the Bureau of the Budget to Senator McKellar, acting chairman of the Senate Appropriations Committee, dated March 11, 1944.

The principal recommendations of the interdepartmental committee

were:

1. That early action be taken in designating an agency as a clearing house for all records and reports concerning international transactions. 2. That each agency involved in international transactions designate liaison office for contact with the clearinghouse.

The more important of the specific recommendations made by the committee are set forth on pages 15, 16, and 17 of its report.

ESTABLISHMENT OF CLEARINGHOUSE

In line with the recommendation of the interdepartmental committee, the President, in a letter addressed to the Honorable Leo T. Crowley, Administrator, Foreign Economic Administration, under date of April 7, 1944, directed him to establish such a clearinghouse in the Foreign Economic Administration, under a director to be appointed by him. The functions of the clearing house include:

1. To develop, in cooperation with the other agencies concerned, such forms and procedures as will assure the necessary information on our transactions relative to foreign areas.

2. Where more than one agency is involved, to collaborate with the agencies of whom information is requested in furnishing such information within, of course, the limits of security requirements.

Information to be covered by this arrangement should include, particularly, transactions on account of international aid, relief in liberated areas, procurement abroad, loans and financial aid, and all other Government outlays and expenditures abroad and receipts from abroad, and also inventory information concerning military and nonmilitary installations, improvements, and stock piles abroad.

The President further stated that it would seem advisable to establish an advisory interdepartmental committee to assist the director, which committee might among others include representatives of the Department of State, Department of the Treasury, War Department, Department of the Navy, Department of Commerce, the Bureau of the Budget and the Office of the Coordinator ot InterAmerican Affairs. (A copy of the President's letter is attached hereto, marked "Exhibit I".)

Furthering the spirit of cooperation which has been exhibited by officials of the Foreign Economic Administration, Mr. Crowley under date of April 15, 1944, addressed a letter to Senator McKellar advising him of the action of the President, and requested that a representative of the investigative staff of the Senate Appropriations Committee be named to serve on the advisory committee. (A copy of this letter is marked "Exhibit II.")

With the findings of the interdepartmental committee thus made available to the appropriations committee, the staff centered its efforts on securing reports showing the value of aid rendered and the amount of expenditures abroad. The original reports called for were to be submitted as of October 31, 1943, with monthly reports thereafter. For several of the agencies, particularly the War and Navy Departments, the reports to October 31, 1943, have been the only ones received. This, of course, is due to the delay in information reaching them from all parts of the world. For other agencies reports have been received up to and including February 29, 1944.

For the purpose of this report, comments will be made on each of the items set forth in the memorandum of the subcommittee on deficiencies, with tabulated statements attached to show the details. In this connection the attention of the committee is respectfully invited to the requests of the War and Navy Departments that for reasons of military security the figures furnished herein be kept secret. It is also the desire of the Foreign Economic Administration that the break-down of lend-lease aid by countries be kept confidential; and the Coordinator of Inter-American Affairs likewise requests that the country-by-country break-down of the expenditures of his office be kept confidential.

APPROPRIATIONS

Lend-Lease appropriations made to the President total $24,683,629,000. Of this amount a total of $22,576,626,477.54 has been, allocated to various departments and agencies of the Government, leaving an unallocated balance as of February 29, 1944, of $2,107,002,522.46. Of the amount allocated, the sum of $18,748,927,285.53 has been obligated by the departments and agencies to which allocated, leaving an unobligated balance of $3,827,699,192.01. The available funds (unallocated and unobligated) as of February 29, 1944, therefore amounted to $5,934,701,714.47. (A statement showing the status of the lend-lease appropriations is attached, marked "exhibit III.")

In addition to the lend-lease appropriations made to the President, transfers from appropriations made to the War and Navy Departments and to the Maritime Commission have been authorized to the extent of $35,970,000,000. In reports of lend-lease aid furnished, however, no distinction is made as to the appropriations under which the items were procured or transferred.

In addition to the foregoing, Congress has with certain limitations authorized the leasing of ships of the Navy and merchant ships constructed with funds appropriated to the Maritime Commission, without any numerical limitation as to the dollar value or the number of such ships which may be so leased.

DIRECT LEND-LEASE

Lend-lease aid to January 31, 1944, amounted to $21,794,737,819. Of this total, $20,961,627,234 represented actual transfers to lend-lease countries, including items totaling $549,487,264 consigned to United States commanding generals for subsequent transfer in the field. The remainder of $832,610,585 covered charges not allocated to the lendlease countries, as follows:

Production facilities in the United States..

Storage and distribution services and facilities in the United
States..

$604, 993, 000

94, 584, 566

Transportation charges, supplies, and materials for vessels, ferrying of aircraft expenses, miscellaneous and contingent expenses_

99, 813, 019

Total..

Administrative expenses_

The figure of $20,961,627,234 representing actual transfers to lendlease countries is distributed as follows:

33, 220, 000

832, 610, 585

(A table showing a further distribution of these figures is attached as exhibit IV.)

In this connection it is felt advisable to bring to the attention of the committee comments made by the Foreign Economic Administration, the War Department, and the Navy Department, as follows:

FOREIGN ECONOMIC ADMINISTRATION

An important limitation exists in the figures for the United Kingdom in that they are not broken down to show retransfers to the dominions and colonies. In the early days of the lend-lease program it was agreed that all requests for goods or services for the British Empire would be made on United Kingdom requisitions. This was done to insure that all possible materials would be furnished from within the Empire before lend-lease aid was requested, to permit the greatest flexibility in the distribution of all materials from within the Empire in accordance with the shifting strategy of modern war, and for other military reasons. Consequently, our records were set up on this basis and it is not possible at this time to determine from the total goods transferred the value of retransfers by the United Kingdom to the dominions and colonies. We have, however, the basic records from which this information can be obtained.

The need for this information has been recognized, however, and we are proceeding with the work of breaking down the transfer data as rapidly as possible. It is a sizable job and several months will be required to complete it. As a stopgap, to serve until the distribution of United Kingdom transfers has been completed, we have furnished a break-down of lend-lease exports to the constituent parts of the British Commonwealth. There is a close relationship between goods exported and goods transferred and it is believed that the exports data will provide a satisfactory indication of the destination of goods transferred until such time as the compilation of retransfers has been completed.

WAR DEPARTMENT

(a) Some duplication exists between the amounts reported monthly to the Foreign Economic Administration by the War Department for lend-lease aid and the expenditures reported in paragraph 7 of this submission for the reason that supplies purchased in foreign countries may be transferred to the foreign government as lend-lease aid. The amount of this duplication cannot be determined.

(b) Aid furnished by overseas theaters is valued by the theater and the accuracy of such values cannot be verified in the War Department as the condition of the items transferred is not known. Reports are not complete on this aid furnished.

(c) Diversions to United States Army use of lend-lease war material by theater commanders have not been eliminated from transfers reported to the Foreign Economic Administration. Reports received from theaters were incomplete and not priced. That data has been returned to the field for completion and

evaluation.

NAVY DEPARTMENT

The following comments on reports of transfers are pertinent. Transfers are not reported until the transaction is complete, and all documents, including a receipt signed by an agent of the foreign government, has been received in the Navy Department.

Services rendered are reported as a transfer when it is possible to identify them with a foreign requisition. Where it is not possible to identify a service with a specific foreign requisition, as for example, freight charges on miscellaneous lend-lease material, the expenditure is handled in one of two ways, i. e.:

(a) If made from an allocation of funds to the Navy from lend-lease appropriations to the President, it is reported to Foreign Economic Administration as a lend-lease expenditure under category nine of the allocation without reference to nation; or

(b) If made from a naval appropriation it is reported as an expenditure from that appropriation for the purpose of the appropriation without reference to end-le ase, and no report is made to Foreign Economic Administration.

No attempt has been made to assign production facilities to specific foreign nations; they are all considered as United States facilities, and in most cases are used by the United States as well as for the nation whose requisition may have prompted their initiation. The cost of production facilities, when financed from allocations from lend-lease appropriations to the President, is reported to the Foreign Economic Administration as an expenditure against category 6 of the allocation, without reference to foreign nation. No report is made to the Foreign Economic Administration when such facilities are financed from regular naval appropriations. With the exceptions dealt with herein in section No. 4, all such facilities, however financed, are in the United States.

No attempt has been made to evaluate information imparted under the terms of the Lend-Lease Act and no report has been made to the Foreign Economic Administration.

In addition to the exceptions in reports to the Foreign Economic Administration noted in the foregoing, there are other minor exceptions. For example, in determining inspection, handling, administrative, and like costs which are incurred in dealing with lend-lease activities it is usually not possible effectively to segregate and prorate the lend-lease portion from the regular Navy portion. Such costs have therefore been absorbed by the naval appropriations.

The valuations of transfers reported to the Foreign Economic Administration and of expenditures of allocations of lend-lease funds from appropriations made to the President have been based on costs as determined by contract or purchase price or by actual expenditures from the allocations made. It is clear that in view of the exceptions cited above, this is not the true cost. Given time and effort a close approximation to the true cost might be made.

REVERSE LEND-LEASE

The problem of reporting and valuing reverse lend-lease aid constitutes one of the most difficult and complex problems with which the United States Government is faced in its program of mutual aid with foreign governments.

As of March 15, 1944, reciprocal aid was reported as follows:

It must be borne in mind that the above figures represent estimates, and are not final.

The reporting of reciprocal aid has been difficult. Originally, the Army and Navy required its overseas commanders to report the aid received in detail as well as the "value" thereof, determined either on the basis of values furnished by foreign governments or, alternatively, estimates by United States military or naval personnel. As the volume of reciprocal aid increased, this reporting requirement became a very heavy burden. In the case of the United Kingdom, particularly, the British Government stated that it could not individually price "issue vouchers" covering goods provided to our forces, inasmuch as its accounting system was not established on such a basis that individual prices could readily be determined, and the manpower which would be required to determine such individual prices could not be spared from more important tasks contributing directly to the prosecution of the war.

Faced with the lack of any indication of costs from the British Government in the great majority of items being obtained, our forces concluded that a separate pricing or estimating of value by them would call for a large staff of price analysts whose services could not be spared from the war effort. Moreover, it was felt that even a large force of price analysts would face grave difficulties in arriving at fair estimates of value, due to the dissimilarity of foreign and United States items, the great variety of items involved, etc.

Accordingly, in October 1942, the instructions to our forces overseas with respect to the reporting and valuation of reciprocal aid were revised to permit the recording of aid in terms of a description of items received, in order to permit subsequent evaluation in Washington when that became necessary. Any values furnished by foreign governments, however, were to continue to be reported to Washington. Many reports of this nature have been received and are on file in the Foreign Economic Administration, but up to the present time no action has been taken to evaluate them, as it is felt that any evaluation at the present time would be purely arbitrary and subject to receipt of further information from foreign governments which may not be available until after the war.

8. Docs., 78-2, vol. 12- -25