INQUIRY FROM SENATOR PROXMIRE REGARDING LEGAL BASIS FOR COVERT ACTION AND GAO AUDIT OF CIA
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Collection:
Document Number (FOIA) /ESDN (CREST):
CIA-RDP77M00144R000600030005-1
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RIPPUB
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K
Document Page Count:
20
Document Creation Date:
December 19, 2016
Document Release Date:
April 12, 2005
Sequence Number:
5
Case Number:
Publication Date:
March 14, 1974
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MF
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,flyv c~t-
MEMORANDUM FOR: Legislative Counsel
SUBJECT: Inquiry from Senator Proxmire Regarding
Legal Basis for Covert Action and GAO
Audit of CIA
1. On 24 January 1974, Senator Proxmire wrote
Elmer Staats, Comptroller General, requesting the latter's
opinion on several matters relating to the Intelligence Com-
munity in general and CIA specifically. Among other things,
Senator Proxmire asked the Comptroller General to provide
an opinion on the legality of the National Security Council
.directing the Intelligence Community in part or whole to
engage in covert activities abroad. Senator Proxmire also
inquired as to the statutory authority of the GAO to review,
audit or otherwise examine the programs and operations of
the various intelligence agencies and what success the GAO
has met with obtaining information from and about the Intelli-
gence Community.
2. We have drawn together appropriate materials
from our files and from the archives and have prepared
memoranda on the legal basis for covert action and the
history of the audit arrangements between GAO and CIA.
These two memoranda are available in our files for what-
ever use you may have in response to Senator Proxmire's
inquiries or otherwise.
~HN S. WARNER
eneUal ounsel
cc: DD/O
DD/M&.S
25X1
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Distribution:
Orig: OLC
1 - OGC SUBJ1 GT CIA ACTS AND STATUTES
1 - OGC Chrono c. r. ACCOUNTING GAO Audit
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14 March 1974
MEMORANDUM FOR: General Counsel
SUBJECT: Historical Review of Audit of CIA
Expenditures by the General
Accounting Office
REFERENCES: Noted on Page 5 and attached
1. The enactment of the CIA Act of 1949 provided the
Director of Central intelligence broad authority to expend
monies on his certification alone without the usual audit by
the General Accounting Office (GAO). The Director adopted
the policy of limiting the exercise of this special authority
to those activities which in the national interest deserved the
maximum security protection, although he considered all
funds appropriated to the Agency to be technically on an
unvouchered basis and therefore exempt from audit by GAO.
Accordingly, the Director requested that the GAO continue
auditing vouchered expenditures.
2. Beginning in March 1959, staffs of the Special CIA
Subcommittee of the House Armed Services Committee and the
GAO met to discuss the audit arrangement between CIA and
GAO. Then. in May, senior GAO officials appeared in executive
session before the Special CIA Subcommittee, which was chaired
by Congressman Kilday, to further examine the audit question.
As a result of this session, the Comptroller General wrote
Chairman Kilday in June 1959 recommending that GAO broaden
its auditing procedures of CIA to bring them in line with the
general audit procedures used with other agencies. This
broadening was possibly to include a limited audit of unvouchered
funds. Mr. Kilday then wrote the DCI, Mr. Dulles, suggesting
that CIA and GAO confer on the audit question.
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3. On 30 June 1959, Mr. Dulles informed the president
of the audit situation, noting that while CIA could take the
position that all expenditures were exempted from GAO audit,
the Agency had adopted the policy of submitting as many expendi-
tures as possible to GAO audit and this normally amounted to
about 45% of all expenditures.
4. A CIA-GAO working group was established in July
1959 to study the question of whether GAO could apply its
"comprehensive audit" approach, then in use with other agencies,
to CIA. Under the "comprehensive audit" the GAO's basic pur-
pose was to review and evaluate the manner in which an agency
carries out its financial responsibilities, including expenditures
of funds and utilization of property and personnel in the furtherance
only of authorized programs in an "effective, efficient and economic
manner. " In conducting such an audit the GAO would examine the
organization structure, review agency practices and procedures
followed in carrying out agency policies and make selective exami-
nation of actual transactions.
5. As a result of the CIA-GAO discussions, Mr. Dulles
wrote the Comptroller General in October 1959 stating his belief
that GAO could expand its audit of CIA, but added a cautionary
note:
.../The Agency policy of submitting the maximum
expenditures possible to GAO audit/ has been exercised
to such a degree that certain activities, not in themselves
sensitive but conducted solely in support of highly confi-
dential operations, are funded under general authorities
without invoking my special authority to make final
accounting therefor. A comprehensive audit of the sort
now conducted by the General Accounting Office in
other agencies, if applied to our so-called vouchered
expenditures, would necessarily reach into the confi-
dential operations which they support and which are
protected by my special authority under Section 8 of the
Act. In these instances, therefore, the comprehensive
audit would have to be limited so as to remain outside
the area of sensitive security operations.
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The Comptroller General responded that he believed an expanded
audit of a considerable part of the Agency's operations was
possible while still remaining outside,of the sensitive area pro-
tected by Section 8 authority. Under these circumstances an
expanded audit was begun on a trial basis in late 1959.
6. In May 1961, after some sixteen months of the trial
comprehensive audit, GAO threw in the towel. The Comptroller
General wrote Chairman Kilday:
... Various steps were taken by CIA to place
the General Accounting Office in a position to make a
comprehensive audit of the overt activities of CIA.
... We have been given sufficient access to make
reasonably comprehensive reviews of the overt
activities of the Intelligence Component, but such
reviews, in our opinion, will not be productive of
significant evaluations because we cannot feasibly
evaluate the extent to which needed overt informa-
tion is available for collection or determine the
need for the intelligence information selected for
collation and use in the production of intelligence
reports. '...In as much as we cannot, in our
opinion, effectively accomplish any worthwhile
audit objectives on a continuing basis, we plan to
discontinue our audit of CIA activities.
7. Mr. Kilday brought the Comptroller General's letter to
the attention of Congressman Vinson, Chairman of the House Armed
Services Committee. Within 48 hours, Mr. Vinson replied to the
Comptroller General conveying his firm opinion that the audit
question should be the subject of further discussions between the
Committee, the GAO and the CIA and strongly recommended the
continuation of the audit in the interim. Chairman Vinson's
reservations, as well as the Agency's, concerning the proposed
GAO pullout were motivated in large part by the political climate
then prevailing in the aftermath of the Bay of Pigs affair.
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8. GAO continued its limited audit of CIA for about
one year. On 21 June 1962 the Comptroller General wrote
Chairman Vinson expressing his continued view that security
restrictions precluded an effective audit of CL.. The Comp-
troller General stated his belief that to conduct a maximum
effective audit, "it would be necessary for our /GAO/ audit staff
to have nearly complete access to CIA activities." He continued
that it would be possible to perform "reasonably comprehensive
reviews... if. permitted complete access to the administrative
activities, such as financial, procurement, property, and
personnel management and internal review activities that are
performed in support of both sensitive and nonsensitive opera-
tions of CIA. " (Emphasis added. )
9. Upon consideration of the audit problems as expressed
in the Comptroller General's latest letter, Chairman Vinson
agreed that GAO withdraw from further audit of CIA activities.
a letter to the Comptroller General, which was drafted by the
... the restrictions you met with in the Central
Intelligence Agency are necessary, I believe, for
the proper protection of its intelligence activities
and should be maintained. Also, Mr. McCone has
informed us that among the reorganizational steps
he has carried out is a major strengthening of the
comptroller and internal audit functions in the
Agency. Consequently, I believe you have met the
objectives of my letter of May 18, 1961, which
recommended that you continue your work at that time,
and since you feel confirmed in your opinion that it is
not a worthwhile effort, I am agreeable that you with-
draw from further audit activities in the Central
Intelligence Agency.
10. Since July 1962, the GAO has not audited CIA, but
a thorough internal audit is conducted by the CIA Audit Staff and
as Agency proprietary CPA firm.
Office of General Counsel
Atts. A_peypg1F(06 F gpa 20R6/pe2/x071:cCIA-RDP77M00144R000600030005-1
OGC SUBJ: A COUN WING-GAO AUDIT.1- Chrorn
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A. Ltr to Congressman Paul J. Kilday fr Comptroller General, dtd
29 May 1959
B. Ltr to Hon. Allen Dulles fr Congressman Paul J. Kilday, dtd
18 June 1959
C. Ltr to The President fr Hon. Allen Dulles, dtd 30 June 1959
D. Ltr to Congressman Paul J. Kilday fr Hon. Allen Dulles, dtd
25 July 1959
E. Ltr to Congressman Paul J. Kilday fr Hon. Allen Dulles, dtd
3 August 1959
F. Ltr to Comptroller General fr Hon. Allen Dulles, dtd 16 October
1959
G. Ltr to Congressman Paul J. Kilday fr Comptroller General, dtd
16 May 1961
H. Ltr to Hon. Allen Dulles fr Comptroller General, dtd 16 May 1961
(Confidential)
1. Ltr to Comptroller General fr Congressman Carl Vinson, dtd
18 May 1961
J. Ltr to Congressman Carl Vinson fr Comptroller General, dtd
21 June 1962
K. Draft Ltr to Comptroller General fr Congressman Carl Vinson,
dtd 11 July 1962
L. Ltr to Congressman Carl Vinson fr Comptroller General, dtd
26 July 1962
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qe~~ SPA
AppCOei ~tOL~:K~r~`L~DE~~5r1
Washington 25, D. C.
Honorable Paul J. Kilday, Chairman
Special Subcommittee, Central Intelligence Agency
Committee on Armed Services
House of Representatives
Dear Mr. Chairman:
On May 15, 1959, Mr. A. T. Samuelson, Director of our Civil
Accounting and Auditing Division, attended an executive meeting of your
Subcommittee to discuss our audit responsibilities and activities at
Central Intelligence Agency. At the conclusion of this meeting, it
was suggested that recommendations be submitted for the future audit
activities by the General Accounting Office at this Agency.
Following the enactment of the Central Intelligence Agency Act
of 1949, the then Director of the Agency requested that notwithstanding
the very broad and unusual powers granted to the Central. Intelligence
Agency by the Act an audit of expenditures at the site, as previously
performed by the General Accounting Office, be continued. Accordingly,
the General Accounting Office has continued to make audits of vouchered
expenditures, under the same arrangements that were in effect with the
predecessor Central Intelligence Group. However, in view of the pro-
visions of section 10 of the Central Intelligence Agency Act, no
exceptions have been taken to any expenditures. In those cases where
questionable payments come to our attention, we refer the cases to
the CIA Comptroller's Office for corrective action. In using the
term questionable payments, we mean any expenditures which, except
for section 10 (a) of the Act, would appear to be improper or illegal
either under law or under the decisions of the Comptroller General.
In our audit work, we have not made a substantive review of Agency
policies, nor of its practices and procedures, and we have made no
audit of expenditures of unvouchered funds.
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Since the enactment of Central Intellig
ence legislation, we have
t, 0
generally broadened the type of audit we make of the activities of most
Government agencies. Under our comprehensive audit approach, our
basic purpose is to review and evaluate the manner in which the agency
or activity under audit carries out its financial responsibilities. We
construe financial responsibilities as including the expenditure of funds
and the utilization of property and personnel in the furtherance only of
authorized programs or activities in an effective, efficient, and
economical manner. In carrying out this kind of an audit, we examine
the organization structure and review the established agency policies
for conformity with legislative intent and applicability to agency activities.
We also examine agency practices and procedures followed in carrying
out the agency policies and make selective examination of actual
transactions as a means of appraising the application of agency
practices and procedures. Reports on the results of our work are
submitted to the Congress and to agency management officials.
We believe that a broader type of audit is appropriate for our
work at Central Intelligence Agency and is more likely to be productive
of evaluations of the administrative functions which would be helpful
to the Congress and the Agency Director. We have accordingly concluded
that it would be desirable to expand our audit work at Central Intelligence
Agency more in line with our regular comprehensive audit approach.
The expanded work would include an examination of vouchered expenditures,
and,. at the outset, the controls and procedures used in processing
unvouchered expenditures. Also we would propose to make a limited
examination of the support for unvouchered expenditures in accordance
with such agreement as to access as can be worked out between CIA and
our Office. As indicated by the preceding comments we have heretofore
carried out only limited audit work at CIA, and we do not believe such
limited work should be continued.
At this time we do not recommend any change in section 10 of the
Central Intelligence Agency Act. We believe, however, that your Sub-
committee could be very helpful in effecting a change in the scope of
our audit work at CIA by advising the Agency of your interest in
broadening the audit performed by the General Accounting Office. Any
broadening of our audit activities should not include an evaluation of
the intelligence activities of the Agency.
We are prepared to discuss this matter further at your convenience.
Sincerely yours,
/s!
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of the United States
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HOUSE OF REPRESENTATIVES
Committee on Armed Services
Suite 313, House Office Building
Washington 25, D. C.
June 18, 1959
Honorable Allen Dulles
Central Intelligence Agency
Washington 25, D. C.
Dear Mr. Dulles:
On March 2, 1959 and subsequent dates staff meetings
were held between the CIA Subcommittee and the General Accounting
Office in order to develop a clearer understanding of the relationship
between the General Accounting Office and the Central Intelligence
Agency. Upon completion of these staff meetings the CIA Subcommittee
met on May 15 with a senior representative of the General Accounting
Office for the purpose of pursuing the information developed in the _
staff conferences.
The Subcommittee fully appreciates the legal exemption of the
Central Intelligence Agency from audit by the General Accounting Office.
However, since representatives of GAO have been assigned to the
Central Intelligence Agency since you became Director and prior
thereto, there is a general impression that the vouchered funds of
CIA have been subjected to the normal audit function of the General
Accounting Office. It is this particular point that the Subcommittee
pursued at its meeting on May 18.
At the conclusion of its meeting, the Subcommittee informally
concluded that:
(1) the degree of audit of vouchered funds performed
by GAO representatives in the Central Intelligence Agency was
considerably less than had been thought;
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(2) for the protection of the Agency and the assurance
of the Congress, the audit function. should continue;
(3) that more senior representatives of the General
Accounting Office should be assigned to this function; and,
(4) that the Chairman of the Subcommittee should
seek the formal opinion of the Comptroller General with
respect to this matter.
In keeping with the above, I requested the official
opinion of the Comptroller General on the relationship of
his office with the Central Intelligence Agency. Under date
of May 29, I received a letter from the Comptroller General,
a self-explanatory copy being hereto attached. You will note
that the Comptroller General recommend a broader type of
audit than is presently accomplished. At the same time he
takes cognizance of appropriate restrictions which are inherent
in this endeavor.
The question now arises as to the action that will be taken
with reference to this matter. Inasmuch as the General Accounting
Office participates in the activities of your Agency by invitation,
it is my opinion that it would be both appropriate and desirable
for you to initiate a conference with the Comptroller General in
an effort to clarify the existing situation. The CIA Sub committee
stands ready to assist in any manner, but I believe you will concur
in my thought that the conference which I have suggested represents
the most desirable approach to a solution.
As soon as you have had an opportunity to consider this
matter I would appreciate an expression of your reaction.
Sincerely,
Enc.
S
/s/
Paul J. Kilday, Chairman.
Subcommittee on CIA
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COPY
25 July 1959
The Honorable Paul J. Kilday
Chairman, Subcommittee on CIA
Committee on Armed Services
U. S. House of Representatives
Washington 25, D. C.
Dear Mr. Kilday:
I refer to your letter of 18 June 1959 and to our discussion
on 30 June 1959 with regard to your desire that I initiate a conference
with the Comptroller General to consider the possibility of a broader
type of audit in the Central Intelligence Agency by the General
Accounting Office.
This is an interim report to advise you that I have contacted
Mr. Campbell who designated Mr. A. T. Samuelson to discuss this
matter with us initially. Colonel L. K. White, my Deputy Director
for Support, has had a meeting with Mr. Samuelson, and Mr. Campbell
and Mr. Samuelson have accepted my invitation to a briefing next week
in order to gain a better understanding of our activities and of the
problems inherent in the conduct of a comprehensive audit. After
this briefing and any other subsequent discussions which the Comptroller
General and I may feel necessary, I shall report further to you on this
matter.
Sincerely,
Allen W. Dulles
Director
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COPY
3 August 1959
The Honorable Paul J. Kilday
Chairman, Subcommittee on CIA
Committee on Armed Services
U. S. House of Representatives
Washington 25, D. C.
Dear Mr. Kilday:
With further reference to my letter of 25 July 1959 in
connection with the relationship between the Central Intelligence
Agency and the, General Accounting Office I should like to report
that Mr. Campbell, the Comptroller General, accompanied by
Mr. Keller, his General Counsel, and Mr. Samuelson, Director
of the Civil Accounting and Auditing Division, GAO, attended a
briefing of approximately three hours duration in my offices on
30 July 1959. This briefing included presentations by our most
senior officials who are responsible to me for the conduct of our
operations and financial activities.
Insofar as was possible within the time available, we gave
Mr. Campbell a full explanation of the activities of the entire Agency..
He indicated that the briefing was extremely helpful and that he would
be in touch with us again soon.
I shall keep you advised as to our progress.
Sincerely,
Allen W. Dulles
Director
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Next 8 Page(s) In Document Exempt
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COPY OF DRAFT; COPY OF FINAL LETTER NOT
RECEIVED
Honorable Joseph Campbell
The Comptroller General
of the United States
Washington 25, D. C.
DRAFT
OGC:LRH:jeb
11 July 1902.
Dear Mr. Campbell:
I have read your letter concerning the restrictions on
performance of an audit of the Central Intelligence Agency and
your opinion that as a result of these restrictions you could not
effectively accomplish any worthwhile audit objectives at the
Central Intelligence Agency.
As you know, the restrictions you met with in the Central
Intelligence Agency are necessary, I believe, for the proper
protection of its intelligence activities and should be maintained.
Also, Mr. McCone has informed us that among the reorganizational
steps he has carried out is a major strengthening of the comptroller
and internal audit functions in the Agency. Consequently, I believe
you have met the objectives of my letter of May 13, 1961, which
recommended that you continue your work at that time, and since
you feel confirmed in your opinion that it is not a worthwhile effort,
lam agreeable that you withdraw from further audit activities in
the Central Intelligence Agency.
Sincerely,
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s------------- t
COMPTROLLER GENERAL
OF THE UNITED STATES
JUL 2 6 1962
Your letter dated July 18, 1962, on further
audit activities by the General Accounting Office
at Central Intelligence Agency is acknowledged.
Your acceptance of our conclusion that we
withdraw from further audit activities at this
Agency is appreciated and we will proceed to com-
plete the work that is in process at a relatively
early date.
Sincerely,
jcsepn C4mpbel3.
Comptroller General
of the United States
Honorable Carl Vinson
Chairman, Committee on
Armed Services
House of Representatives
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