MEMORANDUM ON CENTRAL INTELLIGENCE AGENCY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-01240A000100140093-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 9
• Document Creation Date: December 9, 2016
• Document Release Date: July 24, 2000
• Sequence Number: 93
• Publication Date: January 1, 1959
• Content Type: MEMO

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MEMORANEUM ON CENTRAL DITELLI ENCE AGE!
CONFIDENTIAL
/f/7
This memorandum has been prepared to summarize certain matters
relating to the development of the Central Intelligence Agency,
particularly the financial arrangements and the audit responsibility
of General Accounting Office. The information in this memorandum has
been obtained from the files (Legislative file on Central Intelligence
Act and Amendments; B-59998, Confidential and B-74185) in the General
Accounting Office.
The Central Intelligence Agency was established as a successor to
the Central Intelligence Group under the provisions of Section 102 of
the National Security Act of 1947. Its purpose is to coordinate the
intelligence activities of the several Government departments and Agencies
in the interest of national security. The Agency has no police, stibpena?
law-enforcement powers, or internal-security functions and its activities
are almost entirely covert, carried out principally in foreign countries.
Establishment of Central Intell ence
Under date of Ally 30, 1946, (E-59998) a letter (received August 28,
1946, per GAO date stamp) signed by Lban Acheson, Acting Secretary of
State, Robert P. Patterson, Secretary of War, James Forrestal, Secretary
of the Navy., and William Do Leahy, Personal Representative of the
President an National Intelligence Authority, as sent to the Comptroller
General, attention Chief, Accounting and Bookkeeping Division, requesting
that a working fund be establishedec-Mcneisioianion 601
0 ti $01315pil IMMO 44 civ mom 'el
ii of the Act of June 30, 1932 Oa Stat. 14111Crsiors ilippllpriations to the
jviOV:-1 1113 m3+114P4P." t
three D partments.This working Vrati:to illeArguotifypleinent the
4A01.,.00
Presidential directive of January rrrijrafi to do with foreign
/*AM& Ns*
,
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parti
. 2 .
tivitiee relating to national eectrtty and directed
establishing a Central Intelligence Group to engage in
certain centralized intelligence activities which were of common interest
to the departments concerned. The working fund was deemed necessary to
provide the Director of Central Intelligence with administrative and
operational facilities which include expenditure of funds and furnishing
of personnel and equipment. No specific reply appears to have been made
to this letter by the General Accounting Office, but there ie a notation
at the bottom of the letter by E. L. F. on 8/6/46 as follows!
"This matter was dieeussed personally with the Comptroller
General, the details and procedures were explained to
him and he authorized establishing the working fund as
requested."
Apparently there was same doubt in GAO on the legality of the
propoeed delegation to the Director, Central Intelligence Group, because
the tile (13-59998) contains an unsigned draft letter set up for signature
by the same parties dated August 12, 1946, (also stamped received in (1AO,
August 28, 1946) confirming a working fund arrangement under a different
authority. This unsigned letter refers to the letter dated July 30, 1946,
and to the approval of the Treasury Department and the Comptroller General,
of a working fund, War, General, 1947, which has been constituted and had
been assigned the syMbol nuMber 2175900, ender the authority granted by
Section 291 of the Revised Statutes, the Military Appropriation Act, 1947,
and the Naval Appropriation _Act, 1947: approved JAY 8, 1946 (Public Law /922
79th Congress). At the bottom of this letter a notation initialed by
E. L. F. on 4/21/46 states that:
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25X1A
"1 calledWar 76943) of Cenbsei Istaaeltgense
Gmeetp about this and advised him that the proposed delegation
of authority was extremely doubtful as to ems matters but
that it did not lack color of authority and that under the
circumstances, considering the nature of the Agency, this
Office probably would go along with the delegation with the
understanding the entire matter would be made the subject of
specific legislation at the first reasonable opportunity*"
Under date of September 5, 1946 (B49998), a letter in the same language
as the draft was sent to the Comptroller General which letter was signed
by Dean Aohesonl Robert P. Patterson, James Porrestal, and William D.
Leahy, in their capacities respectively as Acting Secretary of State,
Secretary of War, Secretary of the Navy, and Personal Representative of
the President for National Intelligence Authority. No specific reply
was made to this letter, 25X1A
On August 35, 1946 (13-59998)? a letter signed by
Colonel, Executive for Personnel. Administration for Central Intelligence
Group, to the Comtroller General (received GAO, August 19, 1946)
confirmed a conference between representatives of National Intelligence
Authority and the General Accounting Office on August 14, 1946, relative
to disbursing and accounting procedures to be established in order to insure
security with respect to the confidential operations of the Central
Intelligence Group and outlined a plan of a ',Voucher and Schedule of
Taymentafl for submission to the Chief Disbursing Officer, Treasury apart-
ment, in order to enable that official to make payments to vendors and
other perms. This Voucher and Schedule of Peennents would be used as
voucher(s) since all
both a schedule of payments and the orAginal/basic data normally trans-
mitted through channels to the General Accounting Office for poet-audit
would pbraioalkv be retained in the oonfidential files of Central Intel-
ligence Group* Also, there was outlined in the letter a payroll pro-
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oedure to be follaed by the agency. This letter also *'opoeed that
audits by the General Accounting Office be nade at the uite by auditors
approved by Central Intelligence Group from a security viewpoint and
that after audit and approval for settlement by representatives of the
General Accounting Office the original vouchers and basic payroll data
would be retained in the confidential files of the Central Intelligence
Group for a period of not to exceed five years. Under date of August 280
1946, the Comptroller General, in a letter to the Director, Central
Intelligence Group, approved the procedure for and payment by the
Chief Disbursing Officer of a properly prepared 'Toucher and Schedule
of Poyments.# This letter atated further that in accordance with the
informal discussions the names of the General Accounting Office auditors
designated to perform the site audits would be submitted to the Director,
Central Intelligence Group, for approval prior to the first audit*
On March 27, 1947 (B49998), Hoyt S. Vandorberg? Director of
Centrel Intelligence, wrote the Cemptroller General requeating approval
for an arrangement under which the original vouchers' and Supporting papers
related to disbureteients made at certain locations abroad through officials
of the State Department who have been designated Special Disbursing
Agents to the Chief Disbursing Officer, Treasury Department; would be
forwarded directly to the central office of the Central Intelligence Group
in Wathington, D. 04, and subeeqUentkv retained In their files for audit
by representatives of the General Accounting Office. By letter dated
April 1, 1947g to the Director of the Central Intelligence Group, the
Comptroller General approved the requested procedure.
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letter dated July 1, 1947, the Secretary of State George C.
Mai'siaU, Secretary of War Robert P. Patterson, Secretary of Navy
'James Forrestal, and Personal Representative of the President on National
Intelligence Authority, William D. Leahy, requested that during the 1948
fiscal year the same authorities and arrangements apply to the activities
and funds of the Central Intelligence Group as existed during the 1.947
fiscal year. No reply appears to have been made to this letter and there
is a notation 'Tile E. L. F. 7/28/47ft appearing on the bottom of this
letter.
Enactment of National Security Act of __7biiclaw253, apth .Copeme
On July 26, 19470 Senate 750 was enacted into Public Law 253 which
set up the National Security Council and by Section 102 provided for a
Central intelligence Agency as successorto the Central Intelligence Group.
This le ialatien, however, provided no administrative authorities for
obtaining expending or accounting for funds in carrying out the intel-
ligence activities. 25X1A
Following the enactment of this legiAlAtion
Executive for Administration and Management, on October 7, 1947, 59998)
wrote the Comptroller General in which it was stated that in accordance
with the informal arrangements made with the representatives of the
General Accounting Office and the Treasury Department, it was planned to
operate and administer the funds made available to the National Security
Council in the same manner as funds made available heretofore to the
Central Intelligence Authority, Accordingly, the vouchers and basic
oupporting papers would be retained in the files of the agency in order
to enable the representatives of the Audit Division of the General
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Accounting Office to perform the site audit of these accounts. The
letter also enclosed delegations of authority executed by the Executive
Secretary and concurred in by the Director of Central' Intelligence.
Reply to this letter does not seem to have been made by the General
Accounting Office as it contains a notation "File, no reply necessary,
ELF, 10-9-47."
On July 1, 1948, Secretary of State G. C. Marshall, Secretary of
the Army Kenneth C. Royal, and Secretary of the Nary John L. Sullivan
wrote the Comptroller General requesting that during the fiscal year
1949 the sane authorities and arrangements apply, forthe activities and
funds of the Central Intelligence Agency as existed during 1947 and
1948 fiscal years. No reply seems to have been made to this letter as
it contains a notatibn "File ELF, 7-13-48."
Enactment of legislation for the administration of the
Central Intelligency Agency
H. R. 2663 and S. 961 were introduced in the 81st Congress for the
purpose of providing for the administration of the Central Intelligence
Agency, established pursuant to Section 102, National Security Act of
1947, and for other purposes. Section 7(a) of the bill, renumbered
as Section 10(a) in the bill as enacted, permitted sums made available
to the agency by appropriation or otherwise to be expended for the
purposes set forth in the section notwithstanding any other provisions
of law. Nouse Report No. 160, 81st Congress, reporting on the bill
(page 6) stated that this section was necessary in view of the require-
ments in existing law or Comptroller General's decisions which specified
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that such expenditureslelre not permissable unless authorized by
Section 7(b)? renumbered Section 10(b), in the bill as enacted, provided
followst
"The swnc made available to the Agency may
be expended wtth.-
out regard to the provisions of law and regulations relating
to expenditure of Government ilnxisj and for objects of a
confidential, extraordinax7, or emergency nature, such ex-
penditures to be accounted for solely on the Certificate of
the Director and each Certificate ;tell be deemed a sufficient
voucher for the amount therein certified,"
House Report No, 160 (page 6) did not amplify the meaning of this section
and stated only that the sections permitted the agency to expand sums
made available to it without regard to provisions of law and the expendi-
ture of fends for confidential purposes could be accounted for solely
by the certification of the Director.
On March 4, 1949: J. Darlington Denit? Chief, Accounting and
Bookkeeping Division, wrote the Comptroller General and called attention
to Bills HR. 2663 and Senate 961 providing for administration of Central
Intelligence Agency and particularly to the language of subsection (b)
of Section 7, Mr, Denit pointed out that the general application of
existing lave and the authority and responsibilities vested in this
Office *Vex, the control and review of the financial transactions of
various Goverment acenciee would be completely nullified insofar as
the transections of the Central Intelligenmy Agency were concerned and that
the legal effect of such a provision would place the 'goner in an auto-
nomous position from the standpoint of accountability for the funds that
may be appropriated or transferred to it, He suggested that the follow-
ing language be substituted
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"(b) Of the sums made available to the Agency amounts
shall be specified which Shall be expended for objects of
confidential, extraordinary, or emergency nature, ouch
expenditures to be accounted for solely on the Certificate
of the Director and every such Certificate Shall be deemed
a sufficient voucher for the amount therein certified.n
On Mareh D.t, 199, (1-710-85-0.N.) the Comptroller General wrote to
the Chief, Accounting and Bookkeeping Division and after referring to
a letter of Narch 12, 1948, D-711185 (to Director) Bureau of the Budget
cementing upon draft of the proposed bill) stated that it was ndeemed
unnecessary to rake any other cement on the bills A this time."
Mr. E. L. risher, Gmeral Counsel, on March 103 19491 (B-7/1155)
wrote 2r. Weitzel with return of the files on Central Intelligency Agency
IL . 2663 and Senate 961 and recommended that we not make a
veduntary report on these bills.
. Fisher stated that he honestly
believed that nothing could be accomplished by such a report and we would
jeopardize ourselves against an "abuse report', later on. iXe otated that
we can vetch the operations under the bill and be in a better position
to make an %bum" report later on if we are not disregarded an a voluntary
report now. Ia.: Maher further stated that if we are going to have spies
he could not conceive of a better program to be carried on than one with
almost unlimited authority.
On August 17) 1949, Roar Admiral R. N. Hillenkeetter, Director of
Central Tntelligence wrote the Comptroller General in which be Stated
that the National Security Act of 1947 provided no detailed fiscal or
administrative authorities to which reference could be made in expanding
or accounting for funds and that there was an obvious need for clarifi-
cation of these authorities. This clarification had been accozaplished
through Public Law 1101 81st Congress, which was enacted June 200 1949.
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The AdminiStrator want on to state in this letter that the law granted
the agency and the Director certain very broad and unusual powers in a
number of respects and on which helms keenly aware of his responsibilities.
He further stated that so long as he held the position of Director the
policies on fiscal natters and his attitude toward the Government funds
under his control would in no way be ?hanged by legislative grants of
rower to him. In a note to Nr. Kollar, Mr, Fisher stated no reply was
necessary and rests-mended that the letter be filed.
On June 29, 1951, (D-59998) the Comptroller General wrote Honorable
Walter B. Smith, Director, Central Intelligence Agency, stating that
subsequent to the letter of August 282 1946, which approved site audit
procedures for Central Intelligence Agency such procedures have been
extended to include the audit of diSbursing officers' accounts current and
that accounts current reflecting transactions for the month of July 1951
and thereafter mould be retained by your agency for site audit by approved
representatives of this Office.
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