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WAKEFIELD B. WALKER,

Manager, Property Utilization Section,
Department of Finance and Administration, Salem, Oreg.

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DEAR MR. WALKER: The Special Donable Property Subcommittee of the Government Operations Committee will hold hearings beginning Tuesday, April 3, 1962, at 10 a.m., in room 1501-B, New House Office Building. The purpose of the hearing will be to evaluate the effectiveness of the present donable surplus property program as authorized by the Federal Property and Administrative Services Act, Public Law 81-152, as amended.

As president of the National Association of State Agencies for Surplus Property you are invited to testify on behalf of your national association, particularly on the following points:

(a) Benefits to education, health, and civil defense donees.

(b) Problem areas in administering the program from the States point of view.

(c) Suggestions, if any, for improving the program.

It will be appreciated if your prepared statement (50 copies), can be available for the subcommittee by April 2, 1962.

Your staff may communicate with Ray Ward, staff administrator, room 502, George Washington Inn, phone Capitol 4-3121, extension 5220, concerning any additional details relating to the hearing.

Sincerely yours,

JOHN S. MONAGAN, Chairman.

MARCH 26, 1962.

Dr. ALAN S. WILSON,

Vice Chancellor for Administration,
University of Hartford, Hartford, Conn.

DEAR MR. WILSON: The Special Donable Property Subcommittee of the Government Operations Committee will hold hearings beginning Tuesday, April 3, 1962, at 10 a.m. in room 1501-B, New House Office Building. The purpose of the hearing will be to evaluate the effectiveness of the present donable surplus property program as authorized by the Federal Property and Administrative Services Act, Public Law 81-152, as amended.

It is the desire of the subcommittee to get some testimony from recipient institutions as to the effectiveness of the donable surplus property program. I understand that you have recently made a presentation of this nature and therefore I invite you to appear and express your views to the subcommittee. Your staff may communicate with Ray Ward, staff administrator, room 502, George Washington Inn, phone Capitol 4-3121, extension 5220, concerning any additional details relating to the hearing.

Sincerely yours,

JOHN S. MONAGAN, Chairman.

Mr. MONAGAN. If there is nothing further, gentlemen, we certainly appreciate your cooperation. I believe we have been able to clarify some of the problems in this field. I am confident that it will be helpful to have this up-to-date record of the administration of these programs. I am sure that the committee has been educated difficult as that may seem. Thank you very much.

(Whereupon, at 3:50 p.m., the subcommittee adjourned.)

APPENDIX

APPENDIX 1: LETTER FROM HON. JOHN W. McCORMACK, CHAIRMAN, SPECIAL SUBCOMMITTEE ON DONABLE PROPERTY, TO HON. ABRAHAM RIBICOFF. August 22, 1961

HOUSE OF REPRESENTATIVES,

SPECIAL DONABLE PROPERTY SUBCOMMITTEE OF THE
COMMITTEE ON GOVERNMENT OPERATIONS,

Hon. ABRAHAM RIBICOFF,

Secretary of Health, Education, and Welfare,
Washington, D.C.

Washington, D.C., August 22, 1961.

DEAR MR. SECRETARY: On July 18, 1961, I addressed a letter to the president of the National Association of State Agents for Surplus Property and among other things suggested that:

"***every possible effort should be made to increase the quality of the management of the (donable) program at all levels in order, first, that we take all useful and necessary property which is available and, second, that we make sure that it is allocated and distributed on the most equitable and economical basis possible.

"By this I mean that so far as possible only productive work should be done, at all levels, that costs should be kept at the lowest practicable and that resources should be devoted to the constructive aspects of the program."

In line with this thought and in view of the fact that there are companion bills in both Houses of Congress which would permit the sale of surplus property not needed by the donable program to States and other local governments at 5 percent of acquisition cost I believe it would be most helpful if a survey were made before Congress convenes next January to determine the service charges made by the States and territories participating in the donable program and to analyze the elements of direct and indirect cost involved.

I am sure you will agree that if the service charges should become too high that we would no longer have a donation but a sales program and that, as such, it would be subject to criticism particularly if similar property were sold directly for State and local uses with no strings attached and at a relatively small cost.

It is suggested, therefore, that your very able staff in the Surplus Property Utilization Division, in cooperation with the State agencies survey the situation and report to the Special Subcommittee on Donable Property by January 15, 1962. I would appreciate your comments and suggestions with respect to this matter before the survey itself is initiated.

Sincerely yours,

JOHN W. McCORMACK,

Chairman, Special Subcommittee on Donable Property.

APPENDIX 2: LETTER FROM HON. ABE RIBICOFF, SECRETARY, Department of
HEALTH, EDUCATION, AND WELFARE, TO HON. JOHN W. McCORMACK, SEP-
TEMBER 7, 1961

THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE,
Washington, D.C., September 7, 1961.

Hon. JOHN W. McCORMACK,

House of Representatives, Washington, D.C.

DEAR MR. MCCORMACK: As requested in your letter of August 22, 1961, the Surplus Property Utilization Division will be pleased to undertake an analysis of direct and indirect costs involved in acquiring and distributing surplus Federal property to the eligible health, education, and civil defense donees.

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Experience has demonstrated that the benefits of the program are to a large extent dependent on the effectiveness of the State agencies in acquiring and distributing the available property. At the same time, the cost of the eligible donees is dependent upon economical operations.

We believe that a study of administrative costs is appropriate at this time. We will solicit the cooperation of the National Association of State Agencies for Surplus Property in developing the survey plan and in preparing an analysis.

Sincerely,

ABE RIBICOFF, Secretary.

APPENDIX 3: LETTER FROM HON. IVAN A. NESTINGEN, UNDER SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, TO HON. JOHN S. MONAGAN, APRIL 16, 1962, WITH INFORMATION FURNISHED BY THE SURPLUS PROPERTY UTILIZATION DIVISION

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

Washington, D.C., April 16, 1962.

Hon. JOHN S. MONAGAN, Chairman, Special Subcommittee on Donable Property, Committee on Government Operations, House of Representatives, Washington, D.C.

DEAR Mr. MONAGAN: In my testimony at the hearing before your subcommittee on April 3, 1962, reference was made to a study of service charges and the elements of direct and indirect costs in the operations of the State Surplus Property Agencies. The tabulation of this study has now been completed, and a copy is attached for inclusion in the record of the hearing.

This study covers State agency operations in fiscal year 1961. It sets forth the amounts of property received and distributed in terms of acquisition cost. It also shows total costs of State agency operations and total service charges collected. These elements are then broken down in considerable detail to isolate the various factors which make up the direct and indirect costs, and to provide a basis for evaluating the areas in which lower costs might be achieved.

By way of summary, it may be helpful to set forth the figures on some of the major elements:

1. In the total cost of State agency operations, the two major elements are the direct cost of acquiring property and of distributing property. The cost of acquiring property (inspecting, selecting, transporting, etc.), on an average, amounts to 32.79 percent of total costs, with variations between States ranging from 14.80 percent to 59 percent. Transportation of property is the major factor in this cost, averaging 22.11 percent of total operating costs, with variations ranging from 5.25 percent to 53.41 percent. The cost of distributing property (warehouse operations: salaries, rent, utilities, etc.), on an average, amounts to 35.54 percent of total costs, with variations between States ranging from 11.10 percent to 50.80 percent.

2. Indirect elements of cost have been summarized under the heading of "General Administration". On an average, these costs account for 25.38 percent of total costs, with variations between States ranging from 15 percent to 55.56 percent of total costs.

3. Service charges are shown as a percentage of the acquisition cost of property distributed. On an average, the service charge amounts to 3.78 percent of the acquisition cost of the property, with variations between States ranging from 1.23 percent to 9.72 percent. In connection with service charges, it should be noted that these averages do not mean that this is the charge assessed on each individual item. In setting prices on individual items, obviously it is necessary to take into account the condition and usability of the item; and, on heavy equipment, the cost of transportation must be given special consideration.

It is our conclusion that the collection, tabulation, and distribution of this study provides a valuable medium for the review and evaluation of State agency operating costs. Such use of the material by the Department and the State agencies should result in improved operations at minimum cost to the eligible donees.

Sincerely yours,

IVAN A. NESTINGEN, Under Secretary.

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DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE TABLE 1.-Comparisons-Acquisition costs, total operating costs,

State agency

Property received, fiscal year 1961

Property distributed, fiscal year 1961

SURPLUS PROPERTY UTILIZATION DIVISION

income, liquid assets, fiscal year ended June 30, 1961

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Alaska.

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10, 575, 100 2, 013, 820 2,873, 700 2, 621, 850 41,553, 040 3, 198, 640 4, 516, 180 1,045, 240 1, 102, 780

11, 946, 750

296, 050

2.48

298, 670

2.50

2,560

1,555, 920

84, 320

5.42

77,960

5.01

-6, 360

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Florida

15, 508, 670

16, 411, 410

526, 430

3. 21

599, 300

3.65

Georgia..

6, 753, 010

7,069, 920

281,850

3.99

276, 680

3.91

Hawaii..

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10, 168, 230

318,760

3. 13

316, 670

3.11

-3, 220

Indiana.

7,395, 910

7, 170, 160

174, 040

2.43

195, 320

2.72

21, 290

Iowa..

2,000, 290

2,000, 290

127, 850

6.39

125, 440

6.27

-1, 740

Kansas.

3, 383, 010

2,936, 660

129, 740

4.42

143, 460

4.89

Kentucky

5,706, 740

4,795, 230

250, 100

5.22

295, 160

6. 16

Louisiana..

7,395, 310

7, 249, 130

264, 050

3. 64

231, 150

3. 19

Maine.

Maryland.

2,605, 300

2,483, 760

56, 820

2.29

69,340

2.79

6,896, 320

6, 450, 000

193, 710

3.00

236, 530

3. 67

9, 760 48, 730 -21, 420 9,540 43, 320

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1 Total costs for California include $174,880 of expense of deliveries to donees. The entire net income was refunded to donees.

2 New Jersey and Puerto Rico State agencies operate no warehouses, incur no freight expense (paid by donees), assess no service charges, and operate entirely on appropriated funds.

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