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The CHAIRMAN. But not a Comptroller General's audit ?
Mr. FITTS. Not a settlement and adjustment audit.
Mr. DURHAM. Would you apply that to all Government agencies?

Mr. Fitts. No, sir; I tried to make the distinction that I would apply that only to those enterprises that are engaged in commercial business operations, where they are forced to use the ordinary practical methods of business, and where speed and flexibility and initiative are so very important, and I mentioned as typical examples of those agencies the R. F. C., the Home Owners' Loan Corporation, the Maritime_Commission, the Inland Waterways Corporation, and the Panama Railroad Company, as well as T. V. A. None of those corporations are now subject to the Comptroller General's jurisdiction under the budget and accounting, and I do not think they should be.

Mr. Martin. Those are not the entire number of governmental agencies engaged in proprietary functions, are they? Mr. FITTS. I do not think they are.

Mr. Martin. Would you apply the same principle to all agencies engaged in proprietary function, insofar as that function is concerned ?

Mr. Fitts. That is a pretty broad question. I think I would want to study the facts of each of those agencies. I would want to know just how complex their operations are and how much they need. I think it is a question of balancing convenience. In other words, you: have two conflicting principles.

Mr. MARTIN. Who would determine that point ?

Mr. Firms. I think Congress should, and that is what I am asking here, that you determine it here in the light of our own particular problems and needs. I think you have to balance on the one hand your desire for control through the Comptroller General, and the admitted necessity for a certain degree of independence and flexibility on the other hand, and see which consideration outweighs the other.

Mr. MARTIN. Would you approve of Congress putting that power of judgment in some hands other than the Comptroller General's office?

Mr. Fitrs. I do not think so. I do not think that power ought to be delegated. I think Congress ought to determine it, and I think that is what you are being asked to do whenever you get a piece of legislation like this. I think you are being asked to exercise your 'legislative function in determining whether this is the kind of agency that ought to have that degree of freedom, or whether it is not.

Mr. DURHAM. We have got so many different kinds of agencies today. Take for instance W. P. A. Do you think they should settle their own accounts ?

Mr. Firts. I know very little about their organization. I think I do know our problems.

The CHAIRMAN. I regret very much, gentlemen, but we will have to adjourn until a later date. We will select another day and try to get a time when we can get through with it. You will be notified. Thank you, Mr. Fitts.

(Whereupon, at 4 p. m., the committee adjourned.)

AMENDING THE TENNESSEE VALLEY AUTHORITY ACT

FRIDAY, JUNE 27, 1941

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,

Washington, D. C. The committee met at 4 p. m., Hon. Andrew J. May (chairman) presiding.

The CHAIRMAN. Let the committee be in order please.

I am calling up H. R. 4961, a bill to amend section 9 (b) of the Tennessee Valley Act, as amended by section 14 of the act of August 31, 1935.

(The bill referred to is as follows:)

[H. R. 4961, 77th Cong., 1st sess.) A BILL To amend section 9 (b) of the Tennessee Valley Authority Act, as amended by

section 14 of the Act of August 31, 1935

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 9 (b) of the original Tennessee Valley Authority Act, as amended by section 14 of the Act of August 31, 1935 (49 Stat. 1080), be, and the same is hereby, further amended by adding at the end of section 14 thereof the following: “Nothing in this Act shall be construed to relieve the Treasurer or other accountable officers or employees of the Corporation from compliance with the provisions of existing law requiring the rendition of accounts for adjustment and settlement pursuant to section 236, Revised Statutes, as amended by section 305 of the Budget and Accounting Act, 1921 (42 Stat. 24), and accounts for all receipts and disbursements by or for the Corporation shall be rendered accordingly."

The CHAIRMAN. The Chair at this time desires to recognize the Honorable Lindsay C. Warren, Comptroller General of the United States, and ask Mr. Warren to come around and give such further statement as he desires.

STATEMENT OF HON. LINDSAY C. WARREN, COMPTROLLER

GENERAL OF THE UNITED STATES, WASHINGTON, D. C. Mr. WARREN. Mr. Chairman, and gentlemen: I feel that the committee is entitled to fully know what has transpired since the day you heard us last, when I testified before the committee on the pending bill, and you also heard at that time the General Counsel of the T. V. A. The hearings were then continued.

On Monday morning of this week I received a communication from the Treasury Department, transmitting a request for issuance of a certificate of settlement. That afternoon I received a wire from

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Knoxville, Tenn., from the Tennessee Valley Authority, signed by Mr. Morgan as chairman, reading as follows:

TENNESSEE VALLEY AUTHORITY,

JUNE 24, 1941. Hon. LINDSAY C. WARREN, Comptroller General of the United States,

Washington, D. C. On June 16, 1941, we wrote to the Treasury Department requesting the transfer of $5,000,000 from the Tennessee Valley Authority fund to our checking account. We understand that this request was submitted to you by the Treasury on Thursday, June 19, 1941, in order that you might certify that the balance now remaining in Tennessee Valley Authority funds is sufficient to cover this request. Our records show that that balance is more than sufficient. The request that we have made of the Treasury is simply that $5,000,000 of the remaining balance be transferred to our checking account by settlement warrant so that the operations authorized by Congress may be continued. We are informed by the Treasury that your office has not yet taken action on their request for certification. It is essential that the funds requested be made available for checking not later than end of this week. Any delay beyond that time would jeopardize our entire construction program under these circumstances we feel it necessary to request immediate action on your part. Please let us know tomorrow whether there is to be any delay.

HARCOURT A. MORGAN,

Chairman, Board of Directors. And on Tuesday, I replied to that wire. Had I issued the certificate of settlement requested of me, of course there would have been no occasion for me to have reported to the Congress in the first instance or for the introduction of the bill introduced by the chairman, and the subsequent hearing on that.

I replied to the T. V. A. as follows:
The CHAIRMAN. Would you care to read that wire ?
Mr. WARREN. It is a very short wire.
The CHAIRMAN. All right.
Mr. WARREN. I replied as follows:

JUNE 24, 1941.
Hon. HARCOURT A. MORGAN,
Chairman Board of Directors, Tennessee Valley Authority,

Knoxville, Tenn. Retel June 23 your letter of June 16 to the Secretary of the Treasury which you state was transmitted here June 19 was not delivered to the General Accounting Office until June 23. The procedure indicated in your telegram has never been followed by this office in such a case as the one here presented and I am giving careful consideration to the question of whether there is any authority of law for me to issue a certificate such as you suggest. Pending such consideration and with reference to your statement that any delay beyond the end of this week in making appropriated funds available for expenditure by your disbursing officer would jeopardize your entire construction program I have to advise that I will continue to honor requisitions and countersign accountable warrants for the advance of appropriated funds to the account of your disbursing officer in accordance with the procedure which has been followed ever since the Tennessee Valley Authority began its operations about 8 years ago notwithstanding any delinquency in the rendition of its accounts unless in the meantime this procedure should become inconsistent with action the Congress may take on the matter which I presented to it June 2, 1941. This procedure will enable your disbursing officer to obtain such funds as he may require for current expenditures.

WARREN,

Comptroller General of the United States. As the result of the receipt of that telegram from me on Wednesday morning of this week, Mr. Lillienthal, one of the Directors of the T. V. A., and Mr. Fitts, its General Counsel, visited my office.

the first opportunity I had to meet either of those gentlemen, and the first opportunity I had to discuss any phase of this matter with them since I assumed office last November.

It is fair to say that all of us deplored the situation that has arisen, and we expressed at that time an earnest desire on the part of both of us to further look into the matter, to see if there could not be any possible adjustment and understanding, that we could in turn come back and submit to this committee.

There were three conferences as a result of that first meeting. Of course, the T. V. A. contends that they are not under the Budget and Accounting Act, and are fortified with an opinion from the Attorney General.

As I have previously stated to this committee, that opinion, however, is not binding upon me.

They also took the position that no legislation was necessary even to the extent of the alternate draft proposed in my communication to the Congress which would entirely favor their position.

I have taken the position from the very beginning, gentlemen, that this is a matter that Congress itself should pass on, and that above all I desired Congress to guide my actions.

We have gotten together in a complete understanding and agreement on the matters involved between the General Accounting Office and the Tennessee Valley Authority, and it is that that I am here to submit to you today. It is covered by an amendment to the pending bill introduced by the chairman and it would bring the T. V. A. under the provisions of the Budget and Accounting Act which they have heretofore contended they are not under.

I have stated both in my decision of last December and the communication to the Congress of June 2 that I recognized on account of the peculiar type of the business that they are engaged in that they are entitled to certain latitude that other agencies would not be. That latitude has been given by Congress on numerous occasions to the Home Owners' Loan Corporation, the Maritime Commission; the Employees' Compensation Commission; the Federal Housing Administration; the United States Housing Authority; in many respects to the Veterans' Administration; the Soil Conservation; and the World War Adjusted Compensation Act.

This proposed agreement recognizes that latitude but makes definite that they come under the Budget and Accounting Act. It also for the first time will bring their contracts and their vouchers to the General Accounting Office in the seat of the Government for permanent keeping. That in itself will facilitate our future audits, and certainly should give us a certain degree of economy in making these audits that we have not had before.

I would like to read to you gentlemen the proposed amendment to the present bill, and if there are any phases as to the particular workings of it in the future I would be very glad for you to ask Mr. Yates, the attorney conferee, to answer such questions as you may desire.

It is proposed that the bill be amended as follows: Provided, That, subject only to the provisions of the Tennessee Valley Authority Act of 1933, as amended, the Corporation is authorized to make such expenditures and to enter into such contracts, agreements, and arrangements

upon such terms and conditions and in such manner as it may deem necessary, including the final settlement of all claims and litigation by or against the Corporation; and, notwithstanding the provisions of any other law governing the expenditure of public funds, the General Accounting Office, in the settlement of the accounts of the Treasurer or other accountable officer or employee of the Corporation, shall not disallow credit for, nor withhold funds because of, any expenditure which the Board shall determine to have been necessary to carry out the provisions of said act.

The Corporation shall determine its own system of administrative accounts and the forms and contents of its contracts and other business documents except as otherwise provided in the Tennessee Valley Authority Act of 1933, as amended.

Now, I might say there is not included in this proposed amendment several things that the Tennessee Valley Authority earnestly desired to be in there, and for which they contended, and at the same time I very readily admit that there has been some concession on the part of the General Accounting Office in a desire to end this controversy, and to have written into the statute what shall be our guide in the future, because as I wound up my testimony the other day before you the condition as it now exists is more or less intolerable.

I never had the pleasure of meeting Mr. Lilenthal until this week, and to see him in these conferences, but I think it is only just to say of him that I have found him highly cooperative and that he has the same desire that I have, and those who are associated with me, to bring this controversy to an end in the manner that we have outlined.

The CHAIRMAN. Any questions?
Mr. CLASON. Mr. Chairman, I would like to know-

The CHAIRMAN (interposing). Perhaps the attorney may analyze the amendment for you.

Mr. CLASON. What have you surrendered you had the right to exercise ?

Mr. WARREN. Well, we have done this. Heretofore, we would make these suspensions, and we would hold the disbursing office liable for them. There are a whole raft of suspensions that have been made over a period of the last 4 or 5 years, to which the T. V. A. has recently replied in a mass of documents. We have not had any opportunity, because they only came in this month, to go over those. Of course, we can continue to raise the question about any expenditure. We can call it to the attention of the Board and we can also report it to Congress, but we will not challenge the allowance of that in the account of the disbursing officer.

The CHAIRMAN. If there are no further questions, I am going to ask Mr. Yates to make a brief explanation of the amendment as he understands it.

STATEMENT OF FRANK L YATES, ATTORNEY-CONFEREE TO THE

COMPTROLLER GENERAL OF THE UNITED STATES, WASHINGTON, D. C.

Mr. YATES. Yes, Mr. Chairman.

Heretofore, gentlemen, under the contention of the Tennessee Valley Authority--that is, that there should be only an audit under section 9 (b), as they interpret that section, but no audit and settlement under the Budget and Accounting Act—it would be possible under that

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