Audits Division, or both, do that, because I am really making such investigations for them.

I believe you have your hand on the data, do you not, Mr. Neumann. Mr. NEUMANN. I would not have the disallowances, the disallowance data. I think the disallowances have been removed from the disbursing officers' accounts on the basis that the disbursing officer himself had no knowledge of the fraud.

Mr. DIRKSEN. Suppose you division heads confer on the matter and get that data together.

Mr. NEUMANN. I wanted to find out definitely what you want. I do not think there are any disallowances in disbursing officers' accounts now existing. What we have done, when these same claimants file claims-and there were many items for which they still had open claims which may have been proper-is to offset these items that were improperly paid against the claims that they made and in that way we effected collections on account of prior improper payments. That has been very largely our procedure in the Claims Division.

Mr. DIRKSEN. I do not want to encumber the record particularly, but if you could give the committee and the Congress some statement reflecting the true condition as of the most current date, whatever that may be, I think it would be desirable.

Mr. NEUMANN. We can do this. There will be furnished to the committee by January 26, 1943, a statement of each New York fraud case showing how much we have been able to offset as a result of otherwise proper claims, and the recoveries effected in that and other ways. Mr. FITZPATRICK. Could you tell us during what period these investigations were being made in New York, where you found discrepancies?

Mr. NEUMANN. I think it started in about 1935. I think that is when the W. P. A. investigations first determined that there had been fraud or irregularities.

Mr. FITZPATRICK. And then you continued on?

Mr. NEUMANN. That continued until about-it is continuing even today, but I think it was caught up with, so to speak, along about 1939. I think after that things were pretty well in hand. Am I correct in that, Mr. Tulloss?

Mr. TULLOss. I believe so.

Mr. FITZPATRICK. They had very large projects there, I believe. Mr. TULLOSs. Yes.

Mr. NEUMANN. It continued that way, and as one or the other of these contractors was caught up with, so to speak, they no longer had the opportunity. Some of them were indicted and convicted and others were practically thrown out of business by virtue of the fact that they could not collect any of the money that we were holding in the Claims Division.

AUDIT OF LEND-LEASE EXPENDITURES

(See p. 265)

Mr. HENDRICKS. I have one or two questions to ask, Mr. Baity. I do not know whether you can answer this or not. I am not sure where I saw this, whether it was in a letter written to me, or whether I saw it in a press release, or heard it over the radio, but it was to the

effect that Great Britain has no agency for distributing foodstuffs and materials sent over there; so that when materials are sent over there, they turn them over to merchants, and the merchants sell them, take a profit, and turn the rest of the money into the Treasury. Do you go into that? Do you know anything about that?

Mr. BAITY. Congressman, I am not in a position to tell you because I have no knowledge about it. Mr. Bell is the Chief of our Audit Division. I do not know whether he can give any light on the subject or not. He might make a statement on that.

Mr. BELL. I might say this: I do not think we are getting a proper accounting from the Commodity Credit Corporation for purchases under lend-lease. But as far as the deliveries are concerned, we rely on the administrative certificate that the foodstuffs and materials have been received.

Mr. HENDRICKS. You do not go beyond that?

Mr. BELL. We do not go beyond the certificate, ordinarily, unless we think it necessary to make an investigation.

Mr. HENDRICKS. So you would not know?

Mr. BELL. We would not know. We rely on the certificate of the Government representative that the material was received, inspected, and accepted.

COLLECTION AND SETTLEMENT OF CLAIMS

Mr. HENDRICKS. One other question. What is the function of the Claims Division?

Mr. BAITY. Our Claims Division settles all claims for or against the Government.

Mr. HENDRICKS. Claims of people against the Government?

Mr. BAITY. Yes; for the Government or against the Government. Mr. HENDRICKS. Do you approve the payment of claims against the Government, or rather of bills? And do you ever find out, after having paid those bills that they were overpaid, that the claims were unjust?

Mr. BAITY. Mr. Neumann is chief of the Claims Division. Do you have knowledge of that, Mr. Neumann?

Mr. NEUMANN. I guess there are occasions when we improperly pay a claim, but they certainly are very few. I cannot even recall I have been in the Claims Division for 12 years, chief of the Claims Division for 12 years, April 1st next, and there may have been three or four of them in all of that time.

one.

Mr. HENDRICKS. There are so many things we hear about, that it is difficult to know what the facts are. Somebody brought up the question, I told them I did not think it was the fact-making the point that the General Accounting Office had a lot of claims uncollected. That is, various agencies had overpaid, and these claims on the part of the Government had not been collected; in other words, funds that the General Accounting Office should have collected.

Mr. NEUMANN. That is our job, to settle claims for and against the United States. We have not as many claims for the United States as we have against the United States. But those that we have for the United States are much more complicated than those against the United States. That is our constant job.

Mr. HENDRICKS. Do you know what is the amount of the claims for the United States at the present time?

Mr. NEUMANN. Considerably up into the millions, I should say.

I would not have any idea of the exact amount.

Mr. HENDRICKS. Could you provide that figure for us?

Mr. NEUMANN. It would be quite an undertaking.

Mr. HENDRICKS. I do not want you to go to too much trouble. Is there any way you can estimate the amount?

I do not want to burden you with too much work and clutter up the record.

Mr. BAITY. Could you not give what your debt record shows? Mr. NEUMAN. The debt record, of course, represents 340,000 cards of various uncollectible items which are forwarded to us. We hope, of course, but we do not expect to collect even a large part of these items.

Mr. HENDRICKS. Do you know what these outstanding claims are and how much we have been able to collect over the past year?

Mr. NEUMANN. That is in our annual report, Congressman. Mr. WOODRUM. You can say what you have collected, because you have given that figure to us a number of times.

Mr. HENDRICKS. Will you send me the annual report marked so I can get the information.

Mr. NEUMANN. We did not print the annual report this year, but I have a copy of it here, and we have the figures in the annual report. Mr. WOODRUM. Will you make up a statement for the record that is as accurate as you can?

Mr. NEUMANN. For collections on account of claims for the United States, for the fiscal year?

Mr. HENDRICKS. For the past fiscal year; yes.

Mr. NEUMANN. Yes.

Mr. HENDRICKS. And the outstanding claims as far as possible? Mr. NEUMANN. As far as possible?

Mr. HENDRICKS. Yes.

Mr. BAITY. I will offer this statement, Mr. Hendricks, I believe for 1944 we will collect back more money than will be appropriated for us in this bill.

Mr. HENDRICKS. That may look good, but whether it is really good or not will depend on how much you are supposed to collect. That is what I am trying to get at, the outstanding amount, and the amount that we did collect for the past fiscal year.

Mr. BAITY. We have a debt record, and when any department has an indebtedness, they send it to us, and our best opportunity to collect it is when that debtor files a claim in our office. If he had a debt in our office and it is proper to set it off we set it off and take it out of the settlement.

Mr. HENDRICKS. But you do not always have some one who has a claim against the Government.

Mr. BAITY. No.

Mr. HENDRICKS. How do you proceed to collect, through the Department of Justice?

Mr. BAITY. We try to collect with letters, duns, so to speak, and then sometimes we ask the Department of Justice to file suit.

Mr. HENDRICKS. This is what I would like to find out, Mr. Baity. I would like to know the outstanding claims and how much we collected in the past fiscal year.

Mr. BAITY. Very good, sir. I will attempt to advise you. GENERAL ACCOUNTING OFFICE, Washington, January 19, 1943.

Hon. JOE HENDRICKS,

House of Representatives, Washington, D. C.

DEAR MR. HENDRICKS: I have your letter of January 13, 1943, in which you direct attention to two items appearing on page 157 of the Annual Report of the Comptroller General for the fiscal year ending June 30, 1942. The two items are stated in your letter as "Collections-collections and set-offs during fiscal year 1942, $8,423,955.01" [Cancelations, collections and set-offs during fiscal year 1942-$8,423,955.01] and "Indebtedness as of July 1, 1942, $1,677,488,245.13" and you further state that

"These two items indicate to me that what I had heard was true, and that was that the General Accounting Office had a large backlog of uncollected claims. I am very interested to know what is being done about these uncollected claims in behalf of the Government and also would like to have information as to what general percentage of the claims have not been collected. I should appreciate it if you would give me a brief report of this matter for the record."

The item of indebtedness as of July 1, 1942, includes $1,152,430,411.44 representing in large part technical and accounting differences established in the accounts of G. F. Allen, Chief Disbursing Officer. These differences have been reduced to approximately $192,000 at this time and will be further reduced. Elimination of such differences from the amount of indebtedness reported as of July 1, 1942, would result in a showing of $525,057,833.69 as the indebtedness as of this date.

As you undoubtedly know, the Dockery Act of July 11, 1894 (28 Stat. 205), established in the Treasury Department the offices of six auditors and provided that "The auditors, under the direction of the Comptroller of the Treasury, shall superintend recovery of all debts finally certified by them, respectively, to be due to the United States." So far as this office is aware each auditor maintained such records of amounts due the United States as were deemed advisable and effected settlement of claims against the United States without verifying whether the claimant was indebted to the United States on the records of any other auditor. Too, it is believed that claims were allowed by the auditors without verifying whether, within their own organization, a debt charge had been raised against the claimant.

The act of June 10, 1921 (42 Stat. 24, 31 U. S. C. 41, known as the Budget and Accounting Act, established a General Accounting Office, abolished the offices of the Comptroller of the Treasury and Assistant Comptroller of the Treasury and transferred the duties of the auditors to the General Accounting Office. Said act also amended section 236 of the Revised Statutes to read that "All claims and demands whatever by the Government of the United States or against it, and all accounts whatever in which the Government of the United States is concerned, either as debtor or creditor, shall be settled and adjusted in the General Accounting Office."

During the year 1923 there was established in this Office a debt collection group for the purpose of recording indebtednesses to the United States. By circular No. 10, dated February 7, 1923, this Office invited all Government departments and agencies to forward information as to debts due the United States in order that such debts could be set off against amounts otherwise for payment by this Office to claimants. This group has continued to function and is at present a part of the Miscellaneous Settling Section of the Claims Division.

On July 1, 1933, there were on hand 72,662 debt cards representing a total indebtedness to the United States of $399,941,849.13 and both the number of debt records and amounts due the United States continued to increase until, as of July 1, 1942, there were on hand 341,090 debt cards representing a total indebtedness of $525,057,833.69 as shown above.

An examination of 2,210 debt cards, which it is believed are representative of the debt cards on file in this office, indicates that 1,429 of such cards, or approximately 65 percent, represent debts reported by the Treasury Department, Bureau of Internal Revenue, as tax assessments abated as uncollectible and, of this number, 786, or 55 percent, appear to represent debts that are barred by the statute of limitations. Included in the balance of said cards are debt items reported to this office by the United States Shipping Board and the Emergency Fleet Corporation covering matters arising in connection with the last war. Too, items of debt are reported as uncollectible by the Home Owners' Loan Corporation, Farm Security

Corporation, Agricultural Adjustment Administration, and other Government departments and agencies. All of such agencies are authorized, in the name of the United States, to take such legal steps as appear to be required in an effort to collect sums due the United States. The debts involved, however, are reported to this Office to insure set-off of any amounts due the United States prior to payment by this Office of claims against the United States.

It is believed that not in excess of 10 percent of the debt cards now on file in this Office represent debts which by law it is required to determine and collect. During the fiscal year ending June 30, 1942, there was collected the sum of $605,961.05 in connection with general claims work and there were reported to the Department of Justice for legal proceedings 932 matters involving $2,323,859.42 determined to be due the United States. Thus, this Office has taken such steps as have been required to effect collection of approximately $3,000,000.

From the foregoing, it does not appear that there is any undue “backlog of uncollected claims" or that there has been any undue delay by this Office in disposing of matters which it is required by law to consider.

I trust the foregoing furnishes the information you desire.

However, if not, I shall be pleased to have Mr. D. Neumann, Chief, Claims Division, under whose supervision this record is kept, confer with you or your representative and furnish, orally or otherwise, such additional information as is available.

Respectfully,

J. L. BAITY,

Assistant to the Comptroller General.

TYPE OF AUDIT OF LEND-LEASE EXPENDITURES

Mr. DIRKSEN. Mr. Bell, I would like to know a little more, if you can amplify your previous statement, about the lease-lend audit; that is, the nature and type of the report that you make, and the frequency of the report that you make. Can you give us a little picture of that?

Mr. BELL. Under the lend-lease, we have several types of audit. One involves the war contracts. Another involves the purchase of food by the Commodity Credit Corporation.

There is no difficulty where the supporting documents are sent in to support these expenditures in the disbursing officers' accounts. And I think generally the documents are being furnished with the exception of the Commodity Credit Corporation.

With respect to the war plants, some of them are using War and Navy appropriated moneys and others are using lend-lease money. The Navy Department to date has failed to furnish any supporting documents for expenditures made, for the past 2 years under cost-plus-a-fixed-fee contracts.

We have suspended about $200,000,000 accounts of Navy disbursing officers.

We hope, however, in the near future, to work out an agreement whereby those records will be furnished. We had a meeting last week and I am in hopes that the result of that meeting will be successful. But to date they have not furnished a single supporting document and we suspended about $200,000,000 which represents only a small portion of the 5 or 6 billion dollars spent.

The Navy up to the present time has taken the attitude that the General Accounting Office should accept their audit on a certificate that they have audited the expenditures. We have refused to go along with them on their proposal.

Mr. DIRKSEN. Have we added any legislative provision along the line which would suspend the operation of subsection 53 of the act of 1921, which I think gives you complete authority?

Mr. BELL. No. They have no exemption. They have taken the attitude that we should rely on their certificate without furnishing