LOCATION OF FIELD OFFICES NEAR CENTER OF ACTIVITY

Senator MAGNUSON. Well, generally speaking, the justification for your field office has always been that you tried to locate them within the center of activity in this particular field. There are obviously parts of the United States where there would be hardly any activity in the securities and exchange field. So that the new companies would be out in the field, would they not?

Mr. COHEN. Not necessarily.

Senator MAGNUSON. They would not be around here?

Mr. COHEN. Oh, yes. There are a great many companies around here.

Senator MAGNUSON. They would mainly be around the periphery of your nine offices someplace?

Mr. COHEN. All of them would be, of course. Now, so far as assistance in determining the application of the law, they will get assistance there.

As soon as the legislation was passed, Mr. Chairman, we set a group of people to preparing very comprehensive documents explaining in the greatest detail the nature of the amendments and what would be required of new companies. We spent a great deal of time going through all kinds of manuals trying to find the companies that might be subject to this legislation. We sent each one of them an individual letter in which we enclosed these documents, and invited their comment, and we received a great many letters of inquiry.

That is another thing that we undertook to do with the then existing staff. But of course that drew them away from other duties.

Senator MAGNUSON. Do you provide adequate assistance to the new smaller companies?

Mr. COHEN. Yes, but these are really large companies.

Senator MAGNUSON (continuing). That have not filed before?

Mr. COHEN. They must have at least 750 shareholders. That is considered fairly large. And beginning in July, 500. You see, the legislation

ASSISTANCE RENDERED BY SEC

Senator MAGNUSON. Is this assistance more of a personal nature or by mail?

Mr. COHEN. We do it both ways.

Senator MAGNUSON. I know it would be both ways.

Mr. COHEN. We do it both ways-by mail, personally, and on the telephone. As you know, Mr. Chairman, our agency has, we think, a rather enviable and unique reputation for providing assistance of this kind on a continuous basis. Of course, these inquiries have now increased tremendously.

Senator MAGNUSON. I think you want to do that, and Congress expects you to do it.

Mr. COHEN. It is the best preventive medicine we know.

Senator MAGNUSON. You would have nothing to handle but violations if you did not, and they would be mainly unintentional violations.

Mr. COHEN. Exactly, that is our philosophy; and that is why we have these people assigned to these jobs.

As you say, the field offices will continue to do that.

63-054-66-pt. 2-34

ADMINISTRATION OF REGULATION A FILINGS BY REGIONAL OFFICES

You may have reference also to offerings by small companies. That operation is completely decentralized, and it is handled in the regional offices, and will continue to be so handled.

Senator MAGNUSON. What is the average employment in the regional office? I suppose it depends on the area.

Mr. COHEN. That is right. Our New York office is the second largest unit in the Commission. It is larger than every other division except Mr. Worthy's division. Certain other offices are rather small. They conduct investigations and inspections, and render assistance to U.S. attorneys, and perform other equally important functions.

POSITIONS ELIMINATED THROUGH USE OF COMPUTER

Senator MAGNUSON. All right.

I don't have any further questions. I think we understand your request here today.

There is only one thing-I hope you remember this when you come back next year.

You are the first Commission that has ever come back here after they received a computer where we have ever seen any drop in employment. I am going to cut 15 off no matter how many you come back with.

Mr. COHEN. We delayed obtaining the computer because we knew we were going to move, and we wanted to save the expense of moving it back and forth. I wish to point that to meet the requirements of 60 positions for our new legislation, we hope to be able to abolish 20 positions in other programs. It is on this basis that we have limited our request to an increase of 40 positions.

Senator MAGNUSON. Senator Allott had to go down and present an "E" award. If you can come back here and show me you reduced employment with this computer, we will give you an "E" award. All right. Thank you very much for appearing.

RENEGOTIATION BOARD

STATEMENT OF LAWRENCE E. HARTWIG, CHAIRMAN; ACCOMPANIED BY HERSCHEL C. LOVELESS, BOARD MEMBER; THOMAS D'ALESANDRO, JR., BOARD MEMBER; WILLIAM M. BURKHALTER, BOARD MEMBER; JACK BEATY, BOARD MEMBER; HOWARD W. FENSTERSTOCK, GENERAL COUNSEL; PAUL T. SEMPLE, DIRECTOR OF ASSIGNMENTS; HAROLD E. STONE, DIRECTOR OF ADMINISTRATION; AND MRS. EULIE I. JACKSON, ASSISTANT BUDGET AND FISCAL OFFICER

BUDGET REQUEST AND HOUSE ALLOWANCE

Senator MAGNUSON. The committee will come to order.

We will hear the Renegotiation Board now. The Chairman, Mr. Hartwig, is here, members of the Board and members of the staff. We will place their names in the record in full.

For the purpose of the record, last year your appropriation was $2,530,000. The budget suggested this year $2,477,000, and the House went along with the budget recommendations. However, that is $53,000 under your appropriation for last year.

You have a short statement. We will be glad to hear from you. Mr. HARTWIG. Mr. Chairman, members of the subcommittee, I am pleased to appear today in support of the Board's appropriation request for the year ending June 30, 1967, which has been approved without change by the House.

The Board's appropriation for 1966 initially was $2,500,000. The pay increase effective in October 1965 made it necessary to request an additional $30,000 for a total of $2,530,000 for the current year. Thus, our 1967 request in the amount of $2,477,000 constitutes a $53,000 reduction after making provision for the pay increase.

This saving stems mainly from the fact that average full-time employment in 1967 is estimated at 171 as compared with 175 in 1966.

We anticipate that accelerated military procurement because of Vietnam will result in a heavier workload for 1967. This is reflected in our estimate that 500 contractors' filings will be assigned in 1967 for detailed processing in the field as compared with 430 in the current year. Nevertheless, the Board believes that continued improvement in productivity will enable us to handle the estimated increase in workload with fewer people.

The record will show that the Board has responded vigorously to the President's economy directives. This is tangibly evidenced by the fact that as the workload permitted, the total of personnel on duty has been successively reduced from 223 at the end of 1963 to 206 at the end of 1964, and then to 184 at the end of 1965.

The departments and agencies whose contracts and related subcontracts are subject to renegotiation are the Departments of Defense,

Army, Navy, and Air Force, Maritime Administration, General Services Administration, National Aeronautics and Space Administration, Atomic Energy Commission, and Federal Aviation Agency.

A substantial amount of this procurement, of course, is removed from the jurisdiction of the Board by the numerous exemptions in the Renegotiation Act. Every contractor whose aggregate renegotiable sales exceed $1 million in his fiscal year is subject to renegotiation and must file a report with the Board.

FILINGS SCREENED IN 1965

Of the 3,691 filings screened during 1965, 90.4 percent were cleared at headquarters without assignment to a regional board. The time for screening averaged 36 days, as compared with 59 days in 1964. During 1965, the inventory of all pending cases was reduced by approximately 15.7 percent.

The purpose of the Renegotiation Act as defined by Congress-the elimination of excessive profits-is accomplished both by Board proceedings and by voluntary actions of contractors. From its organization under the 1951 act through 1965, the Board made agreements or orders determining excessive profits in the total amount of $911,941,861 before Federal tax credits. In addition, during that 14-year period contractors reported voluntary refunds and voluntary price reductions to the Government amounting to $1,246,553,691. The total amount of such refunds and savings, from the inception of the Board through June 30, 1965, aggregated $2,158,495,552.

During 1965, the Board made 52 determinations of excessive profits totaling $16,146,803; and on June 30, 1965, additional refund determinations in the amount of $3,369,697 were in process. Also, in 1965, contractors reported to the Board voluntary refunds and price reductions in the amount of $16,402,517.

Of the 52 determinations of excessive profits made in 1965, 41 resulted in refund agreements and 11 resulted in the issuance of unilateral orders. Four of these orders were appealed to the Tax Court.

From its inception through June 30, 1965, the Board made 3,716 determinations of excessive profits, and 3,346 or 90 percent of such determinations were agreed to by contractors. During the same period, 136 or 370 unilateral orders issued by the Board were appealed to the Tax Court. As of June 30, 1965, the court has disposed of 91 cases, leaving 45 pending on that date. The Board's determinations were upheld in 51 of the 91 cases disposed of by the Tax Court; in 5 cases they were increased, and in 35 they were decreased.

My colleagues and I will be pleased to answer any questions or supply any other information, as the subcommittee may desire.

Senator MAGNUSON. I don't have many questions. I want to compliment the Board on holding down their employment level, which is always a problem with this committee on the independent agencies. I hope you can get along the rest of the year, because I do appreciate that you probably will have more filings beginning in the next fiscal

year.

Mr. HARTWIG. We anticipate 1968 will be the year.

Senator MAGNUSON. Justifications for the Renegotiation Board will be inserted in the record at this point.

people have no more rights than the other citizens. However, the Tax Court are running way behind in their claims.

Mr. HARTWIG. Actually there has been a reduction in the backlog of Board cases. It is down to about 42.

Senator MAGNUSON. Now, place in the record the number of people you have aboard now? You have it in your statement, didn't you? Mr. HARTWIG. As of today we have 169 people.

Senator MAGNUSON. And how many are in the field and how many here in Washington?

Mr. HARTWIG. We have 73 in the field and 96 at headquarters. Senator MAGNUSON. So there will be no significant change in the field or the headquarters?

Mr. HARTWIG. In 1967 there will be a slight increase in the field, and a slight reduction at headquarters.