Mr. TULLOSS. If an individual was versatile enough to know where to get the information, he might be able to elicit it from the various activities that contribute, or the T. V. A. might be willing to disclose the information.

Representative WOLVERTON. I am asking if an accountant took the books of the T. V. A., would he see set up in figures the amount in total that has been expended on T. V. A., either through appropriations made by Congress direct to T. V. A., or through any of the other Government agencies?

Mr. TULLOSS. No, I don't see how it would be possible for him to obtain that. It is not recorded on their books.

Senator SCHWARTZ. Could I ask the witness there a question without interrupting you, as to whether the books would show the amount expended by the T. V. A.?

Mr. TULLOSS. Yes.

Representative WOLVERTON. Would it show the amounts that had been expended by other departments of Government for the benefit of T. V. A.?

Mr. TULLOSS. No, sir.

Senator SCHWARTZ. Could those figures be ascertained from the different departments that expended money?

Mr. TULLOSs. We haven't been able to determine fully that that can be obtained. We know of several allocations, and funds made available to the T. V. A., and they have been covered in our reportsin our contemplated reports, but we are not satisfied that we have all of it.

Representative WOLVERTON. May I have the report of 1934, Mr. Biddle?

Mr. BIDDLE. Yes.

(A document was passed to Representative Wolverton.)

Senator SCHWARTZ. Could I ask a question at this point? I think that you testified that T. V. A. has some 200,000 separate accounts. Within your definition, if they wish to buy some material from some particular individual, would that be a separate account?

Mr. TULLOSS. Yes, sir.

Senator SCHWARTZ. And if they carried an account there with some individual as to his wages or salary and the time that he has worked, that would also be a separate account, would it?

Mr. TULLOSS. Yes, but it would be broken down into various classifications.

Senator SCHWARTZ. It would constitute one of the 200,000.
Representative THOMASON. You mean "items," then?

Mr. TULLOSS. Well, the expenditure for an individual would be allocated to several different accounts, and instead of having just one account for the individual, there might be half a dozen.

Representative THOMASON. But there would be 200,000 items.
Mr. TULLOSs. Yes.

Senator SCHWARTZ. And they normally have about 25,000 employees-laborers and employees?

Mr. TULLOSS. I understand that the peak was 17,000, approximately.

Senator SCHWARTZ. There was some testimony, I think, that pushed it up to 20,000. It is not important, though.

CRITICISMS IN 1934 AUDIT REPORT

Representative WOLVERTON. On page 4 of your report, as to the 1934 fiscal transactions, I find this statement:

VALUATION PLACED ON MUSCLE SHOALS PROPERTIES

Notwithstanding that the original investment before the sale of the WarriorSheffield Line was approximately $137,000,000, and that the properties, and so forth, turned over to the Authority on the basis of the cost amounted to nearly $133,000,000, such properties have been established on the books of the Tennessee Valley Authority at an arbitrary value of $51,000,000, or about 38 percent of the cost.

Are you able to tell me at what date in 1934 that entry was made, approximately?

Mr. TULLOSS. It seems to me that it was in-early in 1934. I don't know the date.

Representative WOLVERTON. At what amount does the same item appear on the books in 1935?

Mr. TULLOSS. It was taken off entirely.

Representative WOLVERTON. Do you mean to say that this item to which I have just referred, which according to your report was placed on the books in the early part of 1934, at $51,000,000, absolutely disappeared in 1935?

Mr. TULLOSS. Yes, sir. I am advised that it was not even carried into the 1935 annual report.

Representative WOLVERTON. Did it appear in 1935?

Mr. TULLOSS. No, sir.

Representative WOLVERTON. Has any explanation been made to you why an item of $51,000,000 was placed on the books in 1934, and did not appear in 1935, or 1936?

Mr. TULLOSS. I understand that they claim that the original entry in the books was a tentative entry and not intended as a final entry of the value of the property.

Representative WOLVERTON. Is there any entry in the books to indicate that it is tentative?

Mr. TULLOSS. We did not find anything to so convey that thought to us.

Representative WOLVERTON. From what source were you able to ascertain that it was a tentative figure?

Mr. TULLOSs. I think that it was carried

Mr. BIDDLE. There is the explanation of it if you would like to see it.

Mr. TULLOSS. As stated in the notes here, of the officers and employees of the T. V. A. who prepared this reply to our report:

The valuation of $51,000,000 was purely a tentative figure set up on the books by the accounting department when the organization was first started and before any study had been made or could have been made as to the proper valuation to establish on these properties.

Mr. BIDDLE. Would you finish it? I don't think that he has finished.

Mr. TULLOSS (reading):

It was set up for internal operating purposes only, in order to have some arbitrary balance sheet valuation. This figure was discussed with the auditors personally by the comptroller of Tennessee Valley Authority, who pointed out the tentative nature of the figure and the fact that it did not represent any considered opinion. The auditors were therefore fully aware of this fact and yet they failed to make any mention of it in their report.

Mr. BIDDLE. You haven't finished, have you?

Mr. TULLOSS. I shall continue on, if you wish.

Representative WOLVERTON. I don't know; Mr. Biddle knows more about it.

Mr. BIDDLE. He had read a portion of the reply, and I thought that you wanted to have the full position of the Tennessee Valley Authority as stated in their answer rather than a sentence or two out of the beginning.

Representative WOLVERTON. I do want all of it. It didn't appear in any examination of this witness prior to my doing so.

Mr. BIDDLE. I examined him at great length about it.

Representative WOLVERTON. Not on the feature that I am speaking of.

Mr. TULLOSS. I am still quoting:

As a matter of fact, section 14 of the Tennessee Valley Authority Act of 1933 provides that

"The Board shall make a thorough investigation as to the present value of dam No. 2, and the steam plants at nitrate plant No. 1, and nitrate plant No. 2, and as to the cost of Cove Creek Dam, for the purpose of ascertaining how much of the value or the cost of said property shall be allocated and charged up to"(1) Flood control;

"(2) Navigation;

"(3) Fertilizer;

"(4) National defense; and

"(5) The employment of power.

"The findings thus made by the Board, when approved by the President of the United States, shall be final, and such findings shall thereafter be used in all allocations of value for the purpose of keeping the book value of said properties." Some of the quotation is emphasized, and the additional words underscored.

Mr. BIDDLE. The witness has not finished, Mr. Wolverton. He was about to read another paragraph.

Representative WOLVERTON. Far be it from me to get in everything that you want.

Mr. BIDDLE. I want to get in everything that you want-you want the witness to answer you.

Representative WOLVERTON. I wish that were the case.

Mr. TULLOSs (reading):

This paragraph is cited on page 88 of the report, with the following comment: "In the absence of actual values of the existing properties, no distribution in accordance with the foregoing has yet been made.

The comments concerning the $51,000,000 valuation and also the comment quoted here completely ignore the provisions that an investigation shall be made as to the present value of these properties. By this expression Congress itself recognized the fact that the cost of these properties was not the basis to be used in establishing their value to the Tennessee Valley Authority or as a basis for the future records of the Authority.

It is also evident that no such value is or can be final until determined by the Board and approved by the President. It is also evident that the provision refers to the dam and power plant only and there is no specific provision with reference to a valuation for the nitrate plant. By implication, however, it is

clear that any value established for the nitrate plant should also be a matter for Board determination before it can be considered final. The report is, therefore, in error in failing to point out this fact.

As a practical matter, this valuation, if anything, is too high. Subsequent studies carefully worked out with the help of disinterested consultants, indicate that the present valuation to be assigned to Wilson Dam (dam No. 2) will be around $30,000,000. Any valuation assigned to the nitrate plant will be purely arbitrary, but a reasonable basis would seem to be an amount roughly proportionate to the value received by the War Department in actual sales of similar property. The Old Hickory nitrate plant at Nashville, Tenn., cost $83,583,674, or approximately the same as the combined cost of nitrate plants Nos. 1 and 2 at Muscle Shoals. These properties were sold for $3,420,696, or about 4.1 percent of their cost.

The niter powder plant at Charleston, W. Va., cost approximately $58,400,000 and was "sold to the Charleston Industrial Corporation for $8,505,000. The Charleston Industrial Corporation went bankrupt after paying only $5,514,437. The Government thus received 91⁄2 percent of its actual cost. The sales price of these two combined properties was approximately 6.3 percent of their cost. Applying this same ratio to the nitrate plant at the Shoals, it would give a value of less than $5,500,000. It therefore seems evident that the combined values to the Tennessee Valley Authority of the dam and powerhouse and the nitrate plants at Muscle Shoals would be in the vicinity of $35,000,000 rather than the $51,000,000 originally set up on the books.

Again it is emphasized that these figures are still tentative and subject to final determination by the Board after complete studies have been made.

I think that that is all that it says about that.

Representative WOLVERTON. Was there any explanation given to the auditors as to why $51,000,000 had been fixed when as the report or answer just read from the T. V. A. indicates that they were unable to fix any figure?

Mr. TULLOSS. Other than as they say there, that this was an arbitrary for working purposes.

Representative WOLVERTON. Well, in the statement which you have just read into the record, which is the answer of the T. V. A. officials, it is very plainly indicated that they have not yet arrived at a figure.

Now, if that was true, then did they give any reason for having put $51,000,000 in the books, to start with?

Mr. TULLOSS. It is considered a good accounting practice to put something in the books to represent the value and the costs, and presumably that is why it was done, and in fact they say so.

Representative WOLVERTON. Then if it is good bookkeeping practice to put something in, and they put $51,000,000 in, then they were not observing good bookkeeping practice when they didn't put anything in, in the following years.

Mr. TULLOSS. Yes, sir; it seems to be an inconsistency there in putting it in one year and taking it out the next.

Representative WOLVERTON. That is what I am trying to get at. Why this juggling between different years, with respect to such a large item was $51,000,000.

Mr. TULLOSS. The removal of the item may be explained, although I don't know that this is true, by the fact that our audit report commented on the valuation that was placed on the books.

Representative WOLVERTON. Well, they indicate in that report, which I assume was given to you as an answer sometime during the fall of 1934

Mr. TULLOSS. That report was submitted by letter, dated December 12, 1935.

Representative WOLVERTON. Yes, so that within a year afterward they changed their mind with respect to this particular property having a value of $51,000,000 for bookkeeping purposes.

Mr. TULLOSS. As I recall, the $51,000,000 was placed on the books early in 1934, and the following fall was removed; subsequent thereto we received the reply to the audit report, which was rendered April 3, 1935.

Representative WOLVERTON. To make a long story short, it wasn't on the books in 1935, at any figure.

Mr. TULLOss. That is correct.

Representative WOLVERTON. And it wasn't on the books in 1936 at any figure.

Mr. TULLOSS. That is correct.

Representative WOLVERTON. Well, prior to that, in fact in September of 1934, rates had been established for electrical power, had they not?

Mr. TULLOSS. I understand that that is correct; yes, sir.

Representative WOLVERTON. In fact, in September of 1933?
Mr. TULLOSS. Yes, sir.

Representative WOLVERTON. Did they, or did you at any time think that it was within your province as the General Accounting Office, to ask the basis on which they could fix rates for electrical energy, in September of 1933, when they hadn't decided the value of the property that they were utilizing to produce the electrical energy?

Mr. TULLOSS. Inquiry was made with reference to the basis for fixing rates, but the rates were fixed without any valuation or any explanation as to why it was being done.

Representative WOLVERTON. Well, then, we have this situation before us: That in September of 1933, rates were adopted for the basis of the sale of electrical energy, at which time the Authority had not determined the value of the property that was being utilized to produce the power.

Mr. TULLOSS. Yes, sir.

Representative WOLVERTON. And that some months later they fixed a value of $51,000,000. The following year there was no value given. I refer to the year 1935, and 1936 there was no value, and when did they next place a value on the property?

Mr. TULLOSS. I am advised that the valuation was placed on the property June 30, 1937.

Representative WOLVERTON. At what figure?

Mr. TULLOSS. $33,100,000.

Representative WOLVERTON. Wasn't it $31,300,000?

Mr. TULLOSS. $31,100,000 for Wilson Dam and power plant. Representative WOLVERTON. Now that was just for Wilson Dam? Mr. TULLOSS. And the power plant.

Representative WOLVERTON. What did they do with respect to setting up a value for nitrate plant No. 1, and nitrate plant No. 2, and the Waco quarry?

Mr. TULLOSS. There is no valuation placed on it.

Representative WOLVERTON. Did they give you any information with reference to the fixing of $31,300,000 which related only to Wilson Dam, as to what in their opinion had been the value of nitrate Nos. 1,