U.S. Assistance Programs in Vietnam

U.S. Assistance Programs in Vietnam

_______________

Friday, July 16, 1971

House of Representatives,
Foreign Operations and
Government Information Subcommittee
of the Committee of Government Operations,

Washington, D.C.

The subcommittee met, at 10 a.m., in room 2247, Rayburn House Office Building, Hon. William S. Moorhead (chairman of the subcommittee) presiding.

Present: Representatives William S. Moorhead, John E. Moss, John N. Erlenborn, and Paul N. McCloskey, Jr.

Staff members present: William G. Phillips, staff director; Norman G. Cornish, deputy staff director; Harold F. Whittington, staff consultant; Dale E. Moser, supervisory auditor, GAO; and William H. Copenhaver, minority professional staff, Committee on Government Operations.

Mr. Moorhead.  The Subcommittee on Foreign Operations and Government Information will please come to order.

Today, we continue our investigation of the economy and efficiency of U.S. assistance programs in Southeast Asia. The witness today is Mr. Oye Stovall, Director of the International Division, General Accounting Office. Mr. Stovall will be testifying on aspects of the so-called pacification program in South Vietnam. It is based on a classified report issued earlier this month, that revealed some $1.7 billion of the $2.1 billion in funds authorized for the program was not properly accounted for.

He will also be describing the CORDS program, civil operations and rural development support, and its operations during the past 3 years.

The former director of the program in Vietnam, Ambassador William E. Colby, will be our witness on Monday morning.

Mr. Stovall, will you and your associates who will testify please rise and I will administer the oath?

(Oye Stovall, Director, International Division, General Accounting Office, Eugene Wohlhorn, James Duff, and Ralph Stansbury were sworn by the chairman.)

Statement of
Oye Stovall, Director,
International Division,
General Accounting Office;

Accompanied by

Eugene Wohlhorn, Assistant Director;

James Duff, Associate Director; and

Ralph Stansbury, Audit Manager

Mr. Moorhead.  Mr. Stovall, before you proceed, will you introduce your associates to the subcommittee? {p.124}

Mr. Stovall.  On my left is Mr. Eugene Wohlhorn, Assistant Director of the International Division, and on my right, Mr. James Duff, Associate Director of the International Division, who is responsible for all our work in this area, and on his right, Mr. Ralph Stansbury, Audit Manager of the International Division.

Mr. Moorhead.  You may proceed, Mr. Stovall.

Mr. Stovall.  Thank you, sir.

I have a prepared statement, Mr. Chairman, if I may read it.

Mr. Moorhead.  You may, Mr. Stovall.

Mr. Stovall.  We are appearing here today in response to your request concerning the pacification and development programs in Vietnam.

First, to refer to the origin of CORDS.

The operating arrangement now known as the civil operations and rural development support (CORDS), grew out of an effort in 1967 to improve the U.S. capability for management of its pacification efforts by establishing a single line of management responsibility for U.S. teams and. advisers out in the regions, and districts throughout Vietnam.

Previously there had been no effective mechanism for coordination of the U.S. pacification activities in the field among the various military and civil chains of responsibility. It was stated at the time it was initiated in May 1967, to be an arrangement:

It was placed under the managerial responsibility of a deputy with the rank of ambassador, responsible directly to the commander, U.S. Assistance Command, Vietnam, Comusmacv, for the following stated reasons:

Looking back after 4 years to the conditions that prevailed in 1967 and the sometimes conflicting advice and the uncoordinated actions, and the lack of any unified management mechanism, the CORDS arrangement that was established has in my view, even with all its imperfections, provided a vastly improved management mechanism over what they had before.

On July 2, 1971, we transmitted to your subcommittee a GAO staff document, classified “Secret,” developed from a survey by our staff in Vietnam concerning U.S. involvement in Vietnam’s pacification and development programs during the period from July 1967 through September 1970.

I might add, Mr. Chairman, that shortly afterward, we also transmitted copies of this document to other committees of the Congress, {p.125} that we thought had direct interest in this subject matter. They were the two Appropriations Committees — Senate Foreign Relations, House Foreign Affairs — the Senate Government Operations Committee, and also the Refugees Subcommittee of the Senate Judiciary, which had been interested from time to time in the refugee activities.

Our efforts were directed toward the development of a working document which would contain facts obtainable for a rather complete description of, and perspective on, the various pacification and development programs, the extent of CORDS participation in the program, the amounts and sources of financing for such activities, and whatever information was available to our staff in Vietnam concerning progress toward achieving program objectives.

The document is being used to provide background information needed by our staff for developing plans for more detailed reviews of specific CORDS activities in the future. ¶

It should not be construed as an audit report of the General Accounting Office, but as a useful information document. It has not and will not be subjected to the strict review processes normally applied to our reports, but it has not been submitted to the responsible agencies for official comment. ¶

The security classification applied to the document is based primarily on the classification shown in source documents from which the information was obtained in Vietnam.

Normally a document of this type is not released for use outside our office. However, because of the current significance of these activities, it occurred to us that it might contain information of present value to personnel in the Departments associated with CORDS activities, and to those committees of the Congress having need for such background information and perspective on the CORDS activities.

When we transmitted copies of the classified document to the Secretaries of State and Defense and the Administrator of AID, on July 1, 1971, we requested that we be advised of any inaccuracies which the staffs of those agencies might observe in it.

Our statements here today are drawn primarily from that document which is still classified and accordingly is subject to restrictions on release of classified information.

I should add, Mr. Chairman, that we requested declassification of the draft of this statement from which I am talking now, and the Department of Defense did very quickly act to declassify most of the information that was in that draft. I am working here from those parts of it which were declassified.

Mr. Moss.  Mr. Chairman?

Mr. Moorhead.  Mr. Moss.

Mr. Moss.  Your statement raises a very interesting question. ¶

Classification takes place under Executive Order 10501.

Under what authority does an Executive order bind the General Accounting Office?

Mr. Stovall.  May I ask Mr. Duff to respond to that?

Mr. Moss.  Yes, indeed.

Mr. Duff.  I can’t reply directly to Executive order, Mr. Congressman. However, we do not classify our reports. The classification placed on our reports is the classification of the basic document.

Mr. Moss.  I understand that. I used the term “bind” advisedly. {p.126}

I want to know the effect of an Executive order on the General Accounting Office.

You went to the Department of Defense for clearance of statements you are giving us today.

Mr. Duff.  That is correct.

Mr. Moss.  By inference, if they failed to clear it, you would not then have come to the Congress, of which you are an arm, and given us this statement. ¶

At least you would not have done so in an open session.

Mr. Duff.  That is correct.

Mr. Moss.  This gives, then, to the Executive, a rather effective means of controlling the activities of the Congress and of an arm of the Congress.

I would like to know what the legal position of the General Accounting Office is?

Mr. Duff.  If I may, Mr. Chairman, I am sorry I cannot reply—

Mr. Moss.  You should know. ¶

Therefore, if you can’t give us the—

Mr. Duff.  But I can in general terms tell you how we are bound by that, if you permit me, sir.

Under the Security Act, before we were given the right to review classified—

Mr. Moss.  What Security Act?

Mr. Moorhead.  What act is that you mean?

Mr. Duff.  The Security Act.

Mr. Moorhead.  You said under the act. ¶

There is no Security Act. ¶

There are certain sections of title 18 that are frequently referred to as a National Security Act, but there is no Security Act.

Mr. Duff.  Well, I will attempt to stay away from the legal terms, then.

Mr. Moss.  I think the record should be very accurate, and I am not nitpicking at all.

Mr. Stovall.  I think, Mr. Moss, to respond directly to your question, since we cannot answer it in the context of a legal position, we would be very glad to submit this for the record.

Mr. Moss.  You know what you are doing, you are taking the advisory classification of the Executive and applying it to all of the work relating to anything in which that type of information is contained.

That is why I wanted to know what the binding position is, not the accommodations you have worked out, but whether you recognize that it is binding upon the General Accounting Office?

Mr. Stovall.  May we get an official position with our legal people and submit it for the record?

Mr. Moss.  I think you should.

It might be worthwhile to have the Counsel for the Comptroller General advise the committee.

Mr. Stovall.  We would certainly have to have his advice in such a statement.

Mr. Moss.  I think it is sharply in focus, and this committee has challenged it before.

We have always taken the position that classification is advisory to the Congress and the arms of the Congress. ¶

It is not binding upon them.

Thank you, Mr. Chairman. {p.127}

Mr. Moorhead.  You may proceed, Mr. Stovall.

(The information follows:)

______________________

Executive Order No. 10501, November 5, 1953, 18 Federal Register 7049, provides in section 7 that classified information shall not be disseminated outside of the executive branch except under conditions authorized by the head of the disseminating agency.

The safeguarding of classified information affecting the national security is, of course, a legitimate function of the executive branch. ¶

We do not view our broad right of access to executive branch information as being unreasonably impaired by the requirements imposed under Executive Order No. 10501. ¶

While it might be argued from a technical legal standpoint that the General Accounting Office, as a part of the legislative branch, is not bound by the terms of the order, we believe that it is reasonable for the executive branch to impose conditions relating to the national security in connection with our access to information of the executive branch.

Essentially, we view the question of classified materials and the national security implications involved as part of the total environment in which we must carry out our functions; and we do not consider that we could reasonably assert a right of free access to classified information irrespective of security requirements.

Moreover, as a practical matter, it makes little difference whether we conclude that the order does not bind the General Accounting Office since the order as implemented by Department of Defense regulations precludes Defense personnel from furnishing classified data to those who refuse to follow the requirements promulgated.

Therefore, as a condition to being allowed access to classified documents in the Department of Defense the General Accounting Office agreed to establish a system for insuring the proper safeguarding of classified matter at least equal to that prescribed in the Executive order. ¶

That system is embodied in Comptroller General’s Order No. 1.11 and in section 12(a) provides in part that ¶

In addition, the Executive order provides in section 5(i) that when classified material affecting the national defense is furnished authorized persons other than those in the executive branch, a notation shall be included on the material which states in effect that it contains information affecting the national defense of the United States within the meaning of the espionage laws and the transmission or revelation of the material in any manner to an unauthorized person is prohibited by law.

That part of the criminal code that applies most directly to the employees of the General Accounting Office is 18 U.S.C. 793(d). That section provides in effect that any person lawfully having possession of information relating to the national defense who has reason to believe that such information could be used to the injury of the United States or the advantage of any foreign nation shall not communicate such information to any person not entitled to receive it under penalty of a fine of not more than $10,000 or imprisonment for not more than 10 years, or both. ¶

Section 793 does not define “any person not entitled to receive it” nor does it list any exceptions. ¶

In this regard, it differs from section 798 of title 18 of the United States Code, which governs the disclosure of classified information concerning the cryptographic system and the communications intelligence activities of the United States. ¶

Subsection (c) of section 798 provides that nothing is the section shall prohibit the furnishing upon lawful demand of information to any regularly constituted committee of the Senate or House of Representatives of the United States of America or joint committee thereof. ¶

In view of the stringent criminal penalties that could apply to unlawful disclosure of information by General Accounting Office employees under 18 U.S.C. 793, and in view of the fact that section 793 does not contain a specific legislative exception in effect allowing dissemination of classified information to committees of the Congress independent of the requirements of the Executive order, we believe that we must advise our employees of the requirements of the criminal code and promulgate instructions which will protect them from possible violations. ¶

Whether the release of classified information is a violation of 18 U.S.C. 793 is a matter not within our jurisdiction, being one which only the courts can decide. {p.128}

______________________

Mr. Stovall.  Thank you, sir.

As to the pacification programs, top of page 4, basically the pacification programs are programs of the Republic of Vietnam. ¶

As previously stated, much of the monetary support for the programs comes from the United States but the programs are Vietnamese programs.

The 1969 pacification and development plan was the first attempt by the Government of Vietnam to pull all elements of pacification together. The plan was a continuation of the prior pacification campaigns and placed special emphasis on the role of all the people as participants in the military, political, economic, and social efforts.

These efforts were aimed at defeating the enemy, restoring public security, and ultimately in establishing stability in the Republic of Vietnam. ¶

Under the 1969 plan, the Government of Vietnam deployed the regional forces, the popular forces, and the rural development cadre in as many contested or Vietcong-controlled villages as possible.

The 1970 plan was directed toward involving people in the villages and hamlets in the national struggle. The plan has eight objectives:

1. Territorial security;

2. Protection of the people against terrorism;

3. Peoples self-defense;

4. Local administration of government;

5. Greater national unity;

6. Brighter life for war victims;

7. Peoples information; and

8. Prosperity for all.

These objectives are aimed at achieving a smooth continuation of the 1969 plan, but with renewed effort to:

The 1970 plan was divided into three phases: Phase I ran from January 1, 1970, to June 30, 1970; phase II ran from July 1, 1970, to October 31, 1970; and the supplementary phase covered the last 2 months of the year and was extended into the first 2 months of 1971.

On May 30, 1970, the Government of Vietnam issued a special 1970 pacification and development plan. That special plan set forth two objectives:

The Government of Vietnam stated that the special plan was issued “to restore the momentum that characterized the implementation of the programs in 1968 and 1969.”

The 1971 plan, titled “Community Defense and Local Development Plan,” is a follow-on to the 1970 plans, and will cover the period of March 1, 1971, to February 28, 1972. It has been revised somewhat by consolidating the eight objectives in the 1970 plan into three broad objectives: Those of self-defense, self-government, and self-development. {p.129}

AS TO THE CORDS ORGANIZATION AND PERSONNEL

The Commander, U.S. Military Assistance Command, has overall responsibility for U.S. pacification and development assistance and he administers the program through his deputy for CORDS, Chief of Staff, and the Assistant Chief of Staff for CORDS.

At the Saigon level, CORDS has 11 directorates which advise the Government of Vietnam’s ministries and perform the staff and administrative functions. These directorates are under the control of the Assistant Chief of Staff for CORDS and are manned by both military personnel and civilians. CORDS field personnel are under the direct control of the deputy for CORDS. The organization in the field is similar to the CORDS Saigon in that each of the four military regions has staff advisers organized along the same functional lines as the Saigon directorates.

CORDS had about 13,300 personnel in July 1, 1970. The staffs were composed of U.S. military and civilian personnel; local national employees of Vietnam; and third country nationals from such countries as the Philippines and Korea. Over 80 percent of the assigned personnel as of July 1, 1970, were assigned to field activities outside of Saigon.

CORDS FINANCIAL PROGRAMS

When CORDS was established it was decided that it for the most part would receive services, supplies, and needed material directly from its supporting organizations. Accordingly, it did not establish any central accounting or budget or funds control mechanisms of its own. It drew directly as needed upon its supporting organizations, principally the U.S. military services, and used their employees including military personnel to carry out its activities.

In late 1970, the Saigon headquarters of the Agency for International Development and the Joint U.S. Public Affairs Office still operated independently of CORDS for programs not related to pacification, but their field staffs, that is, outside of Saigon, fall under CORDS for all assistance programs. ¶

Since the bulk of the resources for pacification support were and continue to be provided by the military, the Commander, U.S. Military Assistance Command, Vietnam, was charged with the leadership of the program under the overall authority of the Ambassador.

The combined financing of the CORDS program for the 3 years 1968 through 1970 totaled about, $4 billion. The United States budgeted approximately $2.1 billion, the Government of Vietnam budgeted the equivalent of about $1.6 billion, and the equivalent of about $300 million was made available from U.S. owned or controlled local currency (piasters) accounts. This local currency was generated under other U.S. dollar financed assistance programs.

Approximately $3.2 billion or 80 percent of these funds were budgeted for territorial security or related military programs. ¶

Other uses for which the funds were budgeted were establishment of local government, $328 million or 8 percent; brighter life for war victims or refugee programs, $141 million or 4 percent; general support, $202 million or 5 percent (general support involves such things as CORDS technical support, personnel support, and Air America). Funds in {p.130} lesser amounts amounting in each case to 1 percent or less of the total were budgeted for people’s self-defense force; prosperity for all or civic action; greater national unity or Chieu Hoi; protection from terrorism or Phoenix; and people’s information program.

Under the present CORDS organization the 11 individual directorates, to the extent that they desire it, must obtain their financial information from the agencies (that is, the military services, AID, and CIA) which support their programs.

This is a time-consuming task for them and in some cases is avoided. ¶

During our survey, we received incorrect and conflicting figures from the CORDS directorates. ¶

We also found that some of the responsible officials in the directorates were unaware of the amounts obligated under their programs, and in some cases did not know the amounts in their budgets. ¶

In discussing these matters in Saigon our staff suggested to officials there that procedures for central management and control of budgets and obligation data were needed, as well as procedures for obtaining obligation data input on a regular basis from the contributing agencies. At the conclusion of our survey, CORDS informed us that steps were in process to receive and record financial data on a regular basis.

I don’t know, Mr. Chairman, how far this has progressed. This was based on work last fall. We are going to follow it through. I don’t know what specifically is developing. But this was a local effort. This was not a department effort.

Mr. Moorhead.  When are you going to do that?

Mr. Stovall.  We are going right on to concentrate now on further work in this financial area. It is a continuation. This was the first step of a continuing plan.

We believe that it is now time for a fuller reassessment of the military and AID financing arrangements, not only in Saigon but also at the unified command and department levels. We believe this is needed to clarify fiscal responsibility, and to overcome the lack of adequate central financial records in CORDS. What may have been most expedient under the earlier circumstances should, in our view, be fully reconsidered now in the light of the changing conditions and the prospective shift toward economic and rehabilitation efforts.

In this regard we would like to express caution about the degree of reliability of any presently available overall documents or reports which may purport to contain completely reliable figures on program costs associated with the operations. ¶

We have seen several differing sets of figures as indicated on page 142 of our classified document. ¶

This further supports a conclusion that the system of financial accountability and financial reports on CORDS operations needs to be reassessed and tightened.

SOURCES OF U.S. CONTRIBUTIONS

U.S. resources are contributed through the appropriations of the Department of Defense, the Agency for International Development, and the Central Intelligence Agency. ¶

CORDS receives resources in the form of funds, personnel and material directly from these organizations or from the individual budgets of subordinate U.S. organizations in South Vietnam and the United States. {p.131}

The U.S. funds used to support the CORDS organization are not appropriated for CORDS as such but instead are appropriated for the function being performed. ¶

For example, Department of Defense appropriations which account for some 86 percent of U.S. CORDS funding are from appropriations for operations and maintenance, military personnel and major equipment items.

PROGRAM OBJECTIVES AND RESULTS

The 1970 pacification and development program objectives, and the results, according to CORDS — and I would emphasize, Mr. Chairman that this is a presentation as given us by CORDS, this is not a GAO conclusion — according to CORDS can be summarized as follows:

1. The first objective is to provide effective territorial security for 100 percent of the population. By June 30, 1970, some degree of security had been provided for 91.1 percent of the Vietnamese population. The Government’s regional and popular forces assisted by free world forces and Vietnamese regular forces, the national police, and other civilian forces have principal responsibility for territorial security. The regional and popular forces were expanded by over 115,000 during the 18 months ended June 30, 1970, and have been provided modern weapons and equipment. The national police are also being prepared to assume a greater role in territorial security, and CORDS has attempted with limited success to increase both the quality and number of police.

2. As a supplement to the territorial security program the Government is attempting to improve the organization, training, and equipment of the peoples self defense force. The peoples self defense force is a civilian militia whose mission is to defend the hamlets. The goal of organizing 2.7 million members by June 30, 1970, was exceeded by 800,000.

3. The Government of Vietnam is also decentralizing government administration and permitting village and provincial governments more authority in local matters. As of May 31, 1970, 1,953 of about 2,000 villages had elected officials. CORDS is assisting in developing the capabilities of local officials by providing extensive training programs and deploying rural development cadres to organize and assist village governments.

4. Closely related to the development of local government is the program to involve the people and local governments in economic development projects. During the first 7 months of 1970, 8,500 village self-development projects were started and during the first 9 months of 1970, 511 province-level projects were started.

5. Under the Chieu Hoi program the Government attempted to induce 40,000 of the enemy to rally to the Government’s cause during 1970. Only 65 percent of the goal for the first half of 1970 was achieved.

6. The Government’s Phung Hoang program is directed toward neutralizing members of the Vietcong infrastructure, the leadership of the Communist insurgency. As of August 31, 1970, 13,708 members had been neutralized during the year. Attempts to improve neutralization results have included formal training programs, targeting specific individuals in the infrastructure, preparation of dossiers on known members of the infrastructure, and emphasis on the timely processing and trial of detainees. {p.132}

7. The Government has also attempted to establish an effective people’s information system to explain the Government’s programs and elicit public participation. This goal was being pursued through face-to-face communications, indoctrination courses, television and radio programs, films and distribution of pamphlets and magazines.

8. Finally the Government is attempting to improve the life of war victims by assisting them to resettle in new areas or return to their original villages. The June 30, 1970, goal was to pay full resettlement allowances to 101,825 refugees and to pay full return-to-village allowances to another 273,514 refugees. As of June 20, 1970, only 44,591 war victims had received their full resettlement allowances and only 105,448 had received their full return-to-village allowances. The primary reason for the shortfall was that large numbers of new refugees were diverted from the normal programs to provide emergency relief.

As a result of CORDS assistance, the Government of Vietnam has achieved a degree of success in its pacification and development efforts. However, we observed a number of problems common to many of the Government’s programs, which have hindered the full achievement of objectives. We noted that:

There is a shortage of qualified leaders in the regional and popular forces and the national police.

Military priorities have also adversely affected the retention and recruiting of qualified personnel by civil agencies.

The regional forces and the rural development cadre were not deployed in accordance with the instructions contained in the Pacification and Development Plans. The Special Pacification and Development Plan emphasized the deployment of regional forces in mobile offense missions. We observed, however, that little success has been realized in redeploying the units.

Pay and allowances of the Government’s military and civilian personnel are considered by CORDS to be low and believe this has contributed to desertions in the military corruption by civilian officials and the inability of civil agencies to recruit and retain qualified personnel.

The Government of Vietnam, in some instances, has not provided adequate support.

There has been poor cooperation between Government of Vietnam officials in implementing Government policies. This has been particularly true in the Phoenix program in which the lack of interagency cooperation has been one of the more significant factors hindering program effectiveness.

These problems have been recognized by CORDS and in some instances remedial measures have been developed.

Recent articles appearing in the press since July 10, 1971, conveyed an implication that our survey of the pacification program has disclosed that $1.7 billion of the funds available for that program were lost. This was a misinterpretation of statements contained in our survey document. On page 137 of that document we said:

The point we were developing in our survey was the fact that the overall operational costs for the various programs administered by CORDS are not available at CORDS nor to the best of our knowledge anywhere else. ¶

In other words, we are concerned that the absence of adequate fiscal control over the operating programs of CORDS is a serious weakness which could permit the misappropriation of equipment, materials, and supplies without alerting management in a timely manner.

We did not intend for our statement to infer in any way that we believed $1.7 billion of funds were lost. It is our belief, however, that in the absence of adequate financial controls at CORDS it would be very difficult if not impossible to accurately reconstruct the value of and disposition of equipment, supplies, and services that have been furnished by the United States for the operating programs of CORDS.

To summarize, we believe that the main elements and related questions pointed up by our survey are:

1. CORDS, as the organization responsible for administering the U.S. pacification in Vietnam, has not been given responsibility for financial stewardship and accountability for the costs of the programs it administers.

We believe that CORDS or any other U.S. organization responsible for managing a foreign assistance program, should not be exempted from the integral and very important part of that responsibility that relates to financial stewardship and accountability.

2. The military financial budgeting and accounting system does not provide information as to the portion of the material supplied from the U.S. military pipelines into the CORDS program.

We believe the system should be modified to provide such information.

3. The present system results in a blurred distinction of accountability between the respective U.S. military services, the free world military forces, the Vietnamese armed forces, and CORDS.

We believe that consideration should be given to the more fundamental question of whether an operation such as CORDS or any foreign assistance program or CORDS should have adequate financial control relatable to that foreign assistance program.

We expect to look further into the system for financing and controlling the CORDS operation and plan to make reports to the Congress on the results of our work.

This concludes our statement, Mr. Chairman.

We will be glad to answer any additional questions.

Mr. Moorhead.  Thank you, Mr. Stovall, for a very fine statement. I think the problem you raise about the financial control of a program of this size is very pertinent. And I think this is something the subcommittee should definitely direct its attention to.

I personally didn’t think you were saying that the funds were missing, but that they couldn’t be accounted for, which is a different thing.

Mr. Stovall.  Yes, sir.

Mr. Moorhead.  But the Pentagon issued a statement which, if the newspapers reported it accurately, is quite critical, I would think, of this interpretation of the General Accounting Office. {p.134}

They said — and I am quoting from the Washington Post of July 14:

Yet your statement says that the overall operational costs for the various programs administered by CORDS are not available from CORDS records nor, to the best of your knowledge, anywhere else.

Do you deny the charge that your auditors were looking in the wrong place? ¶

If they had just gone to the right place, they could have found the funds. ¶

Is that correct, sir?

Mr. Stovall.  Mr. Chairman, we should put this, I think, in context.

We do want to emphasize that the information contained in our document and in our statement was material available in Vietnam.

We have not yet checked this for information that might have been available outside of Vietnam at the time the document was prepared.

We are going to follow on through. But this was the first step, to get what we could in Saigon.

Now, in that context, we found that we could get general information from Defense. And we have had some later discussions with them within the past 2 days.

I would like to have Mr. Duff speak to that, if I might, because our statement, we think, is a perfectly good statement.

Mr. Moorhead.  Mr. Duff, if you would, please direct your attention specifically to the fact that the statement you present to us today says: ¶

whereas the Pentagon says you just looked in the wrong place.

Mr. Duff.  Mr. Chairman, the newspaper article does say that. I have reviewed the statement that the Defense Department released, and that statement—

Mr. Moorhead.  Do you have that release, Mr. Duff?

Mr. Doff. Yes, sir.

Mr. Moorhead.  I think it might be appropriate to have that release printed as part of the record at this point.

Without objection, it will be made part of the record.

(The information follows:)

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A recent newspaper article based on a secret GAO survey stated that $1.7 billion of U.S. support to the Government of Vietnam (GVN) pacification program was not accounted for and that GAO could not determine how most of the $2.1 billion authorized for the program was used. The article contains misleading information.

In forwarding the classified survey, GAO informed Secretary Laird that the document should not be construed as a report of the GAO. It was not subjected to the strict review processes normally applied to GAO reports and it was not submitted to the responsible agencies for official comment, as is customary. The primary purpose of the document, GAO said, was to use it for planning and preparation of work programs for conducting more detailed reviews of CORDS programs and activities at some later date. Although a document of this type is not released normally for use outside of GAO, its distribution to certain congressional committees was based on what was considered by GAO to be of current significance.

In making its limited release of the classified survey, GAO qualified the cover-ape and substance as follows:

1. Much of the statistical data, other information, and evaluations were for the most part not developed by GAO.

2. This background document is directed toward presenting what were described as GAO’s very limited observations on the progress of the pacification and development programs in Vietnam toward achieving overall program objectives. {p.135}

3. It did not include in-depth examinations into CORDS activities and expenditures as reported by the Governments of the United States and the Republic of Vietnam.

4. The document is not a report but is intended for use as general background information on the organization, financing and operation of CORDS.

The GAO survey concludes that they were unable to obtain obligation data in Vietnam for $1.7 billion of the $2.1 billion budget. The GAO survey either overlooked or failed to indicate that obligation records are not nor are they intended to be maintained in Vietnam. Records supporting the amounts questioned by the survey are available at activities outside of Vietnam where the financial accounting is actually performed. These records all are subject to periodic audit by the Army Audit Agency.

The largest part of the $1.7 billion, for example, about $1.3 billion, was budgeted to provide military hardware and other commodities to the regional and popular forces (RF/PF) under the military assistance service funded program (MASF). This fact is recognized in the GAO survey. Commodities are brought into Vietnam through the U.S. Army logistics system and are turned over to the Republic of Vietnam Armed Forces (RVNAF) for distribution. CORDS participates to a limited degree in computing requirements but does not participate in ordering or delivering commodities. Assistance to the RF/PF is part of the regular MASF program. As such, material furnished to RF/PF is requisitioned by the Vietnamese Army, Navy or Air Force under the MASF program. Obligations are recorded by the U.S. military department through which the materiel is requisitioned at the time the requisition is processed. When the materiel is received in Vietnam, it is controlled and accounted for in the Vietnamese logistics system until it is issued to RF/PF units.

The RF/PF is another customer of the ARVN, VNN, or VNAF — the same as an Army division, Navy vessel or Air Force squadron. The RF/PF part of the program is not subjected to individual control. To do so would be the same as establishing individual programs for each unit within the ARVN, VNN, and VNAF.

Funds used to support the RF/PF are accounted for and controlled in the same manner as funds provided to support other RVNAF activities.

Over the past several years, the Deputy Comptroller for Internal Audit (DCIA) within the Office of the Secretary of Defense has devoted its efforts in Vietnam to auditing the MASF logistics program. A number of these audits were performed in conjunction with the Army Audit Agency, Navy Audit Service and the Air Force Auditor General. Since the RF/PF are customers of the ARVN, VNN and VNAF, the logistics audits have included coverage of the RF/PF.

The balance of the $1.7 billion, $400 million, is for services and personnel costs and is also funded separately.

Documentation concerning the delivery of materiel that supports the obligations questioned by GAO has been and will continue to be reviewed by DOD agencies as part of the continuing audits of the MASF program for Vietnam.

In summary, obligational records are maintained outside of Vietnam and are periodically audited. Within Vietnam the materiel records are audited continuously for validity of requirements and distribution to users. Validity of inventory records at the Vietnamese Armed Forces Depot level is verified during these audits.

______________________

Mr. Duff.  The Defense Department statement does not say this. And I think, if I might attempt to set the record straight on it, to the best of my ability, I will.

The Pentagon took the position that obligations are available. We said that obligations or cost figures relatable to CORDS in the CORDS program are not available. And I believe both statements are true.

The Pentagon can account for obligations of the overall assistance programs going to Vietnam. We tried to go into that to find out where the funds went in the various programs in Vietnam.

Mr. Moorhead.  You mean the Pentagon says “x billion dollars” went to Vietnam, but they can’t say to which program within Vietnam it was allocated? Is that correct? {p.136}

Mr. Duff.  That is correct.

And so, in my opinion, looking at the statement released by the Defense Department, and in looking at our statement, I think they are both accurate statements in that regard.

And I don’t know how the—

Mr. Stovall.  If I may inject, though it was technically accurate, it was misleading, because the inference in the Pentagon statement was that you can account for the CORDS cost. ¶

We are convinced that you cannot do that.

Mr. Moorhead.  It is your testimony that they can account for this money that left the United States and went to Vietnam, and you could find that out by checking the figures here; but that nobody can find out by normal auditing procedures what happened to the money after it got to Vietnam? ¶

Is that correct?

Mr. Stovall.  And we still have some verification work to do. We are speaking here of the system as we understand that it operates. And I don’t believe — perhaps Mr. Duff can correct me on this, too — I don’t believe that all this information would be available in Washington.

I think, for example, some of it would have to be located at CINCPAC in Honolulu. And some of it would have to be located at some of the single management-control points in the Department of Defense at places in the United States. Some of it, no doubt, is available in Washington.

But it is a tremendous job, the attempt at reconstruction, to get at this. That is part of the further work that we are going to try to do.

The distinction between the actual system and the concept, though, what is really happening, we don’t yet know.

Mr. Erlenborn.  Mr. Chairman, would you yield at this point?

Mr. Moorhead.  Certainly, Mr. Erlenborn.

Mr. Erlenborn.  I think we have a problem with terminology here. For instance, when you stated a minute ago that this money went to Vietnam and that we don’t know how it was used there, really it is not money that was sent there, is it?

Mr. Stovall.  You are quite right. I should have attempted to clarify that point.

A great deal of it is materiel-in-kind, supplies.

Mr. Erlenborn.  And it may have been procured from Defense Department appropriations and then diverted to the CORDS program rather than being utilized—

Mr. Stovall.  Perhaps “diverted” wouldn’t be the best word.

It flows through the Department of Defense supply channels and then moves on out from those channels in Vietnam to the respective users.

Mr. Erlenborn.  And some of this would be personnel costs as well, would it not?

Mr. Stovall.  Some of it would; yes.

Mr. Erlenborn.  So it is not money that was sent to Vietnam and then somehow or other lost?

Mr. Stovall.  No.

Generally, the furnishing was of supplies and materiel and equipment-in-kind, rather than in money.

Mr. Erlenborn.  Thank you. {p.137}

Mr. Moorhead.  Resources.

Mr. Stovall.  Resources; yes.

Mr. Moss.  Mr. Stovall, it could be true in part, however, that money flowed to Vietnam, because you have $400 million for services and personnel, and some of this is indigenous personnel, Vietnamese personnel, and it is paid in the contract, isn’t it?

Mr. Stovall.  For this type of thing there is a flow of funds; yes, sir.

Mr. Moss.  So in both the services and personnel categories, this could represent actual funds flowing into Vietnam; being disbursed in Vietnam?

Mr. Stovall.  Yes.

And to really know the elements of this, we would have to do more digging. We don’t know the relative elements other than the figures that we show in here.

Mr. Moss.  This is very similar to the situation we encountered in 1965 and 1966 in the buildup when there were no audits being carried on in the field — in the military construction programs, and some of the port operations — isn’t it?

Mr. Stovall.  In some ways, this is similar.

Mr. Moss.  In some ways?

I recognize it is not on all fours, but it is similar in some respects.

Mr. Stovall.  I think one distinction between that point was that in that case there was a greater hazard and potential loss in even arriving at Vietnam, whereas here I think they do now have a better means of identifying that these things arrived in Vietnam, but not what happened to them after they got there.

Mr. Moss.  Thank you, Mr. Chairman.

Mr. Moorhead.  And I gather from your statement, Mr. Stovall, you say that possibly this — let’s call it sloppy financial management — was justified in the beginning because of an emergency situation. ¶

But that now the system should be corrected so that CORDS will be able or you will be able, to check on their stewardship of the funds and the resources that are assigned to them. ¶

Is that correct?

Mr. Stovall.  We recognize that the situation in 1967 was chaotic, to say the least, and that a decision was made at that time that it would not be feasible to attempt refined financial controls. And we would not attempt to pass judgment on that.

But we do feel that 1971 is an entirely different situation and that, regardless of the merits of the position taken in 1967, we think it ought to be reassessed and some controls established now.

Mr. Moorhead.  I think it is a pretty clear picture that the quickest way to get resources for this program to Vietnam was to take it out of the tremendous resources of the Department of Defense and move it there quickly, without the bother and time consumed by setting up a proper organization that GAO and the Congress could properly check on.

Mr. Stovall.  I think, Mr. Chairman, that this really points up the central message that we got out of this. The difficulty and the possibility of going back later and ever finding out by reconstructing what really did happen insofar as the specific use is concerned is not there.

Mr. Moorhead.  Do you find a receptive attitude toward setting up a proper system? ¶

Or is there opposition to that? {p.138}

Mr. Stovall.  We haven’t fully explored that. We have had brief discussions within the past few days that — I have the impression that it would be quite difficult to — this is the feeling in the Department of Defense — that it would be quite difficult and would require modification of their normal supply procedures to accommodate this.

But we have not explored it far enough to say anything conclusive. That is another point that we are planning to follow through.

Mr. Moorhead.  I am asking that because I want to get an idea of how strong our report and our recommendations should be.

One final question before I yield to the other members for questioning— ¶

Does the General Accounting Office have any estimate as to the number of refugees in South Vietnam?

Mr. Stovall.  We have done work in this area at various times. The earlier figures wouldn’t be good now. I don’t know whether we have — such figures or not. I don’t believe that we do, Mr. Chairman.

Mr. Duff.  In the earlier report that we submitted. But I don’t know how old those figures are.

Mr. Stovall.  I think the figures that we have are about 2 years old. I wouldn’t want to rely on them.

Mr. Moorhead.  Wo had testimony yesterday, if I recall it, that the figure ranged from a low of around 500,000 to a high of around 6 million.

Do you have any idea today which figure is closer to accurate for refugees?

Mr. Stovall.  This would be a hazardous guess on my part, Mr. Chairman. I really don’t know.

We would be glad to try to get a figure for you.

Mr. Moorhead.  If you would, and be careful about the definition of refugees, which we got into yesterday.

There are refugees actually receiving refugee assistance, and then there are refugees whose assistance has terminated, but we don’t know what has happened to them. And then, of course, there are refugees gainfully employed, happily settled in the new community that would probably no longer be called refugees.

Mr. Stovall.  Now, if I am clear as to your question, you are concerned with the current number who are still in a refugee category? Or the cumulative figure?

Mr. Moorhead.  Well, both, really.

Mr. Stovall.  Both.

Mr. Moorhead.  The very narrow category are those that are classified as refugees and are receiving assistance. But this assistance expires in either 60 days or 6 months, if they are resettled.

But I think that what we want is probably the figure for the narrow definition. We had some accurate testimony on that yesterday.

Mr. Stovall.  I think in building it up, we would try to build it up by category and come up to the figure rather than to try to deal in one blanket total.

Mr. Moorhead.  While you are looking for information on refugees, I notice on page 11 that you said ¶

Do you know that number? How many were generated in 1970?

Mr. Stovall.  I am not sure that these figures are complete, Mr. Chairman, but I do have a statement here that the statistics prepared {p.139} by CORDS in May 1970, show that there were about 156,200 civilian and military disabled; 25,800 registered and nonregistered orphans; and about 131,000 war widows in South Vietnam.

I am afraid that is not directly responsive to your question, though.

Mr. Moorhead.  Can you obtain the number of refugees generated in 1970?

Mr. Stovall.  We have a figure cited on page 116 of our long document that the Government of Vietnam has — reports a total refugee population of 548,805 in August 1970.

Mr. Moorhead.  Was that new refugees in 1970?

Mr. Stovall.  No, sir. That was the numbers of refugees so categorized at that point.

Mr. Moorhead.  So that clearly does not include the number whose entitlement to payment has expired, but who are still — in common parlance — refugees?

Mr. Stovall.  I read from a statement here that beginning in April 1970, a category of refugees in a return-to-village status was added, and that that had been about 249,000 in August 1970.

Mr. Chairman, I am quite skeptical about all these figures. ¶

I don’t believe they are very reliable.

Mr. Moorhead.  That seems to be the case, generally.

Mr. Stovall, why was there a large number of refugees in 1970? ¶

What actions caused that?

We get rosy reports about the success of the pacification program, and yet CORDS’ own testimony that you quote there were large numbers of refugees.

Mr. Stovall.  I don’t think I could answer that very well, Mr. Chairman. ¶

We could include that in our response to get information and furnish it to you.

(The information follows:)

______________________

A review of our files on Vietnam refugees showed that we do not have current or old statistics concerning the total number of refugees whose assistance has terminated, and those who have been resettled. Since our work was performed 1 year ago, we also do not have information on the number of refugees currently receiving assistance. ¶

Therefore, we requested AID officials at AID’S Bureau for Vietnam, Office of Rural Development, to provide us with the information you desire. The information furnished by AID is explained as follows:

The total number of refugees officially registered by the Vietnam Government since 1965 is about 3.5 million; plus an estimated 2 million persons who had been temporarily displaced from their homes. The 2 million persons are designated as war victims and have not been registered as refugees.

AID does not collect data on refugees who have been resettled, and advised us that any statistics that might be found concerning the total number of refugees paid resettlement allowances over the past several years are probably not reliable. However, AID did provide us with statistics which they believe to be reasonably accurate showing that 195,813 refugees had been paid their full resettlement allowances during the period from January 1, 1970, to June 20, 1971. AID also provided information showing that 770,669 refugees received some assistance during the same period but such assistance had been terminated prior to June 20, 1971. AID further advised that the active caseload of refugees receiving assistance at June 20, 1971, was 587,204.

Our files also do not contain current information on reasons for the recent increase in the number of refugees. During our queries at AID, we were advised that there was a substantial increase in the numbers of new refugees during the last 3 months of 1970 and the first 3 months of 1971. ¶

This was caused primarily by relocation of approximately 50,000 Montagnards in the Central Highlands, and Vietnam Army actions in the U-Minh Forest of the Delta that generated 35,000 refugees. ¶

In the earlier part of 1970, there was also an increase in the number of refugee statistics as reflected on page 116 of our survey back- {p.140} ground document This increase, however, was due primarily to a change in the reporting system to include the category “refugees in return-to-village process” not previously reported. ¶

We do not have nor were we able to obtain information on the number of refugees generated in 1970.

______________________

Mr. Moorhead.  It seems to me that if you had a successful pacification program, you would have a small number of refugees, unless there was some other reason, such as our bombing of villages that caused people to flee from their homeland into Saigon, or the coast areas.

Mr. Erlenborn?

Mr. Erlenborn.  Mr. Stovall, I get the message from your statement today that when CORDS was formed, it was not conceived to be a separately funded program. ¶

Therefore, CORDS has no budget of its own, but is funded from appropriations that were made to other organizations such as the Defense Department, the AID and CIA. ¶

Consequently, whatever funds have been spent in the CORDS program have not been separately identified.

Is that a proper observation?

Mr. Stovall.  Yes, sir.

Mr. Erlenborn.  And your recommendation is not necessarily that they set up a separate budget for the purpose of appropriating for the CORDS program, but rather that CORDS accounts for the materiel and services it receives from these other organizations, is that correct?

Mr. Stovall.  Yes.

We think that the circumstances are such that there should be a focal point of financial control as a part of the management of the programs. We haven’t yet developed our views as to what would be the best way of accomplishing that. But we do think this is a major matter that should be considered, and this is primarily, of course, relatable to the flow of the funds and support from the Department of Defense. We were able to find an audit trail insofar as the AID support is concerned.

Mr. Erlenborn.  How about the CIA?

Mr. Stovall.  We did not look at that.

Mr. Moorhead.  Would you repeat that? We did not what?

Mr. Stovall.  We did not look at that.

Mr. Erlenborn.  Do you generally audit CIA funds?

Mr. Stovall.  No.

Mr. Erlenborn.  Does anyone?

Mr. Stovall.  I don’t know, sir.

Mr. Erlenborn.  Maybe we ought to discuss this some other time.

Mr. Stovall.  I am skirting here, obviously.

Mr. Erlenborn.  I don’t want to put you on the spot. But you are not recommending, as I understand it, that CORDS be funded by a separate line item in somebody’s budget for the purpose of audit?

Mr. Stovall.  We think that at this stage in the game would be premature for us to draw those kinds of conclusions.

We do think, though, that there ought to be a consideration of this problem from the viewpoint of what kind of financial stewardship and financial responsibility should be there in order to have reporting back to the Congress, and just to know what is being consumed in the programs. {p.141}

And proceed from there to consider the mechanisms, or the budgetary devices, or even the appropriations by which this should be accomplished. I think we would like to progress to that point rather than leap for it now.

Mr. Erlenborn.  So, accounting for the expenditure of funds can’t be done by looking at a CORDS budget, as you pointed out, but can you identify the expenditure of funds, say, in the Defense Department budget, and follow the course of the procurement and expenditure?

In other words, the funds that are appropriated and spent can be accounted for, can they not?

But you may not be able to identify whether they were spent for CORDS or for military purposes, is that a fair assumption?

Mr. Duff.  Yes, they can be accounted for.

Mr. Erlenborn.  And that is what leads you to say that it is a misinterpretation to say that the $1.7 billion of funds are lost and not accounted for. You can’t account for them being spent in the CORDS operation?

Mr. Duff.  We certainly didn’t intend to imply that.

Mr. Erlenborn.  I don’t suppose we will see a headline in the paper tomorrow of $1.7 billion funds not lost. ¶

I guess that would not be news.

But it isn’t lost, is it?

Mr. Stovall.  Well, we added one more sentence and said that we don’t know. ¶

We did not intend to infer it in that statement, but we don’t ideally know.

Mr. Erlenborn.  You say here on page 8 that some of the responsible officials and the directors were unaware of the amounts obligated under their programs and in some instances did not know the amounts in their budgets. ¶

Do they have budgets?

Mr. Stovall.  I think in fairness to those officials, they are not required to know this. And in the normal sense they do not have authorized budgets, they do have — what would be the best form — program plans?

In broad terminology, they do make plans and submit them, and those are incorporated, as I understand, in the requirements as the budget is assembled coming up the line.

But our concern was primarily with the return of either the resources or funds down the channel, that they are not required to have budgetary accountability in that sense. But they do submit estimates of their needs, and I believe those estimates are considered in the assembly of the military budgets.

Mr. Erlenborn.  I note here on page 7, you say the equivalent of about $300 million was made available of U.S. controlled, or local owned currency, piaster accounts. ¶

Are these funds included in anyone’s budget?

Are local owned currencies subject to the, appropriations process?

Mr. Duff.  The way they are generated, eventually they are subject to it, such as from the Public Law 480 programs and so forth, and these funds are available for use.

I am not too familiar with all of the requirements, but they are made available for use in the contract agreement.

Mr. Erlenborn.  Let me see if I can understand this. {p.142}

We appropriate funds for Public Law 480, we then procure the foodstuffs, we send them to Vietnam, they are sold there, and that generates local currency.

Now, those funds, are they discretionary, does the Ambassador, or someone in MACV, have discretionary use of those piasters, or are they subject then to appropriations by Congress before they can be spent?

Mr. Duff.  The agreements specify at the time the sales agreement is made, going back to the Public Law 480, of what percentage of these funds, for instance, will be used for defense purposes, or security assistance, and these funds do accumulate and are available to the mission director.

Mr. Erlenborn.  Without appropriation?

Mr. Duff.  Without appropriation.

But they do go through the budget process within the agency where they prepare their budgets and so forth, as requested, and they are approved by the agency.

In other words, the man in the field does have to ask for authority before he expends the funds.

Mr. Erlenborn.  But they are not subject to appropriations by Congress. They are discretionary within the limit of the Public Law 480 law and the agreement—

Mr. Stovall.  The congressional appropriations would have been an earlier consideration when they were put in the initial program.

Mr. Erlenborn.  I notice also on page 7, you say funds in lesser amounts in each case, 1 percent or less of the total were budgeted for self defense, prosperity, and so forth.

You include there protection from terrorism or Phoenix. ¶

Less than 1 percent of these funds was spent on the Phoenix program, is that correct?

Mr. Stovall.  Yes, sir.

Mr. Erlenborn.  Does that include military appropriations, DOD appropriations, that went into CORDS?

Mr. Stovall.  These statements were based on the information that our people could get in Vietnam, and I think we do not know the details of this.

Mr. Erlenborn.  My recollection of Mr. Nooter’s testimony yesterday I think would tend to conflict with this as to the amount.

Would my colleagues agree that he gave the indication that Defense contributed considerably more to Phoenix, that AID did not directly, so that AID would account for little or no spending on the Phoenix program. ¶

He gave me the impression that the military portion of the CORDS operation would be considerably more than one percent.

Mr. McCloskey.  My recollection is that it sounded like more than two or three to one, with the majority of the Defense funding going into Phoenix, as opposed to AID, but that is just a recollection.

Mr. Erlenborn.  Thank you, Mr. Chairman.

Mr. Moorhead.  Mr. Moss?

Mr. Moss.  Mr. Stovall, your report, or your statement today indicates a dissatisfaction on the part of the General Accounting Office with the accounting procedures used by CORDS. ¶

Doesn’t the GAO have authority to require an improvement in the accounting by CORDS? {p.143}

Mr. Stovall.  Not in the sense of requiring. ¶

We have responsibility for prescribing principles and for doing all we can to help or urge or push the agency toward developing satisfactory accounting.

Mr. Moss.  Isn’t CORDS subject to sections 112 and 113 of the Budget and Accounting Act?

Mr. Stovall.  I have forgotten the specific terms of those sections. I don’t have them with me.

Mr. Moss.  Well, section 112 reads:

It goes on then and into section 113:

Mr. Stovall.  I would say that does apply to CORDS.

Mr. Moss.  It does. ¶

Then you have more than the power to just suggest?

Mr. Stovall.  We prescribe principles.

Mr. Moss.  Have you prescribed a principle here that is being met?

Mr. Stovall.  The Comptroller General has prescribed the principles within which the Department of Defense is responsible for developing its accounting, and we are saying here that the accounting is not satisfactory. ¶

It is the Department of Defense’s responsibility to take the actions necessary to make it satisfactory, and it is our responsibility to continue to point it up.

Mr. Moss.  Does that place the responsibility on DOD or on the General Accounting Office.

Mr. Stovall.  On the head of the agency.

Mr. Moss.  I thought it placed it on the accounting office, as I read it.

Mr. Stovall.  For the Comptroller General to prescribe principles.

Mr. Moss.  Principles that are adequate to achieve certain specific results.

Mr. Stovall.  And he has prescribed those principles in general terms. I don’t think that CORDS would have to operate under special principles. I think the basic principles—

Mr. Moss.  Wouldn’t the accounting under which the Government operates produce the kind of information you want from CORDS? It is not exemptive, you have said.

Mr. Stovall.  It is not exempt. The General Accounting Office has not approved the accounting systems in this area, because the Department of Defense has not — {p.144}

Mr. Moss.  Aren’t they supposed to be applied to all areas within the Department of Defense unless there is some agreement to exempt them?

Mr. Stovall.  Yes, sir.

Mr. Moss.  And there has been no agreement to exempt this operation from the accounting requirements?

Mr. Stovall.  No.

Mr. Moss.  So it is not now meeting the prescribed accounting requirements within the Department of Defense?

Mr. Stovall.  That is correct.

Mr. Moss.  Because you cannot establish with any reasonable degree of certainty the disposition of funds expended on materiel, equipment, goods, and services?

Mr. Stovall.  That is our view.

Mr. Moss.  And if you were to rely on records within the Department of Defense here in Washington, you would only get general categories, you would not get the specific detailed information which is maintained in the field, is that correct?

Mr. Stovall.  I think that is correct.

Mr. Moss.  Well, let’s put it another way. ¶

Have you ever encountered a case in your auditing of the activities overseas where the records here in Washington are more complete than those in the field?

Mr. Stovall.  Not in my experience, no.

Mr. Moss.  It has not, in my experience, either, and that is why I asked the question. So it would appear that short of assigning broad categories to these expenditures, you cannot find what happened to the billion seven?

Mr. Stovall.  That is correct.

Mr. Moss.  If they were requisitioned, and we will say the billion three was requisitioned from DOD and shipped to Vietnam, are there any end-use audits indicating what happened after it was received in Vietnam?

Mr. Stovall.  There are some end-use audits. I don’t know the extent of them at this stage. There are end-use audits supposedly made by the defense auditors.

Mr. Moss.  In making the study upon which this report was based were end-use audits made available to the General Accounting Office?

Mr. Stovall.  I am not aware of this. This is in the further work that we need to do, because I think we will need to get those in Washington. There is no record that I know of that our people in Saigon got them.

Mr. Moss.  Would the end-use audits be normally kept in Washington, or in the field?

Mr. Wohlhorn. Well, if I may, sir, the end-use audits would be made by the internal audit, which is stationed in Washington, and to my knowledge, they have not made an audit of CORDS as such. The end-use audits would be end-use audits of what was turned over to the Vietnamese for all categories, not specifically for CORDS.

Mr. Moss.  There would be no audit from the time the Vietnamese received materiel from that point on?

Mr. Duff.  We are not that familiar with the specific audits that were made during this survey. We can’t answer your question categorically. It is possible in DOD audits, their end use inspections, that they may make certain spot checks within the Vietnamese forces. {p.145}

Mr. Moss.  You wouldn’t have any way of knowing whether those covered material listed as being requisitioned under authority of CORDS or under the authority of MACV?

Mr. Duff.  Well, when you say the authority of CORDS, this is where the line of responsibility really gets diffused because of the various funding elements that go into CORDS.

Mr. Moss.  Are they so badly drawn as to make it impossible to reconstruct in a meaningful manner an audit of what happened to the material?

Mr. Duff.  I don’t think we could ever reconstruct what has happened in the past, and if I might just try to use an example here, I think it would clarify it more than I can by trying to talk around it.

For instance, a lot of the forces that are employed, the Vietnamese forces that are employed in CORDS programs, are part of the military, so this equipment goes into the Vietnamese military depot system, and some of that equipment would come out into the Vietnamese forces that are employed in the CORDS programs, which is what I am trying to say.

Mr. Moss.  Now, are you saying that materiel in the Vietnamese depot system is requisitioned by CORDS?

Mr. Duff.  The units—

Mr. Moss.  The Vietnamese military units would be requisitioned by CORDS, to go with equipment, supplies of various types?

Mr. Duff.  The units would requisition on the Vietnamese military logistics system, and the units could be employed in CORDS program, yes, sir.

Mr. Moss.  They would be requested by CORDS? Somebody would have to take the initiative to do something, so we would assume that if a unit is going to come out of the ARVN forces and be assigned to CORDS, that the initiative would almost have to come from within CORDS, wouldn’t it?

Mr. Duff.  Well, the various forces, just like our own National Guard—

Mr. Moss.  I know all about that. But that still doesn’t answer the question as to where the initiative lies. These things don’t happen just spontaneously. ¶

Someone has to give an order or someone has to make a request.

Mr. Duff.  That is correct.

Mr. Moss.  And if it is a CORDS operation, the authority is within CORDS, is it not, to take the initiative? Would it be within anyone else?

Mr. Duff.  I think the CORDS organization is such that it is very difficult to visualize it as an order coming from the top of CORDS and going down through the channels.

Mr. Moss.  I didn’t get that impression. I spent quite a bit of time with the director of CORDS. He seemed to me to be a man firmly in control of his organization.

Mr. Duff.  I don’t mean by my statement to say that he is not in control.

Mr. Moss.  I can imagine him getting hold of someone else and telling them what to do, but I can’t imagine very many outside of the Ambassador or General Abrams getting hold of him and telling him what to do. {p.146}

Mr. Duff.  I was referring to a military unit.

Mr. Moss.  A military unit functioning under CORDS?

Mr. Duff.  Yes, correct.

Mr. Moss.  How did it get under CORDS? That is the question I am asking.

Mr. Duff.  I am afraid I can’t answer that.

Mr. Moss.  Well, then, how do you know whether that should even be considered within the scope of your study as a possible item of cost, or is it considered in this billion seven?

Mr. Duff.  Well, we were not able, as we stated, to follow exactly an audit trail of the financing of CORDS. Now, the review that we made was a preliminary survey. We identified this as a problem. Now, to what extent or how deep that problem is at this point, we do not know.

Mr. Moss.  Why is CORDS operating in this very loose manner? ¶

It was not created in any period of extreme urgency. ¶

Things were fairly well organized out there. ¶

The time that CORDS was established, wasn’t Bob Komer the first director of CORDS? ¶

Ambassador Komer was the director of CORDS?

Mr. Stovall.  Yes, sir.

Mr. Moss.  He went out there after making this study, and at least he represented to this committee, a well-defined plan or operation. ¶

At what point did the General Accounting Office first look at the CORDS operation to determine the efficiency of it or the adequacy of record-keeping?

Mr. Duff.  This survey was initiated, I believe, the summer of 1970.

Mr. Stovall.  Just about a year ago.

Mr. Moss.  In 1970. Well, I was out there in 1970. ¶

Again, I have no indication that they were under any strain or stress such as characterized during the period of 1965 and 1966 when we had the port failures and the PX failures and the military construction problems. ¶

Is there any explanation why they have failed to develop any kind of a meaningful accounting pro