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I am not a lawyer. I deal with the issues from the perspective of
an accountant. With the longstanding policy of assuming the cost
of ship accidents where the Commission has been found at fault, it
is sound from an accounting standpoint to continue the recognition
of marine accident costs in the accounting process. This requires an
estimation, as previously described, and is obviously based on the
assumption that the Congress will not preclude such reimburse-
ment. However, until the Congress concludes that a different policy
is approporiate, the proper accounting is to recognize the cost as as
been done by the Commission.
In a matter not different from changes of other accounting esti-
mates, if the ultimate costs are different than estimated, then new
estimates are accounted for and reflected in the Commission's ac-
counting records. Such accounting adjustments will be reflected in
the tolls-setting process, giving credit for overestimates or charging
back underestimates.
In summary, based on the facts and circumstances as I note
them, the Commission's accounting for ship accident costs is sound
and establishes an appropriate basis for the settling of tolls. It also
is consistent with the congressional mandate that the Commission
be self-sustaining and maintain operations at no cost to the U.S.
taxpayer. Accordingly, unless the Congress directs a different
policy in terms of the assumption of the liabilty, I urge that no
change be made or directed in the manner in which the Commis-
sion accounts for ship accident costs.
I thank you for your attention. If you have any questions, I will
be pleased to answer them.
[The statement of Leonard J. Kujawa follows:]
PREPARED STATEMENT OF LEONARD J. KUJAWA, ARTHUR ANDERSEN & CO.
INTRODUCTION
My name is Leonard J. Kujawa and I am pleased to have the opportunity to again
testify before this committee. As a matter of background, I am a partner in Arthur
Andersen & Co., a Certified Public Accountant, and a member of the American In-
stitute of Certified Public Accountants and other professional societies and organiza-
tions. 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 account-
ants. We serve clients in all areas of industry and government and we are among
the largest public accounting firms in the world. Our relationship with the Panama
Canal Company began in 1951 when we assisted in establishing the initial account-
ability for the newly formed Panama Canal Company. We also assisted in the finan-
cial reorganization to the Panama Canal Commission as a result of the Panama
Canal Treaties of 1977. Included in this work was our report, "Analysis of the Esti-
mated Cash Requirements of the Panama Canal Commission, 1979-1983," which
was used to determine the financial impact of the treaties on the Canal enterprise.
Beginning with the first toll increase in 1974, we have had significant continuing
involvement in the toll-setting processes of the Panama Canal and the accounting
upon which tolls are based. An example of this was our report on recommended ac-
counting policy which resulted in several significant accounting changes in fiscal
1973. This report was previously submitted to this Committee. Almost all of the ac-
counting policies we recommend at that time still remain in effect.
SUMMARY OF TESTIMONY
Sound accounting has been an underpinning for the financial success of the
Panama Canal. The cost of marine accidents is an unusual but significant cost re-
quiring the application of appropriate accounting. Although it is difficult to predict