these physical progress reports was developed and is being used effectively by Bureau management. This report reveals the status of apportionment for each activity at the Area Office level, and
the balance of funds available for obligation. It al.so contains data on accrued
expenditures and the percentage of expenditures plotted against the estimated
cost of the work plan. This information, when used in connection with the physical progress reports, discloses the adequacy of funds available for the work
p:i;ogrammed.
Future Plans
Cost accounting. A cost system will be developed to adequately meet the
management needs of the Bureau. Before this is achieved, revisions to simplify
the activity structure should be reviewed.
Budget structure rev1s1ons. An appropriation language change is being proposed in the 1961 Budget submission which would place all appropriations for
construction and maintenance of access roads and reforestation and improvements
in the revested Oregon and California Railroad Land Grant area in one fund. That
fund would be reimbursed from 25% of the receipts from the sale of timber and
other products from these lands.
Internal audit. The Bureau's internal audit staff is responsible for auditing
all accounting and financial transactions of the B-ureau, including the revenues
from public lands, and the appropriation, property, and other general ledger
accounts. Generally, because of the limited staff, the internal audit has been
confined principally to the audit of revenues. It is planned to expand this staff
to enable audit of all major accounting functions of the Bureau at least once each
year.
BUREAU OF MINES
Status
Information developed from the present accounting system permits the preparation of a cost-based budget and provides cost data for management. The system of accounting for expendable property is presently under review and should
be completed during fiscal .year 1960.
- 76 -
1959 Accomplishments
Organization and staffing. A new accounting office was established at Mt.
Hope, West Virginia, to serve two Health and Safety Districts beginn,ing in
July 1959. Competent personnel were selected and trained to enable efficient
operation of this new office.
Accounting system. A new property accounting system has been installed
and manualized, based on a revision of accountability records and improved procedures for non-expendable capitalized property.· The new system is more
versatile and provides more simplified, accurate records.
A new system of cost distribution, optional to each region, was inaugurated
at the beginning of the fiscal year. This system provides for consolidation of
data by object class at the authorization level. Use of these procedures has reduced time and effort in preparing monthly OJ?erating reports and the object class
data required for preparation of budget estimates.
Financial reporting. A more efficient financial reporting system designed to
serve administrators at. all levels has been installed and manualized. Quality
has increased and uniformity has been attained among monthly reports prepared
throughout the regions.
Future Plans
Workload studies will be conducted during fiscal year 1960 in all finance offices to determine the man-hours required to perform various types of fiscal
work, A survey qf the system employed in accumulating and distributing overhead or indirect costs will be made in all regional accounting offices to develop
a uniform method of applying and reporting costs. A review of the expendable
property accounting system is being made where formal storerooms are main ...
tained, covering the methods of issuing, inventorying, and reconciling with the
general ledger.
BUREf\.U OF RECLAMATION
Status
The Bureau has operated under an.accrual accounting syste:m for a number
of years. The General Accounting Office granted approval in October 1950.
Several General Accounting Office qualifications involving matters of policy were
made, and agreements thereon have not been reached to date.
- 77 -
1959 Accomplishments
Review and appraisal of field operations. The Bureau has established a field
office in Denver which is in effect an extension of the Washington Office sys~ems
section. Its principal activity is to conduct a systematic review and apprai :ial of
the organization and operations of regional and project finance offices. In the
course of the reviews, the systems representative ascertains in what respects
the finance office personnel feel that the accounting system or procedures could
be improved. Their proposals can then be considered for Bureau-wide adoption.
In addition, this field office furnishes staff guidance to regional and project offices in installing, refining, and operating the financial and reporting systems,
and also assists in completing special finance assignments of a unique or complex
nature,
Automatic data processing. The Bureau has also established an office in
Denver to direct, coordinate, and supervise all phases of the Bureau's automatic data processing program. A systems study of administrative applications is being performed in that office to determine feasibility and the benefits
to be derived from processing through a medium size electronic computer. Such
a computer is on order and is initially being justified for the proces'sing of long,
complex engineering computations. During the year, two offices were authorized to lease punched card equipment and small electronic computers. Among
the operations now automated are payrolls, power billings, and property accounting. The small electronic computers are being used primarily for the less complex engineering computations.
Employee training. In conjunction with the Civil Service Commission Finan.cial Management Institute held in the fall of 1958, the Bureau held seminars for
field personnel in attendance to acquaint them with the operations of the headquarters office.
Internal audit. During fiscal year 1959, the internal audit processes were
given intensive review to facilitate audit of automatic data processing machine
input and output; to examine possible further applications of statistical sampling;
and to strengthen the program in the areas of procurement, property management, and budgeting.
Futm;ie Plans
Revolving fund legislation. Legislation has been prepared which will place
the Bureau's operations on a revolving fund basis. The draft legislation is now
before the Department.
Internal audit. In addition to continuing the improvement work of fiscal year
1959, consideration is being given to performing field examinations on segmental
- 78 -
bases, as opposed to integrated financial audits, to permit more frequent audit
contact and thu~ promote better management communication with field
installations.
GEOLOGICAL SURVEY
Status
Accrual accounting in a modified form will commence this fiscal year. An
internal system has been developed for reporting services and goods received
but not paid. However, the system will give effect to change in inventory values
only as of the end of the year.
1959 Accomplishments
The Geological Survey has developed an integrated system of payrolling,
leave accounting, cost distribution, and personnel reporting in conjunction with
the use of an electronic .digital computer. This system was informally submitted
by the Department to the General Accounting Office for review and approval in
June 1959. Under the system, the computer processes all transactions to the
payroll, leave, budgetary, and cost accounts; reconciles all personnel and monetary reports; and produces information required for personnel reports and for
position control for all types of rosters. The integrated system has resulted in
a reduction of payroll staff from 19 employees to 12 and some savings in accounting personnel. Annual savings in salaTy costs alone approximate $30, 000.
Future Plans
A vigorous program will be undertaken shortly to review and modify, as
necessary, the accounting system in the bureau. During fiscal year 1960, it is
also planned to study the application of cost-based budgeting as it relates to a
scientific agency primarily concerned in services as opposed to a product or plant
operation. The study will be designed to determine a measurement unit useful for
management planning and control, and will also afford an opportunity to evaluate
the results of the accrual accounting to be effected this year.
NATIONAL PARK SERVICE
Status
Based on a study of action needed to achieve better synchronization of the
accounting, budget, and organization classifications, changes in the budget
structure are to be proposed in the 1962 Budget.
- 79 -
1959 Accomplishments
Accounting system. Good progress has been made in the program for improvement in financial management, including the installation of accrual accounting. Benefits from the new accounting system are being realized at all levels of
management, particularly in the control of the expanded construction programs.
The Service maintains monetary and accountability controis on property and
inventory records. Fixed property acquired or developed prior to installation of
the new accounting system is in the process of being inventoried and picked up
on appropriate fixed property accountability .records and brought under financial
control in the general ledger. It is estimated that on a Service-wide basis over
60% of this work has been accomplished.
Internal audit. Prior to July 1959, procedures we.re established to change
substantially the internal audit practices so as· to place greater emphasis on
accounting and financial matters. Extensive revisions have· been made i~ audit
policies, guideline audit programs, and related aspects of audit activities.
Future Plans
Specific future plans call for the completion of the inventory of fixed assets
and for submission of the accounting manual to the General Accounting Office
for approval on or before the target date of December 1959.
OFFICE OF THE SECRETARY
Status
Accrual accounting.· The Working Capital Fund has been on an accrual basis
since July 1950. Accruals for other funds,. which are primarily administrative
appropriatio.ns, are made at fiscal year en-1.
Cost-based budgeting. The Working Capital Fund is presented on a cost
basis, while the salaries and expenses appropriation is scheduled to be submitted on a cost basis for fiscal year 1961, and all. otheTs. for fiscal year 1962.
Future Plans
It is planned to develop a chart of accounts and put into effect an accrual accounting system on a daily basis for appropriatiop.s made to the Office of Saline
Water. For the remainder of the appropriations rpaintaine<l by the Office of the
Secretary, accruals will continue to be developed at ye1u end.
- 80 -
OFFICE OF TERRITORIES
Status
Present budget and accounting classifications for the Director's Office are
consistent with organizational units. Allotments are made by budget activities,
except that for construction the allotments are made by project.
1959 Accomplishments
The Trust Territory of the Pacific Islands strengthened its property accounting procedures by establishing additional general ledger accounts and segregating
capital property into nine different classes. It also made the first complete inventory of all common use stocks on hand at Guam and in the districts.
Future Plans
Alaska Railroad. More effective accounting and administrative controls over
fixed properties and current inventories are being developed. These will be concerned with acquisition,. utilization, retirement and disposal activities, and
corollary accounting procedures.
Director's Office. An accrual accounting system, including property accounting and providing for accruals on a yearly basis, will be developed and installed by July 1960.
Trust Territory of the Pacific Islands. The improvement effort in this organization will deal with identified problems in accounting for in-transit items,
preparation of financial reports that accurately ·reflect assets and liabilities,
education and training, and conversion to cost-based budgeting techniques.
Virgin Islands Corporation, The Corporation is beginning a punched card
system in January 1960. In the initial stages the system will handle payrolls,
sugar liquidations, and related statements.
SOUTHEASTERN POWER ADMINISTRATION
1959 Accomplishments
Additional applications of machine accounting were initiated. Improved coding
of the source documents simplified recording, and better reporting resulted due
to the fact that cumulative totals are current at all times. Simplification and
time saving were attained in the balancing and preparation of quarterly reports,
- 81 -
especially the Statement of Sources and Application of Funds, and the Report on
Applied Costs and Accrued Expenditures. The nature of the coding system facilitated accumulation of data with reference to payroll costs, non-funded costs relating to leave, imputed costs on rents, and other costs resulting from disbursements and accruals.
Future Plans
Revolving fund legislation. S. 2312 was introduced in the 86th Congress to
establish revolving funds for both the Southeastern and Southwestern Administrations. In each of these organizations, the fund would be credited, without fiscal
year limitation, with all revenues and all moneys otherwise made available by
Congress for operation and maintenance costs in connection with marketing of
electric powel' and energy. This form of financing insures continuity of electric
service and continuous operation of generation and transmission facilities in
emergencies, and provides for repayment of the investment in generation and
transmission facilities.
For the Southeastern Power Administration, the revolving fund would enable
expenditures and applicable receipts of the agency to be more easily related to
each other, bring about an improvement in the overall financing of the activities
of the agency, enable the agency to meet its responsibilities in the transmission
and sale of electric energy in a more orderly and busines.s-like manner, and
permit a simplification of the system of accounts and better financial control
over all activities. The Administration would be authorized to record leave as
it is earned, permitting better cost accounting records to be maintained and payment of lump sum leave without adverse effect on current programs. The authority would be consistent with practices in other business-type activities of the
Government.
Accounting manual.. An overall review and revision of the Administration's
accounting manual is planned to reflect improved accounting procedures, and to
coordinate the accounting procedures to the maximum extent possible with the
General Accounting Office Manual and the Federal Power Commission Uniform
System of Accounts. The revised manual would be tailored to fit the needs of
the Administration and would be kept current by continuing annual review and
revision as required.
SOUTHWESTERN POWER ADMINISTRATION
1959 Accomplishments
Machine accounting. As a result of a prior study, maintenance of the allotment ledger was placed on an accounting machine in June 1958. During fiscal
- 82 -
year 1959 additions to this machine op,eration included the payroll records; work
orders; expense accoµnts; clearing accounts; stock accounts; vehicle operation
accounts; and registers for accrued expenditure, cash receipts, cash disbursements, and accounts receivable.
Work progress reports. Monthly status reports are now prepared in the
Brnnch of Budget a.nd Finance covering all work in progress. These reports
forth by work order number the amount of the original estimate, costs incurred
during the period and year to date, the balances available for completion, and
the completion date. The report furnishes current information on each work
order to the Chief of the Division of Operations and Engineering for use in scheduling operations and revising estimates and completion dates as required.
set
Employee training. Due to the absence of qualified applicants for technical
accounting positions in the Branch of Budget and Financ.e, training agreements
approved by the Civil Service Commission were carried out dur~ng the year.
One budget analyst completed a training agreement during the year, and one accounting technician completed the first six months of an 18-month training
agreement.
Future Plans
Machine accounting. The Administration is making studies to determine the
feasibility of maintaining plant accounts on the machine now in use.
Revolving fund legislation. S. 2312, which was introduced in the 86th
Congress, would establish a revolving fund for Southwestern Power Administration that would have the same features as tho~e outlined in the future plans of
Southeastern Power Administration.
U. S. FISH AND WILDLIFE SERVICE
Status
Organization and staffing. As of the end of fiscal year 1959, the two component bureaus of the Service, the Bureau of Sport Fisheries and Wildlife and
the Bureau of Commercial Fisheries, each assumed responsibility for its budget
and accounting functions. The Bureau of Commercial Fisheries also assumed
responsibility for providing financial management. services to the Office of the
Commissioner. This involved staffing and equipment adjustments, separation
of the work, establishm.ent of separate accounting entities" and determination of
future inter-bureau financial relationships.
- 83 -
Financing and control structure. Under the present financing structure,
similar operations in the Bureau of Commercial Fisheries are in many .cases
financed by more than one appropriation. This results in the issuance of parallel allotments and the maintenance of separate accounts for each activity.
Financial reporting is on the basis of allotment accounting, with obligations and
expenditures reported in relation to each activity.
In the Bureau of Sport Fisheries and Wildlife, simplification of the allotment structure so that allotments will not be issued below the Regional Office
level has not been completed. The target date for completion of this action is
July 1960. It is believed that this date is realistic, and will be met with assistance from departmental staff.
1959 Accomplishments
A study of the financial management problems in the Fish and Wildlife
Service was completed by a joint committee consisting of representatives from
the Department, the Service, and the General Accounting Office. The resulting
report points out that the Service is currently operating under an extremely
complicated set of financing procedures stemming from the multiplicity of funds
that finance its activities. This committee concluded that the financing of these
activities and the related accounting and reporting would be simplified if all ex ..
penditures of the Service could be made through "Special Accounts" in the
Treasury that would embody the "one-fund" principle. The committee further
suggested the development of an overall financial management system which
would embody (a} an overall budget which shows the estimated cost of each activity and the source of financing, (b) one allotment per activity to each regional
office based on its approved budget and work program, and (c) an accrual accounting system which produces meaningful reports that are related to the approved
budget and work programs.
Future Plans
Bureau of Commercial Fisheries. In implementing the joint study of financial management, this Bureau plans to reappraise the "one-fund 11 principle and
to work toward the development of procedures for an accrual accounting system
that integrates requirements for programming, budgeting, and reporting performance at the level of management responsibility. Under the proposal submitted by the survey team, .the accounting system will be developed to include
(a) general and subsidiary ledger accounts at each decentralized accounting location, including the required balance sheet, cost, income, budgetary, and reciprocal accounts; (b) budgetary control through allotments issued at the highest
level practicable consistent with assigned functional responsibilities and the
budgetary structure; (c) cost accounting integrated with the general ledger for
those operations of the Bureau where cost information will be useful to
- 84 -
management in evaluating performance in terms of the operating budget and in
comparison with similar operations; and (d) internal financial reports for the
use of management personnel at all levels of assigned responsibility.
Bureau of Sport Fisheries and Wildlife. In this Bureau, 'the work of the
joint survey team will be reappraised and action will be taken to develop an
accrual accounting system and to achieve the other objectives of this improvement program. In addition, the accounting, and auditing work in the Federal
Aid program will be taken over in fiscal year 1960 from the program operations
organizations and integrated into the administrative finance organization.
- 85 -
DEPARTMENT OF JUSTICE
Financial Management Improvement Program
Agency Report* of Status as of June 30, 1959
Organization
Accrual
Basis
Federal Bureau of
Investigation
Complete
Federal Prison System
4/60
Complete
Complete
Complete
6/60
Complete
Complete
Immigration and
Naturalization Service
6/60
6/60
6/60
Complete
Legal Activities and
General Administration
Complete
6/60
Complete
Complete
*
Partial
This tabulation reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does
not necessarily signify that the General Accounting Office, the Bureau of the
Budget, and the Treasury Department agree with those representations. The
dates represent either an agency target for attainment of an objective, or
the date on which the indicated action was taken.
Conduct of improvement program. Staff of the several bureaus of the ·Department of Justice have worked closely with the central agencies in the development of improved financial management practices, Joint studies by the
Department and the central agencies have resulted in some starts toward major
improvements in recent years. Among these was a reorganization of the administrative staff functions at the departmental level, which included the establishment of a Budget and Accounts Office that when adequately staffed will provide
policy guidance and leadership for the constituent bureaus in a departmental program for improvement of .financial management.
- 87 -
\\
For fiscal year 1960, the Department contemplates extension of the use of
accrual information in the management of operations, and completion of accounting systems in manual form, suitable for submission to the Comptroller General
for approval.
FEDERAL BUREAU OF INVESTIGATION
Status
The payroll system of the Bureau was approved by the Comptroller General
in October 1954. Work is underway on development of a manual for the complete
accounting system, in preparation for submission to the Comptroller General for
approval.
FEDERAL PRISON SYSTEM
1959 Accomplishments
Field examinations conducted by the central office of the Bureau of Prisons
have been consolidated so as to provide more complete reviews of the records
and procedures of that Bureau and the Federal Prison Industries, Inc. Personnel
management surveys are made concurrently with such examinations.
Future Plans
Accounting and procurement consolidations. The general ledger, vouchering,
payroll, and equipment accounting operations of the Bureau of Pdsons 1 New York
Institution will be transferred to Lewisburg, Pennsylvania. The cost accounting
operations of the National Training School also are to be transferred to
Lewisburg, and some procurement activities are to be shifted from New York to
Danbury, Connecticut. Further consolidation studies and extension of warehousing and payroll improvements are also under consideration,
Property accounting. The property records for equipment in the Bureau of
Prisons are to be converted. from a 11 card per item" to a "card per group" b.asis.
Internal audit. The effectiveness of internal audits is to be improved by
placing more responsibility for such reviews at the institutional level.
- 88 -
IMMIGRATION AND NA'.fURALIZATION SERVICE
Status
While work is still underway to complete the development of accrual accounting and related internal procedures in preparation for submission of the system
to the Comptroller General, informal procedures have been employed to enable
submission of a cost~based budget.
LEGAL ACTIVITIES AND GENERAL ADMINISTRATION
Future Plans
Plans include a project in which the Management Office and the Budget and
Accounts Office cooperatively will review the organization, staffing, and procedures of the Budget· and Accounts Office--including particular attention to
internal audit and management reporting practices. Recommendations will be
developed for consideration and action by the Administrative Assistant Attorney
General.
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n·.EPAR TMENT OF LABOR
Financial Management Improvement Program
Agency Report* of Status as of June 30, 1959
Accounting System
Cost-Based Budgeting
Approve by Submission
Used
Budget PreCo .Gen. for A roval Internall sentation
Organization
Accrual
Basis
Bureau of Apprenticeship
and Training
6/60
10/61
6/60
1962
Bureau of Employees'
Compensation
6/60
10/61
6/60
1962
Complete
4/61
Complete
Complete
Appropriated Funds
6/60
10/61
6/60
1962
Bureau of Labor Standards
6/60
10/61
6/60
1962
Bureau of Labor Statistics
6/60
10/61
6/60
1962
Bureau of Veterans Reemployment Rights
6/60
10/61
6/60
1962
Office of the Secretary:
Working Capital Fund
Complete
4/60
Complete
Complete
Appropriated Funds
6/60
10/61
6/60
1962
Office of the Solicitor
·6/60
10/61
6/60
1962
Wage and Hour Divisi.on
6/60
10/61
6/60
1962
Women's Bureau
6/60
10/61
6/60
1962
Bureau of Employment
Security:
Farm Labor Supply Fund
*
This tabulation reflects the agency•s own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does
not necessarily signify that the General Accounting Office, the Bureau .of the
Budget, and the Treasury Department agree with those representations. The
dates represent either .an agency target for attainment of an objective, or the
date on which the indicated action was taken.
- 91 -
Conduct of improvement program. In October 1958, the Administra.tive
Assistant Secretary assigned an accountant to devote full time to the improvement
of financial management throughout the Department. Later a part-time assistant
was provided. This staff was assigned responsibility for the development and conduct of an organized financial management improvement p;rogram in accorda:rice
with the Bureau of the Budget Bulletin No. 57-5. The status, accomplishments
during the fiscal year 1959, and future plans for the more significant items are
discussed below.
Status
During the past year a review of the financial management areas of the
organization units and activity functions was completed for all bureaus._ Based
on this review an improvement program was developed and submitted to t4~
Bureau of the Budget in August 1959. Under this program, the Department plans
to submit three accounting systems to the Comptroller General for approval.
They include systems for the Secretary's Working Capital Fund and the Farm
Labor Supply Fund, and an overall system for administrative expenses and other
appropriated funds that is to be employed by all bureaus.
1959 Accomplishments
Allotment simplification. A review was made of the allotment structure
throughout the Department. In most bureaus, single allotments are made for
each appropriation or limitation. In instances where this did not exist,
changes were made where they could readily be put into effect without disturbing
management requirements for the control of funds. A study is still underway in
the Bureau of Employment Security where the allotment structure is more complex.
Synchronized classifications. This program included a review in all bureaus
of the alignment. of budgetary activity classifications with organizational program
responsibilities. As a result of this review, proposed revisions of the budget
classifications were submitted to the Bureau of the Budget for approval. These
changes were intended to bring about a closer alignment with the organizational
structure, facilitate preparation of the budget, provide more meaningful activity
classifications, and reduce accounting workload.
Reports and financial forms. A review of reports and forms used throughout the Department was started and has already resulted in the elimination of two
monthly reports. The objective of this review is to eliminate unnecessary r·eports
and to evaluate the substance of the remainder so as to provide management with
complete and pertinent information. The review will continue during the next
fiscal year.
- 92 -
I
Future Plans
I
f
I
r
I
I
Property accounting. Detailed monetary property records are presently
being maintained by the individual bureaus. It is planned to establish general
ledger control over these detail property records through current postings of
property transactions to control accounts.
Internal control practices. Internal review and evaluation of specific
management and program operations will be conducted from time to time when
considered necessary by the Administrative Assistant Secretary. For example,
a team will conduct an independent review of certain phases of the. operations
of the Farm Labor Supply Fund. Other internal control proced~res will be
examined and revised, or new procedures will be developed where necessary.
These areas include the proces.sing and payment of employees' compensation
claims,· the programs for auditing the State employment security offices., and
the field audit programs for the Mexican farm labor supply operations.
Internal cost-based budgeting procedures. During fiscal year 1960 it is
planned to accumulate costs through the use of cost distribution ledgers on a
checks-issued basis, with adjustments for accruals at the year end. Previously, management ·data were obtained through allotment ledgers maintained
on an obligation basis. The new system will provide the information needed for
preparation of cost-based budgets.
Other improvements. An evaluation of the present administrative operating
statistics. will be made as part of the 1961 budget examination and review. Other
plans include improvement of the present cost distribution for reimbursable
items, study of the feasibility of centralizing accounting procedures, and further
mechanization of accounting operations.
OFFICE OF THE SECRET ARY
1959 Accomplishments
I
The Working Capital Fund administered by this office has been operating
on an accrual accounting basis since its inception in July 1957. ~uring the past
year improvements were made in the basis for distribution of cost to the operating
bureaus, and in the con.tents of cost reports for management use. An accounting
manual for the operation of this Fund has been substantially completed, in
preparation for submission to the Comptroller General for approval.
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BUREAU OF EMPLOYMENT SECURITY
1959 Accomplishments
The Farm Labor Supply Fund was put on an accrual accounting basis in
July 1958, with monetary property accounting an integral part of the system.
Monthly balance sheets, profit and loss statements, and . operating reports have
been developed for management and external purposes. Payroll procedures in
the field office at El Paso, Texas were simplified to reduce the workload· in
payroll preparation. As a result, a reduction in overtime was effected. An
accounting manual for the operation of this Fund is being developed, in preparation for submission to the Comptroller General for approval.
- 94 -
POST OFFICE DEPARTMENT
Financial Management Improvement Program
Agency Report* of Status as of June 30, 1959
Organization
Post Office Department
*
Acot,ual
BMis
Accounting System
Cost-Based Budgeting
Approved
Submission
Used
!Budget Pre:
Comp.Gen. for Approval Internally sentation
!
byl
7/60
7/60
7/60
1962
This tabulation reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does
not necessarily signify that the General Accounting Office, the Bureau of the
Budget, and the Treasury Department agree with those representations. The
dates represent either an agency target for att,ainment of an objective, or
the date on which the indicated action was taken.
Organized improvement program. The financial management improvement
program of the Post Office Department is conducted by the Bureau of Finance.
That Bureau currently has a total of 306 employees, as compared with 501 in
November 1954. It is directed by an Assistant Postmaster General and a Headquarter's Deputy who is also the Controller. Under this leadership, there are 15
regional controller offices that have a quota of 2, 373 positions. This represents
a reduction of 252 positions since those offices were established. The 273 post
offices that have annual receipts of over $1 million have Chief Accountant's offices,
which employ 2, 642 personnel. For purposes of comparison, these offices had
6, 891 employees in July 1953. These reductions in staff have been realized over
the years in the development of the controllership operation throughout the
Department.
Fiscal year 1959 was a year of important progress in providing modern controllership to all levels of management. Significant accomplishments for that
year and plans for further development are set forth below.
1959 Accomplishments
Property accounting. Thirty pilot inventories were conducted in post offices
in Virginia, Georgia, and Tennessee during fiscal year 1959. After some procedural simplification, such inventories were completed at all 1 1 950 post offices
in Virginia and Tennessee before the close of the fiscal year. This comprehensive
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test provided a basis for estimating costs which will be useful in making recommendations for extending the program, and also disclosed considerable excess
and unserviceable equipment, the disposal of which will result in better utilization and lead the way to more efficient planning for future needs.
Automatic data processing. During fiscal year 1959, the use of a magnetic
drum automatic data processing system was extended to two more regional offices,
and now is applied in seven of the 15 regions. This electronic equipment is used
for payroll and leave accounting, with a resultant increase in speed and improved
manpower control. The use of this equipment was also expanded to include personnel statistics, which provides much needed information for internal and external reporting.
Cost analysis activities. Cost analysis application followed closely the pace
of the Post Office Department's mechanization program. As new capital improvements and operating revisions were installed, cost officers, in close liaison with
representatives of the Bureau of Operations, made "before" and "after" studies
of operating costs to determine the degree of benefit derived from these installations. Continuing progress reports were made on all Mail-Flo systems and
metropolitan area plans. A program was also undertaken to validate estimates
of operational savings attained through better vehicle utilization.
The program of using regional cost officers for instruction and observation
of cost ascertainment work in field installations was expanded during 1959.
Regional cost officers inaugurated cost ascertainment procedures in the majority
of newly designated offices and made instructional and observational visits to
field installations during all statistical periods.
Statistical or random sampling procedures were used to designate the offices
that will collect data for the Cost Ascertainment System in fiscal year 1960.
Second, third, and fourth class post offices will assemble and report data for use
in allocating revenues and expenditures to the classes of mail and services under
that system.
Controllership concept extended to post office level. Further extension of
the controller ship functions involved the establishment of reporting controls,
standardized report forms, and principles of interpretation and analysis for all
offices with annual receipts of $1 million and over; the revision of station examiners 1 procedures to provide better financial controls; the inauguration of
operating reports from the 60 largest post offices for each accounting period;
and provision for systematic visits to those post offices by management teams;
including the Regional Controller as a member, to review and analyze operating
results.
- 96 -
Mechanical accounting equipment was installed in a few larger post offices
that have numerous stations and branches, in order to consolidate promptly and
accurately man-hour information, work performance data, and daily financial
statements. This program was fully tested during the year, and will be extended
early in fiscal year 1960 to all post offices having 30 or more stations and
branches.
Ex:tended procedural improvements. Additional progress was made during
fiscal year 1959 in the further development of financial management improve ..
ments previously reported as being under way.
-- Customs collections remittances. The punched card procedure developed
to simplify postmaster remittances of customs collections was installed
in October 1958. This substantially reduces the number of checks issued
and provides improved controls.
Simplified accountable paper procedures. Punched card equipment was
put in use for direct requisitioning of bulk stamp lots from the Bureau
of Engraving and Printing by first anq second class post offices.
1
Air transportation. Domestic air carriers' settlements on seven and 28
day bases were established in October 1958 for 14 airlines and three
helicopter carriers. Full participation of all domestic air carriers is
assured for fiscal year 1960. Also, a standard mileage billing technique
was initiated with three Alaskan carriers, reducing settlement time by
75%.
Railroad transportation. Service payments on a "space-used" basis
were accelerated by a simplified procedure now used in connection with
46 railroad systems. Authorization for use of such procedure was effected in October 1958 for the eastern railroads.
·
Accounting for international mail. Improvements developed in fiscal
year 1958 were installed during the past year. These included the
processing of dispatch documents by automatic data processing machines,
the payment of i.nternational air transportation charges on the basis of
average route distances between sch~duled air stop points, and a simplified procedure for processing and settling international parcel post
billings.
Statistics and economics program. During the year an orientation and training program was initiated to expand the use of quality control charts and other
industrial-type statistical techniques. These techniques were specifically introduced in areas such as incoming and foreign mail data, auditing of freight bills,
air parcel post rates, delayed mail, cost ascertainment, and mail generating
characteristics of postal patrons.
- 97 -
Research was conducted on the subject of relating workload to manpower,
and on the development of basic mail count procedures by random sampling
methods. Economic data were analyzed and correlated with postal data, resulting in forward planning for such items as mail volume and population trends.
Management teams. During fiscal year 1959 management teams were estab ..
lished in each region, consisting of the Installations Manager, the Distribution
and Traffic Manager, and the Regional Controller. These teams periodically
visited the 60 largest post offices with a view to making the field operating officials more conscious of the needs of management, particularly covering econ ..
omies which can be effected by relating man-hours to volume of mail and by
meeting or bettering targets set for these offices.
Internal audit practices. The Internal Audit Division of the Bureau of the
Chief Postal Inspector launched a broadened and more comprehensive audit program during fiscal year 1959 and substantially completed the recruitment of
staff. Training sessions in the use of statistical sampling in audits were instituted, Increased use was made of the "vertical" approach to internal auditing
wherein coordinated or simultaneous examinations are made of par tictilar
activities at headquarters .and at selected field installations, and the more important findings are summarized in a composite report for management review
and action. Vertical audits were made of accountable paper, unliquidated obligations, metered postage controls, procurement of supplies and equipment, and
other functions. Still further use will be made of this audit and reporting approach
during fiscal year 1960.
Education and training. All supervisory personnel in the Divisions of Accounting, Cost Analysis, and Cost Ascertainment were given a thorough course
on how to be better supervisors. Under the auspices of the Bureau of Personnel
essentially the same program was conducted at regional controller offices.
Selected clerical personnel were given intensified instruction in accounting.
Future Plans
Accounting policy. A comprehensive statement of accounting policy is being
prepared for submission to the Comptroller General as a step towards approval
of the ace ounting sys tern.
Accounting system modification. Changes in the accounting system to facilitate the integration of appropriation and accrual accounting will be made during
fiscal year 1960. The system will continue to meet the need for control and accountability for funds as required by law. It will also provide for development of
accrued costs in accordance with generally accepted accounting principles for
integrating obligation and accrual accounting for capital items and inventories.
- 98 -
Property inventory controls. The inventories of supply items and new equipment in stock that were taken in 1959 in the Supply Centers and the Capital Equipment Warehouses are being placed on the books at cost values. Capital Equipment
Warehouse and major supply items will be carried under perpetual inventories
controlled dollar-wise by the general books. These will be verified annually by
physical count. Minor supply items will be expended and such inventories will
be adjusted by physical counts annually.
Following up on the personal property inventories that have been taken in all
post offices in Virginia and Tennessee, it is planned that the personal property
inventories of all other post offices and postal service activities not presently
under accounting control will be completed before the end of fiscal year 1960,
Procedures will have to be established for recordkeeping and control of (a) spare
parts maintained by post offices where mail handling has been converted to automatic mail handling machines, and (b) equipment to be installed in connection
with the overall Postal Improvement Program. Property records for Governmentowned buildings used by post offices, showing cost and accrued depreciation, still
have to be developed and approved.
Motor vehicle management controls. Improved reporting and control of the
utilization of the motor vehicle fleet are being developed to provide a basis for
more economical use of Government-owned vehicles and a reduction in rented
vehicles. In cooperation with the Bureau of Operations and the Bureau of
Facilities, consultants have been retained to survey the departmental, regional,
and field activities involved in operation of the motor vehicle fleet for the purpose of designing a new accounting and reporting system geared to present-day
management requirements and tied in with the overall accounting system,
Management teams, It is planned to extend the work of the management
teams to the 213 offices having annual receipts of between $1 million and $5
million.
- 99 -
DEPARTMENT OF STATE
Financial Management Improvement Program
Agency Reports* of Status as of June 30, 1959
Organization
Department of State:
Departmental and
Other Programs
Accru
Basis
Accounting System
Cost-Based Budgeting
~.pproved by Su mission
Used
-dget PreCo .Gen. for A roval Internally sentation
12/61
7/61
7/62
1964
Complete
Complete
International Boundary
and Water Commission
Complete
1/53
International Cooperation Administration:
Administrative and
Project Assistance
Programs
7/61
Partial
7/61
7/63
1965
Non-Project
Assistance Program
12/60
Partial
7/61
7/63
1965
*
This tabulation reflects the agencies• own evaluations of the degree to which
they have attained accrual accounting and cost-based budgeting objectives, but
does not necessarily signify that the General Accounting Office, the Bureau of
the Budget, and the Treasury Department agree with those representations. The
dates represent either an agency target for attainment of an objective, or the
date on which the indicated action was taken.
Conduct of improvement program. In the Department of State, a Joint Advisory Group on Financial Management was formally established in January 1959,
to cooperate and assist in the conduct of a financial management improvement
program in the area of Departmental and Other Programs. This joint group consists of a representative from each of the State Department, the Bureau of the
Budget, the General Accounting Office, and a designee of the Treasury Department as needed.
The International Boundary and Water Commission improvement program
was substantially completed several years ago. While refinements continue to
- 101 -
be made in the established system as required, no specific work of major significance is presently contemplated. I:h the International Cooperation Administration, the improvement program is conducted and reported on separately
by staff of that agency.
The status, progress, and future plans for the Departmental and Other Programs area and for the International Cooperation Administration are described
below.
DEPARTMENTAL AND OTHER PROGRAMS
Status
In the improvement effort for this area of the State Department, it is ex ...
pected that a review of the allotment system will be completed by July 1960, The
present target date for completion of budget and accounting classifications more
fully identified with the organization structure is July 1961. The presently estimated completion date for accrual accounting is based on the assumption that the
governing principles, standards and concepts will have been approved and the
system "pilot tested" within the Department prior to July 1961. The first full
fiscal year for which accrual data would be available is estimated to be 1962, On
this basis the first cost-based budget would be available for the 1964 appropriations.
1959 Accomplishments
Accounting system. A review was completed of the financial control system
employed in Washington and at selected foreign service posts in Latin America,
Africa, and Europe. A listing was developed of those problem areas which should
receive attention in the financial management improvement program. This is one
of the important initial actions toward development of a more comprehensive accounting system which will provide for accrual accounting and supporting information for cost-based budgets. A special departmental project team made considerable
progress toward the development of the framework within which the system should
be constructed, including governing principles and policies for accounting and
financial reporting.
Other improvements. Progress during the year included (a) mechanization
by the Office of Fmance of the payroll operations in Washington, which is the
first step in a program for improved payroll and accounting operations through
the use of automatic data processing methods; (b) development of a formal system
for reprogramming available funds to obtain better utilization of financial resources, including semiannual reviews by a committee of central and area budget
office personnel; ( c) establishment of a working arrangement with agencies
- 102 -
serviced under reimbursable programs, for the purpose of setting firm amounts
during the first month of each fiscal year; and (d) simplification of the allotment
system for the "Acquisition, Operation and Maintenance of Buildings Abroad"
appropriation.
Future Plans
Plans for further improvement include (a) examining the possibility of consolidating and rearranging the financing appropriations; (b) examining the possibility of simplifying the allotment structure and more closely relating budget,
accounting, and organization classifications; (c) establishing monetary accounting control over real and non-expendable personal property; (d) integrating
leave records with the electro-mechanical payroll system; (e) mechanizing
payroll, allowances, and leave accounting for all of Europe in a regional office
in Paris; (f) improving further the financing arrangements for administrative
services performed by the Department for other agencies, which involves reimbursements from about 120 appropriations under approximately 300 negoti ..
ated agreements; and (g) submitting for internal review and approval the
accounting system on which development was commenced in fiscal year 1959.
INTERNATIONAL COOPERATION ADMINISTRATION
Status
Accrual accounting. Improvement work in this area indicated that the
management need for accrual information varies with the three types of programs being administered under the Mutual Security Act. Further study of the
problem as related to each of the three programs has resulted in extension of
the target completion dates.
Approval of accounting system. In July 1955, the Comptroller General approved the Administration's accounting systems, except for the area of property
accounting. In view of the changes that have occurred since that time, work is
underway on needed revisions in preparation for submitting the systems for
re approval.
Cost-based budgeting. Further consideration has be.en given to changing the
program development process from an obligational concept to a concept of "aid
delivered." Some major problems will require resolution for successful conversion to cost-based budgeting. As an example, Administration programs are
negotiated and implemented through bilateral agreements with cooperating. governments. Whereas a budget presentation can provide estimated costs for such programs, the cooperating government generally controls the incurring of actual·
- 103 -
costs. Furthermore, due to the uniqueness and complexities of the Mutual
Security Program, four congressional committees, i.e., Senate Foreign Relations, House Foreign Affairs, and both Committees on Appropriations, are
consulted each year before the congressional budget presentation is prepared.
Conversion to cost-based budgeting will require advance clearance with these
committees regarding the changes in style, content, and format of the
presentation.
In consideration of factors such as these, it will be necessary to have the
historical benefit of at least two years of experience in accrual accounting before
the Administration can seek congressional authorizations and appropriations
using the cost-based budget concept.
Synchronized classifications. To improve this phase of financial management,
a review was made of the possibility of relating pertinent Washington program
support costs to the direct (country-distributed) costs of technicians and participants. The development of such a relationship was considered neither practical
nor desirable from the standpoint of management. Instead, the data were rearranged for the congressional presentation document for fiscal year 1960 to pull
together all costs for tech:i:iical support, and separately, all costs for participant
support. This made it possible for the first time to relate workloads to the
amounts justified. With this change, the synchronization of the accounts and the
budget activities is considered complete to the extent practicable.
Simplified allotments. To simplify the allotment structure, an analysis
made in fiscal year 1959 resulted in a further reduction of between 80 to 100 allotments. No additional action is considered necessary at this time.
1959 Accomplishments
Administrative program accounting. As part of the review of the present accounting system in this area, a test was made as of the end of June 1958 to determine the significance of accrual information. All missions were requested to
furnish accrued expenditure information obtained by the inventory method and to
comment on (a) the uses that could be made of accrued data, (b) whether accrued
expenditures would differ materially from disbursements, (c) the frequency with
which accrual data should be compiled, a~d (d) any other co.:tnments. Replies
from 53 overseas missions revealed that accrued expenditures amounted to about
95% of the amount obligated. The missions reported genera.Uy that accrued .expenditures for administrative appropriations during a fiscal year would not differ
materially from disburi:iements. The findings of this test will be used in working
towards satisfying accrual accounting requirements with respect to this program.
Project assistance program accounting. A draft manual order prescribing
·mission accounting procedures on an accrual basis for project•type assistance
- 104 ..
was developed and is being tested at three overseas missions; i.e., Turkey,
Taiwan, and Brazil. The missions in Brazil and Taiwan submitted their March
1959 quarterly allotment and project reports on the accrual basis. A noteworthy
feature of the project reports was the significant change in the progress reported
in terms of accrued expenditures on individual projects as opposed to the cash
basis of reporting. The Administration has extended the test period through
December 1959, and has sent the missions special fiscal year-end closing procedures for the accrual accounting system.
·
Non ... project assistance program accounting. The present accounting system
in this area provides financial information on the obligation of funds and cash
disbursements for commodity procurement. In addition, memorandum accounts
outside of the general ledger furnish "arrival" information that shows when such
commodities are received in the cooperating countries.
Cash disbursements in this program generally are made and entered into
the accounts well in advance of the arrival of commoditie.s at their destination,
and the value of commodities in transit is a significant figure. The tangible value
of the program begins to be realized when commodities are delivered into the
cooperating country's economy. Accordingly, the Administration is drafting procedures to integrate the. arrival memorandum accounts presently maintained by
the overseas missions into the formal accounting system. These procedures will
be finalized and issued as a manual order after being tested at selected missions.
Control of receivables. The Administration completed action to provide. that
all receivables would be reflected and controlled through the general ledger accounts. This added control resulted in substantial improvements in the administration of this area of the program.
Property accounting. Procedural orders have been issued which prescribe
dollar monetary accounting controls for all Administration-owned, nonexpendable
property. The procedures are expected to enable the Administration to (a) assure
actual receipt of all Administration~owned, nonexpendable property for which
procurement action has been initiated; (b) assure that the appropriate general
ledger account is charged with the value of all items received, and that this account is not credited for any items which have not been properly documented as
sold, transferred, or properly written off; and (c) make readily available for
reporting purposes the total dollar value of the Administration-owned, nonexpendable property.
Development of Controller personnel. Two training classes were conducted
during fiscal year 1959 in the Controller overseas intern program. This program is designed to use in overseas operatio:p.s a .limited number of younger staff
members who have demonstrated a high potential for professional growth. The
purpose is the development of the capabilities of younger men to fill controller-type
- 105 -
positions, so that they may assume positions of increasing responsibility as their
capabilities increase.
Permanent procedures were adopted in the past year to estabUsh an annual
Evaluation Panel. This Panel reviews the personnel records of all controller-type
personnel and, based on these reviews, promotions, as well as future assignments
and career development actions are initiated.
Interagency coordination of overseas fiscal operations. An interagency committee was 'established in 1959 to develop standardized policies and procedures
pertaining .to fiscal admini13tration in foreign countries for the State Department,
the International
Cooperation Administration, and the U. S. Information Agency,·
'•
to the extent practical.
This interagency committee has initiated studies of overseas agent-cashier
operations, overseas payroll procedures, and allotment obligation and expenditure
reporting. As standardized procedures are developed by th;e committee, em•
ployees required to perform fiscal operations for more than one agency will no
longer need a knowledge of'three different systems. Considerable savings in
supervision and training s~ould result in each agency involved in these operations.
Future::P.lans
Accounting system. Work will proceed toward the adoption of accrual accounting procedures. The tests being conducted on accounting for project assistance on a~ accrual basis and an evaluation of the procedure as well as any
modifications required, should be completed by the end of the fiscal year. In the
nonproject assistance area, the integration of the arrival accounting records with
the formal accounting system is· scheduled for December 1960. As revisions in
the systems are promulgated, clearance from the General Accounting Office will
be requested.
Budgeting. A "Budget Handbook for the Mission Controller" is being developed to convey to all senior personnel in overseas missions the .role of the
Mission Controller in the budget process, to serve as a guide for controller development, and to serve as a standard upon which a Mission Director can evaluate
the Controller 1 s budgetary performance •. This is expected to be finalized in fiscal
year 1960, and should serve to develop increased professional competence in this
vital area of the overseas mission structure.
Auditing. The Administration has agreed in principle to carry out a program
of review and evaluation of the administration of Title III of the Agricultural
Trade and Development and Assistance Act of 1954 (Public Law 83-480). While
this program is the responsibility of the Department of' Agriculture, it has been
agreed that the International Cooperation Administration will perform the overseas
- 106 -
audit function. The Administration plans to prepare a manual order prescribing
procedures and guidelines that will facilitate the review of the financial aspects
of non-profit American voluntary agencies who receive donations of surplus stock
from Department of Agriculture for distribution to needy persons in foreign
countries.
A review of all construction contracts financed by the Administration is
planned to set up standards for the financial management of such contracts. A
sampling will be taken to determine the extent of reviews and appraisals performed and the post audit exceptions taken. Audit standards will be developed
for each broad contract category. It is expected that this study will improve the
financial management aspects of construction contracts financed by the Administration and facilitate contract performance.
Mechanization. Effective in fiscal year 1960, attachments to the bookkeeping machines will be installed which will produce perforated tape as a byproduct
of posting to the allotment accounts. TP.e perforated tape will be used to produce punched cards, which will provide greater flexibility in the distribution of
cost data for lower organizational levels, and will also permit the preparation of
reports by means of ele.ctrical accounting machine equipment.
Simplification of foreign currency allotment methods. Discussions are being
held internally and with Bureau of the Budget and Treasury representatives to
develop methods of improving the administration of Public Law 83-480 foreign
currencies. The major problem in this area has been the existing policy of prohibiting the apportionment of Public Law 83-480 proceeds prior to actual deposits.
A system of advance apportionments should save considerable time and money in
the administration of the program through more expeditious use of local currency
deposits, thus minimizing the depreciation of local currency open balances. Test
cases requesting advance apportionment will be presented to the Bureau of the
Budget for approval.
Automatic data processing. A steering committee has been established to
make a study of the areas in which automatic data processing may be utilized
profitably. This study will consider the volume of data applicable to such processing, the potential benefits in terms of costs of alternative methods, and the
potential for improving implementation of programs and supplying management
with required information. The committee will submit recommendations as to
how the Administration should proceed in this area.
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DEPARTMENT OF THE TREASURY
Financial Management Improvement Program
Agency Report* of Status as of June 30, 1959
Organization
Accrua
Basis
Accountin System
Gos -Based Budgeting
Approved by Submission
Used
Budget PreCom .Gen. for A roval Internall sentation
Bureau of Accounts
Complete
12/60
12/60
1961
Bureau of Customs
Complete
7/60
Complete
1961
Bureau of Engraving
and Printing
Complete
1/52
Complete
Complete
Bureau of the Mint
Complete
1/53
Complete
Complete
Bureau of Narcotics
12/59
6/60
6/60
1961
Complete
12/60
1/60
1961
Complete
12/60
12/60
1961
Internal Revenue Service
Complete
6/60
Complete
1961
Office of Administrative
Services
Complete
12/60
6/60
1961
Office of tho Treasurer
of the United States
Complete
5/60
Complete
1961
U. S. Coast Guard
Complete
Complete
Complete
6/60
1961
Bureau of Public Debt
U.S. Savings Bonds Div.
9/49
U.
s.
*
This tabulation reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and' cost-based budgeting objectives, but does
not necessarily signify that the General Accounting Office, the Bureau of the
Budget, and the Treasury Department agree with those representations. The
dates represent eith~r an agency target for attainment of an objective, or the
date on which the :i.ndioated action was taken.
·
Secret Service
Complete
6/60
- 109 -
Organized improvement program. In general, the Treasury Department
bureaus have made substantial progress toward accomplishing the objectives of
the program for improvement of financial management. During the year the Department conducted an appraisal of progress and status in all bureaus under the
continuing improvement program. Aside from providing general guidance and
stimulus, this appraisal has served to pinpoint areas where particular bureaus
can use departmental staff assistance in developing definitive targets and in implementing plans. Such staff assistance is being furnished in a number of cases.
During calendar year 1960, the Department has scheduled the submission of
accounting systems to the Comptroller General for those bureaus which have not
yet received the necessary approval. Appropriation requests on a cost basis
have been scheduled for the 1961 Budget. Adoption of accrual accounting is
scheduled to be completed in all bureaus during calendar year 1960. The Department plans to work with the bureaus toward the development and utilization
of the most meaningful financial reports for management, including costs in relation to workload performance. In this connection, departmental staff assistance will be made available, where needed.
Internal audit. The Department has developed internal audit programs in
all of its bureaus as an integral part of the fiscal control sys terns. Although
varying degrees of progress have been achieved in the respective bureaus, all
have established a formal internal audit policy; have assigned audit personnel to
perform the function; and, year by year, are increasing the scope and depth of
coverage. The departmental regulations provide basic requirements with respect
to fiscal internal audit performance by the bureaus. The departmental program
is coordinated by staff assigned for this purpose in the Bureau of Accounts. It
is not expected that the present internal audit program will be expanded significantly in fiscal year 1960. However, audit techniques are improving and greater
benefits should accrue.
Automatic data processing. The Department's program for utilization of
automatic data processing systems in its large-scale operations is especially
significant. Information on progress in this program is highlighted in Part I of
this report, and in the following material covering the individual bureaus.
The development and application of automatic data processing systems constitute a significant part of the Department's overall program which is going
forward as a joint effort of bureau and departmental staff. Plans outlined below
with respect to the Bureau of Accounts, Division of Disbursement, have special
interagency significance and are expected to materialize early in fiscal year 1961.
Extensive planning is under way with long .. range objectives for a comprehensive
system in the Internal Revenue Service.
- no -
BUREAU OF ACCOUNTS
~omplishmencs
.Allotment simplification. Simplified allotment procedures were established
for the Bureau's salaries and expenses appropriation. This was based upon a
reduction in the number of quarterly allotments from seven to three.
Procedure manual. An operating procedure manual covering administrative
accounting and fiscal reporting in the central office was developed. A manual
covering payroll activities, with the exception of a few exhibits, was completed.
Disbursing activities. The Division of Disbursement's continuing improvement program resulted in procedural, equipment, and organizational changes
which effe,cted annual recurring savings of over $500, 000 and a non-recurring
saving of over $150, 000. These improvements included such changes as closing
of the New Orleans Disbursing Office, use of electronic checkwriting equipment,
use of tabulating cards from agency systems for writing checks; and conversion
of addressograph plate files to punched cards.
Future Plans
Disbursing activities. Significant improvements in disbursing are expected
in conjunction with the developments in the administrative agencies on the application of automatic data processing systems to their accounting functions. The
Social Security Administration is installing a pilot automatic data processing
system for its disability accounts in the Baltimore Payment Center early in
fiscal year 1960. The Veterans Administration is centralizing its benefit accounting in the Chicago area (at Hines, Illinois) under an automatic data processing system in January 1960. Coordinately, an automatic data processing
installation is scheduled for the Treasury regional disbursing office in Chicago
early in fiscal year 1961.
The Chicago automatic data processing disbursing operation will involve a
monthly volume of five million veterans 1 checks. About four million other checks
will be prepared monthly with the same equipment (e.g., social security and
public debt interest payments). The inter agency significance of the new system
is evident from the planned results which are outlined below as examples rather
than a complete statement of all the advantages to be derived.
-- Payment records required for checkwriting in the disbursing office
will be on magnetic tape. For veterans 1 payments, the payment tape
file will be updated prior to checkwriting directly from the periodic
magnetic tape furnished by the Veterans Administration system. For
the other classes of payments updating will be done by tabulating cards
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until such time as the agency involved is in position to furnish magnetic
tape as a product of its own system.
All payment records on tape for veterans 1 benefits will carry a geographic code which will be punched automatically into the checks. The.
disbursing office will sort the checks mechanically according to States,
the most populous cities, and various foreign destinations--a matter of
significance to the Post Office Department.
Conventional check issue lists will be eliminated in the Chicago office
for the approximate nine million checks prepared monthly with magnetic tape (25% of the Government's entire check volume). A record
of every check issued will be made readily available in the disbursing
office, on magnetic tape, compatible as direct input for the automatic
data processing banking system of the Office of the Treasurer of the
U. S. --an element of basic integration with the Treasurer's operations.
Disbursing offices. All regional disbursing offices of the Division presently
issue veterans 1 benefit checks. As a consequence of centralization, certain offices are scheduled to be closed soon after their veterans 1 workload has been
transferred to Chicago and their other workload has been distributed to other
appropriate regional disbursing offices. Annttal recurring savings to the Division, following the conversion period, is expected to be almost $750 thousand as
the result of the consolidation of offices and streamlining of disbursing operations
with magnetic tape payment files.
BUREAU OF CUSTOMS
1959 Accomplishments
Revised pr.ocedures were established for reporting collections and deposits,
acconnting for transportation expense, and processing delinquent accounts, It is
estimated that the revised procedures will save several man-years throughout the
Bureau.
BUREAU OF ENGRAVING AND PRINTING
1959 Accomplishments
Manual development. Development of integrated accounting and operating
manuals for the production ,divisions resulted in the issuance of formalized procedures for several organizational components, and the conduct of a survey in
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the Ink Manufacturing and Testing Division. This survey produced several
recommendations for revision of accounting procedures which were adopted,
Machine accounting. The review of clerical and accounting functions to
determine the feasibility of adapting them to machine application resulted in the
establishment of more economical accounting machine processing of postmasters'
requisitions for bulk quantities of postage and savings stamps; and a determination that machine methods will be used to perform the clerical work in connection with inventory control of dies, rolls, and plates."
Cost accounting. Review of segments of the cost accounting system produced some significant revisions, including extension of job order costing to
minor products, use of production averages instead of workload standards for
cost distributions, and adding cumulative current year average costs to the
month-by-month comparisons shown in product cost statements.
Future Plans
The improvement efforts mentioned above are continuing programs that will
go on in fiscal year 1960. Additional manuals will be developed in connection
with impending operational changes; machine methods will be extended to other
operations, including one already identified in connection with inventory control;
and the cost accounting review will give particular emphasis to improving work
flow, methods, and reports to management.
BUREAU OF THE MINT
1959 Accomplishments
Internal accounting procedures in the mints were revised to provide for ad ..
justment of metals wasted in operation upon completion of reimbursable jobs
(foreign coinage orders), rather than determining the wastage at the end of the
fiscal year.
Future Plans
Accounting system. The accounting system in the manufacturing divisions
of one mint will be revised to give better control over the flow of material between functions and to provide more accurate data on work in process. This
project results from the installation of modern manufacturing equipment and
changes in operating procedures.
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Financing pfactices. Consideration will be given to the Comptroller General's
recommendation that. the Bureau's operations, except gold and silver purchases,
be financed from seigniorage and other revenues.
BUREAU OF NARCOTICS
1959 Accomplishments
As work on revision of the accounting system proceeds, an accounting manual
will be developed in preparation for submission to the Comptroller General for
approval. In the course of this work, financial reporting improvements were
made to keep management more currently informed as to operations.
Future Plans
The Bureau plans to review operations with a view toward effecting improvements in fiscal operations, improving the timeliness and quality of information
reported by district offices, and strengthening internal audit procedures.
BUREAU OF THE PUBLIC DEBT
1959 Accomplishments
Accounting system. A new mechanized public debt accounting system was
installed. As a result of this action, the Division of Public Debt Accounts and
Audit was reorganized and is studying staffing needs. An accounting system
manual and related procedural manuals are being prepared.
Automatic data processing. In October 1958, the Parkersburg, West
Virginia, office began full-scale application of an automatic data processing
system to its auditing and accounting operations and to the maintenance of records
concerned with Series E punched card savings bonds. The system provides for
the conversion to magnetic tape of accolinting and registration data from the card
bonds, registration stubs, and control documents. Thereafter, the system is employed to audit and/or balance individual bonds and stubs against control records;
classify accounting data and develop statistics; prepare accountability reports;
maintain alphabetic registration records of issues and numeric records of issues
and retirements, servicing inquiries on the basis of such records; and compute
quarterly fees payable to qualified paying agents.
- 114 -
Savings bonds operations. The Bureau, with the cooperation of the Federal
Reserve System, designed and installed a combined transmittal letter and control
card for retired savings bonds operations.
Future Plans
Employee training. The Division of FUblic Debt Accounts and Audit plans to
establish a management intern type of development program to aid in filling its
future staff needs.
Public debt interest accounting. A review of public debt interest accounting
will be made to determine whether or not changes in that area are feasible.
Savings bonds and stamps operations. The Bureau and the Federal Reserve
System will study the feasibility of using a combined transmittal letter a~d control card for card bond registration stubs. The form would be similar to that
used for retired bonds. The Bureau, the Post Office Department, and the
Federal Reserve System are cooperating in working out the details of a project
designed to simplify the processing of paid United States Savings Stamps.
INTERNAL REVENUE SERVICE
Status
Accrual accounting. The application of accrual accounting with respect to
administrative activities in the Internal Revenue Service, which takes into account undelivered orders, inventories of expendable and non-expendable property, and accrued annual leave, has been completed.
Cost-based budgeting. The 1961 appropriation request will be submitted on
a cost basis reflecting adjustments for undelivered orders and inventories of expendable items. This is as far as the Service contemplates going in this respect
until it can develop satisfactory cost finding methods which will furnish cost
data of value for the management of activities.
1959 Accomplishments
Accounting system. A major accomplishment was the completion of the program for payroll mechanization by transfer of the payroll operations of four
western regions (Chicago, Dallas, Omaha, and San Francisco) to the Western
Service Center (Ogden), resulting in net estimated savings of 24 man-years. Another significant accomplishment was the revision of reporting procedures for
personnel analysis, turnover, and the monthly report of Federal civilian
- 115 -
employment to provide for mechanical preparation from the Service Center payroll records. A complete set of handbooks was issued covering mechanized payroll procedures; also new manual material on administrative accounting principles
and procedures, and a revised edition of the chart of general ledger accounts were
published. The payroll operations in the Northeast Service Center were converted
to automatic data processing equipment, resulting in a further savings in manpower. A number of improvements were effected in the overall accounting system, including the establishment of property accounts in the general ledger, the
development of procedures to segregate costs for the various training programs
in the accounts, and further streamlining of the allotment pattern.
Evaluation surveys. Surveys of fiscal management operations of seven of
the nine regions were completed. The evaluation program of the Service was
revised and a coordinated approach developed in lieu of the separate and individual surveys of various field operations by individual teams from the national
office area concerned.
Future Plans
Cos ting techniques. It is planned to develop "cost finding" techniques, so
as to produce measurable units that will provide management with a better basis
for developing and supporting financial requirements.
Reporting. Further steps are planned in the continuing effort to relate program accomplishments more closely to the execution of the financial plan,
Studies of reports are being conducted with the view to increased use of charts
and other devices to make them more attractive and meaningful to top management.
Evaluation surveys. The program of evaluation surveys of fiscal management operations will be continued as a part of the coordinated national office
evaluation team program. The program of training through interchange of employees on working assignments between the national office and the field will
also be continued.
Automatic data processing. All segments of the Service will be collaborat ..
ing on a long-range program for development of a Service-wide automatic data
processing system. The adaptability of certain operations is currently under
consid~ration.
Although the proposed integrated magnetic tape system is in the
early stages of development, it seems clear now that it will have an effect on
revenue accounting. As the automatic data processing design takes form, the
Service will have a basis for measuring how best to accumulate revenue accounting data and what differences, if any, will result in the number or content of the
accounts.
- I 16 -
OFFICE OF ADMINISTRATIVE SERVICES
1959 Accomplishments
The allotment pattern was reduced to a single allotment at the appropriation
level. The application of resources within the single allotment is guided by an
operating financial plan. Development of an accounting manual is under way in
preparation for submission to the Comptroller Gener.al.
OFFICE OF THE TREASURER OF THE UNITED STATES
1959 Accomplishments
Improvements in the check payment and reconciliation operations included
more effective programming of electronic equipment, improved procedures, and
more efficient utilization of equipment. These improvements resulted in reduced
personnel and machine rental costs, . less manual work, and earlier availability
of information in the check reconciliation operation.
Future Plans
Because of increasing volumes of checks, arrangements have been made to
replace the present data processing equipment with two electronic machines which
will provide greater capacity at less rental. Installation is scheduled for the
second quarter of fiscal year 1961.
U. S. COAST GUARD
1959 Accomplishments
Military pay procedures. An improved system for obtaining .information
authorizing certain pay adjustment entries to be made on military pay records
was developed. The system provides· for use of the Personnel Diary, a basic
personnel reporting document, as a group pay adjustment order in lieu of the
individual adjustment documents previously prepared for various types of military pay changes. This system was put into effect throughout the Coast Guard
in July 1959. The new procedure will substantially reduce payroll paperwork
and the likelihood of certain types of payroll errors.
Mess management. A program was inaugurated to improve Coast Guard
mess management at all levels of responsibility. Internal audit reviews of
- 117 -
mess administration served to identify areas needing improvement. Procurement practices were improved by making greater use of the Department of
Defense Single Manager sources of supply, thereby substantially reducing ration
costs. A new procedure was developed to establish uniform ration allowances
based on the Department of Defense Single Manager subsistence prices. The new
procedure was put into effect throughout the Coast Guard in October 1959.
Decentralization of responsibility. The comptroller functions at the Coast
Guard Academy were strengthened and improved by transferring the responsibility for Academy accounting and reporting from Coast Guard headquarters to
the Academy. This change in fiscal responsibilities will better meet the needs
of Academy management for financial data, and will strengthen financial control
over the several quasi-governmental funds administered there.
Future Plans
Internal audit. A new approach to the Coast Guard internal audit program
is under study. The·•· nationwide audit responsibilities of the relatively small
internal audit staff necessitate extensive travel which not only is costly but also
creates staffing problems. The current study is directed towards attaining increased internal audit benefits at lower cost.
Reporting to management. A comprehensive study has been initiated to de ..
termine Coast Guard requirements for accounting and statistical information for
management purposes. In a number of management areas, there is a need for
more timely and useful information than is presently available.
U. S. SECRET SERVICE
1959 Accomplishments
Surveys were completed covering all segments of financial operations and
budgetary administration. A new accounting system was installed in July 1959
which provides for developing accrual information at periodic intervals. A new
format of a monthly report on administrative expenses was developed which furnishes the current status of allotments and compares obligations with the current
financial plan. A new form was designed for developing and projecting the
financial plan.
Future Plans
Work will continue toward the adoption of improvements in budgetary administration that were recommended as a result of a survey completed in April 1959.
It is planned that in the future, a "Budget Committee" will sit in on designated
occasions to coordinate the development of budgetary information.
- 118 -
HOUSING AND HOME FINANCE AGENCY
Financial Management Improvement Program
Agency Report* of Status as of June 30, 1959
Organization
Accrual
Basis
Coat-Based Budgetin
Accounting S stem
Approved by Submission
Used
Budget PreCo .Gen. for Ap roval Internally sentation.
Federal Housing
Administration
Complete
---- Not Applicable ----
Complete
Par.ti al
Federal National
Mortgage Association
Complete
Not Applicable
-~--
Complete
Complete
Office of Administrator
Complete
Complete
Indefinite
Public Housing
Administration
Complete
Complete
Partial
*
9/60
---- Not Applicable ----
This tabulation reflects the agency's own evaluation of the degree to which it
has attained accrual accounting and cost-based budgeting objectives, but does
not necessarily signify that the General Accounting Office, the Bureau of the
Budget, and the Treasury Department agree with those representations. The
dates represent either an agency target for attainment of an objective, or the
date on which the indicated action was taken.
·
Coordination of improvement efforts. The financial management improvement program in the Housing and Home Finance Agency is being coordinated by
the Office of the Administrator. Each of the constituent agencies develop and
carry out their own improvement programs, the results of which are set forth in
the following pages.
Accrual accounting. All of the constituents of the Agency have converted
their accounting systems to an accrual basis. However, some technical problems
of refinement remain with respect to the loan and grant programs of the Office of
the Administrator. The General Accounting Office is reviewing the adequacy of
the accrual accounting procedures in that Office.
Cost-based budgeting. The budgets for some of the accounts of the Office of
the Administrator will be presented on a cost basis in fiscal year 1961. A
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number of the accounts for the Office of the Administrator and all of the accounts
of the constituent agencies, are revolving funds with business-type statements on
an accrual basis, which is considered by the Agency to satisfy cost-based budget
presentation objectives. However, with the exception of the Federal Housing
Administration, the program and financing schedules for these revolving funds
are on an obligation basis in order to present a better picture of the financial
status of programs with long lead time between the commitment, obligation, and
expenditure of funds. In addition, most of the schedules on administrative and
nonadministrative expense limitations are presented on an obligation basis.
Consideration is being given to converting these limitations to a cost basis in
the 1962 Budget.
FEDERAL HOUSING ADMINISTRATION
1959 Accomplishments
An electronic digital computer was installed during May 1958, initially
covering seven recurring accounting and related operations, and five nonrecurring operations. Subsequently, thirteen additional recurring and nonrecurring
operations of a similar nature were programmed. One of these· is application of
the monthly mortgage payments to interest and principal. The computer is now
being used for this purpose as well as for calculating the next payment due on
each mortgage.
Based on a 40-hour week, approximately 93% (1, 900 hours) of the total available operating time of the computer is being utilized for productive processing.
This represents an increase from the 75% utilization at the end of fiscal year
1958. In addition, during fiscal year 1959 the computer was used for 1, 200 hours
of non-productive operation, such as checking and program testing. Total usage
represents over 11 hours per working day.
Future Plans
Preliminary studies have commenced concerning the feasibility of converting a portion of the mortgage insurance application processing in the field offices
to the computer. This would also mechanize a portion of the processing operation in the Comptroller's Division, and the statistical processing in the Research
and Statistics Division. With the current rate of utilization of the present computer, consideration is being given to adding more rapid peripheral equipment
to increase the computer's capacity.
One phase of the mortgage accounting project that is still incomplete is the
combining of tax and hazard insurance escrows on mortgage accounts. If it is.
- 12.0 -
found feasible to utilize the computer, there will be no need to combine the es ...
crows since the operation would be so rapid. However, if it is not possible and
bookkeeping machines are continued to be used, this phase will be re-examined.
FEDERAL NATIONAL MORTGAGE ASSOCIATION
1959 Accomplishments
During the fiscal year 1959 the installation and application of punched card
data processing systems that started in April 1957 progressed substantially.
Punched card systems for processing mortgage purchases and related accounting and reporting were completed during the year, as was the procedure for
furnishing a monthly consolidated mortgage statistical report.
Future Plans
Future plans include expansion of the punched card systems to the processing of and accounting for mortgage purchase contracts, payrolls, and
Association-owned property.
OFFICE OF THE ADMINISTRATOR
1959 Accomplishments
Organized improvement program. Progress on several projects included
in the Office's program for improvement of financial management is outlined
below.
Evaluation of urban renewal inspection and audit costs. Under this
project, a preliminary analysis of the cost of project site inspection
and audit activities resulted in an interim increase in the fees charged
local public agencies participating in the program. Fees were increased
from • 5% of the project expenditures budget for all projects, to . 75% on
the first $10 million and • 5% on the remainder. On the aggregate of
current projects this would produce a net collection at the rate of.. 71%.
The increase was subject to adjustment, based on a study of current
cost data in representative regions. This study was completed in May
1959, with the recommendation that the interim increase in fees remain
in force.
- 121 -
-- Control of program funds. The purpose of this project was to simplify
apportionment controls so as to reduce workload without sacrificing
meaningful program controls. Following discussions with the Bureau of
the Budget and the General Accounting Office, simplifications were made
in the maintenance of control records at the central and regional office
levels, and several of these records have been eliminated. This has resulted in a corresponding decrease in the administrative workload.
Improvement of financial reports. Information secured by the Division
of Finance and Accounts from users of its financial reports was evaluated with a view to improving the effectiveness of the reports and eliminating those not serving a real need. On the basis of this evaluation,
three reports for the urban renewal program were discontinued, and a
control point for the distribution of all financial reports within the Urban
Renewal Administration was established.
An initial evaluation of comments from users of reports for the Community Facilities Administration indicated the desirability of a more
detailed study of reporting requirements for these program activities.
Consequently, representatives of that Administration and the Division of
Finance and Accounts have been actively engaged in work on the community facilities program financial reports.
•- Coordination of program and financial records and reports. A survey
was made of all operating records and reports of the Community Facilities Administration to determine their value to management, to eliminate
any duplication with the Division of Finance and Accounts, and to assign
organizational responsibility within that Administration for statistical
records and program reports which are outside the scope of accounting
responsibility. The survey recommendations have been accepted, and
implementation will be initiated with the establishment of a central statistical unit in the Community Facilities Administration.
The report recommendations will be installed gradually over a period of
time. When fully implemented, they are expected to result in consid ..
erable simplification in recordkeeping and reporting in the Community
Facilities Administration and more effective systems for providing
management with current and accurate information on the programs. A
great deal of information now being recorded and reported in the Administration will be supplied instead by records and reports of the Division
of Finance and Accounts.
Coordination of urban renewal and low rent housing budget administration.
Considerable progress has been made by the Public Housing and the
Urban Renewal Administrations in establishing local agency budget
- 122 -
requirements which would lead toward resolution of the problem of proration of local expenses between the two programs. The feasibility of
continuing work on this project will be reviewed in the light of the provisions and legislative history of the Housing Act of 1959 relating to
waivers by the Public Housing Administration of approval of local housing
authority budgets.
Internal audit. Revised procedures have been issued with respect to internal
audits of all central office and regional office activities, and with respect to
project audits for the five major programs. In all, twelve procedures were issued having two major objectives: (a) to update previously issued procedures
which had become obsolete in certain important respects, and (b) to incorporate
changes in the scope of audits that are designed to expand the coverage and to
p:i:ovide more effective reviews of the adequacy of internal controls.
Federal Reserve Bank reports. The reporting requirements in effect for
bonds purchased or ac.quired by transfe.r under the College Housing, Public
Facility Loan, and Liquidating Programs, and serviced by the Federal Reserve
Bank of Richmond as fiscal agent and custodian, were substantially revised. A
new report form which consolidates the information, provides detailed collec
tion data with respect to each individual bond issue, and serves as the posting
media for the accounts, was developed in cooperation with the Bank. This is
expected to result in economies both to this Agency and the Federal Reserve Bank.
00
Future Plans
Improvements in financial management over the next year which can now be
readily identified fall generally into two broad categories: (a) work on analysis
and presentation of th.e accounting system to the General Accounting Office for
approval; and (b) completion of the open projects in the program for improvement of financial management, with particular emphasis on such objectives as
improving financial reporting, coordinating program and financial records and
reports, and better coordination of local agency budget administration.
PUBLIC HOUSING .ADMINISTRATION
1959 Accomplishments
Organized improvement program, The Public Housing Administration pro ...
gram that was initiated in fiscal year 1957, was a major all-encompassing financial management improvement effort. It consisted of eleven separate projects of
broad scope and coverage. Projects were set up to cover each of the accounting,
budgeting, classification, and allotment simplification objectives of Public Law
- 123 -
84-863; to install a comprehensive internal audit program; to improve mortgage
accounting; to strengthen project budget planning and control; to review operat ..
ing reserve policies for low rent projects; to improve financial reporting; to
strengthen local housing authority accounting systems; and to review project
auditing practices.
At the close of fiscal year 1958, work had been finished on all projects ex··.
cept the last three. These were completed during fiscal year 1959, as described
below.
Improvement of financial reporting. All financial reports were reviewed
to determine (a) the organization unit using each report and the purpose
served; (b) whether the required information could be obtained from another report, thereby making it possible to eliminate .some reports; (c)
the cost of each report in relation to its usefulness; ( d) changes required
in existing reports as to form, content, frequency, and distribution; ( ~)
additional reports which would be materially helpful to management; and
(f) the source of data used in each report and whether a simpler or more
economical method of preparation could be found. The chief result of
this work was the development of an improved operating statement for
the approximately 900 local housing authorities that will show in one report the operating receipts and expenditures, per unit month figures,
residual receipts, and annual Federal contributions. Also, the timeliness of the report has been improved, thereby increasing its usefulness
for management purposes. This project is now considered complete,
although the Administration will conduct a continuing effort to simplify
financial reporting.
Strengthening local housing authority accounting systems. A single accounting manual for local housing authorities was developed to replace
the two manuals previously used, and the procedures formerly prescribed have been simplified. The accounting system prescribed for
local housing authorities has been put on the accrual basis to the extent
deemed necessary in accordance with applicable principles. This project
is now considered complete although procedures are to be continuously
reviewed for the purpose of further simplification.
Review of project auditing. The objectives of this project incl11.ded (a)
determining whether a more comprehensive type of examination was
needed for better control over local housing authority operations, (b)
developing a clearly defined program of audit th.at would outline the scope
of examination and the audit staff responsibilities for complete coverage
of pertinent operations, (c) establishing standards under which complete
and adequate audit work papers would be developed, and (d) re-examining
the procedures for l,'eviewing field audit reports.
- 124 -
Prior to fiscal year 1959, it was determined that a more comprehensive
audit would be benefi~ial. Subsequently, a revised audit program and
supporting work papers were developed and tested in the actual performance of field audits. In re-examining the review of field audit reports,
it was found that the new type of audit program and work papers also
served as a guide for full review of audit reports, which eliminated the
need for a checklist previously used for this purpose. This represented completion of the project, but continu~us attention will be given
to the possibility of further refinements.
Audit organization. An Audit Division was established in January 19 59, and
located under an Assistant Commissioner for Audits who is directly responsible
to the Commissioner. This organizational change initially involved transfer of
the Internal Audit Section of the Administration Division and the Project Auditing Branch of the Management Division to the new Division. In July 1959, the.
regional office Auditing Sections were transferred to the Audit Division. Thus
the auditing function is now wholly independent of other functions and responsibility for auditing is placed in an official at the Commissioner's staff level. It
is anticipated that this will provide improved consideration and action on audit
findings and recommendations. While no measurable amount of savings can be
attributed to this change, it is in accord with the recognized principles of good
internal control and places the auditing function in a more effective position.
Accounting mechanization. In July 1958 a punched card system of accounting for allotments, obligations, and disbursements was installed. This system
furnishes timely data on the obligation basis of accounting and permits the conversion from the obligation basis to the accrual basis at the end of each fiscal
quarter year with a minimum of effort.
Employee training. A training schedule for accountant (trainee) positions
was developed and approved by the Civil Service Commission in February 1959.
Two specific benefits have accrued through the training schedule. First, the
schedufe created a new Grade GS-5 Accountant (trainee) position in the Administration which can be filled by an applicant who qualifies on the basis of college
graduation alone. Secondly, it permits promotion from Grade GS-5 to Grade
GS-7, or from Grade GS-7 to Grade GS-9, after satisfactory completion of a
six-month training course. Before this schedule was approved, no promotions
could be made in less than one year.
Local housing authority budget procedures. The new procedures for the
local housing authority low-rent project budgets that had been developed in the
Administration's program for improvement of financial management were put
into effect by the local authorities during fiscal year 1959. They were designed
to produce a sound financial program for the consolidated housing management
operations of each local authority. They provide a consolidated budget for each
- 125 -
local authority which reflects the authority's total program and responsibilities
as well as the income and expense estimates for each of its various programs.
'This new budget reflects the way the local authority actually operates and shows
direct total costs of an activity or operation of the authority rather than only the
prorated portion of the cost which is charged to the federally-aided program.
Other benefits include the following:
-- The combined new local authority budget and accounting procedures permit consolidation of contracts between a local authority and the Administration without loss of essential controls. Such consolidation permits
more efficient and economical operation of a local authority's federallyaided housing program. During the past ye;;lr approximately 115 consolidated contracts were executed, covering over 508 housing projects
which contained some 207, 000 dwelling units.
'
-- The new budgets are more realistic and useful in presenting total operations and needs. The programs of work and financial plans reflect
careful planning and provide a better basis for evaluating the financial
soundness of the housing program of an authority.
The new budget system facilitates coordination of financial planning for
the various types of housing programs of an authority (federally-aided
low rent, State aided, urban renewal, etc.).
It is too early to appraise fully the savings attributable to the new local authority
budget system in terms of more effective management, simplified accounting
and budgeting, reduced staffing through consolidation of project operations, and
elimination of duplication and overlapping requirements resulting from multiple
programs and contracts. However, one indication of the savings involved is
provided by the fact that the volume of paper for the new budgets for over 200
larger authorities was 80% less than the prior budgets prepared under the old
procedures.
Future Plans
Audit program. Plans for fiscal year 1960 include (a) accelerating the
schedule of audits of regional offices to an audit of each office once a year instead of the original 18 .. month cycle, (b) developing procedures to provide for
more effective coordination between internal and project audits, and (c) developing a functional type of audit. Previous audits of the regional and central
offices other than fiscal covered all the principal functions "across the board."
It is planned that future audits will cover one major function at a time. Each
audit of a function will be comprehensive, with the objective of obtaining greater
depth and increased benefits to management.
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Local housing authority operations. The Public Housing Administration
·plans to take the initiative in developing coordination and integration of the
financial plans and controls relating to local authority operations for the purpose of reducing local authority overhead and op.erating costs. This will re ...
duce total costs of the program and consequently reduce the need for Federal
subsidy.
The new local authority budget and accounting systems produce data for
which the Administration has no measur.es or guides. It is planned that a study
be made to determine the significant facts available in the budgets and reports,
and that these data be processed through tabulating equipment so as to produce
periodic r.eports which will provide a continuous flow of guidance material and
comparative evaluations of local housing operations. Use of the data will also
be explored, such as the possibility of developing a system of reports which
reflect comparative costs of operations of specific authorities having similar
problems and characteristics, and distributing the reports to local authorities
for use in reducing costs and improving operations.
- 12 7 -
OTHER AGENCIES
Financial Management Improvement Program
Agency Reports* of Status as of June 30, 1959
Organization
Accrual
Basis
.American Battle
Monuments Commission
Complete
Atomic Energy Commission
Complete
Bureau of the Budget
Complete
Civil Aeronautics Board
Complete
Civil Service Commission . Complete
Development Loan Fund
Complete
District of Columbia Govt. Partial
7/63
Export-Import Bank
Complete
B/56
7/61
1962
Complete
Complete
Complete
Complete
3/60
7/61
1962
6/60
Complete
Complete
Complete
Complete
---------Program to.be developed
----------
Complete
Complete
12/59
4/55
Partial
--- Not Applicable ---
--- Not Applicable ---
Credit Administration .Complete
3/60
Complete
1961
Federal Aviation Agency:
Washington Natl.Airport Complete
6/60
Complete
Complete
Farm
Other Operations
~----~--------- Program to be developed ----------------
Federal Coal Mine Safety
Board o.f Review
Complete
Federal Communications
Conrrnission
Complete
Federal Deposit- Insurance
Corporation
Complete
7/59.
9/58
Not Applicable
6/60
Federal Home Loan Bank Thi. Complete
Federal Savings & Loan
Insurance Corporation
*
Complete
Not Applicable -·-
Complete
1962
Complete
1961
Complete
Not
Applicable
Complete
Complete
Complete
Complete
This tablllation reflects the agencies' own evaluations of the degree to which they
have attained accrual accounting and cost-based budgeting objectives, but does not
necessarily signify that the General Accounting· Office, the Bureau of the Budget,
and the Treasury Department agree with those representations. The dates represent
either an agency target for attainment o.f an objective, or the date on which the
indicated action was .taken.
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OTHER AGENCIES {cont'd)
Financial Management Improvement Program
Agency Reports* of Status as of June 30, 1959
Organization
Mediation and
Conciliation Service
Accounting System
Cost-Based Budgeting
Accrual !Approved
Submission
Used
!Budget Pre•
Basis
Como.Gen. for Approval Internally sentation
byl
cu::i_•. -,,.,"'-
Complete
12/59
Complete
1962
Power Commission
Complete
3/60
Complete
1962
Trade Commission
Complete
Complete
1961
6/60
1962
Complete
Complete
Complete
Partial
Foreign Claims Settlement
Commission
Accounting Office
General Services Admin.
B/58
6/60
6/60
Complete
11/55
·complete
Partial
6/60
1961
Indian Claims Commission
10/59
Interstate Commerce Comm.
Complete
Natl. Aeronautics and
Space Administration
Complete
12/59
2/57
Indefinite
10/59
1962
Complete
1962
Complete
Complete
Complete
Complete
9/60
1963
Natl. Capital Planning
Commission
Complete
Relations Bd-
3/58
9/60
Complete
Complete
7/58
Complete
1962
6/60
11/54
6/61
1963
Natl. Security Council
Complete
2/59
Complete
Complete
Office of Civil and
Defense Mobilization
Complete
Complete
1961
Natl. Mediation Board
Natl. Science Foundation
Partial
3/60
This tabulation reflects the agencies' own evaluations of the degree to which they
have attained accrual accounting and cost-based budgeting objectives, but does not
necessarily signify that the General Accounting Office, the Bureau of the Budget,
and the Treasury Department agree with those representations. The dates represent
either an agency target for attainment of an objective, or the date on which the
indicated action was taken.
- 130 -
0 THE R AGE NC IE S (cont 1d)
Financial Management Improvement Program
Agency Reports* of Status as of June 30, 1959
Accounting System
se
Approved by ubmiss on
Bu get PreInternally
sen tati on
Com .Gen. for A· roval
Organization
Complete ---- Not Applicable ---- Complete
Complete
Canal Zone Government
Complete
Railroad Retirement Board
Complete
Partial
Renegotiation Board
Complete
9/58
Saint Lawrence Seaway
Development Corporation
Complete -·--Not Applicable·---- Complete
Panama Canal Company
Securities and Exchange
Commission
6/60
Selective Service System
Complete
Small Business Admin.
3/60
Smithsonian Institution
l/6o
National Gallery of Art
Subversive Activities
Control Board
Inda.finite
Complete
Complete
6/60
Complete
1962
Complete
1962
6/60
Complete
1962
4/54
Complete
1962
7/55
6/61
Indefinite
1/60
Complete
i2/S8
Complete
11/58
Complete
Complete
. Complete
6/59
Complete
Complete
Complete
Complete
1964
1964.
1963
1962
Tennessee Valley Authority Complete ---- Not Applicable
U.S. Information Agency:
Domestic Operations
Overseas Operations
u.s.
u.s.
u.s.
Soldiers Home
Tariff Col11lllission
Tax Court
Veterans Administration
*
Complete
12/60
10/60
7/62
7/61
6/60
12/61
7/62
7/61
Indefinite
6/60
Complete
Complete
7/58
Complete
Partial
Indefinite
Complete
Complete
Complete
Complete
Complete
This tabulation reflects the agencies' own evaluations of the degree to which they
have attained_ accrual aco~unting and cost-based bu~geting objectives,, but does not
necessarily signify that the General Accounting Office, the Bureau of the Budget,
and the Treasury Department agree with those representations. The dates represent
either an agency target for attainment of an objective, or the date on which the
indicated action was taken.
- 131 -
AMERICAN BATTLE MONUMENTS COMMISSION
1959 Accomplishments
An accrual accounting system was installed during fiscal year 1959. The
revised system is based on complete decentralization to the field offices in Paris,
Rome, and Manila, and was approved by the Comptroller General in August 1958.
ATOMIC ENERGY COMMISSION
Status
The Comptroller General approved the basic principles underlying the
Atomic Energy Commission 1 s accounting system in 1949. Commission staff
are currently working with representative!!' of the General Accounting Office to
secure formal approval of the accounting system and the internal control procedures.
1959 Accomplishments
Cooperation with Federal and State regulatory commissions. Representatives of the Commission continued work with the Committee on Accounts and
Statistics of the National Association of Railroad and Utility Commissioners and
with representatives of the Federal Power Commission on accounting problems
concerning nuclear generation of power. The portions of the revised Uniform
System of Accounts Prescribed for Public Utilities and Licensees subject to
the provisions of the Federal Power Act and the Committee's revised accounts
relating to nuclear power facilities and operations resulted from this cooperation.
Construction accounts for nuclear power stations. A classification of
construction accounts for nuclear power stations constructed under cost-plusfixed-fee contracts was developed for use in preparing construction cost
estimates as well as recording and reporting construction costs.
Improved performance reporting. Steps were taken to provide more current estimates of monthly c~sts by the field offices. Heretofore, actual cos~s
incurred were compared with budgets based upon the latest financial plans
approved by headquarters. Currently, whenever significant changes are anticipated, either in the total estimate for a particular activity or in the period in
which the costs are exp!ected to fall, new cost estimates and narrative explanations for the changes are required. Thus, actual costs are being compared with
the l.atest estimates of cost.
- 13Z -
A standard format was adopted for the monthly field office cost budget
reports showing for specified activities the current month costs, the year-todate costs, and the estimated underrun or overrun in the financial plan for the
entire year. Narrative explanations of variances are required and are reviewed
and used by management in controlling programs.
Automatic data processing. Plans have been completed to program
weapon stockpile inventories on an electronic computer. Heretofore, the
inventory records were maintained either manually or on tabulating equipment,
and the several groups responsible for nuclear material, storage, surveillance,
and cost, kept records that were duplicates at least in part. When the programming is completed the records will be combined on the computer to service the
needs of all groups needing the information.
Internal auditing. Significant developments that are expected to produce
more effective and useful results in the Commission's internal audit program
were (a) essential completion of the "Atomic Energy Commission Audit Handbook, 11 and (b) more widespread use of the "across-the-board" type of audit
(examination of all budgetary, financial, and business aspects of a selected
program, project; or activity).
Future Plans
Top management reports and chart room. Reports to top management
are to be revised. It is intended to develop and assemble pertinent material
for use :i:n a headquarters chart and briefing room. Targets, means of attainment, and the current financial and technical status of significant programs and
projects will be presented in reports, graphic material, and oral briefings for
management planning and control purposes.
Cooperation with Federal and State regulatory commissions. This cooperation will continue in 1960 with major emphasis on the development of a list of
units of nuclear power property for use in connection with the Uniform Systems
of Accounts.
Spare equipment. The accounting and reporting for spare equipment is
to be reviewed to see if any improvem.ents can be made in the quantity and cost
data supplied management for use in managing and controlling such equipment.
- 133 -
BUREAU OF THE BUDGET
Future Plans
Revision of the Bureau 1 s accounting manual is in process to incorporate
changes needed to bring the general ledger format, account titles, and numbering system in line with provisions of the General Accounting Office Manual.
Al.so to be included are explanations of the use of "M 11 accounts, and the procedure
employed to convert the Bureau•s accounts to the accrual basis.
CIVIL AERONAUTICS BOARD
1959 Accomplishments
Accounting system. The Board's accounting system was revised as of
May 1959. The accounts are maintained on a cash basis with conversion to the
accrual basis for specified reporting dates. This is accomplished through
accumulation of accruals on work sheets and adjustments to the books of account
at the close of the fiscal year. Cost data are accumulated through use of a cost
distribution ledger. A simplified allotment ledger is used as an aid to prevent
overobligation of funds. Nonexpendable property is recorded in the accounts on
the accrual basis. Expenditures for expendable property will be adjusted annually, based on the change in physical inventory. The accrued annual leave account
will also be adjusted annually to reflect this liability at the close of the fiscal
year.
Simplification of allotments and classifications. The Administrative Regulation for Control of Funds has been revised and the number of allotments have
been reduced to one for each of the two appropriations. The number of budget
activities also has been reduced from five to four with changes in terminology
to more clearly reflect the work area covered.
Future Plans
An accounting manual, setting forth the accounting principles, standards
and procedures of the Board, including a chart of accounts and a description
of the financial reports to be produced, is being prepared for submission to
the Comptroller General for approval.
- 134 -
CIVIL SERVICE COMMISSION
Status
Accounting systems manuals were approved in October 1952 and July 1954,
respectively~ for the Commission's investigations revolving fund and for the
appropriations, "Salaries and Expenses" and "Investigation of U. S. Citizens
for Employment by International Organizations. 11 Requests for formal approval
of manuals covering the Retirem.ent and Disability Fund, the Employees' Life
Insurance Fund, and the appropriation, "Annuities Under Special Acts, " will
be ready for submission about June 1960 •
. 1959 Accomplishments
11
Administrative accounting. The Commission 1s administrative accounting
and fiscal procedures were consolidated into a single handbook in January 1959.
Previously a separate manual was used for thee revolving fund accounting instructions. This change has facilitated the location and use of procedural
material by accounting personnel.
Automatic data processing. In October 1958 the Commission rented a
small-scale electronic digital computer for use on a trial basis in its Retirement Division for the processing of retirement claims. It is currently used on
only one phase of the retirement operations--computing service credit deposits
due the retirement fund.
Future Plans
Automatic data processing. Future plans contemplate a feasibility study
for the application of the computer now in use to billings for purchase of service
credit, to multiple copy face briefs, and to benefit payment vouchers. Consideration is also being given to the feasibility of processing the retirement annuity roll
by means of punched card or electronic equipment.
Retirement and life insurance accounting. Internal control and administrative review functions are being studied to effect a better surveillance of
operating activities. A study is also underway of the desirability of changing
to the "whole dollar" accounting concept.
DISTRICT OF COLUMBIA GOVERNMENT
Status
Conduct of improvement program. The financial management improvement program in the Government of the District of Columbia encompasses many
- 135 -
diverse operations. The financial controls required for each type of organization in the District Government must be tailor-made on the basis of extensive
survey findings. This program is under the overall supervision of the Department of General Administration. The Accounting, Budget, and Management
Offices are coordinating their efforts toward the development of effective solutions to.identified financial management problems~ The results of these improvement efforts are set forth below.
Approval of accounting systems. A question has been raised as to applicability to the District of Columbia Government of the 'raws requiring General
Accounting Office approval of accounting systems. This question has been
formally submitted to the Comptroller General for decision.
Cost-based budgetingo It was originally contemplated that budg~ts for the
administrative-type departments scheduled for accrual systems by fl.seal year
1959 would be presented on a cost basis for fiscal year 1961. However, due to
the relative newness of the accrual procedures, the financia.1 management system
has not yet been developed to the point of effective use of accrual information for
internal management purposes. Because of this fact, it is considered premature
to develop cost-based budg~ts for either internal budget' management or for presentation of appropriation requests to the Congress~ This phase of the program
is currently .undergoing further study.
1959 Accomplishments
Accounting systems_. In carrying out the objectives of the program during
the past fiscal year, particular emphasis was placed on developing and installing
departmental accounting systems. Systems providing for accruals were inst.alled
in five agencies,. the Department of Corrections, the Department of Public
Health, the Public Library, the Recreation Department, and the Department of
Licenses and Inspections. The accounting manual was expanded to .doc_ument
the·accounting systems for these departments. With these changes, accrual
practices have now been established in 26 of the 35 appropdation or organizational units of the District Government. The accounting systems installed are
being reviewed and modified as necessary to me et changing requirements, to
provide effective financial information for management, and to determine their
effectivenesso
Evaluation of organized program. In May 1959, a special report and
evaluation of the District of Columbia financial manage?1ent improvement program
was submitted to the Bureau of the Budget. This report indicated the areas of
study, summarized the progress made, and cited several problems which have
developed in the conduct of the program. Essential to the solution of these
problems is the need to (a) assimilate and analyze the data collected from various accounting surveys in order to formulate conclusions and recommendations,
- 136 -
(b) develop overall standards and policies which are a necessary prerequisite
to the continued conduct of the program, and (c) determine the extent of additional resources required for timely completion of the job.
Future Plans
Development of revised plan of action. The pr.oblem areas identified above
are complex and require an objective evaluation before the full benefits of the
financial management improvement efforts can be realized. To accomplish this
the District Government is currently considering the feasibility of limited outside consulting service. By this means it is contemplated to more adequately
define an overall plan for the future conduct of the program, including more
useful applications of cost and accrual accounting and cost-based budgeti~g for
internal use and appropriation presentation.
I
Development of accounting manual. During fiscal year 1960, the District
Government plans to place more emphasis on the development of an accounting
manual of fiscal policies, standards, and procedures for the District as a whole.
In connection with accrual accounting, policies are heing formulated in such
areas as capitalization., depreciation, and reserves. These policies and the
accounting procedures required will be included in the accounting manual. As
time permits, it is planned ~o survey and prescribe accqunting procedures for
additional departments of the District of Columbia Government.
FARM CREDIT ADMINISTRATION
1959 Accomplishments
The accounting manual was revised to include changes necessary to· maintain records on the accrual basis, in preparation for submission to the Comptroller General for approval.
FEDERAL AVIATION AGENCY
Status
Organized improvement program. TJ:i~ Federal Aviation Act of August
1958 established the Federal Aviation Agency, and provided for the transfer of
the Civil Aeronautics Administration of the Commerce Department and the Airways Modernization Board to the new agency. The Airways Modernization Board
was transferred in November 1958, and the Civil Aeronautics Administration at
- 137 -
the end of December 1958. Comprehensive studies of the field and headquarters
functions and organizations that are now underway are to be completed by June
1960. A detailed time-phased improvement program, designed to assure con•
formance with the objectives of Public Law 84-863, will be prepared and implementing action begun by September 1960.
Allotment simplification. While allotment simplification was reported by
the predecessor agencies to be complete, this objective is one which will require
further attention as organizational patterns and functional assignments are rede•
fined or revised in the new Agency. The allotment structure of the Federal Avi•
ation Agency will continue to be maintained at the highest practical leve 1, giving
due consideration to these factors.
Synchronized classifications. Accounting classifications have been synchronized with the budget execution plan and organizational and functional assignments& Further refinement and synchronization will be needed when the management analysis projects are completed and determinations of.organization and
responsibility assignments are finalized. Changes in internal relationships,
organization, and functions are expected to be a continuing characteristic of the
Agency. The problem of continuing responsiveness of the accounting system to
the dynamics of Agency management therefore will always be present in some
degree.
1959 Accomplishments
Organization and staffing. The accounting and budget functions have been
established in separate divisions of the Office of Management Services. Responsibility for accounting and auditing policies, standards, systems, procedures,
and programs is assigned to the Accounting Divisipn. These operations were previously vested in three separate units--the Financial Management, Accounting,
and Audit Divisions of the Budget and Finance Office. The staff of the new
Accounting Division is being augmented with additional professional personnel to
strengthen systems development and accounting and auditing operations.
The Technical Development Center at Indianapolis was closed, and its
accounting ope rations were divided between the Washington office and the
National Aviation Facilities Experimental .Center at Atlantic City, New Jersey.
Accounting system. Stock records have been established for major supply
and material inventories at the Aeronautical Center in Oklahoma City. The first
phase of a procedure for accounting for facilities material inventories at the
Aeronautical Center was completed and a test prior to installation is pending.
The flow of receiving and inspection reports and supplier's and contractor's invoices was revised to provide for the matching process to be
- 138 -
accomplished in the Accounting Division on an agency-wide basis. This provides for earlier receipt of the accrual documentation in the accounting offices,
and will facilitate a.ccrual accounting treatment of these transactionse
Automatic data processing. New electronic accounting machines were
selected for installation during fiscal year 1960 in Washington. and in the field
offices. These machines will utilize punched paper tape recorders for detail
classifications of information presently posted to subsidiary ledgers. Conversipn of paper tape to punched cards will provide increased capability for
processing detail information, and will expedite preparation of internal reports.
The equipment will also be utilized 1n developing information necessary for
accrual treatment of transactions.
Future Plans
Organization and staffing. A separate audit organization will be established
within the Accounting Division in the second quarter of fiscal year 1960. This
unit will be charged with rasponsibility for (a) establishtnent of a program of
internal audit on an agency-wide basis consistent with the principles and concepts
enunciated by the Comptroller General; (b) conduct of audits of tenants, concessionaires, and other contractors whose activities are authorized by or related to
Agency activities; and (c) improvement of the existing audit program relating to
the Federal Aid Airport Program.
Property accounting functions will also be transferred from the General
Services Di.vision to the Accounting Division during the second quarter of fiscal
year 1960,
Accounting system. Augmentation of the accounting systems staff will be
completed by January 19QO,. Systems surveys of headquarters and field offices
will be instituted for the purpose of identifying (a) management needs for accounting data, (b) financial controls and ;records used in program management,
(c) resources controlled, (d) accounting transactions initiated or processed, and
(e) the existing plan of organization and control.
These surveys will be comprehensive and will furnish the basic internal
requirements for accounting data. They will be substantially completed during
fiscal year 1960. Thereafter, systems development projects will be undertaken
and target dates established for the design and installation of an accounting system
consistent ·with the objectives of Public Law 84-863. ·
In addition, if the proposed legislation to establish a National Capital Airports Corporation is enacted, design of an appropriate accounting system for
the Corporation will be required.
- 139 -
Property accounting. After transfer of the accounting records for supply
and operating materials inventories to electronic equipment, which is scheduled
for the fourth quarter of fiscal year 1960, procedures for placing these inventories under general ledger control will be developed and implemented.
Financial reporting. Financial reports currently being prepared in
response to external requirements and for internal use will be studied to form a
basis for development of improved financial reporting. Rep~rts will be analyzed
for the purpose of developing meaningful ratios and trends having management
significance. These studies and analyses, together with surveys to be made for
the purpose of identifying ope rating management needs for financial information,
will be used to improve the financial reporting system of the Agency.
Education and training. In addition to attendance at seminars, symposiums,
and professional society meetings, personnel will participate in formal training
courses sponsored by colleges and universities, equipment manufacturers, and
Government agencies--with particular emphasis on courses.pertaining to electronic equipment applications.
FEDERAL COAL MINE SAFETY BOARD OF REVIEW
1959 Accomplishments
The revised accounting system installed last year was documented in an
accounting manual and approved by the Comptroller General in August 1959. The
revised system eliminates budgetary accounts in the general ledger and provides,
in ~ieu thereof, an appropriation control account supported by subsidiary cost
distribution registers and files of the obligation documents. A new form of fiscal report for management, showing the Board's operating costs on an accrual
basis, has been developed and is now in use.
FEDERAL COMMUNICATIONS COMMISSION
1959 Accomplishments
Following revision of the accounting system and formal submission of an
accounting manual, the Comptroller General approved the Commission's system
in September 1958.
- 140 -
FEDERAL MEDIATION AND CONCILIATION SERVICE
1959 Accomplishments
Following revision of the accounting system to develop accrual information,
further improvements have been made, and an accounting manual was drafted in
preparation for submission to the Comptroller General for approval.
FEDERAL POWER COMMISSION
1959 Accomplishments
Further improvements were made in the accounting system, which was revised at the beginning of the year to develop accrual information on a periodic
basis. A draft of an accounting manual was developed and discussed with representatives of the General Accounting Office, in preparation for submission to
the Comptroller General for approval.
FOREIGN CLAIMS SETTLEMENT COMMISSION
Status
Accrual accounting information is developed on an informal basis. The
general ledger is maintained.for the Commission by the State Department on an
obligation basis. Formalization of accrual data in the general ledger is contemplated by June 1960. On the basis of the available information, the Commission prepared a sample cost-based budget for fiscal year 1961.
GENERAL SERVICES
ADMINISTRAT~ON
Status
During the past several years major segments of the agency's accQunting
system have been approved by the Comptroller General. It is the intention of
the Administration to submit the complete accounting system for approval of
the Comptroller General during fiscal year 1960 in accordance with his letter of
May 1959.
- 141 -
1959 Accomplishments
Automatic data. processing program. Installation of the first electronic
computer in Kansas. City was completed. Savings in man .. hours and a vastly
speeded up operation a.re anticipated. Similar installations in at least two additional regional offices (Dallas a;nd Atlanta) are scheduled for completion by
December 1959.
['
-
.~~
The following additional steps were taken during the fiscal year:
(a) completion of specifieations for an integrated automatic data processing
system for stock replenishment, purcha,se, distribution, inventory, and financial accounting functions involving store.a stock items and the General Supply
Fu·nd; (b) a selection of a ''medium scale" computer for us.e in the Washington
region is s.cheduled for October 1959; (c) completion of the field phase of the
survey of present operating costs for comparis.on with future cos.t of operation
on a medium s,cale computer; (d) work was. started on a study of requirements
for financial and other data outp'uts from t~e system; and (e). requirements for
automatic data processing programmers were determined, recruitment of quali•
fied personnel within the Administration was announced, and a testing program
was started.
Punched card accounting activity. Work continued on add.itional conversions from manual to machine methods and on the improvement and refinement
of prior electrical accounting machine installations. The most significfl.nt were
the development of: (a) procedures for standardization of a mechanical payroll
system; (b) procedures for the Buildings Management Fund; (c) reports on building
space utilization and assignment; (d) tonnage distribution reports fo~ the Transportation and Public Utilities Service; (e) integration of central office machine data
processing with the Region 3 operation; (f) conversion of inventories of strategic
and critical materials to machine methods was 30o/o accomplished; and (g) machine
processing of the real property inventories a,s of the end of June 1959 by the. '
Washington Data Processing Center, which is expected to produce approximately
$10, 000 a year in savings. The transfer of the payroll operation to Region 3 resulted in a saving to the central office of seven employees. In Region 3, eleven
employees were released from the payroll operation as a result of the new mech•
anized payroll system, with total dollar savings of approximately $59, 000 annually.
Regional office inspection program. The regional inspection of Comptroller
operations has resulted in an interchange of ideas, clarification of central o~fice
procedures and policies~· and adoption on a nationwide . basis of efficient proce ..
· dures developed by individual regional offices. In addition, a uniform organizational pattern for the offices of the regional Comptrollers was issued as a result
of the inspection program.
- 142 -
Training program. Under a training agreement with the Civil Service
Commission, four trainees of the Office of Comptroller have completed the
first phase of the program and have entered the second phase of more difficult assignments. Three more trainees will enter on duty during the first
quarter of fiscal year 1960. This program will ultimately be beneficial to the
organization as a whole, and is considered to be a possible solution to the age
problem in this Office.
The first comprehensive training program in budget ·administration in the
central office was completed. A "Training Manual for Budgetary Administration in the General Services Administration 11 was designed to train new employees of the Budget Division, trainees under the Office of the Comptroller Training Agreement, and interns of the Civil Service Commission Financial Management and Middle Management Institutes.
Financial reporting program. The financial reporting system has received
continuous review and analysis which has resulted in refinement of basic data
to provide more meaningful reports to management, elimination of non-essential
reports, rescheduling of due dates, and a reduction in the frequency of reports.
The reporting workload has been leveled out thus cutting down on overtime. The
most significant accomplishment was the completion of a new reporting system
for the construction and repair and improvement program of the Public Buildings
Service.
The Reports Award Plan under the Administration's Incentive Awards Program was initiated during the year. The plan is designed to stimulate improvement of regional financial reports both to meet the high standards of accuracy
required, and to better the scheduled deadlines. The first six-month award
period shows that the program has served to expedite the filing of key reports
and has achieved the objectives for which it was designed.
Furniture accountability. Instructions were issued covering the transfer
of General Services Administration furniture to the using agencies. Upon completion of the transfers, the Administration will be relieved of accountability
for furniture amounting to approximately $30 million. This should result in manpower savings in this agency in the maintenance of detailed property records,
reconciliation of such records with the control accounts, and taking annual inventories of such items.
Physical inventory program. With the assistance of Air Force representatives, a method was developed for computing the quantities of rubber and
fiber in storage at military depots through use of statistical sampling techniques
without movement of the material. It is expected that this can be done for about
90% of the material, and substantial savings are anticipated by eliminating the
need for moving the material.
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Receivable liquidation program. Efforts continued throughout the year to
expedite the collection of receivables and to reduce the number of delinquencies
to a minimum. To expedite payments, arrangements were made to have the
Supply Service Officers personally contact paying officers in customer agencies;
Air Force paying officers were instructed to pay billings under the General Supply Fund on a "constructive receipt 11 basis, i.e., without awaiting receipt of
receiving reports; and a new series of field reports on non-Federal receivables
was installed effective in January 1959.
During fiscal year 1959, delinquent receivables were reduced as follows:
Federal receivables from $5. 8 to $~. 2 million, and non-Federal receivables
from $9. 6 to $2. 3 million.
Other significant accounting improvements. Credit aspects {terms., conditions, insurance, etc.) of the sale of surplus aircraft were developed. This involved establishing financial policies and accounting procedures, and developing
financial provisions and insurance requirements to be included in instructions
to purchasers. While no tangible savings can be estimated, this plan of credit
sale of surplus aircraft should facilitate sales, insure the highest possible recov-.
ery to the Government, and reduce to a minimum the sales and servicing expense.
Agreement has been reached relative to the accounting for International
Cooperation Administration procurement through the General Supply Fund and
transfer of the related functions to exporting regions. Implementation of the new
system, including methods of liquidating the present system, will be accomplished
in fiscal year 1960 at which time dollar and manpower savings will be determined.
Future Plans
Inasmuch as the Administration has achieved the basic objectives of the
financial management improvement program, future efforts will be directed
toward further refinement and improvement of operating procedures, with particular emphasis on the extension of automatic data processing intBtallations and
further conversions from manual to punched card procedures. To this end, 142
special projects are underway in the several divisions of the Comptroller's
Office, the highlights of which are summarized below.
Accounting Division. Develop and install standardized electrical accounting machine payroll procedures for use in all regional offices; explore the p<;>ssibility of utilizing one cash account for all appropriations; institute a test of the
mechanized preparation of bills of lading to effect manpower savings in all
regional offices.
Budget Division. Study feasibility of consolidating certain appropriation
items such as the Public Buildings Service construction items; review the number
of budgetary cost accounts to determine the feasibility of reduction or consolidation.
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Credit and Finance Division0 Study the reasons for delays in obtaining
payment from the customer agencies of the General Supply Fund, and evaluate
the effect of constructive receipt payment procedures to determine the need for
further administrative actione
External Property Accounting Divisio.;:_. Develop personal and real property accounting guides in cooperation with the Bureau of the Budget, the General
Accounting Office, and the Treasury Department for Government-wide application; prepar~ the inventory and report of legislative jurisdictional status of
Federal land within the States as of the end of June 195 7; modernize the Administration 1s internal "Inventory Guide--Office Furniture and Fixtures" and reissue it for Government-wide usagei develop, in cooperation with the General
Accounting Office, criteria for establishing Government~wide policies regarding
the capitalization of interagency transfers of real property; develop revised instructions for preparation of the annual inventory reports of federally-owned
and leased real property; develop proposed policy and procedures with respect
to the handling of trading stamps received by Governme:rit employees in the procurement of goods and services for the Government.
INDIAN CLAIMS COMMISSION
Status
In the rev1s1on of the accounting system, detailed allotment accounts were
discontinued and budgetary accounts in the general ledger were eliminated. A
single appropriations control account was e~tablished, supported by subsidiary
cost distribution ledgers and files of the obligation documents.
1959 Accomplishments
With assistance from the General Accounting Office, a revised accounting
system was developed. Under this revised system, accrual accounting will be
obtained by the periodic method of converting the general ledger accounts, and
property will be placed under monetary control. A cost-based budget can then be
developed from the accounts.
INTERSTATE COMMERCE COMMISSION
1959 Accomplishments
In March 1959, the payroll system was converted from an electric accounting machine to an automatic data processing system utilizing the digital computer
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already in use for other work of the Commission. The computer simultaneously
prepares the payroll and the pay change notices, determines periodic pay or
longevity increases, prepares bond issue cards, and earmarks maximum deductions. Payroll costs were reduced three man-years.
Pursuant to a study of the practicability of adopting electronic computer
equipment in accounting and reporting, a revised system was installed effective
in July 1959. The system features a card punch machine coupled to a mechanical posting machine. Punched cards containing financial data are prepared
concurrently with the posting to the allotment ledger. These punched cards are
used to prepare monthly financial statements approximately eight days faster
than the method previously used.
Future Plans
Current planning provides for the conversion in January 1960 of the Time
and Attendance Report from manual to automatic data proce~rning. It is anticipated that the conversion will materially reduce the time now spent by time and
leave clerks in the preparation and maintenance of leave records in the Commission.
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Status
During fiscal year 1959 the National Advisory Committee for Aeronautics
ceased to exist as such. In October 1958 it became the nucleus of the National
Aeronautics and Space Administration created by the National Aeronautics and
Space Act of 1958. The General Accounting Office participated in the establishment and installation of the accounting system of the National Advisory Committee
for Aeronautics. This system was adopted in substance by the National Aeronautics and Space Administration. Approval of the accounting system by the
Comptroller General has been deferred pending further joint consideration of
several features of the system now in use.
Under the Administration's financial management system, budgeting,
accounting, and reporting for administrative operations and in-house research
activities are based on object classifications; a consistent system of scientific
area classifications is used for outside research activities; and a project
system is used for the construction programs. This system produces information necessary for a cost-based budget presentation. Accrual and cost data are
in partial use at field levels as a management reporting tool for reporting progress
on certain specific program s--repre senting the extent to which the Administration
believes cost information is useful for management purposes.
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1959 Accomplishments
A new appropriation for research and development was added in fiscal year
1959. The system of budgeting, accounting, and reporting for this appropriation
in terms of scientific program areas was developed and installed during the year.
Future Plans
Improvement of classifications. Modernization of research program
headings to make them more readily identifiable with the current and planned
distribution of effort financed by the salaries and expenses appropriation is
underway. Coordination with the research and development program areas
likewise is underway.
Research and development reporting. Studies of systematic reporting of
performance and cost data for cost-type contracts are being made to assist
agency coordination efforts and to provide a means of indicating areas which
might involve cost overruns. Work has also been initiated on procedures for
accounting for and reporting on Government-owned equipment and facilities in
use by contractors.
NATIONAL LABOR RELATIONS BOARD
Status
Simplification of allotment structure. In accordance with the agency im•
provement plan, the allotment, suballotment, and reserve accounts were reduced
from over 50 to 10 in the past fiscal year. A system of miscellaneous expense
allowances was installed concurrently with the consolidation of allotments.
Cost-based budgeting. Several factors have caused a delay in this area
during the past year. These included some significant changes in top-level
staff, a private management firm survey of the agency, and enactment of the
Labor-Management Reporting and Disclosure Act of 1959. The new target date
for revising the agency's internal procedures to incorporate cost-based budgeting techniques is September 1960, which ties in with the established target for
synchronization of the budget, accounting, and organization classifications. This
will enable the agency to· submit a cost-based budget for the fiscal year l963.
1959 Accomplishments
Periodic inventories of unpaid obligations were made on a six-month trial
basis to determine which obligations were accrued expenditures. Procedures
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for reporting expenditures on an accrual basis were developed for use commencing with fiscal year 1960.
Future Plans
During the past year the General Accounting Office made a report to this
agency following a survey of the Board's financial management practices.
Implementation of the survey recommendations is expected to be completed in
fiscal year 1960. Shortly thereafter, in September 1960, it is planned to submit
the agency accounting manual to the Comptroller General for approval.
NATIONAL MEDIATION BOARD
Status
In accordance with Bureau of the Budget Circular No. A· 11, sample costtype statements were prepared as part of the 1961 Budget submission.
1959 Accomplishments
The revised accounting system approved by the Comptroller General in
July 1958 has proven satisfactory in us.e. Further simplification was obtained
by consolidating the agency's three appropriations into one for fiscal year 1960.
The financial information required for management is now developed through
account classifications in the cost distribution registers.
NATIONAL SCIENCE FOUNDATION
Status
In the National Science Foundation system, grants are considered accrued
at the time of administrative approval. The agency's accounting system was
approved by the Comptroller General in 1954. However, changes and refinements have occurred and will continue to occur. It is planned to resubmit the
agency's accounting system by the close of fiscal year 1961.
1959 Accomplishments
Internal audit. The Foundation established an internal audit office in
January 1959. A staff of three professional auditors was employed. At year
end, the staff had developed a long-range internal audit program which was
approved by the Director of the Foundation.
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Accounting system. During the year, personal property was placed under
general ledger control. In March the backlog of accounts paya'Qle work was
eliminated. Monthly accounting reports to management have been simplified,
prepared on bookkeeping machines, and distributed by the sixth day of each
month.
Future Plans
The Foundation is proceeding toward a system of accrual accounting. This
will be on the inventory basis with adjustments for accruals made at the end of
each quarter.
NATIONAL SECURITY COUNCIL
1959 Accomplishments
A manual, setting forth the accounting principles, standards, procedures,
and practices for the Council was developed and the system was approved by the
Comptroller General in February 1959.
OFFICE OF CIVIL AND DEFENSE MOBILIZATION
Status
Following the merger of the Federal Civil Defense Administration and the
Office of Defense Mobilization in 1958, the budget activities used in the 1960
Budget were revised to conform with the merged organization structure. ·While
the accounting system of the former Office of Defense Mobilization had received
the approval of the Comptroller General prior to the merger, the two systems
of the former Federal Civil Defense Administration had received only partial
approval, with considerable development and documentation of the system in
manual form remaining to be accomplished. Improvement efforts during the
current fiscal year have therefore been directed primarily toward completion
and documentation of the merged systems, incorporating the necessary accounts
and procedures for recording all financial transactions on a fully integrated basis
and in conformity with the principles, standards and related requirements currently prescribed by the Comptroller General.
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1959 Accomplishments
Accounting system. The basic developmental work involved in merging the
separate systems of the predecessor agencies was substantially completed,· and
documentation of the system in manual form for the guidance of accounting and
financial management personnel was about 70 percent complete at the end of the
fiscal year. The system provides for an accrual basis of accounting to facilitate the preparation of cost-based budget presentations beginning with the 1961
budget year.
Completion of the transition of medical stockpile inventory records from
a manual to a. mechanized basis enabled discontinuance of hand postings in
December 1958.
Financing and control structure. The allotments and accounting controls
have been changed to correspond with the approved organization structure of
the merged predecessor agencies a The allotments and coding for fiscal year
1960 have been revised to provide better measurement of performance by program and organization and~ by application, synchronizes the classifications
used for budgeting, programming, and accounting purposes. Other changes
include definitions of cost codes to provide greater accuracy in reports, and
revision of the research and development reports to a project and program basis.
Financial reporting. During fiscal year 1959, the monthly financial
reports to program operators and management were expanded to include a narrative analysis which highlights accomplishments or deviations from plans.
The experience to date has been that this is well received and utilized by
operating personnel in day-to-day operations. Monthly fiscal reports for no
year appropriations have also been revised to reflect information on an annual
basis.
Future Plans
Future plans for improvement include a continuing review~ periodic
appraisal and refinement to ensure the most effective and economical utilization of resources in carrying out the Office's assigned missions. Specific plans
include (a) completion of the accounting m.anual and obtaining final approval of
the merged system by the Comptroller General; (b) revision of the accounting
system for administrative property to achieve simplification, and to alleviat~
difficulties encou:n,tered in reconciling detail property records with control
accounts; (c) expansion of the machi.ne accou~ting unit to enable application of
automatic data processing methods to allotment ledger and cost accounting,
property accounting, and the bomb damage assessment system; (d) consideration
of the desirability of mechanizing the payroll system; and (e) separate financing
for Federal regional underground control centers and similar authorized construction of significant magnitude.
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PANAMA CANAL COMPANY AND CANAL ZONE GOVERNMENT
1959 Accomplishments
Financial reporting. An improved format was adopted for the monthly
financial statements. It provides for greater use of financial and statistical
comparisons, and for the use of charts which present graphically the material
covered on each statement. The new statements have proved more effective as
a top management tool and have reached the goal of 'fully-coordinated reporting
for management, accounting, and budgeting purposes.
A study of plant accounting procedures, partially completed during the
year, resulted in mechanical instead of manual preparation of the plant status
reports. This change provided earlier reports and a saving of clerical time.
Accounting mechanization. The conversion of accounting for retail
stores and service centers to a mechanized system was undertaken during the
year. It was about one-half completed at the fiscal year-end and was scheduled
for completion in September 1959. The mechanized system provides for the use
of punched card methods to record all transfers, credit cards, Government
issues, credit sales to outside organizations, and purchases through payroll
deductions. The mechanized system permits the reporting to store managers
of needed information not previously available.
Work simplification. This program was aggressively pursued during the
year by making specialized accounting systems studies and encouraging employees to make suggestions under the Incentive Awards Program. Under the latter
program, employees made 261 suggestions, of which 56 were adopted.
Future Plans
Accrued expenditure limitations. The two appropriations of the Canal Zone
Government were selected by the Bureau of the Budget as having accrual accounting procedures adequate to permit congressional budgetary control on an accrued
expenditure basis. The 1960 Budget was presented to Congress with proposed
accrued expenditure limitations but they were not enacted. The Canal Zone
Government has been requested to again submit its 1961 budget with such proposed limitations.
Financial reporting. A study is being made to determine the requirements
. for a "Flash Report to Management. 11 This report would consist of actual and
estimated financial data selected to provide monthly operating results, with a
minimum margin of error, two to three days following the end of the month.
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Utilization of machine equipment. A study is in process to establish a
master plan for utilization of all machine equipment and related personnel in
order to provide for maximum economies and to improve accounting and statistical reporting. The master plan also will provide criteria for training of machine
operators and for establishing operators' workload and efficiency standards.
Systems improvements. Systems work is underway to improve the accuracy
of retail accounting through departmentalization, refined commodity classifications, and registration of sales by class of goods. Punched card methods. will be
us~d to record transactions and to collate information for departmental reports
co\·ering sales, cost of goods sold, and gross profit by principal commodity
classes. Desirable features are improved top level and middle management
repqrts, increased accuracy in reporting, and comparability of operating results
with United States retail trade averages. Hospital statistical procedures will be
revised to provide more adequate reporting for rate-making, workload, and budgeting purposes. A study of plant accounting will be completed which will cover
all phases of the authorization and funding controls, and accounting for the various
categories of plant, depreciation, and valuation reserves.
RAILROAD RETIREMENT BOARD
1959 Accomplishments
The Board's quality control program, a sampling method of control previously adopted as a substitute for more comprehensive audit and review work,
was extended during the year to include the large claims load created by amendments to the Railroad Unemployment Insurance Act. This involved the examination of some 650, 000 files containing about 3. 5 million claims.
Future Plans
Considerable progress was made during the year in preparing for conversion to an automatic data processing system in April 1960. Initially, the Board
plans to convert operations relating to the maintenance of earnings accounts,
the certification of service and compensation data for retirement and for unemployment and sickness benefit purposes, and the compilation and computation
of statistical data for administrative and actuarial purposes. Subsequently,
the unemployment and sickness b~nefit payment operations of the Chicago
region are to be converted on an experimental basis in July 1960.
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RENEGOTIATION BOARD
1959 Accomplishments
The agency accounting system, revised to incorporate accrual features
and de-emphasize allotment accounting, was operative the past year and has
proven very satisfactory* It was approved by the Comptroller General in Sep ..
tember 1958 ..
SAINT LAWRENCE SEAWAY DEVELOPMENT CORPORATION
.!2,59 Accomplishments
Construction responsibilities,. Due to the imminent completion of the construction phase of the Seaway, the Corporation as of the. end of December 1958
terminated its delegation of authority to the Corps of Engineers to act as its
construction agent. Since then all contracting, procurement, and land acquisitions have been done ,by the Corporation in its own name, and all construction
accounting records formerly maintained by the Corps of Engineers were tr.ansferred to the Corporation. Except for continuing dredging for channel enlargement, major construction ended in April 1959.
Toll operations. :i;n April 1959 the Seaway opened to deep-draft navigation
on a toll collection basis~ Toll tariffs established by an agreement between the
Corporation and the St. Lawrence Seaway Authority of Canada had been approved
by the President in February 1959. Under that agreement, the Seaway Authority
of Canada is responsible for the billing and collection of tolls and for accounting
to the Corporation for its share. The Corporation participates in the assessment and billing of tolls to insure that revenues earned are recorded correctly
and that collections are accomplished promptly.
In December 1958 the Cornwall-Massena International Bridge was opened
for toll traffic. The bridge was built by the Seaway entities, but is operated by
the Cornwall International Bridge Company, Limited, in which the <Zorporation
is an equal shareholder with the Seaway Authority of Canada.. The Corporation
has established accounting and other revenue and expense controls in collaboration with the Bridge Company and the Seaway Authority of Canada to safeguard
its interest in the earnings.
Future
It is planned to establish plant in service accounts by units, to which will
be allocated all distributive costs, including interest during construction.
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Depreciation procedures will be provided for these accounts, including designation of useful service lives and composite reserves for depreciation by homogeneous classes. Provision will be made for recording amortization in excess
of depreciation to disclose the status of repayments in accordance with requirements of Public Law 83-358. The Corporation accounting manual is scheduled
for completion during the next calendar year.
SECURITIES AND EXCHANGE COMMISSION
Status
While the accounts are not yet formalized on an accrual basis, procedures
are employed that produce selected cost information for internal management
use.
Future Plans
The Commission's accounting system, which includes property accounting,
is maintained primarily on a cash basis. However, the periodic inventory method
of converting the accounts from a cash to an accrual basis will be adopted to provide cost-type information for reporting purposes and for use in preparing the
annual budget estimate.
SMALL BUSINESS ADMINISTRATION
Status
Accounting system. The Administration's accounting system was approved
by the Comptroller General in July 1955. However, since that date, basic revision of the system has been undertaken and is now in process. When fully documented in manual form, the revised system will be submitted to the Comptroller
General for approval in accordance with the guidelines set forth in his letter to
the agencies of May 1959.
Cost-based budgeting. The institution of cost-based appropriation requests
by the Small Business Administr<l;tion is a matter for future determination after
accounting procedures to support such requests become fully operative.
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1959 Accomplishments
Centralization of the loan accounting previously conducted in the three
Fiscal Area Offices and its conversion to punched card equipment has occasioned
extensive revisions in loan accounting procedures. Efforts during the year
necessarily were concentrated on completion and refinement of routine accounting procedures under the mechanized and automated operation on a centralized
basis. This phase of development and installation of the revised system was
substantially completed during the year., Improvements included developmentiof
an automatic data processing program to permit routine processing of irregular
loan repayments, revised punched card accounting procedures for bank serviced
participation loans. machine accounting input-output controls for cash disbursements and receipts, and revised procedures for preparation of statements of
account.
Future Plans
The Administration 1 s accounting instructions are being systematically
revised to encompass changes brought about by introduction of centralized loan
accounting. A new fiscal operations manual is in process of preparation and
it is expected that by December 1959 the sections on books of original entry,
chart of accounts 0 and loan accounting will be completed. Other planned improvements include (a) development of accounting procedu·res to report administrative expenses for budgetary purposes on an accrued expenditure basis for
printing and reproduction, administrative supplies, and contractual services;
(b) preparation of automatic data processing program utilizing electronic equipment to assist in the reconciliation of detailed accounts with general ledger
controls: (c) conversion of participation fee billings from conventional bookkeeping machine to punched card accounting; (d) preparation of account transcripts for each loan account; and (e) simplifcation of the preparation of the
overtime payroll.
SMITHSONIAN INSTITUTION
Status
The Institution's accounting system was approved in August 1959 with
qualification, pending further General Accounting Office determinations on the
capitalization policy for library books. While the installation of accrual accounting procedures had not yet been completed 3 interim procedures were used to
enable presentation of the budget on a cost basis in 1960.
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1959 Accomplishments
Following a survey of the program and accounting operations of the Institution by representatives of the General Accounting Office, a revised accounting
system for funds appropriated by the Federal Government was developed by the
agency in cooperation with the General Accounting Office. The system developed
will simplify the general ledger, is to be maintained primarily on an obligation
and expenditure basis, and is to be adjusted monthly to the accrual basis by the
inventory method.
Future Plans
Plans for fiscal year 1960 include completion of the installation of the
revised accounting system.
NATIONAL GALLERY OF ART
1959 Accomplishments
Revisions in the accounting system of the agency and other financial management improvements were completed prior to fiscal year 1959, resulting in approval
of the accounting system by the Comptroller General in November 1958.
SUBVERSIVE ACTIVITIES CONTROL BOARD
1959 Accomplishments
The major objectives of the financial management improvement program
were accomplished during 1959. ·The accounting system provides accruals on a
periodic basis by the inventory method. It was approved by the Comptroller
General in June 1959.
Future Plans
Property accounting procedures are to be reviewed for the purpose of improving
classification groupings and inventory practices.
- 156 -
U. S. INFORMATION AGENCY
Status
Accounting for domestic operations. The Agency has a target date of
December 1959 for recording other accrual data in the domestic operations accounting system. Completion of a uniform system of property accounting and
recording all domestically controlled administrative and program property in
the general ledger is scheduled for December 1960. Under current plans it is
expected that the major portion of this accounting system can be submitted for
approval of the Comptroller General early in fiscal year 1961.
Accounting for overseas operations. Administrative services overseas are
performed for the Agency by the Department of State. The Agency will work
with the Department of State in developing an accrual accounting application for
agency activities overseas concurrently with the Department of State's installation plans at overseas posts.
1959 Accomplishments
Administrative support handbook for use overseas. The Agency published a
comprehensive "Administrative Support Handbook" for use by its officers overseas as a means of determining and evaluating the services being performed by
the Department of State at field posts on a reimbursable basis. The handbook
reduces possible incidence of the duplication of finance or other administrative
services by the State and Agency offices overseas, thus resulting in indeterminable savings. This handbook was considered so effective and was so well
accepted that copies have been requested by other agencies with overseas posts.
The handbook takes three approaches--first, it discusses the instructions on
which administrative support estimates are based; second, it tabulates the
services covered by administrative support and shows what might normally be
expected from the Embassy or Consulate under each service; and third, it comments on certain individual problems and questions of administrative support so
as to provide possible guidelines for solving other problems.
Mechanized allotment accounting and related operations. The installation of
a mechanized data processing system for the Agency's domestic allotment accounting operations was completed in three accounting offices. This system provid~s for a tape-to-card processing operation whereby cost distributions are
obtained through punched card processes, thus eliminating the need for maintenance of detailed cost, activity, and object class distribution ledgers. In
addition, the Agency installed a tape-to-card system in its New Y'ork Information
Center Service office for preparing cost and statistical data relating to the purchase of books for the Agency's numerous overseas libraries and information
centers. In this connection, the Agency carried out a planned training program
- 157 -
for the finance personnel engaged in developing and operating data processing
systems for the finance, statistical, and related operations.
Home leave and transfer travel costs. A task force studied the Agency's
world-wide Horne Leave and Transfer Travel Program and developed analyses
for a planned effort to reduce the level of cost of this program 1 to reduce the
number of trips with higher-than-average costs, and to improve the general
:management of the program. The Agency utilizes the Foreign Service Travel
Regulations of the Department of State in the general conduct of this travel program covering assignment, separation, home leave, and transfer. These regulations apply in the authorization and performance processes, and in the
examination and costs incurred by Agency Foreign Service personnel. Coordinate considerations were started by the Department of State and the Agency in
the latter part of the fiscal year 1959 to effect revisions in the regulations in
line with the objectives mentioned above. In addition, revised regulations issued during the fiscal year 1959 will provide for :more effective review of
control point records on shipments of household items and effects in order to
pinpoint overages in shipments, and to increase the accuracy of obligation estimates recorded against funds allotted for travel, transportation, and storage
under this program. This improvement work will continue on in fiscal year
1960.
Internal audit. During the fiscal year 1959, the Agency's Audit Staff issued
61 audit reports, 20 of which related to operations in foreign countries. The
audit reports on foreign country operations pointed out the general management
aspects of the administrative support services rendered by the Department of
State and whether or not internal arrangements are consistent with good management practices. The 41 audits made of domestic operations consisted of 25
contract and 16 internal audits. The contract audits aided management in establishing and maintaining more effective con tr actual relationships. The Agency's
audit program has resulted in better internal financial and related controls.
Procedural improvements. Plans were completed for using one Government
bill of lading per month to each air carrier for each overseas destination in lieu
of preparing ? separate Government bill of lading for each shipment overseas as
had been the case. It is estimated that this new system will reduce the number
of bills of lading prepared from an average of 710 per month to approximately 90
per month, resulting in savings in workload and voucher processing in fiscal year
1960 and subsequent years.
The system of obtaining obligation data from the office of the United States
Despatch Agent in New York on Agency ocean shipments was improved. A revised flow of shipping notice documents permits the accounting offices to obligate
for ocean shipments on a more timely and accurate basis.
- 158 -
Future Plans
Accounting system. Agency financial management efforts during fiscal year
1960 will be directed toward refinements of its accounting system. Specific
areas on which refinements are planned include the general ledger, allotment
and cost distribution accounting on an accrual basis, and financial :reporting. Installation of mechanized allotment accounting in the three remaining domestic
accounting offices will be completed during the first half of the fiscal year.
Plans for fiscal year 1960 also provide for continued progress in property
accounting. The Agency has plans for placing additional property records into
the punched card operation during the year. These card records will provide a
more flexible system for management and location control, provide a better basis
for reconciling inventories, and furnish a more effective basis for custodial
accounting.
Home leave and transfer travel costs. As a continuation of progress made
last year, a number of actions are planned for fiscal year 1960 to bring about
further financial and management improvements in this program.
Education and training. The Agency has projected and will carry out in fiscal year 1960 a comprehensive training program for personnel engaged in the
development and operation of electrical accounting machine systems for the
Agency's finance, statistical, and related operations. These plans continue the
progress made in this area in fiscal year 1959.
U. S. SOLDIERS' HOME
Future Plans
I:mprovem ent plans include the development of accrual accounting to me.et
the needs of the United States Soldiers 1 Home, and installation of internal procedures for eventual cost-based budgeting.
VETERANS ADMINISTRATION
Status
With the exception of the accounting system for the insurance program and
the processing systems for the benefit payment and payroll operations, account ..
ing principles and related implementations for all Veterans Administration
- 159 -
operations have been approved by the Comptroller General. A conventional system of general accounts for the insurance operation was submitted for approval
but consideration was deferred bee ause of agency plans for inclusion of this phase
of accounting in the conversion to automatic data processing. The complete system for the insurance operation will be submitted for approval at such time as the
system is fully developed and the conversion to automatic data processing is
accomplished.
1959 Accomplishments
Organized improvement program. The financial management systems of the
Veterans Administration substantially meet the objectives of the Joint Program
and the requirements of Public Law 84-863 and other related legislation. The
reportable accomplishments d:i-iring fiscal year 1959, therefore, are limited in
scope to refinements of the existing systems and practices relating to accounting, auditing, budgeting, funding, and reporting. The most significant achievements are summarized below.
Organization and staffing. An Accounting Reports Division was established
in the Budget Service of the central office in lieu of a separate organizational
unit which was previously responsible for the preparation of agency reports and
statements. This integration of the financial reporting and budget functions in
the Office of the Controller serves as a basis for the improved use of fiscal data
in the budget formulation and execution processes.
A revised organizational structure for the financial management function at
hospitals and domiciliaries was developed. The three financial management
functions of accounting, budget and management analysis, and finance (payroll,
voucher audit, disbursement and collection activities, etc.), are recognized as
distinct components in these field organizations. This formalizes the functional
areas of financial management and provides an improved organizational structure
for its administration.
A flexible organization structure was developed for regional office activities
in recognition of reduced workload at smaller offices. Certain administrative
and management functions at smaller regional offices are being consolidated into
an Administrative Management Division or a Services Division in order to reduce
overhead and achieve maximum utilization of personnel across functional lines.
Accounting systems. A study was made of the system of allocating the cost
of common service activities within the agency. As a result, revised systems
were established reducing the number of activities affected and providing for a
closer coordination and integration of financial and workload data for management and budget purposes. This enables distribution of common service costs
to the using activities on a more realistic basis.
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The mechanized mortgage loan accounting test system developed last year
was refined and installed at those stations having the greatest loan accounting
workload. Approximately 36 percent of the 150, 000 Veterans Administration
portfolio loan accounts are being maintained on punched card systems. In addition, a study was begun to determine the feasibility of maintaining this portfolio of mortgage loan accounts under an automatic data processing system.
The system of benefit payment accounting through the use of punched card
records was extended to 75 percent of the benefit payments. As a preliminary
step to automatic data processing for benefit payments, a procedure was developed whereby the payment function of compensation and pension activities for
small regional offices was centralized to larger offices designated as payment
centers. This procedure permits mechanization of compensation and pension
accounts for 25 small stati9ns that would not otherwise justify punched card
equipment.
The account structure for insurance activities was revised and modified as
a prerequisite to the conversion of premium billing and accounting to automatic
data processing. Agency accounting and internal audit representatives, with
consultative assistance from the General Accounting Office, participated in the
systems design and programming of the automatic data processing system to
assure that adequate controls over input and output of significant accounting data
were built into the system. By taking advantage of machine capabilities, it was
possible to eliminate processing steps and. documents currently required for
recording financial data in the general ledger.
Punched card systems were refined and extended as another prerequisite to
the conversion of insurance operations to an automatic data processing system.
The conversion of 600, 000 monthly insurance award payments to a punched card
operation was completed. Procedures were further refined for the mechanical
processing and transfer posting of collection items which result in a complete
punched card system for collection operations. Punched card billing procedures
were developed and installed for about 350, 000 United States Government Life
Insurance direct pay accounts. This included the conversion of dividend, renewal action, and premium billing operations to a punched card system.
Appropriation revision. A separate appropriation for payments to the
Service-Disabled Veterans Insurance Fund was discontinued. Restoration of
capital to this fund will be made by payments from the ·veterans insurance and
indemnities appropriation.
Internal audit practices. The Internal Audit Service, the top management
audit organization in the Veterans Administration, completed 37 comprehensive
audits during fiscal year 1959. The benefits which result from these audits have
been recognized throughout the agency.
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Additional emphasis was gi.ven to the conduct of special studies by Internal
Audit Service which p:ro";,tid,~ factual i:nform:ation for top management decisions.
In scope, these studies :range from small segments of agency operations to the
largest and most complex. Substantial savings ha'\re resulted from these studies.
A special antomatk data processing a.udit group \Vas established within the
Internal Audit Service during the year. The primary mission of this group is to
develop audi.t techniques, methods, and procedures for auditing and evaluating
agency operations which involve automatic data processing applications.
Cost-based budgetingo The agency financial management system provides
for i~Str'il.1TO:n of all activities on a cost basis. During fiscal year
1959 an agency budget policy manual was developed which incorporates this requirexnent as the uniform poli~y for all segments of the agency.
F'inancial reporting. To enhance the usefulness of financial data for internal
manage:rpent and external reporting purposes, emphasis was placed on improving
both the quality and timeliness. of financial data. The preparation of input media
in the form of punched cards for data processing equipment was decentralized to
field stations. This technique, which is currently prescribed for trial balances
of general ledger accounts and cost accounting reports, has facilitated the consolidation and analysis of financial data for the agency. The data is processed
in the central: of fie e by automatic data processing systems.
Edu.cation and training. A training program established by the Internal Audit
Service to facilitate the recruitment and training of new auditors was formally
approved in April 1959 by the Civil Service Commission.
A !;raining program was established to provide a basis for Veterans Administration employees to enter the professional accounting series GS-510-0 at the
GS-5 level. Successful trainees under this program are eligible for further
training on the job in order to qualify for target positions of Chief, Accounting
Section and Assistant Fiscal Officer.
Othe~ improvements.
Performance measurement and standards policies
werees-ta'51islied~provide for the development and installation of both quantitative and qualitative standa:rds for all measurable activities in the agency.
The construction of a chart room and the scheduling of quarterly program
review briefings perrni.ts each department and staff office head to personally report on the progress of his operations to the Administrator and his staff. The
chart room displayG graphically the performance of agency operations, measuring current progress against established plans, budgets, and standards.
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Improved management techniques provide for the submission from over 200
field stations of teletype reports on key workload, employment, and financial
data on the first workday after the end of each month. Summary totals of agencywide operations are developed in the central office for distribution on the second
workday. As a result, significant changes in trends can be observed and management action taken promptly.
Future Plans
Automatic data processing. The installation of large scale data processing
equipment in the early part of fiscal year 1960 will permit rapid conversion of
approximately 3, 700, 000 National Service Life L."'l.surance accounts in the
Phila.delphia District Office to magnetic tape. The conversion of approximately
2, 100, 000 insurance accounts now in the Denver and St. Paul offices is scheduled to begin in the latter part of fiscal year 1960. In an effort to attain the
maximum efficiency and economy inherent in the use of large scale data processing equipment, the insurance offices will be linked by .a data transmission
network which will provide the means of using the Philadelphia computer to
process work for all three offices.
Plans are well under way for the establishment of an agency Data Processing Center at Hines, Illinois. Initially, the Center will operate an automatic
data processing system for the centralized payment, accounting, and statistical
functions of the disability and death benefits programs. Conversion of the first
regional office accounts to the new operation is scheduled for January 1960. A
thorough study of the entire accounting function remaining at regional offices
after conversion of benefit payments procedures to automatic data processing
is planned for the purpose of developing the best possible method of maintaining such records.
Financial reporting. Major emphasis during the year is to be placed bn a
review 'bf the financial reporting structure of the agency. The study will recognize the significance of financial reporting as the essence of the financial management program. It will include a review of report format, timing, frequency,
content, etc.
Fund control and account structure. A further reduction in the number of
allotment accounts is planned by the elimination of the remaining allotment restrictions below the appropriation limitation level in the largest operating
appropriation.
Further simplification of the agency appropriation structure is under consideration. Supply depot operations are currently funded by a separate appropriation. Consideration will be given to the elimination of this appropriation
and the funding of depot operations through the agency's revolving supply fund.
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This will place the depots on a self-sustaining basis by the inclusion of all costs
in the price at which supplies and equipment are sold to operating appropriations.
A critical study of the agency cost accounting requirements is underway
which should result in a reduction of the number of cost accounts and subaccounts. and a simplification of the cost accounting system.
Other improvements. Plans also include specific procedural implementation of the agency budget policy manual, the development of an agency .. wide
financial audit policy manual, refinement of fund control procedures at operating
'levels. the leveling of workloads in fiscal operations, development of financial
program evaluation standards for the agency, and the development of specialized
financia~ controls over the multi-million dollar hospital maintenance and repair
program of the agency.,
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@FedFRASER