AUDIT OF ENTERTAINMENT ACCOUNTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81-00755R000100080024-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 9, 2016
• Document Release Date: July 12, 2000
• Sequence Number: 24
• Publication Date: December 5, 1949
• Content Type: MEMO

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I44EMORANDUI, 5 December 1949
TO: The Executive
THRU: Chief, SSS
FROM: Finance Division
SUBJ: Audit of Entertainment Accounts
1. In accordance with instructions, pertinent comments are hereby
submitted concerning the audit report of "Entertainment Funds" as pre-
pared by the Chief, Audit Division, I & S, and concerning which the Bud-
get Officer has requested specific comments as to the circumstances and
any further facts relating to those items which may appear unusual or
somewhat out of line.
2. It is believed that the questions raised in the audit report
either directly or by indirection fall into three categories as follows:
(a) Questions as to the propriety or good judgment of a few
specific instances or types of entertainment.
(b) Questions as to possible procedural weaknesses in the sub-
mission of accountings or as to the adequacy of supporting
vouchers.
(c) Questions as to the inconsistency or lack of unified agency
policy as to vhat charges, if any, should be made against
employees for the personal benefit derived through partici-
pation in official entertainment.
3. Each of these matters is discussed in turn in the follovd.ng para-
graphs:
(a) The Confidential Funds Regulations prescribe no specific
criteria governing the expenditure of monies for operational
entertainment. This is not omission but conscious recogni-
tion of the infinite circumstances underwhich varied types
of entertainment may be an operational necessity. The only
basic requirements are that the entertainment be reasonable
and necessary.
(b) Responsibility for compliance with these criteria necessarily
rests with the Assistant Directors and those individuals desig-
nated by them as Approving Officers. A Certifying Officer
normally relies upon the fact of approval by an Approving Of-
ficer that an item of entertainment is necessary and reasonable.
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In the event the amount or type of entertainment appeared
to the Certifying Officer to be of doubtful propriety or
judgment, he would seek additional information from the
Approving Officer. If still not satisfied, he would seek
written approval of the Assistant Director, and if still
not satisfied he would request the Assistant Director to get
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higher approval.
(c) In each of the specific items pointed up in paragraph 8 of
the audit report, additional facts were known or were made
known to the Certifying Officer and the accounts were ac-
cepted and certified. If, for purposes of review of the
practices of the Covert Offices, it is desired to be ap-
prised'of the circumstances warranting certain types and
amounts of entertainment expenditures, it is urged that
this information be obtained from the office concerned. We
believe it would be most inappropriate and unseemly if the
Finance Division were to atterapt to explain or justify the
entertainment expenditures of a CIA Office.
(d) We feel certain that you will concur with this opinion and,
therefore, are not submitting additional comments as to the
circumstances and any further facts relating to particular
instances of entertainment. We can only state that in view
of the proper approvals, together with supplerrn ntary informa-
tion available to this office, the items in question were
accepted as proper charges.
4. The audit report indicates:
(a) Possible types of procedural weaknesses which include the
following:
(1) Lack of adequate identification of persons enter-
tained.
(2) Lack of data as to the number of persons entertained.
(3) In a few instances, lack of the exact date of the
entertainment.
(4) At an earlier period, lack of identification of staff
employees participating.
(5) Delay in the submission of claims for entertainment
reimbursement.
(b) With regard to item4(a)(1), security, of course, is the reason
why actual identification of individuals is not required by
the regulations. The value of requiring adequate identification
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is twofold. It ensures that the Approving Officer actually
is aware of the identity of the person or persons entertained
and hence is more capable of fulfilling his responsibilities.
Secondly, precise identification is a deterrent against sub-
mission of false or improper vouchers, since such information
renders the voucher capable of investigation at some later
date. For these reasons, we recommend the following procedural
changes:
(11. That each office be required to identify persons enter-
tai.ned by cryptonyms, pseudonyms, or any positive means,
and state on the voucher, "The real names of persons en-
tertained are on file in (OSO, OPC, 00, etc.)"
(2) That more specific statements as to the purpose of the
entertainment be required. Such statements should
clearly indicate whether the entertainment was in con-
nection with the interview of a prospective agent,
briefing of an agent, liaison with officials of a
cover company, etc.
(c) With regard to item 4(a)(2), we agree that the number of par-
ticipating individuals is an important item in gauging the
propriety of the expenditure and Certifying Officers have
used this information for this purpose. It is only recently,
however, that this information has been used for retroactive
statistical and review purposes and accordingly the Certifying Of-
ficers will be instructed to ensure written information in this
respect on all future vouchers.
(d) Item 4 (a)(3) represents a few instances where one or more in-
dividuals were very delinquent in submitting claims for enter-
tainment and professed inability to recall exact dates. In
the absence of any other reasons to question the voucher, we
believe it could be properly accepted. However, we strongly
concur that if the individual can remember the amount to be
claimed he can remember the date and to the extent that dates
contribute to the potential possibility of checking a fraudu-
lent or improper voucher, we agree that it should be required.
accordingly, we shall require it in all future vouchers.
(e) As regards item 4 (a)(4) the Finance Division for some months
has required identification of participating staff employees.
This was formerly deemed unnecessary, since the amount of en-
tertainment in the United States was very small and rarely in-
volved more than one staff employee. OPC entertainment require-
ments apparently more frequently necessitate participation of several
staff employees. For this reason, increased control appeared de-
sirable and the procedural requirements of the Finance Division
were accordingly amended.
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(f) Item 1(a)(5) concerns delay in submission of claims for re-
imbursement for expenses incurred. In this connection, we
wish to point out that the individual who procrastinates in
submitting a claim merely places himself in jeopardy and
runs the risk of forgetting the item completely or of having
it disapproved ultimately by the Approving Officer. Instances
of belated claims are very rare, but it should be stated that
OSO many months ago initiated a Ocrackdownl' on belated claims.
We believe that no further corrective action is necessary.
(g) In closing this group of comments, we wish to state that every
item of unusual or apparently unreasonable entertainment is
referred to Assistant Directors for their approval. The cur-
rent Assistant Directors have fulfilled their responsibilities
carefully and, in some instances, where they have approved the
entertainment, they have reproached their employees for faulty
judgment as to the type or extensive nature of the entertain-
ment. We believe that this type of control is far more
practical and effective than inelastic and categoric regula-
tions, and do not recommend any changes in the regulations.
ressions of general policy by the Executive to the Assistant
Directors and the Finance Division should provide ample control.
5. The policy question as to whether a charge should be made against
employees for the personal benefit derived from participation in meals
charged as official entertainment was raised by the undersigned at the
rz,ecutive's Covert Support Staff meeting after the Chief Auditor verbally
advised the undersigned that he had recommended such a charge. Atentative
policy was suggested at the meeting and the undersigned was instructed to
suggest such a policy to the Assistant Directors for their concurrence or
suggestions. This was done in a memorandum dated 15 November 1949. Re-
plies have been received from two of the Assistant Directors concerned in-
dicating concurrence in principle, but with one suggested alteration in
application. After the views of all Assistant Directors have been thorough-
ly explored, the matter x.11 be referred to the Executive for final con-
sideration.
Acting Chief, Finance Division
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