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As a matter of background, I am a partner in Arthur Andersen
& Co., a certified public accountant, and a member of the Ameri-
can Institute of Certified Public Accountants and other professional
societies and organizations. Regarding the Panama Canal, I have
been a consultant on various financial and accounting matters
since 1962 for both the Commission and the predecessor company.
Arthur Andersen & Co. is an international firm of independent
public accountants. We serve clients in all areas of industry and
government and we are among the largest public accounting firms
in the world.
Beginning with the first toll increase in 1974, we have had sig-
nificant continuing involvement in the toll-setting process of the
Panama Canal and the accounting upon which tolls are based.
I prepared for the record a complete statement. In the interest of
time I will summarize from my complete statement.
Mr. HUBBARD. Thank you. It is agreed your full remarks will
appear in the record. We appreciate your summarization.
Mr. KUJAWA. Sound accounting has been an underpinning for
the financial success of the Panama Canal. The cost of marine acci-
dents is an unusual but significant cost requiring the application of
appropriate accounting. Although it is difficult to predict the cost
of marine accidents over the short run, the appropriate accounting
recognizes the inevitability of marine accident costs over the longer
term. This is the accounting followed by the Panama Canal.
In implementing the Panama Canal Commission, Public Law 96-
70 required self-sufficiency, as did the legislation establishing the
Panama Canal Company. In addition, Public Law 96-70 included a
requirement for an accounting as an appropriated agency.
When implementing legislation was being considered, I urged in
testimony before this committee that the requirement for sound ac-
counting be continued. This I referred to as enterprise accounting
which is a comprehensive accounting for all costs and revenues
over a long-term in order to measure financial performance.
Enterprise accounting was essential since the legislative objective
was that the Panama Canal Commission continue to be a self-suffi-
cient, financially viable entity providing service to world shipping.
Public Law 96-70 does establish the requirement for enterprise
accounting for purposes of measuring financial performance and in
the setting of tolls. In addition, as a measure of control, there is the
requirement for an accounting for appropriations. From the per-
spective of financial management, each accounting method has a
role to play and the respective roles must be understood. Clearly
stated, appropriation accounting is not a proper basis for setting of
tolls nor for the accounting for costs in measuring long-term finan-
cial performance.
The financial viability of the canal enterprise is dependent upon
the process of setting a proper level of tolls. As established by law,
the present policy regarding the tolls level is to set tolls to recover
costs. Cost is interpreted to be a comprehensive accounting for all
costs.
The assurance that prices will be set based on cost gives the user
confidence in the reliability of the price-setting process. He is as-
sured that tolls will be rationally set and thus he can predict his
future course of action with more reasonable certainty. This is a