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PROGRESS UNDER THE JOINT PROORAM TO
IMPROVE ACCOUNTING IN THE FEDERAL GOVERNMENT
INTRODUCTORY
STATEMENT
This report was prepared jointly by staffs of the General AoooW1t..ing Office, Treasury Deparbnent, and Bureau of the Budget for the
heads of the three agencies e It is the second report on progres·s bein.g
made, under the leadership of these agencies, in bringing about imp;i:ovements in the Government• s accounting and financial reporting.. IJ.'ha
first report on progress was.released under date of January 12, l9SO,
This report is arranged in two parts and an api)endi.x. The first
is a general .statement of progress in broad perspective. The second
part describes developments in significant areas; for example: new
fiscal legislation,, improvements and simplification in central a.ooounting and related requirements, cooperative work with individual agencies,
more eff~otive.~ethods of a~c)j_ting, etc. The appendix illustrates ~e
oooperativ~ work which has been and is being done with individual agencies
of the Government in finding solutions to their special problems and improving their particular accounting syst~s.
Thi~ report undertakes to sununarize progress from the beginning
of the program in order that it may be a more complete and useful
cfooumenti. Distinction is made, however, between new developments and
those earlier in the program.
January 12,
1951
PROGRESS IDIDER THE JODJT PROGR.Al.1 TO
HIPROVE ACCOUNTING IN HIE FEDERAL GOVERNMENT
I.
GENERAL STATEMENT OF PROGRESS
The joint program faced a formidable problem in the light of the
historical background and traditions of the Government 8 s accoWlting,
the size, complexity, and diversity of it.s operations, the legal requirements and restrict.ions involved, and the conflicting philosophies
which existed respecting the function of accounting and auditing. In
spite of this, noteworthy progress has been made in the relativelJt·
short time that the program has been under way since December 19470
More than a year of spade work, starting with the activation of a
new Accounting Systems Division in the General Accotmting Office, was
necessary.. Irollowing this, in January 1949, the Comptroller General of
the United States, Secretary of the Treasury, and Director of the Bureau
of the Budget jointly issued a comprehensive statement concerning the
program to improve the Government•s accounting and financial reporting.,
The pattern was thus firm)y set with regard to poJicies, objectives,
worldng arrangements, and a broad but sufficiently specific· outline of
work to be done in various areas
This was essential in order that the
program might be systematically pursued along sound lines so that all
work, either in particular situations or from a Government,....wide stand-.
point, could be carried out in the right direction and proper:ty interrelated with ultimate goals in view.
0
·A great deal of cooperative work has been done,, since the program.
was launched, with practically all agencies of the Government on their
particular.. accounting systemsQ The work ·with individual agencies has
been spearheaded by the Accounting Systems Division (GAO), with appropriate consultation and participation on the part of the staffs of the
Treasury Department and Bureau of the Budget. This groundwork at the
operating points in the Goverrurient is the only sure way that accounting
can be made· responsive to management and eventua.lly be brought in line
with the f ollowi.ng goals of the program:
( 1) , The use by all of correct gu:i.cl:ing principles and
terminolosy,;
(2)
Making accolU1ting not only a protective device but
also an aid in spending wisely and not more than
is needed;
(3)
Providing the strongest possible internal control as
a current operating matter;
(4)
Achievj.ng the greatest degree of simplification in accounting and related procedures in the interest of
economy and more productive efforts;
GAO wash.,
o.c.
- 2 -,
(5)
Obtaining accounting results which are necessary as
substance for the Government's central reports;
(6)
Acquiring the necessary accounting talent, properly placed
organizationally, to make accounting a vital factor in
manag anent o
Important 3 however, as this cooperative work on the systems of individual
agencies was, and will continue to be, there are three additional goals in the
:wider field of the Government• s financial operations. These are r
(l)
Obtaining the most realistic financial planning (budgeting)
with proper accounting support,;
(2)
Having a system of reliable and useful central reporting
together with a strong systf;'ffi of accounting over the fiscal
operations of the Goverrunent which focus in the Treasury Department J and
(3)
Realizing the full benefits of independent audit performed
within the Government in ~ccordance with generally accepted
,principles and standards of audit...
,
'The pr.ogram is ent¢ng the phase in which certain far-reaching results
.are 1being realized on the basis of the original planning done and experience
,gained in the earlier years of the programo The fallowing developments have
been .selected as illustrative of the major progress being made.
Highlights of Progress
One of the prime objectives of work under the joint program is to provide
be:tter financial information for the use of the Congressa Effective worldng
arrangements have been established with the legislative committees on apP.ropriations and expendituresa In the field of legislation, interest of the
Congress in the improvement and strengthening of the fiscal system of the
Government along with the work being done under the joint program has oulminat,ed in the ,Budget and Accounting Procedures Act of 19500 Treasury Secretary
John We Snyder, Comptroller General Lindsay Co Warren.? and Budget Director
Frederick Jo Lawton appeared before the Congressional Connnittees on Expenditures in the Executive Departments and expressed united support of the legislationo In approving it.ll the' President called it "the' most important legislation enacted by the Congress in the budget and accounting field since Uie
Budget and Accounting Act., 1921, was passed almost thirty years ago" u 'ltds
Act provides a permanent basis for the most fundamental kind of changes fen·
improvement in the Govermnent 1 s budgeting, accounting, financial reporting,
and auditing" The Post Office Department Financial Control Act of 1950 and
Title IV of the National Security Act Amendments of 1949 a.re major pieces
of legislation for fiscal reorganization_, including accounting,, of two
of the largest executive departments. Legislation obtained for the Bureau of
..~ J Engraving and Printing, and for the National Bureau of Standards, is
typical of the kind of financing and accounting requirema1ts which are
desirable for certain types of operations. The program has played an
active part in these legislative developments as well as in connection
with other important legislation mentioned in the second part of this
report.
In the area of Government-wide requirements, controls and procedures.,
fundamental changes facili.tated by the new legislation are taking place
as the result of intensive review and analysis of the central operations
of the General Accounting Office and Treasury Department. The Accounting
and Bookkeeping Division of the General Accounting Office has been abolished,
elirainating the maintenance of appropriation, expenditure, limi tution,
receipt and personal ledger accounts which parallelled certain classes of
these accounts kept in the Treasury Department. Thia has resulted in a
direct saving of nearly $1 million. The Postal Accounts Division of the
General Accounting Office also has been abolished and its. functions of
maintaining the .administrative accounts for the Post Office Department
transferred to that Department. A tremendous amount of paper work and
considerable duplication was cut out by discont.inuing the submission to
the General Accounting Office of advance copies of schedules of collections
prepared by admini.stra ti ve agencies. Similar results were derived from
discontinuance of the submission of monthly reports of disbursements by
appropriation limitations and monthly reports on the status of approprla,..o.
tions. The General Accounting Office is collaborating with the Treasury
Department in intensive work to provide the Department .with the strongest·
and most efficient system of accounting and internal contro.l possible and
early means of producinB central financial reports that will truly serve
the needs .of the Government.
Other outstanding accomplishments are set out below:
first joint regulation, under authority of the Budget and AcProcedures Act of 195o, has been issued by the Secretary of the
and Comptroller General. It simplies procedures involving the
and countersignature of warrants with respect to the deposit and
accounting for repayments to appropriations. This elirrdnates paper work
and delay in ma~ing the repayments available for disbursement. ·All other
phases of the warrant system with respect to the receipt., retention, and
disbursement of the Government• s funds are under examination with the view
to effecting simplification and improvements.
The
, counting
Treasury
issuance
General Regulations No. 84 of the General AcCOl,mting Officu luJ::> Leon
completely revised. It prov:ides an improved basis for the cla&:~ifi.ci-ition
of receipt., appropriation, and related fund accoW1ts and establishes the
principles under which the 'll:'easury Department will assign account symbols
a.nd
titles for general use.
- 4Budget-Treasury Regulation No. 1, dealing with apportionments and
reports on the status of. appropriations, has been completely revised. It
provides an improved and practical set of requirements for all agencies.
Revision of this regulation and of related General Accounting Office requirements has eliminated certain duplication in reporting which previously
existed.
A joint review was made of the budgeting and accoWlting practices of
the executive agencies at the request of the House Appropriations Committee.
The reports furnished to the Committee will also be useful in establishing
priorities for further cooperative work 1Nith agencies under the program~ ·
The General Accounting Office and Treasury Department are participating
with the Bureau of the Budget in review of the regulations of all executive
agencies to ~st~blish systems of administrative control over appropriations
and other spending authority. Such regulations are required by Section 1211
of the General Appropriation Act, 19.51, to avoid the necessity for defic:lency
or supplemental appropriations and fix responsibilities for violations of
law in that respect11
The General Accounting Office and Treasury Department are con-tinuing
to' explore the introduction of a better integrated and more economical
system for reconciling the checking accounts oi,' disbursing officers, which
is a large and costly operation. A pilot installation with the Department,
of the Army is under way which has considerable potentialities. Meanwhile
some improvements have been made in existing procedures which have been
brought to light as a result of the larger undertaking,
All these and other developments in the Government-wide
cussed at more length in the second part of this report.
~rea
are dis-·
Cooperative work done with practically all agencies of the Governmen-t,
since inception of the program, is too extensive to enumerate in detail
but is summarized, to the extent practicable, in the appendix to this report
relating to work with forty agencies or major subdivisions.. This day-to-day
work ranges from full-time technical assistance on major conversions of' accounting systems or installations of new systems to innumerable formal 'and
inf'ormal consultations and telephone contacts,, and much oorre~pondence, in
the solution of large and small problems, coordinated with all else being
done under the joint program. The truly remarkable progress made in three
years demonstrates that this ldnd of cooperative approach is the only ef, fective way of mastering the problem of improving accounting systems and
performance at the many points where operations take place. The Budget ru1d
Accounting Procedures Act of 1950, for the first time in law,, places squarezy
on each agency the responsi bill ty of establishing and maintaining adequate
systems of accounting and internal control with respect to its own operations"'
In this continuing work wi.th individual agencies,, and the application
and further development of accounting principles, standards, and :related
requirements for their guidance, emphasis has been given to:
- 5{l)
Obtaining a well-conceived fund structure with related
account classifications for the Government as a whole;
(2)
Decentralizing accounting to the i.ndividual agenci.es 1
and within such agencies to the points of delegated
operating and management responsibilities Wlder centralized control;
(3)
Integrating the Government•s accounting through
clear-cut and simplified accounting relationships
between the Treasury Department and other a.gencies.;
(4)
Applying, in appropriate circumstances, the accrual
method of accounting, with corresponding simplification of budgetary accounting performed in confa.. 9lling
obligations and commitments under appropriations;
(5) Establishing accounting entities for certain types of
operations in which financial results need to be disclosed by segregating and grouping assets, liabilities,
costs and expenses;
( 6)
Establishing accounting control over and disclosure
with respect to inventories and other property;
(7.)
Employing cost-accounting methods, where necessary,,
integrated with appropriation accounting;
(8)
Synchronizing budgetary and accounting classifications
and data.
Proper organization and staffing in each agency for the efficient
performance of the accounting function is of paramount lmportance.
There has been real progress and encouraging deyelopments in certain
agencies. A great deal, however, still needs to be done in many agencies
to improve organization and the quality of staffing for accounting. An
important step was taken by the Civil Service Commission toward the
establishment of new classification standards for, a general series of
accounting positions. In order that such standards will be most bene!icial
from the standpoint of the joint program, the General Accounting Office,
Treasury Department, and Bureau of the Budget, together with certain major
executive agencies, are in an advisory capacity assisting the Commission in
the perfection of the classification standards before it officially promulgates them.
In the field of auditing, the extension of comprehensive and other
type audits at the site of operations, with more effective coverage_,
less paper work, and reduced flow of documents into Washington, is
progressing as rapidly as practicable in the light of the size of the
task and the rate. at which qualified staff can be obtained.
- 6Sixteen comprehensive, on-the-site type audits have been tnsti tuted for the
following agencies not subject to the Government Corporation Control Acts
Farmers Home Administration, Soil Conservation Service, Rural Electrification
Administration, and Farm Credit Admi.nistration (Agriculture) f Bureau of
Reclamation and Bureau of Land Management (Interior); Atomic Energy Commission; General Services Administration; Veterans Administration (insurance
activities).; United States Coast Guard and Bureau of Engraving and Printing
(Treasury); Maritime Administration and National Bureau of Standards (Co:mmeroe)J
Housing and Home ~'"'inance Agency (Administrator•s Office)l Natural Fibers
Revolving Fund (Army); and Post Office Department. A new Postal Audit
Division has been set up in the General Accounting Office to perform the
comprehensive audit of the Post O.f'fi°oe Department. These are in addition
to the hundreds of site audits of vouchers and other fiscal documents
being made by the General Accounting Office. Moreover, the central receipt
and appropriation accounts of the Government are now being audited where
the accounts are maint.ained in the Treasury Departmente
PROGRESS UNDER THE JOINT PROGRAM TO
IMPROVE ACCOUNTING IN THE FEDERAL GOVERNMENT
!Io
DEVELOPMENTS IN SIGNIFICANT AREAS
The following summary is indicative of the kind of progress being
made in various areasg
~egislative
Developments
Since the joint program started~ a number of important pieces of
legislation have been enactedo Participation from the standpoint of
the program has played an important part in these legislative developmentso
Of fundamental and far=reaching importance is the recent Budget
and Accounting Procedures Act of 1950 9 which the President cited as
the most important legislation in the budgeting and accounting field
since the Budget and Accounting Act~ 1921~ was passed almost thirty
years agoo The new Act lays a solid foundation in law for carrying
out the policies and objectives of the joint program and provides the
needed flexibi.li ty for putting into effect more economical and effi ....
cient procedures for obtaining maximum benefits from work going forward
under the programo 'I1he declaration of policy in the new law provides
a permanent legal basis for the joint programo
During the past yearJJ other noteworthy legislative
were the enactment of g
~ 0 .. relopments
'rhe Post Office Department Financial Control Act of 19.50.~ which
transferred tc the Department certain administ:rati ve accounting func ....
tions performed by the General Accounting Office for that Department~
provided for reorganLrntion of all accounting of the Post Office De=
partmentj and laid the basis for improved audit by the General .Account·ing Officeo
An act which enables the Bureau of Engraving and Printing to have
a business~·type budget and revolving fund method of financing under
which all expenses and costs of production will be reimbursedJJ and pro<=
vides for an annual audit of the financial transactions~ records~ and
reports by the General Accounting Officeo
Provisions in the Deficiency Appropriation Act.\! 1950.? which enable
the National Bureau of Standards to establish a working capital fund as
a basis for an improved system of financing and cost accounting for the
BureauYs activitieso
Sections 1210 and 1211 of the General Appropriation Act.? 1951,
whieh;;i reBpec ti vely.1, provide for simpl;i.fyi.ng the method of making
t:cansfers between appropriation accounts and strengthening the Jystem
for administrative control over expenditures to av9id the necessity
for deficiency or supplemental appropriationsa
An act which authorizes agencies to pay the beneficiaries of
deceased employees the amount due at time of deatho Previously,
agencies were required to send documents supporting the amount due
to the General Accounting Office for· settlement as claims by that
Office. This act speeds up payments, eliminates unnecessary paper
work, and simplifies related accountingo
In addition.9 a number of improvements and simplifications have
been accomplished in the appropriation structure for individual agencies.
These are from the standpoint both of reduction in m1mber of appropri.ations and providing the basis for better budgeting and accounting results o
Earlier developments were the property accounting and auditing
provisions of the Federal Property and Administrative Services Act of
1949; the Travel Expense Act of 1949, providing certain simplifications
of ac1'Tlinistration 3 accounting, and audit in connection with official
travel; and Title IV of the National Security Act Amendments of 1949,
establishing the controller function and organization for budgeting,
accounting, and auditing.9 along business lines, in the Department of
Defense.
Accounting Principles and Terminologl
Early in the joint program comprehensive material was prepared
on a wide range of subjects dealing with accounting principles and
practices and providing a basis for the adoption of common terminology.
This material has been used as a guide in the cooperative work with
various agencies and many of the principles have been embodied in
their accounting systemso With a view to setting up appropriate guides
which will have general use throughout the Government for years to come,
the extensive material initially prepared has been under review and revision in the light of actual experienceo In this work the services of'
a number of accountants with broad experience, presently in the Government, are being utilized to make certain that the principles give
adequate and balanced recognition to the proper degree of urliformity
for the Government on the one'hand and the diversity of operations and
management needs on the othero
'11 he development of a sound body of principles and practices for
general use is proceeding as rapidly as possible in accordance with
this approach~ This is consistent with the policy of the program and
the intent of the related legislation that principles, standards, and
related requirements be prescr1.bed only after considering the needs
of all concernedo
=
3
=
Because of their Government=wide significance~ the following matters
have been given special attention in the application and further development of guiding principles and standards.
Fund Structure and Account Classificationso A well conceived fund
structure and related account classifications is an essential element of
a sound budgeting.9 accounting and reporting system for the Govermnent as
a whole. The revision by the General Accounting Office of General Regulations Noo 84.11 mentioned elsewhere in this report~ is a major step in
establishing principles for achieving ~his objecti veo Of equal importance
is the incorporation in accounting systems of individual agencies of accounting entities which will segregate and group assets 3 liabilities 9
cos:ts, and expenses when appropriate for certain types of operationso
There has been much emphasis and progress in the development and application of thi.s principleo
Integration~ the Governmente s Accountin&!. A major objective is
the achievement of integrated, but decentralized, accounting for the
Government6 This is being accomplished on the principle that accounting
will be performed where operations take place and by the agencies re=
sponsible for the operations~ and that there will be clear~cut and simpli~
fied accounting relationships with the Treasury Department's accounting
for cash receipts~ disbursements~ and appropriations pertaining to the
Government as a wholeo Progress in applying this principle is evidenced
by: elimination and simplification of certain warrant procedures; elimina=
tion of the duplication of accounti.ng for appropriations and receipts
between the General Accounting Office and the Treasury Department, and
discontinuance by individual agencies of submission to the General Ac=
counting Office of monthly transcripts of appropriation accounts for reconcd:Ji:ilati.onp ~ internal improvements made by the Treasury D'epartment in
procedure for maintaining central receipt and appropriation accounts3
and development o.f improved procedures for effecting reconciliation
between the appropriation accounts of certain agencies and those of the
Treasuryo These developments are discussed elsewhere in this reporto
Decentralization of Accounting =in Agencie~.! To make accounting of
ma:x:imllni usefu1ness for management~ emphasis is' being given to appropriately
decentralizing the maintenance of accounting records to the points of
delegated. operating and management responsibilities., Of __ particular im~
portance in the application of this principle are organizational arrange~
ments for exercising)) through a controller or similar official, central
technical control over accounting operations and procedureso In 'the case
of field operations.9 use is being made of methods and techniques customary
in business for decentralizing detailed accounting to branch offices
under central controls and interlocking accounting relationstiipso
I
Basis of Accountin~ Emphasis has been given to the
practical applica tion 9 in appropriate circumstances~ of' the accrual
~ual
- 4basis of accounting, common to businesso Such method of accounting re•
sults in having .the accounts and reports of agencies reflect, classifyj
and analyze expenditures of appropriated money in terms of amounts of
goods and services received--not simply contracted for or ordered. Expenditures under the accrual concept represent disbursements in combination with unpaid liabilitieso Inventories acquired are taken up as
assets and recorded as costs when they are applied to specific purposes.
Accounts receivable and other controls over money due the Government are
also factors. Accounting on the accrual basis should make possible better
disclosure of the costs of the work and services the Government performs,
its liabilities, and resources available for financing its operations@
Progress in the application of' accrual accounting has included the establishment of revolving funds and busciness-type budgets for certain activities
as well as limited use of such accounting under conventional budgeting and
appropriation controlo Expenditures forinterest on the public debt are
now accounted for on the.basis of interest due and payable rather than
interest pai4 by the UoSo Treasurero Continuing emphasis on accrual accounting is of vital imp~rtance to the 11 performanceti budget concept o
Property A'ccountingo .As a phase of accrual accounting, attention
has been given and progress made in establishing accounting control over
and disclosure of inventories and other propertyo The work done has recog~
nized the need for integration between accounting procedures and the
operating procedures needed for property management o A report on property
management and accounting was made as a result of an extensive joint survey throughout the Government by staffs of the Treasury Department,
General Accounting Office 9 and Bureau of the Budget, and was approved by
the heads of these agencies and concurred in by the Administrator of the
Genera~ Services Administration in 19490 The report was sent to all agencies
for their guidanceo Specific working arrangements were subsequently agreed
upon by the Comptroller General a~d the Administrator of the General Services
Administration to provide for appropriate coordination between accounting
and management phases of the property problemo
·
Cost and Appropriation Accountingo Employment of cost accounting
methods, where·· necessary:-; and their integration with the appropriation
accounting.of agencies, are important objectives to which attention has
been given o Through· accrual accolintin·g 3 ·including adequate property and
inventory accounting9 improved bases have been developed for unifying
detailed cost accounting systems with appropriation accounting o This
produces more accurate and useful cost results for management purposes,
including better control over and support of appropriationso It also
leads to simplification arid elimination of overlapping where cost accounting systems have previously been maintained separately from other
accountingo
Control of Obligationso Accounting procedures for control of commitments and obligations should be kept in their proper sphere, and not expanded, as in the past~ out of all proportion to the purposes which they
can effectively serveo Improvements in this connection have been closely
linked to the application of accrual accounting.. The availability of
classified cost information on the accrual basis reduces the need for
developing detailed and extensive classifications of allotments.9 encum=
brances.11 obligations.'J and disbursements~ and repetitive~ cumbersome.9 and
inaccurate accounting which this involves., Progress made in this connec=
tion is directly linked to the application of improved and modernized
management concepts involving clear=cut delegations of responsibility for
control of commitment action and corresponding decentralization and sim..,
plification of formal.accounting procedureso It is expected that· joint
review.9 now taking placeJ of administrative regulations for controlling
obligations in relation to apportionments.9 submitted by agencies for ap~,
proval of the Director of the Bureau of' the Budget (pursuant to section
1211 of the Gene1--al Appropriation Act~ 1951) ~ will provide a basis for
making further improvements on a wider scale in connection with this
entire mattero
Synchronization of Accounting and Budget Classificationso An area
in which improvement is urgently needed concerns the synchronization of
expenditure classifications and data under each appropriation with classi-~
fications and data used for budget purposeso The principle involved is
that all classifications of expenditures or costs under each appropriation
siho.uil.d be sound and practical from an accounting standpoint while at the
same time being inf orma ti ve and useful in preparing and carrying out the
financial program of the agency concerned" In addition to improvements
along these lines in certain agencies.9 there has been practically com~
pleted 3 as explained elsewhere in this report, a Government=wide survey
of agency accounting and budgetary practices and related expenditure
classifications~ which will be used as a basis for effecting improvements
on a wider scaleo
Reporting and Budgetary DeYelopments
The Budget and Accounting Procedures Act of 1950 affords considerable
latitude for the President to determine the form in which the budget shall
be presentedo It gives specific recognition to budget presentation in
·terms of functions and activities o This provides the legal means for
taking full advantage of past developmental. work which has been directed
at achieving meanill:gf'ul financial planning along the lines of work to be
done by functions and activities 9 the synchronization of budget and ac~,,
counting classifications 9 and the use to an appropriate degree of the ac.,.,
crual method of accounting to reflect the real cost of performance and
for controlling resources and liabilities o
A concentrated joint review was made of the budgeting and accounting
practices of the executhre agencies o 'rhis was done at the request of the
Chairman of the House Appropriations Commi tteeo In its report on the
General Appropriation Bill.:1 1951 51 the Committee indicated the need for
accelerated action in synchronizing budgeting and accounting classifica=
tions and procedures in order to realize the advantages of performance
0
- 6 budgetingo Reports of practically all the reviews of agencies have
been furnished to the Comrni ttee. The results of these reviews are being
used as a basis for establishing priorities for further work to be done
with the agencies under the joint program" They should also be beneficial
by stimulating action in the various agencies for improving their systems
and methods o
The revision of Budget-Treasury Regulation No@ 1, dealing with
apportionments and reports on the status of appropriations, was completed and put into effect November 1, 1950. The revised regulation
represents an improved and practical set of requirements for all executive agencies to follow from the standpoint of budgetary reporting and
better integration of accounting with such reporting.. Dupli,cation in
reporting, which previously existed under separate reg-µlations of the
General Accounting Office and the Treasury Department and: Bureau of
the Budget, has been eliminated@
Section 1211 of the General Approprtation Act, 1951, requires the
head of each agency to establish, by regulation, a system of administrative control over the expending of appropriations to avoid the necessity
for deficiency or supplemental appropriations and to fix responsibility
for violations of law in that respect"' The regulations of executive
agencies must be approved by the Director of the Bureau of the Budgeto
The regulations have the most important implications since, if properly
developed, they will be a force in strengthening control over expenditures~
The General Accounting Office and Treasury Department are
participating with the Bureau of the Budget in the reView of the regulations from the st{µldpoint of the joint program(/
Disbursement and Collection Procedures
Substantial progress has been made and further valuable experience
gained in continuing the intensive work that was undertaken in the early
stages of the program in order to simplify basic procedures, in various
agencies and from a Government-wide standpoint, for the collection,
·
deposit and disbursement of funds, and related audit and control.
Much work has been done toward simplifying procedures for the
control of collections and disbursements in relation to individual appropriations a A procedure was previously developed, for trial installation in the United States Coast Guard, to eliminate overlapping between
cash controls maintained by disbursing officers and those of the administrative agencyo The application of this procedure to the Coast
Guard has been deferred, however, pending installation of the revised
accounting system of that agency in
its district officese
Meanwhile, the approach to simplified procedures has broadened to
a Government-wide basis as the result of the new legislative develoPments previously discussedo Sectlon 1210 of the General Appropriation
Act, 1951.si and the Budget and Accounting Procedures Act of 1950, are
- 7
important factors in the lU1dertaking to simplify the entire system
of control over collections and disbursementso
Under section 1210 of the General Appropriation Act, 1951, Governmentwide procedures were developed and installed in order that all transfer,s,
between appropriation accolll1ts may be accomplished by the issuance oft
checks rather than by warrants issued by the Secretary of the Treasury
and countersigned by the Comptroller Generalo These procedures have
expedited transfers and resulted in improved reporting of expendituresfor work done with funds so transferredj by charging such expenditures
against the appropriations provided for that purpose rather than against
the appropriations to which funds are transferred as a means of. f!i1nancing
the work to be doneo
SectJ.on 115 of the Budget and Accounting Procedures Act of 1950
gives the Secretary of the Treasury and the Comptroller Genera1 the
power jointly to modify procedures which under existing law involve the
issuance and colllltersignature of warrants for the receipt and disbursement of the public fundso Shortly after the Act became law, the first
joint regulation was issued under which all collections representing
repayments to appropriations are deposited directly into the accounts
of disbursing officers:> wi thoU"~ issuing warrants to cover the repayments
into the ~'reasury and then requisitioning them for advance to dispursing
officerso This eliminates paper work and delay in making repayments
available for disbursement without impairment of accounting control or
essential i.nformationo All other phases of the warrant system are under
examination and revised procedures are being developed for recommended
adoptiona Separate appropriation control and receipt accounts in the
General Accounting Office have been eliminateda Coordinate with this
and other developments, both in the General Accounting Office and the
indi TI.dual agencies 9 fundamental proposals are being perfected for revision of the Treasury 0 s system of cash controls and accountingo All
of this is in the direction of the basic objective of the program ·to
effect primary fOntrol through the accounts and related procedures of
the operating agencies of the Government and eliminate unnecessary
duplication and overlapping in central controls o
'l1here were other accomplishments, in the earlier stages of the
program.$) which now form important elements in the transition to simplified accounting and control for disbursements and co1lectionso Regulations of the General Accounting Office were amended to discontinue the
submission to that Office of advance copies of schedules of collection
prepared by the adnrinistrati ve agencieso Voucher payment, examination 1
and audit processes for certain agencies were simplified by the adoption
of a schedule type of voucher on which a number of authorized payments
to different payees are 1.istedo Use of a schedule type voucher makes
it unnecessary to send indi vi.dual vouchers to a disbursing officer, the
- 8 -
underlying documentation being retained instead in the administrative
agencies for either on-the-site audit or direct transmission to the
General Accounting Offfoeo The test O'f this procedure for all administrative agencies served by the Treasury Department's regional
disbursing office in St. Louis was completed on a satisfactory basis
during the yearo Obtaining benefits of this procedure by its wider
application will depend to some extent, however, on the progress
which can be made, as a practical matter, in the extension of on.... thesite auditso
Another procedure which has a close relationship to the wider
adoption of a schedule type of voucher is the use of the transfer
posting method of check writing by which the name and address inscriptions on vouchers are mechanically transferred to checks» thereby
eliminating repetitive typing and proof readingo This method,
originally used by the Treasury Department to some extent in connec'"li
tion with income tax refunds, was also used to advantage in the
issuance of checks in connection with the first insurance dividend
payment of the Veterans Administrationo In order to develop the
further potentialities of thi.s method of check writing, in conjunction
with the use of a schedule type of voucher, arrangements have been
made to test the procedure in its application to the disbursements
of a typical Government agency (Farmers Home Administration, Agriculture) o
As a consequence of the application of on=the=site comprehensive
audit to the United States Maritime Commission and the U;n.ited States
Coast Guard, collection procedures in those agencies were simplified
by the elimination nf the preparation of the schedules of collections
for submission with the collections to disbursing officerso Instead,,
collections of those agencies are being deposited directly with
designated Government depositarieso
Improved and strengthened controls and simpli:fied p~cocedures
for collections, accounts receivable and billings were installed in
the Bureau of Land Management (Interior):; and integrated with on-thesite audito
The General Accounting Office and Treasury Department are con=
tinuing to explore the matter of introducing an improved and more
economical system for :reconciling the checking accounts of disbursing
officers of the Governmento This is a large and important undertaking
since all related operations are. involved-=from the issuance of checks
to their final payment by the Uo S., Treasurer,.along with the necessary
processes of accounting and audito As a result of continuing consideration of the alternative proposals and procedures previously developed,
a nurnber of interim improvements have been made in the existing systemo
These include, cross~verification between the General Accounting Office
and disbursing officers of the issuance of substitute checks, more
effici.ent_development and use of outstanding check lists in connection
with the payment of checks~ establishment of a destruction schedule
for paid check statements at Federal Reserve Banks, the use of prenumbered certificates of deposit to avoid duplication of serial
numbers, and similar modifications of procedure which contribute to
strengthening or simplifying the present systemo
An important step taken from the standpoint of more far-reaching.
revision of the existing system is a trial installation which has
been made with respect to the checking account of the Army Finance
Officer at Sto Louiso Under this trial procedure, the check issuing
operations of the A.rnr.f Fina.nee Of fie er are integrated with the paying
operations at the Federal Reserve Bank of St. Louis, with the view to
reconciling on a decentralized basis the checking account of the
Finance Officer maintained w1-th the Uo S. Treasurero This is being
accomplished through the fac:ilities of the field accounting office
of the Army 3 together with appropriate sifa=:i
to be made by the
General Accoµnting Officeo
Q_~tral
_Accounting and Reporting
The Budget and Accounting Procedures Act of 19.50 assigns important
responsibilities and dU'ties to the 'rreasury Department in the field of
central reporting and accountingo Section 114 of the Act places on the
Secretary of the Treasury t,wo responsibilities& (1) to furnish reports
showing the results of the financial operations of the Government; (2)
to org(3.nize the Treasury Department us own accotmting and reporting in
such a manner that there will be an efficient operating center for this
purposeo These responsibilities a.re in addition to the responsibility
which secti.on 113 of the Aet requires each achninistrati ve agency to
assume in establishing and maintaining systems of accounting and internal control which will fulfill c.ertaii1 .specified needs consistent
with principlesj standards 9 and related requirements preseribed by the
Comptroller Generalo
The policy and objectives of the joint program as subsequently
embodied in the new accounting and auditing law involve a different
approach to the performance of the central control and accounting
functions of ·the Goverillilent o In line with this, the Comptroller
General has been making an intensive review· of the organization an.d
operations of the G~neral Accounting Office coordinated with a review
and analysis of the accounting organization and procedures of the
Treasury Department o While this work has not been concluded:> it has
resulted recently in the abolishment of the Accounting and Bookkeeping
Division of the General Accounting Office with a di:cect saving of
nearly $1 million and additional savings on the part of' ·all agencies
because of the simplification or elimination of certain requirements a
By this actionj the maintenance in the General Accounting Office of'
appropriation, expenditure~ limitation, receipt, and personal ledger
accounts for the Government as a ·whole has been discontinuedo In
addition~ under authority of the Post Of'fi.ce Department Financial
.... 10 Control Act of 1950, the Postal. Accounts Division of the General Accounting
Office was abolished and its functions of maintaining the administrative
accounts for the Post Office Department transferred to that Department. A
Postal Audit Division was created in the General Accounting Office. General
Regulations No o 84 has been completely revised to provide an improved basis
for the classification of receipt, appropriation, and related fund accounts
and to establish the principles under which the Treasury Department will
designate the account symbols and titles to be used by all concerned 0 The
revised regulations afford a basis for accomplishing simplification in accounting procedures for various classes of funds and a better disclosure of
the results of the Government 1 s operations in the Budgete
The Comptroller General's responsibilities in connection with these
matters will hereafter be mor~ effectively served by audit ·of the accatmts
maintained in the Treasury Department and the other agencies, together with
establishing appropriate requirements with respect to the maintenance of
accounting systems in agencies and reviews of the reconciliations made be·tween such agencies of their fund account balances with those maintained by
the Treasury Department o
With the advent of the new legislation, the Secretary of the, Treasury
took two important steps regarding its implementation" He estab1ished: for
the guidance of the responsible operating officials of the Treasury Department a framework of policy concerning the manner in which the law wp.s to
tie carried out as it affects the Department" He also made formal arrangements with the Comptroller General for the full collaboration of the General
Accounting Office in providing the Treasury Department with the strongest
and most efficient system of accounting and internal control possible and
the means of producing central reports which will be of real value to the
Governmento This collaboration is based on an extension of the work being
done in connection with the review of the organization and operations of the
General Accounting Officeo
On the ba1:Jis of this cooperative arrangement, intensive work has been
going on, for some months, with the objectives of (1) appraising the accounting and financial reporting of the Department, both Departmentally and
from the standpoint of its component uni ts; ( 2) developing comprehensive
proposals for the reorganization of accounting and reporting; and (3)
putting systematically into effect reorganization which is necessary or
desirableo This fundamental work in the Department is necessary as a preliminary to the reaching of conclusive determinations by the Treasury
Department, Bureau of the Budget, General Accounting Office, and others
concerned, as to the complete pattern of financial reports which should
be centrally produced on a reliable and useful basis without wasteful
effort
Meanwhile, emphasis will be given t.o certain central reports for
which there may be a special needo For example, because of the urgent
need of the Bureau of the Budget, proce.dure and regulations are now being
developed to provide essential and reliable information concerning the
collection, custody, and disbursement of foreign currency by various
agencies of the Federal Government both on an actual and projected basiso
0
- l l '""'
A great deal of the work mentioned elsewhere in this progress
report has special significance for the central systemo The full development of performance budgeting and the application of accrual accounting have an important bearing on central reportingo In addition,
certain changes which were made earlier in the joint program with
respect to the principles underlying the preparation of the daily
Treasury statement have important implications; namely, the new basis
of accounting for expenditures for public debt interest as it becomes
due and payable 9 the treatment of refunds as deductions from receipts,
and the more current classification of expenditures on the basis of
checks issued rather than checks paido Also of importance is the work
which was earlier started and is continuing in developing practical
means of working out the necessary process for the reconciliation or
integration of the accountiing of the various agencies with the central
appropriation and cash accounting of the 'l'reasury Department . .
Cooperative Work Y'ith Individual Agencies
The key to lasting achievement µnder the joint program is the cooperative work being done with individual agencies in improving their
accounting systems from the standpoint of day ....to=<lay operating and
management needs., The Budget and Accounting Procedures Act of 19.50
requires the head of each agency to establish and maintain systems of
accounting and internal control which will fulfill certain needs specified in the Acto This re~ponsibility~ for the first time in law, is
placed squarely on each agency with respect to its own operationso
Uqder the joint program~ initiative by the individual agencies is
encouraged and they are being urged to assume to the fullest extent
their responsibility for making accounting a vital factor in management
in the light of their particular operating needs., This approach brings
direct and immediate benefits to the agencies concerned and identifies
procedures and techniques for Government~wide application which have met
the test of experienceo Technical advice and assistance to individual
agencies, and review of their systems from the standpoint of conformance
with principles:; standards;) and related requirements is provided by the
Accounting Systems Division of the General Accounting Office, with participation by the Treasury Department~ Bureau of the Budget, and others concerned in the light of their respective needs and requirements.
The cooperative work in this area, relating to forty agencies or
major subdivisions of agencies, is summarized in the appendix to this
report. At· least sixteen of the projects enumerated have involved the
development and installation of new accounting systemso
Considerable work has also been done on special phases such as
hospital accounting and motor vehicle accounting!j which present problems
common to several or most agencieso
... 12 .,,.
Organization and Staffing
It has been recognized from the outset of the joint program that
regardless of the progress made in the technical improvement of accounting systems the matter of proper organization and staffing for the
efficient performance of the accounting function in each agen.cy is of
paramount importance o An important step has been taken by the Civil
Service Commission toward the establishment of new classification
standards for a general series of accounting positions in the Government. · In order that the new standards for classification will ·be most
beneficial from the standpoint of the policies and objectives of the
joint program, the General Accounting Office, Treasury Department, and
Bureau of the Budget,, together with certain major executive agencies are,
in· an advisory capacity.9 assisting the Civil Service Corrunission in perfecting such standards before the Commission officially promulgates them
for general useo
Of major significance was the action taken by the Secretary of
Defense, on September 27j 1950, in defining and clarifying the controller function and organization under 'l'i'.tle IV of the National Security
Act Amendments, 1949, as the basis for implementing the program to
strengthen, simplify~ and effect economies in accounting and fiscal
operations of the Department of Defenseo
In connection with the installation of 'a new financial system for
the Bureau of Engraving and Printing to meet the requirements of Public
Law 656, approved August 4, 1950!1 the controller type of function and
organization is being established coincident with the installation of
the new accounting syst.emo To improve fiscal operations of the Bureau
of Internal Revenue, the Commissioner recently established an Office of
Budget and Finance~ bringing under the control of that office all activities relating to budgeting and accounting for the administrative
expenses of the Bureauo Ground work is being laid in the new Economic
Stabilization Agency for a sound organizational structure for the fiscal
and accounting work of the Agencyo Progress was made in the application
of improved organizational and staffing concepts for accounting performance
in a number of other agencies, such as the Atomic Energy Commission,
Economic Cooperation Administration 9 General Services Administration,
Bureau of Reclamation and Bureau of Land Manaeement (Interior), and the
United States Coast Guard (Treasury)
Entire department such as Agriculture,
Commerce, and Interior are taking important steps in organizing departmentwide programs for improvement in accounting operations under modernized
concepts of decentralization with central technical guidance and coordination.
o
While these developments are progressive and encouragint:s, the fact
remains that a great deal still needs to be done all along the line to
improve organization and the quality of staffing for the accounting
- 13 functiono Attention to this factor takes on added importance in view
of the responsibilities imposed by the Budget and Accounting Procedures
Act of 1950 on each executive agency to establish and maintain systems
of accounting and internal control which will meet certain standards
of quality and usefulness.
Audit
Comprehensive audit at the site of operations, as it is being put
into effect by the Comptroller General, extends not only to the appropriate review of the legality and propriety of financial transactions
but also to the reliability of accounting results, fairness of presentation and disclosure in financial reports, and constructive recorrnnendations
regarding the improvement of accounting, internal control, and related
matters which are of concern to management.
·
Sixteen comprehensive on-the-site audits have been instituted for
·the following 'agencies not subject to the Government Corporation Control
Act: F'armers Home Administration, Soil Conservation Servl.ce, Rural
Electrification Ad.Iainistration, and Farm Credit Administration (Agriculture); United States Coast Guard and Bureau of Engraving and Printing
(Treasury); Maritime Administration and National Bureau of Standards
(Commerce); Housing and Home Finance Agency (Administrator• s Office);
Natural Fibers Revolving Fund (Army); General Services Administration;
Veterans Administration (insurance activities); Bureau of Reclamation
and Bureau of Land Management (Interior); JA.tornic Energy Comnrl.ssion; and
Post Office Departmento A new Postal Audit Division has been set up to
perform the comprehensive audit of the Post Office Department. These
are in addition to the hundreds of site audits of vouchers, and other
fiscal documents.? which have been made by the General Accounting Office
for a number of years, for various classes of activities and transactions (eogo, payrolls)o The central receipt and appropriation accounts
of the Government are now being audited where the accounts are maintained
in the Treasury Departmento
One of the important features of the comprehensive type audit is
that it provides· a sound basis for limiting the examination of individual transactions and related documents to the extent deemed necessary in the light of the effectiveness of the sy·stems of accounting
and internal control and related administrative practices of an agency.
Under this method of auditing, as authorized by the Budget and ·Accounting Procedures Act of 1950 and the Post Office Department Financial
Control Act of 1950, test checks can suffice as opposed to the detailed
examination of all transactions and supporting documents. Moreover, the
documents can be retained in the files of an agency instead of being
transported to Washington as was previously necessary under law.
- 14 This action is in addition to the elimination of previous Governmentwide requirements for the submission to the General Accounting Office
of monthly reports of disbursements classified by appropriation limitations, and other monthly reports relating to the status of appropriations, apportionr.ients, and related. account balances v
The expansion of comprehensive and other site audits, with
increased auditing coverage, less paper work, and reduced flow of
documents into Washington, will proceed as rapidly as practicable.
Jn. this connection, an important consideration is the rate at which
a sufficient audit staff, of qualified accountants, can be obtained.
Benefits to the President and to Congress
The improvements in accounting in individual agencies and in the
Government as a whole being achieved under the joint progrrun are basic
to the President•s program for the improvement of management in the
executive branch9 Likewise, progress under the program is providing a
basis for improvement in service to the Congress by establishing a
generally more reliable foundation of financial information for legislative action and an improved structure for control of the public funds.
This is being accomplished by cooperative impro~ent of agency accounting
systems and related internal control procedures combined with more effective audits by the General Accounting Office. Also, in many specialized
areas of interest to the Congress, work done under the joint program
provides a basis for helpful assistance to interested Congressional
committeeso Continuing working relationships are maintained with the
staffs of the appropriations, expenditures, and other committees of the
Congress and provide an effective means of coordinating progress under
·eke pro~ram with the functions and objectives of such committees.
January 12, 1951
PROGRESS UNDER THE JOINT PROGRAM
TO IMPROVEAOOOUNTINQ IN ·rHE~ FEDERAL dO'VERNMENT
~
:at{
APPENDIX
~AOCOUNTING
DEVELOPMENTS
· INDIVIDUAL AGENOD?a
January 12, l9Sl
J:W
PROGRESS UNDER THE.JQINT'PROGRA'M
TO IMPROVE ACCOUNTING ITu !HE FEDERAL GOVERNMENT
Accounting Developments in Individual
Agencies
CONTENTS
Page
Pref ace
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Departments
Agriculture
. Depart.mental ~ • "' .. • • • • • • .o • •
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Agricultural Research Administraticm. • • • " ., · • " .. • · ,, •.
Farm Credi·t .Admin:l.stration •.- • • • ,.
e • ~ · • • • • • , • • •
Soil c'onservi1.tion Service •• •. - • ~ • • , • ~ • ~ • •. • . • • , , . •
. Farmers }Jome Administration ., • Gp • • • • • • • • .., • o • e .~ o
Office of Foreign Agricultural Re~ations , ,•
Rural E,lect1~if'ication Administra.tion· •••. , , • , .••. , • • •
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Oonmerce:
Departmental 11 o · .,.,· • • •. . • • • •
Office of the Secretary • • • • • • •
Coast .and Geodet.ic Survey • ·• ·• • • ·• •
Civil Aeronautics· .t~dministration • • •.
:Patent Office. o , Iii o
o ~ .•. ~-" •
National BU.reau of Standards • , •••
Maritime Adminis~ratto;n , • • • • • • •
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Defense •
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Interior:.
·])epartmental o o • • , • • • • • • • • "
·:Bureau of' Reclamatiqn
Bureau of Land Management • • , , Iii , .,. o
Bureau of Mines o • o ·, •
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Bureau 'of Indian A.ffairs · • • • • • " • •
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Justice:
Departmental
Immigration and Naturalization Service • . •. • , ~·. • ,. • • • • •
Office of United States Marshals • . • ~ • • , . , • • • , - • • • •
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· Post Office
State
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Departments (Continued)
Treasury:
Departmental.
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United States Coast Guard • • • • •. , • • • • • • • , • • • ,
Public debt interest •
Withheld tax deposits • • • • • • • • • e .. • 111 • • ' • ill I •
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Bureau of Accounts
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Bureau of Cus·toms • • • • • • • • ,,
Bure~u of Engraving and Printing • • • • • • • , • • • , • • •
Bureau of Internal Revenue • ~ • • • • • • •
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!ndef>2ndent Agencies
Atomic Energy Commission • • •
.Civil
Commission
District of Columbia ,
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Econoudo Cooperation Administrat.ion
• • • • • • • , • ,
Economic Stabiliza.tio:q Administraticm
Federal Security Agency
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General S·ervices Administration
Veterans Administrations
Office of Insurance o
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Interstate Commerce Oomm:Lssiori • • •
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Housing and Home Finance Agency
Offi.ce of Finance
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Office of Construction, Supp)¥ and Real
Estat~
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Cooperative Improvement of Acc~untin§ Forms ••• , • • • • • • • • •
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29
-1-
ACCOUNTING DEVELOPMENTS IN INDIVIDUAL AGENCIES
This appendix summarizes various accounting developments in individual
agencies of ~e Government,, on the basis of cooperative
done -within the
framework of the· joint program~ The material does not purport to deal with the
extensive work which still needs to be done in this widespread areai nor does
it attempt to explain the extent.of deficiencies in the accounting systems of
agencies mentioned in this report and others ·not mentioned.
It would be completely misleading to attempt to describe in a general summary» such as this 9 the many hundreds of dif.f'erent. improvements whie.h are cooperatively worked out on a da;y-to-dq basis and· which of.ten lead to more
.far..·reaching accomplishments in other areas of the joint progra.rr11r Many of these
improvements in p:rooedure have been developed as an internal matt~r by agencies
simply on the b_asis of informal discussions with the Accounting Systems Division
of the General Account.ing Office. Moreover,
some places progressive a.cti.on
is taken» without direct cooperative discussions or asaistanoe,, in whioh the
stimulus and basic
of the program.(j and i tts concepts of agency r·esponsibili ty.si are important .faotorso
·
The material included in this appendix is intended to illustrate the kind·
of progress made and which
continuing as a·result of cooperative work on
the accounting problems
various agencieso Such progress results in the main
from the efforts of the individual agencies concerned with cooperativ.e assistance,
consultation, and guidance provided in varying degrees by the Accounting
·
Systems Division of' the General Accounting Offi_ce., and with participation by
Qj,her divisions 0£ the General Accounting 0£fice 1 the Treasury Depa:rtment, and
the Bureau of the Budge·t when appropriate.
·
Progress in some agencies ha.a been remarkable and steps taken in others
are encouragingo It wouldJ> however» be a. fatal mistake to continued progress·
to underestimate the size and di££icUlty of the task which still lies ahead in
making accounting in all agencies meet the req~iremente of Section 113 of the
Budget and Accounting Procedures Act of 1950·,o Enough has been done a .however 9
to provide a .prac,tioa.l demonstration of what oan~be accomplished through real
initiative on the part of individual agencies and through the cooperative ap-!
proach under the joi.nt program of the Gene.ral Accounting Office in ·the discharge
of its .functions in prescribing accounting requirementso
**********
2 ...,
. Department of AgrJ:cul t ure
Departmentalt The Departmental Office of Budget and Finance in cooperation
with the component agencies of the Department and the Accounting Systems Divisio~
of the General Accounting Office has spearheaded the accounting improvement work
in furtherance.of the objectives of the joint program in the Department of
Agricultureo A number of improvements have been made of the departmental accounting operationso On June JO, 1950,, most of the detail records which were
maintained qn a centralized basis at the Departmental level were eliminated
throUgh making the following major changes:
lQ
Discontinuance of all department ledger accounts other than
cash and appropriation availability accounts for unallottad departmental
appropriations (those allotted to two or more agencies) and for such
special and trust fund receipt accolmts as are to be ·appropriated or
allotted to more than one operating agencyo
2o
Delegation to the agencies of the responsibility and authority
to approve req~isitions upon the Secretary of the Treasury for disbursing
fundso:
Jo Delegation to the agencies of the responsibility and authority
tQ .administratively .approve disbursing officers 1. accounts current;.
4o Delegation to the agencies of the responsibility for currently
reconciling the balarwes of their appropriation and fund accounts with
balances reported by the Treasury Department o In this connection a pilot
study leading to the establishm~nt throughout the Government for simpli...
t'ied and more adequate reconcill.ation procedures was· conducted in the
Department and an agreement ·has been reached with the 'rreasury ])apartment
as to the reports to be furnished by the Treasury for use in the direct·
reconciliation of agency cash accountso
5o Elimination of the departmental review of adjustment documents
prepared by the agencies for submission to the General Accounting Officeo
60 More effective utilization of information reflected in the
agencies 1 records in the compilation of financial data for budgetary and
reporting
purposes~
In addition.t a new accounting system was developed and installed in the
Office of the Secretary for the working capital fund for certain central admirdstrative services which embodies commercial accounting·principles and permits the ready preparation of balance sheets, income and expense statements,
and other financial statements and :reports o
indicated,, the Office of Budget
and Finance has cooperated with the representatives of the joint program in
bringing about improvements in the accounting methods and procedures in other
agencies of the Department of Agricultureo The .Projects undertaken are briefly
described in the paragraphs that follow.
Agricultural Research Administration: A completely new acc.xrnnt.ing system
was developed and installed for both the recently established working capital
and the appropr.i. ated funds applicable to operations of the Agricultural Research
Center o The ·system embodies connnercial accounting principles including the
accrual basis and provides for the preparation of balance sheets 9 income and
expense statements~ and other essential financial statements and reports" Some
accounting complexities are involved in financing the Center from both an aPpropriation and the working capital fund and further refinements may be necessary or desirableo
Farm Credit Administration: Plans have been completed and procedures
have been develop'f:)d for implementing the on-the-site comprehensive audit by
the General Accounting
of the Farm Credit Ad.mini.strati.on,,
Janua~J
1
19510
Soil Conservation
The on-the-site comprehensive audit has been .
provided by the General Accounting Office for the Soil Conservation Servi.ca,.
In antictpation of
approach to improved au,di t, t.he use of a voucher
schedule has been apprcnred and adoptedo This has resulted in a cons:tderable
decrease in documentati.on by the agency as well as effecting additional economies in the disbursing functionso Also, plans and procedures have been
developed for decentralizing maintenance of the general ledger
the Regional·
Offices to eliminate repetitive record keepingo
Farmers Home Administration: On-the-site comprehensive type audit has
been instituted for t.he Farmers Home Administrationo In addition; significant
improvement and savings have been made possible through the . use of voucher
schedules, eliminating extra copies of docurnents, and by reducing the work involved in handling funds borrowed from the Treasury and in computing interest
paymentso Procedures for preparation of voucher schedules have been adapted
to punched card processes and have been tied in with the use of tran~fer posting processes for check preparation in the Treasury 1 s Division of Disbursement.
This work is of significance in developing potentialities of this method of
check writing for other agencieso
Office of' Foreign Agricultural Relations: A survey has been made of the
accounting practices· and activities of the Office of Foreign Agricultural
Relations and specific areas in
improvements can be made in the accounting system have been determined6 Revised procedures are being developed to
improve the accounting practices and methods and to provide management with
timely and essential datao
Rural Electrification Administration: ·The accounting system of the Rural
-Electrification Administration is being redesigned to embody the latest
developments in Government accounting@
Although the work on this
proj~ct
not. yet completed there have been some
developments
A new organi~ation plan with respect to the accounting function has been developed and will
be placed in effect shortly to merge the present program and administrative
accounting organizations into a single organizational unit responsible for
.
<J
all accounting within the Administration 0 In 9-ddition, an internal au<;}.it staff
has been established independent of the accounting organizationn Extension of
the comprehensive
program to the agency has permitted the simplification
of disbursement P!'.Ocedures. thl."ough
use of a combined voucher and schedule
form., This in t~ has m.~e possible the ·elimination of pU,blic voii c;her forms
for advances to
· ·and for payments to vem:lor-s when certified invoi.ces
1
are recei yedo Simplified procedures for
of .collections t.hrough the
use of collection
,
been
an~, are under study9
A
:review of loan accounting procedures has been undertaken to deter·mine the
.fe~sibility of adopti.ng punched card.methods as well as to develop any
eimplifications
tiona~
calculations and
and
~~-·--~~····~·
5-
Departmental: The Office of Budget and Management is coordinating
a. planned program of accounting improvements in the several organization
units in the Department under close working arrangements w:i.th the component
agencies and. the Accounting Systems Division of the General Accounting
Of'ficeo The most significant progress to date is described generally in the
paragraphs that follow
<ii
The Office of the Secretary is the accounting
and Domestic Commerce, Office of Inter~
Production Administration:) and Office of the
new system of accounting was developed and insta1le4
the Department, 8 s working capital fund utilizing
such as the accrual basis to provide accounting data
reflect the business type operations of this
on the accounting services rendered to the
with a view to improving the quality of the
furnished to such units in the light of operating
accounting for the Office of Foreign and
is performed by the Office of the Secretary fl transactions
relative to the sale of publications are handled at the field of fices of
the Office of F·oreign
Domestic Commerceo Procedures were developed
for simpli..fying the
techniques a.nd the processing of collec·tionso
Coast and Geodetic Survey: A major modification of pay roll proce~
.dures applicable to individual ships .wws developed resulting in considerable simplification
this fvnctiono Revised procedures for
disbursing by Treasury disb1~rsing agents were released to the fieldo
Arrangements
were completed for audit of pay rolls at the agency
office a.
Civil Aeronautics Administration: A comprehensive survey of th~
accoun'"tingpractices ... and procedures ·and of the operating needs for·
financial data is currently in progresso It is anticipated that this
survey will serv~ to determine the areas in which further accounting improvements should be made and.will serve as the basis for making such
improvements a Previously .11 internal i.mprovements were developed and installed for more adequate.documentation and control of accounts receivable
and more simplified obligation control., Modifications also were made in
the chart of accounts to provide more inforrnati ve data and to permit using
the accounts as media for fixing responsibility for various phases of
accounting and billing operationso
and
applicationsw
Improvements have been made in accounting for fees
connection with processing of patent and trade-mark
This has resulted in these operations being brought Q:rt
- 6 a current basis as opposed to prcY11rL:1us delays of at least two days and
saving of administrative expensesa A complete survey of the accounting
practices and procedures is scheduled for early commencemento
A completely revised system of aoBureau of Stande.rds which
provides for the development of project costs on an applied cos·t bash
in a manner consistent with principles a.pp,lica.b
to industrial opera.tionsc Conourrently 9 procedures have been developed to implement tP,e
legisl,ation for f
the operations of the Bureau throueh a wholly
sable working c
(revolving) fundo Provisions have been
made f rrr on=the-s
comprehensive audits by the General Ao counting
Office with re
s
from ·the elimination of duplicati\Jro doou•
men-ta through the :retention by the agency of origina.l documents.and
utilization o
voucher and scheduleo Emphasis is being
placed on th
in the system as needs therefo:r
become
througlJt. d.ay ..·to'"''qay operations~ particularly
the tn"eas
of more
accounting JI more equitable overhead di stributionj)
reporting., an.d formalization of prooedure~Ja
Various changes were made within
the decentralization of acoountin~
work to
under the supervision of diat:d.ct oomptrollers,p
a oomplete r
of the Division of Audits 9 and the establishment of an
and Pr~cedur,es Branch~ A sta.ff provided under
the joint
cooperation with personnel o.f the
Comptroller' G
,
developed and issued a manual of accounts and
proceP.ural
s cover !.ng
detail most of. the .accounting operations 11
and has
much
a stance in the Washington and district offioes
in implementing the prp
and ·training the personnel o Comprehe~
eive reports for budgetary
ation
of operating costs have
been introduced on a decentralized basis o All .assets have been plaoed
under accounting'coritrolo The personnel of the bivision of-Accounts
was reduced by more than 27% 9 but through the, introduction of simpli~ ·
fied accounting
cedurea it
been possible t,0 accomplish the
and
current work and
further progress in reducing
the·a~co~ting
logs o The installation of the tmproved a,ccounting methods and th'tt
training of
f a.oili tated. by close coordination of'
systems work
site audit worko
7
of Def'ense
Developments within the Defense Department under the National
Security Act Amendments of 1949 have provided essential internal. leader- ·
ship and enabled the Treasury Depa:rtment ~ Bureau of the Budget~ and
General Accounting Office to work with the Defense establishment ·largely
on the basis of providing assistance and advice and coordinating improve"'
menta initiated by the depa.rtrnen t with the. overall acoountine; improvement;
program.o·. These developments include: establishment of Comptroller type
organizations,p flexibility in rearrm1ging appropriation and .f'unotional
~ccount structure in terms of performance. type budgets, establishment of
working capital funds~ establishment of' staffing patterns of fully
qualified personnel at the policy making level 9 and full reoognition Qf.
the primary a.ccounti11g responsibili.ty of th~ depa.rtmentl'
Th.a following
of progressive steps 9 which :l.n the main
be:1en ini·tiated by the departments and al'.'e being develop~d with the day""
to-day cooperation
the three central fiscal ageno iea of the Go·vernm.ent 4
'are illustrative ·of actual accomplishments rmd of the gemar~l objeotive:l:J
toward which progress is being ~adeo
L
L
Ba.sic regulations governing the establishment and operation of working cap!t.al funds have been promulgated to cover in.dustrial9 stook .~n·d m.an.agem-ent funds. Three pilot combined
.def.ense printing s.ervi.ce inst.allations have been made~ one in
each military depa:r·tmento There has· been established an Air Force
Clothing Fund and plans are well alotlig for setting up a olothi.ng
and equipage stock fund in the Q~artermaster Corps of the Army"
The Military Sea Transport Service has taken over the operations
of the Army Transport Service» the Navy Transport Servioe 9 and
the Navy Tanker Serviceo Substantially all preliminary work has
been completed for converting three major industrial activities
(an Army Ordnance arsenal p a Naval Shipyard,, and a Naval Ordnance
Plant) to the fund type of operationo Experience gained in these
pilot installations will be used as a basis fo:r the rapid expansion of this conversion. program to all shipyards.I) arsenals an.d
other industrial activitieso
The advantages of these developments» which will become more
and more apparent as fund type operation's expand 9 include ~""'
ao Elimination of the chaotic financing arrangements
fdlich were inherent under appropriation and allotment procedures with their inescapable burden of paper work and
splitting and intermingling of opeqd:;ing and accounting
re spOIJ.S ib i 1 ities o
bo The ascertainment of real costs in terms of both,
the workii'1g fund operations and the distribution of such
received by
costs on the b a.sis of
~ctivities
financed
from appropriationso
Co
Adequate control of inventories and other assets including appropriate segregati.on of capital and operating outlays o
d~
Savings due to the gre;ate:r restraint upon 0 and attention to, operating costs by agencies which must pay from .their
own funds .for work or services ordf!:redo
·
cation of billing and payment procedures for
ell>
services r
f
o
A basi Er for the extenSion of the oomprehensiv'e type
audit('
processes are beint( developed in connection wi.th
21$
the asaigmnent
single service" procurement responsibilities under
which the compl:j.cated !'unQ.ing iind reporting mechan:i.sms of ad\fe.nce
payments.I! cross· senio~· allotments 8 etc-n. will be siimplU"ied through
direot
fun.ds ohargeableo
Accounting procedures have been 'developed· in connection
with "cross disbursing" (under 'Which vouchers for all three military departments
be paid by the most conveniently located dis...,
·
bu:rBing officer) o
4o The central accounting operations of the Army have been
decentralized on a
ba.sis 11 with emphasis being placed on sim-
plified procedures and improved service to the operating components.
Separation of the Air Force finance and accounting operation from
that of the Army is w:ider wa.yo
military ·pay ·systerrxs
5'°
o.r
·'t?ll,~
uniformo They are bei~g ~crutinized E,md
of Defense for the purpose .or devel9ping
and improved internal c-0ntrolso
departnier+ts have· b$en made>
~ested
fu~ther
in the Department
simplifications
60
have been
and coordinated with sim.1 ..
le.r developments on a Government-wide basis for simplifying warrant
and
accordance with the Budget &nd Accou.nting
A
'
type budget under which substantial improve ..
·terms of functional alignment of operations
est ab li-shed in the Navy Department o
pe:rrc:>r110.a.rH~e
and a pi
installation is now
as an ad_junct of the payment
- 9 procedures in the Federal Reserve banks
provide a basis for --
o
These procedures will
ao Improved and integrated internal controls and
ultimately for the application of internal and external
comprehensive audit techniques in connection with all
phases of. disbursing accountsa
bo Determining the extent to which central check :re ....
conciliation processes may be eliminated or modifiedo
co Exparndon of the use of cheaper punched card
checks and related processeso
There is being developed a sinr;le document 11 a.ll purpOl!H~1 1 i1
billin~ and payment procedure in the form of a combination vouM
cher and schedule which it is anticipated will greatly simplify
accounting for inter-departmental and inter-bureau transactions
by .......
9o
ao Eliminating the need for the use of sav0ral separ·
ate documents (invoices» disbursement voucher 9 disbursement
schedule 9 collection voucher. and collection schedule) for
each
transeu~tl.ono
bo
Reduoine the number of' steps in each transaotlono
co Reducing the numb er of copies of' the new "all
purpose'' docwnent below those now required for the dh.·bursing voucher aloneo
do Reducing the issuance of checks and the making of
advance payments or other fund transferso
eo Eliminating the basio conflict that has always
existed between Defense department billi.ng and payment procedures and those of the civil agencies and the Tr.easu:ry
Departmento
lOo Basic principles and procedures have been developed and
installed with respect to the guaranteed loan program~ authorized
by the Defense Production Act of 1950 (Public Law 774, 8lst Congress) and Executive Order No .. 10161 9 dated September 9, 19500
These procedures include proviSions for the full disclosure of the
effect of all financial transactions under the pror;ram 9 for effect....
ive internal controls» and for comprehensive type on·tho-aite
audits on the basis oi'\ retention of all pnrtinent documents by
the responsible program accounting offices~
- 10 -
A great deal of work, the significance of which is not.yet
apparent in terms of specific accomplishment, also is being done
···in such general areas as -ac
Progress that has been·: ma.de in developing improvements in cost accounting philosophy and techniques and in
. integrating cost accomrt.ing with overall accounting systems.
.
bo
The ~velopment of the overall accounting structure
of the departments to provide most effectively for the needs
of management, of the Executive Branch of the Government
generally, and of the Congress through accrual accounting
and aligning the accounting functions with operational responf3ibility consistently with commar1d channels o
Co .
The development of overall plans with respect to
comprehensive type internal audits in proper· relation to the
.development of the comprehensive type of' audit by the General
Accounting Office fl including appropriate recognition of
statutory or "compliance" featureei as an integral part of
the comprehensive type audit<)
d.
The evolution of a sound and consistent property
accounting program including its application to the working
fund type of operation and the inherent logistical problems
·or the military. establishmento
e.
'I1he developm~nt of. effective and fully concerted
plans and instructions with r~spect to the 'application of
. comprehensive type audit techniques in the audit of contractors• records, including the elimination of requirements for separate documentation for the departmental audit
agencies and for the General Accounting Officeo
In addition to the foregoing, a number of projects of less importance from the· standpoint of principle, have been developed, which
.represent very practical improvements and should result in substantial
sa.Vingso The following examples are merely iliustrative of this type
of worka
·
1. · · A simplified method of scheduling disbursements and
collections on electric accounting machines has been.devised$
teated and is now being installed throughout the Defense
Department@ To illustrate potential economies from these procedures~ ~t is estimated that more than 100 clerical jobs in
the Navy regional accounting offices can be elindnated 1 and
- 11 -
that similar; al though more widely dispersed, aa.ving:s wi 11 be
possible in the field disbursing activities in the Army and
Air Force.
2. Improved and simplified procedures have been developed
and are being installed for processin~ debt collections and for
adjustment transactions.
"" 12
Department of Interior
Since the early stages of the program cooperative work in certain
bureaus of the Department of Interior httS been an important factor in too
development and testing of improved accounting methods and procedures
aimed at some of the major objectives o.f the progre.ma Tha results aocoCTplished have been useful in wider application in the Government of
such fundamental accounting improvements as decentralization of' accounting operations 9 application of the accrual basis of accounting coordinated
with simplified obligation control 9 synchronization of programi> budgetary
and accounting classifications 9 improved control of receivables and
related billing procedures» and simplification and decentralization of
disbursement controls and related administrative examination procedurese
Departmental: Leadership and direction exercised by the Departmental
Office of Budget and Finance has been an important factor in the conduct
of the accounting improvement program of the several bureaus of the Department both from the standpoint of coordina.tion with improvement in management from a departmental viewpoint and Government ... wide obj eoti ves"' Of
particular importance is the V1JOrk done by this Office with the Bureau of
the Budget and the Congressional appropriation committees in the appropriation and allotment structure in the various bureaus of the Departmento
This provides a. greatly improved foundation for integrated improvement
of accounting and budgetingo Of importance in this connection als.o, a.re
the establishment of a working capital fund for the Department in connection with connnon services and various modificntio:ns which were worked
out in appropriation language for various bureaus of the Department to
provide a basis for simplifying budgeting and accounting procedures4
Bureau of Reclamation~ The work of installing; a completely revamped
accounting system on an accrual basis for the Bureau of Reclamation has
been completed except for the adaptation of' policies with respect to the
accounting for depreciationo Under the new system~ accounting operations
have largely been decentralized to projects~ with a resulting reduction
of accounting workloads in the Washington and regional officesc The
project cost accounts have been integrated with the appropriation accounts
and a completely revised system of financial reporting is used to provide management with comprehensive cost and other accounting data essential for operating purposes and for supporting the budget which ia pre.pared on a performance basi.s o Property accountingp procedures» and
policies ha:ve been developed and installed e.s a part of the acccunting
aystem for all properties of the Bureauo The management uses of accounting results have been emphasized within th'3 Bureauo Internal audi·t by
the ControllerYs Office of the Bureau has been developed on a coordinated
basis with the installation of the new system .. On.... the-site comprehensive
type audit by the General Accounting Office has been initiated"
Bureau of Land Manaf.ement: A revised system of aecounting for
receivables has been installed with the result that cont:rol is established over revenues at the time such revenues nre earnedQ The
13 ...
establishment of appropriate accounts~ receivable controls and billing
procedures was coordinated with the installation of on·-the-site audit
methods. Installations have been made for rece1vable and revenue
accounting on the new basis and decentralization of accounting to the
operating locations a.t which such transactions occur has been practically completed. Addi tione.l areas where improvements are needed in the
overall accounting system are receiving continuous attention. Forms
and procedures developed in the course of improvements have been adopted
for use by other Government agencies.
Bureau of Mines~ In the Bureau of Mines the work of dece11traUzing
the accountir.1.g functions to local field offi cer:i has been aocompli shed
through the use of branch office techniques. The allotment accounting
procedures were simplified and considerable duplicatiqn in accounting
work and recordation of financial. data were eliminated through the
development of improved and simplified accounting procedures e.nd fo:rrnao
Refinements !3,re 0urrently being made to brinr; about f'urthe:r i.mprove,...
ments and simpliffoations,J
Bureau o.r Indian Affairs: The oooperati ve work vd th the Bureau of
Indian Affairs has been directed principally to the making of a review
and analysis of acootmting needs preliminary to the development of an
organization and procedures for ea tab lishing and maintaining ~ modern
and comprehensive system of accounting consistent with the provisions
of the Budget and Accounting Procedures Act of 19500 In view of the
widely diversified activities of the Bureau, which engages in the construction, maintenance» and operation of hospitals, power ·plants 9
irrigation systems 9 and public roads and furnishes local government
and other services to Indiana, there is much work that will have to be
performed in the development and installation of an adequate accounting
system.. In cooperation with the General Accounting Offfoe,, the Interior
Department and the Bureau have initiated pians for a continued study·
and an improvement program with respect to the accounting in the Bureau
of Indi~ Affairso
14 -
Justice
Departmental: On July
1950.9 the combined general ledger maintained
in the Administrative Di visi.on of the Department for the Alien Properly
Custodian, Legal Division 1 Immigration
Naturalization Service, Federal
Bureau of Investigation, and Bureau of Prisons was separated according to the
respective organization units and; in August, the general ledg(~r
the
Immigration and Naturalization Service wa.s transferred to tha.t agency o Attention is being given to t,he problem of integrating the appropriate allotment
and other subsidiary accounts vd 'th these general ledgers o
cedures have
been completed for direct reconciliat,ion of agency accounts for appropriated
!u.nds with accounts
Department
&
The wor·k of
the
accomplished
work
being done to train the ~"'--'-tu""
in the
accounts and 'to
work .
A proposed reorgani~ation
.a..r,•- ..... .,,.ation
has been charted
and uniform pey
procedures
been
(both Washington and field)() Obligat.ions fo:r persone\l
the total appropriations) have been brought under
Improved collection and reimbursable procedures
and these operations are now on a current basiso
to the
in August
keeping of the
resulting from
activity along
review by the
adopted for
services (about .88%
effective accounting
have been placed
Q
Offices of United States Marshals: The completely revised system of
accounting, developed-in the previous year, has been installed in 64 of the 93
judicial districts and installation work in the remaining districts is progressing at a
of
to five districts completed each montho Improved
control and informati.on are being achieved$ with substantially less paper
work, through implementation of the new systema Arrangements have' been made
tor on-the~site audits of pa;y
by the General Accounting Officeo
15 Post Office
Depa.rtmen~
On November 15, 1950~
the first time since 1836, the Post Office
Department assruned the same responsibility for performing its own accounting
f llllctions as has been imposed upon other Government agencies o This was made
possible by enactment of the Post Office Department Financial Control Act of
1950~ approved August 17~ 19500
This Act provided for the transfer of ad.mini strati ve accounting and
reporting functions performed by the Gener~ lccounting Office for the Department to the Postmaster General and imposed upon him the responsibility to
establish and maintain adequate and efficient systems of accounting and internal
controlo The Comptroller General is responsible for prescribing principles and
standards for accounting, cooperating in the development of the accounting system~ and auditing the financial transactions of the Departmento
To the fullest
extent practicable, as determined by the Comptroller Qenera1 9 this audit is t~
be performed at the place or places where the accom1ts of the Department are
normally kept,· and in a;ccordance with generally accepted principles of auditing., The Act also provided for postponement of any or all of the provisions
of the Act for a pe:r":iod not to exceed two years o But the Postmaster General
and the Comptrol).er General, desirous of achieving improvements contemplated
by the Act as promptly as possible, worked out immediate arrangements for
assumption of the new responsibilities by the Post Office Departmento
The functions,, personnelJl records, equipment, and appropriations of the
Postal Accounts Division of the General Accounting Office at Asheville» North
Carolina, were transferred to the Department as of November 15, 19.500 For th&
time being most of the operations are being carried on in a similar manner as
heretofore, but from time to time as new and improved procedures are developed»
operations in Washington or Asheville are being appropriately adjusteda A
complete revision of the accounting system and procedures has been initiated
by tne Post Office Department with the cooperation and assistance of the
General Accounting Officeo
During this transition period the General Accounting Office is discharging
its audit function through a small staff of the newly formed Postal Audit
Divisiono As procedures a.re changed, modified audit techniques will be adopted
with the eventual goal being a comprehensive on-the-site audit of the Post
Office in accordance with generally accepted principle~ of auditingo
Work is progressing on the development of a new accounting system which
Will give recognit:i.on to the size of the Postal Establishment, the multiplicity
of operating units (42,000 post offices)~ the wide-spread dispersal thereof
through the 48 states and territories, and the large volume of financial t:rane""
actions, each involving a small amount but agg·regating over 18 billion dollars
annuallyo It will provide the information required.by the Postmaster General
for control of these farflung operations~ and will disclose the results of those
operations and the financial condition of the Post Office to the Congr•ess and
to the publico It will be geared to and facilitate the preparation of the performance-type budget. in cot.formance wit.h the recently modified appropriation
structureo
16
It is presently planned to
-. the accounting
internal audit
functions now performed at
twelve regionaJ. oTfices where the
accounts of all post offices in the
i.rlll be consolidated o Control of
all expenditures will be directed from Washington but the accounting at headquarters will be liniited to integrating 'Lhe accounts maintained at post
with those maintained at the Department
through combining the twelve
consolidated accounts
those of the Department
In view of the magnitude and widespread nature of postal operations and
the complex transitional problems involved, the development of a completely
revised effective accounting system, the procedures under which it will operate,
and the accomplishment of the detailed phases of
successful installation
extensive and intensive coope
effort for completion, which
can
be accomplished on an orderly basis over an extended period of time 0
A specialized development vmich even preceded the enactment, of the Post
Act of' 1950.9 and which is of great impora modernized Po!St Office Department accounting
system
done toward the development
installation
of a completely ,
plan
operations for postal money
lated accolmting
control and audit. procedures€! The
the new
elimination of detailed
of money order
transactions
Accounting Office~ were agreed upon by the Postmaster General and the Comptroller General early in 19SOo Intensive .work in
the implementation of
and procedures for the installation of this new
esystem on ,July l, 1951, are being developed in the Post Office Department
With the
cooperation and participation of the
Accounting Office_.
'j'reasl,lfy Department,
Reserve banks, and 'commercial bankers~
Office Department
·tance
the
The new system will
use of a punched card instrument which will pe~
mi t mechanization
many
accounting and related operations involved
in the issuance, payment,
a.pd auditing of these large scale operations
involving about 400 million trQnsactions a yea:r representing over $5 billion
in transfers o:r small amounts of money o The money orders, under the new system, will be payable at any post office or through any Federal Reserve bank
rather than only at specified post offices as is the case under the present
systemo The new system will also consolidate postal notes and money orders
into a single systemo The Post Office Department has developed the new money
order to better serve the needs of the public as well as to provide a basis
for more economical operations
the processing and control of money order
transactionso The procedural. plans for the new system which are presently
being implemented are being synchronized with the basic plans for the entire
Post
aQcounting system in terms of decentralization
operation$
to regional
otherwisec
Implemsntation
tem is progressing
the introduction of the new money order sysa definite schedule with deadlines set
for each phase of 'the
Inasmuch as the date of introduction of the
new money order
been definitely determined, this program is receiving
~~th
- 17 ...
State Department
The State Department has organized and undertaken a program for improving
its fiscal management affairs and the work of revising accounting methods and
practices in selected areas is underway. A chart of general ledger accounts
has been developed and installed which forms the framework for the control of
accounting transactions and classifications that are necessary for management
purposes. Procedures have been developed and installed for modifying and simplifying use of the State Account of Advances., A new system has been installed
for accounting for the Foreign Serv:l.ce Retirement and Disability Fund. A comprehensive study of the accounting practices, procedures, classifications, and
the operating needs for the financial data is currently in progress. It is
anticipated that this study will serve to determl.ne the areas in which further
accounting improvements should be made, the priori ties to ·be established and
the basis for making such improvements.
Unlike most· other Governmental departments which have separate appropriations and accmmting systems for bureaus or divisions, the State Department' a
system is operated as one accounting entity for all organizations and appro ....
priati.onso The rate of progress will, therefore, depend upon the determination
of needs for the entire Department and the coordination of the procedures on an
overall basis.
18
Developments in
reporting system and the
, controls
the Governments s central accounting and
and simplification of Government-wide
was
sed elsewhere
this progress
been made in improving the accounting
Department~
Improvements of accounting in
bureaus of the Department
.......... A'""'"''"'""· under a comprehensive program established by the
This program has been so organized as to assure
and participation from the standpoint of
considerations., Important
Departmental poli.cy issued by the Secretary
participation
the accounting
of the
nv>'l~mt:>'nT' through the
of Fiscal Assistant
the
bureaus; specific
for the
of the
accounting
togethor with
au.di t; and
Departmental
designed to serve substantially the same purposes within
the Department as Accounting Systems Memo~anda
the General Accounting Office
serve for the Government
a ~holeo
have been made
the accotinting practices
Division of Deposits, Section of Surety Bonds,
Specific areas where accounting improvements
<md action has been and
being taken to make
Revlsions have been made in the administrative and cost accounting of the
as the initial project, of a comprehensive program of
the
designed to improve budgeting, accounting~ and reporting in each
bureau of the Departmento Under the new plan the administrative accounting
system has been
from the «9cash" basis to a practical "accrual" basis,
The Chief Disbursing
is confident that the new system provides J) • on the
most practical
integration of accounting results and performance
Division of
and furnishes
The
useful
information for current operating
with this
be a valuable basis
of other
revenue acti vi-
of
a system of internal
control on the collection
, it has been
Customs before pro-
"" 19
to give
Substantive legislation was obtained
:; effective July l~ 1951'1 a busi-
ness-type budget, revolving fund method o financing under vmich all expenses
and costs of production will be reimbursed» and an industrial system of
accounting together with a comprehensive type of audit by the General Accounting
Officeo A completely new accounting
vrith cost accounting properly
integrated with the general accounts was developed and installation was begun
1July lJ> 19500 This system provides for the development of unit costs of p:roduets with complete utilization of accrual accountingo It involves establishment of accounting control over all inventories and property 9 depreciation of
fixed assets, and the preparation of meaningful financial, opera.ting., and cost
reports for the use of
o
The Comptroller General ha.s directed that
comprehensive
be instituted for the Bureau coordinated
with the installation qf the new accounting systemo Thus, conversion to the
new accolIDting system and comprehensive audit are in process during the fiscal
year 1951 in preparation for the new system for financing and budgeting which
will take effect for the
year 1952 o
An appraisal was made,, at the reque
of the
;,
the methods of budgeting and accounting
used by the Bureau to control and manage its administrative expenseso Tne
results of the
reported to the Commissione.rl' including suggesfor proceeding with improvements in various
the Bureau 9 several months ago 9 undertook a trial
installation in one field office to coordinate, integrateD and improve its
accounting and disbursement activitieso The results were highly satisfactory
and provide the basis for s
installations in other field offices~ Also»
the Commissioner has established an Office of Budget and Finance bringing
under the control of that
all activities relating to b~dgeting and
accounting
ve expenses of the Bur13auo This will be a
means of making further improvements on a cooperative basis under the joint
prograro.o
tions of a fm1damental
areas" Based on the
United States Coast Guard
A completely new and decentralized system
of accounting,!) on~ an accrual basis, has been developed and progressively installed in eleven districts of the Coast Guard~ leaving installation to be
effected in the near future in one distr~ctj four headquarters units~ and tvro
supply centerso The new system is geared to operating needs by providing better
information and control over the expenditure of funds through comprehensive
cost finding and reporting in connection with programs and activitieso The
comprehensive type of audit at the site of operations has been instituted by
the Gene
.Accounting
I>
Simplified procedures have been established
the handling and
o.f collections and for controlling and accounting
for disbursing funds thereby :reducing paper work and eliminating duplication in
acc01mting with commensurate
in operating cost(» Simplification and
improvement of the appropriation
for the Coast Guard was incorporated
in the
Appropriation
, 19510 The Coast Guard 8 s installation ~~s a
yaluable
ground
accounting and related fiscal operations
elsewhere in the
20
Public debt interest:
Accounting
interest
on
the public debt was re-
visedso that the expenditures are now taken up in the aceounts and reported
in the daily Treasury statement on the
the ruoount which becomes due
and payable rather than according to the
checks and coupons which are
paid by the Treasurer of the United
Also ;; the accounting and re po rt-
ing provides for
of tha
interest coupons and checks
not yet presented for payment by the Trea.surer¢l' Related changes in operatina
procedure
the processing and examination of paid
coupons
money
of a.t
$1.50 1 000 annually to the
non-rei.mbursable expenses on the part of the
... . ,.,. ...,,,.,.., ..... public debt interest accounts,
Bookkeeping and Warrants,
been eliminated
controlling accountQ ·
developed
the
the collection
the new procedure
the respective operating
Reserve banks,
s Office
, Bureau of Internal Revenue 1 and
This procedure is being further simplified in
"'"'"""d........ ,•..,, of the Federal Ins'l,\:rance Contributions Act
21 Commission
The. controllership organi~a.tion for administering accounting and related
fiscal activities of this agency has demonstrated the efficiency of this type
of organization in carrying out the objectives of the joint accounting improvement programa A system of accounting on an accrual b~sis has been installed,
including accounting 9ontrol over the large and diversified property holdings,
aJ1d. refinements are continually being made in the light of operating needs and
conditions., Synchronized with the application of this basis of accolll1ting has
been the development of a cost type budget in which detailed functional classifications of expenditure data on an actual cost basis form a part of a coordinated presentation of budget estimates tying into an Hobl:i.gationtt basis
for the appropriation' as a wholeo The accounting of the major cost type
contractors dealing with
Atomic Energy Commission has been integrated
with the Commission• s accounting system, also on an accrual basiso
avoids
duplication and overlapping and permits simplification of documentation coordinated with ·site a.udito The revised procedure for effecting payments
through the use of voucher schedules has been extended to' the Commission and
has resulted in more economical handling of disbursementso
The accounting practices and procedures used in all field offices have
been reviewed in connec.t.ion with the planning and development of all possible
improvements in the accounting systemo Emphasis is being placed on the development of basic policies and procedures with respect to depreciation accounting,
simplification of allotment procedures, and development of unit costs& The
system in effect provides for meaningful financial statements, including
balance sheet, operating
cost statements, and statements of source and
application of funds. Work
underway to improve cost accounting for con..
struction activities and budget presentation of all financial datao
Comprehensive audit of the agency's activities by the Corporation Audits
. Division of the General Accounting Office was initiated in January 19510
On-the-site audit by the General Accounting Office of exvenditure transactions
had already been in effect for several yearso
22
~
Considerable wo~k has been done by the Commission during the past
three years in the development of a new
of aooounting for reti~I·
ment funds and the proposed aystem>. is nearly :ready for submission to
the Comptroller General for approvalo Various phasgs of the revi
system are presently being tested in actual opera.tion by the OommiaalGQ.
as a basis for working out such modifications and adaptations aa may
be neceasa.ry or desirable.
·
Survey;-s of; th aocounttng praotiqea and :n~e.da have been
in.
the Govern.ment ·of the Distr iot of' Columbia preliminary to th~ devel()p+w
ment of an accounting system t.,o me"t the requirements of the Budget
and Acc.ounting '.Prooedures Act of 19500 An organization chart has 'been
prepared for the Auditor~s Office which, ·when made effective, will
achieve more efficient operationa, A combination purchase order and
voucher form has been designed and procedure~ developed to streamline
the procurement of materials and aerviqes and control dooum~ntation.
Prescribed pay roll procedures adapted to punch c~d method$ have be&n
instituted for about 50% or the District of Columbia employees,.. New
procedures ware developed ~o p:roQf'HllS P4blic Aasi~tanol$ payments on
punched card equipmento
avings realized on the foregoing ~pproximate
$40 9 000 annuallyQ Appro:dmately 30,000 cheoka are being produood
monthlyo A system of genefal ledBer aoc·ounts has b4'~n drafted and
tentative procedures have been prepared for EJtrengthening the inte:rnd
control exercised oy the Auditor and for decentralizing certain accounting activities to the points of operation appropriately int¢!'grated on
~ ~ccrual basis with the ~coounts in the Auditor' a Office~
- 23 Economic Cooperation Administration
The controllership type of organization was established at the incepti.on
of the Economic Cooperation Ad.ministration following a pattern utilized in
progressive business organizations which places jurisdiction over accountin~
and related fiscal activities at the highest level of management under the
Administratore This made it possible to closely integrate the development or
the accounting system from the inception of this agency to modern coricepts of
management in which clear cut delegation of responsibility was an important
element.,
Significant features of the system include appropriate application of
the accrual basis to ·accounting for administrative expenses; decentralization of responsibility for control of such expenses to the points where
obligating authority is exercised subject to internal audit by the Economic
Cooperation Ad.ministration Controller; and the development of special techniques and methods in the direction of simplified and economical account
keeping, reporting, and control.
Progress in development of improvements, modifications and refinements in the accounting systems and in keeping it adapted to changes in
management needs is continuing under the leadership and direction of the
Economic Cooperation Administration Controller under appropriate coordination with the General Accounting Office~ The coordinated development of
accounting and internal audit is a significant factor in control over these
world-wide operationso
From its incept1.on, expenditure transactions under Economic Cooperation
Administration appropriations have been audited by the General ~ccounting
Office from documents in the offices of the Administration.
- 24 Economic Stabilization Administration
The work of developing and installing a system of accounting for the
Economic Stabilization Administration was begun shortly after the Administration was establishedo The accrual basis of accounting w:lll be applled where
appropriate with provision for the disclosure of expenses and costs on the
basis of resources actually applied to particular programs or purposeso The
system will provide for disclosing and controlling all assets and li.abilities
with complete integration of budget and accountso
Federal Security: Agency
Considerable work has been done towards eliminating 'unnecessary paper
These changes included substituting
a single monthly voucher for payment of rents, awards, stipends and fellowships, in lieu of several thousand individual vouchers, and a revised and
simplified procedure for accounting for patients 1 funds at St. Elizabeth~ s
Hospitalo Some survey work has been done of the hospital activities of the
United States Public Health Service in connection with the Government-wide
project for improvement of hospital cost reporting and accountingo The
accounting system of the Food and Drug Administration was surveyed at the
headquarters office@ Controls were found to be adequate; however, informal
recommendations were made concerning reporting procedures which, when put
into effect, will result in furnishing more current information on field
obligations and expenditures than have been available heretoforea
work and revising internal proc.edureso
Ho using and Home Finance Agency
The principles and framework for a complete revision of the accounting
system for the Office q~ A4miniptrator w~re developed by the Accounting
Officer of the Bous:tng: ';.:,md Boni~ fina:(lCe Agency ·and approved by the Comptroller
Qf?Peralo The sy~teip. ,is .be·ang Jmpl~niented by· tl)e progressive installation of
. necessary detailed piQ;oedu,ti~s~. The principles approved include provision for
l(lpplication of the acc;ru~l basis of accounting, accounting control of all
~sets, the developme·nt bf program cost information geared to management
-iteeds, and simplified obligation control methods o Comprehensive on-the-site
audit has been initiated by the General Accounting Officeo
Interstate Commerce Commission
Improvements in the systems and procedures have resulted in placing
property under accounting control, improving internal control over purchases
and property, and eliminating duplications in the internal auditing work.o
General Services AdJ1Linistration
The functional responsibility for nll phases of financial manaeement of
the General Services Administration is coordinated in the Office of the
Controllero .An internal accounting improvement program has made considerable
progress in combining the original accounting systems of the sf:iveral previous
individual. agencies into one integrated systemi:i Accounting and administrative
examina.tion
accounts has been decentralized to the regional of fices under
the jurisdiction of the regional controllerso The regional accounts are integrated with central office accounts through the application of branch office
techniques to eliminate dupli·cation and repetitive record keeping o At the
same time, the various central, and field accounting offices of the prior
agencies have been consolidated into a single central organi2;ation and into
the ten regional offices, resulting in a substantial overall reduction of
personnel engaged in accounting workv The agency has established a qualified internal audit staff and has developed an internal audit pro gram"' The
internal audit will have a direct relationship to the external comprehensive
audH by the General Accounting Office which has oeen initiated.
of
As a part of the agency's accounting improvement program, a. chart of
general ledger accounts and illustrative entries have been developed~ and been
approved by the Comptroller Generalo The disbursing operations have been
simplified through use of a combined voucher and schedule formo The account-·
ing system as approved is based on appropriate application of the accrual
basis of accountingl) Other work to date includes revision of existing cost
systems for repair service shops and working fund opera.tionso Attention will
continue to be directed to improvement and refinement of the system as a
whole with particular emphasis on simplification of allotment procedures,
improvement and simplification of billing procedures and more effective
control of propertyo
In the broader relationships of accounting and property management as
they effect all of the executive agencies, arrangements have been made for
a cooperative approach to the discharge of the respective responsibilities
of the Comptroller General and the ,Admi.nistratoro Surveys have been initiated
in several agencies in which property management and accounting considerations
are coordinated in the light of the respective responsibilities of the General
Services Administration~ the General Accounting Office, and the individual
agencies directly concerned.? the results of which will be useful in evaluating
further improvements in the field of property management and accounting o
As a further part of the cooperative program, a combination form of purchase order, invoice and voucher has been developed and promulgated by the
Administrator, General Services Administration» for use by Government agencies
as a basis for simplification of procedures and paper work in making small
purchaseso Where this form is applicable, its use should result in substantial economies and should improve the relationship of Government agencies
with vendorso Moreover.9 the manner in which the form and related procedures
were promulgated is such as to provide a basis for cooperative development in
various individual agencies of the most effective procedures in the light of
the many types of individual circumstances and conditions involvedo
26 Veterans Administration
Cooperative work under the joint program has been tied into internal
efforts of the Veterans Administration to develop and install improved accounting procedures for its large and complex operations and for new operations which it is required to undertake in connection with its general
functionso The following are illustrations of some of the more significant
developments under this approacho
Office of Insurance
NSL! Dividend:
The development of accounting and related procedures
for the payment of the first National Service Life Insurance dividend of 208
billion dollars was a major undertaking in which there was close cooperation
on the part of all agencies concernedo The procedures developed incorporated
many effective adaptations of modern machine methodso Necessary documentation was simplified.(; The close integration of the procedures of the various
agencies involved in these operations resulted in economies through direct
utilization by one agency of the product of the work of the othero 'Such
economies as the following were the result of this coordinated effort in the
development and installation of procedures:
lo
Direct mechanical reproduction of punched card ch~cks by ,
the Treasury from the same punched cards produced by the 'Veterans
Ad.ministration as an integral part of its procedure in developing ·
dividend payments from the ·basic recordso
2o
Direct mechanical transfer by the Treasury of. name and ad....
dress inscriptions from the payment vouchers, prepared by the Veterans
Ad.ministration, to the checks issued by the Treasury Departmehto This
eliminated the necessity of key punching, typing and proof reading
checks in the Treasury•s Division of Disbursemento
~o
Provision for payment of checks by first receiving Federal
Reserve bank thereby eliminating the usual necessity of transferring
paid checks from the first receiving Federal Reserve bank to the
Treasurer of the United Stat~.s, or other designated FeQ.ei--al Reserve
b~kso
Under the procedur~s adopted, paid checks went direct from
the first receiving Federal Reserve bank to the General Accounting
Office for reconciliation and audito
4~
Simplification and mechanization of General Accounting
Office operations for reconciling disbursing officers• accountso
These procedures provide for developing outstanding checks by
mechanically matching paid checks against the same punched cards
which were previously utilized by the Treasury in the mechanical
preparation of checksG
In addition to the above there were numerous effective adaptations of
mechanical methods in the internal procedures of the Veterans Administration
and the Treasury's Division of Disbursement~ and certain internal records of
the Veterans Administration, for 16.11000,000 veterans, were established or
verified as a by-product of adapting mechanical methods .for paying the
dividendo
Basic Improvements in Insurance Accounting: Joint understandings were
reached early in the joint program relating to the areas which needed to be
covered in a general program for accounting improvement to be conducted on
a cooperative basis for the large scale operations of the veterans 1 insurance
activities o These understandings followed determinations made by Veterans
Administration officials and surveys of both central and district offices.
The need was recognized for attention to the problem of providing coordinated
accowting controls over;1 and between, individual insurance records~ accounts
and actuarial recordse It was agreed that the undertaking should include
careful consideration in the light of operating factors, of various alternative systems and related mechanical methodso It was also agreed that in the
circumstances matters of accounting principle and theory had to be carefully
weighed in the light of administrative costs and other practical operating
considerations involved in these large .scale operationso
The urgency of the dividend payment and related work in planning,
developing and installing procedures for that operation resulted in deferring action on this comprehensive programo It has recently been reactivated by the Veterans Administration with special attention being given
presently to establishing integrated procedures and related accounting
controls between the Veterans Administration and the Armed Services for
"in-service it insurance accounts o The General Accounting Office has established the comprehensive type audit for the insurance activities of the
Veterans Administrationo In addition to more effective audit, it is expected
that this will provide a better basis for cooperatively wor·king out necessary improvements in accounting procedureso
Office of Finance
There has been continuing cooperative effort for the development of
accollllting improvements in the Office of Financeo The following are examples
of Work done 8
lo
Various alternative proposaJ.s for improvement of benefit
payment accounting in the Veterans Administration (for compensation,
benefits, annuities, etc o) involving approximately 6 million payments
each montho The proposals were intended as a basis for cooperative
analysis and development of improvements in the procedures of the
Veterans Administration and Treasu~J Departmento Presently, the
Veterans Administration is now testing certain tentative procedures
to improve accounting control over these monthly paymentso
- 28 2o Adoption by Veterans Administration pf accounting organizational arrangements for the direct loan program which eliminated
potential duplication of accounting work and thus reduced acirlinistrative cost. An accounting system for the direct loan program
and simplified documentation requirements for construction loans
was cooperatively developed for this program.
3. Major revision in accounting procedures wns made in the
arrangement of accounts for trust fund activities. Provision
was made for summary accounts in the Office of Finance relating
to the insurance program» for which detailed accounting is performed in the Office of Insuranceo
General collection documentation procedures have been
and special documentation procedures were developed
for collection of amounts due the Government by means of deductions
4o
si~plified
from the
~ecial
insurance divid1:md payments.
Office of Construction, Supply and Real Estate: Surveys have bean
made of the inventory accounting operations of the Veterans Ad.mini strati on and joint agreement reached on areas for accounting improvement.)
'rhis includes r;eneral agreement regarding plans for integrating inventory accounts with the Eeneral accountss and the achievement of this
objective in some cases" Cooperative work on the inventory accounting
problem in the Veterans Administration is being coordinated with property
management surveys by the General Services Administrationo Veterans
Administration officials have adopted a progressive program for improved
inventory accounting which envisions ultimate integration of hospital
cost accounting with the general accounting system, thereby achieving
properly coordinated relationship between the budget, the general accounts, the cost accounts and the inventory recorqs
Q
•
29 Cooperative Improvement
Accounting Forms
An important phase of the cooperative work with agencies is that of
development, review and approval by the General Accounting Office of various
classes of accounting forms used in the Governmento This work is fully coordinated with all phases of the joint program and is of special significance
in the cooperative work with agencies from the standpoint of:
lo
Accomplishing uniformity, to a necessary degree, and improvements in forms having Government-wide use~ and economizing in printing
costs;
2o
Accomplishing improvements of forms peculiar to individual
situations or agencies and affording leads for simplifying or improving
procedures involving the use of such forms;
3c
Bringing to light opportunities for more comprehensive projects
.for the cooperative improvement of accounting systems of individual agencies
or Government-wide procedureso
In line with the policy of the joint program and responsibilities recently
imposed on agencies by the Budget and JAccounting Procedures Act of 1950 in
developing and maintaining their system of accounting and internal control, work.
done in this field is placing more initiative and responsibility with individual agencies in the development of forms which will best fit their particular
operations and internal procedural needso At the same time, central review
has proved valuable in giving them the benefit of work done in other agencies
on similar matters and providing appropriate guidance from the standpoint of
Government-wide considerations
During the past year, the Accounting Systems Division (GAO) reviewed and
approved over 200 different accounting forms relating to a great variety of
operationso In addition to improvements in individual forms and related procedures, there has been a continual reduction in the number of forms used, a
single new form in many cases being substituted for a number of old forms
serving the same purposeo
The work in forms control is too extensive~ detailed and interrelated
with other acoounting systems work to be described fully in this kind of reporto
A few illustrations, however, should serve to convey an understanding of its
importance and value both in itself and as a part of the larger scheme of
improvemente
A small form combination Purchase Order -· Vendor s Invoice - Public
Voucher was promulgated by the General Services Administration to simplify
procurement procedures, reduce paper work, and improve relationships between
vendors and the Government in connection with purchases of small dollar amounts.
The form represents the result of cooperative work between the General Services
Administration, the General Accounting Office, and various other agencieso
w
Provision has been made for developing modifications to the form and related
procedures in the light of divergent operations of various agencies, and promulgation of the form on this basis is expected to bring about the adoption of
more efficient and economical procurement practices throughout the Government,
In the case of agencies for which comprehensive or other on-the-site
audits are being made by the· General Accounting Office, the certified invoices
of vendors are accepted a~ sufficient vouchers without the necessity of preparing, in addition, .the Government's standard form of voucherQ
The certification required of. vendors, ih. connection with their invoices
or use of the Government 1 s standard form of voucher, has been simplified., 'I'hia
simplified cert'ification eliminates a possible source of delay in effecting payments and consequent misunderstanding and irritation on the part of vendors.,
Forms and procedures have been developed to facilitate the settlement of
due certain deceased civilian employees under recent legislation.:i
amo~ts
A schedule type of voucher for listing many individual payments was
developed, and is being used in certain situations, to eliminate the sending
of great numbers of separate vouchers and supporting papers to disbursing
officersQ Adaptations of the schedule type of voucher, for particular
classes of payments, have also been used; for example, by the Railroad
Retirement Board and Social Security Board for the monthly payments of rents
to various lessors@
Continuing emphasis is being given to the improvement and simplifica-
tion· of forms and related procedures which apply to indi victual agencies or
have widler use o Every effort is made also to reduce the number of forms in
useo . In all this work careful attention is devoted to making adaptations
and modifications in individual circrnnstances in the light of the many diverse
types of operations performed in the Government., Progress in forms improvement and simplification is accelerated through the constructive suggestions
of the operating agencies.
@FedFRASER