We have accumulated under Public Law 480 and various othe agencies a lot of foreign currencies. I would like to discuss thos and ask some questions.

Does the Treasury act as a depository of these foreign currencie for these various agencies?

Secretary DILLON. Yes, Senator; we do. When the currency i first acquired. We do not, however, continue to act as depository after the currency is transferred to agency accounts.

Senator WILLIAMS. You publish a report annually or quarterly Does that report include the foreign currency holdings of all the agencies of the Government as of the date that you publish it?

Secretary DILLON. Our annual report covers all agencies of the Government and the quarterly reports only currencies held directly by the Treasury.

Senator WILLIAMS. I have been working on that subject for several months now, and I have discussed it with you. I have just about reached the conclusion that there is no agency in the Government that has knowledge of the amount of foreign currencies that we have. am glad to know that you do have, and I will ask you now, How much foreign currency do we have as of December 31, 1959?

Secretary DILLON. 1959?

Senator WILLIAMS. Or whatever date you may have available. But that is the report that I have been working on.

Secretary DILLON. Yes. I do not have that report with me here. I will be glad to furnish that for the record. We have discussed this, and I do think there are probably improvements that could and should be made in the general accountability of these funds.

Senator WILLIAMS. I am not picking questions out of the air. I have your report. You furnished it to me last week and you give an overall total of foreign currencies of $1,334,572,426.56, that is the dollar equivalent as of December 31, 1960. Is that about the amount, as you recall?

Secretary DILLON. If that was in our Treasury report

Senator WILLIAMS. I want to be sure I am reading the correct figure.

Secretary DILLON. This certainly looks like the correct total, yes, Senator.

Senator SYMINGTON. Will the Senator yield?

Senator WILLIAMS. Sure.

Senator SYMINGTON. In this connection, Mr. Secretary, as I remember there was a figure another Government agency put out recently that counterpart funds have been slightly over $9 billion.

Secretary DILLON. That must be the overall figure of what we have had in the past, because I do not think we have any such figure now. Senator SYMINGTON. It was the overall figure.

Senator WILLIAMS. I think that is the overall figure. What was the figure as of December 31?

Secretary DILLON. The closing balance is indicated on December 31, and comes here to a figure which is called a grand total of $1,334,572.000-plus, and so forth.

Senator WILLIAMS. Yes. I also asked ICA for a report as of the same date. I understand that you act as a depository for ICA, but they show more on deposit than you have in the Treasury. They

I

show as of December 31, deposits of $1,351,363,000. They have about $17 million more than you have and I understand you are the depository for all the agencies. That gets back to my question: Is there any agency of the Government that has any record of our foreign currency holdings?

Secretary DILLON. Senator, the figures, the accurate figures, I would say, would have to be those of the Fiscal Service of the Treasury Department, because we have the figures on deposit.

I think I mentioned to you that this whole subject of foreign currencies could be improved and better clarified by making certain that the Treasury figures are utilized by other agencies.

Other agencies prepare their own figures, and the dates may be somewhat different through leads and lags and things of that sort, and they could come out with different figures.

But I think we have to assume that the Treasury's figures are the correct figures, because they are made up from what we actually have on deposit.

DISCREPANCIES IN DEPOSIT FIGURES

Senator WILLIAMS. I will not pursue this, because this is not the place for it, although I want to say that I am going to pursue it further later on. To illustrate the point, however, will you tell me how much you had in Austria as of December 31, according to your report? Secretary DILLON. These are the foreign currencies acquired by the United States without purchase of dollars. Our total of Austrian Schillings shows $43,966,000.

Senator WILLIAMS. Getting back to the ICA figures, they show $53,318,000. They have $10 million on deposit with you more than you have in Austrian schillings.

I will not go through the other figures. I have been working on these reports, and I have discussed this with the chairman and with you, and I have reached the conclusion that there is not any agency of the Government, nor anyone in any agency of the Government who could tell the President of the United States on any reasonable notice within millions how much we have of these international currencies. Would you care to dispute that? I hope you do, because I would like to know where we can get them.

Secretary DILLON. I do not think the situation is quite as bad as that, but I fully agree with you, Senator, it can be further improved by a further centralization of responsibility in the Treasury Department to a greater extent than is presently the case.

Senator WILLIAMS. Just one more item, here, to show you the confusion. In the ICA report which they furnished to Congress September 15, 1959, they gave the dollar equivalent of their currencies on hand as of the close of business that fiscal year which ended June 30, and they report it as $1,698,343,000. Their very next report, which begins the fiscal year 1960 on July 1, shows their dollar equivalent at $1,344,440,000, a difference of $300 million overnight. I have discussed this with ICA and they say they reevalued these currencies overnight, but that still will not amount for the difference, I do not mind saying, because there were still millions of dollars off for some countries where the currencies were not reevalued. I was wondering if you will check and see if you can find any place in the U.S. Government

where you can show the amount of foreign currency we have on hand of all the agencies in a consolidated report as of, we will say, December 31, 1959. If we do not have it, let us recognize that fact.

IMPROVING CONTROL OVER LOCAL CURRENCIES

I do not mind saying to you, I would propose a bill that we consolidate these amounts in one agency, and I think it should be consolidated under the Treasury Department.

Would you care to comment on that?

Secretary DILLON. No. I would be glad to furnish you such a report to see if it can be done, Senator.

The only comment I would like to make is that I think you put your finger on an important point, which is this question of the value of foreign currencies in dollar equivalent, which varies, and is a very difficult thing to handle on a meaningful basis.

Certainly with those difficulties it is clear that there should be one central authority that sets these values, and everybody should value their currencies on the same basis so that all agencies may have them, which has not always been the situation in the past.

Senator WILLIAMS. That may be one explanation of these discrepancies. I am not suggesting that anything has been done wrong. I have not found anything to that effect. But a lot of it is in evaluating. I found that ICA, for an example was using four different exchange rates all simultaneously in the same country. I do not think you can get accountants enough in the United States to keep the records straight.

Secretary DILLON. I would agree with that, Senator.

Senator WILLIAMS. When you make your report you evaluate them differently again. I do not think anyone knows exactly what is being done.

Secretary DILLON. I would certainly agree that the situation is confusing and it can be greatly improved.

(The information referred to is as follows:)

STATEMENT ON FOREIGN CURRENCY HOLDINGS AND REPORTING BY TREASURY AND INTERNATIONAL COOPERATION ADMINISTRATION

U.S.-owned foreign currencies may be held in the custody of the Treasury Department or may be held by other agencies to which the funds have been allocated for use in their programs. The currencies which have been allocated to these other agencies have already passed through the Treasury accounts at some time in the past. As a result, at any given time the total inventory of currencies held by the U.S. Government consists of two broad categories:

(1) The balances held in the Treasury, and

(2) The balances held on the books of other agencies.

The Treasury publishes quarterly reports of the balances still held in its custody and annual reports combining the overall balances for the Government as a whole.

In recent years, the combined holdings of local currencies have been increasing at the rate of several hundred million dollars a year. For example, during the fiscal year 1960 balances on hand in all agencies amounted to $2,080 million on June 30, 1959, and rose to $2,450 million June 30, 1960. During the fiscal year new receipts amounted to $1,231 million while expenditures, sales, and adjustments amounted to $861 million. The net increase was about $370 million during the year.

As of June 30, 1960, the currency in the custody of the Treasury, which had not been allocated to other agencies at that time, amounted to $1,035 million.

During the first half of fiscal year 1961 collections that were paid into the Treasury amounted to about $704 million and withdrawals for various purposes amounted to about $405 million. As a result the balance on hand in the Treasury as of December 31, 1960, was $1,334.6 million.

In addition to the currencies in the custody of the United States, whether in agency or Treasury accounts, there are counterpart accounts held by foreign countries over which the United States exercises some control. Since the currencies in such accounts do not belong to the United States and are not to be used for U.S. use purposes they are not included in any of the Treasury reporting.

Public Law 480 is the major source of new accruals of foreign currency into Treasury accounts, but there are a number of other sources, such as repayments to DLF, sales of agricultural commodities under section 402 of the Mutual Security Act, lend-lease and surplus property agreements, and small portions of counterpart funds which have been set aside under bilateral agreements with foreign countries for the use of the U.S. Government for its expenses in foreign countries.

A part of the withdrawals from Treasury accounts is sold for dollars and thus represents a dollar saving to the U.S. Government in its foreign expenditures. The overall total so expended has been running at the rate of a little more than $200 million a year of which about one-half represents currencies acquired under Public Law 480. The dollar proceeds of this latter portion or about $100 million a year will be returned to the Commodity Credit Corporation in dollars, restoring in part the capital fund of the CCC.

There are a number of difficult accounting and reporting problems in dealing with these extensive accounts in a large number of foreign currencies. In order to get a rough idea of the value of these currencies, they are converted into dollar equivalents for accounting and reporting purposes at appropriate exchange rates. It should be recognized that they can be substituted for dollars to a limited extent only, since they can only be utilized for those purposes that are permitted under the agreements which give rise to these currencies. In the accounts of the U.S. Government they are not considered as a U.S. dollar resource, but as an inventory of property, and the valuations put upon them are strictly for accounting and reporting purposes.

A large part of the balances which are on hand in the Treasury Department consists of the currencies of a small group of countries where large Public Law 480 programs have been in effect. In part these balances represent excess requirements and in part they represent funds which have not yet been allocated to agencies which will program their disbursement.

The inventory on hand in other agencies generally results from the necessary time lag which takes place before the currencies are disbursed under the agency programs. The largest part of this portion of the inventory represents ICA boldings of currencies which will be loaned to foreign countries for economic development. but for which loan disbursements have not yet been made.

The specific situation with respect to Treasury reporting of foreign currency holdings and related matters is as described below:

A. TREASURY REPORTS

The Treasury regularly publishes the following three reports on foreign currency holdings; copies of all these reports are available.

1. Part V of the combined statement of receipts, expenditures, and balances: Foreign currencies in the custody of the United States

This report is made annually, as of the end of each fiscal year. The most recent is, therefore, that for June 30, 1960. It contains statements on all foreign currencies in U.S. accounts whether those of Treasury or other agencies. The data is shown both by the programs generating the currency and the country in which generated. Beginning balances, receipts, withdrawals, and closing balances for the fiscal year are given.

The total dollar equivalent value of the currency held as of June 30, 1960, by all agencies was $2,450,253,768. (This figure appears both on p. 7, the grand total of table 16 showing the currency by source of acquisition, and on p. 49, the grand total of table 17 showing the currency by country.) It may also be of interest to note that as of June 30, 1960, $1,034,945,704 was in Treasury custody accounts and the balance, nearly three-fifths, was in the accounts of other agencies.

2. Report on foreign currencies in custody of the Treasury Department This report is made quarterly; the most recent published is that through December 31, 1960. It is generally similar to the report appearing in the combined statement described above with the important difference that it covers only currencies in the custody of the Treasury and not those in accounts of other agencies. As of December 31, 1960, the balance in Treasury accounts was $1,334,572,426 the amount referred to by Senator Williams.

3. Status of funds under title I of Public Law 480, as amended

This report is a special report issued quarterly dealing with Public Law 480 transactions only. The most recent issue is that of December 31, 1960. It is in two parts, the first showing Public Law 480 transactions from the inception of the program as they took place on Treasury accounts and the second part showing cumulative transactions in agency accounts.

The balance of currencies in Treasury accounts as shown in column VII of part I ($939,600,585) is included in the quarterly report described in (2) above. The balance in agency accounts ($1,324,638,333) as shown in the last column of part II is not, however, included in the Treasury quarterly report.

B. TREASURY ACCOUNTING

It may also be of interest to note that all foreign currencies entering U.S. accounts are in the first instance passed through Treasury accounts unless the Treasury has specifically authorized an exception. Thus, even though the bulk of currencies now on hand are in the accounts of other agencies, they have been in Treasury accounts and have been transferred to other agencies pursuant to the applicable statutes. For example, in the case of Public Law 480, all collections are deposited in Treasury accounts, but the portion of those funds which under the statute and the Public Law 480 agreements are for country uses, i.e., loans under section 104 (e) and (g) and grants under sections 104 (c), (d), and (e), are transferred to the accounts of the agencies responsible for administering these programs.

C. COUNTERPART

Note might also be taken of the foreign currencies generated as the counterpart to certain of our foreign aid activities. That portion which is available to the United States to meet its administrative expenses in the recipient countries (sometimes referred to as 10 percent counterpart) comes into U.S. Treasury accounts and is reported both annually and quarterly. The remainder (90 percent or more) does not, however enter any U.S. accounts since its ownership and custody remains in the foreign countries concerned and it is to be used for the benefit of these countries. The United States, however, does exercise control over its use. Releases of counterpart are made only upon approval of ICA. According to ICA reports the balance of currency in such counterpart accounts as of December 31, 1960, was the equivalent of $420,382,013. Treasury reports do not cover this counterpart. Counterpart and other countryowned currency is accounted for on accounting and disbursing records of the cooperating country. The countries are required to submit accounting reports to the USOM evidencing the status of counterpart funds. The cooperating countries' records are also periodically reviewed by the USOM.

D. AGENCY ACCOUNTING AND REPORTING (ICA)

U.S. owned foreign currencies are subject to the same regulations and controls, e.g., section 3769 of the Revised Statutes (Antideficiency Act) and Bureau of the Budget Circular A-34, etc., as are U.S. dollar funds appropriated by the Congress, and are programed in a similar manner. As foreign currency accrnes to the credit of the United States, it is entered into the accounts of the U.S. disbursing officer abroad. Each USOM maintains a complete set of accounts in which the detailed transactions involving the currencies for which ICA is responsible are recorded. The USDO and USOM accounts are reconciled at the end of each month and separate reports are submitted to Washington. Each voucher is certified by an authorized certifying officer prior to its entry into the accounts. These reports are consolidated by ICA in Washington into a single monthly report reflecting cumulative activity for each currency in foreign