I Wage increases have been determined consistent with the description contained in the answer to question A-2. Employment levels decreased 80 man-years by 1975 principally in the retail merchandising and packaging activities where certain services were consolidated or eliminated.

The increase in cost of goods sold reflects cost escalations.

The increase in the cost of services received from other Company activities was due principally to wage and material cost escalations.

The increase in other expenses reflects cost escalations in contract maintenance for housing, ocean freight, and sup plies and materials consumed. The costs of these operations were substantially recovered by revenues.

1 Wage increases have been determined consistent with the description contained in the answer to question A-2. 2 Employment levels increased 111 man-years by 1975. This increase is primarily due to the transfer of security guards from other activities to the newly formed Canal Protection Division for purposes of centralizing the security function. 3 The increase in the cost of services received from other Company activities was due principally to wage and material cost escalations.

The increase in depreciation was attributable to the initiation of depreciation in 1974 of certain assets not previously depreciated and to the acceleration of depreciation of certain assets begun in 1973.

Other expenses for fiscal year 1975 have been recast to exclude amounts reimbursed by the Company for unrecovered Canal Zone Government costs of providing hospital and education services to individuals who, although otherwise eligible for such services, are not sponsored by an employing agency.

1 Wage increases have been determined consistent with the description contained in the answer to question A-2. Employment levels increased 55 man-years by 1975. In executive and operations direction there was a requirement for additional personnel principally to accommodate new workloads resulting from the Occupational Safety and Health Act and to assure equal employment opportunity. Financial management required additional manning, particularly in areas of systems analysis and computer programing in the development of additional computer applications. Expanded employee training programs and intensified labor-management relations contributed to a need for added manning in personnel administration, and increased translator and clerical support services created a need for additional manning in general services.

The employees' health benefits are covered by the Federal Employees' Health Benefits Act. The Company's contribution to the insurance premium increased from 40 pct to 50 pct in January 1974 and to 60 pct in January 1975.

The increase in the cost of services received from other Company activities was due principally to wage and material cost escalations.

The increase in other expenses consists principally of the lease of additional computer equipment and employee travel and transportation costs related to home leave, recruitment, and repatriation.

• Amounts reimbursed the Canal Zone Government by the Panama Canal Company for education, hospital, and fire protection costs are excluded above and included in the net cost of Canal Zone Government.

Note: The Panama Canal Company is required under 2 Canal Zone Code § 62(e) to reimburse the Treasury, as nearly as possible, for the interest cost of the funds or other assets directly invested in the Corporation. This reimbursement is to be made at interest rates determined by the Secretary of the Treasury based on the computed average coupon rate borne by Treasury bonds outstanding as of Apr. 30 of the past fiscal year. The Secretary of the Treasury established rates of 4.349 pct for 1974 and 4.649 pct for 1975 as compared to a rate of 3.956 pct in 1973.

1 The Canal Zone Government is responsible for the administration of the civil government, education, health services, and sanitation functions in the Canal Zone. All funds appropriated for the Canal Zone Government, for operating expenses and capital outlay, are returned to the U.S. Treasury through the deposit of user charges and by reimbursement of the net cost of operations by the Panama Canal Company.

* Increases reflect normal escalations of wages and other costs, minor force increases, and the impact of cost escalations in the Company on the cost of servicing the government. Cost increases are offset by increased recoveries achieved through higher rates charged for services rendered.

3 Net cost of Canal Zone Government has been recast for fiscal years 1973 and 1975 to include in net cost amounts reimbursed by the Panama Canal Company for its share of education, hospital, and fire protection costs.

Pt. II.-A (8) Indicate the proportion of total Canal expenses in each fiscal year for claims, ship-related and otherwise.

Answer: The amounts and proportions of claims to total Panama Canal Company expenses for the ten-year period, fiscal years 1966-1975, were:

1 "Other claims" include, among others, freight, tort, injury, and household property damage. For example, the composition of claims in the "Other" category for 1975 was as follows:

Tort claims..

Employee injury claims.

Freight claims..

Household damage claims..

Total......

$879,000

479,000

51,000

17,000

1,426,000

For the period 1973-75 the above expenses were based on estimates provided for the annual accruals to a reserve. The actual claims charged against the reserve were approximately $38,000 less.

Pt. II.-A (9) Indicate the proportion of the Canal budget which is utilized for personnel, material, and other costs.

Answer: The attached tabulations indicate the proportion of the various elements of expense for each of the years as indicated.