The midland journal. (Rising Sun, Md.) 1885-1947, 1935-06-07


electric power on huge scale was to
serve as a yardstick on electric rates
charged by private power companies.
Lately, ]. r. McCarl, comptroller
general of the United States, has had
his bookkeeping sleuths at work on
the records of the Tennessee Valley
authority, 1t being government cor
poration. Mr.. McCarl was not con-
cerned about the yardstick for power
rates nor was he interested in expert
ments designed to prove the value Of
government ownership in the power
field. His Job was to determine what
had happened to all of the money that
had been taken from the treasury and
spent in the effort to transform the
Tennessee valley into modern Gar
den of Eden.
1t happened that Mr.. McCarl's re-
port on the audit of IVA affairs was
made public coincidentally with
movement by the IVA directors for
new neutrality-suspicious. to their
basic law which would give them addi-
tional authority. This circumstance
resulted in the IVA and its yardstick
being examined by congressional
committee under the strong lens of
magnifying glass. l believe it Is gen.
orally agreed that IVA suffered In
prestige, and government ownership
advocates came off second best be-
cause disclosures before the commit
tee were of such a nature as to con-
vince most sound thinking observers
that there is a colored gentleman in
the IVA woodpile.
For instance, Mr.. McCarl showed in
his report that the federal govern
ment had expended total Of $780,
$4,000 in development of the power
facilities, equipment and necessary
appurtenances. This property was
transferred by the federal govern
ment to the Tennessee Valley author
ity, a corporation, and is carried on
the corporation books at $51,OOO,OOO.
This is SO per cent of the actual cost
to the taxpayers of the property trans
ferred.
Disclosures of this fact brought
many charges in the course OF the
committee hearing and led to the con-
clusion by several house members that
no electric rate based upon ~ per
cent of the cost of the production ia
cilities could be considered honest. In
other words, the thought was that
yardstick based on such a method of
calculating investment necessarily
would have to be made of rubber.
Mr.. McCarl told the committee also
that he had found various haphazard
and "trick" methods
"Trick" of bookkeeping and
Bookkeeping that he had found 1t
necessary to disal-
low expenditures of something over
two million dollars which ne said were
illegal. The comptroller general did
not refer to these expenditures as hav-
ing been fraudulently made but he
told the committee it was his opinion
that the law had to be stretched rath-
er far by any spending agency to con-
strue the payments as justlhaDle.
The comptroller general took sharp
exception to the bookkeeping meth
DDS used by the IVA. 1t is upon these
records that the electric rate is based.
Likewise it is upon the basis Of these
records that the IVA must show
whether 1t has earned profit.
despite the apparently excessive
depreciated value at which the Muscle
Shoals property was taken up on the
books, the authority is not using the
valuation basis for depreciation but
instead is basing depreciation on the
earnings from the sale of power by
charging 10 per cent of the gross rev.
enue to operations as depreciation and
accommodating the amount or sucn
charges as a reserve for depreciation.
assuming very conservative rate
of valuation consumption for example,
2 per cent, the amount of depreciation,
based upon the value at which the
properties in question were capital
lied by the authority, would be ap-
proximately $1,0O0,000 per annum.
"a larger revenue will proportion
ately increase the reserve for depre-
citation at the present 10 per cent
method of amortization, but to &C
cumulate a reserve on the 10 per cent
plan equivalent to the amount that
would be charged to depreciation on
valuation basis at 2 per cent, the
gross revenues would have to be more
than ten times the present amount or
about $10,OO0,O00 per annum.
There is very little basis for as
Stunning that revenues will ever reach
such a figure"
The comptroller's report touched on
many other phases of iva affairs
which he found sub
Much to ject to criticism and
Criticise it made mention OF
factor that, 1t
seems to me, ought to be Of vital i'm
portance to communities throughout
the country. That factor is taxation.
It is to be remembered that govern
ment agencies, federal, national, state
-. IooaI 0o1 M favoa into the treasury