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Funds in the amount of $13,892,000 are requested to provide additional resources to compensate for increased operating costs resulting from the decline in value of the 11.5. dollar in foreign exchange ($6,000,000) and to comply with the Comptroller General's Decision No. B-186348 that Department of State be charged by the Department of the Treasury for the value of funding losses incident to the evacuation of Vietnam in April, 1975 ($7,892,000).

1/ Includes proposed supplemental of $13,460,000 for federal salary increases.

APR 20 1979

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For an additional amount for "Salaries and Expenses"

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The purchasing power of the dollar overseas has weakened considerably since the development of the FY 1979 budget for the Department's "Salaries and Expenses" appropriation. Because our overseas operations are primarily paid for in local currencies, the decrease in the value of the dollar in relation to other currencies has caused the dollar cost of our operations budgeted in FY 1979 to increase sharply.

As a result of exchange losses between December 1977 and December 1978, the Department is requesting an increase of $6,000,000 to maintain the same level of activity as approved by the President and the Congress for FY 1979. Our exchange losses have occured primarily in six OECD countries. These losses are:

Japan.....
Federal Republic of Germany.
France.....
Belgium.
Italy.
United Kingdom

Total..

.$1,648,100

1,493,300
1,112,100

873,900
477,700

404, 900
6,010,000

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Exchange losses will affect a significant portion of our operating budgets for the six countries listed above. The greatest loss is felt in Japan where the budget lost 22% of its buying power. The budget for Belgium, which includes the missions to NATO and the EEC, lost 14% against the Belgian Franc. In the Federal Republic of Germany our operation must function with a 13% loss in the buying power of the dollar. Our OECD mission and French posts lost approximately 10% of their budget, while the British and Italian posts lost approximately 7% and 5%, respectively. Activities adversely affected include local employees' salaries, allowances paid to overseas American employees, rents, utilities, contractual services, supplies and equipment.

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Losses from adverse exchange rate effects on the dollar in other countries world-wide are partially offset by exchange rate gains. SUPPS&E-4

RESTORATION OF U.S. AND VIETNAMESE CURRENCY LOSSES

In Decision No. B-186348 dated July 18, 1977, the Comptroller General ruled that adjustment 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. Since the current 1979 Salaries and Expenses appropriation of the Department of State is not sufficient to cover the amount of the loss, we are requesting a supplemental appropriation in the amount required to cover the total loss as reported below:

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This loss, which was due to the emergency evaluation of Saigon in April of 1975, consists of piasters left in the Embassy; U.S. currency which was reportedly destroyed; checks which were issued by the United States Disbursing Officer (USDO) where it is not possible to identify the chargeable appropriation; and cash payments and other transactions for which there is no accurate documentation available.

A report based on a Secret Service investigation states that on the day of the evacuation (April 29, 1975) nearly all of the U.S. currency was placed in two burn barrels which were ignited. The remainder totalling $160,000 was shredded.

*Exchange rate of $1 U.S. = 755 Vietnamese piasters.

SUPPS&E-5

The USDO assigned to Saigon subsequently provided a list giving the denomination and serial numbers of all destroyed bills to the Treasury Department. Later, pursuant to a Treasury request to check serial nunibers of bills processed by banks near Vietnamese refugee centers, 218 of the bills on this list turned up in a bank near Fort Chafee, Arkansas. These bills totalled $4,360.

The Department of the Treasury maintains that because some of the money alleged to be destroyed was apparently not destroyed and because the Treasury cannot certify what exact amount was destroyed, the entire amount must be considered as a physical loss. In decision No. B-186348, the Comptroller General concurs in this opinion and the Department must therefore request a supplemental appropriation to cover this loss.

Upon the enactment of this supplemental appropriation the Department of the Treasury will issue a charge to the Department of State. The funds will then be transferred to the Department of the Treasury through a paper transaction which will result in a decrease in the Department of State's statement of account with the Treasury, but no real budget outlays.

This transaction will be in accordance with 31 USC 82a-1 (1970), which states that if relief is granted to a United States Disbursing Officer (USDO) for physical loss of funds (United States and foreign currencies), the amount of such relief shall, unless another appropriation is specifically provided, be charged to the appropriation or fund available for the expense of the disbursing or other accountable function at the time the adjustment is effective.

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