AFTERNOON SESSION, TUESDAY, NOVEMBER 29, 1938

(The hearing was resumed at 2 p. m.)

TESTIMONY OF STUART B. TULLOSS-Resumed

Mr. MARQUIS. May I ask the witness one question?

Do you have with you any figures as to the cost to the General Accounting Office of the audit services performed for T. V. A.?

Mr. TULLOss. No.

Mr. MARQUIS. I think that the committee would appreciate it if you would supply a statement of that cost broken down by fiscal years and also by the type of services performed. Can you do that at your leisure?

Mr. TULLOSS. I may have that information, but I am not sure that we have. I will try to get it up.

Mr. MARQUIS. I think that the committee would like to have a statement of that kind submitted.

Chairman DONAHEY. You may proceed with the witness if you are ready, Mr. Wolverton.

DELAY IN MAKING OF AUDIT REPORTS

Representative WOLVERTON. Mr. Tulloss, in this communication addressed to the chairman of our committee, under date of November 22, 1938, by the Acting Comptroller, on page 31, it is stated:

In view of the wide scope of the audit required by the Comptroller General under the law, supra, it is frequently necessary to get access to board minutes, administrative correspondence files, and office memoranda, and to interview personnel, in order to trade the origin of and to verify authorizations and the legality of financial transactions. In addition to the difficulties encountered, due to the location of various offices in separate buildings and to the decentralized systems of accounting and filing of supporting documents, the General Accounting Office field auditors at times met with obstacles that prolonged the audit, and were at times refused such data or told that there was no such authorization or information nor was it considered necessary. Specific examples of such interference have been reported by representatives of this office, substantially as follows:

Now, before I take up those incidents, are we to assume from that statement that those reasons that you have set forth there account for the delay in presenting the yearly audit of the T. V. A.?

Mr. TULLOSS. Not entirely. There were other reasons for the delay. One was that for a period we had no funds available to pay the expenses of the audit; another reason is that the accounts have not been complete as rendered, and the entire accounts are in a state of suspension because of their incompleteness.

Representative WOLVERTON. When you speak of "incompleteness" does that have reference to it being an incomplete transaction so far as the T. V. A. is concerned, or an incomplete transaction so far as furnishing you with data is concerned?

Mr. TULLOSS. In complete accounts, in that the supporting data, and certain phases or parts of the account, have not been submitted. Representative WOLVERTON. As I understand the situation, the committee now has available to it the report of the General Accounting Office with respect to the fiscal year ending June 30, 1934.

Mr. TULLOSs. Yes.

Representative WOLVERTON. Is there such a report available to the committee for the fiscal year 1935?

Mr. TULLOSS. No, sir.

Representative WOLVERTON. 1936?

Mr. TULLOSS. 1934 was the last such report.

Representative WOLVERTON. So that up to the present time, for one reason or another, it has been impossible for the General Accounting Office to conclude its examination of the financial affairs of the T. V. A.?

Mr. TULLOSS. Yes, sir.

Representative WOLVERTON. I gathered the thought that the field work had been completed, is that true?

Mr. TULLOSS. Yes, sir.

Representative WOLVERTON. By "field work" do you mean the examination of documents by the auditors of your department? Mr. TULLOSs. Yes.

Representative WOLVERTON. What follows the gathering together of that information by your auditors with respect to the making of a report by the Comptroller General?

Mr. TULLOSS. Well, there are two other activities of the General Accounting Office involved in this audit. After we finish the field audit, we still have the problem of bringing together the actions of our field auditors, and the actions of these two other activities of the General Accounting Office, to complete the report. It is a matter largely of reconciling and assembling the material that has been developed. When we complete that, the report will be ready to submit.

Representative WOLVERTON. Is the delay in completing those reports due to handicaps in the way of field auditors, in the examining of the documents?

Mr. TULLOSS. That has in a measure, because I am dependent upon those field auditors to assemble the data after they return, and the longer they remain in the field, the longer it will take them to assemble the data after they return.

Representative WOLVERTON. How many men does it require to make the audit?

Mr. TULLOSS. Well, quite a number could work on the audit. We have generally had from 12 to 16 assigned to the audit in the field.

Representative WOLVERTON. Do their services extend over the entire year?

Mr. TULLOSS. For the examination made for the fiscal years 1935, 1936, and 1937, they remained in the field almost a whole year.

Representative WOLVERTON. Have you any idea as to the cost to the Government of making such audit?

Mr. TULLOSS. As I recall, the services for that year aggregated sixty-some thousand dollars. That represented the field work for 3 fiscal years.

Representative WOLVERTON. Was that an annual expense or was that the total expense?

Mr. TULLOSS. That was the total expense for that tour of duty in the field, including salaries, and supplies, and transportation and traveling allowance, and the like.

TENNESSEE VALLEY AUTHORITY BUDGETING PROCEDURE

Representative WOLVERTON. Does the T. V. A. have a set of books that correctly set forth the detailed financial transactions? Mr. TULLOSS. Yes; they have.

Representative WOLVERTON. How many accounts are there?

Mr. TULLOSS. They range from 60,000 in 1935 to almost 200,000 in 1938.

Representative WOLVERTON. Do you mean to say that the T. V. A. in its set-up of books carries as many as from 60,000 to 200,000 separate, distinct accounts?

Mr. TULLOSS. Yes, sir.

Representative WOLVERTON. Well

Mr. TULLOSS. They have some 16 separate sets of books. Representative WOLVERTON. Do you know of any comparable situation in any other department of Government?

Mr. TULLOSS. No, sir; I do not.

Representative WOLVERTON. Are you able to give the committee some idea of the system of bookkeeping that requires as many as 200,000 separate accounts?

Mr. TULLOSS. I understand that most any system of accounts would make this possible, that is, it could be expanded to almost any number, and the reason for the numerous accounts is, however, that is, their desire for considerable detail and break-down in costs, and other segregations they feel necessary.

Representative WOLVERTON. Could you give some idea of the general headings that are broken down into different departments, designating them by name?

Mr. TULLOSS. In addition to the break-down by departments, they have it by subclassifications, such as coded classifications and other features, there are some 20 different classifications, and they would have a break-down for each classification for each project, and the like. Representative WOLVERTON. Then would there be a break-down of the break-down?

Mr. TULLOSS. Well, I believe that there is such.

Representative WOLVERTON. So that the ultimate result is that whatever appropriation is made by Congress is broken down so that it either appears or disappears in 200,000 different accounts?

Mr. TULLOSS. Well, the activities under the appropriation would appear in that detail, that break-down...

Representative WOLVERTON. Will the books, then, show how the money appropriated by Congress is actually spent?

Mr. TULLOSS. Yes, sir; that can be gotten from the books.
Representative WOLVERTON. Is it readily ascertainable?

Mr. TULLOSS. Well, the greater the detail, the more difficult it is to reassemble it and trace the items that enter into the total.

Representative WOLVERTON. Is the appropriation made by Congress in a lump sum, or for specific purposes?

Mr. TULLOSS. There were several appropriations but they have now been consolidated into one fund and one appropriation each year.

Representative WOLVERTON. So that when Congress appropriates money, it is a lump sum for the use of the T. V. A.?

Mr. TULLOSS. Yes, sir.

Representative WOLVERTON. Is there any restrictions that require the T. V. A. to spend it on the basis of the reasons given to the Appropriations Committee for the different items that make up the total amount?

Mr. TULLOSS. The Tennessee Valley Authority Act is, you might say, a series of limitations upon the availability of funds appropriated to the Authority. The appropriating language, as I recall, makes the moneys available for the purposes specified in the Tennessee Valley Authority Act.

Representative WOLVERTON. I have in mind, from reading the hearings of the Appropriations Committee, that representatives of the T. V. A. appeared and set forth the amount of money that is desired for specific objects. Therefore, I am making inquiry, whether in the form that the appropriation is granted, are the officials of the T. V. A. required to spend that money in the manner in which they have testified before the Appropriations Committee or may they use their discretion and change it to suit their desires?

Mr. TULLOSS. The Budget estimates generally set the fund up in some detail, and by break-down, but the law does not require adherence to that break-down.

Representative WOLVERTON. So that it is possible for the officials of the T. V. A. to appear before the Appropriations Committee and obtain moneys for certain purposes, and then after they have obtained them, to use their own judgment as to whether they shall use them for the purpose testified to before the Appropriations Committee? Mr. TULLOSS. That is correct, but of course those purposes must come within the Tennessee Valley Authority Act in order to be legal. Representative WOLVERTON. Within the general scope?

Mr. TULLOSs. Yes.

Representative WOLVERTON. Does the T. V. A. to your knowledge prepare a budget for presentation to either the Director of the Budget or to the Appropriations Committee?

Mr. TULLOSS. I understand that a budget is prepared for the Director of the Budget.

Representative WOLVERTON. Has your examination of the books found that the expenditures follow the budget that has been presented? Mr. TULLOSS. We do not audit to the budget. I am advised that we have found that changes have been made, but we do not make a point of that in our audit.

Representative WOLVERTON. In the slight examination that it was possible for me to give before I left Knoxville, I found that the expenditures in many instances were far different from the Budget set-up, and we had before this committee the evidence with reference to the phosphate lands, where a definite amount, a small amount, had been budgeted for the purpose of purchasing phosphate lands and that then afterward a very vast sum was changed from other budgets in order to make available enough money to buy the phosphate lands of the American Agricultural Corporation, and having that illustration be fore us, I am inquiring whether that isn't in a way illustrative of the

exercise of this discretion by the T. V. A. with respect to other Budget items?

Mr. TULLOSS. Yes, sir; I would say that it is.

Representative WOLVERTON. Have you at any time considered it within your duty as the General Accounting Office, the watchdog of the Treasury, so to speak, to suggest to the T. V. A. any particular system of accounting or of books that would more correctly set forth all the moneys that are being expended by the Government in the T. V. A. region?

Mr. TULLOSS. In the beginning, we offered our services in setting up the necessary accounts, to enable the T. V. A. to operate, in the same manner that we do for every other department and establishment. We were not received very well on that, and we gave up. We have made suggestions as to changes, from time to time-so far as I know, they have been informal.

EXPENDITURES OF OTHER AGENCIES

Representative WOLVERTON. Does the T. V. A. accounting system make available the moneys that are expended by other departments for T. V. A. activities?

Mr. TULLOSS. No, sir; that is one thing that-they set up only their own appropriations. In our audit report, it has been necessary for us to obtain that information elsewhere.

Representative WOLVERTON. Does the T. V. A. show by its books how much has been expended in improving its property by the use of C. W. A., C. C. C., or W. P. A.?

Mr. TULLOSS. No, sir.

Representative WOLVERTON. Does it show what moneys have been expended by the Forestry Department of the Government? Mr. TULLOSS. No, sir.

Representative WOLVERTON. Does it show what, if any, moneys have been expended by the Army or War Department?

*

Mr. TULLOSs. There was one item with reference to the Wheeler lock, some $2,000,000, I believe, that was shown on the books asI beg pardon, it was going to be put on the books but had not been, and I assume that it has been by now.

Representative WOLVERTON. So that with the exception that you have now referred to, the T. V. A. bookkeeping system does not correctly set forth the amount of Government money that has been invested in T. V. A.?

Mr. TULLOSS. That is right, sir.

Representative WOLVERTON. Have you any knowledge of how much has been expended which does not appear from the books of the T. V. A.?

Mr. TULLOSS. Our information is that there are twenty-odd million dollars, or there has been twenty-odd million dollars so expended by the Tennessee Valley Authority, that has come from other agencies, for the benefit of the T. V. A.

Representative WOLVERTON. Is it possible for an interested taxpayer of this Nation, by examination of the books of the T. V. A., to ascertain the entire amount that has been invested in the T. V. A. since its inauguration in 1933?