donations which the Veterans' Administration might be required to make if the first section of H. R. 3322 is enacted would be relatively small and, accordingly, is not considered a basis for objecting to such enactment.

Advice has been received from the Bureau of the Budget that there would be no objection to the submission of this report to your committee.

Sincerely yours,

JOHN S. PATTERSON,
Deputy Administrator

(For and in the absence of the Administrator).

Mr. BARRY. I would like permission to insert the report on behalf of the Texas Surplus Property Agency. It covers an entirely different phase of the situation than I discussed this morning, as chairman of our national association. I think this statement that I want to introduce brings out some pertinent points as to the type of property that we are losing.

Mr. McCORMACK. Without objection, that will be done, and as a part of your original testimony, that is, succeeding your original testimony. It will be made a part of the record at that point.

Mr. WARD. We have Mr. Maxwell Elliott of the GSA here.

Mr. McCORMACK. We will be very glad to hear from you, Mr. Elliott.

STATEMENT OF MAXWELL H. ELLIOTT, GENERAL COUNSEL, GENERAL SERVICES ADMINISTRATION; ACCOMPANIED BY JOHN THOMAS, DIRECTOR OF PERSONAL PROPERTY UTILIZATION DIVISION; AND LEWIS C. TUTTLE, DEPUTY DIRECTOR, PERSONAL PROPERTY UTILIZATION DIVISION, FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION

Mr. ELLIOTT. Mr. Thomas is with me, Mr. Chairman. He is the Director of our Personal Property Utilization Division.

We do not have a formal report to present to the committee at this time for this reason: We had assembled our ideas and comments and discussed them with Mr. Mansure, the Administrator, on Friday, which he approved. We then prepared the text of the report, but Mr. Mansure is out of town today. He has, as you know, a very deep personal interest in bringing efficient businesslike conduct into the business of the Government. He also has a very deep interest in the health and education of our Nation. Because of that we thought it advisable for him to see the actual text of the report and look at it before we submitted it.

Since Mr. Mansure had approved the basic ideas, they were incorporated in a draft report and on last Friday evening, at the meeting of the Budget Bureau, we left them a draft of the proposed report. I was very happy to hear Mr. Pearson give that report, only in better language than ours. In other words, our position is substantially that as expressed by the Director of the Bureau of the Budget.

We feel that under the act as originally passed, particularly with the amendment embodied in Public Law 754, 81st Congress, that the Federal Property Act is paramount to the stock-fund provisions. (See formal legal opinion of February 18, 1955, of General Counsel of General Services Administration, on this point, appendix II, p. 315.) I recognize that lawyers will differ.

When Mr. Jonas last year was on the Appropriations Committee, he used to ask me why we had so many lawyers in General Services

Administration. Well, one of the reasons is that lawyers among the executive branch differ in their interpretations, and we have to spend a lot of time and work on these things. For that reason, we welcome this legislation in order to clarify beyond all doubt the intent of the Congress and to stop the lawyers' arguments so that then perhaps we will not need so many lawyers in the next period, until the next disagreement arises.

There are a couple of comments that I would like to make, if I might, sir, that I do not believe were touched upon.

One is in connection with restrictions.

Section 5 of the bill as it now reads relates apparently only to restrictions and conditions imposed prior to the enactment of the bill as law.

We in General Services Administration have had some limited experience in compliance on restrictions, because as has been testified previously, under some of the other laws, the compliance activity was inherited by General Services Administration.

Frankly, we found that from our limited experience, and we cannot speak for HEW, the cost of compliance is not worth the gain. It is unworkable and somewhat unrealistic.

Therefore, we would very frankly recommend the elimination of these particular restrictions on particular property, but in lieu thereof, so that you would not lose all Federal control, we would suggest that the Congress vest in the Secretary of Health, Education, and Welfare an affirmative authority to suspend a State from the donable property list for periods of time when it appears to the Secretary that the State was not making proper use of the property donated.

In other words, as we look at it, the end result would be a self-policing proposition on the States, and if the State had a bad actor, I just feel that the State will know how to take care of its own bad actors.

At the same time, the Secretary of Health, Education, and Welfare would have authority to call in the State if a State got out of bounds, or if a State failed to police itself, and say, "Look, boys, you are getting out of bounds," or, "Some of your people are, get your house cleaned, or we will have to suspend you from the list until you do remedy the situation."

That would be our suggestion, sir, for the handling of the restrictions provisions.

One other aspect that I would like to touch upon, that is, we feel the same considerations that apply to stock-fund property with reference to the donation program should also apply to utilization of excess property.

Mr. MCCORMACK. Do you mind if we interrupt? I am sure that Mr. Jonas, after we had a little colloquy, both of us have a meeting of the minds. Would you want to ask him some questions on that suggestion of his?

Mr. JONAS. I was a bit intrigued at all of this authority that you want to give the Secretary of Health, Education, and Welfare to control the States.

Mr. McCORMACK. To convict the States.

Mr. JONAS. To convict them; yes. [Laughter.]

Mr. ELLIOTT. On the contrary, sir; I am afraid I did not make my point clear. The Secretary presently does have that authority. I was merely suggesting that the Congress make this point clear by specific

reference. The point is that now under the present regulations, as was brought out by Mr. Barry this morning, restrictions are placed on particular pieces of property in their use, and the Federal Government, through HEW, has to go out of the State, to the local school board in the individual school district, and see if they are using that properly. And what I was suggesting is that that individual policing of particular property be left to the States, and that the Secretary's sole remedy be in effect to deal with the State and to require the State to police its own house and keep it in order.

Mr. JONAS. You mean instead of undertaking to exercise any police powers over the institution that it would deal directly with the State? Mr. ELLIOTT. That is correct, sir.

Mr. McCORMACK. You would not go so far as to suspend the State getting the benefits? Is not your idea, your suggestion, more on policing by the State, retaining the power where there is individual violations, too, through the State, to reach those individual violations, rather than saying to an entire State that, "Your benefits under this program are suspended for a week or 2 weeks or a month"?

If you did that, we would have another revolution.

Mr. ELLIOTT. Mr. Chairman, it has been done in other programs, as you know, sir.

Mr. McCORMACK. I know, but there is a difference-this is much different.

Mr. JONAS. It is not as satisfactory to the States in the others; is it? Mr. ELLIOTT. I just feel that under the present system compliance by the Federal Government-at least it has been our experience—is inadequate because you do not have the staff and you cannot get the appropriations for the staff to police every individual piece of property that goes to every institution. At the same time, as long as that primary responsibility is vested in the Federal Government I am not sure that the States, not having the responsibility, are fully as diligent in keeping their own house in order as they might be.

I am suggesting, therefore, do not divide the responsibility-make the state responsible for the individual violations-but give the Secretary of Health, Education, and Welfare a little bit of a sanction on the State to see that it is done.

Mr. McCORMACK. If you have that in mind, instead of imposing punishment upon a State as such, and all of the political subdivisions, and all of the colleges and the hospitals and the schools that are the beneficiaries under this program, would it not be more consistentI am just exploring now, I am not challenging what you have saidwith your suggestion that the Secretary of Health, Education, and Welfare would have the power where there is a noncompliance to a point where action should be taken to direct the State in relation to the particular beneficiary within a State, to say whether it is a college or a hospital, that any suspension of the benefits should apply to the violator?

Mr. ELLIOTT. I think there again you are putting the Federal Government back into the individual compliance business. If I can use an analogy-and like all analogies it has many flaws-I think in our small law office in General Services Administration, if some of the individual attorneys make mistakes of law, draft bad documents, it does not seem to me that it is up to Mr. Mansure, the Administrator,

to go down himself and find that out and impose the sanctions on the particular lawyers.

He looks to me, and he says to me, "Max you get your law office in order or we will get somebody else who can keep it in order."

It was that sort of relation that I was suggesting.

Mr. JONAS. May I interrupt there to ask a question?

Mr. ELLIOTT. Yes.

Mr. JONAS. This subject is pretty new to me. Why can we not trust the States with this problem? We give as the reason, one of the reasons, for this approach that this money was taken from the States in the first place. The property belongs to the people. If we cannot trust the States, why should we trust somebody working for the Federal Government to do it correctly? Why can we not just allocate this property to the States on some basis and let them administer it?

Mr. ELLIOTT. Could Mr. Thomas answer that question?

Mr. JONAS. Yes; anybody who can.

Mr. ELLIOTT. He is the operating man. He knows more about operations than I ever will.

Mr. THOMAS. I go back to what Mr. Ward said earlier this morning that we are only custodians of the property.

My own personal opinion is that you can trust the States and that you can trust a Federal employee.

I believe as custodians, however, of this property, being a Federal employee, that we should have some means, or there should be some means developed-I am open to exploring it-for being able to work with the State, turning the property over to them, and that from there on the State picks up the responsibility.

Mr. McCORMACK. Are there any further questions?

Mr. JONAS. That was the only question I had.

Mr. McCORMACK. Would you be willing to have representatives of your legal staff cooperate with the committee through its staff member and the other representatives of the legal divisions of the other agencies in discussing this?

Mr. ELLIOTT. We would be very happy to do so.

Mr. McCORMACK. I do not see that there are many points of difference. As a matter of fact, the area of difference has been reduced considerably.

Mr. ELLIOTT. We would be very happy to work with the staff. I would like to make two quick comments, if I might, that they might consider.

One, I think it should be made clear that property that is in trust funds and by trust funds I am talking about money that is derived from private sources, such as the Railroad Retirement Board fundsshould not be subject to donation. There are not many of them around the Government, but there is property involved which is not the property of all of the taxpayers. It is the property of certain individual groups. There is some property of the Federal Reserve Board, also, which is another example. It is that type of thing that I refer to. They are presently excepted in the act. I think that exception should be continued.

Mr. McCORMACK. That would be section 4, the protective feature! Mr. BARRY. Does that become surplus?

Mr. ELLIOTT. That type of property becomes surplus. It does become surplus.

Mr. McCORMACK. We will keep that in mind.

Mr. ELLIOTT. The bill is not clear on that point.

The other point that I would like to make, sir, is that we feel that the same considerations regarding availability of stock-fund property should apply not only to donations, but also to the use of excess property by other Federal agencies. In other words, under the present law, as we look at it, all property, including stock-fund property, is available for transfer, for use among Federal agencies. (See appendix II, p. 313.)

This is Federal use before it ever becomes surplus.

The extent of reimbursement for transfer of excess property is determined by regulations of the Administrator, as approved by the Director of the Bureau of the Budget. We would like to make it clear in any amendment that stock-fund property is not exempted from that general rule, but is subject to it, just as well as all other properties.

We think the same reasons apply to both. As long as the committee is considering this whole subject, it might be well to clarify the intent of the Congress on that point, also.

Mr. McCORMACK. General Services has always supported the donor program?

Mr. ELLIOTT. Yes, sir; we have.

Mr. McCORMACK. And you strongly urge action that will insure its integrity and continuance in the future?

Mr. ELLIOTT. That is correct, sir.

Mr. THOMAS. I would like to add a little bit of information on trust funds. I can speak from experience because I have been in a field office operating the donable-property program.

There is very little property that does become surplus that would be of any great interest, I believe, to the educational people in the properties developed out of trust funds, so that it would not cause too much of a problem there.

Mr. McCORMACK. In other words, if I follow what you have just said, it is so negligible that we had better not try to legislate on the subject in any new bill.

Mr. THOMAS. That is correct.

Mr. McCORMACK. But to proceed under the organic act as it now exists?

Mr. THOMAS. That is right.

Mr. WARD. May I ask a couple of questions?

Mr. McCORMACK. Yes.

Mr. WARD. Have you made a study of the operation of section 201 (c) with respect to the exchange provision of the act, or has anyone in your agency?

Mr. THOMAS. We have.

Mr. ELLIOTT. Could you answer that question?

Mr. THOMAS. I can answer it, but I would like to have Mr. Tuttle answer it, who has been working with that section in developing a very detailed regulation which is a revision to a regulation that we have out. Mr. WARD. I will repeat my question. Have you made a detailed study of the operation of the exchange provision, that is, section 201 (c) of the Federal Property and Administrative Services Act; do you