BASIS OF THE TREASURY STRUCTURE
THE story of how Uncle Sam keeps track of the vast sums of money that pour into his Treasury involves a description of a great business organization that has been developing and operating from September 2, 1789, until the present day.
The original structure of the Treasury Department, as it was planned by the first Secretary of the Treasury, Alexander Hamilton, still stands. The methods of operation conceived by that great official are still utilized. They have been changed in minor particulars from time to time to meet the necessities of expanding business, but as to its fundamentals, the original plan is still used. The same system of check and balance and disinterested inspection and audit is in operation day in and day out, and has been throughout the one hundred and forty years of the Federal Government’s history.
Our Constitution provides that “No money shall be drawn from the Treasury but in consequence of appropriations made by law,” and the statute that was passed by the first Congress September 2, 1789, known as the Treasury Organic Act, together with the section of the Constitution above quoted, is the basic law on which the present Treasury structure rests.
TREASURY OFFICIALS AND THEIR DUTIES
The Organic Act provided that there be a Department of Treasury and that the Secretary should be the head of the department. It stipulated that he should prepare the plans for the management of the revenue and for the support of the public credit; prepare the estimates for the revenue and report the expenditures ; collect the revenue; issue the warrants for expenditures pursuant to appropriations made by law; and, in general, superintend the Federal finances. The act also provided for the appointment of a Comptroller, an Auditor, a Treasurer, a Register, and for an Assistant to the Secretary.
The duties of the subordinate heads are set forth in the statute by its stipulating that the Comptroller shall examine the accounts after certification by the Auditor and that he countersign the Secretary’s warrants for the payment of money; it provides that the Treasurer receive and keep the moneys of the United States and disburse them only on the warrants drawn by the Secretary, countersigned by the Comptroller. It provides that the Auditor shall receive and examine the public accounts and that a claimant may appeal to the Comp-troller when dissatisfied with the Auditor’s findings.
The Register of the Treasury is authorized and directed to receive and preserve the adjusted accounts of moneys received and paid, and to report the results of the financial operations.
PERFECTION AND ACCURACY OF ACCOUNTING METHODS
Such, briefly, is the original Treasury structure. The system is one of check and balance, so arranged that the acts of each of the officials named are subject to observation and the sanction of the other Treasury officials.
That system still prevails (although the powers and the duties of the auditing officials have been somewhat changed), and the rule that requires every dollar of Federal revenue to be paid to the Treasurer is still in force. Likewise, the rule that no funds can be paid out except upon the Secretary’s warrant countersigned by the Comptroller is still the law and is still followed.
It was originally required, and it is still the rule, that exact records be kept of the source from which every dollar is derived and of what becomes of each dollar.
Every sum paid out, no matter how small, must be supported by a written voucher therefor that carries the signature of the individual to whom it is paid.
The documents that disclose to whom and why each Federal dollar is paid are all carefully preserved in the sole custody of the accounting officers, and those officers have nothing to do with the receipts and payments of the Government’s money. They are entirely disinterested, and a payment made forty years ago can be explained exactly so that one may see just why it was paid and to whom the payment was made.
It is with confidence that it may be asserted by every Treasury official who knows Treasury operations that no bank in the world ever kept more exact records than the Federal Treasury, nor was any great bank ever operated in which greater pains have been taken to accomplish an exact balance of its accounts or a more complete proof of the accuracy of its records. The system of check and proof is so designed that, once funds are delivered to the Treasurer and a receipt therefor taken by the depositor, it is a practical impossibility for the funds to pass unaccounted for. Either they will be still in the Treasury or the Treasury will hold a voucher that will account for their disposition; and if they are still in the Treasury, the official charged with their custody will be periodically and unexpectedly required to submit them to inspection and count by experienced, painstaking, and competent auditors, who will ascertain that every dollar is either present or accounted for.
The rule that funds may be paid out by the Treasurer only on a warrant that has been signed by the Secretary was followed literally until about twenty years ago. The Secretary himself, or one of the four Assistant Secretaries acting for him, actually signed each warrant. The task became so voluminous and so burden-some that a subordinate was authorized to sign for the Secretary.
WARRANTS FOR PAYMENT OF MONEY
The warrants for the payment of Federal funds are of two classes, viz., settlement warrants and accountable warrants.
The former are direct payments in settlement of sums due individuals on claims that have been settled by the Federal accounting officers. When a claim has been reviewed and the sum due has been ascertained, the accounting officers submit to the Secretary of the Treasury a statement that discloses the sum due. The Secretary’s warrant is executed, countersigned by the Comptroller, and is paid by a check drawn by the Treasurer in favor of the claimant.
The accountable warrant is the means employed to place Federal funds to the credit of a disbursing officer. That class of warrant is the basis for setting up a credit in the Treasury in favor of the officer concerned, against which that officer may draw checks on the Treasury in payment of vouchers. When the warrant is issued, the officer is charged on the books of the accounting office with the amount credited to him, and the charge will stand against the officer until he either submits vouchers that the accounting officers find represent lawful payments or returns the funds to the Treasury.
Each such disbursing officer is required to state his account with the Treasury and transmit it regularly (in most cases each month), and thus he is required to disclose the status of the Federal funds intrusted to him.
When funds are thus credited to a disbursing officer, he is personally responsible for them. He may draw a check in his own favor and cash it, if necessary to make pay-roll settlements, but such cash as he has in his own possession he must safe-keep. The integrity of the officer is guaranteed by the Government requirement that the officer provide a surety bond before the funds are advanced to him.
The rules and the laws relating to the payment of Federal funds are very exacting and require the most scrupulous care on the part of every disbursing officer. He must keep acquainted with all payment regulations, or he will find himself obliged either to recover an unauthorized payment or make it good to the Treasury from his personal funds.
Although the rules relating to payments are very strict, it is a fact that if a disbursing officer makes a payment in good faith and the Government has been properly a beneficiary, it is almost a certainty that the officer will eventually be accorded credit for the payment. The Government never intends an injustice. But if a disbursing officer should, through an overpayment in cash, find his account short, there would be no escaping responsibility for the missing funds. He would have to restore them, for the accounting officers would not and could not excuse a shortage. No power except Congress can do that.
SUPERVISION OF APPROPRIATIONS
Each of the executive departments and independent Federal offices has supervision over the expenditure of the appropriation made by Congress for its support.
As funds are required by any one of these establishments, the chief thereof executes a requisition on the Treasury in favor of the disbursing officer who is to pay out the funds. The requisition is the basis for the Treasury’s placing the funds to the officer’s credit. As the warrant credits the disbursing officer concerned, the latter may then draw his checks on the Treasurer up to the full amount so credited.
The Treasurer cashes the checks on presentation, but has no responsibility for the propriety of the officer’s payments. The Treasurer’s concern is that the check is genuine and that the officer’s balance is sufficient. The disbursing officer’s check is the Treasurer’s receipt for the funds he pays out and is the basis on which the accounting officers allow the Treasurer clearance in his general account.
THE TREASURER’S ACCOUNT
The Treasurer’s account to the auditing authorities is the same sort of statement that each disbursing officer submits. In stating his account to the Auditor, the Treasurer is required to acknowledge each sum for which he has receipted and formally to demonstrate, by submitting written evidence of each payment, that the sums paid plus the balance in his possession equal the precise amount for which he is accountable.
The account that the Treasurer submits is a summary of the various books of account that are kept in his office and that have been fully proved to be in balance before the statement to the Auditor is prepared. Although the statement discloses the aggregates of the vast sums collected and paid by the Government during the period to which the account relates, it is as exactly correct as if it related to a single business transaction.
The Treasurer’s account to the Auditor is so stated that each transaction is made clear enough to be fully understood. Rarely is it necessary for the accounting officers to make an inquiry as to the meaning of a particular item of receipt or payment. The document itself carries a complete story of what the transaction was. If it is the admission of a deposit, the copy of the receipt tells the story. If it relates to a payment, the voucher shows who was paid, when, how, and why.
THE ACCOUNTING PLAN SUMMARIZED
Assurance that all moneys paid into the Treasury are completely accounted for and fully proved to have been paid out for legitimate Government purposes only is, of course, the right of those who are paying the taxes, and the preceding descriptions have been under-taken with a view to such a demonstration.
One who wishes to comprehend the general accounting plan should bear in mind that each Government depository bank is required to submit a daily statement of its Federal receipts and payments as well as the balance of the Federal funds it has on hand. From those accounts and the accompanying items supporting them, the banks are charged and credited on the books of the Treasurer’s Division of General Accounts. The checks that support the bank’s claim for credit are charged to the account of the Government officer who drew the checks, and are credited to the bank that paid them and sent them to the Treasury. The two must equal each other. Likewise, the currency that the bank claims credit for sending to the Treasury must be the same amount that the money counters at the Treasury find in the package. If the Treasurer credits the remitting bank, the money-redemption official who accepts it is charged with, and must account for, that same amount. That, in simple terms, is the way it is known that the funds are all accounted for. The same system of verification and proof exists throughout all the Treasurer’s money, bond, coupon, and check transactions. Once money is receipted for, the receipt raises a charge, and the trail of it cannot be obliterated. Nothing but a payment voucher that will pass the disinterested officials of the General Accounting Office can offset the charge.