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B-145436, APR. 1, 1965

B-145436 Apr 01, 1965
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ALASKA COMMUNICATION SYSTEM: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 8. WAS SENT TO THE OFFICE OF THE CHIEF OF FINANCE. FOR WHATEVER ACTION WAS DEEMED DESIRABLE BY OUR OFFICE IN VIEW OF THE "INFORMATION" REFERRED TO IN A LETTER DATED APRIL 20. WHICH WAS ENCLOSED. WAS RECEIVED PER YOUR LETTER. 13 FEBRUARY 1962. "2.REVIEW OF THE FACTS AND CIRCUMSTANCES SURROUNDING THE PERIOD AND CONDITIONS COVERED BY THE VOUCHER INDICATES A POSSIBILITY THAT "MATERIAL EVIDENCE OR DETAILED FACTS" MAY HAVE BEEN ABSENT OR INSUFFICIENTLY CLEAR AT THE TIME OF REVIEW. * * * "3. IT IS RECOMMENDED THAT THE CASE BE REVIEWED AND RECONSIDERED IN LIGHT OF THE REMARKS MADE BY THE COMPTROLLER. ARE CONTAINED IN A MEMORANDUM FROM YOU TO THE "F AND A OFFICER.

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B-145436, APR. 1, 1965

TO MR. WALTER E. ROWLAND, COMPTROLLER, ALASKA COMMUNICATION SYSTEM:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 8, 1965, IN WHICH YOU TAKE EXCEPTION TO THE FOLLOWING STATEMENT APPEARING ON PAGE 22 OF OUR DECISION OF AUGUST 1, 1962, B-145436, FROM THE COMPTROLLER GENERAL TO THE SECRETARY OF THE ARMY:

"IN VIEW OF THE FOREGOING, THE ACS COMPTROLLER'S STATEMENT THAT COMMERCIAL BUSINESS HAS BEEN CARRIED ON OVER THE LONG DISTANCE TELEPHONE LINES OF ACS AT A LOSS TO THE TREASURY APPEARS TO BE WITHOUT FOUNDATION IN FACT, EVEN IF IT COULD BE CONSIDERED AS A BASIS FOR DENIAL OF THE SUBJECT CLAIM.'

UNDER DATE OF FEBRUARY 8, 1962, OUR CLAIMS DIVISION ISSUED A SETTLEMENT SHOWING THE AMOUNT OF $7,818.73 TO BE DUE THE CITY OF KETCHIKAN, ALASKA, D/B/A KETCHIKAN PUBLIC UTILITIES (KPU), FOR REDUCED TELEPHONE INTERCONNECTION SERVICES FURNISHED THE ALASKA COMMUNICATION SYSTEM (ACS), UNITED STATES ARMY SIGNAL CORPS, DURING THE PERIOD JUNE 1, 1960, THROUGH MARCH 31, 1961, AND THE VOUCHER AUTHORIZING PAYMENT OF THE CLAIM, STATED IN FAVOR OF KETCHIKAN PUBLIC UTILITIES, WAS SENT TO THE OFFICE OF THE CHIEF OF FINANCE, UNITED STATES ARMY, FIELD DIVISION, INDIANAPOLIS, INDIANA, BY TRANSMITTAL NO. 81010, DATED FEBRUARY 8, 1962. ON FEBRUARY 13, 1962, THE OFFICE OF THE CHIEF OF FINANCE FORWARDED THE VOUCHER FOR PAYMENT TO THE FINANCE AND ACCOUNTING OFFICE, ALASKA COMMUNICATION SYSTEM, SEATTLE, WASHINGTON. HOWEVER, BY LETTER OF APRIL 24, 1962, THE U.S. ARMY FINANCE CENTER, INDIANAPOLIS, RETURNED THE VOUCHER TO OUR CLAIMS DIVISION, UNPAID, FOR WHATEVER ACTION WAS DEEMED DESIRABLE BY OUR OFFICE IN VIEW OF THE "INFORMATION" REFERRED TO IN A LETTER DATED APRIL 20, 1962 (SIGAK-CC 5), FROM THE FINANCE AND ACCOUNTING OFFICER, U.S. ARMY, ALASKA COMMUNICATION SYSTEM, SEATTLE, TO THE COMMANDING GENERAL, U.S. ARMY FINANCE CENTER, INDIANAPOLIS, WHICH WAS ENCLOSED. THE LETTER OF APRIL 20, 1962, STATED IN PART:

"1.THE ATTACHED VOUCHER FOR $7,818.73 IN FAVOR OF THE KETCHIKAN PUBLIC UTILITIES, CERTIFIED BY THE COMPTROLLER GENERAL FOR PAYMENT, (INCL 1), WAS RECEIVED PER YOUR LETTER, FILE FINCY, SUBJECT: VOUCHER APPROVED FOR PAYMENT, 13 FEBRUARY 1962.

"2.REVIEW OF THE FACTS AND CIRCUMSTANCES SURROUNDING THE PERIOD AND CONDITIONS COVERED BY THE VOUCHER INDICATES A POSSIBILITY THAT "MATERIAL EVIDENCE OR DETAILED FACTS" MAY HAVE BEEN ABSENT OR INSUFFICIENTLY CLEAR AT THE TIME OF REVIEW. * * *

"3. IT IS RECOMMENDED THAT THE CASE BE REVIEWED AND RECONSIDERED IN LIGHT OF THE REMARKS MADE BY THE COMPTROLLER, ALASKA COMMUNICATION SYSTEM (INCL 2).'

THE "REMARKS" MADE BY YOU, REFERRED TO IN THE ABOVE LETTER, ARE CONTAINED IN A MEMORANDUM FROM YOU TO THE "F AND A OFFICER," DATED APRIL 6, 1962, WHEREIN IT IS STATED:

"5. * * *

"B. NO BENEFIT TO THE GOVERNMENT. * * * AS REPEATEDLY EMPHASIZED BY THE COMMANDING OFFICER, ACS DOES NOT ENCOURAGE INCREASED USE OF THE TELEPHONE FOR LONG DISTANCE PURPOSES: MORE ,COMMERCIAL BUSINESS . . . OVER THESE MILITARY LINES" SIMPLY MEANS MORE WORK-LOAD FOR THE ARMY--- WORK-LOAD NOT RELATED TO THE ARMY MISSION OF DEFENSE, AND CARRIED ON AT A LOSS TO THE TREASURY OF SEVERAL MILLION DOLLARS ANNUALLY.

"C. RATES. * * * COMMERCIAL LONG LINES COMPANIES' RATES MAY COVER ALL COSTS FROM ORIGINATING TELEPHONE TO TERMINATING TELEPHONE, BUT ACS RATES DO NOT EVEN COVER THE COST OF THE LONG LINES SERVICE PROVIDED BY ACS ITSELF. SPECIFICALLY, ACS RATES DO NOT TAKE INTO ACCOUNT OR INCLUDE ANY AMOUNTS FOR ALLOCATION TO LOCAL COMPANIES' EQUIPMENT COSTS.'

IN THE MEMORANDUM OF APRIL 20, 1962, YOU ALSO STATED THAT ACS HAD ALLOWED KPU'S TELEPHONE EXCHANGE FACILITIES TO REMAIN CONNECTED WITH THE ACS TOLL FACILITIES BECAUSE THE MAYOR OF KETCHIKAN HAD SPECIFICALLY REQUESTED THE COMMANDING OFFICER OF ACS "TO CONTINUE THE CONNECTION SO THAT THE PEOPLE OF THE CITY WOULD HAVE A MORE ACCESSIBLE AND CONVENIENT MEANS OF "CONTACT WITH THE OUTSIDE WORLD.'"

IN OUR DECISION, WE SET FORTH FULLY OUR FINDINGS RELATIVE TO THE CIRCUMSTANCES UNDER WHICH KPU'S TELEPHONE EXCHANGE FACILITIES HAD BEEN ALLOWED TO REMAIN CONNECTED WITH THE ACS TOLL FACILITIES. IN SUM, WE STATED THAT THE FACTS DISCLOSED BY OUR INVESTIGATION RELATIVE TO THIS PHASE OF THE MATTER FORMED NO BASIS FOR REVERSING OUR CONCLUSION THAT THE ACTIONS OF THE CONTRACTING OFFICER IN ACCEPTING THE INTERCONNECTION (SWITCHBOARD) SERVICES DURING THE TIME NEGOTIATIONS AND AN AUDIT WERE IN PROGRESS TO DETERMINE THE VALUE OF THE SERVICES CONSTITUTED CIRCUMSTANCES FROM WHICH A CONTRACT TO PAY THE REASONABLE VALUE THEREOF MUST BE IMPLIED IN FACT.

IN YOUR PRESENT LETTER, HOWEVER, YOUR CRITICISM OF THE DECISION IS DIRECTED TOWARD THE STATEMENT THEREIN THAT "THE ACS COMPTROLLER'SSTATEMENT THAT COMMERCIAL BUSINESS HAS BEEN CARRIED ON OVER THE LONG DISTANCE TELEPHONE LINES OF ACS AT A LOSS TO THE TREASURY APPEARS TO BE WITHOUT FOUNDATION IN FACT.'

YOU STATE THAT, AS COMPTROLLER OF THE ALASKA COMMUNICATION SYSTEM FROM 1958 TO 1965, YOU HAVE ISSUED MANY STATEMENTS THAT ACS OPERATES AT A LOSS TO THE UNITED STATES TREASURY; THAT YOU STILL ISSUE SUCH STATEMENTS; AND THAT YOU "HAVE NEVER BEEN AWARE THAT ANY GAO AUDITOR, OR ANY ARMY AUDITOR, OR ANY AIR FORCE AUDITOR, OR ANY MIDDLE WEST ACCOUNTANT, OR ANY ACS ACCOUNTING AND FINANCE OFFICER, OR ANY ACS ACCOUNTANT, OR ANY ACS COMMANDER, OR MY PREDECESSOR AS ACS COMPTROLLER, U.S. ARMY COLONEL HENRY F. SCHNEIDER, OR ANY KEY ACS EMPLOYEE OF ANY KIND, EVER HELD OR EVER EXPRESSED THE OPINION THAT ACS OPERATES WITHOUT LOSS TO THE TREASURY.'

THE STATEMENT IN THE DECISION TO WHICH YOU OBJECT FOLLOWS A SIX PAGE SUMMARY OF TESTIMONY BY OFFICIALS OF THE ARMY SIGNAL CORPS BEFORE CONGRESSIONAL COMMITTEES IN SUPPORT OF APPROPRIATIONS REQUESTED FOR OPERATION OF THE ALASKA COMMUNICATION SYSTEM, INCLUDING SPECIFICALLY THE TESTIMONY OF MAJOR GENERAL E. F. COOK, DEPUTY CHIEF SIGNAL OFFICER, AND MR. M. C. WEST, ACTING COMPTROLLER, SIGNAL CORPS, AT THE HEARINGS HELD BY THE SUBCOMMITTEE OF THE HOUSE COMMITTEE ON APPROPRIATIONS, 87TH CONGRESS, 1ST SESSION, ON DEPARTMENT OF DEFENSE APPROPRIATIONS FOR THE FISCAL YEAR 1962. DURING THESE HEARINGS, GENERAL COOK OBJECTED TO THE DIFFERENCE OF $1.3 MILLION BETWEEN ANTICIPATED RECEIPTS AND COSTS OF OPERATION OF THE SYSTEM BEING CHARACTERIZED AS A LOSS, POINTING OUT THAT COMMUNICATIONS SERVICES WERE FURNISHED TO ALL GOVERNMENT AGENCIES WITHOUT CHARGE OR REIMBURSEMENT. A REQUESTED REPORT FURNISHED BY GENERAL COOK ESTIMATED THE VALUE OF SUCH FREE SERVICES FURNISHED IN FISCAL YEAR 1960 AT $3,041,554, OF WHICH $2,356,294 WAS FURNISHED FOR DEFENSE AGENCIES.

WE BELIEVE IT IS QUITE CLEAR FROM THE DECISION THAT THE STATEMENT OBJECTED TO BY YOU WAS MADE IN THE CONTEXT OF THIS TESTIMONY AND IN CONFORMITY WITH THE POSITION OF THE DEPUTY CHIEF SIGNAL OFFICER THAT THE COST TO THE TREASURY OF SUPPLYING COMMUNICATIONS SERVICES TO GOVERNMENT AGENCIES SHOULD NOT PROPERLY BE CONSIDERED AS A LOSS TO THE TREASURY. HOWEVER, IT IS OUR PRESENT UNDERSTANDING THAT THE INFORMATION QUOTED FROM THE SUBCOMMITTEE HEARINGS DID NOT INCLUDE COSTS RELATING TO MILITARY PAY ASSIGNED TO THE ALASKA COMMUNICATIONS COMMISSION, NOR DEPRECIATION. UNDER THE CIRCUMSTANCES THE STATEMENT CONCERNING YOUR POSITION BEING WITHOUT FOUNDATION IN FACT MAY NOT BE CORRECT AND THE DECISION IS MODIFIED TO THAT EXTENT.

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