LUNCHEON MEETING WITH COMPTROLLER GENERAL ELMER STAATS ON TUESDAY, 22 AUGUST 1978

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81M00980R001500070015-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 11
• Document Creation Date: December 16, 2016
• Document Release Date: July 6, 2005
• Sequence Number: 15
• Publication Date: August 22, 1978
• Content Type: MF

Approved For Relea
oQ1
P81 M0099(9,F 0)g09g700N~15-3
2 2 AUG 1978
25X1
MEMORANDUM FOR: Director of Central Intelligence
THROUGH:
FROM:
Deputy Director of Central Intelligence
Acting Legislative Counsel
SUBJECT: Luncheon Meeting with Comptroller General
Elmer Staats on Tuesday.. 22 August 1978
1, -Action Requested: This memorandum provides background
for your luncheon meeting today with Comptroller General Elmer Staats
on the matter of legislation sponsored by Chairman Jack Brooks (D., Tex.),
House Government Operations Committee, that would, among other things,
open the Director's confidential funds authority to Comptroller General
review. The memorandum also discusses issues.that should be raised with
Mr. Staats.
1 2 ac
. kground: Last April Congressman Brooks introduced
H. R. 12171, e er Accounting and Auditing Act of 1978. " Basically
this legislation would make any confidential funds authority enjoyed by the
President or other Executive Branch official subject to full review by the
Comptroller General; the bill also provides an independent right of access
to the courts by the Comptroller General to enforce this authority.
We have raised serious concern with this legislation by letters
to Chairmen Brooks and Boland (attached at Tab A). The Department of
Justice offered testimony in opposition to the bill. Chairman Brooks'
Committee, however, completed action on the bill and is now ready to
file its report without changing the bill. It is entirely possible that
Chairman Brooks may have introduced his bill at least in part at
Mr. Staats' urging.
At our behest, the House Permanent Select Committee on
Intelligence (HPSCI) has requested the Speaker to refer the bill to the
HPSCI; the referral will not take place until Chairman Brooks' Committee
files its report. Within the last few days, however, Chairman Boland
apparently has come under pressure from Chairman Brooks not to delay
floor action on H. R. 12171; Chairman Brooks apparently is holding off
filing his report until Chairman Boland lets him know whether an amendment
acceptable to the Community can be worked out. Members of OLC and the
Office of the Comptroller talked with Mike O'Neil, HPSCI Chief Counsel,
yesterday; representatives of the FBI were also present. Mike O'Neil said
the HPSCI is under the gun to provide Chairman Brooks by the middle of
this week with such amendatory language.
x?yr F7 a..,~-,r-IP, 25
.Y
Approved For Release'2105f07/14 : CIA-RbP81 0098OR001500070015-3
 Approved For Release
97114 _ !- P$.1 M00980R001500070015-3
The clear intent of the bill is to open for GAO audit the financial
funds authority now enjoyed by Community entities. However, we do not know
specifically what has precipitated Chairman Brooks' pressure to have the
bill enacted this session. (Although a companion bill has not yet been intro-
duced in the Senate, we have received indications that such a move is likely.)
It is possible Chairman Brooks is interested in seizing the initiative and enacting
a "confidential funds overriding authority" in advance of the charter legislation,
which has its own such provision (section 123).
Although Comptroller General Staats has indicated in a recent exchange
of views that he is not interested in conducting audits of the CIA (see Tab B),
he did testify in favor of H. R. 12171; Mr. Staats may have had in mind all
along that this bill is necessary to give him the authority he would need to
audit Agency funds. It would be useful if we could obtain a clarification of
Mr. Staats' current views on this matter.
The intelligence charter legislation contains in section 123 authorities
and limitations on Comptroller General audit of intelligence activities and
expenditures of funds by Community entities. This matter is currently
being studied by the charter legislation working group, but there is not yet
a coordinated position thereon. For this reason, we cannot at this point
recommend to the HPSCI amendatory language to H. R. 12171 that Chairman
Boland could provide Chairman Brooks. We will provide you a separate
memorandum recommending a course of action in this regard following
our meeting today with representatives of Justice, Defense and the FBI.
3. Staff Position: We are working closely with the Offices of the
Comptrolle eneral Counsel, Finance, and the Inspector General on this
matter. These offices agree with the recommendation contained in paragraph 4
below.
1 4. "Recommendation: It is recommended that, during your luncheon
meeting today wi Comptroller General Staats, you sound him out on the
following matters:
--His view of H. R. 12171 (i. e., what is behind the
pressure in favor of the legislation).
--The extent to which the Comptroller General is
interested in conducting audits of the CIA and, to the extent
not now conducted, of other entities of the Community.
--Whether the Comptroller General would support
tackling this whole question in the context of the charter
legislation rather than as a separate bill.
1 h t ' ?
j 7u'i.s ..4
Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
25
 Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
OLC RLB:.sm (21 Aug 78)
Orig - Addressee, w/atts
1 - DDCI, w/atts
1 - ER, w/atts.
1 - OGC, w/atts
1 - Compt, w/atts
1 - 0/Finance, w/atts..
1 - IG Audit Staff, w/atts
1 - IC Staff, w/atts
1 - OLC Subject; w/atts
1 - OLC Chrono, w/o atts
Distribution:
Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
 -RDP81 M00980R0P10p07M3
Honorable Jack Brooks, Chairman .
Comaittee on Government Operations
House of Representatives
Washington, D.C. 20515
Dear Nr. Chairman:
J
UL 1978
I would like to take this opportunity to comment on.HLR. 12171, the
'Federal Accounting and Auditing Act of 1978."
H.R::12171 would allow the General Accounting Office unlimited.
access to all information required to verify confidential funds expendi-
tures, including those currently made. by Director of Central Intelligence
certification pursuant to authority in subsection 8(b) of the Central
Intelligence Agency Act of 1949, as wended (50 U.S.C. 403j (b)). If
enacted, this would have the operative effect of eliminating confidential
funds as a resource available to the Director.. Authority to account for
expenditure of funds solely on the certificate of an officer of the
Government is meaningless if such officer is subsequently required to
produce to an external authority complete documentation supporting the
expenditure. This authority is particularly crucial where the conduct
of sensitive intelligence activities is concerned, and we strongly oppose
legislation to override it.
The capability to carry out certain operations in the interests of the
United States Government in secret-fashion is a capability that has been
continued through the nation's history. President Washington, for example,
asked for, and was granted, a secret "contingent fund" expenditures
authority, for which he could account "by making a certificate of the
amount of such expenditure, as- he may think it advisable not to specify;
and every such certificate shall be deemed a sufficient voucher for the
sums therein expressed to have been expended." (Stat. at Large. I. 299)
This fund was used by President Washington and successive Presidents
in conducting foreign intelligence efforts, and it was well understood
that the existence of the fund was grounded on the need for extreme
secrecy in certain matters. This rather special capability comes down
to us in present tines of more complex government in the form of statutory
authority for the President's Director of Central Intelligence to exercise
control over the expenditures of confidential funds. This is the Director's
"8 (b) Authority," cited above, the actual terms of which closely parallel
the authority given President Washington.-
Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
 Approved For Release 2005/07-1-.,14-: CIA-RDP81 M00980R001500070015-3
The capability for the Government to fund certain sensitive under-
takings in a manner consistent with the requirements for strictest secrecy
has never been lost or abandoned throughout our history. H.R. 12171,
however, would have such an- adverse effect since, if enacted, the bill
would supersede section 8(b) of the Central Intelligence Agency Act; no
exception is provided for-national security interests in general or CIA
expenditures in particular. This is unacceptable. It is a basic require- -
ment for the successful conduct of sensitive activities of the Agency that
'
"
"
the Director
s
B (b) Authority
be preserved.. In the future as in the
past, it will be necessary to undertake actions of extreme sensitivity
for which the withholding of information from all except those directly
involved with the activities or in the oversight process is essential to
ilus bill, in providing for comprehensive, unrestricted and otherwise
unlimited access by GAO to Agency activities--through access.to Agency
8'
books, documents, papers, records, and other information" and through
related external verifications relating to confidential. expenditures--
to achieve the general and specific purposes of an audit, would not
only supersede the Director's "8(b) Authority," but would also directly
contravene the Director's statutory authority to protect sensitive intel- -
ligence sources and methods from unauthorized disclosure (section 403(d) C3),
National Security Act of 1947, as amended; 50 U. S. C. 102 (d) (3)) . In. effect,
the bill would make it impossible for the Director fulfill this responsi-
bility since it would require him to surrender to the Comptroller General
without restriction or selectivity all records relating to any particular
expenditure. The bill does not reflect the considerations. on which. the
Director's statutory responsibilities and authorities are based; intel-
ligence activities must of necessity be carried out in a confidential
manner, and the funding of these 'inherently sensitive activities is as
much a part of that process as are the particulars of the activities them-.
selves. In recognition of these factors, the Congress has provided that
funding of sensitive intelligence activities shall not be subject to funding
and accounting requirements applicable to other, less sensitive Govezinnent
Furthermore, the requirements envisaged.by H.R. 12171 are unacceptable
in that they would certainly create conflicts which, according to the pro-
visions of the bill, could be taken to open court for resolution. ' Because
the bill would grant the Comptroller General the right to bring an action
in the district court to compel the furnishing of any records not supplied
to him, the bill has the potential of making the Comptroller General a
"special prosecutor" in times of conflict between the Legislative and
Executive Branches on intelligence matters. Taking such issues into
-open court could only further complicate matters, and more importantly,
increase the potential for disclosure of intelligence sources and methods,
since the Agency, as defendant in such suits, could be forced to discuss
in open court activities financed through the use of confidential funds
on Director certification.
Approved For Release 2005/07/'Il : CIA-RDP81 M00980R001500070015-3
 Approved For Release 2005/07/14: CIA-RDP81 M00980R00150007001-5-3
such information. Even if the major provisions in this bill were unacceptable,
at a min;mvim, all GAO personnel to be involved directly or indirectly in such
audits would have to be subject to security arrangements identical with those
that pertain to Agency personnel (for example, full security clearance (s) , .
H. R. 12171 is also problematic from the point of view that any "uncleared"
GAO employee could have access to -the findings of confidential funds audits
as well as related materials. The bill is unacceptably silent with regard
to the matter of proper security and control. arrangements to be provided
respect could have an even greater impact on, future recruitments.
that such relationships will remain completely confidential. Should..it
become publicized that GAO. is reviewing the most sensitive Agency activities,
there may well be a tendency for sources of information or support to be
unwilling to continue to provide information or support at the risk of
their association becoming public knowledge; the degree of concern, i this
As a corollary to the problem of the unauthorized disclosure of intel-
ligence sources and methods, it must be underscored that the fact that
Congress had passed legislation which would provide for GAO auditing of
Agency confidential funds expenditures could have an adverse impact-on
present and potential intelligence sources. An essential factor in
recruiting sources in support of operational activities is the assurance
and execution of secrecy agreements).
Presently, four active congressional oversight committees (Senate
and House Appropriations Committees, Senate Select Committee on Intelligence,
and' House Permanent Select Committee on Intelligence), with sizeable staff
personnel, and the Surveys and Investigation Staff of the House Appropriations
Committee, could claim jurisdiction over matters related to audits of CIA
confidential funds. In our view, additional. independent external audit .
appraisal authority is not needed, particularly at the cost of a probable
substantial additional commitment of CIA manpower to deal with GAO teams
and the increased number of individuals and entities having access to-
sensitive intelligence sources and methods.
It is submitted that treatment of the substance of H.R. 12171 af'this
time is premature since the same topic is being more appropriately considered
in the context of H.R. 11245 (S. 2525), the intelligence charter legislation.
Since the confidential finds authority is so fundamental to the successful
completion of CIA's mission, consideration of all the issues involved is
better left on the agenda of the intelligence charter legislation which,
among other things, will address the matter of CIA statutory authorities
as a whole.
For these reasons, we oppose enactment of H.R. 12171.
3
Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
 Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
The Office of Management and Budget has advised there is no objection
to the submission of this report from the standpoint of the. Administrations
program-
eo
I--
I
or
Approved For Release 2005/0714: CIA-RDP81 M0098OR001500070015-3
 Approved For Release 2005/07/14: CIA-RDP81 M0098050P9,7,QA,
2 6 JUL 1978
Honorable Edward P. Boland, Chairman
Permanent Select Committee on Intelligence
House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
I am writing to raise - serious concerns that I have with H.R. 12171,
the "Federal Accounting and Auditing Act of 1978," which was ordered
reported on 19 July by the Committee on Government Operations.-
H.R. 12171 would, among other things, allow the General Accounting
Office unlimited access to all information required to verify confidential
funds expenditures, including those currently made by Director of Central
Intelligence certification pursuant to authority in subsection 8(b) of
the Central Intelligence Agency Act of 1949, as amended (50 U.S.C. 403j (b)) .
Not only would this legislation supersede this "8(b) Authority," but it
would also directly contravene the Director's statutory authority to pro-
tect sensitive intelligence sources and methods from unauthorized disclosure
(section 403(d) (3) of the National Security Act of 1947, as amended; 50 U.S.C.
102(d)C3)). It is essential that the 18(b) Authority" be preserved. In
the future as in the past, it will be necessary to undertake actions of
extreme sensitivity for which the withholding of information from all except
those directly involved with the activities or in the oversight process is
essential to the success of the action.
The bill was introduced on 18 April 1978 by Chairman Brooks of the
Committee on Government Operations. The bill was initially referred to
the Government Operations Subcommittee on Legislation and National
Security which, after one day of testimony by the Department of Justice
on 26 June, referred the bill to the full Committee without mark-up.
Deputy Assistant Attorney General Lawrence Hammond presented testimony,
coordinated and concurred in by CIA, which stressed that unrestricted
access by G.4O to confidential funds expenditures is problematic from a
constitutional viewpoint since it threatens the balance between the
Executive and the Legislative Branches, and infringes upon the President's
privilege of confidentiality in the diplomatic,. military and national
security spheres. In addition, QMB and CIA each forwarded reports in
opposition to the bill to Chairman Brooks.
Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
 Approved For Release 2005/07/14 -C1A-RDP81 M00980R00150007Q015-3
ligence equities at stake. We are prepared to present our case in full
referred to your Committee for immediate consideration of the intel. -
your Committee's jurisdiction over such legislative matters under
H. Res. 658, I would urge that you request the bill be sequentially
on the capai .i .ty of thus agency to fulfill its vital mission. Based on
H.R. 12171 directly addresses an essential authority of the Director.
of Central Intelligence; if enacted, it would have a major-adverse impact
to Chairman Brooks. Thank you for your attention to this-very important
I have enclosed a copy of this Agency's views letter which-was sent
before the Permanent Select Committee on Intelligence.
Sincerely,
Enclosure
Distribution:
Orig - Addressee, w/encl
.1 - DCI, it/encl
I - DDCI, w/encl
1 - ER, w/encl
I. - OGC,.w/encl
1 - IG'Audit Staff, w/encl
1 - Compt, w/encl
1/- 0/Finance, w/encl
- OLC Subject, w/encl.
1 - OLC Chrono, w/o encl
OLC:RJW:sm (20 Jul 78)
2
Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
 Approved For Release 2005/07/14: CIA-RDP81 46040150007001- -
? April 28, 1973
LC
LP#7k3
MEMORANDUM FOR: General Counsel
Legislative Counsel
Deputy Director for Resource Management
Deputy Director of Central Intelligence
SUBJECT
GAO Audits
1. I met on April 28th with Elmer Staats to discuss
GAO audits of the Intelligence Community.. After disc
~~cs;rm
- 25
3. I proposed that all requests for compartmented in-
formation be routed through our two Select Committees. Elsner
categorically rejected this and maintained that the Committees
would, themselves, agree with him'. I said this was open to
question.
4. Elmer's alternative was that we review the GAO requests
on a case-by-case basis. I said this put the Director and me
in the unenviable position of having to say no on a selective
basis, and this could lead to fundamental misunderstanding with
the GAO. Elmer said he. comprehended our concern, but saw no
other way. He felt he could not back off his responsibility,
particularly since he had had access to compartmented informa-
tion for a number of years.
Approved For Rele4iA"90 .5O7Yf4 : _GfA-R?P81 M00980R0015000iik-~ Signer
Sgner
 Approved For Release 2005/07/14: CIA-RDP81 M00980R001500070015-3
5. Elmer did say, however, that he would agree to
certain restrictions on his auditors. For example, he
could agree that all reviews of compartmented information
documents would be done in place, and no copies made. He
could also agree not to circulate written reports to third
agencies. Finally,.he could agree that each GAO audit in the
intelligence area would be reviewed personally by him or his
Deputy.
6. We decided to go back to our respective staffs and
reexamine the issue. It seems to me that there is merit to
examining Elmer's proposals. A case-by-case review is, in
.fact,.our present policy as I understand it. The restrictions.
Elmer is willing to impose would at least cut down on the
number of requests. A flat "No" on. all. compartmented clear-
ances would represent a policy change, and would lead to a
confrontation.
.7. Please give me your reactions.
.25
ran ar ucci
cc: - DCI
Approved For Release QU6/ZF7/14"'; CIAREl 81 M00980R001500070015-3