and this is the expression to which I want to call your attention particularly and when he wrote, in 1925, that now, I call particular attention to this language, which is in quotations, from you "our Government, and every government, is and must be a government of men and not of laws." In the first place, I want to ask you: Did you make that statement? Mr. LILIENTHAL. Well, it is taken out of the context of an article I wrote about that time for some magazine; and out of its context, as is the case with so many things out of context, it does not Senator MCKELLAR. Just a minute, sir. I am asking you for a "yes" or "no" answer. Is that correct? Mr. LILIENTHAL. I think that is correct. It is part of a sentence, but it is correct. Senator MCKELLAR. Well now, if that is correct, do you know any difference between that expression of political views and that of Mr. Stalin of Russia? He believes in government by men, and believes in a government by one man, and those under him. Do you not believe in the same thing? Mr. LILIENTHAL. No. Senator MCKELLAR. Have you not so ruled in the Tennessee Valley Authority? Since you got rid of Dr. A. E. Morgan, have you not controlled that just as one man, just as Mr. Stalin controls or is supposed to control Russia? Mr. LILIENTHAL. No. Senator MCKELLAR. You have not done that? Mr. LILIENTHAL. No. Senator MCKELLAR. I will read on he was expressing a thought which he is still paraphrasing today. Is that correct? I suppose it is, because you have just said that it was correct. You still believe in it, do you not? Mr. LILIENTHAL. You have stimulated me into paraphrasing it this morning. Yes; I suppose that is correct. Senator MCKELLAR. You still believe in that doctrine? Mr. LILIENTHAL. Yes; I still believe that passing laws without having adequate administration of them is a fallacy. Senator MCKELLAR. Is that the reason that you established a civil service of your own down there, instead of taking the United States civil-service law? Is that the reason Mr. LILIENTHAL. May I answer the question? Senator MCKELLAR. Wait a moment. Is that the reason that you established a flood-control organization down there, when we had a general law providing for flood control? Is that the reason that you have set up all of this general accounting system of your own, without consulting the general accounting laws that you had? Is that the reason that you have a civil-service organization of your own and a retirement system of your own? Is that the reason that you have disregarded all the laws that the Congress has been called upon to pass? Mr. LILIENTHAL. It is a rather comprehensive question. Senator MCKELLAR. Yes, it is. I will be glad for you to answer it just as comprehensively. Mr. LILIENTHAL. First, the answer is no, because the premises in fact are wrong, Senator. Let me go over them. First, as to the civil service laws: The Congress of the United States provided in the Tennessee Valley Authority Act that the TVA should set up a merit system of its own-this was in the original act Senator MCKELLAR. Just read that provision that you rely on. Mr. LILIENTHAL. And that the Classification Act of 1923 should not apply. It also provided explicitly- Senator MCKELLAR. If you can, will you read the particular provisions that you rely on, please? Mr. LILIENTHAL. It also provided explicitly that appointments should be on the basis of merit and without regard to political considerations, and that any member of the Board of Directors who violated that should be removed by the statute. Senator MCKELLAR. Just one moment, if I may interrupt you. Is that not exactly what the civil service and retirement law of the United States provides? And have you not ignored the general law and set up a system of your own, because you believe in a law of men and not of law, as you have stated? Mr. LILIENTHAL. May I read section 3 of the Tennessee Valley Authority Act: -SEC. 3. The Board shall without regard to the provisions of civil-service laws applicable to officers and employees of the United States, appoint such managers assistant managers, officers, employees, attorneys, and agents, as are necessary for the transaction of its business, fix their compensation, define their duties, require bonds of such of them as the Board may designate, and provide a system of organization to fix responsibility and promote efficiency. Any appointee of the Board may be removed in the discretion of the Board. It is also provided by section 6: SEC. 6. In the appointment of officials and the selection of employees for said Corporation, and in the promotion of any such employees or officials, no political test or qualification shall be permitted or given consideration, but all such ap pointments and promotions shall be given and made on the basis of merit and efficiency. Any member of said Board who is found by the President of the United States to be guilty of a violation of this section shall be removed from office by the President of the United States, and any appointee of said Board who is found by the Board to be guilty of a violation of this section shall be removed from office by said Board. Therefore, the charter of the TVA itself provided that the civilservice laws, this so-called Classification Act, should not apply, and it also made this specific provision of section 6. Neither of these were inventions of mine or any member of the Board of the TVA. Senator MCKELLAR. And those are the two sections that you rely on to establish all the various organizations that you have established, such as I have named? Mr. LILIENTHAL. Senator, may I answer the question? You asked a comprehensive question, and you said I might answer it comprehensively. Senator MCKELLAR. I want you to have every opportunity, Mr. Lilienthal. Mr. LILIENTHAL. Thank you, sir. That is in respect to that part of the question about ignoring the civil-service laws of the United States. Now, your question also encompassed the flood-control system and asked, as I recall it, why we had set up a flood-control system apart from and without regard to the general flood-control laws. That, too, is provided for by the charter of the TVA and the direction of Congress, and I should like to refer to the duties imposed on the Board of the TVA in that respect. First of all, the preamble reads: An act to improve the navigability and to provide for the flood control of the Tennessee River. The statute then goes on: Be it enacted, That for the purpose of maintaining and operating the properties now owned by the United States in the vicinity of Muscle Shoals * * and to improve navigation in the Tennessee River and to control the destructive flood waters in the Tennessee River and Mississippi River Basins, there is hereby create a body corporate by the name of the "Tennessee Valley Authority." Then the policies in respect to that flood-control system are spelled out by the Congress in this act, and not dependent upon the generalized flood-control laws. For example, in section 9 (a): The Board is hereby directed in the operation of any dam or reservoir in its possession and control to regulate the stream flow primarily for the purposes of promoting navigation and controlling floods. And then there are other provisions of the same sort. As to the part of the question that related to the matter of accounting and the jurisdiction of the General Accounting Budget and Accounting Act of 1923: Here too, the Congress has provided special provisions in the TVA Act covering that. Those were included in the original act, and then were amended by joint recommendation of the incumbent Comptroller General of the United States, and the TVA in, I think, about 1941 or so. The CHAIRMAN. Would you pardon me just a moment, Mr. Lilienthal? Justice Roberts just came in, and the Honorable John Bell, former Governor of Pennsylvania. We sent word back asking these distinguished gentlemen if they would not like to come up here and sit in a softer chair. We would be delighted if you would come, gentlemen. Mr. LILIENTHAL. I would like to call Judge Roberts as a character witness. Senator MCKELLAR. I think you need him badly. The CHAIRMAN. Excuse me, Mr. Lilienthal, go ahead. Mr. LILIENTHAL. I was referring to the provisions of the Tennessee Valley Authority Act, the directions to the TVA Board as to the supervision of the General Accounting Office. I have been out of the TVA so long that I do not find my way through this act as well as I used to; here it is, section 9. Section 9 is a special provision of law in respect to the functions of the Comptroller General in the auditing of the transactions of the TVA, and is a different provision, a somewhat different provision, than those provided in the Budget and Accounting Act. And that appears specifically the relation to the Budget and Accounting Act appears specifically-in the next to the last paragraph, not numbered, of section 9. The fourth part of your question related to the civil service laws. I take it that was covered by the first part of my answer, and the last relates to TVA's retirement system. That too was covered by statutory authorization which I am not familiar with. The whole question, Senator, of which these are parts, related to my philosophy about the importance of laws in respect to the men who administer them. This TVA statute is a very good example of a well-drafted law in that respect, because it provides policies in rather great particularity to guide the administrators. It also provides a system under which administrators are given that degree of flexibility, and that protection from the pressures that make administration difficult if not impossible. It provides that by law, so as to enable men to carry out laws. I think that is my answer to your question. Senator MCKELLAR. Have you finished? Senator MCKELLAR. And you and Mr. Warren, the Comptroller General, have been having constant opposing views about this, and you know that Mr. Warren said that under the system in which you permitted your books to be examined, no one could tell what was being done in your establishment down at the TVA, do you not? Mr. LILIENTHAL. There are two questions there, and I would like to answer them in turn. First, Mr. Warren, the Comptroller General and I are not in constant disagreement. We had an initial disgreement as to the meaning of the TVA law when Mr. Warren first came into office. Like a good legislator, he went to the Congress for a clarification of that law and discussed it with us, and we came in together. That resulted in an agreed amendment of the law that clarified it to its present form. We have not had constant differences with the General Accounting Office since that time. On the contrary, I think you will find, by directing an inquiry to the Comptroller General of the United States, that Mr. Warren has some degree of respect for the accounting procedures and the cooperation afforded his office by the TVA. Senator McKELLAR. Just one moment there. Mr. Chairman, I want to make the request that I may insert in the record just at this point exactly what Mr. Warren said in reference to it. I have not it with me, but I will insert just what he said about it; which is absolutely at war with the statement that the witness has just made. The CHAIRMAN. That may be inserted. (The statement referred to is as follows:) (From the testimony of the Comptroller General of the United States, Mr. Lindsay Warren. p. 4, Hearings on H. R. 4961, June 18, 1941:) We say the audit they rely on is merely in addition to the audit under the Budget and Accounting Act. Now, what kind of audit is this, that they say is all we can make and all that they will permit us to make: Well, it is nothing more than what is known as a commercial audit. Under that they can go ahead, if they please, and make every kind of illegal expenditure on the face of the earth, and there is nothing that we can do about it but report it. The horse is then out of the stable. Mr. LILIENTHAL. Mr. Chairman, may I have the privilege of noting in the record references to reports and statements of the Comptroller General to the Congress, in which he states his views about the TVA's accounts? The CHAIRMAN. That may be done. (The following are quotations from reports and statements of the Comptroller General with respect to relationships between the General Accounting Office and the TVA since June, 1941) TESTIMONY OF COMPTROLLER GENERAL LINDSAY J. WARREN ON JUNE 27, 1941, BEFORE THE HOUSE COMMITTEE ON MILITARY AFFAIRS ON H. R. 4961, SEVENTY-SEVENTH CONGRESS, FIRST SESSION Mr. WARREN. Mr. Chairman, and gentlemen: I feel that the committee is entitled to fully know what has transpired since the day you heard us last when I testified before the committee on the pending bill * * * We have gotten together in a complete understanding and agreement on the matters involved between the General Accounting Office and the Tennessee Valley Authority, and it is that I am here to submit to you today. It is covered by an amendment to the pending bill introduced by the chairman and it would bring the TVA under the provisions of the Budget and Accounting Act which they have heretofore contended that they are not under. I have stated both in my decision of last December and the communication to the Congress of June 2 that I recognize on account of the peculiar type of business that they are engaged in that they are entitled to certain latitude that other agencies would not be * * * This proposed agreement recognizes that latitude but makes definite that they come under the Budget and Accounting Act. ANNUAL REPORT OF THE COMPTROLLER GENERAL OF THE UNITED STATES FOR THE FISCAL YEAR 1943 (P. 31) The foregoing audit reports for the fiscal years 1940 to 1942, inclusive, were based upon a strictly professional examination executed by members of the staff of the General Accounting Office selected for their professional experience and skill in public accounting. Perhaps the best evidence as to the results of this policy is the following quotation from the Authority's reply to the 1940 audit report: "We are pleased to inform you that the new audit program initiated by you appears to incorporate more comprehensive procedures relating to matters of financial position and results of operation and is of genuine helpfulness to the Board and Management of the Authority. You may be sure that we welcome this broader scope of your audits." ANNUAL REPORT OF THE COMPTROLLER GENERAL OF THE UNITED STATES FOR THE FISCAL YEAR 1944 (PP. 33 AND 34) Representatives of the General Accounting Office have been examining and auditing the records of the Authority since its organization in 1933. However, until the enactment of the amendment of November 1941, there existed differences of opinion between the two agencies as to the scope and effect of the audit and as to the material to be included in the final audit reports. Consequently, since the enactment of the amendatory act of August 31, 1935, there had been unavoidable delay in the submission to the Authority of the reports for the fiscal years 1935 through 1939, and in the filing by the Authority of its statements with respect thereto as contemplated by the amended act. Every effort has been made to improve the usefulness of the audit of the Authority's transactions by the General Accounting Office, and the present relations between the two organizations offer an encouraging contrast to those which formerly prevailed. Senator MCKELLAR. I continue to read from your biography. |