• Ill 

n i I Ma __ ..

Fed ral Go 

August 1979 

JOINT FINANCIAL MANAGEMENT 

IMPROVEMENT PROGRAM 
WHAT IS JFMIP ? 

The Joint Financial Management Improvement Program 

(JFMIP) is a joint and cooperative undertaking of the 

Office of Management and Budget, the General Accounting 

Off ice, the Department of the Treasury, and the Off ice 

of Personnel Management, working in cooperation with 

each other and with operating agencies to improve f inancial management practices. The Program was initiated in 

1948 by the Secretary of the Treasury, the Director of 

the Bureau of the Budget, and the Comptroller General, 

and was given statutory authorization in the Budget and 

Accounting Procedures Act of 1950. 

The overall objective of JFMIP is to improve and 

coordinate financial management policies and practices 

throughout the Government so that they will contribute 

significantly to the effective and efficient planning 

and operation of governmental programs. Activities 

aimed at achieving this objective include: 

--Reviewing and coordinating central agencies' activities and policy promulgations to avoid possible conflict, inconsistency, dupiication and confusion. 

--Acting as a clearinghouse for sharing and disseminating financial management information about 

good financial management techniques and technologies. 

--Reviewing the financial management efforts of the 

operating agencies and serving as a catalyst for 

further improvements. 

--Undertaking special projects of a Government-wide 

nature to resolve specific problems. 

--Providing advisory services in dealing with spe-

~if ic financial management problems. 

The JFMIP plays a key role in mobilizing resources 

and coordinating cooperative efforts in the improvement 

of financial management practices, and· relies on the 

active participation of Federal agencies to be successful. 
FINANCIAL MANAGEMENT FUNCTIONS 

IN THE FEDERAL GOVERNMENT 

JOINT FINANCIAL MANAGEMENT 

IMPROVEMENT PROGRAM 

AUGUST 1979 
TABLE OF CONTENTS 

Page 

Foreword i 

CHAPTER 

EXECUTIVE BRANCH ORGANIZATIONS 

1 THE OFFICE OF MANAGEMENT AND BUDGET 

Introduction. . . . . . . . . . . . 1 

Principal Functions of OMB. . . . . . . . . 2 

Organization. . . . . . . . . . . . . . . . 3 

Important Statutory Authorizations. . . . . 7 

Principal Executive Orders. . . . . . . 10 

The Budget Process. . . . . . . . . . . . . 12 

Budget Presentation . . . . . . . . . . . . 18 

Budget Authority and Related Transactions . 20 

Collections . . . . . . . . . . . . 23 

Other Transactions. . . . . . . . . . . . . 26 

2 THE DEPARTMENT OF THE TREASURY 

Introduction. . . . . . . . . . . . . . 28 

Organization of the Treasury Department 28 

Functions Associated With the Federal 

Financial System. . . . . . . . . 31 

Functions Associated With the Federal 

Reporting System. . . . . . • . . . . 47 

Appendices 

A The Federal Reserve System . . . 49 

B Principal Financial Reports 

Prepared and Published by thf1 

Treasury Department. . . . . . . . 51 

c Financial Reporting Regulations 

and Requirements . . . . . . . 56 

3 THE OFFICE OF PERSONNEL MANAGEMENT 

Introduction. . . . . . . . . . . . 58 

Organization of OPM . . . . . . . . . 58 

Principal Functions . . . . . . . . 58 

Nature of Operations. . . . . . . . . . 63 

Guidelines. . . . . . . . . . 63 

Financial Programs. . . . . . . . . . . 64 
CHAPTER 

4 THE GENERAL SERVICES ADMINISTRATION 

5 THE 

6 THE 

Introduction. . . . • . • . ..•. 

Organization of GSA . • • . •. 

Public Buildings Service. . . . . .•. 

Federal Supply Service .........•• 

National Archives and Records Service • 

Automated Data and Telecommunications 

Service •..•.•••.••.••. 

Federal Property Resources Service. 

Transportation and Public Utilities 

Service ...•••.••. 

Federal Preparedness Agency 

Regulatory Material .•.. 

Codified Regulations •.••. 

Financing of GSA Activities . 

LEGISLATIVE BRANCH ORGANIZATIONS 

GENERAL ACCOUNTING OFFICE 

Introduction •..••..••.•••. 

Principal Functions of GAO. • . ••• 

Auditing .................. . 

Fraud Prevention. • • . • • . . • • • • 

Improving Accounting and Budgeting Systems. 

Director Assistance to the Congress . • • • 

Legal Decisions by the Comptroller General. 

Claims Settlement . • • . • • . • . •• 

Records Management and Services •••••. 

Countersigning Warrants • • . • • . . • 

Organization of GAO • . • • • • . . •• 

Appendix 

A Organization Chart 

CONGRESSIONAL BUDGET OFFICE 

Introduction •••••••• 

Responsibilities of the CBO •.•.•.•• 

Organization of the Off ice •.•. 

Appendix 

A Statuto~y Tasks Assigned to CBO. 

Page 

68 

68 

69 

72 

72 

73 

73 

74 

75 

75 

75 

76 

78 

80 

81 

85 

87 

89 

90 

91 

93 

94 

94 

95 

101 

101 

103 

108 
7 THE COST ACCOUNTING STANDARDS BOARD 

Introduction. • . . • • . • . • • • . . . • 111 

Organization of the Board • . • • • 111 

Principal Functions • . . • • • • . • • 111 

Development of Standards. . • . • • • • 112 

Standards Promulgated . . . . • . . • . • • 113 

Responsibilities for Compliance With 

Promulations of the Board • . 114 

Relationship of the Board to Other 

Authoritative Bodies. . • . • • • . • • • 115 

Appendix 

A The Board's Resear~h Process • . 116 

COOPERATIVE EFFORT OF EXECUTIVE AND 

LEGISLATIVE BRANCHES 

8 THE JOINT FINANCIAL MANAGEMENT IMPROVEMENT PROGRAM 

Introduction. • • • . . • • 117 

Origin and History. . . • . 117 

Goals and Objectives. • . • • . . • . • 119 

Organization and Operation. . • • . • • 119 
FOREWORD 

The information presented in this booklet is designed to 

familiarize its readers with the key central agencies in the 

Federal Government responsible for providing financial and 

management guidance to operating agencies. 

The booklet, published in 1974 by the Joint Financial 

Management Improvement Program has been updated and discusses 

the organizations, authorities, and principal functions of 

those agencies responsible for: 

1. Assisting the President with budget formulation and 

execution. 

2. Supervising and managing the Government's finances. 

3. Independently reviewing the efficiency and effectiveness with which Federal programs are managed. 

4. Promoting the development and use of improved f inancial management systems throughout the Government. 

5. Providing central leadership for a wide variety of 

property management and related services for the 

Government. 

6. Fostering a quality Government workforce through 

various programs to improve personnel management at 

all Federal agencies. 

In addition, the chapter on Federal budgeting offers a 

summary of the procedures followed in the annual preparation 

and execution of the Federal budget; an awareness of the 

checks and balances built into the process, including the 

respective roles of the Executive and Legislative Branches; 

and an understanding of the forms and terminology associated 

with budgeting in the Federal Government. 

It should be recognized that although the central 

agencies in the Federal Government provide direction and 

guidance, operating age~cies have the basic responsibility 

for designing and implementing financial management systems 

which support their programs and meet central reporting 

requirements. 

i 
We believe that this booklet, which describes in one 

volume the functions of the central financial agencies of the 

Government, will serve as an excellent reference document. 

Those in the Federal sector should ~ind it useful for furthering their general understanding of the central agencies 

and for orientation, recruiting, training, and other purposes. Others who are seeking a better understanding of the 

Federal Government's central financial organizations should 

also find the booklet invaluable. For these reasons, the 

Joint Financial Management Improvement Program has updated 

the document for wide distribution within both the public and 

private sectors. 

We would like to thank the many individuals from the 

centr~l agencies who contributed significantly in the revision of this document. 

August 1979 

susumu Uyeda 

Executive Director 

ii 
CHAPTER 1 

THE OFFICE OF MANAGEMENT AND BUDGET 

INTRODUCTION 

This chapter deals with the organization and functions 

of the Off ice of Management and Budget (OMB) and procedures 

on budget formulation and execution, and OMB's role therein. 

The Office of Management and Budget was established by 

Part I of Reorganization Plan No. 2 of 1970, effective July 

1, 1970 (84 Stat. 2085). The Plan designated the Bureau of 

the Budget as the Off ice of Management and Budget. It transferred all functions vested by law in the Bureau and its 

Director to the President, who, in turn, delegated them to 

the Director of the Off ice of Management and Budget by 

Executive Order 11541 of July 1, 1970. 

The inten~ of the Plan was to provide the President with 

an institutional staff capable in the various areas of executive management--particularly in program evaluation and 

coordination, Government organization, information and 

management systems. The Off ice has continued to perform the 

key function of assisting the President in the preparation 

and execution of the Federal budget. That function has been 

strengthened by a greater emphasis on fiscal and program 

analysis. 

The basic authority for the Office's budget function is 

derived from the Budget and Accounting Act of 1921, as 

amended. Reorganization Plan No. 2 of 1970 transferred that 

function to the President, who, in turn, delegated it to the 

Director of the Off ice of Management and Budget. The 1921 

Act gave the Bureau of the Budget the authority "to assemble, 

correlate, revise, reduce, or increase the requests for 

appropriations of the several departments or establishments." 

The Act also safeguarded the budget as transmitted by the 

President to Congress by denying Federal agencies the right 

to seek funds outside regular budget channels except at 

legislative request. The Bureau was further authorized to 

make detailed administrative studies for the President with a 

view to "securing greater economy and efficiency in the 

conduct of the public service." The-Act required the Bureau 

"at the request of any committee of either House of Congress 

having jurisdiction over revenue or appropriations" to render 

"the committee such aid and information as it may request." 

- 1 -
In response to a request by the Chairman of the House 

Appropriations Committee, the President instructed the Federal agencies in 1921 to submit to him through the Director 

"all requests or recommendations for legislation, the effect 

of which would be to create a charge upon the public treasury 

or commit the Government to obligations which would later 

require appropriations to meet them." The scope of this 

clearance procedure was later extended to apply to all legislation. 

The Office of Federal Procurement Policy was established 

in the Office of Management and Budget by Public Law 93-400, 

enacted August 30, 1974. Its Administrator, appointed by the 

President with the consent of the Senate, provides overall 

direction of procurement policies, regulations, and procedures for executive agencies. 

President Carter sent to the Congress on July 15, 1977 

Reorganization Plan No. 1 of 1977, his plan for the reorganization of the Executive Office of the President. In his 

message transmitting the Plan, the President noted that he 

had "asked the OMB to reorganize its management arm to 

emphasize major Presidential initiatives, such as reorganization, program evaluation, paperwork reduction, and regulatory 

reform." This organization is reflected in the attached 

chart which shows OMB reorganization and management activities in two major areas headed by an Executive Associate 

Director for Reorganization and Management. These are 

Organization Studies and Management and Regulatory Policy, 

each headed by Associate Directors. 

PRINCIPAL FUNCTIONS OF OMB 

OMB is charged with a basic responsibility for assisting 

the President in the development and effective management of 

Federal programs. Within this framework, the primary functions of OMB are as follows: 

1. To assist the President in the preparation of the 

budget and the formulation of the fiscal program of 

the Government. 

2. To supervise and control the administration of the 

budget. 

3. To assist the President in his effort to develop and 

maintain effective Government by reviewing the 

organizational structures and management procedures 

of the Executive Branch to assure that they are 

capable of producing the intended results. 

- 2 -
4. To evaluate the performance of Federal programs and 

to serve as a catalyst in the effort to improve 

interagency and intergovernmental cooperation and 

coordination. 

5. To assist the President by clearing and coordinating 

departmental advice on proposed legislation and 

recommendations for Presidential action on bills 

passed by the Congress. 

6. To assist in the consideration, clearance, and where 

necessary, the preparation of Executive orders and 

proclamations. 

7. To help develop regulatory reform proposals and programs for paperwork reduction. 

8. To keep the President advised of the progress of 

activities by agencies with respect to those proposed, actually initiated, and completed. This, 

together with the relative timing of interagency 

activities, is necessary to assure that programs are 

coordinated and that money appropriated by the 

Congress is spent effectively with the least possible overlapping and duplication. 

9. To provide overall direction of procurement policies, regulations, and procedures for Executive 

Agencies. 

ORGANIZATION 

Director's Office. The Director's Office provides 

executive direction and coordination for all Off ice of 

Management and Budget activities. The Director's Office 

consists of the Director and Deputy Director and their 

principal assistants and support personnel. 

The Assistant to the Director for Legislative Affairs 

provides staff support for the Director and works with the 

Assistant Director for Legislative Reference in reviewing 

legislative programs of the agencies submitted with the 

budget estimates and subsequent agency recommendations for 

the President's legislative program. This division assist 

the Director and staff of the White House Office in preparation of legislative portions .of the State of the Union 

Message, the Budget Message, the Economic Report, and other 

special messages, and maintains a continuing record of major 

legislative proposals under consideration in the Executive 

- 3 -
ii:.. 

I 

OFFICE OF 

PUBLIC AFFAIRS 

r 

ASSOCIATE DIRECTOR 

MANAGEMENT AND 

REGULATORY POLICY 

MANAGEMENT 

-I l~~R~~~r~~iION DIVISION 

FEDERAL i.-1 PERSONNEL POLICY 

DIVISION 

REGULATORY POLICY 

i.-1 AND REPORTS 

MANAGEMENT 

DIVISION 

INFORMATION 

"""' SYSTEMS .POLICY 

DIVISION 

INTERGOVERNMENTAL 

i...IAFFAIRS 

DIVISION 

T 

OFFICE OF 

GENERAL COUNSEL 

OFFICE OF 

ADMINISTRATION 

EXECUTIVE 

ASSOCIATE DIRECTOR 

REORGANIZATION AND 

MANAGEMENT 

DOMESTIC 

REORGANIZATION 

COORDINATOR 

---

---

HUMAN -I RESOURCES 

DIVISION 

---

---

ECONOMIC 1-1 DEVELOPMENT 

DIVISION 

---

---

NATURAL -I RESOURCES 

DIVISION 

---

GEN~RAL .... GOV~Rl'flENT 

DIVISION 

REORGANIZATION 

PROJECT 

MANAGEMENT 

STAFF 

ASSOCIATE 

DIRECTOR 

ORGANIZATION 

NATIONAL SECURITY 

.._.AND INTERNATIONAL 

AFFAIRS DIVISION 

'--·------~ 

DIRECTOR 

DEPUTY DIRECTOR 

I 

OFFICE OF 

LEGISLATIVE 

AFFAIRS 

I ASSOCIATE DIRECTOR 

NATIONAL SECURITY ; .'\ND INTERNATIONAL , AFFAIRS 

INTERNATIONAL ...., AFFAIRS 

.... 

DIVISION 

NATIONAL 

SECURITY 

DIVISION 

...., SPECIAL STUDIES 

DIVISION 

OFFICE OF MANAGEMENT 

AND BUDGET 

I 

OFFICE OF 

ECONOMIC 

POLICY 

I 

OFFICE OF 

FEDERAL PROCUREMENT 

POLICY 

EXECUTIVE 

ASSOCIATE DIRECTOR 

BUDGET 

BUDGET 

REVIEW 

DIVISION 

ASSOCIATE DIRECTOR ASSOCIATE DIRECTOR 

HUMAN RESOURCES, ECONOMICS AND 

VETERANS, AND LABOR GOVERNMENT 

HEALTH AND TRANS PORT A TI ON , 

i-1 INCOME COMMERCE, AND 

MAINTENANCE HOUSING 

DIVISION DIVISION 

LABOR, JUSTICE, 

1....1 VETERANS, AND TREASURY , AND 

EDUCATION GENERAL MGMT. 

DIVISION DIVISION 

1-1 SPECIAL STUDIES SPECIAL STUDIES 

CIVISION DIVISION 

I 

ASSOCIATE DIRECTOR 

NATURAL RESOURCES, 

ENERGY, AND 

SCIENCE 

NATURAL ..... RESOURCES 

DIVISION 

---

---

ENERGY AND ..... SCIENCE 

DIVISION 

...., SPECIAL STUDIES 

DIVISION 

NOVEMBER 1978 
Branch and the Congress. The Assistant Director for Legislative Reference also has responsibility for clearing and 

coordinating agency legislative proposals and reports on 

pending legislative, except appropriative bills and reorganization plans. 

General Counsel. The General Counsel provides legal 

advice to the Director, Deputy Director, and the agency 

staff. He is responsible for the discharge of OMB's responsibilities with respect to clearance of proposed Executive 

orders and proclamations and participates in the development 

of legislative proposals sponsored by OMB or which affect OMS 

functions. In addition, the General Counsel maintains 

liaison with departmental general counsels and White House 

staff on legal matters of mutual interest. 

Assistants to the Director for Public Affairs and Admin~ 

istration provide support to the Director and to agency 

staff. 

The Assistant Director for Economic Policy provides the 

Director, other policy officials and OMB staff with needed 

information on the economy and assistance in the analysis of 

economic policy issues, including tax expenditures and other 

tax policy issues. 

The Executive Associate Director for Budget supervises 

and directs those parts of OMB primarily concerned with the 

preparation and execution of the Federal budget as well as 

with fiscal and program analysis. 

The Assistant Director for Budget Review supervises the 

division which coordinates and participates in the review of 

Government programs, the preparation of the budget, and the 

timely apportioning of funds made available by the Congress. 

The division prepares fiscal, economic, and financial 

analyses and forecasts. It recommends and participates in 

developing budget, tax, credit, and fiscal policies. 

The division also publishes the Catalog of Federal 

Domestic Assistance, a compilation of all grant and aid programs. It formulates, recommends, and implements accounting, 

auditing, cash management, and other financial management 

policies; and participates with the Department of the 

Treasury, General Accounting Office, and the Office of 

Personnel Management in the Joint Financial Management 

Improvement Program. 

- 5 -
The Associate Directors for National Security and 

International Affairs; Human Resource, Veterans and Labor; 

Economics and Government; and Natural Resources, Energy, ant 

Science oversee the divisions which review agency programs 

and budget requests. These divisions also help control 

execution of the budget, analyze proposed legislation and 

Executive orders. They initiate special projects aimed at 

establishing goals and objectives that will result in longand short-range improvements in the agencies' financial, 

administrative and operational managements. 

Executive Associate Director for Reorganization and 

Management. The Executive Associate Director for Reorganization oversees the division involved in reorganization and 

management improvement of the Executive Branch, program 

evaluation, paperwork reduction, regulatory reform, interagency and intergovernmental relations, and policies on 

information, computer and teleprocessing systems. 

The Associate Director for Organization Studies has 

under his direction the national security and international 

affairs, human resources, economic development, natural 

resources, and general government divisions. Staff of these 

divisions review functions and programs in major areas such 

as law enforcement, human services, and community economic 

development. Their studies and action proposals emphasize 

how Government can more effectively meet the needs of its 

citizens. 

The Associate Director for Management and Regulatory 

Policy dir~cts the work of the divisions concerned with 

management improvement and evaluation, Federal personnel 

policies, regulatory policy and reports management, information systems, and intergovernmental affairs. These divisions 

also deal in such areas as paperwork reduction, personnel 

management, administrative services, program evaluation, and 

policies on acquisition, utilization, and protection of 

information systems. 

The Office of Federal Procurement Policy was created to 

improve the economy, efficiency, qnd effectiveness of the 

procurement of property and services by Executive agencies. 

The functions carried out by the Off ice of Federal Procurement Policy are as follows: 

1. Establish a system of coordinated, and to the extent 

feasible, uniform procurement regulations. 

- 6 -
2. Establish criteria for soliciting the viewpoints of 

interested parties in the development of procurement 

policies and regulations. 

3. Monitor and revise policies relating to reliance by 

the Government on the private sector to provide 

needed property and services. 

4. Promote and conduct research in procurement policy 

matters. 

5. Establish a Government-wide procurement data system. 

6. Recommend and promote programs for recruitment, 

training, career development, and performance evaluation of procurement personnel. 

The authority of the Administrator for Federal Procurement Policy is limited to procurements payable from 

appropriated funds and to procurements by recipients of 

Federal grants and assistance funds. In addition, the 

Administrator is prohibited from interfering with the 

determination of the need for property or services or from 

otherwise interfering in specific actions in the award or 

administration of procurement contracts. 

IMPORTANT STATUTORY AUTHORIZATIONS 

The following statutory provisions pertain to the Off ice 

and its principal functions: 

1. Reorganization Plan No. 2 of 1970, 35 F.R. 7959, 

which established the Off ice of Management and 

Budget in the Executive Office of the President. 

see also Reorganization Plan No. 1 of 1977, 42 F.R. 

56101, which changed the functions of the Office 

from those contained in the 1970 Plan. 

2. Budget and Accounting Act of 1921 (31 u.s.c. 1-24), 

which provides for the preparation of the annual 

budget and any supplemental or deficiency estimates, 

and for the conduct of administrative studies to 

enable the President to achieve greater economy and 

efficiency in the Executive Branch. 

3. Government Corporation Control Act of 1945 (31 

u.s.c. 847-849, 852}, which extends the Executive 

budgetary functions to wholly owned Government 

corporations. 

- 7 -
4. Budget and Accounting Procedures Act of 1950 (64 

Stat. 832), which amplifies the Budget and Accounting Act by clarifying responsibilities, especially 

in the fields of administrative analysis and integration of statistical work, and by providing for a 

continuous program for the improvement of accounting 

and financial reporting throughout the Government. 

5. Section 3679 of the Revised Statutes, as amended (31 

u.s.c. 665), which prescribes procedures for apportioning appropriations, provides for agency systems 

of administrative control of funds, and authorizes 

establishing reserves in appropriations and funds. 

6. Act of August 1, 1956 (70 Stat. 782), which amended 

the Budget and Accounting Act and the Budget and 

Accounting Procedures Act, mainly to make further 

improvements in governmental budgeting and accounting methods and procedures. 

i. Act of October 30, 1965 (40 U.S.C. 759), which deals 

with automatic data processing equipment, and under 

wh~ch guidelines and information are provided for 

the management of automatic data processing activities in the Federal Government. 

8. Section 204 of the Demonstration Cities and Metropolitan Development Act of 1966 (42 U.S.C. 3334), 

under which rules and regulations are prescribed for 

the coordination of Federal aid in metropolitan 

areas. 

9. Intergovernmental Cooperation Act of 1968 (42 u.s.c. 

4201-4244), and the President's memorandum of November 8, 1968, delegating certain authority under that 

Act (33 F.R. 16487), which require the issuance of 

rules and regulations with regard to (1) improved 

administration of grant-in-aid to the States; (2) 

special or technical services to State and local 

units of government; (3) the formulation, evaluation, and review of Federal programs and projects 

having a significant impact on area community 

development. 

10. Section 102 of the District of Columbia Revenue Act 

of 1970 (P.Lo 91-650) which requires the Office to 

examine and review District of Columbia appropriations to determine priorities of expenditures and 

where reductions can be made. 

- 8 -
11. Office of Federal Procurement Policy Act (P.L. 93-

400) established this Office in OMB to provide 

overall direction of procurement policy and to 

prescribe procurement policies, regulations, 

procedures, and forms for Executive Agencies. 

12. Sections 201-202 of the Legislative Reorganization 

Act of 1970 (31 u.s.c. 1151-1153), which assign to 

the OMB and others the responsibility for developing 

and maintaining a standardized information and data 

processing system for budgetary and fiscal data 

together with a set of standard classifications for 

Federal programs, activities, receipts, and expenditures that will serve both the Congress and the 

Executive Brancho 

13. Privacy Act of 1974 (P~L. 93-579) which requires the 

Off ice to develop guidelines for the implementation 

of the Act by all agencies and to provide continuing 

assistance to and oversight of implementation by the 

agencies. 

14. Congressional Budget and Impoundment Control Act of 

1974 (P.L. 93-344) which, among other things amended 

the Budget and Accounting Act of 1921, in several 

respects and established new procedures for the 

reporting and treatment of impounded funds. 

15. 5 UoS.C. 305, which requires the issuance and administration of regulations under which each agency 

makes systematic reviews of its operations on a 

continuing basis. 

16. 5 u.s.c. 4112, which requires the issuance of regulations with regard to the absorption of costs of 

Government employee training programs. 

17. 44 u.s.c. 1108, which requires approval of the use 

of appropriated funds for the printing of periodicals. 

18. 44 u.s.c. 3501-3511 (the Federal Reports Act), which 

requires coordination of Federal reporting and statistical services in order to eliminate duplication, 

reduce costs, and minimize the burden on the public 

of furnishing information to Federal agencies. 

- 9 -
PRINCIPAL EXECUTIVE ORDERS 

The statutory authorizations of OMB are supplemented by 

a number of related Executive orders: 

1. Executive Order No. 8248 of September 8, 1939 (4 

F.R. 3864), which specified the functions of the 

Bureau of the Budget in the Executive Off ice of the 

President. 

2. Executive Order No. 9094 of March 10, 1942 (7 F~R. 

1972), which provides for coordination and planning 

of Federal mapping and chart-making activities. 

3. Executive Order No. 10579 of November 30, 1954 (19 

F.R. 7925), which provides for decisions on appeal 

by an agency from any determination by the Administrator of General Services with respect to the 

establishment of an interagency motor vehicle pool 

or system. 

4. Executive Order No. 10900 of January 5, 1961 (26 

F.R. 143), as amended by Executive Order No. 11036 

of July 11, 1962 (27 F.R. 6653), which delegates a 

part of the President's authority to fix amounts of 

foreign currencies to be used for various purposes 

and to waive certain statutory requirements. 

5. Executive Order No. 11030 of June 19, 1962 (27 F.R. 

5847), as amended by Executive Order No. 11354 of 

July 1, 1967 (32 F.R. 7695), as amended by Executive 

Order No. 12080 of September 18, 1978 (43 F.R. 

42235)., which provides for clearance for the President of Executive orders and proclamations. 

6. Executive Order No. 11060 of November 7, 1962 (27 

F.R. 10925), which requires establishment of rates 

for hospital care and treatment furnished by the 

United States for use in connection with recovery 

from tortiously liable third persons. 

7. Executive Order No~ 11893 of December 31, 1975 

amending Executive Order Nos. 11717 and 11867, 

relating to joint funding and financial, procurement, and property management functions. 

8. Executive Order No. 11541 of July 1, 1970 (35 F.R. 

10737), as amended by Section 1 of Executive Order 

No. 12013 of October 3·, 1977 {42 F.R. 54931), which 

- 10 -
delegates to the Director, OMB, the functions of the 

Bureau of the Budget which were transferred to the 

President by Reorganization Plan No. 2 of 1970. 

9. Executive Order No. 11592 of May 6, 1971 (36 F.R. 

8555), which delegates to the Director the functions 

of granting certain approvals under provision of the 

River and Harbor Act of 1970 and the Flood Control 

Act of 1970. 

10. Executive Order No. 11609 of July 22, 1971 (36 F.R. 

113747), which delegates to the Director, OMB, statutory authorities of the President involving (1) 

regulatory functions with respect to quarters and 

facilities, (2) transfers of balances of appropriations, (3) interagency land transfers, land 

acquisitions, contracts for land acquisitions and 

other land transactions, and (4) allocation of funds 

for management improvement. 

11. Executive Order No. 11721 of May 23, 1973 (38 F.R. 

13717), as amended by Executive Order No. 12004 of 

July 20, 1977 (42 F.R. 37527), and as amended by 

Section 2-lOl(a) of Executive Order No. 12107 of 

December 28, 1978 (44 F.R. 1055), designates the 

Director of OMB, the Director of the Office of 

Personnel Management, and the Secretary of Labor as 

the President's agents under the Federal Pay Comparability Act of 19700 

120 ·Section 1-107 of Executive Order No. 12113 of January 4, 1979 (44 F.R. 1955.) provides for OMB to 

review reports or plans for water projects in order 

to determine their relationship to the President's 

program. 

13. Executive Order Noo 11961 of· January 19, 1977 (42 

F.R. 4321) provides for OMB to exercise oversight 

over certain international investment surveys. 

14. Executive Order No. 11954 of January 7, 1977 (42 

F.R. 2297), as amended by Executive Order No. 12030 

of December 15, 1977 (42 F.R. 63633) provides for 

OMB to exercise oversight over Federal real property 

policies. 

15. Executive Order No. 12039 of February 24, 1978 (43 

F.R. 8095) delegates certain science and technology 

functions to the Director, including those related 

- 11 -
16. Executive Order No. 12044 of March 23, 1978 (43 F.R. 

12661) assigns to the Director the responsibility 

for management and oversight of the Government-wide 

regulatory improvement program. 

17. Executive Order No. 12046 of March 27, 1978 (43 F.Ro 

13349) delegates to the Director the responsibility 

for telecommunications procurement and for determining Government appeals from radio frequency 

assignments by the Secretary of Commerce. 

18. Executive Order No, 12088 of October 13, 1Y78 (43 

F.R. 12088) assigns oversight responsibility to the 

Director for agency pollution control plans. 

19. Executive Order No. 12092 of November 1, 1978 

provides for the Administrator of the Off ice of 

Federal Procurement Policy, Office of Management and 

Budget, to exercise overall direction of the program 

designed to prohibit inflationary procurement practices. 

THE BUDGET PROCESS 

The budget system of the U.S. Government supports 

decisionrnaking and management of programs in relation to the 

requirements of the Nation, effective financial control, and 

accountability for the use of Federal resources. The budget 

process has four main phases: (1) executive formulation and 

transmittal; (2) congressional action; (3) budget execution 

and control; and (4) review and audit. Each of these phases 

interrelates with and overlaps the others. 

Executive Formulation and Transmittal 

The budget sets forth the President's financial plan of 

operation and thus indicates his priorities for the Federal 

Government during the corning year. The President 6 S transmittal of his budget to the Congress early in each calendar 

year is the climax of many months of planning and analysis 

throughout the Executive Branch. Formulation of the budget 

for a fiscal year begins in the spring of the year, prior to 

the beginning of the fiscal year to which the budget will 

pertain, although general goals were set earlier. 

In connection with the development of the budget, a 

three-year budget planning and tracking system expands the 

budget planning horizon to cover the two years following the 

budget year and integrates l~ng-range planning into the 

executive budget cycle. The multi-year budget planning 

- 12 -
system requires that broad fiscal goals and agency spending 

targets beyond the budget year be established during the 

budget planning process and that agency budget requests be 

prepared in the context of the expanded planning period. 

Long-range implications are identified and considered during 

the decisionmaking process and to the extent possible, 

decisions are made tor the two years beyond the budget year 

.as well as for the budget year. 

During the period when a budget is being formulated in 

the Executive Branch, there is a continuous exchange of 

information, proposals, evaluations, and.policy decisions 

among the President, the Off ice of Management and Budget 

(OMB), and the various Government agencies. Decisionmaking 

in the budget process is facilitated by the use of zero-base 

budgeting, a management process that provides for an in-depth 

evaluation of all proposed and existing programs and activities in conjunction with planning and budgeting. 

In the spring, agency programs are evaluated, policy 

issues are identified, and budgetary projections are made, 

giving !ttention both to important modifications and innovations in programs and to alternative long-range program 

plans. These budgetary projections, including projections 

of estimated receipts prepared by the Department of the 

Treasury, are then presented to the President for his 

consideration, and the major issues are discussed. At about 

the same time, the President receives projections of the 

economic outlook that are prepared jointly by the Council of 

Economic Advisors, and Departments of Commerce, Labor, the 

Treasury, and OMB. 

Following a review of these projections, the President 

establishes general budget and fiscal policy guidelines for 

the fiscal year that will begin about 15 months later, and 

for the two years beyond. General policy directions and 

planning ceilings are then given to the agencies to govern 

the preparation of their budget requests~ 

Throughout the fall and early winter the Executive 

Branch is involved in the development of the President's 

budget. Current services estimates are also prepared to 

provide the Congress with a basis for the review of the 

President's budget. These estimates are projections of 

budget authority and outlays required to continue Federal 

programs and activities in the upcoming fiscal year without 

policy changes from the fiscal year in progress at the time 

th~ estimates are submitted. The Congressional Budget Act of 

1974 requires that these estimates be transmitted by November 

10 in order to provide the Congress with early information on 

projected costs of current programs. However, the current 

- 13 -
services estimates transmitted at that time did not provide a 

suitable basis for review, since the underlying assumptions 

could vary before the transmittal of the budget. Therefore, 

the Congress has passed a joint resolution continuing an 

experiment in which the current services estimates are 

transmitted with the President's budget and therefore, are 

based upon the same economic assumptions. 

The primary phase of the budget process involves the 

formulation and preparation of the President's budget for 

transmittal to the Congress. Budget determinations are 

developed after detailed reviews of the agency zero-base 

budget requests and the Government-wide OMB ranking of zerobase decision packages falling at the margin of approved 

agency totals. These determinations are then discussed with 

the agencies and may be revised as a result of later Presidential decisions. Overall fiscal policy issues--relating to 

total budget outlays and receipts--are reexamined. Consistent with the multiyear budget planning system, the effects 

of budget decisions on outlays in the years that follow are 

also considered and are explicitly taken into account. Thus, 

the budget formulation process involves the simultaneous 

consideration of the resource needs of individual programs, 

and the total outlays and receipts that are appropriate in 

relation to current and prospective economic conditionso The 

budget reflects the results of both of these considerations. 

Congressional Action 

The Congress can act to approve, modify, or disapprove 

of the President's budget proposals. It can change funding 

levels, eliminate proposals, or add programs not requested by 

the President. It may also act upon legislation determining 

taxes and othe~ means of increasing or decreasing receipts. 

In making appropriations, the Congress does not normally 

vote on the level of outlays directly, but rather on budget 

authority. The congress first enacts legislation that 

authorizes an agency to carry out a particular program and, 

in some cases, includes guidance on the amount that subsequently should be appropriated for the program. Many 

programs are authorized for a specified number of years or 

indefinitely; other programs, such as most education and 

health programs, nuclear energy programs, space exploration, 

defense procurement, foreign affairs, and some construction 

programs, require annual authorizing legislation. 

Budget authority is usually provided in a separate, 

subsequent action. Generally, budget authority becomes 

available each year only as voted by the Congress. However, 

- 14 -
in a significant number of cases, the Congress has voted 

permanent budget authority, under which funds become 

available annually without further congressional action. 

Most trust fund appropriations are permanent, as are a number 

of Federal fund appropriations, such as the appropriation to 

pay interest on the public debt. 

Congressional review of the budget begins when the President transmits his budget estimates to the Congress within 

15 days after the start of each new session in January, as 

required by law. Under the procedures established by the 

Congressional Budget Act, the Congress considers budget 

totals before completing action on individual appropriations. 

The act requires that each standing committee of the Congress 

submit reports on budget estimates to the House and Senate 

Budget Committees by March 15; and that the Congressional 

Budget Off ice submit a fiscal report to the two budget 

committees by April 1. This is followed, no later than May 

15, by the adoption of the first concurrent budget resolution, containing Government-wide budget targets of receipts, 

budget authority, and outlays to guide the Congress in its 

subsequent consideration of appropriations and revenue 

measures. 

Congressional consideration of requests for appropriations and for changes in revenue laws occurs first in the 

House of Representatives. The Appropriations Committee, 

through its subcommittees, studies the proposals for appropriations and examines in detail each agency's performance. 

The Ways and Means committee reviews proposed revenue 

measures.. Each committee then recommends the action to be 

taken by the House of Representatives. 

As the appropriation and tax bills are approved by the 

House, they are forwarded to the Senate, where a similar 

review process is followed. In case of disagreement between 

the two Houses of the Congress, a conference committee 

(consisting of Members of both bodies) meets to resolve the 

issues. The report of the conference committee is returned 

to both Houses for approval. When the measure is agreed to, 

first in the House and then in the Senate, it is ready to be 

transmitted to the President in the form of an enrolled bill, 

for his approval or veto. 

After action has been completed on all money bills, the 

Congress adopts, by September 15, a second concurrent 

resolution containing budget ceilings classified by function 

for budget authority and outlays, and a floor for budget 

receipts. This resolution may retain or revise the levels 

set earlier in the year, and can include directives to the 

- 15 -
appropriations committee and to other committees to recommend 

changes in new or carryover authority or entitlements. Similarly, the second resolution may direct the appropriate 

committees to recommend changes in budget receipts or in the 

statutory limit on the public debt. Changes recommended by 

various committees pursuant to the second budget resolution 

are to be reported in a reconciliation bill (or resolution, 

in some cases) on which the Congress must complete action by 

September 25, a few days before the new fiscal year commences 

on October 1. 

After the Congress completes action on the reconciliation bill or resolution, it may not consider any spending or 

revenue legislation that would breach any of the levels 

specified in the second resolution. The Congress would be 

able to pass a supplemental appropriation that would cause 

budget authority or spending to rise above, or reduce 

receipts below, the second resolution's totals only if it 

adopted a new budget resolution changing the levels set by 

the second resolution. 

If action on appropriations is not completed by the 

beginning of the fiscal year, the Congress may enact a "continuing resolution" to provide authority for the affected 

agencies to continue operations usually until their regular 

appropriations are enacted. 

Budget Execution and Control 

Once approved, the budget becomes the financial plan for 

the operations of each agency during the fiscal year. Under 

law, most budget authority and other budgetary resources are 

made available to the agencies of the Executive Branch 

through an apportionment system. The Director of OMB 

apportions (distributes) appropriations and other budgetary 

resources to each agency by time periods (usually quarters) 

or by activities. Obligations may not be incurred in excess 

of the amount apportioned. The objective of the apportionment system is to ensure the effective and orderly use of 

available authority and to reduce the need for requesting 

additional or supplemental authority. 

Changes in laws or other factors may indicate the need 

for more authority during the year, and supplemental requests 

may have to be transmitted to the Congress. On the other 

hand, reserves may be established under the Antidef iciency 

Act to provide for contingencies or to effect savings made 

possible by or through changes in requirements or greater 

efficiency of operations. Amounts may also be withheld for 

policy or other reasons pursuant to the Impoundment Control 

Act of 1974. 

- 16 -
Whenever the President determines that all or part of 

any budget authority provided by the Congress will not be 

required to carry out the full objectives or scope of a 

program for which it was provided, or that such budget 

authority should be rescinded for fiscal policy or other 

reasons, a special message is transmitted by the President to 

the Congress requesting a rescission of the budget authority. 

The budget authority proposed by the President for rescission 

must be made available for obligation unless both the House 

and the Senate pass a rescission bill within 45 days of 

continuous session after receiving the President's message. 

Whenever all or part of any budget authority provided by 

the Congress is deferred (that is, temporarily withheld from 

obligation), the President transmits a special message to the 

Congress on such deferrals. Either House may, at any time, 

pass a resolution disapproving this deferral of budget 

authority, thus requiring that the funds be made available 

for obligation. When no congressional action is taken, 

deferrals may remain in effect until, but not beyond the end 

of the fiscal year. If the funds remain available beyond the 

end of a fiscal year and continued deferral of their use is 

desired by the President, he must transmit a new special 

message to the Congress. 

Review and Audit 

This is the final phase in the budget process. The 

individual agencies are responsible for assuring--through 

their own review and control systems--that the obligations 

they incur and the resulting outlays follow the provisions of 

the authorizing legislation and appropriations, as well as 

other laws and regulations relating to the obligation and 

expenditure of funds. OMB reviews program and financial 

reports and keeps abreast of agency programs and the effort 

to attain program objectives. 

In addition, the General Accounting Office (GAO), as an 

agent of the Congress, regularly audits, examines, and 

evaluates Government programs. Its findings and recommendations for corrective action are made to the Congress, to OMB, 

and to the agencies concerned. The GAO also monitors the 

Executive Branch's reporting of special messages on proposed 

rescissions and deferrals. The GAO reports any items not 

reported by the Executive Branch and any differences that it 

may have with the clas~if ication (as a rescission or deferral) of withholdings included in special messages transmitted 

by the President. The GAO may bring civil actions to obtain 

- 17 -
compliance should the President fail to make budget authority 

available irt accordance with the Impoundment Cotitrol Act of 

1974. 

BUDGET PRESENTATION 

Agencies and Programs 

The budget totals cover agencies and programs (including 

Government corporations) owned by the Federal Government, no 

matter how funded, except for off-budget Federal entities, 

such as the Federal Financing Bank, (because these transactions have been excluded under provision of Law) and the 

transactions of privately owned, Government-sponsored enterprises, such as the Federal land banks and Federal home loan 

banks. 

Functional Classification 

The functional classification presented in the President's budget arrays budgetary data according to the major 

purpose served by the unit being classified. In accordance 

with the Congressional Budget Act of 1974, the Congress must 

pass resolutions establishing budget targets and ceilings by 

functional categories. 

The following criteria are used in establishing and in 

assigning activities to functional categories: 

--A function must have a common end or ultimate purpose 

addressed to an important national need. (The 

emphasis is on what the Federal Government seeks to 

accomplish rather than the means of accomplishment, 

what is.purchased, or the clientele or geographic area 

served.) 

--A function must be of continuing national importance 

and be significant in size. 

--Each basic unit of classification (generally the 

appropriation or fund account) is classified into the 

single best or predominant purpose and assigned to 

only one function. However, when an account serves 

more than one major purpose, it may be subdivided into 

two or more subfunctions. 

--Activities and programs are normally classified by 

common purpose (or function) regardless of which 

agencies conduct the activities. 

- 18 -
National Needs Presentation 

8ection 601 of the Congressional Budget Act of 1974 

requires that the budget for each fiscal year beginning with 

the fiscal year ending September 30, 1979: 

shall contain a presentation of budget authority, 

proposed budget authority, outlays, proposed outlays, and descriptive information in terms of--

(1) a detailed structure of national needs 

which shall be used to reference all 

agency missions and programs; 

(2) agency missions; and 

(3) basic programs. 

The functional presentation of the budget is used to 

meet the national needs requirement because the thrust of the 

budget functional classification has always been to summarize 

what the Government is doing, or expects to do, in terms oe 

the ultimate purpose that the Government programs are 

designed to serve. Each major function is described in the 

context or national needs being served and subfunctions are 

described in the context of major missions devoted to serving 

national needs. This is in keeping with the act, which 

states: 

To the extent practicable, each agency shall furnish information in support of its budget requests 

in accordance with it assigned missions in terms of 

Federal functions and subfunctions, including mission responsibilities of component organizations, 

and shall relate its programs to agency missions. 

In the national needs presentation, Federal programs are 

discussed in terms of national needs and the functional 

classification. In this context, a single program may be 

identified as serving several national needs even though 

classified in a single function. For example, medicare, 

primarily a health program, is identified as meeting the 

riational need for improved health care. However, it also 

provides a form of income security by paying for medical 

bills and, hence, can also be identified as meeting the 

national need for income security. A discussion of Federal 

programs based solely on the function classification system 

would have been 1 imi ted -to discuss ion of each program, 

classified by major purposes served, in only one category. 

- 19 -
Types of Funds 

Agency activities are financed through Federal funds and 

through trust funds, both of which are included in the budget. 

Federal funds are of four types. The general fund is 

credited with receipts not earmarked by law for a specific 

purpose, and is charged with payments from appropriations of 

such receipts and from general borrowing. Special funds 

contain Federal receipts earmarked for specific purposes, 

other than for carrying out a cycle of operations. Public 

enterprise (revolving) funds finance a cycle of business-type 

operations in which outlays generate collections primarily 

from the public. Intragovernmental funds, including revolving management and consolidated working funds, facilitate 

financing operations within and between Government agencies. 

Trust funds are established to account for receipt and 

expenditure of moneys by the Government for use in carrying 

out specitic purposes and programs in accordance with the 

terms of a trust agreement or statute. These moneys are not 

available for the general purposes of the Government. Within 

the category of trust funds there is a special subcategory of 

trust revolving funds that carry on a cycle of business-type 

operations. 

Current Expense and Capital Investme~~ 

The budget includes spending for both current operating 

expenses and capital investment, such as the purchase of 

lands, structures, and equipment. It also includes capital 

investment in the form of lending and the purchase of investmentss 

BUDGET AUTHORITY AND RELATED TRANSACTIONS 

Budget Authority 

Government agencies--whether or not they are included in 

the budget totals--are permitted to enter into obligations 

requiring either immediate or future payment of money only 

when they have been granted authority to do so by law. This 

authority is usually provided as budget authority. (Collections specifically authorized to be credited to appropriation 

and fund accounts are also available for obligation.) 

Budget authority permit~ obligaiions to be incurred. 

The amounts of budget authority requested are determined by 

the nature of the programs or projects being funded. 

- 20 -
For activities for which the cost depends upon the 

program level planned for a fiscal year, the amount of budget 

authority requested covers the obligations expected to be 

incurred during the year. Most of these Federal activities, 

such as operations and maintenance, entitlement programs and 

continuing research programs, are fully funded on an annual 

basis. 

For most projects that are separate and distinct units, 

particularly direct Federal major procurement and construction projects, "full funding" is requested. That is, funds 

are requested to cover the entire cost to complete the project at the time it is initiated, regardless of the expected 

time of completion. 

Budget authority usually takes the form of appropriations, which permit obligations to be incurred and payments 

to be made. Some budget authority is in the form of contract 

authority, which permits obligations in advance of approprations and therefore requires a subsequent appropriation or 

the collection of receipts to "liquidate" (pay) these 

obligations. There is also authority to borrow; such budget 

authority permits the use of borrowed money to incur obligations and make paymentse 

Since January 1976, it has not been in order for either 

House of the Congress to consider any bill, with certain 

exceptions, that provides new borrowing or contract authority 

unless that bill also provides that such new spending authority will be effective only to the extent or in such amounts 

as are provided in appropriations acts. 

Most appropriations for current operations are made 

available for obligations only during a specified fiscal year 

(one-year appropriations). some are for a specified longer 

period (multiple-year appropriations). Others, including 

most of those for construction, some for research, and many 

trust fund appropriations, are made available for obligations 

until the objectives have been attained (no-year appropriations) • 

When budget authority is made available by the Congress 

for a specific period of time, any part that is not used for 

obligations during that period expires and cannot be used 

later. Reappropriations--Congressional actions to continue 

availability of unobligated amounts that have expired or 

would otherwise expire--are counted as budget authority in 

the year for which the availability is extended. 

- 21 -
A rescission is a legislative action that cancels new 

budget authority or unobligated balances of budget authority 

prior to the time the authority would otherwise have expired. 

Rescissions are offset against new budget authority in 

arriving at the total of budget authority for each year. A 

deferral is an Executive Branch action or inaction--including 

the establishment of reserves under the Antideficiency Act--

that effectively delays the obligations or expenditure of 

budget authority. 

Most authority to obligate funds is granted year by year 

(current authority). Under certain laws, some budget authority in Federal funds and most budget authority in trust funds 

becomes available from time to time without further action by 

the Congress (permanent authority). 

The amount of budget authority is usually stated specifically in the legislation that makes it available (def ini~e 

authority). In some cases the amount is left indefinite, to 

be determined by subsequent circumstances (indefinite authority). Examples of the latter type are the appropriation for 

interest on the public debt, and the trust fund appropriation 

equal to receipts under the Federal Insurance Contributions 

Act (social security). 

Obligations Incurred 

Following the enactment of budget authority, obligations 

are incurred by Government agencies. Such obligations 

include the current liabilities for salaries and wages, certain contractual services, and interest; contracts for the 

purchase of supplies and equipment, construction and the 

acquisition of land; contracts to make loans, and other 

contractual arrangements requiring the payment of money. 

Outlays 

Obligations generally are liquidated by the issuance of 

checks or the disbursement of cash; such payments are called 

outlays. In lieu of issuing checks, obligations may also be 

liquidated (and outlays occur) by the maturing of interest 

coupons in the case of some bonds, or by the issuance of 

bonds or notes (or increases in the redemption value of bonds 

outstanding). Outlays during a fiscal year may be for payment of obligations incurred in prior years or in the same 

year. Such outlays, therefore, flow in part from unexpended 

balances of prior year budget authority and in part from 

budget authority provided for the year in which the money is 

- 22 -
spent. Total budget outlays are stated net of deductions for 

offsetting collections (see collections below), and exclude 

outlays of off-budget Federal entities. Payments for tax 

credits in excess of tax liabilities are treated as outlays 

rather than as an adjustment to budget receipts. 

Balances of Authority 

Not all budget authority enacted for a fiscal year is 

obligated and paid out in the same year. The obligated 

balance is that portion of the budget authority that has been 

obligated but not yet paid. For example, in the case of 

salaries and wages, one to three weeks elapse between the 

time of obligation and the time of payment. In the case of 

major procurement and construction, up to several years may 

elapse. Obligated balances of budget authority are carried 

forward until the obligations are subsequently paid. In 

addition, in multiple-year or no-year accounts; budget 

authority that is still available for obligation (unobligated 

balances) may be carried forward for obligation in the 

following year. 

Therefore, a change in the amount of budget authority 

for a given year does not necessarily result in a similar 

change in either the obligations incurred or the budget outlays of that same year. A change in budget authority in any 

one year may have an effect on obligations for two or more 

years, and may affect budget outlays for an even longer 

period. In the case of standby budget authority, obligations 

and outlays may never materialize. 

Allocations Between Agencies 

In some cases, an agency may share in the administration 

of a program for which appropriations are made to another 

agency or to the President. This is made possible by the 

establishment of allocations from the "parent" account, to 

which the appropriation was made. Obligations incurred 

through such allocations are included with the parent account 

in the ~udget (without separate identification) and in the 

Budget Appendix (where the total obligations of each participating agency are identified separately under the parent 

account). 

COLLECTIONS 

In general, amounts collected during the year are classified into two major categories: 

- 23 -
--Budget receipts, which are compared with total outlays 

in calculating the budget surplus or deficit. 

--Offsetting collections, which are deducted from 

disbursements in calculating total outlays. Corresponding offsets are made in arriving at total budget 

authority and net obligations incurred. 

Budget Receipts 

These are collections from the public that result from 

the exercise of the Government's sovereign or governmental 

powers and from contributions paid by participants in certain 

voluntary Federal social insurance programs. These collections, also called governmental receipts, consist primarily of 

tax re·ceipts and social insuranc.e premiums, but algO j._nclude 

receipts from court fines, certain licenses, and deposits of 

earning by the Federal Reserve System. Gifts and contributions (as distinguished from payments for services or costsharing deposits by State and local governments) are also 

counted as budget receipts. 

Offsetting Collections 

These are collections from other Government accounts or 

from transactioni with the public that are of a business-type 

or market-oriented nature. They are classified into two 

major categories: collections credited to appropriation or 

fund accounts and offsetting receipts (that is, amounts 

deposited in receipt accounts). In generai, the distinction 

between these two major categories is that collections 

credited to appropriation or fund accounts normally can be 

used without appropriation action by the Congress, whereas 

funds in receipt accounts cannot be used without being 

appropriated. 

Collections credited to appropriation or fund accounts 

occur in two circumstances: 

1. Reimbursements. When authorized by law, amounts 

collected for materials or services furnished (for 

example, amounts received from the public to pay 

expenses of providing information under the Freedom 

of Information Act) are treated as reimbursements to 

appropriations. These collections are netted in 

determining outlays from such appropriations. 

2. Revolving funds. Ln the three types of revolving 

funds--publ1c enterprise, intragovernmental, and 

- 24 --
trust revolving--collections are netted against 

spending and outlays are reported as the net 

amount. 

Offsetting receipts generally are deducted from budget 

authority and outlays by functions and/or subfunction, and by 

agency. Offsetting receipts are subdivided into two categories, as follows: 

1. Proprietary receipts from the public. These are 

collections from the public--deposited in receipt 

accounts of the general fund, special funds, or 

trust funds--that arise out of the business-type or 

market-oriented activities of the Government (for 

example, loan repayment, interest, sale of property 

and products, charges for nonregulatory services, 

and rents and royalties). Such collections are not· 

counted as budget receipts, and, with one exception, 

are offset against total budget authority and outlays by agency and by function. The exception 

consists of receipts from rents and royalties from 

outer Continental Shelf lands that are deducted from 

total budget authority and outlays for the Government as a whole rather than from any single agency 

or function. 

2. Intragovernmental transactions. These are payments 

into receipt accounts from Federal appropriations or 

fund accounts. They are treated as an offset to 

budget authority and outlays, rather than as a budget receipt. Intragovernmental transactions may 

either be intrabudgetary (where the payment and 

receipt both occur within the budgetary universe) or 

result from receipts from off-budget Federal entiti~s in those cases where the payment is made by a 

Federal entity whose funds are exluded from the 

budget totals. Normally, intragovernmental transactions are deducted from both the outlays and the 

budget authority for the agency receiving the 

payment. However, in two cases intragovernmental 

transactions are not deducted from the figures of 

any agency or function. Instead, intragovernmental 

transactions that involve agencies' payments 

(including payments by off-budget Federal entities) 

as employers into employee retirement trust funds 

and the payment of interest to nonrevolving trust 

funds appear as special deduct lines in computing 

total budget authority and outlays for the Government. 

- 25 -
Intrabudgetary transactions are further subdivided into three categories: (1) interfund 

transactions, where the payment is from one fund 

group {either Federal funds or trust funds) to a 

receipt account in the other fund group; (2) Federal 

intrafund transactions, in those cases where the 

payment and receipt both occur within the Federal 

fund group; and (3) trust intrafund transactions, in 

those cases where the payment and receipt both occur 

within the trust group. 

OTHER TRANSACTIONS 

Borrowing and Repayment 

Borrowing and debt repayment are not treated as receipts 

or outlays; if they were, the budget could be balanced simply 

by borrowingo This rule applies both to borrowing in the 

form of public debt securities and to specialized forms of 

borrowing--such as the sale of agency securities, the assump~ 

tion of military family housing mortgagesr and certificates 

representing participation in a pool of loans. However, some 

transactions that otherwise would be treated as borrowing are 

required by law t6 be treated as a sale of assets~ This 

results in collections being credited to an appropriation or 

fund account with a corresponding reduction in outlays. 

Exercise of the Monetary Power 

Seigniorage is the prof it from coining money; it is the 

difference· between the value of coins as money and their 

cost, including the costs of manufacturing. Seigniorage on 

coins arises from the exercise of th_e_ Gov:e_r_nme_nt 11 s monetary 

powers and dif~ers from receipts coming from the public, 

since there is no corresponding payment by another partyg 

Therefore, seigniorage is excluded from receipts and treated 

as a means of financing a budget deficit, or as a supplementary amount to be applied to reduce debt or to increase 

the cash in Treasury in the years of a budget surplus. The 

increment (profit) resulting from the reevaluation of gold as 

a monetary asset is treated like seigniorage. In recent 

years 1 the profit from the sale ·of gold was treated as a 

proprietary receipt. However, since the value of gold is 

determined by its value as a monetary asset rather than as a 

cornmoditye the budget treats all of the profits on gold sales 

as a means of financing rather than as an offsetting collec~ 

tion. 

- 26 -
Liabilities in Deposit Fund Accounts 

Accounts outside the budget, known as deposit funds, are 

established to record certain amounts held in suspense temporarily, or held by the Government as agent for others (for 

example, savings accounts for military personnel, State and 

local income taxes withheld from Federal employees~ salaries, 

and payroll deductions for the purchase of savings bonds by 

civilian employees of the Government)e Such transactions 

affect Treasury's cash balances even through they are not a 

part of the budget. 

Exchange of Cash 

The Government's deposit with the International Monetary 

Fund (IMF) are considered to be similar to cash assets. 

Therefore, the movement of money between the IMF and the 

Department of the Treasury is not in itself considered a 

receipt or an outlay, borrowing or lending~ In a similar 

manner, the holdings of foreign currency by the Exchange 

Stabilization Fund (ESF) are considerd to be cash assetsQ 

Changes in these holdings are outlays only to the extent 

there is a realized loss, and offsetting collections only to 

the extent there is a realized prof it on the exchangeo 

Obligations to Multilateral Development Banks 

Debt instruments issued (in lieu of checks) in payment 

of subscriptions to multilateral development banks are not 

considered borrowing or outlays, but remain a part of the 

obligated. balances unt i 1 they are cashed, a.t which time they 

become outlays.. These d-iff-er only in form, and not in 

substance, from ordinary balances ~or unpaid obligations. 

- 27 ~· 
CHAPTER 2 

THE DEPARTMENT OF THE TREASURY 

INTRODUCTION 

This chapter describes the functions and responsibilities of the Treasury Department, the manager of the Federal 

financial and financial reporting systems. 

The Federal Government, like any enterprise, needs a 

financial organization to estimate its financial needs; 

receive, keep, and disburse its funds; and record and report 

its financial information. The Constitution placed the 

fund-raising and fund-granting authority in the Congress. 

The Congress determines the purposes for which public funds 

will be spent and the ways in which the revenues will be 

raised. The duty of the Treasury Department is to conduct 

the flow of funds in the manner prescribed by the Congress. 

The Treasury Department was created by the Act of 

September 2, 1789, as the official fiscal agency of the 

Government. The head of the Department is the Secretary of 

the Treasury, who is charged with the general duties of 

supervising and managing the Government's finances. The 

basic laws under which many of the budgeting, accounting, 

reporting, and auditing functions in the Government are 

carried out are the Budget and Accounting Act of 1921, and 

the Budget and Accounting Procedures Act of 1950. 

ORGANIZATION OF THE TREASURY DEPARTMENT 

The principal operating bureaus and off ices of the 

Treasury Department, and their primary areas of responsibility, are shown in the organization chart and the 

following tables. A more detailed description of the 

Treasury's functions as manager of (1) the Federal financial 

system and (2) the financial reporting system for the 

Government, is presented in the subsequent sections of this 

chapter. 

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t-.J 

\0 

Commissioner 

Internal Revenue 

Service 

Deputy 

Asst Commissioner 

(Compliance I 

Asst Commissioner 

!Data Processing) 

Asst. Commissioner 

!Employee Plans 

and Exempt 

Organizations) 

""'·-[ !Inspection I 

~""~- (Planning 

and Research) 

Asst. Commissioner 

!Resources 

Management) 

rC•m•.o- !Taxpayer Service 

and Returns 

Processing I 

~"" , ...... ., !Technical) 

Assistant Secretary Assistant Secretary 

(Tax Poficy) (Economic Policy) 

Deputy Asst Sec. 1'-""" for Domestic for Tax Analysis Econ. Policy 

I I 

I 

Office of I .... Tax Analysis financial Analysis 

~ '"'"" "" '" 1-"" .. for for International 

Tax legislation Econ. Analysis 

~ ""'"'" legislative Cour.sel 

1 

Office of 

International 

Tax Counsel 

1 

Office of 

Industrial 

Economics 

ORGANIZATION OF THE DEPARTMENT OF THE TREASURY 

r-------------------1 

I 

SECRETARY I 

I Emu.,_ Seaeta~ }- DEPUTY SECRETARY H lnspe<tll'Genenll 

I 

IOlfoceolln~1 I SU\lPOl1 I 

I 

I 

I 

I I 

I UNDER SECRETARY I 

I I 

I FOR MONETARY I UNDER SECRETARY 

I AFFAIRS I 

'._---1----------- I 

-----"' I I I I I 

I Assistant Secretary Assistant Secretary Assistant Secretary i Fiscal Assistant Assistant Secretary Aais!l!nt Secretary Assistant Secretary General Counsel Comptroller of 

(Domestic Finance} !International Secretary (l.egislativeAffllilsl (Pubic Affairs) (Administration I (Enforcement and the Currency 

Affairs I Operations} 

Deputy Deputy Deputy Deputy Treasurer Deputy First Deputy of the 

United Stat£s 

Deputy Asst Sec. 

w·~"""'1 r-· ~ ~~· legal Division 

for Debt for De~eloping Government Administrative Deputy Asst Sec. Office of Director 

Management Nanons Financial Programs (Operations) of Practice Operations U.S. s.;"• I Bonds Division 

I'"'"'""''" i-"""' i "'""'"~ Deputy Asst Sec. for Capital for Trade and ~ ·~""'" Office of 

Markets Policy Investment Policy Public Debt (Enforcement} Tariff Affairs 

I, ... "" .. t""""' Office of Budget Bureau of Alcohol, 

for State and for Commodities and Program Tobacco and 

~ and Natural Local Finance Resources Analysis firearms Bureau of 

the Mint 

I 

~-"""'I Office of ~ .... U.S. Customs 

Revenue Sharing for International Computer Science I- Service Bureau of Monetary Affairs Engraving and 

Printing 

~ '"'~"'" 1 ~ -· Asst Sec. for Equal Opportunity .... U.S. Secret 

Saudi Arabian Program Service 

Affairs 

~ '"'"""'" Asst .... I ~ rem Sec. and Sec. Management and Law Enforcement of the International Organization Training Center Monetary Group 

~-''""' for International Office of ~ .... Personnel Foreign Assets 

finance Control 

{ 

~~-z. 1;. W--0 S;' 

"'··''"" 
Division or Off ice 

The Secretary 

Bureau of Alcohol, 

Tobacco, and Fi rearms. 

Off ice of the Comptroller of the Currency 

U.S. Customs Service 

Bureau of Engraving 

and Printing 

Bureau of Government 

Financial Operations 

Internal Revenue 

Service 

Bureau of the Mint 

Bureau of the Public 

Debt 

Off ice of Revenue 

Sharing 

U.S. Savings Bond 

Division 

U.S. Secret Service 

Federal Law Enforcement 

Training Center 

Functions 

Advises President on monetary, 

fiscal, and economic policy. 

Oversees all Treasury employees. 

Regulates those three industries, 

enforces applicable laws, insures 

collection of relevant taxes. 

Acts as administrator of national 

banks. 

Enforces import and export laws. 

Assesses and collects duties. 

Designs, engraves, and prints paper 

currency, Treasury securities, 

postage stamps, and other documents·. 

Receives public monies, manages 

Government's central accounting and 

financial reporting system, issues 

checks, manages cash resources, and 

performs various banking functions. 

Determines, assesses, and collects 

income and other taxes. 

Manufactures_ ·cQ_ins and medals. 

Maintains custody of gold andsilver stock. 

Receives, stores, issues: and 

redeems Government securities. 

Controls sharing of Federal funds 

with state and local goverrnents. 

Promotes sale and retention of UoS. 

Savings Bonds. 

Protects President and other high 

Government officials. Enforces 

laws against counterfeiting 

currency and forging checks. 

Operates a school in Georgia for 

training Federal Law agents. 

- 30 -
FUNCTIONS ASSOCIATED WITH THE FEDERAL FINANCIAL SYSTEM 

Cash Management. 

The Treasury Department acts as the Government 1 s 

treasurer and, as such, has the responsibility of efficiently 

managing the nation's cash resources, which includes estimating the Government's financial needs, and receiving, keeping, 

and disbursing its funds. Even though the Congress has the 

power to control the purse as provided in the Constitution, 

the appropriation actions of that body do not in themselves 

create public funds for the Treasury to disburse. 

The cash balance maintained by the Treasury Department 

is based on the current disbursing needs of the Government. 

Sufficient cash is not kept in the Treasury to meet all 

unexpended appropriations and other expenditure authority 

available to the various Government agencies~ In determining 

the cash balances to be maintained, consideration is also 

given to the effect the flow of cash in and out of the 

Treasury will have on the economy of the country. 

Most of the public funds in the Treasury are held in or 

for the U.S. Treasury account. Public funds are acquired 

mainly through (1) collections of taxes and other revenues, . (2) sales of public debt obligations, (3) collections of 

moneys held by the Government as trustee in accordance with 

the terms of a trust agreement or statue, and (4) miscellaneous reimbursements and refunds. 

Most of the receipts of the Governmentt other than those 

deposited in the tax and loan accounts with financial insti- tutions~ are deposited in the Treasury account at Federal 

Reserve banks and branches. The Treasury Department draws 

upon these balances for its daily disbursements. As these 

balances become depletedf they are restored, in part, through 

additional receipts but largely by calling in (withdrawing) 

funds from the thousands-of financial .institutions-throughout 

the country authorized to maintain tax and loan accounts. 

The tax and loan accounts are used for collections of 

Federal income, social security, railroad retirement, and 

excise taxes and for proceeds of sales of savings bonds and 

other public debt obligations~ They are maintained in about 

14,000 incorporated banks and trust companies. The tax and 

loan account system permits the Treasury to collect the 

Governmentss receipts through financial institutions and to 

leave the funds in the financial institutions and to communities until such time as the Treasury needs the funds for its 

operations. 

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The original purpose of the tax and lo~n system was to 

promote the smooth functioning of the economy by reducing the 

impact of Government financial operations on the distribution 

and level of bank reserves and on the money markets. For 

this purpose, the Treasury kept approximately two-thirds of 

its operating cash in tax and loan accounts and the other 

one-third in the Treasury accounts at the Federal Reserve. 

banks. A Treasury Department study completed in 1974 concluded that the earning value of tax and loan accounts 

balances, for which the Treasury received no interest, had 

risen substantially beyond the value of applicable services 

rendered by the bank, for which the Treasury paid no direct 

fee. Based upon the conclusions of the 1974 study, Treasury 

sought and obtained legislative authority to invest its 

excess operating cash on a short-term basis. In accordance 

with the authority provided by Public Law 95-147, the 

Treasury Tax and Loan Investment Program was implemented on 

November 1, 1978. 

During the period October 1974 until implementation of 

the Investment Program, the Treasury followed a policy of 

maintaining balances in tax and loan accounts such that the 

aggregate value of the balances approximately equaled the 

aggregate value of compensable services rendered to the 

Treasury. This policy resulted in a sharp reduction in the 

level of tax and loan accounts balances (to less than onethird of the total cash balance) and a correspondingly sharp 

increase in Treasury balances in the Federal Reserve Banks. 

Under the new Investment Program, the Treasury will return to 

the policy of permitting funds representing tax and loan 

payments to remain on deposit, invested as short-term obligations with depositaries, until needed by Treasury to meet 

disbursement needs. Depositary financial institutions select 

the manner in which they will participate in the Program. 

Depositaries that wish to retain funds deposited in their tax 

and loan accounts in interest-bearing obligations participate 

under the Note Option. Depositaries that wish to remit the 

funds to the Treasury account at Federal Reserve banks and 

branches participate under the Remittance Option. Under the 

Program, the Treasury also pays financial institutions for 

services they render to the Government in connection with tax 

and loan accounts, accepting Federal tax deposits, and issuing and redeeming United States Savings Bonds. 

Government checks drawn on the U.S. Treasury cleqr 

through banking channels against the available funds of the 

Treasury account in the Federal Reserve System. As indicated above, the tax and loan account balances are subject to 

immediate transfer to the available funds; therefore, these 

funds can also be considered available operating.funds. The 

- 32 -
other assets of coin, currency, etc., for purposes of day-today operations are not considered as operating funds because 

these assets are not immediately available for transfer to 

the Treasury account in the Federal Reserve System. 

Debt Management 

As a means of providing sufficient funds available for 

disbursement, Article 1, Section 8, of the Constitution 

gives the Congress the power "to borrow money on the credit 

of the Uriited States." The Congress has delegated that 

authority with wide discretionary powers to the Secretary 

of the Treasury, subject to the approval of the President 

for most types of securities. The only authority the 

Treasury now has to borrow from the public is provided by 

the Second Liberty Bond Act, as amended, which was initially 

enacted into law on September 24, 1917 (40 Stat. 288). 

Since its inception, the Government has financed its 

activities in part with borrowed money. Until World War I, 

however, revenues over the years were approximately equal 

to expenditures so that the outstanding debt never exceeded 

$3 billion. Deficit financing during World War I increased 

the public debt to slightly in excess of $25 billion, but 

the balance outstanding was reduced to approximately $16 

billion by 1930. Since then, however, the Government's 

activities have been financed from borrowings from the 

public on an increased scale. 

The permanent limit on the amount of public debt 

obligations issued under the Second Liberty Bond Act, as 

amended, and the face amount of obligations guaranteed by 

the United States and not owned by the United States that 

may be outstanding at any one time was changed to $400 

billion by the act of March 17, 1971 (31 u.s.c. 757b). 

However, this act provided a temporary limit of $430 

billion for the period from March 17, 1971, to June 30, 

1972. The temporary limit has been increased several times 

since, and the act of April 1, 1979, increased it to $830 

billion through September 30, 1979. 

At September 30, 1978, about 22 percent of the total 

public debt obligations outstanding and subject to the debt 

limitation was held by or for the account of Government 

agencies or trust and other custodial funds administered by 

the Government. Of the approximately $168 billion in 

public debt obligations held by such funds; the more 

significant holdings were as follows: 

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Civil Service Retirement Fund 

Federal Old-Age and Survivors Insurance 

Trust Fund 

Federal Hospital Insurance Trust Fund 

Highway Trust Fund 

Unemployment Trust Fund 

National Service Life Insurance 

Federal Disability Insurance Fund 

Federal Supplementary Medical Insurance 

Trust Fund 

Airport and Airway Trust Fund 

Employees Life Insurance Fund 

Railroad Retirement Account 

(millions) 

$55,885 

30,412 

11,707 

11,578 

9,517 

7,618 

4,352 

4,021 

3f687 

3,016 

2,795 

Although the investment of the funds in interestbearing public debt obligations is expressly authorized by 

the Congress in each instance, the rates of interest which 

these investments shall yield are not always prescribed by 

the Congress. 

In addition to the purchase authorizations, the 

Congress has authorized the payment of interest to certain 

other trust funds on the amount of their funds on deposit 

in the Treasury. The liability for these trust funds is 

not included in the public debt and is not subject to the 

debt limitation; the interest on these funds is paid from 

various permanent appropriations other than the appropriation for interest on the public debt. The approximately $500 

million Indian Trust Fund balances and the $90 million in the 

Soldiers' and Airmens' Home Permanent Fund constitute the 

major items -0f this type. 

The Federal Financing Bank (FFBj is a Government 

corporation under the general supervision of the Secretary 

of the Treasury established by the Federal Financing Bank 

Act of 1973 to coordinate and reduce the costs of public 

borrowings by Federal agencies and borrowers whose obligations are guaranteed by Federal agenciess To carry out this 

purpose, the act authorizes the bank to purchase obligations 

issued, sold, or guaranteed by Federal agencies with fund 

obtained by the issuance of bank obligations to the public or 

the Secretary of the Treasuryo 

The FFB's officers are Treasury officials, and its 

operations are conducted by Treasury employees who furnish 

services to the bank on a reimbursable basise Except for 

an initial public offering of bills in 1974, the FFB has 

financed its lending by borrowing from the Secretary of the 

Treasury. 

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Since it began operations in 1974, the FFB has become 

the vehicle for financing most Federal agency direct borrowings, guaranteed loans, and asset sales. The major programs 

eligible for bank financing still not financed by the bank 

are Department of Commerce guaranteed ship mortgages, Department of Housing and Urban Development guaranteed tax-exempt 

housing and urban renewal notes and bonds, and Government 

National Mortgage Association guaranteed passthrough securities. 

On September 30, 1978, FFB holdings of Federal and 

Federally backed obligations totaled $48.1 billiono 

Government Banking 

The Treasury Department acts as the Government's 

banker. The banking function is carried out by the Bureau 

of Government Financial Operations (BGFO) .. All monies 

collected by the Government are deposited to the credit of 

the U.S. Treasury account through a system of designated 

commercial depositary banks and Federal Reserve banks and 

branches. Commercial banks that are members of the Federal 

Deposit Ins.urance Corporation may be authorized to receive 

collections from Government officers and transfer the funds 

to the Treasury's account at the respective Federal Reserve 

bank or brancho Each Federal Reserve bank or branch, acting 

in its capacity as fiscal agent of the Government, also 

receives collections directly from Government off ices for 

credit to the Treasury's account maintained at each bank or 

branch. 

Each Federal Reserve bank and branch forwards a daily 

transcript of transactions in the Treasury account to the 

BGFO. Credits listed in these transcripts include internal 

revenue and customs collections; miscellaneous collections 

of other Government officers; sales of public debt securities; and deposits to the checking accounts of disbursing 

officers and Government corporations, including sales of 

corporations' securities. Charges listed in the transcripts 

include Government checks cashed and the necessary check data 

forwarded to the BGFO in Washington, D.C. for payment, 

redemptions and interest payments of public debt and Government corporationss securities, cashed postal money orders and 

food stamps coupons, and payment vouchers drawn against 

letters of credit. Increases and decreases to the Treasury 

tax ;and loan.accounts (described in the Cash Management 

section of this chapter), categorized by group, also appear 

on this transcript. 

- 35 -
Each Federal Reserve bank and branch also submits in a 

separate transcript a listing of deposits of public moneys 

made to the Treasury account at designated commerical 

depository banks in its district. The BGFO also receives 

transcripts of transactions directly from certain off ices of 

the Treasury Department and from designated commercial 

depositories outside the continental United States and ~n 

foreign countries. 

The Federal Reserve Bank of New York also submits a 

gold custody transcript to the BGFO. This transcript 

reflects increases and/or decreases in gold holdings, and 

the balance of gold held in custody. By issuing gold 

certificates to the Federal Reserve System against the gold 

balance, the Treasury may obtain available cash. 

The transcripts from these various sources, with supporting documents, provide input to the bureau's Governmentwide Accounting System. 

As stated above, all Government checks except those 

issued to make payments in foreign currencies are drawn on 

the U.S. Treasury. The checks, when cashed, clear through 

commercial banks to Federal Reserve banks where necessary 

check data for payments and reconciliation are captured by 

high-speed reader/sorters on magnetic tapes and microfilm. 

The Federal Reserve banks store the checks and forward the 

tape and microfilm.to the BGFO for payment and reconciliation. 

In the Federal Government, checks are reconciled by the 

"banker" rather than by the office writing the checkso The 

check payment and reconciliation process is performed by the 

BGFO in Washington on electronic data processing equipment. 

Every disbursing off ice drawing checks on the Treasury 

reports each month the numbers and amounts of checks issued. 

This information is recorded in the electronic equipment. As 

the check data is received for payment, it is entered in the 

electronic equipment a~d matched against the issue infbrmation; information on the amount of checks outstanding is thus 

developed. 

Microfilm copies of checks which match stop-payment 

orders are examined to determine whether payment should be 

refused. Checks which do not match the amount reported as 

issued by the disbursing off ice are given a detailed examination and, unless the difference represents an obvious 

alteration by the negotiators, the check is accepted for 

payment and a notice of discrepancy reported to the disbursing off ice for adjustment. If the difference represents an 

- 36 - ' 
overpayment to the payee, the disbursing office must collect 

the overpayment and deposit the money in the Treasury's 

account. If an undercharge to an appropriation of fund_ is 

involved, an additional charge to the account must be processed. Check alterations or forgeries are referred to the 

Secret Service for investigation and, where identification of 

the wrongdoer is made, the case may be referred to the 

Justice Department for prosecution. 

The BGFO receives claims for checks drawn on the 

Treasury's account which are reported lost, stolen, or not 

received. The check description is ~urnished by the 

disbursing officer, and stoppage of payment is placed in the 

computer system. 

If the check is .found to be paid, the original check 

is obtained from the Regional Federal Records Center where 

stored. When the check has been received, the endorsement 

appearing on the check is compared to the signature of the 

claimant on the letter. If the signatures do not match, a 

claim is forwarded to the claimant (who may be the payee or 

an endorser) for proper execution and return to the BGFO. 

If forgery is apparent, the case is referred to the U.S. 

Secret Service for an investigation and refund of the check 

proceeds is requested from the presenting bank. The BGFO 

may issue a settlement check before receipt of refund or 

before the investigation has been completed, if satisfied 

that the endorsement of the check is forged and the 

claimant is not involved in its negotiation. 

If a stop payment action reveals that the original 

check is outstanding, the BGFO will authorize the issuance 

of a subtitute check to the claimant. In certain cases a 

bond with or without sureties will be required. 

The stop-payment order remains in the system to intercept the original check should it come in for payment. This 

intercept action may occur before a substitute check has been 

issued. Whenever an intercept action occurs, the check is 

examined, together with the existing case file, to determine 

whether the check should be paid or declined. If the check 

appears to have been forged~ claim forms are sent to the 

payee and a Secret Service investigation is requested. 

The BGFO must take many types of actions in support of 

the check claims operation, including obtaining refund for 

double payments, referring difficult request-for-refund cases 

to the Attorney General for protection of the interest of the 

- 37 -
Government, providing information in compliance with White 

House or congressional requests, and furnishing photostatic 

copies of miscellaneous paid checks pursuant to requests from 

interested parties. 

BGFO examines mutilated currency submitted for reimbursement and makes payment in accordance with regulationse 

This function is not performed at the Federal Reserve banksa 

Treasury Central Accounting 

The Treasury Department maintains a system of central 

accounts integrated into its Governm~nt-wide accounting 

system to provide a consolidated record of the Government's 

financial transactions and to meet its responsibility for 

reporting on the state of the Government's finances to the 

Congress and the public. These central accounts do not 

constitute an overall general ledger for all the Government's assets and liabilities. They do reflect the assets 

and liabilities of the United States to which receipts and 

expenditures and the Treasury's cash operations, including 

borrowings, are directly relatedo These accounts are posted 

monthly on the basis of: (1) reports from disbursing offices 

for the amounts of checks issued or cash payments made, the 

amounts of deposits made by the administrative agencies for 

which such offices disburse, and the related classification 

by account for the amounts of receipts and disbursement processed for the administrative agencies; and (2) transcripts 

from Federal Reserve banks, branches, and Treasury offices 

discussed ~arlier that reflect the amounts of deposits 

received in the u. s. •:rireasury account and the amount of ca.$h 

p~id out for checks drawn against the accounte Subsidiary to 

the central accounts are the individual appropriation, fund, 

and receipt accounts to which are posted the appropriations 

or spending authorizations granted by the Congress and the 

reported expenditures and receipts. 

Each month the Treasury Department prepares a statement 

of these individual accounts and transmits it to th~ ~dministi~tive agency concerned tc show the status (balance) of its 

accounts based on the cash receipts and disbursements data 

recorded in these accounts. These statements serve as reconciliation media with the agency's books, and the final fiscal 

year statement of the accounts is the basis for the official 

Combined statement of Receipts, Expenditures and Balances of 

the United States Government issued by the Treasury Department. These same figures must also be used in agencies' 

budget presentations to the Congress. Also subsidiary to 

- 38 -
the central accounts are individual accounts for each disbursing office's outstanding checks and for deposits in 

transit to the U.So Treasury account for agency accounting 

entities. Also subsidiary to the central accounts are 

individual accounts for each disbursing office's outstanding 

checks and for deposits in transit to the U.S. Treasury 

account for agency accounting entities. 

Collection of Public Funds 

Classification of Receipts 

Receipts of the Government are classified in several 

different wayso They are broadly categorized as either 

governmental, proprietary, or intrabudgetary~ Governmental 

receipts result from the sovereign rights of government 

e.g., various taxes and duties. Proprietary receipts result 

from the business type operations of agencies 1 e.g~, sales of 

publications, licenses, or feeso Intrabudgetary receipts of 

various classes result when there is activity between Federal 

accounts. 

Receipts are also classified as to type of funde 

Receipts not earmarked by law for a specific purpose are 

classified as general fund receipts-these are primarily 

internal revenue taxes, customs duties, and a large number 

of miscellaneous receipts. These receipts are used to 

finance discretionary programs in the President's budget as 

approved by the Congress in the appropriation process~ 

Receipts from specific sources earmarked by law to finance 

specified programs in the budget are classified as special 

fund rece'ipts .. 

Receipts of the Government are also classified by 

sources. These are (1) internal revenue receipts, (2) 

alcohol and tobacco taxes, (3) customs receipts, and (4) 

miscellaneous receipts. Internal revenue receipts, alcohol 

and tobacco taxes 6 and customs duties are collected by the 

Treasury Department; miscellaneous receipts are collected 

usually by the agency most closely associated with the source 

of the revenue .. 

Tax and Customs Revenues 

Responsibility for administration of internal revenue 

laws, except chapters 51, 52, and 53 of the Internal Revenue 

Code which are discussed below, is vested in the Internal 

Revenue Service in th~ Treasury Department, Collections are 

made en the basis of tax returns filed by the taxpayers 

(e.g., income taxes, estate taxes, and. admission ta~es) or 

- 39 -
through the sale of stamps (e.g., documentary stamps and 

stock transfer stamps). The funds collected are deposited 

by the collectors with Federal Reserve banks or general 

depositaries (commercial banks) for the account of the U.S. 

Treasury. 

Income and social security taxes on wages and salaries 

are required by law to be withheld by employers. Regulations issued by the Treasury Department require that these 

withheld taxes be deposited by the employers for the 

Treasury's account with depositaries located throughout the 

country. The depositaries credit the Treasury's tax and 

loan account and report the collections daily to the 

nearest Federal Reserve bank. 

Employers are required to file tax returns, reporting 

the total taxes withheld, with the Internal Revenue Service 

quarterly. The cash received by the collectors, like all 

their other collections, are deposited with a Federal 

Reserv.e bank or a general depositary for the account of the 

U.S. Treasury. 

Responsibility for administration of chapters 51, 52, 

and 53 of the Internal Revenue Code (26 U.S.CQ) relating to 

alcohol, tobacco products, and firearms, respectively, is 

vested in the Bureau of Alcohol, Tobacco and Firearms .in 

the Treasury Department. These responsibilities include 

protecting the revenue on liquor and tobacco products as 

well as providing methods for collection of the taxes. 

The taxes on distilled spirits, wine, beer, cigars, 

cigarettes, and cigarette papers and tubes are paid by a 

return system whereby the return and remittance are filed 

with the Internal Revenue Service. Special occupational 

taxes are also paid, by return, to the Internal Revenue 

Service, which then issues a special tax stamp to the taxpayer. These taxes represent the second largest revenue 

source. 

The U.S. Customs Service in the Treasury Department is 

responsible for collecting general fund receipts, which 

include (1) duties on imports, (2) excise taxes, and (3) 

miscellaneous receipts and receipts other than general 

fund, which are made up of appropriation reimbursements and 

refunds, trust fund available receipts, and collections for 

other agencies. It is the third largest revenue-collecting 

agency of the Government. All customs collections are 

deposited by district directors with Federal Reserve banks 

or general depositaries for the account of the U.S. Treasury. 

- 40 -
( 

Miscellaneous Receipts 

Miscellaneous receipts (e.g., miscellaneous taxes, 

fees for permits and licenses, proceeds from sales of 

Government property, rents and royalities, gifts and contributions, etc.) are collected usually by the agency most 

closely associated with the source of the revenue. 

Trust Fund Collections 

In addition to revenue receipts, monies are collected 

for credit to funds held in trust by the Government, Trust 

fund monies are paid to the Government as trustee in accordance with the terms of a trust agreement or statute. 

These receipts in some respects are similar to special 

receipts in that they are earmarked for specific purposes. 

Trust receipts, like miscellaneous receipts, are collected 

by the various departments and establishments of the Governmento Major trust funds are: Civil Service Retirement 

Fund, Federal Old-Age and Survivors Insurance Trust Fund, 

Federal Disability Insurance Trust Fund, Federal Hospital 

Insurance Trust Fund, Federal Supplementary Medical Insurance Trust Fund, Highway Trust Fund, Airport and Airway 

Trust Fund, Railroad Retirement Account, Unemployment Trust 

Fund, Employees Life Insurance Fund, and the National Service Life Insurance Fund. 

Disbursement of Public Funds 

Except for the Department of Defense; the Panama 

Canal; U.S. Marshalls; and certain Government corporations, 

including the Postal Service; the Division of Dis©ursernent 

in the BGFO disburses most of the funds for the executive 

departments of the Government. The disbursing functions 

for the excepted agencies and for most organizations in the 

Legislative and Judicial Branches are performed by their 

own disbursing off ices. 

The Treasury Disbursing Organization 

The Division of Disbursement carries out its functions 

through 11 disbursing centers located in the principal 

financial centers in the United States and the Philippine 

Islands. The Division is headed by the Chief Disbursing 

Officer. Each disbursing center is headed by a regional 

disbursing officer who, although administratively responsible to the Chief Disbursing Officer, disburses funds in 

his own name. 

- 41 -
In addition, payments are made by approximately 90 oth~r 

disbursing officers and some 7,000 cashiers, all of whom are 

employees of other agencies but who, in disbursing public 

funds, operate under regulations issued by the Division of 

Disbursement. These other disbursing officers are used 

principally in the U.S. Coast Guard and the Department of the 

Interior and at foreign service posts of the State Department. The disbursing officers of the State Department also 

disburse for other civil agencies operating in foreign 

countries. 

Cashiers are used in almost every agency of the Government to make small cash payments for purchase of supplies and 

certain service expenses. Cash is advanced to the cashiers 

by the disbursing office through which the agency submits its 

vouchers for payment. The advances are recorded as accountability items in the account of the disbursing officer making 

the advance. Reimbursement vouchers representing expenditures from the advance funds are submitted to the advancing 

-disbursing off ice which reports the expenditures in its 

account and replenishes the cashier's funds. 

Reporting Procedures 

The procedures outlined here apply basically to all 

disbursing offices of the Government. Although two different 

procedures are used for reporting receipt and expenditure 

transactions, the entire system is dependent on certain basic 

docum~nts establishing the accountability of the disbursing 

officer and classifying the transactions of the agencies. 

The basic Treasury system in operation today is commonly 

call~d the SF 224 (Statement of Transactions) system. Under 

this system, aTl disbursing- officers __ JwJtl1 gertain exceptions), operating ~nder delegation of authorify fro~ the 

Chief Disbursing Officer, report, by eight-digit agency 

location code (ALC), the total amount of vouchers paid for 

each agency. This report is a supporting document to the 

disbursing officers' monthly accountability report (SF 1219, 

Statement of Accountability). Monthly, each agency location 

code served by these disbursing officers reports disbursments 

and collections classified' according to appropriation, fund, 

or receipt symbol. These two reports are used in the central 

accounting system's reconciliation of agency receipts and 

expenditures and disbursing officers' accountability. 

Disbursing officers not operating under the Division of 

Disbursement (i.e., Department of Defense, etc.) and the few 

that are under the Chief Disbursing Officer but are excepted 

from the SF 224 system, report transactions classified by 

- 42 -
appropriation, fund, or receipt symbols on the SF 1220 

(Statement of Transactions). Under this concept, the total 

reporting for collections and disbursements is through the 

disbursing officer without separate reporting by the agency. 

Disbursing officers reporting in this manner also use the SF 

1219 (Statement of Accountability). The exception to this 

are the u.s. disbursing officers who use the SF 1221 (Statement1 of Transactions-Foreign Service Account) and the SF 1218 

(Statement of Accountability~Foreign Service Account). 

The Statements of Accountability serve a dual purpose, 

being used by the central accounting system for reconciliation purposes and by GAO in settling disbursing officers' 

accounts. The Statements of Transactions when prepared by 

the disbursing officers are submitted to administrative 

agencies for reconciliation with their accounts, after which 

the statements and the supporting detailed accounting documentation are held by the agencies for use by GAO in its 

audit work. 

Disbursing Off ice Accountability 

Each disbursing off ice is under the supervision of an 

accountable officer in whose name the Statement of Accountability is rendered for the accounting period in which he 

serves. The official title of the officer may be: disbursing 

officer, regional or assistant disbursing officer, special 

disbursing agency, or U.S. disbursing officer. Items of 

accountability include cash on hand, advances made to agents 

(cashiers), undeposited collections of Government funds or 

unconfirmed deposits made to the account of the U.S. Treasury, check-issue discrepancies (overpayment of certified 

voucher amounts), etc. 

The disbursing officer's accountability is increased by 

the amount of all checks drawn on the U.S. Treasury and all 

collections made. Accountability is decreasep by the amount 

of all properly certified vouchers evidencing a charge to 

Government accounts supporting the checks drawn, and all 

confirmed certificates of deposit ~evidencing the deposit of 

collections credited to Government accounts. 

In summary, the disbursing officer is held.responsible 

for checks drawn on the Treasury for which there is no 

properly certified voucher and for any cash collected for 

credit to Government accounts which has not been deposited in 

the account of the u.s8 Treasuryo 

- 43 -
Check Issue and Cash Deposit Procedures 

Each disbursing off ice has a disbursing symbol number 

and a deposit symbol number. In some cases the off ice has 

additional disbursing symbols (checking accounts) due to the 

nature of the disbursing operation. The disbursing symbol 

number is preprinted and prepunched in all check stock to 

identify the disbursing off ice issuing the check and to 

serve the BGFO in the electronic reconciliation of the paid 

checks. The deposit symbol number is used in matching 

deposits claimed by the disbursing off ice with deposits 

credited in the Treasury's account. 

The actual disbursing process is relatively simple. The 

disbursing off ice receives a schedule of payments which has 

been certified as proper for payment by the administrative 

agency. The schedule shows the appropriation or fund to 

which it is to be charged and the name or names of the payee 

or payees to whom the payment or payments are to be made. In 

most cases the disbursing off ice draws a check and mails it 

to the payee. The schedule is stamped by the disbursing 

off ice to show the date paid, the check number. and the 

disbursing office symbol number, and a copy is returned to 

the administrative agency to support its accounts. In the 

case of cash payments (normally made by cashiers), the 

signature of the payee must be obtained on the voucher, after 

which the voucher is used as support to the a9counts. 

An alternative to the use of ch2cks is the Treasury's 

Direct Deposit/Electronic Funds Transfer Program (DD/EFT). 

This program is applicable to virtually all classes of 

Federal recurring payments including Social Security, 

Supplemental Security Income, Railroad Retirement, Veterans 

Administration Compensation and Pension, and Civil Service 

Retirement for which the payee has designated a financial 

institution to receive the amount directly to be deposited 

into the individual's bank account. The system also includes 

revenue sharing payments which are made quarterly. using 

DD/EFT, the Treasury provides computer tapes that will 

automatically take funds from Government accounts and credit 

them to depositors at participating banks, eliminating the 

need for payments by check and therefore the dangers of loss 

or forgery. 

The Department of the Treasury has established the 

Treasury Financial Communications System (TFCS), which 

provides the Treasury wltn the capability of making payments 

electronically through increases to the reserve accounts of 

member banks of the Federal Reserve System and corresponding 

decreases in the Treasury account. The system also processes 

- 44 -
receipts from member banks directed to the Treasury. By 

utilizing this interconnected banking network, the Government 

can receive payments originating from nearly any commerical 

bank within a matter of minutes.. Since TFCS consists 

entirely of electronic transfers, checks and their accompanying collecting time are completely eliminated and the 

Government receives usable funds on the actual payment date. 

On the payments side, TFCS gives the Government absolute 

disbursement control through its ability to initiate and 

complete positive payment on actual due dates. 

When the administrative agency utilizes the disbursing 

and reporting facilities of the Division of Disbursement the 

collection officer prepares the certificate of deposit showing the eight-digit agency location code and deposits the 

collection at a Treasury depositary for the account of the 

U.S. Treasury. Under this concept (i.e., the SF 224 system), 

neither the disbursing officer nor his accountability is 

involved in collection transactions. In the case when the 

disbursing officer prepares the statement of transactions, 

either the disbursing officer or the collection officer of 

the involved agency prepares the certificate of deposit and 

makes the deposit to the credit of the disbursing officer's 

symbol with an appropriate Treasury depositary. 

Production of Money 

U.S. money consists of coin and paper currency. The 

sole power to coin money is vested in the Congress by the 

Constitution, and, though not expressly stated in the 

Constitution, the courts have held that the Congress also has 

the incidental or implied power to issue paper currency. The 

states are expressly forbidden by the Constitution either to 

coin money or to issue paper currency. 

The nation's money is manufactured by the Treasury 

Department through the Bureau of the Mint, which produces 

coins, and the Bureau of Engraving and Printing, which produces paper currency. New coins are struck at the Bureau of 

Mint's facilities in Philadelphia, Denver, and San Francisco. 

Paper currencies are produced by the Bureau of Engraving and 

Printing in Washington, D.C. 

All paper currency and coin go into and out of circulation through the Federal Reserve banks or their branches. 

Coin 

The coins currently authorized by the Congress to be 

issued by the Treasury Department are dollars, half dollars, 

quarters, dimes, nickels, and pennies. 

- 45 -
Since the passage of the Bank Holding Company Act of 

December 31, 1970 (Public Law 91-607), all dollars, half 

dollars, quarters, and dimes produced for regular circulation 

have been three-layer composite coins with an outer cladding 

of 75 percent copper and 25 percent nickel bonded to a core 

of pure copper. Coins for regular circulation contain no 

silver. 

Since the face value of the coins minted is greater than 

the cost of the metals contained in the coins, a gain accrues 

to the Government. This gain, which results from the Government's sovereign right to coin money, is called seigniorage. 

Seigniorage on coins manufactured during fiscal year 1978 

amounted to $367 million. 

Paper Currency 

Federal Reserve notes and U.S. notes are the only two 

kinds of paper currency notes now being produced. 

Federal Reserve notes are issued by the Federal Reserve 

banks under Government auspices in denominations of $1, $2, 

$5, $10, $20, $50, and $100. On July 14, 1969, the Treasury 

Department discontinued the issuance of currency in denominations of $500, $1,000. $5,000, and $10,000. 

Federal Reserve notes are obligations of the United 

States and are a first lien on the assets of the issuing 

Federal Reserve bank. In addition, they are secured by a 

pledge of collateral equal to the face value of the notes. 

This collateral must consist of the following assets: (1) 

gold certificates, (2) Special Drawing Right certificates, 

(3) U.S. Government securities, or (4) "eligibl~ papern as 

described by statute. Federal Reserve notes constitute over 

99 percent of the total paper currency in circulation. 

u.s. notes, which make up less than one percent of the 

circulating currency, are now being printed only in $100 

denominations.· The amount of U.S. notes outstanding mustj 

by law, be maintained at $322,539,000. Notes redeemed are 

immediately reissued by the Treasury Department in denominations of $100. In March 1968 the gold reserve of $156 

million required to be held by or for the account of the U.S. 

Treasury to back these notes and Treasury notes of 1890 was 

removed by Public Law 90-269. 

A few other former issues of currency are still in circulation but are being gradually retired as they are received 

in the Treasury Depart~ent. The following table shows the 

amount of each type of paper currency in circulation as of 

September 20, 1978. 

- 46 -
Current issues: 

U .-s. notes 

Federal Reserve notes 

Discontinued issues: 

Federal Reserve note (issued before 

July 1, 1929) 

Federal Reserve bank notes 

National bank notes 

Gold certificates 

Silver certificates 

Treasury notes of 1890 

$ 313,485,000 

96,566,191,000 

641,000 

48,455,000 

19,542,000 

3,338,000 

207,127,000 

8,000 

$97,i58,787,000 

FUNCTIONS ASSOCIATED WITH THE FINANCIAL REPORTING SYSTEM 

Responsibility for developing the Government's financial 

reporting system was vested i~ the Secretary of the Treasury· 

by section 114 of the Budget and Accounting Procedures Act of 

1950, which provides, in part, that: 

"The Secretary of the Treasury shall prepare such 

reports for the information of the President, the 

Congress, and the public as w·ill present the 

results of the financial operations of the Government: Provided, that there shall be included such 

financial data as the Director of the Bureau of the 

Budget may require in connection with the preparation of the Budget or for other purposes of the 

Bureau. Each executive agency shall furnish the 

Secretary of the Treasury such reports and information relating to its financial conditions and 

operations as the Secretary, by rules and regulations, may require for the effective performance of 

his responsibilities under this section. 

The principal financial reports prepared by the Treasury 

D~partment which relate to the operations of the Government 

as a whole are: 

1. Daily Treasury Statement. 

2. Monthly Statement of the Public Debt of the United 

States. 

3. Monthly Treasury Statement of Receipts and Outlays 

of the United States Government. 

4. Annual Treasury Combined Statement of Receiptsr 

Expenditures and Balances of the United States 

Government. 

- 47 -
The content and purpose of these and other reports are set 

forth in Appendix B. 

- 48 -
APPENDIX A 

THE FEDERAL RESERVE SYSTEM 

The Federal Reserve banks and the Federal Reserve Board 

are components of the Federal Re.serve System, which was 

established under the act of December 23, 1913 (the Federal 

Reserve Act, 12 u.s.c. 221). 

The stated purposes of this act were: 

1. To provide for the establishment of Federal'Reserve 

banks. 

2. To furnish an elastic currency. 

3. To afford means of rediscounting commercial paper. 

4. To establish a more effective supervision of banking 

in the United States. 

The System consists of: 

1. The Board of Governors. The supervisory body 

consisting of seven members appointed by the 

President and confirmed by the Senate. 

2. The Federal Open Market Committee. 

3. The Federal Advisory Council. 

4. 12 Federal Reserve banks and 25 branches. 

5. 5,600 member banks consisting of all national banks 

and such State banks and trust companies as have 

been admitted. 

In addition to exercising supervision of the Federal 

Reserve banks and member banks, the Federal Reserve Board 

determines general monetary, credit, and operating policies 

for the System as a whole and formulates· the rules and 

regulations necessary to carry out the purposes of the 

Federal Reserve Act. 

Federal Reserve banks act as depositaries of public 

funds and as fiscal agents of the U.S. Treasury in connection 

with: 

1. Collection of income, social security and other 

taxes withheld or required to be paid by employers. 

2. Issuance and redemption of public debt securities. 

- 49 -
The Federal Reserve banks and branches are authorized to 

verify (as to genuineness, kind, value, and number of pieces) 

and destroy currencies in all denominations below $500 that 

become worn and no longer fit for general use under procedures prescribed by the Treasury Department. Federal Reserve 

notes in denominations of $500 and above are canceled with 

distinctive perforrnations and cut in half lengthwise. The 

lower halves are shipped to the Treasury Department in 

Washington, D.C., where they are verified and destroyedo The 

upper halves are retained at the Federal Reserve banks and 

destroyed after the banks are notified by the Treasury 

Department that the lower halves have been verified. 

For further information on the o~ganization and functions of the Federal Reserve System, reference to the 

following is recommended: 

1. "United States Government Organizational Manual." 

2. "The Federal Reserve Systern--Its Purposes and Functions" (published by the Board of Governors.) 

3. "A Day's Work at the F~deral Reserve Bank of New 

York" (a pamphlet published by the Federal Reserve 

Bank of New York.) 

- 50 -
APPENDIX B 

PRINCIPAL FINANCIAL REPORTS PREPARED AND PUBLISHED 

BY THE TREASURY DEPARTMENT 

DAILY TREASURY STATEMENT 

The Bureau of Government Financial Operations (BGFO) is 

responsible for preparing the Daily Treasury Statement. 

Basically, this statement is a report of transactions affecting the operating cash balance account of the U.S. Treasury, 

and shows an analysis of Public Debt transactions. 

MONTHLY TREASURY STATEMENT OF RECEIPTS AND OUTLAYS 

OF THE UNITED STATES GOVERNMENT 

Treasury also publishes a monthly statement of receipts 

· and outlays reflecting the budget surplus or deficit. 

Receipts and repayments are reported on the collectionsreceived basis by administrative, disbursing, or collecting 

organizations. Outlays are reported on the basis of checks 

issued and cash payments made except for public debt interest, which is reported on the basis of interest accrued. 

Final Year-end Statement 

The regularly monthly statement for the last month of 

the fiscal year is entitled "Final Monthly Treasury 

Statement of Receipts and outlays of the United States 

Government." It is issued approximately 20 days after 

September 30 of each year and contains the final figures 

showing budget results for the fiscal year. This statement 

is used by the Secretary of the Treasury and the Director of 

OMB to anhounce the receipts, ~utlays, and budget surplus or 

deficit for the fiscal year. The statement is, in effect, a 

summarization of receipt and outlay data included in the 

annual Treasury Combined Statement of Receipts, Expenditures 

and Balances. 

ANNUAL TREASURY COMBINED STATEMENT OF RECEIPTS, EXPENDITURES 

AND BALANCES OF THE UNITED STATES GOVERNMENT 

The annual Treasury combined Statement of Receipts, 

Expenditures and Balances of the united States Government is 

prepared by the BGFO. This statement is prepared in compliance with section 15 of the Act of July 31, 1894, 31 U.S.Co 

1029, which provides that: 

"It shall be the duty of the Secretary of the 

Treasury annually to lay before Congress, on the 

first day of the regular session thereof, an 

accurate combined statement of the receipts and 

- 51 -
expenditures during the last preceding fiscal year 

of all public moneys*** designating the amount of 

receipts, whenever practicable, by ports, districts, and States, and the expenditures, by each 

separate head of appropriation." 

The statement is prepared in book form and contains an 

explanatory foreword, an index, and various tabulations of 

financial data segregated into five major parts .. 

Part one contains three summary statements representing 

the Federal Government's balance sheet, statement of receipts 

and outlays, and financial statement. These summary statements are followed by related schedules supporting such items 

as: 

1. Analysis of monetary assets with the International 

Monetary Fund. 

z. The public debt. 

3. Agency securities issued under special financing 

authorities. 

4. Federal securities held as investments of Government 

accounts·. 

5. Accountability for cash and other assets held 

outside the Treasury account by disbursing, collecting, and other fiscal officers. 

6. Other U.S. Treasury monetary assets. 

Part two contains the detail of internal revenue, customs, and miscellaneous receipts for the fiscal year as 

follows: 

1. Receipts by source and categories. 

2. Receipts by organizational unit. 

3. Federal individual income and FICA taxes clearing 

accounts, budget clearing account (suspense), and 

other receipt clearing accounts. 

4. Capital transfers. 

5. Customs collections of duties by districts and 

ports. 

- 52 -
6. Internal revenue receipts by states and districts. 

Part three contains detailed statements of appropriations, outlays, and balances for the fiscal year divided into 

three sections: (1) budget expenditure accounts (2) deposit 

fund accounts and (3) summary of budget authority, appropriations, outlays, and balances. 

Part four contains miscellaneous informational tables on 

appropriations and authorizations, the public debt, and 

status of special and trust fund receipts. 

Part five contains information pertaining to the status 

of each foreign currency account for currencies acquired by 

the U.S. Government without payment of dollars and by other 

means. 

The foreign countries are classified as excess-currency 

countries, near-excess-currency countries, and non-excesscurrency countries. 

The financial tabulations in parts one, two, and three 

are prepared from the central revenue, expenditure and 

appropriation accounts of the U~S. Government maintained by 

the BGFO and other related information reported by all 

Government agencies. 

The tables and other financial data in parts four and 

five are based on information obtained from various organizations both within and outside the Treasury Department. 

OTHER OVERALL FINANCIAL REPORTS 

The Treasury Department regularly publishes, in addition 

to the statements previously described, the following reports 

containing overall financial information: 

Annual Report of the Secretary of the Treasury on the State 

of Finances 

This report, which is issued in compliance with the act 

of September 2, 1789, as amended, 31 U.S.C. 1027, is prepared 

by the BGFO. It is published in book form and includes 

administrative reports of the bureaus and divisions of the 

Treasury Department; discussion of tax, monetary, and other 

fiscal developments during the year; and tables dealing with 

the public debt and actual and estimated receipts and expendit~res of the Government. Most of the data on the public 

debt and receipts expenditures is based upon information 

- 53 -
previously published in other Treasury Department publications. Many of the tables in the annual report contain data 

for a number of preceding years. 

Monthly Treasury Bulletin 

The BGFO also prepares the Treasury Bulletin. This publication is issued monthly and contains many tables relating 

to the public debt and receipts and expenditures of the 

Government based on information contained in the Monthly and 

Daily Treasury Statements. In addition, the Bulletin has 

many tables dealing with ownership of Government bonds, sales 

and retirements, prices and yields of Government securities, 

internal revenue statistics, monetary· statistics, and capital 

movements between the United States and foreign countries. 

The statements of financial condition and income and retained 

earning submitted by Government corporations and certain 

unincorporated agencies are published in the Bulletin 

periodically. 

Foreign Currency Reports 

Pursuant to section 1415 of the Supplemental Appropriation Act, 1953, approval July 15, 1952 (66 Stat, 662), 

Executive Order No. 10488, dated September 23, 1953, as 

amended, and Treasury Circular No. 930, Revised, dated June 

8, 1978, data is compiled in connection with the acquisition 

and use of foreign currencies by the U.S. Government. Periodic reports covering the collections, withdrawals, and 

balances of foreign currencies are prepared by the BGFOo 

These reports identify the collections and withdrawals by 

country and program, stated in U.S. dollar equivalent, and 

also show the balances in units of foreign currency. In the 

Annual Combineq Statement, a separate section of foreign 

currency accounts is included as part five showing the detail 

of activities and balances in the accounts of the Secretary 

of the Treasury, as well as agency account. 

Consolidated Financial Statements 

Since 1975, the Treasury Department, in cooperation with 

several Government agencies, has been developing Consolidated 

Financial Statements for the Federal Government. This experimental application of accrual accounting to the measurement 

of Government finances, has as its objectives: 

--The improvement of accounting at all levels of Government: Federal, State, and local; 

- 54 -
--The development of accounting standards for public 

financial reporting by government entities; and 

--The integration of governmental accounting standards 

with accounting standards applicable to the private 

sector. 

To date, three prototype statements have been issued (FY 

1975, FY 1976, and FY 1977). Treasury is continuing its efforts to improve reporting of financial data in consolidated 

financial statements. 

- 55 -
APPENDIX C 

FINANCIAL REPORTING REGULATIONS AND REQUIREMENTS 

MAJOR REPORTING REGULATIONS 

OMB Circulars 

No. A-34-- Prescribes reports to be submitted by executive 

agencies relating to apportionments and budget 

status. 

NO. A-11-- Provides instructions for the preparation and 

submissions of annual budget estimates by the 

executive agencies. 

Treasury Department Regulations 

Treasury Fiscal Requirement Manual--Provides procedures 

to be observed by departments and agencies in relation to 

Government-wide fiscal responsibilities of the Treasury 

Department. These include central accounting, reporting, 

payrolls, deductions, withholding, disbursing, deposit 

regulations, and other fiscal matters. Specific reports 

prescribed in the Treasury Fiscal Requirements Manual 

include: 

1. Reports relative to foreign currencies acquired by 

the Government without payment of U.S. dollars 

(I TFRM 2-3200). 

2. Business-type financial statements relating to 

operations and financing activities of the Government to be submitted to the Department of the 

Treasury and OMB (I TFRM 2-4100). 

3. Annual reports serving as the Treasury's preclosing 

trail balance of the central appropriation and fund 

accounts, the agencies' request for transfers and 

withdrawals, and the agencies' analysis of available 

appropriations and funds (I TFRM 2-4200)0 

4. Reports regarding contracts entered into or other 

obligations incurred prior to appropriations for the 

payment of such obligations (I TFRM 2-6100). 

5. Reports to be used for reporting Federal aid payments to state and local governments (I TFRM 2-

7000). 

6. Reports to be used for reporting joint funding 

transactions of Federal assistance programs (I TRFM 

6-7000). 

- 56 -
Federal Account Symbols and Titles 

This document is updated on an annual cycle as part of 

the appropriation process. It contains the following parts: 

Part I - Receipt Account Symbols and Titles--contains a 

list of receipt account symbols and titles by fund groups and 

major classes. The fund groups are separated into general 

fund, special funds, and trust funds. The major classes are 

(1) Government receiptsv such as taxes, customs duties, 

gifts, and contributions, (2) proprietary receipts, such as 

fees charged for services, and (3) interbudgetary transactions such as interest on investments. 

Part II - Appropriation and Other Fund Account Symbols 

and Titles--contains a list of appropriation and other fund 

account symbols and titles showing general, revolving, 

special, deposit, and trust accounts by agency. 

Part III - Foreign Currency Accounts Symbols and Titles-

-contains foreign currency account symbols and titles 

assigned for use in accounting and reporting for receipts, 

disbursements, sales for dollars, and balances of foreign 

currencies originally acquired by the U.S. Government without 

payment of dollars, and for currencies held in trust. 

A copy of this publication is of particular value in any 

review of the appropriation structure of a particular 

agency. 

FINANCIAL REPORTS RELATING TO INDIVIDUAL AGENCIES 

A wide variety of financial reports are prepared by 

individual Government agencies to cover their own operations; 

many of these reports are required by specific legislation. 

Because these reports are so numerous and varied and are 

constantly changing, it is not practical to include a comprehensive list of themo 

The Clerk of the House of Representatives is required 

each year to annually prepare a list of the nreports whi~h it 

is the duty of any officer or department to make to Congress." This listing is printed as a House document and sets 

forth by agencies the nature and frequency of reports required and citations to the applicable laws requiring theme 

- 57 -
CHAPTER 3 

FUNCTIONS OF THE OFFICE OF PERSONNEL MANAGEMENT 

INTRODUCTION 

This chapter describes the authority, organization, and 

primary functional responsibilities of the Office of Personnel Management (OPM). OPM was created by Reorganization Plan 

No. 2 of 1978 and the Civil Service Reform Act. 

The Civil service Act of 1883 created a competitive 

service based on merit, as determined in open and competitive 

examinations, and the Civil Service Commission administered 

the Act. Subsequent legislation broadened the Commission's 

responsibilities across the spectrum of Federal personnel 

management. The Intergovernmental Personnel Act of 1970 

added a role in intergovernmental cooperation through grants 

and training, to assist in strengthening the personnel 

resources of State and local governments. 

The combined effects of the Civil Service Reform Act 

and Reorganization Plan No. 2 are intended to improve 

government efficiency and to balance management authority 

with employee protections, through a reconfigured organizational structure. The functions of the tormer U.S. Civil 

Service Commission, therefore., have been divided between two 

new agencies--an Off ice of Personnel Management and an 

independent Merit Systems Protection Board~ 

ORGANIZATION OF OPM 

Under a director, the OPM administers its responsibilities through a central office headquarters and regional and 

area offices in the field. The area offices are located at 

major centers of population and Federal employment. The 

Director oversees OPM's operating and staff activities, and 

provides Government-wide leadership in personnel administration. The following charts show the organization of the OPM 

and the geographic territories assigned to its regional 

off ices. 

PRINCIPAL.FUNCTIONS 

The Office categorizes its principal functions, for budgeting purposes, under fourteen activities: 

1. Staffing Systems and Services 

- 58 -
2. Compensation, Retirement, and Insurance 

3. work Force Effectiveness and Development 

4. Agency Relations 

5. Agency Compliance and Evaluation 

6. Executive Personnel and Management Development 

7. Affirmative Employment Programs 

8. Labor-Management Relations 

9. Intergovernmental Personnel Programs 

10. Voting Rights 

11. Presidential Commissions 

12. Executive Direction 

13. General Administration 

14. Mandatory Payments 

1. Staffing Systems and Services 

Staffing the competitive service includes programs 

to: 

a. Control and oversee recruiting, examining, and 

selection procedures delegated to the departments 

and agencies, to protect against prohibited personnel practices and the use of unsound management 

practices. 

b. Conduct nationwide recruiting and examining to 

staff positions in the competitive civil service at 

and below the grade of GS 15. 

c. Provide lists of the best qualified candidates to 

fill positions, in response to requests from 

appointing officers in the Federal agencies, 

through competitive selection based on nationwide 

recruiting and examining. 

d. Develop and maintain qualifications standards and 

job-rating standards for determining pay levels. 

- 59 -
e. Research and validate selection methods. 

f. Manage the Government-wide merit promotion program. 

g. Conduct checks and inquiries as required by law on 

persons entering the Federal service; conduct background investigation, for security purposes, of 

applicants for or employees of certain agencies, as 

required by law or as requested by the agencies; and 

evaluate implementation of the Government-wide 

security program. 

2. Compensation, Retirement, and Insurance 

The organization has programs to: 

ao Maintain and evaluate the Federal compensation systems, including pay, leave, retirement, insurance, 

and benefits systems; incentive and performance pay 

guidelines; and perform pay comparability surveys. 

b. Establish and maintain occupational structures. 

c. Administer the Civil Service Retirement Act, the 

Panama Canal Construction Annuity Act, and the 

Lighthouse Service Widows Annuity Act. 

d. Administer the Federal Employees Group Life Insurance Act. 

e. Administer the Federal Employees' Health Benefits 

Act and the Retired Federal Employees' Health 

Benefits .l-' .. ct. 

:;. work Force Effectiveness and Development 

To help assure the effectiveness of Employees, thi: 

Off ice conducts programs to: 

a. Improve employee and organizational productivity, 

and the quality of work life. 

b. Provide for Government-wide occupational health and 

medical activities. 

c. Develop and implement methods for conducting 

employee relations, maintaining employee discipline, 

and evaluating individual and organization performance. 

- 60 -
d. Administer the Government Employees' Incentive 

Awards Act. 

e. Provide for nationwide training activities designed 

to develop and retain a skilled and effective work 

force. 

f. Provide a management consulting resource for Federal 

agencies. 

4. Agency Relations 

Through its agency relations program, the Off ice 

seeks to assure a positive and constructive response to 

agency needs and problems. 

5. Agency Compliance and Evaluation 

To measure the effectiveness of OPM programs as 

implemented by the agencies, the Office: 

a. Evaluates personnel management in the agencies; 

fosters personnel management evaluation in the 

agencies; and evaluates the agency evaluation 

programs. 

b. Designs, prescribes, and maintains information 

systems in support of personnel functions. 

c. Negotiates and monitors delegation agreements with 

agencies. 

6. Executive Personnel and Management Development 

For the Senior Executive Service (SES), managers at 

GS 16 through Executive Level IV and their equivalents 

in the executive branch, and all other positions at GS 

16 and above, the OPM: 

a. Manages the SES, including classifying positions, 

reviewing and approving qualifications, and 

controlling the number of positions; or, where 

appropriate, reviewing agency performance of these 

functions. · 

b. Manages the Administrative Law Judge program. 

c. Provides for executive development and training 

through guidance and the conduct of training. 

- 61 -
7. Affirmative Employment Programs 

The Off ice provides equal employment opportunity 

leadership to Federal employees, including minority, women, and hispanic employment; special 

emphasis program coordination; upward mobility; and 

employment of veterans and the handicapped. 

8. Labor-Management Relations 

OPM provides policy leadership to agencies in 

labor-management relations, maintains a registry of 

labor agreements in the Federal service, and conducts 

liaison with appropriate labor organizations. 

9. Intergovernmental Personnel Programs 

The OPM has programs to: 

a. Administer the awarding of grants to strengthen 

state and local management capacity and provide 

training to employees. 

b. Provide and coordinate technical assistance in 

personnel administration. 

c. Authorize temporary personnel mobility between the 

Federal government and State and local governments, 

colleges, and universities. 

d. F6ster cooperative recruiting and exa~inings. 

e. Admit State and local employees to Federal training 

courses. 

f. Manage the Presidential Management Intern program. 

10. Voting Rights 

The Office provides voter eligibility examination, 

observer, and listing data services under the voting 

Rights Act of 1965. 

11. Presidential Commissions 

The OPM provides: 

a. Administrative support to the President's Commission on Personnel Interchange under Executive Order 

No. 11451. 

- 62 -
b. Support for the President's Commission on White 

House Fellowships. 

12. Executive Direction 

This activity includes: 

a. Coordination of personnel management research and 

demonstration projects. 

b. Operation of a program to avoid, or identify and 

correct, conflicts of interest in the Federal 

Government. 

NATURE OF OPERATIONS 

Under its regulatory responsibilities, the OPM has an 

obligation to guide Federal agencies by issuing rules, 

regulations, and instructions and following up on compliance 

through evaluations and audits. 

The Off ice has decentralized to a large degree to 

respond to the audiences it serves. The ten regional 

offices and area offices, like the· central office, are 

heavily involved in serving the public, State and local 

governments, and the Federal establishment, in such areas as 

recruiting and examining, equal employment opportunity, 

personnel management evaluations and assistance, training, 

occupational health, labor-management relations, and the 

like. 

GUIDELINES 

The OPM publishes the Federal Personnel Manual as the 

basic guide to Federal agencies in conducting their personnel management programs. This includes the policies, 

principles, standards, and criteria implementing the various 

laws and Executive orders and the applicable rules, regulations, and procedural instructions which agen~ies must 

follow. The manual also identifies the reporting requirements levie9 on the agencies by the Off ice. 

Regulations issued by the OPM on Federal pay and leave 

form the basis for agency payroll operations. The Federal 

Personnel Manual incorporates many Comptroller General 

decisions on Federal pay matters as clarification of the 

regulations and procedures. 

- 63 -
A grants manual provides instructions to State and 

local governments on how to qualify and apply for grants 

under provisions of the Intergovernmental Personnel Act. 

FINANCIAL PROGRAMS 

The OPM administers four programs which are primarily 

financial in nature--the retirement, life insurance, and 

health benefits programs for Federal employees, and the 

grants program to strengthen the personnel resources of 

State and local governments. 

The Civil Service Retirement Law (5 u.s.c., Chapter 83) 

authorizes the Off ice to administer the program for retirement. Financial transactions include: (1) the receipt of 

retirement deductions from employees and Members of Congress 

plus an equal amount from the respective agency appropriations or funds used for payment of the payroll; and (2) the 

payment of annuities to retirees and survivors, or the 

refund of retirement deductions to former employees who 

elect to withdraw them and are not eligible for an annuity. 

The Off ice makes an annual reconciliation between agency 

accounts of retirement deductions and the receipts collected 

by the OPM, through the Annual Summary Retirement Fund 

Transactions Report (Standard Form 2807-2), prepared by each 

agency. 

The OPM provides financial control and general administration for group life insurance and group accidental death 

and dismemberment insurance under the Federal Employees' 

Group Life Insurance Act of 1954 (now 5 u.s.c., chapter 87). 

Agencies must determine eligibility for coverage; withhold 

from employees' pay; remit withholdings and contributions to 

the OPM; and maintain records and controls which comply with 

the principles and standards prescribed by the Comptroller 

General. The Office of Federal Employees' Group Life 

Insurance, the administrative office in New York City which 

represents the insurance companies underwriting the group 

insurance program, has the administrative responsibility for 

settling claims. 

The Government sponsors a program of health benefits 

for Federal employees under the Federal Employees' Health 

Benefits Act (5 u.s.c., chapter 89) and for retired Federal 

employees under the Retired Federal Employees Health 

Benefits Act. Employees and retired employees and their 

dependents have a choice of health plans. The Government 

contributes to the cost of providing the benefits and the 

employee or retired employee pays the remainder. The Office 

of Personnel Management negotiates contracts annually with 

the carriers of .the various plans. 

- 64 -
Under the grants program, the OPM assists State and 

local governments in implementing personnel programs consistent with merit principles; helps improve personnel 

administration; and promotes training for administrative, 

professional, and technical personnel. Grantees may use the 

money for: personnel administration improvements; training 

certain employees; Government service fellowships; or any 

combination of these. OPM normally makes awards for a 

12-month period, or less; however, projects may be multiyear. The Office may make payments on a letter-of-credit, 

an advance payment, or a reimbursable basis. To the maximum 

extent possible, OPM relies on State and local government 

accounting, audit, and other internal control systems to 

insure financial accountability. 

- 65 -
°' O"\ 

OFFICE OF. '.lHE 

GENERAL COUNSEL 

OFFICE OF 

PUBLIC AFFAIRS 

LABOR-MANAGEMENT 

RELATIONS 

EXECUTIVE PERSONNEL AND 

MANAGEMENT DEVELOPMENT 

1-79 

OFFICE OF PERSONNEL MANAGEMENT 

DIRECTOR 

DEPUTY DIRECTOR 

OFFICE OF CONGRESSIONAL RELATIONS 

OFFICE OF EQUAL EMPLOYMENT 

OPPORTUNITY (INTERNAL) 

FEDERAL PREVAILING RATE 

ADVISORY COMMITTEE 

OFFICE OF 

GOVERNMENT ETHICS 

OFFICE OF 

INTERNAL EVALUATION 

FEDERAL PERSONNEL ADMINISTRATION CAREER BOARD 

OFFICE OF MANAGEMENT 

OFFICE OF 

PERSONNEL 

POLICY ANALYSIS AGENCY RELATIONS 

INTERGOVERNMENTAL 

PERSONNEL PROGRAMS 

COMPENSATION 

NATURAJ~ RESOURCES, 

ENERGY. AND SCIENCE 

HUMAN RESOURCES, 

VETERANS I AND LABOR 

AGENCY COMPLIANCE 

AND EVALUATION 

REGIONAL OF.FICES 

ATLANTA NEW YORK 

NATIONAL SECURITY AND BOSTON PHILADELPHIA 

INTERNATIONAL AFFAIRS CHICAGO ST. LOUIS 

ECONOMICS AND 

GOVERNMENT 

WORK FORCE EFFECTIVENESS AND DEVELOPMENT 

DALLAS SAN FRANCISCO 

DENVER SEATI'LE 

STAFFING SERVICES 
O'\ 

-..J 

-a SE 

~<7 o~ 

~{) HAWAII 

SF 

OFFICE OF PERSONNEL MANAGEMENT REGIONS 

NORTH DAKOTA 

DE 

COlORADO 

DE~<VER * 

lf(W MEXICO OKLAHOMA 

-----

REGIONAL AREA KEY 

AT - ATLANTA NY - NEW YORK 

BN - BOSTON PH - PHILADELPHIA 

CH - CHICAGO SE - SEATTLE 

DA - DALLAS 

D II! - DENVER 

SF - SAN FRANCISCO 

SL - ST. LOUIS 

*REGIONAL HEADQUARTERS 

e CENTRAL OFFICE 

c::;.r~~ .::::? 

PUERTO RICO 

AND 

THE VIRGIN ISLANDS 

NY 

EFFECTIVE JULY 1. 1971 
CHAPTER 4 

THE GENERAL SERVICES ADMINISTRATION 

INTRODUCTION 

The General Services Administration (GSA) was established July 1, 1949, to provide a wide variety of property 

management and related services for the Government. The 

Federal Property and Administrative Services Act of 1949 (40 

u.s.c. 471), which created GSA, stemmed from recommendations 

contained in the first Hoover Commission report and other 

studies aimed at bringing about improvements and economies in 

property management practices. 

The Act consolidated functions formerly assigned to 

various agencies and vested in the Administrator of General 

Services, broad powers to-organize and manage the affairs of 

GSA. The administrator, subject to the direction of the 

President, directs the execution of all functions assigned to 

GSA by the Act, as amended, by other laws, and by reorganization plans of the President, to provide for their effective 

accomplishment. 

ORGANIZATION OF GSA 

GSA is organized into seven services, two staff offices, 

and supporting off ices reporting to the Administrator of 

General services, The organizational responsib~lities for 

the administration of GSA are presently divided into three 

basic tasks and assigned as follows: 

1.. Overall direction, administration, and program and 

policy control is held by the Administrator with the 

assistance of the Deputy Administrator and supporting off ices to include: the Off ice of Inspector 

General, the Office of Acquisition Policy, the 

Office of Congressional Affairs, the Office of 

Public Affairs, and the immediate Office of the 

Administrator. 

2. Staff services are provided by the Office of 

Controller-Administration and the Office of General 

Counsel. 

3. Program operations are assigned to seven services: 

the Public Buildings Service, the Federal Supply 

Service, the National Archives and Records Service, 

- 68 -
the Automated Data and Telecommunications Service, 

the Federal Property Resources Service, the Transportation and Public Utilities Service, and the 

Federal Preparedness Agency. 

Responsibility and authority in connection with their 

functional areas have been assigned to the heads of these 

organizational elements. Exercise of these responsibilities 

and authorities is subject to the limitation that the 

ultimate responsibility and authority rest with the Administrator. 

An organization chart of the GSA Headquarters Office, 

located in Washington, D.C., and a chart of GSA's 10 regional 

off ice locations and boundaries follow. The organizational 

structure of each regional off ice generally parallels that of 

GSA Headquarters w.ith the Regional Administrator responsible 

to the Administrator for the overall direction and administration of his off ice. 

The program responsibilities assigned to the major 

organizational elements of GSA are summarized belowe These 

functional assignments of responsibility provide an insight 

into the various activities performed by GSA and its relationship to the rest of the Government. 

PUBLIC BUILDINGS SERVICE 

The Commissioner, Public Buildings Service, is responsible for programs and activities of GSA relating to the: 

lo Planning of space and facility needs for the Government. 

2. Acquisition and custody of real property. 

3. Management of public buildings and other real pro~ 

perty, including their operation; maintenance,. 

protection and the assignment of space therein. 

4. Physical transfer of furnishings and equipment 

involved in the assignment and reassignment of 

space. 

Se Design, construction, alteration, extension, remodeling, repair, and preservation of Government owned 

or leased buildings. 

- 69 -
-..J 

0 

I 

IMMEDIATE 

OFFICE OF' .M 

ADMINISTRATOR 

I 

PUBLIC 

BUILJ;IINGS 

SERVICE 

I 

l . 

BOSTON 

GENERAL SERVICES ADMINISTRATION 

ADMINISTRATOR 

DEPUTY 

ADMINISTRATOR 

I 

I I 

OFFICE OF OFFICE OF OFFICE OF OFFICE or 

ACQUISITION POLICY CONGRESSIONAL AFFAIRS PUBLIC AFFAIRS 'INSP.ECIOR 

GENERAL 

GENERAL 

OFFICE 

COUNSEL 

OF 

CONTROLLER 

OFFICE 

ADMINISTRATION 

OF ~ 

I I I I I 

FEDERAL NATIONAL AUTOMATED DATA FEDERAL TJlANSPORTATION FEDERAL 

SUPPLY ARCHIVES AND AND PROPERTY PUBLIC UTILITIES PREPAREDNESS 

SERVICE RECORDS SERVICES TELECOMMUNICATIONS RESOURCES SERVICE AGENCY 

\ SERVICE SERVICE 

I I I I· I r I I ~EGIONAL OFFICES 

2 3 4 5 6 7 8 9 10 

NEW YORK WASHr~;.;TON ATLANTA CHICAGO KANSAS CITY FORT WORTH DENVER SAN AUBURN 

DC FRANCISCO 
-...J 

~ 

GENERAL SERVICES ADMINISTRATION. 

REGIONS f:lASKA .. I 

'® \ SAN· 

\ ~F'RttJVc1s'c or 

\ \ ~ -

\ 

\ 

\ 

\ 

oo Clo 

HAWAI~°D 

MONT. I N. OAK. 

i ·------~s.D"Ai WYO.· 

@ 

' NEBR. ~IOWA 

N. MEX. 

\ ____ _ ---w·s~Mo. 

@ KANSAS CITY 

OKLA. rex:l -

~·~.--..\ I 

I .. _ ._i 

LEGEND 

- Regional Boundaries 

* Regional Headquarters 

@ Regional Number 

FT. WORTH(LA . * . (i) ) 

RICO 

VIR~lb 

Of;:> 

ISLANDS 
6. Promotion of economy in the utilization of space 

occupied by Federal agencies. 

7. Promotion of environmental and cultural considerations in the construction of public buildings. 

8. Other duties of a management nature relating to 

Government owned or controlled real property. 

FEDERAL SUPPLY SERVICE 

The Commissioner, Federal Supply Service, is responsible 

for the following programs: 

1. Development of Government-wide programs, regulations, and other instructions relating to inventory 

management; purchasing and contracting; warehousing 

and distribution; quality control; commodity standardization. 

2. Assistance to Federal agencies in all phases of 

supply management, including the integration of 

agency supply operations with those of Federal 

Supply Service into a Federal supply system. 

3. Development and execution of operational programs 

relating to inventory management, purchasing and 

contracting, quality control of materials procured~ 

storage and distribution of common-use items of 

supply and commodity standardization. 

4. Operation of a nationwide supply~ystem wbereby 

common-use commodities and services are sold to 

Federal agencies (l) from supply depot stocks or (2j 

by direct delivery from suppliers, whichever is more 

economicalo 

5. Development of plans, programs, policies, and 

systems to insure continuity of supply during 

periods of military mobilization. 

NATIONAL ARCHIVES AND RECORDS SERVICE 

The Archivist of the United States is responsible for 

the nationwide GSA activitie~ rel~ting to the: 

1. Operation of the National Archives. 

2. Operation of Presidential librarieso 

- 72 -
3. Filing and publication of Federal rules, law, and 

constitutional amendments and servicing in connection therewith. 

4. Operation of Federal Archives and Records Centers 

throughout the country. 

5. Promotion and coordination of records management in 

Federal agencies. 

6. Direction and administration of the Government-wide 

interagency reports programs and the standard and 

optional forms programs. 

7. Operation of NARS educational programs to promote 

and publicize its educational and cultural services. 

8. Operation of the National Audiovisual Center which 

provides central services to Federal agencies and 

the general public on audiovisual materials produced 

by or for Federal agencies. 

AUTOMATED DATA AND TELECOMMUNICATIONS SERVICE 

The Commissioner, Automated Data and Telecommunications 

Service, is responsible for GSA's Government-wide ADP and 

communications programs. These programs include: 

1. Management, operation, and utilization of Federal 

Data Processing Centers ~nd communications facilities which provide services to GSA and other 

departments and agencies of the Federal Government. 

2e Promotion and coordination of the economic and 

efficient purchase, lease, maintenance, operation, 

and utilization of ADP equipment by Federal departments and agencies. 

3. Provisions of guidance, assistance, and coordination 

to Federal agencies in their procurement and utilization of ADP and communications services~ 

FEDERAL PROPERTY RESOURCES SERVICE 

The Commissioner, Federal Property Resources Service, is 

responsible for programs and activities of GSA relating to 

the: 

- 73 -
1. Promotion of maximum utilization of real property by 

Federal agencies and the transfer among Federal 

agencies of excess real property. 

2. Revise planning, interagency coordination, and 

environmental and cultural enhancement reviews 

involved in the disposition of excess and surplus 

real property. 

3. Promote maximum utilization of excess personal property and the transferring of excess and/or surplus 

personal property among Federal agencies and other 

authorized recipients. 

4. Assignment, care, custody, and accountability of 

excess and/or surplus property and the disposal of 

surplus real and personal property. 

5. Management of the national, supplemental, and 

Defense Production Act stockpile of strategic and 

critical materials required to keep the Nation's 

mobilization base viable. 

6. Management of the Jewel Bearing Program in accordance with Public Law 90-469, August 8, 1968. 

TRANSPORTATION AND PUBLIC UTILITIES SERVICE 

The Commissioner, Transportation and Public Utilities 

Service, is responsible for the following programs: 

1. Development and execution of all programs concerned 

with transportation and traffic management and the 

procurement of public utilities. 

2. Operation and maintenance of motor equipment and 

public utilities to meet the requirenents of Federal 

agencies. 

3. Maintenance o~ interagency motor pool transportation 

system. 

4. Conduct of surveys and studies in the motor equipment, transportation, and public utility areas to 

improve practices in the Federal agencies. 

5. Audit of all U.S. Government transportation bills 

and processing of transportation claims by and 

against the U.S. Government. 

- 74 -
6. Assisting executive agencies in proceedings before 

Federal and State regulatory bodies and in the 

Qegotiation of rates and contracts for transportation and public utility services. 

FEDERAL PREPAREDNESS AGENCY 

The Director, Federal Preparedness Agency, is responsible for the following: 

1. Development of national policy and program guidance 

in the field of civilian preparedness. 

2. Conducting studies and analyses in support of preparedness activities. 

3. Coordinating Federal response in special crises and 

providing guidance to the States relative to emergency preparedness. 

4a Maintaining suitable emergency operating facilities 

and other arrangements for continuing operation to 

ensure continuity of the Government in emergencies. 

5. Preparing plans which enables the country to respond 

to emergencies and for continually informing the 

President and affected agency heads of developments 

in these emergencies. 

REGULATORY MATERIAL 

The Federal Property and Administrative Services Act of 

1949, as amended, directs the Administrator to prescribe 

policies to guide executive agencies in the conduct of property operations. The Administrator has issued regulations 

which sometimes prescribe or limit the discretion of the 

agencies and sometimes set the policy but allow a certain 

amount of agency choice in how they conduct their property 

operations.. 'I'he regulations issued by the Administrator 

within the scope of applicable law and regulations of the 

President which specifically authorize their issuance must be 

regarded as statutory regulations having the force and effect 

of i aw ( 3 7 Comp • Gen • 3 0 6 ) • 

CODIFIED REGULATIONS 

The codified regulations of the Administrator are pub--

lished in the Code of Federal Regulations under the following 

titles: 

- 75 -
Title 32A, Chapter 1 - Federal Preparedness Agency. 

This chapter contains several regulations and other documents 

prescribed by FPA and its predecessors. The regulations deal 

with the following things: necessity certificates, which 

certify that a construction project will be used for certain 

defense purposes; payment certificates, which certify that a 

p~yment made by the United States to a taxpayer is.compensation for the unamortized cost of an emergency facility; the 

preservation of wage and salary records under the Defense 

Production Act; the investigation of the effect of imports on 

national security; and a prohibition against discrimination 

based on race, color, or national origin in financial assistance programs. 

Title 41, Chapter 1 - Federal Procurement Regulations. 

This title incorporates policies, procedures, and regulations 

prescribed by the Administrator for the economical and 

efficient procurement of personal property, construction, 

transportation, and services by the Federal agencies. The 

title covers such matters as contracting; advertising; 

foreign purchases; procurement forms; bonds and insurance; 

the procurement of ADP equipment and services; and Federal, 

State, and local taxes. These regulations apply to all 

Federal agencies to the extent specified in the Federal 

Property and Administrative Services Act of 1949 or other 

applicable laws; most of the regulations are not made mandatory on the Department of Defense. 

Title 41, Chapter 101 - Federal Property Management 

Regulations. Under this title are published the policies, 

procedures·, and regulations prescribed by the Administrator 

for the economical and efficient management of -property by 

the Federal agencies. The topics covered include recoids 

management, stockpile management, construction and management 

of buildings, assignment and utilization of space, inventory 

management, distribution, quality control, Government-wide 

automated data management services, telecommunications 

management, public utilities, motor equipment management, 

transportation and traffic management, property rehabilitation, and utilization and disposal of real and personal 

property. These regulations apply to all Federal agencies to 

the extent specified in the Federal Property and Administrative services Act of 1949 or other applicable laws. 

FINANCING OF GSA ACTIVITIES 

GSA's operations are financed through direct appropriations; self-liquidating advances from, and user charges to, 

customer agencies; transfers of construction funds from other 

Government agencies; interest-bearing advances from the 

- 76 -
Treasury; proceeds from rentals of building sites; and proceeds from sales of certain types of surplus property. As 

indicated, the costs associated with many of the services 

performed by GSA are reimbursable, and, to facilitate the 

financing of these services, various revolving, managing, 

and trust-type funds have been established. The types and 

amount of financing available for GSA activities, including 

brief descriptions of the activities, are shown in each 

year's U.S. Budget Appendix. 

- 77 -
CHAPTER 5 

THE GENERAL ACCOUNTING OFFICE 

INTRODUCTION 

The General Accounting Office (GAO) is a nonpolitical, 

nonpartisan agency in the Legislative Branch of the Government. It was created by the Congress through the Budget and 

Accounting Act of 1921 and placed under the direction and 

control of the Comptroller General of the United States. The 

Act vested in GAO all the powers and duties formerly 

prescribed for the Comptroller of the Treasury by statutes 

extending back to 1789. 

The Comptroller General and the Deputy Comptroller 

General are appointed by the President with the advice and 

consent of the Senate. The law provides that they (1) hold 

office for 15 years, (2) retire from office when they reach 

the age of 70 years, and (3) be removed only by joint resolution of the Congress for specified causes or by impeachment. 

The Comptroller General is not eligible for reappointment. 

Established to act in behalf of the Congress, GAO is 

required by the 1921 Act to: 

--Investigate all matters relating to the receipt, disbursement, and application of public funds and make 

recommendations for greater economy or efficiency in 

public expenditure. 

--Make investigations and reports requested by either 

House of the Congress or its committees having jurisdiction over revenue, appropriation, or expenditures. 

--Furnish any aid and information requested by these 

committees. 

The need for audits by "an establishment of the Government independent of the executive department" is clearly 

expressed in these excerpts from the legislative history of 

the Act. 

"The creation of an independent auditing department 

will produce a wonderful change. The officers and 

employees of this department will at all times be 

going into the separate departments in the examination of their accounts. They will dis cover the 

- 78 -
very facts that Congress ought to be in possession 

of and can fearlessly and without fear of removal 

present these facts to Congress and its committees. 

The independent audit will, therefore, *** serve to 

inform Congress at all times as to the actual conditions surrounding the expenditure of public funds 

in every department of the Government." 

* * * * * * 

"The bill provides for the appointment of an official termed the Comptroller General, whose duty it 

is to follow every appropriation made by Congress 

and see that the money is properly spent. This 

will be of invaluable service to Congress, as this 

official, being entirely independent of every other 

branch of the Government, is directly responsible 

to Congress. 

"It was the intent ion of the commit tee that the 

Comptroller General should be something more than a 

bookkeeper or accountant; that he should be a real 

critic, and at all times should come to Congress, 

no matter what the political co~~lexioITof Congress 

or the Executive might be, and point out ineff iciency***." 

In addition to reviewing the economy and efficiency of 

Government activities, GAO examines whether programs and 

activities are achieving their objectives. Program results 

reviews consider whether (1) desired benefits are being 

realized; (2) legislative objectives are being met; and (3) 

alternative approaches might achieve program objectives more 

efficiently or at a lower costw 

Since 1921 GAO's responsibility and authority have been 

broadened by additional Acts of the Congress including the 

Government Corporation Control Act in 1945, that Accounting 

and Auditing Act of 1950, the Legislative Reorganization Act 

of 1970, the Congressionl Budget and Impoundment Control Act 

of 1974, and the General Accounting Office Act of 1974. In 

addition, various other statutes have expanded the Comptroller General's audit and evaluation responsibility and his 

authority to have access to information or require action in 

support of his responsibility. Among the significant statutes enacted in recent years were the Energy Policy and 

Conservation Act of 1975, the Health Professions Educational 

Assistance Act of 1976, Public Law 95-125 (October 7, 1977) 

granting access to tax records of the Internal Revenue 

Service and the Bureau of Alcohol, Tobacco, and Firearms, 

- 79 -
Public Law 95-142 {October 25, 1977) giving subpoena power 

for purposes of audit programs authorized under the Social 

Security Act, the Department of Energy Act of 1978--Civilian 

Applications, and the Federal Banking Agency Audit Act of 

1978. 

A history of the d~velopment of Federal financial control and audit authority is given in Titles I and III of the 

General Accounting Off ice Policy and Procedures Manual for 

Guidance of Federal Agencies. 

PRINCIPAL FUNCTIO~S OF GAO 

The principal functions of GAO are: 

Auditing: 

Auditing the programs, activities, financial transactions, and accounts of the Federal Government, 

and reporting to the Congress and the agencies the 

results of audit work. 

Fraud Prevention: 

Providing resources to make an overall analysis of 

identified fraudulent or potentially fraudulent 

practices in order to develop controls and audit 

approaches designed to prevent or minimize opportunities to commit frauds. 

Accounting and Financial Management: 

Prescribing principles, standards, and related 

requirements for accounting; cooperating in the 

development and improvement of agency accounting 

and financial management sy~t~m~~ approving agency 

accounting systems; and reviewing agency accounting systems in operation. 

Direct Assistance to the Congress: 

Making special surveys and reviews at the request 

of congressional committees and members of 

Congress; furnishing information in reply to 

inquiries; assigning personnel to assist congressional committees; testifying before committees of 

the Congress; developing questions for use during 

hearings; commenting on proposed legislation, and 

supporting the congressional budget process, 

·including advising the Congress on the legality and 

impact of rescissions and deferrals of budget 

authority proposed by the President. 

- 80 -
Legal Decisions by the Comptroller General: 

Deciding, at the request of department and agency 

heads or disbursing and certifying officers, the 

legality of proposed payments or transactions, and 

reviewing GAO settlements when disallowed; deciding, at the request of procurement officials, 

contractors, or bidders, questions about the award 

of government contracts. 

Claims Settlement and Debt Collection: 

Settling claims by and against the Federal Government and collecting amounts certified by GAO to be 

due the Government, including amounts reported by 

Government departments and agencies as uncollectible through means available to them. 

Records Management and Services: 

AUDITING 

While agencies are responsible for managing their 

own records, GAO specifies the records which make 

up accountable officers' accounts and as such are 

considered GAO records. GAO also has an interest 

in agency records which are needed in the course 

of GAO audits and specifies the length of retention required for audit purposes. 

GAO audits Federal financial, management and program 

activities to provide the Congress and agency officials with 

significant and objective information, conclusions, and 

recommendations to improve government operations. 

The full scope of a GAO audit includes: 

--Examining accounting records and financial transact ions and statements. 

--Checking for compliance with applicable laws and 

regulations. 

--Reviewing the efficiency and economy of operations. 

--Evaluating the effectiveness of programs to determine 

if desired results, including legislative objectives, 

have been achieved. 

Audits of the effectiveness of Government program and 

the efficiency with which they are carried out naturally 

extend to the productivity of Government operations. GAO 

has a basic responsibility to use its audit results to 

- 81 -
foster productivity improvements throughout the executive 

branch. Under its legal requirement to audit the National 

Center for Productivity and Quality of working Life, the GAO 

has recommended that, even though the Center was being disestablished, there should be a continuing effort at the 

Federal level to participate in a coordinated attack on 

productivity problems. GAO also evaluates the impact of 

Federal programs and regulations on the productivity of the 

private sector and State ~nd local governments. 

Within certain limitations, the audit authority and 

responsibility of the General Accounting Office extends to 

all activities, financial transactions, and accounts of the 

Federal Government. The authority extends also to the 

records of contractors having Government contracts negotiated 

without advertising; their subcontractors and recipients of 

certain Federal financial assistance, such as loans, 

advances, grants, and contributions. 

With the extension of the General Accounting Office's 

audit authority by the Federal Banking Agency Audit Act of 

1978, the remaining limitations on audit authority relate 

principally to the Exchange Stabilization Fund established by 

the Gold Reserve Act of 1934 and the Central Intelligence 

Agency. 

Frequency and Location of Audits 

The frequency and scope of GAO's audits are usually 

determined by the Comptroller General. There are some exceptions, however. For example, corporations subject to the 

Government Corporation Control Act must be audited at least 

once every three years, as must the Federal Deposit Insurance 

Corporation, the National Homeownership Foundation, and the 

Government Printing Off ice. 

Also, GAO must settle the accounts of accountable 

officers within three years of their receipt if officers are 

to be held personally liable for any deficiencies, except in 

cases of fraud or criminality. 

The breadth and depth of Government-wide audit responsibilities in relation to GAO's resources require efficient 

use of staff both in assignments undertaken and in the 

conduct of those assignments. Except as otherwise required 

by statute, external request, or other factors beyond its 

control, the basic audit policy of GAO is to apply its 

resources and talents to the Government's programs, activities, and operations where they will be most useful to the 

Congress and do the most to bring about greater efficiency, 

economy, and effectiveness. 

- 82 -
Most audits are performed at the off ices of the agencies 

where operations are conducted and books and other records 

are kept. That may be in Washington, D.C., at points 

throughout the United States, including Alaska or Hawaii, or 

in foreign countries. 

Reporting on Audits 

Information resulting from GAO audits is usually communicated in written reports to the Congress as a whole; to the 

congressional legislative, appropriation, and Government 

operations committees; and to individual Members of Congress 

who have expressed special interest in particular subjects. 

Copies of audit reports are sent to the responsible 

agency officials so that they can act·promptly to bring 

about greater effectiveness, efficiency, and economy in the 

conduct of their programs and activities. Also, most reports 

are made available to the general public. 

Periodic publications are used to summarize and highlight audit recommendations. For example, the Monthly'List 

of GAO Reports, distributed to all members of the Congress, 

highlights reports recently issued. The list briefly 

summarizes the reports so the recipients can identify and 

request copies of reports of special interest. 

The annual report of the Comptroller General is another 

important means of communicating information. It summarizes 

the significant audit findings, recommendations, and accomplishments for the fiscal year and calls attention to any 

significant unresolved issues. 

Wben f~ndings, conclusions, and recommendations in GAO 

reports do not require action by the Congress or are believed 

not sufficiently significant to be of interest to the Congress or its committees, the reports are issued directly to 

department or agency officials concerned. 

GAO's recommendations for improving operations or 

achieving greater economy or efficiency are frequently 

adopted by the agencies without the intervention of the 

Congress or its committees. However, the Legislative 

Reorganization Act of 1970 requires--for each GAO report 

containing recommendations to the head of any Federal 

agency--that the agency, within 60 days after issuance of the 

report, submit to the Governments Operations Committees a 

written statement of action taken on GAO's recommendations. 

- 83 -
A similar statement is required to be submitted to the 

Appropriations Committees in connection with the agency's 

first requ~st for appropriations submitted·more than 60 days 

after the date of the report. 

Audits of Government Agencies 

Each Federal agency is responsible for managing and 

using its resources--funds, property, and personnel--only for 

authorized programs, activities, or purposes, and conducting 

its programs or activities in an effective, efficient, and 

economical manner to achieve the objectives established or 

intended by the Congress. 

GAO audits the agencies for the Congress to independently examine the manner in which the agencies discharge 

their financial and managerial responsibilities. Particular 

emphasis is placed on aspects suspected or found to require 

correction or improvement. The objective is not only to 

stimulate corrective action but to avoid repetition of the 

problem. 

GAO also examines the personal accountability of 

certifying, collecting, and disbursing officers. These 

audits serve as a basis for making settlements with these 

officers, when required. 

GAO also reviews results of programs and activities to 

provide in~ormation the Congress needs in its legislative 

and oversight responsibilities. GAO reports on the agencies' progress in accomplishing the objectives of their 

programs and activities and identifies matters ·that need 

resolution to improve the agency's operafions. 

Audits of Negotiated Contracts 

Negotiated contracts are used extensively throughout 

the Federal Government. Primary audit responsibility rests 

with the contracting agencies. GAO audits negotiated contracts, - on -a selective basis, to examine the effectiveness 

with which the administrative agency and the contractor have 

discharged their financial responsibilities to the Government. Access to the pertinent books, documents, papers, and 

records of contractors and subcontractors is provided in a 

number of laws. 

Audits of Recipients of Federal Financial Assistance 

Various laws also give GAO authority to audit the records of certain recipients of Federal financial assistance 

- 84 -
such as loans, advances, grants, or contributions. These 

audits are an integral part of GAO's efforts to review the 

manner in which funds and resources of the Federal Government 

are being used and safeguarded. The primary objective is to 

evaluate the effectiveness with which the administering 

Federal agencies and recipients fulfill their respective 

responsibilities and obligations to the Government. 

Payroll Audits 

As a general rule civilian payroll expenditures by 

Government agencies are audited by GAO at the agency sites 

where the payroll, personnel, leave, and other pertinent 

records are kept. Pay of military personnel is audited, for 

the most part, at one central location for each of the military departments. 

Audit and Settlement of Accounts of Accountable Officers 

With certain exceptions, all cash transactions of the 

Federal Government and all funds in the possession of 

officers of the Federal Government must be reported in the 

accounts of accountable officers. The accounts are subject 

to audit and settlement by GAO. The exceptions relate principally to Government corporations whose officers generally 

are not required to submit accounts for settlement and to 

those agencies for whom the Treasury Department disburses at 

its regional disbursing offices or branches~ 

The term "accountable officer" refers to authorized 

disbursing officers, certifying officers, and certain collectorss An· account is a summary of_the officer's transactions 

for the month, a statement of the amount for which he is 

accountable, and a statement of the amount of items comprising his accountability. The account is supported by the 

expenditure vouchers, schedules of collections, and related 

documents or by lists of vouchers if the agency concerned has 

been permitted to retain the documents for audit at the site. 

GAO settles accounts of accountable officers by examining and testing the agencies' internal controls, including 

internal audit, financial transactions and related documents, 

and by issuing certificates of exceptions outstanding when 

appropriate to do· so. 

FRAUD PREVENTION 

The amount of funds being wasted as a result of fraudulent or otherwise improper payments has increased sharply 

with the growth of Federal individual assistance programs 

- 85 -
which are read~ly susceptible to false entitlement representations and with the sheer magnitude of Federal programs for 

contracts, grants, and loans. GAO and agency audit activities have uncovered numerous instances of fraudulent or 

potentially fraudulent practices in the course of operational 

audits. While individual instances where the evidence 

warranted were reported to the Department of Justice for 

possible prosecution, there was no attempt to make an overall 

analysis of identified fraud or potential fraud and develop 

controls and audit approaches designed to prevent or minimize 

opportunities to commit frauds. 

GAO has established a Special Task Force on the Prevenc1on of Fraud to act as a focal point to analyze all the 

information available on fraud or potential fraud in order to 

take more effective preventive action. Specific objectives 

are to: 

--Obtain an overview of the extent of fraud, abuse 1 and 

error identified by Federal agencies, and their 

efforts to control these problems; 

--Determine the weaknesses in internal controls or program features which permitted these problems to occur, 

and make ~hem known to each agency; 

--Determine the vulnerability of the programs of 

selected agencies to fraud, abuse and error and report 

it to the Congress; 

--Develop the tips GAO receives on its nationwide "Hotline" into cases which either can be prosecuted by the 

Justice Department or reported to agencies for corrective action; 

--Improve the training received by auditors and investigators in this area so they may better detect and 

prevent fraud; 

--Followup on fraud cases reported to the Justice 

Department to make sure action is being taken on 

them; 

-~Maintain close liaison with the cognizant congressional committees so that they, through hearings and 

by other methods, can help agencies take appropriate 

corrective action. 

- 86 -
IMPROVING ACCOUNTING AND BUDGETING SYSTEMS 

Accounting 

Prescribing Accounting Principles, Standards, and 

Related Requirements 

The Comptroller General, after consulting with the 

Secretary of the Treasury and the Director, Office of Management and Budget (OMB), and after considering the needs of 

other executive agencies, is responsible for prescribing the 

principles, standards, and related requirements for accounting to be observed by each executive agency. In meeting this 

responsibility, GAO has issued the principles and standards 

of accounting to be observed by executive agencies as Title 2 

of the GAO Policy and Procedures Manual for Guidance of 

Federal Agencies. Other requirements are stated elsewhere in 

that manual. 

Cooperating in the Development of Accounting Systems 

The head of each agency is responsible for establishing 

and maintaining systems of accounting which conform to the 

principles and standards prescribed by the Comptroller 

General. Under cooperative arrangements initiated either by 

GAO or the agency, GAO helps executive agencies develop their 

accounting systemso 

The two basic objectives of GAO's cooperative work are: 

1. Developing accounting systems which meet the 

requirements prescribed by the Comptroller General. 

2. Developing financial management systems which meaningfully integrate accounting with other aspects of 

management. 

Approval Responsibility 

The Comptroller General approves agency accounting 

systems when deemed by him to be adequate and in conformity 

with prescribed accounting principles, standards, and 

related requirements. Under procedures adopted in October 

1969, the Comptroller General will formally approve: 

1. The agency statement of accounting principles and 

standards established to govern thei~ accounting 

systems. 

- 87 -
2. The proposed general designs of the systems. 

The purpose of the two-stage approval process is to 

obtain early agreement between GAO and agency on the underlying principles and standards to be followed in the design 

and implementation of the system. This process facilitates 

systematic and early identification and resolution of 

possible problem areas that might preclude ultimate approval 

of the system design. 

After a statement of accounting principles and standards 

and a general design of the accounting system have been 

approved, GAO continues to cooperate _in further refinements 

and, when needed, to demonstrate to management the benefits 

to be derived from the use of soundly based financial data in 

the decisionmaking processes of the Government~ 

Review of Accounting Systems in Operation 

GAO reviews Federal agency accounting systems in operation to (1) ascertain whether accounting systems comply with 

the principles, standards, and related requirements prescribed by the Comptroller General (2) identify needed 

improvement and encourage further development effort by the 

executive agencies, (3) identify ways to improve overall 

financial management, and {4) settle accounts of accountable 

officers. 

GAO's major Goncern is whether information produced is 

useful in ~eeting the financial management needs of both the 

Congress, and the Federal agencies. Adequate accounting 

systems are among the most important tools for effective 

financial managementa 

Budgetary and Fiscal Standardization 

The Legislative Reorganization Act of 1970, as amended 

by the Congressional Budget and Impoundment Control Act of 

1974 gave GAO a number of responsibilities related to budgetary and fiscal information. For example, OMB and the 

Treasury, in cooperation with GAO, are to develop standardized fiscalf budgetary, and program information systems for 

the use of the Federal Government and, insofar as practicable, State and local governments. 

Also, the Comptroller General, in cooperation with the 

Treasury, OMB, and the Congressional Budget Offices, is 

responsible for developing standard terminology, def initions, classifications, and codes for use by Federal agencies 

in supplying budget information to the Congress. 

- 88 -
In developing these standard classifications and 

definitions, the Comptroller General is to give particular 

consideration to the needs of the budget, appropriations, and 

tax committees and the needs ·of the Congressional Budget 

Off icee The Comptroller General is further required to help 

committees develop their information needs and to report 

annually on the identification of such needso Each year OMB 

and the Treasury are also to report to the Congress on their 

plans for adddressing the committees; needs. 

GAO also furnishes budget and related information to 

the Congress, including data directories, and assists the 

Congress in analyzing budget data. The Comptroller General 

is authorized to establish central information files to meet 

the needs of the Congress. Also, OMB, in cooperation with 

GAO, the Congressional Budget Office, and State and local 

governments is to provide (to the extent practicable) budget 

information to States and localities so that they may determine the impact of Federal assistance upon their budgets. 

The provisions of the 1970 Act, as amended, are an 

extension of congressional policy as stated in the Budget and 

Accounting Procedures Act of 19500 One of the objectives in 

the 1950 act was to provide some assurance to the Congress 

that the executive agencies developed accounting systems 

which would provide the basis for preparing and supporting 

agency budget requests, for controlling the execution of the 

budget, and for providing financial information required by 

the Executive Branch. GAO believes that budgetary and -fiscal 

data processing requirements under the Legislative Reorganization Act are a necessary step toward establishing an 

appropriate relationship between the Federal accounting and 

budgeting functions. 

In responding to the mandate of the 1970 Act, GAO works 

with the committees of the Congress to more clearly identify 

the type and extent of budgetary and fiscal data they need 

to carry out their legislative and oversight functions. This 

work is closely coordinated with efforts of the Department of 

Treasury and OMB to establish the budgetary and fiscal data 

processing system called for in the 1970 Act. 

DIRECT ASSISTANCE TO THE CONGRESS 

A very important aspect _of GAO's work is the special 

assistance it provides the Congresso In addition to the work 

initiated under its statuto~y responsibilities, GAO makes 

many audits and special studies at the specific request of 

the Congresse This includes surveys, reviews, and studies 

directed by law, recommended in committee reports, and 

requested by congressional committees and members~ 

- 89 -
The Comptroller General also assists committees to 

develop statements of legislative objectives and methods for 

assessing program performance and develops and recommends 

program evaluation methods to the Congress. In addition, the 

Impoundment Control Act of 1974 gave the Comptroller General 

responsibility for reviewing and advising the Congress about 

the legality and impact of proposed rescissions and deferrals 

of budget authority by the Executive Branch. GAO also has 

the authority to bring suit against the agencies to free 

budget authority not made available as required. 

Other ways GAO directly assists the Congress include: 

--Providing information and legal services relating to 

Government operation and policies to congressional 

committees and members of the Congress through formal 

testimony, informal conferences, reports on proposed 

legislation, and interpretations of statutes~ 

~-Providing advisory assistance in developing and drafting legislative proposals and furnishing questions for 

use during hearings. 

--Assigning staff members to directly assist congressional committees. 

LEGAL DECISIONS BY THE COMPTROLLER GENERAL 

Numerous questions about the legality of Government 

expenditures arise during the day-to-day performance of the 

Government's operations~ Conclusive answers are needed to 

establish the propriety of individual payments or the legality of entire programs. Authority to decide these questions 

is vested in the Comptroller General5 

The Comptroller General also renders decision in 

advance of payment when requested by disbursi~g officers, 

certifying officers, and the head of any department or 

establi~hment of the Government. In the case of disbursing 

officers and certifying officers, decisions are rendered 

only on specific vouchers~ To minimize delays in awarding 

Government contracts, contracting officers may request 

advance decision. Also, bidders may protest proposed or 

actual contract awards directly to the Comptroller General~ 

After GAO reviews the matter, the bidder and administrative 

off ice are advised of the legalitye 

Decisions also are rendered to disbursing and certifying officers who request review of settlements of their 

accounts and to individual claimants who request review or 

- 90 -
reconsideration by the Comptroller General of settlements 

disallowing their claims in whole or in part. 

The Off ice of General Counsel prepares these decisions 

for the Comptroller General. The decisions are final and 

conclusive on the Executive Branch but are not binding on 

the Congress or the courts. 

To keep the Government agencies and others currently 

informed, GAO furnishes daily synopses of decision of uniform 

application or general interest, furnishes copies of such 

decision upon request, and publishes them in monthly pamphlets and annual volumes. Copies of unpublished decisions 

also are available to Government agencies on requesto The( 

Off ice of the General Counsel maintains a subject card index 

of both published and unpublished decisions and furnishes 

research service to authorized officials of the Government. 

Requests for such service may be made in writing or by telephone. 

CLAIMS SETTLEMENT 

GAO has the authority and responsibility to settle and 

adjust claims and demands by or against the Government of the 

United States unless otherwise specified by law. 

Claims Against the United States (Payment Claims) 

Generally each Government agency is responsible for 

paying the obligations incurred in connection with its operations. Two classes of claims, however, are referred to GAO 

for settlement before payments is made or deniedo The first 

includes those involving doubtful questions of law or fact. 

The second includes claims which the administrative agencies 

are specifically prohibited by law from paying, prior to 

settlement by GAOQ In addition, GAO considers reclaims of 

items previously denied by administrative agencies, unless 

the agency determines that the administrative disallowance 

was erroneous and can be corrected at the agency level. With 

certain exceptions, claims must be received by GAO within six 

years~ 

Claims against the United States arise from every kind 

of Government transaction, and the claimants include private 

citizens; Government personnel, both civilian and military; 

business entities; and State, local and foreign governments~ 

The categories of claims include Government contracts; compensation due civilian employees, including overtime and 

premium pay; quarters and cost-of-living allowances; travel; 

transportation of household effects; per diem; allowances on 

- 91 -
change of official station; pay and allowances due military 

personnel; retirement pay; compensation due survivors of 

deceased civilian officers and employees; pay due survivors 

of deceased members of the Armed Forces and the National 

Guard; as well as miscellaneous claims by Government personnel. 

GAO gives the rights of both the claimant and the 

United States impartial consideration. Claimants are 

allowed legally entitled amounts without the expense 

involved in litigation. GAO's settlements are final and 

conslusive on the Executive Branch of the Government, but 

claimants may request reconsideration of adverse settlements 

and have further recourse to the Congress or to the courts. 

Claims by the United States (Debt Claims) 

Each agency also is responsible for collecting debts 

arising out of its operations. If the collection actions 

are unsuccessful, the debts are referred to GAO, or in the 

case of some agencies, to the Department of Justice~ In 

addition, numerous claims of the United States are referred 

to GAO for adjudication when they involve doubt as to the 

amount due, the legal liability of the parties, or the 

action to be taken. Similarly, GAO independently adjudicates claims disputed by debtors. 

If GAO's collection action is unsuccessful because the 

debtor refuses to answer correspondence or arrange for 

settlement, the claim is referred to the Department of 

JU Stice., GAO certifies the partie_s lia_ble and the amount 

due the United States. All the information and documents 

necessary to support court proceedings is transmitted to the 

Department of ~ustice. 

By law, the Comptroller General or executive agency 

heads may waive claims for pay and allowances erroneously 

paid to Government employees and members of the uniformed 

services or National Guard. The basis criteria for granting 

waivers is that collection would be against equity and good 

conscience and not in the best interest of the United 

States. 

Waivers may be granted only if there is no indication of 

fraud, misrepresentation, fault, or lack of good faith on the 

part of the employee or other interested persons. Only GAO 

may waive overpayments of pay and allowances aggregating more 

than $500 and exceptions made by GAO in the account of any· 

accountable officer. 

- 92 -
Agency Reviews and Assistance~Claims 

To improve agency effectiveness in claims settlement, 

debt collection, and waivers, GAO reviews agency regulations, 

procedures, and actual operationse After reviews are completed, GAO reports its findings and recommendations to the 

heads of agencies or subordinate officials, and, when warranted, to the Congress. 

RECORDS MANAGEMENT AND SERVICES 

Agencies are responsible for managing their own records, 

subject to statutory and regulatory restraints. Good management requires that records be disposed of as soon as they are 

no longer needed, that archival needs be recognized, and that 

there be a continuous records management program to appraise, 

transfer, or dispose of records efficiently and economically. 

GAO's responsibility for settling the accounts of 

accountable officers requires that the records making up 

those account be defined by GAO. These records are defined 

along with rules governing their retention and disposition in 

Title 8 of the GAO Policy and Procedures Manual for the 

Guidance of Federal Agencies. 

GAO also has a direct interest in Federal agency records 

which document program operations and administrative 

functions (such as personnel, payroll, procurement, and 

communications). These records are needed for auditing 

Government operations and settling accounts. 

When.audits are conducted where the accounts and records 

of such agency are normally kept the agencies retain the 

records subject to GAO's regulations as given in title 8. 

Fiscal, property, and other records pertaining to 

claims, demands, and accounts may not be disposed of without 

written approval of the Comptroller General. GAO approves 

the disposal of records which, after the lapse of stated 

periods of time, have insufficient administrative, legal, 

research, or other value to warrant their further preservation. Further, GAO approves agency programs for transferring 

records retained for audit to Federal records centers. 

Records Services 

Records, books, papers, and other documents in GAO's 

possession often contain information or evidence which is 

required by Government agencies or individuals for use in 

- 93 -
public or private business. Copies are furnished on proper 

application and payment of fees when requested. Certified 

copies are admissible in evidence equally with the originals, 

and to the same effect. 

COUNTERSIGNING WARRANTS 

warrants signed by the Treasurer of the United States 

are used for recording and adjusting appropriations on the 

books of the Treasury Department and the agency for which the 

appropriation is made. The Comptroller General is required 

to countersign warrants issued under continuing resolutions. 

Such warrants are countersigned for the Comptroller General 

by members of the General Government Division audit group 

assigned to the Treasury Department audit. 

ORGANIZATION OF GAO 

Appendix A shows the organization chart of the General 

Accoun.ting Office and summarizes the responsibilities and 

functions of some of the suborganizational units. 

- 94 -
\0 

U1 

I 

I 

CLAIMS 

DIVISION 

I COMMUNITY AND 

ECONOMIC 

DEVELOPMENT 

DIVISION 

UNITED STATES GENERAL ACCOUNTING OFFICE 

I 

OFFICE OF EQUAL 

EMPLOYMENT 

OPPORTUNITY 

GENERAL 

COUNSEL 

OFFICE OF 

THE 

GENERAL COUNSEL 

T 

I 

OFFICE OF 

CONGRESSIONAL 

RELATIONS 

I 

COMPTROLLER GENERAL 

OF THE 

UNITED STATES 

DEPUTY COMPTROLLER GENERAL 

OF THE 

UNITED STA-ES 

ASSISTANT TO THE 

COMPTROLLER GENERAL 

POLICY AND 

PROGRAM PLANNING 

I 

OFFICE OF POLICY 

OFFICE OF PROGRAM PLANNING 

I T 

ENERGY AND 

MINERALS DIVISION 

FEDERAL 

PERSONNEL ANC' 

COMPENSATION 

DIVISION 

FIELD 

OPERATIONS 

DIVISION 

FINANCIAL AND 

GENERAL 

MANAGEMENT 

STUDIES DIVISION 

GENERAL 

GOVERNMENT 

DIVISION 

I REGIONAL OFFICES 

ATLANTA LOS ANGELES 

BOSTON NEW YORK 

CHICAGO NORFOLK 

CINCINNATI PHILADELPHIA 

D>\LLAS SAN FRANCISCO 

DENVER SEATTLE 

D~TROIT WASHINGTON, D.C. 

KANSAS CITY 

-r 

I 

OFFICE OF 

JOINT FINANCIAL 

MANAGEMENT 

IMPROVEMENT 

PROGRAM 

1 The Exer.utive Director. JFMIP, reports 

to a steering committee composed of of 

ficials of GAO. OMB, Treasury, and CSC 

The Director. FGMS, 1s a steering com 

mittee member. 

I l 

OFFICE OF 

INTERNAL REVIEW 

INFORMATION 

OFFICER 

I 

HUMAN 

RESOURCES 

DIVISION 

I ASSISTANT TO Til~ 

COMPTROLLER GENERAL 

ADMINISTRATION 

I 

DIRECTOR OF PERSONNEL 

DIRECTOR 

GENERAL SERVICES 

AND CONTROLLER 

ORGANIZATION ANO 

MANAGEMENT PLANNING 

STAFF 

I 

INTERNATIONAL 

DIVISION 

I OVERSEAS OFFICE> 

<'RANK FU RT 

HONOLULU 

BANGKOK 

PANAMA CITY 

I LOGISTICS AND 

(0MMUNICATIO'l5 

DIVISION 

I PROCUREMENT 

ANO S'r STEM:; 

ACOUISI T ION 

DIV15JON 

I 
APPENDIX 

AUDIT DIVISIONS 

Community and Economic Development Division 

The Community and Economic Development Division coordinates GAOvs work in the area of food; domestic housing and 

community development; environmental protection; land use 

planning arrangement, and control; transportation systems and 

policies; and water and water-related programs. 

In addition to its leadership responsibilities for these 

issue areas, this division provides GAO audit coverage at the 

Departments of Agriculture, Commercer Housing and Urban 

Development, Interior (except energy _and mineral activities, 

and Transportation; the Army Corps of Engineers (civil functions): the Environmental Protection Agency; the Small 

Business Administration; the Interstate Commerce, Federal 

Maritime, and Federal Communications Commissions; the 

National Railroad Passenger Corporation (AMTRACK); the Washington Metropolitan Area Transit Authority; the U.S. Railway 

Association; the Civil Aeronautics Board; the Commodity 

Futures Trading Commission; and a variety of boards, 

commissions, and quasi-governmental entities. 

Energy and Minerals Division 

The Energy and Minerals Division serves as lead division 

within GAO for the issue areas of energy and of materials. 

The division provides GAO audit coverage for the Department of En~rgy; the Tennessee Valley Authority energy and 

minerals programs of the Department of the Interior; and 

energy and materials activities located in numerous other 

Federal entities. 

Federal Personnel and Compensation Division 

The Federal Personnel and Compensation Division is the 

lead division for GAO work in the issue of Federal personnel 

management and compensation. 

This division provides GAO audit coverage for the Off ice 

of Personnel Management, Merit Systems Protection Board, and 

Federal Labor Relations Authority (these agencies have 

replaced the Civil Service Commission). The division also 

examines -government-wide personnel activities relating to and 

affecting Federal Forces. 

Field Operations Division 

The Field Operations Division, through its regional of~ 

fices in 15 cities, provides direct aud1t support throughout 

- 96 -
the continental United States, Alaska, Puerto Rico, and the 

Virgin Islands for GAO's other operating division. Thus, 

this division plays a major role in most of the audits and 

work of GAOa About half of GAO's professional staff is 

assigned to its regional offices. 

r 

Financial and General Management Studies Division 

The Financial and General Management Studies Division is 

responsible for coordinating GAO's work in the issue areas 

of: automatic data processing, internal auditing systems for 

Federal and federally assisted programs; accounting and 

financial reporting and national productivity. 

This division carries out its responsibilities through 

participation in the Joint Financial Management Improvement 

Program; assistance to other GAO division in technical and 

advisory services; and its government-wide responsibilities 

for automatic data processing, accounting systems, internal 

auditing, and productivity. It also provides GAO audit 

coverage at the Securities and Exchange Commission. 

General Government Division 

The General Government Division is responsible for 

coordinating GAO's work in the issue areas of: intergovernmental policies and fiscal relations; law enforcement 

and crime prevention; tax administration; and data collected 

from non-Federal sources (statistical and paperwork implications}. 

This division provides GAO audit coverage for the 

Departments of Justice and Treasury; the District of Columbia 

Government; the United States Postal Service; the judicial 

and legislative branches of the Federal Government; the bank 

requlatory agencies; and various other agencies and commissions. 

Human Resources Division 

The Human Resources Division serves as lead division for 

the issue areas of: consumer and worker protection; administration of nondiscrimination and equal opportunity programs; 

education; health; income security; and employment and training. 

In addition to its leadership responsibilities for issue 

areas, this division provides GAO audit coverage for the 

Department of Labor, the Department of Health, Education and 

Welfare; the Community Services Administration; the Consumer 

- 97 -
Product Safety Commission; the Federal Trade Commission; the 

Legal Services Corporation; ACTION; the Railroad Retirement 

Board; the Equal Employment Opportunity Commission; the 

veterans Administration; and various other commissions and 

independent agencies. 

International Division 

The International Division serves as lead division for 

the internal affairs issue area. 

This division provides GAO audit coverage for the 

Department of State; the Agency for International Development; the Export-Import Bank of the United States; the 

International Communication Agency; the Panama Canal Company; 

as well as international activities of numerous other Federal 

entities, International Division personnel staff GAO's overseas off ices. 

Logistics and Communications Division 

The Logistics and Communications Division serves as the 

lead division within GAO for work in the areas of: facilities 

and material management; military preparedness; Federal 

information (creation, protection, access, disclosure, and 

management); and communications. 

Most of this division's work covers the Department of 

Defense. It also provides GAO audit coverage for portions of 

the General Services Administration and the Government 

Printing Office, in addition to its government-wide responsibilities relating to logistics, information, and 

communication. 

Procurement and Systems Acquisition Division 

The Procurement and Systems Acquisition Division is 

responsible for coordinating GAO's work in the issue areas of 

Federal procurement of goods and services, and of science and 

technology policy and programs. 

Most of this division's work is concentrated in the 

Department of Defense, the National Aeronautics and Space 

Administration, the defense-related activities of the 

Department of Energy, and the Federal Supply Service of the 

General Services Administration. It also has the responsibilities for government-wide procurement and science and 

technology matters. 

- 98 -
Program Analysis Division 

The Program Analysis Division serves as the lead division within GAO for work in the issue areas of: tax policy; 

evaluation guidelines and methodology; program and budget 

information for congressional use; regional and national 

economic problems; and alternative methods for achieving 

Federal program objectives. It also serves to lead the 

Office's activities in the science policy area. 

This division maintains audit responsibility for several 

agencies, including the Off ice of Science and Technology 

Policy, the National Science Foundation, and the Bureau of 

the Public Debt. It is GAO's focal point for work in the 

areas of economics and program evaluation techniques, and 

coordinates GAO activities with the Congressional Budget 

Off ice and the Off ice of Technology Assessment. 

OTHER OFFICES AND DIVISIONS 

Off ice of the Comptroller General 

There are four off ices which operate in the immediate 

off ice of th~ Comptroller General, performing direct staff 

services for him. These are: the Office of Congressional 

Relations, which coordinates GAO's activities with congressional committees and members; the Office of Equal Employment 

Opportunity, which oversees GAO's efforts to carry out all of 

its activities in a nondiscriminatory manner; the Office of 

Internal Review, which audits and reviews GAO's own operations; and the Off ice of Information, which assists the 

public and the media with their queries on GAO reports and 

activities. 

Off ice of the General Counsel 

The Off ice of the General Counsel assists the Comptroller General in all phases of the legal work involved in 

matters coming before the General Accounting Office, including carrying out responsibilities for interpreting laws 

governing public expenditures. Through the work of this 

Office, numerous reports of the Comptroller General inform 

the Congress of the construction executive agencies currently 

are placing on congressional mandates and the extent to which 

these actions relect congressional intent. The General 

Counsel also prepares for the Comptroller General final and 

binding decisions to government officers who are accountable 

for public funds which they administer. The Office decides 

disputes between agencies and businesses concerning entitlements to government contracts ("bid protests"), including 

- 99 -
grantee contract award actions. Members of Congress and 

Committee chairmen are supplied with opinions on the legality 

of agency activities and on legislative optionsQ Through the 

Off ice of the General Counsel, the Congress is informed of 

Executive Branch impoundments of available budget authority, 

and assured of compliance with the provisions of the Impoundment Control Act of 1974. 

Claims Division 

The Claims Division settles and adjudicates claims and 

demands by or against the United States. It reviews, evaluates, and reports on the claim settlement and debt collection 

activities of government agencies. 

Administration 

GAO's own internal management and administration is 

supervised by the Assistant to the Comptroller General for 

Administration. He provides direction over the activities of 

the personnel and General Services and Controller organizations. Through the latter organization, activities such as 

publishing services, library and information, and financial 

management are carried out. In addition, and Organization 

and Manag~ment Planning Staff reports directly to the 

Assistant to the Comptroller General. 

Policy and Program Planning 

The Off ice of Policy and the Off ice of Program Planning 

report directly to the Assistant to the Comptroller General 

for Policy and Program Planning. They ensure that the audit 

work of GAO is planned. coordinated, and reported in a consistent and ef~ective manner. These off ices work with the 

audit division to implement GAO's policies and planning 

guidelines across divisional lines. 

- 100 -
CHAPTER 6 

THE CONGRESSIONAL BUDGET OFFICE 

INTRODUCTION 

The Congressional Budget and Impoundment Control Act of 

1974 (Public Law 93-344) established a new procedure by which 

the Congress considers and acts upon the annual federal budget. To implement this reform, the Congressional Budget Act 

created three Congressional institutions responsible for 

various aspects of the new budget process. Two of these 

bodies are standing committees of the Congress--the House and 

Senate Committees on the Budget. The third--the Congressional 

Budget Offide~-serves both branches of the Congress. 

The Congressional Budget Off ice (CBO) is a nonpartisan 

organization, mandated to provide the Congress with budgetrelated information and with analyses of alternative fiscal, 

budgetary, and programmatic policies. The office does not 

make recommendations on matters of policy; its principal 

missions are to present the Congrees with options for con-

$ideration and to study the possible budgetary ramifications 

of those options. 

RESPONSIBILITIES OF THE CONGRESSIONAL BUDGET OFFICE 

CBO's analyses usually take the form of published studies 

comparing present policies and programs with alternative 

approaches. A list of the CBO publications is available from 

CBO's Office of Intergovernmental Relations, and most of the 

publications can be obtained either directly from CBO or, for 

a small fee, from the Superintendent of Documents, U.S. Government Printing Off ice, Washington, D.Ce 20402. 

The responsibilities of CBO, as outlined in the Budget 

Act, fall into two general categories: 

--Budgetary estimates, and 

--Fiscal and programmatic analysis. 

These generai functions are described in more detail belowe 

The specific statutory provision of CBO's duties are given 

in the Appendix. 

- 101 -
Budgetary Estimates 

Scorekeeping. Each spring, the Congress formulates 

and adopts a concurrent resolution on the budgetg setting 

expenditure and revenue targets for the fiscal year to begin 

on the coming October 1. In September, the Congress reviews 

the detailed spending and taxing decisions it had made during 

the summer in the form of individual bills. It then arrives 

at and adopts a second concurrent resolution, reconfirming or 

changing the totals in the spring resolution. While the 

first resolution sets targets, the second establishes an 

actual ceiling for spending and a floor for revenues. CBO 

keeps score of Congressional action on individual bills, 

comparing them against targets or ceilings in the concurrent 

resolutions. The Off ice issues periodic reports showing the 

status of Congressional actiono 

Cost Estimateso Four types of cost estimates are 

required of CBO by the Budget Act. 

CBO prepares, to the extent practicable, a five-year 

estimate for what it would cost to carry out any public bill 

or resolution reported by Congressional committees (except 

the two appropriating committees)~ 

CBO furnishes to a reporting committee a report on each 

committee bill providing new budget authorityo Each report 

shows: (a) a comparison of the bill with the most recent 

concurrent resolution, (b) a five-year projection of outlays 

associated with the bill, and (c) the amoufit of new budget 

authority and resulting outlays provided for state and local 

governments. 

CBO also furnishes to a reporting committee an analysis 

of each bill providing new or increased tax expenditures. 

The reports cover: (a) an assessment of how the bill will 

affect levels of tax expenditures most recently detailed in a 

concurrent resolution, and (b) a five-year projection of the 

tax expenditures resulting from the bill~ 

As soon as practicable after the beginning of each 

fiscal year, CBO prepares a report that analyzes the fiveyear costs of continuing current Federal spending and taxing 

policies as set forth in the second concurrent resolution~ 

The purpose of these projections is to provide a neutral 

baseline against which the Congress can consider potential 

changes as it examines the budget for the upcoming fiscal 

years~ 

- 102 -
Fiscal and Programmatic Analysis 

Fiscal Analysis. The Federal budget both affects and is 

affected by the national economy. The Congress thus must 

consider the Federal budget in the context of the current and 

projected state of the economyo To provide a framework for 

such considerations, CBO prepares periodic analyses and forecasts of economic trends. It also prepares analyses of 

alternative fiscal policies. 

Inflation Analysis~ Beginning in 1979, CBO will prepare 

estimates of the inflationary effect of major legislative 

proposals and, more generally, will identify and analyze the 

causes of inflation. These estimates are intended to provide 

the Congress with guidelines, as it undertakes new programs, 

of the cost in terms of inflation that these programs might 

entail. 

Program and Policy Analysis. CBO undertakes analyses of 

programmatic or policy issues that affect the Federal budget. 

These reports include an examination of alternative approaches to current policy; all reports are nonpartisan in 

nature. These reports are undertaken at the request of: (1) 

the chairman of the committee or subcommittee of jurisdiction 

of either the House or the Senate; (2) the ranking minority 

member of a committee of jurisdiction of either the House or 

the Senate; or (3) the chairman of a Task Force of the House 

Budget Committee. 

Annual Report on Budget Options. By April 1 of each 

year, CBO furnishes to the House and Senate Committees on 

the Budget a report that combines many aspects of the 

functions outlined above. The annual report presents a 

discussion of alternative spending and revenue levels, levels 

of tax expenditures under existing law, and alternative 

allocations among major programs and functional categories. 

ORGANIZATION OF THE OFFICE 

The organization of CBO is designed to accomplish its 

tasks with a maximum of expertise and efficiency. The 

office's total number of personnel is established annually by 

the Congress. At present, CB0 9 s staff includes 200 professionals and support personnel. Two positions are specified 

under the statute--Director and Deputy Director. 

The following pages describe the organization of the 

Congressional Budget Off ice and provide a summary of each 

unit§s responsibilities and functionsa 

- 103 -
I-' 

0 

.;::.. 

CONGRESSIONAL BUDGET OFFICE 

DIRECTOR 

DEPUTY DIRECTOR 

v---. ---·--. ------

Off ice of f Off ice of 

General Counsel I 

1--~~~~~-+~~~~~~ Intergovernmental , __ Relations 

~- I - · __ [ - ___ I . I- --i I I I I IA~sistant I Director 

Assistant 

Director 

for B::Jdget Analysis 

'-----· - . 

Assistant 

Director 

··for ~.,iscal 

.. Analysis 

Assistant1 

Director 

for Tax 

Analys,is 

I ___ _ 

Assistant 

Director 

for Natural 

Resources 

and 

Development 

for Human 

Resources 

and 

Community 

Development 

Assistant 

Director 

for 

National 

Security 

and International 

Affairs 
Off ice of the Director 

The D~rector of the Congressional Budget Off ice is 

appointed for a four-year term by the Speaker of the House of 

Representatives and the President Pro Tempore of the Senate 

upon the recommendation of both Committees on the Budget. 

The Deputy. Director is appointed by the Director. 

The Director has responsibility for seeing that all the 

duties of the organization as specified in the Budget Act are 

performed effectively. The Deputy Director assists the 

Director in the overall management of the organization and 

acts in the absence of the Director. 

Off ice of the General Counsel 

The General Counsel performs legal work for CBO, 

interpreting applicable statutes, analyzing proposed legislation, and overseeing procurement actions. The General 

Counsel also serves as a senior advisor on policy issues. 

Off ice of Intergovernmental Relations 

The function of the Off ice of Intergovernmental Relations (OIGR) is threefold. First, the Office serves as CBO's 

center of communications with the Congress, with State and 

local governments, with organizations outside government, and 

with the news media. Accordingly, OIGR is responsible for 

ensuring that full and accurate information on the budget 

process in general, and on CBO's activities £-elated to 

specific ~ssue in particular, be available at all times. As 

part of this mission, OIGR is charged with all aspects of the 

publication of CBO's studies, including editing, overseeing 

production, and distribution both to the Congress and to the 

public. 

The second role of the Off ice of Intergovernmental Relations is the analysis of issues relating to the Federal 

workforce and Government administration. The unit undertakes 

studies of the budgetary issues involved in Government-wide 

organization, manpower utilization and compensation, and 

related management issues. 

The third function of the Off ice of Intergovernmental 

Relations is to serve as the administrative center of CBO. 

To monitor the progress of all ongoing work at CBO, OIGR 

maintains a computerized project control system. Other 

administrative duties include personnel management and 

providing computer, contracting, and library services. OIGR 

also prepares and manages CBO's annual operating budget. 

- 105 -
Budget Analysis Division 

The Budget Analysis Division assumes the major portion 

of CB0 1 s responsibility for budgetary estimates. The division has two subunits--the Budget Estimates Branch and the 

Budget System and Process Branch. 

The Budget Estimates Branch is responsible for providing 

the scorekeeping reports and cost estimates on legislation, 

and for developing the five-year projection reports on the 

total Federal budget. 

The Budget System and Process Branch assumes CBO's 

statutory responsibility for development of budgetary terminology, analysis of advance appropriations, and support to 

committees on the Congress in continuing studies of additional budget reform proposals, In addition, the unit is 

responsible for developing automated budgetary information 

systems and for coordinating the provision of all computer 

support services to CBO analysis. 

Fiscal Analysis Division 

The Fiscal Analysis Division is responsible for developing economic projections and the analysis of alternati~e 

fiscal policies. These analyses focus on issues such as 

production, employment, and inflation as well as their 

interaction with the Federal budget~ 

The division consists of four subunits: Current Developments Unit, Model Simulation Unit, Special Studies Unit, and 

Inflation Impact Unit. 

Tax Analysis Division 

The Tax Analysis Division is responsible for revenue 

estimates, analysis of tax expenditures, and related studies 

and evaluations. The division prepares the estimates on 

revenue receipts required in the annual report on budget 

options and the five-year projection report on the total 

budget. 

Natural Resources and Commerce Division 

The Natural Resources and Commerce Division prepares 

analyses of programmatic and budgetary issues in the areas of 

energy, environment, natural resources, science, agriculture, 

commerce, transportation, and communications. 

- 106 -
Human Resources and Community Development Division 

The Human Resources and Community Development Division 

provides analyses of budgetary issues in the programmatic 

areas of income assistance, social services, education, 

employment, health, veterans' affairs, and community 

development and housing. 

National Security and Internal Affairs Division 

The National Security and Internal Affairs Division 

prepares analyses of national defense and international 

economic programs. 

- 107 -
APPENDIX 

STATUTORY TASKS ASSIGNED TO CBO 

Listed in the order in which they appear in the 

Congressional Budget Act of 1974 (Public Law 93-344). 

Citations are to the U.S. Code and, in parentheses, to 

section numbers of Public Law 93-344. 

1. In general, provide information to the two Budget Committees on all matters within their jurisdictions, 2 use 

602(a), (202(a)). 

2. On request, provide information to the appropriating and 

taxing committees, 2 use 602(b), (202(b)). 

3. On request of any other committee, provide information 

compiled under 1 and 2 plus, "to the extent practicable," 

additional information that may be requested, 2 USC 

602(c)(l), (202(c)(l)). 

4. On request of a Member, provide information compiled 

under 1 and 2 plus "to the extent available," additional 

information that may be requested, 2 USC 602(c)(2), 

(202(c)(2)). 

5. Perform the duties and functions formerly performed by 

the Joint Committee on Reduction of Federal Expenditures, 

2 use 602(e), (202(e)), see also 31 use 571. 

6. Annually on or before April 1, furnish to the Budget 

Committees a -report on fiscal policy for the next fiscal 

year, to include a discussion of alternative levels of 

revenues, budget authority, outlays, and t~x expenditures, plus alternative allocations among major programs 

and functional categories, all in the light of major 

national needs and the effect on "balanced growth and 

development of the United States," 2 USC 602(f)(l), 

(202(f)(l)). 

7. From time to time, furnish the Budget Committees such 

further reports as "may be necessary or appropriate," 2 

use 6 o 2 ( f) ( 2) , ( 2 o 2 < f) ( 2) ) • 

8. Develop and maintain filing, coding, and indexing systems 

for all information obtained by CBO from the Executive 

Branch or from other agencies of the Con~ress, 2 use 

603(b), (203(b)). 

9. With respect to each committee bill providing new budget 

authority, furnish to the reporting committee for its 

consideration: (a) a comparision of the bill with the 

- 108 -
most recent concurrent resolution on the budget, (b) a 

five-year projection of outlays associated with the bill, 

and (c) the amount of new budget authority and resulting 

outlays provided by the bill for state and local governments, 31 use 1329(a)(l), (308(a)(l)). 

10. With respect to each committee bill providing new or 

increased tax expenditures, furnish to the reporting 

committee for its consideration: (a) a report on how the 

bill will affect the levels of tax expenditures most 

recently detailed in a concurrent resolution on the 

budget, and (b) a five-year projection of the tax 

expenditures resulting from the bill, 31 USC 1329(a)(2), 

(308(a)(2)). 

11. Periodically, issue a scorekeeping report on the results 

of Congressional actions compared with the most recently 

adopted concurrent resolution on the budget, plus status 

reports on all bills providing new budget authority or 

changing revenues or the public debt limit, plus up-todate estimates of revenues and the public debt, 31 USC 

1329(b), (308(b)). 

12. Annually, "as soon as practicable after the beginning of 

each fiscal year," issue a five-year projection of 

budget authority and outlays, revenues and tax expenditures, plus the projected surplus or deficit, year by 

year, 31 USC ll29(c), {308(c)). 

13. Prepare "to the extent practicable" a five-year cost 

estimate for carrying out any public bill or resolution 

reported by any committee (except the two appropriating 

committees), 31 USC 1353, (403). 

14. Study jointly with the Office of Management and Budget, 

but report separately, on the feasibility and advisability of year-ahead budgeting and appropriating, the 

report to be made by February 24, 1977, 31 USC 1020 

note, (502(c)). (The report was submitted on that 

date.) 

15. Cooperate with the Comptroller General in the development of standard fiscal terminology, 31 use 1152 (a)(l), 

(80l(a)), (Sec. 202(a)(l) of the Legislative Reorganization Act of 1970). 

16. Cooperate with the Comptroller General in developing an 

inventory of fiscal information sources, providing 

assistance to the Congress in obtaining information from 

- 109 -
those sources, and furnishing, on request, assistance in 

appraising and analyzing information so obtained, 31 use 

1153(b), (80l(a)), (Sec. 203(b) of the Legislative 

Reorganization Act of 1970). 

17. With the Comptroller General, establish a central file 

or files "of the data and information required to carry 

out the purposes of this title," 31 use 1153(c), 

(80l(a)), (Sec. 203(c) of the Legislative Reorganization 

Act of 1970). 

18. Cooperate with the Office of Management and Budget in 

providing useful federal fiscal information to State and 

local governments, 31 USC 1153(d), (80l(a)). (Sec. 

203(d) of the Legislative Reorganization Act of 1970). 

- 110 -
CHAPTER 7 

THE COST ACCOUNTING STANDARDS BOARD 

INTRODUCTION 

The Cost Accounting Standards Board was established by 

the Congress in August 1970 (Public Law 91-379) to act as its 

agent in creating uniform and consistent cost accounting 

principles to be followed throughout the Government. The 

Board was formally organized in January 1971 following the 

initial appropriation of funds for its activities. 

ORGANIZATION OF THE BOARD 

The Comptroller General of the United States is the 

Chairman of the Cost Accounting Standards Board and, pursuant 

to the law, he has· appointed four Board members to serve with 

him. The members represent the views of Government, industry, the accounting profession, and the academic community 

and are appointed for a term of 4 years each. 

In addition, the Board is served by an Executive Secretary, a General Counsel, and a full-time staff, which at 

October 15, 1978, included 17 professionals and 10 administrative and clerical personnel. In selecting and recruiting 

staff, the board has been able to maintain the same balance 

of representation evidenced by the backgrounds of the Board 

members. The Board carries out its operations from its headquarters, located in Washington, D.Ce 

PRINCIPAL FUNCTIONS 

The Board's primary goal is to issue clearly stated Cost 

Accounting Standards to achieve (1) an increased degree of 

uniformity in accounting practices among Government contractors and (2) consistency in accounting treatment of costs 

by individual Government contractors. 

·A Cost Accounting Standard is a statement formally 

issued by the Cost Accounting Standards Board that (1) 

enunciates a principle or principles to be followed, (2) 

establishes practices to be applied, or (3) specifies 

criteria to be employed in selecting from alternative 

principles and practices in estimating, accumulating, and 

reporting costs of contracts subject to the rules of the 

- 111 -
Board. A Standard may be stated in terms as general or as 

specific as the Cost Accounting Standards Board considers 

necessary to accomplish its purpose. 

Increased uniformity and consistency in accounting are 

desirable to the extent they improve bnderstanding and 

communication, reduce the incidence of disputes and disagreements, and facilitate equitable contract settlements. 

DEVELOPMENT OF STANDARDS 

Before the promulgation of any Standard, the Board makes 

an in-depth study of the subject area. It includes extensive 

research and careful testing of alternative proposals. 

Although the precise nature of the research varies somewhat, 

depending upon the subject under consideration, certain basic 

elements of the research procedure are followed each time. 

After a topic has been authorized by the Board for 

research, authoritative materials on the subject are 

reviewed, including sources such as books and theses, Government procurement regulations, pronouncements of accounting 

and regulatory groups, Court and Board of Contract Appeals 

decisions, Government agency reports of problems, and 

Disclosure Statements filed by contractors with the Board. 

At the time of reviewing these materials, issues and sources 

of problems related to the topic under research are 

identified, e.go, lack of recognition of underlying cost 

concepts, inadequacy of guidelines, misunderstanding in 

interpreting exisiting regulation. 

Concurrently, the initial phase of liaison with various 

contractors and governmental agencies is begun through 

correspondence'· telephone conversations, personal interviews, 

or plant visits to obtain empirical data and to discuss 

actual practices and the underlying accounting concepts. 

Based on this research, a preliminary draft of a 

proposed Standard is developed which is discussed with appropriate groups such as professional accounting associations, 

contractors, and Government agencies. After comments on this 

preliminary draft are analyzed, the Board publishes a 

proposed Cost Accounting Standard in the Federal Register. 

After this initial publication, a number of contractors and 

Government agencies are visited to discuss further all 

aspects of the proposed Standard, with additional special 

emphasis on the anticipated administrative ,costs of implementation and the probable benefits to be achieved through · 

adoption of the Standard. 

- 112 -
On the basis of careful consideration of all comments 

submitted by the public and the further discussions with 

outside organizations, the Board makes appropriate revision 

of the proposed Standard and publishes it for the second time 

in the Federal Register. 

Standards promulgated by the Board are sent to the 

Congress at the time of the second publication in the Federal 

Register. The Standards become effective unless the Congress, within 60 days of continuous session, passes a 

concurrent resolution stating in substance that it does not 

favor the proposed Standards. The Board's promulations have 

the full force and effect of law. 

A schema. of the Board's research process is shown in the 

Appendix to this chapter. 

STANDARDS PROMULGATED 

As of October 15, 1978, the Board had promulgated 16 

Cost Accounting Standards. The first two require (1) consistency in estimating, accumulating, and reporting costs and 

(2) consistency in allocating costs incurred for the same 

purpose and in like circumstances •. These two Standards, 

together with the Disclosure Statement which was promulgated 

in the initial year of the Board's operation, provide that 

individual contractors must follow cost accounting practices 

uniformly for all covered contracts at any given point in 

time. 

The Board also promulgated Standards covering (1) the 

allocation of home office expenses to segments, (2) the 

capitalization of tangible assets, (3) the accounting for 

allowable costs, (4) the base periods for allocating indirect 

costs, (5) standard costs, (6) accounting for compensated 

personal absence. (7) depreciation, (8) allocation of business unit expenses to final cost objectives, (9) accounting 

for costs of material, (10) pension cost, (11) cost of money 

(12) accounting for deferred compensation, and (13) insurance 

costs. 

In addition, the Board had in various stages of research and development, potential Standards dealing with a 

variety of accounting subjects. Selection of specific areas 

for research is based primarily on (1) relationship to the 

objectives of Public Law 91-379, (2) significance of observed 

costing problems, and (3) relationship to other work of the 

Board. 

- 113 -
RESPONSIBILITIES FOR COMPLIANCE WITH PROMULGATIONS 

OF THE BOARD 

The basic responsibility for securing compliance by 

contractors with Board promulgations rests with the relevant 

Federal contracting agencies. They are responsible for such 

things as: 

1. Incorporating all applicable Board promulgations 

into their procurement regulations; 

2. Including the contract clause in all covered contracts; 

3. Receiving Disclosure Statements; 

4. Reviewing and approving the adequacy of such Statements; 

5. Reviewing contractors' records to determine whether 

or not contractors have (a) followed consistently 

their disclosed cost accounting practices and (b) 

complied with promulgated Cost Accounting Standards; 

6. Making appropriate contract price adjustments 

because of changed accounting practices, failure to 

follow existing Standards, or the issuance of new 

Standards; and 

7. Evaluating the validity of claims by contractors for 

exemptions, under criteria established by the Board, 

or exclusions as established by Public Law 91-379. 

It should be noted that Section 719(j) of the act gives 

to any authorized representative of the agency head concerned, of the Board, or of the Comptroller General of the 

United States, the right to examine and make l~opies of any 

documents, papers, or records relating to compliance with 

Board promulgations. 

Another element of compliance concerns the manner in 

which relevant contracting agencies implement the requirements established by the Board. Special and recurring 

reviews of agencies' compliance with Board promulgations 

should be performed by the agencies' internal review staffs 

and by the U.S. General Accounting Office. 

The Board has retained the responsibility for evaluating 

the effectiveness of the Standards, rules, and regulations 

that it promulgates. Most of the Board's evaluative needs 

- 114 -

j 
can be met by reviewing reports from contracting and audit 

organizations. To this end, the Board and the major contracting agencies have worked cooperatively to establish 

reporting requirements which have been embodied in the 

agencies' procurement regulations. 

RELATIONSHIP OF THE BOARD TO OTHER AUTHORITATIVE BODIES 

A number of authoritative bodies have been established 

to issue pronouncements affecting accounting and financial 

reporting. The Cost Accounting Standards Board views its 

work as relating directly to the preparation, use, and review 

of accounting data in the negotiation, administration, and 

settlement of negotiated defense contracts. The Board is 

the only body established by law with the specific responsibility to promulgate Cost Accounting Standards. 

There are many accounting areas of interest to the Board 

which are also of interest to others for financial and tax 

accounting purposes, such as: the measurement of costs in 

general; determination of the amount assigned to a resource 

to be consumed in operations; allocation of the cost of 

resources consumed to time periods; and allocation of direct 

labor, direct material, and factory overhead to the goods and 

services produced in a period. 

Promulgations by the Cost Accounting Standards Board may 

involve areas of interest to other authoritative bodies. 

Contract cost accounting often deals with the same expenditures and the same problems of allocation to time periods as 

are of interest in financial and income tax accounting. 

The Board seeks to avoid conflict or disagreement with 

other bodies having similar responsibilities and will through 

continuous liaison make every reasonable effort to do so. 

The Board has stated that it will give careful consideration 

to the pronouncements affecting financial and tax reporting, 

and in the formulation of Cost Accounting Standards it will 

take those pronouncements into account to the extent it can 

do so in accomplishing its objectives. The nature of the 

Board's authority and its mission, however, is such that it 

must retain and exercise full responsibility for meeting its 

objectives. 

- 115 -
APPENDIX 

THE BOARD'S RESEARCH PROCESS 

Board Activity 

TOPIC 

SELECTION 

LIBRARY 

RESEARCH 

ISSUES 

PAPER 

Contractor, Agency, 

Professional/Industry 

Association 

Participation 

FIELD 

VISITS 

COMMITTEE 

LIAISON 

REQUEST 

FOR 

QUESTIONNAIRE 1--~-.. RESPONSE 

PRELIMINARY 

DRAFT 

PROPOSED 

STANDARD 

REVISED 

STANDARD 

WITH 

PREFATORY 

REMARKS 

REQUEST 

FOR COMMENT 

FIELD 

VISITS 

- 116 -

Federal Register 

Publication 

PUBLIC 

SOLICITATION 

FOR COMMENT 

PROMULATION 

OF COST 

ACCOUNTING 

STANDARD 
CHAPTER 8 

THE JOINT FINANCIAL MANAGEMENT IMPROVEMENT PROGRAM 

INTRODUCTION 

The Joint Financial Management Improvement Program 

(JFMIP) is a joint and cooperative undertaking of the Office 

of Management and Budget, the General Accounting Office, the 

Department of the Treasury, and the Office of Personnel 

Management, working in cooperation with each other and with 

operating agencies to improve financial management policies 

and practices throughout the government. 

ORIGIN AND HISTORY 

In 1947 Lindsay C. Warren, the Comptroller General of 

the United States initiated a cooperative financial management improvement effort with James E. Webb, Director of the 

Bureau of the Budget, and John w. Snyder, Secretary of the 

Treasury. After preliminary work by the staffs of the three 

agencies, and with the staff of the Senate Committee on 

E~penditures, Mr. Warren sent a letter dated October 20, 

1948, to the heads of departments and agencies announcing the 

establishment of the Joint Accounting Improvement Program. 

In part, his letter said: 

"The Program contemplates the full development of 

sound accounting within each agency, as a working 

arm of management, in terms of financial information and controle At the same time it envisions an 

integrated pattern of accounting and financial 

reporting for the Government as a whole responsive 

to executive and leg is lat ive needs. Balanced recognition will be given to the need for a flexible 

basis for accounting development within agencies in 

the light of varying types of operations and to 

overall fiscal, reporting, and audit responsibilities. The accounting and reporting principles, 

standards, and basic procedures established will 

take into consideration the various areas of 

responsibility involved, the elimination of overlapping operations and paper work, and the fuller 

application of efficient methods and techniques in 

accounting operations through the Government." 

- 117 -
The heads of the three central agencies followed up on 

January 6, 1949, with a general statement of policies and 

objectives. They expressed agreement on the following basic 

principles: 

1. Current accounting and financial reporting are proper functions of the Executive Branch and accounting 

systems prescribed by the Comptroller General should 

be in recognition of this as a fundamental principle. 

2. Audit, independent of the Executive Branch, is an 

essential and proper function of the General 

Accounting Off ice and properly designed accounting 

systems are vital factors to the effectiveness of 

such independent audit. 

3. Accounting systems should be developed as a cooperative undertaking as an essential to meeting the 

needs and responsibilities of both the Executive and 

Legislative Branches of the Government. 

Initial improvement efforts dealt mainly with the 

accounting and auditing practices of the Government. However, the central. and operating agencies recognized that, if 

maximum benefits from the accounting changes were to be 

obtained by the managers at every level of agency operations, 

the area of improvement had to be broadened to cover the full 

spectrum of financial management. 

This initial experience under the Program led to the 

development and passage of the Budget and Accounting Procedures Act of 1950 (31 u.s.c. 65). The act specifically 

identified responsibilities for budgetingy accounting, 

auditing, and financial reporting in the Federal Government, 

and it also provided the central agencies with broad legal 

authority for the Program. Section III stated, as the policy 

of Congress that: 

"(f) The Comptrolier General of the United States, 

the Secretary of the Treasury, and the Director of the Bureau of the Budget conduct a 

continuous program for the improvement of 

accounting and financial reporting in the 

Government. 

With the scope of the Program expanded, efforts were 

directed toward improving those budgetingy reporting, and 

related financial management practices that would assist 

- 118 -
agency managers in their program planning, execution, and 

control. The Program was redesignated the Joint Financial 

Management Improvement Program in December 1959. 

At the request of the Principals of the Joint Program, 

the Chairman of the Civil Service Commission (now the Office 

of Personnel Management) joined the Program in 1966 to assist 

in the personnel aspects of financial management. 

GOALS AND OBJECTIVES 

The overall objective of JFMIP is to improve and 

coordinate financial management policies and practices 

throughout the Government so that they will contribute 

significantly to the effective and efficient planning and 

operation of governmental programs. Activities aimed at 

achieving this objective include: 

--Reviewing and coordinating central agencies' activities 

and policy promulgations to avoid possible conflict, 

inconsistency, duplication and confusion. 

--Acting as a clearinghouse for sharing and disseminating 

financial management information about good financial 

management techniques and technologies. 

--Reviewing the financial management efforts of the 

operating agencies and serving as a catalyst for 

further improvements. 

--Undertaking special projects of a Government-wide 

nature to resolve specific problems. 

--Providing advisory services in dealing with 

specific financial management problems. 

ORGANIZATION AND OPERATIONS 

Leadership for JFMIP is provided by the Comptroller 

General of the United States, the Secretary of the Treasury, 

the Director of the Office of Management and Budget, and the 

Director of the Off ice of Personnel Management. 

Each JFMIP Principal has designated a representative to 

serve on a Steering Committee that is responsible for the 

general direction of JFMIP. The Steering Committee coordinates central agency improvement efforts on Government-wide 

matters and selected improvements within individual agencies. 

- 119 -
An Executive Director, also a member of the Steering 

Committee, is responsible for developing and directing programs and projects. The head of each operating agency has 

designated a liaison officer to serve as a point of contact 

on matters related to JFMIP. 

JFMIP carries out a variety of activities aimed at 

achieving its established goal and objectives. It sponsors 

conferences, workshops, and seminars. It publishes a 

periodic news bulletin and various other documents to 

disseminate information on progressive financial management 

practices and promotes their widespread application. It 

reviews the management improvement efforts of the operating 

agencies and coordinates financial activities of the central 

agencies. JFMIP sponsors and conducts studies on financial 

management matters and assists operating agencies in dealing 

with financial management problems, particularly those that 

have relevance to other programs and agencies. 

A number of projects are carried out through interagency 

as well as intergovernmental project teams organized by 

JFMIP. Such teams may include staff members from central and 

operating agencies as well as State and local governments. 

Some financial management problems may be dealt with by 

referral to a source of expertise, some by assignment to one 

of the central agencies and some by informal consultation. 

JFMIP serves as a catalyst to stimulate action by whatever approach suits the circumstances~ Achievement of 

financial management improvements depends heavily on the 

interest and active participation of personnel from the 

central agencies and operating agencie-s-. In some cases there 

also is need for close working relationships with State and 

local Governments. JFMIP plays a key role in mobilizing 

resources and coordinating cooperative efforts. 

- 120 -