Evening star., 1946-09-30
RfC Not Responsible
For Auditing Surplus
Sales, Royal Says
By Don S. Warren

Suggestions of buck passing
were raised today by members of tn,
House Surplus Property Committe,
when an official of the Reconstruc
ton Finance Corp. told the com.
mittee 1t was not the responsi.
bility of RFC to initiate audits O.
the accounts of industry agents sell
ing surplus property for the Wa
Assets Administration.
Nathaniel Royal, chief auditor fo
RFC, who was the first witness a
today's hearing of the investigation
group, said responsibility for audit
Ing of the agents accounts lay with
the War Assets agency itself ant
he mentioned particularly Gusta,
Schwarz, WAA official formerl,
handling sales of electronics ma
terials.
Earlier testimony has been tha
no audits of any of the account
of the agents, paid 10 per cent com
mission on sales plus expenses, hae
been completed as yet. However
many audits now are under wa,
under orders which the new admin
istrator, Robert M. Littlejohn, issuee
shortly after he was assigned to the
post July %.
urgent" in May, Still Undone.
Under questioning, Mr.. Royal
said the RFC had received request.
on February IL of this year from
Mr.. Schwarz and from Gen. E. B
Gregory, formerly in charge of sur.
plus sales, for an audit of one &C.
count where the situation was con.
s1dered urgent" Arrangements fol
this audit, said to be still incom-
pleted, were concluded last May 3
Mr.. Royal said.
The case in question involved q
New Jersey concern whose contract
since has been cancelled, which re.
ported sales of $103,9OO through MAY
81 and expenses charged to the Gov.
ernment of $780, 200.
Chairman Slaughter of the House
Committee emphasized that CORE.
pondence about an audit of the CASE
mentioned had been started "ovel
six months ago" and the witnes.
agreed it had taken "a long time te
get started" Hugh D. Wise. jr.
chief committee counsel, interjected
And this was considered an emer-
gency case"
MIR. Royal, insisting that the re.
sponsibility for audits lay with the
agencies directly handling war sur
plus sales, said some of the DELAY
was due to questions about the fee
to be charged by a private firm OF
accountants selected to make the
audit.
Chairman Slaughter commented
that this was matter of $500
which was chicken feed"
Ridley Sees Buck Passing.
Representative Ridley, Republican
OF Oklahoma, emphasized that un.
til last March 26, when WAA wa.
set up, surplus sales had beer
under agencies of the RFC, these
including the Defense Supplies
Corporation. The witness agreed
when Mr.. Riley said that RFC
ofncials had had some indication
something was wrong" as far back
as June l, 1945. And yet, the
Oklahoman continued, the Govern
ment agencies continued to ship
merchandise to this company.
1T seems to me there Is now q
question OF passing the buck over
negligence in getting the audit
made" Mr.. Ridley said. When he
declared that RFC Ibid nothing
about the audits until War Assets
officials called the case to it's at
tention last February, the witness
said that at the time change of
jurisdiction was pending.
Another witness, Arthur Brown
stein, president of Cords Limited
Inc, Of Newark, N. j., an industry
agent between March 8, 1945, and
August 8, 1916, told the committee
his firm had suffered loss of more
than $4,000 on its Government sur
plus contract, instead of IAN uncon-
scionable profit" he said had been
suggested by publicity.
Says 1t Was Scrapped.
Reports laid before the commit
tee last week included statistics
showing this firm had been sent sur
plus material which cost the Gov
ernment nearly $4,000 and that il
had sales returns of only $14 but ex-
penses Of $4,571. This would show
expenses to the Government of 3d.
$50 per cent of the sales proceeds.
Mr.. BroWnstein protested that all
OF the equipment sent him, except a
small number of pieces he sold fol
$685. was "scrapped" instead of sal
able material" He said he had noti-
ned the Government agency two
months after he had received his
first shipments The witness de-
clared his firm had not charged the
Government for a warehouse he had
leased for storage of the material
until he received it, and that he had
not charged the Government for ad-
ministration and other overhead
BEST Time wasted, NaylOr Says.
Harold l.. Naylor, formerly chief
OF the pricing section of the elec-
tronics division of WAA, told the
committee under questions by Chair
man Slaughter, it was true "the
cream of the time" for the best re-
turns on sale of surplus electronics
had largely been wasted"
Mr.. Slaughter suggested this was
due to interminable delays" in get
ting the surplus program going, and
the witness agreed.
Mr.. Naylor confirmed the once
mysterious memorandum inserted in
WAA files last April and back
dated to December 18, correctly rep
resented an agreement for a $4,000
reduction in the sale price of some