1 Develop, prescribe, and coordinate the departmental internal audit policies and guidelines for internal audit organizations in the bureaus and offices to implement the programing and execution of comprehensive internal audits; 2 Perform comprehensive internal audits of primary organizational units that do not have an internal audit staff and prepare related audit reports, including recommendations for the improvement of operations, to the Assistant Secretary of Commerce for Administration and Public Affairs; direct special audits and examinations, as required, in the Department's various offices and bureaus; 3 Provide continuous review of audit programs of bureaus and offices to determine whether the scope, emphasis, priority and utilization of audit manpower are appropriate to the current needs of the Department, bureaus and offices; 4 Formulate, direct, and prescribe programs designed to further the career development of individual members of the internal audit staffs of the Department and its various offices and bureaus; to obtain high quality professional staffs of accountants and auditors; and to obtain appropriate recognition of the professional character of the work done by members of the audit staffs; 5 Review, analyze, and evaluate audit reports and accomplishments of audit organizations in the Department's various offices and bureaus to determine the significance and effectiveness of the audit work proposed or performed; and to digest and report to the Assistant Secretary of Commerce for Administration and Public Affairs the significant findings revealed in these audit reports; and 6 Participate in formulating departmental accounting principles, standards, and procedures through recommendations contained in audit reports. SECTION 6. DEPARTMENT OF COMMERCE AUDIT COUNCIL: To assist the Director, Office of Internal Audit, in fulfilling his responsibilities, there shall be a Department of Commerce Audit Council consisting of the Director, as Chairman, and the heads of the various internal audit organizations of the Department's offices and bureaus as members. The Council shall meet on call from the Chairman for the purpose of assisting in the development of departmental audit policies necessary to achieve maximum effectiveness of the audit activity throughout the Department. Luther Secretary of Commerce USCOMM-DC-6130 Mr. BROOKS. Do you have any questions on the production and audit staff operations, Mr. Wallhauser? Mr. WALLHAUSER. No, I think you have covered it very well, Mr. Chairman. Mr. BROOKS. Mr. Schweiker? Mr. SCHWEIKER. No, sir. DEPARTMENTAL ANNUAL REPORT Mr. BROOKS. I would like to go into the inadequacies of the annual report and ask you, Governor, is it the general practice in Government for each department and agency to submit an annual report to Congress? While these reports vary in quality and content, as a general rule there is some feeling they don't emphasize information on departmental and agency activities of really significant value to Congress, and I wondered what you own views were on this general subject of departmental reports to Congress. Mr. HODGES. I think the average report made by an agency, whether it's a State or Federal Government agency, isn't worth anything to the Congress on the average. I think some of them are good; I think too much money is spent on them. We spent too much money last year on ours. We were trying to fix it so people would pay some attention to it. We glorified it and put in some pictures This time we are going to make it a simple thing, probably not print it, have certain basic facts on a mimeographed form as compared to making a more ambitious one. Mr. BROOKS. Well, Governor, I sort of share your feeling on that. I wondered, it seems to be the opinion of the subcommittee that the interest of the Government and the public would be better served really if this annual report would have in it a list of five or six particular items. I might run down and get your opinion on each one of them. I will run through the five first, and you can answer them as you get to them. We feel it ought to have a list of specific programs, responsibilities, and objectives; second, it ought to have a quantitative and qualitative analysis of its programs, responsibilities, and objectives, and their estimated unit cost; third, a statement of expenditures by organizational unit and by program, responsibility, or objective with a specific justification for all personnel assigned to that division; fourth, a list of all the GAO reports received during the year and action taken in response thereto; and finally, a list of all internal audit recommendations made by your own audit operation and an analysis of the response made to those. Now, I would like to have your views on whether or not your annual report should include, first, the specific programs Mr. HODGES. I think I have in mind what you said there. I think that it ought to include all of the things you mentioned. I think on the first one there I would divide the old programs and the new ones so as to show what had been started new during the year; I think I would add that to it. Mr. BROOKS. You think the unit cost should be included, too? Mr. BROOKS. Well, I would say the analysis of a program, whatever it would be, like the ARA-that is a new program which we 89028-62-pt. 1 4 have just discussed-would show what the total number of personnel is, what the total cost is, what the number of loans is, what the average cost of processing each loan would be, what the estimated number of jobs that were created by these loans would be, so as to get an idea of its general efficiency by that program, not by the entire Commerce Department's operation. Mr. HODGES. I see, break it down by programs. That sounds all right to me. Mr. Klotz, would you add anything to that? Mr. KLOTZ. I think that sounds fine; and we should give it careful consideration. Mr. BROOKS. In other words, I was particularly interested in this specific justification for personnel. We have had some inquiries about that with you and with your office, and some justification of these personnel seems to be a difficult thing in the administration of these large departments. I think that a precise analysis of that inside a report would be helpful to Congress in evaluating the need for 500 or 5,000 new employees. Mr. HODGES. All right, sir. Mr. BROOKS. Any questions on this report? Mr. WALLHAUSER. I have none; no. Mr. BROOKS. Mr. Schweiker? Mr. SCHWEIKER. I am wondering if we might include another question here about the list of programs or services that have been terminated during the past year because they are no longer necessary. I think this would immediately enable Congress to pinpoint whether the department is conscious of this type of thing, as you are, but I am thinking more of some of the other departments who are less conscious of this. Would it be feasible to include something like that, saying what programs or services have been rendered unnecessary or obsolete, just like the one you pointed out about the Franco-Prussian War situation? It seems to me that if we put it on the department's shoulders, the responsibility of saying that you are attempting to clean out the deadwood each year, wouldn't it make Congress feel a little more ready to appropriate money if it has been thoroughly investigated? Mr. HODGES. Well, Mr. Schweiker, I would agree with you, sir, in principle. I do not know the legal situation with regard to discontinuance of a program that Congress had authorized. I do not know what you have to go through now. Mr. SCHWEIKER. How did you get rid of the Franco-Prussian War program? Mr. HODGES. I don't know. Mr. SCHWEIKER. I hope we don't need a law to get rid of that. In other words, there is some deadwood you can clear out without having a law. Mr. HODGES. I am not hiding behind the law. We will clean out individual situations as we find them. The question is: Do you stop a program which has been authorized specifically under a line item by Congress? I don't know what the answer to it is. Mr. BROOKS. Our committee now, for your information, is considering legislation that is making it mandatory to review all programs every 5 years with that in mind. Mr. HODGES. But you would also have a law which would allow a department head to do away with a total program or something of that character, if you give him a leeway. That's the kind of thing I was asking 10 percent leeway of doing, of saving at least some part of a program we didn't think it was necessary to carry on. I don't know what they are; I don't know whether there are any or not. I have never-frankly, it would be a great piece of news to say the Federal Government had discontinued something it had started. It would be one of the greatest pieces of news in the country. You don't find that. That's why I hesitate to be completely frank with you because I don't know what we would run into. Mr. WALLHAUSER. The report does list the achievements, does it, that have occurred during the year of the Department? Mr. HODGES. Yes, the report always brags about what we have done. UTILIZATION OF PERSONNEL Mr. BROOKS. Governor, we appreciate that. I wonder if we could turn now to the general administration and sort of preface it with this comment: that in a directive that was issued July 4, 1962, by David Bell, Director of the Bureau of the Budget, to the heads of executive departments and establishments regarding the preparation and submission of Government departments annual budget estimates, it is stated. More emphasis has been placed on the need for attention to personnel requirements and employee productivity, with the objective of holding Government employment to the minimum required for efficient administration of Government programs. The heads of departments and agencies and their subordinates must make every effort to meet new personnel requirements through adjustments in existing activities and procedures, in lieu of adding new employees. Increases in staffing should be planned only where it is clear that essential functions cannot be performed effectively with present personnel. It is expected that the President, in considering dollar amounts in connection with the 1964 budget, will also review proposed employment levels. Now, I wondered, sir, what action you have taken or contemplate taking in connection with this memorandum, seemingly in conformance with your stated views on efficiency. Mr. HODGES. Mr. Brooks, I went over to see Mr. Bell quite some weeks ago, even before this memorandum had reached us. I didn't even know it was on its way. I talked about this same principle, what we can do. Mr. BROOKS. Off the record. (Discussion off the record.) Mr. HODGES. We have been doing some of the same things that are in A-11, Mr. Brooks, for some time. We will follow it. We think its fundamental objectives are good the way he put them down. Mr. BROOKS. On several occasions in the past, Mr. Secretary, you have made statements indicating that the Department's activities and responsibilities might be performed with fewer personnel, and I would say that these statements give rise to two questions. First, assuming that the Department was required to undertake, say, just a 10-percent cut in personnel, what specific reductions in force would you undertake and essentially why? Mr. HODGES. Mr. Brooks, it would be impossible to answer the question this morning. We would have to assume that we have gotten a directive or something to do that, either from the President or the Congress. If we did that then we would go at it seriously. If we should talk about it now all you would do is create bad morale and a lot of talk. Mr. BROOKS. Would you say that you would not make it a 10percent across-the-board cut? Mr. HODGES. That's right, unless we had a directive I don't think we would, unless we had a directive from the President or the Congress. I don't like across-the-board cuts. Mr. BROOKS. You found that the one you made recently was not really affecting the Internal Audit Bureau and was probably not the best way to make even a smaller cut? Mr. HODGES. I think basically what you do in government is not to eliminate people; what you do is try to give a better service to the public or greater information or do it more effectively so that you don't have to add on others later on. I think the one great thing about budget making and we tried it in State government we had what is known as an A and B budget, Mr. Chairman. "A" budget meaning all continuing services which had to be put down as an A budget, and a B budget was all new items, every new person, every new program. The psychology of doing that, they stopped adding to; they never drop any A's, they just don't put on many B's. JUSTIFICATION OF NEW EMPLOYEES Mr. BROOKS. I was wondering, Governor, in view of that, how do you justify the substantial increase in employment in question in the 1963 budget? Now, while the total figure is a little difficult to compute, the House Appropriations Committee permitted you an increase, as I understand it, of 1,229 positions, which was 907 below your request. Now, I understand that the Senate Appropriations Committee is being requested to appropriate funds for an additional 981 positions in excess of those previously approved by the House, and I am assuming that were the Senate to approve these additional positions and that they got through conference, it would mean an increase in employment amounting to over 2,200 jobs for the 1963 fiscal year. I am wondering, in view of your own stated policies and awareness of the problem, how you would justify these increases? Mr. HODGES. That is a very good question, Mr. Chairman, it looks like it's contradictory. I hope any of my associates here will correct me if my recollection and estimates are wrong. When we went before the House, sir, we asked for a certain number of new programs and a certain number of new jobs. This is a traditional way of doing it. You got something new, you add so many people, so many things. The House, let's say, out of $30 million, let me put it in dollars, $30 million, granted roughly half of it. Traditionally it is that you appeal that ungranted part to the Senate committee. We actually did not appeal somewhere between $15 or $20 million, but, Mr. Chairman, coincidentally with this going before the House and the Senate there was in the Budget Bureau and the President's Office a whole series of supplemental appropriations for new things, transportation had been added, either by Congress or by the executive since we presented our budget originally to the House, so that brought in about another $15 or $17 million, a very embarrassing situation, let me tell you. As much as we had tried to save for the Government we did not appeal the House |