VIETNAM STUDIES 

ncial Management 

of the Vietnam Conflict 

1962-1972 

DEPARTMENT OF THE ARMY 
• 

JOU"''' . " 

--... --
VIETNAM STUDIES 

FINANCIAL MANAGEMENT 

OF THE VIETNAM 

CONFLICT 

1962-1972 

by 

MajOl· General Leonard B. Taylor 

DEPARTMENT OF THE ARMY 

WASHINGTON, D.G. 1991 
Library or Congress Catalog Card Number: 74-13506 

FirSI Printed 1974-CMH Pub 90-13 

f or sale by the Superintendent of Documenl$, U.S. Go'"f:rnm<'nt I'rinting Office 

W;ashingtoll, D.C. 20402 
Foreword 

T he United Stales Army has mel an unusually complex challenge in Southeast Asia. In conjunction with the other services. the 

Army has fought in support o[ a national policy of assisting an 

emerging nation to develop governmental processes of iu own 

choosing. free of outside coercion. In addition to the usual problems of waging armed conflict. the assignment in Southeast Asia 

has required superimposing the immensely sophistica ted tasks of 

a modern army upon an underdeveloped environment and adapting them to demands covering a wide spectrum. These involved 

helping to fulfill the basic needs of an agrarian population, dealing 

with the frustrations of antiguerrill a o~ at ns , and conducting 

conventional campaigns aga inst well·trained and determined regular uniu. 

It is st ill necessary for the Army to continue to prepare 

for other chall enges that may li e ahead. While cognizant that history never repeaLS iLSelf exactly and that no army ever profited from 

trying to meet a new challenge in terms of the old one, the Army 

nevertheless stands to benefit immensely from a sllldy of iLS experience, iLS shortcomings no less than its achievements. 

Aware that some years must elapse before the offi cial histories 

will provide a detailed and objective analysis of the ex perience in 

Southeast Asia. we have sought a forum whereby some of the more 

sa lient aspects of that experience can be made ava il able now. At 

the request of the Chief of Staff. a representative group of senior 

officers who served in imponant posts in Vietnam and who still 

carry a heavy burden of day.to-day responsibilities has prepared a 

series of monographs. T hese studies should be of great value in 

helping the Army develop fu lure opera tional concepts while at the 

same time cOOlribuling to the historica l record and providing the 

American public with an interim report on the performance of men 

and officers who have responded. as othen have through our his· 

lory. to exacting and try ing demands. 

The reader should be reminded that mon of the writing was 

accomplished while the war in Vietnam was at its peak, and the 
monographs frequently refer to events of the past as if they were 

laking place in the present. 

All monographs in the series are based primarily on official 

records. with additional material from published and unpublished 

secondary works, from debriefing reports and interviews with key 

participants, and from the personal experience of the author. To 

fa cilitate security clearance, annotation and detailed bibliography 

have been omitted from the published version; a fully documented 

account with bibliography is filed with the U.S. Army Center of 

Military History. 

The author of this monograph, Major General Leonard B. 

Taylor, played a key role in the financial management of the U.S. 

Army's Vietnam war activities. From July 1966 to May 1971 he 

served as Assistant Director and subsequently Director of Army 

Budget in the OOice of the ComptrOller of the Army. A thirty-two 

year veteran of Army service. General Taylor served in the North 

African Theater and in Italy during World War II. He holds the 

degree of Master of Business Administration from the University 

of Maryland and has done postgraduate work at Harvard University. 

General Taylor is presently Commanding General, United States 

Army Administrative Schools Center and Fort Benjamin Harrison. 

Indiana. 

Washington. D.G. 

15 December 1973 

i, 

VERNE L. BOWERS 

Major General, USA 

The Adjutant General 
Preface 

"Vietnam is different." That phrase or some semblance of the 

words couched in different terms has been voiced by nearly everyone 

involved in the conflict about every phase of the war. To financial 

managers, it might have been more appropriate to say. "Vietnam 

was a nightmare." It was much like starting out a game of baseball 

with the nOTmal rules and during the third inning. finding out that 

you were playing basketball. Those of us involved in financial 

management believed that we would handle this war much as we 

had done the Korean conflict. This meant that there would be no 

requiremelll for stringent accounting controls or budgeting and that 

a sufficient amount of funds would be available. This assumption 

was responsible to a large degree for the lack of an adequate organization for financial management in the early days of the buildup. 

Early in the conflict the Secretary of Defense. Robert S. McNamara. 

counseled the heads of departments and major field commanders 

concerning Vietnam: " ... Under no r;rcumstances is lack of money 

to stand in the way of aid to that nation." ""hen the rules were 

clarified. and we found that we were expected to establish virtually 

a peacetime system for financial control and reporting. it was 

a lmost too late. Many transactions had already occurred which were 

impossible to document in the normal fashion. In some cases. we 

will never be able to specifically identify exactly who received the 

benefit of funds expended, but we did attempt in every way to bring 

the situation under control and to respond to the requirements of 

the Department of Defense and Congress. 

To state that our efforts in this regard were as prodigious as 

those of the combat troops or the logisticians might seem somewhat 

vain. but in many cases t~ . ..! same tenacity was required. Certainly 

innovative thought and actions were taken in spite of high odds 

favoring failure. Most of the financial contention did not take 

place in Vietnam. since we did not want and were so directed not to 

burden the commander on the ground with the bothersome task of 

obtaining data necessary to hlrnish to those individuals in the 

Office of the Secretary of Odense and Congress who increasingly 

questioned our prudent use of resources. I think that the system 

" 
we developed, particularly the concept represented by the Centralized Financial Management Agency, was the most rapid, effective 

operation which could have been accomplished in the time required. 

The total effort resulted in a method for doing something which 

had long been considered impossible-budgeting for a war. 

In this monograph. I have attempted to record some of the major 

steps taken. but certainly not all details have been included. These 

steps are representative of the work done at all echelons to insure 

that every means at our disposal was used to obtain the needed funds 

and to prove that they were used effectively. The topics covered 

included areas where events might have been handled better or 

where some changes in laws, directives, or general concepts could 

have made our job a little easier. If after reading this treatise someone involved in planning for financial management will take action 

to gain early approval for changes that are necessary. 1 will have 

attained one of my goals in writing it. Further, if I can interest 

commanders in giving impetus to these plans perhaps on a par with 

logistics support, our task in the future will be considerably easier. 

Criticism of our actions will be made, but it is easier to quarterback from a chair. This criticism may yet prove helpful if ways to 

improve the situation are explored. We attempted in Vietnam 

not only to account for costs. but to introduce discipline into the 

supply system as well. Perhaps this requirement was at fault and 

not those who answered. There is doubtless room for jmprovement 

in our financial management, but many of the necessary changes 

must begin at the level of the Secretary of Defense and must be 

approved by Congress. 1 be lieve that Congress will be willing to 

grant some changes if they are asked and given sufficient reason to 

do so. J have never found them deaf to new ideas provided that the 

presentation clearly detailed the need for action and the conse· 

quences for lack thereor. I am sure that Congress will co-operate in 

any endeavor to improve financia l management in the Army. 

I would like to thank the many individuals who have contributed 

material to this monograph, especially Lieutenant Colonel Charles 

T. Lynn. jr .. and Major Richard O. Felton of the staff and faculty, 

U.S. Army Finance School. Il would have been impossible to com· 

pile the data without their assistance. I was deeply impressed with 

the co-operation I received at every level. Once the basic idea of the 

subject was conveyed to the present financial managers, they were 

eager to assiSt in the documentation of this facet of the war, in the 

hope that future conflicts will provide for a better method at the 

beginning of our involvement. 

" 
The views and interpretation of the data given are based on 

many years of intense interest in the Army's management of resources. Should these opinions not coincide with those of the reader, 

ItrUSl that they will be given an objective appraisal before dismissal. 

We both should be interested in building the strongest ATmy possible within the TesOUTCes provided, and this can only be accomplished thTough an effective financial management program. 

Fort Benjamin Harrison, Indiana 

15 August 1972 

vii 

LEONARD B. TAYLOR 

Major Genera l, U. S. Army 

Contents 

ChapI(r Paitl 

I. PLANNING FOR FINANCIAL MANAGEMENT OF 

LIMITED WAR. . . . . . 3 

The Roots of u.s. invoivt!menl . 3 

The Need lor Ploru . 4 

Arm)' EDorts . . . . . . 6 

Prophetic Planning . . . 10 

II. BUDGETING FOR WAR 11 

Boclcg'found for Budgeting. 11 

The Early Budgets . . . . 16 

Supplemental Budgets . . 19 

Crowing Congressional Concern 23 

Changing Attitudes . . . . . 25 

The Fiscal Year 1968 Budget. . 29 

The Fiscal Year 1969 Budget. . SO 

New Problems in th e Seventies. 32 

If. Review 0/ Army Actions. . . 36 

If. Reputation lor Responsibility 41 

III. ACCOUNTING FOR THE CONFLICT 42 

The Early Days . . . 43 

In More RecerH Times . . . . . . 54 

In Retrospect .. . . . . . . . . 60 

IV. THE REIMBURSEMENT PROBLEM. M 

Early Stages . . . . 65 

Later Developmtmts . . . 67 

The Crisis Builds . . . . 70 

More Studies and Audits 78 

The Seventies . . . . . 78 

Realignment Progrnm . . 81 

Reinbursemenls by A /lies 88 

LooAing BacA . . . . . 85 

V. ORGANIZATION FOR FINANCIAL l\IANAGEMENT . 87 

Basic Design . . . . . . 88 
Chnplt!f 

Managemtml 0/ {I W{lr . . . . . . 

New HOriZOns lor FinancllIi MMwgement 

VI. FUTURE FINANCIAL MANAGEMENT 

GLOSSARY 

INDEX 

Charts 

No. 

lo Planning Progr;uning Budgeting Cycle .. . 

2. Dir«t Budget Plan in Million Dothlrs .. . 

5. Okinawa Financial Management Environmcnt 

4. Prototype Financial Network ... 

5. Revised Financial Network in Fiscal Year 19118 

6. CFMA Orbranizillion .......... . 

7. Financial EnvironmclIl and Document Flow . 

8. Requisition Fund Control System Channels. 

9. Reimbursable Issue Inforrn;uio n Flow .. 

10. CFMA Reimbursab le Transaction Process . 

11. Framework for Financial Management. 

12. Department of lhe Army Influence Nctwork . 

15. Top Financi al Management Cha nnels 

Tables 

I. Fimllu:ial Summary of Fiscal Year 1966 Budget 

2. Economic Aid for Vietnam . . . 

3. Realignment Projects . . . . . 

4. Adjustments, R« Iam3s. Restorations . 

• 

Page 

91 

95 

97 

105 

106 

12 

51 

47 

48 

52 

57 

58 

61 

69 

80 

89 

90 

94 

20 

25 

33 

35 
FINANCIAL MANAGEMENT 

OF THE VIETNAM CONFLICT 

1962- 1972 

CHAPTER I 

Planning for Financial Management 

of Limited War 

The primary purpose of this treatise is to discuss financial 

management of the Army operation and maintenance appropriation 

in the Vietnam War. In order to complete the picture. however, it 

will be necessary to cover some of the activities prior to our deep 

involvement in SOlltheast Asia and the plans which had been made 

to conduct financial support of this area of the world under the 

circumstances which evolved. 

The Roofs of U .S. lflVolvemtmt 

A poll of individuals in the United States would probably show 

that the average citizen believes that we were not supporting a war 

effort in Vietnam prior to the early 1 960s. Some of the more enlightened might estimate its stan in 1955, when President Dwight 

D. Eisenhower pledged maleriel and advisory assistance to the newly 

formed country of South Vietnam, but, in fact, the United States 

had been contributing to the war since the late 1940s because of 

treaties with France. When the French attempted to re·establish 

their rule after World War II. they were met with an insurgency 

well organized to fight the invaders during the war. The United 

Statl!$ supplied weapons and supplies to assist the French until their 

defeat at Oien Bien Phu. With the subsequent rl!$olution of the 

situation by the Geneva Accords of 1954, American advisory groups 

began entering Vietnam as the French troops were sent home, and 

direct support began. 

The costs of these advisers as well as the supplies and materiel 

furnished the South Vietnaml!$e at this time were funded in the 

Military Assistance Program, much like that in existence today in 

many countries around the world. At the time, there was little if 

any direct impact on the operation and maintenance appropriation, 

since the primary effort of any advisory group is to furnish weapons 

and (rain individuals in their use. The pay and allowances of the 

advisers were budgeted in the Army military personnel appropriation and the cost of weapons and equipment covered by the Anny 

, 
4 FIN .... NCI .... L M .... N .... GEMENT OF THE VIETN .... M CONFLICT 

procurement of equ ipment and missiles appropriation. The other 

minor supplies were negligible and unidentifiable in the overall 

appropriation expenditures of the Department of the Army for 

operations and maintenance. The budgets submitted during these 

early years show no direct support of Vietnam and little indication 

that the conflict which eventually evolved was considered. 

While no thought was given on how to manage the funds for a 

war effort specifically for Vietnam, the climate in the political are na 

at the time dictated that the United States re-evaluate its position 

with respect to the conduct of war, During the late 19405 and 19505, 

it was generally agreed that strategic weapons were all that were 

needed to prevent war. The concept of limited war began to gain 

general acceptance late in this period and the shift in planning was 

evidelll. Under the previous concept there was very little need for 

planning the best method of conducting general war, since the 

prevalent feeling had always been that a "blank check" would be 

available and that financial management would be relegated to 

keeping track of what had happened, with no real attempt being 

made to budget or to implement any other method of control of 

funds and expend itures. The parameters of a limited war included 

budgeting to the best extent possihle. prudent use of resources, and 

something less than tota l mohilization of the economy. 

The Need for Plans 

The Army recognized the challenges of such an environment and 

began developing a plan for financial management in the late 19505. 

The basic elements of the plan included the ability to react quickly 

to divert funds from currently approved programs to finance an 

emergency until Congress cou ld be asked for additiona l money. In 

order to facilitate this program. certain deviations from what are 

considered normal procedures were envisioned. The most important 

of these, in my opinion. was a recommendation that when such an 

emergency arose, one service would be given the sole responsibility 

for the funding of all activities in the emergency area, to include 

furnishing all supplies and equipment that were common to all 

services. Those items unique to a service required by the forces in 

the limited war area would be specificall y identified by the individual service concerned and a complete picture could be presented to Congress which would provide an adequate basis for 

restoration of the funds taken from other programs. Another 

important point in the plan was the provision which would allow 

the services to exceed current authorizations should the conSict 

deplete available funds. This plan was submitted to the Assistant 
PLANNING FOR FINANCIAL MANAGEMENT OF LIMITED WAR 5 

Secr~tary of Defense. Comptroller, the Honorable Franklin B. 

Lincoln. Jr., on 18 February 1960 for approval. 

Certain aspects of this plan would have required some rather 

radical departures from normal proc~dures. including temporary 

relief from certain statutory limitations. The primary law which 

would have required modification was Rev ised Statlile 3679. 31 U.S. 

Code 665. The provisions of this law form the basis for obligating 

the United States government to pay for supplies and services. 

Strict limitations are outlined as well as severe penalties for failure 

to comply with the prescribed method of obl igation of funds. Additionally. Congress has traditionally imposed the limitation of 

$25.000 on minor construction from the operations and maintenance 

appropriation. A waiv~r of this requirement would have provided 

much needed Aexibility. Finally. the normal budget subm ission with 

specific items identified to the respective service. under the Anny 

proposal. could only have been accomplished after the fact. 

On SI May 1961, Mr. William F. Schaub, Assistant Secretary of 

the Army for Financial Management. restated the potential problem 

in a memorandum to the Assistant Secretary of Defense. the Honorable Charles J. Hitch. entitled. Budgeting and Financing for 

Emergency Conditions. In this he re-emphasized the critical natur~ 

of approva l of some definitive plan for limited war in these words: 

"The Army has the demonstrated ability to react rapidly to emergency situations in a physical sense (e.g .. in the movement of personnel. equipment. and supplies) and to take effective and positive 

action with all systems and organizations geared for emergency 

operations with one exception: the budget and financing system. 

The problem in budget and financing with regard to emergency 

operations stems principally rrom the rigidity and austerity of the 

budget, especially the O&:M (operations and maintenance) . which 

includes the consumer funds required ror supplies to support all 

types of activities. romine and emergency." Even though at the 

time. Mr. Schaub was not considering Vietnam, per se, his words 

were almost prophetic of lhe situation which occurred. He made 

the following specific suggestions for meeting the problem: 

a. The adoption of emergency financial procedures appropriate to 

the three services similar 10 the procedures which were submitted to 

your office on 18 February 1960 under the title Department of Ihe 

Army Financial Management Plan for Emergency Conditions. 

b. The use of the Contingency Fund of Ihe Department of Defense 

(DOD). This would probably require language clarification and an 

increase in the amount of this appropriation as well as procedures for 

iu use. 

c. The determinalion of what requirements could and should be in· 

cluded in normal budgetary programs. 
6 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

He closed the memorandum with, "The Department of the Army 

will be glad to assist in any way possible to reach a solution to this 

problem." Unfortunately, there is no evidence to indicate that this 

plea for action was given serious consideration until after the build· 

up in Vietnam was under way. Failure to act on this proposal 

created an inadequate and incomplete financial management pic· 

ture. 

The Army continued to push for some approval of a plan for 

financing emergencies such as a limited war. On 30 November 1962. 

a memorandum from the Secretary of the Army, the Honorable 

Cyrus R. Vance, again stressed the need for a definite plan for this 

type of funding. Although the primary purpose for the memorandum 

was to request additional funds, he stated, "Emergency situations 

involving Army participation, without a designated source of funds 

therefor. prevent responsible personnel at all levels from properly 

administering previously approved ~nd still necessary programs. 

Considerable turbulence is caused in major field commands whell 

they are faced with the financing of immediate emergency actions 

within funds currently available to them. The Commander is faced 

with the dilemma of seriously impairing already approved programs 

upon which his future combat readiness is based in order to finance 

an unforeseen contingency which mayor may not develop into a 

national emergency." He further requested authority to work directly 

with the Comptroller to develop possible solutions to this problem in specific terms. Here again. Mr. Vance was not specifically 

addressing Vietnam, but he recognized the fact that normal budg· 

eting and funding procedures combined with the stringent Jaws 

regarding obligations were not flexible enough to cope with emer· 

gency situations. A need existed for financial planning for military 

activities short of general war and exceeding peacetime funding 

levels. 

Army EDorts 

In keeping with the intent of the above memorandum, the 

Comptroller of the Army, Lieutenant General Robert Hackett, 

studied the problem, and on 25 November 1964, Mr. Edmund T. 

Pratt, Jr., the Assistant Secretary of the Army for Financial Manage· 

ment, forwarded his recommended actions which could be taken by 

the ~cretary of the Defense to increase flexibility for the Comptrol· 

ler. None of the six recommended actions required approval of the 

Congress, but were within authority already possessed by the ~cre· 

tary of Defense. 
PLANNING FOR FINANCIAL MANAGEMENT OF LIMITED WAR 7 

The first of these actions is that the Secretary of Defense may 

authorize unlimited reprograming within appropriations. Under 

existing agreements with Congressional Committees, certain reprograming actions require advance approval by such committees. 

However, this is not legally binding on the Secretary of Defense. 

and he would undoubtedl y take action in emergencies without 

awaiting approval. This type of authority is of little benefit near 

the end of a fiscal year, when funds are largely obligated and therefore not available for transfer. However. it can be useful at other 

times. particularl y when Congress is not in session, to appropriate 

additional funds. It has the disadvantage of merely deferring a 

request for a supplemental appropriation to replace the funds 

diverted from norma l uses to meet the emergencies. What often 

happens is that the delay in processing a supplemental appropriation 

request makes it impossible to obligate new funds within the fiscal 

year, and the Army is required to absorb the diverted amounts at 

the expense of other necessary programs. 

Second. the Secretary of Defense may transfer funds between 

appropriations. This aut hority is limited to $200 million a year, 

and not more than 7 percent of any appropriation may be transferred to another. This is a useful device. since there are usually 

unobligated funds in the procurement appropriations, which may 

be transferred to the operating appropriations. normally required 

for emergency purposes. In addition, it permits fund transfers from 

one military department to another. However, the fiscal year end 

problem still exists. since an emergency near the end of the fiscal 

year ma.y find the Secretary of Defense's transfer authority completelyexhausted. 

The third recommendation is that the Secretary of Defense may 

authorize incurring of deficiencies for costs of increased military 

strength beyond the numbers appropriated for. This requires a 

determination by the President that the increase is netessary. It 

would cover all military personnel. Army (MPA). and operation 

and maintenance. Anny (OMA) , costs incident to the strength 

increase. as well as other operating appropriations. In theory. it 

would also pennit incurrence of deficiencies in the capital appropriations. such as procurement of equipment and missiles. Anny 

(PEMA). for equipment, and military construction, Army (MCA) , 

for minor construction up to 5200,000 per projett, if sufficient unobligated funds were not available in those accounts. 

Fourth . the Secretary of Defense may authorize the incurring 

of deficiencies for subsistence: ruel including petroleum, oils. and 

lubricants; transportation; clothing; quarters; and medical supplies 
8 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT. 

free of the limitations now contained in Department of Defense 

Directive 7220.8. Although the military departments 00\'" have the 

authority to incur deficiencies for these purposes, they are required 

by the cited directive (0 make a certificate. in advance of incurring 

obligations, that the amounts authorized are only to cover the period 

of emergency. Obviously it is not feasible to forecast the duration 

and fund needs of emergencies affecting national defense. The 

directive also requires an immediate effort to obta in funds. This 

is not feasible where it is necessary to exceed the total of the appropriation, and Congress is not in session to enact a supplemental. 

The final recommendation is that the Secretary of Defense 

amend the Department of Defense stock fund regulations to permit 

issue of stock fund property for use in emergencies without full 

reimbursement. Current Department of Defense directives pennit 

such issue for short-term aClivities normally not over 90 days, such 

as maneuvers and training exercises and reserve forces field activities. 

Upon returll of the property to the stock fund, reimbursement is 

made only for repair and reconditioning costs, or for losses of 

property not returned. It would appear that similar provision could 

~ made for issue of equipment to troop units in emergencies, 

greatly minimizing the fund impact of such issues. 

The basic purpose of forwarding these actions which could be 

taken was to urge the Secretary of Defense to delegate some of these 

authorities to the services in order for them to be able to take immediate action in case of emergencies. Mr. Pratt stressed the need 

for action in these words. "Recent experience in the handling of 

financial pro hi ems associated with the action in South Vietnam has 

not lessened my fee ling that the procedures for giving authority to 

the command on the ground do not result in the kind of expeditious 

response that should take place in such a situation. Accordingly, J 

again urge that this matter be made an item of more urgency than 

has been accorded to it during recent years." 

During the approximate lime frame in which the Department of 

the Anny was attempting to obtain additional flexibility from the 

Secretary of Defense. the headquarters of the United States Army, 

Pacific (USARPAC), developed a plan for financial management 

within that theater of operations. The plan was in three parts, with 

one specifically devoted to limited war. In this section, the need 

was recognized for deviations from normal procedures in this manner: 

Whenever forces of an y USARPAC subordinate command become 

involved in combat operations or support thereof. Headquarters. 

USARPAC will immediately request Department of the Army, on 
I>LANNING FOR FINANCIAL MANAGEMENT OF LIMITED WAR 9 

behal£ of that command, for such of the following itS is considered 

appropriate to the sca le of operations involved: 

a. Relief from the requirements to cite consumer funds on requisi- tions with concunence transfer of funding responsibilities to depots 

for direct issues to the affected command. b. Establishmem of a general allotment for the funding of requirements, and the discontinuance of accounting for ,md reporting of 

obligations prior 10 payment. 

c. Relief (rom all cost accounting requiremenu and from the preparation and submission of COSt and perform:lI1ce summaries. 

d. Elimination of financial inventory accounting and reporting reo 

quirements. 

e. Elimination of requirements to m;limain financial records of 

accountJ receivable, accoums payahle. fixal assets. accrued liabilities. 

revenues. and expenses. 

£. Authority to drol) stock fund ·owlu .. 'l:1 invelllorics from financial 

accountability and to c ose stock hind :lccoullling ,·cconls. 

This plan was fonvarded to Headquarters, Department of the 

Army, for information. Some of the recommended actions would 

have required Congressional approva l. The authorization of a 

general allotment would have been one of the most beneficial 

procedural changes. but Congress would have to agree. I can find 

no evidence that the U.S. Army, Pacific. ever asked for this provision, 

nor that it was seriously considered at the Department of Army or 

the Department of Defense. The authorization of this type of 

funding would have solved many of the subsequent problems which 

arose in management of resources. For example. under a general 

allotment concept there would have been no need for the separation 

of construction projects from those which should have been funded 

from operation and maintenance. Army. appropriation. It would 

have removed the restriction that minor construction from opera· 

tion and maintenance funds could not exceed $25,000. This one 

provision in the regu lation will haunt the Army for years to come 

as the General Accounting Office conducu more extensive investigations into certain projects in Vietnam. The office will undoubtedly 

find that many projects which were begun using operation and 

maintenance funds eventually cost more than the limit. This is not 

to say that funds were miSllsed intentionally. When these projects 

were begun, it was most orten the honest estimate of those involved 

that the projects could be completed within the limitation or that 

they were required for emergency operation purposes. Many factors 

contributed to excessive costs. and in some cases attempts were made 

to hide the total cosu simply to avoid criticism. By a simple modification of a peacetime regulatory requirement to fit the situation in 

Vietnam, the potential for this type of activity would have been 
10 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

avoided. The difficulties encouillered in arriving at a meaningful 

budget and the restrictions imposed on the use of funds will be 

covered in more depth in a later chapter, but it is obvious that had 

these plans been adopted, many problems would have been solved. 

Another of the recommended actions would have eliminated 

the need for one service to reimburse another service for supplies 

and equipment. Approval of the common service supply system 

for all types of supplies, which was envisioned as a necessity in all 

of the Anny planning, would have negated the need for a reim· 

bursement program at all. I will devote another chapter of this 

monograph to the myriad of problems which this caused and the 

tremendous amount of paperwork which it generated, with little 

va lue to anyone. As long as costs are accumulated and Congressional 

needs for iT,formation met, it would seem that identification of the 

spedfic service which uses the resources is unnecessary. As a matter 

of fact. it is my opinion that if Congress had been asked to approve 

this type of funding early in the buildup pbases, approval would 

have been granted. 

Prophetic Planning 

In all aspects of planning for financial management under 

conditions which later existed in Vietnam, the envisioned problems 

were identified which later became reality. The primary difficulty 

seemed to be that these plans were not taken seriously; at least they 

were not accorded the intense study and approval granted combat 

and logistics plans. Had they been, we would have been able to 

provide more effective management of resources without the turmoil 

which resulted and further would have been able to provide the 

field commander with the needed flexibility without fear of criticism 

for violation of regu latory and statutory requirements which were 

designed for a peacetime situation. By specifically identifying the 

allotment which would cover all costs associated with Vietnam, we 

would have been more responsive to Congressional interests concerning the total war cost which increased steadily from year to year 

and which will be the subject or discllssions ror years to come. 
CHAPTER II 

Budgeting for War 

Never before had the Department of Defense been called upon 

to budget fOT the activities of its components during a war, as was 

the case during the Vietnam conflict. Even during the Korean War, 

when reasonably accurate records were kept concerning the cost, 

there was no Teal attempt to limit the funds requireJ to assure 

everything necessary to bring a successful conclusion. At the begin· 

ning of the Vietnam situation, Congress regarded the Vietnam 

requirements in much the same light as those for Korea, but as the 

nature of the war developed into one of 3urition. there was an in· 

tense feeling of frustration created in the minds of Congressmen. 

They wanted to assure thallhe American fighting man was provided 

everything he needed, but his needs were often in direct competition 

with domestic programs. This change in Congress was a subtle one, 

with no real turning point. but the budget hearings slowly required 

more and more information concerning the appropriate use of 

resources. In this chapter, I will trace the budgetary actions of the 

Army primarily dealing with the operation and maintenance appropriation: it will be necessary, however. to briefly touch other 

appropriations which affected it. 

Backgroll7/(1 lor Budgeting 

In order to present a complete picture of the environment which 

existed during the period. it is desirable that the reader understand 

the normal planning. progTaming, and budgeting system used 

within the Department of Defense. Chnrt I is a graphic representation of this cycle constantly in operation. For the most part. this 

method of arriving at a hudget was lIsed during the war, with certain 

deviations which 1 will point out as they occurred in the sequence 

of events. The chart is a rather complicated rendition of a simple 

basic concept. In theory. the development of a budget requires that 

one take lhe Joint Strategic Operations Plan and with certain 

adjustments to fit the current situation simply assign dollar values 

to the desired actions. This would then become the budget. There 

are a number of pressures being exerted during the entire process 

which are covered on the illustration by the block "External In· 

" 
12 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

CH ART \ - PI..ANN I !>:O P ROGRAMING U UUCETINO eVCL!'. 

I EXTERN .... l INFLUENCES I 

1970 1911 

NOV o,e '" MAR 

r> i'-.. 

"0 

~o ~ . S~ •• 

• <> 

" •• 

OSO OSO REV,EW •• II OSO REVIEW >0 

-z OSO REVIEW 

SERV'CES 

.0 

'1 >z 

-< '0 

r,f <- 2' It; ::I 

r~o 

~ • • "E,;;e'sL..J8 

'< .!¥J ~c 

llV -i5 - ~" 

,es 

> 

o 

~-===~--~~J.I~-+~ SERVICE &. ! .... GENCy PLANNING r SERV'CE 

I-
1\ UDGF.TING FOR WAR 13 

OSO PROGRA ... , 

BUDGET REVIEW 

I 

V SEC DEI' STRATEGIC 

GUID"NCE 

VI SECOEF REVISED FISCAL 

& CAP ... SILITIES GUIO"NCE: 

VII JCS PROGRAM : 

SUe "'ISSION : 

VIII "'ILIT"RY DEPT , 

PROGRAM SUe"'ISSION 

IX SEC DEI' PROGR ...... 

DECISION ME"'O 

X MILIT"RY DEPT. BUDGET 

---jI-i-- t.H~;::-t -r: H---II---f+L_ ESTIM ... TES 
14 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

fluences," These could include decisions made concerning national 

policy by the President. They \vQuld most certainly take into consideration the economy of lhe nation and the "climate" existing 

within Congress with regard to defense spending. Disregarding 

these sometimes indeterminate factors which shape the budget, one 

is still left with the problem of calculating exact requirements in a 

peacetime situation, with the problem increasing in war. Just by 

examining the time frames involved in the process, the plight of a 

budgeteer becomes evident. The illustration depicts the cycle for 

the preparation of the 1973 fiscal year budget, which had to be 

ready to present to Congress in January of 1972. The Funds appropriated by Congress as a result of this budget were to be used 

during the period I July 1972 to 30 June 1973. The major portion 

of the planning effort had to be completed during June of 197 1. one 

year prior to the availability of any of the requested funds and two 

years before the exhaustion of the authority granted. Although 

refinements may be made until the last moment before presentation 

to Congress, at best, a budget has to include items which are antici· 

pated needs for some eighteen months ahead. In other words. the 

Defense Department in time of war must antiCipate what lhe enemy 

is going to do and the response we should make far in advance. Most 

field commanders would be pleased with one day's notice of enemy 

intentions and anticipated actions. 

One other facet of the current budget process should be under· 

stood to appreciate some of the actions taken to finance the Vietnam 

War. The budget submitted by the Department of the Army is 

staff developed. This essentially means that the Department of the 

Army staff develops the entire budget with minimal input from 

the field. The installations throughout the world do submit budgets 

representing their requirements for the immediate fisca l year, but 

they do not impact directly on the Presidential budget submitted to 

Congress. As a matter of fact. these installation budgets are better 

described as a request for a certain portion of those funds appropriated by Congress. This is not to say that there is absolutely 

no input from commanders in the field, but there is little detailed 

information concerning programs which are anticipated. As a 

general rule, the commanders are allowed to indicate any major 

changes in the programs which were pursued in previous years. The 

staff of the Department of Army makes extensive use of factors to 

determine what is needed in the operations and maintenance appropriation. BaSically. the number of divisions which will be re· 

quired is established. and then factors for the various supporting 

activities are used in establishing funding levels for the Army. These 
BUDGETING FOR WAR 15 

(actors are usuall y based on historical information durinR like 

periods. As you can see, it was difficult to prepare a budget for 

Vietnam, when we had never been engaged in a war of this Lype 

before. Man y of the initial [actol's proved incorreCt and also we.Te 

the subject of quite a number of debates not only berore Congress 

but between the Department of the Army and the Department of 

Defense. These factors have been conti nuall y revised throughout 

the conduct of operations in Vi eltlam, and they have become rather 

accurate now (1972), but since we are diminishing our presence, 

they have not been useful in current budget preparations. 

As if the difficulties already stated were not enough for the 

budgeteer to overcome, he has one more deterrent to effective 

financial management. Historica ll y, Congress has been late in mak· 

ing the final determination on appropriations for the services. The 

budget which is submitted in J anuary and is to become effective on 

I Jul y o[ that same year is normally not enacted into law until late 

in the fiscal year. The following listing reflects budget submission 

dates and appropri ation act dates for fiscal years 1965- 72. 

Fueal Year 

1'''' 906 

19" 

1968 I,., 

1970 

1971 

1972 

PRESIDENT'S BUlxa.-r SUBMISSION 

ANIl API'ROI'R IATION DATES 

~tsideltt's /judget 

S'lbmi.l.!iou Appropriafiolt 

21 Januar)' 1964 19 AURU$t 1964 

25 J anuary 1965 21 September 1965 

24 J anuary 1906 II October 1966 

24 January 1967 13 September 1967 

29 January 1968 Ii October 1968 

15 Janua'1' 196' 18 Oecember 1969 

2 t'ebruary 1970 29 December 1970 

29 January 1971 15 December 1971 

This requires that the Army operate on an authority provided hy 

Congress, which is stated to commanders in the field in these words: 

Effective 1 July YOll ,1I'e "uti1ori/(.'(1 10 incur ob lig:,tions for esse ntia l 

operati ng expenses of .. rOlllillui ng natu re limier the Oi\fA appropriation at a n ue consistent with the level of )'our preceding fiscal yea r 

opera ting expenses. 

Un less specifica lly revised this ;nnhority \\'i ll remaitt in effect ulltil 

forma) allotmcnt~ arc issued. 

There are usuall y some indications of specifi c items which wi ll 

not be approved based on Congressional hearings and informal 
16 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

contacts with powerful personalities in Congress. The result of 

being forced to operate in this void of information is either to 

maintain a level of obligation which is below or above that which 

would have resulted in efficient use of resources. 

With this as a backdrop, J would like to review the actions taken 

by the Department of Defense and the Congress during the period 

of the Vietnam War. There were some major innovations used to 

obtain additional funds, some of which were condoned by Congress 

and some which brought the wrath of certain Congressmen during 

hearings on the budget. The mood of both the people and certainly 

the legislature was different than had ever been experienced before. 

The Early Budgets 

As I mentioned in Chapter I. our suppon of Vietnam started 

with direct use of funds and other resources to sustain French 

operations. This Fact was officially recognized in the Semiamlilal 

Report of the Secretary of Defense for the period January I to June 

!iO. 1954. Charles E. Wilson , then Secretary of Defense, stated: 

The complete loss or Indochina. rich in raw materials and lyillR 'I.~tride 

the air route between South Asi;1 and the Pacific, .... 'ould constitute a 

direct threat to the sa fety of all neighboring coullIries and to nations as 

far removed geographically ,IS India. Australia. and even Japan. In 

recognition of this faCL the United Stales made ;. major effort durin~ 

fiscal year 1954 to assist the French forces and those of the Associated 

States of Cambodia. Laos, and Vietnam in their struggle against Communism. In September 1953, SS85 million were allocated to Ihe direct 

support of the French Union forces and added to the $400 million previously appropriated for this purpose in the budget for fiscal year 1954. 

These amoullts wcre in adclition to the regular Indochinese military 

assistance program for we:II>ons and C<luipmeIH. the delivcry of which 

was given the highest priority. Technicians ..... cre dispalchcd to help 

maintain in operalional order the major weapons and C<luipment supplied by the United States. During the emergency in May 1954. United 

States Air Force Ir;lIlsl>orlS rushed troop reinforcements from France 

to Indochina. Despite all the assista nce that ..... a5 provided. our allie.~ 

found themselves JIl a precariou~ military position al thc close of the 

fiscal year and felt compellc<1 to ne~otiate a settlement. Such;1 se ttlement 

will not reduce Ihe need for (OllIinucd military assistance fot· the free 

people of Southeast Asia . 

The Congress. at this time . regarded Vietnam as a necessary 

ex~nse and a vital concern of national defense. Not only were funds 

provided for normal 0~ration5 under the Military Assistance 

Program. including advisory support and wcapons, but the Mutual 

Security Appropriations Act for 1955 made available a fund of $700 

million to be used as conditions might dictate in Southeast Asia and 
BUDGETING FOR WAR 17 

the western Pacific. T his was used almost tmally for operations in 

Indochina. Although an active insurgency existed in Vietnam, there 

were very few Americans directly involved and the amount of money 

being expended was relatively small when compared with the total 

defense budget. 

This was the climate which existed in Congress from that time 

until well after the major buildup of U.S. forces had occurred. As 

a matter of fact, there is little record of Congressional interest in 

Vi etnam as a major topic for discussion until funds were being reo 

quested for the buildup. Typifying the lack of opposition to our 

assistance efforts were the Senate hearings on the fiscal year 1964 

appropriation. Senator Richard B. Russell. Chairman of the Senate 

Appropriations Committee. in queryi ng the .Army Chief of Staff. 

General Earle G. Wheeler, concerning our acti viti es in Vietnam 

almost casua ll y asked how many people were there, referring to the 

number of American military personnel. General Wheeler replied, 

" In the Armed Forces. as a whole. the figures are around 12,000, sir. 

The majority of those. oh. around 8.000·odd are from the Army." 

This number was noted as an increase over the last ca lendar year. 

When asked by Senator Russe ll if there were any plans which con· 

templated augmenting this force. General Wheeler replied, "No 

sizable increase. sir. We have had to make some changes in ollr 

maintenance units over there for helicopters. to beef up the main· 

tenance. There will he other realignments of rorces which may ca ll 

for a small increase, but I wouldn't expect any sizable increase." 

T he matter was promptly dropped in favor of a discussion on the 

co-operation which was being received from the Vietnamese, and 

then drifted quickl y into an overa ll questioning concerning our 

armed forces located in 80 different countries around the world. 

It was plain that the Vietnam problem was virtually lost in the 

magnitude of our total support to other nations. 

Although Vietnam escaped the intense interest of Congressmen. 

it is evident that such was not the case within the Department of 

Defense. It is difficult to state unequivoca ll y lhat long range plans 

there envisioned such an increase in the involvemen t of the U.S. as 

that which actually occurred, but it is possible to establish the 

feeling of the Secretary of Defense, Robert S. McNamara, as of 1 

March 1965. On that date, he signed a memorandum for all of the 

service secretaries which left little doubt of his position with regard 

to our support of South Vi etnam. He stated: 

Over the past two or three years, I have emphasized the importance 

of providing all necessary military assistance to SOllth Vietnam, whether 

it be through MAP or through application of U.S. Forces and their 
18 FINANCIAL MANAGEMENT OF THE "IETNAM CONFLICT 

associated equipment. O..:t:<lsion,dly, instant:es t:Ollle to my attention 

indit:ating that some in the Department feel restra ints arc imposed by 

Iimilations o( funds. I want it clearly understood that there is an un· limited appropriation available for the financing of aid to Vietn;lffi. 

Under no circumSlances is lack of money to sta nd in the \\lay of aid to 

that nation. 

Here was the blank check again, which military leaders normally 

expected to receive when preparing for a war. This memorandum 

was the basis for many actions which precluded efficient manage· 

ment of resources, especially during the early stages of the buildup. 

Unfortunately in later developments, neither the Congress nor 

certain members of Mr. McNamara's own staff subscribed to the 

words in the memorandum. It became sharply evident that the 

luxury promised of " unlimited appropriation" was not, in fact, to 

be the case. 

It is somewhat paradoXica l that only two weeks prior to the date 

of the above memorandum, the Army was defending before 

Congress its operation and maintenance budget for fiscal year 1966 

which requested a modest inCrease for Southeast Asia over fiscal 

year 1965. In the House Appropriations hearings. General Ralph 

E. Haines, Jr., then Deputy Assislalll Chief of Staff for Force Development, responded to queries concerning this increase in this 

manner: "The $10,100,000 increase in the Pacific is primarily for 

the support of the increased strength and the equipment in this 

theater, and primarily in Ihe Southeast Asia area. The increased 

number of tactica l aircraft in the Pacific occasioned by deployment 

of additiona l aviation units to Vietnam will require an increase of 

over $6 million for mission support, and for Ihe O&M realignment 

of aircraft repair parts." 

It was not apparent at this hearing that a major buildup was 

contemplated. and certain ly there were no funds requested to support such a plan. The Congressional interest was increasing, how· 

ever. but the tenor of comments was slill to the effect that we should 

do everyth ing necessary 10 provide support. This feeling was typified by House Appropriation Committee Member Mr. George W. 

Andrews' comment concerning supplies of petroleum, oils. and 

lubricants. " Y do nOI want you to have a shortage do\vn there." 

T hese same hearings provided some indicalion that Congress 

expected normal methods of fundi ng and reimbursement to be 

used in Vietnam. There was a discllssion of the costs of convert ing 

the USNS Albermarle, a Navy seaplane tender scheduled for moth· 

balling, into a Aoating ma intenance facility for repairing helicopters. 

Lieutenant Colonel J. P . Cribbins, Office of the Deputy Chief of 
8UDGETING FOR WAR 19 

Staff for Logistics, testified concerning the fundin~ for this con· 

version, "Actually, the Army funded for the PEMA and OMA 

funds for conversion and operation of the Albemarle. This was a 

program coordinated with the Navy." Mr. Andrews then asked, 

"Will you reimburse the Navy for all the work they will dor' 

Colonel Cribbins replied, "We will reimbu rse the Navy for all the 

work they do." Since I will devote a later chapter to the problems 

caused by reimbursement procedures, I will not dwell on this point 

here. This represents only the beginning of the use of different 

funds for va rious purposes so intermingled as to defy identification, 

and the insistence that norlOal procedures prevail. 

Supplemental Budgets 

It was shortl y after this period that Mr. McNamara demonstrated 

his new approach to budgeting which was to continue throughout 

the early stages of the war. He made extensive use of the supple· 

mental approach to submission of budgets. Although th is was not a 

new method, it was normally reserved for emergency situations and 

Congress challenged this quite sharply, as will be pointed out later. 

Calendar year 1965 was to see the major buildup begin and it 

would continue into 1966 with the greatest increase in troops and 

materiel in one location since World War II. The chain of events 

began in March 1965, when 3.500 marines were sent to establish a 

defensive perimeter around the air base at Da Nang. May saw the 

17M Airhorne Brigade land at Bien Hoa fTom Okinawa. In June, 

Mr. McNamara announced the deployment of an additional 21.000 

troops, bringing the total in Vietnam to 75.000. In an address to 

the people during Jul y, President Lyndon B. Johnson. announced 

that he had given authority to increase the strength from 75,000 to 

125,000 men. He further stated, "Additional forces will be needed 

later and they will be sem as requested." The number reached 

approximately 200,000 hy the end of the year. 

In order to finance this tremendous increase. Mr. McNamara 

appeared before Congress during August 1965, requesting $1.7 

billion in a separate accou nt. "Emergency Fund, Southeast Asia." 

There was very littl e opposition to gra nting this amount, even 

though testimony indicated that this was necessary primarily for 

additional financing to gear lip the production machine in order to 

have equipment and weapons available to support the buildup. It 

was evident that the current year's appropriation did not contain 

sufficient funds to sustain the effort in Vietnam. and I do not think 

that anyone in Congress was truly surprised when a supplemental 

request for fiscal year 1966 was submitted to Congress on 19 January 
20 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

1966. Table 1 shows the total submission including the original 

fiscal year 1966 funds approved, the disposition of the $1.7 billion 

given to Department of Defense in August 1965, and the new requirements for the rema inder of the fiscal year. 

TABLE I-FINANCIAL SUMMARY OF FISCAL YEAR 1966 RUDel., 

(INCLUDING THE PROPOSED SUPPLEMENTAL FOR SoUTHEAST AsI .... ) 

(In 'hOIl .. n<b or dollartl 

Mill<,.". 

NOA 11.700 .nd ,;lvIl. Solltheast ~na I~ mlllllln Ian "'" "., e:tdlldlnl amend· ollppl~ . o.,,,,,Ic. T .... 

amendmenl =" ~". menIal NOA 

Milila£), personnel: 

A=y ........ .. .... ....... 4.092.291 . ....... 222.100 8~3.600 5.147.991 

N.vy . , . . . . . . . . . . . . . . . . . . . 3,055,000 .. ...... 182,600 318.500 3.556,100 

Marine Corps .. .. . .. .. .... 749,900 ........ 42.400 184.600 916,900 

Air Force . . . . . . . . . . . . . . , . . 4,393.800 ... ..... 227,600 219,500 4,840,700 

National Guard personnel, 

A=y .......... .... .. ... 271,800 .. ...... ',500 45,900 "',200 Reserve personnel. Army .. . 238,600 .. .. . .. . .. .. ... 7,500 246,100 

National Guard personnel, 

Air Forte .... .. ... ... ... 71,300 .. .... ',500 5,700 8(),500 

Reserve personnel, Navy ... 105,100 .. . ... . ',600 .. .. .... . 109,700 

Reserve personnel, Marine 

eo.". .. ... .... .... ..... 33,000 .. . . .... '.600 2.200 56,800 

Reserve personnel , Air Forcc 60,500 .. . .. ... '.200 2,700 &4,400 

Retired pay, defen..e ....... 1.529,000 ........ 71,000 .. ....... 1,600,000 

Total military personnel 14.600,291 ... .. ... 761 .100 1.620,000 16,981 .591 

Opention "d maintenanO!!: 

A=y ..................... 3.4"',067 .. ...... 3~ ,400 1.077.200 4.544.667 

N.", ................... .. 5,292.137 .. ...... 25,000 ",",000 ',821,157 

Marine eo'P' ........... . 192,101 .. ...... 1.054 102,600 295,755 

Air Force ............ ..... 4;4()'.7~7 .. .. . ... 27,600 544,900 4.976.2~7 

Defen5l! a~ncie$ .......... 685,680 . ....... 14 ~!ifi 41,769 7~9,805 

Operation and maintenance. 

A=y National Guard .. . 208,796 .... . ... 2,000 55,700 246,496 

Operarion and maintenance, 

Air National Cuard ... ... 8,OOO .... . ... ',000 8,100 247, 100 

National Boord for Promo· 

tion of RiOe Practice, 

A=y ......... .......... ." .. .. .. .. .. ..... .. ....... .59 

Claim,. defense ............ 24,000 .. ...... ....... .. ....... 24,000 

Contingencies, defen..e ..... 15,000 ..... ... .. ..... .. .... ... 15,000 

CoUrt of Military Appeab, 

deCensc . . . . . . . . . . . . . . . . . 579 .. .. .... 11 .. .... ... 590 

Total operation and 

maintenance: .. . ... . 12 ~92.556 .. ...... 102,421 2,516,269 14,911,246 
BUDGETING FOR WAR 21 

TABLE I - FINANCIAL SUMMAR.Y OF FISCAL YEAR 1966 BUDGET- Continued 

(III .hou~. o j donn,) 

MfII.a.-, 

NOA 11 ,100 an.d ci vil · Sou.h~ut 

na .rd I1IlIIlon Ian pay A,l. 

nciudlnl amend. "pp ~. UPI I~ . Toul 

amendmen. m~II' mm.al men'" !'lOA 

Procuremenl: 

Pl"OQIrement of ~uipmenl 

and miMila, A=y ..... ,,204 .... "',500 .. .... 2,46S.000 4,I74,!OO 

Procurement of aircraft and 

mlMiles, N • ., ........... 2,220.587 ' 90.200 .. ..... ''',500 5,I75.oa7 

Shipbuilding and Con· 

venion, N." ........... 1,590,SOO ........ .. ..... ......... 1.590,SOO 

Other procurement, Navy .. 1,1 55,000 167,090 .. ..... 607,500 1,909.590 

Procurement, Marine Co~. 15,800 149,100 ....... 516.600 '09,500 

Alrc:nft procurement, Air 

Force ................... 5.516,700 158,800 . ..... 1.585,700 5,261.200 

MiMlle procurement, Air 

Fo= ................... 771 ,900 4,000 . ..... 65,700 859.600 

Other procurement, Air 

.'orce ................... 829,100 ....... .. .... 1,016,40(1 2,206,100 

Procurement, defen5e 

agencia ............ .... 15.200 .. ...... ....... .. ....... 15.200 

Total procurement .... 11 .527,587 1.551,290 ....... 7,019,400 9.881.0'17 

Re5earch, dcvelopment, 

and evaluation: "" 

Amly ............. ....... . 1,455,988 .. ...... ...... 27,995 1,461,985 

Navy .............. .... ... 1,515,180 ........ .. .... 52,570 1.565,700 

Air Force .... . ............ 5,181,956 ........ .. ..... 71,085 5.255,04 1 

Ddcn5e agencies ... . .. ... .. 491,!OO ........ ....... .. ....... 491,500 

Emergency fund , defcnse ... 19,426 ........ ....... .. ....... 19,426 

TOIII, rexan;h develop' 

ment. tat and eVlllua· 

"M ................ 6,659.800 .. ...... ....... 151,650 6,791,450 

Military construction: 

A~y .............. . .. ... 546,845 ...... . ...... 509,700 92UU 

Navy . . . . . . . . . . . . . . . . . . . .. 529,405 ..,,210 .. .. .. 254,600 627,2 15 

AII' Force . . . . . . . . . . . . . . . . . 561,775 57,900 ... . .. . 274,100 695,775 

Defense agencies . . .... . .. .. 19,768 .... . .. . .. . . . . . 200,000 219,768 

A~y Reserves .......... .. ......... ........ ....... .. ....... . ........ Nanl Rese\"\'cs ..... .. ..... ',500 ........ ....... .. ....... ',500 

AII' FoTtt Reserves .. .. .... . 4,000 ........ ....... . ........ 4,000 

A~y National Guard ..... 10,000 ........ ....... . .... .. .. 10,000 

Air National Guard ....... 10,000 ........ ....... .. ....... 10.000 

Loran nations, defense ..... 5,000 ........ ....... . ........ 5,000 

Total military con· 

structlon ............ 1,096,289 165,710 .. ..... 1,258.400 2.500,599 
22 FINANcrAL MANAGElI.1ENT OF THE VIETNAM CONFLICT 

TABLE I-FINANCIAL SUMMARY OF FISCAL YEAR 1966 BUDGET-Continued 

( In Lhou ... noU of dollan ) 

MlllLarr 

NOA '1.100 and civil· Southeut 

(nacted million Ian par A,I. 

excludlnr amend· ,upple. lupplc. Total 

amendment m~' men ... 1 mental NOA 

Family housing: Defense .. ... 665 .... .. ... ... .... ... .. ....... 665,846 

Civil defense: 

Office of Mobiliution ...... ".066 ........ .. ... .. .. .. .. ... ".066 

Research, abe iter lurvey, 

marking .... ............ 42,700 ........ .. ..... .. ....... 42,700 

Total civil defense .. ... 106,766 . .. ..... .. . .. .. .. ...... 106,766 

TOlal military funelion 46,928,9!5 1.700,000 86',521 12,"'5,719 61.858,175 

Military aMistance: Executive . 1,470,000 ........ ....... ...... ... 1.470.000 

Total Departmcnt of 

Defense ... ....... .. 48.!98,955 1.700.000 86~.52 1 12,545,719 63.308.175 

ReClpitula tion: 

A~y ................. . .. . 11 ,241,644 .569,100 262,000 5,002,595 17,075J,9 

N",y ...... ............... 14,268.960 549,600 255.254 3.509,670 18,583,484 

Air Force ............. .. .. 17,842,766 581.!OO 260,900 3.791.685 22,476,651 

Defcn5t; agencies .. .. ... .. . 3.468.799 .. .. .... 85,567 24 1.769 3,795,9!5 

Civil defCIUe ... ... ........ 106,766 .. ... .. .. .. .. .. . .... 106.766 

Millta..,. u"istalll::e ......... 1,470,000 . .. ... .. ... . ... .. . ..... 1,470,000 

Total ................. 48,398,955 1.700,000 863,521 12.545.719 63,308,175 

It was during the hearings for this supplemental appropriation 

that it Was" officially recognized that Vietnam no longer fell within 

the purview of the Military Assistance Program. A request to 

transfer all balances from the assistance program to other appr()-

priations was granted. The aClual transfer took place on 25 March 

1966. T he interest of Congress in total costs in Vietnam was becoming more and more evident. One of the specific requests of Senator 

Stephen M. Young, a member of the Senate Committee on Appropriations. was a revelation of the total amount of military assistance provided South Vietnam. The amounts shown in Table 2 

were entered into the CmlgresSiO)lai Record. 

It is interesting to note that at the time Congres.s was conSidering 

the 1966 fiscal year suppl emental , the budget for fiscal year 1967 had 

already been submitted by the President. This fact was addressed 

several times d uring testimony, and Mr. McNamara indica ted 

through his comments that the fiscal year 1967 budget was based 

on current plans and would support the anticipated activity through 

June 1967. Although he did not specifically outline his new ap-
u.s. fi.ta.l fun 

BUDGETING FOR WAR 

TABLE 2- EcoNOMIC AID FOR VIETNAM 

(III m lllioll' of doll arl) 

Public 

Law-l84 

{.lIt;ILnj 

T OI.1 

19.5S-57 ........................ 783.9 39.. 82U 

1958 ............. . ........ _.... 179.1 9.7 188.8 

19.59 ........ . .................. tOO.6 6.5 20'1.1 

1960 ........ . ........ . ......... 169.0 11.5 180..5 

1961 .......... .. . ........ . . . ... 152.6 12.0 1«.6 

1962 ......... . .. . . .. ........... 110.7 52.5 145.2 

1965 ........................... 155.2 64.5 197.5 

1964 ............ . .............. 159.3 71 .0 2!O.5 

23 

1965 ............. ............. '1-~2;;1:;6':;.'_-+_~52;;";-_l-,,~2";;;, __ TOTAL ...... ... .... ..... 1= ;;."" ;;;;~~~~299~.7c=~~~2. ""4,; .. 2 ~= 

1966 ........................... '541.1 79..5 620.6 

1967 .................. . ..... .. . 550.0 98.1 648.1 

I CUrTeRt eatlm. tc of 6oc:al ,"'I' 1981! AID pr08T. m. Indudln, S21~. OOO.OOO r~u( .. fd in lhe' 

6oc:al Yt'lr IIHMl tuppl .. menli l. 

proach to budgeting to Congress at this time. he certainly gave 

several hints to this effect. In discussing the basis for formulation of 

the budget for this fiscal year, he said, "With regard to the preparation of the FY 1967- 71 program and the FY 1966 Supplemental and 

the FY 1967 Budget, we have had to make a somewhat arbitrary 

assumption regarding the duration of the conRict in Southeast Asia. 

Since we have no way of knowing how long it will actually last, or 

how it will evolve, we have budgeted for combat operations through 

the end of June 1967." 

This, then, became the pattern for budget submissions for 

Vietnam. The assumption was always made tbat enemy activity 

would continue at the level which existed at the time of budget 

preparations and that the war would be over by gO June of the fiscal 

year under consideration. This, naturally, would require a supplemental request should either of these assumptions prove invalid. 

Growing Congressional Concern 

During the proceedings of the Senate subcommittee of the Committee on Appropriations, it became increasingly evident that the 

cost of the Vietnam War was of growing concern to the Congress. 

As an illustration, the following dialogue between Senator Stuart 

Symington, Member, Senate Armed Services Committee, a.nd me is 

furnished from the Congressiotlal Record. 
24 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

Senator Symington. I saw the Deputy Secretary of Defense on a 

television show last night. To the best of my recollection he said the 

Vietnam war was costing a billion dollars a month minimum, and th:u 

they could not figure all the overhead. Some of us figure that it is costi ng 

a great deal more than a hill ion a month. As the budget officer for the 

U.S. Army, do you have any figure that you have draWl! up as to what 

the total cost is per month for the Vietnamese operations? 

General Taylor. We have not made ;In attempt to put a precise price 

tag on the COSt of the war. There are many, many reasons for this. The 

rationale is simple. Each estimate would depend entirely on the assumptions that you use to determine what price you derive. For example, the 

very large J)rocuremem appropl'iation that we received in fiscal year 

1966 pro\!i es for things which wou't be delivered for another year or 

18 months. So you really can't charge these to anyone particular fiscal 

year. 1 am aware that Secretary i\lcNamara used the $ 1 billion figure 

and I have no reason to depart from that. This is a good order of mag· 

nitude cost estimate. Also, yOll get into this situation in trying to deter· 

mine costs. The 25th Infantry Division, for example. is now in Vietnam. 

I£ the 25th Infantry Division had remained in Hawaii, it would incur 

a major portion of the cost th:11 it is now incurring in Vietnam. The 

only items you could charge off 10 Vietuam would be sLlch things as 

increased combat consumption and provide for a faster rotation of 

people. 

Senator Russell. Where wou ld YOll charge ;"1 the installations there? 

Do you not think the 1st Infantry ought 10 bear a part of that? They 

could not be supplied without it? 

General Taylor. Yes. sir; J think so. The construction that is going 

on out there. to what fiscal year can you apportion that? Some of it 

will not be completed until -. 

Senator Symington. What worries me. Mr. Chairman, is that one 

sees headlines about saving $1 billion, $SV! billion, the same time you 

are heavily increasing the COSt of the war. It is hard to correlate that. I 

personally view with grave apprehension lhe danger LO the ruture value 

of the U.S. dollar incident to these various programs. I noticed. for 

example. the tremendous development in Oklll.lwa. But your reeluesl 

this year for docks and aircraft alone in South Vietnam arc over a 

quarter of a billion dollars more than the total investment in Okinawa 

by the Uniteel States si nce World War II. This budget apparently really 

means little as against the president of a company reporting to his board 

of directors just how much money he neeeis to run his business for the 

next year. You know there will be some gigantic su pplementals come up 

here incident to whal we arc doing. The people do lIOt have any idea as 

to what the basic facts are incident to the cost of Vietnam. 

This question of lhe Department of Defense ability to identify 

the IOlal cost of the Vietnam connict generated actions which were 

later to haunt the budgeteers in attempting to justify budgets during 

the years of diminishing troop strengths. The Department of Defense instructed the services to introduce a new account imo their 

respective accounting systems to identify those costs which could be 

associated with the Vietnam troop support. This was not only to 
BUDGETING FOR WAR 25 

include those direct expenses in Vietnam and the Pacific, but also 

those expenses in the continental United States training base, 

which could be considered as being directly related to training of 

replacements for that area. Here, again, the concept of the "blank 

check" reared its ugly head. There is little evidence to support the 

general feeling which prevailed concerning this new expense account, but it was almost universally assumed that any costs which 

could be logically charged to Vietnam would be funded completely. 

At the training centers, it was difficult, if not impossible, to identify 

each individual who was destined to go to Vietnam upon completion 

of training. Additionally, it was equally difficult to specifically. 

identify accurately all of the costs on an installation and pinpoint 

whether or not it should be included in the Vietnam account. I 

think it is common knowledge now (1972) that the prevailing 

trend at the time was, "When a doubt exists, charge it to Vietnam." 

A5 these costs were subsequently accumulated and provided in bulk 

to Congress, they became concrete evidence, not only of the cost 

of the war, but also that those funds would not be needed should 

our presence in Vietnam be no longer required. This mistake will 

plague us for some time in attempting to establish a meaningful 

base line for the cost of a peacetime force. 

Cha'lgillg Attitudes 

A5 had been anticipated by Senator Symington, the "gigantic" 

supplemental for fiscal year 1967 was submitted to Congress by the 

President on 24 January 1967. The request was for a total of 

$12,275,780,000, of which $1,968,000,000 was for operation and 

maintenance, Army. This was perhaps the most difficult time for 

those individuals who were charged with the responsibility of 

justifying this budget. The climate in Congress had definitely 

changed and many of the Congressmen felt as if Mr. McNamara had 

overstepped his authority in administering the funds appropriated 

to the department. The concern of Congress is adequately stated by 

Mr. Glenard P. Lipscomb, Member, House Committee on Appropriations, in the following excerpt from the CongressioPlal Record of hearings on the fiscal year 1967 supplemental before the 

House sulx:ommittee: 

Mr. Lipscomb. Mr. Secretary. you spent a part or your statement 

explaining why you did not request of Congress a sUfplemental last 

autumn and fall when Congress was still in session, all( you explained 

in your statement why you made the decision. 

Now, I recognize. as I am sure all or us do, that it is necessary in 

an emergency to have Rex.ibility in the Department of Defense budget 
26 F INANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

to permit you to make quick det:isions, take care of unforeseen problems, 

and I think that this is necessary. This authority ..... as placed in the law 

by Congress for this purpose, but is was not intended, as I sec it, to be 

used excessively or abused. 

When the 1967 budget was before the Congress, it ..... as clear at that 

time that the estimates for fiscal year 1967 were understated and that a 

budgeted estimate could have been briven to Congress to be acted upon 

when we were still in session. It made a lot of difference to us as 

Congressmen to know just what the fiscal year 1967 demands werc for 

the whole budget. 'Ve could have made a dctermination, should other 

programs in the domestic area be reduced: should we raise taxes at that 

time: what was Ollr national debt goi ng to be. In other words, it was a 

very signifi cant time for liS. 

You indicate th at the budget is an estima te, that you cou ldn't pre· 

cisely see what the needs would be for Southeast Asia, but a budget i5 

always an estimate. It is a plan. It is a guess in many cases. 

We had before us at that time mililary and civ ili an pay. We knew 

about the stock fund . Certai nly we realized that certa in production 

funds weTe needed. We cou ld have Teevaluated the assumption at that 

time that the war wouldn't be oveT June 30, 1967. Many Members of 

the House and the Senate Tecognized that the Department of Defensc 

needed mOTe money. 

This is of concern ami lh is is a good lime, I think. to ta lk about it, 

because you have changed your assumptions and ha"e recognized a grea t 

difference in your fiscal year 1968 budget, as well as the supplementa l 

that is before us. There is a big change in your approach. 

At tbat time, suppose Congress. which 1 believe re presems the 

peo~le, had decided that there was a limit to the amount they were 

willm~ to spend in Southeast Asia? Suppose they wanted to debate at 

that lime the size of the forces or whetheT they desired to appropriate 

funds befoTe the forces were committed? Suppose that we had ",allied 

to know at that time what the commitments were in that which the 

Department of De£ense was proposing? Suppose we had wanted to give 

you all the money you wanted, but had said to come back to Congress 

befoTe you make any further commitment, so th:u we cou ld look at it? 

As of the end of calendar yeaT 1966 we were in the dark. 

That JUSt does not seem to be the way Congress should handle the 

Department of Defense budget. It appears to me that we have lost all 

control as a CongTess o\'er the Dep<'rtlllelll of Defensc appropriation 

process. No matter wha t we do. whether we raise your bud~et or vote it 

In as you request it, it doesn't seem like Congr ess has an}' control over 

this at all. ihis is a meaningless operation we go through every year. 

FOT insta nce, if the State Department or the CommeTce Department 

or the U. S. Information Agency or the Federal Bureau of Investigation 

came in here and asked for 123,000 employees thai were already hired. 

OT on board, and then wou ld come in and say they wanted th e funds to 

r.ay them. there would be a revolutionary development in the Congress 

If they handled it Ihe same way. 

Now, what gives the Department of Defense this weal ;tnd uncon· 

trollable authority and what gives the Depanmem of Defense the right 

to be as loose in ha ndling the money that Congress appropria tes to it, 
BUDGETING FOR WAR 27 

and why can't we, ,IS Members of Congress. have a better idea and a 

better control over Department of Dcfense money? 

Secretary McNamara was very seldom placed on the defensive 

before Congress, and this was certainly not to be the case when 

confronted by the above statement. The foll owing dialogue ensued: 

Secretary McNamara. Mr. Lipscomb, no Congress in the midst of 

military operations has ever had as much detailed information as this 

Congress has been receiving in the la.u two years and is receiving now 

about our military program. 1 would simply ask you to look at the 

record if you doubt my statement. I h;we looked at the record. 1 

cxamined the financing of the Korean ''''ar and I examined the 

financing of World War II and the manner in which we are submitting 

the budget to you is vastly more precise than that employed by the 

Defense Department in either of those tWO previous occasions. I com· 

pletely disagree with YOUi' conclusion that Congress has lost control of 

the war. Such is not the casc. You had the opportunity last year, you had 

the opportunity in 19&i, and you have the opportunity today. 10 debate 

the issue of the support of our forces in Vietnam and to turn dowli the 

appropriation requests that lie before you. 

I don't believe that it is ever wise for a department to submit to 

you requests for ap(,ropri;llions in advance of the lead times required 

for those appropriations and especially when we arc so uncertain as to 

the requirement as to not be able to documem it. That is exactly the 

condition we were in last year. I explained it very carefully to this 

committee and to other committees. You may have a different view. I 

think the process we arc following leads to the most prudent financial 

management possible under the circumstances. I believe it gives the 

Congress the greatest degree of potentia l control over the budget. I 

guarantee you that we are going to come ou t of this military operation 

with a better financial control and with less waste than was incurred in 

the Korean War. I think that result will be entirely :t reflection of the 

change in the way the budget has been prepared and presented to the 

Congress. 

Mr. Lipscomb. Mr. Secretary, why does the Department of Defense 

have a different approach 10 the budget than is required of other 

Government agencies? 

Secretary McNamara. The main reason is we are fighting a war and 

they aren't and it is absolutely impossible {OI· us to predict the actions 

of ollr enemy 21 months ill advance. 

The desire of Congress to maintain costs at a minimum level 

is epitomized in the following exchange between House committee· 

men Daniel J. Flood and Speedy O. Long. and Department of 

Defense representatives General Wheeler and Secretary McNamara. 

Mr. Flood. You know artillerymen and so do I. What about your 

ammunition? You give an artilleryman a gun and a lot of ammunition 

and he will have a ball day and night. He JUSt keeps pulling that Ian· 

yard-whang, whang, whang. What about that? 
28 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

Gencral Wh eeler. The), arc ~hooti g ;1 lot of ;ulItlIunitioll. There is 

an ample su ppl y of ;mununition. 

Mr. Flood. 15 that an answer? 

General Wheeler. I didn't know to which poilll your question was 

directed. 

Mr. Flood. I know you are not short o f ammunition. 

Secretary McNamara. The answer is that we are not short, and they 

are shooti ng II lot of :mllnunitioll, 

Mr, Flood, .lust so they arc not having fun with this hardware. 

General Wheeler, I don't think you could charactcrize it that way. 

fl.ofr. Flood, 

Mr. Flood. It is just a tlllcstion of waSte and not a question of shortage. I never thought there was a shortage. I know there was once a 

certa in line [type of ammunition) but that didn't last long, It was about 

a year now. Now it is comi ng out of your cars and you are all right, with 

an extra linc stand ing by. Therc is such a thinK as waste in war. 

General Wlu .. 'Cler. I think Cenel'al Westmoreland CllII be trusted to 

keep a propel' cOUlral over the as~ets given him, Mr. FJood. General Westmoreland [i n Saigon] is a long way from 

that hill [Artillery Hill near the demiliwrized lOne] you are talking 

about. 

General Wheeler. He is up there quite frequelllly, J was with him 

there the other day. 

Mr, Long. Is the cost of artillery shells, bullets. and that sort of 

thing a very import;IIH part or -the COSt of the war? 

Genera l Wheeler. SubstantiaL 

Mr. McNamara , It is substantial but I think in relation to polenlial 

gai n to us it is not someth ing we are seeking to hold down, We have 

encouraged our commanders to request whatever they wa nted in the 

way of grollnd ordnance and to usc it freely. 

It was evident already to budgeteers within the services that 

this type of rece ption could have been anticipated, since their 

submissions to th e Department of Defense had been carefully pared 

to minimum levels. In the case o f the Army, the Department of 

Defense had elimina ted 32 percent o f the total budget dollar value 

submitted to it by the Army, Thus. only 68 percent of the Army's 

requirements were forwarded to Congress. Whether these cu ts 

made by the Department o f Defense before submission to Congress 

were genuine attempts to provide only those funds which their 

statistics indicated were necessary or were cuts imposed to bring 

the total supplemental request within levels which might be acceptable in Congress is a question difficult to answer, 

There was on e specific point o f disagTeement between the Anny 

and the Department of Defense which resulted in almost all of the 

cuts. The budget had been based on the anticipated number o f 

troops to be supported in Vietnam, More importantly, a factor of 

tons per man-year was used to obtain the total amount of funds to 

be requested. The fiscal year 1967 regular budget had been sub-
BU1>GETING FOR WAR 29 

mitted using a factor of 5.5 tons per man-year. This was obviously 

incorrect, but the question of just what it should be was the point 

of discussion. Figures accumulated by the Army during 1966 and 

the first quarter of 1967 indicated that it should be 9 tons per manyear. The Department of Defense believed the correct factor to be 

7.8 tons per man-year. Since this is a bulk factor covering all types 

of equipment and suppli es, it is naturally a judgment decision as to 

which is correct. Even though the Army submitted a rec1ama concerning the decision, the Department of Defense factor was used in 

developing the budget. From this point on the blank check was 

obviously gone. Service submissions since have been carefully scrutinized by the Department of Defense before submission to Congress, and more and more effort has been expended to control the 

cost of the Vietnam War. Financial management and responSibility 

in this conAiCl began here a£ter the major buildup was accomplished. 

The Fiscal Year /968 Budget 

Compared to the discussions of the fiscal year 1967 suppl emental 

appropriation, the hearings on the fiscal year 1968 budget were 

mild. Congress had evidently vented its wrath during the earlier 

deliberations, and further, had been told that a change in the 

method of budget preparation had been made for fiscal year 1968. 

The major change was the estimate that the war might extend 

beyond 30 June 1968 and that continuation of the current level of 

activity would be experienced. This would negate the necessity for 

another large supplemental as had been required in fiscal ·years 

1966 and 1967. The hearings on the regular budget did bring out 

one new twist in funding which was later to generate considerable 

verbiage in the Cotlgressiotlaf Record concerning its propriety_ 

Under a program, known as AID/ DOD Realignment. the Department of Defense (DOD) was to assume some of the hmctions in 

Vietnam previously performed by the Agency for International 

Development (AID) . This was a logical shift of responSibility, since 

projects such as building roads. repairing the railway system, providing medical suppli es. construction of ports and waterways, and 

other nonnal developmental actions were just as necessary to the 

war effort as they were to the improvement of the Vietnamese 

infrastructure. In fact. many of the same req uirements existed in 

both programs. 

T he funds required to pursue the program was another matter, 

not so clearly defined. In attempting to obtain suffici ent funds it 

was sometimes dilliwlt to correlate figures which the Agency for 

International Development was willing to relinquish with the sums 
30 FINANCIAL MANAGEMENT OF THE V IETNAM CONFLICT 

requested by the Department of Defense to administer these activities. This was brought rather forcefully to light in this comment 

during the fiscal year 1968 hearings. 

MI'. Lipscomb. Regarding the AID/ DOD Realignment program, we 

have now been provided with three different sets of figures as to the 

amoulll required for fiscal 1968. The information you have provided 

the committee shows that $92.1 million will be required to carry out 

this function . 

The Office of the Assistant Secretary of Defcnse, Comptroller. has 

submilted a project listing wh ich indicatcs you will obligate $97.8 

million for this progrO'lm. However. 1\fr. [Rutherford M.l PoalS. Assistant 

Administrator. Far £.1.81, Agency for International Developmcnt. has 

advised the Subcommittee Oil Forcign Operations that the Army will 

only require $50.4 million to carry out this activity. 

For instance. yoUI' SUI)j>orting information states you need $5 million 

for MEDCAP teams. T Ie Office of the Assistant SCi:retary of Defense 

shows it at $5.~ million. but AID estimates that :tt only $~ million. Can 

yOll tell the committee which <Ire the proper figures? 

The response was, as expected, that the Army's figures which were 

currently under consideration were the correct ones and stated 

the exact needs. Even though there was considerable comment, 

there is no evidence thal Congress seriollsly balked at approving the 

requested funds. 

Although the fiscal year 1968 budget had been prepared using 

different guidelines. there ,"'as a need for another supplemental as 

the year progressed. ItS size, however, was only approximately 

one-third that of the supplementals for fiscal years 1966 or 1967. 

Whether Congressmen had resigned themselves to the supplemental 

form of budgeting .. or they were relieved that it was so small in 

comparison, is not clear. but this supplemental passed virtually as 

requested with none of the innuendoes conceruing the possibility of 

mismanagement of funds which had characterized the fiscal year 

1967 supplemental hearings. There were instances when the Army's 

obvious attempt to institute a form of financial management was 

lauded by certain members of the subcommittee. It was evident 

that some measure o[ control had been initiated at least and that 

we were truly underway toward having more meaningful data on 

which to base future submissions. 

The Fiscal Year 1969 Budget 

The fiscal year 1969 budget discussions were equally mild, 

although the budget represented a slight increase over fiscal year 

1968. The budget plan shown in Chart 2 was submitted to Congress 

to illustrate the budget plans for fiscal years 1967, 1968, and 1969. 
BUDGETING FOR. WAR !l 

CHART 2-DIRECT BUDGET PLAN IN MILLION DOLLARS 

P.o.r.m 3.356.1 • Fllu! V ... 1961 

""'" 3.152.8 • Fllc.1 V ... 1968 

o~,.u,.. Fon;" 

3.89].6 • FIK.I V .. r 1969 

III 605.5 

'''' = 593.9 Ttllnlni Acli"ill .. • 563.3 

1.123.2 

"" 1.111.4 

C,nt,.! Supply 1.108.6 

"" ~ 496.6 

Dtlpot M.I,.iel M,lnt,n,ne, 

,nd Support Acll"illes ~ == "'" 160.4 

"" 

12 299.8 

M..:IrUI Ac:t;vltlH = ]55.5 

~ 310.1 

"" ~ 694.1 

Army Wid. Actl"ill .. t= 155.8 

~ 191.9 

115.0 

Army "" R.SI<v. and ROTC 118.3 

110 .• 

Approp.I,tlon Tol.1 .~" .. '. 

1.290 .• 

1.9U.3 

.. '.m 

8.205.0 
32 FINANCIAL MANAGEMENT OF T HE VIETNAM CONFLICT 

Also indicated on the appropriation total lines are the costs for 

Vietnam. The explanation wh ich accompanied this illustration 

emphasized the larger numbers of personnel planned for support in 

1969 than had been accomplished in 1968 with a modest increase in 

funds required. In fiscal year 1968, the active Anny strength was 

quoted as 1,477.525, compared with an anticipated support requirement for 1,501,397 during fiscal year 1969, while an additional 39,000 

free world military armed forces were envisioned. The realignment 

prOgr.tm received the anticipated scrutiny during the hearings. and 

the Army was asked to specifically identify costs with programs fOI" 

the new fiscal year. The Army's submission is shown in T able J. 

The fiscal year 1969 supplemental arrived on schedule as expected and was made quite acceptable by two factors completely 

unrelated. The first was that it was smaller than the request had 

been for the fiscal year 1968 supplemental, and, second, there was 

much discllssion at this time concerning the Viemamization program, which was looked upon by many as the beginning of the 

phasedown of the U.S. presence in that country. The actual submission date for this budget was 17 January 1969. Even though the 

initial amount requested was less than the fiscal year 1968 supplemental . additional changes in policy by the new administration 

called for re·evaluation of the request. Reductions were presented 

to Congress formally on 27 March 1969, and during hearings other 

areas of possibl e reductions were identified. Apparently, Congress 

adopted a wait-and·see attitude to determine just exactly what 

would be required to fin ance the needs of the Department of 

Defense for fiscal year 1969. The supplemen tal appropriation was 

finall y passed on 22 Jul y 1969 after the end of the fiscal year, and 

represented approximate ly a 15 percent reduction from that originall y requested in January. The end of massive budgets LO support 

this increasingly unpopular war was in sight, but the problems of a 

diminishing budget for the Army had just begun. 

New Problems in the Seve"lies 

At the time of submission of the fiscal year 1970 budget. withdrawal of American troops had already begun. The Army found 

itself in the unique position of trying to anticipate the phaSing of 

troops out of Vietnam, which proved just as difficult as projecting 

the buildup in many instances. T his was somewhat paradoxical, 

since we had just accumulated quite accurate data on which to base 

budgets for continuing activity in Vietnam. We even had some 

factors concerning the costs of increasing American troops in 
BUDGETING FOR WAR 

TABLE 8-REAI..ICNMENT PROJECl"S 

Dncriplion o r AID/ DOD 1'.0)0«' 

( In mlliionf) 

Amount 

I. MEDCAP: Supply medicines for Military Civic Action Teams. The'te sup· 

plies are UJCd by US, RVNAF and FWMAF medical pcor~ormC'l conducting 

the Medical Civk Action Prognm (MEOCAP) ....................... $ 3.0 

2. Medical ,upply: Provide' (unds for prowrcment of common IUC medical 

,upplies in treating civilian population by medical pcorsonnC'l working for 

the Ministry of HUlth. AID and DOD will.hare oosu equally (50-SO).. 15.8 

3. Railway ROOtage rcplaoemmt: DOD will assisl Ihe GVN Directorale of 

Vietnam Railway SYllem, to COnlinue impic.mentalion of Ihe USMD 

planned restoration of VN railroad •. Assislanot will consin of commodity 

IUpport and technical usistance ..............................•.. . 3.8 

4. Commodity .upport of GVN polior: To provide ,upplies or funds for financ· 

ing items uKd by the National Polioe FiC'ld Forcu invoh'ed in para· 

military opcoradons ............................. .. ............. ..... . 12.4 

5. Highway mainlenanoe: Originally thit program wu 10 furnish supplies and 

lechnical usittance 10 the GVN Ministry of Public Workl for the Direc· 

torale General of Highways. It has been expanded to include contractor 

and troop malnlenanor of lOme major highways and SIrCCU! .... 23.1 

6. Poru and waterwa)'s, commodity ,upporl: Commodity a"i,ance for rehabil· 

itation and dcvC'lopmenl of RVN porU! by Ihe' GVN Ministry of Com. 

munications alld Tnnlport. AID COlltinuCi to provide t~hnical auislance 

and training but DOD finanoes Ihe commodity support ... .... ...... ... .8 

7. R.evolutionary dClo'e!opmenl: DOD providCl commodities 10 , upporl 3 mili· 

tary albin proj~u: (I) Military Civic Action; ('2) Popular FOrte De· 

pendent Housing; (5) People's Self Defense .•........................ .M 

8. Vietnam TV: DOD financu the Vietnamcac Television Service as an illle· 

gratcd adjunct of the U.s. Armed Forcu Radio and Television Service 

and;u a sepantely managed program by JUSPAO. As an C'l5ential psychological warfare dfort JUSPAO ro-onlinalt$ whh GVN Ministry of Infor· 

mation and Open A~ and Ihe Dir~lor of Television ................ 2.5 

9. Chieu Hoi program: ProvidCl I'ncourageml'nI 10 NVN defcctors and care. 

Including educationJI program for thete defcaon .................... 2.0 

10. Pori handling and oft.loading charge: Forml'rly reimbursed by AID i. IlOW 

budgeted ;u a direct Amly expense ......................... ... ...... 7.0 

II. Sut.btl'nce, consumable. and associated air lransport lor millla!,), personnel 

farailiCi and refugccl ................................................ 5.3 

Total ........................................•................. $78.7 

Vietnam. Now, the whole picture had changed, and our budget 

heame a guessing game again. 

The hearings on this budget brought to light a problem which 

had heretofore been lost in all of the activities to support our 

troops with everything necessary to carryon combat-excess supplies 

and equipment. I will discuss the matter of "push" shipments of 

supplies and the methods used to insure that no shortages existed 

in Vietnam in a later chapter. The Army had just begun to identify 
!l4 FINANCIAL MANAGEMENT OF THE VJETNAM CONFLICT 

those items which were in long supply. and this became a subject 

for debate during {he deliberations on {he fiscal year 1970 budget. 

Mr. Robert L. Sikes. Member. House Committee on Appropriations, issued this prophetic understatement during the House appropriation hearings: "You will get some criticism for shipping too 

much material in there, but I would rather err on the side of too 

much than on the side of not enough." The criticism did, in fact, 

materialize, and in the very same hearing. The following excerpt 

is only one example: 

Mr. Lipscomb. I am gelling a little tired of working on the supple. 

mental budget basis. Mr. Chairman. The next thing we know we will 

have another supplenlental budget ill here that we have got to work on 

in a hurry in order to get help to our men in Vietnam. It just seems 

inconceivable to me that with all the computers. accountants, and technicians and all of the compiled statistica l data that we have over in the 

Pentagon. or ha"e had. that now at this date we are told of a great 

oversupply and oventockage. an excess of stock; and yet the combat 

intensity over there. as far as I can tell. is still pretty high. It just does 

not make sense to me. 

But I should be able to think it out. probably. 

General Taylor. No. sir. May I respond? 

Mr. Lipscomb. Yes. I would be glad to have you respond. 

General Taylor. Mr. Lipscomb, this is the fim time in the history 

of our country that we have ever conducted a war where we have 

attempted for the first time to institute in an active theater of operations 

any type of financial inventory accounting or actual monetary controls. 

Even this was not started until. I guess it was. 1968. 

General Hayes. 1968: right. 

General Taylor. 1968. after Ihe war had been Rai ng-on for a period of 

2 yean. we are now anempting to do lhis. I think we are well on the 

way. But lhis is part of our problem. We have never attempted to have 

an actual inventory of supplies on hand in an active theater of operalions. nor have we attempted in the past to maintain a strict monetary 

accounting system in-country. We actually have not instituted financial 

accounting. per se. in-coumry. but it is in the theater at Headquarters. 

USARPAC at this particular time and we are now starti ng to make 

improvements. I am not trying to tell you that we will be perfect 

because I would be foolish. 

Mr. Lifscomb. I do not expect you to. You just happen to be across 

the table. am not being critic:II of the present officers but I have never 

before been under the impression. sitting on this side of the table. that 

we have been other than carefull y prudent about appropriating money 

and sending supplies necessary to our men over there. I thought thal the 

Department had the best available system to do this-to get these supplies over there. In fa(,t. I have thought from time-la-time that we have 

been too close in what we sent. There was a time a few years back they 

were short of clothes. and they were short of ammunition in some areas. 

You remember the shortages talk. Well. at that time we were being 

criticized because we were holding it tOO much in line. So I have never 

had the impression that we have been just shipping supplies out. tires 
BUJ:X;ETING FOR WAR 35 

and all the rest of these things. without adequate authorization or adequate invoices and whatever you use to account. 

Not only did the Anny experience some difficulties in justifying 

requests for funds in Congress, but analysts in the Department of 

Defense disagreed in many areas with the anticipated costs for 

operations during the 1970 fiscal year. The original operation and 

maintenance appropriation of Budget Program 2000 submission by 

the Army to the Defense Department totaled $3,662.3 million. Reductions identified by the Department of Defense were $712 million. 

Reclamas were $327.1 million, of which $23.7 million were restored. 

Table 4 is a detailed listing of the Office, Secretary of Defense 

(08D) I adjustments to the original submission, the Anny rec1amas 

by projects, and those which were restored. 

For the first time since fiscal year 1966, no supplemental was 

required for the 1970 fiscal year. This was made possible to a large 

degree by the decision to further reduce the number of troops in 

Vietnam during the year. The required funds were supplemented by 

TABLE 4-AOJUSTMENTS, RECLAMAS, REsToRATIONS 

( In thouoa...s. of doU .... ) 

Operation. cactical forces aircrafl .......... . 

Ocher JUpport Iccivilic:s ............... .. . 

Revolucionary development cadre. Viecnaro . . 

]CS directed and co-ordinated exercbc:t ..... 

Claal6ed projecl ........ . .......•......... 

Republic of Viemam Jupplies ~d materiel .. . 

Air pollution abatemenl program ......... . 

Array civil defen.e mining ............... . 

Real propeny roaincc:nance ............... . 

Automacic data procasing ................ . 

Reaclor .upport a(livities ......... _ . . ..... . 

Air Defense Force. ...............••...... . 

Sentinel system ........................•. . 

Man.year cot:u ................... . ..... .. . 

Military assistance activities ............... . 

AdminiJtracion and U50Cialed activilies .... . 

Reducclon 01 cosu in Europe ............. . 

General purpose: lorce, ..................•. 

Addlclonal l ubmiMlons . . ........ .. ...... .. 

Strategic and ReseI'Ve FOf'CCt air dden.e .... . 

General purpoec: force, air ddc:ntc: ......... . 

Civilian c:mploymenc ..................... . 

Soutlic:aJt Asia audcion and consumption , '" 

MiJa,lIanc:ous .................. . ....•.•.. . 

Total .. . ..•........................•. 

_12,800 

_7.79'1 

+ 2,1)94 

_ 9,000 

+50 

_252.700 

_228 

-92 

_M,m 

_11,400 

+1.700 

-"'" +'" _2.859 

+6.700 

- 51-"" .05 

_15.5.10' 

_19.&65 

_10,624 

-. .., _ '.169 

_160,000 

-58' 

711 ,95() 

N." reda.",. 

,.m 

9,100 

211,100 

!O " .... 11,400 

_1.000 ". -" 

15.222 "" 

7,499 

9,100 

10.286 

9 .... 

.s.t69 

'27,087 

+22' 

+10,889 

+IO,SOO 

+2,0!I2 

_552 

-25' 
36 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

the identification of more excess supplies and equipment which 

could be used by other commands, thereby reducing their need 

for new obligational authority. Financial management improved 

throughout the year, and the Army was finally bringing all aspects of 

funding and supply under firm control. As evidence of the renewal 

of interest in eliminating unnecessary spending, a Chief of Staff 

Action Memo was issued by Headquarters, Military Assistance 

Command, Vietnam, to all commanders. It urged conservation of 

resources in these words: 

During fiscal year 1970 there has been increasing pressure to reduce 

spending within DOD. This has been evidenced by the receipt of actual 

funding authorizations which are far below previously budgeted reo 

quirements. From all indications to date, the austere funding limitations 

will continue for the next several years. Accordingly, efforts must be 

initiated now to effect substantial reductions in all elements of cost and 

to initiate a program that will insure the conservation not just of funds, 

but all other MACV resources as well. 

With the continued withdrawal of troops and renewed awareness 

of cost by commanders, the fiscal year 1971 budget reached a new 

low during the conflict and was only lightly challenged by Congress. 

men. The major area of discussion concemed the fact that many 

members of the Appropriation Committee did not feel that we were 

reducing the budget enough in light of the reduced activity in 

Vietnam. They harked back to previous hearings when the Anny 

had presented their total costs for Vietnam, and the reeling seemed 

to be that we should be able to live at pre-Vietnam levels of funding 

when all of the troops were withdrawn. The indication was present 

that we were not headed toward that level at a rate consistent with 

the draw-down of troop strength. The response by the Anny to this 

line of reasoning was based on several factors, induding pay raises 

for civilians, training and maintenance which had been deferred 

due to the need for funds in Viel11am, rise in cost of supplies and 

equipment. and costs associated with actions which would have to 

be completed in connection with the withdrawal, such as excess 

supply identification and distribution. It was made exceedingly 

dear to the Congress that the Anny could never suppon the same 

troop strength which existed in 1964 with the same number of 

dollars which were appropriated in that year. This method of 

justification had prevailed since the hearings on the fiscal year 

1971 budget. 

A Review of Army Actions 

In submitting the 1972 fiscal year budget to the House subcommittee, the Assistant Director of the Anny Budget, operations 
BUDGETING FOR WAR 37 

and maimenanct:, Office of tht: Comptrollt:r of tht: Army, Brigadit:r 

Gt:nt:ral John A. Kjellstrom, providt:d an insight into the actions 

takt:n by the Department of the Army to establish a viable financial 

management arena for the operation and maintenance appropria· 

tion. His remarks included the following: 

I would like to highlight some of the efforu we have initiated within 

the Department of the Army to improve the management of the 

Operation and Maintenance, Anny Appropriation. 

Fi,lQncial Management 

In January 1970, an Army Financial Management Committee was 

convened at the direction of the Vice Chief of Staff of the Army. This 

committee, which was chaired by the Comptroller of the Army, was 

charged to conduct an examination of the Army's organiza tion and 

procedures for Financial Management and to make appropriate r«om· 

mendations as to how they could be improved. The r«ommendations 

o[ this commitl/,:t: have resulted in significant changes in the Army staff 

financial management organization and procedures. The thrust of the 

reorganization was to improve the capability to review critically the 

total Army program and budget request so that the very tOp Army 

managers could make timely decisions concerning the allocation of 

funds between all programs ;lIlrl appropriations. It was the recommendation of this committee that resulted in assignment of responsibility for 

OMA to the Assistant Dire<tor of Army Budget in order to allow the 

DirectOr to concentrate his attention to the entire Army Budget. These 

recommendations have resulted in better balance between appropria· 

tions and beller budget justifications. 

Operation find Mainfell,mr,.. Army A,lfllysis 

A second effort 10 improve the management of the Operalion and 

Maintenance. Army appropriation was the formulation of an in-house 

Department of the Army group to conduct an indepth analysis of the 

appropriation. The objective of the analysis was to improve budget 

development te<hniques and procedures to ensure that programs funded 

by this appropriation ~re sound and balanced. 

The major effort was directed toward development of cost esli· 

mating techniques which wou ld facilitate the rrogram and budget 

development of this appropriation. As a result 0 this effort. new cost 

estimating techniques. which relate costs to military strength supported. 

have been developed and are being validated at the present time. This 

effort also provided new insights into the relationship between mission 

and base operations runds. 

Mission funds provide support for the soldier, his unit and other 

supporting activities without respect to their geographical locations. 

For example. mission funds support the divisions located in the Con· tinental United States. Should one of these divisions be deployed to 

reinfortt the North Atlantic Treaty Organization (NATO) I the same 

mission funds would support the division in Europe as in the United 

States. These funds prOVide for command and control, individual and 
38 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

unit training, operating supplies and equipment maintenance. Base 

operations funds, on the other hand, provide housekeeping services for 

the soldier, his unit and other su pporting activities at a specific geo· 

graphical location. Referrin$ to the earlier example, these funds pay 

for the operation of installations where the divisions are located. These 

cosu continue as long as the installation is open, whether or not a 

division is located there. Base operations funds provide essentially the 

same services that a city provides to its residents plus services peculiar 

to a military organization. 

The group researched and st udied the validity of hiSLOric;11 work· 

load indicators such as student loads, items processed, short LOns shipped, 

and patient loads. In addition, they studied the application of the ac· 

cepted business practice which recognizes that some cosu vary with 

volume or output while other costs remain essentially fixed. This was 

found to be applicable in many of the OMA programs, but it was 

particularly so In the force related programs. The group found that the 

dollar requirements in these programs are quite variable and relate to 

the average number of military personnel in the Army. 

nle group also found that many of the costs which OMA supports 

cannot be related directly to the average number of military personnel 

supported. These costs, which we have chosen to ca ll "static costs," 

closely resemble what the business world calls fixed costs in that they 

do not vary directly with volume or output. A good illustration of static 

costs occurs in base operations where costs vary only somewh at with 

volume or output but do not vary in direct proportion. For example, 

the annual base operations cost to operate fort Hood, Texas, which 

supports two divisions, is approximately $27 million. If we.. moved one 

of the twO divisions from Fort Hood, we wou ld have reduced the troop 

strength by one half, but would not be able to reduce the base 

operations by one half. The reason is that some costs continue 

whether there are 10.000 or 20,000 soldiers at an installation, For example, there are the same miles of roads to maintain and essentially the 

same number of buildings to repair. Since the buildings remain, the cost 

of fire protection remains the same. The base services, such as com· 

missary. laundry and dry cleaning, can reduce some costs by reducing 

the number of people they employ and. to some extent, by limiting the 

hours of operation. However, iF the level of services is to be maintained, 

the costs cannot be cut in half solely because the military population 

has been reduced by one half. 

I believe the Army's efforts in this direction hold great promise in 

improving the management of manpower re lated progt"ams as well as 

our base operations activities. We are continuing within my organization 

to refine and improve these management techniques. I would like, however, to emphaSIze that this approach is not designed to replace our 

proven workload indicators nor our field commanders' estimates. It is 

an additional management technique which has been used along with 

many others in developing this request. 

Contintntal Army Command Bast Operations 

A third effort to improve our management began in June 1970 when 

the Comptroller of the Army, in coordination with the Commanding 

General of the Continental Army Command. undertook an analysis of 
IlUDGETING FOR WAR 39 

base operations at installation level. The objectives of the analysis were 

to identify the reasons for the wide variance in base operations costs 

at various installations in the ColHinenta l Army Command. The analysis 

also sought to establish a method for analyzing installation base operations funding levels in relation to a standard of performance. Although 

we do not altempt to manage each installation from the Pentagon, we 

do, however, assist the installation commander in improving the management of his resources. This study was directed at assisting our field 

commanders as well as our own overview of these costs. 

The study identified the k.ey factOrs which inAuence the base operations fund requirements and account for the differences in cost between 

installations. Some of these detenninants are: 

-The number and type of military personnel assigned to the r;'st. 

-The number, type, condition and use of real property facihties. 

For example, physical size of the POSt, the training areas and temporary 

versus permanent construction. 

-The density, type, condition and use of vehicles, weapons and 

other equipment items. 

-Geographic location in tenns of weather conditions, wage rates 

and transportation charges. 

-Policies, directives, and priorities emanating from the installation 

commander or high commands. 

It was recognized that, because of these detenninants, each insta llation is unique in its requirements for base operations funds. In view 

of this, it is necessary that the character of each installation be recognized 

when resource decisions are made. 

Using data obtained by reports and field visits, we have been able 

to develop specific base operations cost levels for 25 maior and 17 lesser 

Continental Army Command installations. With the methodology developed in this study, the Commanding General, Colllinental Army 

Command, who is responsible for managing the installations, will con· 

tinually validate, update, and expand its application. 

The real value of this technique, when fully developed, is that we 

will have a valid standard against which to measure performance and 

develop base operations estimates. This standard is designed to relate 

workload to dollars received and, at the same time, provide adequate 

support to our soldiers. 

The methodology developed in this study has been determined to be 

applicable to both mission activities and base operations world-wide. 

We have JUSt recently undertaken the extension of the study with personnel resources presently assigned to the Office, Comptroller of the 

Army. 

Transportation 

One of the most serious financial management problems facing the 

Army today is that of determining and managing second destination 

transportation. As you recall, we found it necessary to reprogram in 

excess of $100 million into the transportation account in order to meet 

our Fiscal Year 1971 requirements. We believe the Fiscal Year 1972 

request is correctly stated; however, we are continuing our efforts to 

improve transportation management. 
40 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

In January of this year, we formed an in-house group to examine 

ways for improving Ihe financial management of the Army transporta· 

tion program. The group is headed by a genera l officer from Ihe Office 

of the Comptroller of the Army and has representatives from other 

Army staff agencies and field commands. The group's recommendations 

are scheduled to be completed by May of this year. 

Supply Support 01 Forces in Vit:lnam 

The Army has, for several years, devoted a great deal of effort to 

managing the procurement of operating supplies for our forces and 

Allies in Vietnam. We have in operation in Vietnam. within the depot 

system, a Financial Inventory Accounting System comparable to that 

utilized throughout the rcst of the Army. We did not implement a 

Financial Inventory Accounting System during the early stages of the 

conflict, but our experience indicated a firm requirement for financial 

information on supply levels. issues, and receipts. The Commander, U.S. 

Army, Vietnam, now provides for Headquarters, Department of the 

Army, information 011 supply operations on a monthly basis. This data is 

utilized at all echelons to carefully manaJ;e our financial requirements 

for supplies in support of our forces in Vietnam. Since Fiscal Year 1968. we have had the Centralized Financial Man· 

agement A~ency located at Headquarters, U.S. Army, Pacific in Hawaii. 

This orgamzation is the financial manager for all Operation and Maintenance. Army funded supplies and materiel purchased in support of 

U.S. Army Forces, Republic of Vietnam Anned Forces. and Free World 

Military Assistance Forces in the Republic of Vietnam. In the formula· 

tion of the budget request, requirements for Southeast Asia supplies 

were separately determined and reviewed. 

The computation of requirements involves the use of a zero based 

consumption budget using actual monthly dollar consumption. The 

fact that the Vietnamese and ot her Free World Forces consume fewer 

supplies than a U.S. soldier is considered in the computation formula. 

Once the total requirement has been determined. we then determine 

how much of the requirement ca n be satisfied by utilizing assets already 

on hand and how much will require new obligational authority. 

For example. in Fiscal Year 1970. the Army was able to use assets 

on hand in the amount of .$21$1.5 million against a total consumption 

requirement of $1,404.4 million. The Fiscal Year 1971 plan calfs for 

asset utilization in the amou nt of $2 15,4 million against a total con· 

sumption requirement of $7511.4 million. The Fisca l Year 1972 budget 

contai ns a planned asset utiliz;Jtion figure of $1Q1.8 million agai nst a 

total estimated consumption requirement of $5115.9 million. The lower 

asset utilization plan for Fiscal Year 1972 is the result of our intensive 

efforts to achieve better supply and financial management over our 

inventories in support of Vietnam and reduce our excess supply ~ition. 

As a result of aggressive and intensified supply and finanCial man· agement actions, the Army has, in the past two fiscal yea rs, been able 

to provide supplies to our forces in Vietnam worth over $1.8 billion, at 

a cost in curren t years obligational authority during these two years of 

just slightly over $U billion. Because of its importance to the support 

of our forces in Southeast Asia. this supply program is intensively man-
BUDGETING FOR WAR 41 

aged and undergoes frequent personal rcview by the Secrctary of the 

Army. This intensive management has paid dividends by allowing the 

Army to take advantage of savings and long supply utilization to offset 

what might otherwise be new dollar requirmlents in support of Southea5t Mia. 

A Reputation lor Responsibility 

The Army has emerged from the Vietnam conflict with a 

reasonably good reputation with Congress. Even in the years when 

frustrations resulted in sharp comments and sometimes ridicule, it 

was the Department of Defense which bore the brunt of the attacks. 

Numerous instances arose, in which Army budgeteers were more 

successful in obtaining funds from Congress than they had been 

with their requests at the Department of Defense level. The general 

impression created throughout was that tbe Army was making 

every effort to maintain a reasonable degree of financial control 

while insuring that no commander in the field was deprived of 

anything absolutely necessary to pursue the war as he deemed 

necessary. This is a difficult tightrope to walk, but the dividends to 

be derived in future budget submissions wtll be evident. At least 

with Congressmen, the Army has no credibility gap at the moment. 

I think it is also evident that the Congressmen were walking the 

same tightrope with their constituents. There will always be competition for the limited funds available, but with the reputation 

developed through this period of extreme turbulence and the institution of measures such as described above, the Army should be in 

an excellent position to defend its requirements. While some belt 

tightening will be necessary. proper financial management should 

provide for a strong, responsive force. 
CHAPTER III 

Accounting for the Conflict 

Most, if not all, governmental accounting systems concentrate 

on fund control, almost to the exclusion of accounting for managerial purposes. The system used by the U.S. Anny focuses on fund 

control and aims at reporting to Congress how appropriated funds 

are spent. Congress has persistently displayed a keen interest in 

financial operations and seldom has relinquished tight controls or 

the need to account for funds. It would be untenable to question 

the interest of Congress when the 1969 fiscal year defense budget for 

support of Southeast Asia reached $29 billion. Given that the Army 

was charged with maintaining an accounting system designed, 

primarily, to function in a stable, peacetime environment, how was 

the task to be accomplished in a wartime atmosphere? 

Accounting systems rely basically on capturing data closest to 

the point of origin and as soon as it is available. The fact that most 

of the information was generated in a tactical environment by 

nonadministrative oriented personnel presented a perplexing problem. The Army Chief of Staff established the policy. early in the 

conflict. that the Army in Vietnam would be relieved of as many 

administrative responsibilities as possible. This decision established 

a sizable roadblock and interfered with a basic accounting principle. 

It meant information would somehow have to flow to a remote 

accounting operation through a pipeline using minimum staffing. 

Army financial planners began a search around late 1964 for 

alternatives as to where to locate the accounting operation and how 

to collect data. Basically there were two alternatives: to locate 

somewhere in the continental U.S. or to locate somewhere in the 

Pacific. Proximity to the theater of operations weighed heavily in 

favor of a Pacific site. Okinawa appeared to be an excellent choice 

as the logistical system was centered on that island outpost. Further· 

more, some accounting was being done for the Military Assistance 

Advisory Group in Vietnam although the funds were allotted to the 

Military Assistance Program and transactions mainly involved 

reimbursement to the operation and maintenance, Army, allocation. 

Hawaii too was considered but decided against, although resources 

existed and several accounting operations were in being. 
ACCOUNTING FOR THE CONFLICT 43 

Once a site was selected, the job of setting up a collection system 

loomed high on the horizon. Then~: were too few members of 

finance units in Vietnam. The units further had been designed to 

be more capable of paying the troops and selling piasters than of 

operating an accounting system. Comptroller staffs were almost 

nonexistent or constrained by size. The logistics system was primitive and lacked centralized control. Initial troop deployments 

correctly concentrated on combat units to the exclusion of support 

troops. It was to be a while before the support elements caught up 

with the volume of the war. With all these hurdles, the necessity 

for reporting to Congress prodded the Army into developing a 

workable system. In the end, Okinawa was chosen because it combined proximity with availability of data. The latter, it was decided, 

could be generated as a by-product of the supply system. Since 

logistics consumed most of the Army operations and maintenance 

funds, the planners believed the residual expenditures could be 

accounted for with minimal effort. 

The Early Days 

Thus, Okinawa was chosen, and accounting for Vietnam expenditures appeared imminent. In a normal situation, the operation and 

maintenance funds for the Army Row from Congress through the 

Department of Defense, the Department of Army, special operating 

agencies, and regular operating agencies to the final place where 

they are obligated. Okinawa had an operating agency, so again it 

appeared a good choice. The operating agency, it should be noted, 

is just an administrative activity which consolidates reports and 

channels funds. The major difference with Vietnam is that it did 

not receive the normal "allotment of funds" as would a stateside 

installation. This would involve more sophisticated accounting and 

budgeting in-country than allowed by Department of Army policy. 

Thus, the nonnal chain was broken at its bottom link. 

Constrained by this departmental policy. an alternative vehicle 

to the allotment of funds was needed to inform the commanders in 

Vietnam of how much they could spend. This was not a unique 

problem. In numerous cases funds are required by an installation to 

finance a unit or activity which is absent from the installation. 

Therefore. several methods of funding or financing these absent 

aCl~\lities have developed. One of the devices is an "Advice of Obligation Authority." This is a cumbersome document at best, chaos 

at worst. Let us digress for a brief explanation of the obligation 

authority. The home installation issues a Department of Army 

Form 14-114 to the installation where its absent activity is tempo-
44 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

rarity located. The authority is for a stated period and amount. 

Funds are normally spent for local procurement items required 

immediately and for items of a nonrecurring nature. The authority 

is usually limited to a thirty-day period from the date of issuance. 

The period may be extended to ninety days but normally no longer. 

A record of all obligations is maintained on the reverse side of the 

form. At the end of each month all supporting documents are 

forwarded to the issuing installation where the transactions are 

recorded in the formal accounting records. Almost immediately 

it was recognized that Okinawa would be inundated by the flood 

of fiscal papers flowing toward the island. Eventually, a high of over 

fifty million dollars was positioned in Vietnam under the obligation 

authority. This is not much money compared with what was 

eventually spent on the war, but the sum is significant when the 

number of documents supporting obligations for this amount is 

considered since an obligation authority is normally used for small, 

limited transactions. 

To finance the supplies for Vietnam, it was decided that the 

stock fund would be used and reimbursed from the Army operation 

and maintenance allocation. using establ ished Army procedures. 

The stock fund is a revolving or working capital fund and is one of 

the many types of funds used in the federal government. The basic 

concept of any revolving fund is that the capital of the fund 

theoretically remains constant since there are established procedures 

for adjusting the capital. At the time of initial capitalization, the 

fund is given an allocation of funds with the U.S. Treasury. The 

Army Stock Fund uses these funds to procure inventory for resale. 

Thus the stock fund is genera ll y composed of funds with the 

Treasury and of inventory. When supplies are procured, there is 

an increase in the amount of inventory, but since payment must be 

made to the source of procurement. there is a corresponding decrease 

in funds with the Treasury. When a sale is consummated, there is 

a reduction in the amOUnL of inventory; but since the customer 

must pay for the items received, there will be a corresponding 

increase in funds with the Treasury. Normally. supplies are purchased by the major command stock fund from Army Materiel Command and the Defense Supply Agency. These act as wholesalers and 

purchase the supplies from civili an producers. T he command stock 

fund then retails or sells the supplies to the users and is reimbursed 

from the user's funds. 

One requirement for an orderly interface, the common boundary 

of different organizations, is that the users must estimate, rather 

accurately, their needs for the fiscal year. This requirement suffered 
ACCOUNTING FOR THE CONFLICT 45 

from the impact of a 1965 memo from Secretary o( Defense McNamara. At that time. Mr. McNamara said that unlimited appropriations were available to finance the U.S. involvement in 

Vietnam. This policy was reiterated later by the Secretary during a 

visit to Headquarters. Pacific Command. With a blank check, and 

no supply discipline to constrain requisitioners, forecasting was almost impossible. Compounding the problem was the lack of supply 

accounting. Many requisitions were probably submitted without an 

underlying requirement because no one knew what was available. 

The stock fund was never furnished accurate forecasts, and the 

supply requirements were overwhelming. Also, the troop level 

increased so rapidly that the financial procedures could not keep 

pace. Financial managers in the theater had no idea at what rate 

troop levels would accelerate or what the final base line would be. 

Other procedures complicated a tenuous situation. "Push packages" prepared by the Army Materiel Command were being shipped 

automatically to Vietnam and Okinawa, and Army operation and 

maintenance funds were being charged. The push shipments were 

packaged by the various National Inventory Control Points and 

sent to Vietnam without processing requiSitions. National Inventory 

Control Points are organizational elements of a wholesale stock 

fund assigned responsibi lity for integrated mat~riel inventory management of a group of items. The packages were assembled based 

on engineering estimates, experience gained from other theaters. 

and the end item density or the level of supplies needed for sustained operations. The logistical concept and rationale for push 

packages is probably sound but presented budgeting and accounting 

problems. For example, demand data were sometimes not recorded, 

so that the pipeline could be filled. In many cases, before the push 

package could be identified and supplied to the customer, he would 

have initiated requisitions, thereby inflating actual demands on the 

National Inventory Control Points in the continental United States. 

Another technique devised was (he "Stovepipe." This was a 

management technique designed to supply special types of equip· 

ment such as for missiles and helicopters. Requisitioners dealt 

directly with U.S. suppliers and by·passed al1 normal supply channels. Once again. the goal of expediting supplies was attained at 

the expense of financial management. This idea proli£erated until 

there were over ten systems all submitting bills to Okinawa. These 

logistical solutions rurther degraded the accounting system's integrity 

and added to the problem of keeping the stock fund liquid. 

Additionally. shortages of qualified personnel and data processing 

machines combined to make accurate projections of stock fund 
46 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

requirements impossible. Sales data were not recorded promptly 

nor accurately, thus delaying reimbursement. Cash availability 

became critical and at times the fund was illiquid. This was in 

violation of U.S. statutes which were later changed. Now (1972) 

cash must exceed accounts payable only at the home office or head· 

quarters. This legislative change eased conditions somewhat. A 

complicating factor was that obligation authority was often in· 

sufficient to procure items from inventory because of poor forecasting 

and inaccurate supporting data. Chart) shows the financial environ· 

ment in which Okinawa was operating. This can be compared with 

Chart 4 which shows a prototype financial network, In essence, just 

bringing all the fiscal paper together at Okinawa was a major 

problem, Processing the paper once it was received was hindeTed 

by limited automatic data pTocessing equipment and numeTOUS 

breakdowns of this equipment. The hectic planning and the failUTe 

to consider all aspects of the potential operation dealt the coup de 

grace. One of the most important aspects was the shortage of avail· 

able personnel. Individuals capable of operating the system .were in 

short·supply and sufficient numbers could not be hired. Thus, a bad 

situation worsened from the start. 

Confusion was not limited to Okinawa, Some Army supply 

activities used their own funds obtained from the Department of 

the Army; others requested funds from the U.S. Army, Pacific, to pay 

for issues to U,S. Army, Vietnam, or requested bills to be forwarded 

to Vietnam, Okinawa, Hawaii, and many separate offices in the United 

States for payment. It was not known if the issues should be billed to 

stock funds or consumer funds. Requests were received from many 

sources for funds to support U.S. Army, Vietnam, issucs; these 

requests could not be refuted or verified, The result was that funds 

were widely dispersed; piecemeal funding actions became the rule; 

and the overall Vietnam budget, fund requirements, and responsi. 

bilities could not be established. Budgclary aClions became so 

numerous that funding actions had to be handled on an emergency 

basis to mect the support requirements. Thus, a current stalus of 

funds in support of U.S, Army, Vietnam, could not be determined; 

requirements could not be identified or forecast; adequate controls 

could not be exercised to assure that the U.S. Army, Vietnam, 

supply support funds were actually being applied to this purpose; 

nor was it possible to "pin down" information with regard to total 

Vietnam support costs, 

The situation needed change which was soon coming. During 

1966, the Department of the Army completed a study of the U.S. 

Army, Pacific, logistic system in support of forces in Vietnam. This 
CHART 3-OKINAWA FINANCIAL MANACUIENT ENVIR

NUMER

SPECIA

SYSTE

ONG",SS 

B '0' rSo I DA 

(NOW OMS) 

'L __ ---,J 

USARPAC 

(SPECIAL 

OPERATI N

AGENCY) 

APPROPRIATES APPORTIONS SUS.APPORTIONS ALLOCATES 
48 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

z c c ; z S.lN]~]S~na~I]~ " > , ~ " " " 0 

• S]l't'S • • " 0 

0 • z • 0 ~ -

\ I 

0 

: 

• • • , 

I 

• 0 

I 

c 

0 

c 

= u I 

;; 

• • 0 

0 

• • 0 

~ 

I 

• • • • 0 

z 

0 

0 
ACCOUNTING FOR THE CONFLICT 49 

study was made under the direction of a steering committee composed of Dr. Robert A. Brooks. Assistant Secretary of the Army for 

Installations and Logistics; General Creighton W. Abrams, Vice 

Chief of Staff; Lieutenant General Lawrence J. Lincoln, Deputy 

Chief of Staff for Logistics; and Lieutenant General Ferdinand J. 

Chesarek. Comptroller of the Army. In addition to recommendations 

concerning realignment of the Army Pacific logistical system, the 

committee also recommended that the financial management functions for all support sY.$tems for Vietnam be centralized and performed by Headquarters, U.S. Anny, Pacific, in Hawaii. There 

were to be several more important Department of Army studies. 

but none had the effect of the Brooks Study. Financial procedures 

for Vietnam assumed a new character. 

Planning started in November 1966 under the direction of the 

Materiel Management Agency, an activity of the U.S. Anny, 

Pacific, Deputy Chief of Staff for Logistics. After much planning. 

writing of computer programs. co-ordination, and correspondence. 

on 1 July 1967 centralized accounting started in Hawaii. In June 

1968 the organization was renamed the Centralized Financial 

Management Agency and established as a separate table of distribution and allowances organization under the operational control of 

the Deputy Chief of Staff, Comptroller, Headquarters, U.S. Army. 

Pacific. To eliminate confusion, the tenn Centralized Financial 

Management Agency (CFMA) will be used for all time periods 

discussed. 

[n 1968 there were six major features of the computerized 

CFMA system. The first concerned the release of supply documents 

from Vietnam without financial restriction. Vietnam requisitioners 

were not constrained by fund limitations, but accounting for supplies was initiated. 

The second feature, concerning the centralized obligation of 

funds on receipt of billing. discontinued the use of the stock fund 

for Vietnam requisitions. However, this meant consumer funds of 

the operation and maintenance appropriations had to finance depot 

and unit inventories. Another significant technical change was that 

funds were not obligated until a bill was received from the supplier. 

Normally. funds would have been obligated at the time a requisition 

is submitted. This change reduced the time consumer funds were 

tied up. When a requisition was received, it was edited and entered 

in the fund reservation fi le. A reservation was equivalent to a 

formal commitment which is an administrative earmarking of funds. 

When a matching bill was received from the supplier, the requisition 

resulted in an obligation which is a legal earmarking of funds. 
50 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

The third feature concerned the forecast of fund requirements. 

Using priorities assigned to supply actions and statistical methods 

based on past experience, forecasts were made of fund requirements. 

Fourth, regarding the centralized reimbursement billing function, all documentation for support furnished by the Army to 

other military departments or agencies on a reimbursable basis was 

funneled into CFMA for preparation of billings and receipt of 

collections. Inter-~rvice Support Agreements between the Army 

and other activities or customers were the basis for most billings 

and covered all appropriations whether military personnel, operations and maintenance, or procurement of equipment and missiles. 

(Chapter IV discusses reimbursements in detail.) 

The fifth feature concerned budgeting and accounting outside 

the combat area. Except for in-country expenditure requirements, 

all budgeting and accounting functions were performed at Headquarters, U.s. Army, Pacific. 

Finally, in regard to the daily status of funds, the master files 

for fund reservation, obligation, and disbursement were updated 

daily. This procedure kept records on a more current basis and 

related amounts obligated to the annual funding program. 

These major features are a part of CFMA today (1972) and are 

discussed later; however, the second feature warrants additional 

comment at this point. Normally, requisitions submitted to the 

Army Materiel Command would result in an obligation of funds at 

the time of submission. This procedure caused difficulty for Vietnam 

because of the uncertainty in the supply system, extensive lags in 

receipt, or nondelivery of many items requisitioned. Thus, fun~ 

available would be reduced needlessly, and many obligations would 

never result in a bill. Therefore, the Department of Army decided 

in 1967 that a fund reservation would be established and the 

obligation would be recorded when the bill was received. This 

procedure has been challenged and discussed over the years. As late 

as 1971 approval of Headquarters, Department of Army, and Office 

of the Secretary of Defense was underscored, and it was noted that 

neither the General Accounting Office nor the Army Audit Agency 

had questioned the technique. While the procedure may appear 

to be a splitting or hairs, it was a most important deviation and an 

example of the will to bend when needed. More of this philosophy 

was required, however. 

The scope of CFMA's mission can be appreciated when one con· 

siders the numerous support subsystems operating in Vietnam. In 

1972, these included the following: 
ACCOUNTING FOR THE CONFLICT 51 

1. Milstrip (Normal supply system) 

2. Army Marine maintenance activity 

3. ARVN base depot supplies (Realigned Military Assistance 

Program) 

4. Aircraft Materiel Management Center 

5. Hawk parts 

6. Commercial vehicle repair parts (Philco-Ford) 

7. Special Services depot supplies 

8. Armed Forces Radio and TV service supplies 

9. Bulk petroleum, oils, and lubricants 

10. Offshore local procurement (San Francisco Procurement Agency 

and Japan Procurement Agency) 

11. GOER vehicle parts 

12. Military Interdepartmental Purchase Requests and Intra-Army 

Orders (Out-of-country performance) 

13. Non-standard repair parts depot (pA&E) 

14. Supply directives/support lists 

15. Milstrip requisitions placed with other services in Vietnam 

16. Medical supplies 

17. Red Ball Express/Red Ball Expanded 

There were also in Vietnam almost 500 authorized requisilioners, submitting documents through numerous channels, who 

could introduce an action which could end up as an obligation. A 

major feature of CFMA was simplification of the funding network 

even though it placed more of the burden on one agency. In the 

1968 fiscal year, only two allotments were issued as compared to 

fourteen in the 1967 fiscal year. (Chart .5) This chart should be 

compared with Chart J. Headquarters, U.S. Army, Vietnam, received an allotment to pay for such items as local procurement, 

rental hire of local nationals, and pay for Department of ATmy 

civilians. CFMA received an allotment for all out-of-coumry reo 

quirements. Even with streamlining. there were many procedural 

routines for the diverse types of requisitions and customers. These 

variations complicated the administrative process and increased 

the probability for errors and the probability that documents 

would by-pass the system. Also during the 1968 fiscal year, to underscore the scope of CFMA, requisitions, bills, cancellations, and other 

support documents entered the centralized file at an average daily 

rate of almost $4.5 million. 

Sophisticated procedures were still stymied by the fact that 

CFMA was tangential to the supply system. Reservation documents 

were r«eived from the initiator or some intermediate agency, while 
52 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

~ 0 

> • z ~ " • • • • ••• ~~ z • > q • ---- , ~ •• z , ~ 0 " u ' , u • 00 

z u - u 

~ • 

0 

z • " ~ 

- z ~ , 

0 

8 • " 

• ( 

;: -

• u 

~ 

• 

, 

~ 

• " t • g 

--• 

a 

• z 

~ 

1 • 

~ 

, • • 

• 0 

g 

• z 

1 0 

" • 

~ 

• • 

> ~o 

•• 0 

• • " • 

T ! 

f 

0 

• • • • • • 

• " 0 

z 

8 
ACCOUNTING FOR THE CONFLICT 53 

actual fund obligation documents came from the billing by the 

supplier. In fiscal year 1968. 67 percent of the dollar value of 

requisitions (over $1.8 billion) were wiped off the records due to 

various actions. some because an obligation document was never 

received. Further. the fund reservation technique is designed to be 

used to earmark funds for later obligations; however. in fiscal year 

1968, 67 percent (over $1 billion) of the total obligations were 

established without a matching fund reservation. These statistics 

certainly portray how hectic it was to budget and manage in an 

orderly manner. It also points out that CFMA was still not receiving 

all the documents necessary to account for the Vietnam conAict. The 

logisticians concentrated on providing information and documentation to the various supply organizations. As CFMA was not in the 

direct supply channels, it had difficulty in obtaining the required 

documents from the logistical operators. The agency was not idle. 

In April 1968 a series of messages went from the Department of 

Army to the Army Materiel Command, the Defense Supply Agency, 

and General Services Administration asking for help. The goal 

was to ascertain the validity of fund reservations in excess of $500 

million which had not been billed. Magnetic tapes and punch~d 

cards were handcarried to CFMA to help reconcile the files as soon 

as possible. Also, computer routines were developed to identify 

which units requisitioned supplies but failed to send CFMA the 

necessary documents. 

Establishment of the Logistic Control Office, Pacific, has greatly 

facilitated the chore of maintaining a current fund reservation file. 

This office informs the CFMA of the status of requiSitions and 

controls "Red ball" requisitions. The latter is a system designed to 

expedite certain items of supply. In 1969 the Department of Army 

instituted changes to place CFMA in the regular supply channels 

for status information. However, there was still no central control 

in Vietnam for requisitions-a problem that was to last several more 

years. 

As mentioned, the Brooks study had the most significant impact 

on the financial network. However, a Department of Army task 

group which reviewed the financial managemem system in 1967 

also had several major findings. The main thrust of the task force 

review is related to the reimbursement problem and is discus.,ed 

in a separate chapter. Some of their findings are included at this 

point to highlight organ izational weaknesses and staff philosophy 

which clouded an already confused picture. 

A small fiscal accounting office staffed with two officers and 

eleven enlisted men had been operating as an integral part of the 
54 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

U.S. Army, Vietnam, Comptroller organization. This office administered the in-country allotment of funds which was $500 million in 

1966. The task force found that accounting for reimbursements was 

accomplished by this activity. The group saw no need for an 

expanded accounting capability merely for the reimbursement 

program. However, the group concluded that CFMA was an expedient until the U.S. Army, Vietnam, had a requirement to accomplish 

its own financial management. In 1967 the emphasis was on more 

stalf systems accountants to provide managerial accounting assistance. The U.S. Army, Vietnam, had estimated that 400 additional 

personnel would be required to accomplish expanded responsibility 

for finance and accounting. These spaces would have had to be 

filled by military as recruiting of civilians was impossible. 

The task group found further that inherent weaknesses in the 

Okinawa finance and accounting office were not properly evaluated 

when the decision to use Okinawa was made. The concurrent activation of the 2d Logistical Command received most of the command 

emphasis to the detriment of the financial requirement. The group 

further recommended placing CFMA under the Comptroller of the 

U.S. Army, Pacific, to provide a focal point for financial management 

rather than a sharing of responsibilities with the G-4. 

During the Vietnam buildup, staff responsibility for accounting 

at the Pacific headquarters was under the budget and accounting 

staff officer. The emphasis was placed on the budget process and less 

effort on the accounting capability necessary to support the emerging situation. This organizational arrangement had a deleterious 

effect on an inherently worsening situation. In May 1967, the reo 

sponsibility was transferred to the staff finance and accounting officer 

as in continental U.S. army headquarters and other major head· 

quarters. 

Itl More Rectmt Times 

As time passed, CFMA changed and operating procedures 

evolved to present day methods. Many actions required long periods 

for modification because of the geographical dispersion and the 

subsequent multitude of commands. There are still today in 1972 

Significant operating problems, and it is unlikely they will soon 

abate as the withdrawal continues. Currently, an important issue is 

ensuring that only needed supplies, not available in Vietnam, are 

requisitioned and that stocks in Vietnam are exhausted. This issue 

is complicated by the fact that staff planners and field operators do 

not know the true withdrawal rate or schedule of units far enough 

in advance. 
ACCOUNTING FOR THE CONFLICT 55 

All problems aside, it would be beneficial to review the current 

mission, organization, and staffing o[ CFMA as it is at this time of 

writing in 1972. There are several key features of the mission that 

warrant mention, some of which were listed in the discussion of the 

earlier period. Today in 1972 the CFMA: 

1. Operates under the operational control of the Deputy Chiet 

of Staff, Comptroller. U.S. Army, Pacific. and acts as the fiscal agent 

for the Deputy Commanding General, U.S. Army. Vietnam. The 

agency receives the Approved Operating Budget for out·of·country 

funds, that is. the operations and maintenance fund and military 

personnel fund. in support of U.S. Forces, Republic of Vietnam 

Armed Forces, Free World Military Assistance Forces. and the U.S. 

Agency [or International Development in Vietnam. 

2. Formulates policies. plans, and procedures for the manage· 

ment and control of the operation and maintenance funds and the 

military personnel funds for Viemam. 

3. Maintains accounts to reflect current status of approved 

program and funds; issues statements of program and fund avail· 

ability; records. reconciles. analyzes. and reports program and ac· 

counting transactions pertaining to Vietnam funds. 

4. Performs the accounting and billing function for all supplies 

and services furnished by elements of the U.S. Army, Vietnam, to 

other Department of Defense services. other government agencies. 

commercial activities. and individuals on a reimbursable basis. 

5. Prepares numerous cyclical and special reports on all financial 

aspects di,iCussed above which are common to many finance and 

accounting offices plus reports unique to CFMA, provides analysis 

and interpretation of fund data. 

6. Prepares periodic operation and maintenance budget esti· 

mates, for example, the Command Operating Budget and Budget 

Execution Review, with direct co-ordination with the U.S. Army, 

Vietnam; maintains records required to permit evaluation of progress toward program goals: initiates action to reprogram, as required, subsequent to periodic evaluations. 

7. Computes and issues operation and maintenance requisition 

ceilings to the Commanding General, 2d Logistical Command, and 

the Deputy Commanding General, U.S. Army, Vietnam, while the 

2d Logistical Command, located in Okinawa, handles certain classes 

of supply as well as materiel excesses in addition to military assist· 

ance items; reviews cyclical requisition ceiling status to ascertain 

its adequacy and initiates necessary changes-this important item is 

discussed more: fully later. 

Accomplishing the above is truly a major job and requires 
56 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

liaison with numerous commands dispersed over a wide geographical 

area-from Southeast Asia to the continental United States. This 

is all done with only three officers and fifty-one civilians. Computer 

support is not organic and does reduce manpower requirements 

somewhat. Also. the actual disbursement is accomplished by another 

office. The organization in 1972 is shown in Chart 6. The elements 

accomplish actions indicated by their name, and a detailed listing of 

their functions is not necessary. The key point is the simplicity and 

orderly How of data within CFMA. To laymen, CFMA can be 

compared to the accounting division of a finance and accounting 

office or the program and budget division of a comptroller office. 

Earlier the financial environment was discussed along with the 

simplification of the funding network in fiscal year 1968. Chart 7 

shows the 1972 financial environment and document How between 

CFMA and activities providing infonnation. Requisitioning channels are now (1972) more centralized and the sources of input to 

CFMA have been reduced from twenty to four. Concurrently, while 

the budget was around $1 billion in 1966-1967. it is now approximately $143 million for Program 2, U.S. Forces, and $278 mil· 

lion for Program 10, other nations. However, the workload has not 

decreased but increased. The difference is that the individual requisitions are for fewer numbers of an item; e.g., when 1.000 tires 

were on a requisition in 1966, there were probably 100 in 1971. 

Also, CFMA is acquiring more data than in earlier days and is 

getting more information from the supply sources. The Army 

Materiel Command alone published several letters on insuring 

documents reaching CFMA. As mentioned, this was a reversal of 

earlier policies when CFMA was excluded from direct channels by 

supply regulations. This is reRected in the decrease in "surpri~ 

bills." These are bills for which CFMA has no matching requisition 

in the fund reservation file. These amounted to $174.9 million or 

25 percent of obligations in 1971. This compares to $1 bilHon or 

67 percent in the 1968 fiscal year. For four months in the fiscal 

year 1972, the figure was $~2.2 million or 14.3 percent. Fund reservation adjustments are also down to $492.7 million or 38 percent 

for fiscal yt:ar 1971, and $58.~ million or 19 percent for four months 

of fiscal year 1972, as compared to $1.8 billion or 67 percent in 

fiscal year 1968. CFMA is also matching (in 1972) its tape files 

against those of the supply agencies in Vietnam to keep the fund 

reservation file mOl'e accurate. Most surprist: bills are now the 

result of administrative procedures and not the failure to receive 

the necessary documents. Requisitions arriving after receipt of billing are the cause of most surprise billings. 
ACCOUNTING FOR THE CONFLICT 

" > 0 i u 

> z • z < < • Q 0 , • g ~~ • 0< ;; { o z • , < 

• 

" - ~ 

• > 0 • • 0 - " • " • Z 

• 0 0 

0 • 

~ 

-

" > 0 

z • z i u z ~ 0 Q 0 , z ~ • , < ;; 0 • " > 0 ~ • - 0 > < " 0 0 • " 

-

• " Z 

• 

~ Z 0 

• Z 

, • ~ • • • " • 

• " z z ,0 

z 0 

0 

0 ~ < • 

0 " z • 0 

" z z < 0 • 0 • 

~ 

~ 

0 

-

> 

" 

" 

~ 0 

" 

• z 

• 

;; "

u 

-

• 

57 

" > i u o 

::! 2: 

> 0 

o " 

" > i u o • 
CHAAT 7- FINANClAL EN VIRONMENT AND DocUM

"0 '-- L e ....... 3,)': 

LCOP & OTHERS 

"- • , ~ !c ~ ti 

" 

• • .r,.. "'0", 

·"'3. 0." _

~{~ 

• z UPDATE FILES , " - > 

320 MEDICAL DEPOT I REQUISITION 

DATA 

eFMA FUND 

RESERVATION/OBLIGATION 

MASTER FILE 

• " ,1'. o~ 

< 

USED IN CFMA 

~. ,~ 

MANAGEMENT 

I OBLIGATE NON·MILSTRIP ORDERS WHEN REQUISITION SUB
ACCOUNTING FOR THE CONFLICT 59 

In early 1969, General Chesarek, then Assistant Vice Chief of 

Staff, headed a team to the Pacific headquarters in Hawaii, Okinawa, 

Japan, and Vietnam. One of the purposes was to examine Anny 

operation and maintenance fund control. This marked a turning 

point away from the blank check philosophy to financial controls. 

However, General Chesarek reiterated the caveat that controls 

would not impair mission accomplishment. General Haines, the 

commanding general of the U.S. Army, Pacific, immediately dispatched a personal message to Lieutenant General Frank T. 

Mildren, Deputy Commanding General, U.S. Army, Vietnam, 

on the subject of "Improvements in Management of Logistic and 

Financial Resources." General Haines warned of severe financial 

constraints and reduced funding levels in the 1969 and 1970 fiscal 

years. He also emphasized the belief of the Bureau of the Budget 

and the Secretary of Defense that management and control techniques were needed. A staff paper written several weeks later recog· 

nized, as in the message, that significant actions had been taken. 

However, the fund reservation system was still plagued by problems 

and this was a key stumbling block to resource management. Gen· 

eral Haines directed, among other things, that an objective be 

established to: "Apply financial management techniques at HQ 

USARV and at agencies authorized to requisition out-of-country 

that will instill financial responSibility through establishment of 

financial goals. These techniques should provide a framework 

within which supply action can be specifically related to and wn· 

trolled by fund availability should such be required." 

General Mildren soon replied: "USARV is applying all financial 

management techniques available to reduce the level of requisition. 

ing to that considered minimum essential to combat operations; 

however, the support of the combat units is paramount and cannot 

be constricted by financial restraints which may interfere with 

successful mission accomplishment. Therefore, I would hope that 

an army in combat would never be limited by a financial goal." 

The Pacific Army Command decided to proceed with financial 

guidelines and a 26 March 1969 letter to the Commanding General 

of U.S. Army, Vietnam, announced that "Program Dollar Goals" 

would be aSSigned. Assignment of such goals was not restrictive in 

the legal sense, as an allotment would be for example, but were 

to serve as a ta.rget against which perfonnance or fund utilization 

could be measured. The system was also to be used to support 

budget and reprograming requests. Targets were issued for the 

first and second quarters of the 1970 fiscal year. The program was 

not successful and was dropped. There evidently were still too 
60 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

many requisitioning points and no way to truly enforce the goals or 

discipline the system. 

The financial planners never gave up. Effective 1 July 1971, a 

Requisition Ceiling Fund Control System (RCFCS) was implemented in Vietnam. This system was developed as a part of the 

Logistics Support System 1971 of the Pacific headquarters study to 

improve managerial control over the CFMA allotment of funds. 

CFMA in 1972 computes and issues three ceilings: two to the 

commanding general of the 2d Logistical Command for the Army 

of the Republic of Vietnam Military Assistance Service Funded 

and Republic of Korea Overseas Replacement Training Command 

programs; and, one to the commanding general of U.S. Army. 

Vietnam, for out-of·country procurement of supplies and associated 

services. Chart 8 shows this distribution. All requisitions are processed through a routine against the appropriate ceiling. If the 

ceiling is reached, the requisition is suspended for management 

review. The ceiling can be exceeded for certain high priority requirements. Data are captured on magnetic tape and used for 

report purposes and to update the CFMA fund reservation file. 

The system appears to be working bet::ause of more centralized 

control and-better reporting procedures. 

The foregoing covers the major elements of CFMA and reflects 

its current procedures in 1972. More changes will be necessary to 

meet the challenges of the drawdown. 

In Retrospect 

Looking back, the Army had little choice but to account for the 

war using modified peacetime techniques. This may have been done 

more at the insistence of the Office of the Secretary of Defense than 

of Congress. The defense office was exercising caution and attempting to validate their budget requests and document the use of funds. 

Decisions made along the way seemed appropriate at the lime 

albeit problems with Okinawa started almost immediately. If 

CFMA had been started earlier, better asset control and utilization 

may have occurred. I did take exception several times with the 

Office of the Secretary of Defense about imposing a peacetime 

accounting system on a combat environment. When one considers 

that many requirements were instituted after the buildup, it 

demonstrates that timing may be as critical as the system. 

The establishment of CFMA was probably the best decision that 

the Department of Army made in the financial area. It must be 

remembered that CFMA was activated and designed for a specific 

purpose. It is better suited for emergency situations than normal or 
CHART S-R£Q.UISITION F UND CaNnOI. SYSTEM C

ARVN 

r ... " 

2D lOG 

r COMMAND 

'0' 

MASF 

CEILINGS ..... DCS, LOG 

USARV 

oe,. 

L COMPTROLLER 

USAAV 

~G 

32D MED 

COM MAND 
62 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

sustained operations. Along these lines actions must be taken to 

retain accurate files of routines and procedures to aid future 

financial planners. Accounting out-of-country did interfere with 

obtaining more accurate, complete data. The alternative was a full 

fledged financial operation in Vietnam which was unacceptable 

given departmental policy and manpower ceilings. I am not sure 

such an operation would have been cost effet:tive. One thing is for 

certain, in the future, a systems approach must be used to insure 

that financial management is an integral part of logistical management and not a peripheral nuisance. 

Care must be exercised to avoid repetitive errors in judgment. 

For example, in 1970, the Department of Army was seriously con· 

sidering moving CFMA back to Okinawa. Most of the disadvantages 

that led to the earlier failure still existed. Fortunately, this proposal 

was finally disapproved. 

The end of CFMA is contingent on the future involvement in 

Vietnam, but it appears it will playa vital role in the withdrawal. 

Unfortunately, systems development takes time; for example, not 

until 1969 was the Department of Army able to report te Congress 

that the logistical system was complete. As CFMA reached its 

operating optimum, it was time for a phasedown. 
CHAPTER IV 

The Reimbursement Problem 

Appropriation reimbursements are probably one of the least 

known or understood facets of military accounting. Reimbursements are well founded in accounting theory and are similar to cost 

transfers or the apportionment of costs in a civilian cost accounting 

system. In governmental fund accounting they also have a logical 

basis. So, let us digress temporarily for a short course in accounting 

for appropriation reimbursements. 

What are appropriation reimbursements? They are collections, 

other than refunds such as a soldier repaying an overpayment, for 

supplies or services furnished between appropriations, to other 

agencies of the government. or to an individual or firm to be 

credited to an appropriation account. The term can also include 

collections for supplies or services furnished between allotments 

within a Department of Army appropriation. Collections are credited to the appropriation current at the time they are earned, 

regardless of whether or not an account receivable has been established and recorded. Normally, reimbursements are considered 

to be earned at the time the services are rendered or supplies are 

shipped. Earnings can also accrue as expenses are incurred even 

though the services or supplies are not delivered. 

To the extent posSible, reimbursements are budgeted, controlled, and accounted for at the level of performance, normally 

the installation. In certain cases, the use of reimbursements is 

controlled at organizational levels higher thai I that at which reimbursements are earned. In such cases, reimbursements are 

budgeted and accounted for at that higher organizational level. 

There are two types of reimbursements: funded and automatic. 

The latter is the more prevalent and the type which caused problems in Vietnam The reader can ignore funded reimbursements 

which were mentioned only for the sake of completeness. For 

emphasis, it should be noted that the term reimbursable is used 

with reference to a transaction which eventuall y results in a transfer 

or collection of actual funds or money. The transaction involves 

the sale of supplies or services by the installation to a customer. 

Authority to engage in automatic reimbursement activity is granted 

" 
64 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

to the installation on the Approved Operating Budget. The funds 

are generated or created at the installation when it is necessary to 

temporarily finance the procurement of supplies or services which 

will be sold. 

Certain specific stages or steps must be present in automatic 

reimbursement transactions. The first is known as Authority Re· 

ceived. As mentioned, authority is annotated on the Approved 

Operating Budget or funding document. 

The second step. Orders Received. is any finn authorized agreement to furnish equipment and supplies to others, or to perform 

work or services on a reimbursable basis. Quantities and estimated 

dollar amounts of supplies or services to be delivered must be stated 

in an order. Orders may also be recorded based on estimates of 

reimbursable supplies or services in cases where it is customary to 

provide services without the use of a specific order. The receipt of 

orders from reimbursable customers increases the funds available 

to the installation for obligation. Th~ funds are used initially to 

provide support to reimbursable customers. 

In the third step, Earned Reimbursements. the reimbursement is 

earned based on the actual delivery of supplies or services to the 

customer. Any difference between the amount of orders received 

and the actual amount ultimately earned is adjusted on an individual order basis to insure that these two amounts correspond. 

A reduction in the amount of orders received reduces available 

funds by the same amount. Such a reduction can result in an overobligation of funds at the end of the fiscal year, if earned 

reimbursements are not accurately estimated. Since reimbursable 

sales result in an expense to the installation or the relinquishment 

of an installation asset, an accounts receivable must be established. to 

assure collection from th()('je individuals or activities to which the 

reimbursable sale is made. 

Collection is the final stage and signifies receipt of cash in 

payment of the bill for the earned reimbursement. Detailed. files on 

the stages are usually maintained. Special accounts are designated. 

to control the handling of reimbursements. Each state of the 

procedure requires the matching of documents to insure validity of 

the transaction and increase internal control. A monthly report is 

submitted to the Department of the Army to assist in the control of 

and funding for the reimbursement program. 

Various agreements are used to determine support to be (urnished other installations and activities. The three m()('jt used agreement documents are discussed here. The first is the Intra-Army 

Order (DA Form 2544) . This order is a firm agreement between 
THE REIMBURSEMENT PROBLEM 65 

two installations or activities of the Army authorizing supplies or 

services of a specific and definite nature to be furnished 011 a reimbursable basis. The order must be supported in terms of quantities 

and dollar amounts before it can be accepted. The sell er furnishes 

the requ ired items and periodically bills the customer. If receiving 

reports match the bills, the customer reimburses the seller, 

The second is the Military Interdepartmental Purchase Request 

(DD Form 448), This interdepartmental request is a method of 

financing used between the Oepartmem of the Army and other 

departments, offices, and agencies of the Oepartmem of Defense. 

Use is similar to the Intra·Army Order; however, a suballotment 

and a direct fund citation can be used to finance the request as well 

as a reimbursable order. The suballotment is a method of financing 

in which an installation or activity transfers a portion of its allotment to another installation. When a direct fund citation is used, 

the requester gives the performing activity the authority to cite 

its funds on all documents and contracl5 executed on behalf of the 

ordering activity. 

The third agreement document is the Interservice Support 

Agreement (OD Form 1144), This form is used to document all 

continuing support agreements between and among Oepartmeni of 

Defense components and other participating federal government 

activities. The requesting activity furnishes the perfonning activity 

funding data and the address to which the hilling document is to 

be sent. The agreement states the accord reached between the two 

activities involved, especially the obligations assumed by, and the 

rights granted to each. All agreements must be specific with respect 

to the resources provided by the parties, Agreements are subject 

to annual review and may be canceled at any time by mutual 

coment of all parties concerned or with ninety days' notice by 

either party. Quarterly reports are required. 

Early Stages 

A Department of the Army faclsheet written in 1966 noted that 

during the early stages of lhe 1965 buildup, compli<.:ations and 

administrative problems were beginning to mount because of the 

multitude of funding channels in Vietnam. The different militaTY 

services were responsible for providing various types of supplies 

and services, but generally were responsible to finance only the 

support of their own force. This led to many peculiar and inefficient 

situations, For example. up-country military advisers were required 

to obtain their day-to-day logistical support from Saigon, located 

200 miles away, even though the same support could have been 
66 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

made available at much closer locations, but then would have been 

financed by funds of another service. Another specific source of 

delay and paperwork was the fact that Army cargo was (;arried only 

on a reimbursable basis 011 the small cargo vessels operated by the 

Navy along the Vietnam coastline. This situation required detailed 

Interservice Support Agreements. The fact sheet observed that 

"continuation of this situation would involve tactical commanders 

in financial matters which do not contribute to carrying out their 

assigned missions." 

The solution of minimum record keeping in-country and the 

accomplishment of reimbursement actions in Okinawa was thought 

to be a positive decision. However, it was proposed that an optimum 

solution would be either to make one service responsible for logistical support including necessary funding or to make one service 

responsible for logistical support, with each service funding costs 

of its support. Here reimbursement action would be taken on a 

factored statistical basis at locations out of the country. 

A team from the Department of the Anny was engaged in 

preparing a departmental plan for common supply support in Vietnam. The Army, it was contemplated, would provide common supplies with reimbursement at departmental level. In February 1966, 

representatives from the Office of the Secretary of Defense indicated 

doubt as to the legality of reimbursement between military services 

based on the use of statistical factors, and suggested legislation 

would be required. It was noted in the referenced fact sheet that; 

"The advantages of a common supply support system would be 

lost, and i1$ purpose defeated, if it should be necessary for the Army 

to keep detailed auditable records of supplies issued to other military services." 

In early 1967 , the Department of Defense requested the Army to 

submit its plan for common funding to the other services for 

co-ordination. The Depanment of Defense had endorsed the plan 

but restricted application to petroleum, oils, lubricants, subsistence, 

medical supplies, and some 3,500 common housekeeping items. For 

various parochial reasons, the Navy. Marine Corps, and Air Force 

all nonconcurred in the plan. The fact that Mr. McNamara did not 

force the services to accept the Army plan or some modification is 

perplexing. For awhile the Armed Forces seemed headed toward 

more service integration with the establishment of such activities as 

the Defense Supply Agency and Defense Intelligence Agency. Common funding would have been an even more logical step. 

The problems in Okinawa with accounting were even more 

critical in the handling of reimbursements. The latter, being a much 
THE REIMBURSEMENT PROBLEM 67 

more involved process, proved tOO much for Okinawa and this 

function was also passed to the Centralized Financial Management 

Agency and will be discussed later. 

Later DtvdopmetlLs 

As mentioned in the discourse on procedures, reimbursements 

usually start with an order received, thus generating funds to support the transaction. In a June 1967 message from the Department 

of Army to U.S. Anny, Pacific; Military Assistance Command. 

Vietnam; and U.S. Army, Vietnam; it was noted that this was not 

presently the case. Army operations and maintenance funds were 

being used by the Army to finance services and supplies furnished 

others. Millions of dollars of the operation and maintenance fund 

were diverted from financing Army needs until bills for reimbursement transactions could be collected. Additionally, billings were 

not accomplished on a timely basis. Thus, the message warned of 

an "unwarranted deficiency" and an "unexplainable and embarrassing" situation. Compounding problems was the fact that centralized 

accounting was not in operation-it came into being one month 

later, 1 July 1967. 

The Department of the Army requested immediate bil1ing to 

such diverse activities as Air Force. Navy, Red Cross, 5th Special 

Forces, Pacific Architect and Engineers, and other private contractors. Reimbursements from the military construction to operation and maintenance appropriations were also to be accomplished 

using statistical estimates. If billings (or Class II, IV, and V issues 

could not be developed on the basis of actual issues. negotiated 

settlements were to be used. (Designations for classes of supply 

referenced throughout the monograph are for those used prior to 

1969. Class II includes such articles as cloth ing and weapons; Class 

IV takes in equipment for fortifications and airborne operations; 

Class V includes ammunition.) The use of the more normal order 

system was to be instituted retroactive to 1 May 1967. This procedure would increase hmd availability and reduce the threat of a 

fiscal deficiency. Addressees were given less than six days to advise 

the Department or the Anny ir actions could be accompliShed and 

what the amount of earnings could be expected to be. 

The use of the order system was also directed for the 1968 fiscal 

year. This was in addition to the Interservice Support Agreement 

and provided for quarterly estimates. Adjustments were to be made 

after comparing estimates with earnings; this procedure seemed odd 

since the agreement can serve as the basis for recording an order 
68 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

received. Negotiated seulements were again urged for all government 

agencies to reduce the backlog of bills and unbilled transactions. It 

was hoped this would allow fiscal year 1968 transactions to be kept 

on a more current basis. 

In July 1967 the U.S. Army, Pacific, in support of the U.S. 

Army, Vietnam, sent a message to the Department of the Army in 

further response to their June message. There were several key 

facts in this reply. First was that the Centralized Financial Manage· 

ment Agency was activated on I July 1967 and that the U.S. Army, 

Vietnam. had been directed to furnish reimbursable issue docu· 

mentation clearly marked "Reimbursable Issue Documentation" on 

a daily basis. Orders received and earned reimbursements were 

recorded simultaneously. This is a deviation from normal procedures and from the June message of the Department of the Army. 

The agency had established detailed accounting controls and reports 

to monitor the reimbursement program. (Chart 9) The U.S. Army, 

Vietnam. was to be provided monthly feeder information to deter· 

mine if all documents were reaching the centralized agency and if 

estimates contained in related Interservice Support Agreements 

were over· or understated. The reports were to result in improved 

management of reimbursable transactions. 

The Pacific headquarters further replied that the U.S. Army. 

Vietnam. had been instructed to attempt to negotiate interservice 

agreements to allow reimbursement on a factored basis, thus reducing the paper mountain. Also, confirmation of shipping was to 

replace the need for receiving reports. The latter was apparently 

never accepted and is disclissed in a later section. Both attempts are 

deviations from the normal procedure mentioned earlier. 

The U.S. Army. Pacific, also asked reconsideration of the reo 

quirement to obtain quarterly orders when the transaction was 

supported by an interservice agreement. U.S. Army. Vietnam. 

argued that the agreement is an order received, as noted above. and 

that further action would duplicate it. The command believed that 

reimbursements could be monitored using those procedures outlined above. 

Evidently the U.S. Army, Pacific, was still uncertain that the 

Centralized Financial Management Agency could alleviate the reimbursement problem. General Dwight E. Beach, the commanding 

general of U.S. Army. Pacific, sent a personal message, also in July 

1967, to Lieutenant General Bruce Palmer, Jr., the deputy com· 

manding general of the U.S. Army, Vietnam, and Brigadier General 

Shelton E. Lollis. the commanding general of 1st Logistical Com. 

mand, on the subject "Loss of Army Resources in Support of Re-
CHART 9 - REIMBUItSABLE IsSUE lNFOItMATION 

. ' 

DEPOT, GENERAL I ISSUE DOCUMENTATION .1 

OR DIRECT 

SUPl"ORT UNIT 

eFMA #",#' 

" '< 

" 

NON·ARMY 

CUSTOMER 

-c,O 

tb''-'-' 

MONTHLY 

MANAGEMENT 

REPORTS 

ISSA NEGOTIATION. FOLLOW UP · USAR
70 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

imbursable Customers." Losses of Army resources were valued at 

$24.5 million based on Interservice Support Agreements. Failure to 

recoup Army funds was attributed to the failure to require documented requests for materiel and the failure to obtain the issue 

documentation to furnish it to the centralized agency for billing. 

The latter was identified as the most prevalent. General Beach wrote: 

This problem is a matter of command concern at all levels. It is apparent that more positive action is required to sa fe~uard against the 

Issue of resources without reimbursement. The admimnrative workload 

involved in documenting issues to reimbursable customers cannot justify 

the Army's failure to obtain proper documentation w support billings. 

This is another task that must be accomplished. 

In the future, issues/support should not be furnished reimbursable 

customers unless they present the required documentation. The only 

exception to this would be under combat emergency conditions. Addi- tionally, no issues will be made without preparing proper issue docu· 

mentation and forwarding it to the USARPAC MMA [now CFMA] 

for billing action. 

In reflecting on financial problems in the U.S. Anny, .Pacific, 

during fiscal year 1967, I wrote in a fact sheet that no real advances 

had been made in the reimbursable area in spite of command emphasis and directives from the Department of Army. Lack of documentation was the major obstacle to recouping Army funds. No 

matter how sophisticated accounting procedures are, the fact remains 

that Lhe supply clerk in the field is the base of the system. Adding to 

the problem was the blank check philosophy discussed earlier. An 

attitude of "easy come-easy go" prevailed and militated against 

stringent controls. 

The C.,.iJis BuildJ 

At the direction of the Comptroller of the Army in January 

1967, the U.S. Army Audit Agency perfonned an audit of reimbursements due from non·Anny organizations in Vietnam during 

the period 15 March to 19 May 1967. The audit covered the fiscal 

year 1967 transactions up to 31 March 1967. The auditing agency 

concluded that a more active monitoring of the reimbursement 

program was required by all levels of command. As a result of the 

audit and subsequent developments, Chief of Staff Memorandum 

67-350 was issued by General Harold K. Johnson, Army Chief of 

Staff. This memorandum directed the Comptroller of the Army to 

review the financial management system employed by U.S. Army, 

Pacific, and recommend actions needed for strengthening these 

operations. The Army Staff Task Group conducted its survey from 
THE REIMBURSEMENT PROBLEM 71 

25 September to 21 November 1967. Highlights of the report are 

discussed below. 

No reimbursement program was operative within Vietnam prior 

to the last quarter of the 1967 fiscal year. Emphasis placed on the 

problem by the higher commands resulted in positive action at all 

levels within Vietnam to secure the necessary documentation to 

support reimbursement billings in fiscal year 1968. Reimbursement 

documentS transmitted to the Centralized Financial Management 

Agency increased from 404 documents in December 1966 to IS,OOO 

documentS in October 1967. However, types of issue documents and 

procedural instructions varied at all levels in-country, and standard· 

ization was needed to strengthen the program. Improvements were 

effected within the existing logistics system without the imposition 

of additional financial controls. It should be noted, however, that 

the new centralized accounting system was in operation and con· 

tributed to the accomplishment of these improvements. 

Interservice Support Agreements were better monitored due to 

the procedures referred to earlier. Review by the U.S. Army, Viet· 

nam, of the 146 interservice agreements in effect in September 1967 

revealed that potential reimbursements were overstated by $76 

million. 

Reimbursable issues of subsistence were not always processed for 

billing because certain subsistence ration breakdown points and 

depots were not aware that issues to non-Army customers were 

reimbursable. The 7th U.S. Air Force had received about $200,000 

of subsistence per month from one ration breakdown point but had 

not been billed for over two years. A negotiated settlement was 

finally made for $5 million. Reimbursable issues by tactical units 

were not substantial and should be excluded from the program. 

Issues below depot level from self-Strvice supply centers were insignificant and not worth the cost of reimbursement record keeping. 

This practice was discontinued in February 1968. 

Receipt, storage, distribution. and control of bulk petroleum 

products posed a major problem. Division of responsibility between 

the Army and Air Force by type of fund appeared clear as far as 

initial financing from the Defense Fuel Supply Center. However, 

storage. distribution, and transportation were an Army responsibility 

and were accomplished by a complex distribution system using 

many modes. During the 1966 and 1967 fiscal years, almost no 

documentation was maintained. Instructions on reimbursable issues 

were misunderstood; for example. the Air Force was chargep for 

issues ITom its own fund. Air Force fuel transported by the Army 

was paid for by the Army although delivered to Air Force users. 
72 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

Construction supplies were financed by operation and maintenance and military construction funds and were commingled, The 

operation and maintenance appropriation was, in effect, pre-financing military construction appropriation projects and tying up 

operation and maintenance funds. 

Joint Chiefs of Staff directive 5848, 15 July 1966, subject: 

"Responsible Logistics Support for Combined Operations," assigned 

to the Army responsibility for providing logistical services support 

on a nonreimbursable common service basis to all U.s. sponsored 

activities located within a U.S. Army area of jurisdiction in the 

Republic of Vietnam. Nomeimbursable support was valued at 

$70- 80 million per year or 15 percent of the annual Vietnam 

operations and maintenance budget. Twenty·one percent of the 

total 1st Logistical Command personnel were used to support non· 

Army activities. 

It can be seen that many areas were identified for management 

action, but major problems were still being identified after the 

Task Group left and much remained to be done. The problem was 

receiving top-level attention. Also, beginning in November 1967, 

a special section of the centralized agency was designated to handle 

reimbursements. There is now ( 1972) a separate branch established 

for this purpose as discussed in Chapter III. In March 1968 the 

Anny Comptroller, Lieutenant General Frank J. Sackton, forwarded 

to General Beach, Commander in Chief, U.S. Army, Pacific. a 

follow-on report of the Department of Army Task Group discussed 

earlier. 

Nored was a significant backlog of documents awaiting processing. This was caused by the increased workload resulting from 

renewed emphasis and the activation of the Centralized Financial 

Management Agency. Collection of actual billings was proving 

difficult. As of 31 October 1967, $5.6 million had been billed but 

only $328,000 had been collected. General Beach replied that obtaining the required documentation to support billings was the most 

difficult problem. The 1968 Viet Cong Tel offensive had further 

complicated the situation. General Beach reiterated the need for 

common service funding and simplification of financial accounting 

requirements. 

In June 1968. a message from the DepaTtment of Army directed 

that obligations for petroleum, oils, and lubricants would be based 

on consumption rather than shipping documents. As with many 

new procedures involving numerous agencies scattered over a wide 

geographical area, communications was a problem. The other 

services were not aware of the revised rules. Accounting and billings 
THE REIMBURSEMENT PROBLEM 

were being accomplished under two separate systems. Duplicate 

bills were being received. The Air Force was still billing for the 

fiscal year 1968 although the Army had paid for all of the petroleum, 

oiis, and lubricants for that fiscal year. Even within the Army, some 

commands had not received the word. The Army Petroleum Command and U.S. Army, Japan, were not following the revised technique. Bills from these two commands exceeded obligations by $7 

million. Receipt of bills at the centralized agency for petroleum, 

oils, and lubricants chargeable to another service was a major 

problem. Over $5.7 million in bills for these products consumed 

by the Navy had been received fTom the Army Petroleum Command. The latter did not appear cognizant of the mission of the 

centralized agency or the financial organization of the U.S. Army, 

Pacific. The Air Force and Navy were billing the agency for bulk 

issues at the retail level. The Department of Army Task Group 

had recommended cessation of this procedure which was also 

supported by the Pacific Command in a message to the Joint Chiefs 

of Staff. The Joint Technical Assistance Team which was dispatched 

to review problems with petroleum, oiis, and lubricants had also 

suggested discontinuing billing at the retail level. 

In a briefing dated October 1968, it was noted that problems 

were still being encountered. Full mechanization was not suitable 

and about one quarter of the work force of the Centralized Financial 

Management Agency was spending full time on the reimbursement 

program. This effort was expended for only I percent of the agency's 

dollar volume. 

More Studies and Audits 

As discussed in Chapter III, General Chesarek visited the U.S. 

Army, Pacific, in 1969. His visit caused much soul searching and 

another review of financial procedures. A staff paper written after 

his trip revealed that reimbursemenlS were yet a problem and that 

the situation could be expected to continue. Documents were still 

not being received. Some issue documents could not be matched 

with a supporting Interservice Support Agreement or with an office 

to be billed. Additionally, accounts receivable were not being 

liquidated promptly. Administrative changes were being instituted 

without much success. 

Although recognizing that some improvemenlS had been 

achieved as a result of the combined efforts of the Department of 

the Army and the Army in the Pacific, I was still concerned with 

the low collection rate indicated in financial reports. This was true 

of fiscal years 1966 through 1969. So, two representatives from the 
74 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

Department of Army went to the U.S. Army, Pacific, Okinawa, and 

Vietnam in April 1969 to again review financial procedures and 

follow up the recommendations of the Department of Army Task 

Group (CSM 67- 350) discussed earlier. Representatives from the 

Navy and Air Force joined the team in Vietnam. Having representation from the Air Force and Navy proved beneficial. In the Saigon 

area alone, the Navy representatives located $28 million worth of 

delinquent bills in their accounting offices. 

Improvements in collections for ammunition, subsistence, 

petroleum, oils, and lubricants were noted. Billings were based on 

negotiations supported by certain accepted reports. The U.S. Army, 

Pacific, was now buying bulk petroleum products from the Army 

Stock Fund through the Army Petroleum Agency, and not using 

operation and maintenance funds to finance excessive inventories 

or sales to other agencies. 

The reimbursement program was receiving command support 

and surveillance, although not always to the depth or extent con· 

templated by the Department of Army Task Group. Down through 

direct support units, care was being exercised and special emphasis 

was being placed by logisticians, internal review staffs, and financial 

managers. Some weaknesses were noted at the lowest levels upon 

which effectiveness of the system was dependent. 

As I had gleaned from financial reports, the U.S. Army, Pacific, 

was encountering substantial difficulty in actually effecting collections from most customers with whom interservice agreements had 

been negotiated. Billings for Class II and IV supplies were a prime 

problem. Documentation to support issues which failed to satisfy 

the criteria of the billed agency aggravated the situation. Geographical separation intensified the critical situation as most customers 

positioned their funds and accounting offices in Vietnam far from 

the centralized agency. 

The Centralized Financial Management Agency was in the un· 

enviable position of relying on personnel in Vietnam to follow 

through on billings and to satisfy terms of the Interservice Support 

Agreement. A deluge of corresJX>ndence flowed between Hawaii and 

Vietnam. Judging from the collection rate and age of the receivables, 

the efforts in Vietnam were of questionable intensity. 

As mentioned numerous times, initial documentation of the 

transaction was the primary problem. Identification of the customer 

was often difficult as key information was missing or illegible on the 

supporting document. Verification by the suspected customer and 

follow through by the Anny in Vietnam seemed endless. If punch 

cards were used, the source document was destroyed and unavail-
THE REIMBURSEMENT PROBLEM 75 

able for use in the audit trail. Use of a charge-plate system similar 

to the current commercial credit cards was again recommended as 

it had been several times before. The Department of Army Task 

Group had considered the idea in 1967 but did not adopt it. The 

charge plate appears to have been a reasonable idea as the card would 

have imprinted the required information very legibly on the source 

document. It also would have eliminated a decision step as to reimbursement at the initial transaction level. 

The report reflected that the major recommendations of the 

Department of Anny Task Gmup had been implemented. It was 

concluded after the Task Group Study that continued split 

responsibility between the centralized agency and the U.S. Army, 

Vietnam, was undesirable. It was suggested that responsibility for 

the reimbursement program be transferred from the agency to the 

fiscal office in Vietnam. The Task Group had concluded that the 

centralized agency was an "expedient" until the U.S. Army, Vietnam, had a requirement to establish its own financial management. 

This transfer was not executed, however. 

Other agencies and activities were concurrently concerned about 

the reimbursement program. From February to May 1969 the Army 

Audit Agency conducted another audit of the reimbursement program. Their findings were released in two reports-70-1, Reimbursements for Interservice Support- Republic of Vietnam; and 70-2, 

The Reimbursement Program- Republic of Vietnam. Succinctly 

stated. the reports concluded that the reimbursement program in 

Vietnam had never worked well. This much should be obvious from 

all that has been said thus far in this chapler. Highlights of the 

reports are discussed below. Repetition of previous observations are 

included to emphasize the persistence of the problems and the time 

involved in correcting deficiencies. 

In the 1969 fiscal year reimbursable supply support cost the 

Army an estimated $138 million. As evidenced throughout the life 

of the program, much less than $138 million was recovered. Most 

of the loss was caused by weaknesses in the accounting system. 

Attempts to upgrade the system have been neutralized by the desire 

to minimize paperwork in Vietnam. 

The effectiveness of the program was almost wholly dependent on 

the quality and timeliness of the data How to the centralized agency. 

Distance, marginal communications, fragmented responsibilities, 

and volume combined to weaken the program. Use of departmental 

level negotiation for bulk petroleum products, subsistence, and 

ammunition was tacit recognition that conventional methods could 

not be made to work. Findings for these commodities paralleled 
76 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

the Department of Army Task Group findings in 1967. Some of the 

recommendations had not been implemented because of the lengthy 

co-ordination process involved. Also referenced in the report of the 

Army was a Joint Technical Assistance Team made up of Army. 

Navy, and Air Force representatives who visited Vietnam in January 1968. They also found a complete breakdown in accounting 

control over petroleum products. 

Billings {or Class II and IV supplies continued to be a problem, 

and controls had never been effec tive. The system relied heavily on 

the ability of supply personnel to recognize reimbursable transactions and process them correctly. Fluidness of the tactical situation, 

rapid turnover of personnel, and lack. of instructions were causative 

variables. The report gave examples of lack. of knowledge of procedures and showed that some documents were two years old. About 

10 percent or 1,500 of the documents sent to Hawaii were returned 

by the centralized agency to Vietnam each month for correction. 

This was a time·consuming process, and many documents were never 

returned. Audit trails were nonexistent, and no control existed over 

documents going to or returned from the centralized agency. Many 

documents never reached the agency. In November 1968 the Navy 

informed the agency that it had over $3.4 million in accounts payable 

for issues in Da Nang. The Navy was not billed automatically because the agency .never received the issue documents. 

As of 31 March 1969, there were 112 interservice agreements 

naming U.S. Army, Vietnam, as the agency providing support. The 

estimated yearly value was $138.8 million. Unexplained differences 

between the estimated value and actual billings were large enough 

to suggest a breakdown in billing procedures. At the end of the third 

quarter of the fiscal year 1969, nothing had been billed on 33 of the 

74 interservice agreements for equipment, repair parts, and general 

supplies. Actual billings on the other 41 of the 74 agreements 

mentioned were over and under the estimates by a gross $25 million. 

LaCking audit trails and other management aids, causes could not be 

determined. Lost documents, unrealistic estimates on agreements, 

and billing lags were probable causes. Even after billing, some bills 

were not collected because they lacked support documents and customers ref used to pay. 

The audit report observed that however desirable remote accounting may be for other reasons, it complicates the problem of 

accounting control. As discussed, the concept was based on the 

decision to minimize paperwork in Vietnam. Remote accounting is 

not unique but the 6,500 mile span is unusual. Communications and 

document control were difficult. Document control, it was observed, 
THE REIMBURSEMENT PROBLEM 77 

must originate in-country. Department-level reimbursement was a 

perceptible improvement. Command emphasis had also helped. The 

report goes on to say: 

But there is one very cogent reason why further efforts to upgrade the system may not achieve the hoped-for results. The advantage imputed to reimbursement for interservice support versus common service 

funding is restrained consumption. Ordinarily, both the buyer and 

seller have limited resources. Presumably, consumption is restrained 

when the consumer has to pay for what he gets. The seller is similarly 

motivated. Under the automatic reimbursement concept, new funds 

became available as soon as the seller recorded income from sales. 

Unless the seller recovers the costs of sales to his customers, he will 

exhaust his resources. The buyer would benefit from a windfall at the 

expense of the seller's mission. But the theory does not hold in Vietnam. 

The fund controls that are so rigidly enforced elsewhere in the Army 

are iII·suited to the rea lities of combat. Sudden and unforeseen changes 

must be reacted to quickly. To preclude over-obligation, Vietnam is 

neces.sarily given priority in the distribution of Operation and Mainte· 

nance funds. In Vietnam, the unrecovered cost of reimbursable issues 

has 1t!SS immediate impact on the seller. 

The report went on to recommend common service funding and 

noted it is authorized in combat zones by Department of Defense 

Directive 4000.19. A less attractive but workable alternative. was 

common servicing for support below the depot level. Also suggested 

was conventional accounting with rigid controls, including an audit 

trail for individual documents. The Assistant Secretary of Defense, 

Comptroller, nonconcurred in the approach of the Army Audit 

Agency and directed continuation and improvement of the exiSling 

system. 

If turnabout is fair play, it was the Army's turn. The lst Logistical Command was a customer under sixteen interservice agreements. 

Estimated value of these agreements for the first eight months of the 

1969 fiscal year was $40 million. Al of 28 February 1969 only $2.5 

million had been billed. No check was made on bills and most were 

not matched with an interservice agreement. They were obligated 

and disbursed at the same time. The Army Audit Agency recommended that receiving reports be sent to the Centralized Financial 

Management Agency for comparison with bills received from the 

supplier. 

In reply to the Army Audit Agency, the U.S. Army, Vietnam, 

and the U.S. Army, Pacific, made several suggestions and comments. 

First was that new subsiSlence reimbursement procedures were to be 

implemented on 1 July 1969. These procedures had been recommended in 1967 by the Department of Anny Task Group. It was 

further suggested that Interservice Support Agreements be sup-
78 nNANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

poned by Mili.tary Interdepartmental Purchase Requests, thus fund. 

ing the centralized agency in advance of actual receipt of supplies 

and services. This would avoid lying up Army funds during the 

lengthy reimbursement process. New procedures were also instituted 

for the transmittal of documents. Detailed instructions on handling 

reimbursable issues were distributed and used in on-the·job training 

for enlisted personnel. Finally, the use of common service funding 

was again recommended. 

In November 1969 the Joint Logistics Review Board was briefed 

on financial management and procedures in support of Vietnam. 

Almost one-third of the briefing was based on the two Anny Audit 

Agency reports reviewed above. In the discussion period of the 

fonnal briefing that followed, it was pointed out that the Army was 

trying to make the system work as the Office of the Secretary of 

Defense had vetoed the use of common service funding and that 

the use of charge plates was being introduced. The failure of documentation to reach the billing point was mentioned. Common 

service funding was again rf.'Commended. Complexity of the supply 

system and the need (or internal discipline were also discussed. 

The Seventies 

As time passed, automatic data processing equipment became 

more sophisticated. Procedures were refined and agreements were 

renegotiated. Innovations occurred, but many of the old problems 

persisted. In 1970 command emphasis had not waned, and the 

reimbursement program was receiving much attention. Computer 

listings were useful for identifying problem areas and recurring 

deficiencies. Special master files had been developed such as the 

Imerservice Support Agreement file and the activity index file for 

identifying reimbursable customers. Unbilled account payables were 

yet being found during co-ordination visits with customers. Reimbursements from the Army military construction to operation and 

maintenance funds were still low and inadequate, One of several 

conferences in Vietnam was held in November 1970 for the primary 

purpose of discussing reimbursements, 

Difficulties were also encountered in paying the Air Force for 

suppon received. As in the Army's case, documentation was a problem as well as improperly prepared documents. Additionally, many 

bills had not been paid because of confusion over responsibility. It 

was not known if the Air Force should be paid by the Centralized 

Financial Management Agency or from the in-country funds. This 

was finally ironed out and the agency assumed action on the disbursements. 
THE REIMBURSEMENT PROBLEM 79 

In a February 1971 conference at U.S. Army, Vietnam, control 

of documents was again discussed. Transmittal records and supporting files were in use and of value in proving sales to reimbursable 

customers. Also mentioned was the problem of maintaining "hard 

copy" backup. Although the centralized agency was supposed to 

retain the source document which could be used to support contested bills, some direct support units weTe destroying the original 

documents after thirty days when punched cards were prepared. 

During this time period operating problems were still the subject of 

much concern. For example, subsistence documents forwarded to 

U.s. Army Food Service Center, Chicago, Illinois, for submission 

to the centralized agency for billing were now to be sent directly to 

Hawaii. The Chicago routine had been instituted in July 1969 as 

part of revised procedures to increase collections for subsistence. 

The procedure did eliminate over 3,000 documents Rowing into the 

agency monthly. The direct·to-Hawaii change was made to expedite 

billing by the cemralized agency. Unbilled subsistence items were 

still Significant in November 1971. Procedures for handling contested bills were yet unsettled. Responsibility for data conversion 

was also being debated. Maximum conversion to automatic data 

processing had increased the ability of the financial agency to rapidly 

provide additional and more detailed feedback. 

Chart 10 reflects the currelll system used in handling reimbursement transactions supported by interservice agreements. As reRected 

here. the Centralized Financial Management Agency now receives 

most data on magnetic tapes. This allows the agency to manipulate 

the data to provide various listings and reports. For example, information is furnished the United States Army, Vietnam, showing 

dollar value of reimbursements by issuing activity and by customer. 

The agency uses computers to review all supply transaClions to detect reimbursable transactions by matchings with a master file of 

reimbursable customers. The tape system evolved from the introduction of a decision logic table for use by supply clerks. Each clerk 

was furnished a table listing numerous activity account codes and 

the action to be taken depending on the status of the requisitioner. 

Reimbursement transactions almost doubled after the card was 

introduced. The idea identified the significance of reviewing each 

transaction. Thus. it was decided to record all information from 

hard copy documents on magnetic tapes and let the computers 

decide the status of Ihe transaction. 

Coll et:tions are still causing difficulties. Fifty percent of the 

reimbursable issues are mailed to the customer. This creates a 

difficulty in proving that the requistioner received the shipment and 
• 

f-I-----1 

" 

LCCV 

AMMCV 

20 LOG 

320 MEDICAL 

COMMANO 

OTHERS 

CUSTOMERS 

CHART IO--CFMA REIMBURSABLE TRANSACTION 

" 

." 

ISSA NEGOTIA,TIONS 

CONTES7EO BlttS 

CFMA ####-

MANAGEMENT 

REPORTS IN 

VARIOUS 

FORMATS 

NU

V

lISARV 
THE REIMBURSEMENT PROBLEM 81 

that all items ordered or shipped were received. Currently, a transportation control and movement document card is prepared to 

accompany the shipment. but the card identifies only the first hem 

in the package. Current Anny Post Office regulations do not permit 

return receipts or registered packages. Thus,-it is impossible to prove 

that all items were received if a bill is contested. Complicating the 

situation is the procedure that bills are produced based on listings 

of issue documents. Some bills are even refuted because of administrative differences in filling out forms. An attempt is made to 

avoid duplicate billing. The computer routines of the centralized 

agency provide for matChing reimbursable issue transactions against 

a one-year history file. In November 1971, duplicates were being 

identified at a significant volume. Contested bills are forwarded to 

the U.S. Anny. Vietnam, for settlement with the customer. Unfortunately. the Army has a habit of backing off and not pushing for 

payment. If a bill is canceled, Anny funds are used and diverted 

hom their primary purpose of supporting Army requirements. For 

example, in November 1971, almost .$380,000 was outstanding in 

the accounts receivable files for the fiscal year 1969 and $942,000 

was due from fiscal year 1970. The 1971 fiscal year figures were $7.7 

million. In 1972 a reserve was established for adjustments to bills. 

This is a technique similar to the commercial practice of establishinga "reserve for bad debts." There is some question as to the legality of the procedure. but the theory is sound and deserves further 

consideration. In the first five months of the 1972 fiscal year almost 

the entire reserve of $1.3 million was exhausted. 

Realignment Program 

One of the more interesting reimbursement transactions is the 

Realignment Program of the Agency for International Development 

and the Department of Defense involving a considerable amount of 

money. For instance. in the 1971 fiscal year the program totaled 

approximately $80.9 million. The U.S. Army, Pacific, assumed 

funding responsibility for the program in the latter part of fiscal 

year 1967. retroactive to I July 1966, based on a memorandum of 

understanding between the Department of Army and the Agency 

for International Development, dated 25 May 1967. The Secretary 

of Defense had determined in November 1966 that certain of the 

programs performed by the international agency were appropriate 

functional responsibilities of the Department of Defense. 

In hearings from the 1967 fiscal year Department of Defense 

appropriations before the Senate Appropriations Subcommittee, the 

late Senator Richard Russell questioned putting funds for the pro-
82 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

gram in the Department of Defense budget. As previously noted, 

the 1967 fiscal year was the sei:ond year for the Military Assistance 

Service Funded so assistance funds were being put in the operation 

and maintenance appropriations. The senator stressed that very 

little money should be included in the Department of Defense 

budget but rather that funds should be included in the economic 

program. Senator Russell saw this move as a ploy to augment the 

economic program because no one would oppose military assislance 

to Vietnam. Senator Russell asked for a breakdown of the value of 

funds for projei:ts previoUSly funded by the Agency for International 

Development. The total was $20.8 million. Mr. McNamara further 

explained that some actions could not be identified as purely military 

or economic efforts. Items in this gray area which were an essential 

adjunct to military operations or a result from military activities 

were being shifted from the economic program to the Department 

of Defense. The department would refrain from paying for programs 

not closely related to military operations. Some of the programs 

covered by the Department of Defense in 1972 are: 

I. Military Medical Civic Action Program 

2. Military Provincial Hospital Assistance Program 

S. Railway sabotage 

4. Highway maintenance 

5. National police force 

6. Public safety telei:ommunications 

7. Popular Forces shelters 

8. Military civic action 

9. Chietl Hoi amnesty program 

10. Government of Vietnam television 

Budget requirements are developed by the Military Assistance 

Command, Vietnam, and the Agency for International Development, Vietnam, and included in the U.S. Army, Pacific, budget 

submissions to the Department of Army. Budget and program 

guidance also Rows through joint channels, that is, from Vietnam to 

the Pacific Command to the Joint Chiefs of Staff to the Department 

of Defense. The Pacific Command has little, if any, influence over 

the size or composition of the program and merely acts as a funding 

channel. The Agency for International Development, Vietnam, 

initially incurs the expenses in support of those programs it operates 

solely and then bills the Centralized Financial Management Agency. 

The latter maintains reimbursement records and pays all bills for 

the Army in support of the program. The international agency 

maintains auditable accounting rei:ords to support billing of the 
THE REIMBURSEMENT PROBLEM 8S 

Army. This negates maintaining two complete sets of accounting 

records. Some elements of the program are financed initially by 

service funds, and then the cost is transferred to the Realignment 

Program or else reimbursement is effected between the Army and 

the service concerned. In cases where the international agency reimburses the Army for certain services, it is a round robin affair. 

The Centralized Financial Management Agency bills the Agency 

for International Development but the international agency sends 

their payment to the 7th Finance Disbursing Section in Saigon. The 

Saigon finance office processes the collection as a "transaction for 

others," an involved administrative process. 1t would be simpler to 

eliminate the Saigon office from the reimbursement channel. 

Once again the program is mired in a quagmire of administrative 

red tape. The verification process of the U.s. Agency for International Development delays payment to the financial agency and 

often results in contested bills. The development agency has admitted that their records may not be accurate. In June 1971 there 

was $1.5 million outstanding. Billings to the financial agency are 

also delayed by a complicated administrative program, and thus the 

current status in 1972 of the program is not readily available. 

Another difficulty is that negotiations with the U.S. Agency for 

International Development were normally handled at the level of the 

Office of the Secretary of Defense with the Department of the Army 

only infonned after-the-fact. Additionally, the program grew rapidly 

from $20.8 million in the 1967 fiscal year to $50.4 million in fiscal 

year 1968. The figure grew to $78.7 million in the fiscal year 1969, 

went to $64.5 in 1970, back to $80.9 in 1971, while $65.1 was requested for fiscal year 1972. 

Reimbtmemetlts by A lUes 

Reimbursement of support furnished the Army of the Republic 

of Vietnam and the Free World Military Assistance Forces falls into 

two distinct categories: reimbursable and nonreimbursable. Most 

support was of a nonreimbursable nature and was a cost transfer 

between funds of the U.S. Army, Vietnam, under Program 2 and 

operation and maintenance Program 10, Support of Other Nations. 

An interesting exception to this program was the payment procedures used by the Australian and New Zealand forces in Vietnam. 

Agreements between these two countries and the U.S. called for 

complete reimbursement for all services rendered. This procedure 

worked both ways and was advantageous to the three countries. 

Australia and New Zealand did not want the U.S. to support any 

of the cost of their forces in Vietnam; however, they realized that 
84 FINANCIAL MANAGEM)';NT OF THE VIETNAM CONFLICT 

there were many areas of support which we could furnish more 

economically due to our extensive administrative and logistical 

system. These areas included items such as billeting for the head· 

quarters personnel in Saigon, fuel and repair parts for aircraft and 

vehicles, and certain other items of logistical support. 

Reimbursement for this support was broken down into two 

categories: reimbursement on a capitation basis and reimbursement 

for so-called actuals. Capitation reimbursement was a monthly 

charge for a particular service. Examples would be charging so much 

per man per month for billeting or so much per vehicle per month 

for fuel and repair parts. These rates were reviewed annually and 

adjusted accordingly. The charge for actuals on the other hand was 

the charge based on actua l cost of a service or the cost of a particular 

item of supply plus a surcharge to cover transportation expenses. 

Examples would be the cost of fuel for a visiting aircraft or the cost 

of repairing a wrecked vehicle. A monthly statement was provided 

each country reRecting the amount due the U.s. for these services. 

New Zealand reimbursed the U.S. on a cash basis; the reimbursement 

from Australia included cash plus other commodities. 

To offset an adverse balance of payments deficit in Australia. 

the U.S. agreed to accept sugar and other commodities as pan of the 

reimbursement. An annual specified amount of sugar was shipped 

(Tom Australia to Southeast Asia. All reimbursement charges which 

exceeded the amount of commodities received by the U.S. were paid 

on a cash basis. 

The capitation process worked very smoothly. The cost offset 

by sugar and other commodities was prorated on the basis of 75 

percent for the Royal Australian Army component and 25 percent 

for the Royal Australian Air Force component. Due to its small 

size , the Royal Australian Navy component reimbursed the U.S. on 

a cash basis. The Australian and New Zealand forces furnished the 

comptroller of the Military Assistance Command, Vietnam. a 

monthly repon which conta ined information pertaining to strength. 

vehicle usage, and fuel consumed. This information was used to 

prepare a formal billing for each country in accordance with the 

financial working agreements. 

Some problems were encountered in the bi ll ing for actuals. 

Original agreements stated that each country would furnish the 

comptroller a monthly listing of supplies and equipment drawn 

fTom U.S. supply sources. These listings were forwarded to the 

centralized agency for preparation of a formal billing. The listings 

did not include the original requisition number and the agency 

had no way of verifying the supplies drawn by cross·checking against 
THE REIMBURSEMENT PROBLEM 85 

U.S. Army. Vietnam, depot issue listings. The General Accounting 

Office look exception to this policy, and Australia and New Zealand 

agreed to furnish requisition numbers on subsequent listings. 

As a result of the General Accounting Office audit, the Centralized Financial Management Agency began to bill Australia and 

New Zealand by comparing the U.S. Army, Vietnam. depot issue 

listings with the monthly listings furnished by the two countries. 

This created some duplicate billings due to partial shipments on 

requisitions. Additionally, Australia and New Zealand were being 

billed for items which they had not received. These items were on 

order for direct shipment to them in Vietnam. Under their regulalions they could not pay for an item until it was physically received. 

The Australian Air Force was also being billed under the actuals 

process for aircraft repair parts which they were paying for based on 

capitation rates for aircraft operating hours. These items are still 

being studied in 1972. 

Reimbursements between U.S. agencies caused many problems, 

but procedures worked rather well with the allies. It is true, however, that the costs of U.S. forces have been overstated due to failure 

to identify all issues chargeable to the allies. This occurred most 

often when supplies issued to U.S. forces were subsequently furnished Ihe allies and no documentation was prepared. 

Looking Back 

Looking back at the repetitive phases of the reimbursement 

problem, it can be concluded that seldom was so much effort expended so fruitlessly. The obvious solution for a joint theater is a 

common supply plan, an idea suggested numerous times at all levels 

of command. The parochial interests overshadowed all attempts to 

impose order on the interface among lhe services, allies, and government agencies. 

Much overhead was created and administrative costs expended 

attempting to keep the records straight. Many times reimbursable 

issues were ignored as the easy way out. It was often too much of 

an administrative hassle to collect for the issues and to document 

the transaction. The supply clerks who are the cornerstone of the 

system \\Iere often ill-trained or lacked guidance. No amount of 

sophistication at higher levels could overcome these basic short. 

comings. 

Reviewing the numerous inspection and audit reports one can 

see that the defects which reappeared so often were inherent to 

the system. Many problems have never been reconciled or were 
86 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

resolved too late; now that the end of the conflict is near the urgency 

of the matter is gone. 

A subtitle for this chapler could aptly stale, quid pro quo; the 

government spent much time, effort, and money identifying who 

should get something in return. The result is that U.S. Army funds 

were supporting the major portion of the war while in the continental U.S. badly needed repair and maintenance projects were 

being deferred from year to year at nearly every installation. The 

amounts lost through failure to obtain reimbursement would have 

considerably improved the permanent plant facilities in the continental United States. 
CHAPTER V 

Organization for Financial Management 

After years of working in the financial management structure, 

1 was prompted by this monograph to review how certain elements 

of the Defense Department are organized and how the structure 

affect5 management. Students of organizational theory and behavior 

can find a plethora of potential subject areas if they were to examine 

the federal government. This is not to ignore the many fine Presidential commissions such as the Hoover Commission. Implementation of the latter's recommendations are with us today and will 

likely remain. However, an entity as large as the federa l government 

is too dynamic not to warrant periodic review. One of the latest 

groups at the time of writing-the Presidential Advisory Council on 

Executive Organization or the Ash Commission, headed by Mr. Roy 

L. Ash, President of Lillon Industries in 1972-again recognized 

the need for reassessment and restructuring. A Presidential commission more closely identified with the Armed Forces was President Nixon's Blue Ribbon Defense Panel chaired by Mr. Gilbert 

W. Fitzhugh, Board Chairman of the Metropolitan Life Insurance 

Company. This panel made over one hundred recommendations 

relating to the Defense Department's organization and functioning 

in 1970. 

The Anny has also made in-house studies which have resulted in 

improved organization. For example, in 1970, based on the findings 

of an ad hoc committee on Anny financial management, the Assistant Vice Chief of Staff was designated the Director of Anny Programs. The change was instituted to improve the programing and 

budgeting procedures and provide a more integrated, systems approach. Many citizens and even individuals within the government 

do not appreciate the awesome size of the government. The Defense 

Department, with an annual $70 billion budget for the last several 

years, ranks far ahead of the largest companies in Fortune's "Directory of the 500 Largest InduStrial Corporations." The Army would 

place about fourth on the list based on its operation and maintenance 

appropriation alone, ignoring all the other appropriations such as 

the funds for the procurement of equipment and missiles or for 

military construction. The amount spent for Southeast Asia in the 

87 
88 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLI CT 

1969 fiscal year would rank. about fourteenth. These rankings were 

based on a comparison with the total sales of the various companies 

on Fortune's list. A total-asset comparison would be even more 

one·sided in favor of the government. An organization this large is 

worthy of review. Some of the structure has been explained in 

discussions of the various functions such as budgeting and accounting; however, the foca l point in this chapter is the organization 

per se. 

Basic Design 

The basic framework. for financial management as well as for 

most facets of national security is depicted in Chart 11. Detail is 

omitted in some cases when focus on financial management is not 

sharp. It can be seen immediately that the framework is multi-layered and there are many off-shoots or spurs. Contrast this chart with 

Chart 12 which shows the inAuence network in which the Department of Army operates. Together the two charts depict a frenetic 

atmosphere where there is much co-ordina tion required, and backtracking and retracing of actions abounds. 

Organizations usually evolve without central planning or control 

and often are not as efficient as if they were redesigned at each 

stage of development of the activity itself. This is especially true of 

the government as new responsibilities are added and new requirements are absorbed. This is manifested by legislation that established 

the Transportation Department. Responsibilities were fragmented 

and so diverse that a major realignment was required. As expected, 

power groups prevailed and not all agencies having responsibilities 

in the transportation area relinquished their functions. Thus it can 

be seen that even when the need for realignment is identified, 

attainment of a more efficacious system is difficult. 

The Defense Deparunent organization reAects the needs of 

tactical command and admin istrative control. For example, the 

unified commands are most useful when organizing for combat or 

ma intaining a deterrent force where representation from two or 

more forces is necessary such as in the Pacific Command. This 

tactical solution creates nightmares for the administrators. Each 

service has separate logistical and administrative systems which do 

not interface with the other services easily. The handling of the 

exchange of asselS and the problems of mutual support create 

numerous hassles and increase the administrative overhead. The 

traumatic experiences reflected in Chapter IV bear witness to this. 

The Defense Department situation is not unlike any textbook con-
CHART J I - FRAMEWORK FOR FINANClAl. MANAGE

[ f------- 

CONGRESS PRESIDENT 

" 

I 

I 1 

STATE 0'0 

I

I OCAA j I OSA 

I '" I I ARMY 

J 

~ ------------- (I ST

STAFF EXAMP

CO

I UNIFIED CO MMANO~ I 

(lor I .. ",ple, PACOM) f' M,uOR COMMANO~C

for <Plmpll. USARPAC 

-- ~~## 

~!,!:/;.~i.;"~ ..-

I( SU8COMMANOS ')1 

(for ulmpll. MACV) f' SU8COMMANOS nl 

for USAAV) 
CHART 12- DEPARTMENT OF TilE ARMY I NFLUENCE N

CONGRESS 

NEWS 

MEDIA 

INOUSTRY 0. 

---. . . . 

-. 

-- INTERNAL 

INTEREST 

GROUPS GENERAL 

PUBLIC 
ORGANIZATION FOR FINANCIAL MANAGEMENT 91 

Aict between staff and line officials. There is no way to avoid the 

inevitable conflict and dichotomy of needs, but there must be 

emphasis on minimizing the differences. 

The multi-layers of organization and the dual requirements for 

structuring combine with the influence of special groups to provide 

a formidable environment for management. The Army is not unique 

in having to wrestle with numerous special interest and power 

groups. Industry often has this problem. What does make the Army 

different is its place in American society and its role as public 

servant .. This limits the action the Army can use in countering 

pressure groups and magnifies the numbers of laws and regulations 

designed to keep the armed forces impartial. 

Ma1wgement of a War 

With the foregoing as a background, it would be appropriate to 

discuss the organization's impact on Vietnam. Before the buildup 

and the transition to Military Assistance Service Funded, the 

management of the war followed the normal channels of the Military Assistance Advisory Group. The assistance group in Vietnam 

submitted requirements through the Pacific Command because it 

was an advisory element and all services were represented. As 

depicted in Charl J 2, the Army was responsible for supporting its 

own element and providing the necessary resources. These requirements were merged at the Department of Army after traveling the 

separate channels of communication. Designation of the assistance 

group as Military Assistance Command, Vietnam, and the activation 

of large field commands such as the U.S. Army, Vietnam, the 1st 

Logistical Command, and the III Marine Amphibious Force 

changed the complexion of the structure. The joint channel of 

command was emphasized although the Army element was involved 

with sending information and requests through the U.S. Army, 

Pacific. Actually, the latter was more of a figurehead because of the 

nature of the U.S. involvement. Thus. requirements were not always 

anticipated at the Department of Army and often the password was 

react instead of act. The Executive Department played a more 

direct role in establishing requirements and providing policy, thus 

further subjugating the Army's prerogatives. What had been an 

orderly dual track now of information soon became a one-track with 

emphasis on flow £Tom top to bottom. 

Perhaps one shortcoming to the emphasis on the joint channel of 

command was the supporting comptroller organization. Because in 

the Military Assistance Command, Vietnam, the comptroller was 

not a general officer, his role as a financial manager was diminished 
92 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

and his influence on the staff reduced. Many problems were passed 

to the U.S. Anny. Vietnam. for resolution when they could have 

been handled in the Military Assistance Command. Vietnam, which 

perhaps could have forced all the services to an agreement. Lack of 

a strong financial organization at the bottom further forced impetus 

to originate at the top echelons of the defense hierarchy. 

The peacetime procedure was bureaucratic enough but operated 

because there was time to make the system work. The exigencies of 

a combat environment, especially one directed from the highest 

levels of government, left little or no time for making the system 

work. Emphasis was rightly on making the correct move from a 

tactical standpoint with financial management being a tangential 

issue. The stress affected the American economy from a macro point 

of view, and perhaps finances were de·emphasized too much. At any 

rate, the military organization pushed aside financial considerations, 

and the tactical and logistical planners and operators assumed full 

direction of the daily operation. 

Thus as anticipated, the Army's raiSQtI d'etrc became the con· 

sumer of all its attention and the administrative resources languished. The Army needs a financial management structure to help 

conserve limited national resources and to effectively utilize those 

assets made available. The requirement for the structure during a 

time of combat involves national priorities and an ordering of objectives. It has been advocated that less money and manpower would 

have been consumed had financial management been a more integral 

part of the decision process. The type of war and the stages of 

escalation mitigated against financial management. The stress was 

on a quick military victory at any price. Not many people saw such 

a long-term, esca latory involvement. Also, the rest of the Army was 

not at war. Many installations and activities of the Anny were 

needed as a deterrent against aggression from other areas and for 

the normal housekeeping activities of a large armed force. Thus, we 

had two systems operating simultaneously. each competing for 

resources and attention. 

·Within the Department of the Army there is overlap and often 

a fine delineation of duties. The ComptrOller of the Anny has the 

responsibility for budgeting but must rely on the program managers. 

There is designed into the system a balance of power and a need for 

co-ordinated effort. For example. the Department of Army prepares 

the plans and programs which consume many of the Army operation 

and maintenance dollars \\'hich the comptroller has worked so 

strenuously to obtain through the budget process. The costs of this 

type of organization are often expensive, especially during a time 
ORGANIZATION FOR FINANCIAL MANAGEMENT 93 

of crisi~. Some of the problems are: overlapping responsibilities; 

organizational conflict; excessive lime required to process actions; 

failure to act when responsibilities are unclear; and duplication of 

effort. 

Even within the financial channels there arc numerous layers, 

and our research has shown some overlap. Chart 13 highlights the 

financial channel from the Department of Army to Congress. The 

reader of the chart mun not forget that there are financial staffs 

at all levels of the Army, and that some are filled with personnel 

lacking the proper training and experience. The chart shows only 

the financial channels and ignores all the other organizational 

clements which are a strong influence on the process. Each block 

represents within itself a myriad of responsibi lities and a separate 

organizational entity. Granted that some elements are larger than 

others, each does add to the bureaucratic process and at times 

inhibits fan action. Within Congress there is much organization and 

the numerous committees which have a say on the budget consume 

reams of paper for printing concerning the Army operation and 

maintenance appropriations alone. Perhaps it is time again to 

re-examine and possibly nreamline our financial management 

process. 

New Horizons for Fi,wPlcial Matlageme,1t 

The computer opens new frontiers for financial management 

and makes available van amounts of organized data in a decisionmaking format. There are numerous systems being designed and 

proliferated which will in lime make decision-making easier. 

Until the marvels of the electronic age are assimilated, improvements mun be made. Increased centralization and the elimination 

of intennediate financial managers would increase the rate at which 

information moves. The danger is too large of an organization at the 

central point. This can be contained with proper planning and the 

use of systems analysis techniques during the organizational design 

phase. 

Consolidation and reduction at the top levels is also possible. As 

mentioned earlier. organizations often grow unchecked and without 

purposeful planning. Thus, it is no indictment of anyone when a 

suggestion is made to periodically review an organization. A 

thorough management analysis of the Comptroller of the Army 

organization would probably identify areas for improvement and 

reorganization. The interface between the various levels depicted 

in Chart 1) warrants examination. There may be unnecessary 
CHART 13-T op FINANCIAL MANAGEMENT CHANN

SECRETARV OF SECRETARY OF CHIEF OF STAFF- THE ARMV_ 

I-- OEFENSE--ASO, I- 

COMPTROLLER "- ASSISTANT VICE f-- ASA, FINANCIAL 

COMPTROLLER 

OF THE ARMV 

CH IEF 0" STAF" MANAGEMENT 

~- - -- - --
ORGANIZATION FOR FINANCIAL MANAGEMENT 95 

overlap and the repeating of requirements or functions that are 

similar in scope and content. 

Within the Department of Army staff there is overlap and the 

need to reassess responsibilities. The relationship between the 

Comptroller of the Army and the other major staff elements needs 

to be studied. Also, the interface among the other staff elements 

warrants re-evaluation in the area of financial management responsibilities. The "Report of the Special Review Panel on Department 

of the Organization" released in 1971 is a good starting point. While 

the Special Review Panel analyzed the Department of the Army 

staff and selected major commands, the review proposed in 1972 

would focus on the financial management organization. 

In organizing for a war, especially the limited type such as 

Vietnam, our organizational design requires rethinking. We tried 

to manage from within a peacetime financial organization. Perhaps 

what was needed and may be suitable for future conRicts is a special 

purpose organization. In academic jargon "matrix management" is 

in vogue. Matrix management is the administrative equivalent of 

the tactical task force. A separate activity would be established at 

the Department of the Army to administer the financial aspects of 

the war much as the Centralized Financial Management Agency 

handles the accounting mission. The special activity would have 

a counterpart activity in the theater or outside the theater, such as 

the centralized agency. All intennediate commands would be el im· 

inated to expedite information Rowand to avoid the pyramiding of 

manpower requirements. At the Department of the Army, each 

interested staff section would be tasked to provide subject area 

spedalists to assist the financial managers. The activity would be 

a well-rounded and balanced team whose sole mission would be to 

effectively manage asset acquisitions and utilization. The normal 

staffs would be unaffected and pennitted to conduct their normal 

operations with min imum interference. Streamlining above the 

Department of Army staff would also be necessary to increase 

reaction time and Rexibility. Matrix management has been effective 

in industry as an addition to the normal organization when designed 

with a limited life for a specific purpose. 

Along with speCial purpose organizations comes the need for 

supporting table of organization and equipment-type accounting 

units which can be deployed. The Army had available accounting 

table of organization and equipment units which could have been 

used in place' o[ the Centralized Financial Management Agency. 

When the agency was established. it was an organization using a 

table of distribution and allowances and staffed mainly wich dvil-
96 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

ians. If the Army had an accounting table of organization and 

equipment unit available for early activation and deployment, 

accounting could commence sooner and at less cost using military 

personnel. Our doctrine on the use of accounting units needs 

rethinking. 

What I have said in this chapter should not be taken as an 

indictment of the financial management system or its managers. If 

this monograph is to serve the future, it should serve as a guide to 

our past and should illuminate the need for change. An organization 

as large and dynamic as the Army requires re-evaluation. While our 

experiences are current, the situation should be examined. 
CHAPTER VI 

Future Financial Management 

Throughout this treatise, many methods of better financial 

management have been indicated, but the question of the future 

continues unless some definite steps are now taken to prepare for 

an emergency or a repeat of the conditions of limited war. Planning 

is currently under way within the Department of the Army to 

establish procedures which could provide for effective utilization of 

resources, and the lessons learned in Vietnam will contribute to the 

shape of these plans. One such plan is entitled LSS-71 and, while 

primarily a logistics procedure, embodies the financial implications 

as a major portion. It is perhaps a tribute to the planners of the 

late 19505 and early 19605, that the financial procedures envisioned 

are virtually the same as had been included in plans of that era, 

such as a single service concept for common supplies and other 

relief from peacetime limitations imposed by Congress. If those 

earlier recommended methods of financial control were never implemented, what hope do we have that the situation will be altered 

in the future? It would appear that now is the time to assure that 

the elements of the plan are approved at all levels so that their 

activation will be automatic in case of another limited war. By 

seriously conSidering the innovations required in these periods of 

conRict, it is conceivable that some changes will be dictated in our 

peacetime structure for financial management as well. 

Far too often in the past. our approach to resource management 

has been based on reaction rather than action. An installation 

commander, faced with the requirement to respond to a query of 

some higher authority. has concentrated on that specific area of 

interest, to the detriment of other programs just as important. Our 

current accounting system at installation level is designed more to 

render reports required at higher echelons, including the Department of Defense and Congress, than to provide for the infonnational 

needs of the local commander. It is a fortunate commander who has 

developed a comprehensive method of gathering all of the infonnation required to effectively manage his resources on a day-to-day 

basis. 

97 
98 FINANCIAL MANAGEMENT OF THE V IETNAM CONFLICT 

More of a problem is the seeming lack of co-ordination between 

missions given and the funds to adequately support these missions. 

This was pointed out repeatedly during the Vietnam War when 

many tactical decisions were made in joint channels, including the 

Department of Defense and the White House. These decisions were 

passed down through the Commander in Chief, Pacific, and Headquarters, Military Assistance Command, Vietnam, to the U.S. Army, 

Vietnam. for implementation. Rarely was there any real co-ordination of the impact on funds wh ich some of these decisions had. In 

the period when there was no limitation on funds available, this was 

not a major consideration, but diversions from other necessary 

programs were required later to finance these decisions. This is not 

to say that financial considerations would, or should have changed 

the outcome, but had commanders been made aware of what was 

being deleted from the program in order to meet the new requirement the ir actions may have been far different. It is possible that 

some alterations would have been dictated. We are currentl y trying 

to obtain levels of funding which will allow us to perform some of 

the maintenance and act on other programs which were deferred 

for years in order to provide money for some of these actions in 

Vietnam. 

The ideal situation would be for the budget to actually fit the 

pattern which I described earl ier and merely be a reflection of the 

amounts of money required to carry out al1 of the approved programs, as indicated in the Five Year Defense Program. While this 

may never become a tota l reality, we should strive toward that end. 

One way in which to accomplish this would be to make Congress 

more aware of the elements of the plan and the funds required to 

pursue it. Vietnam has forced the budgeteers and programers to 

move in this direction. A great dea l of emphasis has been and is 

being given to the development of factors both for bulk allocation 

of funds and for specific requests for information. This approach 

could well prove to be the salvation of our financial management 

program. Once data is developed which is accurate enough to 

convince the Office of the Secretary of Defense and Congress of its 

validity, we no longer would be debating the cost of a particular 

budget item, but whether or not it should be accomplished at all . 

If it was decided that it was necessary. there would be an automatic 

price tag involved. While this utopian approach may never be 

reached completely, the closer we come to making programming 

decisions automatic budget decisions, then the easier the task of 

effective management of resources will become. We cannot just 

stop with Congress. but the same idea must permeate the entire 
FUTURE F INANCIAL MANAGEMENT 99 

Department of Defense. Any commander given a mission should be 

given the resources to accomplish this mission virtually in the same 

directive, or else be allowed to identify in the previously approved 

program that item which will not be accomplished due to the 

diversion of funds to the new one. 

The above concept will require a shift in the thinking of many 

individuals involved in the utilization of resources, since human 

nature makes it difficult to admit that by some miracle of better 

management one cannot assume new missions without more resources. In actuality, if an installation commander can take on new 

projects without letting others suffer as a result, he is admitting that 

he was not achieving maximum results from his present funding 

level prior to the assignment of the new program. Admittedly, this 

has not been the interpretation genera ll y prevalent in the past, but 

it should be in order to insure a truly effective financial management 

posture within the Army. 

If program decisions could, in faCt, become budget decisions, 

it is conceivable that this could have a very desirable effect on two 

deterrents to effective resource management. The first, I have 

mentioned before-late approval of the budget by Congre.ss. Although we will never completely divorce dollars from the consideration of the programs of the Department of Defense, if we could 

merely standardize the formu lation process, the discussions of what 

a particular program should cost would diminish and there would 

be a good chance that budget approval could be granted much 

earlier in the fiscal year under consideration. Not only that, but 

once a program was approved, if it lasted over a number of years. 

individuals involved in pursuing that program could rely on funds 

being made available since to do otherwise would eliminate the 

project and thereby negate any value from money already expended. 

The key element here remains the Army's ability to forecast 

accurately the total cost of any of the elements of their program. 

This would include taking into consideration external influences 

such as a factor for inAation, the side effect costs associated with the 

introduction of a new weapon into the inventory, replacement 

comparison costs with the weapon being eliminated, and all other 

elements which might be affected even extraneously by the project 

under consideration. In other words. a totally complete program 

should be submitted, and, more important, once approved, cost 

data should be developed to prove, or disprove, the validity of our 

costing procedures. The more reliable these become and the more 
100 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

we can prove to Congress that we are capable of effective financial 

management, the less suspect will be our budget, and the quicker it 

will gain approval. 

The second deterrent, of which I spoke, is almost an extension 

of the first, since it involves the installation commander and his 

reliability index in the use of funds. There is a rather prevalent 

myth that a 99.9 percent obligation of available funds indicates 

effective utilization of resources. Even more germane is the feeling 

that if one does not achieve this figure, the next year's budget will 

be cut, since one obviously does not need all of the funds which 

were requested. It appears to me that both of these statements should 

be incorrect, particularly in an environment where accurate factors 

provide accurate costs for accomplishing a particular mission. & a 

matter of fact, the above two statements could only be true in an 

environment where more missions were assigned than resources to 

effectively pursue them. This destroys true management of resources 

and leads to "stop·gap" measures, which are designed to apply 

enough resources to each little area to keep it from falling apart, 

merely delaying the inevitable day when some inspeCtion reveals an 

activity which is desperately in need of funds and there are none 

to be found. If a commander, through better financial management, 

can perform the task with only 90 percent of the funds which had 

been estimated for its cost, then he should receive the plaudi(S of 

his superiors for an outstanding job. Certainly, his next year's 

budget should not reflect any change for this exemplary accomplishment, except for the possible revisions to factors based on similar 

performance by a number of commanders under like conditions. 

In one area alone, the Army should have learned its lesson in 

this regard-repairs and utilities maintenance. For years the Congress 

approved budgets which included funds to maintain the facilities on 

installations. They did not seriously question either the amounts 

requested or whether or not the maintenance was actually being 

performed. Considerable liberties were taken with these funds. 

however, and they were diverted to other higher priorities in many 

cases. The required maintenance was deferred. As a result many of 

the facilities reached the point that something had to be done, but 

this required funds. Once Congress was aware of this situation, their 

reaction was naturally one of shock. In effect. the members of Congress asked some rather embarrassing questions about what had 

been done with the money which had been appropriated for this 

purpose. They then imposed an additional control on funds to 

insure that we used the funds for repairs and utilities maintenance 
FUTURE FINANCIAL MANAGEMENT 101 

which they had given us. They gave us a Hoor; we had to spend a 

certain amount of money in this category. This action typifies the 

reaction which one can expect on any area in which mismanagement 

of funds is indicated, bUl, worse, from a congressional point of 

view, it is an indiCllnent of the Army as a whole. The only way to 

escape these added controls and the extremely close scrutiny of 

Congress in all areas is to prove ourselves capable of their trust to 

manage effectively. 

As I have indicated earlier, I feel that the Army will emerge 

from Vietnam with a relatively good reputation in Congress, but 

there naturally will be some closer looks given the expenditures of 

the entire Department of Defense. This will require that commanders at all echelons become interested in all aspects of the 

financial management structure, and in the development of a 

comprehensive plan to insure that information is immediately 

avail able regarding costs of alternatives prior to reachi ng a decision. 

There will be times when more mundane actions must be pursued 

in order to have a complete program which makes the best overall 

utilization of funds. If this does not become the rule, our reputation 

can quickly diminish to one in wh ich Congress and other higher 

echelons are directing each acti vity to the lowest de tail. This will 

certainly be admitting a failure in effective resource management. 

If this same interest were carried over into the planning for any 

type of engagement which might occur in the future. perhaps our 

financia l management posture could gain the same reputation which 

is enjoyed by our combat troops abil ity to react to any situation. 

Throughout Vietnam, numerOus laudatory comments were made 

about our ability to build up so quickly witham a major drain on 

Reserves or Nationa l Guard. Also considered exemplary was our 

rapid establ ishment of a logistics base to supply the troops, and to 

construct necessary facilities in an area which almost defies construction efforts. When questions arise as to whether or not prudent 

use of our resources was made in accomplishing these tasks. the 

Army may be criticized severely. 

In order to remedy this for future limited wars, we must plan 

for a viable organization to accomplish this activity. I feel strongly 

that we should plan ror the immediate establishment of an organization something like the Centra lized Financial Managemem Agency 

to be implemented at the outset of hostilities. We should ask Congress for relief from statutory requirements which hamper operations, and that approva l should be granted now to be effective 

immediately whenever conditions warrant. Further, we should strive 

to have any deviation authority authorized by Congress passed to 
102 FINANCIAL MANACEMENT OF THE VIETNAM CONFLICT 

the lowest possible level to provide the maximum flexibility to the 

commander who must insure that he takes every action to obtain 

the best mission accomplishment through effective utilization of 

all [actors at his d isposal-including efficient financial management. 
AAA 

AID 

AMC 

AMMCV 

AOB 

ARVN 

ASA FM 

ASO Comp 

ASO I&:L 

ASO ISA 

ASD MRA 

ASD SA 

BOB 

CFMA 

Cllieu Hoi 

COA 

DA 

DCAA 

DOD 

DPRC 

DSA 

FWMAF 

FY 

FYDP 

G-4 

GAO 

GVN 

Hq 

lAO 

ICCV 

ISSA 

j~B JSOP 

jUSPAO 

Glossary 

Army Audit Agency 

Agency lor International Development 

Army Materiel Command 

Aviation Materiel Management Center, Vietnam 

Approved operating budget 

Army, Republic of Vietnam 

Assistant Secretary of the Army, 

Financial Management 

Assistant Secretary of Defense, 

Comptroller 

Assistant Secretary of Defense, 

Installations and Logistics 

Assislalll Secretary of Defense, 

International Security Affairs 

Assistant Secretary of Defense, 

Manpower and Reserve Affairs 

Assistant Secretary of Defense. 

Systems Analysis 

Bureau of the Budget 

Centralized Financial Management Agency 

South Vietnamese open anllS or amnesty program 

Comptroller of the Army 

Department of lhe Army 

Defense Contract Audit Agency 

Department of Defense 

Defense Program Review Council 

Defense Supply Agency 

Free World Military Assistance Forces 

Fiscal year 

Five Year Defense Program 

Assistant chief of staff for supply 

General Accounting Office 

Government of Vietnam 

Headquarters 

Intra-Army Orders 

Inventory Control Center. Vietnam 

Inlerservice Support Agreement 

Joint Chiefs of Staff 

Joint Logistics Review Board 

Joint Slrategic Objectives Plan 

Joim U.S. Public Affairs Office 

'03 
104 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

Leop 

Log 

Loran 

MAP 

MASF 

MCA 

Med 

MEDeAP 

MILPHAP 

MILSTRIP 

MIPR 

MMA 

MPA 

NOA 

NSC 

NVN 

O&:M 

OEP 

OMA 

OMB 

OSD 

PA&E 

PEMA 

POL 

RCFCS 

ROK 

ROK ORTC 

RVNAF 

SEC OEF 

USAID 

USARPAC 

USARV 

USARVIS 

Logistics Colllrol Office. PacirlC 

Logistics 

A long range electronic navigation system 

Military Assistance Program 

Military Assistance Service Funded 

Military Construction, Army 

Medical 

Mililary Medical Civic Action Program 

Military Provincial Hospital (or Health) 

Assistance Program 

A uniform procedure for requisition and issue 

of material within Slandardized priorities 

Military Interdepartmental Purchase Request 

Materiel Management Agency 

l\'filil3ry Personnel. Army 

New obligation authority 

National Security Council 

North Vietnam 

Operation and maintenance 

Office of Emergency PI:mning 

Operation and i\laintenallce, Anny 

Office of Management and Budget 

Office of the Secretary of Defense 

Pacific Architects and Engineers 

Procurement of Equipment and Missiles, Army 

Petroleum. oils, and lubricants 

Requisition Ceiling Fund Control System 

Republic of Korea 

Republic of Korea Overseas Replacement 

Training Command 

Republic of Vietnam Armed Forces 

Se<:retary of Defense 

United Statts Agency for International 

Development 

United States Army. Pacific 

United States Army, Vietnam 

United States Army, Ryukyu Islands 

Index 

Abrams. General Creighton W.: 49 

Accounting. See also Re imburscmenl.5. 

ceUiralized. in Hawaii: 49-51 

documenta tion: 49-51. 53, 7!-79. 81 

forecasting: 45--46. 50. 99-100 

guidelines: 59-60. 63-65 

operations in Okinawa: 43-46.54 

order system: 67-68. 70 

remote: 76 

responsibility: 9. 54. 62. 99 

supply: 45 

weakneMeS in: 42-46. 53-54. 62. 70-73. 

75.97 

Advice of Obligation Authority: 4s-44 

Ad~j50rs. United States: 3. 16 

Agency for International Development: 

29-50.55. 81-83 

AlD/DOD R(:illignment: 29-50 

Air Force. United States. SI;(' Un ited 

States Air Force. 

Airborne Srigalle. 173d: 19 

Aircraft: 18,51 

Ammunition: 27-28, 74 

Andrews, George W.: 18-19 

Appropriations. Su (I{$O Budgets; Reim· 

bllrsemenls; United States Congress. 

expenditu res: 4 

general allotmenl: 9 

Hou5(! huring1: 18 

maintenance: 3. 14 

operating: 7. 14 

procurement: i 

req Oe5tS: 27 

Senate Committee: 17.22.81 

supp]emental: 7-8, 19-23, 25-26, 28-30. 

S2, S5 

unlimited: 18-19 

Army ,\ud it Agency: 50, 70. 75. 77-78 

ATIIly Financial Management Comm ittee: 37 

Army Materiel Command: H-45, SO, 53. 

56 

Army Petroleum Command: 73-74 

Army Post Ollice: 81 

Arm)' Stock Fund: H. 74 

Army Task Group: 70, 72. 74-76 

Ash Commission: 87 

Ash, Roy L,; 87 

Assistant Director of the Army Budget: 

36-37 

As.sistant Secrctary of the Army fo r Fi· 

nancial Management: 5--6 

Assistant Secretary of the Army for In· 

stallations and Logistics: 49 

Assistant Secreta ry of Defense:, Comptrol' 

ler: 4-6, 50, 77 

Australian forces: 8~5 

Automatic data processing: 45-46,53.56, 

78-79.81.93 

Beach. General Dwight E,: 68,70.72 

Bien Hoa: 19 

Bill ing. Stt Reimbursements. 

Blank cheek: 4, 18, 25. 29, 45, 59, 70 

Blue Ribbon Defense: Panel: 87 

Brooks, Dr. Robert A.: 49 

Brooks Study: 49. 53 

Budget Program 2000: S5 

Budgeting and Financing for Emergency 

Conditions: 5 

lIudgeu 

accounting for: 42-43. 60 

Approved Operating: 55, 64 

CongTeSSional limitations: 5. 16-18, 

25-29, 36 

CUiS: 28, 32, !16. 56 

early: +-5, 16-19 

emergtncy: ~6 

estimatcs: 26, 99 

installation: 14 

operations and maintenance: 18, 59 

preparations: 15. 28-29. 32. 37, 4\. 

98-101 

requirements for: 14,40,92-93 

submission and appropriat ion datcs: 

15-16,99 

supplemental: 19-23. 25-26. 28-:50. 32. 

Buildup: " 17-]9, 29, 32, 65, 91 

Bureau of the Budget: 59 
INDEX 107 

Centralized Financial Management 

Agency: 40,49-51, U-56, 62, 67-68, 

71-74,77-79,82-83,85,95, 101 

Charge.plate system: 75 

Chaardr., Lieutenalll Genenll Ferdinand 

J,: 49, 59, 73 

Chief of Staff, Unit«l Statn Army: 42 

Combat readinCS$: 6 

Commander in Chief, United Slate:. 

Army, Pacific: 98 

Common aervice supply syJlem: 10,66 

Communica.tions: 35, 51. 82 

Comptroller of the Army: 57-39, 49, 70, 

77, 92-93, 95 

Comptroller Itaffs: U 

Com pUlers, See Automatic data proces· 

ling, 

Congre"ional Record : 22-2',25,29 

Construction supplies: 72 

Continental Army Command: '8-59 

Contingency Fund, Department of De· 

fense: 5 

Cost accounting: 9 

Cribbins, Lieutenant Colonel J, P.: 18-1!:! 

Da Nang: 19, 76 

Defectors: " 

Derenle Fuel Supply Center: 71 

Defenle Intelligence Agency: 66 

Derenle Supply Agency: 44, 55, 66 

Department of the Army: 8, 14-15, 46, 

SO, 6S-08, 70, 81-83, 88, 91-95, 95, 97 

I)eparlment or Ddenae: 9, ,4 

and AID: 29-50, 81-83 

and budgeting: II, 15-16, 20, 26-29, 41 . 

87-88, 98-102 

cost defense: 24, '2, 35 

financial managementltructure: ~, 

87-88, 91-9', 95-96, 98- 101 

planning for Vietnam war: 17 

I)epartlllelll of Defense Direct"" 7220.8: 

, 

Oeputy Auistant Chief of St~rr for Force 

De\'elopment: 18 

DePllly Chief of Slaft for Logistics: 49 

Dien Bien Phu: 3 

Director of Army Programs: 8i 

Economic aid to Vietnam: 23 

Economy, mobiliution 0(: 1 

Eiaenhower. Pre:.ldent Dwight D.: 5 

Emergency Fund, Southeast Asia: 19 

Emergency situations: 4-8, 19,25,46,97 

field commanders: I~ , !8-59, 41 

Finance Disbursing Section, 7th: 85 

Financial In" emory Acounting SY5lem: 

'"' Financial management: 5, 18,27, 29. See 

also Accounting. 

Defense Department sy$lem: 87-88, 

91-95, 95-96, 98-101 

in Hawaii: 49 

impro\'emen~: 36-57,46-41. 62, 86, 92 

limitations on: 4, 1.5,55-54 

matrix: 95 

plans for emergencle:.: 5-6, 97 

problems: 7J-78, 86, 98 

procedu r«: 6-10, 50, 37, 4.5, 78 

techniques: 59-60, 62, 93 

Fitzhugh, Gilbert W.: 87 

Fh'e Year Defense Program: 98 

Flood, Daniel J.: 27-28 

Free World Armed Forcu: 32,40, 55, 85 

French in\'oh'ement: 5, 16 

Funds, See (l1~o Appropriations. 

collections: 67-68, 70-74, 76-78, 81-85 

com mon service: 72, 77-78, 85 

consumer: 46, 49 

control: 42, 49-51 

forttas~: 45--46, 50 

leo'eb of: 14, 59-60 

methodolog)': 45-44, 6H5 

mismanagemelll: 50, 46, 81, 86, 98 

obligation of: 5 

reservations: 50, 53, 59 

re:.ponsibiliti«: 9, !16-,7 

restric tions on: 10, 18, Sf) 

$lock: 4-4-46, 49 

C~neral Accounting Office: 9, 50 

General Services Admilliltration: 53 

Geneva Accord. of 1954: , 

Hackett, Lieutenant General Robert: 6 

Haines, ~ner1lll Ralph E., Jr.: 18,59 

tlawaii : 40, 42, 59, 74, 76, 79 

Helicopters: 17-18 

lIighways: 52, 82 

H itch. Charlo J.: 5 

Hoo\'er Commission: 87 

House of Represenlat!\·o. See United 

States Congre". 
108 FINANCIAL MANAGEMENT OF THE VIETNAM CONFLICT 

Infanlry Division 

III: 24 

251h: 24 

Insurgency: 5, 17 

Intencrvice supporl agreemenLS: SO, 

65-68, 70-71, 75-74, 76-79 

Intra·Army Order: 64-65 

Japan Procurement Agency: 51 

JohnJOn. General Harold K.: 70 

JohnJOn, President Lyndon B.: 19 

Joint Chiefs of Stalf: 72-75. 82 

Joint Loglnia Review Board: 78 

Joinl Siralegic Operalions Plan: II 

Joint Technical Auulance Team: 76 

Kjellmom. Brigadier General John A.: 

Korean " War: 21 

Lincoln , Franklin B. Jr.: 5 

Lincoln. General Lawrence J.: 49 

Lipscomb. Clenard P.: ~27, 50 

logistic Control Office, Pacific: 55 

Logislical Command 

lsi: 68. 72, 77. 91 

2d: 54-55. 60 

Logiuic JUpporl: 50, 66, 71-75, 101 

Logislia: 45, 46, 49 

Lollis. Brigadier General Shellon E.: 68 

Long, Speedy 0.: 21 

LSS-71: 97 

McNamara , Secretary Roben 5.: 11-19. 

22. 24-25, 21-28, 45, 66, 82 

Marine Corps. Uniled Stale.. See Unital 

State. Marine Corps. 

Maleriel Management Agency: 49 

MEDCAP: 50. 55, 82 

Medical lupplies: 51 

Mildren. Lieutenant General ,,'rank T .: 

Milhary " Assistancc AdviJOry Croup: 42. 

'1 

Mililary Assistance Command, Vietnam: 

!S, 61. 82. 84, 91-92, 98 

Military Assistance Prognm: 3. 16-17, 

22,42 

Military Assistance Service Funded: 82, '1 

Military Construction, Army: 7 

Mililary Interdepartmental Purdlase Re· 

quesr.: .51,65, 18 

Missiles: 4 

Mutual Se.::urity Appmprialions ACI for 

1955: 16 

National debt: 26 

National Guard: 101 

National 'n"enlOry Control Poinu: 45 

Navy, United States. See United States 

Navy. 

New Zealand forces: 83-85 

Nixon, President Richard M.: 87 

Obligation docurncnr.: 53 

Okinawa: 19, 24. 42-46, 54, 59--60, 62, 

66-67, 74 

Operation and Maintenance. Army: 1, 

19, 25. 37-38, 43, 59, 67, 77 

Pacific Archhect and Enginccn: 67 

Palmer, Lieutenant General Bruce, Jr.: 

fiB 

Pelroleum, oiu, and lubricanu: 51, 

11- 74, 16 

Planning, programing. and budgeting 

system: II, 81 

PGaIll. RUlherfom M.: 50 

Poru: '5 

Prall. Edmund T .. Jr.: 6-7 

Presidelllial po .... ers: 7, 14, 25 

Procurement of Equipment and MiMiles, 

Army: 7. 19 

Program Dollar Goals: 59 

Push p1Ickagn: 45 

Push Shipments: " 

Railway sabolage: 5~. 82 

Rcalignmenl Prognm: 81, 85 

Red Ball Express: 51 ,55 

Red Cross: 67 

Reimbursemenu: 10. 19, 50. 54. See al$Q 

Accounling. 

automatic: 65-04, 11 

appmprillion: 65 

betwccn military services: 66. 68. 10-79. 

85 

billing: 61-6£1, 70-74. 76-18. 81-85 

capilation: 84 

funded: 65 

Issue Documentation: 68 
INDEX 109 

Reimbursements-Continued 

monitoring: 70 

weakness in sYltem: 67-7', 75-78 

Repllir parts: 51 

Republic: of Korea Ovenell! Replace:· 

ment Tnining Command: 60 

Republic of Vietnllm Armed Fon:c:s: 40. 

55, 60, 83 

RC:<luisition Ceiling Fund Control Sys. 

tem: 60 

Requisitions: "S, "9, 5 1, 5'. 56. 60 

Revi5c:d Statute !679. 'I U.s. COOc: 665: 

5 

Russell. Richard 8 .: 17, 81-8'l 

Saduon. LieUlc:nant Gc:nenl Frank J.: 72 

San .·rancisco PTO(urernent "Reney: 5 1 

Sch;lUb, William F.: 5 

Sc:cretary of the Army: 6. "I 

Sc:cretllry of Defense: &-8. 16-17. '5. 50. 

59-60. 78, 81, 8,. 98 

SemlannulIl Report of thc: Sc:crc:tary of 

Dc:fense: 16 

Sc:natc:. Un ited Statn. Su United States 

Cong~ 

Specia l .'orcc:s, 5th: 67 

Stock funds: 8-9 

Stovc:pipc:: 'IS 

Supply support: 4{)....41. 'I' 

Surprise bilb: 56 

Symington, StUlIrt: 25-25 

Tlixes: 26 

TlIylor, Major Genera l Leonard 8 .: 

23-2 .. 

Tet offensh~: 72 

Training N5C. oontinentai U.s.: 25 

Tnnsportation: 390-40 

Troop ttrength 

incrc:un: 7 

reduction: '5-36 

Trooll strength-Continued 

support requirement: ,2 

withdrawlll: 54. 62 

United StatCS Air Force: 66-67.71.75-74. 

76, 78 

Unitc:<1 Statn Army. J apan: 73 

United States Army. Pacific: 8-9, 40. "6. 

'19-50. 55. 59. 67-68. 7 ... 81-82. 91 

United States Army. Vielllam: 46,51. 5". 

55,60.67-68,71.75.81,8,.91- 92.98 

United States Congress, See QUO Budgets. 

lIuthmiutions: 9 

and budget limitatioll5: 5. 16-18.25-29. 

36. 97. 101 

comm iltc:n on lIpprollriations: 17-18, 

22-25. 36, -8 1-82 

and funding: 4. 6-8. 14, 19. 30 '5. 9' 

needs for information: 10. 'I I. 42 ....... '. 

98, 100 

Senate Anne:<! Sc:rvicu Committee: 

25-2" 

and Vietnam rc:quiremenlt: II . 17, 

22-23. 32 

Un ited Stlltes Marine Corps: 19. 66 

United Slates Navy: 18-19.66-67.75-74. 

76 

United Stales Treasury: .... 

Vance. Secrela'1' Cyrul R.: 6 

Vic:tnamiution: 32 

War 

general: 4 

limited : 4-6, 8, 97. 101 

Westmorelllnd, General William: 28 

Wheeler. General Earle G.: 17. 27-28 

Wilson. Charles E.: 16 

World War 11 : 27 

Voung. Stephen M.: 22 

• 

•• 

.. fl'"I; I/O 

'H j N II , " 

__ .... _"TIN 
PIN 039667-000