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to meeting with Mr. Lioeanjie and Mr. Gaskins as well as Mr. Tal Simpkins, in all of the hearings we have had, both here as well as in Panama, and we have always felt as though they have been very objective and analytical in their presentation, and have given us good guidance.

I am very happy to see that you are working cooperatively with the gentleman whose achievement I referred to, Governor Parfitt, who is doing, as I said in my opening statement, an oustanding job. I think you make a good team.

With that in mind, I want to express our thanks to all of the members of your panel for being with us, and for being so tolerant.

I am sure that you could understand that with the Governor on the witness stand and with the Assistant Secretary, Mr. Veysey, that we could not have rushed through the testimony any sooner. We would like to have been adjourned not later than 5 o'clock, but it was important that we finish the hearings, and we appreciate your tolerance and understanding.

With that, we express our thanks to you, and the meeting stands recessed until 10 o'clock, tomorrow morning.

Thank you very much.

[Whereupon, at 5:50 p.m., the subcommittee meeting recessed, to reconvene at 10 a.m., Wednesday, April 7, 1976.]

PANAMA CANAL FINANCES

WEDNESDAY, APRIL 7, 1976

HOUSE OF REPRESENTATIVES,

COMMITTEE ON MERCHANT MARINE AND FISHERIES,
SUBCOMMITTEE ON THE PANAMA CANAL,

Washington, D.C.

The subcommittee met, pursuant to recess, at 10:05 a.m., in room 1334, Longworth House Office Building, Hon. Ralph H. Metcalfe (chairman of the subcommittee) presiding.

Mr. METCALFE. The recessed hearings of the Subcommittee on the Panama Canal will please come to order.

Madam Chairman and members, ladies and gentlemen, this is the second day of what we hope are very productive hearings on the finances of the Panama Canal.

Yesterday the subcommittee heard from the Governor of the Canal Zone and the Assistant Secretary of the Army, as well as the National Maritime Union, whose president could not be here today.

The Treasury Department and the General Accounting Office will file statements for the record of these hearings, and so we will have all the additional Executive agency comments from them.

Today we have another group of distinguished witnesses. Arthur Andersen & Co., very well known financial experts, will lead off our testimony.

We have the American Institute of Merchant Shipping, a key organization representing canal users, who will follow.

The third witness today will be Sea-Land Service, one of the carriers which are major users of the canal.

We will also hear from various labor organizations, represented by their leaders in the Canal Zone locals, as well as by the national representatives.

Since we have so many groups representing organized labor interests today, we have decided to ask that each labor group limit their testimony to ten minutes, and with unanimous consent we will proceed to hear each of the groups and their representatives, and we shall not attempt to unduly interrupt their presentations.

Following all their presentations the representatives of all the labor groups, whom we will ask to sit at the witness table as a panel, will discuss the canal's financial problems, and how this matter relates to them and their organizations.

We also will hear from the Civic Councils of the Canal Zone. I want to emphasize that the subcommittee is intent in its desire. to help solve these financial and employee problems. We want to listen closely to all the groups who come before us.

Now that we have set the stage for today's deliberations, let us welcome Mr. Leonard J. Kujawa and Mr. Donald Kane, unless the ranking minority member from Kentucky, or Madam Chairman, have anything that they would like to offer at this point.

Mrs. SULLIVAN. I have nothing.

Mr. SNYDER. I have no statement.

Mr. METCALFE. Then may we hear from you, Mr. Kujawa and Mr. Donald Kane?

Please identify yourselves for the record.

STATEMENT OF LEONARD J. KUJAWA, PARTNER IN ARTHUR ANDERSEN & CO., CERTIFIED PUBLIC ACCOUNTANTS, ACCOMPANIED BY DONALD V. KANE, PARTNER IN THE WASHINGTON, D.C. OFFICE

Mr. KUJAWA. My name is Leonard J. Kujawa. I am a partner in Arthur Andersen & Co. I am a certified public accountant, and am a member of the American Institute of Certified Public Accountants and several other professional societies and organizations. My entire 20 years of professional experience have been concerned with rate regulated public utilities and major governmental organizations. My clients include some of the largest public utilities in the United States. I am accompanied by my partner Mr. Donald V. Kane, who is a member of our Washington office, dedicated to rendering professional services to departments and agencies of the U.S. Government.

As a matter of further background I have been a consultant to the Panama Canal Company on various financial and accounting matters since 1962.

As an expert witness I previously testified before this committee on two occasions, and it is a pleasure that I appear before you again at your invitation.

My firm, Authur Andersen & Co., is an international firm of independent public accountants with 49 offices in the United States, and 57 offices in 34 other countries. Our personnel number in excess of 14,000. We serve approximately 50,000 clients, and are among the largest of public accounting firms in the world.

Our relationship with the Panama Canal Company started in 1951 when we assisted in the determination of the initial accountability for the property which was to be assumed by the newly formed federally chartered Panama Canal Company. Our work for the Panama Canal Company has included tolls, tonnage systems, computerization programs, and the subject of my testimony this morning, which is accounting and financial matters.

My testimony and the summarization I will give this morning are in the interest of time, and therefore I request that my prepared testimony become a part of the record at this point in these hearings. Mr. METCALFE. Without objection, it is so ordered.

[The following was received for the record:]

PREPARED STATEMENT OF LEONARD J. KUJAWA OF ARTHUR ANDERSON & Co.

My name is Leonard J. Kujawa. I am a partner in Arthur Andersen & Co. I am a certified public accountant and am a member of the American Institute

of Certified Public Accountants and several other professional societies and organizations. My entire 20 years of professional accounting experience has -been concentrated on work for rate-regulated utilities and governmental organizations. Among private companies I have responsibility for my firm's work for the railroad industry and my clients include United Air Lines, Chicago and North Western Transportation Company and several other major rate-regulated utilities. In the governmental sector I had responsibility for my firm's substantial engagement as financial and accounting advisors during the organization phase of Amtrak and I am responsible for my firm's work for the Chicago Board of Education and several other government clients. Regarding the Panama Canal Company, I have been a consultant on various financial and accounting matters since 1962. As an expert witness I have previously testified before this Subcommittee on two occasions regarding toll matters. In addition, I have testified before various Federal and state regulatory bodies, Federal courts and the National Arbitration Board.

I am accompanied by Mr. Donald V. Kane, a partner in our Washington, D.C., office. Mr. Kane joined the firm in 1945. He is a certified public accountant in Maryland and numerous other states, a member of the American Institute of Certified Public Accountants, the American Accounting Association and numerous other professional organizations. He is a member of the Greater Baltimore Committee, the Chamber of Commerce of Baltimore and other civic organizations. Mr. Kane is a member of our Washington, D.C., organization dedicated to rendering professional services to departments and agencies of the United States Government. He has had extensive practice in the areas of operating and capital cost studies, capital financing programs, subsidy evaluations, shortand long-range rate-making studies, cost accounting principles, financial reporting and information systems and electronic data processing, and has provided expert testimony to many different levels and types of government agencies and courts on these matters.

Arthur Andersen & Co. is an international firm of independent public accountants with 49 offices in the United States and 57 offices in 34 other countries. Our personnel number in excess of 14.000. We serve approximately 50,000 clients and are among the largest of public accounting firms in the world. Our relationship with the Panama Canal Company started in 1951 when we assisted in the determination of the initial accountability for the property which was to be assumed by the newly formed Federally chartered Panama Canal Company. Of more immediate significance is the work we have done through continuous engagements for the Company from 1962 to the present time. Following is a brief description of some of our work:

1. We have consulted with the Company and prepared extensive studies to determine the most appropriate method to assess tolls on individual ships for the use of the Panama Canal.

2. We have performed an evaluation of the universal measurement system developed by the Inter-Governmental Maritime Consultive Organization, an agency of the United Nations. The universal measurement system is now in the final adoption process by the various governments of the world as a replacement for existing national tonnage systems. It should be considered as a possible substitute for the Panama Canal and Suez tonnage systems which have been separately developed as a basis for assessing ships for the use of these respective canals. Our studies involving an evaluation of the possible problems for canals and ports in adopting the universal measurement system are the most extensive of any studies available in the world.

3. We recently assisted in the change in the level of tolls to reflect increased costs of operation. This was the first toll increase in the history of the Panama 'Canal.

4. We assisted the Company in the initial feasibility studies regarding computerization of many data processing activities. This included the selection of a computer, the training of personnel and the application of computer-based systems to the many diverse activities of the Panama Canal.

5. We assisted in developing its management reporting system for the purpose of controlling and reporting costs to all levels of management.

6. We have reviewed certain of the Company's accounting policies with respect to cost recognition. Such reviews principally focused upon the adherence of such policies to generally accepted accounting principles, considering that the Company is similar to a rate-regulated public utility from a legal viewpoint.

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