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GAO: Working for Good Government Since 1921

Chapter 4, The Shift to Comprehensive Auditing, 1945-1954

GAO's wartime experiences spelled the end of the voucher checking era. The increase in paperwork showed how difficult it was for a single agency to keep up with examining every government disbursement. The war also highlighted a number of accountability issues. In the 1940s, Comptroller General Warren repeatedly pointed to the lack of accountability of government corporations and to problems with contract fraud.  He commented on questionable practices, noting, "During the. . . war some of the instances of low moral standards in Government were shocking.  We reported many of these instances.  The attitude then was 'So what?  We're in war.'  It was terribly discouraging for us in the General Accounting Office.'"  Warren expressed strong feelings about fraud and corruption, stating that "the overwhelming majority of Government people are honest, capable and conscientious, especially the old-line career employees.  A few rotten apples may not contaminate the whole barrel, but they certainly make it smell.  I believe that an official moral code could help stop the spoilers from operating.'"

A man of vision, Warren concluded that his agency best could serve the nation by changing the way it worked.  After the war, the Comptroller General sought to make better use of GAO's resources and to increase the Office's effectiveness. To do this, he began moving the agency away from voucher auditing. In the late 1940s, GAO began auditing government corporations, performing "comprehensive audits," and working with executive agencies to improve their accounting systems. Warren applauded the passage in 1945 of the Government Corporation Control Act, which authorized the auditing of wholly owned government corporations and mixed ownership corporations. Responding to the requirements of the act, Warren created a Corporation Audits Division in 1945. He began hiring accountants to perform annual audits of government corporations.

The Corporation Audits Division's work foreshadowed the move of GAO as a whole to comprehensive auditing in the early 1950s. Comprehensive auditing called for examination of the adequacy, legality, honesty and efficiency of the application of public funds.

Instead of concentrating on individual fiscal transactions, GAO began reviewing financial management and internal controls at government agencies. Responsibility for checking vouchers shifted to the various executive agencies, as GAO focused on prescribing accounting principles, performing site audits, and checking financial controls and procedures.

The move to comprehensive auditing represented a major turning point for GAO.  The agency reduced the number of voucher clerks in its employ and began hiring accountants. In 1947, GAO's staff was down by 4,000 from its high of 14,904. In 1951, when GAO moved into its new headquarters across the street from the Pension Building, it employed just under 7,000 people, less than half the number that had been on the rolls in 1946. Some voucher clerks departed soon after the end of the war because they held temporary wartime appointments rather than serving in permanent civil service positions. Others left because of reductions in force. Some voucher auditors, such as the 779 member staff of the Postal Accounts Division, were transferred along with their functions to executive agencies. A small group of clerks remained to work on transportation vouchers, a vestige of the old style auditing function that GAO retained until 1975.
 

Photograph (c) 1940, The Washington Post.  Reproduced with permission.

The face of GAO changed as the agency reduced the number of voucher clerks on its rolls and began hiring accountants.

The transition to comprehensive auditing brought major changes to GAO's staffing, organization, and job processes.  Some of the changes were difficult and triggered extensive debate among the agency's senior managers. Executives who managed units that played prominent roles in voucher checking now faced the abolition of their offices.  For example, in 1950, Warren abolished GAO's old Accounting and Bookkeeping Division because most of its work had been discontinued.

At the Comptroller General's request, Ted B. Westfall, an official in the Corporation Audits Division, reviewed GAO's operations and organization between 1949 and 1952. He reported on job processes, staff competence and training, working relationships between attorneys and operating divisions, the problems of selecting managerial assistants based on seniority rather than merit, and the extent to which elaborate levels of supervision slowed down work.

Westfall made a number of hard hitting recommendations aimed at clearing out dead wood, jettisoning outdated procedures, and integrating the new comprehensive auditing and accounting systems improvement efforts into GAO's work.  Some of Westfall's suggestions are reflected in Comptroller General Warren's reorganization of GAO's auditing functions in the early 1950s.  In 1952, Warren named Westfall to head the newly created Division of Audits, which consolidated four existing units. GAO also initiated a reduction in force of some 400 employees.

As GAO moved into comprehensive auditing, it developed detailed guidance for its employees. It first issued a Comprehensive Audit Manual (CAM) in 1952. The manual included chapters on audit authority and responsibility; audit objectives and policies; how to perform a comprehensive audit; auditing standards; the nature of management control; and descriptions of different activities subject to audits (procurement, property, travel, printing, and so forth). GAO updated the; CAM a number of times after 1952. In 1981, the Project Manual and the General Policy Manual replaced the CAM. In the early 1950s, GAO also published a Report Manual for its employees.  This manual described the basic policies for developing and writing audit reports. The Communication Manual replaced the Report Manual in 1989.  GAO's current General Policies/Procedures Manual and Communications Manual are available on the agency's intranet. 

Warren played a key role in working with the Department of the Treasury and the Bureau of the Budget (BOB) to establish the Joint Accounting Improvement Program in the late 1940s. This cooperative effort to develop government accounting programs and improve financial management was renamed the Joint Financial Management Improvement Program in 1959. Within GAO, the accounting improvement effort centered in the Accounting Systems Division, created by Warren in 1948. Warren enjoyed good relations with legislators and found significant support in Congress for his efforts to transform GAO. In 1950, the Budget and Accounting Procedures Act provided a statutory underpinning for the postwar changes in GAO's work.

The United States faced many challenges after World War II, as the 1950s brought economic change at home, military action in Korea, and a Cold War with the Communist bloc. The federal government poured money into military alliances and helped countries ravaged by World War II to get back on their feet. To keep a watchful eye on spending at home and abroad, GAO formally established a network of regional offices throughout the United States in the early 1950s and opened a European office in 1952.

In 1951, GAO moved into a new headquarters building at 5th and G Streets, across the street from its old quarters in the Pension Building.  President Harry Truman attended the dedication of the building.  In his speech the President noted that many people in government considered GAO to be "a bugaboo that keeps them from doing what they want to do."  He disagreed, saying, "the General Accounting Office is neither a bugaboo nor a bore.  It is a vital part of our Government.  Its work is of great benefit to all of us.  The people who run the General Accounting Office certainly deserve these new and better quarters."

President Truman attended the dedication of GAO's headquarters building in 1951

Although the Comptroller General's term was not set to expire until 1955, Warren resigned in 1954 for health reasons.   A newspaper in the capital city reported the news of his resignation:  "Many believe he rates a blue ribbon:  'Best watchdog in show.'"