TO AMEND THE BUDGET ANIt ACCOUNTING ACT OF 1921

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					TO AMEND THE BUDGET ANIt
  ACCOUNTING ACT OF 1921


                        HEARINGS
                              BEFORE THE

        COMMITTEE 0$ EXPEMtURES IN THE.
           EXECUTIVE DEPARTMENTS
           HOUSE OF REPRESENTATIVES
                SEVENTY-EIGHTH CONGRESS
                           FIRST SESSION
                                  OX

                         H. K. 1610
              A BILL TO AMEND THE BUDGET AND
                   ACCOUNTING ACT OF 1921



                         FEBRUARY 18, 1943



                       Printcd-for the use of the
         Committee on Expenditures in the Executive-Departments




                          UNITED STATES
                    GOVKUNMEST 1'IHXTING OFFICE.
43217                    \V.\SIIIXGTOX : 1013

                          1175
      COMMITTEE ON EXPENDITURES IN THE EXECUTIVE
                     DEPARTMENTS.
                        JAMES A. O'LEARY, New York, Chairman
JOHN J. COCHRAX, Missouri                 CHARLES L. OIFFORD. Massachusetts
WILL M. WHITTINGTON, Mississippi         CLARE.E. HOFFMAN, Michigan
EDWARD J. HART, New Jersey               D. LANE POWERS, Now Jersey
JOE B. BATES, Kentucky                   GEORGE H. BENDER, Ohip
CARTER MANASCO, Alabama-                 WILSON I). GILLETTE, Pennsylvania
JOSEPH J. MANSFIELD, Texas               RALPH E. CHURCH, Illinois
JOSEPH A. OAVAGAN, New York              NOHRIS POULSON, Collfornia
CECIL R. KlNG..Califomia                 JOHN PHILLIPS, California
MICHAEL A. FF.IGHAX, Ohio                ROBERT HALE, Maine
DANIEL K.JIOCH, Pennsylvania
WILLIAM Ir. DAWSQN, Illinois
      II
TO AMEND THE BUDGET AND ACCOUNTING ACT, 1921

                      THURSDAY, FEBRUARY 18, 1943
                        HOUSE OF REPRESENTATIVES,
                    COMMITTEE ON EXPENDITURES INT THE
                                   EXECUTIVE DEPAnTMENTS,
                                                   Washington, D. G.
   The Committee on Expenditures in the Executive Departments
met in the committee room, 304 Old House Office Suilding, at 10:30
a. m., Hon. James A. O'Lcary (chairman) presiding.
   The CHAIRMAN. Gentlemen, the meeting has come to order. We
have inet this morning for the purpose of considering H. It. 1610,
which is a bill to amend the Budget ajid Accounting Act of 1921.
   "Without objection a copy of the bill will be inserted in the record
at this .point.
   (H. R. i6iO is as follows:)
                              (II. R. 1610, TStli Cong., Iststss.)
                    A BILL To amend the Budsct and Accounting Act, 1921
    Be it enacted l>./ the Senate and House of Representatives of the United Slates of
America in Congress assembled, That the Budget and Accounting Act, 1921
 (_42 Stat. 20), as.amended, is hereby further amended by adding at the end of
title II sections-reading as follows:
    "SEC. 218. (a) Whenever the President, or the head of a department, inde-
pendent establishment, agency, in the executive branch of the Government, or
of a Government-owned or controlled corporation (hereinafter referred to as the
agency), or such other officer as may be designated by the President or thu
licad.of the agency for the purpos.-, shall determine that equipment, materials,
or supplies (hereinafter referred to as property) under the control or in the
possession of the agency arc excess to the needs of such agency or any office of
bureau thereof in the performance of the activity for which the property was
acquired, he shall declare to the Procurement Division, Treasury. Department,
such property as surplus.
    "(b) The properly declared surplus under subsection (a) of this section shall
be (1) transferred, at values fixed by the Procurement Division under regula-
tions of standards promulgated liy the President, to such,agencies as may be
designated by the Director of the Bureau of the Budget (hereinafter referred to
as-the •Directory'; (2) sold,-by-the Procurement Division when it-is-determined
by the Director that Mich surplus property is not required for the needs of any
agency; or, (3) otherwise disposed of or abandoned ifthc cost of .sale would exceed
the proceeds.. Whore such surplus property has been, acquired by the use of
funds appropriated from the general fund of the Treasury (and Mich'appropriated
funds arc not, by law, reimbursable, from assessment, tax, or other revenue),
proceeds deri\ed from the transfer or sale thereof shall be deported and covered,
into the Treasury to the credit-of a special fund from which appropriations arc
hereby authori/ed for all nccwar^ (.-.\pcnses of w arehousing, safeguarding, t ransfer,
sale, or oilier disposition, inr'iiding transportation, rehabilitation, and handling
of (lie property, and rent and puT.-onal .scmccs .of operating personnel in the
.District of Columbia and elsewhere, notwithstanding the provisions- uf thu Act
of June B, 1896 (31 U, S. C. 489). Unappropriated balances of such special fund
shall be covered into the surplus-fund of the Treasury at the uiul of each fiscal
year. Where surplus prupcr'tj that 1m* been acquired by the use of funds' other
than those appropriated from the general fund of the Treasury or l>\ thu use of




                                            1177
2               AMEND THE BUDGET AND ACCOUNTING ACT

funds appropriated from the general fund of the Treasury which are, by law,
reimbursable from assessment, tax, and other revenue, is sold or transferred, the
agency receiving the property will reimburse the Procurement Division for its
expenses incurred hercunder and pay the remainder of the appraised value of
the property transferred to the agency releasing same.
    "titc. 219. Whcncver-the Director shall .determine it to be efficient or economi-
cal, he may detinue specific elates of Government -owned equipment in the
possession or control of \ arioiis agencies which -inaj be made a\ailnble for full use
for definite periods of lime by other agencies, or for the performance of function;,
activities, or projecU other than those for which said equipment was acquired
\\itiiin an agency , at a rental rate ba^ed on a schedule promulgated by the Director,
winch rental schedule shall include maintenance, repairs, replacement, and a
depreciation factor appropriate to the character of the ittin. Rental of equip-
ment sliall be wall the consul of the agency having possession or control thereof
and only for use in an activity has ing an appropriation .t\ .lil.ible for the rental of
such equipment: PIOIK/K/, That rental payments therefor, when received, sli 11
be ciedited'to the-current appropriation or-fund available to thi. rtntor agency for
maintenance, repair, or replacement of the equipment, or, in the absence of Mich
an appropriation or fund, skill be covered into the Treasury as miscellaneous
receipts.
    "fciEc. 220. When the United States is in a state of war, and upon determina-
tion by the President that .;u\ laud, building, appurtenant facilities, or fixtures, or
any supplies, material.-,, equipment, or instruments owned by the Government and
devoted to a particular use arc urgently needed in the conduct of the v\ar, are not
subject to disposition o> surplus property , and cannot otherwise be provided, he
may aMhori/.e or direct the ' .cad of the agen ;y hav ing control thereof, in order to
fulfill suc.h need, lo sell 10 nongovernmental agencies such jyoperty for cosh for a
price cqn. 1 to the full replacement value thereof, or to lease or rent such property
at commercial rates or such other rates as will fully compensate the Government.
Any funds realised fr'uin the sale, lea^e, or rental of such property shall be deposited
in appropriate special funds in the Treasury aid shall be available, w i t h the
approval of the President, for replacement of such property . Piuvidul, That funds
not obligated for such replacement w i t h i n two fiscal years after the cessation of
hostilities shall be covered into thi. surplus fund of the Treasury.
   "SEC. 221. la) All transactions and procedures set forth \\\ foregoing sections
218, 210, and 220 shall bo in accordance w i t h regulations approved by the Presi-
dent. All powers herein vested in the Director may be exercised in his discretion,
by -a representative designated by him fqr the purpose.
  "'^(b) Nothing in sections 218, 219, and 220 shall be construed as modify ing any
of IV provisions of title III of this Act."
   The CHAIKMA-N. On November 30, 1942, I-rcceivcd a communicnliou
from the President at the White House, which reads as follows
[reading]:
Ho:i. JAMES A. O'LEAiiv,
     Chairman, Committee on Expenditures in the Executive Departments,
                                                     House of Representatives.
  Mv DEAR Mn. O'LKAUY: I have today transmitted a message to the Congress,
  '
which will promote a more effective utili/.ation of Government supplies and
equipment both during -And after the war.
  It is believed that the enactment of legislation along the Hues of the attached
draft of bill would accomplish this objective.
                                                      FR.VNKUN D. ROQSKVEI.T.
  The CHAIRMAN. The message- that he sent to the Congress of the
United Stales is as follows [reading] :
To. the Congress of the l/nilcd Stales:
   Under our system of direct appropriations by Congress to operating agencies
for .specific purposes, each executive agency pmteeds quit), independently to nc-
ciuire and ulili/.c the materialn, supplies, equipment, and u l l u r property which it
deems necessary fur the purpose* of each appropriation. Both the Bureau of (lie
Budget in preparing the annual budget and supplemental or deficiency estimates
               AMEND THE BUDGET XS^- ACCOUNTING ACT                                    3

of appropriation, and the Congress in appropriating funds, inust consider the
iie-eds for such items on the basis of. the individual appropriation and function to
be performed. The legislative brunch quite properly insists that the cash and
equivalents made available in an appropriation to the c-xecutivc branch shall be
used exclusively for the specific purposes of the appropriation. I recogni/.c fully
that unless the integrity of our appropriation structure is so maintained our
entire budgeting and appropiiating systems would be nullified.
   On the other hand I find that with respe-t to operating materials, supplies,
equipment, and OUKr property, existing limitations, or, perhaps more accurately,
lack of affirmative legislation, unnecessarily handicap efficient management.
Standards of siipplv und equipment stocking and utili/.atij'n exist onlx here and
there throughout the executive branch and arc quite ir.coordinated. E.\cessi\c
stocks, inefficient utili/.ntioii, lack of fluidity of use among kindred action pro-
grams, and waste in other forms, arc all too apparent.
   Only to the extent that property is found to be "surplus" to the needs and
purposes of the appropriation under vvhich it \vas acquired can it be made effec-
tively available for other uses. In Executive QrdcrXo. 923o, of August 31, 1942,
I pi j\ idcd, as far as appeared possible under existing law, for an ov er-all executive
control of "surplus" supplies and equipment. Xew legislation is necessary, ho_vv-
ever, to provide for such a measure of control of the vast quantities and wide
varieU of supplies and equipment in the possession of our-c\ccuti\e departments
anil establishment* as uill insure their Complete mobilisation fur war, and also
prov idc that degree of fluidity of use \\hich is essential to efficient peacetime
management.
   As an example of the need for this legislation in the interest of the successful
piosccutioi. of the- war, there is an urgent demand on the part of certain war
industries for air-conditioning equipment, which need could be met in consider-
able part by utilizing fur Uiis purpose equipment no\\ in Government buildings.
   I, therefore, recommend earh consideration by the Congress of legislation, in
amendment of the Budget and Accounting Act of"1921, which \\ill promote a more
effective utilisation of Government supplies and equipment both during and
after the war.
                                                       FRANKLIN D. ROOSEVELT.
  THE WHITE HOUSE, \uv,cmlcf 30, 19.'i2.
  The CHAIRMAN. On December 5, 1942, I wrote to the President to
this effect [reading]:
Hon. Fn.vNKi.ix D. ROOSEVEI/I,
    The President of the United Slates,
        The White House, Washington, D. C.
   M\ DBAR MR. PRESIDENT: In accordance with your message to Congress
under date of November 30, I have introduced a bill to amend the Budget and
Accounting Act, a copy of which is attached hereto.
  The m..ttcr will be expedited as quickly as possible.
  'With kindest regards, I am
       Sincerely yours,
                                               JAMES A. O'LEAKV, Chairman.
   The CHAIRMAN. Then on December 12, 1942,1 received a communi-
catioibfrom.Mr. Mclntyre, secretary to-tlu- President, -\\hich-ivnds-as
follows [reading]:
                                                       TUB WHITE HOUSE.
                                                  Washington, December IS, 19//3.
Hon. JAMES A. >0'LKAiiY,
    Chairman, Committee on Expenditures in.the Executive Departments,
        House of Representatives, Washington, I). C.
   MY DKAU Mn. O'Li..\n\: The iVc'sident received jour note of December 5th
wit.l) its enclosed copy of a bill to nmend the Budget and Accounting Act.
  Henskecl mo to drop vou aline of thanks and 10 convey hi.sappreciation.
         Sincerely yours,
                                                          M. II. McIxTYRE,
                                                         Secretary to the President.
  The CHAIRMAN. I introduced the bill known as II. 1R. 7S35 of the
Seventy-seventh Congress. I asked for a report on it and found that
the General Accounting Office and the Budget Office were in conflict,


                                         1179~
 4.             AMEND THE BUDGET AND ACCOUNTING ACT

 as you older members of tin.- committee will recall. Shortly thcre-
 after,il.R. 7S35 died v\i'h the emUns; of the Seventy-seven JiCojigress.
    I then rcqiU'bUd of the President, thai he get the General .'• '•counting
 Office and Budget Department in accord with each othci, \\hioh he
 did, and II. R. 1G10 of the Seventy-eighth Congress is the product of
 the.couferences of those t\vo groups.
    N.nv, we have appearing here this morning Mr. James E. Scon.
 Assistant Chief of the Division of Estimates, Bureau of the Budget,
 and we will hear him.
 STATEMENT OF JAMES E. SCOTT, ASSISTANT CHIEF, DIVISION
         OF ESTIMATES, BUREAU OF THE BUDGET
                                     f

    Mr. SCOTT. Mr. Chairman and gentlemen of the committee, my
 name is James E. Scott, and I am Assistant Chief of the Division of
 Estimates of the Bureau of the Budget.
    I have a general statement concerning this legislation. The state-
 ment is .of considerable length. I ha\e given the reporter of the.
 committee a copy of this statement and if it is the pleasure of you
 gentlemen, 1 will be glad to read it to you.
    Mr. BLXDEH. In a short statement, can }'ou tell us what the state-
 ment contains?
    Mr. SCOTT. The statement contains the background of the situa-
 tion. It gives the history of legislation by Congress on this subject
 of machinery or equipment and supplies, and then points out the
 need for further legislation and discusses briefly the sections of the bill
 now proposed.
    Mr. BEXDRK. This bill in the main provides for the transfer of
 certain iijuipincul and property fium one department to another; is
 that it?
    Mr. SCOTT. It provides both for the ordinary transfer among the
 departments of surplus property, and the sale of surplus property
 which is not ncciK 1 or desired by any Government agency. First \\e
 provide for transfer and, second, \\c pro\ii'e for the sale of surplus to
 the Government as a whole.
    Mr. GIFFOKD. Tell hie w h a t the difTereiice is between this bill and
 the other one which we considered.
    Mr. Scorr. This bill straightens out the liifFeu'iices ihat had existed
 between the General Accounting Office and the Budget, Office, that,
 hiul to-be iroiail-Olll. Thi-uligiiiiil bill' pj'u|/osuv! to-jjivu-the-lDiiveliir "
 of the Budget authority to declare propuly surplus on the basis of
 standard of utilization, as to whether or not the head of (,lie depart-
 ment or tin head of the agency declared it to be sinpius, and this draft
 puts that authority in the President.                       •
    Tin1 oilier differences were technical matters reluiJng to accounting
 and the handling of the money invohed, and Mr. Kahn (?) and Mr.
 Tales of the General Accounting Office are present and could explain
 those differences better than 1,
    Mr. BKNDKK. Would jou sa\ i h n l the Accounting Office is satisfied
-with this?
 . ]\Ir. Storr. Yes, sir; the Comptroller General has assured us that
 he,is not only satisfied w i t h this bill, but he is in complete accord \\ilh
               nnd is anxious to support the program in any way he can.
               Eu. Who appoints the Comptroller?


                                   1180
                AMEND THE BUDGET AND ACCOUNTING ACT                                    O

  „ Mr. SCOTT. The President appoints them subject to confirmation.
Tht Comptroller General is appointed by the President for apeiiod of
 15 years under the General Accounting Act.
    Mr. BENDER. Yes; 1 know all about that.
    Mr. CHUKCH. Mr. Scott. ha\ e vou nil extra copy of your statement?
I am obliged to leave for another i. eeting.
    Mr. SCOTT. Lam sorry 1 have no extra copies. I omy had one extra
copy, which I gave to the reporter.
    Mr. WniTTixGTON. Mr. Chairman, I suggest that the witness
proceed in his own way ami either read or as briefly as he can, give us
 the high points of his statement. Perhaps he can emphasize the
high points of his statement that he has given to thau-porter, ami the
reporter can insert it as a part of his remarks, ami after he has com-
pleted bib statement, each member of the committee will be given an
opportunity lo ask such questions pertinent to the subject.
    The Cri.uiiMAX. 1 think it would save time to proceed along that
line, and then each member of the committee will have an opportunity
to question the witness. That is the procedure we will follow with all
the witnesses appearing on this matter.
    Mr. SCOTT. In the report of a subcommittee of the Senate Com-
mittee on Appropriations—.Senate Report Xo. 1554, Seventy-seventh
Congress, second session, dated July 22, 1942— that was known as the
'Tydings committee report, the following statements appear:
   Obviously, the full utilization of personnel, space, equipment, .ami .ill other
resource^ of the Government is n responsibility of management. This rc?i.ohsi-
bilitr ii. primarily that of the President, but, like even large corpi-ratioi^, the
President must uf necessity delegate to subordinate organizations and induiduar
the execution of this responsibility because of the huge task incident to the
management of the Government in all its ramifications.
  .The .Congress in recognition and because of the nccessit j uf prov iding the means
wbercbv tlic President \\ill be aided in the execution of this respoiisibil'fy has
created" the Bureau of the Hiidg. * by the Budget and Accounting Act of 1921.
   The Bureau of the Budget was charged by law \yith the duty of executing
efficiency and efficient management in the executive branch of the Federal
Government.
   It is the committee's opinion that b\ v i r t u e of the legislation cited, the Bureau
of tlio Budget posse«ia> tin. authority, subject to the direction of the President
of the United States, tu take such steps as ma\ be iitces»ar\ to acculiiplish efficient
management of the operations of the executive branch of the Government.
    With respect to supplies and equipment, it cannot be successfully
deried that e(Tucti\c o\ur-all management was almost entirely lacking
iii.thc.exccuti.V-e brancluof..our .Govern men tfrom March 4, 178.9.,,dawn
 to August 31, 1942. It is respectfully subinitled, however, that this
shortcoming is fairly attributable in large part at least to lack of legis-
lative authority for such over-all management.
    Our Constitution vested in the Congress full control over the purse
and property of the Federal Government. Implementing and rein-
forcing the Constitution the act of March 3, 1809 (2 Slat. 535), and
the act of February 12, 186S, provided that—
  Tliu stunn appropriated In Imv for each branch of expenditure in the several
departments, shall he .iolol.\ applied to the objects for uliich they nreTe.ipecthel.v
appropriated, and to no other.
And further, that —
  Tin- officers, agents, or oilier person*, \\liu ma.\ be receivers of public moncy.s,
shall remit r di.Mincl accounts of the application uf such nmne.vs according to the.
appropriation or appropriations under \\liicli «anic have been drawn.




                                          1181
 t               AMEND THE BUDGET AXD ACCOUNTING ACT

   Again in the apt of February" 12, 1SGS (15 Stat. 36; 31 U. S. Code
 628), Congress reiterated that-^-
     Excopt as otherwise provided by law, sums appropriated for the various
  brandies of c.\]H;inliturc in the public service -hall be applied solely to the objects
 •for which they arc respectively made, and-fof no others.
      lii large part, the "sums appropriated" by Congress are quickly
  converted into expendable and nonexpendable or durable supplies,
   equipment, and other property. Such conversion^ however, conveys
   to the responsible executive no new authority or freedom ol action
  with respect to the use or disposition of such property, and it, there-
  fore, follows that there is no authority except in Congress or as ex-
  pressly delegated bj* Congress to dispose of supplies, equipment, or
  other property in the possession of the United States.
     Inevitably certain supplies, materials, equipment, and other prop-
  erty, from time to timci become surplus to, or are ho longer needed
  for the purposes of the appropriation under which-they were acquired.
" The purposes of --the appropriation may have been fully accom pushed;
  activities or functions may have been eliminated or curtailed; pur-
  chases may have been excessive; new methods of operation requiring
  lesser quantities of supplies and equipment ma}- have been devised,
  of .equipment may have become worn or damaged beyond repair.
     Now the Congress has recognized and dealt legislatively with sur-
  plus property in particular situations.
     if or example:
     In 50 United States Code 5, provision is made for the sale of un-
  serviceable ordnance stores, materials, and so forth.
     In 32 United States Code 47, the sale of arms and equipment of
  the National Guard is authorized.
     The sale of old vessels of the Xavy is govc-ncd by 34 United States
  Code 492.
     Government property at any Indian reservation, not required for
  the benefit of the Indians thereon, may be transferred to another
  reservation or sold-undcr the provisions of 25 United States Code 191.
     Machinery or materials in,the Government Printing Office may be
 ^condemned or sold under 44 United States Code 56 and 57.
     More recently, the net of December 20, 1928 (40 U. S. Code 31 la),
  prescribed a system for disposing of surplus materials, supplies, and
  equipment in executive agencies in the District of Columbia, and for
  covering the proceeds thereof into the Treasury as miscellaneous
 receipts. And.Piiblic;Law' 7$ Sovent3>sevcnlli.G'ongrcss,-thc:Labor-
 Fcderal Security Appropriation Act, 1943, provided for disposition
  of properly surplus to the Civilian Conservation Corps and' the
 National Youth Administration.
     The fact remains, however, that the Congress has never legislated
 comprehensively or in nn over-all fashion with respect to surplus
 Government-owned supplies, materials, equipment, or other property,
 whether serviceable or unserviceable.
     In fho absence of such legislation, the executive agencies have
 assumed certain .general authority to transfer and otherwise dispose
 of surplus properly. In 1882 Attorney General Brewstor rendered
 an opinion on the subject (17 Opinions 482), in which he said:
                 AMEND THE BUDGET AND ACCOUNTING ACT                                7
       .j         ~    ~     '
   Where articles arc manufactured or purchased by oiw branch of tlic public
scrkice under an appropriation made for that i-itrpujt, awl arc aftcfuards, uh
grounds of administrative expediency, tfatisfcrruJ to anuthr.rbnine.Ii of the ser\-
ice, the latter thi'feupbn reimbursing the aji|>rui>riaLi^n of lliu foriiiur with the
cost pf the articles out of a:iappropriation applicable.to tie iLanut'actiiru or piir-
chasc thereof, this transaction-is not a »;ile cither according to the ordinary of the
legal signification of that term. It is nothing more than a transfer of tliu c.isto.dy
and use of the property and consequent accountability for tlie f^inc, accompanied
by a transfer of the cost thereof from one appropriation to'another within the
scope of cither of which the expenditure may properly come.
  This opinion, it -will be observed, carefully maintained the integrity
of the appropriations made by the Congress. On the other ha-id,
Attorney General Daugherty, on April 20, 1921. in 32 Opinions oil,
hot only held that—
   There is no legal objection to the inerc transfer from one bureau or department
'of the .Government-to ai.uthcr department of real or personal property no longer
needed for the purposes for which it was Appropriated; that such a transfer is not
a s.ile ai>rt is not open to the objection that public property cannot bi> disposed.of
witho-.it-the authority of Congress-^-                                       =
But also that such surplus property miglit be transferred without
charge against the appropriation to the purposes of which it wa&
transferred:. This opinion entirely overlooked the fact that while the
transfer of property no longer heeded .could not be said to interfere
with the purposes of the appropriation from which it \\.as transferred,
its transfer withont cliarge against the receiving appropriation un-
questionably augmented the latter appropriation without the knowl-
edge, consent, "or authority of Congress. The Congress, of course, .is
quite as much concerned with the nnauthorixed augmentation of its
appropriations as it is with their unauthorised impairment.,
    PrcsKlpnt "Wilson recognized this fact in his Executive Order No.
3019 of December 3, 1918, which prcsc.lbed a procedure for dealing
with the large quantities of surnlus equipment in the. District of
Columbia resulting from the cessation oMiostililics in the PirsL World
War. That order provided' that all materials aiul equipment trans-
ferred from the surplus stocks \vould be paid for by the receiving
appropriations and the proceeds returned to the Treasury. The
Congress, in the act of Deceinbcr 20, -1928, made the above cited
Executive order effective as statutory la\v.            ' --         -
    The Labor-Federal Security Appropriation-Act for 1943, anthomcd
 the Director of the Civilian Conservation Corps to dispose of the
properly of that agency to other Federal agencies, with or without
r.e.imbursjjnijcnt. Rather naturally, .pcrjiaps, .the transfers Imve- been
witlioui reimburseinent, and \\ hile liquidat ioimf the Corps hiav thereby
have been somewhat hastened, numerous appropriations of GOJI-
grcss have been augmented in amounts which are unknown to the
Bureau of the Budget or to Congress by this donation of useful supplies
 and equipment. In the same appropriation act it was directed that,
 surplus National Youth Administration properly be "londerc.d io
 other agencies of the United Stales for use in-lho war ofl'ort." Noth-
 ing was said as to the financial basis of such transfers. Accordingly
 it is being transferred under Executive Order No. 9235 wly'nli is here-
 inafter oulliiied, and which requires the receiving agencies to pay
 appraised values and for ret urn-of the proceeds to the Trcnsur.y.
    Until August 31, 1942, when Executive Order No. 9235 was issued,
 this authority to manage surplus supplies am) equipment w«s vested
            83217—43^—^2
8            AMEND THE BUDGET AND ACCOUNTING ACT

not in the Bureau of the Budget nor elsewhere in the Executive Office
of the President, but in the heads of the departments, agencies, and
other establishments Human nature being what it is, declarations,
by responsible executives that something was no longer needed have
been relatively negligible. We nil like to acquire, and to retain our
possessions.
   Executive Order No. 9235r issued August 31, 1942, did not strip
the executive headTof tllFilepartriieiils, agencies, and other establish-
ments of their authority to declare surpluses, but it did make one
important change, it vested in the Director of the Bureau of the
Budget authority to'deterii ihe surpluses, and to declare these surpluses
and dispose of them without necessarily awajting such action by the
head of the departmeit, agency,, bureau, division, or office. Tlie
order authorizes the Bureau of the Budget to survey what the Govern-
ment has in its possession to formulate standards of utilization and of
adequacj'of stocking, and, oji the basis of such standards, to determine
what is surplus and to require the transfer from the agency in which
the surplus exists to another agency where there is an evident need.
As a secondary objective,-the order contemplates the gradual develop-
ment of a unified warehousing system for the executive establishment.
   Air. HALE. Will you tell me the date of that Executive order?
   Mr. SCOTT. That Executive order was issued on August 31,1942.
   In that connection I would like to say that a survey was recently
completed of vvarehousing facilities of the Government and wo find
that there are" 331 such warehouses 'n active operation, 25 of which
are operating on ft national basis, and over 200 on a regional basis.
Our aim is to establish one unified system of warehouses under a
division of the Treasury Department, and handle this business for
the entire executive branch of the Government.
   To carry out the purposes of 'this Executive order, we have organized
in the Division of Estimates in the Bureau of the Budget a group of
five men, including n warehousing specialist, a specialist in office
management, and a specialist in field equipment. The functions of
the unit are as follows:
   1. Develop and promulgate regulations and policy concerning proj>-
ertj- management from an executive ufli"e level.
   2: Develop and promulgate standards for the utilization of equip-
ment and supplies.
   3. Sponsor the establishment of property control systems within
each department, establishment, and agency of the Federal Govern-
ment.
   4. Encourage the appointment of a property manager or equipment
and supply conservator within each department, establishment, and
agency of Federal Government to control purchases, direct maximum
use of property presently owned by said agency arid to provide;
from the office of the Department head, a general over-nil property
management. The group of conservators will bo welded into a
committee to counsel and advise with this section, of tin- Bureau in
matters of policies, standards, and regulations.
  ^5, Through studies and survey, sponsor improved purchasing
policies and the establishment of master /.one warehouses under the
control of the Procurement Division, Treasury Department.
             AMEND THE BUDGET AXD ACCOUNTING ACT                       9

   6; Cooperate with appropriate officials of the War Production
Board to redistribute surplus equipment and supplies so that the Vvar
effort will-be best served.
   7. Cooperate with .the Government Requirements Branch of
W. P. B. in a manner that will enable this section to-present the total
requirements of the Federal Government as a single consumer. This
section, will then allocate cod pioducts that are made available to
W. P. B. for Federal Government use to agencies requesting same.
   8. Conduct rill surveys concerning property, purchasing; ware-
housing, systems; or procedures; determined by the Director to be
necessary.
   9. .Establish system of reporting by the Procurement Division
which will provide data concerning value of surplus property made
available and the value of surplus property transferred to each agency.
Also report on transfer and market value of property transferred anil
assist in negotiating reserves of funds saved by the transfer of surplus
property;
   10. Study all existing law concerning Federal property and prepare
amending or new legislation to give perpetuity to properly control
and increased fluidity in the use of Federal property.
   11. Through maximum use of existing Federal equipment, reduce
stock pile of said equipment, reduce purchases, and otherwise prepare
for post-war handling of surplus Federal property.
   The Bureau of the Budget docs not desire or intend to enter the
field as an operating agency by virtue of this Executive order. The
Procurement Division of the Treasury Department will conduct the
essential-operations, and the role of the Budget Bureau, in cooperation
with departmental and agency representatives through a council of
supply and equipment, will be, as it should be. to furnish leadership
and direction.
   In the first 3J;' months of operation under this Executive order,
S5,25D,000 worth of surplus property \\as_found and conditioned for
tran^ftr, and $3,225,OOD was actually transferred. Those figures       •s
rej.rjscnt more than twice the volume luoved in the preceding 4,1?
months of this fiscal year. All transfer subsequent to October 16.
1042, the efTettive date of the order, resulti d in payments into miscel-
laneous, receipts of the Treasury, whereas previously only transfers
within the- District of Columbia had resulted in such recoveries, and
that money had been paid into the miscellaneous receipts of the
Treasury..                                 -     -
   Mr. BKXDKR. May I ask who does the appraising of the property?
   Mr. SCOTT. The. Procurement Division of the Treasury makes the
appraisals.
   Mr. BKNMJKH. Will you tell us something about the Procurement
Division?
   Mr. SCOTT. The Procurement Division of the Treasury is the agency
which has been in operation for n good many years as the central
purchasing agency foi the Government. The Director is Mr. Clifton
E. Mack, of the Treasury Department, and he is here to testify
boforo you this morning as to his part in this operation.
   Mr. PHILLIPS. Were you saying that $3,225,000 of surplus property
was actually transferred, is that merely a book entry, or do you mean
you sold that outright to 'othor branches of the Govermnunt?



                                   1185
10          AMEND THE-BUDGET AND ACCOUNTING ACT

   Mr. Scotr. We transferred it to other agencies, within the Govern-
ment, and the receiving agency paid that much money back into the
miscellaneous receipts of the Treasury.
   Mr. PHILLIPS. Was this at the appraised value of the property?
   Mr._ScpTT. Yes, sir.
   Mr. HALE. Was that an actual cash payment?
   Mr. SCOTT. Yes, sir; in other words, the money was actually saved.
If that \yere not done the money would have been spent otherwise.
As it is, it is money appropriated by Congress which will not be spent
otherwise.
   Mr. PotLSON. This surplus, whatever it happens to be, when the
particular equipment or material or whatever it is is sold, the departs
ment which lias designated it as surplus does notTecuivc that money.?
   Mr. SCOTT. No, sir; that money goes into the miscellaneous receipts
of the Treasury.
   Under our budgetary system the appropriations b}T Congress are
made directly to the operating agencies, each Jor its own well-defined
purpose or purposes. Both- the Bureau of the Budget and Congress
in their consideration of the annual Budget estimates and supple-
mental or deficiency estimates of appropriation must consider supply
and equipment needs on the baiss of the work to be done under each
such appropriation, Not only must the integrity of each appropria-
tion be maintained, but «ich must be self-sufficient, bupplics and
equipment purchased under one appropriation cannot be used for
purposes of another appropriation without, in effect, depicting the
one and augmenting the plluT. An .igenry borrow ing equipment from
another cannot expend iU> own funds to repair that equipment so as
to return it to the lending agency in the same good condition as when
bojrowcil.
   Even under normal conditions, excessive stocks, unnecessary dupli-
cation lack of iraximum utilization, and \\astc in other forms arc all
too apparent. Under the present emergency situation, with many
items of supply and equipment scarce or ii.ipossible to obtain in the
commercial market, it will inevitably follow that, unless adequate con^
trols arc exercised, certain work programs of the executive establish-
ment will be hampered by lack of equipment which should but cannot
bo jnadc available from other executive agencies.
   Jo one knows the extent of the Federal Government's inventory of
operating supplies and equipment. Omitting the Army and.JNavy
froin the-pictuiv \\c spend about SoOO;000,000-cncli yuar uiujiir lliesb
heads. A very conservative guess would place our noainilitoiy in-
ventory well in excess of-a billion dollars.
   The liquidation of the Work Projects Administration is fdcnsing a
 surplus property inventory estimated at $48,000,000. When the
present war ends it is altogether likely that tho Federal Government
will have surplus stocks of almost unimaginable size.
   At the oM of tho last ^yar wo had surplus stocks worth at least
 $5,000,000,000 and at the end of this war wo anticipate that wo shall
 have at least 850,000,000,000 worth of supplies and equipment on
 hand, which will require intelligent management of tho highest order,
 not merely to insure the Federal Government against wasteful dissipa-
tion of that inventory, but oven to prevent some serious impact upon
 our peacetime economy.
             AMEND THE BUDGET AND ACCOUNTING ACT                        11

    While some of the essential features of effective surplus property
 management have been initiated and can-be further developed during
 the war period under Executive Order Xo. 9235, that order, based in
 part upon the War Powers Acts, is(pfobabry short-lived, and docs not
 provide a fully adequate basis for the necessary operations in dealing
 with such surplus inventories asarejiow at hand and logically expected.
    The draft of bill now presented, insofar, as it deals with the general
 surplus problem, »vill first definitely place the responsibility and pro-
 vide the essential legislative basis for the over-all management which
 has long been needed, and will always be needed. Because the func-
 tions and operations it provides for are essentially budgetary controls it
 is proposed as an amendment of the Budget and Accounting Act.
    Mr. BENDER. Mr. Scott, how long have vou been with the Bureau
 of the Budget?
    Mr. SCOTT. I have been with the Bureau of the Budget since 1938.
Preceding that I was 2S years in the Department of Agriculture. I
'have been around about 33 years.
    The CHAIK.MAX. Gentlemen, if you will refrain from asking questions
 until the witness completes his statement, I think we will save time.
    Mr. SIOTT. Section 2IS (a) would for the first time by legislation
 affirmatively authorize the responsible executives uniformly to
 determine and declare property in the possession of their respective
 agencies to be surplus tu the needs for which it \\as acquired. This
 authority, although generally and haphazardly vxurci&cd in the past,
 has been explicitly static! only in legislation of limited scope, such as
 your War Department and Xavy Department Acts. Jt would also
 make it uniform practice that all-property now or hereafter becoming
 surplus in the executive branch of the Government be so declared to
 the Procurement Division of the Treasury Department. Upon such
 declaration that unit would immediately assume jurisdVtion and
 full responsibility, under guidance of the Bureau of the Budget, for
 the most advantageous disposition of that property. A single focal
 point for all surplus property transactions appears ob\ iuiisly desirable.
 This section is also designed to provide a central authority over
 surplus propjity determinations, on the Exjcutive office level. The
 method of procedure which we contemplate would bt to develop
 gradually, and in cooperation with the departments and agencies,
 standards of stocking and of utilization fur application as unifoindy
 as possible throughout the executive branch but adapted to the widely
 varying needs of particular situations. Upon tlic basis of such
 soundly developed standards it would be entiiely practicable to deter-
 mine true surpluses. Furthermore, such standards would become
 increasingly useful in-reviewing and passing upon estimates of appro-
 priation both to the Bureau of the Budget and to the Congress. This
 section recognizes the fact t h a t the head of an agency may, in the
 diligent performance of his duly to declare excess property as surplus,
 view the matter strictly from the level of his agcjicy Jiecds; whereas
 tho delegated'representative of the President would view the property
 situation with an over-all evaluation of all agency needs and deter-
 mine the existence of surplus on the. basis of broader standards.
    Section 2JS (c) sets forth the financial procedures which would
 govcrmall surplus property transactions. Tin- provision for payment
 by receiving appropriations fully protects the integrity of the appro-



                                 11-87
i2            AMEND THE BUDGET AND ACCOUNTING ACT

priations made by Congress. None would be augmented or increased
except through the regular congressional procedures.
   Mr. PHILLIPS. I am sorry, I do riot find 218 (c) in this draft.
   Mr. SCOTT. I am sorry, smcc I wrote this statement it has been
revised. .                                                                    -
   Wasteful rci uisitioniiig from surplus stock catalogs would be dis-
couraged. Very large savings to the Government would accrue.
Equipment and supply needs arc always considered and .provided, for
in e\cry lump-sum appropriation made by Congress. \Vilhout such
a payment .procedure as this section'o.f the bill would make uniformly
applicable, it would be entirely possible for the agencies controlling
such appropriations to secure their needed supplies and equipment
largely from free surplus, and spend the supply and equipment por-
tions of their appropriations Tor excessive supplies and equipment, or
for any and all other objects of expenditure within the scope of the
appropriation. In fact this practice in the past has resulted in tre-
mendously heavy expenditure* not contemplated by either the Bureau
of the Budget or Congress, and .is very serious waste.
   I can recall one rather striking example of that wit Inn the past
few years. AVe recommended ami Congress appropriated for a certain
program an appropriation 01" 85,000,000 in the fall of 193S. At least
82,000,000 of that 85,000,000 was spent for durable supplies and
equipment. The job was completed in about 2 years. What became
of that durable supplies and equipment inventory of S'2,000,000?
It \\as takeu by the agency responsible for carrying out thai particular
job and simply thrown info its general operations, which vicre financed
by another appropriation. In other words, their regular operating
appropriation was augmented to the tune of $2,000,000 without any
knowledge of the Bureau of the Budget or Congress, which in my
judgment nullifies completely the budgetary system set up by Con-
gress in the Economy Act.
   The pro\ isioiis of this subsection would supersede the act .of June
8, 1S9G.
   Mr. GiFKonn. What is that?
   Mr. SCOTT. 31 Unitw.l States Code 480. which permitted the
deduction of costs of salts before depositing proceeds into misc'«l-
lancous receipts of the Treasury. In otlu-r words, it was a permanent
indefinite appropriation, and that act, passed at t h a t lime, could not
hft\c (outcmplatfil the treineiuu'Us siuplus property business which
we-hnvt-onoiir iinmls ; toda\ «iul-\\iH : bc cuiifiniitud-\\ilh-iirlliu>futiiiu.
This language as you see, does not pro\ ide a firm or definite appro-
priation. It is not an appropriation act. It is purely legislation,
simply authori/.ing an appropriation for tho expenses of tarrying on
 the work. That ad dealt only with sales of old material, condemned
stores, ct cetera, and could not h:i\f loiiluuplatc-d the tivJiiuiulous \ol-
ume of inUTageney mo\emeiit-of property with which \\c arc .. >w con-
fronted. The IH-W language is designed to bring thi- Proi-uroment
Division s(|unnly into operation on a sound btis' icsalike basis as the
innnngcr of our business in second-hand supplies and uquiiununt.
It should be noted that this section recognizes the essential difference-
between property acquired froi.i funds appropriated from the geiiural
 fund of the Treasury and that acquired from corporate funds, or
 funds resulting from operating revenue existing in such agencies as
Home Owners Loan Corporation, and so forth. In the Inlter cases,


                                     1188
                 AMEND THE BUDGET AND ACCOUNTING ACT                                  13

  the proceeds of sale, less expenses incurred in the transaction by
  Treasury Procurement arc returned to the funds from which the
  original purchase was made.
     And now this section provides for rental, that is section 219, which
  provides for the most economical and efficient use of many items of
  equipment. The most economical and efficient use of many items of
  equipment, particularly heavy machinery, tractors, road graders,
- and so forth, is secured only through fullest possible use of such items
  during their normal life period. Every general contractor knows this
  and fights against the waste of idle equipment against which the
  factors of depreciation and interest on investment are constantly
  running. Lack of fluidity of usc-with respect to GovcrnmentTOwned
  heavy equipment likewise causes duplication of investments and stock-
  ing by neighbor agencies, and excessive depreciation costs per unit of
  work performed. Limitations have been removed with respuct to
  certain agencies such as the Forest Service and the Public Roads Ad-
  jnims-lration. Section 219 of the proposed bill would place all agencies
  upon an equal 'footing in this respect, would definitely promote more
  efficient use of equipment and quite certainly produce economics.
     Now section 220 of the bill is the companion to a piece of legislation
  which has just been passed by the House; it passed on February 15,
  namely H. R. 1294, and that bill as .passed by the House, reads as
  follows:
   That whenever during the continuance of the present hostilities the President
 shall determine that ar.y mechanical equipment now owned by the •Government
 and devoted to a particular use is urgently heeded in the conduct of the war, and
 cannot otherwise be provided, the head of thcxjepartment, agency,-or establish:
 nicnt having control thereof, in order to fulfill .such need, id authorized to sell such
 property for cosh for a price equal to the full replacement value thereof.
    That text is like the text of this proposed bill; with these exceptions:
    In the first place, this text provides when the United States is in a
 state of \yar. When the House passed the present Lanham bill it
 said "during the continuance of the present hostilities." There is no
 particular objection to that. It is for Congress to decide whether they
 want to grant that authority during the present war or make it
 operative in case we get in other wars.
    Second, the Lnnlinm bill as passed goes only to mechanical equip-
 ment. The term "mechanical equipment" is necessarily subject to-a
 variety of definitions. It maj be interpreted to include a screw
 driver, and the thing the Lanlmm Act is particularly interested in was
 nil-conditioning equipment anil boilers. We malic no objection to
 that, but I would like to make this point, that under orders of the
 '\Var Production Board construction projects totalling, I believe, some
 nineteen billions of dollars have been temporarily suspended. These
 were Federal construction projects, such as the power plant construc-
 tion of the Bonncville Dam, the Tennessee Valley Authority, public
 roads, and various other nomvar construction projects that ha\e-been
 temporarily suspended.
    In connection with those, projects, we find lying around on the
 projects considerable, amounts of such items as lumber, cement,
 fabricated steel, ami so forth, which by no stretch of the imagination
 can be designated ns mechanical equipment. Now we make the
 point that it should be good practice for .the executive branch of the
 Government to pick up such stock \\hich is not surplus, hut which



                                        1189
14           AMEND THE BUDGET AND ACCOUNTING ACT

cannot be put to use as originally intended due to temporary suspension
of activities, and put that material to the best use during the war
effort. The Lanhain bill, as passed by the House, will pot'permit it,
as it is confined to mechanical equipment.
   Finally', the third difference is that the text of our bill provides
that any funds realized from the sale or jrenlal of such property would
be put in a special fund and made available for the replacement of
such property.
   Now a point of order was raised that that same language was in
the Lanhain bill. That point of order was raised in the House a few
days ago, and it was sustained and Unit langauge was thrown out.
We have no objection to that. We generally believe that upmi the
sale o." property the receipts should go in the miscellaneous receipts
account of the Treasury, and then if lhejT need the money again
they should come back to Congress and get it.
   Insofar as the sponsors of the legislation are concerned, section 220
may be eliminated without objection from us.
   The Lanhain bill, as passed by the House, goes partly in the same
direction. If that is as far as Congress wishes to g_o, we make no
objection. I do, however, make the point that it is not adequate
because it confines it to mechanical cquipmc;.b.
   Section 221 provides for essential regulations and for appropriate
delegation of authority.
   Tlif bill as a whole, excepting tho war emergency section-, contains
nothing radically new, but rather brii.gs up'to7latc, clarifies, and per-
mits uniform application of the best past practices with respect to
surplus property management. Essentially it supersedes the act of
June 8, 1936 (31 U. S. C. 489), and makes generally applicable
throughout the executive branch the act of December 20, 192S, which
for some unknown reason dealt only with surplus property in the
District of Columbia. Finally, it establishes a central authority in
the President, or his designated representative, which is essential to
effective over-all management of the huge Government investment m
supplies and equipment.
   The draft as now presented to the Congress hns been jointly pre-
pared by the General Accounting Office, the Treasury Department,
and thc'Burcau of the Budget.
   That, Mr. Chairman and-gentlemen, concludes my general state-
ment.
   The CHAIKMAX. In the Lanhain bill we lake it that it just covers
•mechanical-equipment-?
   Mr. SCOTT. Yes, sir.
   The CHAIRMAN. And this is an over-nil proposition that will take
care of every type of equipment?
   Mr. SCOTT. That is right; this takes care of all supplies.
   Mr. Pom.sox. This also takes care of land.
   Mr. HALE. H. R. 125M is not a law now, is it?
   Mr. SCOTT. No; it is not a. law. It has just been passed by the
House, that is all.
   Mr. WinrnNr.ToN. Mr. Scott, aside from your proposed suction
218 (a), I understand that the War Department and tho N.nvy Do-
pnrlment generally lm\e authorit} to dispose of surplus materials?
   Mr. SCOTT. Yes; they have some authority to dispose of materials.
 Quite ft number of them have been passed, found in title X of the
War Powers Act.
            AMEND THE BUDGET AND ACCOUNTING ACT                     15

   Mr. WHITTINGTON. What type of materials?
  Mr. SCOTT. Material supplies, mechanical supplies and equipment.
There is condemned or obsolete equipment which is rather general;
No; that is for the Military Academy: machinery, mechanical equip-
ment, and stocks unsuitable for public service; individual pieces of
armament, surplus supplies; dental outfits.
   The CHAIRMAN, mint-is "surplus-supplies"?.
   Air. SCOTT. TV ell, that is pretty general. "The Secretary of "War
is authorized and directed to sell at public and private sale-^-", no;
that is;ipr dental outfits.
   Air. WHITTINGTON. Generally the Army and the Navy are author^
izcd to sell miscellaneous supplies?
   Mr. SCOTT. Yes, sir.
   Mr. WHITTINGTON. "What limitation under the act generally applies
to the sale of the supplies in other words, is there any value placed
on the properties, or is it left to the Army and the Navy Depart-
ments?
   Mr. SCOTT. It is left to the departments; that is right.
   Air. WHITTINGTON. What dqes the Procurement Division of the
 Treasury have to saj- about fixing the ^alue of those items that niay
be sold?
   Mr. SCOTT. It has nothing to say in regard to the fixing of the
value oi' the items that are sold.
   Air. WHITTINGTON. There is no restriction then with respect to
the value at which they may be disposed of by either the Army or
flic Navy?
   Air. SCOTT. There are no restrictions that I know of.
   Mr. WHITTINGTON. There arc no restrictions except the rules and
regulations .that the Army and the Navy may have adopted?
   "Mr. SCOTT. That is right.
   Air. WHITTINGTON. Now, in section 218, is it contemplated that
there should be any limitation of the value, or airy limitation as to
the amount that can be accepted?
   Air. SCOTT. Yes, sir.
   Mr. WHITTINGTON. What determinations are made?
   Air. SCOTT. The Treasury Department, under guidance of the
Bureau of the Budget, has sot up standard methods of appraisal that
have boon .gradually developed, and applied by die Procurement
Division. The Procurement Division will be the operating agency
nmUhp.Bureau of the Budget wJlLact to. furnish .that, agency .guidance
in developing bound methods and techniques in appraising surplus
properly.
   Air. WHITTIXGTON. TTnve 3*011 any explanation why this safeguard
must not bo extended to the disposition of surplus property of the
Army and Navy as well?
    Air. SCOTT. No, sir; I think the surplus properties of the Army and
Navy or any otlior agency should bo disposed of through this system,
under the' Treasury Department and under general rules and
regulations.
   Air. WIIITTINGTOX. Under the laws previously passed by Congress
authorising the disposition of certaiii materials at various times for
the Army and N a v y Deportments, are the proceeds from the receipts
of such property covered in the Treasury through the miscellaneous
wccipts fund, or have there beon other 'dispositions of the funds re-
ceived from the. sale of surplus materials?


                              1191
16            AMEND THE BUDGET AND ACCOUNTING ACT

    Mr. SCOTT. I do not believe I can answer that question exaclh/,
 but there are circumstances under which it is now provided that the
 proceeds shall be reimbursed to the appropriations and icinain avail-
 able for the year during 'which the sale was made and for 1 full
 year thereafter.
    Mr. "\VHITTIXGTOX. If you can answer that question more fully
 later in your interrogation I would be glad to have you do so, and
 when the Arnry and Navy representatives appear before the com-
 mittee, I would like to have them speak on it.
    Mr! Scott, I think you gave a very apt illu . ation in the caso you
 cited where the Government through Congress in an einergeniy
 authorized a lump sum appropriation for acquiring materials and
 equipment and subsequently $2,000,000 at least of the materials
 were utilized for other purposes. .1 am .vondering if 1113" recollection
 is correct. I understand that 3*011 were referring to the hurricane in
 New-England.
    Mr. SCOTT. Yes, sir.
    Mr. AYmmxGTOx. That is a ca;e where Congress made an appro-
 priation of several millions of dollars and the supplies were utih/.ud
 by the agencies that carried on those operations in their other opera-
 tions without their making note of it.
    Mr. SCOTT. That is right.
    Mr. AYniTTixGTOX. And 3-011 found that amounted to several
million dollars?
    Mr. SCOTT. You recall the appropriation was for 85,000,000, and
 I am guessing, but I think $2,000,000 was spent for durable supplu'j
 and equipment.T
    Mr. AATHITTIN GTO.\. Ami without legislation of the t3rpe embraced
 in this bill there would be no reasonable way for either the Director
 of the Budgetr or for Congress to know what disposition was made of
 that proport3 , and the agencies that acquired that property w.ould
not properly notify Congress of making the d.. ! .clion in the estimates
 for such property obtained in that operation.
    Mr. SCOTT. That is happening all the time. An even more striking
 example would bo that attending the liquidation of the AY. P. A.
where we have an in\ entoiy estimated sis o\ er $46.000,000 of supplies.
That S4S,000,000 of supplies was disposed of without an\ knowledge
 of cither the Bureau of the Budget or-Congress.
    Mr. AA'nrmxGTOx. I would like to ask a question w i t h respect to
.the AY. P. A. AY-hat-exjsting4cgjs]ation.,i:iUH!r ujilhoming tins ordiM-K
liquidation of the AY. P. A., or other legislation is there that would in-
 applicable to the liquidation, that \\ould pro\ ide for the disposition of
 tncse millions of dollars worth t> f property and equipment that has
 been acquired by the W. P. A.?
    Mr. StoTT. Thero is> none, sir; there is no aflirmathe legislative
 authority.
    Mr. WHITTINGTON. AYhat has boon the practice of the AY. P. A. in
 that regard up to the present time, if you know?
    Mr. SCOTT. AA'o have it under control. AATo placed it under the- con-
 trol of Executive Order No. 9235, and it is being disposed of t h i u i y h
 the Procurement Division of the Treasury Department, and we e.\|jucl
 to return to the Treasury any sum up to the $-18,000,000. The prop-
erty is being transferred priiniirily to the Alaskan Ilighw a..\, tin- Inter-
national Highway, and to other AA'ivr Department projects; and the
              AMEXD THE BUDGET AND ACCOUNTING ACT                        17

 receiving appropriations aie paying for it, and the money is gring in
 miscellaneous receipts.
    Mr. BENDER. What clous that material consist of-chiefly, Mr. Scott?
   Mr. SCOTT. Construction material.
    Mr. WHITTIM.TOX. So that whon Congress appropriates money for
 the Intcrntitioii.il Highway tliey might contemplate that A large
 amount of matiuHs could be acquired through the disposition of
material andsupplics'by (he W. P. A.?
   Mr. SCOTT. Yes, sir.
   Mr. WHITTINGTON. So that under this Executive order these mate-
rials and these supplies and properties \\ ould only be transferred to these
agencies, where Congress has authorized the agencies to acquire these
properties?
   Mr. SCOTT. Yes, sir.
   Mr. WHITTINGTOX. And you have a number of those?
   Mr. SCOTT. Yes. sir.
   Mr. WHITHNGTO.N. Well, does this Executive order contemplate
that uo other disposition:should be made by the W. P. A., or by the       :
Department of the Interior through its control?
   Mr. SCOTT. Yes, sir.
   Mr. WHITTIXGTOX. I mention that and I ma}' say incidentally that
the charge has been made, if not the statement, that the W. P. A.
actually destroyed and burned materials needed now,, especially in the
agricultural areas on the theory that it might be sold in competition
with local materials that the local hardware merchants w ould normally
soil but .which the hard\\are<iiie.rchants were unable to obtain power to
sell. IIo\\ ever, I do not know whether that prefaced the order that
you referred to.
   Mr. SCOTT. I have heard that said, yes, sir; and under the Presi7
dent's Executive order the W. P. A. has no authority to dispose of
anything without first declaring it surplus to the Procurement Divi-
sion, which Division immediately assumes full jurisdiction and re-
sponsibility under the Treasury Department.
   Mr. WHITTINGTOX. Is it 1 your understanding that if this bill
passes substantially in its present form that the W. P. A., irrespective
of the Executive order to which you have referred for the disposition
of property of that administration, would be subject to the terms of
this act?
   Mr. SCOTT. Yes, sir.
   Mr. Wiiirii.NuTON. I should like to ask you whether-or not under
the terms of this act, namely under section 218, the Departments
would transfer at the values fixed by the Procurement Division, over
to.thi! agencies that would be designated by the Director of the Budget?
   Mr. SCOTT. Yes, sir.
   Mr. Wnmi.NGTo.N. In other words, it would be necessary for the
agency or department to show that they needed the properly?
   Mr. SCOTT. Yes, sir.
   Mr. WHITTINGTO.N. And (hat they recogni/ed the acts of Congress
pcnnitting them to acquire it before it was transferred to them?
   Mr. SCOTT. That is right, and there would be the additional advan-
tage that UieBureau of the Budget would'know at all times what they
were getting, what they paid for it, and what we and you people
allowed them in Congress to acquire this property; and they coifld



                                1193
 18           AMEND THE BUDGET AXD ACCOUXTIXG ACT

  acquire tliis pro* rty more cheaply from the surplus list than going
  out in the open market, and thus they would save the difference
    Mr. WHITTINGTOX. And secondly, if the property is not transferred
  to another department, if the Director found it is unnecessary, he may
  authorize it to be sold, that is if il has been determined by the Treasury
 Department that it is hot required for the use of any governmental"
 agency?
    Mr._ SCOTT. That is right.
    Mr. "VVHiTTixGTOX. And in the third place, if the Procurement
 Division dccMus that the cost of the sale would exceed the value of
 the property it msiy make whatever disposition i(. deems necessary,
 in its discretion?
    Mr. SCOTT. Yes, sir.
    Mr. yrHiTTixGTOX. Under the terms of this bill, or under an}* other
 legislation, what authority is there in the Procurement Division of the
 Treasury Department, or in any other agencies outside of thut Divi-
 sion, having under its jurisdiction the control of the property to
 actually adjudicate and determine whether property is surplus or
 whether it is needed by that agency?
    Mr. SCOTT. There is no such authority.
    Mr. WHITTIXGTOX. Do I understand then that under the terms of
 this bill, that it is fur the heads of7 the agencies to determine whether
 or not; it has any surplus propert} ?
    Mr. SCOTT. This bill for the first time in histoiy provides that cen-
 tral authority and puts it in the President.
    Mr. TTniTtiXGTOX. Then under the terms of this bill for tho first
 time authority is .put in the President?
    Mr. SCOTT. Yes, sir.
    Mr. WIIITTINGTOX. The authority is put in the President to dctcr-
jnine whether or not there is surplus material in any executive agency
 or department?
    Mr. SCOTT. That is right.
    Mr. WIIITTINGTOX. And that is in this section 218?
    Mr. SCOTT. That is right.
    Mr. ^YIUTIIXGTOX. Now, I would like to ask you whether there is
any sound reason why the proceeds from the sale of this property, in
 (he evnit it is transferred, where it may be appraised and charged
under the act of Congress (o the proceeds being covered into the
miscellaneous receipts in the first instance, without providing for it
being for replaceiiUMil or operating expenses? T» there any sound run-
son if an agency has surplus material and (he President estimates it
dots not need-(hose innlerials, wiry that ngrncy should not come back
to (lie Congress of the United Slates and V subjected to the scrutiny
of Congress, which would determine whether they should be given
more-materials?
    Mr. SCOTT. In my judgment-there is no sound reason fori.ut putting
this in miscellaneous receipts of the Treasury, and if they need any-
thing new let thorn come to tin Bureau of the Budget and ask for it.
    Mr. AYnittiNGTOJC. Under i l i e general provisions of section 218,
the first section of this bill, is there nny authority under this suction
that would authorize the disposition of lands, buildings, as well as
materials, supplies, and equipment?
    Mr. SCOTT. Not except in section 220, which is in regard to the war
offort; no, sir.
                        THE BUDGET AND ACCOUNTING ACT                           19'

    Mr. WniTTiNGTON. In other words, undei-thc prescription of "equip-
 ment, materials, and supplies" there would be uo authority iu the \Vnr
 Department, for instance, or in the Xavy Department, or in the armed
 forces, to dispose of more than 1,000,000 acres of public domair?
    Mr, SCOTT. No, sir
    Mr. WHITTJLNGTON. Thai is hind that lias been acquired as I under-
stood yesterday.T
    Mr. SCOTT. > o, sir; the language says "materials, equipment, or
supplies."
    Mr. WHITTIXGTOX. Now, under section 219?
    Mr. SCOTT. That is the rental section.
    Mr. WIUTTINGTON. What is 3 our construction of what section 219
provides?
    Mr. SCOTT "          provides for greater fluidity of the use of equip-
 ment that \\i         c on hand among the agencies. I can probably
illustrate it In . by a concrete illustration. I am a forest super-
visor somewhere out West. Next door to me is a big national forest,
rho-ve sonic tractors, a number of graders, and some heavy machinery.
I need them for 2 or 3 .months in the year, perhaps. Now, in the big
national park next to me the}* have sonic tractors and grading ma-
chinery, and other equipment, and they need that for a short period
of time. Now I cannot 'oan my equipment to the Pa/k Service, nor
can they lend their equipment to me under present legislation, as at
present we can only charge the operating costs. I can loan them my
tractor and they can run it over a clifl' and I am out a tractor, and then
I am faced with the problem of coming to Congress and explaining
why I need a new tractor when previously I had one. Congress
might say to me "What did you do with your tractor?" and I would
Jinvc to s<i3r "I tarried it over to the Park Service and they destroyed
it."
   Mr. TVniTTiNGTON. This-gives-you authority to rent it out?
   Mr. SCOTT. They \\ould do it only with the consent of the agency.
This law provides:
  Rcnt.il of equipment shall be \\il1i the consent of Uie agency having possession
or control thereof and only fur use in an activity having an appropriation avail-
able for the rental of such equipment: Provided', That rental payments therefor,
when received, shall bo credited to the current appropriation or fund available
to the renter agency for maintenance, repair, or replacement of the eqiiipnient,
or in the absence of such an appropriation or fund, shall be covered into tro
Treasury as miscellaneous receipts.
   That is put in there to protect llieirilcgfily-of'tlfi-lendingflgeiicy's
appropriation if it is willing to rent its equipment under (hose con^
ditiions.
   Mr. WHITTINGTON. Is there any reason why those funds should not
he covered in* : the Treasury?
   Mr. SCOTT. Yes; I think so.
   Mr WHITTINGTON. "Why?
   Mr. SCOTT. Those funds are needed by the lending agency because
when they get those tractors back it is necessary to give them n
general overhauling, and the rental money is all they have to pay for
that general overhauling.
   Mr. \YIIITTIXGTON. lint that could be provided for in the rental
iigruement uhich provided that thcjMmipmcnt would be returned in
good condition.



                                   1195
20           AMEND THE BUDGET AND ACCOUNTING ACT

   Mr. SCOTT. Yes, sir.
   Mr. WHITTINGTOS. If you have a tractor mid you lease it to me, why
3*ou would be a shre\vd businessman to provide that that tractor
\vould-be returned in the same condition, wear and tear exceptcd.
   Mr. SCOTT. Yes, sir; but it is, I think, more difficult of administra-
tion than this oiic would be.
   Mr. WmftixcTON. I see the point you have in mind'. Now, in
section 220 disposition might be made of land that you referred to,
that all land would be disposed of under section 218 (a)?
   Mr. SCOTT. That is right. _
   Air. WHITTINGTOX. As well as buildings arid equipment. Now
under the terms of section 220, who values those lands and who
fixes the appraisal value at which they may be disposed? What
safeguards are there that they will be substantially reimbursed?
   Mr. SCOTT. The entire transaction would be subject to regulation
by the President. I do not believe he would delegate thai responsi-
bility to the agency that proposes to 'urn loose equipment or land
or whatever it might be.
   Mr. WHITTIXGTOX. Well, if Congress is going to undertake to
provide a 3rordstick with respect to equipment rtiid materials and
supplies, is there any reason why Congress should not provide some
sort of safeguard for the appraisal of values with respect to land,
buildings, and appurtenances to buildings?
   Mr. SCOT' . No, sir.
   Mr. WHITTIXGTON. In other words, that might be done if it was
done infection 218?
   .Vlr. SCOTT. Yes, sir.
   Mr. WHITTIXGTOX. We understand the workings; the Executive
would-have to delegate that power and '-authority to some, other agen-
cies and, as I understand 3*011, there is no sound reason wiry that
shoiild-uiol be-writtcn in the bill.
  _Mf. SCOTT. There is no-reason whatever.
   Mr. WHITTIXGTOX. Do 3Tou know what reason there wojild be that
the funds should not be covered into .the Treasury t>o that the agencies
or departments needing such funds could como to the appropriate
agencies for those funds?
   Mr. SCOTT. No, sir.
   Mr. PHILUPS.' You arc discussing section 220?
   Mr. BENDER. Will you pardon an interruption here?
   }Yp-haye quite ;an importniit session today and .there arc .twenty^
soine members of this committee, and each of us would like to inter-
rogate this witness.
   Mr. Whittinglon has had the wiiness;fov about n half an hour and
I would like him for about a half an hour, and I inn sure other mem-
bers would like to question the witnesses. 1 think it would he
desirable.
   I think, Mr. Whittinglon, that your questions are very proper and
very important, and very much in order. ]Iowo\er, I think it would-
be well if we arranged to have a meeting hero earlier in the morning
m\(\ devote some consiuoroUe lime to tins subject..
   The CHAIRMAN. I think Mr. Wliit.tingi.on is developing the subject
very well. I would suggest wo let him proceed.
   Mr. BENDER. AVe hove a meeting of Congress at 1-2 o'clock noon,
which is quite importnnt.
             AMEND THE BUDGET AND ACCOUNTING ACT                      21

     Mr. WHITTIXGTOX. All transactions referring to section 221 (a)
 jiiitt procedures set forth in sections 218, 219, and 220 shall be in
 siccordance \\itb regulations approved by the President, and the powers
 you vest hi the Director maj- be exercised in his discretion by a rep-
 resentative designated by him for that purpose. Would there be
 si.yy reason to require all transactions should normally be in accord1
 siiico with regulations approved by the President, as provided by
 this act?
     Mr. SCOTT. I see no-objection to'.that insertion.
     Mr. WHITTINGTOX. The Director of the Budget could have some-
-body recommcnd/iiim.
  - Is'ow, sections 218,219, and 220 are a part of the Budgetary Account-
 ing Act, that is with reference to the language. Am I correct in that?
     Mr. SCOTT. Title HI? That section, title III, is the budget and
 accounting provision which creates the office of the Comptroller
 General.
     Mr. \VnmixGtoN. This is a question I want to ask you: This is a
 new section 218 (a), but you make reference to the original section --
 section 218. Is that intended? We pass this additional section 218
  (a) and all of section 219 and all of section 220 of the original act?
     Mr. SCOTT. No, there is nothing in the original Budget Act.
     Mr. WIIITTJNGTOX. You should take these sections and make them
  correspond to the sections of the original act.
     That concludes my remarks.
     The gentleman from Ohio (Mr. 'Bender) has \\cll said that this is a
  most important bill, and u\ cry member of this committee should have
  a right to be fully advised, and I think it Is very important for us to
 be over in the House-at. 12 o'clock, and if there be n.6 objection I nm
 going to-move that wc'go in executive session.
     Mr. GIKFOUD. Just a minute. Let us insist upon proper procedure,
 \\hicli is that all the members of the committee tfke their time and
  each one have an opportunity to interrogate this witness.
   Mr. TVniTflXGTON. YPS.
   Mr. GIFKOHD. I want just as many minutes as 3*011 had, and I will
not take any more.
   The CHAIRMAN. I think what we ought to do is to have these pro-
ceedings printed right up to this point, or to the point where we
adjourn, so that ever} member of the committee will have an oppor-
tunity to consider Mr. Scott's statement .and be prepared to ask him
questions.
   Mr.. Scott, your statement is particularly important and it should
be printed. ]s then1- any objection to having the proceedings printed?
   Mr. PHILUPS. Mr. Chairman, I would like to carefully read Mr.
Scott's statement.
   Tlie UIIAIRMAX. Thuro being no objection, we \sill have the pro-
ceedings of this morning punted and copiis dislri ntrd to all members
of the "committee.
   Mr. BKNIH.U. I think, Mr. Chairman, we should meet early so thai
\se \\ill IIHAC. more time to devote to our interrogation of the witness.
   The CIIAIRMA-X. We \\ill adjourn to meet Tuesday morning »\ 10
ojclock,
   (Tlicreiiponlho committee went into executive session.)
      X




                                       1197