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Mr. SPARKMAN. If you are not able to complete it when you submit the list of exceptions outstanding you can at least indicate those which the T. V. A. has attempted to explain.
Mr. Yates. I think that could be done.
Mr. YATEs. It is a big job. Let me say this, we will do the very best we can, within the time we have to make a showing in that regard to the committee.
Mr. SPARKMAN. Now, Mr. Yates, as I understand the system in the General Accounting Office, as you have explained, is more a matter of determining the legality of expenditures than it is the bookkeeping part of it or the accounting part, is it not?
Mr. Yates. The audit under the Budget and Accounting Act-yesplus the requiring of full accounting to the General Accounting Office in order that there might be made a settlement which will show whether the officer owes the Government money or whether he still has money to his credit.
Mr. SPARKMAN. Is the first part of that called adjustment and the second part, settlement? You
You use both terms there. I am just wondering if the first part refers to the word "adjustment.”
Mr. Y ATEs. The word "adjustment” merely means taking into consideration credits and debits with respect to the various items of collection ad disbursement, for instance
Mr. SPARKMAN. Are the people you employ to examine those accounts when they come in accountants or lawyers or clerks or what
Mr. YATES. They are all auditors. Many of them are accountants. Some of them are both lawyers and accountants.
Mr. SPARKMAN. Those who actually examine the accounts and pass on them?
Mr. Yates. That is right—the individual vouchers.
Mr. YATES. As to the propriety and legality and so forth of the expenditures represented by those vouchers. You might be surprised to know many of these men are both accountants and lawyers.
Mr. SPARKMAN. That is all.
The CHAIRMAN. Let the Chair make a statement here. We have as witnesses yet representing the Comptroller General's Office the Honorable John C. McFarland, General Counsel of the General Accounting Office; S. B. Tulloss, Chief of Investigation, General Accounting Office;
and in view of the fact that today there is a memorial service in the House, we will hear Mr. McFarland and Mr. Yates further, as well as Mr. Tulloss after the Tennessee Valley Authority has presented their side of the matter if the committee desires to hear you further or if you desire to be heard further. With that, let me say furthermore that the committee is to meet tomorrow morning to hear the T. V. A.'s side of the matter. Mr. Fitts is here as their general counsel. Is there any request, Mr. Fitts, you want to make at this time?
Mr. FITTS. I do not think so, Mr. Chairman.
The CHAIRMAN. I would like to ask the committee if we could meet at 10 o'clock in the morning:
Please observe that 10 o'clock is the hour.
AMENDING THE TENNESSEE VALLEY AUTHORITY ACT
THURSDAY, JUNE 19, 1941
HOUSE OF REPRESENTATIVES,
Washington, D. C. The committee met at 10 a. m., Hon. Andrew J. May (chairman) presiding.
The CHAIRMAN. The committee will please be in order, Gentlemen, we have met this morning for further consideration of H. R. 4961, 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.
STATEMENT OF WILLIAM C. FITTS, JR., GENERAL COUNSEL FOR
THE TENNESSEE VALLEY AUTHORITY
The CHAIRMAN. The representatives of the Tennessee Valley Authority are here this morning and Mr. Fitts, their general counsel, is available as a witness, I believe. We will call Mr. Fitts first. Mr. Fitts, of course you understand what the issue involved here is and we will be glad to have your statement and any suggestions that you care to make. Make it as briefly as you can, although we are going to give you whatever time is required, if it takes considerable time.
Mr. Frits. Mr. Chairman and gentlemen of the committee, I would like first to give just a brief statement as to what evidence we would desire to put before this committee, and the witnesses that we would desire to have appear. I plan to cover in general the matter that was covered by the Comptroller General yesterday, attempting to give our viewpoint of the legal issue involved and our viewpoint as to the policy of this proposed bill; and specifically how it would affect the legal business of the Authority. Following me, Mr. E. L. Kohler, the comptroller of the Authority, will state to the committee how this proposed bill and the procedures that it would put into effect would affect the general administrative business of the Authority and also explain to the committee the present system and the status of the Authority's accounts; that is directly under his jurisdiction.
Following Mr. Kohler we would like to have the committee hear Mr. Walter Schaffer who is a member of the firm of Lybrand, Ross Bros., & Montgomery, a firm of certified public accountants who have for several years made an outside audit of the books of the Authority in addition to the audit performed by the Comptroller General under section 9 (b) of our statute.
And then as a final witness we would like to have the committee hear Director James P. Pope who will speak as the representative of
the Board on the opinion of the board with respect to this bill; and also in explanation of some of the remarks which were made yesterday.
Now, gentlemen, I want you to know I understand the disadvantages under which I am appearing here. The Comptroller General appears here with all of the prestige of his position and with the advantage of years of association with you gentlemen in your important work as legislators. I appear here to you as nothing but another Government lawyer. My only standing on this question is that I have really lived with it day and night for several years.
The CHAIRMAN. You do not object to the committee using their acquaintance with Mr. Warren as a means of determining the question of the credibility of the witness?
Mr. Fitts. No, Mr. Chairman, I am merely stating I know I am here with that disadvantage and my only claim is I think I know this subject as it affects the T. V. A. because I have had to deal with it every day of my life for several years.
The CHAIRMAN. I am glad to hear you assume there is a lot of friendship among the Members of the House.
Mr. FITTS. I know there is. And all I ask under those circumstances is that I be permitted to state our case; that you listen to me if not with sympathy, at least with tolerance, and give us an opportunity to attempt to show you how this thing would operate.
The CHAIRMAN. I will assure you now you will have that kind of hearing. You may proceed.
Mr. FITTS. Now, the trouble is that the kind of interference that would be brought about by the enactment of this bill is not an easy thing to dramatize. You cannot deal with it in generalities. You have to get down in the day-to-day workings of your business and show from your own experience what would happen under this bill. Now, necessarily you cannot be brief and you cannot be summary when you are dealing with a question like that. So I am simply going to have to ask for what time it takes to attempt to make clear why we oppose this bill.
Now, first I would like to get out of the way what appear to me to be extraneous issues that have no bearing on the merits of this question but that create scenery and atmosphere and which must be disposed of if this bill is going to receive the kind of consideration it deserves.
The first of those matters to which I wish to refer is that the Comptroller General spent some time yesterday explaining to the committee that he is not personally prejudiced against the T. V. A. and that he has always been in sympathy with the program. Now, no one, gentlemen, disputes that. That is not in issue here. And I want it clearly understood that whatever I might say about this bill and about the procedures and system of the General Accounting Office have no reference to the person of the gentleman who occupies that office. What I have to say is directed to matters of principle and to a system and a method of procedure. Now, it is perfectly clear that the present Comptroller General has not been in the office long enough for me to be talking about him. And I just want that understood. And it does not make any difference what the personal views views toward the T. V. A. of the occupant of that office are. Because the paralyzing effect we are going to try to explain to you does
not come from the personality or personal views of the occupant but from the whole system as it has been built up through the years.
Now, the other question which seems to me to be extraneous, but which ought to be understood if we are going to get down to the merits of this matter, relates to statements made yesterday with respect to conferences that were held between representatives of the authority and the Comptroller General. Now, necessarily, I was not present at all of those conferences. And Senator Pope is going to have to give you the first-hand statement as to what happened. I do know, though, what went on before that; and why those conferences were held and why they finally broke up. And there is not any mystery about that. And I do not understand why the impression seemed to have been created that there was something criminal about the memorandum that was written stating our position. Here is all there is to those conferences: When Senator Brown became Comptroller General we thought it would be a good idea to sit down and try to discuss two things because they both had to be discussed. One, this basic question of jurisdiction as to whether or not the Budget and Accounting Act of 1921 applied to the Authority or whether section 9 (b) of our own statute was exclusive. Now, that is the legal question.
The second question that had to be discussed in those conferences involved an attempt to work out mutually satisfactory methods of conducting the audit under section 9 (b), that everybody has always agreed the Comptroller General has to conduct.
So there are two separate questions that were the subject of those discussions. Now, before we were able to get any commitments from Senator Brown or before any matters could be worked out he ceased to be Comptroller General. Of course, the reason we thought there was an opportune time for discussing the matter with him when he became Comptroller General was because he was a member of the special committee investigating the Tennessee Valley Authority who studied this question over a period of two years and signed the majority report which held that the Authority was correct in its position on this subject.
The CHAIRMAN. In other words, you felt you had a fellow that was already committed to the theories of the Tennessee Valley Authority and you preferred to discuss it with him rather than anybody else?
Mr. FITTS. Mr. Chairman, that is one way of putting it, of course. The CHAIRMAN. That is the way you put it.
Mr. FITTS. I do not think so. I think I put it that we understood from the report of the committee that Senator Brown in his personal views and as a member of that committee thought that we were right on the legal question and on the question of policy. But nothing happened. In other words, we were still in the process of attempting to work out those two questions when he ceased to be Comptroller General. When Mr. Warren assumed the office naturally it was decided to attempt to continue those efforts. The very first thing that was done was to attempt to show him our position on the legal question of jurisdiction and also to attempt to work out procedures for the audit under section 9 (b).
Senator Pope attended those conferences. What I know about the memorandum that was produced here is that when Senator Pope returned from one of those conferences he requested me as General
Counsel of the Authority to prepare a statement in writing of the Authority's position on this matter. He said at that time that Mr. Warren had requested that this statement be prepared and be presented to him. I therefore prepared the statement. And that is the memorandum. And that memorandum is nothing more than a restatement; nothing new in it; it is a restatement of the position that the Authority stated fully to this committee in 1935; that the Authority stated again to the special investigating committee in 1938; and everybody in and outside of Congress knew what the position of the Authority was on these questions. Nobody had ever disguised it. And, therefore, it is difficult for me to understand why there is this expression of surprise at having received that memorandum.
Now, another comment that was made on that memorandum was criticism of a recommendation that we made in that memorandum as if there was something horrible about it. Now, it may have been wrong, but I do not see what is so terrible about it. That recommendation was that if our view were accepted on the legal question the Comptroller General might very well in order to carry out his auditing functions under section ğ (b) designate some qualified firm of certified public accountants to make an annual audit of the Authority's books and records. Now, what is so terrible about that? That is exactly what is done with the Panama Railroad Co., except that the Comptroller General does not have anything to do with desig. nating the auditors.
Mr. DURHAM. Will the gentleman yield?
Mr. FITTS. The memorandum is in the record. If it is not I will be glad to put it in. I think it went in yesterday when the Comptroller General put in his letter to us in which he quoted that memorandum in full. That is my recollection of it. I will check the record though, and if it is not in I will see that it is put in.
As I say, that recommendation for an outside audit is what is done with the Panama Railroad Co. except they select their own auditors. And the Comptroller General has nothing to do with that. That is what is done with the Reconstruction Finance Corporation, as I shall show in more detail a little later.
So that, so far as I know, is the whole story about those conferences.
Now, what happened is, after that last conference we received the Comptroller General's formal opinion in which he finally and definitely reiterated the views that had been taken by his office from the beginning—the view that the T. V. A. was subject to the Budget and Accounting Act of 1921 and that, therefore, we must comply with all of the procedures set out in that act.
Faced with that issue squarely drawn, the Board made this decision. And it seems to me a very sensible decision. The Board said:
Here we have a question that is entirely a question of statutory construction of the legal issue as to whether or not the Tennessee Valley Authority Act subjects the Tennessee Valley Authority to the Budget and Accounting Act. There is a difference of opinion on the construction of that statute between the two agencies of the Federal Government. We take one construction. The Comptroller General takes another.