strategic and logistic plans developed by the Joint Chiefs of Staff is retained.

Section 8. Changing the relationship of the Secretary of Defense to the Research and Development Board

The same remarks which were made in connection with section 7 of the proposed legislation are applicable to section 8. The Chairman of the Research and Development Board is made clearly responsible to the Secretary of Defense to assist the Secretary in performing the functions which have been made the responsibility of the Secretary.

A minor amendment to paragraph 214 (b) (3) eliminates from the 1947 statute the words "of joint interest" at the end of the sentence. This change was recommended by the Chairman of the Research and Development Board because of the fact that all research and development programs have a degree of joint interest. As a consequence the removal of the words clarifies the fact that it is not necessary to attempt to catalog certain projects as having joint interest and other projects as not having joint interest insofar as research and development are concerned.

Section 9. Compensation of civilian secretaries and other civilian officials (a) Secretary of Defense.-No change is made in the compensation prescribed for the Secretary of Defense. At the present time the annual salary of the Secretary of Defense is $15,000.

(b) Deputy Secretary of Defense. The legislation proposes that the Deputy Secretary of Defense shall be paid at the rate of $14,500 a year. The present statute provides that the Under Secretary of Defense, which position is intended as being succeeded by the post of Deputy Secretary, shall be paid at the rate prescribed for under secretaries of executive departments. At the present time the under secretaries of the Army, Navy, and Air Force receive $10,000 per year. (c) Secretaries of military departments. At the present time the Secretary of the Army, the Secretary of the Navy, and the Secretary of the Air Force receive compensation at the rate of $15,000 per year. The proposed legislation reduces this amount to $14,000.

Pay of consultants.-At the time the National Security Act of 1947 was passed the National Security Council was omitted from the provisions of section 303 (a) which authorized the Office of the Secretary of Defense, the Central Intelligence Agency, and the National Security Resources Board to employ part-time consultants. The committee looks upon this omission as an oversight and has corrected it, inasmuch as the National Security Council merits the highest priority of any of the agencies insofar as its requirements for consultants are concerned. The proposed legislation also increases the authorized daily compensation from $35 to $50. This is agreement consistent with the current appropriation act provision providing funds for such consultants and limiting their compensation.

Section 10. Reorganization of fiscal management to promote economy and efficiency

General summary.-Section 10 of the bill adds a new title to the National Security Act of 1947.

The title contains various provisions, all of which are intended to implement the authority over the budgets of the military services conferred upon the Secretary of Defense under section 202 (a) of the

National Security Act, as it now exists or as it may be amended. The title provides, among other things, for the appointment of a Comptroller in the Office of the Secretary of Defense, for the appointment of comptrollers in the military departments, and for comparable organization and procedures in budgetary and fiscal matters in the Office of the Secretary of Defense and in the military departments. The title also provides for the presentation of budgets in a form that clearly reflects the cost of performing the activities of the Department of Defense and for the conduct of authorized programs in the same manner. It contains authority for certain program adjustments, and gives the Secretary of Defense control over requests for legislation which would authorize new appropriations. It also contains provisions designed to prevent overdrafts and deficiencies. Among its other provisions are authority for the organization of inventories of the military departments into stock funds, for the operation of industrial- and commercial-type activities as integral working units-in a manner similar to commercial business enterprises-on the basis of an adequate capital structure, for departmental management funds to facilitate the carrying out of joint and special operations, for uniform terminologies, classifications, reporting systems, and accounting procedures, for the common use of disbursing facilities, and for reports of property

Whatever may have been the differences of view on other matters expressed by those who testified on the 1949 amendments to the National Security Act before the Armed Services Committee of the Senate. there seems to have been unanimous agreement that the Secretary of Defense should have effective authority and control over the military budgets and over fiscal procedures. This authority is conferred upon the Secretary of Defense by the provisions of section 202 (a). The new title IV is intended to implement it. Its provisions are designed to place the operation of the Defense Establishment on a sound budgetary and fiscal management basis. Comptroller of Department of Defense (sec. 401 of the new title)

(a) Establishing the Office; salary.-This subsection establishes a Comptroller for the Department of Defense in the Office of the Secretary of Defense. The Comptroller is to be a person experienced in this field, appointed from civil life by the Secretary and compensated at the rate prescribed by law for Special Assistants to the Secretary of Defense. The Comptroller will be the principal adviser of the Secretary of Defense on all budgetary and fiscal matters and will exercise the several specified functions under the authority and direction of the Secretary.

(b) Duties of the Comptroller.-This subsection provides that the Comptroller will be the fiscal management officer of the Department of Defense and as such responsible, under the Secretary of Defense, for efficiency and economy in its business operations. A principal function is the supervision and direction of the preparation of an integrated military budget, based upon the strategic plans of the Joint Chiefs of Staff, coordinated with the plans of the Research and Development Board in the field of research and with the plans of the Munitions Board in the fields of procurement, industrial mobilization, and stock piling of strategic and critical materials This includes the programs and estimates of the Office of the Secretary of Defense

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and its associated boards and agencies, as well as those of the Departments of the Army, Navy, and Air Force.

The Comptroller will also establish and supervise the execution of principles, policies, and procedures to be followed in connection with organizational and administrative matters relating to the preparation and execution of the departmental budget, to fiscal, cost, operating and capital property accounting, to progress and statistical reporting, and to internal audit. He will also establish and supervise the execution of policies and procedures relating to the expenditure and collection of funds administered by the Office of the Secretary of Defense and by the military departments.

The Comptroller will also be responsible for the establishment of uniform terminologies, classifications, and procedures in such matters insofar as they are applicable to the military departments and all agencies of the Department of Defense.

Military Department budget and fiscal organization—departmental comptrollers (sec. 402 of the new title)

(a) Fiscal practices and procedures in military departments to be consistent with those in Office of Comptroller, Secretary of Defense.-This subsection authorizes the Secretary of Defense to require that each of the military departments organize its budget, accounting, reporting, and administrative management matters in a manner consistent with the operations of the Office of the Comptroller in the Department of Defense. This is essential to achieve reasonable coordination and effectiveness in fiscal management.

(b) Departmental comptrollers.--This subsection permits the Secretaries of the military departments to appoint either military or civilian personnel as departmental comptrollers and contemplates the utilization at every echelon of competent civilian personnel and competent military personnel of either the line or the various staff corps. In order to insure that budget and fiscal matters receive the top-side civilian control and attention necessary to bring about the fullest measure of economy and efficiency, this subsection requires that the comptrollers of the several military departments be directly responsible to either the Secretary, the Under Secretary, or an Assistant Secretary of the respective military departments. Where departmental comptrollers are not civilians, the Secretaries are required to appoint a civilian as deputy comptroller.

Performance budget (sec. 403 of the new title)

(a) To be used wherever practicable; uniformity prescribed.-This subsection requires that the budget estimates of the Department of Defense be formulated, presented, and justified, and authorized programs administered, in a manner that clearly reflects the cost of performance of functions and activities that can be identified readily as self-contained, integrated operations. The Secretary of Defense is given authority to determine the manner of budget preparation and presentation and the manner of program administration, with these objectives in mind, subject to the authority and direction of the President. The subsection requires that operating and capital costs be separated, and permits this new form of budget administration to be instituted on a gradual basis in view of the complexity and magnitude of the problems involved in the change-over from the present

system. It also requires budget presentations in readily comparable form and uniform pattern, to the extent practicable.

The Commission on Organization of the Executive Branch of the Government and the Task Force Committee on the National Security Organization recommended unanimously that the Federal Government should adopt a budget based on functions, activities, and projects. This type of budget was designated by the Commission as a performance budget.

The performance budget will focus attention upon the general character and relative importance of work to be done and services to be rendered, rather than upon things to be acquired, such as personal services, supplies, equipment, and so on. These items are after all, only the means to an end The all-important thing in budgeting is the purpose to be achieved-the work or service to be accomplished-and what that work or service will cost. The performance budget focuses executive and congressional evaluation, a‹tion, and direction on the nature, scope, and magnitude of the proposed activities. It places both the accomplishment and the cost of each identifiable program in a clear light before the President, the Congress, and the public, and permits a more ready determination of how efficiently and economically an approved program has been carried out.

Defects in present budgeting structure.-Under the present budget and appropriation structure, almost every project or program undertaken by the Federal Government requires, for its execution, financing from numerous appropriations. Usually such appropriations are managed or administered by scattered and somewhat unrelated organizational divisions. This situation is comparable to having a business or a farm financed from numerous sources and managed by persons having either varying degrees of operational responsibility or none at all. This kind of absentee administration inevitably hinders the achievement of efficiency and economy.

The multiplicity of sources from which operational funds are now derived makes it practically impossible, in activities of any magnitude, to estimate in advance with any reasonable degree of certainty the cost of performance or operation of an identifiable activity or program. These difficulties prevent accurate and reliable cost accounting and thus deprive budget planners and the Congress of any real guide to the costs of project or budget programs.

Reflects cost of performance.-Subsection 403 (a) is intended to eliminate these difficulties by financing each identifiable project or budget program from a single source, thus clearly fixing management responsibility, simplifying reporting, and permitting departmental management and the Congress more easily to determine costs and to evaluate progress and accomplishment. Its effect is to make the budget structure parallel the management structure. Thus the cost of performance of functions and activities will be reflected clearly

Strengthens congressional control. The performance budget does not dilute, but strengthens, legislative control and responsibility The Congress retains fully and in all respects its power over appropriations and expenditures. As a matter of fact, the performance budget sharpens congressional control over the Department of Defense by giving more comprehensive and reliable information to departmental

management officials, as well as to the President, the Congress, and the general public. It affords the individual Members of Congress the means of understanding what the military establishment is doing, and what the costs are. Supporting schedules can be fully provided, and in more understandable and effective form than at present.

Basic principles.-The underlying principles of the performance budget are clear and simple. The performance budget contemplates—

(a) that all costs relating to a logical and identifiable program be included as a project or a budget program for presentation and justification by the Department concerned to the Bureau of the Budget, the President, and the Congress, and for administration and reporting after the appropriation of moneys;

(b) that there be a logical and, so far as practical, uniform grouping of projects or budget programs by the primary functions of the military departments, with this grouping paralleling so far as possible, the organization and management structure;

(c) that there be a segregation between capital and current operating categories.

The budget structure not only affects the presentation of budget estimates but runs to the root of management and fiscal responsibility. Management is handicapped when fiscal responsibility is diffused. The financing of an identifiable program from a single source of funds clearly fixes management responsibility, simplifies reporting, and permits departmental management and the Congress more easily to determine costs and to evaluate programs.

(b) Expediting conversion from present basis to cost-of-performance basis. To expedite the change-over, subsection 403 (b) authorizes the Secretary of Defense, for a limited time, to make such transfers and adjustments between the appropriations available to each of the military departments in such manner as will facilitate both efficiency and economy in the management of identifiable programs and activities and concurrently promote the development of complete costs for each separate budget project. The subsection permits the establishment of a new account or the retitling of an existing account in order that the resulting title may be descriptive of the functions to be performed thereunder.

The right to make the transfers and adjustments authorized by this subsection is limited (1) to the end of the second full fiscal year following the effective date of this Act and, (2) to transfers and adjustments between appropriations within a single military department. It is further limited by a requirement that the approval of the President be obtained.

Subsection 403 (b) is more readily understood if it is realized that the budget processes of the Federal Government require many months for development and consideration. The budgets for the fiscal year 1951, for example, have been in the course of preparation since the beginning of 1949. Even with the statutory requirement for submission of budgets of a performance type, full implementation will not be possible until presentation of the budget for 1952, nor will the full benefits of a performance-type budget be available until probably fiscal year 1953, at which time there will have been one year's experience under such a budget. Some benefits of a performance budget, however, can be realized almost immediately by the