Mr. MAXWELL. To get the best utilization of the equipment, that would be correct. So that we do not have only a part-time use, the equipment should be used only in those places where the volume is arge. Mr. GARY. There would be very few installations outside of Washngton, if you decentralized, which would have a workload sufficient o justify the use of this electronics equipment? Mr. MAXWELL. That is exactly right, Mr. Chairman. Mr. GARY. If they did it would be a duplication of cost, to a large extent? Mr. MAXWELL. Or a lack of utilization of equipment. Mr. Cannon has a figure on that with respect to the lowest number of items that an be economically processed. What was the number of items? Mr. CANNON. Generally speaking, Mr. Chairman, if the volume runs s much as 1 million or more a month we think that an electronic nstallation would be feasible. It should produce a minimum of 1 million checks per month. The rental, as Mr. Maxwell indicated, is ery high. The rental runs around $3,000 to $4,000 a month on a ingle unit of this type of equipment. We feel it is too expensive for any agency having less than 1 million checks per month. We do hot think it would be economically feasible. Mr. GARY. Did you want to give us some examples? Mr. MAXWELL. Could you give other instances where you plan to xperiment with machines? I have mentioned the one to begin on March 1. Mr. CANNON. The one Mr. Maxwell had reference to is to be intalled in our Boston office, where we plan to process the tax refunds for the Northeastern Area Office of Internal Revenue Service. In ddition to that volume, which is considerable, we would, of course, have the veterans compensation checks for the New England area plus the salaries and other types of payments which that equipment an handle. The second installation which will follow shortly after the Boston nstallation would be in New York, where we have a considerably igher volume. We will run approximately 211⁄2 million checks honth on this type of equipment in New York. per Whereas the Boston installation will be a single installation, at New York there would be a dual installation, the same type of equiphent with double capacity. The one in New York will have about 00,000 checks per day capacity. After that we plan to go into ther types of electronics equipment of different manufacturers as apidly as the machines become available. As you know, this is more or less in its infancy. The manufacturers re competing against each other trying to get their equipment on the harket just as soon as they can. Burroughs, I believe, will be first. do not know which will be next. We are planning on experimenting ith Remington-Rand, Addressograph, and International Business Machines Corp. Those are the types we have in mind. We hope to determine by actual use of these different types of hachines which equipment would be best suited to serve the Governhent's need for checkwriting purposes. Mr. GARY. Do you have an office in Chicago? Mr. GARY. You have an office in Chicago and under this decentral ized plan you have another office out there. Which is that one? Mr. MAXWELL. Railroad retirement. Mr. GARY. Both of those are issuing checks; is that correct? Mr. GARY. Could those checks not be issued more economically i the two operations were consolidated? Mr. CANNON. My personal opinion is that they could, Mr. Chair man, be issued more economically when we get electronic equipmen in Chicago in a central location. It can be stated, of course, that i the Treasury can use electronic equipment so can an agency for whic the Treasury disburses, which has a large volume, but there is thi distinction which I should like to call to your attention: The capacit of these machines is so great that the same equipment which an agenc running 1 million checks a month might require can in our hands als take on another 1 million checks or more a month, with the sam equipment rental cost. There is that difference, which should b borne in mind in connection with the proposed decentralized or dele gated functions. In our hands, with our tremendous volume, the opportunity fo substantially complete machine utilization and consequent lower cos is much greater than where there is a parallel operation within th same city. Mr. GARY. In Boston you have the Internal Revenue Service, whic makes an IBM card called a check-issue card and sends it to you fo issue of checks. Would there be any savings through location of tha machine in the Internal Revenue Office, or do they have sufficien volume to take care of that so that they would not have to send thos cards over to you? Mr. CANNON. Mr. Chairman, you spoke of their producing a check issue card. This year they are changing their procedure somewha so that they will not produce a check-issue card as such. They wil use what they call, I believe, their name card. That card will be com pleted under this program to include the amount to be refunded t the taxpayer. The card will be referred to us for the production the check, using this electronic machine. As soon as we have finishe we will return the card to Internal Revenue for further use in thei office. There will not be a separate check-issue card as such. With regard to your question as to whether we should locate th machine in the Internal Revenue Office, that would necessitate pu chasing additional signing, inserting, and microfilming equipmer solely for use over a period of only 3 to 4 months each year, whereas i our Boston office, which is only 20 miles away, we already have chec signing, check inserting, and microfilming equipment. We have studied this question carefully. The only added expens involved in handling the disbursing phase of the operation in ou Boston office is the transportation of cards back and forth. Tha would be much less than it would cost to equip a separate disbursin office at Lawrence, where the Internal Revenue office is located. 1 would cost much more to equip that office to complete the check writing operation. There would have to be a vault for check storag and grill work to protect the area where the checks are handled. W would have to purchase check signing, check inserting, and microfilm ing machines for that one operation. These costs more than outweigh the nominal cost of transporting the cards back and forth to Boston. Mr. GARY. Your operation in Boston and your operation in Chicago are inconsistent. Mr. MAXWELL. Under the planned operation, that is correct. Mr. MAXWELL. That is right. Mr. GARY. In the other you divide it up between the agencies so that one or the other is bound to be more expensive. Mr. MAXWELL. We found from these experiments in these areas that certain procedures have been developed which have effected economies which we think can be applied irrespective of whether the disbursing is decentralized or not. In other words, there is mutual utilization of documents, for example, which has been helpful and which has been installed in places where disbursing has not been decentralized. When this electronic equipment about which Mr. Cannon is speaking becomes available, we will be inconsistent in Chicago unless we do something about it. MANAGEMENT IMPROVEMENT Mr. GARY. I am glad to know you have a management improvement program set up in your Bureau. I think it could well devote its time to study of these matters, as you say it is doing now. It seems to me that the use of this electronics equipment offers an opportunity for great savings in Government expenditures throughout the entire Government. I am not at all certain that there should not be a general survey made of the Government to see where the electronics equipment can be used to advantage. As long as we do not have a commission studying that situation, I think certainly each department and agency should give very careful consideration to it, because it is unquestionably true that by utilizing electronics equipment you can make great savings. I think some of the bureaus have made progress in this direction, but there is room for a great deal more. RECONCILIATION OF PAID CHECKS BY TREASURER'S OFFICE Mr. MAXWELL. Mr. Chairman, could I supplement that by stating that the joint program of the General Accounting Office, the Bureau of the Budget, and the Treasury, as far as it can, is working on a number of projects of that kind, one of which may have been mentioned to you and undoubtedly will come up when the Treasurer's Office comes in for discussion of its appropriation. That is the reconciliation of paid checks by the Treasurer's office, previously done by the General Accounting Office. That will be made a part of the Treasurer's work, combining the two operations-stating and reconciliation of checks and using electronics equipment. They expect to save a considerable sum. Mr. Sokol, do you have any idea what the savings will be? Mr. SOKOL. Approximately $1.7 million of annual savings in addition to some $500,000 savings from the Federal Reserve banks. Mr. GARY. That was to be my next question, Mr. Maxwell. JOINT ACCOUNTING IMPROVEMENT PROGRAM Tell us what the Joint Accounting Board is doing. That is composed, as well as I recall, of the Secretary of the Treasury, the Director of the Bureau of the Budget, and the Comptroller General. Mr. MAXWELL. By the way, Mr. Sokol is Deputy Commissioner in Charge of our Accounting Systems Staff, and he is pinchhitting for Mr. Cake, who could not be here today. Mr. Sokol may be able to supplement anything I may say in more detail with respect to the joint program. About one-third of the Accounting Systems Staff is working on projects of the joint program. These include such items as a revision of our procedure for handling certified claims, whereby claims now being approved by the General Accounting Office for payment will be certified by the administrative agency concerned. Also, there will be established a separate account in each of the agencies to pay such claims, instead of having a single account in the Treasury Department. Some weight has been given to this proposal by including the suggestions in the Hoover Commission report. This group has also been working on legislation-or has worked on legislation which would permit the General Accounting Office to make adjustments in connection with suspensions made in disbursing officers' accounts where there is no fraud or negligence or where records have been lost. They have also participated in the study on the use of electronics equipment for reconciling checks previously mentioned. They have also been continuing the project of converting the writing of checks from paper to punchcard checks. Then we have about one-third of our force, working on the central accounting system; assisting in that installation, which is a joint project. We have been spending this last year, since July 1, improving those accounts which we hope to have pretty well installed by the end of this year. The accounts will give us a positive check between the figures reported by the various agencies on expenditures and receipts with related figures in the Treasurer's account, so that we can tie the two together. Also, we have the public debt accounting project which was also mentioned in the Hoover Commission report. I am very enthusiastic about the way it is coming along. The general project was a subject of a joint study by representatives of the three agencies participating in the joint program. After approval of the recommendations to go ahead with the installation, the matter was turned over to Public Debt to develop the procedure which would be followed. We are assisting them on that study. A General Accounting Office representative is also working with them. We hope to operate under the new procedure beginning next July 1. Undoubtedly Public Debt may mention that in their testimony. Those are some of the major items we have been working on, Mr. Chairman. We feel that very good progress has been made. In previous years we have had a summary statement which we have been able to give to you for the record, but this year that report is not yet available. I understand it may not be ready for a couple of weeks. However, we have a summary statement here of the certain projects in the Treasury Department, which we would be glad to furnish to the committee for its use or insertion in the record if you desire. This covers the highlights of accounting developments in the Treasury Department in 1955. HIGHLIGHTS OF ACCOUNTING DEVELOPMENTS Mr. GARY. The document "Highlights of Accounting Developments in the Treasury Department in 1955" will be inserted in the record at this point. (The information is as follows:) HIGHLIGHTS OF ACCOUNTING DEVELOPMENTS IN THE TREASURY DEPARTMENT IN 1955 The annual progress reports under the joint accounting program have governmentwide coverage and are necessarily highly selective as to subject matter and brief with respect to individual topics selected. This year, there has been prepared a report on accounting developments in the Treasury Department for the purpose of providing more comprehensive information on particular subjects relating to Treasury accounting operations which are contained in the joint program reports. The following are highlights of the developments reported with respect to the Treasury's systems of central accounting and reporting and other projects of governmentwide significance. SYSTEM OF CENTRAL ACCOUNTING In 1955, certain important changes were made in the system of accounting for the Government's receipts and expenditures and related cash operations. In many respects, the installation of these changes, beginning on July 1, 1955, brought to a climax a 5-year evolutionary period of progressive modification under authority of the Budget and Accounting Procedures Act of 1950. The new system of central accounts is designed to disclose the Government's receipts, by principal sources, and its expenditures according to the individual appropriation and other funds involved, together with the various types of cash transactions and the directly related assets and liabilities. The central accounts will show the budget surplus or deficit, both annual and cumulative. The cumulative deficit will be represented by the difference between the assets and liabilities. One of the fundamental objectives in this area was to anchor the receipts and expenditures, which are derived from the operations of disbursing and collecting officers, to the changes in the balance of the account of the Treasurer which result from deposits in and payments from the Treasurer's account through the banking system. This is being accomplished through the central accounting for liabilities representing checks unpaid and assets for deposits in transit. Procedures built into the system tie in the balance of checks unpaid for individual disbursing officers with the reconciliation and audit of the officers' accounts. Likewise, the deposits reported by disbursing and collecting officers are tied into the deposits received in the Treasurer's account through the central summary operations. The new system has been made possible through progressive simplification of central control procedures during the past 5 years. A basic step taken in 1955, immediately preceding the installation of the new system, was the issuance of a joint regulation by the Secretary of the Treasury and the Comptroller General, under authority of the Budget and Accounting Procedures Act of 1950, which authorized the great majority of disbursing officers to draw checks directly on the general account of the Treasurer. This eliminated the use of about 2,000 intermediate checking accounts for disbursing officers, with balances based on amounts of appropriations and deposits of certain collections. In addition to providing a practical basis for the new system of central accounts, this action created widespread simplication of procedures formerly required for the maintenance of checking accounts. Also, it provided the basis for streamlining deposit procedures, the accounting for receipts and various interagency transactions. Further, the effect toward a simple concept of accountability for |