Foreign Relations of the United States, 1945–1950, Emergence of the Intelligence Establishment

417. Memorandum for the Executive Secretary of the National Security Council (Lay)⁰

Washington, February 23, 1950.

JOINT STATEMENT OF DEPARTMENTS OF DEFENSE AND STATE ON CIA BUDGET FOR FISCAL 1951

1. For the first time, members of the National Security Council have made an examination of the CIA budget, and other than to note it in the National Security Council meetings. For this reason it is appropriate to comment upon the procedure and on the conditions under which the CIA budget was reviewed, as well as on the budget itself. Both the Department of State and of Defense wish to commend the Director of Central Intelligence for his helpfulness and cooperation in making his staff and records available to the representatives of the two Departments in the budget presentation.

2. The practice of having the CIA budget reviewed in some detail is an important step forward in fostering sound relationships between the Central Intelligence Agency and the Departments of State and Defense. It is frequently overlooked that by virtue of their membership on the National Security Council, the Secretaries of State and Defense have a responsibility for the progress and direction of the CIA program. By having an opportunity to comment on the programs each year at the time it is submitted, the Secretaries of State and Defense not only are able to exercise their responsibilities for CIA in a more direct and effective manner, but will develop a confidence that the CIA program is being conceived and executed in harmony with its assigned missions and the requirements and policies of those Departments primarily affected.

3. Since the budget review was conducted at a very late stage in the annual program development, it did not accomplish as much as can be expected in future years. This was recognized prior to undertaking the review. Whatever experience could be gained this year, both in the review process and in substantive comments, is a worthwhile addition. In this connection it is important to note that the presentation of the budget this year was directed primarily at the increase being requested, without any analysis of previous budgetary allotments. Furthermore, it is obvious that devoting only an hour or two to each office, with this type of presentation, clearly has limitations.

4. In consideration of the interests of the National Security Council, it would appear that much could be gained by some procedure which would allow the Departments of State and Defense to participate in some degree on a continuing basis as the programs develop throughout the year. It is felt that the CIA would gain much strength and much support from the mutual confidence to be derived from a more detailed understanding of its direction.

General Comments

5. The funds appropriated for the activities of Central Intelligence are not large in terms of the total budget of the United States Government, nor in terms of the contribution which intelligence and operations can make to national security and the success of the United States foreign and military policy. Nevertheless, the CIA budget does represent a very significant element of the total government appropriation to intelligence activity; in fact, CIA appropriations are greater than the aggregate of the other US foreign intelligence organizations.

6. The United States is relatively inexperienced in operating a national intelligence system. Wise and vigorous action will be necessary if this Government hopes to shorten appreciably the decades normally required for the development of a sound national intelligence system. In a broad review of this type, therefore, the primary question to be answered is “What is the proper rate of growth?” In general, CIA should be supplied with moderately increased funds over the next several years, limited primarily by the effectiveness with which they can spend their funds.

7. There are two points which are relevant to the question of effectiveness. First, and of more importance, is the question of objectives. The objectives of CIA are found in the National Security Act of 1947 and in the directives of the National Security Council. This latter category includes the National Security Intelligence Directives (NSCIDs), the report titled “The Central Intelligence Agency and National Organization for Intelligence” (Dulles Report), and NSC 50. Thus, during the current review, the specific objectives outlined in these directives were considered to help in arriving at least at a tentative answer to the question as to whether the funds appropriated were being spent in such a manner as to fulfill the objectives of the agency in the most direct manner. The conclusion is inescapable that CIA still continues to have serious shortcomings. NSC 50 remains largely unimplemented. It is recognized that the Department of State and of Defense have requested that paragraph 6a(1) not be implemented until it can be given further study. This, of course, should not operate to delay the implementation of the other directives of the National Security Council in NSC 50. It is further recognized that there remain serious defects in the integration of the federal intelligence system which derive from unresolved differences with departmental agencies.

8. A subsidiary question to the question of effectiveness is the capability of the agency to spend the money in the period for which it is requested. There are serious reservations on the part of the State and Defense Departments about the capability of CIA to spend the increase which has been requested for profitable projects, which are clearly defined.

9. The capability of CIA to recruit and train in 19 months 514 competent people, as indicated by comparison of their present and proposed authorized strength, is open to question. Even if it is possible, the implications of this pressure to recruit rapidly should be noted, for the pressure to fill large numbers of vacancies lowers measurably the standards of recruitment.

10. The more specific comments which follow apply to only three of the offices of CIA. It is felt with respect to the remaining offices that no comment was necessary and that, within the limits of judgment afforded by the presentation and review, a generally satisfactory condition appeared to exist.

Office of Policy Coordination

11. Of the total amount appropriated for this security for the current fiscal year, only about 40% had been programmed by November 1. An additional one-third had been earmarked for one project which came up for consideration after the beginning of the fiscal year. These figures would appear to indicate that the firm demand for funds for this activity could be supplied without difficulty within the funds appropriated—with the added possibility that there might be unexpended funds at the end of this fiscal year—and that the need for increased funds for fiscal 1951 is wholly dependent on new projects undertaken. New projects are in turn dependent on the possibilities for accommodation of this type of activity to foreign policy as it evolves in fiscal 1951. An increase of funds is requested for fiscal 1951 amounting roughly to 100%. Given the present rate of development, it is doubtful that the need for new projects will double over the next 18 months. The Departments of State and Defense are entering no objection to the requested increase in funds, but suggest that continuing review be given the progress and developments of this Office during the next several months.

12. The comment above on the tendency of unfilled vacancies to have an adverse pressure on the quality of personnel recruited seems to have particular application to this Office. Most of the total increase of persons requested by CIA as a whole is for this activity. Here particularly it would appear doubtful that so many people with the desired qualifications, plus normal turnover, could be recruited and cleared in eighteen months.

Office of Special Operations

13. Generally, the Departments of State and Defense feel that this Office has requested a justifiable increase and that the emphasis by geographic area resulting from the increase is proper.

14. It is suggested that the Office inquire into the possibility of effecting specific savings in the negotiation of properties abroad through the application of the mutual defense concept of the North Atlantic treaty.

15. It is further suggested that the Office increase its efforts to provide for cover arrangements other than through official United States Government establishments abroad. This must be for the foreseeable future a paramount assignment of this Office.

Office of Reports and Estimates

16. In the light of the National Security Act of 1947, NSC Intelligence Directives, the Dulles Report, and NSC 50, serious question arises over the existence of such a large staff in this Office.

17. Appropriate to this question is the discussion during the course of the review, in which it was pointed out that the organization had grown on an ad hoc basis since its establishment in the Central Intelligence Group and that the organization was shaped by customer requests. It was advanced that since CIA is the intelligence facility of the NSC, it is incumbent on ORE to furnish them the type of estimate they need, irrespective of NSCID No. 1. It was further stated that if the National Security Council Staff requests an estimate, and sets a deadline, and the Agency having responsibility for that particular type of intelligence is unable to meet the deadline, then ORE must have facilities on hand to do the work in lieu of the Agency normally responsible. Among other things this argumentation overlooks the fact that one of CIA’s important responsibilities is the coordination of intelligence.

18. It is apparent that there exists a fundamental divergence of view as among the several agencies on the mission to be performed by ORE, on the relation of its work to that of the other intelligence resources of the Government and therefore on the size of staff required. There is an urgent need for clarification of this function and responsibility, probably requiring revision or amplification of existing NSCID’s. Under certain interpretations of the present directives the conclusion is inescapable that ORE is overstaffed. It is suggested therefore, that urgent consideration be given this problem.

0. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Records of the Bureau of Intelligence and Research: Lot 58 D 776, State–CIA Relationship 1949–1956. Top Secret. The date is the drafting date of a brief covering note from Armstrong to Deputy Under Secretary Rusk. This note, which also bears the handwritten date of February 24, reads: “General Burns approved this paper for the Department of Defense, provided you ok’d it. For your information, Mr. Webb has already seen and approved these comments in draft.” The covering note also indicates that the memorandum was being cleared with Joyce and Humelsine. It is not clear whether this memorandum was actually sent to Lay.