LETTER TO ROBERT M. GATES FROM LAWRENCE R. HOUSTON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89G00643R001000030025-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 23, 2016
• Document Release Date: July 2, 2012
• Sequence Number: 25
• Publication Date: March 4, 1987
• Content Type: LETTER

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87-1009/2
NOTE TO: EXDIR
DDA
The Comptroller
The General Counsel
In my confirmation hearings, Senator Roth asked if I would be willing
to sit down with the SSCI Chairman and Vice Chairman to discuss the
possibility of GAO involvement with the Agency. I was advised beforehand
that he would do this and that his intention was to try to use my
agreement just "to talk" to head off a vote by the Government Operations
Committee that could have been very damaging to us. When the time comes
to have that conversation, it sounds to me like this memorandum would be
helpful.
Attachment:
Letter from Houston/Pforzheimer
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87-1009X
Hon. Robert M. Gates
Acting Director of Central Intelligence
Central Intelligence Agency
Washington, D.C. 20505
At your recent confirmation hearings, Senator Roth pro-
posed that you attend a meeting of senior members of the Senate
Select Committee on Intelligence and the Senate Committee on
Governmental Affairs in regard to expanded authorities for the
General Accounting Office (GAO). It is probable that these
would allow the GAO to audit all CIA funds and expenditures.
The undersigned were concerned that time had not per-
mitted you to become aware of the early history of CIG/CIA re-
lations with the Comptroller General/GAO in which the GAO had
itself voluntarily withdrawn from such audits.
We have prepared the attached Memorandum on this early
history in the hope that it may prove useful.
With best regards, we are
LAWRENCE R. HOUSTON
WALTER PFORZ IMER
Former Legislative Counsel, CIA
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MEMORANDUM FOR: The Acting Director of Central Intelligence
SUBJECT Early Relations Between CIG/CIA and the General Accounting
Office/Comptroller General
1. The earliest relations between the Comptroller General and the Central
Intelligence Group were probably during the Directorship of Lt. Gen. Hoyt
S. Vandenberg (10 June 1946-1 May 1947). These involved the fact that
CIG had no funds of its own, but derived them from the State/War/Navy de-
partmental budgets. Thus, the DCI could not re-delegate the funds to sub-
ordinates until the Bureau of the Budget, the Treasury, and the Comptrol-
ler General authorized the National Intelligence Authority to establish a
"working fund" for CIG's use over which the DCI could exercise the same
authority as could the Secretaries over the basic appropriations.
2. As of 22 January, 1947, CIG actually became illegal, because of the Inde-
pendent Offices Appropriations Act of 1945, which provided that no funds
could be used for any agency which had been in existence for more than
one year and for which funds had not been specifically appropriated by
Congress. Again the Comptroller General (through his excellent General
Counsel, Lyle Fisher), the Bureau of the Budget, and the Treasury Depart-
ment ruled that, if no one else raised the question, they would not raise
it, and CIG should keep going until it ran into something. They had no
desire to upset the situation at all, particularly as we were then in the
process of securing our enabling legislation. The Comptroller General
(Lindsay Warren) was very hard-nosed as a rule, but now he went along.
3. Early in 1948, it was determined to submit additional legislation for
CIA's housekeeping, administrative and funding purposes. [This proposal
passed the Senate in 1948, but events did not permit its final passage in
the House. It became law as the Central Intelligence Agency Act of 1949
in the latter year.] Prior to the submission of the proposed legislation
to the Congress in March 1948, it was necessary for CIA to "clear" the
draft through the Bureau of the Budget. Among those to whom the Bureau
submitted our draft for clearance was the Comptroller General. Of parti-
cular interest to the latter was what is now Sec. 8(b) of the 1949 Act
which provides for the expenditure of certain funds to be accounted for
solely on the certificate of the Director [an authority extended to the
DDCI by Comptroller General's decision of 2 January 1962]. The idea of
so-called "confidential funds" was not new. In fact, President Washington,
in his first message to the 1st Congress, had requested and received such
authority. However, we knew that Comptroller General Warren was gener-
ally opposed to the granting of such authority, and, if memory serves us,
he had, a short time before, vetoed such a request from the Atomic Energy
Commission, which had then withdrawn it. After conversations between Mr.
Houston and GAO General Counsel Fisher, the Comptroller General wrote the
Bureau of the Budget in March 1948 as follows:
"[certain sections] provide for the granting of much wider
authority than I would ordinarily recommend for Government
agencies generally, [but] the purposes sought to be obtained
by the establishment of the Central Intelligence Agency are
believed to be of such paramount importance as to justify
the extraordinary measures proposed therein. The importance
of obtaining, correlating, and disseminating to proper agen-
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Gies of the Government intelligence relating to national se-
curity under present international conditions cannot be over-
looked. In an atomic age,...it becomes of vital importance
to secure, in every practicable way, intelligence affecting
its security. The necessity for secrecy in such matters is
apparent and the Congress apparently recognized this fully in
that it provided in section 102(d)(3) [of the National Secu-
rity Act of 1947] that the Director of Central Intelligence
shall be responsible for protecting intelligence sources and
methods from unauthorized disclosure. Under those conditions
I do not feel called upon to object to the proposals ad-
vanced..."
Had the Comptroller General opposed our desire for "confidential funds",
we feel sure that those authorities could not have been obtained. As it
was, in 1948, Senator Brian McMahon moved on the floor to strike that
provision, and it was stricken. However, after a rather bitter dispute
with Mr. Pforzheimer outside the Senate chamber immediately thereafter,
to his credit Senator McMahon returned to the Senate floor and restored
the stricken provision. We had no more trouble in securing this provi-
sion.
4. After enactment of the CIA Act of 1949, it was agreed that a.specially
cleared team of GAO auditors would audit all CIA expenditures, except for
those accounted for solely on the certificate of the DCI. Initially,
the GAO performed a simple voucher audit, but in time this changed to a
true comprehensive (or program) audit, including such operations which
were supported by normal expenditures. The GAO ran into two difficul-
ties: (a) for activities supported by normal expenditures, the vouchers
were in some cases backed up by documents which the GAO team was not
authorized to see; and (b) they could, by agreement, not see any of the
vouchers for those expenditures which were accounted for solely on the
DCI's certificate. It was difficult for GAO to draw the line between
(a) and (b).
5. In view of the problems noted in para. 4, and after we spent a consider-
able period of time trying to work out a suitable solution, GAO itself
notified CIA that it would have to withdraw from auditing our expendi-
tures. It is Mr. John Warner's recollection, having worked for years as
Mr. Houston's assistant and who became CIA Legislative Counsel in 1958,
that Cong. Carl Vinson, Chairman of the House Armed Services Committee
and the CIA subcommittee thereof, urged that more time be given to try
to work out a solution, and this was done without success. GAO then
withdrew completely.
6. Over the last session or two of the Congress, the GAO has supported very
comprehensive legislation which would give them sweeping powers to look
into virtually all governmental matters. The language of these previous
bills seems to be sufficiently broad to include reviews of any and all
CIA expenditures. This is evidently coming forward again, if one can
correctly interpret Senator Roth's comments at Mr. Gates' confirmation
hearing. The reason that we are writing this Memorandum is to be cer-
tain that Mr. Gates is aware of the early history of our relations with
GAO before he attends a meeting, such as Senator Roth suggested, between
the senior members of the Senate Committee on Governmental Affairs and
the Senate Select Committee on Intelligence on this subject.
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7. One last note on semantics. It should be noted that the funds involved
under the DCI's certification often have been referred to as "unvouchered
funds". This is erroneous, as virtually all CIA expenditures are
vouchered to the extent possible. The current term for those funds ex-
pended under the DCI's certificate is "confidential funds".
LAWRENCE R. HOUSTON
Former General Counsel, CIA
WALTER PFORZHE ER
Former Legislative Counsel, CIA
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