TESTIMONY OF MR. L. H. WILSON, OF OLIVIA, MINN., SECRETARY OF THE NATIONAL RURAL LETTER CARRIERS' ASSOCIATION. Mr. BROWN. I want to ask Mr. Wilson one question. You have been sworn, have you not? Mr. WILSON. I have. Mr. BROWN. You were present at the convention at Little Rock, Ark.? Mr. WILSON. Yes. Mr. BROWN. What was your impression as to the standing of Paul Lindsey at the Little Rock convention? Mr. WILSON. Well, practically the same as stated by Mr. McMahon. He had friends there, very warm friends of his, and there were other carriers there that did not like him; in fact, they were not friends of his; that was all. Mr. BROWN. Which predominated, his friends or those who were not so friendly toward him? Mr. WILSON. Judging from the result of the convention on the election of officers, which followed at the close of the meeting, I do not think that his friends were in the majority. Mr. BROWN. Did you hear any criticism of Mr. Lindsey's conduct at the Little Rock convention? Mr. WILSON. Considerable; yes, sir. Mr. BROWN. He was a more popular man when he went to Little Rock than he was when he left, was he not? Mr. WILSON. Well, as to that I could not say; I do not know whether there was anything done to change the feeling at that time. or not. The principal objection that most people had to his being there, those that did object to it, was the fact that he was taking up a great deal of the time of the convention by speeches on the floor when it was considered he had no right there, inasmuch as he was not an accredited delegate and had not presented credentials from his State organization. Mr. BROWN. He was permitted to take this time by Mr. Frey, the presiding officer of the convention, was he not? Mr. WILSON. That is true. Mr. DE GRAW. Did Mr. Lindsey take any part in the subsequent national convention at Milwaukee? Mr. WILSON. He did. Mr. DE GRAW. Under the presidency of our esteemed friend, Mr. McMahon? Mr. WILSON. Yes. Mr. DE GRAW. There was no objection to the time taken there, was there? Mr. WILSON. Not at all, because he was a delegate. I should just like to say that it seemed to me in the talk here yesterday about this much-discussed Form 55024, in regard to whether or not it was discretionary with the postmasters as to whether they could reduce pay or whether it was obligatory upon them to make reductions, it seems to me that in the table of this form, which is the best evidence in any case, that it is absolutely obligatory upon the postmaster to make those reductions. Mr. DE GRAW. There is no question about that. I have not questioned that at all. Mr. WILSON. I did not think that was brought out yesterday, that was the reason of making my statement yesterday of when I lost time this year on account of the fierce weather. It states in here perfectly plainly that the excuse that roads are slippery or too hard to travel can not be accepted. Now, I did not ask my postmaster to pay me that day's pay for the simple reason I did not think under that rule he had any right to ask for it. Mr. DE GRAW. I think you were pretty nearly right in construing it that way. The circular was not explicit. But the moment it was found not to be as clear as it should be it was revised. Deductions under it are compulsory if the route is not covered. But when it is shown by a postmaster that proper effort had been made by a carrier the amount deducted is invariably remitted, and you admitted yesterday that several of these remittances had been made to carriers in your vicinity. Mr. WILSON. Prior to this order issued. Mr. DE GRAW. The proper action has been taken; they had forgotten it or overlooked it, and as the record shows now under the revised order, it is absolutely essential that every carrier shall be paid if he makes proper effort to serve his route and that effort is reported to the department by the postmaster. In that connection, I want to say to Mr. McMahon and Mr. Wilson, referring to a statement made by Mr. Redfield yesterday, an inquiry made of me in connection therewith and my reply in response thereto, that if they will submit to the department the exact status of their respective cases in which they lost pay through deductions, which I said I believed they had lost unjustly and through misunderstanding, steps will be taken immediately to compensate them for that work. In other words, the amounts of the deductions will be remitted to them through the paying postmaster. Mr. WILSON. It was not a personal matter for me; it was on behalf of all the carriers. Mr. MCMAHON. I just want to state I have never before appeared as a witness; I have been very fortunate in not being around when hearings happened, and questions have been asked me time and again in a way it appeared to me I could not answer them and do justice. I hold Mr. De Graw in the highest regard, and also Mr. Brown, and I would not do either one of them an intentional injustice, and any answer that I may have made that showed any animus or ill will or anything of that sort toward either of them, I say I did not intend it as such, and I did not intend to evade any question. It was not my object to evade. Further hearing adjourned until 10 o'clock a. m., Friday, February 23, 1912. COMMITTEE ON EXPENDITURES, IN THE POST OFFICE DEPARTMENT, The committee met at 10 o'clock a. m., Hon. William A. Ashbrook (chairman) presiding. The following members of the committee were present: Messrs. Alexander and McCoy. There were also present: Hon. P. V. De Graw, Fourth Assistant Postmaster General; Hon. Russell P. Goodwin, Assistant Attorney General for the Post Office Department; and Mr. Charles A. Kram, Auditor for the Post Office Department. TESTIMONY OF MR. CHARLES A. KRAM, AUDITOR FOR THE POST OFFICE DEPARTMENT. The witness was duly sworn by the chairman. Mr. DE GRAW. Mr. Chairman, I believe that we now come to the point where we left off yesterday, where it is the judgment of the Post Office Department that the Auditor of the Treasury for the Post Office Department should explain the matter of the charge that the Postmaster General misstated the financial condition of the Government in his annual report, in saying that it would show a surplus, when, in reality, as the charge claims, there was a deficit, and, as these figures are only obtainable from the Auditor of the Treasury for the Post Office Department, I have requested Mr. Kram, the auditor, to give the department's side of that question. That statement, I believe, Mr. Kram, is correct, is it not? Mr. KRAM. Yes, sir. The CHAIRMAN. The charge having been made in the R. F. D. News that the report of the Postmaster General for the last fiscal year was incorrect, and that, in reality, instead of having a surplus, there is a deficit of some considerable amount Mr. BROWN (interposing). Mr. Chairman, I think it is hardly fair to say that any charges were made. The CHAIRMAN. The statement was printed in your publication. Mr. BROWN. In that statement, I submitted a copy of my letter to the Auditor for the Post Office Department and the auditor's reply, and in view of those two letters and the auditor's statement, I asked if the annual report of the auditor was correct. I do not think anyone can charge that I said in this article that it was incorrect, but I asked whether the statement was correct. The closing paragraph of my article is in these words: "The question is, Have they done so?" That refers to the allegation of the Post Office Department that the department had substituted a surplus for a deficit. The CHAIRMAN. I think in this connection and at this time it would be proper to introduce into the record the article that appeared in the R. F. D. News which brought about this inquiry. Mr. BROWN. It is already in the record in another place, but it might be well to put it in again. I feel that it is proper for me to say further, Mr. Chairman, in explanation of the article in question, that Mr. De Graw in his statement claimed that this was in the nature of another attack, or one of a number of attacks, that the R. F. D. News had made upon the Post Office Department. I want to say, in all truth, that it was not so intended. It was not intended as an attack on the Post Office Department; but, in view of the auditor's statement in his letter to me, I could not see that there really was a surplus in the Post Office Department, and it seemed to me that in calling attention to the matter in the manner in which I did I was rendering a service to every postal employee in the United States. I think no one will doubt that the Postmaster General has an ambition to establish 1-cent first class letter postage; and if you will analyze the revenues of the Post Office Department, it will be fair to assume that the department with a 1-cent letter postage rate would face a loss on the present scale of at least $50,000,000 or $60,000,000 annually, and if we are going to face that loss every year I did not see that any employee in the Postal Service would ever have any chance for recognition or increase in pay for many years to come. That, Mr. Chairman, was the sole object I had in mind when I published that story. Mr. McCoy. Now, it is not a question of a deficit or a surplus; but, as I understand it, so far as your statements are concerned, they turn on this fact, one way or the other that if the expenses incurred during the fiscal year Mr. BROWN (interposing). Which are not taken into account Mr. McCoy (continuing). Are not taken into account, the true status would not be shown. Now, I have read a statement in some Washington paper-and then I read Mr. Britt's statement—and it was not clear to me whether Mr. Britt stated that there were certain arrearages carried over from years prior to the last fiscal year; and these things, when taken into consideration, might make it appear that there was a deficit rather than that there was a failure to take into account indebtedness actually occurring within the fiscal year. Now, as to the year 1910-11, the statement that you make, as I understand it, is that the Post Office Department actually incurred in that year certain indebtedness which would not be met until after the close of that fiscal year? Mr. BROWN. Yes, sir; after the close of the fiscal year. Mr. McCoy. Did that refer to any indebtedness that accrued in years previous to 1910? Mr. BROWN. I will read my letter to Mr. Kram, which will, perhaps, illuminate the subject. Mr. GOODWIN. Pardon me just a moment. Would it not be a good idea, Mr. Chairman, in this connection, to state the page in the record on which this entire article can be found, so that, if any reference is made to it, it can be readily located in the record. Mr. McCoy. It has not been printed, has it? Mr. DE GRAW. I suggest that the entire article go into the record at this point, so that the matter will all be together. Mr. BROWN. I was about to read these letters. Mr. GOODWIN. Well, the letters are a part of the article, and I suggest that the entire matter be inserted in the record at this point. The CHAIRMAN. Let the entire article be inserted in the record at this point. The matter referred to is as follows: DEFICIT OR SURPLUS, IN POSTAL REVENUES CREATED AT WILL BY THE POST OFFICE DEPARTMENT-WANT A DEFICIT? PAY ALL BILLS PROMPTLY--WANT A SURPLUS? WITHHOLD PAYMENT UNTIL AFTER CLOSE OF FISCAL YEAR. For some time past Postmaster General Hitchcock has been given credit for his economical management of the affairs of the Post Office Department. He claims to have changed the time-honored annual deficit in the postal revenues to a surplus by his wise and skillful administration. Has he done so? A busineses concern selling its goods upon a strictly cash basis does $100,000 worth of business within a given period of time. During that period the concern contracts debts amounting to $110,000, $90,000 of which are paid before the close of the period, leaving $20,000 still unpaid. Query: Has the business actually made a profit of $10,000 or a loss of that amount? Apply the same principle to the Post Office Department. In order to ascer tain whether or not the service is self-sustaining, is it proper to take the reve nues for a given fiscal year and deduct therefrom all expenses actually paid up to the close of that fiscal year and call the difference a surplus, regardless of the amount of obligations still outstanding and unpaid; or should the total liabilities contracted during the year, whether paid or unpaid at the close of the year, be charged against the total earnings in order to ascertain whether the department was run at a profit or loss? Shortly after the close of the fiscal year 1911 the Post Office Department joyfully announced that the usual deficit in the postal revenues had been wiped out and a surplus of several hundred thousand dollars created. The report of the auditor for the Post Office Department for the fiscal year 1911 was issued October 7. It showed that up to the close of the fiscal year there was an excess of receipts over disbursements, amounting to $219,118.12. The auditor's report also showed that from July 1 to September 30, 1911, there was paid out on account of the fiscal year 1911, $7,201,149.64, making an apparent deficit of nearly $7,000,000. In order to get at the exact facts in the case the R. F. D. News addressed the following letter to the auditor: Hon. CHARLES A. KRAM, WASHINGTON, D. C., January 11, 1912. Auditor for the Post Office Department, Washington, D. C. DEAR SIR: In looking through your report for the fiscal year, 1911, I find some items which are not entirely clear to me and, as a matter of public interest, I respectfully ask you for some additional information. In table 4, page 07, you show the following: Audited postal revenues to June 30, 1911....... Audited postal expenditures, including losses by burglary, fire, etc.--. Net postal surplus_‒‒‒‒‒ $237,879, 823.60 237, 660, 705. 48 219, 118. 12 As I understand it, this surplus only covers expenditures audited to June 30, 1911. Table No. 12, pages 014 and 015, shows there has been paid by warrant from July 1 to September 30, 1911, $7,201,149.64. In showing the actual business of the Post Office Department for the fiscal year 1911, should not the last-named items be included in expenditures? I also note in Table 4, above referred to, under the head of audited postal expenditures, various items on account of fiscal years previous to 1911, amounting to $7,132,112.23. This amount deducted from the total of $237,660,705.48, shown as audited expenditures to June 30, would leave $230,528.593.25, which, if you add expenditures from July 1 to September 30, $7,201,149.64, would make a total of expenditures up to June 30, 1911, for the fiscal year 1911, $237,729,742.89, which, being deducted from the total revenues, would leave a net surplus of earnings over expenditures of $150,080.71. Is not this correct? The Postmaster General's report for 1910 shows payment on account of previous years, $6,786,394.11. Your report for 1911 shows payment on account of previous years, $7.132,112.23. Can you give the amount of audited accounts for the fiscal year, 1911, from October 1 to date, and can you say what the total outstanding accounts, chargeable to fiscal year 1911 will amount to? Regardless of whether or not any outstanding accounts for the fiscal year 1911 have yet been paid, should not the amount of such accounts be included in your statement in order to show the actual business of that fiscal year? Thanking you in advance for the courtesy of a prompt and full reply, I am, Yours, very truly, W. D. BROWN. AUDITOR'S REPLY. WASHINGTON, January 13, 1912. Mr. W. D. BROWN, Bond Building, Washington, D. C. SIR: Receipt is acknowledged of your letter of the 11th instant relative to revenues and expenditures of the postal service, on account of the fiscal year ended June 30, 1911. In reply you are advised that the postal surplus for the fiscal year 1911 was based on the revenues, expenditures, and losses audited from July 1, 1910, to |