In another case, the committee was instrumental in preventing the disposal, for a negligible sum, in Japan of metal fence posts originally costing $2,482,000, and effecting their use by the Corps of Engineers. Also, the committee was instrumental in effecting a change in the demilitarization policy in the Department of Defense by which surplus aircraft, instead of being sold for scrap, are sold to commercial users. In 1 specific sale, additional returns to the Government of $119,000 were realized. Many more thousands of dollars will be realized in future sales.

In another instance 87 TBM planes which had been scheduled for sale as scrap were made available as commercial flyable planes. This resulted in a direct saving to the Government of $184,984.87. In addition, 10 TBM planes were transferred to the United States Forest Service for fire-protection purposes and the military regulations dealing with demilitarization was amended to make additional property available for sale for its original use rather than for scrap purposes.

(f) Elimination of Air Force baking facilities.-As a result of conferences with Air Force officials, the elimination of unnecessary baking facilities planned for the new Air Force Academy was effected at a saving of approximately $13,000.

(g) Civil defense expenditures. Substantial savings in civil defense expenditures resulted from the committee's investigation of contracts let for survival planning studies. The finding of overlapping and duplicating contracts resulted in revisions and cutbacks which may effect savings of up to $500,000.

Sharp reductions in FCDA annual appropriations have reflected the committee's finding that Federal expenditures for civil defense were largely ineffective. These reductions also indicate an increased congressional awareness of the need for critical scrutiny of FCDA budget requests, rather than a routine acceptance of Executive budget estimates.

The committee is convinced that wasteful expenditures for civil defense have been avoided and that future budget requests for this purpose may be based on more realistic civil defense planning.

(h) Reduction in SAGE costs. As a result of the committee's interest and subsequent action by the General Services Administration and the Federal Communications Commission, discussed earlier in this report, the cost of telephone service for the project has been and will continue to be reduced by $11 million a year.

2. International matters

(a) Aid operations in Iran.-Commencing in the 84th Congress, the committee conducted a sweeping and detailed inquiry into the administration of the United States foreign aid program in Iran. Since 1951, International Cooperation Administration expenditures in that single country have exceeded one-third of a billion dollarsan average rate of expenditure of about $50 million per annum. Our inquiries culminated in the publication of House Report 10, 85th Congress. It is impracticable to attempt a precise determination of how much saving already achieved in this program is attributable to the impact and specific recommendations of the report, but there is no question that the effects thereof have included extensive tightening of

former slipshod practices and procedures. Reasonable estimates of future savings could run into several millions of dollars.

(b) International Cooperation Administration budget formulation and presentation.-During the 85th Congress, the committee undertook a careful study of the budget formulation and presentation practices of the International Cooperation Administration, resulting in the publication of House Report 449. The dominant purpose of this study was to assist in clarifying for Members the massive and complex budget request, thus aiding effective evaluation, and to point up deficiencies in existing legislation requiring correction through amendment. In the committee's opinion, this report and that on Iran were undoubtedly responsible, either directly or indirectly, for very significant dollar savings in our aid program. In the last session, they led to floor action which included a tightening of the use by the Executive of discretionary funds. With a greater awareness among the Members of the uses to which money is to be put, the International Cooperation Administration will find it necessary to eliminate those items which cannot be fully justified, the total of which will undoubtedly come to many millions of dollars.

(c) State Department public-opinion polls.-The committee's report on State Department public-opinion polls, resulted in a correction of a misuse of confidential funds by the Department of State, which had resulted in the expenditure of $553,000 over a 14-year period. The report also called attention to improper propagandizing by the International Cooperation Administration, although the cost of this impropriety to the Government in dollars is impossible to measure. Since the Department of State has agreed to terminate the use of confidential funds for polls in the future, the measurable saving is close to $40,000 a year.

(d) Offshore procurement contracts in Europe. As a result of the committee's investigation into the European operations of the General Accounting Office and related programs in that area, the United States Army-Europe took immediate action with respect to recoupment of local taxes included in United States offshore procurement contracts in Europe. This has resulted in recovery of $366,183 on 35 Italian contracts and $529,870 on similar contracts in other European countries. In addition, there is a possibility of recovering an additional $257,074, representing disputed amount of local taxes involved in 7 other Italian contracts. The total amount, actually recovered to date is $896,053.

(e) Cambodian highway project.-The committee's comprehensive investigation of the ICA-negotiated contracts for the Cambodian highway project, as an integral part of its overall study of foreign aid construction projects, has resulted in actual and anticipated savings to the United States totaling upward of $850,000. This includes the probable denial, by ICA, of a pending petition of the construction contractor for an increase in his fee from $525,000 to $1,020,000-a saving of $495,000. This denial would also have the effect of eliminating a basis for increasing the fee of the engineering supervision contractor on the Cambodian highway project.

The General Accounting Office is considering, with a view to recovery, the legality of the payment by the contractor of $92,000 in commmissions on his sale of his used construction equipment to the Government for $920,000.

There also appears to be a basis for a tax recovery, with penalties estimated at $250,000, as a result of the committee's disclosures as to the manner in which the contractor ran his $525,000 profit through a foreign corporation.

Acting upon evidence developed by the subcommittee, ICA was able to recover $5,250 that it had paid to the construction contractor as part of an equipment expediting contract that had been disapproved by ICA.

(f) Thailand highway project.-Questions raised by the committee as to the propriety of awarding an engineering contract for a Thailand highway project to a high bidder of the overseas mission's choice have already resulted in a $300,000 reduction in the proposed fee of the engineering firm. In all probability, when the contract is let the fee will be reduced, as a result of this study, in an additional amount of $150,000 to $200,000.

(g) Taiwan dam project.-When the committee questioned the intention of ICA to reverse the recommendations of its contract office and award a contract to a high bidding construction contractor for a dam project in Taiwan, the agency assured the committee that the fee of the successful bidder would be negotiated downward to come as close as possible to the level of the fee proposed by the low bidder. The savings potential is the $500,000 spread between the proposed fee of the low bidder and the proposed fee of the successful bidder. The actual savings should be at least $250,000.

3. Public-works matters

(a) Federal timber sales.-The interest of the committee in Federal timber policy has resulted in substantial savings to the Government (primarily in the form of increased revenues) in the marketing and administration of its timber property. In line with recommendations in House Report 2960, 84th Congress, Federal Timber Sales Policies, the Federal agencies with timber-marketing functions in 1957 lifted certain marketing and other restrictions affecting timber sales, thus enabling the Government to receive the higher price normally incident to an increase in the number of bidders.

Also, more extensive and accurate inventorying, along lines of the recommendations in the committee report, is being done by the agencies concerned. Today, inventory levels have been raised by 1 billion board-feet, valued at $20 million. When fully completed, the inventory levels will have been raised by an estimated 2 billion boardfeet, valued at $40 million. Thus there is a more precise basis for establishing the full allowable sustained-yield cut.

Also, pursuant to the committee's recommendations, salvage sales of dead and dying timber have increased and become more profitable. Moreover, following the committee's report and a GAO audit, the affected Federal agencies have improved their timber-appraisal methods with the result that the appraised (fair market) value of the timber-which is the upset price at public sales-is more accurately determined, giving greater assurance of a fair return to the Government.

The extent of these savings can be seen from the fact that the Government's estimated timber-sale income in 1957 from the national forests alone is $110 million.

Although not a direct monetary gain to the Federal Government, the Indians of the Quinaielt Reservation in Washington, whose tim

berlands yield close to 100 million board-feet annually, have been benefited by adoption by the Bureau of Indian Affairs of some of the committee's timber-policy recommendations. A report subsequently made by the Senate Committee on Interior and Insular Affairs (S. Rept. 971, 85th Cong., Timber Sales, Quinaielt Indian Reservation, p. 6) referred to this committee's recommendations and noted that the Bureau of Indian Affairs had adopted some of the recommendations, viz, promulgation by the Bureau of "a basic policy of stimulating relatively short-term, low-volume sales of Indian timber, using competitive bid methods," and the Bureau's discontinuation of "the practice of requiring bidders on allotted timber to make advance payments so large that maximum participation in the sale offering is restricted."

(b) Virgin Islands.-Several recommendations of the committee's report on the economic appraisal of the sugar operations of the Virgin Islands Corporation may result in the following savings to the Gov

ernment:

(1) Separate pricing of Virgin Islands raw sugarcane, which has more fiber than Puerto Rican sugarcane, would amount to $40,000 financial benefit annually to the Virgin Islands Corporation, a Federal Government Corporation.

(ii) Thirty-five thousand dollars saving can be achieved annually through more adequate flow of sugarcane to the factory of the Virgin Islands Corporation.

(iii) Annual savings of $90,000 by improvement of stores handling procedures of the Virgin Islands Corporation.

The committee's recommendations concerning the Virgin Islands government can result in the following savings:

(i) Cessation of the 8 cents per gallon molasses subsidy payments by the Federal Government would result in savings of $50,000 annually.

(ii) The committee recommended against the installation of a $112 million salt-water distillation plant in the Virgin Islands and the substitution of a more effective retention reservoir costing only $600,000. Abandonment of the expensive distillation project could result in a potential savings of almost $1 million. This matter, however, is still under consideration by the Interior Department.

(iii) The committee's recommendations regarding adequate fire prevention and preparedness as well as disaster-insurance coverage, made as a result of a January 1957 fire at the Virgin Islands Corporation sugar plant which destroyed property having a replacement value of $150,000 should result in elimination of such losses in the future.

(c) Public power preference customers (Roseville, Calif.).-On October 15, 1956, 3 weeks after the conclusion of hearings held by this subcommittee, the city of Roseville, Calif., was allotted 7,250 kilowatts of Central Valley project power by the Bureau of Reclamation. Roseville had been actively seeking project power since 1950 and for the past. year had held itself free to contract with the Bureau for immediate delivery of power by taking its supply from Pacific Gas & Electric Co. on a very expensive day-to-day basis. The committee found that project power had been available for sale to Roseville for some time (cf. H. Rept. 218, 85th Cong., Availability of Power to Public Preference Customers From Central Valley Project (Roseville), pp. 2-3). How

ever, instead of its being sold as dependable power to a preference customer such as Roseville, this power was being picked up cheaply by Pacific Gas & Electric at 2 mills per kilowatt-hour, to be resold at considerable profit. The sale to Roseville of 7,250 kilowatts of dependable power from the Central Valley project has meant increased revenue to the United States of approximately $7,000 monthly over what would have been derived from disposal of the same energy to Pacific Gas & Electric Co. Moreover, the savings accruing to the city of Roseville as a result of the new power contract with the Government currently amount to $60,000 a year.

(d) Defective power conductor.-In response to a request by the subcommittee, the Comptroller General of the United States investigated allegations that the Aluminum Company of America had furnished defective high-voltage Chukar conductor to the Bonneville Power Administration. Thereafter, a supplemental agreement dated February 6, 1957, was entered into under which the Bonneville Power Administration received a consideration of approximately $330,000 for waiving its claims against the company.

(e) Morningside Hospital, Portland, Oreg.-It is expected that the Morningside Hospital investigation will result in the collection of considerable back taxes by the United States Government. The Internal Revenue Department is making an exhaustive review of all financial aspects connected with this operation. The amount of income involved during the 20-year period 1936-55 exceeds $230,000.

(f) Nickel plant, Nicaro, Cuba.-The acceptance of certain findings and recommendations made in the committee's report of June 19, 1956, Inquiry Into the Expansion and Operation by General Services Administration of the Government Nickel Plant at Nicaro, Cuba, has resulted in savings. During the fiscal year of 1958, a savings of $52,330.19 was made in the operator's fee. The GSA is negotiating for a downward adjustment of engineering fees paid the H. K. Ferguson Co., and of the construction contract fee paid Snare-Merritt. A better utilization has been made of accounting records, and inventory control has been substantially improved.

(g) Federal Housing Administration insurance practices.-The committee conducted an investigation of the practices of the Federal Housing Administration in insuring residential leasehold in the Territory of Hawaii. As a result of this investigation, recommendations were made to FHA which are expected to be incorporated in the very near future. The appraisal practices in regard to residential leaseholds were such that over insurance has resulted which probably exceeds $2 million. Also, the committee pointed out to FHA that the Government asssumed the obligation of paying annual ground rentals but did not receive any premiums for assuming such obligation. Efforts will be made to get FHA to collect the usual one-half of 1 percent premium on the amount of such obligations. Should this suggestion be adopted, the value to the Government should be the value of a $12,000 annuity in perpetuity.

4. Surplus property matters (see also Defense matters, supra)

Under section 203 (e) of the Federal Property and Administrative Services Act of 1949, as amended, the Committee on Government Operations is charged with the responsibility of reviewing all pro