Mr. ROONEY. You will follow the course of using the low-priced accommodations rather than the Hollywood Roosevelt one there at $15.80 a day?

Mr. BENNETT. That is correct.

Mr. ROONEY. Are there any questions with regard to support of prisoners?

FEDERAL PRISON INDUSTRIES, INC., ADMINISTRATIVE AND VOCATIONAL EXPENSE FUND

Mr. ROONEY. The last item for this afternoon, gentlemen, is that entitled "Federal Prison Industries, Inc.," which appears beginning at page 127 of the committee print. The particulars are to be found. under tab 31 of the justification book. We shall insert at this point in the record pages 31-1 through 31-10.

(The pages referred to follow :)

Summary analysis of estimates-Federal Prison Industries, Inc., administrative and vocational expense fund

Language changes

None.

General justification

Federal Prison Industries, Inc., operates under sections 4121-4128, title 18 U.S.C. The functions of the corporation: (1) To establish and operate industries in the U.S. penal institutions for the production of articles and commodities for consumption in the institutions and for sale to the departments and independent establishments of the Government; and (2) To provide such forms of employment and vocational training as will give the inmates of all Federal penal and correctional institutions a maximum opportunity to acquire knowledge and skill in trades and occupations which will provide them with a means of livelihood upon release. It is also authorized to establish industries and vocational programs in the military disciplinary barracks (18 U.S.C. 4122(d)). The Branch Army U.S. Disciplinary Barracks at Lompoc, Calif., where we have operated a clothing factory since 1955, was taken over during fiscal year 1960 by the Bureau of Prisons and required a complete new vocational training program. We have also operated a clothing factory at the U.S. Disciplinary Barracks at Fort Leavenworth, Kans., since 1956.

In 1962 the corporation expects to operate 54 shops located at 24 Federal penal and correctional institutions throughout the United States.

Sales of the products and services are restricted to Federal penal and correctional institutions and to other Government departments, agencies and independent establishments. Sales for the fiscal year 1962 are estimated at $32,736,000 with estimated net earnings of $4,636,000.

The corporation has sufficient funds to carry out its program set forth in the budget, since its earnings from industrial operations pay all expenses and leave a balance for the payment of dividends. The corporation has paid to the Treasury, from its earnings, $43 million during the period January 1, 1935 to June 30, 1960. It is estimated that $49,436,000 will have been paid in dividends by June 30, 1962.

Detail justification

ADMINISTRATIVE EXPENSE FUND

The administrative expense limitation for 1961 was approved for $500,000, while an additional limitation of $34,000 is being requested for the pay increase bringing the total to $534,000 for 1961. The estimate for 1962 is $544,000. The net increase of $10,000 is to maintain the 1961 level of employment, health benefit costs being absorbed during 1961 less a savings of 1 day in excess of the 52-week base.

The $544,000 requested for 1962 is only 1.7 percent of estimated sales of $32,736,000.

The central office, located in the District of Columbia, is responsible for planning, production, procurement, inmate training, and personnel for all industrial activities. It is also responsible for research work in industrial lines and product design in connection with the installation of new industries, and the operation and conversion of existing industries. The central office prepares consolidated financial statements, conducts field audits and special examina

tions, purchases a substantial part of the raw materials used in the factories, supervises and audits purchase and sales contracts and specifications; prepares and keeps up to date the Schedule of Products Manufactured and determines selling prices. It contacts other Government agencies with reference to the use of its products and all orders from other Government agencies are received and controlled by the central office.

The corporation is authorized to use its funds to provide vocational training of inmates without regard to their industrial or other assignments. (18 U.S.C. 4122 (c) 4126).

The vocational training expense limitation was approved for $915,000 in 1961, while an additional limitation of $64,000 is being requested for the pay increase bringing the total to $979,000 for 1961. The estimated total for 1962 is $1,038,000, an increase of $59,000 which would finance four previously authorized positions that were lapsed during fiscal 1961 at a cost of approximately $25,000 and make available: $15,000 to maintain the 1961 employment level; $9,000, for health insurance costs (being absorbed in 1961); and $10,000 to provide for increases in personnel benefits, official travel, publications and text materials, minor equipment and repairs, and training supplies and other teaching materials. Previously authorized positions

Related Trades Instructors, GS-9, at Petersburg, Va.; Milan, Mich.; Seagoville, Tex. and Terminal Island, Calif. Petersburg is now operating as a youth institution and is in need of a trained and experienced civilian instructor to handle the increase in the classroom phase of the vocational training being provided the youthful inmates in a variety of trade and service areas. This is the training which has recently gained the recognition of the Virginia State Apprenticeship Council. At the other three institutions the positions are needed for program expansion. This is part of an effort to upgrade the level and extent of vocational training in our correctional institutions.

The estimated average employment of permanent personnel for 1962 is dis

The total average estimated employment of 122 for 1962 includes the equivalent of seven full-time employees to cover the part-time instructors.

GENERAL ACCOUNTING OFFICE AUDIT RECOMMENDATIONS

The General Accounting Office has made commercial type audits of our records each fiscal year since 1945 pursuant to Corporation Control Act (31 U.S.C. 841) without any exceptions that have not been resolved. The audit report for fiscal year 1959 (H. Doc. 304, 86th Cong., 2d sess.) did not contain any recommendations to the Congress. The General Accounting Office report states in part that:

"Our audit did not disclose any matters which, in our opinion, require consideration by the Congress."

"The corporation does not receive any appropriations from the Congress. All expenditures made in conducting the operation of the industries and the vocational training programs are financed out of funds derived from the operations of the various industries. The Congress, however, places limitations on the amount of the vocational training and placement program expenses and the administrative expenses that may be incurred."

The corporation has carefully considered and reviewed with officials of the General Accounting Office their recommendations for improvement of procedures and practices. Those items having application have been adopted and those items which the corporation feels have no application, insofar as our operations are concerned, have been resolved with the General Accounting Office.

INCREASE REQUESTED FOR 1962

Mr. ROONEY. This request is for an authorization in the amount $544,000 for administrative expenses and $1,038,000 for vocational expenses. This would be an increase of $10,000 over the present fiscal year in administrative expenses and $59,000 over the present fiscal year in vocational expenses, when anticipated pay act supplementals are taken into consideration in both instances.

MAINTENANCE OF EMPLOYMENT LEVEL

The administrative expenses increases are set forth at page 31-4, which alleges that the net increase of $10,000 is "to maintain the 1961 level of employment, health benefit costs being absorbed during 1961 less a savings of 1 day in excess of the 52-week base."

It is a welcome observation that the total of $544,000 requested is only 1.7 percent of the estimated sales of this corporation, amounting to $32,736,000.

This entire business amounting to $32,736,000, Warden, requires but 534 employees?

Mr. WILKINSON. Yes, sir, supervisors, foremen.

Mr. ROONEY. This is easily the best operation we have run across today.

Mr. WILKINSON. Thank you, sir.

Mr. BENNETT. Let me elaborate a little.

Mr. ROONEY. Perhaps you better not.

INCREASED SALES

Mr. BENNETT. I want to cheer you up a little. This last year we had a pretty good year. The sales have increased. The number of inmates employed has increased almost 1,000. Most of all, the net earnings of the Corporation which revert to the Treasury, so far in the 7-month period are $772,422 more than they were at this same time last year.