Mr. RALPH. It was the liberty bonds largely. I dropped work, reimbursable work that I would have delivered to the Treasury, to carry on the liberty bond work, and as a result of that I have turned back into the Treasury of the compensation and printing appropriation $200,000. That was unexpended money that was appropriated. and it was turned back because of the fact that I did not execute all of that work. I would have been called upon to print it had we not been called upon to do this other work on the liberty bonds. Nobody appreciates what a task that is. There are 75,000,000 printing impressions to meet the demands for those $2,000,000,000 in liberty bonds. It is in excess of the number of sheets that we delivered to the Treasury in a year's work.

Mr. GILLETT. What I do not quite understand is whether this lack of money was due to the fact that you were printing the liberty bonds, and whether, if you had not done that work, you would have had plenty of money.

Mr. RALPH. No, sir; we would have had a deficiency for materials, due to the fact that the prices have been advancing, added to the fact that we had so much work to do last year. Our annual contracts were not sufficient to meet the demands made upon them. For instance, take the contract for dextrin: The man who makes our dextrin has been furnishing it for less than 7 cents per pound, but when his contract expired I had to pay 10.5 cents a pound for it. I contracted for paper at 6.5 cents per pound, but when the contract expired the price was 11 cents per pound, and I had to buy it in the open market. There are a thousand other things like that in which the cost of materials has increased 100 per cent. That would have made it necessary for me to ask for more money, notwithstanding the fact that I had $200,000 unexpended to go back into the Treasury. If Congress would authorize the transfer of $125,000 from the compensation and plate-printing appropriation, it would cover this. We did not discharge any plate printers, because I am now employing everyone that I can get hold of in the country. I would take 200 men to-morrow. I have had the employers of labor throughout the country jumping on me and saying that I am ruining their business. Employers in Boston, New York, and Chicago are saying that I have taken plate printers away from them; but I did not invite them. I simply advertised through the Civil Service Commission and through labor organizations throughout the country, saying that we would give them 6 months' work, or maybe 9 months' work. It looks to be now like it would be 12 months' work. I did not use the money that Congress authorized me to use in printing notes for the Treasury. We are in an embarrassing position there, but I hope we will get out of it successfully.

The CHAIRMAN. What materials have increased in price?

Mr. RALPH. I will say that linseed oil was bought last year under our contract for 78 cents per gallon, but when our contract ran out I had to pay $1.33 per gallon for it. That is just one thing. I had to buy 75,000 gallons for work in June. Millinet, which is a cotton cheesecloth, cost under our contract 30 cents per pound, but since then I have paid 45 cents per pound for it, and it is now 58 cents per pound. I bought steel plates for 3 cents per square inch, but I am now paying 5 cents per square inch for them. Printers' blankets

have advanced in price 150 per cent, and muslin has advanced 75 per cent. All the way down the list the materials used in the bureau have increased proportionately in cost. I had to buy these materials subject to Congress authorizing an appropriation for them, and I am personally liable for it.

The CHAIRMAN. What is the exact deficit?

Mr. RALPH. $125,000 for materials and miscellaneous expenses.
The CHAIRMAN. That is an ascertained deficit?

Mr. RALPH. Yes, sir. We knew that on the 2d of July, because we could not make a contract. We have an unexpended balance on compensation of $68,000 and on plate printing of $147,000, making a total of $215,000 that I expect to turn into the Treasury as an unexpended balance.

Mr. CANNON. I want to get this straight in my own head: Not having done all of the printing that would have been done under normal conditions, you were left with that amount of unexpended balance to turn into the Treasury, and you have had to do work in the way of printing bonds and other urgent matters beyond the amount of your appropriation?

Mr. RALPH. Yes, sir.

Mr. CANNON. And not having the power to transfer funds from the appropriation for plate printers and from other appropriations to this specific work that you felt you were compelled to do, you went ahead, and the Secretary of the Treasury agreed with you as to that proposition?

Mr. RALPH. Yes, sir; that is right. I want to say that there was machinery which had to be purchased to carry on the bond work, and that could not be foreseen.

The CHAIRMAN. What work has not been done that it was anticipated would be done?

Mr. RALPH. I can not state specifically

The CHAIRMAN (interposing). What class of work?

Mr. RALPH. Notes, silver certificates, gold notes, and miscellane

ous.

The CHAIRMAN. I wish you would fix up a memorandum showing the amount of work in the various classes that was not done, but that was estimated to be done.

Mr. RALPH. Yes, sir. In addition to that, Mr. Fitzgerald, I reduced our stock of faces and backs, in order to get in a stock of bonds. You see we carry a large stock, about 25,000,000 sheets, that is in process of completion, and the 1st of July we had reduced that very materially, which increased the amount of unexpended money for plate printing.

Increase in limit.

DEFICIENCY.

MATERIALS AND MISCELLANEOUS EXPENSES, 1917.

7,000.000 sheets regular revenue stamps, 4,000,000 sheets warrevenue stamps, 200,000 sheets checks, drafts, and miscellaneous, amounting to___

Increase in prices after contracts had expired.

Offset, typographic and power plate presses_

Estimate submitted May 31, 1917.

$50,000

23,000

52, 000

125,000

Linseed oil, $0.78 to $1.33 a gallon.

Millinet, $0.30 to $0.45 per pound.

Steel plates, $0.0324 to $0.05 and $0.055 per square inch.

Printers' blanket, 100 per cent.

Muslin, 60 per cent.

Compensation_

Plate printing

ESTIMATED SURPLUS, 1917.

$68,000

147,000

The CHAIRMAN. I would like to have a statement of the work of the various classes which it was anticipated would be done, but which was not done.

Mr. RALPH. Yes, sir; I will be glad to furnish that.

66

Statement of various classes of work not done, together with the corresponding reductions in expenditures in the 1917 appropriations for Compensation of employees" and for "Plate printing."

Compen- Plate sation. printing.

2,200,000 sheets plate printed less than estimated and a corresponding increase in sheets surface and offset printed.

5,525,000 sheets decrease in stock of money backs and faces..

Unexpended total for 1917..

Saving in part loss of leave, and in overtime cost not bearing any pro rata for leave and holiday pay....

1,818,000 sheets of national bank and Federal reserve bank currency delivered less than estimated....

WORK OUTSIDE BUREAU.

The CHAIRMAN. Is any of this work being done outside of the Bureau of Engraving and Printing?

Mr. RALPH. We are having the documentary stamps done outside

of the bureau.

The CHAIRMAN. Where are they being printed?

Mr. RALPH. In Buffalo, N. Y. It is being done at the rate of about 52,000,000 stamps a day.

The CHAIRMAN. Where is that being done?

Mr. RALPH. In Buffalo.

The CHAIRMAN. Out of what appropriation?

Mr. RALPH. That will be paid out of the appropriation for materials and miscellaneous expenses.

The CHAIRMAN. How can that be done? What authority have you for doing that?

Mr. RALPH. Under authority in the war-tax bill. That permits work that the bureau can not execute to be done outside of the bureau.

The CHAIRMAN. Under which war-tax bill?

Mr. RALPH. Under the one pending in the Senate.

The CHAIRMAN. It is not a law yet.

Mr. RALPH. I know it is not a law. Would you have me to stop that?

The CHAIRMAN. That is unquestionably an absolute violation of the law. It is a violation of the law to use that money for work done outside of the Bureau of Engraving and Printing.

Mr. RALPH. I am doing most of the work with my people. Practically 85 per cent of the employees on this work are my own employees.

The CHAIRMAN. What do you mean by that? That is a plain violation of the law.

Mr. RALPH. Would you have me to discontinue that work now? Would you consider it good business policy to discontinue it?

The CHAIRMAN. I consider it absolutely indefensible for whoever is responsible for it to take money appropriated for work in the Bureau of Engraving and Printing and pay it out for work done on the outside of the bureau in violation of law.

Mr. RALPH. We have not paid it.

The CHAIRMAN. And you can not pay it because the statute prohibits it.

Mr. RALPH. We will not pay it until the bill becomes a law.

The CHAIRMAN. If anybody authorizes it to be done, it is absolutely indefensible. It is the setting up of personal authority in defiance of law. What does this contract amount to?

Mr. RALPH. I do not think it will be over $10,000. It will be in the neighborhood of $10,000 or $13,000.

The CHAIRMAN. How much is the contract for?

Mr. RALPH. It is not for any definite amount.

The CHAIRMAN. The contract is for what?

Mr. RALPH. I do not know how many stamps we will print there. The CHAIRMAN. Please send up a copy of this contract with a statement of the work done under it.

Hon. JOHN J. FITZGERALD,

TREASURY DEPARTMENT,

BUREAU OF ENGRAVING AND PRINTING,
Washington, D. C., July 26, 1917.

Chairman Committee on Appropriations,

House of Representatives.

SIR: In compliance with your verbal request and with further reference to the matter of printing stamps by a private concern discussed in connection with the deficiency estimates, I beg to state that no formal contract has been made with the Niagara Lithograph Co. for the reason that the nature of the work required to be done was such that a fair estimate upon a per thousand stamp basis could not be made by them. At several conferences with their representatives, both here and at their plant in Buffalo, the manner and the conditions under which the work was to be done were discussed and mutually agreed upon, subject, however, to the approval of the Secretary of the Treasury.

On June 5, 1917, I addressed a letter to the Assistant Secretary of the Treasury, Oscar T. Crosby, recommending approval of the informal agreement I had made with the company, which he did by letter of June 6, 1917. A copy of each of these letters is inclosed herewith. The company's representatives were told that the Secretary had approved of our understanding, and work was promptly started under the supervision of this bureau as verbally agreed upon. On June 11, 1917, the company addressed a letter to this bureau embracing an outline of a formal contract which it was expected to enter into with this Company. This letter was quoted in the memorandum I furnished as a part of the hearings. On account of the press of work and on account of not

knowing the cost and volume of work to be done the formal contract had not been made.

The documentary stamps were ordered by the Commissioner of Internal Revenue in a letter addressed to the Secretary of the Treasury on May 15. 1917, and referred to this bureau on May 18, 1917, with instructions to execute the order. A copy of this order is also inclosed herewith.

Relative to postal savings certificates, which this bureau has been printing and binding for the Post Office Department for some time, it was decided. owing to the congested condition in the surface printing division, to relieve that division temporarily of the printing of these certficates and to have the printing done at the plant of the Niagara Lithograph Co., the binding and other work continuing to be done at the bureau, as heretofore.

Respectfully,

J. E. RALPH, Director. TREASURY DEPARTMENT, Washington, June 6, 1917.

Hon. JOSEPH E. RALPH,

Director Bureau of Engraving and Printing,

Treasury Department.

SIR: You recommendation of June 5 is approved and you are authorized to employ the Huebner-Bleistein Co., of Buffalo, N. Y., to prepare offset plates and to print therefrom documentary stamps in anticipation of the new war-revenue bill and postal savings certificates, which are required by July 1, the estimated requirements of which are 2,500,000 sheets of the former and 500,000 sheets of the latter. The method of payment for the above service may be determined later, as you suggest.

Respectfully,

OSCAR T. CROSBY, Assistant Secretary.

TREASURY DEPARTMENT,

BUREAU OF ENGRAVING AND PRINTING,
Washington, D. C., June 5, 1917.

Hon. OSCAR T. CROSBY,

Assistant Secretary of the Treasury.

SIR: I have the honor to state that, owing to the great pressure of work in the surface division of this bureau, in the overprinting and numbering of the Liberty Loan bonds and the various certificates required in connection with the issue of those bonds, it is necessary to obtain additional help for the work of that division, and it would appear to be most practicable to have two large jobs executed outside of the bureau. These jobs are the documentary stamps, in anticipation of the new war-revenue bill, and postal savings certificates, which are required by July 1, the estimated requirement for the former being 2,500,000 sheets and for the latter 500,000 sheets.

Both of these jobs are printed by the offset process, and I arranged with the Huebner-Bleistein Co., of Buffalo, N. Y., who are experts in making offset plates and printing therefrom, to make plates for this work and do the printing. but it is difficult to estimate the cost of the work in advance, and the most feasible method of handling the matter would be to have them do the work at cost plus a fair commercial profit. This is a little unusual, as the practice of your office is to require me to submit requisitions with stated amounts as to the cost of the material and service before approval thereof, but I believe that this matter can be handled more economically for the Government by the method above explained.

I, therefore, respectfully request your approval of the plan of having this work done by the firm above named and under the method stated as to cost. but if you do not approve of the method of cost, I would ask that you in any event immediately approve of having the work done at that plant so that I may begin to make arrangements therefor, and later determine the method of payment.

In case of your approval of having this work done outside of the bureau, it would be my idea to send the necessary watchmen from the bureau to guard the plates, paper, and printed impressions, and any other expert employees that might be needed in the work, and I would go personally to start the operations and see that everything was properly safeguarded.

Respectfully,

J. E. RALPH, Director.