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"Except as otherwise specifically provided by law, the financial transactions of each executive, legislative, and judicial agency, including but not limited to the accounts of accountable officers, shall be audited by the General Accounting Office in accordance with such principles and procedures and under such rules and regulations as may be prescribed by the Comptroller General of the United States. In the determination of auditing procedures to be followed and the extent of examination of vouchers and other documents, the Comptroller General shall give due regard to generally accepted principles of auditing, including consideration of the effectiveness of accounting organizations and systems, internal audit and control, and related administrative practices of the respective agencies."

This authority for the Comptroller General to determine the scope and manner in which the audits will be conducted recognizes their comprehensive nature. It also imposes upon us a responsibility to conduct these audits in the best and most expeditious manner. You will note that we are specifically required, in determining our audit procedures, to consider among other things the “* * * internal audit and control, and related administrative practice * * *.

*." Section 313 of the Budget and Accounting Act of 1921 contains the legislative requirements for the departments and agencies to furnish information and grant access to their records as follows:

"All departments and establishments shall furnish to the Comptroller General such information regarding the powers, duties, activities, organization, financial transactions, and methods of business of their respective offices as he may from time to time require of them; and the Comptroller General, or any of his assistants or employees, when duly authorized by him, shall, for the purpose of securing such information, have access to and a right to examine any books, documents, papers, or records of any such department or establishment * * *."

The foregoing provisions and their legislative backgrounds clearly contemplate that the General Accounting Office shall conduct comprehensive audits and give consideration to agency internal audits and controls in making such audits. Also, that the Office shall have access to any information and records as may be required by the Comptroller General. We believe you will agree that the independent audit contemplated requires that all available information pertinent to any matter under study be considered. Such information is necessary to assure that our findings and reports will be as complete, accurate, and objective as possible and will thus be of maximum usefulness to interested officials and agencies concerned.

As a practical matter, the lack of access to the ICA evaluation reports would probably mean that some of your most significant information would not be available to us, and that the lack of this information would preclude adequate recognition of your internal audit and review work when we are planning and carrying out our own audits. This would result in unnecessary duplication of audit effort and in some cases will impose a dual burden on your operating personnel in having to undergo similar reviews by two groups. Normally, we utilize your internal audit and review work as much as possible and supplement it only to the extent we consider necessary.

With reference to the reasons stated in memorandum of June 18, 1957, concerning the limited distribution of the evaluation reports, the General Accounting Office has always recognized its responsibility to avoid improper release of information. As you know, draft copies of reports which result from our normal audit,activities have in the past been made available to the International Cooperation Administration for review and comment, prior to their release. This procedure has been found to be satisfactory by various officials of the International Cooperation Administration and has resulted in the expeditious consideration and adoption of many important recommendations. We expect to continue this process and it will afford ample opportunity to avoid inappropriate release of information.

In view of the foregoing, it is requested that instructions be issued making reports prepared by the Assistant to the Director for Evaluation available to General Accounting Office personnel. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

EXHIBIT No. 22

INTERNATIONAL COOPERATION ADMINISTRATION,

OFFICE OF THE DIRECTOR,

Washington, D.C., August 30, 1957. B-120810. The COMPTROLLER GENERAL OF THE UNITED STATES.

DEAR MR. CAMPBELL: I have your letter of August 15, 1957, requesting that the reports prepared by our Assistant to the Director for Evaluation be made available to General Accounting Office personnel.

My decision that it is necessary to restrict distribution of the evaluation reports came before any of them were prepared and long before your request. I felt that I could not get the type of forthright study and candid comment on the validity and effectiveness of our aid program both military and economic as an instrument of our foreign policy absolutely necessary to the head of this agency without making this decision in advance and adhering to it.

Your letter indicates that your request perhaps is based on a misconception of the nature of the reports. You refer to "earlier evaluation reports" supplementary to internal audit reports. The latter we make available to the GAO as a matter of course. The reports now in question are of a different nature and for a different purpose and are not intended to be supplementary to the internal audit reports.

The evaluation reports cover basic overall ICA program objectives and content and seek to answer the fundamental question, “Do ICA programs effectively carry out U.S. foreign policy objectives in the particular country?” They do not directly concern financial operations and transactions. We have provided separate and distinct mechanisms and procedures for this latter purpose and such reports are available to you.

It is my belief that the statutory provisions you cite are not directed at reports which essentially concern foreign policy and the basic means of implementing it, but relate rather to materials concerning financial transactions and business methods. As stated in 31 U.S.C. 65(d), the General Accounting Office, as an agent of Congress, is entitled to information "directed at determining the extent to which accounting and related financial reporting fulfill the purposes specified, financial transactions have been consummated in accordance with laws, regulations, or other legal requirements, and adequate internal financial control over operations is exercised, and afford an effective basis for the settlement of accounts of accountable officers." I do not believe that the evaluation reports fall within the reach of this provision.

You have recently indicated your agreement with this view in testimony concerning the ICA program in Korea before the House Foreign Affairs Committee (hearings before the House Foreign Affairs Committee on the Executive Branch Proposed Draft Bill To Amend the Mutual Security Act of 1954, part VI, p. 1144):

"We would stress the point that our examination was directed to a critical analysis of the financial management of selected segments of the program.

"Since the objectives of the program are predominantly military and political in character, it is not within our province to evaluate the accomplishments of the program in terms of these objectives."

There are repeated statements to this effect from you and other representatives of the General Accounting Office at other points in these hearings. See, for example, pages 16–17, 20, 109, 1159, 1162.

I believe that it is in the public interest to keep the distribution of these reports limited to certain specific officers within the executive branch. They are reports to me from personnel in my immediate office. They contain confidential opinions and tentative recommendations on a wide variety of matters affecting foreign policy. They are in no way definitive or final statements or decisions of this Agency or the U.S. Government.

That the Congress itself recognized the sensitive nature of mutual security operations and the undesirability of a mandatory requirement to turn over all documents of every nature to that body was indicated during the debates on the Mutual Security Act of 1956, when a provision making such requirements was debated and defeated by a substantial margin (see debates on the Hardy amendment, vol. 102, part 7, Congressional Record, 84th Cong., 2d sess., pp. 9906–9910, June 8, 1956).

I think you know that during my term as Director of ICA, and, indeed, from the viewpoint of a former Member of Congress, it has been my firm policy to keep the Congress and General Accounting Office fully informed, and that I

have given access to your office to all of our operating files for your immediate use in the course of GAO audits.

However, this is one of those few rare cases where I believe I should exercise the executive privilege of withholding a report. I believe it is essential to do so in order to assure myself that I will obtain the type of report necessary to guide me in carrying out my responsibility to the President and to the Secretary of State in formulating basic policy for ICA. The Department of State fully concurs with this decision. Yours very sincerely,

JOHN B. HOLLISTER.

EXHIBIT No. 23

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, June 26, 1958. B-107366 B-134192 The Honorable the SECRETARY OF DEFENSE.

DEAR MR. SECRETARY: For a period of several months discussions have been carried on between representatives of the Department of Defense and repre sentatives of the General Accounting Office concerning proposed directives to be issued by the Department of Defense dealing with access to defense information by the General Accounting Office.

Our respective representatives reached an understanding on March 7, 1958, and by letter dated March 14, 1958, the Assistant Secretary of Defense (Comptroller) sent to us drafts of the proposed directives requesting our comments or concurrence. By letter dated March 21, 1958, we advised the Assistant Secretary that except for a technical change the proposed directives were satisfactory, it being understood that should any situation arise in the future which would make the proposed revised procedures unworkable, in that the General Accounting Office would be impeded in carrying out its duties and responsibilities, we would have to insist that the procedures be reconsidered.

The directives were not issued and on June 5 and June 17, 1958, representatives of the Department of Defense discussed with us further changes in the directive dealing with access to information generally. At these meetings, the Department representatives were advised that the changes proposed were not satisfactory to the General Accounting Office.

The changes in question are in paragraph III.B.3. concerning the availability of reports of the Inspector General in the internal audit, inspection, examination, and survey areas, and in paragraph III B.4. relating to the furnishing of information which would raise a question as to whether the information may be furnished to a member or a committee of the Congress.

We wish to make it clear that our letter of March 21, 1958, to the Assistant Secretary of Defense (Comptroller) concerning the prior proposed directives is not to be construed in any way as an approval or concurrence in the changes recently discussed with us. While we understand that the changes have not been finally adopted by the Department of Defense, we believe that if the directive is issued with the changes included it will seriously impede the work of the General Accounting Office. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

EXHIBIT No. 24

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, March 21, 1958. B-107366 B-134192 Hon. W. J. MCNEIL, Assistant Secretary of Defense (Comptroller), Department of Defense.

DEAR MR. McNEIL: Reference is made to your letter dated March 14, 1958, enclosing a draft of a proposed new directive dealing with unclassified information, and proposed amendments to Department of Defense Directive 5200.1 dated July 8, 1957, concerning access to classified defense information by representatives of the General Accounting Office.

The amendments to Department of Defense Directive 5200.1 should be headed Paragraph III D and Appendix (3), Enclosure 1, of Department of Defense Directive 5200.1 dated July 8, 1957, are amended to read as follows:" Otherwise, the drafts, if properly implemented, are satisfactory to us, it being understood that should any situation arise in the future which would make the proposed revised procedures unworkable, in that the General Accounting Office would be impeded in carrying out its duties and responsibilities, we would have to insist that the procedures be reconsidered.

It will be appreciated if you will furnish us copies of the revised directives as soon as they are finalized and issued. Your cooperation in this matter is appreciated. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

EXHIBIT No. 25

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, October 9, 1956. B-45101. The Honorable the SECRETARY OF THE ARMY.

DEAR MR. SECRETARY: Our program for the audit and accounting system development work in the Department of the Army is being expanded to cover all significant activities on a more comprehensive basis, rather than to limit our coverage to selected industrial fund activities and other restricted areas of operation.

We intend to review concurrently the activities at several selected installations having a coordinate responsibility in a basic program in order to perform a comprehensive review of the program as well as to audit the individual installations. Our audits will be conducted in full recognition of all internal review activities, and will evaluate their effectiveness and eliminate the necessity for duplicating much of their efforts. In this connection we intend, except in the most unusual circumstances, to allow a reasonable period of time to elapse prior to our starting an audit at the site of activities which have been recently subjected to internal audit, review, or inspection. This approach affords responsible officials the opportunity to initiate or effect corrective action where appropriate.

During the course of our work we will discuss matters of significance, as they arise, with the responsible officials affected. We feel that our efforts, within the scope of our capabilities, can be of inestimable assistance to responsible management in the identification of operating deficiencies and problems and cooperatively developing appropriate solutions. Upon completion of our work, draft copies of our reports will be submitted to responsible officials for the purpose of such clarifying discussions and comment as may be desired. We intend to address our final audit reports to the appropriate management level depending on the significance of the findings and recommendations involved. In this connection we would appreciate advice as to your desires in the matter of transmitting copies of reports.

Recently we have completed a preliminary survey of the operations of the Office of the Deputy Chief of Staff for Logistics and are currently conducting an audit of logistics activities in the Signal Corps. We appreciate fully the cooperation received in the conduct of our efforts in these areas. We are in the process of developing a program for the audit of the Ordnance Tank-Automotive Command. Our present plans are to start the audit of this activity at the site of selected installations in January 1957.

Your cooperation in making available all official documents, records, and reports and in establishing arrangements which will facilitate our audit of the Ordnance Tank-Automotive Command and our future work in your Department will be appreciated. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

EXHIBIT No. 26

DEPARTMENT OF THE ARMY,

Washington, D.C., December 19, 1956. The Honorable the COMPTROLLER GENERAL OF THE UNITED STATES.

DEAR MR. COMPTROLLER GENERAL: I have received your letter of October 9, 1956 advising of the contemplated expansion of your program for the audit and accounting system development work in the Department of the Army. I view with much satisfaction your intention to give full recognition to internal review activities performed within the Army. The work of the Army Audit Agency has improved consistently in quality and scope, and I believe it to be an effective element of our complete program for financial management and control. Your plan to evaluate the effectiveness of the internal review and concurrent elimination of duplication of the detailed review activity will contribute significantly to the overall effectiveness of the Army Audit Agency and to strengthening of the internal review function which it performs.

Of importance, in this connection, is your proposal to allow a reasonable period of time to elapse prior to starting an audit at the site of activities which have been recently subjected to internal audit, review or inspection. The Army has approached the function of internal audit as affording advice and protection to the operator as well as providing an independent appraisal of control and application of resources for the Secretary and the Chief of Staff. It is our desire to foster and maintain both of these benefits of internal audit. The interrelationships between the operating officials and the auditors is a matter requiring special and thoughtful consideration, since the effectiveness of the internal audit and review function is largely a function of the responsiveness of the operating officials to the recommendations arising out of the audit or review based upon their understanding and acceptance of such recommendations. The Army's procedures, therefore, provide that a period of time be allowed for the careful review and study by responsible staff and operating officials of reports of audit in order that they may formulate plans for implementing recommendations and taking corrective action as well as indicate areas in which justifiable differences in viewpoint may exist. We consider this phase in the audit process to be a most important one since it assures consideration of the findings and judgments expressed in the report by all levels of management responsible for the operations. With this in mind, I am of the opinion that the Army should not be asked to make available internal audit reports or any related working papers until this important phase of the audit process has been completed and until sufficient time has elapsed to permit the implementation of an orderly program of improvement or corrective action on the part of the responsible operating officials.

I believe, also, that it would facilitate action and coordination between your office and the Department of the Army if any requests for audit reports or working papers desired by General Accounting Office personnel were directed to my office rather than to field installations or activities or other staff elements of the Army.

Prompt review and appropriate implementation of recommendations contained in the reports of audit conducted by General Accounting Office per. sonnel is essential if the full potential benefits visualized as resulting from your expanded program are to be realized. Effective implementation of recommendations, however, will in many instances require consideration of basic policies to the extent, in some cases, of actual revision thereof. For this reason, I believe that coordination can best be effected if draft reports are furnished for comment not only to the installation or activity commander and the supervising command (i.e. Technical Service and intermediate command, if any, or the appropriate ZI Army Headquarters) but also to the appropriate management echelons in the Department of the Army, including Deputy Chief of Staff for Logistics, Comptroller of the Army and my Office. Similarly, our mutual management objectives will be best served if final audit reports are furnished to each of these management levels.

I appreciate being advised of the planned audit of the Ordnance TankAutomotive Command. Subject to the foregoing, I shall assure that all official documents, records and reports not otherwise prohibited for release are made available as necessary in the conduct of the audit after clearance by my Office.

You may be assured that the Department of the Army will con

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