BY THE U.S. GENERAL ACCOUNTING OFFICE’ ” 

Report To The Director, U.S. Arms Control And 

Disarmament Agency 

- 

Need For Internal Control Improvements At 

ACDA, Including Adequate Internal 

Audit Coverage 

ACDA is required to comply with the Federal 

Managers Financial Integrity Act of 1982 and 

to maintain effective internal controls over its 

activities, including providing adequate internal audit coverage (31 USC 3512). 

ACDA has internal control weaknesses and 

has not established the expanded-scope audit 

coverage it needs. After GAO started its work, 

ACDA began to improve operations; however, 

it needs to do more to comply with executive 

branch directives on internal controls and 

internal audit. Further, GAO’s work also 

showed that ACDA needs to resolve the differences in assigned versus performed verification duties and to assess the requirements of 

its authorizing legislation. 

GAO recommends that ACDA (1) establish an 

internal control system and provide internal 

audit coverage in accordance with legislative 

requirements and administrative directives, and 

(2) correct other internal control problems 

addressed in the report. 

111111Ill 

122551 

GAOINSIAD-83-88 

SEPTEMBER 30.1983 

\ 
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I I 
UNITED STATES GENERAL AccOuNTiNG OFFICE 

WASHINGTON, D.C. 20546 

NATIONAL SLCUlllTV AND 

IN7L~NITlONAL AffAIRS DIVISION 

B-212009 

The Honorable Kenneth L. Adelman 

Director, Arms Control and Disarmament Agency 

Dear I4r. Adelman: 

Followiny our testimony in March 1983 before the Subcommittee on International Security and Scientific Affairs, House Foreign Affairs Committee, the Chairman and Ranking Minority Member 

of the Subcommittee asked us to examine certain aspects of the 

Arms Control and Disarmament Agency (ACDA). This report, which 

discusses internal controls and internal audit, is one in a 

series of three reports addressing issues raised by the Subcommittee. 

Although relatively small, ACDA is an executive branch 

agency and, therefore, obligated to comply fully with the legislative and administrative requirements related to internal controls, including internal audit. Internal controls include the 

entire system of organization, policies, and procedures used in 

~ managing an agency's affairs. Such a system begins with delegated 

authority and planned operations, and continues through perform- 

~ ante and internal reporting on performance. A well-designed 

system of control helps to ensure efficiency, economy, and 

achievement of planned results. It should be well-documented, 

effectively conveyed to all personnel, and reviewed by management 

on a continuing basis. 

Our work focused on whether ACDA was cortlplying with legislative and administrative directives on internal controls and 

internal audit. We found that, although ACDA has established 

many internal controls, it needs to implement important internal 

control requirements, including those related to internal audit 

coverage. Also, ACDA needs to address other management issues, 

such as resolving differences in assigned versus performed verification duties and thoroughly analyzing its authorizing legislation. The objective and scope of our work, and the methods we 

used are summarized in appendix I. 

~ BACKGROUND ..-------- 

Since the early 195Os, executive branch agencies have been 

responsible for maintaining internal controls over operations, 

including internal audit. 31 U.S.C. 3512(a)(3) requires execu- 

~ tive branch agencies to: 
B-212009 

"***establish and maintain systems of accounting 

and internal controls that provide* * *effective 

control over, and accountability for, assets for 

which the agency is responsible, including 

appropriate internal audit***." 

Over the years, we have issued numerous publications to 

guide agencies in establishing and maintaining their internal 

control systems; and the Office of Management and Budget (OMB) 

issued Circular A-123 in October 1981, prescribing policies and 

standards to be followed by executive branch agencies in designing, installing and maintaining their internal control systems. 

In spite of these actions, numerous problems continued throughout 

the Government, dramatically demonstrating the need for better, 

more effective internal controls. Consequently, increased attention has been focused recently on improving controls over Government operations. 

The Federal Managers' Financial Integrity Act of 1982 (31 

U.S.C. 3512) directs renewed emphasis on the need to strengthen 

internal controls. Among other things, the Act requires that 

agencies' internal control systems be established in accordance 

with our standards; and be periodically evaluated and annually 

reported on by the heads of executive a'gencies in accordance with 

OMB guidelines. Of primary importance is executive agency awareness of weaknesses in existing controls and the identification of 

such weaknesses for corrective action. 

ACDA NEEDS TO IMPLEMENT KEY 

~ERNALNTROL HE~IR~G~TTS --. --- 

As a forerunner to the Federal Managers' Financial Integrity Act of 1982, OMB Circular A-123 identified many basic design 

features and standards for internal control systems. Their implementation would allow agencies to be in a better position to meet 

the requirements of the recent legislation. For example, design 

features such as adequate, written organizational documentation is 

important to receiving a favorable evaluation under OMB's evaluation guidelines. 

When we started our review in April 1983, ACDA had not yet 

begun to implement A-123. As noted later in this report, our work 

disclosed problems with such basic internal controls as assigning 

and i,mplementing organizational responsibilities. Consequently, 

we focused on A-123 implementation since problems in this area 

would adversely affect ACDA'S ability to comply with the Federal 

Managers' Financial Integrity Act of 1982. 

A-123 specifically directs that, among other things, each 

agency prepare an internal control directive which: 

2 
B-212009 

--sets out the frequency of internal control 

reviews: 

--provides for a vulnerability assessment plan; 

--establishes specific responsibilities for seeing that agency internal control systems are 

developed, maintained, evaluated, and improved 

as necessary in accordance with the internal 

control guidelines; and 

--assigns responsibility for internal control to 

specific officials in each organizational component. 

After our work began, ACDA started implementing certain 

aspects of the OMB guidance. For example, ACDA met with OMB 

officials concerning ACDA's planned program for compliance and 

--established an Internal Control Committee to 

coordinate guidance, develop procedures for 

conducting reviews, and supervise review and 

assessment activity; 

--assigned responsibility for internal control to 

key officials; and 

--prepared an internal control plan. 

Also, ACDA officials told us they planned to do vulnerability 

assessments and internal control reviews, and report their 

results to the Director. 

ACDA HAS NOT HAD THE .---a---- -- EXPANDED SCOPE INTERNAL - --I_---------- AUDITCOVERAGE IT NEEDS .--A-.--------.- a.----- 

OMB Circular A-73 dated March 1978 "Audit of Federal Operations and Programs", revised June 20, 1983, was issued to promote audit practices, achieve more efficient use of audit staff, 

improve coordination of audits, and emphasize the need for early 

audit of new or substantially changed programs. Although the 

Circular applies to all executive branch agencies and includes 

all of their audit functions, ACDA has not implemented its provisions. 

A-73 directs, among other things, that each agency 

--establish procedures requiring periodic review 

of its programs and operations to determine 

coverage, frequency, and priority of audit 

required for each program; 

3 
R-212009 

--issue policies, plans, and procedures for the 

guidance of its auditors; and 

--prepare an audit plan at least annually. 

A-73 defines an audit as a systematic review or appraisal 

that determines and reports on various aspects of agency programs and operations. Further, A-73 requires the audit function 

to be conducted in accordance with the Comptroller General's 

Standards for Audit of GovernmentalOrsanizations, Pr-, 

ST-ax Functions, and have sufficient scope to cover 

thefollowingelements.K-- 

1. 

2. 

3. 

Financial and czliance--determine 

'(1) whether financial statements present 

fairly the financial position and the results 

of financial operations in accordance with 

generally accepted accounting principles and 

(2) whether laws and regulations that may 

have a material effect upon the financial 

statements have been properly implemented. 

Economy and efficiem--determine (1) whether 

resources (such as personneli property, 

space) are being managed and used-economically and efficiently; (2) the causes of inefficiencies or uneconomical practices; and (3) 

whether laws and regulations concerning matters of economy and efficiency have been 

properly implemented. 

Program results--determine whether (1) the 

desired results or benefits established by 

the legislature or other authorizing body are 

being achieved and (2) whether alternatives 

that might yield desired results at a lower 

cost have been considered. 

Collectively, we believe the audit function with the above 

elements--known as expanded-scope auditing--can benefit executive agency management and improve internal controls over operation. Not every individual audit assignment has to include all 

these aspects, but should be tailored to meet management's 

needs. However, over time, management needs to have adequate 

expanded-scope coverage of its programs and activities. 
B-212009 

ACDA's rnternal audit -"-"-"-'.m.F.m-e""-- 

coverage is rnade~~~~~ .------ -*------a 

ACDA has no internal audit staff and its very limited 

internal audit coverage falls short of meeting the requirements 

of A-73. A small imprest fund and some research contracts have 

been audited for ACDA by other agencies. While the General 

Services Administration (GSA) occasionally audits aspects of 

ACDA financial transactions, these audits have a very limited 

scope and do not cover all of ACDA's internal controls. 

With regard to A-73 and the internal audit function, ACDA 

reviewed the situation and after consultation with OMB staff, 

explained that: 

"***In general, ACDA is covered by this circular 

[A-731. However, the real question is to what 

extent OMB Circular A-73 is applicable to agencies with audit staffs. ACDA does not have an 

audit staff and, therefore, the provisions of 

Circular A-73 do not apply directly***. Previous 

managements of ACDA have historically decided 

that the Agency did not need an internal audit 

staff. We understand that this conclusion was 

made because the Agency is small and that the 

checks***[byl GSA ***and audits by GAO and the 

independent audit agencies were adequate for the 

type of operations ACDA conducts and the size of 

the Agency's appropriation." 

We disagree with this position for the following reasons: 

--A-73 applies to all executive branch departments and agenci= including ACDA. If the 

existence of an audit staff was the key to A-73 

applicability, any executive branch agency 

could make A-73 requirements inoperative by 

eliminating its internal audit function. 

Clearly, OMB did not intend this when it issued 

A-73 and would not tolerate such actions. 

--ACDA officials advised us in January 1979 that 

ACDA planned to use an internal auditor, thus, 

recognizing the need to establish an internal 

audit function. 

--ACDA can establish expanded-scope audit coveraye without hiring staff. Adequate coverage 

can be acquired in a variety of ways, discussed 

later in this report. 

5 
13-212009 

Apart from technical compliance requirements, there are 

logical management benefits from adequate internal audit 

coveraye. ACDA officials say that ACDA has operated for more 

than 20 years with minimum internal audit coverage and, believe 

there will be increased costs and limited benefits from 

expanding such coverage. We recognize that to establish 

adequate expanded-scope internal audit coverage would increase 

ACDA's costs, however, our current and past work in ACDA 

provides numerous illustrations of the potential benefits to be 

derived from adequate internal audit coverage. For example, the 

following situations are typical of those that could be 

addressed under expanded-scope audits of Agency programs and 

activities; however, none would be addressed under the type and 

level of internal audit coverage ACDA now obtains. 

Seriouslout-of-date policies and 

pmce_d_ures_he ofFic,ral ACDA Manual 

and Instructrons- e-e . 

Although ACDA has issued 26 Instructions and 61 Notices on 

administrative procedures since October 1981, most documentation 

governing the structure and operation of ACDA is outdated. The 

most recent update to the Manual was in 1978 and more than 60 

percent of the Instructions we reviewed were in need of revision 

for more than 4 years. ACDA officials explained that this situation did not affect ACDA's ability to control its operations 

and resources. We were told most officials are aware of each 

others' responsibilities. However, functional statements of the 

responsibilities of organizational units have not been formally 

updated in the ACDA Manual even though a major reorganization 

occurred in October 1981. This matter relates to the instances 

described below, of inconsistencies between assigned and performed duties, of not preparing verification reports to the 

Congress, and of noncompliance with administrative 

requirements. ACDA officials told us that the Manual is going 

to be updated. 

Differences in the duties assversus those performe_d_ 

ACDA's statement of responsibility for arms control verification activities assigns them to the Bureau of Verification 

and Intelligence (VI). However, other bureaus are performing 

verification activities instead of VI. Specifically, ACDA's 

Assistant Director in charge of the Rureau stated that VI was 

not 

--meetiny all the responsibilities identified in 

VI functional statements, 

--reviewing all the verification papers which 

other organizations in ACDA prepare, or 

6 

2. 

,r;,, ,,. :..,,. 

‘. 

,U’q. ,, 

; E:’ ;, 
B-212009 

--attending high-level meetinys on verification 

issues. 

ACDA has said that steps are being taken to enhance VI's 

capability as the focal point for ACDA verification work. 

ACDA's authm legislation needs -----_ F<be6?%%? thoroughly sared - - A----- 

Laws passed by Congress are an important element of internal control since they authorize agencies to carry out the 

functions of government, and can establish the extent to which 

such functions are to be performed. A standard starting point 

for defining and assigning responsibilities for performing these 

functions within agencies is a thorough legislative study to 

determine what the law requires. 

Although ACDA officials believe the Agency accomplishes all 

its required mandates, ACDA's General Counsel told us that comprehensive legislative analyses have not been done. The General 

Counsel could provide us with only two limited-scope analyses 

dealing with (1) ACDA's authority to participate in interagency 

groups and (2) the conyressionally mandated title of the ACDA 

Assistant Directors. After our fieldwork was completed, we 

became aware of an additional analysis done in 1977 of ACDA's 

obligations under the then-new Section 37 of the Arms Control 

and Disarmament Act. This analysis was directed at the Director's responsibility for congressional reporting on the verifiability of arms control proposals and agreements. 

Without thorough legislative analyses we do not believe 

ACDA has a defensible basis for concluding that it is meeting 

all of its required mandates. In our opinion, legislative 

analyses are important criteria for measuring agency resource 

utilization and performance. In commenting on a draft of this 

report, ACDA agreed to determine the need for additional legislative analyses. 

m--y-.-- Section 37 report% to the Co_llress and -- noEcomfiiance with admzrative --^*.-P-.--- requirements --w-u 

ACDA has not provided the Congress reports on the 

verifiability of significant arms control proposals, under Section 37(a)(l) of the Arms Control and Disarmament Act (22 

U.S.C. S2!577(a)(l)). Reports for significant proposals have not 

been provided for Mutual and Balanced Force Reductions, and 

Intermediate Nuclear Forces. However, on two occasions a report 

has been submitted upon request, to a committee of Congress, in 

keeping with Section 37 (a)(l): last year, a report was made to 

the Senate Foreign Relations Committee on the Strategic Arms 

Reduction Talks and in 1979 on SALT II negotiations. 

7 
B-212009 

In recent years ACDA has not provided OMB with the arms 

control research reports required by Executive Order 11044, nor 

had it implemented various OMB directives when our work began, 

such as: 

--A-71 (Transmittal Memorandum Number 1) on 

"Security of Federal Automated Information 

Systems." 

--A-73 on "Audit of Federal Operations and Programs." 

--A-l23 on "Internal Control Systems." 

east GAO work 

Our past work yields further examples of the types of 

issues that can be developed under expanded-scope audits and 

brought to ACDA's management attention for corrective action. 

In our March 17, 1980, report, entitled "Coordination of Federal 

Arms Control Research Programs To Be Improved" (ID-80-61, we 

discussed inadequacies in Government-wide arms control research 

coordination in the sense of 

--ACDA's failure to implement required research 

coordination procedures and 

--the uncertainties in the scope of research to 

be coordinated. 

The report also pointed out that ACDA needed to improve 

management of its external research program. 

More recently, in our January 25, 1983, report on "RECOVER: 

A Potentially Useful Technology for Nuclear Safeguards But 

Greater International Commitment Is Needed" (GAO/ID-83-g), we 

pointed out that 

--the REmote Continual VERification system, 

designed by ACDA and costing over $4.0 million 

through 1982, had an uncertain future; 

--ACDA lacked in-house capability to develop the 

system; and 

--the project was behind schedule by as much as 2 

to 3 years. 

Additional examples of the value of expanded-scope internal 

audit coverage are provided in our companion reports on ACDA's 

computer-based support activities and its arms control research 

program. (See GAO/NSIAD-83-66 and 67.) 

* 

8 
B-212009 

VARIOUS APPROACHES TO OBTAIN ---- _________ --.---.-.------ INTERNAL AUDIT COVERAGE ------ -.a----- -a------ 

ACDA must decide which type of arrangement would best 

ensure effective internal audit coverage in compliance with 

legal and administrative requirements. The usual way Federal 

agencies, even small ones like ACDA, provide coverage is to 

establish an organization and hire a staff. If ACDA does not 

elect to create a small, in-house audit staff, other approaches 

include: 

--Contractins with an InsEtor General or GSA. .-e-w -a- ACDA could contract with an~~~c~~<<eral 

organization in another Federal agency or with 

GSA, provided that the auditing personnel have 

the security clearances and access to the documents needed to conduct the audit. 

--Contracting with a non-Federalzation. - -- ACDA could contract with a non-Federal organization, such as a private consulting firm, to 

perform its internal audit function. This 

approach, however, could present difficulties 

when the expanded-scope audit activity requires 

access to classified information. Executive 

Order 12356 limits ACDA's ability to authorize 

access to classified information to anyone outside the executive branch except under conditions that ensure that the information will be 

given protection equivalent to that afforded 

within the executive agency. 

The use of any alternative to an in-house organization does 

not eliminate or reduce ACDA's responsibility under A-73, A-123, 

and other internal control directives. For example, ACDA would 

still be responsible for (1) seeing that the audit group, 

whether in-house or under contract, met applicable audit standards, (2) developing the annual audit plan required by A-73, and 

(3) establishing and implementing other policies and procedures 

related to internal control, including internal audit. 

In May 1983, ACDA officials met with GSA officials and 

others about obtaining expanded-scope audit coverage for ACDA 

activities, however, a final decision had not been made by the 

time we completed our audit work. 

9 
B-212009 

CONCLUSIONS --a---- 

ACDA recognizes the need to comply with internal control 

requirements and has taken some actions. Much more remains to 

be done, however, regarding adequate internal audit coverage. 

We recognize that internal audit coverage will increase costs to 

the Agency but such coverage is an important internal control 

element. We have long advocated the benefits of effective 

internal audit to good management and the problems discussed in 

this report clearly illustrate situations which internal audit 

coverage --either in-house or under contract--could bring to 

management's attention. 

RECOMMENDATIONS 

We recommend that the Director, ACDA: 

--Establish an internal control system which is 

in accordance with legislative requirements and 

administrative directives. 

--Establish internal audit coverage in accordance 

with the requirements of 31 U.S.C. 3512 and of 

OMB A-73, "Audit of Federal Operations and 

Programs." 

--Correct the matters discussed in this report 

related to (1) updating the ACDA Manual and 

Instructions, (2) resolving the differences in 

assigned versus performed verification duties, 

(3) assessing all of ACDA's legislative authorities, and (4) preparing reports specified by 

Section 37(a)(l) of the Arms Control and Disarmament Act. 

AGENCY COMMENTS AND OUR EVALUATION ---py.-I__- 

We sent a draft of this report to ACDA and OMB for official comment. The official responsible for this area within OMB 

told us that ACDA would respond for both agencies. In general, 

ACDA said it is acting on most of our recommendations, indicating, for example, that efforts to improve internal controls had 

begun; GSA would provide expanded-scope internal audit coverage; 

ACDA's General Counsel would review existing legislative analyses and recommend to the Director additional ones that may be 

appropriate; and VI's resources will be increased to enable it 

to perform assigned verification duties. ACDA believes that it 

has fulfilled its responsibilities under Section 37 (a)(l) of 

the Arms Control and Disarmament Act. We comment on this as 

well as other parts of ACDA'S response in our notes to appendix 

II. 

10 
B-212009 

As you know, 31 U.S.C. S720 requires the head of a Federal 

agency to submit a written statement on actions taken on our 

recommendations to the Senate Committee on Governmental Affairs 

and the House Committee on Government Operations not later than 

60 days after the date of this report, and to the House and 

Senate Committees on Appropriations with the agency's first 

request for appropriations made more than 60 days after the date 

of the report. 

We are sending copies of this report to the requesters; 

Director, Office of Management and Budget; Administrator of 

General Services; the cognizant congressional appropriation and 

authorization committees; and others upon request. 

Sincerely yours, 

Frank C. Conahan 

Director 

11 
I ,. ., ’ !I: r , 
APPENDIX I 

OBJECTIVE, SCOPE AND METHODOLOGY -----em e-w------ 

Our objective was to determine whether ACDA was adequately 

complying with legislative and administrative directives on 

internal controls, including internal audit. Our work, which 

was performed between April and June 1983, included: 

--Interviewing ACDA, GSA and OMB officials. 

--Examining ACDA's documents and manuals related 

to internal controls. 

--Reviewing GSA's financial and audit activities 

performed for ACDA. 

--Analyzing legislation and OMB directives 

related to internal controls and internal 

audit. 

Our work was done in accordance with the Comptroller 

General's 'Standards for Audit of Governmental Organizations, 

Programs, Activities, and Functions." 

12 
APPENDIX 11 

OFFICE OF ’ 

THi: OIREC;SR 

UNITED STATES ARMS CONTROL AND DISARMAMENT AGENCY 

WASHINGTON 

September 1, 1983 

The Honorable Charles A. Bowsher 

Comptroller General 

of the United States 

Washington, D. C. 20548 

Attention: Mr. Frank C. Conahan 

Dear Mr. Bowsher: 

The Arms Control and Disarmament Agency (ACDA) has 

reviewed the General Accounting Office's draft report on 

"Need for Internal Control Improvements, Including 

Adequate Internal Audit Coverage (GAO/NSIAD-83- I", as 

forwarded with your August 17 letter. 

While parts of the report will be useful as we 

continue to review ACDA'S operating practices and procedures, certain sections do not present an accurate 

or complete assessment. Our detailed comments on those 

areas requiring clarification or correction are attached. 

Sincerely,, 

Kenneth L. Adelman 

Attachment 

13 
APPENDIX 11 

Arms Control and Disarmament ATen 

--- -- - 

Comments on Draft Report "Need for Internal Control ---- Improvements, -r-- - --- ---- 

-- 

Including Adequate Internal Coverage" ---- (GAO/NSTAD-83- ) 

r_.-----2 

OMB Circular A-123 Implementation - ------ 

ACDA has been planning its internal control activities to 

meet the requirements of the Federal Managers' Financial 

Integrity Act since early 1983 so that the Agency's Director 

will be able to provide the required report to the President 

and the Congress by the December 31, 1983 deadline. Following 

passage of the Act on September 8, 1982, interest in expanding 

internal control systems has increased throughout the Federal 

Government. Detailed guidelines for establishing an internal 

control evaluation, improvement and reporting process were. 

forwarded by OMB in January 1983 and ACDA began planning its 

implementation efforts on a schedule similar to other small 

agencies. 

ACDA has taken several actions to ensure that the Agency 

will be in a position to meet the reporting deadline set by the 

Act, including: (1) several meetings with various responsible 

OMB personnel concerning ACDA's program for assuring compliance 

with the Circular and the Act; (2) preparation of a vulnerability assessment and internal control plan; (3) meetings with 

representatives of the GSA External Service Branch and the 

Inspector General Office concerning GSA plans for supporting 

the A-123 effort, as a part of the administrative support 

agreement ACDA has with GSA; and (4) conclusion of a contract 

with a major independent accounting firm to supplement the 

capabilities of the Agency's small administrative staff for 

the conduct of vulnerability assessment and internal control 

revisions and further implementation of Circular A-123. 

The above actions are at least equal to and on a time 

schedule that meets or exceeds those of other small agencies. 

These actions demonstrate the Agency management's commitment 

to improved internal controls through compliance with OlIB 

Circular ~-123. (SEE GAO NOTE A.) 

14 
APPENDIX 11 

Internal Audit Coverage -- 

2 

The report incorrectly states that ACDA management believes 

that increased audit coverage will produce only "increased costs 

and no benefits." The Agency's management has consistently stated 

that any suggested improvements in the Agency's audi 

would receive serious consideration.(SEE GAO NOTE 8. \ 

practice 

Consistent with this approach, ACDA management has: (1) reviewed the provisions of OMB Circular A-73 and the appropriateness 

of previous.ACDA managements' decisions on internal audit in light 

of current conditions; (2) reviewed with the Executive Secretary 

of the President's Council on Integrity and Efficiency the Agency's 

compliance with any directives from the President or the Council: 

and (3) reviewed with GSA the various checks within the GSA system 

related to ACDA's expenditures and the possibility of expanding GSA 

audit coverage. As a result of these and other ACDA initiatives, 

ACDA formally informed GSA that the Agency will require expanded 

audit coverage during FY-84. Starting this coverage sooner in 

FY-83 was not possible because GSA audit capabilities have been 

fully committed. 

ACDA management believes that the establishment of an 

internal audit group staffed by full time permanent agency 

employees is only one of several ways to obtain expanded audit 

coverage. For an agency of ACDA's size (169 full time permanent personnel estimated for FY-84), this alternativ 

less cost effective than other contract approaches. ~~ftf~tS&f~N0TE c. ) 

Out-of-Date Policies 

The review of manuals, procedures and instructions for an 

Agency the size of ACDA is a continuing process. Following a 

long-established practice, ACDA's Instructions and Notices and 

other properly executed documents supersede sections of the ACDA 

Manual until these changes have been incorporated in the Manual. 

This is a procedure that has been followed since 1971. 

During the period October 1981 to August 1983 ACDA issued, 

revised or reviewed 26 Instructions and issued 61 Motices on 

Administrative procedures. Notice of reorganization including 

changes of responsibilities and organizational structure were 

provided in writing by ACDA's Director to all ACDA staff members. 

These actions were taken to keep ACDA's personnel informed on 

organizational responsibilities, procedures and other aspects 

of the Agency's operations. 

15 
APPENDIX 11 

3 

Differences in the duties assigned versus those performed. --- - -- 

Verification issues cut across a number of ACDA's line 

functions. The Verification and Intelligence Bureau was established 

in late 1981 to provide a focal point for verification activities. 

The intent of this action was not to restrict verification decision 

making to a single bureau but rather to provide an organizational 

point of emphasis for these rllatters. 

The Vcrificiation and Intelligence Bureau is a new organization 

and until March 10, 1983 was without a confirmed Assistant Director 

because of inaction by the Congress on the President's nomination 

for this position. The report properly mentions ACDA's plans 

to strengthen the capabilities of the VI Bureau and the President 

has approved an increase in ACDA's financial and personnel resources 

in part for this purpose. (SEE GAO NOTE D.) 

No comprehensive assessments done on what ACDA's 

authorizing legislation requires. 

ACDA maintains close and frequent contact with the Congressional Committees having principal jurisdiction over arms control. 

The Agency has found that through relevant legislation and the 

accompanying legislative histories the Congress clearly makes 

known its intent to ACDA on arms control matters. Oversight by 

ACDA's authorizing committees is detailed and a close working 

relationship exists between the Agency and interested Congressional 

staffs to ensure that the will of the Congress expressed through 

legislation is carried out. 

ACDA's Director plans to have the Agency's General Counsel 

review past legislative analyses and make recomendations on the 

need for any additional legislative analyses that may be appropriate. 

Non-compliance with legislative and administrative 

requirements. 

The draft report asserts that ACDA has not fulfilled its 

responsibilities under Section 37(a)(l) of the Arms Control and 

Disarmament Act to submit reports to Congress on the verifiability of significant arms control proposals. To support this 

assertion, the draft report states that ACDA has not submitted 

reports for the Strategic Arms Reduction Talks, the Intermediaterange Nuclear Forces Talks, and other negotiations. 

16 
APPENDIX 11 

4 

This assertion fails to take adequate account of the meaning 

of Section 37 as is made clear by its legislative history. The 

Conference Committee report (HR Rpt NO. 95-563) noted that Section 37(a)(l) was not intended to interfere with the President's 

ability to conduct arms control negotiations. President Carter 

noted this statement when he signed the bill and reiterated that 

the control of negotiations with other states is the responsibility 

of the President. 

It is clear from the above that ACDA is in compliance with 

Section 37(a)(l) concerning negotiations between the U.S. and 

other States. ACDA has submitted such verification reports when 

directed by the President. Also, it should be noted that the 

legislation calls for reports on a "timely" basis and upon request 

of appropriate Committees. All such Committee requests have been 

met. (SEE GAO NOTE E.) 

Coordinat-ion of Federal Arms Control Research Programs 

ACDA has in the past carried out its research coordinating 

responsibilities through its participation in the interagency 

iprocess to avoid duplication of research among agencies of the 

Executive Branch. ACDA's Director plans to institute a review 

to determine the amount and type of arms control research coor- 

~ dination that is app,ropriate to present circumstances. If 

I necessary, new procedures will be instituted or legislative relief 

~ sought to eliminate this requirement. With respect to the 

~ reporting procedures noted in the draft report, it is the Agency's 

) understanding that the Executive Branch ceased reports to OMB 

on the coordination of Government-wide arms control research 

in consultation with the Committees of Congress having primary 

jurisdiction over the Agency and no objection was interposed. 

RECOVER 

The draft report uses as an example of inadequate internal 

controls certain conclusions contained in the report GAO/ID-83-9 

on ACDA's RECOVER program. After an exhaustive investigation 

involving GAO interaction with all involved parties in the U.S. 

and abroad, GAO did not attribute its findings to inadequate 

internal controls. GAO stated in the title of GAO/ID-83-9 its 

principal conclusions that ACDA had developed in RECOVER a 

"potentially useful technology for nuclear safeguards, but (that) 

greater international commitment is needed." While GAO has 

identified certain "management problems" in the RECOVER program, 

ACDA understands that these were related to factors other than 

internal control and were addressed in the Director's comments 

on GAO/ID-83-9. (SEE GAO NOTE F.) 
APPENDIX II 

GAO NOTES: ----me-- 

A. 

B. 

c. 

D. 

~ E. 

ACDA'S statement overlooks the focus of the 

report's discussion. OMB's Circular A-123 was 

dated October 1981 and ACDA had not begun to 

implement its provisions when our work began 

earlier this year. 

We have changed the report to more properly 

characterize the discussions we had with ACDA 

officials throughout the review. 

Our report discusses ACDA's options for providing 

adequate internal audit coverage. Contracting 

for GSA audit services is among those options 

but, although GSA may perform the audits, ACDA 

management is still responsible for assuring that 

audit standards are met and that adequate overall 

coverage is obtained. GSA officials told us that 

they may not be able to provide the requested 

audit services. If this proves to be the case, 

then ACDA will have to select another approach. 

ACDA describes VI as a "new organization" which 

was without a confirmed head until earlier this 

year. VI was created in October 1981 and the 

duties assigned to it did not all require dealing 

with other agencies. In such cases, we do not 

see the relevance of VI not having a confirmed 

head. A confirmed head is also not 

order to deal with others; although 

of protocol and the perception of VI by others, a 

confirmed head would have been desirable. 

Section 37(a)(l) of the Arms Control and 

Disarmament Act, as amended, 22 U.S.C. 

S2577(a)(l), provides that the Director of ACDA 

furnish verification reports on arms control 

proposals to the Congress on a timely basis, or 

upon a request by an appropriate committee of 

Congress. ACDA's comment implies that the 

Director is not required to provide verification 

reports on arms control proposals because it 

interferes with the President's responsibility 

for arms control negotiations. Nevertheless, 

ACDA states that the Director has provided 

reports when directed by the President and that 

all congressional committee requests for reports 

have been met. 

We requested ACDA to furnish us with information 

about verification reports provided either to the 

Congress, or, upon request, to its committees 

18 
APPENDIX II 

since the statute was enacted in 1977. Based on 

the information we obtained from ACDA, it has 

only issued two reports under Section 37(a)(l), 

both of which were at the request of the Senate 

Foreign Relations Committee. These reports were: 

(1) a February 23, 1978 report on Salt II and 

(2) a November 18, 1982 report on START. ACDA 

also furnished us with information that it had 

provided the House Permanent Select Committee on 

Intelligence with a verification report under 

Section 37 concerning the U.S.-USSR Treaty on 

Limitation of Strategic Offensive Arms and its 

Protocol. The report was furnished on July 18, 

1979, which was one month after the United States 

had signed the treaty. Although the treaty 

needed the advice and consent of the Senate to 

become effective under U.S. law, it was no longer 

a proposal, as negotiations had been concluded. 

ACDA has provided no verification reports to the 

Congress pursuant to Section 37(a)(l). (It has 

provided Section 37(a)(l) reports on two 

occasions when requested by a committee of 

Congress.) We have no evidence that the Director 

of ACDA provided such reports to the Congress 

through briefings, meetings or other written or 

oral communi,cations. Thus, although several 

major arms control negotiations have taken place 

since Section 37 was enacted in 1977, no 

verification reports have been furnished to the 

Congress. For example, no reports have been 

furnished with respect to negotiations concerning 

Mutual and Balanced Force Reduction and 

Intermediate Range Nuclear Forces. 

Thus, while ACDA has complied with congressional 

committee requests under Section 37(a)(l), it has 

not provided verification reports to Congress. 

The congressional conference committee report 

recognized that the Section 37(a)(l) requirement 

is not "intended to interfere with the 

President's ability to conduct arms control 

negotiations" but rather "is intended to 

emphasize the responsibility of ACDA***to keep 

the Congress informed with respect 

19 
APPENDIX II 

to the verifiability of significant arms control 

proposals." ("Joint explanatory Statement of the 

Committee on Conference for H.R. 6179," 95th 

Congress, House Conf. Rep. No. 95-563, p.5) In 

his August 18, 1977 statement in signing H.R. 

6179 which became Section 37, President Carter 

referred to this provision of the conference committee report and added "***I share Congress' 

belief in the importance of consultation and 

close cooperation on these matters and I am confident we will continue to work together in a 

manner that is consistent with our respective 

constitutional responsibilities in the conduct of 

the Nation's foreign policy.***." 

We believe ACDA should find some means to keep 

the Congress informed about verification issues 

in arm8 control proposals. 

F. The point we were making was that RECOVER had 

management problems-- it was costly and had an 

uncertain future; ACDA lacked the in-house capability to develop it; and it was two to three 

years behind schedule. These are the kinds of 

problems internal audits would highlight for top 

management attention. If there was an internal 

control failure connected to RECOVER, it was in 

the lack of adequate internal audit coverage for 

potentially identifying its management problems. 

20 
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