As anyone would expect, it developed that in a few instances the Mississippi Power Co. could not show perfect title to a small number of rights-of-way. The question then presented was whether it was worth while to insist upon the elimination of every possible defect. Such insistence would have involved incalculable delay in the consummation of the transaction as well as an increase in the consideration to cover the expense involved. Upon the advice of a competent local attorney familiar with the title situation it was determined to accept these few isolated defective titles as they stood. That this was a wise decision has been demonstrated by the fact that whatever defects there were have now been removed at a total cost of a few hundred dollars. Yet the General Accounting Office for years carried as an exception in its audit reports a total of $850,743, the full amount of the purchase price paid to the Mississippi Power Co. for all of the properties covered in this transaction. Under this proposed bill the Authority would not have dared go forward with that sensible business transaction, and the result would have been either that the sale would never have been consummated or that after months of expensive delay the Authority would have obtained exactly what it now has at a greatly increased expense. Section 9 (b) of the Tennessee Valley Authority Act makes specific provision as to purchases and contracts by the Authority for supplies and services other than personal services. Under this section such purchases and contracts can be made only on the basis of advertising and competitive bids except in three specific types of cases:

1. When an emergency requires immediate delivery of the supplies or services; 2. When repair parts, accessories, supplemental equipment, or services are required for services and supplies previously furnished; and

3. Where the amount involved does not exceed $500.

Where bids are required, the lowest bid must be accepted except that the Board is specifically directed to consider such factors as relative quality, adaptability, financial responsibility, skill, experience, and record of the bidders, ability to furnish repairs and maintenance, time of delivery, and whether the bidder has complied with the specifications. On the basis of such consideration, it may determine in a special case that the lowest bid need not be accepted.

The General Accounting Office has not disagreed with the Authority's interpre tation as to the legal meaning of this section of the act. It has, however, taken the position that it, rather than the Authority's Board, is the final judge of whether any of the three exceptional situations noted above exist, and as to wheher a factor exists which would justify the rejection of the lowest bid. If It disagrees with the Board's judgment, it excepts to the transaction involved. The question raised is whether on such a matter administrative discretion directed to be exercised under a statute by one agency responsible for its administration shall be subject to a veto by an outside agency having no such responsibility. To put the General Accounting Office's contention into practice would lead, moreover, to absurd results. The Board, for example, might decide that an emergency existed and that, accordingly, some needed supply should be obtained in the open market without advertising for bids. The Authority's disbursing officer, on the other hand, if he believed that the General Accounting Office might not agree that an emergency existed, could prevent consummation of the transaction unless it were passed upon by the General Accounting Office in advance. By the time the question was submitted and a determination made that an emergency existed, the emergency might have become a crisis. The very authority given the Board to meet an emergency might thus become entirely illusory.

A striking illustration of the irreconcilability of the settlement and adjustment system with ordinary business practices is found in the expressed attitude of the General Accounting Office toward administrative increases in invoices furnished by contractors.

Where a contractor has furnished goods or services to the Authority, he is required in rendering his bill to certify that the amount claimed is that which is due. Where an examination of the invoice shows that, through errors in mathematical computation, an overcharge is being made by mistake, the Authority, of course, deducts the amount of the overcharge in making payment. With this practice the General Accounting Office is in full accord. Where an invoice discloses on its face that, through a similar mistake, an undercharge has been made, the Authority's practice is to make payment in the full amount which it finds to be due. To this practice the General Accounting Office excepts on the ground that any increases in the amounts certified by the contractors represent

overpayments. In other words, its position is that while a mistake by the contractor entitles him to no advantage, he is likewise not entitled to be relieved from such a mistake where it would result to the advantage of the Authority. It is the Authority's belief that the General Accounting Office's position cannot be supported either from an ethical or from a legal standpoint, and that for the Authority to follow the policy suggested would cost it more in litigation and ill will than it could possibly save in taking advantage of whatever mistakes contractors might make.

The final example of interference with administrative responsibility that I wish to cite is to me the most astounding of all. In acquiring land for the reservoirs constructed under the statute, it is necessary for the Authority to institute and conduct through the Federal courts hundreds of condemnation cases. In this condemnation program cases arise involving varied technical questions of valuation. Of course, there are hundreds involving the question of the value of farm lands. In addition, there are others involving the value of mineral deposits, such as marble, iron ore, and coal, and still others involving claims of great potential water-power value. There is only one possible way to try these cases, that is, by producing in court expert professional witnesses, such as geologists, metallurgists, mining engineers, and hydraulic engineers. It is a foregone conclusion that the landowners will employ the best talent that they can procure to present their theories of valuation. The only way in which the interests of the Government can be adequately protected is for us to be prepared to meet that testimony with the best expert advice that we can procure. This involves far more than merely calling a witness to the witness stand. It means that these professional men must leave their own businesses and spend days, and sometimes weeks, examining the properties involved and making their studies and determinations. There is only one possible way in which such advice and testimony can be procured— that is by contracting with the men in question for their services.

The investigators of the General Accounting Office take the position that all disbursements representing compensation for the services of such experts are illegal upon the ground that these witnesses could be subpenaed and thereby forced to testify with only the nominal per diem provided by statute for the attendance of witnesses. This is utter nonsense. If any lawyer attempted to try cases of this character, depending solely upon expert-opinion evidence, by subpenaeing witnesses who had never had the opportunity to examine the property or to make the necessary professional studies he ought not only to be fired but disbarred. If the witness happened to be within 100 miles of the place of trial, which is usually not the case, his physical presence could be compelled by subpena, but that is all. There is no statute or rule, and in the nature of things there could be none, that would permit a court or a litigant to compel a professional man to make the investigation and studies prerequisite to the formation of an opinion to permit him to testify. If this bill is enacted, a disbursing officer, knowing in advance that any payments of this character would be disallowed, could not afford to approve them. The increased cost to the Government in enhanced awards in these condemnation cases under such circumstances would be incalculable. I do not understand how any lawyer could assume the responsibility of conducting such litigation under such a set-up.

We oppose this bill because it is unnecessary and ill advised; because it strikes at the heart of responsible administration; and, finally, because it would not accomplish the purposes that have been advanced in its support. Instead of increasing efficiency; it would destroy it; instead of preventing extravagance, it would compel it; instead of increasing public accountability, it would transfer the responsibility for the administration of the Tennessee Valley Authority Act from its Board of Directors appointed by the President for that purpose to the General Accounting Office in Washington.

The CHAIRMAN. The committee will meet at 3 o'clock this afternoon. (Whereupon the committee recessed until 3 p. m. of the same day.)

AFTER RECESS

(The committee reassembled at 3 p. m., pursuant to recess.) The CHAIRMAN. The committee will please be in order. I believe Mr. Wellington is our first witness. Will you please give your name and position, Mr. Wellington?

STATEMENT OF C. OLIVER WELLINGTON, PRESIDENT, AMERICAN INSTITUTE OF ACCOUNTANTS

Mr. WELLINGTON. My name is C. Oliver Wellington, president of the American Institute of Accountants. I have with me Mr. Maurice E. Peloubett, vice president of the American Institute of Accountants. The CHAIRMAN. You may make a statement here for 5 minutes, Mr. Wellington, with respect to what you want to tell the committee regarding commercial audits.

Mr. WELLINTON. The organization we represent is the American Institute of Accountants, which is a national body of certified public accountants, with a membership in excess of 5,500 accountants.

At the hearing yesterday some questions were asked, I believe, by Mr. Kilday, in regard to what a commercial audit is, which were not answered either by Mr. Warren or by Mr. Yates. A commercial audit is made to determine whether the financial statements correctly and adequately set forth the results of business done. We as accountants check not only the total cash received and disbursed, but we say for what purposes expenditures are made. It is not enough that materials and supplies are properly purchased; we are interested in how they have been used and which operation should be charged with their use. Certified public accountants make tests of fiscal inventories, confirm customers' accounts receivable by direct communication with the customers, check the adequacy of charges for depreciation and maintenance, and see that there is a correct separation of expenditures for new plant and for operations. The statements of operations may be inaccurate and misleading unless there is a proper distinction made between different kinds of expenditures.

If the T. V. A. is to be compared with commercial concerns, it is important that its accounting be handled on the same basis, and audits by independent certified public accountants are required by the Securities and Exchange Commission for commercial concerns

The CHAIRMAN (interposing). Just a moment, Mr. Wellington. You assured me before you took the witness stand that you would take no sides in the question as to whether this bill should pass or not pass, or whether the T. V. A. was right or wrong. Now, then, you are entering into that subject.

Mr. WELLINGTON. I beg your pardon, Mr. Chairman. I am merely making the comparison. What Congress decides as to the control of T. V. A. is not a matter in which we are appearing.

The CHAIRMAN. Very well.

Mr. WELLINGTON. My next remark bears on that point, sir. Whether Congress does or does not decide that something further is required for T. V. A., the record should be correct as to the work of certified public accountants for commercial concerns. That is the matter in which we are interested.

Mr. Yates stated that expert accountants disagree as to what a commercial audit is. I call the attention of the committee to a booklet of some 40 pages entitled, "Examination of financial statements by independent public accountants." This was issued in January 1936. On the first page of the booklet is a statement that it is a revision of the bulletin prepared in 1919 and published by the Federal Reserve Board under the title Verification of Financial Statements. That booklet in 1919 was a revision of an earlier booklet published in

1917. So that ever since 1917 there has been a booklet in existence outlining the general scope of the work done by independent public accountants, and agreed upon by all the leading practitioners.

Therefore, while there may be disagreements as between two accountants, as between any other two professional men, there is not general disagreement in the profession. The work of the accountant has been utilized not only by the Federal Reserve Board for many years, but in more recent years by the Securities and Exchange Commission. Congress recognized our profession in the Securities Act of 1933, and in the Securities and Exchange Act of 1934, requiring registration statements to be accomplished by the opinions of independent public accountants.

I thank you for this opportunity to make this statement on behalf of the accounting profession.

The CHAIRMAN. Thank you very much, Mr. Wellington.
Now, if you have any further statement, Mr. Fitts?

STATEMENT OF WILLIAM C. FITTS, JR.-Resumed

Mr. FITTS. Mr. Chairman, I only want to give some information that Mr. Smith requested me to check on this morning. He requested me to check up on the present status of the accounting of the Maritime Commission. I have done that and I am informed by the office of the General Counsel of the Commission that the statement I made this morning is entirely accurate, and that after several years of controversy over this same subject they prepared the amendment that I referred to this morning, and it was enacted in 1938, and that since that time the only connection of the General Accounting Office with the Maritime Commission has been that the General Accounting Office has conducted an audit of the same character as the audit now provided for in section 9B (b) of our statute. They do not settle and adjust the accounts of the Maritime Commission. And that is made clear by the report of the Committee on Merchant Marine and Fisheries on the Merchant Marine Act of 1938, which is report No. 2168, Seventy-fifth Congress, third session.

That is the information that Mr. Smith asked for this morning. The CHAIRMAN. All right. Now, Mr. Fitts, you are general counsel for the T. V. A.?

Mr. FITTS. Yes, sir.

The CHAIRMAN. How long have you been general counsel?

Mr. FITTS. I have been in the Legal Department of the T. V. A. since August of 1934, Mr. Chairman. I became general counsel when Mr. Fly left the Authority to become Chairman of the Communications Commission, which was about two and a half years ago. I was before that his First Assistant, occupying the position of Solicitor of the Tennessee Valley Authority.

The CHAIRMAN. When the T. V. A. goes to the Appropriations Committee of the House for funds for any of its activities, do you have' anything to do with the conferences with respect to preparation of them?

Mr. FITTS. Yes, sir; I do; to this extent: I have to pass on the budget requests in order to determine whether or not the funds are being requested for purposes that I believe are authorized by the terms of the statute. Of course, it is not my function to determine whether they

are asking for enough money or too much money. My function is to determine whether they are asking for money for authorized purposes, and I try to do that.

The CHAIRMAN. Now, I understood you to say that the question. involved here was merely a difference of opinion between two agencies of the Government, the Comptroller General's office on the one hand and the Tennessee Valley Authority on the other hand. Is that right? Mr. FITTs. I consider them both to be agencies of the Federal Gov

ernment.

The CHAIRMAN. Agencies of the Federal Government? All right. Have you read the Budget and Accounting Act of 1921?

Mr. FITTS. Yes, sir; I have had to.

The CHAIRMAN. I would like to call your attention to section 2 of title I on the subject of definitions, wherein the budgeting Act says that "When used in this Act, the terms 'department and establishment,' and 'department or establishment,' mean an executive department, independent commission, board, bureau, office, agency or other establishment of the Government, including the municipal government of the District of Columbia, but do not include the legislative branch of the Government or the Supreme Court of the United States."

Mr. FITTs. Yes, sir.

The CHAIRMAN. Now, do you not think T. V. A. comes within that definition?

Mr. FITTs. I do not, Mr. Chairman. And the reason I do not is twofold.

First, the Supreme Court of the United States held in the Emergency Fleet Corporation case that the word "agency" as used in that act was not sufficiently broad to include a Government corporation, on the ground that the reason for setting up a corporation in corporate form was to free it from that type of control.

Second, and more important, that language does not stand alone. Long subsequent to the enactment of that statute, Congress passed the Tennessee Valley Authority Act, which is the charter defining the rights and duties of this corporation, and in that statute it provided for a relationship between the Authority and the general accounting office, which is entirely inconsistent with the budget and accounting

act.

In other words, we rely upon what I have always regarded as a well settled rule of statutory construction, that when Congress enacts a subsequent statute that is apparently full and complete on its face, and that is inconsistent with the prior statute, the subsequent statute governs.

In brief, that is our position and it is the position of the Attorney General.

The CHAIRMAN. All right, Mr. Fitts-now, just a minute-you have already designated and denominated the T. V. A. as an agency of the Government of the United States.

Mr. FITTS. I have no doubt of it.

The CHAIRMAN. Now, then, the statute says:

bureau, office, agency or other establishment of the Government.

Mr. FITTs. That's correct.

The CHAIRMAN. Do you insist here now that in the face of that language that does not include the T. V. A.?