REEXAMINATION OF CIA'S REIMBURSEMENT PRACTICES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP61S00750A000700010008-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 9, 2016
• Document Release Date: March 5, 2001
• Sequence Number: 8
• Publication Date: February 2, 1956
• Content Type: MF

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FEB 2 1056
MEMORANDUM FOR: Director of Central Intelligence
SUBJECT: Reexamination of CIA's
Reimbursement Practices
1. The attached report has been prepared in
cooperation with the Deputy Director s,,atictl:ithei 11n ;pe or
General in pursuance of your instruction. Its main objec-
tive is to be responsive to your letter of September 23, 1954
to Mr. Armstrong, which states that: "The scheduled re-
examination of the method of financing State's NIS program
by CIA in cooperation with the Bureau of the Budget and the
Department of State should be concluded by 15 February
1955, in order that the conclusions of such reexamination
may be reflected in the budget for fiscal year 1957.
2. However, we have endeavored to treat the sub-
ject of reimbursement as comprehensively as possible
because of questions in the past about reimbursement in
other connections raised byGeneralCabell and the Bureau
of the Budget, because of possibilities such as those raised
by Mr. Amory regarding coordination of. intelligence budgets
(memorandum of August 11, 1954) and in view of the
Inspector General's summary of our reimbursement situa-
tion in all regards with the Department of State (memorandum
of October 11, 1954).
3. It is recommended that you approve the conclu-
sions and recommendations of this report.
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4. While this study has dealt only with current
reimbursement instances there are problem areas which
should be given prompt study in the light of the conclusions
and recommendations of this paper. Three of these deemed
most pressing are foreign publications procurement, map
procurement, and collection of scientific intelligence infor-
mation from overt sources. Accordingly after your decision
is taken in the attached paper it is planned to initiate studies
on these problems.
ssistant.to .the Director
for Planning and Coordination.
SECRET
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SECRET
CONCURRENCES:
Deputy Director of Central Intelligence
25X1A
SECRET
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CONFIDENTIAL
17 February 1955
REEXAMINATION OF CIA's
REIMBURSEMENT PRACTICES
1. To reexamine the existing practices of CIA regarding
reimbursement to the Department of State for National Intelli-
gence Survey (NIS) production, and services rendered by the De-
partment with regard to external research
- and to relate such reexamination to the problem o pro-
viding an adequate budget for intelligence activities important to
CIA and to the national security.
DISCUSSION:
2. It is a principle of Government that each agency has
the responsibility to obtain the funds to carry out its own respon-
sibilities with the provision that reimbursements are encouraged
when a second agency is more competent or in a position to per-
form more efficiently a service required by the first. However,
care must be exercised that reimbursement does not subvert the
intent of Congress as expressed in appropriations acts and re-
lated legislative history. The NSCID's help explain why the reim-
bursement problem has arisen, because the Directives set the
general design for the cooperative effort of the IAC community.
(see Tab A)
3. Our intelligence system consists of five major intelli-
gence producing and collecting agencies, which are essential to
one another. Machinery exists for determining their functional
responsibilities and for coordinating their intelligence activities
but there is no requirement that each separate agency budget for
25X1 B
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all of the intelligence activities for which it is responsible or
refrain from budgeting for unassigned and possibly duplicative
activities. The collection and production of intelligence is for
all of these agencies (except the CIA) a relatively small and
distinctly subsidiary function within the totality of their opera-
tions. Inevitably departmental intelligence budgets (like their
budgets for other purposes) are shaped in the main by depart-
mental needs, which in turn grow out of their major functions.
Yet there is no assurance that a department's functional respon-
sibility to collect or produce a particular kind of intelligence,
which presumably reflects the needs of the intelligence commu-
nity as a whole, will coincide with its own felt need for that in-
telligence. Therefore, budgetary provision may fall short of (or
exceed) that which would be appropriate to meet a national re-
quirement.
4. While the budget responsibility generally is exercised
by the agency charged with performance of function under NSCIDs,
provision must be made to recognize those cases where depart-
mental need is not coincident with functional responsibility. At
least two of these situations may be described as follows:
a. The DCI's responsibility for coordinated pro-
grams bearing on national security in which each agency
is to participate in accordance with its assigned area
when such program demands are not coincident with de-
partmental demands. In the case of clearly definable
interagency programs requiring sizeable additional re-
sources of participating agencies, it is desirable that
there be a coordinated budget statement or central budget-
ing by CIA. This is explained in Tab B. NIS is such a
specific program. There may be others. Reimburse-
ment between agencies required by such central budget-
ing would then be appropriate.
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b. The fact that an agency (in this study, the
CIA) may levy requirements on another agency
when such requirements demand use of, or estab-
lishment of facilities in excess of those required
to meet the needs of the performing agency. Re-
imbursement in such case would then be a ro ri-
ate.
This is also true of the External Research
to see Tab D), although it has some elements
of 4(a) above.
5. The sound development of the intelligence community
now requires that the IAC and the Bureau of the Budget take note
of these situations and adopt procedures which will identify such
cases and principles which will permit cooperative effort to meet
individual agency requirements and national security programs
in the intelligence area.
6. In considering the reimbursement problem in current
cases we have considered in each case alternative methods of
meeting the intelligence needs involved and have rejected them
(specific discussion is set forth in respective Tabs).
CONCLUSIONS:
7. That there is no way of ensuring that intelligence acti-
vities, especially those of national rather than departmental in-
terest, will be supported by the agencies functionally responsi-
ble for them on a scale that reflects the interest of the whole in-
telligence community as well as departmental priorities.
8. That it is not feasible at this time to develop a state-
ment covering all intelligence activities which would show the
responsibility, measure the performance, and give the cost of
each on a comparable basis because present budgetary and
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accounting practices do not permit the segregation of intelli-
gence activities from other elements in departmental budgets.
9. That under these circumstances reimbursement will
some times be useful as a device to ensure that intelligence pro-
grams of broad national interest, but possibly of limited depart-
mental appeal, will be financed, and reimbursement will often
be preferable in these cases to the alternative of major shifts of
functional responsibility.
10. That, since the need for a coordinated review of finan-
cial support, and performance and requirements is greatest with
respect to national programs, the Director should from time to
time as circumstances permit, request the IAC to prepare co-
ordinated statements of member agencies' budget needs with re-
gard to specific national programs. A specific case in point
proposed for such treatment is the NIS.
11. That the DCI should prepare with the cooperation of
the IAC a statement of the annual budget needs of the members
of the IAC for NIS production and to submit such a statement to
the Bureau of the Budget for its information, the DCI then request-
ing funds for all of these needs except for the Department of De-
fense where it is anticipated departmental policies or the pecu-
liarities of the budget processes within Defense would seem to re-
quire them to submit budget requests directly. (Tab C)
U. That the present practice of CIA reimbursement to
State for external research should be continued. However, in the
event that either State or Defense is unwilling or unable to sus-
tain its share of the enterprise, consideration should be given to
transferring the clearing house function to CIA financed entirely
by CIA (Tab D).
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14. That the release of this report to the Bureau of the
Budget and to the State Department be authorized as a basis for
discussion by the Deputy Director (Support) and the Special As-
sistant to the Director for Planning and Coordination with those
two agencies lookin toward agreement on the method of financ-
ing NIS, ERS as soon as possible.
15. Should an issue arise as to the desirability of com-
piling comparable budgetary statements covering all the intelli-
gence activities of the Government for use by the Bureau of the
Budget in the budgetary estimating process prior to issuance of
final allowances, the DCI should advise the Director of the
Bureau of the Budget or other reviewing authority that the pre-
paration of such budgetary statements would be impossible with-
out major changes in the budgetary practices of the departments
and agencies concerned.
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CONFIDENTIAL
17 February 1955
THE NSCIDs AND REIMBURSEMENT
1. The National Security Council Intelligence Directives,
while drawing a design for the maximum cooperation among IAC
agencies do not go into financial matters, except by implication
in phrases which protect the resources of the member agencies.
Thus, the intelligence organizations shall provide or procure
such intelligence as may be required by the DCI or by one of the
other departments or agencies "within the limits of their capa-
bilities." Their major mission is admitted to be to make their
own research facilities "adequate to satisfy" the agencies' indi-
vidual needs, taking full cognizance of the undertakings of other
agencies. They are enjoined to "endeavor, " but are not required,
to maintain adequate research facilities to accomplish production
tasks allocated to them and also to provide reports or estimates
within the dominant field of interest to meet requirements of
other agencies. The collecting and reporting facilities of the
agencies while being utilized so as to avoid unproductive duplia-
tion and uncoordinated overlapping should insure the full flowjin-
telligence to meet the major needs of all the departments and
agencies "within budgetary limitations. "
2. It is therefore clearly recognized that each of the IAC
members has a function or functions allocated to it and that the
output in regard thereof must be made freely available to all.
However, it is also recognized that each agency's primary tar-
get is departmental need and that departmental interest provides
both the primary motive and real limitations.
3. There is no NSCID provision which authorizes reim-
bursement except in the case of NSCID-10 which applies to col-
lection of scientific intelligence. The Office of Scientific Intelli-
gence (OSI) recommended that reimbursement be provided State
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under this provision, but this was not approved by the Bureau
of the Budget
The NSCIDs do not suggest
explicitly (with the exception of NSCID-10) any alternative in the
event that an intelligence agency is unable, because of financial
limitations to meet the legitimate requests from outside vg its own
Department. NSCID-1, paragraph 3 does state the general injunc-
tion that "Coordination of intelligence activities should be designed
primarily to strengthen the overall governmental intelligence struc-
ture. Primary departmental i wrrwWwA requirements shall be
recognized and shall receive the cooperation and support of the
Central Intelligence Agency" (underlining supplied). Such support
presumably could be, though need not necessarily be, financial, or
it might take such form as testifying to the Bureau of the Budget on
behalf of another agency's program. Another inference can equally
well be drawn, namely, that where production capabilities are in-
adequate and cannot be sufficiently strengthened to meet the needs
of another IAC agency the requesting agency is then free to produce
intelligence to meet its own needs or responsibilities.
3. Alternatively, the reallocation of functions in whole or
in part might take place under the provision that the general de-
lineation of dominant interests is ".... subject to refinement
through a continuous program of coordination... " (NSCID-3, para-
graph 3). Thus far in the field of production, such refinement has
occured in the establishment of services of common concern,
namely, the responsibilities of the Office of Research and Reports
(ORR) in economic intelligence on the Soviet Orbit -- NSCID-15
and DCID-15/ 1, and Scientific and Technical --
NSCID-8, or have led to a division of responsibility, technical vs.
scientific research -- DCID-3/4.
4. The omission in the NSCIDs of any reference (except in
NSCID-10) to reimbursement suggests that the law had already
adequately covered this practice. Furthermore, where the NSCIDs
refer to the limits of budgets, the NSC, it is believed, merely in-
dicated that its directives gave no budget authorizations beyond
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those which are received from the Bureau of the Budget. The
NSC did not indicate specific limits on reimbursement prac-
tices authorized by the law. Of course, inter-departmental
reimbursements are reviewed by the Bureau of the Budget to
assure that no violation of the controls over appropriations oc-
curs.
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Coordinated Budget Presentation for the
Intelligence Community
PROBLEM:
1. To determine the desirability and feasibility of the
formulation and presentation to the Bureau of the Budget and
Congress of a coordinated statement of the budgets of the intelli-
gence activities of the agencies of the Government.
DISCUSSION:
2. It is clear that the intent of the National Security Act
and the NSCIDs is that the Agencies represented on the Intelli-
gence Advisory Committee are to operate insofar as possible as
a system, interrelated and interdependent. While the Act and
the Directives accord due respect to the fact that the individual
intelligence agencies must meet their departmental responsibi-
lities, the separate agencies are to be managed as to achieve
coordinated intelligence in the interest of national security.
3. Despite the necessity for budget requests to be related
directly to the coordinated intelligence program, there is at
present no machinery by which this can be accomplished. Pre-
sent procedures provide only for each of the IAC agencies to pre-
sent and justify their estimated requirements for the intelligence
function independently to the Bureau of the Budget and Congress.
In addition, as intelligence activities frequently cut across ap-
propriation items, it is not even possible always to identify read-
ily by agency or, at times within an agency, the funds requested
for carrying out the intelligence function.
4. Due to the lack of a coordinated formulation and pre-
sentation of an Intelligence Community Budget, there is no
mechanism by which either the Bureau of the Budget or the Con-
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gressional Committees on Appropriations can be made fully aware
of the interdependence of the IAC agencies and assured wherein
the individual agency requests are essential to the coordinated
community effort. As a result, there is no assurance that the ac-
tion taken on the estimates by either the Bureau of the Budget or
Congress will be consistent among the IAC agencies in regard to
provision for intelligence activities.
5. To the extent that the allowances granted by the Bureau
of the Budget for submission of estimates to Congress of the funds
finally appropriated by Congress represent a reduction from the
amount originally requested, adjustments must be made by the in-
dividual departments in the various activities, including intelligence,
within the general appropriation item. Due to the lack of a coordin-
ated Intelligence Community Budget there is also no systematic way
to assure that, in this adjustment process, intelligence activities
essential to the community effort are not impaired.
6. An Annual Coordination of Intelligence Budgets; The solu-
tion to the difficulties set forth in the foregoing paragraphs might be
for the IAC to undertake annually the coordination of the member
agencys' intelligence budgets prior to submission to their respec-
tive agency or departmental budgets and, of course, prior to sub-
mission to the Bureau of the Budget.
7. This procedure might be as follows:
(a) The IAC might establish a_Budget Subcommittee
to prepare for IAC consideration a coordinated statement
which might include the intelligence activities in the mem-
ber agencies identifying them, insofar as possible, where-
ever they may be.
(b) This statement might be accompanied by an
analysis of the interaction of the activities covered by
these budgets with some explanation of the way in which
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gaps in intelligence collection or research have
been identified during the previous year thru post
mortems of NIEs and other research.
(c) Upon approval by the IAC, each of the
agencies might report to its respective agency or
department and to the Bureau of the Budget the
views of the IAC, including reference to such items,
if there by any, on which the IAC members were
unable to identify sufficiently a community interest.
(d) The Budget Bureau might earmark, in the
granting of allowances to the individual IAC agencies,
the amount approved for intelligence activities. To
the extent that the allowances reflect reductions in
the original amounts requested, the IAC Budget Sub-
committee might study and advise the IAC of the ef-
fects of the cuts on the coordinated. intelligence pro-
grarri, with appropriate recommendations When
deemed necessary, the IAC would appeal to the
Budget Director the action taken on the allowances
and make every effort to secure restoration of essen-
tial items.
(e) The individual agencies might be advised of
final IAC endorsement of the coordinated statement
as an essential requirement to the coordinated Intel-
ligence Community program.
(f) The IAC Budget Subcommittee would study
and report to the IAC the effects on intelligence
activities of the final appropriation action taken by
Congress. The IAC, as required, would give ap-
propriate support to the intelligence officials in the
individual agencies to assure that in the final allot-
ment of funds adequate provision is made for carry-
ing out each agency's responsibilities in the coordin-
ated intelligence program.
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8. Difficulties in the Coordinated Approach: There are
many practical difficulties, however, that would have to be over-
come before the above model plan could be fully effectuated:
(a) As intelligence activities frequently cut
across appropriation items, it is not possible to
identify readily and accurately the funds reflected
in estimates for carrying out the intelligence func-
tion. There is a need for considerable further
study (1) to determine a standard classification of
intelligence activities which could be used by all
LAC agencies for budget purposes, (2) to obtain
agreement among the agencies as to the items to
be reflected under each category to insure uni-
formity in reporting, and (3) to develop adequate
costing formula and techniques for identifying in-
telligence costs when activities do not coincide
with appropriation items.
(b) In many instances where intelligence ac-
tivities do not coincide with allotment accounts it
will not be possible to secure an accurate account-
ing record of cost experiences. Only on an esti-
mated basis, therefore, will it be possible to com-
pare actual performance with the budget plan.
(c) The present tight budget schedule leaves
little opportunity for the IAC to make a thorough
review and analysis of the budgetary requirements.
To be most effective, the IAC review should occur
before the agency estimates are made to the respec-
tive departments and would require a very thorough
evaluation of program performance. It does not
appear that sufficient time would be available within
the present budget review schedule to permit such
a time consuming review,
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(d) Under present budget practices each depart-
ment must submit its estimates within an overall budg-
et ceiling. The proposed review by the LAG would
place it in a position of possibly appealing to the
Budget Bureau for funds for intelligence activities
in excess of that which the individual department be-
lieved it possible to allocate within its ceiling
figure.
9. An Alternative to the Coordination of Intelligence Budgets:
A less ambitious, but more practical, effort to solve this problem
would be for the IAC to undertake annually the coordination of a
statement of member agencies' budget requirements to permit
their participation in specific community programs. Such a state-
ment would include a presentation of the IAC program in question,
the justification for the program, and an explanation of the import-
ance of the member agencies participation for achievement of the
program. The NIS is such a program and would provide an excel-
lent starting point for this approach.
10. Experience gained in handling selected programs in this
manner would be useful in a longer range effort to study and re-
solve the difficulties which appear today to be insurmountable in
regard to the preparation of coordinated budgets of intelligence
agencies. It is, of course, possible that such further study would
show such total coordination to be unwise as well as unworkable.
CONCLUSIONS:
11. That it is not feasible at this time to develop a state-
ment covering all intelligence activities which would show the re-
sponsibility, measure the performance, and give the cost of each
on a comparable basis because present budgetary and accounting
practices do not permit the segregation of intelligence activities
from other elements in departmental budgets.
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12. That, since the need for a coordinated review of finan-
cial support, and performance and requirements is greatest with
respect to national programs, the Director should from time to
time as circumstances permit, request the IAC to prepare coordi-
nated statements of member agencies' budget needs with regard to
specific national programs. A. specific case in point proposed for
such treatment is the NIS.
13. Should an issue arise as to the desirability of compiling
comparable budgetary statements covering all the intelligence acti-
vities of the Government for use by the Bureau of the Budget in the
budgetary estimating process prior to issuance of final allowances,
the DCI should advise the Director of the Bureau of the Budget or
other reviewing authority that the preparation of such budgetary
statements would be impossible without major changes in the budge-
tary practices of the departments and agencies concerned.
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.,D N flIt
SMKM T
1 January 1955
FINANCING THE NATIONAL INTELLIGENCE SURVEY (NIS)
PROBLEM:
1. To reexamine alternatives for financing the NIS.
FACTS BEARING ON THE PROBLEM:
2. The National Intelligence Survey was one of the first
IAC programs to be established. It stems from paragraph 3
of section 102(d) of the Act of 1947 but in more definitive form
in paragraph la of NSCID-3 (for the text see Annex A). The
NIS Standard Instructions were prepared by a special commit-
tee of the IAC and approved by that body and the NSC. All
concerned have recognized that it was important for the NIS to
be developed as a broad, coherent and long range program both
fora national emergency (such as was faced in 1941 when there
was a vast demand for basic intelligence for strategic and oper-
ational purposes) and for providing that solid foundation of
factual detail on which any reliable estimating and planning must
be based.
3. Reimbursement for NIS: At the inception of the NIS
program in 1947, the Director of Central Intelligence made
arrangements for the Central Intelligence Agency to budget for
all NIS production except that of the Defense Department intel-
ligence agencies. Non-IAC agencies, such as Agriculture and
Interior, were not in a position to seek funds for NIS for which
they had a basic know-how but which was quite aside from
their statutory assignments. In the case of the State Depart-
ment, pre-fixed and usually reduced ceilings made it imprac-
tical to seek so large a new fund as NIS required. Furthermore,
research in the Department's field (i.e., social science) is
notoriously difficult to "sell" as compared with the scientific
and technical fields.
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4. It is probably true that the intelligence area of the
Department favored obtaining funds from CIA because it
doubted that even if the money could have been obtained from
the Congress, the Department would have made full alloca-
tion to the NIS program in the face of other Departmental in-
terests competing for the total State Department appropria-
tion. The Defense Department intelligence agencies preferred
not to participate in such budgeting, possibly on the ground
that they preferred to have complete control over the deploy-
ment of personnel working under their supervision in intel-
ligence, plus the fact that some in the military believed that
the responsibility to obtain necessary appropriations went
with the allocation of responsibility for production of intelli-
gence. It is also noted in this connection that the military
were already preparing a close equivalent of NIS in the form
of the Joint Army-Navy Intelligence Survey (JANIS). In 1951
G-2 was interested in having the CIA budget for the Army
contributions, to NIS, This proposal was not acted upon be-
cause the G-2 learned that such action would not have affec-
ted the personnel limitations imposed by the Office of
Secretary of Defense.
5. The responsibility to produce certain sections of
the NIS has been assigned to agencies of the Government out-
side of the Intelligence Advisory Committee (IAC), namely,
in the Department of the Interior and the Department of Agri-
culture. Because the subject matter in these sections gener-
ally falls within the State Department's bailiwick, State has
been delegated the responsibility by CIA to coordinate the
NIS production of these non-IAC agencies, although funds are
allocated by CIA directly to those agencies. The funds allo-
cated in 1955 to the State Department for NIS was
plus as a result of the USIA Survey; to the epar -
ment of Agriculture and to the Department of In-
terior, -{including for Board of Geographic
Names.) It is noteworthy that military production on assign-
ments for NIS has, on the average, been behind schedule much
more than State production which is financed by the CIA.
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6. Evaluation of the NIS Program: The development
of the NIS program required extensive planning and the ac-
ceptance of the principle, based on World War II experience,
that when completed, the NIS would fill an important need
of the Government in the national security field. The fruits
of this planning in the program have become more apparent
in the last several years. The use of NIS material in estimat-
ing, for example, became apparent in the recent National In-
telligence Estimate on Afghanistan, the discussion section of
which was substantially NIS material. The direct application
of a number of sections of NIS material to the needs of psy-
chological warfare and foreign information programs was re-
vealed in the course of the USIA Survey and subsequently.
The Coordinator of the NIS has in the last several months
completed an extensive survey of consumer reactions to the
NIS which was generally favorable. While it is extremely dif-
ficult to evaluate the NIS in terms of the dollar costs, we be-
lieve that the conclusion is justified that the NIS is a wise pro-
gram not only for its published product, but also for its con-
tribution to more substantial planning and programming for
both production and collection in the departments, thus pro-
viding greater strength in estimating and special reporting.
The NIS insures, in what-is probably the only fashion that
would be seriously effective, a review and build-up of world-
wide information that are both comprehensive and systematic.
7. Inter-agency support of the NIS program must be
reasonably consistent from year to year among the participa-
ting agencies to achieve a balanced production effort. The in-
ter-agency allocations necessitate a nicety of production
balance and timing so that subsection contributions may fit
into complete sections which, in turn, make up the scheduled
chapters and supplements. Disruptions in the production flow
cause disproportionate setbacks throughout the entire produc-
tion process. These disruptions are mainly caused by uneven
fiscal support for NIS requirements and by the use of NIS
capabilities for other purposes.
EO tET
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8. Alternatives for Financing NIS. In considering
how best to finance the NIS, it is believed that a major ob-
jective should be to preserve and strengthen this program.
While the proper method of financing should be established,
we must be mindful that the method should not be selected
without careful consideration to its effects.
9. Alternative I. Continue the present arrangement.
While the program would probably be substan-
tially at the same level, this method will likely come in for
increasing criticism from the Bureau of the Budget or the
Congress. It appears pressures will continue for a more
formally established arrangement for financing than that used
at present. Furthermore, difficulties will probably increase
in obtaining balanced production of NIS among the agencies.
10. Alternative II. CIA to discontinue financing NIS
production by IAC agencies notifying the Bureau of the
Budget and the Department of State of this fact and request-
ing the State Department to budget accordingly.
The Department of State would be unlikely to ac-
cept this responsibility because by tradition they have come
to assume this responsibility belongs to the Director; and in
any event, in view of its poor anticipation of success in
raising its budget ceiling for this purpose, the Department
would not want to risk having to provide for NIS within the
framework of its present allocation. However, even if the
Department did request the necessary funds to continue the
production at the current rate or with the expansion pro-
posed in the USIA Survey and its request got as far as the
Congress, it is doubtful that the total appropriation from the
Congress (which would likely be considerably less than the
request) would be allocated in the full amount for NIS produc-
tion.
SET
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The earliest budget in which the above could apply
would be that for fiscal year 1957 and the outcome could not
be known definitely until July 1956. Insofar as the decisions
.of the Congress and of the Department in making allocation
are short of the production rate proposed, readjustments in
the entire program would be required. A return to Alterna-
tive I in such an eventuality would be practically precluded
because of the then legislative history on the item.
The Department, when notified of this decision of
the Director to discontinue reimbursement, might on the other
hand refuse to accept the responsibility for budgeting for the
NIS. In such an eventuality (a) there could be a continuance
Alternative I or (b) the IAC could recommend to the NSC a re-
allocation of State's responsibility for NIS. In addition, the
transfer (probably to CIA) of the whole of that NIS now assigned
to State would have the effect of seriously weakening the intel-
ligence organization in State, both in terms of its contribution
to meet departmental needs and its contributions to NIEs. Re-
lations with State are almost bound to deteriorate as State gets
weaker and as demands force CIA into developing intelligence
materials based on NIS research but of a political estimating
type. It can also be anticipated that, with the State organization
now truncated, the Department will be encouraged to do what
many of its officers have long wanted to do, namely, to get rid
of the intelligence organization except for possibly a small
staff assigned to the Special Assistant for Intelligence, placing
the freed assets in the political bureaus.
11. Alternative III. CIA to budget for the whole of NIS pro-
duction by all agencies (Central udgetin ).
Unde =.- such an a v? angement there would be greater
likelihood of stability in production in keeping with the schedules.
This is supported by experience in regard to comparing State
and military production, the latter being generally behind
schedule more than State production. It may be that the Bureau
of the Budget and the Director of Defense would need to make
adjustments in the budgeting procedures of the Department of De-
fense.
CONFIDENTIAL
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CONFIDENTIAL
Central budgeting for NIS as far as State and non-IAC
agencies is concerned already exists and they have adjusted
their internal administration satisfactorily to make an account-
ing of their utilization of NIS funds to CIA. The preparation-of
the coordinated statement for the foregoing has been accomplished
by representatives of the agencies working with the CIA Coordi-
nator of the NIS. This might be more difficult for the military be-
cause of departmental ceilings in the Defense Department. The
military would probably object to the lack of flexibility in the utili-
zation of NIS personnel which normally applies in the way in which
they administer NIS production. Thus, in times of crisis, NIS
personnel have been drawn off almost entirely for critical work.
U. Alternative IV. The DCI to prepare with the coopera-
tion of the IAC a statement of the annual budget needs of the mem-
bers of the IAC for NIS production and to submit such statement
to the Bureau of the Budget for its information, the DCI then re-
questing funds for all of these needs except for the Department of
Defense where it is anticipated departmental policies, or the
peculiarities of the budget processes within the Department of De-
fense may require the intelligence agencies in Defense to submit
budget requests directly.
This proposal would be substantially the practice today
with the important addition, however, of providing a comprehen-
sive statement of needs for the NIS program even though allowan-
ces would have to be made for the Department of Defense to handle
its funds separately, as it does today.
At the moment this appears to be the most realistic al-
ternative, it being fully realized that at a later stage it may be de-
sirable and possible to adopt Alternative III.
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CONFIDENTIAL
CONCLUSIONS:
13. That the DCI should prepare with the cooperation of
the IAC a statement of the annual budget needs of the members
of the IAC for NIS production and submit such statement to the
Bureau of the Budget for its information, the DCI then requesting
funds for all of these needs except for the Department of Defense
where it is anticipated departmental policies and the peculiarities
of the budget processes within the Department of Defense may re-
quire the intelligence agencies in Defense to submit budget re-
quests directly.
CONFIDENTIAL
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NATIONAL SECURITY COUNCIL INTELLIGENCE DIRECTIVE NO.3
COORDINATION OF INTELLIGENCE PRODUCTION
(Approved 1/13/48; SECRET)
Pursuant to the provisions of Section 102 of the National Security
Act of 1947, and for the purposes enunciated in paragraphs (d) and
(e) thereof, the National Security Council hereby authorizes and
directs that the following over-all policies and objectives are es-
tablished for the coordination of the production of intelligence:
1 a In order that all facilities of the Government may be utilized
to their capacity and the responsibilities of each agency may be
clearly defined in accordance with its mission, dominant interest,
and capabilities, the whole field of intelligence production is divided
into the following categories, and responsibilities are allocated as
indicated:
a. Basic Intelligence
(1) Basic intelligence is that factual intelligence which
results from the collation of encyclopedic information of a more
or less permanent or static nature and general interest which,
as a result of evaluation and interpretation, is determined to be
the best available.
(2) An outline of all basic intelligence required by the
Government shall be prepared by the CIA in collaboration with
the appropriate agencies. This outline shall be broken down into
chapters, sections, and sub-sections which shall be allocated as
production and maintenance responsibilities to CIA and those
agencies of the Government which are best qualified by reason
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of their intelligence requirements, production capabili-
ties, and dominant interest to assume the production and
maintenance responsibility.
(3) When completed, this outline and tentative al-
locations of production and maintenance responsibilities
shall be submitted for NSC approval and issued as an im-
plementation of this Directive. It is expected that as the
result of constant consultation with the agencies by the
Director of Central Intelligence, both the outline and the
allocations will be revised from time to time to insure the
production of the basic intelligence required by the agencies
and the fullest possible use of current agency capabilities.
Changes in the outline or allocations shall be effected by
agreement between the Director of Central Intelligence and
and the agencies concerned.
(4) This basic intelligence shall be compiled and
continuously maintained in National Intelligence Surveys to
cover foreign countries, areas, or broad special subjects
as appropriate. The National Intelligence Surveys will be
disseminated in such form as shall be determined by the
Director of Central Intelligence and the agencies concerned.
. (5) The Director of Central Intelligence shall be
responsible for coordinating production and maintenance
and for accomplishing the editing, publication, and dissem-
ination of these National Intelligence Surveys and shall make
such requests on the agencies as are necessary for their
proper development and maintenance.
(6) Departments or agencies to be called on for
contributions to this undertaking may include agencies other
than those represented permanently in the IAC.
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to MOM I
1 January 1955
Financing the External Research Staff (ERS).
in the Department of State
Problem,
1. To reexamine alternatives for financing the ERS.
Facts Bearing on the Problem:
2. History: The Department of State in 1952, faced
with budget cuts, was prepared to abolish its External Research
Staff. At that time, ERS was a joint CIA -State (R) clearing
house for external research
owever, in. .
1952 the DDI (Mr. Becker) informed the Psychological Strategy
Board (which had taken an interest in the coordination of
external research in the foreign affairs field in the form of a
survey and report prepared by Henry Loomis) that while CIA
opposed the Loomis Report, CIA "welcomed the association of
the Psychological Strategy Board staff (PSB) with our coordinating
effort, " Subsequently and to strengthen that coordinating effort,
CIA agreed to contribute at an annual rate of o support
ERS. It proposed to the Defense Department an W tat Department
agreed to transfer to ERS in 1953 for the preparation of
abstracts of Department o Defense contractual research in
psychological and unconventional warfare. The Department of
State agreed. to. continue to pay the salary of the director of ERS
and to provide office space and materials. The decision to
continue to maintain the clearing house for external research in
State was reached after discussion with both IAC and interested
policy and operating agencies. It rested mainly on the belief
that private external. and in particular academic, researchers in
the social sciences preferred to deal with the Department of
State in the functions carried out by ERS. Moreover, ERS had
functioned satisfactorily in State for four years and there seemed
to be no compelling reason to move it.
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3. What ERS Does: ERS issues an annual inventory
with quarterly supplements of Government-sponsored external
research projects relating to foreign areas and psychological
warfare. An appraisal of the usefulness of this inventory
within CIA made by the Agency's coordinator of external
research indicates that research officers find the inventory
highly valuable as an insurance against duplication of research
and as a means of obtaining leads to other researchers with
common interests. On the basis of a questionnaire distributed
by ERS, it may be concluded that the inventory is highly
useful to other agencies in the executive branch as well.
4. ERS also publishes comprehensive lists of non-
Government-sponsored social science research on foreign
areas. It maintains a central research file which is available
for reference by research analysts and collection officers.
When called upon to do so, it negotiates contracts for Govern-
ment agencies, private scholars and research organizations,
It also acquires, reparduces and disseminates to interested
Government agencies the products of external research that
might not otherwise be available. An indication of the use-
fulness of ERS as a focal point for information about research
was given recently when the Operations Coordinating Board
(OC$) designated ERS to be the principal point of contact
between OCB member agencies and private research organiza-
tions. As a means of developing more effective coordination
in the field of external research, the DCI on 11 December 1954
proposed to the Secretary of Defense, the Secretary of State
and the directors of FOA, OCB and USIA the establishment of
a committee on this subject under the chairmanship of the
Agency. The jointly-sponsored ERS would, of course, facilitate
the work ,of such a committee.
Discussion:
5. The need for a clearing house in external research
is generally accepted in the national security community and
we believe it is sound, The technique of a clearing house for
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various kinds of research in Government it; freqtiently followed,
e. g. the National Science Foundation, Public Health Service,
Department of Agriculture, the National Advisory Committee
for Aeronautics. We see the following alternatives for financing
it.
Alternative I: Discontinue CIA Reimbursement,
The Department of State has already given.
evidence that it could not continue the ERS function,
In the event State did give it up, it is reasonably
certain that the Department of Defense would es-
tablish a comparable clearing house to meet its
own needs. It is believed that the academic
community would not be as inclined to work with
Defense as with State,
7. Alternative II: CIA. to budget for the whole of. ERS
and Administer the funds in CIA.
By agreement with the Department of
State, CIA might move the function to. CIA. It
is believed that the Department of Defense would
welcome this, although not seek it. In our dis-
cussions with the Department of Defense to
obtain their participation in the financing of ERS
to the extent of -{a figure. comparable
to that proposed for CIA), Defense expressed
the hope that, in subsequent years, CIA might
finance the function one hundred per cent.
While CIA has not been. assigned by
the NSC to be the Coordinator of External Re search
in the social sciences in foreign areas, the
Agency has assumed a posture tantamount to
this. The other agencies appear generally to
accept that notion. The time may have arrived
erg ..-e_'_ R4a, ly when such assignment should be
made by an NSCID.
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S T
It would be administratively cleaner
for CIA to finance and house the whole of ERS,
A potential disadvantage is that we might have
trouble working with the academic world be-
cause of the nature of this Agency, The other
agencies might not contribute substantively
as much information if they had no financial
stake in this program. If the other agencies
respond favorably to the Director?s letters
noted in paragraph 4 above and. a coordinating
committee is established, a. case could be
readily made that the clearing house function
should be attached to the agency which provides
the chairmanship of the committee.
8, Alternative III: Continue ERS on the basis of
financial contributions from State, CIA and Defen ,e..
ERS is now functioning reasonably
well. There appears to be no reason of principle
why CIA should not continue its present financial,
support of ERS. Continuance of ERS at the
present level is problematical, depending on the
attitude of the moment of any one of the three
agencies.
9. Alternative III, namely to continue as at present, is
the best arrangement., In the event, however, that either State
or Defense is unwilling or unable to sustain its share of the
enterprise, consideration should be given to transferring the
clearing house function to CIA financed entirely by CIA.
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