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section 117(a) of the Accounting and Auditing Act of 1950, and so specifically required to be considered by the Comptroller General in the conduct of his audits. Such information and factual data should not be withheld or subject to procedures designed to screen official documents, papers, or records before being made available to the General Accounting Office.
Your cooperation is requested in providing a copy of the report entitled “Review of Procurement Activities in the Military Sea Transportation Service," October 1957, to the Defense Accounting and Auditing Division of this Office for use in connection with their current review of procurement activities in MSTS. Mr. Hassell B. Bell, Assistant Director, Defense Accounting and Auditing Division, may be contacted to arrange for the receipt of this report. Because of the importance of this matter and congressional interest in any denial or delay in providing us access to such data, we request that the above report be furnished promptly. Sincerely yours,
JOSEPH CAMPBELL, Comptroller General of the United States.
EXHIBIT No. 16
OCTOBER 17, 1958. B-134192 Hon. JOSEPH CAMPBELL, Comptroller General of the United States General Accounting Office, Washington, D.C.
MY DEAR MR. CAMPBELL: I have given much thought to the request in your letter of September 9, 1958, for a copy of the October 1957 report by the Procurement Review Group, Office of Naval Material, entitled “Review of Procurement Activities in the Military Sea Transportation Service.”
A copy of this report was previously requested by Mr. Leslie Surginer of your Office in his letter of July 24, 1958 to the Assistant Secretary of the Navy. Our reply to this request was deferred in accordance with our agreement with Mr. Surginer and Mr. Hassell Bell at a meeting with representatives of the Navy on August 14, 1958.
In considering this request, I have kept in mind both your interest and responsibilities and the spirit of mutual cooperation which has long marked our relations with your Office. I most sincerely wish to do what I can to maintain this spirit, which I feel is to the advantage of all.
In an organization of the size and complexity of the Navy, it is essential that management have the benefit of effective internal inspection and selfanalysis. To accomplish this, it is necessary to rely upon the Inspector General, and, in the case to procurement, the Chief of Naval Material to make searching inquiries and to report their candid findings, opinions, and conclusions. To assist in performing this function, the Chief of Naval Material has established the Procurement Review Group in the Office of Naval Material to review procurement procedures and methods, to recommend revision of existing procedures and methods, and to analyze the effectiveness of purchase management in the Navy bureaus and offices. The report which you have requested was prepared by this group.
I believe that this type of candid self-appraisal, properly utilized, can be one of our most effective management tools. Its effectiveness depends upon the inspector's receiving and giving frank, outspoken, and completely candid expressions of opinion, conclusions, and recommendations. If these reports are given broader distribution, there may be a tendency on the part of the inspector to soften criticism, avoid doubtful matter, and generally be more cautious and restrained. Similarly, if those who are questioned are aware that their views may be circulated outside, they are more likely to hedge their remarks and to speak for the record. Should this happen, the inspector would be impeded by not receiving the full and frank views of those questioned. Management would suffer by not receiving the candid reports which it needs. And you would not get the type of report that would serve your purpose. Thus our purposes would be defeated withoạt yours having been achieved.
There is, of course, no thought of withholding any facts which you require. We have, accordingly, prepared and enclose for your information a copy of the report which you have requested. In accordance with the principles set forth
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above, we have omitted from this copy only the recommendations, opinions, and conclusions of the writers. All of the facts contained in the report have been retained.
In this fashion, I hope that we can find a mutually satisfactory way to preserve the candid conclusions which we need and at the same time provide you with all the facts which you require in order to form your own conclusions. Sincerely yours,
W. B. FRANKS, Under Secretary of the Navy.
EXHIBIT No. 17
COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, October 30, 1958. B-134192 The Honorable the SECRETARY OF THE NAVY.
DEAR MR. SECRETARY: We acknowledge the letter of October 17, 1958, from the Under Secretary of the Navy, in response to our request for a copy of the report prepared by the Procurement Review Group, Office of Naval Material, entitled "Review of Procurement Activities in the Military Sea Transportation Service," dated October 1957. The letter transmitted a revised report, edited to exclude recommendations, conclusions, and opinions of the writers, in lieu of the report requested. We understand that the full report was withheld because of concern that if such reports are known to be available to groups outside the Navy, there may be a tendency on the part of the reporting group to soften criticism, avoid doubtful matters, and generally be more cautious and restrained.
We cannot share your concern that internal review groups would not express full and frank views if they knew that their reports were not limited to internal distribution. For nearly 242 years now, ever since we initially began a compre hensive review of selected Navy activities in the spring of 1956, we have had access to the documents, records, and reports which we needed to perform our statutory responsibilities. Over and above the basic documentation dealing with procurement, supply, and financial matters, we have also had access to inspection, internal review, and other internal audit reports. We have never discerned any tendency to minimize significant findings or to reshape the material in any way by reason of knowing that our professional staff would review their reports and workpapers. In fact, these groups have frequently sought our opinions as to how their work and ours might be better coordinated in the Government's interest. In our relations with the responsible personnel performing these studies, we have been impressed with their competence and objectivity. We cannot perceive that these officials and Government employees would be swayed by reason of the knowledge that their reports and their efforts would be subjected to an impartial and independent review by persons other than those in the Naval Establishment especially when such review is specifically provided by law.
It seems quite evident that some misunderstanding exists as to our need for access to complete reports of the various internal reviews as well as the basic data from which the reports are prepared. Perhaps an amplification of our position will assist you in understanding our need for access to and the right to examine any books, documents, papers, or records of the Navy Department.
As you know, an internal control system takes many forms in different areas; but in all cases a satisfactory system of internal control must include such things as a plan of organization, clearly defined policies and procedures, adequately trained personnel, effective and timely reporting and analysis, and a strong internal review system. A thorough review and evaluation of the effectiveness of an internal control system is an essential part of any meaningful review of the efficiency and economy of activities. The need for such a review and evaluation is universally accepted by professional groups engaged in this type of work and was emphasized by the Congress when it enacted legislation requiring this Office to give due consideration to existing systems of internal audit and control in conducting our reviews of agency activities.
The function of internal review may be comprised of internal audits, inspections, surveys, or special management studies at all levels. Whatever it is called and irrespective of the type of organization or unit assigned the responsibility for it, it is a necessary management mechanism and from our point of view one of the more important ones. We are pleased that its importance is recognized in the Under Secretary's letter.
In the Department of the Navy the internal review or inspection system is diffused through many organizations. The inspector general, in addition to his other duties, covers many aspects of installation management. Special groups from the Office of Naval Material devote considerable time studying procurement and supply management problems. The internal audit under the comptroller of the Navy is concerned largely with budgeting, accounting, and related financial management problems.
The work of these groups represent practically the only means by which operating management can determine whether established policies are being followed, whether approved programs are accomplishing their purposes and, in general, whether the functions of the agency are being carried out effectively, efficiently, and economically.
In conducting our reviews we must appraise the performance of this very important segment of the total internal control system in the Navy. In making this appraisal we must be intimately familiar with the scope of work undertaken by these groups, the depth of their study, the extent of the review, the conclusions drawn, the recommendations made, and the agency action on findings and recommendations.
The material submitted in lieu of the report requested consists principally of background data and statistical information, much of which can be obtained from the MSTS handbook, organization manual, MSTS headquarters procedural instructions, and financial and statistical reports. The material, as edited, does not include specific data as to the scope of review, nature of problem areas covered, extent of verification, conditions under which the procurements are made, evaluation of existing controls, or any factual information from which reasonable conclusions can be drawn. Omitted also are the opinions, conclusions, and recommendations of the procurement review group as well as comments of MSTS management with respect to the findings and action taken on the report recommendations. Consequently, we find that the material, as submitted, is not an adequate substitute for our access to the full report and the data in support of the report.
Because of the importance of this matter and the congressional interest in any denial or delay in providing us access to such data, we must insist that an unedited copy of the subject report be made available without further delay. Additionally, I would urge that appropriate instructions be issued to the Naval Establishment directed toward eliminating restrictions as to information required in the performance of our work so as to avoid any other unnecessary incidents of this character. Your prompt consideration and action will be appreciated. Sincerely yours,
JOSEPH CAMPBELL, Com.ptroller General of the United States.
EXHIBIT No. 18
DEPARTMENT OF THE NAVY,
OFFICE OF THE SECRETARY,
Washington, D.C., November 22, 1958. B-134192. Hon. JOSEPH CAMPBELL, Comptroller General of the United States, General Accounting Office, Washington, D.C.
MY DEAR MR. CAMPBELL: This will acknowledge receipt of your letter of October 30, 1958, with regard to the report prepared by the Procurement Review Group, Office of Naval Material, entitled “Review of Procurement Activities in the Military Sea Transportation Service.”
As indicated in our letter of October 17, management in the Navy must have the benefit of effective internal inspection and self-analysis in order to strive for self-improvement and internal reform. Thus persons such as the inspector general and the Chief of Naval Material, in making their investigations must be able to obtain frank opinions, advice, and criticism from persons at lower levels who are familiar with the facts and problems. If anything were to interfere with the obtaining of such frank and candid statements of view, our ability to work continually for self-improvement and internal reform would be substantially
limited. Also, these frank statements of opinion, advice, and recommendation sometimes conflict with others, and not all of them are accepted at higher levels. In any event, if we should release them outside the executive branch of the Government, in the future it would only be natural for persons familiar with the facts to soften criticism, avoid doubtful matter, and generally to be more restrained. Self-improvement and reform within the executive branch would then become much more difficult, and the results would certainly be less in the public interest.
We have, however, no desire to withhold any facts which you may require in this connection. A copy of the report in question, with recommendations, opinions, and conclusions omitted, was previously forwarded to you.
Also, the General Counsel of the Navy stated at the meeting with you on October 17, that if there should be any additional factual material which you might desire in connection with the subject report, we should be happy to furnish it. Your letter now states that the material previously forwarded to you did not include certain specific data as to the scope of review, the nature of the problem areas covered, and certain other information. As a result, the General Counsel has again reviewed the report, and a copy of the report is handed you herewith which contains, I am confident, everything which you may desire with the exception of opinions, conclusions, recommendations, and other advisory matter. It presents a full factual picture of the MSTS operations described. Sincerely yours,
THOMAS S. GATES.
EXHIBIT No. 19
June 18, 1957.
The reports prepared in the Office of the Assistant to the Director for Evaluation will be given limited distribution for the reasons stated below:
(a) The Assistant to the Director for Evaluation and the evaluation teams under his direction function as part of the immediate office of the Director and bear a special confidential relationship to the Director. Their reports are, in the first instance, in the nature of personal reports to the Director from his own immediate staff.
(6) They are reports to the Director of the Agency containing not only highly classified information, but also opinions of the individuals who prepare the reports and a large number of recommendations on a wide variety of sensitive subjects.
(c) The opinions and recommendations in the reports may well be at variance with U.S. Government policy in certain respects and, at the time the reports are issued, will not have been approved or disapproved by the Director of the Agency.
(d) The reports are therefore preliminary and represent only the first step in a process designed to develop more effective programs and courses of action in the Agency.
(e) As preliminary documents they will be put through the process of intraand inter-agency review under the general auspices of the regional director for the area in which the evaluated country is located. This review is designed to develop a program of action for recommendation to the Director. This program of action as finally approved may be different in many important respects from the recommendations of the evaluation report.
(f) The members of the evaluation teams are requested to write their reports with complete forthrightness and candor, and to deal frankly with the most sensitive subjects if these are relevant to their evaluation. In order that there may be no damaging repercussions on them personally, they have been assured that the reports will be treated as privileged documents.
Because of the above considerations, evaluation reports will be given limited distribution, within the executive branch, on a strict need-to-know basis, and only with the specific approval of the Director.
However, consideration will be given to supplying copies of the action pro grams mentioned above, as finally approved by the Director, to Members of the Congress and to the General Accounting Office.
John B. HOLLISTER.
EXHIBIT No. 20
APRIL 25, 1958. The COMPTROLLER GENERAL OF THE UNITED STATES.
DEAR MR. CAMPBELL: Mr. John Murphy, the Controller of ICA, has brought to my attention the draft GAO Report on Taiwan in which the authors twice (pages 4b and 4c, 46 and 47) present arguments as to why GAO should be permitted to have access to ICA evaluation reports.
I have reviewed the letter on this subject which you wrote to my predecessor, Mr. Hollister, on August 15, 1957, and his reply to you, dated August 30, 1957. I have reached the same conclusion he did—that these personal and confidential reports to the Director of ICA should be made available only to a restricted few in the executive branch. The facts and information they contain which would be relevant to your examination are already available to you in our files and audit reports, to which your staff is given full access. What they contain, in addition, consists of the personal opinions, observations, reactions, recommendations and conclusions of the two men who write the reports. This latter material is intended to stimulate thought and to suggest new ideas and ways of attacking some of our difficult problems. As such it has no standing except as the opinions of the two evaluation officers, and, in fact, many of the recommendations are rejected during the process of the careful review through which the reports are put. We could not properly ask these officers to express their personal views with such complete candor as we do if they were not assured that their reports would be held most closely and not be available outside the small circle of people in the executive branch who need to have access to them. Thus, if there were any likelihood that this protection would be withdrawn, we feel that the character of this work would change substantially and that we would defeat the basic objective of these studies. This would be truly unfortunate, since they are making it possible for us to improve our operations in important respects and are valuable in stimulating thought and action and in overcoming the tendency, always present in a large organization, to keep on doing things in the same old way because it is easier to do so than to make the effort to change.
In view of these considerations, I could not follow any other course than that of refusing, on the ground that they are privileged documents, to make the evaluation reports available to your office. I hope you will agree with me, therefore, that it would serve no useful purpose but, on the contrary, would only stir up a fruitless controversy between the legislative and executive branches of the Government, to include the material to which I have referred in your report to the Congress.
I am eager to make clear to you why it would be harmful to the effectiveness of our program to make these reports available to your office, and would be glad to discuss the matter further with you personally. Sincerely yours,
J. H. SMITH, Jr.
EXHIBIT No. 21
COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, August 15, 1957. B-120810 Hon. John B. HOLLISTER, Director, International Cooperation Administration.
DEAR MR. HOLLISTER: It is understood that there have been several discussions between representatives of our respective staffs concerning the availability to the General Accounting Office of reports prepared by the Office of the Assistant Director for Evaluation, International Cooperation Administration. Also, we have been apprised of the memorandum for the executive staff dated June 18, 1957, stating the reasons for limited distribution of evaluation re ports.
Based on our examination of earlier evaluation reports, which were prepared within ICA before this function was assigned to the Assistant to the Director for Evaluation, it is our opinion that these reports are in a broad sense in the nature of, and supplementary to, internal audit reports and, therefore, should be available for examination by the General Accounting Office.
Section 117(a) of the Budget and Accounting Procedures Act of 1950, provides :
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