The reference to "section 4(b)" in section 8 of the bill should be "section 4." Section 9 (c) of S. 2710 provides that the Secretary of the Treasury shall determine the interest rate on sums appropriated to the revolving fund annually in advance, such rate to be calculated to reimburse the Treasury for its costs in connection with such appropriated funds, taking into consideration the current average interest rate which the Treasury pays upon its marketable obligations. We believe that the rate of interest should be determined by the Secretary of the Treasury, taking into consideration the current average yield upon outstanding marketable obligations of the United States.

Section 10(b) (1) provides that the Commissioner of Education shall with respect to the financial operations under the bill, prepare annually and submit a budget as provided for wholly owned Government corporations by the Government Corporation Control Act. Budget Circular No. A-11 "Instructions for the Preparation and Submission of Annual Budget Estimates," provides that business-type financial statements will be prepared for all revolving funds, except those "feeder accounts" which are solely available for making advances to other funds or accounts. Since under existing law and regulations the budget program for this fund would be prepared as provided for wholly owned Government corporations, section 10(b) (1) is unnecessary.

Section 10(b) (2) provides that the Commission shall maintain an integral set of accounts to be audited annually by the General Accounting Office in accordance with principles and procedures applicable to commercial corporate transactions, as provided by section 105 of the Government Corporation Control Act. These accounting and auditing requirements are unnecessary since they are adequately authorized under existing law.

The Budget and Accounting Procedures Act of 1950 places in the head of each executive agency the responsibility of establishing and maintaining a proper system of accounting and internal control for his agency. The accounting system developed by agencies must conform to broad principles and standards prescribed by the Comptroller General but the details of the system are left to the agency to provide full disclosure of the results of its activities and adequate financial information needed for management purposes. Also, the Budget and Accounting Procedures Act of 1950 provides specific statutory authority for the General Accounting Office to make the type of audit most suited to the activities of the agency involved and in accordance with generally accepted principles of auditing. In short, this enables the Comptroller General to prescribe the type of audit that would be most practicable and useful for this financial assistance program. There thus is no need for any special accounting or auditing provisions in this bill.

Section 10(b) (2) also provides that the financial transactions of the Commissioner shall be final and conclusive upon all accounting and other officers of the Government. The effect of this proviso would be to preclude the Comptroller General from raising any exceptions to any illegal transactions found in the audit. We strongly recommend, therefore, that the entire section 10(b) be deleted from the bill.

It is noted that the bill does not apply to Guam whereas Public Law 85-864 is applicable to Guam.

Sincerely yours,

FRANK H. WEITZEL, Assistant Comptroller General of the United States.

[S. 3007, 86th Cong., 2d sess.]

A BILL To authorize Federal loans to colleges and universities for the construction, rehabilitation, alteration, conversion, or improvement of classroom buildings and other academic facilities

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "College Classroom Assistance Act of 1960".

AUTHORITY TO MAKE LOANS

SEC. 2. (a) The Commissioner may make loans to educational institutions for (1) the construction of new structures suitable for use as classrooms, laboratories, libraries, and related facilities (including initial equipment, machinery, and utilities) necessary or appropriate for the instruction of students

or the administration of the institution, and (2) the rehabilitation, alteration, conversion, or improvement of existing structures for the uses described above if such structures are otherwise inadequate for such uses.

(b) Any educational institution which, prior to the date of enactment of this Act, has contracted for the construction, rehabilitation, alteration, conversion, or improvement of any structures for the uses described in subsection (a) above may, in connection therewith, receive loans under this section, as the Commissioner may determine, but no such loan shall be made in connection with the construction, rehabilitation, alteration, conversion, or improvement of any such structure if the work thereon was commenced prior to the effective date of this section, or was completed prior to the filing of an application under this section.

(c) No loan under this section shall be made unless the educational institution shows that it is unable to secure the necessary funds from other sources upon terms and conditions equally as favorable as the terms and conditions applicable to loans hereunder, and no such loan shall be made unless the Commissioner finds that the construction, rehabilitation, alteration, conversion, or improvement involved will be undertaken in an economical manner, and that it will not be of elaborate or extravagant design or materials.

(d) A loan under this section (1) may be in an amount not exceeding the cost of constructing, rehabilitating, altering, converting, or improving the structures involved (including related facilities), and the cost of acquiring any land necessary thereto, as determined by the Commissioner, (2) shall be secured in such manner and be repaid within such period, not exceeding fifty years, as may be determined by the Commissioner, and (3) shall bear interest at a rate determined by the Commissioner which shall be not more than the higher of (A) 24 per centum per annum, or (B) the total of one-quarter of 1 per centum per annum added to the rate of interest paid by the Commissioner on funds obtained from the Secretary of the Treasury as provided in section 3 of this Act.

LOAN FUNDS

SEC. 3. (a) To obtain funds for loans under this Act, the Commissioner may issue and have outstanding at any one time notes and obligations for purchase by the Secretary of the Treasury in an amount not to exceed $125,000,000.

(b) Notes or other obligations issued by the Commissioner under this section shall be in such forms and denominations, have such maturities, and be subject to such terms and conditions as may be prescribed by the Commissioner, with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury which shall be not more than the higher of (1) 21⁄2 per centum per annum, or (2) the average annual interest rate on all interest-bearing obligations of the United States then forming a part of the public debt as computed at the end of the fiscal year next preceding the issuance by the Commissioner and adjusted to the nearest one-eighth of 1 per centum. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations of the Commissioner issued under this section and for such purpose is authorized to use as a public-debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any purchases of such notes and other obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this section. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public-debt transactions of the United States.

(c) There are hereby authorized to be appropriated to the Commissioner such sums as may be necessary, together with loan principal and interest payments made by educational institutions assisted hereunder, for payments on notes or other obligations issued by the Commissioner under this section.

GENERAL PROVISIONS

SEC. 4. (a) In the performance of, and with respect to, the functions, powers, and duties vested in him by this Act, the Commissioner, notwithstanding the provisions of any other law, shall

(1) prepare annually and submit a budget program as provided for wholly owned Government corporations by the Government Corporation Control Act, as amended; and

(2) maintain an integral set of accounts which shall be audited annually by the General Accounting Office in accordance with the principles and procedures applicable to commercial transactions as provided by the Government Corporation Control Act, as amended, and no other audit shall be required: Provided, That such financial transactions of the Commissioner as the making of loans and vouchers approved by the Commissioner in connection with such financial transactions shall be final and conclusive upon all officers of the Government.

(b) Funds made available to the Commissioner pursuant to the provisions of this Act shall be deposited in a checking account or accounts with the Treasurer of the United States. Receipts and assets obtained or held by the Commissioner in connection with the performance of his functions under this Act, and all funds available for carrying out the functions of the Commissioner under this Act (including appropriations therefor, which are hereby authorized), shall be available, in such amounts as may from year to year be authorized by the Congress, for the administrative expenses of the Commissioner in connection with the performance of such functions.

(c) In the performance of, and with respect to, the functions, powers, and duties vested in him by this Act, the Commissioner, notwithstanding the provisions of any other law, may

(1) prescribe such rules and regulations as may be necessary to carry out the purposes of this Act;

(2) sue and be sued ;

(3) foreclose on any property or commence any action to protect or enforce any right conferred upon him by any law, contract, or other agreement, and bid for and purchase at any foreclosure or any other sale any property in connection with which he has made a loan pursuant to this Act. In the event of any such acquisition, the Commissioner may, notwithstanding any other provision of law relating to the acquisition, handling, or disposal of real property by the United States, complete, administer, remodel and convert, dispose of, lease and otherwise deal with, such property: Provided, That any such acquisition of real property shall not deprive any State or political subdivision thereof of its civil or criminal jurisdiction in and over such property or impair the civil rights under the State or local laws of the inhabitants on such property;

(4) enter into agreements to pay annual sums in lieu of taxes to any State or local taxing authority with respect to any real property so acquired or owned;

(5) sell or exchange at public or private sale, or lease, real or personal property, and sell or exchange any securities or obligations, upon such terms as he may fix;

(6) obtain insurance against loss in connection with property and other assets held;

(7) subject to the specific limitations in this Act, consent to the modification, with respect to the rate of interest, time of payment of any installment of principal or interest, security, or any other term of any contract or agreement to which he is a party or which has been transferred to him pursuant to this title; and

(8) include in any contract or instrument made pursuant to this Act such other covenants, conditions, or provisions as he may deem necessary to assure that the purposes of this Act will be achieved.

(d) Section 3709 of the Revised Statutes shall not apply to any contract for services or supplies on account of any property acquired pursuant to this Act if the amount of such contract does not exceed $1,000.

SEC. 5. The Commissioner shall take such action as may be necessary to insure that all laborers and mechanics employed by contractors or subcontractors on any project assisted under this Act (1) shall be paid wages at rates not less than those prevailing on the same type of work on similar construction in the immediate locality as determined by the Secretary of Labor in accordance with the Act of March 3, 1931 (Davis-Bacon Act), as amended, and (2) shall be employed not more than forty hours in any one week unless the employee receives wages for his employment in excess of the hours specified above at a rate not less than one and one-half times the regular rate at which he is employed; but the

Commissioner may waive the application of this subsection in cases or classes of cases where laborers or mechanics, not otherwise employed at any time in the construction of such project, voluntarily donate their services without full compensation for the purpose of lowering the costs of construction and the Commissioner determines that any amounts saved thereby are fully credited to the educational institution undertaking the construction.

APPORTIONMENT

SEC. 6. Not more than 10 per centum of the funds provided for in this Act in the form of loans shall be made available to educational institutions within any one State.

DEFINITIONS

SEC. 7. For purposes of this Act

(a) The term "Commissioner" means the (United States) Commissioner of Education. (b) The term "State" includes Puerto Rico, Guam, the Virgin Islands, and the District of Columbia.

(c) The term "educational institution" means any educational institution offering at least a two-year program acceptable for full credit toward a baccalaureate degree, including any public educational institution, or any private educational institution no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Hon. LISTER HILL,

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, March 28, 1960.

Chairman, Committee on Labor and Public Welfare,
U.S. Senate.

DEAR MR. CHAIRMAN: Your letter of February 29, 1960, requests a report on S. 3007 which would provide for Federal loans to universities for the construction, rehabilitation alteration, conversion, or improvement of classroom buildings and other academic facilities.

The providing of such assistance and the extent thereof appear to be matters of policy primarily for determination by the Congress. Consequently, and since we have no particular knowledge concerning the need or desirability for such assistance we have no recommendations to offer concerning the merits of the proposed legislation. We do, however, offer the following comments for your consideration.

The proposed assistance program would be administered by the Commissioner of Education. A related program to assist educational institutions in financing the construction of housing and other educational facilities presently is administered by the Housing and Home Finance Administrator pursuant to authority contained in the Housing Act of 1950, 12 U.S.C. 1749. We believe that consideration should be given to placing the administration of the proposed legislation in the Housing and Home Finance Agency and of requiring the Commissioner of Education to pass upon the eligibility of the institutions to participate in the program and the general suitability of the academic facilities.

Section 3 authorizes the Commissioner to issue notes and obligations for purchase by the Secretary of the Treasury. The Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended.

Authorization to finance programs and activities through public debt transactions are usually stated in terms of maximum amounts of obligations in the Treasury which can be outstanding at any time with no annual limitation. The authorizations are contained in substantive legislation originated in legislative committees instead of appropriation legislation reviewed by the Appropriation Committees. The continuing feature of these authorizations avoids the need for annual appropriations, and thus there is less compulsion for careful evaluation by successive Congresses of the need for continuing particular programs. We believe that the financing of loan programs through public debt transactions, by combining program authority with funding, tends to perpetuate programs that might not otherwise stand the test of recurring congressional review.

The General Accounting Office has for many years stated objections to this method of financing and recommends that funds to finance Government activities should be made available to the agency responsible for administering the program through the normal appropriation processes rather than through authorizations to finance through public debt transactions.

Section 3 also provides that notes or obligations issued by the Commissioner for purchase by the Secretary of the Treasury shall bear interest at a rate determined by the Secretary of the Treasury which shall be not more than the higher of (1) 22 percent per annum, or (2) the average annual interest rate on all interest-bearing obligations of the United States than forming a part of the public debt as computed at the end of the fiscal year next preceding the issuance by the Commissioner and adjusted to the nearest one-eighth of 1 percent.

In the event the public debt transaction feature is retained we suggest that, in order to have the interest rate considered on a current basis, the following language be substituted for that presently appearing on page 4, lines 5 to 12 of the bill:

"Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yields on outstanding marketable obligations of the United States having comparable maturities."

We recommend that all of section 4(a) be deleted from the bill. Section 56 of Bureau of the Budget Circular No. A-11, “Instructions for the Preparation and Submission of Annual Budget Estimates," requires that business-type financial statements will be prepared for all revolving funds except certain feeder accounts. Also that part of the paragraph regarding the maintenance of accounting records and the provisions for audits by the General Accounting Office is unnecessray as similar authorization is presently contained in the Budget and Accounting Act, 1921, and the Budget and Accounting Procedures Act of 1950. We especially object of the inclusion of the proviso contained in this section that such financial transactions shall be final and conclusive upon all officers of the Government. This finality clause precludes the Comptroller General from raising exceptions to any illegal or improper transactions.

Section 4 (c) (6) of the bill would authorize the Commissioner to obtain insurance against loss in connection with property and other assets held. We believe the Government should act as its own insurer of such property and other assets and we recommend, therefore, that this provision be deleted from the bill. As a protection against waste or improper use of the funds raised by the sales of obligations issued by the Commissioner we suggest that a section be added to the bill requiring all recipients of loans to keep records which will enable audits to be made by the Commissioner and the General Accounting Office. Such records would enable the Commissioner to see whether the recipients have complied with the terms of the act. Under the authority of this section the Commissioner would be expected to audit the books and records of each recipient, leaving to the General Accounting Office the right to audit as many recipients each year as determined necessary by the Comptroller General. This could be accomplished by placing language in the bill as follows:

"SEC. -. (a) Each recipient of assistance under this Act shall keep such records as the Commissioner shall prescribe, including records which fully disclose the amount and the disposition by such recipient of the proceeds of such assistance, the total cost of the project or undertaking in connection with which such assistance is given or used, and the amount and nature of that portion of the cost of the project or undertaking supplied by other sources, and such other records as will facilitate an effective audit.

"(b) The Commissioner and the Comptroller General of the United States, or any of their duly authorized representatives, shall have access for the purpose of audit and examination to any books, documents, papers, and records of the recipient that are pertinent to assistance received under this Act."

Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

Senator YARBOROUGH. As our first witness this afternoon, we are honored to hear from one of the most eminent champions of education in the U.S. Senate, and I think in any other place, Senator Joseph Clark.