words of the conference committee in charge of the bill, to 'have much of the freedom and elasticity of a private business corporation.' Attempts to amend the act in order to bring the Authority under the provisions of the Budget and Accounting Act failed both in the House and in the Senate. The United States Supreme Court has held that the Emergency Fleet Corporation was not subject to this act, since the very purpose of using these corporate agencies was to enable them to 'employ commercial methods.' The committee concludes that the Budget and Accounting Act is not applicable to the Authority." Senate Document No. 56, p. 244. [Italics supplied.]

The majority report was signed by the chairman, Senator Vic Donahey, of Ohio; and by Senators Frazier, of North Dakota; Mead, of New York; and Schwartz, of Wyoming; and Representatives Barden, of North Carolina, and Thomason, of Texas. The General Counsel for the Committee was Francis Biddle, the present Solicitor General of the United States.

A minority report was signed by Senator Davis, of Pennsylvania, and Representatives Jenkins, of Ohio, and Wolverton, of New Jersey.

If the Congress did not agree with the conclusions of its committee, it has never demonstrated that by any congressional action.

Consideration has been given to Executive Order No. 6549, dated January 3, 1934, which provides in part:

* * it is hereby ordered and directed that accounts of all receipts and expenditures by governmental agencies, including corporations, created after March 3, 1933, the accounting procedure for which is not otherwise prescribed by law, shall be rendered to the General Accounting Office in such manner, to such extent, and at such times as the Comptroller General of the United States may prescribe, for settlement and adjustment pursuant to title III of the Act of June 10, 1921, 42 Stat. 23."

That Executive order is not deemed applicable because it only applies where the accounting procedure is not otherwise provided by law, while the accounting procedure of the Authority is so prescribed, and, further, because the accounts are to be settled and adjusted pursuant to title III of the Budget and Accounting Act, 1921. It has been demonstrated that the Congress, both before and after the issuance of Executive Order 6549, demonstrated its intention that the Authority should not be so accountable to the Comptroller General.

From the legislative history of section 9 (b) of the Tennessee Valley Authority Act of 1933, as amended, the legislative history of the Second Deficiency Appropriation Act, fiscal year 1935, and the conclusions of the Joint Committee on the Investigation of the Tennessee Valley Authority, it must be concluded that the Authority was not made accountable to the General Accounting Office by the 1933 act, and that the 1935 amendments were not intended to bring the Authority within the scope of the Comptroller General's jurisdiction in the matter of accountability.

Having determined that the funds appropriated to the Authority need not be settled and adjusted in the General Accounting Office, there remains for consideration the question how those appropriated funds may be made available to the Authority.

It is fundamental that no money may be withdrawn from the Treasury of the United States except pursuant to appropriations made by law, article I, section 9, clause 7, Constitution of the United States, and that the Treasurer of the United States may disburse the moneys of the United States only upon warrants signed by the Secretary of the Treasury and countersigned in the General Accounting Office, section 305 of Revised Statutes of 1873, as amended (U. S. C., title 31, sec. 147).

In disbursing money from the Treasury two types of warrants have been employed, "accountable warrants" and "settlement warrants."

The accountable warrant is used to advance money to a disbursing officer, while the settlement warrant is used to pay an indebtedness of the United States directly to the person entitled to the money. 1 Lawrence, Decisions of the First Comptroller 421, 422–428.

Since, in the disbursement of funds appropriated to the various departments and establishments of the Government, there must be an accounting to the accounting officers of the Government for the validity of the expenditures made. it can readily be seen that the procedure of making the money available by first advancing it to the disbursing officer by means of an accountable warrant is best adapted for these purposes.

A description of that procedure will best demonstrate why that procedure is so well adapted to the disbursement of funds where the accounts are required to be settled and adjusted in the General Accounting Office, and why it is not fitted to a situation where the Congress did not intend that these accounts should be so settled and adjusted.

In order to have available funds to meet payroll expenses at the next pay period, or to pay obligations to private persons which a department has incurred, and in order that such payments may not be delayed until after the General Accounting Office shall have had an opportunity to settle and adjust these claims, the department or establishment will request that a certain portion of the appropriate appropriation be withdrawn from the Treasury and credited to the official account of the disbursing officer in order that he may make payments directly from that account. Section 3648 of Revised Statutes of 1873, as amended (U. S. C., title 31, sec. 529); Williams v. United States (U. S. 1843), 1 How. 290. There is sent to the General Accounting Office a requisition requesting the advance and specifying the appropriation to which it is to be charged. If the requisition is approved by the General Accounting Office, it is transmitted to the Department of the Treasury where an accountable warrant is drawn by the Secretary of the Treasury and sent to the General Accounting Office for countersignature in that Office. Act of July 31, 1894, as amended (U. S. C., title 31, sec. 76).

Upon the basis of that warrant, the Treasurer will withdraw from the Treasury the amount specified therein and charge the proper appropriation account therewith, section 305 of Revised Statutes of 1873, as amended (U. S. C., title 31, sec. 147), section 3675 of Revised Statutes of 1873, as amended (U. S. C., title 31, sec. 77); and credit the official deposit account of the disbursing officer, section 3620 of Revised Statutes of 1873, as amended (U. S. C., title 31, sec. 492).

The disbursing officer is then in a position to disburse those funds upon the basis of payroll vouchers, etc., properly certified by persons authorized by law to incur obligations on behalf of the United States. Section 4 of Executive Order No. 6166, June 10, 1933. In order that he may receive credit for disbursements made by him, the disbursing officer must render accounts, section 3623 of Revised Statutes of 1873 (U. S. C., title 31, sec. 498), act of August 30, 1890, 26 Statutes 413, as amended (U. S. C., title 31, sec. 497); and, if the disbursements, when audited in the General Accounting Office (after a preliminary administrative examination has been made in the proper department, act of August 23, 1912, 37 Stat. 375, as amended (U. S. C., title 31, sec. 82)), are found to be valid and proper, the disbursing officer will receive credit for the disbursements so made. If, however, the General Accounting Office disapproves a disbursement as not being valid and proper, the disbursing officer, under the present practice of the General Accounting Office, will receive no credit and, being charged with the amount advanced to him, will be indebted on the books of that Office for the difference between the amount advanced to his account and the valid disbursements made therefrom.

* *

It may be noted that the General Accounting Office, in considering a requisition for the advance of funds, will disapprove the requisition if there is any delinquency in the rendition of accounts to that Office, and may so do "for other reasons arising out of the condition of the officer's accounts for whom the advance is requested Act of July 31, 1894, 28 Stat. 209, as amended (U. S. C., title 31, sec. 78). Since a requisition must accompany an accountable warrant when the warrant goes to the Treasurer (act of July 31, 1894, 28 Stat. 209, as amended (U. S. C., title 31, sec. 76)), the Comptroller General may, unless the Secretary of the Treasury overrules the General Accounting Office's decision with regard to the condition of the officer's account for whom the advance is requested or waives the delinquency in rendering accounts, prevent the advance of funds to the disbursing officer.

Although that procedure is suitable for the expeditious payment of claims prior to their settlement and adjustment in the General Accounting Office pursuant to section 236 of the Revised Statutes, it would seem clear that where the Congress intends that that section is not to be applicable, there is no need to advance funds by an accountable warrant to a disbursing officer.

Since the claims on which payments have been made by the disbursing officer of the Authority are not to be settled and adjusted in the General Accounting Office, and since no disallowances can be made in his accounts by that Office,

Act of July 31, 1894, 28 Stat. 209, as amended (U. S. C., title 31, sec. 78).

60332-41-7

there is no reason that funds need be advanced to him in the same manner as they are to an accountable officer. When the Congress makes an appropriation to the Authority, the Authority is entitled to receive that money and to expend it without having the General Accounting Office settle and adjust each claim that it pays. Since the Authority considers the accountable warrant procedure as too cumbersome a method for making such appropriations available and since that procedure is unnecessary because there is to be no "accountability," it is my opinion that the Secretary of the Treasury may validly sign a "settlement warrant."

Direct support for my conclusion is to be found in an opinion of Comptroller of the Treasury Warwick to the Secretary of the Treasury (1917), 24 Comp. Dec. 118. The question there presented was the manner in which appropriated funds were to be paid to the United States Shipping Board Emergency Fleet Corporation. Comptroller Warwick stated the problem as follows (at p. 120): "The question which arises is whether it shall receive them in a form requiring accountability to the Treasury, which would be obtained by treating the request of the corporation as a requisition for funds and issuing thereon an accountable warrant placing the amount to the credit of its financial officer, who would be required to give bond to account therefor to the Treasury; or whether a pay warrant should issue based on an auditor's settlement under which there would be no accounting to the Treasury."

99 10

After determining that the corporation was not accountable to the Treasury, he concluded:

"As such corporation it is not required to render an accounting to the Treasury of its moneys. The intent of Congress in authorizing it to receive the public moneys to expend as its other moneys, can mean nothing else than to relieve it of accounting for the use of public moneys as such moneys are usually accounted for, to wit: to the accounting officers of the Treasury.

"You are accordingly advised that unless the President directs otherwise, the moneys requested by the corporation are to be paid on a pay warrant issued upon an auditor's settlement."

That the making available of funds for which no accountability is required may be properly done by means of settlement warrants would follow from the fact that, as I am informed by the Division of Bookkeeping and Warrants of the Department of the Treasury, funds appropriated to the Fleet Corporation were likewise made available by direct settlements during the period July 1, 1921-February 8, 1922, the first 8 months of the existence of the General Accounting Office. It does not appear why that procedure was changed, but nothing appears that would cast any doubt upon the validity of that procedure.

I am informed, moreover, that, in the purchase of stock in corporations with funds appropriated by the Congress, the practice has been to make the funds available by use of settlement warrants.

The Secretary of the Treasury, in signing a warrant, has the duty of determining, among other things, whether the warrant is a proper one. Cf. (1881) 17 Op. Atty. Gen. 233; (1899) 5 Comp. Dec. 390. In the latter ruling, there was involved an appropriation to the trustees of the Philadelphia Museums which contained a proviso "That this sum should be expended only for the purposes set forth in this section." The Auditor for the State and other Departments stated an account calling for the issuance of a settlement warrant. Comptroller Tracewell, commenting on this, stated (at pp. 391-392):

"If a warrant of the character contemplated by this settlement is issued and paid to this corporation, so far as the accounting officers of the Government are concerned, the incident is closed, and there could be no accounting made or had, as indicated by the Auditor. The only remedy the Government would have in case the trust was not in good faith executed by the donee would be to go into court and enforce the trust.

"I am in grave doubt as to the authority of the Comptroller to decide in a way binding on the Secretary of the Treasury that he should or should not attempt to enforce the trust imposed by the act by safeguarding this appropriation by requiring of these trustees a bond of indemnity securing the execution of the terms of the trust before paying the amount over to them, or by appointing a special disbursing agent to receive and account for the money under the terms of the trust." He continued, however, by saying (at p. 392):

10 Those functions of the Department of the Treasury in relation to accountability were transferred to the General Accounting Office by the Budget and Accounting Act.

"But I am of the opinion that the payment of this money under the terms of this appropriation is a matter entirely within the discretion of the Secretary. He may pay it absolutely, as would follow under the construction of the Auditor, no accounting to follow, or he may pursue the course herein indicated, which would secure the enforcement of the trust and an accounting for these funds through the accounting officers of the Government." [Italics supplied]

It is my conclusion, therefore, that the funds appropriated to the Authority may be made available by means of a settlement warrant. Since the certificate of settlement from the General Accounting Office, certifying the amount due the Authority, must accompany the settlement warrant when it goes to the Treasurer (act of July 31, 1894, 28 Stat. 209, as amended (U. S. C., title 31, sec. 76)), the Secretary of the Treasury may wish to advise the Comptroller General of this opinion before proceeding further.

Very truly yours,

Mr. E. H. BARTELT,

Commissioner of Accounts.

E. H. FOLEY, Jr., General Counsel.

STATEMENT OF H. R. 4961

The proposal now before this committee raises an issue of fundamental importance. In his message to Congress recommending the enactment of the original Tennessee Valley Authority Act the President stated that the purpose of the legislation was to create "a corporation clothed with the power of government but possessed of the flexibility and initiative of private enterprise." Pursuant to that recommendation the Authority was created as a corporation with the broad charter powers set out in its statute. The essence of the statute is found in those attributes of corporate identity, initiative, and flexibility. It is those qualities that differentiate the Government corporation from administrative departments and bureaus.

The corporate form has been adopted wherever Congress has determined that the unique or complex character of the job to be accomplished demanded a degree of independence incompatible with the traditional departmental organization. This is no new development. It is significant that in periods of crises when novel demands on Government must be met with speed and efficiency, the trend toward the use of the Government corporation as an administrative device has been accelerated.

During the period of the first World War, when jobs of unusual importance and complexity had to be performed with minimum delay, there were created the United States Shipping Board Emergency Fleet Corporation, the War Finance Corporation, the Spruce Corporation, and many others. In determining that the Emergency Fleet Corporation was an entity separate and distinct from the ordinary Government department and therefore not subject to General Accounting Office control, the Supreme Court of the United States recognized the basic reason for the use of the corporate device in the following statement:

"Indeed, an important if not the chief reason for employing these incorporated agencies was to enable them to employ commercial methods and to conduct their operations with a freedom supposed to be inconsistent with accountability to the Treasury under its established procedure of audit and control over the financial transactions of the United States" (Skinner & Eddy Corp. v. McCarl, 275 U. S. 1, 8 (1927)).

Again, during the economic crisis beginning in 1930, it became necessary for the Government to enter new fields of endeavor and again the answer to the demand for speed, initiative, and imagination was found in the use of the Government corporation. The Reconstruction Finance Corporation, the Federal Deposit Insurance Corporation, the Home Owners' Loan Corporation, and the Tennessee Valley Authority are examples of the corporate enterprises chartered by Congress during that period.

The purpose of the proposal now before this committee is to reverse the trend and nullify the lessons of experience. The effect of the enactment of this bill would be to destroy the very attributes that give significance to the Government corporation as an instrumentality for administering the Government's business. The form would remain, but the qualities of imaginative leadership and Initiative could not survive under the veto power of the General Accounting Office.

Why has the Tennessee Valley Authority been signaled out for this attack? It does not stand alone in its resistance to administrative control by the General

Accounting Office. That control has not been extended to such corporate enterprises as the Reconstruction Finance Corporation, the Federal Deposit Insurance Corporation, the Inland Waterways Corporation, the Panama Railroad Company, the Home Owners' Loan Corporation, the Federal Savings and Loan Corporation, and the War Finance Corporation. Just a few days ago the chairman of this committee stated on the floor of the House that all other Government agencies are accountable to the General Accounting Office. It is remarkable how this misconception persists. This controversy is as old as the modern development in the use of Government corporations. The United States Emergency Fleet Corporation fought this same battle throughout the period of its existence. The Panama Railroad Company successfully resisted an attempt to extend General Accounting Office control to it as recently as 1935. An earlier attempt to extend the same control to the Inland Waterways Corporation was also defeated. In all of these instances the administrative officials of the corporations involved strenuously opposed the suggested changes upon principles identical with those that we advocate.

When legislation radically changing existing law is proposed, it should be justified by some showing of pressing necessity for such a change. No such showing appears in this record. The representatives of the General Accounting Office do not suggest that this proposal is required because of any deficiency in the Authority's accounting or internal audit procedures. The Authority's system of accounts is in accord with standard practices in accounting, and its power accounts conform to the uniform system prescribed by the Federal Power Commission, with such adaptations to meet the particular problems of the Authority as are approved by the Commission. In addition, the Authority has always maintained an elaborate system of internal audit controls, and its accounts have been subjected to audits by two outside organizations, the General Accounting Office and Yybrand, Ross Bros. & Montgomery, a nationally recognized firm of certified public accountants. In the 8 years of its existence the Authority has handled more than $300,000,000 of Federal funds without the faintest suspicion of fraud or misappropriation.

None of the reasons that have been advanced to justify this proposal stand up under analysis. First, it is said that the purpose of this amendment is merely to clarify existing law and not to change it. The history of the difference of opinion between the Authority and the General Accounting Office makes it perfectly clear that no such clarification is needed. The issue upon which that difference of opinion has turned is a simple one of statutory interpretation upon which everyone has agreed except the General Accounting Office. Section 9 (b) of the Tennessee Valley Authority Act defines and delimits the jurisdiction of the General Accounting Office over the transactions of the Authority. That section provides that the Comptroller General "shall audit the transactions of the Corporation at such times as he shall determine, but not less frequently than once each governmental fiscal year, with personnel of his selection." It is provided that the Comptroller General and his representatives "shall have free and open access to all papers, books, records, files, accounts, plants, warehouses, offices, and all other things, property, and places belonging to or under the control of or used or employed by the Corporation." He is to make a report of each such audit in quadruplicate, one copy for the President of the United States, one for the chairman of the Board, one for public inspection at the principal office of the corporation, and the other for the uses of Congress. The statute further directs the Comptroller General to "make special report to the President of the United States and to the Congress of any transaction or condition found by him to be in conflict with the powers or duties entrusted to the Corporation by law." The Authority has not only never resisted the conduct of this audit provided for in its own statute but has repeatedly sought to have it made more effective.

The representatives of the General Accounting Office have contended that the Authority is subject, in addition to this detailed audit procedure, to all of the procedures set up in the Budget and Accounting Act of 1921, including monthly rendition of accounts and vouchers to the General Accounting Office in Washington, the approval or disapproval of requisitions of funds by the Comptroller General, and the final settlement of the accounts of disbursing officers.

The precise issue which the Comptroller General now raises was presented to Congress in 1935 by one of his predecessors during the consideration of certain proposed amendments to the Tennessee Valley Authority Act. At that time the