OCEANOGRAPHY 1961 — PHASE 3 335 



grants are concerned and report to us. Even if GAO does not do it, 

 the National Science Foundation at some point will, 1 am certain. 



Mr. Bauer. When did this start ? 



Mr. RuTTENBERG. I believe they actually began to go out to the in- 

 stitutions within the past year. I know that there are at least six or 

 eight where audits have been made beginning in a circle with Wash- 

 ington as the center. They started m the Washington area with 

 Maryland, George Washington, and so on. They have been at Rut- 

 gers, the University of Pennsylvania, or they may be there now, and 

 one or two other institutions. This circle is going to expand as they 

 get more experience and more people. 



Mr. Bauer. I am very much interested, and I think the committee 

 is, in how do you maintain financial management that the Navy has 

 been doing for years very successfully, if the program of financial 

 management of your grants has just started this year, and you have 

 granted in excess, since you started, of some $500 million. 



Mr. RuTTENBERG. If I may speak to that, Mr. Bauer, your state- 

 ment is not quite accurate. What I was referring to is actual on-the- 

 site audits. We have had auditors on our staff all along and they go 

 over these financial statements on a regular basis. Wliat I am speak- 

 ing of now is the actual on-the-site audits. 



Mr. Bauer. That is what I am referring to. 



Mr. RuTTENBERG. Yes. 



Mr. Bauer. What is your policy with respect to depreciation of 

 capital assets created by your gift ? 



Dr. Robertson. I do not believe we have a policy which we impose 

 on the institution in that respect. 



Mr. Bauer. In other words, if an institution receives a $10 million 

 ship or a $7 million ship, is it going to depreciate it, or carry it for- 

 ever as a capital asset at cost ? 



Dr. Robertson. As far as I know, and this is not a field in which 

 I am qualified, the individual institutions have their own standard 

 bookkeeping systems, including depreciation formulas, and we per- 

 mit them to apply those procedures to the property which we give 

 them. 



Mr. Bauer. If they do not depreciate the ship and carry it at the 

 cost, then when the ship is no longer useful, they would have no 

 reserve for replacement of the ship, and that means then that you will 

 have to buy them a new ship, is that it ? 



Dr. Robertson. Any proposal for a new ship would be considered 

 on its own merits. I think your implication that there should be de- 

 preciation on ships included in the financial statements of these in- 

 stitutions is correct. 



Mr. Bauer. In other words, you favor the depreciation of the ship 

 after the gift to the institution ? 



Dr. Robertson. That would seem to me a proper procedure, but I 

 am not skilled in the art of accountancy. 



Mr. Bauer. Do you not think it is important that the National 

 Science Foundation have a policy as to whether depreciation is con- 

 cerned, because you will remember Mr. Fye's testimony. He was un- 

 decided as to whether he should depreciate the ship or not. 



Mr. Ruttenberg. Mr. Bauer, we have been discussing this problem 

 and the matter is not settled as to how this should be handled. 



