Summary of funds authorized for ASCS operations under 1964 budget estimate

1 Adjusted for comparability. Includes authorized transfers from CCC.

+630, 918

+163,866

+1,246, 739

+22,900 +52, 300

-49,000

+26, 200

+261,055, 615

2 Budget estimate includes $5,000,000 anticipated supplemental. The supplemental actually submitted was $4,000,000.

3 Includes anticipated supplemental of $6,000,000.

♦ Bracketed figures are not included in totals. They do not represent new obligational authority. NOTE. The above adjustments for funds made available to other agencies and received from other agencies include only those items which are shown separately in budget estimates. They do not include such items as payment to General Accounting Office for the CCC audit, payment to Treasury for issuing ACP checks, and numerous other transfers which are treated as payments in the budget.

Mr. HORAN. You mean as far as picking up the check is concerned? Mr. BEACH. Yes, sir. In other words, the Congress in recent years has appropriated funds for title I, Public Law 480, for the budget year, rather than having to go back and pick it up for past years.

Mr. HORAN. It is very confusing. It does represent deductions from the common purse of America of a considerable size. It is for that reason that I would like to ask some questions regarding it.

On page 71 of the committee print there is some new language. You have a total request in your estimates in the first category of $115 million, which is an increase of over $20 million over last year. Mr. BEACH. We didn't have the committee print. This is the administrative expense item for ASCS. It represents a consolidated account of all the expenses of running the organization. You are citing the difference between

Mr. HORAN. I was citing the difference between appropriations for the current year and your estimate for this year.

Mr. BEACH. A footnote indicates there were transfers from the CCC fund in addition to those actual amounts of appropriations.

Mr. HORAN. Are those transfers to be included in that total

Mr. BEACH. Yes, sir. The proposal before you is that all of these transfers will be included in the item of expenses ASCS

Mr. HORAN (continuing). That I just mentioned?

Mr. BEACH. Yes.

Mr. HORAN. And you will have allotments and other funds of $42,780,000 to spend. I assume part of these are for administrative costs, aren't they?

Mr. BEACH. Yes, sir; these would be included in the administration of all the programs for which the agency is responsible.

Mr. HORAN. They are outlined on page 288 of the justifications. Has that been-that has already been included by the chairman, I believe.

Mr. BEACH. Yes, sir.

Mr. HORAN. I would like to list what those allotments are going from: Great Plains conservation program

Mr. BEACH. We have a statement, Mr. Horan, which shows the total funds that we received from other agencies and transferred to other agencies, which we will be glad to put in the record.

Mr. HORAN. At this point?

Mr. BEACH. Yes.

Mr. HORAN. It will be different than the justification?

Mr. BEACH. No, sir; I think it will be similar to that one, the project

statement.

Mr. HORAN. Mr. Chairman, I am going into this rather fully. This has already been put in the record, but since I am trying to have a discussion and trying to understand this budget, I wonder if we could have this included at this point, rather than where you already put

it in.

Mr. WHITTEN. I will be glad to have it at this point. Insofar as the other, we will leave it up to the staff to see whether it should be there, too.

Mr. HORAN. That is all right with me.

Mr. WHITTEN. If it is a duplication, it won't hurt.

Mr. HORAN. It isn't large.

Mr. HORAN. It is a $43 million item. I think it is only fair to the administration to have it referred to at this point where I am asking these questions.

(Information requested appears on p. 1835.)

INTERNAL AUDIT AND INVESTIGATION ACTIVITIES

Mr. HORAN. In the administration of the Commodity Credit Corporation, are you satisfied with the number and caliber of personnel engaged in the internal audit of the activities of the CCC?"

Mr. GODFREY. Yes, we were. They have now, as you know, been assigned over to the Inspector General, who works directly under the Secretary.

Mr. HORAN. You have read these reports that we get from the Comptroller General. And I have also, as far as they affect the work that I am supposed to do. I wish you would outline the steps that you have taken to explore or enlarge or strengthen the internal audit. You have just recently put on an Inspector General, haven't you?

Mr. GODFREY. Yes; reporting directly to the Secretary.

Sometime last fall, in November, when we reorganized ASCS, we combined out audit and investigative staffs into one division and assigned them as reporting directly to the Administrator. They had been reporting directly to the Administrator as far as program work was concerned, but for housekeeping chores had been reporting to Mr. Beach, as Deputy for Management. Then, in December, the Secretary assigned all the audit and investigative functions for the entire Department to the supervision of the Inspector General, Mr. Condon. He is now in the process of getting his organizational structure complete. Until this is completed, they are continuing to function as they did in the past, reporting both to Mr. Condon and the reports coming direct to the administrators of the agencies also. Prior to that time, however, we had taken considerable steps in ASCS to strengthen the investigative and audit activities, extending back to January 1961. One of the first undertakings when I came into Washington, was to strengthen the audit staff and investigative staff.

Mr. HORAN. Just as an example, this occurred on March 23, 1960. This is from the Dallas office. They recorded a claim of about $273,000. That is a small enough amount, so we can all understand that-in connection with a shortage of about 1.2 million pounds of CCC-owned tung oil stored by Miller of tung units under a warehouse agreement. Apparently you recovered some of that, including the warehouseman's bond. But the net loss was about $177,000. The warehouseman apparently reported this to you. What steps have you taken to make sure that the bond is adequate and that warehousemen just can't come up to you and say, "I have lost some tung oil"?

Mr. GODFREY. This, of course, refers to the time prior to January, when I came into Washington, so I'll deal with it since I came into Washington, January 1961. We now have revised our procedures considerably since that time.

Mr. HORAN. That is the answer I want.

Mr. GODFREY. We make two inspections every year of all warehouses storing CCC commodities and more often if there is any indication that there may be a shortage involved. During the time when we are having a heavy load-out of grain, such as we are having at the present time, we make careful, periodic inspections.

I was explaining the actions we now take to insure that we have our commodities on hand. We make the two inspections annually during the periods of heavy load-out. In the case of grain, we make more periodic inspections.

In addition to this, when the inspection is made, normally the amount is determined by measurement. In measuring grain you are not always able to tell to the exact bushel what you have there. But if there is an indicated shortage which we would consider beyond what you would call an operational shortage-within 1 or 2 percent of the amount which is obligated for we immediately may order a load-out of all Government grain, notify the bonding company, and if necessary, we station one of our men at the warehouse to assure that we are protected at all times and that the grain moves the way we think it should move.

Now to come back to the tung oil question, the warehouseman in question was the Alabama Tung Mills, Inc. Although the GAO report indicates a net loss of about $177,000, we advised in July of 1960 that the commodity office had security in the form of warehouseman's bond for $42,000, and payables due the warehouseman for charges on warehousing of about $6,200.

In addition we had a personal guarantee to the CCC signed by one of the warehouse principals which is estimated at $322,000. As of right now, it is not possible to tell what the actual loss, if any, will be. By letter dated January 20, 1963, we are making a determination from the Dallas office of the exact status of this particular case.

We have strengthened our warehouse extensions; we have strengthened our procedures for followup

Mr. HORAN. You are doing that through the Inspector General and a stronger internal audit?

Mr. GODFREY. No, this is done through our commodity offices through closer supervision of our warehouses by the commodity offices, and the addition of more warehouse examiners who last year were put on to do this.

Mr. HORAN. I don't see any way we can escape that. As I attempted to point out before, when we were off the record, the Commodity Credit Corporation supplants the built-in disciplines that are in ordinary commerce, which is quite brutal at times, but discipline is necessary here. We know through the years that it cannot be avoided. We felt quite proud of our Pacific Northwest operations until we found somebody in the commodity office up there was in collusion. Mr. GODFREY. I would like to add two or three other things.

CCC NET LOSS

Mr. HORAN. I want them. We have a responsibility to the American people with a 142 billion dollar corporation, which has cost the American people somewhere in the neighborhood of $20 billion in net loss.

Mr. GODFREY. I might disagree with the $20 billion in net loss because I think a material amount of it should be charged to foreign assistance programs.

Mr. HORAN. You can follow that one out at your leisure.

Mr. GODFREY. I will say the additional things and if you don't mind, I'll come back to this a little bit later and show the actual price-support losses if you would like.

Mr. WHITTEN. We will be glad to have you supply for the record the amount of Commodity Credit stocks that have gone into the foreign aid program under the law and the amount of money that has been appropriated after the fact to make the Commodity Credit Corporation funds available for price-support operations.

(Price-support losses are shown beginning on p. 1902. The other material supplied follows:)