Mr. FASCELL. To buy the supplies that you had already bought?

General WESTPHALINGER. To buy the supplies we had already bought. Anyway you look at it we are saving the United States Government funds. Mr. FASCELL. To the extent that you are using the money for needed

. supplies?

General WESTPHALINGER. Yes; and we are using them for needed supplies.

Mr. FASCELL. I am not at all familiar with this process and I have not heard anything about it until now.

General WESTPHALINGER. This is a one-shot proposition. It does not pertain any more.

Mr. FASCELL. Were these funds all expended by this command ? That is, the Army? Were all three commands involved or did they all have an allocation out of this?

General HODES. All three commands had an allocation.

Mr. FASCELL. Therefore, there was authorization obviously from the Department of Defense making the allocation and authorizing the expediture.

General Hopes. That is probably true.
Mr. BLAIR. That is correct.

Mr. FASCELL. Otherwise the funds would not be made available on a shared basis. They would not have any way to get it.

Mr. BLAIR. The German Government supplied deutschemarks to the occupying forces here and that support is phasing out. You depended on those funds for the operation of the command.

Mr. FASCELL. Obviously there must have been some kind of an arrangement made between our Government in some way to receive these deutschemarks.

Mr. BLAIR. One of the restrictions involved your deutschemarks procurement. You could not take it out of the German borders to dispose of it in France. In other words, your deutschemark-procured trucks, when they became excess, could not be taken over to France.

Mr. FASCELL. That is what I am getting at now. If you procured all of this with that limitation within Germany, and then it became excess and had to be distributed, how would you get rid of it instead of using it right within the area where procured?

General Hones. Excess to the area and not to the theater?
Mr. FASCELL. How do we get it out of Germany
Mr. Blair. We cannot. It is deutschemark procured.

Major SULLINGER. If deutschemark-procured property, it must be returned to the Federal Republic of Germany. The Federal Republic has title to that property.

Mr. FASCELL. Are we talking about linseed oil and nails?

Major STLLINGER. If it is deutschemark-procured property of any kind.

Mr. FASCELL. Any kind?
Mr. POLAND. Those were occupation deutschemarks.

Major SULLINGER. Occupation and defense funds. There are two types of funds--occupation cost funds and defense cost funds.

Mr. FASCELL. Then you do have the supply that was purchased. In other words, is the supply far in excess of requirements for that area since you cannot move it out of that area; is that the fact of the matter?

Major SULLINGER. You can move it anywhere in Germany.

Mr. FASCELL. Then the bases upon which you have to measure the determination are the requirements in Germany ?

Mr. BLAIR. That is correct. Mr. FASCELL. That is the only way to be objective about this thing. We are not talking about use in the entire theater or use in the entire military system. We are talking about use in Germany, period, for as many years as it takes us to use it up, based on whatever the requirements are in Germany. We could not do anything else with the money except give it back, so we spend it?

Major SULLINGER. When we have no requirement for a deutschemark-procured item, then it reverts or is given back to the Federal Republic of Germany.

Mr. FASCELL. I understood that. This raises a question as to the determination of priorities of the items purchased under this system. If, for example and the reason I ask the question without relation to these two specific items—you bought an item which was bought at a good price but which in the German-zone area represented a 50year supply, there is a good chance that it might become excess. On the other hand, you might have some very high priority items which could have been bought which had no chance of becoming excess. This, to me, seems to be the issue. The question is, How far down on the priority list is linseed oil, nails, or whatever you bought? I do not have any idea what you bought.

General WESTPHALINGER. As you know, at the end of the year you have a certain amount of money and in this particular case we were going to lose it. You have to have something you can buy quickly.

Mr. FASCELL. All right. That makes sense.

General WESTPHALINGER. These were things that we could buy quickly.

Mr. FASCELL. In other words, you could not buy an airplane quickly and you could not buy a tank quickly?

General WESTPHALINGER. That is right, and a lot of other things. We could not use the money for services because we could not spend it. We had to spend the money quickly and this was the logical way of doing it.

Mr. FASCELL. In other words, then I understand from that, that had a limitation in some way upon the expenditure of these funds, a time limitation?

General WESTPHALINGER. That is right.

Mr. FASCELL. It made it necessary then for us to go out and buy quick-market items, shelf items!

General WESTPHALINGER. That is right.

Mr. FASCELL. Question: How come this happened? I do not know that you can answer that question and I do not know that it is your responsibility.

General WESTPHALINGER. You are going to be confronted with this very problem when one of these days you go back to the States and you have so much money in hand. Are you going to spend it in Paris? Are you going to go out and buy things that you can buy quickly!

Mr. FASCELL. What you are saying is that there was no chance to program the expenditure of this money?

General WESTPHALINGER. Yes, sir; that was a windfall. We had to husband our resources and at the end of the year, just before the funds were about to expire, we got them all together and said, “We have this much money and we have to do something about it quick.

Mr. FASCELL. Does this open any new areas of questioning by the General Accounting Office?

Mr. BLAIR. No, Mr. Chairman. It is an area that we have been following since our establishment here in 1952. We have been attempting in our examinations in Germany to apply the same safeguards or measure of efficiency to the expenditure of deutschemarks that we have done on dollars.

Mr. FASCELL. What was the time limitation on the expenditure of those funds?

Mr. BLAIR. An annual budget was drawn up.

Mr. FASCELL. What year? What date was it in which we said that if they did not spend the money by that date the funds would go back?

General MAROUN. For all practical purposes, there are no occupation deutschemarks as such at present. This is what is now known as the third defense support year because effective May 5—I think in 1955—the German Federal Republic became a sovereign nation. From that time on the occupation deutschemark, as such, ceased to exist. However, there were certain deutschemarks unobligated that by agreement with the German Ministry of Finance we have continued to use for certain things. One of those is construction. There are certain construction programs going on.

Mr. FASCELL. Without limitation?

General MAROUN. Without limitation. However, there are very few in that category left. Also, in the claims area, occupation claims during that time, they were still coming in.

Mr. FASCELL. Therefore, without limitation !

General MAROUN. Without limitation. That was all in the agreement with the German Government and for all practical purposes we are using everything which is dollar backed.

Mr. FASCELL. Except for these exceptions that are without limitations, what was the cutoff date on the expenditure of occupation deutschemarks?

General MAROUN. There is no cutoff date now. It is more or less a no-year obligation, and because they found that they could not spend them in time for these projects, construction, and claims for the occupation period, there are some occupation deutschemarks that we are still now spending.

General WESTPHALINGER. What he is talking about is, there are a certain amount of deutschemarks that have expired.

General MAROUN. Occupation deutschemarks, as such, are the only ones left. There are no others. They have all been obligated.

Mr. FASCELL. I was a little bit confused because I was under the impression from previous testimony that there was a cutoff date by which occupation deutschemarks had to be expended and unless this fell into one of those exceptional categories without limitation, if they were not expended by that time, they would have to be returned to the German Government.

General MAROUN. We are getting into another type of deutschemarks. I am talking about occupation deutschemarks, as such. There was a cutoff date but by agreement between this headquarters and the Ministry of Finance they extended that so that they would include these special projects.

Mr. FASCELL. That was for these funds not expended as of that time and the agreement reached extended that without limitation?

General MAROUN. For all practical purposes, the cutoff date was May 5, 1955, the day that the Federal Republic of Germany came into being. Now there is the Berlin deutschemark which we now get from the German Federal Government by agreement and if we do not spend this money by the end of the German fiscal year, which is the 31st of March of this year, that will revert back to the Germans. Those are dollar backed. Those deutschemarks that we spend in Berlin are dollar backed, as far as this command is concerned.

Mr. FASCELL. In other words, you have appropriated funds credit for expenditure of deutschemarks that are contributed in Berlin for Berlin expenditure!

General MAROUN. Right. There is a section—I think it is 142– which exempts the Department of Defense from turning the money back to the Treasury, but that, as far as this command is concerned, takes dollars for any deutschemarks that we spend.

Mr. FASCELL. Mr. Blair, then as far as the expenditure of occupation deutschemarks outside of Berlin for purposes other than construction, payment of claims, and these other exemptions is concerned, that is a completed phase ?

Mr. BLAIR. That is correct. Mr. FASCELL. In other words, we have no problem with respect to what is going to happen in the future?

Mr. BLAIR. That is correct. In other words, we have gotten into a little discussion here, you might say, of ancient history of some 3 or 4 years ago. USAREÚR was following the same procedure for the expenditure of deutschemarks as they were for dollars. This particular procurement on linseed oil—I do not have in the report the specific date of the procurement-but we did find instances of where the officer there was requisitioning linseed oil for use in Stuttgart from excess property lists. That leads me to believe that the procurement was actually made prior to 1955, the cutoff date for all practical purposes on the use of these occupation funds.

Mr. FASCELL. That was the question I had in mind. That is, was the expenditure of those funds proper when you knew that Germany was going to become a reality? Point No. 2, was the expenditure of those funds on what might be called a nonpriority or urgent basis done in order to get money to buy shelf items!

General MAROUN. Let me say that the expenditure of deutschemarks for these items at the end of the fiscal year under the

Mr. FASCELL. I understand, but getting back to this Berlin detuschemark thing; first of all, before we get into that, have we cleared up this question now? Have we covered all the points of that?

Mr. BLAIR. I think so.

Mr. FASCELL. Did we have a problem with respect to appropriated dollar buildup in the Berlin area?

Mr. BLAIR. We have not conducted any examinations in Berlin except of an exploratory nature, Mr. Chairman. We are not in a position to advise you on their procurement program.

Mr. FASCELL. Is this a report which is in progress or under consideration ?

Mr. BLAIR. I think you have reference to an examination that we did with respect to the procurement of a stockpile of goods, and the money for that was not appropriated to the Army but was appropriated to State and used by ICA for the buildup of a stockpile of food and other items.

Mr. FASCELL. That is another problem someplace else.
Mr. BLAIR. Not relating to USAREUR.

General WESTPHALINGER. I might add that we do keep large stocks in Berlin so we do not have to go into another area. For example, we have a year's supply of coal up there and 6 months of food up there.

Mr. FASCELL. That makes sense. Thank you very much, Major. If there is anything that you would like to add to the record, go ahead.

General MAROUN. I do not think I have anything else, Mr. Chair

man. What I am giving is from memory, but generally that is the case.

Mr. FASCELL. I understand. General MAROUN. As I pointed out, it is ancient history, and complicated.

Mr. FASCELL. If you fellows, on further reflection, think that there is something you would like to add to the record in order to do an accurate job of reffecting accurately your position, by all means submit it to us later. We will see that it gets into the record, even if it is in the form of a narrative statement, so we will have an objective picture of this.

Go ahead, Colonel.

STATEMENT OF LT. COL. A. B. NIBBELINK, STAFF OFFICER, G-4,

USAREUR, HEIDELBERG, GERMANY Colonel NIBBELINK. I am Lt. Col. A. B. Nibbelink, a staff officer in G-4, USAREUR. My subject is Inventory Control and Property Accounting

I shall discuss inventory control, first, from the installation level, and then through the depot level.

First, I want to state the objective of stockage in USAREUR.

The objective of stockage in USAREUR is this: Stocks on hand at all supply echelons that issue supplies to user organizations and units below that of distribution depots will be kept to a minimum consistent with the assigned mission.

Major commanders, that is, the commanding generals, Seventh Army and United States Army Communications Zone, Europe (COMZ) are responsible for reviewing revisions and approving installation requisitioning objectives. That consists of the sum of stocks represented by the operating level, safety level, order, and shipping time.

Another responsibility is assuring that regular installation inspections are made by liaison personnel on a 6-month cycle to see that supply levels are maintained in accordance with existing instructions and that inventories, as prescribed, are taken.

These are the responsibilities [indicating] of the chiefs of the technical services. It is their responsibility to take timely supply action on all requisitions, directing disposition of excess supplies, designating sources of supply for all items, and assuring that qualified liaison personnel are assigned to depots and supply control agencies. I would like now to discuss the conduct of inventories.