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Mr. Tulloss. From these other activities.
Mr. BIDDLE. How is it made up? Is it an estimate or judgment or guess?
Mr. Tulloss. That is an estimate; the figure that I gave yesterday was an estimate.
Mr. BIDDLE. Where was it made from? What book entries was the $20,000,000 made up from?
Mr. Owen. That was the testimony of Chairman Morgan before one of the committees, in order to get money to run the T. V. A. on.
Mr. BIDDLE. What did Chairman Morgan testify with respect to $20,000,000 or $6,000,000?
Mr. OWEN. He testified that it would average that from November 1933.
Mr. BIDDLE. What would average what?
Mr. BIDDLE. It was Chairman Morgan's estimate of the expenses of other departments which you took as being direct benefits of T. V. A., which should be shown in T. V. A. books?
Mr. OWEN. Yes; the estimate should not be shown but they should go over
and get the right figure and put that on. Mr. BIDDLE. And have you any idea whether those departments would have spent that money irrespective of the T. V. A.?
Mr. Owen. I think there is a general program of C. C.C. work going on all over the country, but not to help stop erosion in a dam or reservoir which is running a generator.
Mr. BIDDLE. So you think because the C. C. C. program for planting trees, planted to prevent soil erosion, that that planting should be treated differently from its ordinary planting, and charged differently?
Mr. Owen. When the Board of Directors directly request, they say, "We want some C. C. C. boys down here, to put some trees around our reservoirs and banks to keep the water from going in,” yes; I think that that should be worked out in some way.
Mr. Matchett. If I may interrupt, it wasn't confined to the planting of trees. A good bit of that was used on the erection and maintenance of transmission lines.
Mr. BIDDLE. I am trying to get the line of demarcation, specifically, how much was definitely used on transmission lines, and how muchI don't suppose that you have any idea.
Mr. MATCHETT. In 1934, we traced $41,000 plus to transmission lines.
Mr. BIDDLE. Work by whom?
Mr. MATCHETT. C. W. A. or one of the alphabet organizations, not C. C. C.
Mr. BIDDLE. It was money that was appropriated by C. W. A. and spent by them in connection with the transmission lines, and the post office, isn't that right?
Mr. Matchett. There is nothing in there about the post office. That $41,000 was all spent on transmission lines.
Mr. Tulloss. We were speaking yesterday of the post-office transaction, which was $35,000.
Mr. BIDDLE. And this was $41,000.
Mr. Tulloss. This is another item here. Mr. MATCHETT. This is a separate item. Representative WOLVERTON. I suppose that you have as a basis for your suggestion, charging this on the books of the company, of the T.V. A., that the same reason should apply with respect to the property or services rendered by C. C. C. or any other of these agencies, as applied to the War Department when it turned its properties over.
Mr. OWEN. Yes.
Representative WOLVERTON. The War Department turned over a considerable amount of property, running into millions of dollars, and it appears on the books of the T. V. A. It would be surprising if it didn't.
Now, what distinction is there between C. C. C., in making a gift to T. V. A., or the C. W. A., or any of these other agencies, than would apply or does apply with respect to the property turned over by the War Department?
Mr. Tulloss. There is really no distinction, as I see it. It has been a general rule of the General Accounting Office that in such cases there is really an augmentation of the appropriation to the same extent as though Congress had specifically increased the appropriation by that amount, and it had been expended for that purpose.
Representative WOLVERTON. In other words, for the same purpose that you or I as an individual, if we came into possession of any property as a result of a death or otherwise, we would add it to our list of assets, wouldn't we?
Mr. Tulloss. Yes, sir.
Representative WOLVERTON. Well, this property which is being augmented, as you have said, by services of the C. C. C. and all of these other governmental activities, National Forest Administration, and so forth, certainly increased the value of the property, and it would seem to me' have just as much right to be set out on the books of T. V. A. as the setting forth of the property delivered by the War Department. Mr. TULLOSs. Yes, sir. Representative WOLVERTON. I am unable to see any difference. Mr. TULLOSS. Yes.
Mr. BIDDLE. Should we in determining our yardstick, try to allocate the benefit to the private utilities of planting of trees around Hales Bar, and the nonpayment of taxes in Hales Bar? We ought to in making a fair comparison.
Mr. Tulloss. I don't believe that
Mr. BIDDLE. You wouldn't be auditing their books but I was just wondering.
Mr. Tulloss. I don't know what you mean by that, Hales Bar, if you are speaking of someMr. BIDDLE. C. C. C. trees planted around the dam.
Mr. Tulloss. As a point made here awhile ago if the Tennessee Valley Authority thought that that was a worth-while thing to be done and requested it
Mr. BIDDLE. Shouldn't that be charged against Tennessee Electric Power Co.? It benefited their dam; it was given by the Government.
Mr. Tulloss. Oh, yes.
Representative WOLVERTON. I am not examining at the present time, as to whether this should be charged as against power, or navigation, or flood control, or any other agencies or activity of the T. V. A.
I am only now trying to ascertain why all of the value that goes into the T. V. A. is not set up on its books, so that there may be a true picture of what T. V. A. represents as of Government investment, whether it comes directly by appropriation from Congress to the T. V. A. or through other agencies of the Government.
That is all that I am interested in at the present time.
RELATIONSHIP BETWEEN AUTHORITY AND COOPERATIVES
Now, on page 110 there is a statement set forth there purporting to be the assets and liabilities of the Tennessee Valley Associated Cooperatives, Inc. Will you tell me just what that corporation is, and what its connection is with the T. V. A.?
Mr. MATCHETT. The association at that time had a number of the officials of the Tennessee Valley Authority who were also officers of the Tennessee Valley Associated Cooperatives. There were a number of organizations in and around Tennessee and North Carolina, organized for various purposes, such as disposing of canned goods, or local manufactured chairs, and such, and the T. V. A. was working in close cooperation with this organization.
Representative WOLVERTON. Now, let us get a little bit more detailed explanation of it. Who were the incorporators of the Tennessee Valley Associated Cooperatives?
Mr. MATCHETT. The board of directors of the Tennessee Valley Authority.
Representative WOLVERTON. Were there some others; was Mr. Bass?
Mr. MATCHETT. That I am not prepared to answer without some study.
Representative WOLVERTON. I think that you will find it in your report there, if you wish to refresh your memory. I think it is around page 104 of your 1934 report.
Mr. Tulloss. May I suggest that I read that page, as reflecting the facts?
Representative WOLVERTON. I think that it would be very helpful. Mr. Tulloss (reading):
The Tennessee Valley Associated Cooperatives, Inc., was organized and incorporated under the laws of the State of Tennessee, January 23, 1934, to promote, organize, establish, manage, finance, coordinate, and assist in any way whatsoever in the development of cooperative enterprises in the Tennessee Valley and contiguous areas through grants and loans of funds and management services. capital stock consists of 100 shares of common no par value, subscribed by Arthur E. Morgan, Harcourt A. Morgan, and David E. Lilienthal for and in behalf of the United States. No cash was paid for the stock.
The officers of the association are Arthur E. Morgan, president; Harcourt A. Morgan, vice president; and David E. Lilienthal, secretary, and Frank J. Carr, treasurer, who are also directors and officers of the Tennessee Valley Authority and serve the association without pay. Arthur C. Jackson is the paid executive of the Authority, and serves the association as administrator, together with assistants in his office, whose salaries also are paid under Tennessee Valley Authority appropriations.
The administrative expenses of the association, approximately $90,000 per annum, based on June 1934, during which month there was expended approximately $7,400, of which $6,400 was for salaries and travel and about $1,000 for material and supplies, have been accounted for and capitalized on the records of the Tennessee Valley Authority as "regional development.”
The minutes of the Tennessee Valley Authority record approval by the Board of continued payment of the salaries and expenses of Arthur C. Jackson, the administrator of the association, and his force, from Tennessee Valley Authority funds.
In the statement of the Tennessee Valley Authority's accounts, such amounts as have been expended by the Authority for administration of the association have been set up as accounts receivable from the association. Conversely, in the accounts of the association the amounts expended have been set up as a liability with the corresponding charge to income.
Representative WOLVERTON. So that the picture as I understand it is that the Tennessee Valley Authority, for some reason, best known to themselves, formed a corporation under the laws of Tennessee, for what was termed the Tennessee Valley Associated Cooperatives?
Mr. Tulloss. Yes, sir.
Representative WOLVERTON. Your report sets forth the purposes of that corporation, if I may say to the members of the committee, if they wanted to take the opportunity to read the purposes of that corporation, it is really setting forth the most idealistic system that I have ever seen reduced to language.
Representative Thomason. Čongress made a specific appropriation of that activity, did it not?
Mr. TULLOSS. No, sir.
Representative WOLVERTON. What Mr. Thomason has in mind is that the President made an Executive order by which he turned over $300,000 to the Governor of Tennessee, and the Governor of Tennessee turned it over to the Tennessee Valley Associated Cooperatives, is that about right?
Mr. Tulloss. That is right.
Representative THOMASON. At the same time the directors of the T. V. A. presented this matter fully to the appropriate committees of Congress, and every body was fully apprised of the situation.
Mr. OWEN. Yes, the T. V. A. records are clear and separate, and the T. V. A. C. are clear and separate.
Mr. TULLOSS. I do not know whether the activities of this corporation were reported to the Congress.
Representative WOLVERTON. Well, then the officers of the association were Arthur Morgan, president, and Harcourt Morgan, vice president, and David Lilienthal, secretary, and Mr. Carr, treasurer, who was also the treasurer of the Tennessee Valley Authority?
Mr. Tulloss. Mr. Carr, I think, was the comptroller of the Tennessee Valley Authority.
Representative WOLVERTON. Yes, I think that that is right. Is Mr. Jackson still with the T. V. A., do you happen to know?
Mr. OWEN. I understand that he is not.
Now, did the Tennessee Valley Authority make contributions to the Tennessee Valley Associated Cooperatives, Inc.? Would that appear on page 111 of your report, that I am asking for?
Senator SCHWARTZ. You are not objecting to that statement because it is idealistic, are you?
Representative WOLVERTON. Oh, no.
Senator SCHWARTZ. The whole progress of civilization is turning the ideal into the real, isn't it?
Representative WOLVERTON. I merely mentioned it to the committee because it made an impression on me as I read it, last night, and I thought that you folks might enjoy reading it also; it is certainly worth while to read it.
Mr. Tulloss. I understand that the Tennessee Valley Authority expended approximately $39,000 for the benefit of the Tennessee Valley Associated Cooperatives, and that amount was set up as a receivable for the Tennessee Valley Authority.
Representative WOLVERTON. That is the amount carried on the books of the Tennessee Valley Authority as an account receivable?
Mr. Owen. No, it was not carried as such, it was carried as an expenditure by them for their account, and we claim it is for the account of the T. V. A. C., and we set it up as a receivable from the T. V. A. C. on the T. V. A. books.
Representative WOLVERTON. Well, your statement on page 104 seemed to indicate that it had been set up as an account receivable.
Mr. OWEN. We set it up ourselves, as such.
Representative WOLVERTON. So that so far as the T. V. A. is concerned, it is considered a straight out-and-out gift?
Mr. OWEN. An expenditure, yes; we took exception to that item, and made a journal entry for it and set it up against the T. V. A. C. on the T. V. A. books.
Representative WOLVERTON. Are the books of the Tennessee Valley Associated Cooperatives open to your audit?
Mr. Tulloss. They were at that time.
Representative WOLVERTON. Why do you qualify it by saying "at that time"?
Mr. Tulloss. I think that there has been a separation there, and they are no longer associated. They were not examined after that, after that year.
Representative WOLVERTON. Are the original incorporators still members of the board of directors of the Tennessee Valley Associated Cooperatives?
Mr. Tulloss. I do not know.
Representative WOLVERTON. What has happened to the Tennessee Valley Associated Cooperatives?
Mr. Tulloss. I understand that the Tennessee Valley Associated Cooperatives is still in operation, but separate and apart from the Tennessee Valley Authority.
Representative WOLVERTON. Well, under the statement of the General Accounting Office with respect to it, it appears that the capital stock consisted of 100 shares of common no-par value subscribed by Arthur E. Morgan, and Harcourt A. Morgan, and David Lilienthal, for and on behalf of the United States. Where is that 100 shares of common stock now held, and by whom?