APPENDIX 3 EXCHANGE OF LETTERS BETWEEN HON. LEE H. HAMILTON AND DEPARTMENT OF DEFENSE CONCERNING REPORT RELATING TO OVERCHARGE IN CAMBODIAN ACCOUNT CONGRESS OF THE UNITED STATES, Washington, D.C., April 28, 1975. Hon. JAMES R. SCHLESINGER, Washington, D.O. DEAR MR. SECRETARY: Enclosed is a copy of a letter from the General Accounting Office to Senator Pearson concerning a recent report by the Department of Defense relating to an overcharge in the Cambodian account of $21.5 million for ammunition during fiscal year 1974. I would appreciate receiving the comments of the Department of Defense on this report and I would intend to publish those comments along with this letter in the record of our hearings. I would like you early attention to this inquiry so that the record of our hearings can be completed. With best regards. Sincerely yours, LEE H. HAMILTON, Chairman, Special Subcommittee on Investigations. DEPUTY ASSISTANT SECRETARY (SECURITY ASSISTANCE), OASD/ISA, Hon. LEE H. HAMILTON, DEFENSE SECURITY ASSISTANT AGENCY, Washington, D.C., May 10, 1975. Chairman, Special Subcommittee on Investigations, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: This responds, on behalf of the Secretary of Defense, to your letter of 28 April 1975, in which you requested Defense's comments on the letter report of the GAO to Senator Pearson concerning an overcharge in the Cambodian account of $21.5 million for ammunition during fiscal year 1974. We believe you will find that the attached letter to the Chairman, Committee on International Relations, the Honorable Thomas E. Morgan, which addresses the question of Cambodian ammunition overcharge, is responsive to your requirement. Please advise if we can be of further assistance. Sincerely, (497) H. M. FISH, Lieutenant General, USAF. OFFICE OF THE DIRECTOR DEFENSE SECURITY ASSISTANCE AGENCY AND DEPUTY ASSISTANT SECRETARY (SECURITY ASSISTANCE), OASD/ISA, Washington, D.C., April 4, 1975. Hon. THOMAS E. MORGAN, Chairman, Committee on International Relations, House of Representatives, DEAR MR. CHAIRMAN: The Comptroller General's letter of March 28, 1975 to Senator Pearson concerning the handling by the Department of Defense of an overcharge in the pricing of ammunition for Cambodia during fiscal year 1974 concludes that it does not violate the technical requirements of section 655 of the Foreign Assistance Act of 1961, as amended, but does violate the spirit and intent of the Congress. In view of the latter contention, and inasmuch as the Department of Defense was not given an opportunity to comment on the Comptroller General's letter before it was issued, we think it appropriate to respond to the chief points in that letter at this time. On page 2 of the letter, the Comptroller General states that he believes that charges to the MAP must be made on the basis of consistent accounting, billing, and pricing practices. We agree wholeheartedly. Indeed, as the Comptroller General's letter indicates, the reason for the overcharge is that the standard accounting, billing and pricing practices applicable to all MAP countries were not correctly applied in some cases. The basic purpose of the Defense audit report was to determine whether the standard practices had in fact been followed and to assure compliance with those practices. The recovery of the amount of the overcharge is a direct consequence of our insistence that the standard practices be followed. In this connection, the Comptroller General recommends at the end of his letter that the Congress direct that the pricing for MAP purposes be determined at the time material to be delivered is withdrawn from inventory. In fact, the applicable Department of Defense regulation, DOD Directive 7200.7 (December 16, 1964) expressly so provides (See sections VII.B.1. and VIII.B.2). In part, the overcharge resulted from not complying with that requirement. With respect to the text of section 655, the Comptroller General, while conceding that section 655 speaks in terms of obligations, quotes extensively from the language of the 1971 report of the Committee on Foreign Relations which speaks in terms of a ceiling on expenditures. In the context of the Comptroller General's subsequent discussion of the underlying purpose of section 655, a casual reader could infer that, notwithstanding the literal language of section 655, the Congress was trying to control expenditures. Any such inference is, of course, clearly mistaken. As originally adopted by the Foreign Relations Committee and approved by the Senate, section 655 of the proposed Foreign Assistance Act of 1971 imposed a ceiling on both obligations and expenditures. However, in the conference between the House and the Senate, the reference to expenditures was deliberately deleted. Presumably, it was deleted for the reasons urged by the Executive Branch in its comments on that section to the Conference Committee. On this point, the Executive Branch had stated as follows (Conference Committee Print, November 19, 1971, comparing S. 2819 and S. 2820 with the House Amendments thereto, page 104): "The Laos ceiling was originally proposed in terms of 'funds obligated or expended', but was amended by the sponsor so that it was a ceiling on expenditures solely, at the request of the Executive Branch. The nature of the operations in Laos lends itself to fiscal control of expenditures, rather than of obligations. The contrary is true, however, of our assistance programs for Cambodia. The Military Assistance Program has always been controlled on a program basis whenever the Congress decided some type of control or restriction was appropriate. The Executive Branch requests that throughout proposed section 655 there be deleted the words 'or expended,' 'and expenditure,' 'or expenditure,' and that in subsection (f) the word 'obligated' be substituted in place of 'expended' wherever it appears." See also in this connection the colloquy between Senators Symington and Stennis in the Congressional Record for October 29, 1971, S17171 (daily pagination). In the circumstances, notwithstanding the language of the committee reports, there is no basis for imputing to the Congress in 1971, when section 655 was originally enacted, an intention to place a ceiling on the aggregate of deliveries from current year and prior year programs. As we understand the intent of the Congress, it was that the funds authorized and appropriated for the fiscal years 1974 and 1975 for military assistance to Cambodia be used for the purpose authorized and not be diverted to augment other appropriation. Rather than violating the Congressional purpose, we believe that we are carrying it out by insisting that the military assistance funds allocated for Cambodia, be used for the purpose for which the Congress made such funds available, namely to deliver the full value of the ammunition ordered by the Military Assistance Program from the Army for Cambodia. Sincerely yours, H. M. FISH, Lieutenant General, USAF. APPENDIX 4 FACT SHEET ON ORPHANS AND REFUGEE RELIEF IN INDOCHINA, APRIL 11, 1975 1. What AID is doing AID Administrator Daniel Parker was appointed the President's Special Coordinator for International Disaster Assistance on March 29. In his dual role, Parker has called on the varied resources of AID, especially the Agency's office of Foreign Disaster Relief Coordination and other Federal agencies. He set up the Emergency Indochina Relief Committee, working out of AID's Office of Foreign Disaster Relief Coordination. AID continues to be involved in humanitarian programs-resettlement, child care, health-care and city-to-farm projects. Efforts in these areas have been intensified as a result of recent hostilities. AID's immediate concern is meeting the basic needs of refugees: food, shelter and medical care. Working through-and in support of voluntary agencies, international institutions, and the Government of Vietnam, making relief supplies available, and transporting orphans in process of adoption to the United States. 2. Refugees As of April 10, about 352,000 newly-registered refugees are at the following locations: MR-III (ALL LOCATED IN THE VICINITY SURROUNDING Saigon and THE PORT CITY OF VUNG TAU) AID has authorized 100,000 metric tons of Food for Peace rice for emergency food programs in Vietnam, enough to provide one million refugees with 500 grams each of rice per day for six months and 13,500 tons of blended fortified foods, used primarily for maternal and child care. The United States with these additional allotments has committed more than 227,000 tons of food and other products under the Food for Peace program for fiscal year 1975. These commodities and transportation costs are estimated to be worth about $116 million. -The following emergency supplies have been or are being mobilized for support of the new refugees: -The following items have been or are being moved from Saigon to the refugee areas: REPUBLIC OF VIETNAM MINISTRY OF SOCIAL WELFARE 123 tons canned fish; 1,443 rolls plastic sheeting for shelter; 500 pounds clips for plastic sheeting; 450 pounds polyethylene fabric; 44,100 100-pound bags bulgar wheat; 66,000 150-pound bags wheat-soy blend; 3,000 empty 55-gallon drums for water containers; 120,000 pounds rice; 102,000 pounds rice (Australian donation); and 22,000 pounds canned fish (Canadian donation). CATHOLIC RELIEF SERVICE 134,000 bags bulgar; 40,000 bags corn soy blend; 12,000 bags wheat soy blend; 300 cases cooking oil; 49,000 cans of meat; 8,500-1 gallon cans tomato sauce; 4,000 bales clothing; and 17,500 pounds rice. -Over 850 tons of the above materials have arrived at refugee areas. |