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Mr. HINMAN. For the past several years, in Spain, the primary focus of the defense support program has been on immediate, shortrun stability.

Mr. FASCELL. There was no expenditure of Public Law 480 toward any defense support as such, even under the old definition?

Mr. Hinman. Public Law 480 funds are only available for the agreed-on uses between the two countries, of which military use is one possibility.

Mr. FASCELL. Which could include a number of things, for example! I know that in some cases it includes construction of barracks and supplies.

Mr. HINMAN. There is another point there. We have another special feature in the program here in Spain. In 1955, there was a section of the defense support program called the McCarran amendment, section 109, which added $55 million to the Spanish program making a total of $85 million. That $55 million had to consist of agricultural surplus commodities sold in Spain for pesetas and the proceeds had to be loaned 80 percent to Spain for economic development. That year we had specific injunction that that much of the proceeds had to be used for development purposes. The other 20 percent was used for United States use.

Mr. FASCELL. That was a one-shot thing?
Mr. Hinman. Yes; the use of that 20 percent could include military

Mr. FASCELL. How about the problem that you continue the sales under Public Law 480? You obviously could not build up local currencies available. That would make more credit available in a country which would have a definite impact on your economy,

Mr. Hıxman. The impact would be desirable or undesirable, depending on general circumstances in the country.

Mr. Fuscell. To what extent does the Department of Agriculture participate !

Mr. Hinman. They have the primary responsibility. Their field man is the agricultural attaché who is a member of the embassy staff de facto and works cheek by jowl with the rest of us.

Mr. FASCELL. Do ICA and the agricultural man reach a joint agreement then on the amount of sales that the Agriculture Department is going to make in Spain?

Mr. Hinnan. We try to work it out as closely as possible for several reasons. One is that it has a big impact on the total economy which is our concern. Second, in the ICÀ program or the defense support program we usually have to have a component of agricultural surplus commodities. Certainly, we want to make sure that surplus commodities under 480, surplus under ICA, are dovetailed as well as possible. They are 2 halves of a total import program, or ? parts, I should say. We do work strictly close with the agricultural

Mr. FASCELL. Since your mission is integrated with the economic section of the Embassy, it would appear to me that you should have direct control over the question of whether or not sales are to be made in Spain.

Mr. HIINMAX. The Ambassador is the No. 1 man out here. He has, if not direct control, an awfully strong voice. I would say that for al practical purposes his voice is controlling in these decisions.

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If you are talking about strict lines of organization, I guess that in theory the attache reports to him directly rather than through the USOM.

Mr. FASCELL. The agricultural attaché is in the line of command under the Ambassador!

Mr. HINMAN. Correct. He sits up here on the sixth floor and I am
on the fourth floor and we spend an awful lot of time together.

Mr. FASCELL. He does not do anything independently as far as the
Department of Agriculture is concerned ?
Mr. HINMAN. It is a highly cooperative arrangement.
Mr. FASCELL. Any other questions on this phase of the discussion ?

Mr. MONTGOMERY. I might ask this one question: What is the ratio
of the Spanish military budget to the gross national product?

Mr. HINMAN. As I recall, it is something under 4 percent, defense expenditures.

Mr. MICHEL. Would you have the gross national product figure handy?

Mr. HINMAN. That is around $7.5 billion, or equivalent, somewhere around there. It is about $255 per capita, and the population is around 30 million.

Mr. MICHEL. Their budget for the last year ran what in dollars,
roughly?

Colonel MELENDEZ. About eight-hundred-some-odd million dollars.
Mr. HINMAN. That would be 10 percent.

Mr. MICHEL. The total budget for the year was, roughly, $800 mil-
lion?

Colonel MELENDEZ. I have the exact figure, but not here.

Mr. MICHEL. The percentage figure that you gave there was of gross
national product; is that right?

Mr. HINMAN. I am afraid some of those are classified figures. The
Spanish keep their defense figures closely held. Am I correct on that?
Colonel MELENDEZ. Yes.
Mr. HINMAN. We have had trouble in getting hold of some.
Mr. FASCELL. Generally, it is in that magnitude ?

Mr. HINMAN. I do not think the ratio is as high as 10 percent. It
may be a little under that. Actually, according to our projection, the
ratio will probably go down next year. The national product is grow-
ing a little faster in proportion than the Spanish defense outlays,
although they are both growing: We do give considerable thought in
the economic section to the question of economic impact and the burden
of the Spanish military effort.

Colonel CHILES. I can show you a confidential document on this, if you wish.

Mr. FASCELL. I think we have gotten generally basically what we need here in order to make a slight comparison. The Spanish Federal budget is a Federal budget as such? I mean the Federal level.

Mr. HINHAN. It is more so than ours. The Provinces have fewer
functions.

Mr. FASCELL. Cities are independent?
Mr. HINMAN. Cities are not nearly as independent as in the United
States. They do have some local revenues,

Mr. FASCELL. They are technically Federal functions that go into

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Mr. HINMAN. It is not a Federal State, if you use the term in the United States sense. It is a unitary State with a line of command down to the cities.

Mr. FASCELL. Thank you very much, Mr. Hinman.

Mr. HINMAN. I have some more facts and figures, if you would like to inquire into that.

Mr. FASCELL. There was one table you mentioned that is a summary. If it is available, we would like to have that.

That will be made a part of the record. (The material referred to follows:)

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1 An additional $15.7 million in pesetas were approved for Spanish program in September 1957.
2 Actual disbursements.
3 Withdrawn in July 1957.
Mr. FASCELL. I thank you very much, Mr. Hinman.

Mr. Hinman. Thank you for the opportunity of appearing before you.

Mr. FASCELL. Mr. Rouse, would you come forward, please?

Mr. MONTGOMERY. Mr. Rouse, you are the manager of the Madrid Field Station ?

Mr. Rouse. That is right.

STATEMENT OF G. O. ROUSE, MANAGER, MADRID FIELD STATION

Mr. MONTGOMERY. The committee would be interested in knowing something about you. How long have you been here?

Mr. ROUSE. I arrived here in August 1954. I was on the investigative staff of the General Accounting Office at that time. We started out our work here in making investigations into the contracting procedures and preaward surveys that the Navy made of the subcontractors available for work in Spain.

This involved their advertisement procedures and bid procedures and awards. We made several reports on those investigations and we made some reports on individuals who were reported to be interested in 5 percent commissions. These latter reports disclosed no evidence of "5 percenters."

Then last year, while our Madrid office had a slight reorganization, we changed our method of operation so that we are operating under the project-type reporting and auditing now.

Mr. F ASCELL. You took a comprehensive look at every project!

Mr. RoUsE. Yes, sir. I have only been manager here since May of this year, 1957. Before that, Mr. Minnies was manager.

Mr. FASCELL. Of what does your staff consist ?

Mr. ROUSE. We have a staff of four men here and a secretary. That is all we have at this time.

Mr. MONTGOMERY. You heard the testimony this morning concerning the problems involved in connection with some of the base construction in Spain. The General Accounting Office has made a review of those particular bases?

Mr. ROUSE. That is right.

Mr. MONTGOMERY. Would you tell the committee something of the findings of the General Accounting Office with respect to those bases starting with the Torrejon site selection?

Mr. ROUSE. Did Mr. Bell want to take this?
Mr. BELL. Perhaps I should if the chairman does not mind,
Mr. FASCELL. Go right ahead.

STATEMENT OF HASSELL B. BELL, ASSISTANT DIRECTOR, DEFENSE

ACCOUNTING AND AUDITING DIVISION, GENERAL ACCOUNTING OFFICE

Mr. BELL. Let me explain briefly. I am Assistant Director of the General Accounting Office's Defense Accounting and Auditing Division, charged with the responsibility for audit, investigative, and accounting-systems work of the Navy. As such, all of the work that is done by GAO throughout the world ultimately passes--that is, for Navy—through my hands. My job here is to help coordinate this overall report that we are working on. As such, I have done a considerable amount of independent review into the various reports and facts that have been developed.

I hope that I can be as successful as General Kissner in staying out of the classified area. Starting with the selection of the Torrejon base we made a rather exhaustive study, I think, of the reasons underlying the selection of this particular base. We learned that the base was first chosen as a tentative site by the initial team largely because it was already in existence as a base in some respects.

There were several other—4 or 5, I think-tentative sites selected for review and each one of them was discounted or ruled out for one reason or another.

As was testified to this morning, our feeling is that the selection of the Torrejon base definitely creates a traffic-control problem, the extent of which we do not know. There is a conflict of opinion as to the severity of the problem with the CAA on the one side

and the Air Force on the other as to whether it is a problem that is beyond solution or whether it has a solution. We really do not know. We do know that the selection of that base did create a particular problem.

Mr. MICHEL. As far as you know, was CAA's opinion as far as this site was concerned, formed on the basis of the same criteria they use in the States? There they say that something like a minimum of 12 miles between airports is desirable.

Mr. BELL. I believe, yes. They did use that. Of course, as was pointed out earlier this morning, there are a lot of situations in the United States where we have airports closer than 12 miles. The Air Force also states that actually the traffic here is not very heavy. It is their belief that the problem is not as severe as it is believed to be by CAA. That about sums up the facts on the Torrejon site selection.

Mr. FASCELL. How does that affect the expenditure of funds one way or the other, Mr. Bell?

År. BELL. As I see it, Mr. Chairman, the expenditure of funds in this particular case would not be affected a great deal one way or the other.

Mr. FASCELL. As a question of operational efficiency?
Mr. BELL. That is right.

Mr. FASCELL. It is a question of judgment and that is something that the military will have to work out!

Mr. BELL. That is right; and apparently they have given a great deal of thought and study to it. They have a plan for working it out.

Mr. FASCELL. Only time will tell whether they will get operational efficiency !

Mr. BELL. Only time will tell. The CAA said that in the conditions of instrument-flight rules, you would have the equivalent

Mr. FASCELL. To the extent it does affect expenditure of funds!

Mr. BELL. If you have a base that you cannot use, you spend money for nothing.

Mr. FASCELL. If you cannot use it for the maximum utilization that might be involved ?

Mr. BELL. Yes.

Mr. FASCELL. Nobody knows what the extent of that will be until they make an effort to use it?

Mr. BELL. That is correct.

Mr. FASCELL. As I understand it, the General Accounting Office points out that the problem does exist and that from the standpoint of expenditure of funds there is a question of maximum utilization ?

Mr. BELL. Exactly.

Mr. FASCELL. I think that is a very fair reasoning. I do not see anything wrong with that.

Mr. MONTGOMERY. The General Accounting Office is convinced that a knowledge of this problem existed at the time this base was selected ?

Mr. Bell. I am personally convinced that it did; yes.

Mr. FASCELL. General Kissner said that they knew about it but it was something that they had to live with because of other factors which created a greater advantage for the use of that site.

Mr. BELL. Whether they realized in the early days the extent of that problem is a matter of conjecture, but I feel certain it was considered.

Colonel YOUNT. We had known that this problem existed for 3 years; we discussed this matter with the architect-engineer people who came over here. They had some former CAA people with them. We discussed this with the CAA mission on a practically daily basis and with the Spanish. There never has been any question in our minds, and there is no question now, that the problem can be resolved within the guidelines that General Kissner established this morning.

Mr. FASCELL. From a fund-expenditure standpoint the problem is whether you used X number of dollars for 100 percent of efficiency or 50 percent of efficiency? That is the way I see it.

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