Mr. TULLOss. I do not know. Mr. BIDDLE. And you don't think that your office should have inquired to know whether they were? Mr. TULLOSS. I don't think that we should, because they had put that on the books, at $51,000,000, and they were holding out to the public that this was the value of this property. Mr. BIDDLE. Well, now, would this fact be taken into consideration from that, the Old Hickory Nitrate Plant, which cost the Government $83,500,000, was later sold for three and a half million, about 4 percent of the cost. Would that be at all important? Mr. TULLOSS. No, not at all, because Old Hickory was built under a cost-plus contract, and it cost "plus" a great deal, and it didn't have a value and it was built as a war venture, and after the war it was practically valueless as a commercial enterprise. Mr. BIDDLE. How about this Muscle Shoals plant? Wasn't that a war venture? Mr. TULLOSS. Yes; but that had potentialities that Old Hickory did not, and they had a very fine nitrate plant there and fertilizers could be made there. Mr. BIDDLE. And that nitrate plant had been standing idle for 20 years? Mr. TULLOSS. Yes; but the Government was going into the business with this, with the T. V. A. Mr. BIDDLE. Did you calculate the depreciation in making the summary exceptions? Mr. TULLOSS. The depreciation, in my opinion, would have been very high indeed if the Government didn't contemplate going back into the business of producing nitrate and fertilizer but here was the T. V. A. to reopen and start that plant, and the value became enhanced by that very act. Mr. BIDDLE. So that you put it up from the passage of the act, up went the value. Mr. TULLOSS. Oh, yes. Representative JENKINS. Might I ask him a question there? Wouldn't it be possible, in your course of making an audit, to arrive at a conclusion that an appraisement was improper as you went along with the audit, just as well as you would jump to the conclusion before you started the audit? Mr. TULLOSs. Yes. Representative JENKINS. Now, then, in this case, do you know whether that big reduction so shocked your common sense that you commenced with a proposition that it was an improper deduction or did you arrive at it after you had gone into the accounts? Mr. TULLOSS. I am speaking now with reference to my personal thought on the matter. My auditors, however, were of this opinion; in other words, I did not have the same basis for my individual conclusion that they had for their auditing conclusion. In other words, this was the actual auditors, who knew about the appraisals and the like. Indeed I don't remember now, but I know one time down there we had an engineer with us, but aside from their or the basis of their conclusion, my personal conclusion is that disparity between the cost and the valuation on the books, was so great that it justified comment, and I thought that the Congress should know about it. Mr. BIDDLE. Did it justify an exception or comment or did you merely want to make a comment without filing an exception? Mr. TULLOSS. I don't think that there is any exception there. Mr. BIDDLE. Do you comment on matters to which you don't take exception? Mr. TULLOss. Yes. Mr. BIDDLE. Just a general running criticism which has nothing to do with the audit itself. Mr. TULLOSS. It has something to do with the audit but we would not carry it into the exceptions, or charge against the accountable officer $51,000,000. Mr. BIDDLE. You accepted it but commented on it. Mr. TULLOSS. We merely commented on it and it is not an accounting exception. Representative JENKINS. I have one other question. I want to know about how did you come to the conclusion, as an auditor, or your department, the General Accounting Department, how did you come to this conclusion that this reduction from $137,000,000 to $51,000,000 was too great? In other words, you did something besides revolving it in your own mental processes. What was the first manual or physical thing that you did, to show that you didn't think that that was a fair reduction? Mr. TULLOSS. We had had a group of auditors working down there some months, and examining all of the records and accounts of the Tennessee Valley Authority, and in addition to that, we had the accounts of the Corps of Engineers of the Army, beginning with the inception of the Muscle Shoals and other activities that were constructed down there. We had evidence of the costs, and we had as I mentioned awhile ago, I believe, a serious offer from Mr. Ford that he would give $100,000,000 for this plant. Representative JENKINS. As I understand it, when you made this statement, or your Department made any statement to anybody, that was made after mature consideration by auditors and engineers. Mr. TULLOSS. Yes, sir; but without Representative JENKINS. Without a final report? Mr. TULLOSS. Without saying just what we thought was a true valuation. Mr. BIDDLE. You said the T. V. A. was wrong, but didn't say what it was. Mr. TULLOSs. We said it looked bad. You had the costs of the dam from the Army engineers. Did your auditors and engineer go to the dam and examine it? Mr. TULLOSs. I think that they did. Mr. BIDDLE. Who were they, by the way? What auditor and engineers? Mr. TULLOSS. I didn't say "engineers," I said that we had an engineer with us. Mr. BIDDLE. How many auditors? Mr.TULLOSs. I think that there were about 10 or 12. Mr. BIDDLE. How many of those 10 or 12 were certified public accountants? Mr. TULLOSS. I don't know that any of them was. Mr. BIDDLE. You don't think anyone was? Mr. TULLOSs. I doubt it; yes, sir. Mr. BIDDLE. What were they, then, if they were not certified public accountants? Were they investigators? Mr. TULLOSS. Some were accountants, and others were auditors, trained in the General Accounting Office." Mr. BIDDLE. Was there not one of those men who was a certified public accountant? Mr. TULLOSS. They were accountants but not certified; there may have been one. Mr. BIDDLE. But men who had worked in your office, and their training had been from your office? Mr. TULLOSS. Experience as auditors; yes. Mr. BIDDLE. As auditors for you? Mr. TULLOSS. Yes. Oh, I suppose some of them, and in factMr. Bruk, is Mr. Rose a certified public accountant? Mr. BIDDLE. You think one was? Mr. TULLOSs. You think Mr. Rose was not? Mr. BIDDLE. You think that 1 out of the 10 or 12 was an actual certified public accountant? Mr. TULLOSS. There was one that was mentioned as being a certified public accountant. Mr. BIDDLE. Of all of the men that you have had investigatingI think that you used the term "investigator," it is not my term, I think it is yours, you call them investigators? Mr. TULLOSs. Yes. Mr. BIDDLE. Of all of those investigators, working for the last few years, on the T. V. A. accounts, how many of those men, of all of them, were certified public accountants? Mr. TULLOSs. Just the one. Mr. BIDDLE. Just that one man? Out of how many men working on the accounts? Mr. TULLOSS. I imagine that there have been 20, altogether, differ ent men. Mr. BIDDLE. Now, let us come to one of the other sales. Do you remember the nitrate plant at Charleston, W. Va.? Mr. TULLOSS. I remember something about it. Mr. BIDDLE. Do you remember that the cost to the Government was $58,400,000? Mr. TULLOSS. No, sir. Mr. BIDDLE. Do you remember that that was sold for $8,500,000? Mr. TULLOSS. Some such figure. I don't recall. Mr. BIDDLE. Of which the Government actually received about $5,500,000? Mr. TULLOSS. That is the general run of selling Government property. Mr. BIDDLE. That has no basis of comparison, and the sales have no basis of comparison when you make values? Mr. TULLOSS. The Charleston plant was comparable to the Old Hickory plant. Mr. BIDDLE. What I asked was whether sales in the market of Government property had absolutely no value in considering the value of that property? Mr. TULLOSS. We did not consider that; no. Representative WOLVERTON. Was the property at Charleston a nitrate plant? Mr. BIDDLE. The property at Charleston was Representative WOLVERTON. I thought it was a powder plant. Representative WOLVERTON. It wasn't a comparable plant from my understanding, with the Muscle Shoals. Mr. BIDDLE. It was a much smaller plant. Representative WOLVERTON. In character, either. Mr. TULLOSS. There is a vast difference between putting property up for sale, and its value. We know that the selling price of property is what you can get for it, if you have to sell it, whereas it might have a very high value; that is why a man buys at sales, because he is getting more than his money is worth. Mr. BIDDLE. The T. V. A. Act says that the valuation of the Board shall be final, and in view of that language you consider it your duty to comment on the valuation in spite of that? Mr. TULLOSS. Yes, sir. Mr. BIDDLE. Well Mr. TULLOSS. We will comment on anything-under my oath of office Mr. BIDDLE. I realize that. Mr. TULLOSS. Under my oath of office, I will comment on anything that I think is wrong, and against the interests of my Government. Mr. BIDDLE. I realize that. Mr. TULLOSS. If I have no other excuse for this, than that, then let us say it was done because I thought it was wrong, or the Comptroller General thought it was wrong under his oath of office. Mr. BIDDLE. Well Mr. TULLOSS. Because after all, we come back to the Constitution of the United States, and the laws enacted pursuant thereto, which we are sworn to uphold and defend. Mr. BIDDLE. There are one or two items that I don't understand, that I am going to ask you about, in the 1934 audit. The further item, I think it is in the balance sheet, I think it is after page 38, there is an item there of $35,000, that is marked "Donated C. W. A. Labor." Mr. TULLOSS. Yes, sir. Mr. BIDDLE. Is that a T. V. A. disbursement? CIVIL WORKS ADMINISTRATION EXPENDITURES Mr. TULLOSS. So far as capital goes, the money didn't come out of the Tennessee Valley Authority's fund, but it was donated to capital, and therefore proper for consideration in the cost. Mr. BIDDLE. It was work done by the C. W. A.? Mr. TULLOss. Yes. Mr. BIDDLE. And therefore you felt it should be charged against T. V. A.? Mr. TULLOSS. It should be shown as a capital credit. Mr. BIDDLE. What was that work done? Mr. TULLOSS. It was a clearing for power lines, and the like. Mr. BIDDLE. Well, was it an item of $35,000 to remodel the post office? Mr. TULLOSS. Mr. Bruk, what was that? Mr. BIDDLE. Mr. Bruk, wouldn't you like to move up by Mr.. Tulloss? Mr. BRUK. For which the T. V. A. fund was available, that they would have to spend themselves. Mr. BIDDLE. I think it will be a little clearer if you tell us the information, and otherwise we have to put you on to testify. Have him give Mr. Tulloss that, instead of telling us about it. How much of that was used for remodeling the post office? Was that $35,000? Mr. TULLOSs. The $35,000 was advanced to the treasurer of the T. V. A. for use in repairing buildings, and repairing post office buildings. Mr. BIDDLE. That was charged as a capital charge against the T. V. A.? Mr. TULLOSs. That is right. Mr. BIDDLE. Although the post office is owned by the United States and not by T. V. A., and although the T. V. A. might occupy the post office for a short or longer period, nevertheless, it was charged with the full amount of the item. Mr. TULLOSS. It was using the post office building. Mr. BIDDLE. And because it was using it, you charged that as against a capital item against the T. V. A.? Mr. TULLOSS. It made the repairs itself, didn't it? Mr. BIDDLE. Did the T. V. A. do the repairs itself? Mr. TULLOSS. Well, the money, as I understand it, was allocated to the T. V. A. for this purpose. Now, they may have had C. W. A. workers, and others. Mr. BIDDLE. Well, the C. W. A. did the work, and out of their appropriation, and then you charged it as a capital charge against T. V. A. because T. V. A. was going to occupy it? Mr. TULLOSS. No; I understand that the money was turned over to T. V. A. and was expended by T. V. A., paying the labor and other expenditures. Mr. BIDDLE. Turned over by C. W. A.? Mr. TULLOSS. That is my understanding. VALUATION OF MUSCLE SHOALS PROPERTIES Mr. BIDDLE. I have one more question, Mr. Chairman. I notice this statement on page 84: Despite the apparently excessive depreciated value at which the Muscle Shoals property was taken up on the books, the Authority is not using the valuation |