PROCUREMENT AND BUILDINGS SUBCOMMITTEE U.S. Congress. House OF THE COMMITTEE ON FYPENDITURES IN THE HOUSE OF REPRESENTATIVES EIGHTIETH CONGRESS FIRST SESSION JK1661 CONTENTS Theodore Herz, Assistant Director, Corporation Audits Division, General Accounting Office, accompanied by Ted B. Westfall, Corporation Audits Division, General Accounting Office, and William Ellis, assistant to the Comptroller General.. Harvey J. Gunderson, Director, Reconstruction Finance Cor- poration, accompanied by James L. Dougherty, general counsel, Testimony of Melvin Zucker, Assistant Director, Corporation Audits Division, General Accounting Office, accompanied by E. S. Warner, supervisor on the U. S. Commercial Company, General Accounting 4-5172 INVESTIGATION OF PROCUREMENT AND BUILDINGS TUESDAY, DECEMBER 2, 1947 HOUSE OF REPRESENTATIVES, PROCUREMENT AND BUILDINGS SUBCOMMITTEE EXECUTIVE DEPARTMENTS, The subcommittee met at 10:30 a. m. in room 1536, New House Office Building, Washington, D. C., Hon. George H. Bender (chairman) presiding. Present: Representatives George H. Bender, R. Walter Riehlman, John W. McCormack, and Porter Hardy, Jr. Also present: Coleman Rosenberger, counsel; Robert Brown, special counsel; and Mrs. Fritzie P. Manuel, investigator. Mr. BENDER. The committee will come to order. The Procurement and Buildings Subcommittee of the House Committee on Expenditures in the Executive Departments is beginning hearings today on the report of the General Accounting Office of its audit of the Reconstruction Finance Corporation. Volume I of this report was transmitted by Comptroller General Lindsay Warren to the Speaker of the House on June 11, 1947, and referred to this subcommittee. It has been printed as House Document No. 316. The audit reported to us covers the operations of the RFC and its subsidiary corporations for the period ending June 30, 1945, and was performed pursuant to the requirements of section 5 of the act of February 24, 1945. The General Accounting Office has reported certain major deficiencies and unnecessary losses in the wartime operations of the RFC and its subsidiary corporations. Among these are: 1. The bypassing of regular congressional appropriation procedures through the abuse of the RFC's borrowing and lending powers. 2. The overpayment of more than $9,000,000 to railroads by RFC subsidiaries during the war. 3. The failure of Defense Plants Corporation to made adequate collections of rentals due from lessees of war plants built by it at the cost of billions of the taxpayers' moneys. 4. The failure of the U. S. Commercial Company to maintain adequate financial records for approximately $200,000,000 of wartime trading expenditures. 5. The failure of Defense Plants Corporation to maintain adequate control over plant facilities and inventories procured by it at a cost of $7,000,000,000. 6. The unnecessary loss of millions of dollars in the construction and operation of certain war-plant facilities due to the division of |