POSSIBLE GAO AUDIT OF LAOS PARAMILITARY PROGRAMS IN FY 1973

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP74B00415R000300210010-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 19, 2016
• Document Release Date: August 17, 2001
• Sequence Number: 10
• Publication Date: August 4, 1972
• Content Type: MF

72 _ie f4
OGC Has Reviewed
Executive Registry
4 August 1972
?~r-- 7 2--6%Q6r
MEMORANDUM FOR: Executive Director -Comptroller
SUBJECT: Possible GAO Audit of Laos Paramilitary
Programs in FY 1973
REFERENCE: Memo fr C/FE to Multiple Addressees,
Dtd 18 July 72, Same Subject
1. This memorandum contains a recommendation submitted
for Executive Director-Comptroller approval. Such recommendation
is contained in paragraph 10.
2. Referent transmitted a memorandum of 18 July 1972 to
Chief, Far East Division, discussing Senator Symington's request of
15 June 1972 to State and DoD for a more detailed accounting by
individual agencies for supplies, equipment and services provided
under the Laos ceiling during FY 1972. It is understood that similar
additional information will be requested for FY 1973 as a basis for a
GAO audit to be requested by Senator Symington. That memorandum
goes on to state that the Executive Director has requested that FE
Division conduct a study of the implications of a GAO audit of DoD
funds expended by CIA in FY 1973 in Laos. There is attached to the
memorandum to Chief, Far East Division, a detailed discussion of
current Agency procedures in Laos. Included are the actual budget
figures, the details of KIP and Baht funding, discussion of the Lao
irregular program by military regions including the relationship with
Agency intelligence programs in Laos, discussion of air support and
CLASSIFIED BY - Signer
EXEMPT FROM GENERAL DECLASSIFICATION
SCHEDULE OF E 0. 1Ii:52, EXEMPTION CATLGOFY;
50(I), ?- (J) cr (~) (circle one or more)
AU!0 lppir'tiQ&cF
P&RWhse 20
Approval of DCI
XT'41s ~a~a+nible, inarrl dole or ovenl)
WARNING N 0TtGE
EE(~S V INTELLIGENCE SOURCES
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logistics. We believe that the decision made by the Agency to exclude
from State's report (in response to a request from Senator Symington)
details of FY 1972 Agency expenditures under the ceiling is equally
applicable to FY 1973 expenditures and the mere fact that the source
of the 1973 funds is DoD does not change the basic factors considered
in reaching the decision as to FY 1972.
3. The authority granted by Congress to the Director of
Central Intelligence under section 8(b) of P. L. 81-110 removes GAO
from the audit of those funds certified by the Director. The purpose
of the statute is to protect the security of Agency activities and
operations. As a pure legal matter, it is perfectly clear that GAO
has no legal authority to audit funds expended under the Director's
certification regardless of the source of such funds. Thus, funds
transferred to the Agency from DoD for the Laos paramilitary
program are not, as a legal matter, subject to audit by GAO.
4. The hearings before Senate Armed Services Committee on
7 March 1972 are pertinent. The principal witnesses were: The
Honorable G. Warren Nutter, Assistant Secretary of Defense, ISA;
Honorable William H. Sullivan, Deputy Assistant Secretary for East
Asian and Pacific Affairs, Department of State; and Mr. Don R.
Brazier, Principal Deputy Assistant Secretary of Defense (Comptroller).
The subject of the hearings was the Military Authorization Bill for FY
1973 and there was considerable discussion concerning the proposed
transfer from the Military Assistance Service Fund (MASF) to the
Agency, principally for the payment of Laotian irregularsand Thai
irregulars. Chairman Stennis questioned Brazier, Nutter and Sullivan
extensively as to why it was proposed that be transferrec25X1A
to CIA. The thrust of their answers was that while t ere was ample
legal authority for DoD to carry out this program, nevertheless the
transfer and disbursement by CIA. was planned strictly as an admin-
istrative convenience since the Agency had the disbursing machinery
in place. The DoD witnesses repeatedly stated that there was no legal
barrier in DoD carrying out the disbursement and that the transfer to
CIA. avoided the problems of DoD establishing new disbursing machinery
in Laos .
2
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5. It is our view that a GAO audit of the
transfer to the Agency utilizing normal governmental accounting
requirements would undoubtedly result in numerous exceptions.
Further, the GAO findings would certainly support further charges
by those in the Congress who have already stated that the Thai
irregular program is in violation of the Fulbright amendment as
well as other charges against the mercenary programs. Specific
examples would include:
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6. It would appear appropriate here to point out that the
potential for exceptions in GAO audit does not relate to mere
accounting standards and procedures. It is a substantive question
in that CIA does have the statutory authority to pay a subsidy to the
irregulars as in the case of the Lao irregulars. We have devised
accounting procedures to insure, insofar as possible, that monies
granted for subsidies are expended for the purposes intended. On
the other hand, DoD simply has no statutory authority for paying
subsidies of this nature. Therefore, if GAO were to attempt an
audit they would have to start with examination of the basic chain of
authority delegated down from the Director as well as Agency policies,
regulations and procedures for expenditure of unvouchered funds. Thus,
a proper audit by GAO would start at Headquarters and then move to
the field.
7. The funds to support the operational programs run by
CIA are accounted for in accordance with established Agency regu- 25X1C
lations and procedures and, of course, are subject to audit by the
Audit Staff of the Inspector General. No effort is made, however, 25X1C
to segregate DoD versus CIA-funded programs. F
While theoretically possible to segregate all
aspects of Agency activities involved with the expenditure of DoD-
supplied funds, it would involve a massive reorganization effectively
requiring an insulated little CIA separate from the existing organization.
8. It is assumed that the ostensible purpose of an audit would 25X1A
be to determine if the Lao ceiling had in fact been exceeded. It should
be noted, however, that of the con ressional budget
for the paramilitary program, is to be transferred to 25X1A
the Agency. The remainder, of course, is subject to audit in any event.
Also, it would be illogical to assume that the Agency would spend from
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its own budgeted funds more than transferred to
it for this purpose. Consequently, the case for an audit of the
is weak on the merits unless the real purpose is a
fishing expedition. On the other hand, if GAO is to assure that
the Agency only spen or this program, it could 25X1A
logically ask for review of other documentation and other expen-
ditures to assure that the Agency had not put some of its own
funds into the program. It seems obvious that the Agency would
not permit such review. It should also be mentioned in passing
that $102. 8 of t will be expended by DoD for
materiel which will be transferred to CIA. GAO, of course,
could apply its normal audit function to the purchase and issue of
such materiel but would be unable to trace the materiel to its end
use, their trail ending with the transfer from DoD to CIA. It
would appear, therefore, that even if the Agency were to acquiesce
in a GAO audit of DoD-supplied funds to CIA, there are so many
obstacles to a full and complete audit that it is doubtful that GAO
would ever be in a position of certifying to the Congress that the
Laos ceiling was not exceeded.
9. In summary, there is a clear legal basis for denying GAO
access for audit of funds expended under the Director's certification.
It is believed that to acquiesce in such an audit would establish an
undesirable precedent, having in mind the much larger sums which
are yearly transferred from DoD and expended by the Agency under
the Director's authority. Additionally, to permit GAO audit would
almost certainly result in charges that the testimony of Nutter and
Brazier before Senate Armed Services was inaccurate in the sense
that there would be uncovered legal impediments against DoD expend-
ing the funds in the manner in which they are currently being expended.
Also, a GAO audit poses severe security considerations by exposing
to GAO internal CIA procedures both at Headquarters and in the field
because of the intertwining of financing, logistics support, and opera-
tional direction of paramilitary activities and intelligence operations.
Finally, it is doubtful that GAO could issue an unconditional certification
that the Laos ceiling had not been exceeded.
10. In view of the above, it is recommended that we not acquiesce
in any attempt to have GAO audit funds expended under the Director's
authority even though the source of the funds is by transfer from DoD.
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bate
Date
Date
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Messrs. Woodruff and Preston of the Senate and House Appropriations
Committee staffs support this view. If this is to be the Agency position,
careful consideration, of course, should be given to discussing this
situation more fully with our subcommittees to apprise them of our
views and to seek their support.
CONCURREDk
Director of Finance
Chief, Far East Division
Director, Office of P 1~a ing,
Programming and Budgeting
Legislative; Cojunsel
Dep
r I
The recommendation in
paragraph 10 is approved.
Executive irec or - omp ro er
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SUBJECT: Possible GAO Audit of Laos Paramilitary Programs
in FY 1973
Distribution:
O - OGC
1 - ExDir-Compt
1 - ER w/o att
1 - D/Finance w/o att
1 - DDP w/o att
1 - C / FE w/o att
1 - D/OPPB w/o att
/l - OLC w/o att
1 - C/DDP/MPS w/o att
1-C/ /oatt
1 - DDS w/att
1 - D/Logistics w/o att
7
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 -BEN
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18 July 1972
JUL 1972
MEMORANDUM FOR: Office of General Counsel
Office of Legislative CounselL
Director, OPPB
Director of Finance
Director of Logistics
Chief DDP/ALPS
Chief,
SUBJECT Possible GAO Audit of Laos Paramilitary
Programs in FY 1973
i11 T L ] 1 l T._, l 97t; a"L'ta C.ti c; u iieliiuici.iluttiil u at~;Ca 18 Duy 1.; i 2
an
accompanying outline highlights a problem facing CIA
during FY 73. It will be appreciated that you or a
member of your staff attend a meeting in the FE Conference
Room 5D03 on 21 July 1072 at 10:30 a. m.
Chie Far East Division
Attachment: As Stated
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E C R E i CLASSIFIED BY ...... ,:. ;
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18 July 1972
MEMORANDUM FOR: Chief, Far East Division
SUBJECT Possible GAO Audit of Laos Paramilitary
Programs
1. On 15 June 1972 Senator Symington in his capacity
as Chairman, Subcommittee on United States Security
Agreements and Commitments Abroad. requested from State
Department certain information on FY 72 expenditures in
Laos. Among other items, he requested a detailed accounting
by Agency of supplies, equipment and services provided
during FY 72 and those ordered but undelivered as of
30 June 1972. When queried by State on the intended use
of these accoiunti_ngs, a Subcommittee staff member responded
that the accountings would serve as the basis for a GAO
audit to be requested by Senator Symington to determine
if the Executive Branch is complying with the law.
2. An Agency decision has been made to deny Senator
Symington's request for more information for FY 72 on the
basis that detailed information on the expenditure of CIA
funds should only'be supplied to the CIA Oversight Committee.
This decision was informally conveyed by OLC to Mr. Ed Braswell,
staff member of the Senate Armed Services Committee who
concurred. However, Mr. Braswell advised OLC that while
he could support this decision with regards to expenditure
of CIA funds, he would be hard pressed to support such a.
decision regarding FY 73 expenditures since all funding of
the irregular program in Laos was contained in the DOD
budget.
3. Mr. Colby has requested that FE Division conduct a
study on the implications of a GAO request for audit of DOD
funds expended by CIA in FY 73 in Laos..---_--_
EXEMPT FR4',4 CEI??UL PE3LAP-IFICAT1814
L+F E. U. tie5?, CATEti4RY:
AutUfi..ai. LLi LivL.. $ FIEJ 0M
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SENSITIVE INtELLIGENGE SOURCES
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4. An attached draft outlines some of the current
record-keeping procedures used in Laos. While all problems
have not been included there are a sufficient number to
conclude that immediate changes must be implemented if the
Agency is to concur in GAO audit of DOD funds expended by
CIA during FY 73. On the other hand a decision is needed
if in fact we will and can permit GAO audit of the DOD funds
disbursed on the basis that such funds are being disbursed
under special authority of the DCI. We must also bear in
mind that the Armed Services Committee has been assured
by DOD that the transfer of funds to CIA in FY 73 for the
irregular program is not being done to avoid. DOD legal
restrictions but is being done for administrative con-
venience since DOD does not have sufficient personnel
in-country or any existing system to handle their disbursement
under regular procedures.
5. A meeting of all interested components is necessary
to review the whole problem and to recommend a course of
action to the Executive Director.
Attachment: As Stated
WARNING NOTICE
ITIVE INIELLIGENCE SOURCES
\ND METHODS INVOLVED S E C E T
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;CIE1,4ORANDUM FOR: Chief, Far East Division
SUBJECT: Possible GAO Audit of Laos Paramilitary Programs
DDP/FE/T'BL/I
:mms (18 July 1972)
Distribution:
1 - 0GC
25X1A
2 - OF
1 - FE/BF
1 - FE/LOG
1 - FE/SUP
1 - FF)
1 - CFA
1 - DDP/NTPS
25X1A I - 0
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1
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SE C R T
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hti D IMI~ E C Fr
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PPB '72-1090
ME 1bMORANDUM FOR: Deputy General Counsel
Comments on "Possible GAO Audit of
Laos Paramilitary Programs in FY 1973,,.
REFERENCE: Your draft memo to ExDir dtd 28 Sul 72;
same subject
1. Para. I -- No comment.
2. Para 2 -- Believe the last line should be dropped if.it is
a conclusion of your paper, or changed if it Is a conclusion of the
referent paper to state that fact.
3. Para. 3 -- This paragraph deals with a number of matters
which I think need clarification. Are the Defense funds "transferred"
to the Agency? Should these funds be expended under the Director's
certification? Can the Agency receive any funds in any manner
except by transfer from another Agency or by appropriation. Do our
transfers currently meet all legal requirerrxents? Could GAO audit
transfers to CIA in order to determine the validity of the transfer?
I think we need to settle these questions in order to fully develop
the Agency position on. this matter.
4. Para. 4 -- Does not the sense of DoD testimony weaken
continued use of the Director's certification which see.-Vs to be the
principal legal defense to GAO audit?
5. Para. 5 --- I agree with the conclusions reached in this
paragraph, but I believe they pose ;whether internal coo receive action
is not a-?t least as desirable a goal as continuing to shut out GAO.
6. Para. 6 -- This paragraph deals with Agency accounting
procedures and implies that while such procedures arc adequate
for the Ag-ncy, they do not meet GAO standards for the Federal
Government. I belie-re this to he the actual state, of affair's. And
while tC ere may be food and sufficient reasck-t1:3 for CIA to maintain
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lesser accounting standards in certain circumstances, there
is a question as to whether all Agency projects require such
favored treatment, or whether, where conditions permit, we
should hold to GAO standards, even if we do not give GAO the
right to audit. In other words, can we justify our own accounting
practices in these projects?
7. Para. 7 -- This paragraph assumes that the current issue 25X1C
concerns only those funds which are directly passed to the CIA.
25X1 C
I do not know this to be an absolute certainty.
8. .Para. 8 -- I agree with everything said in this paragraph,
but I believe there are other points requiring discussion as indicated
above.
9. Para. 9 -- I suggest we explore the possibility of improving
our internal accounting system so as to bring it more in line with
GAO standards; that ,, ve explore the manner in which we treat funds
received by the Agency in order to assure correct legal handling of
these funds; and that we at least explore the general possibility of
permitting GAO audits on certain projects even if this particular
one is beyond the tolerance.
Deputy Director of Planning,
Programming, and Budgeting
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r~ :~u:>,r. ~Itn ttr'tlCr ecrgtpa , .
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comic CHCROY
H1ria POLICY
Arlo ?TELPII s
Er
Honorable Melvin R. Laird
Secretary of Defense,
The Pentagon
Washington, D. C.
Dear Mr. Secretary:
,:r ? f t..
Xt.is our underatanding that Section 505 of the Defense Authorization Act of
1
(
6
.971.
P. it. 92-1~
I and Section 655 of the Fox'eign Ansiotance Act of 197],
which established expenditure ceilings for United Stated ?aetivi,tiee in X,t'or
and Cambodia, respectively, have been the subjects of extensive study in. the
=
Department of Defense.
We are particularly interested in the administration of there 3.awa and in
their effent ,Iran Un1.tpr' States prngrA .. i.r * -s ane' C!z tbodia. -In the -61c re
connection, we would like to have available, prior to the mark up of the
Southeast Asia portion of the FY ].973 Defense Procurement Bill by the Armcd
Servicen Committee, detailed information regarding the procedures inutituted
by the Defense Department to ensure compXianae with these two'ceiUn&si rncl
.v u1d appreciate as soon as possible the following items:
~.~ vvpi.eu vi eu.4 Ln% erpretacions ana aeternursaT.ons, oomr
formal and informal, made by_ the Office of the General Counsel,
relating to the expenditure ceilings for Laos and Cambodia.
. 2. Copies of current gu id el: ine~ and instructions relating
to the application of these laws and the preparation of the reports'
?required by them, These should include all guidelines and tnstrue-
tiona directed to or originated by the General Counsel's Office,
the Office of the Controller, the Office of the Assistant.Secretary
for International. Security Affairs, the Directorate of Defense
Security Assistance, CINCFAC, MACTHAI, Doputy Chief, MACTH&Tp the
Requirements Office, Vientiane, and the Military Equipment Delivery
Team, Cambodia, and any service commando, procurement or logistics
authoritiea.
3. A detailed accounting of all, goods, supplies, materials,
equipment, aorvicea, personnel or advisors provided to, for, or
on behalf of Laos and Cambodia during PX 1972 by gift, donation,
loan f l,ease# transfer or othexwrise
rl
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m d unclasp if ied inforinat ion
? le. An accounting of all go.uo, cupplien, mate' rJ ala, equipmeni.,
ncrv iced, peroonne1, or advisory nor i,n?'the pr'oceos of procurement,
contracting and which nre intended for the ultimate U: o of the
Royal Laon Government, its regular or irregular forced or any of
ilto"..ocal forcer" and'far the Government of Cambodia,,
.In your renponnes to the foregoing quenti.ons ki.naly include both claenii f 1
If ncceeoary, and in
supplying individual
y6ur reply until , all.
order to avoil =aue delay, we would appreciate your
anni-rero to the above queotiona rather than delaying.
information is oxailab1e.'
Approved For Re 1 lease 2006/09/25
?
' 1
uart 3S-iningtoa
Cha.iruior
{.
subcommittee on United Statea Security ?
A .r2CrZCnte . and COIrait>`1Cnts l:~r:,-4
' '~. ~ ,: ?r' ~ 1' , , JAS-'? ~,?, i!f. .~~ ,. .!.
:.CIA-IDP74B00415RQ,003d6210610-1:"
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MORRIS, OSD/DSAA ON 23 JUNE 72 FOR
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