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Storage

HEARING

BEFORE THE

- rg COMMITTEE ON

/FFICE AND CIVIL SERVICE

.J3 OF REPRESENTATIVES

UGHTY-SEVENTH CONGRESS

FIRST SESSION

ON

H.R. 7532 and H.R. 7691

BILLS TO AMEND TITLE 39 OF THE UNITED STATES CODE

RELATING TO FUNDS RECEIVED BY THE POST OFFICE

DEPARTMENT FROM PAYMENTS FOR DAMAGE TO PERSONAL PROPERTY, AND FOR OTHER PURPOSES

JULY 25, 1961

Printed for the use of the

Committee on Post Office and Civil Service

U.S. GOVERNMENT PRINTING OFFICE

73160 WASHINGTON: 19431
COMMITTEE ON POST OFFICE AND CIVIL SERVICE

TOM MURRAY, Tennessee, Chairman

JAMES H. MORRISON, Louisiana ROBERT J. CORBETT, Pennsylvania

JAMES C. DAVIS, Georgia

JOHN LESINSKI, Michigan

KATHRYN E. GRANAHAN, Pennsylvania

THADDEUS J. DULSKI, New York

DAVID N. HENDERSON, North Carolina

ARNOLD OLSEN, Montana

JOSEPH P. ADDABBO, New York

RICHARD H. 'CHORD, Missouri

G. ELLIOTT HAGAN, Georgia

CATHERINE D. NORRELL, Arkansas

MORRIS K. UDALL, Arizona

H. R. GROSS, Iowa

JOEL T. BROYHILL, Virginia

AUGUST E. JOHANSEA Michigan

GLENN CUNNINGHAM, Nebraska

GEORGE M. WALLHAUSER, New Jersey

ROBERT R. BARRY, New York

KATHARINE ST. GEORGE, New York

JOHN H. ROUSSELOT, California

EDWARD J. DERWINSKI, Illinois

SUBCOMMITTEE APPOINTED To CONSIDER H.R. 7532 AND 7691

KATHRYN E. GRANAHAN, Pennsylvania, Chairman

THADDEUS J. DULSKI, New York

JOSEPH P. ADDABBO, New York

G. ELLIOTT HAGAN, Georgia

MORRIS K. UDALL, Arizona

II

JOEL T. BROYHILL, Virginia

GLENN CUNNINGHAM, Nebraska

GEORGE M. WALLHAUSER, New Jersey

ROBERT R. BARRY, New York
CONTENTS

Statement of—

Lindsley H. Noble, Deputy Assistant Postmaster General, Bureau of

Finance; accompanied by Adam Wenchel, Associate General

Counsel; Ralph Nicholson, Assistant Postmaster General for

Finance; and John Miele, executive assistant to the Controller;

Post Office Department 

III

Page

2

REIMBURSEMENT OF POST OFFICE DEPARTMENT

APPROPRIATIONS

TUESDAY, JULY 25, 1961

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room

215, House Office Building, Hon. Kathryn E. Granahan (chairman

of the subcommittee) presiding.

Mrs. GRANAHAN. The subcommittee will come to order, please.

This subcommittee was appointed to consider H.R. 7532 and H.R.

7691, identical bills which were introduced by Mr. Murray, chairman

of the House Post Office and Civil Service Committee, and Mr.

Corbett, ranking minority member, respectively, as a result of an

official recommendation by the Post Office Department.

(The bill, H.R. 7532, follows:)

[H.R. 7532, 87th Cong., 1st sess.]

A BILL To amend title 39 of the United States Code relating to funds received by the Post Office Depart- ment from payments for damage to personal property, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 2203 of title 39 of the United States

Code is amended by adding at the end thereof the following new subsection:

"(c) Collections from the following shall be credited by the Postmaster General

to current applicable appropritions of the Department and shall be available for expenditure for the purpose of such applicable appropriations—

"(1) Payments for damage to Government owned personal property under

custody and control of the Department;

"(2) Rent paid by private concerns for space in buildings acquired by the

Department under the provisions of sections 2102 and 2103 of this title;

"(3) Payments made by contractors for services performed for them by

postal personnel; and

"(4) Fines, penalties, and refunds resulting from nonperformance or inadequate performance under contracts with the Department."

Mrs. GRANAHAN. The purpose of this legislation is to broaden the

authority which now permits certain funds collected by the Post

Office Department to be credited to applicable appropriations and

to be available for subsequent expenditure. Present law (39 U.S.C.

2203) authorizes collections for damage to Post Office Department

vehicles and collections for the sale of leather, metal, canvas cuttings,

and old canvas resulting from the manufacture and repair of mailbags

and locks, to be used by the Department for the cost of repair of such

items. This authorization was first contained in the Treasury-Post

Office Appropriation Act, 1956, Public Law 51, 84th Congress.

This legislation proposes that such procedure be broadened to

include funds received from four additional classes of collections.

The collections would be credited to current applicable appropriations

1
2 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

and would be available for expenditure for the purpose for which the

appropriation is available. At the present time, the law requires

that the funds collected from these four items be treated as postal

revenue and as such, are not available for use by the Department

without subsequent appropriation action by the Congress.

The only witnesses we have scheduled for today are representatives

of the Post Office Department. We will be pleased to hear from

them at this time. I understand Mr. Noble will present the statement.

STATEMENT OF LINDSLEY H. NOBLE, DEPUTY ASSISTANT POSTMASTER GENERAL, BUREAU OF FINANCE; ACCOMPANIED BY

ADAM WENCHEL, ASSOCIATE GENERAL COUNSEL; RALPH

NICHOLSON, ASSISTANT POSTMASTER GENERAL FOR FINANCE;

AND JOHN MIELE, EXECUTIVE ASSISTANT TO CONTROLLER

Mr. NOBLE. Madam Chairman and members of the subcommittee,

my name is Lindsley Noble, and I am Deputy Assistant Postmaster

General and Controller for the Post Office Department.

I should like first, with your permission, to introduce for the record

the letter from the Postmaster General of May 24, 1961, to the

Speaker of the House, transmitting this legislative proposal, together

with the general statement of purpose and need which accompanied

the letter.

(The letter follows:)

OFFICE OF THE POSTMASTER GENERAL,

Washington, D.C., May 24, 1961.

Hon. SAM RAYBURN,

Speaker of the House of Representatives, Washington, D.C.

DEAR MR. SPEAKER: There is transmitted herewith, for consideration by the

Congress, a legislative proposal to amend title 39 of the United States Code

relating to funds received by the Post Office Department from payments for

damage to personal property, and for other purposes, together with a statement

of general purpose and need and an analysis of the proposed bill.

The early enactment of this legislation is urged by the Department.

We have been advised by the Bureau of the Budget that from the standpoint

of the administration's program there is no objection to the presentation of this

legislative proposal to the Congress for consideration.

Sincerely yours,

J. EDWARD DAY, Postmaster General.

GENERAL STATEMENT OF PURPOSE AND NEED

The purpose of this proposed legislation is to broaden the reimbursement

procedure now available to the Post Office Department. Present law authorizes

the Department to use collections resulting from damage to Government-owned

vehicles and collections from the sale of leather, metal, canvas cuttings, and old

canvas from the manufacture or repair of mail bags for meeting the cost of repair

to such items.

It is now proposed that this reimbursement procedure be broadened to include

recoveries of funds received from payments on account of damage to Governmentowned personal property under the custody and control of the Post Office Department, funds received from payments made by contractors for services performed

for them by postal personnel, funds received from private concerns as rent for

space in buildings which the Department has rented on long-term leases, and

funds received for fines, penalties, and refunds, resulting from nonperformance or

inadequate performance of contracts with the Post Office Department. Such

reimbursements would be credited by the Postmaster General to current applicable appropriations, and would be available for use as payments of the compensation of postal personnel or for meeting the cost of repair or replacement of damaged items or the cost resulting from other contracts.
REIMBURSEMENT OF POST OFFICE APPROPRIATIONS 3

At the present time funds collected from these items are treated as revenue

and as such are not available for use of this Department.

While no one item is a comparatively large amount, they all represent cost paid

from our appropriation and it is believed that any funds devolved in such manner

should be a reimbursement to its current applicable appropriation rather than

treated as revenue which cannot be used.

For example, corner mailboxes are purchased out of appropriation funds. For

damaged boxes and other postal property we collect an estimated total of $75,000

a year, which is placed into revenue and as such, is not made available to the

Department to repair or replace the damaged property. This Department should

have the use of such funds to repair or replace the damaged property.

In cases where postal personnel are used to assist contractors in order to keep

the mail moving the Department is reimbursed by the contractors for such services

and such reimbursement is also placed into revenue which is not available for use

by the Department to pay the compensation of postal employees. It is believed

that such funds should accrue to the appropriation out of which salaries are paid

and made available for salaries of postal personnel. This item is estimated to

be $400,000 a year.

Similarly, in cases where space in buildings which the Department has rented

on long-term leases is furnished to private sublessees we collect payment (rent) .

These facilities are paid for from appropriated funds but the payment received is

placed into revenue. These payments should more properly be used to reimburse

the appropriation from which such rents are paid. This item is estimated to be

$180,000 a year.

In case of fines, penalties, and refunds on contracts, the applicable appropriation is used to pay the expense necessary to fulfill the contract, although in effect

some of the work which was paid for has not been performed. It is believed that

such reimbursement should revert to the current applicable appropriation and be

available for use by the Department to defray the expense necessary to accomplish

the intent of such contracts. For example, in the case of a fine or a penalty,

when the mail is delayed for an unreasonable length of time due to nonperformance

or inadequate performance OD the part of mail transportation contractors, it often

results in additional handling and processing costs. The work force in post

offices is scheduled in advance for an anticipated workload. When such workload

fails to materialize because of such delays on the part of transportation contractors,

payment for idle time results. When the delayed mail does arrive and is in such

volume that the cost of handling and processing cannot be absorbed by the regular

scheduled work force, the Department must incur added costs either in the form

of additional personnel or in the form of payment of overtime. It is estimated

that the amount of this item is approximately $400,000 per annum.

ANALYSIS OF PROPOSED LEGISLATION

The attached proposal will amend section 2203 of title 39 United States Code

by adding a new subsection which will authorize the Department to credit current

applicable appropriations of collections from the following:

(1) Payments for damage to Government-owned personal property under

custody and control of the Department,

(2) Rent paid by private concerns for space in buildings which the Department

has rented on long-term leases;

(3) Payments made by contractors for services performed for them by postal

personnel; and

(4) Fines, penalties, and refunds resulting from nonperformance under contracts with the Department.

Mr. NOBLE. To appreciate fully the need for the legislation requested by H.R. 7532, it is necessary to be familiar with the financial

procedures under which the Post Office Department operates. For

the benefit of the committee, I should therefore like first to outline

briefly .the way in which the Department receives and disburses over

$4 billion annually in the administration of the postal service.

The Post Office Department currently deposits into an account

with the U.S. Treasury known as the postal fund the net receipts of

post offices, certain reimbursements received from Federal agencies

and others, and the annual public services appropriation established
4 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

by the Postal Policy Act of 1958. From this fund the Department

pays for its day-to-day operating expenses and for the procurement

of necessary supplies, equipment, and improvements to postal facilities. These expenditures are limited by the amounts established in

the annual Treasury-Post Office Appropriation Act which also provides that to the extent the postal revenues are not sufficient to cover

these authorized amounts, the difference may be drawn from the

general fund of the Treasury and deposited in the postal fund to

cover them.

The Department is also authorized to make two other general types

of expenditure out of the postal fund over and above those authorized

in the annual appropriation acts. One of these is payable from postal

revenues and consists of the amounts required for procurement of embossed stamped envelopes and the amounts required for the payment

of indemnities for loss or damage to mail and court judgments.

The other type of expenditure is made out of the annual appropriations but the appropriations are specifically reimbursed therefor so

that the amount appropriated by the Congress is not depleted by

such expenditures. Included in such reimbursements are amounts

received for reimbursable work for other Government agencies, recoveries from sales of assets which may be applied in the purchase of

similar assets, and proceeds from the sales of sites to lessors under

the commercial leasing program.

For fiscal year 1962 the Department estimates that under existing

legislation these reimbursements will amount to about $54 million

consisting principally of the following:

In millions

Transportation of mail for Department of Defense $38. 9

Other services to Government agencies 2. 8

Sites resold to lessors and other recoveries from property disposals 12. 5

The amount of reimbursable work done for other agencies will depend entirely on their requirements. If it proves to be more than

was estimated, the Department does not have to seek supplemental

appropriations for the expenditures as it would in the case of unexpected increases in its own program.

It is the responsibility of the agencies concerned to provide any

additional funds. The advantage to the Department of this kind of

financing therefore is that while the expenditures pass through the

appropriation accounts, they are in effect self-financing. The same is

generally true of reimbursements we receive for damages to Government-owned vehicles, sales of used equipment, and sales of post office

sites to lessors.

There are, however, several generally similar areas in which the

Department does not have the legislative authority to permit it to

apply the recoveries as appropriation reimbursements. Instead the

proceeds are treated as postal revenues and the related expenditures

are charged against our appropriation limitations. This tends to

limit somewhat the Department's flexibility of administration.. It is

the purpose of the proposed legislation to place these items on the

same financial basis as generally similar work already provided for.

There are four types of items covered by the bill.

At the present time the Department is authorized to use collections

resulting from damage to Government-owned vehicles in the repair

of such damage without charge against the appropriation limitation.

The bill would extend this provision to payments for damages to all
REIMBURSEMENT OF POST OFFICE APPROPRIATIONS 5

types of Government-owned property under control of the Department—damage to street letter boxes is one of the principal items that

would come under this category. It is estimated that the total

amount involved would be in excess of $75,000.

In cases where temporarily excess space in buildings which the

Department has rented on long-term leases is furnished to private

sublessees, we collect rent for such space. Rent paid by the Department comes out of appropriated funds and the Department believes

that the recoveries from the sublessees should more properly be used

to reimburse the appropriation from which the primary rents are

paid. In our statement of purpose we indicated that this item would

total about $180,000 a year. Current analysis indicates that the total

this year will be somewhat less—possibly about $50,000.

In cases where postal personnel are used to assist the railroads in

loading and unloading cars, the Department is reimbursed for such

services since the railroad rates include the terminal handling charges

for all mail moved. It is believed that such funds should be credited

to the appropriation out of which the salaries are paid and thus be

made available for financing the cost involved. The amounts here

were estimated in our report to be $400,000. Current experience

shows a much greater use of Department time. The total this year

may be substantially more.

In cases of fines, penalties, and refunds of contracts, the applicable

appropriation is used to pay the expense necessary to fulfill the contract although in effect some of the work which was paid for has not

been performed. It is believed that such reimbursements should

likewise be credited to the current applicable appropriation and be

available for use by the Department to defray the expense necessary

to accomplish the intent of such contract. The estimate for this

category of reimbursement amounts to about $400,000 annually.

Thus the amount of reimbursements to be covered by this bill will

probably be between $1 and $2 million annually. The advantages

of placing these funds under the same fiscal provisions as other reimbursements are consistency of accounting treatment and improved

budgetary flexibility.

We will be glad to answer any questions that the committee may

have on this.

Mrs. GRANAHAN. Under the existing law, Mr. Noble, you only

have at the present time, I believe, the damage to Post Office Department vehicles, and the collection from the sale of letter, metal, canvas

cuttings, and old canvas. It is very limited?

Mr. NOBLE. We have that, but we also have, Madam Chairman,

under other provisions of law, the ability to treat other work or

reimbursements as credits to the appropriation. For instance, the

largest single item to which I referred, some $38 million of reimbursements from the Department of Defense for the movement of military

mail overseas, is treated as an appropriation reimbursement. This is a.

workload over which we have no control and it is financed by reimbursement to us from the Department of Defense.

We also get reimbursement for the sale of migratory bird stamps,

for the sale of savings bonds and stamps for the Treasury Department,

boat stamps for the Coast Guard, and a variety of similar items.

73160-61----- 2
6 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

We sometimes provide vehicle service to other agencies and they

reimburse us. And those items are credited to the respective

appropriations.

Mr. BROYHILL. When you say "credited to the appropriation,"

then those funds are treated just as if they were appropriated originally by the Congress?

Mr. NOBLE. That is correct.

Mr. BROYHILL. So you can go ahead and expend them?

Mr. NOBLE. That is correct. They do not come out of the limitation, in oth-r words, established in the congressional appropriation.

To the extent that there is work required and the agency gives us

the funds, we can spend them.

Mr. BROYHILL. They fall in the same category as these examples

Mrs. Granahan spoke of?

Mr. NOBLE. That is correct.

Mrs. GRANAHAN. I have no further questions, Mr. Noble.

Mr. Addabbo?

Mr. .ADDABBO. What effect will this have on the Post Office deficit?

Will this increase the deficit?

Mr. NOBLE. No, sir; this will have no net effect on the financial

results. It is merely a change in accounting and budgetary procedures. The deficit will not. be affected by this.

Mr. ADDABBO. Under the present law, the money that comes in

from the four categories you wished changed now, is that treated as

postal revenue?

Mr. NOBLE. That is correct.

Mr. ADDABBO. Then it would be considered all as postal revenue

and if that is taken away from the revenue, would that not increase

the deficit?

Mr. NOBLE. It will be treated as a credit to the appropriation, as

a reimbursement. It will have the same effect, eliminate the costs,

and hence be eliminated from the deficit in exactly the same manner,

as far as the end result is concerned.

Mr. ADDABBO. These particular items of cost of repair or use of

manpower in other agencies, is that listed as a cost of the Department

now?

Mr. NOBLE. Yes. We list those and it is merely a matter of how

we treat the accounting for the recovery, whether we add it to the

postal revenues or have it in a separate category of appropriation

reimbursements, which is a form of revenue. It is an accounting

classification, but as far as the net result is concerned it is nil.

Mr. BROYHILL. On the surface, at first glance, Mr. Noble, this

certainly makes sense to me. I think you can streamline your operations a great deal. I have a couple of questions that you possibly

could answer for me, in my mind. First of all, whether or not this

procedure is in violation of the Constitution, which states in effect

that all funds expended will be appropriated by Congress and if it is

not in violation of the Constitution, my question is, why couldn't we

carry this a little further and streamline the operation a little bit

more, so you can take the funds received from the sale of stamps and

go ahead with the operations rather than going through this circuit

of turning the money over to the Treasury and going to Congress for

appropriation? Why do we stop at this point? Why is this the

dividing line, beyond which you are not asking further authority?
REIMBURSEMENT OF POST OFFICE APPROPRIATIONS 7

Mr. NOBLE. I might ask our Associate General Counsel to speak

to the legality of this question or the constitutionality.

Mr. WENCHEL. I think in a constitutional sense this would be an.

action within that clause of the Constitution which requires an appropriation. There is nothing in the Constitution which requires an

annual appropriation or limits it, except certain military expenditures,

so the congressional action of authorizing this treatment of these

funds could be considered an appropriation.

On the other aspect of it, I think there you are getting into a rather

major problem, and this particular proposal is only intended to be a

very limited one. There has been, from time to time, discussion as

to whether the Department should not use its revenues and then

have only its so-called deficit appropriated. But I don't believe there

has been any firm policy decision made on that in recent years.

Mr. NOBLE. There have been, as Mr. Wenchel says, proposals to

set up the Post Office as a true revolving fund, presenting its budget

annually to the Congress, showing its projected revenues and its

projected expenses and having them approved, and then spending the

funds in accordance with the program, but not being subject to

budgetary limitations except in the overall total which might have to

be withdrawn from the Treasury for the deficit. We have not advocated that at the present time.

If the revenues were adequate to cover the expenses, we think a

business-type operation such as this might properly be handled that

way, the same as the Panama Canal or TVA, for instance.

Mr. BIlOYHILL. It could be an indirect way of forcing the Post

Office Department or forcing the Congress to force the Post Office

Department to balance the budget. The reason I asked the question

about the constitutionality of this—I don't question your answer at

all, but I had a similar problem over here at the Pentagon, where they

have a so-called concessions committee, that leases out the concessions there on the concourse. It does not go through the General

Services Administration. They receive several hundreds of thousands

of dollars a year from that rent and they apportion to the Treasury

whatever they feel like appropriating and keep back several hundred

thousand dollars a year for a so-called employees' welfare fund.

I made some inquiries into that, because of my concern about bow

the funds were being used, and I received a ruling from the Comptroller General that that was in violation of the Constitution, the

concessions committee receiving this money and dispersing it themselves or making the allocation themselves, rather than the whole

business going back to the Treasury and then the concessions committee receiving an appropriation from Congress. I had that thought

in mind when I asked the question about the constitutionality of this,

because at first observation I can't see too much difference between

what you are proposing to do and what you have been doing and what

this concessions committee has been doing, even though I recognize

this is a far more efficient way of handling that operation.

Mr. WENCHEL. I am not sure what the Pentagon situation is, but

in this instance the funds would be used in accordance with the terms

of the appropriation law. These would be used only for those purposes which Congress had itself authorized. That may be the

difference.

Mr. BROYHILL. One more question, Madam Chairman.
8 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

In your statement you referred to this leasing of extra space in your

buildings. Do you now have authority under present law to use

those funds, or is that proposed in this new legislation?

Mr. WENCHEL. That is one of the items covered by this legislation.

In further comment on your question about a revolving fund,

historically I think it is interesting that when the Post Office Department Financial Control Act of 1950 was being proposed, the Department had attempted to get that type of legislation 

Mr. BROYHILL. You mean for the whole business, stamps and

everything?

Mr. WENCHEL. Yes. But the bill came out with language which

at first sounds as though we have the authority, but then has the

limitation, "within limits of appropriations." That language is now

in section 2202 of title 39. Thus we did have an experience of attempting to get that legislation, and the Congress not desiring to give it to

us at that time.

Mr. NICHOLSON. I believe it is also correct to generalize and say

that the categories of cases that we are concerned with here tend to

be unpredictable or accidental or opportunistic. To the extent they

are those things, they cannot be anticipated in appropriations requests.

Yet the burden, the costs imposed on the Post Office, generally by

others, are such that they at present must be paid for within the

appropriation limitations set up by Congress.

For example, in the case of mail carried for others, we do not know

in advance what amount of money to set aside or request in our appropriation request for that purpose. Or perhaps even more clearly, in

the case of terminal handling charges, we do not know when the

railroad employees will be adequate or even present to handle that

mail.

Mr. BROYHILL. It is possible there might not be any, not probable,

but possible?

Mr. NicHoLsoN. Correct. So with the mission of nioving the mail

at some unknown time, we must spend our dollars out of the

operation's appropriation, to fulfill a task, which we had already paid

for under the terms of the payments to the railroads for doing that

same work.

So from our point of view, unless these unpredictable or accidental

drains on our appropriation limitation are reimbursed into the same

appropriation, we must either ask for excess amounts to cushion us

against these unforseen events, or we need this authority to reimburse

the appropriation in which the expense is covered. If they were

predictable or if the Congress would allow us certain margins—these

are modest amounts to be sure—then perhaps this legislation would

not be essential.

However, as Mr. Noble testified, for purposes of internal budgetary

simplicity and control, it seems to us to be desirable to set these things

up on a self-liquidating or self-controlling basis, to the extent these

accidents or unpredictable demands are made on our appropriations,

the amount of that drain is replaced directly into the appropriation.

Mr. BROYHILL. Are all of the existing authorities listed in your

statement? I don't believe they are, because you have listed some

additional ones there.

Mr. NOBLE. I think they are by general reference. On page 2 of

my statement I referred to three major types of reimbursements
'REIMBURSEMENT OF POST OFFICE APPROPRIATIONS 9

presently available to the Department. But they cover a great

many individual items, particularly that second one, "Other services •to Government agencies."

Mr. BROYHILL. You didn't mention in your statement the things Mrs. Granahan mentioned.

Mrs. GRANAHA N. We have an additional sheet here, Mr. Broyhill,

as to what they have now and what they are asking for.

Mr. BROYHILL. I wonder if it wouldn't help to clarify this, if we couldn't have a list of the items covered by the existing authority and a list of items that are proposed.

Now this probably does it. But it doesn't cover all the items he listed, Mrs. Granahan.

Mrs. GRAN A. HAN. It might be well to include in the record the items under the existing law and the additional items which you are asking for.

Mr. NOBLE. We would be very glad to submit an itemized list of existing items and the authority therefor.

Mrs. GRA NAHAN. All right.

(The document referred to follows:)

POST OFFICE DEPARTMENT

Estimated reimbursements by source, 1962

[In thousands]

Activity Authority 1962

estimate

Federal departments and agencies:

1. Transportation of military mail, Department of Defense: 1

Airmail 

Nonpriority mail 

2. Health unit services, Federal Communications Commission 

3. Sale of migratory bird stamps, Department of Interior 

4. Alien registration, Department of Justice 

5. Sale of savings bonds and stamps. Treasury Department 

6. Sale of Coast Guard boat stamps 

7. Communication services, agencies occupying Federal buildings

operated by the Post Office Department.

8. Miscellaneous services to Federal sources _ 

Total, Federal departments and agencies 

Non-Federal sources:

Proceeds from sale of replaced miscellaneous equipment 

Proceeds from sale of replaced vehicles 

Sales of scrap 

Collections for damage to vehicles 

Land acquisition 

Refund of leave on reemployment 

Total non-Federal sources

Total reimbursements, 1962 budget

131 U.S. C . 686 _ _ _ __ {

12, 879

$26, 021

31 U.S.C. 686_ _ ___ 5

16 U.S.C. 718_ 118

31 U.S.C. 868 

d_ _

31 U.S.C. 757c_ 

31 U.S.C. 686_ 

266 

983 

105

31 U.S.C. 686_ 575

31 U.S.C. 686_ ____ 212

41, 164

40 U.S.C. 481 (c)__ _ 200

40 U.S.C. 481(c) 273

39 U.S.C. 2203(b)__ 55

39 U.S.C. 2203(a)__ 150

39 U.S.C. 2113_ ___ 12,000

5 U.S.C. 61b 20

12,698

53,862

PROPOSED ADDITIONAL REIMBURSEMENTS

1. Collections for damages to Government-owned property (other than vehicles) 

2. Rent from private sublessees 

3. Railroad terminal and similar contract work 

4. Fines, penalties, and refunds on contracts 

Total additional proposed reimbursements 

$75

50

700

400

1,225

The Department of Defense has an agreement with the Post Office Department whereby the latter

assumes responsibility for dispatch of Army post office and fleet post office mail, moving by air, at point of embarkation, pays the carrier and is reimbursed by the Department of Defense.
10 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

Mrs. GRANAHAN. Mr. Barry?

Mr. BARRY. Thank you, Madam Chairman.

I would like to ask how these were excepted as items, rather than

placing these funds in the same fiscal category as other reimbursements.

Mr. NOBLE. I believe, Mr. Barry, that the history has been that

originally everything had to be appropriated, or included in an appropriation act and one-by-one provisions were made for the treatment of

items as reimbursements.

For instance, the Economy Act, which authorized one agency to do

work for another agency—this act was passed during the depression—

where another agency could do the work more economically than going

outside, it seemed sensible to do that—that provided that one agency

could reimburse the other and the performing agency didn't have to

take the funds out of its appropriations and go in and ask for more.

As we have taken on the various other missions, such as the sale of

migratory bird stamps, the legislation at that time provided we would

be reimbursed for that work by the Department of the Interior and those

funds would be available to replace the money we spent. The sale of

the Coast Guard boat stamps is the same way.

So I think it has been a case of individual exceptions moving

out from under the appropriation act. These just never have. I

know that is true of damage to motor vehicles. That was given to us

by the Appropriations Committee, I believe, in one year as an amendment to an appropriation act, for us to be able to use those funds to

repair the vehicle and not charge them against our limitation.

Mr. BARRY. May I ask if there are any other items in the post

office beyond the four you are now requesting, that would not be

subject to fiscal provisions for reimbursement?

Mr. NOBLE. There are some. I can think, for instance, of the

movement of foreign mail, transit mail, across the United States,

which traditionally we have treated as revenues and the costs of

moving that are in our regular appropriation.

Mr. BROYHILL. Do you receive any revenue for that?

Mr. NOBLE. Yes. We are reimbursed by the foreign country.

When, for instance, Mexico forwards its mail to Canada, we pay the

railroad companies for its transit across the United States. We get

reimbursement from Mexico. But the reimbursement is treated as

a revenue item and the cost goes into our cost of mail transportation

and comes out of our appropriation for transportation.

We have not sought to clear that one up, because it hasn't presented

any problem. But there may be a few items such as that.

Mr. NICHOLSON. This is as distinguished from mail that originates

in other countries and is delivered in this country.

Mr. BROYHILL. You are not reimbursed for that?

Mr. NOBLE. No, sir. It is transit mail to which I referred.

Mr. BARRY. Would a general authorization be better than special

authority in all these instances?

Mr. NOBLE. I think from our viewpoint it would. I am not sure

the Appropriations Committee would be too happy about it. They

naturally feel they want to be specific in each instance and be sure

they have adequate control. I think as far as we are concerned, the

general authority would be fine.

I would think the congressional fear might be, with respect to a

general provision, that it would enable some other administration—this
REIMBURSEMENT OF POST OFFICE APPROPRIATIONS 11

one, of course, wouldn't do it but some future administration might

engage in a variety of activities and be free to finance them themselves.

It would sort of open the door and be, I am sure, a policy which the

Congress would seriously question in principle.

Mrs. GRANA HAN. Would the gentleman yield?

Mr. BARRY. I have just one further question.

Has the General Accounting Office picked you up on any of the

other authorities, by virtue of abuse of the authority on any prior

occasion?

Mr. NOBLE. Not in the 6 years I have been with the Department.

Mr. WENCHEL. I know of no case.

Mr. BARRY. All right.

Mrs. GRANA HA N. I was going to say, it is really a matter of bookkeeping; is that correct? You are not asking for any additional

money?

Mr. NOBLE. It is both bookkeeping and budgetary control. I think

there is an element of freedom of control.

Mrs. GRANAHAN. There is no money involved.

Mr. NOBLE. The net result would be the same.

Mr. BARRY. But there would be an immediate effect of being able

to spend the money you get for these things, in order to replace it or

for some other purpose, would there not?

Mr. NOBLE. We have already spent the money, Congressman, and

we are reimbursed.

It would enable us, presumably, to reduce the amount we would

have to have in our appropriation act for our own operations, if we

were sure these type of things would be financed by the reimbursements we would receive.

Mr. BARRY. Madam Chairman it would in effect not mean additional money, but less of a fund they would have to draw down which

they are now using, say to repair the trucks.

If you take the money from damage to trucks and send it back to

the Treasury, and I presume this would be the money they get from

insurance companies, and then use money from another fund. They

no longer would have to use the money from that other fund, as

they could use the money from the insurance company. This would

loosen the situation within, so you would have money available to

spend for the manner which the Appropriations Committee appropriated it.

Mr. NOBLE. That is correct.

Mr. NICHOLSON. I think you describe it correctly.

At present this increases our gross revenue. Under the proposal it

would tend to decrease our net expenditures; thus the total obligational authority might be less to the same extent that presently revenues are more.

Mr. BARRY. When an appropriation committee appropriates, do

they set up a fund for contingencies, for this kind of thing, such as

damage to trucks?

Mr. NOBLE. No. In the case of damage to trucks, we do have

authority which the Appropriations Committee gave us, to use those

funds to finance the cost of repair. But the Appropriations Committee does not recognize contingencies as such. They always feel

our estimates are too high and reduce them down to what they think
12 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

are necessary. And I don't think they intentionally leave any contingency factor in there.

Mr. BARRY. As a matter of fact, this would bring you from between

$1 million and $2 million nearer to balancing your budget, wouldn't

it?

Mr. NOBLE. It depends on what you mean by "balancing the

budget." We have talked here of the postal deficit as being the

difference between total revenues and total obligations, and this

wouldn't change that net difference, because while it would reduce

revenues, as Mr. Nicholson said, it would reduce appropriation expenditures, because those items would be financed from items now in

revenue, so the effect on the net would be zero.

Mr. BROYHILL. Would the gentleman yield?

Mr. BARRY. Mr. Noble, why is the transportation of mail for the

Department of Defense listed here as a separate item? Don't you

provide the same service you provide for other governmental agencies.

Mr. WENCHEL. That arose a little differently, I believe, as a result

of the wartime activity of oversea air transportation.

Mr. BROYHILL. Free mail for the troops, you mean?

Mr. WENCHEL. Well, it was outbound mail, primarily, I believe,

or in both directions, but the transportation facilities were under the

control of the Department of Defense at that time and they bore this

expense. Later, when those transportation facilities were freed of

Defense Department control, the Department of Defense continued

to bear the expense burden of that transportation, although we actually

procured it for them.

Mr. BROYHILL. Then it is not because it is a much larger amount?

Mr. WENCHEL. No, there is a historical quirk involved.

Mr. BROYHILL. Now, the services for other agencies are not

handled—your statement brings out the point that the transportation

of mail for the Department of Defense is covered by existing legislation?

Mr. WENCHEL. That is correct.

Mr. BROYHILL. Now, you are not proposing that that same procedure be used for other agencies, in this legislation, so you are still

keeping to the Department of Defense separate in this regard.?

Mr. 6WENCHEL. Services we perform for other agencies are reimbursed but under the authority of the Economy Act or other acts

rather than as a result of this outgrowth of World War II.

Mr. BROYHILL. But are they reimbursed the same way?

Mr. WENCHEL. Yes.

Mr. BROYHILL. This existing legislation, I understand you take the

funds and reuse them?

Mr. WENCHEL. That is correct, and we can in effect use the funds

that they give us to perform the services that we are performing for

them. In most cases the money is deposited in advance.

Mr. BROYHILL. I am a little confused. Then if you have the same

authority in handling the reimbursed funds for other agencies, then

my question would be why is that not listed in your statement,

wherein you stated you had the existing authority that permitted

reimbursements of funds by the Department of Defense and you

could use those funds for paying for those services?

Mr. NOBLE. That is included in page 2 of my statement, under

"Other services to Government agencies," where I give a figure of

$2.8 million.
REIMBURSEMENT OF POST OFFICE APPROPRIATIONS 13

Mr. BROYHILL. Is there that much difference between the Depart- ment of Defense and the other agencies?

Mr. NOBLE. Yes.

Mr. BROYHILL. The other agency services only come to $2.8 million?

Mr. NOBLE. Yes, they are relatively small.

. I would like to make clear, however, this does not relate to reim- bursement for the handling of mail. These are nonpostal services, this $2.8 million. The sums we get for all office mail goes in as postal

revenue, the same as the sale of stamps to the public, and is not involved here. That is part of our operation.

Mr. BROYHILL. That is what confused me now, and that answered

my question.

Mrs. GRANAHAN. Any further questions?

Mr. ADDABBO. One question. Could there be, under this legisla- tion any excess left over from the receipt of these reimbursements? Air. NOBLE. It could be. For instance, in fines and penalties that

we assess primarily to common carriers, the amount could actually exceed the costs to the Department.

Mr. ADDABBO. What would happen to the excess?

Mr. NOBLE. The effect would be to increase the availability of funds in the appropriation of the particular appropriation concerned. It would increase the spending authority to that extent.

Mr. BARRY. In that connection, I wondered when I read that, if that might encourage heavier fines on behalf of those assessing, in order to create quite a little kitty in their department.

Mr. NOBLE. I don't think the operating people that assess those fines have much concern in the financial area and I am sure it would have no effect on their judgment as to the amount or nature of the fine involved.

Mr. BARRY. If fines came in at the $400,000 annual rate suggested in the second to last paragraph of your statement, would that $400,000 be credited to the activity for which the violation occurred, or is it credited to the department having to do with assessing of the fines?

Mr. NOBLE. It should be credited to the account in which the cost

was incurred, which isn't always easy to determine. For instance, if it involved special handling, as a result of the lateness of the mail, the additional cost would be in our operations appropriation

'

where the clerks and other personnel are paid. If it involved some kind of additional transportation costs, it would come out of the transportation appropriation.

Mr. BARRY. In no sense would the credit be to the particular division of the Post Office Department having to do with the assessing of fines or penalties?

Mr. NOBLE. No, sir.

Mr. BROYHILL. Since you are going to provide us a list of the existing authority that you now have and also what is proposed in the legislation before us, I am wondering if you could break down somewhat the examples of this $38.9 million Department of Defense reimbursible item, just as two or three examples.

Mr. NOBLE. We will be glad to do that, Mr. Broyhill.

Mr. ADDABBO. Would the Department have any objection that the bill also include any excess be paid over to the Treasury as part of the postal revenue?
14 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

Mr. NOBLE. I think that would be difficult to determine and subject us, I think, to probable arguments from time to time with the

General Accounting Office. I think in that type of thing, we would

just as soon leave the fines and penalties where they are, as revenue,

than to try to go into a fine accounting to determine exactly what

that particular delay costs. I think that would not be justified.

Mr. BROYHILL. How about where you sold to lessors, and property

disposal? Would that go back to the Treasury to be used for purchase of other sites?

Mr. NOBLE. These would be credited to the appropriations from

which the rent is paid, which is the facilities appropriation, and uould

serve to reduce the costs of rents to us, for which we required funds

in our appropriation act.

Mr. ADDABBO. At the end of the year, there might conceivably be

a considerable surplus there?

Mr. NOBLE. Our rents in the aggregate run $60 or $70 million.

There certainly wouldn't be more rents taken in than we pay out.

In a given case, we might be able to sublease it for a better price

than we were paying the original lessor; I don't know. If that is

what you mean, on an individual lease basis, we might have a profit.

Mr. ADDABBO. In that case and also at the beginning of the year,

you ask for appropriation for the rent for the year and during the

year you would be receiving, you would estimate you would be receiving X dollars, but through better deals, you receive X-plus, so at the

end of the year there would actually be an excess there over what was

appropriated for that purpose.

Mr. NOBLE. That is correct. It would reduce our appropriation

requirements, make them less than our original estimate.

Mr. ADDABBO. Would that excess be carried over to the next year's

appropriation, or would it provide that be paid to the Treasury as

postal revenue?

Mr. NOBLE. No, sir; unobligated appropriations lapse at the end

of the year and are not carried forward from year to year. We are

strictly on an annual appropriation basis.

Mr. BROYHILL. May I follow that through, Mr. Noble. Using

his example there, you receive an appropriation, you estimate what

your rents will be for the year and you receive an appropriation for

that; is that correct?

MT. NOBLE. That is correct.

Mr. BROYHILL. During that fiscal year you sell some sites and

receive some revenue for that?

Mr. NOBLE. I would like to separate the sale of sites from this, Mr.

Broyhill, because the sale of sites is an entirely separate transaction,

covered by a different law, which we are applying. We are talking

here about where we are leasing a property and we temporarily have

some excess space, so we put it to use, we sublet it, rather than have it

go idle and therefore recover some of the rent we are paying to the

owner of the property.

Mr. BROYHILL. What happens in that event? What do you do

with those funds?

Mr. NOBLE. At the present time those funds are accounted for as

postal revenue and go to reduce the postal deficit.

Mr. BROYHILL. Goes into the Treasury?
REIBIBMISEMENT OF POST OFFICE APPROPRIATIONS 15

Mr. NOBLE. Yes, into the Treasury, but it is measured against the

postal fund. All of the revenues, sales of stamps and all other revenues of the Post Office Department, go into the postal fund which

serves to finance these appropriations.

Mr. BROYHILL. Then that was Mr. Addabbo's question. There is

in effect then a surplus in this amount that is appropriated, if you

are able to sublet any?

Mr. NOBLE. That is correct, if we had obtained from the Congress

enough funds to cover the rent for the year, and then we find we don't

need it all and we recover some from a sublessee, it would serve to

provide additional spending authority.

Mr. BROYHILL. How about the case of the sites resold?

Mr. NOBLE. Now the case of the sites resold, we have a special act

known as the Financial Property Act, or we call it the commercial

leasing program, under which the Department is empowered to go

out and take options on, or acquire sites for future post offices, and

then negotiate with a prospective lessor—actually, I am sorry, it is

not negotiating—we advertise for bids for the construction of a post

office on that site, and leasing it to the Department. Part of the

terms of the invitation to bid provide that the lessor will reimburse

us for our outlay on that site.

Mr. BROYHILL. I understood that. The funds you receive you can

use again?

Mr. NOBLE. That is correct. That money can be turned over.

We can buy new sites or use it to pay rents. It is rent money, but

that is not true of these incidental leases to which we have reference.

Mr. NICHOLSON. In case of other categories, Mr. Broyhill, it is

likely the reimbursement would not be adequate to cover the cost of

the damage, let us say, to a mail box or storage box, and the net effect;

I believe, of all this seems to sum up in my mind this way. At

present there is between $1 and $2 million of reimbursement, which is

going into revenue. There is the chance that one or two of these

items might overrun, for example, the subleasing of space at a higher

rate than we are paying the prime lessor. In which case, those overruns might be in the magnitude of—I am only guessing—perhaps 1 or

2 percent. So there is perhaps the possibility that $1,000 or $2,000

a year would be recovered more than cost in some categories, offset

by underrecoveries in other categories, as opposed to the picture we

are now confronted with of having some $1 to $2 million, we believe, in

the wrong accounting category.

Mr. BROYHILL. Then almost in all cases, if not all cases, you do get

full reimbursement for the cost of the sites from the lessors?

Mr. NOBLE. Yes, sir. We put that in the invitation to bid. They

will reimburse us so much and they all figure that in their proposals.

Mr. ADDABBO. Wouldn't it go for better and more closer scrutiny

to leave the renting of the space and the money on subleasing going

back into the Treasury, if the Department was limited to what they

could spend to rent out space? In other words, if you go out to rent

out two buildings, and one building may be a little more modern and

rent a little higher, but you figure we are going to be able to sublease,

so we go in and spend this money and you may find a little laxity there

on what they can get for the subleasing or leasing one building as

against the other and again we have a greater postal deficit, because
16 REIMBURSEMENT OF POST OFFICE APPROPRIATIONS

we are not, ,receiving the postal revenue as we are receiving now, the

amount of money we receive on subleasing.

Mr. NOBLE. If it has an effect on an actual operating decision, such

as you have reference to, it might affect the postal deficit.

Mr. ADDABBO. Not this administration; some other one.

Mr. NOBLE. I don't think, at the present time, we ever deliberately,

acquire a property with the idea of subleasing it. We could conceivably, if we see a need in the next several years for some additional

space, and we have an opportunity to get the property now, we might

take that into account. But I doubt if that is very often done.

Generally I would think in our subleasing we would not obtain as

good a, deal as a long-term lease. I mean, we are trying to get someone to occupy it for a short period of time • and, therefore we probably

aren't in a position to get as good a rent from it as the lessor from

whom we leased it on a long-term basis. So I would doubt, if in

individual cases of subleasing, we are actually making a profit on the

deal. It is helping to reduce our expenses during the period that we

have excess capacities.

Mr. BROYHILL. I might point out, as a compliment to the Department, you certainly are efficient, prudent, and economical, in making

your leases. I know I have had some experience with it, and a constituent would come to me to try to get help on it and you are tough.

I would say it is certainly in the interest of the taxpayers. You do

drive a close, hard bargain in leasing space.

Mr. NOBLE. It is certainly our intention to.

Mrs. GRANAHAN. The subcommittee will now adjourn. If the

members will stay, we will have a short executive session.

(Whereupon, at 11 a.m., the subcommittee was adjourned to

executive session.)

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