Production credit corporations Rural Electrification Administration Pursuant to my request, representatives of our respective offices have discussed this matter at considerable length, and I have been informed that because of manpower limitations and other demands upon your Office, including the necessity for meeting specific requirements of law for certain audit reports to the Congress, it will be impossible at this time for you to make these audits as of January 31, 1953. It is understood also that your representatives have suggested an alternative course of action which will provide for an audit to be made by audit staffs in the Department with participation by your Office. It is my intention that the scope of these audits would be such as to provide an independent opinion that the financial statements of the corporations and lending agencies as of January 31, 1953, accurately reflect their assets and liabilities as of that date. While an independent audit by your organization would be preferred, I understand the conditions that make it impossible. Accordingly, I would appreciate information as to the nature of your alternative proposal, and the extent of participation by your Office in implementing it. Hoping that mutually satisfactory arrangements can be agreed upon, I am, Sincerely, EZRA TAFT BENSON, Secretary. COMPTROLLER GENERAL OF THE UNITED STATES, Hon. EZRA TAFT BENSON, Secretary of Agriculture. MY DEAR MR. BENSON: I have your letter of January 26, 1953, concerning an audit of certain activities of the Department to be made as of January 31, 1953. I regret that the pressures upon the General Accounting Office resulting from statutory reporting requirements and other congressional commitments, coupled with an acute shortage of qualified personnel, make it impossible for us to perform the audit you desire. To completely satisfy the desires expressed in your letter with respect to verification of the financial statements of the various corporations and lending activities of the Department of Agriculture as of January 31, 1953, would involve audits of each of such activities comparable to the audits performed by the General Accounting Office as of June 30 of each year under the Government Corporation Control Act. Such audits would entail the expenditure of many hundreds of thousands of dollars and would require many months to perform. In undertaking an audit along the lines which you propose, I feel it is only fair to point out and emphasize some of the difficulties which will be faced by your staff and would be faced by any audit organization: 1. The assets of Commodity Credit Corporation consist largely of loans on and inventories of farm commodities. The commodities involved are tremendous in quantity and are located all over the United States on farms, in warehouses, and other storage locations. The physical inspection work necessary to verify the existence and recorded quantities of commodities in storage under these circumstances is almost impossible to accomplish as of one given date. There is no counterpart in private industry for this type of situation. 2. Large amounts of the assets of Commodity Credit Corporation as well as Farmers Home Administration consist of loans to individual farmers. The standard method of verifying assets of this type is by direct correspondence with the debtors. Our experience in the past on such confirmation work has been that satisfactory replies of a type necessary to verify the account balances of such loans are almost impossible to obtain. 3. The production of financial statements as of one given date requires that all important transactions be cleanly cut off as of the date as of which the statements are made. In the case of Commodity Credit Corporation it is almost physically impossible to make a clean cut-off because of the number of transactions in process at widely separated locations throughout the country. Because of this, considerable time and effort would be required to try to reconcile the quantities determined by physical counts or confirmations with the amounts shown by accounting records. 4. Another factor to be considered in an undertaking of this nature, aside from its cost, is the disruption of the normal aduit plans and programs now in process in the Department's various agencies. The carrying out of a plan aimed at a verification of assets and liabilities as of January 31 will tie up all the auditors in the Department for many weeks at the expense of falling behind in carrying out their regularly scheduled audit work. I do believe, however, that the alternative procedure suggested below should go far to satisfy you of the integrity of the accounts and financial procedures of the business enterprises for whose operations you are now assuming responsibility. In this connection, I wish to point out that in carrying out our audits great reliance necessarily is placed upon the work done by the Department's own audit and investigative staffs. Based upon our experience we have found such reliance generally to be justified. In fact, a major criticism in this area has been that management officials have not always taken proper advantage of the findings reported to them by auditors and investigators. In preliminary discussions, an alternative method of accomplishing your desired result was presented by our staff. In essence, the suggestion was made that the burden of performing the necessary audit-verification work be assigned to the various internal audit organizations within the Department with participation by members of our staff to be provided in the form of guidance, review, and evaluation of the work planned and performed. Specifically, the extent of participation by the General Accounting Office would be limited to 1. Providing preliminary planning guidance and reviewing and evaluating audit programs developed by each agency's internal audit staff to meet your request for an audit as of January 31, 1953. 2. Reviewing and evaluating, on a test basis, audit work papers and reports in connection with such audit. Based upon this work I will be pleased to furnish you at the completion of the audit an evaluation of the soundness and adequacy of the audit methods followed by the agency audit staffs. Immediately upon being informed by you that you desire to proceed with the audits along the lines indicated in this letter, I will be glad to assign members of our staff to cooperate further with your staff. Sincerely yours, Hon. LINDSAY C. WARREN, Comptroller General of the United States. DEAR MR. WARREN: Receipt is acknowledged of your letter of January 26, 1953, in which you confirm my understanding that it is impossible at this time for the General Accounting Office to perform the special audits of the Department's corporations and lending agencies as of January 31, 1953. Careful consideration has been given to the alternative proposal contained in your letter. Under the circumstances, it appears desirable to proceed in accordance with that plan. The participation by members of your staff as specifically outlined in your letter will be appreciated. Also it is requested that you give consideration to the possibility of any additional audit methods or procedures in connection with your regular audit work for the fiscal year ended June 30, 1953, that might provide me with additional assurance concerning the financial condition of these agencies. In order that detailed plans for the audits may be started immediately, I have advised the head of each of the agencies affected that an audit will be made as of January 31, 1953, and each of the agency audit staffs will be prepared to cooperate to the fullest extent possible. Attached for your information is a copy of a memorandum which I have released in the Department directing that all files and records be made available to your auditors and investigators, except those prohibited by statute or Executive order. This memorandum has been issued in keeping with my intention that there shall be full cooperation between our two agencies. Sincerely, EZRA TAFT BENSON, Secretary. 30505-53-pt. 1——5 UNITED STATES DEPARTMENT OF AGRICULTURE, OFFICE OF THE SECRETARY, Washington, D. C., January 27, 1953. MEMORANDUM No. 1321 AVAILABILITY OF FILES AND RECORDS TO THE GENERAL ACCOUNTING OFFICE The General Accounting Office is authorized by the Budget and Accounting Act of 1921 (sec. 312, 31 U. S. C. 53) and the Government Corporation Control Act (sec. 105, 31 U. S. C. 850) to make audits and investigations of financial and related activities of the Department of Agriculture, and in connection therewith has the right to examine its books and records. The Budget and Accounting Act also provides (sec. 313, 31 U. S. C. 54) that the Department shall furnish such information regarding its activities and financial transactions as the Comptroller General may require. It is my desire to cooperate in every way possible with the Comptroller General, and in keeping with the intent and spirit of the statutes cited it shall be the policy of the Department of Agriculture to make available to representatives of the General Accounting Office all files, accounting records, and other information required in the conduct of audits or investigations, except such records the production of which is specifically prohibited by statute or Executive order. Further restrictions have been placed by the administrative regulations of the Department on the general availability of certain records in order to safeguard the public interest. It is not intended, however, that such restrictions shall be applied to the General Accounting Office when such information is necessary and essential to the discharge of its official duties and responsibilities. When material classified for security purposes is requested by auditors or investigators, it is incumbent on the agency security officer to assure compliance with security regulations in making any such records available for examination. If an agency official in any case should consider it advisable to withhold records or reports requested by a General Accounting Office representative, the Department's Director of Finance shall be consulted, or a report thereon shall be made to him. Such reports shall include a description of the records withheld and a statement setting forth the reasons why access thereto has been denied. EZRA TAFT BENSON, Secretary. THURSDAY, FEBRUARY 26, 1953. THE BUDGET FOR THE DEPARTMENT OF AGRICULTURE WITNESSES RALPH S. ROBERTS, DIRECTOR OF FINANCE AND BUDGET OFFICER, DEPARTMENT OF AGRICULTURE JOSEPH C. WHEELER, DEPUTY DIRECTOR, OFFICE OF BUDGET AND FINANCE, DEPARTMENT OF AGRICULTURE T. ROY REID, DIRECTOR OF PERSONNEL, DEPARTMENT OF AGRICULTURE Mr. ANDERSEN. The committee will come to order. Mr. Ralph S. Roberts, budget officer, Department of Agriculture is here to discuss the 1954 budget with us. Mr. Roberts, we welcome. you once gain. We appreciate the good work you have done in the past, and I consider you are one of the very best men in the Department. I might say the same about Mr. Reid of the Personnel Office. Prior to Mr. Roberts' statement, we will insert pages 2 and 3 of the committee print in the record. (The material referred to follows:) Mr. ANDERSEN. Mr. Roberts, do you have a general statement you wish to make? If so, we will be glad to receive it. Mr. ROBERTS. We appreciate the privilege of appearing again before this committee to discuss the work of the Department of Agriculture. During the course of the hearings, we want to be as helpful as we can in aiding the committee in its consideration of budget needs in 1954. We appreciate the expressions of confidence that you have indicated the committee has in us, and we hope to be able to so perform our work that it may continue. I thought it would be helpful to the committee, if, rather than present a formal statement, I might take a few minutes to give the committee summary information on the overall budget situation as presented in the estimates now before you. Mr. ANDERSEN. You may proceed in any way you see fit. Mr. ROBERTS. It might be helpful to the committee if we begin our discussion with a summary table which has been furnished to each member of the committee, table 1 of the book of budget tables we have prepared for your use. I would like to refer to certain figures in those tables, and a series of three charts we have which might be helpful in getting a general understanding or concept of the total makeup of the agriculture budget. Mr. ANDERSEN. I should like to have the summary included in the record at this point. (The material referred to is as follows:) |