of the Corporation shall determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid", and further provides that the funds of the corporation may be deposited with the Treasurer of the United States, or in any Federal Reserve bank, and be subject to check by authority of the Corporation. No accounting is made to the General Accounting Office. See copy of office letter dated April 21, 1932, herewith. Reconstruction Finance Mortgage Co.-This is a private corporation. The Reconstruction Finance Corporation under authority of Public No. 1, Seventyfourth Congress subscribed to $10,000,000 of the capital stock of the Reconstruction Finance Mortgage Co. Managers of the Reconstruction Finance Corporation loan agencies will act as agents for the mortgage company.

Inland Waterways Corporation.-The Corporation is independent of annual appropriations by Congress and functions entirely on funds derived from operations. There is no audit by the General Accounting Office evidently because act creating the Corporation does not provide for an accounting either to the General Accounting Office or to the Congress.

Corporation of Foreign Security Holders.-The above was created by the Corporation of Foreign Bondholders Act, 1933 (48 Stat. 92), for the purpose of protecting, conserving, and advancing the interests of holders of foreign securities in default. The act authorizes the Corporation to borrow money, and further authorizes the Reconstruction Finance Corporation to loan $75,000 for the use of the Corporation. It is provided that

"The board of directors shall cause accounts to be kept of all matters relating to or connected with the transactions and business of the Corporation, and cause a general account and balance sheet of the Corporation to be made out in each year and cause all accounts to be audited by one or more auditors who shall examine the same and report thereon to the board of directors." It is further provided that—

* * The board of directors of the Corporation shall determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid."

The above provisions of the law appear to eliminate an accounting to the General Accounting Office.

Gorgas Memorial Institute.-Annual contribution to the Gorgas Memorial Laboratory is contained in the State Department appropriation act, and accounting is made to the General Accounting Office for payment by the State Department to the Gorgas Memorial Institute of Tropical and Preventive Medicine. The law requires that the books and accounts of the laboratory shall at all times be open to examination by the Comptroller General of the United States. Accordingly, examination of the books is made annually at the offices of the institute, but no accounting is rendered to the General Accounting Office.

Panama Railroad Co. (including Panama Railroad Steamship Co.).—The Panama Railroad Co. was created by a charter from the State of New York and has always been operated under the charter as a private corporation. In view of Executive Order No. 2135, February 4, 1915, establishing regulations governing the accounting to the Treasury of the United States (now the General Accounting Office) for Panama Canal collections, which states that the accounts which the collector is required to render need not include moneys of the Panama Railroad Co., it has been held that there is no legal authority for requiring an accounting to the General Accounting Office for its funds.

The interrelated activities of the Panama Canal and of the Panama Railroad Co., both of which are agencies of the United States under the supervision of the same officials, have but a fictional line of damarcation, and legislation should be enacted to dissolve the Panama Railroad Co. (including the Panama Railroad Steamship Line) as a separate entity and to provide that its activi· ties be transferred to and become a part of the Panama Canal operations, and that a complete accounting be rendered to the General Accounting Office for all financial transactions pertaining thereto, and that all of its funds be depos ited subject to the provisions of existing law relating to the deposit of other public funds of the United States.

Joint-stock land banks.-Joint-stock land banks were authorized by the Federal Farm Loan Act of 1916, the act providing "That the Government of the United States shall not purchase or subscribe for any of the capital stock of any such bank." Such banks thus being private corporations with no Government funds, no accounting to the General Accounting Office is required.

NOTE. By the act of May 12, 1933, however, the Reconstruction Finance Corporation was authorized to make available to the Farm Loan Commissioner (Land Bank Commissioner) the sum of $100,000,000, to be used for a period of 2 years for making loans to joint-stock land banks for liquidation of the business thereof. Such moneys are accounted for by the Farm Credit Administration.

Federal land banks.-The banks were established under the Federal Farm Loan Act of 1916, each to have subscribed capital of not less than $750,000, the stock to be subscribed for and held by any individual, firm, or corporation, or by the Government of any State or of the United States. The act granted the banks authority "To deposit its securities and its current funds, subject to check, with any member of the Federal Reserve System and to receive interest on the same as may be agreed." Accordingly, the funds of the banks not having been covered into the Treasury, no accounting therefor has been made to the General Accounting Office.

Federal intermediate-credit banks.-The banks were created under authority of the Agricultural Credits Act of 1923 (49 Stat. 1454), the charters being granted upon application of the directors of the Federal land banks. Although the capital stock was purchased by the United States, the banks being similar to and in a manner allied with Federal land banks, they have administratively been construed as being in the same category as the Federal land banks with no accounting to the General Accounting Office.

Federal home-loan banks.-The banks were created under the authority of the Federal Home Loan Bank Act approved July 22, 1932, the act providing that the Federal Home Loan Board shall require examinations and reports of condition of all banks in such form as the Board shall prescribe. In view of such requirement no accounting has been made to the General Accounting Office.

Federal credit unions.-Federal credit unions were authorized by the act of June 26, 1934 (48 Stat. 1216), and may be organized by any group, not less than seven in number, having common bonds of occupation and living within a well-defined community. Being private associations, no accounting to the General Accounting Office is required.

NOTE.-Fees received from the unions by the Farm Credit Administration for supervisory expenses are accounted for by the Farm Credit Administration. National farm-loan associations.-National farm-loan associations, also authorized by the Federal Farm Loan Act, are associations of persons desiring to borrow money on farm-mortgage security, through which loans are made to farmers by Federal land banks. Being of a private nature, no accounting is required to be made to the General Accounting Office.

II. LIST OF AGENCIES, INCLUDING GOVERNMENT CORPORATIONS, WHOSE FINANCIAL TRANSACTIONS ARE SUBJECT TO AUDIT BY THE GENERAL ACCOUNTING OFFICE BUT FOR WHICH ACCOUNTS HAVE NOT BEEN SOBMITTED FOR AUDIT

Home Owners' Loan Corporation.-The Corporation was created by the Home Owners' Loan Act of 1933, under supervision and direction of the Home Loan Bank Board. Capital stock of $200,000,000 was subscribed by the Secretary of the Treasury. An accounting procedure was prescribed, and the Corporation agreed to account accordingly, as evidenced by correspondence with the Comptroller General and by a statement made by the Chairman of the Board before a subcommittee on Banking and Currency, United States Senate, on March 22, 1935, as follows:

"Not only that, but the accounting itself is a highly complicated problem which we have worked out, as we have to, in conjunction with the Office of the Comptroller General. A unit of his office is in our office here in Washington and, with us, has worked out the forms and the methods, so that it becomes easy to audit, from a Government standpoint, and the Comptroller General can have it handled just as it ought to be handled, in accordance with the Federal requirements."

By letter dated August 7, 1936, to the Comptroller General, the Chairman of the Board states:

"Further consideration has been given to your letter of April 24, 1936, in reference to the accounting of Home Owners' Loan Corporation.

"Upon receipt of your letters of August 13, 1934, and November 27, 1934, and since that time, the Corporation has made diligent effort to install the system of accounts and forms prescribed by you in these letters.

"Having failed in this period of time to establish an accounting system to your satisfaction, we feel compelled to abandon the effort and to establish an accounting system and forms according to our best judgment, which we believe under the law to be our duty.

"Home Owners' Loan Act of 1933, subsection (j) of section 4, provides that Home Owners' Loan Corporation 'shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds.' We believe this to be a necessary provision of law for the operation of an establishment of this character. We believe that the business was set up in corporate form for the purpose of releasing it from Government procedures, which are inconsistent with the operation of ordinary business throughout the United States and its territories. We are convinced that the Corporation cannot be successfully operated under the accountable warrant system, which you propose to prescribe.

"We construe the Executive order of January 3, 1934, to be intended to provide for an audit of the affairs of this Corporation, but we do not construe it to be intended to transfer to another authority the responsibility of the board of directors of the Corporation to operate the Corporation according to the provisions of the law, and to incur expenditures as is provided by law. "Accordingly, the Corporation is glad to make available to you at any reasonable times and places all of its books and records for audits and the Corporation will make every reasonable effort to conduct its business in such manner and to record its transactions so that the same may be properly audited.

"We have reviewed again your letter of March 27, 1936, with reference to our compliance with section 21 of Public 473 and your letter of May 27, 1936. on the same subject, and our letter to you dated April 20, 1936. Upon investigation of the matter it appears that the procedure referred to in these lastmentioned letters involves a compliance with the accountable warrant system, which, in our opinion, is impracticable to be installed in the operation of this Corporation. We, therefore, wish to withdraw our proposal made in this connection and state to you that, in our opinion, the procedure proposed in these letters is inconsistent with the accomplishment of the duties of the board of directors of Home Owners' Loan Corporation."

No accounting has ever been made to the General Accounting Office. Federal Savings and Loan Isurance Corporation.-The Federal Savings and Loan Insurance Corporation was created under title IV of the National Housing Act and obtains it funds by receiving premiums from insured institutions, admission fees, and special assessments against the insured institutions. The law provides that the funds shall be deposited into the United States Treasury or invested in obligations of the United States or in obligations of which the principal and interest are guaranteed by the United States.

The General Accounting Office prescribed an accounting procedure for the Corporation, wherein it was provided that all moneys would be covered into the Treasury and advanced upon accountable warrant. The Treasury Depart

ment refused to cover such moneys, with the result that the accounting received from the Corporation through the chief disbursing officer had to be handled as a "Special deposit" accounting. Under date of June 15, 1936, the acting administrative assistant to the Secretary of the Treasury, by direc tion of the Treasury, addressed a letter to the Treasurer of the United States in part as follows:

"In accordance with an understanding reached between the Treasury Department and the Federal Savings and Loan Insurance Corporation, the special procedure heretofore established to care for funds of the Corporation will be eliminated, effective immediately. Hereafter the Corporation will deposit its collections directly with the Treasury of the United States for credit of its special deposit account, and the treasurer of the Corporation will draw checks directly on the Corporation's account in payment of its obligations. A special deposit account, symbol no. 13820, has been established by your office in the name of the Corporation for that purpose."

As a result of this arrangement, whereby there was established an accounting procedure contrary to that prescribed by the Comptroller General, and one which, it would appear, had for its purpose the evasion of an accounting to the General Accounting Office, since June 30, 1936, no accounting has been

made to the General Accounting Office, for the funds of the Federal Savings and Loan Insurance Corporation (copy of letter of June 15, 1936, attached). Federal Deposit Insurance Corporation.-This Corporation was created under the Banking Act of 1933, the chief function being to insure the deposits of all banks entitled to the benefits of insurance under the law. The capital of the Corporation was subscribed by the Treasury of the United States and the Federal Reserve banks. Funds of the Corporation, when not otherwise employed, are required to be invested in securities of the Government of the United States, except that for temporary periods they may be deposited in a Federal Reserve bank or with the Treasurer of the United States.

No accounting has ever been rendered to the General Accounting Office. Regional agricultural credit corporations.-These corporations were authorized by the Emergency Relief and Construction Act of 1932 (47 Stat. 713) to be created by the Reconstruction Finance Corporation. While under the jurisdiction of the Reconstruction Finance Corporation no accounting was required. By Executive Order No. 6084, March 27, 1933, the corporations were transferred to the jurisdiction of the Farm Credit Administration, and accounts were prescribed for an accounting to the General Accounting Office. However, no accounting has ever been received and the corporations are now in process of liquidation.

NOTE.-Funds transferred by the Reconstruction Finance Corporation to the Farm Credit Administration to cover supervisory expenses of the Farm Credit Administration are being accounted for.

War Finance Corporation.-The War Finance Corporation was created by the act of April 5, 1918, to give financial support to industries whose operations were "necessary or contributory to the prosecution of the war" and to banking institutions that aided in financing such industries. The Corporation is now in liquidation under the supervision of the Secretary of the Treasury. No accountng has ever been made to the General Accounting Office. Tennessee Valley Associated Cooperatives, Inc.-The Tennessee Valley Associated Cooperatives, Inc., was organized and incorporated under the laws of the State of Tennessee to promote, organize, establish, manage, finance, coordinate, and assist in any way whatsoever in the development of the cooperative enterprises in the Tennessee Valley and contiguous areas through grants and loans of funds and management services. The officers of the association are also directors and officers of the Tennessee Valley Authority, and serve the association without pay.

No accounting is rendered to the General Accounting Office and the association admits no jurisdiction of that office over its financial transactions, as evidenced by the following extract from letter of its president, under date of July 21, 1934, in reply to letter of the Comptroller General, dated July 14, 1934: "Because of the fact that these funds were granted by the Federal Emergency Relief Administration to the State of Tennessee, and by the State of Tennessee to the Tennessee Valley Associated Cooperatives, Inc., and because no money has been put into the organization directly by the United States, we feel that this organization is not subject to the usual regulations affecting Government departments. Nevertheless, we are glad to furnish you this information, and we have been glad to cooperate with your auditors, who are now in Knoxville, by opening up to them all books and records in connection with the transactions of this organization."

Representative KNIFFIN. Mr. Gulick, is it the view of the President's committee that any of the agencies such as those enumerated by Senator Byrd should be exempted from the audit?

Mr. GULICK. It is the view of the President's committee that there should be an audit of every agency which is spending public funds and is under the ultimate control of the Government of the United States. Now that audit should be in almost all cases, possibly in all cases, provided through the General Auditing Office. There may be special cases, like the Federal Reserve, in which some other equally satisfactory method of audit may be established, but there must be an independent audit in every case.

Representative KNIFFIN. It would not be a uniform audit?

Mr. GULICK. To that extent it would not be uniform, but those would be minor cases.

Senator BYRNES. Mr. Gulick, the reason Congress did that was because the funds to operate the Reconstruction Finance Corporation, and so forth, should come from the Federal Reserve, not the Treasury. These corporations are on an entirely different footing.

Mr. GULICK. It is my understanding that in all of those cases, though I did not follow the list completely, that in all those cases some form of audit is provided, and in many cases through bringing in commercial concerns to make the audit, and in many cases the audit really takes place by the Federal examiners connected with the Comptroller of the Currency, and so forth.

Representative COCHRAN. In some of those cases Congress specifically provided that the Auditor General should not audit the accounts because it was held that they should conduct their business along the lines of general business methods rather than the manner in which the Government conducts its business, and it was not required to adhere to the letter of the accounting system used for the general agencies of the Government.

Senator BYRD. That only applies to a number of those agencies, it does not apply to all of them.

Representative WARREN. Would you advocate bringing those that are exempted under the Auditor General?

Mr. GULICK. It is the position of the President's committee, as I said, that the agencies should be subject to audit, that they should all be brought in under the Auditor General unless, through some specific reason, it is decided that they should be audited in some other manner.

Representative KNIFFIN. Notwithstanding the fact that they are spending public money?

Mr. GULICK. I concede that there may be some cases where an equally satisfactory method of audit may be made, but the point is that there must be an independent audit.

Representative KNIFFIN. We go back then to the scattering of your audit system?

Mr. GULICK. It would be desirable to avoid that as far as possible. Senator BYRD. What about the R. F. C.? They should certainly set up an audit, should they not, when the appropriation is made directly from the Treasury for their administrative expenses?

Mr. GULICK. I am not sufficiently acquainted with the detailed nature of the audits that are provided to say that they should or should not be. We are dealing with the general question of policy. Senator BYRD. I inserted that matter, Mr. Chairman, into the record so that the Comptroller General and the General Accounting Office would not be blamed for the action of Congress, which exempts quite a number of departments from the general audit.

The CHAIRMAN. It is true that Congress has exempted, as Mr. Cochran said, some of these agencies from the authority of the Comptroller General.