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Mr. Chairman and Members of the Committee,

I appreciate the opportunity to appear before you in support of a FY 1979 supplemental request of $13,892,000.

This request is composed of two parts:

$6,000,000 to replace

exchange rate losses because of decline of the dollar abroad

and $7,892,000 for the physical loss of U.S. currency and other

resources incident to the evacuation of Vietnam in April, 1975.

The $6 million to replace exchange rate losses is based on

exchange rate movements for December 19, 1977 to December 29,

1978 for six major OECD countries.

The exchange market for the

dollar against these currencies was volatile during the last

calendar year, and at times the dollar had lost over 25 percent

of its strength against the Swiss Franc and the Japanese Yen.

The six posts were singled out because they represent the

bulk of our exchange loss, and the size of their loss does not

permit reprogramming without severely harming other important activities. Although a number of other posts experienced losses, these can be offset by gains from other posts.

Concerning the request for $7.892,000, the Comptroller

General in his decision (B-186348) of July 18, 1977 ruled that

all adjustments for funding losses incident to the evacuation of

Vietnam in April, 1975 should be charged to the Department of State's Salaries and Expenses appropriation. The Department is liable for this physical loss because the disbursing operation in Vietnam was a Departmental responsibility.

This physical loss of $7,892,000 includes Vietnamese

piasters abandoned at the time of the evacuation; U.S. currency which was reportedly destroyed; checks which were issued by the

United States Disbursing Officer (USDO) for which it proved

impossible to identify the chargeable appropriation; and, cash payments and other transactions for which there is no accurate documentation available. This loss is composed of a $5,794,000 dollar loss and $2,098,000 in the U.S. equivalent of piasters.

Although only $4,360 of this currency turned up in this

country, the Treasury, with the agreement of the General Account

ing Office, is treating the entire amount as a physical loss since

some of the money which should have been destroyed was not.

Therefore, the Department is seeking a supplemental appropriation of $7,892,000 to transfer to the Department of the Treasury where the funds will be credited against the Department of State's statement of account. This transaction will result

in a clearance in the Department of State's statement of account with the Treasury which will result in no real budget outlays.

Mr. Chairman that concludes my prepared statement.

I would

be pleased to answer any questions you or the Committee may have.

Thank you.

Mr. READ. In summary, let me say, if I may, that this supplemental request of $13,892,000 is made up of two items: one, a $6 million request to replace the exchange rate losses because of the decline of the dollar abroad; and second, a $7,892,000 request for the physical loss of U.S. currency and other resources incident to the evacuation of Vietnam in April of 1975.

CURRENCY LOSS IN VIETNAM At that time, we made an effort to destroy all remaining U.S. currency and piasters that were in the possession of the Embassy and thought we had done so. Apparently, within the year a relatively small sum of this currency-$4,360—showed up in this country, and under a ruling by the Comptroller General, we are required to request the Committee for this appropriation which would, of course, be turned over in full to the Treasury.

Mr. HIGHTOWER. Mr. Chairman, may I ask for a little further explanation at that point?

Mr. Read, are you saying then that the $7 million is the total that could possibly have been taken over by the Vietcong? We are charged with the $7 million because several hundred showed up?

Mr. READ. That is exactly correct, Mr. Hightower. The Comptroller General's decision of July 18, 1977 requires that if any funds of a larger sum which has been destroyed deliberately and in line with policy does turn up, the assumption must prevail that the entire sum has not been destroyed.

Although only $1,360 of the currency has turned up in this country, we are required to ask for the full sum.

Mr. HIGHTOWER. When did that turn up in this country?
Mr. READ. I am told it was in 1975.

Mr. HIGHTOWER. Why is it only now that it is being put into the appropriation request?

Mr. READ. The Comptroller General was asked to make a ruling on what to do about it, and his ruling came down in 1977.

Mr. HIGHTOWER. Was this identified by serial numbers?

Mr. READ. Yes. The currency was indeed marked currency, and there was a record kept of what had been destroyed.

Mr. HIGHTOWER. Does anyone in the State Department have any idea how this might have occurred when they thought it had been destroyed ?

Mr. READ. Absolutely none. It was, of course, a far from orderly scene during the final days of the Embassy. Every effort was made to destroy the currency, and we thought our aim had been accomplished, but it simply wasn't. This is a transaction, of course, which has no real budget outlay.

Mr. HIGHTOWER. It is just so unusual, or at least unusual in my experience. I want a little more detail about it. Actually, then, there is good evidence that the very large part of this $7 million was actually destroyed.

Mr. READ. We thought the full amount had been destroyed. We found out otherwise and are, therefore, required to take this step by Treasury, the GAO and OMB.

Mr. HIGHTOWER. Thank you, Mr. Chairman.


Mr. SLACK. We shall insert at this point in the record the supplemental justifications for "Salaries and Expenses” and “Payment to the Foreign Service Retirement and Disability Fund."

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