47, 794, 600.00

[58] The above table shows that total construction fees collected aggregated $1,364,455.27 in 1927 and $2,050,460.72 in 1931. The fees collected, in 1931, on construction work performed in the United States averaged 3.69 percent of the construction cost, whereas the fees collected on construction work in foreign countries averaged 5.84 percent of the construction cost. There is no clause in the service contract with foreign companies covering fees on construction work. These fees are all capitalized by the operating companies.

The costs applicable to the revenue derived from construction fees are quite small. Direct salaries that could be applied to this service amounted to only $21,425 in 1927 and $39,693.75 in 1931, as set forth on page 38. These fees, on the other hand, amounted, as already shown, to $1,364,455.27 in 1927, and to $2,050,460.72 in 1931. (See p. 37.) These large construction fees, therefore, as compared with the small direct costs are practically all profit, and, as already stated are capitalized in the property accounts of the operating companies.

Commissions received for sale of securities.-Commissions received amounted to $1,288,216.01 in 1927 and $1,377,961.01 in 1931, details of which are set forth in the following table:

On preferred stock sold in customer-ownership campaigns (exhibit 24).
On preferred stock sold to brokers (exhibit 25)..

436, 178, 50

On sundry purchases and sales (exhibit 25)..

21, 227.75

Total...

NOTE.-Exhibit referred to for 1927 is contained in Commission's exhibit no. 4613 and for 1931, within this report, Commission's exhibit no. 5602.

The details of how the above commissions are computed and rates charged, are shown in part II, section 25, of the service contract with operating companies and part II, section 16, of the contract with holding companies. The charges to the various companies and rates charged, are also shown in the exhibits referred to in note at the bottom of this page.

There are approximately $200,000 in salaries for both 1927 and 1931 that could be applied as a direct expense to commissions received. These commissions, however, are part of the total income under the service contract as explained on page 35. Here, again, the costs of the service are only a very small percentage of the fees charged.

Acquisition fees.-There were no acquisition fees collected in 1927, but fees aggregating $167,689.72 were collected during 1931.

[60] These fees are all collected from American & Foreign Power Co. and represent charges for services in connection with the acquisition of foreign properties for that company.

There is the salary of one vice president that could be applied as a direct expense against this class of fees collected. These fees, however, are part of the total income under the service contract.

Fees collected on services presumably performed at cost.—As shown in table 8, this class of income amounted to $2,553,561.39 in 1927 and $1,912,827.63 in 1931, made up as follows:

As previously stated, the above special services were to be rendered at cost so that the above fees received were supposed to equal the direct and indirect expense of rendering such services.

Engineering fees.-A fee for special engineering services is charged each client who requisitions this service.

During 1927, a designing order was made out and the actual labor cost, supply cost, and traveling expense incurred on account of the order were recorded. The fee, the company asserted, consisted of the total of the costs thus recorded. The statement of the services in [61] this connection and reimbursement for the cost therefor is set forth in part II, section 27, of the service contract.

The contract effective January 1, 1929, and in effect during 1931, as to charges for special engineering services, provides for the payment to Electric Bond & Share Co. of the compensation paid by it to its specialists and other employees engaged on such special engineering services, for the period of their employment thereon, plus 90 percent of the compensation so paid for domestic companies and 100 percent for foreign companies. This agreed charge of 90 and 100 percent of compensation is in lieu of the overhead charge previously made and purports to represent cost.

Included under the heading of engineering charges are the following expenditures:

[62] TABLE 14.-Nature of expenditures and amounts included as engineering charges for the years 1927 and 1931

Salaries plus overhead charges, total.

An additional fee of 15 percent is added to the total of "Salaries plus overhead charges" to certain companies only, total

Engineering charges for year..

[63] The above table (see exhibit no. 9, Commission's exhibit no. 4613 for 1927 and exhibit no. 9 within this report, Commission's exhibit no. 5602) shows that the items included under the heading of engineering are salaries paid to engineers and draftsmen of the engineering department, and to certain employees in the purchasing, traffic, and inspection departments, and that to the salaries, in 1927, are then added percentages ranging from about 75 to 100 percent to cover indirect charges and, in 1931, 90 percent on domestic companies and 100 percent on foreign.

In 1927, the percent added to direct salaries to cover indirect charges averaged 95.9 percent and in 1931, 93.8 percent, whereas the actual indirect charges, as shown in the following table, averaged 93.2 percent and 91.3 percent, respectively.

The following table gives the detail of how the indirect charge was computed: