5 A7 GIFT OF ivir .H .L .Leupp STUDY ON ELIMINATION OF UNNECESSARY EXPENSE FROM ARMY ADMINISTRATION PREPARED BY THE WAR COLLEGE DIVISION, GENERAL STAFF CORPS AS A SUPPLEMENT TO THE STATEMENT OF A PROPER MILITARY POLICY FOR THE UNITED STATES WCD 9053-113 ARMY WAR COLLEGE : WASHINGTON NOVEMBER, 1915 511 WASHINGTON GOVERNMENT PRINTING OFFICE 1916 . WAR DEPARTMENT, Document No. 511. Office of the Chief of Staff. ELIMINATION OF UNNECESSARY EXPENSE FROM ARMY ADMINISTRATION. 1. In Section VIII of a memorandum to the Chief of Staff, dated September 3, 1915, the Secretary of War directed that a " study be made by the General Staff of the possibility of eliminating any un- necessary item of expense." To make clear the character and scope of the study desired by him, the Secretary quoted from a memo- randum of instructions issued by him, under date of April 29, 1915, the substance of which is as follows : * * * * * * * In order to enable me to obtain proper knowledge and to be wisely guided, I must have a painstaking, thorough, impartial, and concentrated investigation of this subject matter. Each considerable item of expenditure must be studied with a view of reaching an impartial conclusion as to whether the thing for which it is expended is necessary; whether in the handling of the money our administrative methods are proper and economical; and whether we are re- ceiving the proper return for the money expended. * * * * * * * Certain items of expenditure need not be considered with any view of being able to lessen them, because they are, by their nature, fixed ; and the only thing to be considered with respect to them would be the administrative methods through which the money was expended, and a consideration of whether those methods were more expensive than necessary. * * * I mean by this that certain great items need only be cursorily considered, because it is not my in- tention to attempt economy by recommending a reduction in them, unless the reduction is one that has to do with the administration of the sum as con- trasted with the thing for which expended. All other items than such as would be properly comprehended within those just mentioned, I desire to have looked into, with the character of attention above described and for the purpose above set forth. 2. In a message to Congress under date of March 3, 1911, the President stated : * * * Estimates of departmental needs have not been the object of thorough analysis and review before submission; budgets of receipts and disbursements have been prepared and presented for consideration of Congress in an un- scientific and unsystematic manner; 'appropriation bills have been without uniformity or common principle governing them; there have been practically no accounts showing what the Government owns, and only a partial representa- tion of what it owes; appropriations have been overencumbered ivithovt the facts being known; officers of Government have had no regular or systematic method of having brought to their attention the cost of Government adminis- tration, operation, and maintenance, and therefore could not judge as to the 30669 No. 511 16 (3) GG7363 economy or waste. There has been inadequate means whereby those who served with fidelity and efficiency might make a record of accomplishment and be distinguished from those who were inefficient and wasteful; functions and establishments have been duplicated, even multiplied, causing conflict and un- necessary expense; lack of full information has made intelligent direction im- possible and cooperation between different branches of the service difficult. The statements contained in this message of the President were based upon a preliminary general investigation and resulted in the appropriation by Congress of funds to enable the President to con- tinue the investigation, and to start the construction work of cor- recting the defects disclosed, in so far as that could be done by executive action. 3. A special commission known as the President's Commission on Economy and Efficiency, commonly referred to as the Cleveland Commission, was appointed, with Dr. Frederick A. Cleveland, a distinguished economist, as its chairman. 4. After 21 months of continuous labor and the expenditure of a total of $230,000, the President, in a special message to Congress, dated January 8, 1913, asked for the appropriation of an additional $250,000 to provide for the continuation of the work, which he char- acterized as only begun. The Cleveland Commission is merely typical of others which have been previously appointed. As the result of their investigations much valuable information has been acquired, but constructive work of correcting the defects disclosed has been curiously lacking. 5. The foregoing facts are cited as indicating the magnitude and character of the investigation necessary to ascertain the data desired by the Secretary of War. It is apparent that many months must elapse before the data essential to a proper analysis can be gathered and put into budgetary form, which must be done before items can be studied by themselves and in their relationship to other items. 6. House of Representatives Document No. 854, Sixty-second Con- gress, second session, publishes a report of the President's Commis- sion on Economy and Efficiency, entitled " The Need for a National Budget." A study of this document leads convincingly to the con- clusion that the budgetary form of presenting fiscal data is the only means by which either the national or a departmental executive may be apprised of the nature and purpose of past and proposed expendi- tures, and so be enabled to intelligently judge of their necessity. 7. The conclusions arrived at by the Economy and Efficiency Com- mittee concerning departmental methods of transacting business are summed up in a report dated December 18, 1912, which, for the reason that funds were not available for continuing the work, un- fortunately proved to be the final report. The opinion expressed is to the effect that public business is carried on " at a very high 511 cost " ; that methods of accounting in all departments are such that data are not readily available; and that a proper balance between economy of expenditure and efficiency of operation can only be main- tained by " building up a permanent organization " as a constructing and responsible agency " continuously at work." 8. Discontinuous investigations may disclose unnecessary past ex- penditures. They can not insure against current or future waste in a different quarter. The fundamental step in the "elimination of unnecessary expense" is, therefore, the organization of a perma- nent agency to carry on continuous investigation. 9. So far as the War Department is concerned, Congress provided by the act approved February 14, 1903, a permanent agency equipped with all the legal powers necessary to properly supervise expendi- tures. Full advantage has never been taken of this, however, to set the economic side of this machinery in motion by the exercise of executive action. Each disbursing agency within the War Depart- ment continues to operate independently of the others ; and although the sanction of law exists, a continuous investigation of the economic side of handling funds and the corresponding constructive work of balancing economy against efficiency by the annual preparation of a budget has never been instituted. 10. A presumption is thus created, strong enough to warrant as- suming it to be true, that wastage still occurs regardless of the ex- cellence of the business methods of each individual disbursing agency. 11. As the initial and only step possible at the present time look- ing toward the elimination of unnecessary expense, a division or continuing committee of the General Staff Corps should be em- powered and instructed to pursue a continuous investigation of this subject ; and should be made the responsible agency for the prepara- tion of an annual budget in such form as will make possible a more comprehensive supervision over the estimates than can now be exer- cised. 12. When this has been accomplished the preparation of full de- tailed information will become a matter of routine, and constructive work may anticipate instead of follow expenditures. The need for intermittent investigations will disappear and a full understanding of past, present, and proposed operations, together with the inci- dental expense attached thereto, will become possible. 511 o AN INITIAL FINE OF 25 CENTS -lOOm-12,'43 (8796s) Binder Gaylord Bros. Makers Stockton, Calif. ' PAT. JAN. 21, 1908 YC 62932 C67363 UNIVERSITY OF CALIFORNIA LIBRARY