[Congressional Record Volume 140, Number 4 (Friday, January 28, 1994)]
[House]
[Page H]
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[Congressional Record: January 28, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                               M ACCOUNTS

  Mr. GRASSLEY. Madam President, I will address another point, 
something that I addressed over a long period of time--last year, at 
least--the breakdown of discipline and integrity in financial 
management within the Government. I suppose there are problems all the 
way through Government on this. But I have been spending most of my 
time speaking about the breakdown of such discipline and integrity in 
fiscal management specifically within the Defense Department. So, 
today, speaking further on that, and more specifically to what I feel 
is incorrect action the General Accounting Office has taken. I want to 
direct some criticism dealing with the Department of Defense but this 
time toward the Comptroller General, Mr. Charles Bowsher.
  I would have to say over a long period of time I have been very 
complimentary of things that Mr. Bowsher has done. He cooperated with 
me on a great number of things. He has been very helpful to the 
Congress as a whole in making sure that the taxpayers' dollars are well 
spent. But in this particular instance I have to disagree with what Mr. 
Bowsher has said.
  My concerns about Mr. Bowsher and GAO's decision flow directly from 
that decision to reopen the Department of Defense, or DOD, M accounts. 
I am fearful the GAO decision will further the breakdown of discipline 
and integrity in the fiscal management within our Government. And, of 
all Government officials, I think the Comptroller General should be in 
the forefront of enhancing fiscal management of Government. I feel 
until this decision I have not disagreed very often with Mr. Bowsher.
  I would like to divide my presentation on Mr. Bowsher's decision into 
two parts.
  Today, I would like to address the legal issues surrounding the 
decision.
  Then next week I would like to focus on one technical aspect of the 
decision that I find particularly offensive.
  To refresh your memory, Madam President, DOD had stashed $50 billion 
in expired appropriations in a slush fund known as the M accounts. This 
money had accumulated over three or four decades. This money had no 
fiscal year identify and was being used to cover cost overruns and 
other unauthorized activities beyond the purview of Congress.
  So Congress took steps in 1990 to close down the secret bank account. 
Congress passed a law that phased out the M accounts over a 3-year 
period. The last M account was closed on September 30, 1993.
  Early last year, I heard some Pentagon bureaucrats were planning a 
last-ditch raid on the M accounts.
  They were seeking approval from the Comptroller General to draw 
substantial sums of money from M accounts that had been closed by a 
1990 law that we passed.
  The Army wanted to recover $130 million that it said was 
inadvertently canceled due to a clerical error.
  I would like to meet the clerk who misplaced the decimal point and 
accidentally canceled $130 million in Army budget authority.
  The DOD plan causes me concern, Madam President, and it still causes 
me concern because they can go ahead now under this GAO ruling.
  To begin with, why would DOD turn to the Comptroller General for 
relief from a law passed by Congress?
  I think there is an obvious answer.
  The bureaucrats in the Pentagon were hoping to use a legal gimmick to 
circumvent the law and make another end run around Congress.
  The Air Force had previously launched a similar probe, seeking relief 
from the M account law, but Congress threw cold water on that idea.
  DOD figured the General Accounting Office [GAO] was easier than 
Congress. And they are right about that.
  The Army's $130 million request was to be a test case--like the 
camel's nose under the tent. A green light from the Comptroller General 
on the $130 million could open the flood gates.
  The Air Force is waiting in the wings with a request for another $200 
to $300 million of clerical error and maybe more.
  That is the word on the street. I do not know about the Navy.
  So on March 25, 1993, I wrote to Mr. Bowsher to inquire about how he 
intended to proceed with the DOD request to reopen the M accounts. The 
M accounts had been closed by act of Congress. It took 6 long months to 
get an answer.
  Then Mr. Bowsher did exactly what I was afraid he would do.
  He gave the Pentagon the green light to reenter the magic vault or M 
accounts.
  Madam President, I do not understand Mr. Bowsher's decision.
  He cites legal authority but none of it withstands scrutiny.
  Madam President, the main source of my concern is Mr. Bowsher's 
decision paper entitled ``Department of the Treasury Request for 
Opinion on Account Closing Provisions of the Fiscal Year 1991 National 
Defense Authorization Act.'' The report is identified, for anybody who 
wants to read it, by the number B-251287 and is dated September 29, 
1993.
  Madam President, I ask unanimous consent to print my letter and the 
GAO documents in the Record.
  There being no objection, the material was ordered to be printed in 
theRecord, as follows:


                                                  U.S. Senate,

                                   Washington, DC, March 25, 1993.
     Hon. Charles A. Bowsher,
     Comptroller General, U.S. Government Accounting Office, 
         Washington, DC.
       Dear Mr. Bowsher: I am writing to raise questions about 
     your review of the Department of the Treasury's request to 
     exempt the Department of Defense (DOD) from certain 
     provisions of the ``M'' account reform act of 1990--Sections 
     1045 and 1406 of Public Law 101-150.
       At DOD's request, the Treasury Department is seeking 
     approval and authority to use ``administrative procedures'' 
     to draw substantial sums of money--at least $130 million and 
     probably much more--from ``M'' accounts that have been 
     cancelled and closed by law.
       The Treasury Department has asked you to render an opinion 
     on this matter, based on the authority vested in your office 
     by 31 USC 1553 and 31 USC 3326. The request is contained in a 
     letter dated October 27, 1992.
       Mr. Bowsher, I am somewhat baffled by the Treasury 
     Department's request, since the department readily admits 
     that there is no authority in the law to do what DOD wants 
     done.
       The Treasury Department's letter clearly suggests that the 
     ``plain language'' of the ``M'' account reform act leaves no 
     room for ``administrative discretion'' to resolve DOD's money 
     problem. The Treasury Department letter correctly points out 
     that the balances involved have been cancelled, deobligated, 
     withdrawn, and are no longer available. And, as Treasury 
     points out, the law does contain a safety valve designed 
     specifically to address the DOD's problem. If there are 
     indeed legitimate obligations that are properly charged to 
     accounts that have been closed under the current law, then 
     Section 1405 (b)(7) provides for the use of current 
     appropriations to meet those obligations. The Treasury 
     Department concludes with this assessment:
       ``The law does not provide for the adjustment or 
     restoration of amounts cancelled or withdrawn based on 
     clerical mistakes or errors in reporting; nor does it provide 
     for administrative correction, after the fact, of 
     cancellations or withdrawals which resulted from clerical 
     mistakes or errors in reporting * * *''
       Mr. Bowsher, I think the Treasury Department's 
     interpretation of the law is entirely correct. The intent of 
     the law is crystal clear. There is no ambiguity in the law 
     whatsoever. The accounts in question have been cancelled and 
     closed. The balances in those accounts have been wiped off 
     the books. They are gone. There is nothing in the law that 
     would permit DOD or Treasury to re-open those accounts. And 
     certainly, there is no authority in the law to establish ``a 
     pass through account mechanism''--as proposed by Treasury--
     that would allow for adjustments after accounts were closed 
     due to sloppy bookkeeping procedures.
       Furthermore, if DOD had complied fully with the ``M'' 
     account legislation and audited those accounts and determined 
     which obligations were valid and supported by documentary 
     evidence as required by 31 USC 1501, the Pentagon would not 
     be in this fix today.
       Now, Mr. Bowsher, how does DOD find itself in this 
     predicament? How could DOD erroneously cancel $130 million in 
     valid, unliquidated obligations--due to a ``clerical error''? 
     As you know so well, this is not the result of a ``clerical 
     error.'' It is the result of sloppy bookkeeping--pure and 
     simple. Disbursements and obligations are not being recorded 
     in accounting books in a timely manner. The delay between the 
     time an obligation is incurred and recorded can be measured 
     in days. It can be months and even years. The process of 
     recording obligations should be nothing more than a technical 
     accounting function, but at the Pentagon, it has become 
     highly politicized--and for good reason. The failure to 
     record obligations in a timely way has become a way of 
     avoiding and concealing Antideficiency Act violations.
       It is exactly this kind of problem that gave rise to the 
     ``M'' account reform act. Slopping bookkeeping, 
     overobligations, and Antideficiency Act violations seem to be 
     a way of life at the Pentagon. In my mind, this is 
     unacceptable and must not be tolerated.
       I would like to urge you not to authorize the Treasury to 
     reopen ``M'' accounts that have been cancelled and closed by 
     law. I would like to be informed of your final decision on 
     this matter.
       Your consideration would be appreciated.
           Sincerely,
                                              Charles E. Grassley,
                                                     U.S. Senator.
                                  ____

                                               Comptroller General


                                         of the United States,

                               Washington, DC, September 29, 1993.
     Hon. Charles E. Grassley,
     U.S. Senate.
       Dear Senator Grassley: This responds to your March 25, 1993 
     letter regarding a request of the Department of the Treasury 
     for our opinion on the account closing rules in section 1405 
     of the fiscal year 1991 National Defense Authorization Act. 
     Pub. L. No. 101-510, 104 Stat. 1675 (1990). Specifically, 
     Treasury asked whether it has the authority to restore 
     canceled appropriation account balances in order to correct 
     reporting and accounting errors.
       Enclosed is our decision of today, B-251287, which advises 
     that Treasury may not restore canceled appropriation account 
     balances. A narrow exception to this rule allows for 
     restoration of canceled balances where an obvious clerical 
     mistake has been made. The decision also concludes that 
     Treasury may adjust canceled appropriation account balances 
     in order to record a disbursement that was made prior to 
     cancellation. The recordation of the disbursement is neither 
     a new obligation of, nor an expenditure from, the canceled 
     account, but is merely an accounting adjustment to reflect 
     the liquidation of an obligation that was incurred prior to 
     cancellation. We share your concerns about the bookkeeping 
     practices of the Department of Defense, and recommend, in the 
     decision, that the Secretary of the Treasury establish 
     reasonable time limits for the correction of reporting errors 
     resulting from obvious clerical mistakes and for the matching 
     of disbursements with canceled obligations.
       We would be happy to meet with you or your staff to discuss 
     this decision further. Ms. Amy Shimamura of our Office of the 
     General Counsel can arrange such a meeting. Her telephone 
     number is (202 512-5644.
           Sincerely yours,
                                                Milton J. Socolar,
                                        Acting Comptroller General
                                             of the United States.
                                  ____


                                Decision

     Matter of: Department of the Treasury Request for Opinion on 
         Account Closing Provisions of the Fiscal Year 1991 
         National Defense Authorization Act.
     File: B-251287.
     Date: September 29, 1993.


                                 digest

       1. Under the fiscal year 1991 National Defense 
     Authorization Act, canceled merged appropriation account 
     balances may not be restored. 31 U.S.C. Sec. 1551 note. 
     However, if the Department of the Treasury is presented with 
     convincing evidence that a reporting error has occurred as a 
     result of an obvious clerical mistake, it may restore such 
     balances to correct the mistake. We recommend that Treasury 
     establish reasonable time limits within which agencies must 
     submit requests for correction of errors.
       2. Under the fiscal year 1991 National Defense 
     Authorization Act, canceled appropriation account balances 
     are not available for obligation or expenditure for any 
     purpose. 31 U.S.C. Sec. Sec. 1552(a), 1555. The Department of 
     the Treasury, however, may record a disbursement made before 
     cancellation as a payment. Recording the disbursement is 
     neither a new obligation of, nor an expenditure from, a 
     canceled account, but is merely an accounting entry to 
     reflect the liquidation of an obligation before cancellation.


                                decision

       The Department of the Treasury (Treasury) requests our 
     opinion on questions raised by the Department of Defense 
     (DOD) regarding the account closing provisions of section 
     1405(b) of the fiscal year 1991 National Defense 
     Authorization Act (Act), Pub. L. No. 101-510, 104 Stat. 1675 
     (1990), codified at 31 U.S.C. Sec. 1551 note. Treasury asks 
     two specific questions. First, Treasury asks whether it may 
     restore either unobligated or obligated appropriation account 
     balances that were canceled due to reporting errors or 
     clerical mistakes. We conclude that Treasury may do so.
       Second, Treasury asks whether it may record as a payment 
     from a canceled account a disbursement made prior to 
     cancellation of the account. Treasury may do so. Since 
     the liquidation of the obligation eliminates the budget 
     authority, leaving nothing to be canceled, recording the 
     disbursement is neither a new obligation of, nor an 
     expenditure from, a closed account. It is merely an 
     accounting entry to reflect the liquidation of an 
     obligation validly incurred and liquidated prior to 
     cancellation.


                               background

       Treasury's question arise from two different situations. In 
     the first situation, the Department of the Army (Army) 
     submitted to Treasury a year-end statement (S.F. 2108) for 
     fiscal year 1991, certifying its balances to be withdrawn and 
     canceled. The Army advises that it mistakenly included 
     approximately $130 million in valid, unliquidated obligations 
     in its listing of unobligated merged surplus authority 
     balances that were canceled under section 1405(b)(3) of the 
     Act. This mistake involves Army procurement appropriations 
     for fiscal years 1983, 1984, 1985, and 1986. The Army has 
     asked the Treasury to restore the $130 million to its ``M'' 
     account.
       The second situation involves delays in year-end reporting 
     with respect to ``cross-disbursing'' transactions, that is, 
     transactions where one DOD component makes payments for 
     another. Many DOD disbursing officers make payments on 
     obligations of other DOD components as well as of their own 
     component. Inherent in this practice is a time delay between 
     the date of payment and the date on which the activity 
     holding the obligation receives notification of payment. The 
     time delay is exacerbated when the disbursing activity makes 
     an accounting error, for example, by charging the payment to 
     the wrong appropriation account.\1\ These cross-disbursing 
     payment issues take on added significance when payments are 
     associated with ``M'' or expired account balances nearing 
     cancellation dates.
---------------------------------------------------------------------------
     Footnotes at end of article.
---------------------------------------------------------------------------
       DOD and Treasury note that if the disbursing activity fails 
     to notify the activity holding the obligation in due course, 
     the budget authority supporting the paid obligation may be 
     canceled by operation of law, 31 U.S.C. Sec. Sec. 1551 
     note, 1552(a), leaving only current appropriations 
     available to cover obligations and adjustments to 
     obligations of canceled appropriation accounts. 31 U.S.C. 
     Sec. Sec. 1551 note, 1553.
       Under prior law, obligated balances of an appropriation 
     account, 2 years after expiration of the account for purposes 
     of obligation, were merged with the obligations of like 
     appropriation accounts from prior fiscal years into what came 
     to be called merged or ``M'' accounts. 31 U.S.C. Sec. 1552 
     (1988), amended by section 1405(a) of National Defense 
     Authorization Act for 1991, Pub. L. No. 101-510, 104 Stat. 
     1675. Similarly, the unobligated balances of expired accounts 
     were combined with the unobligated balances of like accounts 
     for prior fiscal years in merged surplus authority accounts. 
     Id. To the extent an agency needed additional authority to 
     cover adjustments to obligations or previously unrecorded 
     obligations in the ``M'' accounts, the agency could restore 
     unobligated amounts from the merged surplus authority 
     accounts to the ``M'' accounts. Id. The merged accounts were 
     available to adjust obligations without fiscal year 
     limitations.
       In 1990, Congress determined that the controls over the use 
     of appropriations were not effective and that DOD, in 
     particular, was expending funds from these accounts without 
     sufficient assurance that authority for such expenditures 
     existed or in ways that the Congress did not intend.\2\ To 
     correct these defects, Congress enacted the account closing 
     provisions in the fiscal year 1991 National Defense 
     Authorization Act.\3\
       The Act eliminates merged accounts and extends an expired 
     appropriation account's fiscal year identity to 5 years, 
     after which time the account closes. 31 U.S.C. Sec. Sec. 1551 
     note, 1552(a). Section 1405(b)(3) of the Act canceled merged 
     surplus authority accounts on December 5, 1990. Section 
     1405(b)(6) of the Act canceled, on March 6, 1991, merged 
     obligated balances of budget authority that had been in ``M'' 
     accounts more than 5 years. Under section 1405(b)(4), any 
     remaining ``M'' account balances are to be canceled by 
     September 30, 1993.


                               discussion

       As a general rule, Treasury may not restore balances 
     canceled under sections 1405(b)(3), 1405(b)(4), and 
     1405(b)(6). This proposition flows naturally from Congress's 
     decision to ``cancel,'' that is, to nullify or invalidate, 
     the unobligated balances in the merged surplus authority 
     (section 1405(b)(3)) and the obligated balances in the ``M'' 
     accounts (sections 1405(b) (4) and (6)). Although the 
     operative language of section 1405(b)(6), entitled the 
     ``Cancellation of oldest obligated balances,'' does not use 
     the verb ``cancel'' to achieve the stated result, it achieves 
     the same result by specifying that ``[a]mounts so deobligated 
     and withdrawn may not be restored.'' Thus, the restoration of 
     canceled unobligated balances would be inconsistent with the 
     Act.
       This does not mean that Treasury cannot restore amounts so 
     as to correct obvious reporting and clerical errors. We have 
     long held, for example, that Treasury may transfer from the 
     general fund to the correct appropriation account amounts 
     improperly deposited into the general fund. See, e.g., 45 
     Comp. Gen. 724, 730 (1966); 3 Comp. Gen. 762 (1924); 2 Comp. 
     Gen. 599, 601 (1923); 12 Comp. Dec. 733, 735-36 (1906). The 
     Comptroller of the Treasury explained the rationale 
     underlying this principle: ``Taking [the improperly deposited 
     amount] from the Treasury and placing it to the credit in the 
     Treasury of the appropriation to which it belongs violates 
     neither the Constitution nor any other law, but simply 
     corrects an error by which it was placed to the 
     unappropriated surplus instead of to the appropriation to 
     which it belongs.'' 12 Comp. Dec. at 735. We think the same 
     principle applies here.
       In this sense, the Treasury adjustments of the accounting 
     records does no more than place the funds back into the 
     account where they otherwise belong. As the Supreme Court 
     observed in a related situation, it ``would be unrealistic * 
     * * to require congressional authorization before a data 
     processor who misplaces a decimal can `undo' an inaccurate 
     transfer of Treasury funds.'' Republic National Bank of Miami 
     v. United States, ---- U.S. ----, 113 S. Ct. 554, 561 (1992).
       We wish to emphasize, however, that Treasury's authority to 
     correct the accounts relates only to obvious clerical errors 
     such as misplaced decimals, transposed digits, or 
     transcribing errors that result in inadvertent cancellations 
     of budget authority, and is not meant to serve as a 
     palliative for deficiencies in DOD's accounting systems. The 
     current record does not provide any indication of the type of 
     mistake at issue here. Only if the Army is able to provide 
     Treasury with convincing evidence that the mistake here falls 
     within the coverage of the above decisions may Treasury 
     adjust Army's accounting records to restore budget 
     authority needed to correct the mistake. One of the very 
     reasons for the new account closing procedures was the 
     inadequacy of DOD's past accounting of ``M'' account 
     obligations. See, e.g., H.R. Rep. No. 665, 101st Cong., 2d 
     Sess. 2962 (``not all claims against the M accounts are 
     valid''). We have recently reported on a number of 
     accounting problems in the Army and Air Force which 
     indicate that DOD's accounting for current appropriations 
     is also inadequate. For example, in a report examining the 
     Army's financial statement for fiscal years 1992 and 1991, 
     we were unable to express an opinion on the reliability of 
     the financial statements for those fiscal years because of 
     the Army's accounting systems inadequacies and failure to 
     adhere to DOD and Army financial policies.\4\ In another 
     report, we found that five Air Force Air Logistics Centers 
     had inaccurate account balances totalling $512 million due 
     to, among other things, paying a contractor too much, 
     charging the wrong appropriation account, or processing 
     information on obligation, payment, or collection 
     transactions inaccurately or incompletely.\5\
       In our view, the type of clerical errors that Treasury can 
     correct should typically manifest themselves soon after an 
     account is closed. The passage of time only magnifies the 
     difficulty inherent in reconstructing the facts needed to 
     establish the error. Therefore, we recommend that Treasury 
     establish reasonable time limits within which agencies must 
     submit requests for correction of reporting errors resulting 
     from obvious clerical mistakes.\6\
       Turning to the second question, Treasury may adjust 
     canceled appropriation account balances to record 
     disbursements made before cancellation of expires accounts. 
     The restriction in section 1552(a) of title 31, United States 
     Code, codifying section 1405(a)(1) of the Act, does not apply 
     because recording the disbursement results in neither a 
     new obligation of, nor an expenditure from, the canceled 
     appropriation account. The liquidation of the obligation 
     eliminates the underlying budget authority, leaving 
     nothing to be canceled. It completes the transaction and 
     discharges the government's liability. The recording of 
     the disbursement made prior to cancellation of the expired 
     account is simply an accounting entry to reflect the 
     completion of the transaction before cancellation of the 
     expired account. We see no reason why DOD and Treasury 
     should not record these disbursements for canceled ``M'' 
     account or expired account balances.\7\
       Accordingly, if DOD is able to establish to the 
     satisfaction of the Treasury that a validly recorded 
     obligation in a canceled appropriation account was liquidated 
     before cancellation, then Treasury may adjust the canceled 
     appropriation account balance to reflect the disbursement. If 
     a disbursement that was made before cancellation of an 
     appropriation account cannot be matched with a recorded 
     obligation of a canceled account, but DOD can establish to 
     the satisfaction of Treasury that the disbursement represents 
     payment of a valid unrecorded obligation otherwise properly 
     chargeable against the canceled appropriation account, then 
     Treasury may adjust the canceled account balance to reflect 
     the disbursement. Of course, if there is insufficient budget 
     authority available in the canceled account to cover the 
     disbursement, DOD should determine whether there was a 
     reportable violation of the Antideficiency Act, 31 U.S.C. 
     Sec. 1341.
       We recommend that if the Secretary of Defense cannot match 
     disbursements with obligations of canceled appropriation 
     accounts within time limits established by Treasury,\8\ the 
     Secretary determine the reason for DOD's inability to do so, 
     and take appropriate action to correct the problem.


                               footnotes

     \1\We have reported that the Navy's Standard Accounting and 
     Reporting System which annually accounts for nearly $57 
     billion, or 57 percent, of the Navy's overall budget, 
     contained $12.3 billion in unmatched disbursements as of 
     February 19, 1992. In that report, we stated that unmatched 
     disbursements were largely caused by lax compliance with 
     existing guidance, procedural requirements, and internal 
     controls. GAO Report to the Acting Secretary of the Navy, 
     ``FINANCIAL MANAGEMENT--Navy Records Contain Billions in 
     Unmatched Disbursements,'' GAO/AFMD-93-21 (June 1993).
     \2\GAO Report to Congressional Committees, ``FINANCIAL 
     MANAGEMENT--Agencies' Actions to Eliminate ``M'' Accounts and 
     Merged Surplus Authority,'' GAO/AFMD-93-7 (April 1993).
     \3\H.R. Rep. No. 665, 101st Cong., 2d Sess. 2962-63 (1990).
     \4\GAO Report to the Congress, ``FINANCIAL AUDIT--Examination 
     of the Army's Financial Statements for Fiscal Years 1992 and 
     1991,'' GAO/AIMD-93-1 (June 1993).
     \5\GAO Report to the Chairman, Subcommittee on Defense, 
     Committee on Appropriations, House of Representatives, 
     ``FINANCIAL MANAGEMENT--Air Force Records Contain $512 
     Million in Negative Unliquidated Obligations,'' GAO/AFMD-89-
     78 (June 1989).
     \6\Pursuant to section 4230.60 of the Treasury Financial 
     Manual (TFM), treasury requires the submission of year-end 
     closing reports by deadlines specified in TFM Bulletins.
     \7\The alternative of using current appropriations, provided 
     by sections 1405(a)(1) and 1405(b)(7) of the Act, 31 U.S.C. 
     Sec. Sec. 1551 note, 1553(b)(1), would not be appropriate 
     here because under those sections current appropriations are 
     only available for obligations and adjustments to obligations 
     that would have been chargeable to canceled balances. 
     Obligations that were liquidated by disbursements made prior 
     to cancellation are no longer obligations of the canceled 
     account. The use of current appropriations to liquidate paid 
     obligations would result in a double charge to budget 
     authority.
     \8\With available technology, DOD should have no difficulty 
     reconciling its year-end expenditures with obligations in 
     time for inclusion in year-end closing reports required by 
     Treasury.

  Mr. GRASSLEY. First, Mr. Bowsher's decision authorizes DOD to regain 
access to M accounts that have been closed by law.
  If the Department can present convincing evidence that valid 
obligations were accidentally canceled because of a clerical error, Mr. 
Bowsher is willing to reopen the doors to the Magic Vault--but just a 
crack, he promises. Not very much, just for $130 million clerical 
error. How many more will we have?
  Second, Mr. Bowsher's decision authorizes the DOD to continue 
recording obligations and disbursements against closed M accounts--but 
only if the transactions were made prior to cancellation of those 
accounts.
  Third, Mr. Bowsher's decision authorizes DOD to monkey with the M 
accounts indefinitely.
  Mr. Bowsher's decision lacks a sound foundation in law. I am 
referring, of course, again to the 1990 M account reform law embodied 
in sections 1405 and 1406 of Public Law 101-510, the law that we passed 
in 1990 that canceled all M account authority. The intent of the law is 
crystal clear. There is no ambiguity in the law whatsoever: No more 
slush fund in the honey pot, period.
  I believe that the legal analysis underlying Mr. Bowsher's decision 
in this M account case OK'ing a $130 million clerical error to be paid 
for is flawed for two reasons.
  The first is that the M account reform legislation canceled account 
balances and provided no basis whatsoever for reopening them. This 
clear statutory directive supersedes existing discretionary authority 
to reopen accounts to correct clerical errors. There is nothing in the 
law that leaves an opportunity to go back and replace a missing decimal 
point or a lost number. Again, that is a $130 million clerical error 
that was a misplaced decimal.
  Next, the authority cited by the GAO is weak. The only authority that 
the Comptroller General gives is a handful of previous rulings by the 
Comptroller General and two paragraphs of dicta from Justice Blackmun's 
opinion in the Republic National Bank of Miami versus United States. 
That opinion was joined by only two other Justices. Instead, six 
Justices wrote concurrently to express their disagreement with the part 
of the opinion cited as authority for the General Accounting Office's 
decision.
  Here is the legal basis for this, I want to emphasize. The 
Comptroller General used previous Comptroller General opinions and then 
dicta in a statement by a Supreme Court Justice that was a minority 
view, a 6-to-2 decision. It does not seem to me, regardless of how 
distinguished Justice Blackmun might be, that the discussion in any way 
reaches the situation at hand as a basis for a legal determination for 
the Comptroller General to approve a $130 million clerical error. I 
think it is a decision made in the sand that will not stand up to 
authority.
  Furthermore, I think the decision is unnecessary. The M account 
reform law contains a safety valve specifically designed to address the 
Department of Defense's money problem. If the obligations in question 
are legitimate and if they are properly chargeable to accounts that 
have been closed by law, then the Department of Defense is authorized 
under section 1405(b)(7) to use current appropriations to pay the 
bills.
  So I am baffled and somewhat disturbed by Mr. Bowsher's decision 
allowing them to go elsewhere for $130 million. In frustration, I 
requested a meeting with Mr. Bowsher. The meeting took place on 
November 4, 1993, in my office. It was attended by the Acting 
Comptroller General, Mr. Milton Socolar, who made the decision in Mr. 
Bowsher's absence. But I can assure you that Mr. Bowsher is backing up 
Mr. Socolar 100 percent. The meeting with Mr. Socolar deepened very 
much my frustration. The meeting did nothing to address my concerns and 
to answer my questions.
  In a final attempt to clarify and resolve the issue, I went back both 
to Mr. Bowsher and Mr. Socolar with three specific questions. These 
letters are dated November 9, 1993, and I ask unanimous consent to 
print this correspondence, as well as the responses from the General 
Accounting Office, in the Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:


                                                  U.S. Senate,

                                 Washington, DC, November 9, 1993.
     Hon. Charles A. Bowsher,
     Comptroller General, U.S. General Accounting Office, 
         Washington, DC.
       Dear Mr. Bowsher: I am writing to express concern about Mr. 
     Socolar's recent decision giving the Department of Defense 
     (DOD) continued access to certain ``M'' accounts that were 
     closed by law.
       A copy of Mr. Socolar's decision is attached for your 
     review. It is dated September 29, 1993. I understand that you 
     were ``traveling on the west coast'' on that date. In your 
     absence, the decision was approved and signed by Mr. Socolar.
       I thought, perhaps, that you might either be unaware of Mr. 
     Socolar's decision or maybe you just have not had a chance to 
     review it.
       I am troubled by Mr. Socolar's decision and question its 
     legal foundation. The opinion fails to address the question 
     of why the M account reform law does not clearly eliminate 
     any discretion to reopen closed accounts because of a 
     clerical error, and fails to cite any binding legal authority 
     in support of this broad discretionary authority vested in 
     the Treasury.
       I shared those same concerns with Mr. Socolar during a 
     meeting in my office on October 4th and repeated them in a 
     letter to him dated today. A copy is attached for your 
     information.
       Would you be kind enough to examine Mr. Socolar's decision 
     on the M accounts and let me know whether you agree with his 
     conclusions in their entirety.
       Your cooperation in this matter would be appreciated.
           Sincerely,
                                              Charles E. Grassley,
                                                     U.S. Senator.
                                  ____



                                                  U.S. Senate,

                                 Washington, DC, November 9, 1993.
     Mr. Milton J. Socolar,
     Acting Comptroller General, U.S. General Accounting Office, 
         Washington, DC.
       Dear Mr. Socolar: I am writing to follow up on our meeting 
     of November 4th, concerning Department of Defense (DOD) M 
     accounts.
       First, I would like to thank you for your willingness to 
     review the evidence the Army will be submitting to the 
     Department of the Treasury to prove that $130 million in 
     budget authority was accidentally canceled due to clerical 
     error. You agreed to report back to me within two weeks on 
     the results of that review. I appreciate your offer and look 
     forward to seeing your end product.
       I also hope you will scrutinize other similar requests with 
     equal vigor, because I keep hearing the Air Force has $200 to 
     $300 million in ``obvious clerical errors'' that it is ready 
     to present to the Treasury now that your decision has been 
     rendered.
       Second, I am not convinced that your decision of September 
     29, 1993, that Treasury/DOD can reopen accounts canceled 
     pursuant to the M account reform act where there have been 
     clerical or transcription errors, is supported by law. I find 
     your analysis flawed for two reasons:
       (1) M account reform legislation clearly cancels account 
     balances without providing any basis for reopening them. This 
     clear statutory directive supersedes any otherwise existing 
     discretion to reopen accounts for clerical errors (refer to 
     Section 1405 of Public Law 101-510).
       (2) Even if the M account reform law does not supersede 
     otherwise existing discretion to correct clerical errors, the 
     authority you provide for your contention that such 
     discretion does exist is weak. Your only authority for this 
     proposition is a handful of previous decisions of the 
     Comptroller General and two paragraphs of dicta from Justice 
     Blackmun's opinion in Republic National Bank of Miami v. 
     United States, a portion of the opinion of which only three 
     justices joined. Indeed, six justices wrote concurrently to 
     express their disagreement with the part of the opinion you 
     cite as authority for your position. Moreover, the 
     discussion by Justice Blackmun does not reach the 
     situation at hand. This is not merely a situation 
     involving an ``inaccurate transfer'' . . . ``where money 
     intended for one account was accidentally deposited in 
     another.'' And in the M account situation, there is clear 
     Congressional authority that the accounts cannot be 
     reopened, even for clerical errors.
       Mr. Socolar, I urge you to clarify and reveal the basis you 
     found in the M account statute or other binding legal 
     authority for concluding that Treasury/DOD retain authority 
     to reopen the M accounts to correct clerical errors.
       Third, I fear that your decision gives DOD continued access 
     to the M accounts for an indefinite period of time.
       Your decision directs the Secretary of the Treasury to 
     ``establish reasonable time limits'' for the correction of 
     obvious clerical mistakes and for matching expenditures with 
     obligations.
       Mr. Socolar, I do not understand why you failed to 
     recommend reasonable time limits for recording financial 
     transactions.
       As the Acting Comptroller General, you should know what 
     constitutes a ``reasonable'' period of time for recording 
     obligations and expenditures. Is it 5 days, a month, 6 
     months, or 5 years? I would like to have a specific answer to 
     the question.
       Fourth, I would like to have your advice and assistance in 
     drafting legislation to end the widespread practice of not 
     recording obligations and expenditures as they occur.
       The failure to record obligations and expenditures in the 
     books has led to a very dangerous situation. DOD could have 
     up to $50 billion in ``unmatched disbursements''--checks or 
     payments that cannot be matched with or linked to 
     obligations.
       A multi-billion dollar pool of unmatched disbursements--
     from a Pentagon bureaucrat's point of view--has many of the 
     advantages of another slush fund. It can be used to hide 
     illegal and unauthorized payments.
       As your office has reported in the recent past, this could 
     mean that ``fraudulent or erroneous payments may have 
     occurred without being detected or disbursements have 
     exceeded appropriation and other legal limits,'' that is, a 
     violation of the Anti-Deficiency Act (see AFMD-93-21, page 
     1).
       The inability to match disbursements with obligations led 
     directly to your decision on the M accounts, and it is one of 
     the main reasons why your auditors cannot audit the 
     government's books--like those of the Defense Business 
     Operations Fund (DBOF). The continuing inability to match 
     disbursements with obligations means that the government does 
     not know which bills have been paid or how much money remains 
     in the various appropriations accounts to cover emerging 
     obligations. It means DOD has lost control over the peoples' 
     money. It means DOD does not know how the money is being 
     spent. Financial management at the Pentagon is nonexistent.
       I hope you will help me fix the problem. Now, what is the 
     best way to do it?
       Should we try to beef up Section 3528 of Title 31? If 
     ``certifying officials'' were doing their jobs, as defined in 
     Section 3528, all necessary accounting hookups would be made 
     or established prior to payment. Unrecorded obligations and 
     unmatched disbursements would not exist. Why are ``certifying 
     officials'' failing to carry out their responsibilities under 
     the law? Or is there a better way to accomplish that goal?
       I hope you will help me craft some remedial legislation. In 
     doing this, we will need to work with the Governmental 
     Affairs Committee and Mr. Hamre in the Pentagon.
       Your assistance in these matters would be appreciated.
           Sincerely,
                                              Charles E. Grassley,
                                                     U.S. Senator.
                                  ____

                                               Comptroller General


                                         of the United States,

                                Washington, DC, December 22, 1993.
     Hon. Charles E. Grassley,
     U.S. Senate.
       Dear Senator Grassley: Thank you for your letter of 
     November 9, 1993 expressing concerns about our decision of 
     September 29, 1993 (B-251287). You are particularly concerned 
     that by allowing the Department of the Treasury to correct 
     obvious clerical errors in Department of Defense year-end 
     reports on canceled merged balances, we are making additional 
     budget authority available to DOD.
       By separate letter of today's date, Milton Socolar is 
     responding to your specific concerns about the decision. As 
     he explains in his letter to you, our decision does not 
     provide the Department of Defense (DOD) with any more budget 
     authority than it otherwise would have.
       I share your desire to see significant improvement in the 
     accuracy and reliability of DOD's financial management 
     systems. As you know, our reports have repeatedly highlighted 
     the numerous problems at DOD in need of corrective action. 
     Your continued interest and attention to these issues is 
     vital if we are to make progress in solving these problems.
       I look forward to working with you on these important 
     issues in the future. If I can be of further assistance, 
     please do not hesitate to contact me.
           Sincerely yours,

                                           Charles A. Bowsher,

                                        Comptroller General of the
                                                    United States.
                                  ____

         Special Assistant to the Comptroller General of the 
           United States,
                                Washington, DC, December 22, 1993.
     Hon. Charles E. Grassley,
     U.S. Senate.
       Dear Senator Grassley: This responds to your letter of 
     November 9, 1993, regarding our decision of September 29, 
     1993 (B-251287), that the Department of the Treasury may 
     correct obvious clerical errors in agency year-end reports on 
     canceled merged balances. In your letter, you question the 
     legal basis for our conclusion that the Treasury may correct 
     clear mistakes in the year-end reports. You also express 
     concern that our decision would allow the Department of 
     Defense (DOD) to reopen closed merged (``M'') accounts and to 
     have continued access to the ``M'' accounts for an indefinite 
     period of time.
       Because section 1405 of the National Defense Authorization 
     Act for Fiscal Year 1991, Pub. L. No. 101-510, 104 Stat. 1675 
     (1990), canceled the merged balances, you are not persuaded 
     that there is any basis to reopen them, even to correct 
     mistakes. You are also concerned about the adequacy of the 
     authorities we cited to support our decision, particularly 
     our quotation of dicta from Justice Blackmun's decision in 
     Republic National Bank of Miami v. United States,    U.S.   , 
     13 S. Ct. 554, 561 (1992).
       Treasury's adjustment of the accounting records to correct 
     obvious errors does not, in our view, offend section 1405. As 
     we explained in our decision, we and the Comptroller of the 
     Treasury before us have recognized the authority of the 
     Treasury to correct mistakes without obtaining legislation. 
     See, e.g., 45 Comp. Gen. 724, 730 (1966); 3 Comp. Gen. 762 
     (1924); 2 Comp. Gen. 599, 601 (1923); 12 Comp. Dec. 733, 735-
     36 (1906). This view is consistent with the judicial practice 
     of relieving parties from the consequences of accidental 
     mistakes, for example, by reforming legal instruments to 
     accurately reflect the true state of facts or the parties' 
     true agreement. See 27 Am. Jur. 2d, Equity Sec. Sec. 28-35 
     (1966); 66 Am. Jur. 2d, Reformation of Instruments, 
     Sec. Sec. 48, 77 (1973).
       Moreover, the purpose served by such corrections is a 
     salutary one, namely, to correct errors in order that the 
     accounts, in this case the canceled merged 
     balances, accurately reflect the account balances. To 
     prevent abuse, we carefully circumscribed this authority, 
     limiting its use to cases of obvious clerical errors 
     supported by convincing evidence.
       With respect to your comments concerning our use of Justice 
     Blackmun's remark in Republic National Bank of Miami v. 
     United State, above, we agree that the passage quoted was 
     dicta and, as you point out, that only two other justices 
     joined this part of Justice Blackmun's opinion. We still 
     think that the nub of Justice Blackmun's observation holds 
     true, namely, that you should not need an act of Congress to 
     correct an obvious clerical error. The separate opinion of 
     the Court did not dispute this principle; rather, they felt 
     it was not relevant to the facts of the dispute at hand. See 
     Republic National Bank of Miami v. United States,    U.S.   , 
     113 S. Ct. 554, 562, fn. (1992) (Opinion of Chief Justice 
     Rehnquist).
       It is important to recognize that our decision does not 
     provide the Department of Defense with any more budget 
     authority. To the extent that there are corrections of 
     reporting errors resulting in restoration of canceled 
     unobligated balances to canceled ``M'' accounts, no 
     additional budget authority is created or provided. All 
     obligated balances in the ``M'' accounts involved in our 
     September 29 decision were canceled on September 30, 1993. 
     The disbursement of any obligation that should have been, but 
     erroneously was not, carried in the ``M'' accounts prior to 
     cancellation will come out of current funds. The only effect 
     of our decision derives from the fact that charges to current 
     appropriations for obligations of canceled merged balances 
     are limited to the unobligated balances of the original 
     appropriation account available for the same purpose. 
     National Defense Authorization Act for fiscal year 1991, Pub. 
     L. No. 101-510, 104 Stat. 1680, Sec. 1405(b)(7) (1990) 
     (codified at 31 U.S.C. Sec. 1551 note). Consequently, in 
     order to know how much current authority is available to 
     cover old obligations, there needs to be an accurate 
     rendering of the balances in the old accounts.
       We understand that the Department of the Army does not 
     intend to submit its request for correction of the alleged 
     $130 million certification error in its year-end report. With 
     regard to the Department of the Air Force errors that you 
     mention in hour letter, to date the Air Force has not 
     submitted a request for correction to Treasury. Additionally, 
     under Treasury's proposed instructions implementing our 
     decision, agencies will be allowed to request correction of 
     mistakes in the accounts canceled on September 30 on only one 
     occasion. Treasury would require agencies to submit their 
     requests for correction by May 1, 1994, and to provide 
     convincing evidence of the clerical error. Since, as we 
     stated in our decision, the type of clerical errors that 
     Treasury can correct should typically manifest themselves 
     soon after the account is closed, we have informally 
     suggested to Treasury staff that 6 months may be longer 
     than necessary to allow for the correction of obvious 
     errors.
       We share your concern about the failure of the agencies to 
     record obligations and expenditures as they occur and agree 
     that this practice has exacerbated the problem of unmatched 
     disbursements. We think, however, that current law adequately 
     requires the agencies to record these obligations and 
     expenditures. For example, 31 U.S.C. Sec. Sec. 1501 and 1108 
     contemplate that each agency will record all valid 
     obligations of the government and certify to the accuracy of 
     its obligations in its budget submission to the President and 
     the Congress. Additionally, under 44 U.S.C. Sec. 3101, each 
     federal agency head is required to make and preserve records 
     containing adequate and proper documentation of its essential 
     transactions in order to protect the legal and financial 
     rights of the government. Further, under the Financial 
     Managers' Financial Integrity, Act, 31 U.S.C. Sec. 3512, and 
     the Chief Financial Officers Act, 31 U.S.C. Sec. 901 et seq., 
     agencies are required to establish systems of internal 
     accounting and administrative controls which provide 
     management with reasonable assurance that obligations are in 
     compliance with applicable laws, and revenues and 
     expenditures are properly accounted for and recorded to 
     permit the preparation of accounts and reliable financial 
     reports.
       We think the statutes are clear with regard to the 
     requirement for the proper recording of obligations and 
     expenditures. What we think needs improvements is the 
     execution of the requirement of these statutes. The reports 
     cited in our decision point out the failure of DOD's 
     accounting systems to meet these statutory requirements. For 
     example, one of the reports found that the Navy has $12.3 
     billion in unmatched disbursements in its Standard Accounting 
     and Reporting System. The problem there was not caused by the 
     lack of statutory guidance, but rather was caused by the 
     Navy's failure to comply with existing guidance, procedural 
     requirements, and internal controls. We recommended that the 
     Assistant Secretary of the Navy (Financial Management) 
     enforce existing regulations and procedures which require the 
     proper resolution of this problem.\1\
---------------------------------------------------------------------------
     \1\GAO Report to the Acting Secretary of the Navy, 
     ``FINANCIAL MANAGEMENT--Navy Records Contain Billions in 
     Unmatched Disbursements'', GAO/AFMD-93-21 (June 1993).
---------------------------------------------------------------------------
       We think the Department's Chief Financial Officer must take 
     the appropriate steps to address DOD's failure to record its 
     obligations and expenditures and that other problems we all 
     know exist. In this regard, continued oversight by the 
     Congress and the audit community is the more effective 
     response.
       We trust that you will find this information useful.
           Sincerely yours,
                                                Milton J. Socolar,
                     Special Assistant to the Comptroller General.

  Mr. GRASSLEY. Madam President, my questions to Mr. Bowsher were as 
follows: What was the legal authority for the decision to open the M 
accounts? And, second, how long will the Department of Defense have 
access to the M accounts beyond the statutory deadline already passed 
as of September 30, 1993? Last, what kind of remedial legislation is 
needed to address these issues in the future if, as I stated, the 1990 
law that gives the Department of Defense authority to come to Congress, 
if there has been a clerical error, does not fill the needs of the 
Department of Defense?
  I did receive an answer to that letter on December 22, 1993. The 
letters from Mr. Bowsher and Mr. Socolar did not help to bring the 
issue into sharper focus. What is the legal authority for allowing the 
Department of Defense to regain access to M accounts shut down 3 years 
ago? What is the authority for allowing the Department of Defense to 
draw on account balances that have been canceled by law? Both Mr. 
Bowsher and Mr. Socolar go to great lengths to deny the decision does 
what it is really designed to do: Help the Department of Defense get 
more money out of the back door. This is what Mr. Bowsher and Mr. 
Socolar said:

       Our decision does not provide the Department of Defense 
     with any more budget authority.

  Madam President, that is flat wrong. All of the fuss and all of the 
maneuvering tells me that money is indeed the issue. More money is at 
stake. The $130 million sought by the Army, that was a misplaced 
decimal, a clerical error, has been canceled by law. It is gone, it is 
wiped off the books. But that is $130 million more that was spent not 
appropriated by Congress.
  Now Mr. Bowsher has dredged up an obscure legal gimmick to 
reauthorize that $130 million in the Army budget authority that was 
canceled by law. If that happens, then we are talking new budget 
authority; absolutely new budget authority without a bill passing 
Congress because the old budget authority was canceled by Congress.
  So, Madam President, Mr. Bowsher is creating more budget authority. I 
think Mr. Bowsher made a bad decision. Unless Mr. Bowsher is able to 
identify a solid legal foundation to support his decision, he should 
withdraw the authority to reopen the M accounts. And if we do not get 
this settled with a more justified approach by the Comptroller General, 
I hope we in this body for future clerical errors, whether they are 
$130 million clerical errors, more or less, that we will reject them as 
we rejected such a request that was made under the 1990 law to the 
Congress of the United States, because anything short of doing that is 
just simply, through the back door, giving the Department of Defense 
the authority to spend hundreds of millions of dollars of more money.
  I yield the floor.

                          ____________________