the Commission will agree that competent Government employees who are working hard, doing a necessary job, are essential-but that we do not need a single one who does not perform a needed task. The Commission has 4,123 employees, as of June 30, 1962; an annual overall budget for 1962 of $21,349,000 and its payroll for the month of June 1962 was $2,369,975. Experience is a vital attribute when it comes to running the Nation's civil service, to insuring that the best possible employees are obtained, that the standards remain high, that they are treated fairly and their benefits properly administered. We are fortunate, indeed, and so are the Nation's many civil service workers, to have a commission headed by men so soundly grounded in the career service: Chairman John W. Macy, Jr., who started in Government as an intern in 1939 and has served 5 years as Executive Director of the Commission; Commissioner Frederick J. Lawton, Director of the Budget under President Truman and a career Government worker for some 40 years-42 he told me this morning; Commissioner Robert E. Hampton, who spent a dozen years working in the State Department and on the White House staff, and the present Executive Director, Warren B. Irons, who has long held key posts in the Commission. I would like at this time to say we appreciate very much the cooperation we have had to date, Mr. Chairman, and suggest we ask you a couple of questions. Then I will ask you a question on your own operation and at that point put in the record, with your own comments, the letter I received this morning from you pertinent to those actual economies. The first question I want to ask is, Does the Civil Service Commission have an internal audit system? STATEMENT OF JOHN W. MACY, JR., CHAIRMAN, CIVIL SERVICE COMMISSION; ACCOMPANIED BY FREDERICK J. LAWTON, COMMISSIONER; ROBERT E. HAMPTON, COMMISSIONER, WARREN B. IRONS, EXECUTIVE DIRECTOR AND Mr. MACY. Mr. Chairman, the Civil Service Commission does not have an internal audit system in the generally understood meaning of that term. The Commission has a work reporting and cost analysis system that it has had in operation since 1945, and which has been refined and improved in the years since. This system provides a means for very close supervision and review of employee productivity and in the evaluation of costs for given operations. In addition, the Commission has a regular supervisory review of its operations, and in the judgment of the Commissioners this review provides the equivalent of an internal audit. Mr. BROOKS. Mr. Chairman, do you feel that the audit operation reports directly to you and the members of the Commission? Mr. MACY. Under the organization of the Commission, the Executive Director is the general manager and responsible for the accomplishment of the Commission's programs and their effective administration. He reports directly to the Chairman and the Commissioners. The functions that I identified as representing those of management control are part of his staff. Mr. BROOKS. Well, Mr. Chairman, will you at this time give us an idea of the specific action that you and your fellow Commissioners and your staff down there have been taking to increase the efficiency and the economy in the Commission's operations? In reply to that I would like to say at this point we will put the letter received from you this morning in the record. (The letter referred to, exhibit 1, follows:) EXHIBIT 1-LETTER FROM JOHN W. MACY, Jr., CHAIRMAN, UNITED STATES CIVIL SERVICE COMMISSION, TO HON. JACK BROOKS, AUGUST 20, 1962 U.S. CIVIL SERVICE COMMISSION, Hon. JACK BROOKS, Chairman, Government Activities Subcommittee of the House Committee on Government Operations, Washington, D.C. DEAR MR. BROOKS: This is in further reference to your letter of July 24 inviting me to present specific proposals or suggestions concerning increased efficiency and economy within the Civil Service Commission. We are, of course, constantly seeking ways in which our organization may be reshaped to discharge our functions more efficiently. Some of the more important actions taken by the Commission to improve our operations are discussed in the following paragraphs. These improvements have already produced significant savings and we have projected these savings in planning our future operations. Within the past 2 years we have realined substantially the organization of our central office. In August 1960, the Bureau of Field Operations, which had been responsible for directing the administration of our regional offices, was abolished. In May 1961, we abolished the Bureau of Departmental Operations. The abolishment of these two bureaus considerably reduced overhead costs and at the same time provided a more direct channel of communication between program bureaus and the regional offices. Similar efforts have had effect in our field service. Effective January 2, our Cincinnati regional office was consolidated with the Chicago regional office. The States of Kentucky, Indiana, and Ohio are now served by the Chicago region. The State of West Virginia, formerly served by the Cincinnati office, is now served by the Philadelphia region. This move reduced administrative costs without impairing service in the States affected. Another improvement in our field structure was the consolidation of the examining and inspection divisions in each of our regional offices. The new divisions have become personnel management divisions and represent a broader approach to improving agency personnel management. Each of these divisions include several Civil Service representatives who are located in key cities. These representatives are closer to the agencies and the various publics served by the Commission. The representatives represent the Commission in a number of related areas, such as recruiting, examining, inspecting agency boards of examiners, visiting schools and colleges, and advising and assisting agency field officials. Personnel to staff these newly created positions were transferred from existing overhead positions in the regions and the central office. Executive Order 10988, issued January 17, 1962, extends to nonveteran Federal employees the same rights of appeal to the Commission on adverse personnel actions as are currently available to veterans under section 14 of the Veterans' Preference Act. The appellate provisions of the order became effective July 1, 1962, and create a new appellate workload for the Commission. However, since this is a new program, the workload is expected to build up gradually. In the meantime, we plan to absorb this work by increased efficiency and economy measures in handling our other appellate workloads. A number of changes and improvements have been adopted in our methods for processing security investigations. A discussion of the more significant ones follows: A. In January 1960 the Commission adopted a change in the scope of its full field investigations as a means of reducing costs which continued to spiral upward with each passing year. Reason for the upward trend was the length of the investigative period. Uniformly going back to January 1937 or to the 18th birthday, whichever was later, meant a gradual lengthening To solve this problem of of the period with each passing year, requiring investigation at more added travel, and increased investigating costs. places, spiraling costs, the Commission initiated a proposal to change the scope of intensive personal investigations to the most recent 15 years, with added coverage when necessitated by derogatory matters. Receiving substantial support from the interested agencies, plus top Government investigative and security officials, the Commission adopted the revised coverage. The change caused billing rates to drop from $370 per case in January 1960 to $330 in July 1960. Savings to the Government on investigations conducted by the Commission alone as a result of this change in the investigative period are estimated at close to a million dollars a year. To this must be added substantial savings to the Defense Department, which has adopted the 15-year standard coverage for its investigations of civilian, military, and industrial security personnel. B. An example of the continuing emphasis on economy and efficiency over the years is found in our program of conducting national agency check and inquiry (NACI) investigations. These are investigations on appointees to nonsensitive positions in the Federal service as required by Executive order. Despite salary increases of 40 percent since 1949, cost per case in fiscal year 1962 was only 1 percent above what it was in 1949. Then the average case required 3 hours and 20 minutes of work. By 1962 this had been reduced to 2 hours. This overall reduction of 1 hour and 20 minutes adds up to a sizable amount on an annual volume of approximately 300,000 cases. the same time, no aspect of quality or service has been sacrificed. At C. Included in the changes made during the past fiscal year was the establishment of 3 area centers to do all the NACI work formerly done in 10 regional offices and the central office. Also established during the year were four area centers to transcribe reports of full field investigations conducted by Commission investigators. These are investigations for appointment to sensitive positions and are made on a reimbursable basis as a service for employing agencies. Establishment of these two types of area centers is resulting in substantial economies through larger volume processing operations. D. The major administrative and operational improvements during fiscal year 1962 enabled the investigative activity to end the year in excellent condition in terms of amount of work remaining on hand. In addition, we saved $300,000 on a nationwide basis compared to what the work would have cost if we had continued to operate at the same rates experienced in 1961. These savings permitted us to liquidate the large carryover of work from the previous year and to process almost 40,000 more NACI cases than were anticipated in the 1962 budget. We have recently acquired a computer for use by our data processing center. With the acquisition of this equipment we reviewed the rental cost for all mechanical equipment then in use. Our appraisal indicates a reduction in machine rental which we anticipate will result in a savings of $34,500 in fiscal year 1963. with an additional savings of $15,500 in fiscal year 1964; so that by the close of fiscal year 1964 we will realize an annual savings of $50,000 in the area of automatic data processing. Of even more significance than the anticipated monetary savings are improvements in operations now possible through use of the computer. some of the more significant programs for which the computer has or will be used are discussed below: A. Through the use of the computer we have inaugurated the Federal personnel statistics program. This program is a modern system of statistical sampling which will result from the Commission's establishment and maintenance of information concerning 10 percent of the Federal work force. Agencies have forwarded to the Commission a one-time information sheet on sample members. Upon receipt of this information, it was converted to automatic data processing media where it is maintained current through the use of personnel action documents, copies of which are forwarded to the Commission as actions are processed. Having such statistics stored will enable us to do a more efficient and economical job in supplying personnel statistics to the President and Members of Congress. It should obviate the need for many types of "crash" programs requesting statistical backup from the agencies and eventually make it possible to reduce the number of statistical reports required from agencies. This sample has already made it possible to prepare a report for the Post Office and Civil Service Committee of the House of Representatives at considerable savings to the individual agencies and the Government. B. This fall the Commission will automate the Federal service entrance examination in the Washington metropolitan area. This examination is geared to college juniors and graduates. Through use of the computer, we will do the scheduling and scoring. Previously, in the scheduling, it was possible for eligible applicants to retake the examination before this situation was detected. Through the use of new equipment installation, this condition will be rectified. In scoring answer cards on the computer, the results will be more timely and accurate. The notification of eligibility or ineligibility on the written test will also be automated and printed and mailed to the applicants earlier than was possible using manual methods. C. In connection with the examination discussed above, a pilot study will be conducted with parallel manual operations in the establishment and maintenance of registers and in the issuance of certificates of eligibles. This will be done in order to determine the feasibility of complete automation in these areas, as well as to determine the relative efficiency and percent of accuracy provided in each method. Plans are also underway to conduct a clerk general examination using the computer. Senior staff members of the Commission are currently evaluating a proposal for a major change in our examining procedure designed to improve the caliber of Federal employees. This plan is designed to: First, increase the use of competitive examinations at the entrance level; second, encourage mobility across agency lines at the middle grade levels through the use of community, State, and nationwide rosters of career employees; and, third, provide a system which, while encouraging recruitment from career ranks through use of rosters, will still provide a method whereby businessmen, faculty members, and others outside the Government can be attracted to the Federal service on either a temporary or permanent basis. The Commission has adopted a policy of encouraging the establishment of central or consolidated boards to be financed by the agencies served. We hope to have several such boards in operation on a pilot basis in the next few months. Such boards will: First, offer improved services to schools, colleges, universities and the public; second, provide better trained personnel for board operations, since it could justify more efficient full-time employment for a few employees in lieu of a larger number of part-time employees; third, provide applicants an opportunity to be considered for more jobs; and, fourth, provide opportunity for single announcements covering many positions. The Commission in November 1961, added to its inspection coverage the review of manpower utilization systems employed by agencies inspected. We concern ourselves with methods used in determining requirements, the systems established for reviewing utilization within the agency, and significant achievements by the agencies in conserving manpower. This inspection, while primarily factfinding, does provide information which we can and do use as a basis for recommending improvements to the heads of agencies involved. Recently I have discussed with the Director of the Bureau of the Budget the desirability of issuing instructions on behalf of the President to all agency heads, reiterating the continued need for careful review of all vacancies. As vacancies are created through transfer, quits, retirements, dismissals, deaths, or other causes, each agency is expected to review these vacancies on an individual basis. The review should determine whether functions can be absorbed by other personnel or performed at a lower cost through modification of functions. Another tool of management used most extensively by the Commission is the work reporting and cost analysis system, which provides a standardized method for obtaining workload, time, and cost statistics for the use of management at all levels and for synchronizing budget activities with the Commission's organizational structure. Time, cost, and workload data obtained through the system are used in programing operations, improving internal management, and measuring the progress of program operations. Variations in unit costs and deviations of accomplishments from program goals are some of the management considerations in establishing allotments of funds, program objectives, and operating program levels for both regional offices and central office bureaus and offices. The system enables us to continually evaluate our operations and to detect potential trouble spots before they impair efficiency or affect economy. A recent study on streamlining functions and procedures in regional budget and fiscal offices resulted in a cutback on the number of personnel assigned to regions, making it possible for the Commission to realize an annual savings of $63,000. To capitalize on the experience of our field personnel, we have invited suggestions for improvement in operations from our regional directors on a continuing 89028-62-pt. 4 basis. This source has been very productive in helping us to keep central and regional office operations in balance. We also review systematically and regularly all programs in depth. Weekly discussions are conducted by the executive director with bureau directors, at which time programs are reviewed to determine whether we are meeting management goals. For example, are we doing some things that we need not be doing or are there some things to be done which we have not been doing? This approach has been highly effective in helping us to meet our program objectives both in the central and regional offices. Most of the savings referred to throughout this letter have been utilized to meet obligations incurred in new or expanding programs which otherwise would have required higher appropriation requests. We feel it is significant to note that while meeting these obligations it has been possible for us to do so with a decrease in staff paid out of our salaries and expenses appropriation from 3,005 employees in fiscal year 1954 to 2,537 employees in fiscal year 1962. I and other representatives of the Civil Service Commission will be pleased to appear before your subcommittee to elaborate on the matters discussed in this letter and other actions being taken by the Commission to achieve increased economy and effectiveness in our operations. Sincerely yours, JOHN W. MACY, Jr., Chairman. Mr. BROOKS. Will you comment briefly on this letter? Mr. MACY. I would be very happy to. I welcome this opportunity to meet with you and the fellow members of the subcommittee to discuss a matter of mutual interest; namely, the improvement of Federal operations, with emphasis on efficiency and economy. The Commission's concern really falls in two areas; one, the management of its own program and staff, and the other, leadership with respect to the Government at large. The first comment is with respect to the area of internal management which you have referred to. I would like to give a few highlights of Commission action in recent times with respect to improvement of Commission operations. Reference is made, Mr. Chairman, to my letter of this date, August 20, responding to your inquiry with respect to the Commission's internal efforts to improve management. The first area I would like to mention is that of reorganization. STEPS TO REDUCE OVERHEAD During the past 2 years, the Commission has conducted an analysis of its organization with the objective of taking steps to reduce overhead within the organization, and to assure that the optimum manpower resources are applied to the Commission's operating programs. As a result of this review, in 1960 the Commission, under the leadership of my predecessor, Roger Jones, eliminated the Bureau of Field Operations, and in 1961 the Commission eliminated the Bureau of Departmental Operations, thereby shortening the line of supervision to the operating programs of the Commission, and effecting some dollar savings. We have also reviewed in the course of the past year the Commission's regional organization, and we concluded last fall that the Commission could maintain its standard of service and reduce the number of regional offices from 11 to 10. As I have indicated in this report to you, we eliminated the office at Cincinnati, transferring the States of Ohio, Indiana, and Kentucky to the regional office located at Chicago and the State of West Virginia |