MAY 15, 1996. REPORT [To accompany H.R. 3259]



Section 101.-Authorization of appropriations

Section 101 lists the departments, agencies, and other elements of the United States Government for whose intelligence and intelligence-related activities the Act authorizes appropriations for fiscal year 1997.

Section 102.-Classified schedule of authorizations

Section 102 makes clear that the details of the amounts authorized to be appropriated for intelligence and intelligence-related activities and applicable personnel ceilings covered under this title for fiscal year 1997 are contained in a classified Schedule of Authorizations. The Schedule of Authorizations is incorporated into the Act by this section. The details of the Schedule are explained in the classified annex to this report.

Section 103.-Personnel ceiling adjustments

Section 103 authorizes the Director of Central Intelligence, with the approval of the Director of the Office of Management and Budget, in fiscal year 1997 to exceed the personnel ceilings applicable to the components of the Intelligence Community under section


102 by an amount not to exceed two percent of the total of the ceilings applicable under section 102. The Director may exercise this authority only when doing so is necessary to the performance of important intelligence functions. Any exercise of this authority must be reported to the two intelligence committees of the Congress.

The Committee emphasizes that the authority conferred by Section 103 is not intended to permit the wholesale raising of personnel strength in any intelligence component. Rather, the section provides the Director of Central Intelligence with flexibility to adjust personnel levels temporarily for contingencies and for overages caused by an imbalance between hiring of new employees and attrition of current employees. The Committee does not expect the Director of Central Intelligence to allow heads of intelligence components to plan to exceed levels set in the Schedule of Authorizations except for the satisfaction of clearly identified hiring needs which are consistent with the authorization of personnel strengths in this bill. In no case is this authority to be used to provide for positions denied by this bill.

Section 104.-Community management account

(a) Authorizations of Appropriations: There is authorized to be appropriated for the Community Management Account of the Director of Central Intelligence for fiscal year 1997 the sum of $93,616,000. Within such amounts authorized, funds identified in the classified Schedule of Authorizations referred to in Section 102(a) for the Advanced Research and Development Committee shall remain available until September 30, 1998.

(b) Authorized Personnel Levels: The Community Management Staff of the Director of Central Intelligence is authorized 273 fulltime personnel as of September 30, 1997. Such personnel of the Community Management Staff may be permanent employees of the Community Management Staff or personnel detailed from other elements of the United States Government.

(c) Reimbursement: During fiscal year 1997, any officer or employee of the United States or a member of the Armed Forces who is detailed to the Community Management Staff from another element of the United States Government shall be detailed on a reimbursable basis, except that any such officer, employee, or member may be detailed on a non-reimbursable basis for a period of less than one year for the performance of temporary functions as required by the Director of Central Intelligence.

(d) Declassification: This section authorizes $25 million for fiscal year 1997 for the purposes of carrying out the provisions of Section 3.4 of Executive Order 12958, dated April 17, 1995.

Section 307 of last year's Intelligence Authorization Act limited declassification expenditures to $25 million in fiscal year 1996 and requested a specific budget request from the President. The conferees noted that "* * * there needs to be a continuing effort to fully evaluate the potential costs associated with declassification review program." The conferees also urged that the declassification effort be coordinated closely with CIAs Historical Review Program Office to enhance the intellectual coherence of the declassification process.


The Committee remains committed to the systematic declassification of documents in the U.S. Intelligence Community. It is equally committed to ensuring that this is done in a fiscally sound manner consistent with the need to ensure that intelligence sources and methods are fully protected. The Committee continues to receive information that raises doubts about the prudence of the overall expenditure of declassification funds. Mindful that this is a priority program for President Clinton, the Committee has balanced this against spending priorities necessary to keep a strong and vibrant Intelligence Community; therefore, the Committee has kept the authorization at the same level as fiscal year 1996.

This authorization provides funds to declassify documents 25 years or older. The request was only one part of a much larger request for classification management and declassification of documents that is contained in the classified annex. Despite the fact that Section 307 of the Intelligence Authorization Act for Fiscal Year 1996 required that the President submit a detailed request for funds to carry out the provisions of his executive order, the submissions have been meager. Information provided to the Committee staff indicates that the declassification program is driven by numbers of documents that must be declassified, not a prudent regard for the protection of intelligence sources and methods or the costs.

The Committee believes that the funds requested in the President's budget submission grossly understate the real cost of carrying out the provisions of Section 3.4. The Committee intends to follow this issue intensively in the coming months, and plans to hold at least one hearing at which it will aggressively address the issues of: (a) whether important intelligence sources and methods are at risk in the implementation of Executive Order 12958; (b) problems raised by having an Executive Order, in effect, automatically mandate annual expenditures; and, (c) whether this mandate should be fully funded at the expense of other high-priority programs.

(e) National Drug Intelligence Center: This provision authorizes the appropriation of $32,076,000 to support the programs and personnel of the National Drug Interdiction Center (NDIC) in Johnstown, Pennsylvania.

After 12 years of decline, between 1980 and 1992, drug use has risen steadily since 1993. According to Donna Shalala, Secretary of the Department of Health and Human Services, marijuana use among 12-17 year-olds doubled between, 1992 and 1994. These numbers have not yet reached the peak levels of 1979, but the increase in first-time use of marijuana serves as a wake-up call. Accordingly, the Committee has taken the unusual step of authorizing the NDIC in the open bill to signal its strong commitment to waging the war on drugs.

This Committee has long supported counter-drug programs funded through the NFIP, TIARA, and JMIP. Substantial increases in intelligence counter-drug programs were authorized by the Committee every year since President Bush announced his National Drug Strategy in August of 1989. The Intelligence Community plays a vital role in supporting drug interdiction efforts overseas before narcotics cross our borders. The NDIC, created in 1991, coordinates and consolidates drug intelligence from all national security and law enforcement agencies, and produces information on


the structure, membership, finances, communications, and activities of drug trafficking organizations. It acts as a filter between intelligence operations and the law enforcement community ensuring that information developed from lawful intelligence collection abroad is passed to the law enforcement agencies (such as FBI), without triggering prohibitions contained in the National Security Act on intelligence involvement in law enforcement.

The Committee views the funding of the NDIC through the NFIP as a unique opportunity to underscore the important role intelligence plays in law enforcement. The Committee will carefully oversee the activities of the NDIC to provide it with adequate resources and authorities to ensure that the NDIC will play a vital role in supporting the law enforcement community. The Committee also believes that it is important to reduce redundant systems and capabilities, and will carefully review the NDIC mission against that of the El Paso Intelligence Center (EPIC) to ensure that these two facilities complement but do not duplicate each other.

It is an Intelligence Community goal to improve the working relationships between intelligence and law enforcement agencies on the transnational drug problem. The Intelligence Community's focus on international narcotics trafficking and international organized crime have already led to increased foreign intelligence collection and analytic efforts on these issues as well as to the dissemination of such intelligence to the law enforcement community via the NDIC. These efforts are paying dividends; the recent and publicly noted arrests of Cali Cartel leaders in Colombia was due to cooperation between the Central Intelligence Agency, the Drug Enforcement Agency, and the Colombian authorities.

The Intelligence Community can assist the law enforcement community by supporting NDIC. The Center's charter is to coordinate and consolidate drug intelligence from all national security and law enforcement agencies, and to produce information regarding the structure, membership, finances, communications, and activities of drug trafficking organizations. Consistent with the requirements of the National Security Act of 1947 and Executive Order 12333, NDIC can perform appropriate and timely exchange of intelligence information and resources between the law enforcement and intelligence communities.

Despite the transfer of funding for NDIC from the Joint Military Intelligence Program to the National Foreign Intelligence Program (NFIP), NDIC will remain a law enforcement organization. Further, it is important to highlight, as described in a joint letter dated April 16, 1996, from the Deputy Director for Central Intelligence and the Deputy Attorney General to Chairman Combest and Ranking Democratic Member Dicks, the National Security Act of 1947 and Executive Order 12333 prevent the DCI from exercising any direction or control over NDIC operations because of its unique support for law enforcement.

The Committee will work with the Attorney General and the Director of Central Intelligence to clarify the role of the Intelligence Community's support for the NDIC and law enforcement generally and ensure that funding the NDIC in the NFIP respects the current prohibition on CIA's involvement in law enforcement activities.


(f) Environmental Programs: This section authorizes $6 million to carry out programs administered by the Environmental Intelligence Application Program (EIAP), formerly known as the Environmental Task Force.

This section authorizes the Environmental Intelligence and Applications Program (EIAP)-formerly known as the Environmental Task Force. The EIAP acts as a broker for the Intelligence Community as a source of security-cleared scientific talent upon which it can draw as the Intelligence Community addresses environmental intelligence issues as part of its normal intelligence collection and analysis efforts in support of policymakers.

Fiscally sound programs that address environmental problems are of keen interest to this Committee. The Central Intelligence Agency is now working on a more coherent plan on how to address environmental intelligence issues, and the scientific talent of the EIAP will be part of the overall Intelligence Community effort in this area.

In December 1995, a senior CIA official testified at a hearing of the House National Security Committee's Subcommittee on Military Research and Development. In that testimony, which focused on Russian contamination of the Arctic Ocean, the official stated that the EIAP has demonstrated its ability to work closely with the Intelligence Community on issues that affect the U.S. national interest.

The EIAP combines the talents of the scientific community, the Intelligence Community, and other government agencies to respond to policy-related questions concerning world-wide pollution effects. This was exemplified by the project the CIA undertook in the fall 1994 to perform a quick, but technically sophisticated, analysis of the Komi oil spill in Russia-an analysis that could not have been done so quickly without the extensive engagement of the scientists from the EIAP as well as analysts from NOAA and EPA.

The Committee has questioned in the past some of the EIAP programs, because of their lack of focus. The EIAP program managers are now addressing these concerns. Information derived from the cooperative efforts of the EIAP and the Intelligence Community will assist other federal agencies previously authorized for the ETF departments. The Committee has, therefore, authorized $6 million for the EIAP. Finally, the Committee is disturbed to learn that U.S. intelligence funds may have been used to pay for foreign government officials to appear before the Congress. If the source of their travel funds was not disclosed, this would, at a minimum, constitute an unfortunate mistake. The Committee will examine this matter further.


Section 201.-Authorization of appropriations

Section 201 authorizes appropriations in the amount of $184,200,000 for fiscal year 1996 for the Central Intelligence Agency Retirement and Disability Fund.


Section 301.-Increase in employee compensation and benefits authorized by law

Section 301 provides that appropriations authorized by the conference report for salary, pay, retirement and other benefits for federal employees may be increased by such additional or supplemental amounts as may be necessary for increases in such compensation or benefits authorized by law.

Section 302.-Restriction on conduct of intelligence activities

Section 302 provides that the authorization of appropriations by the bill shall not be deemed to constitute authority for the conduct of any intelligence activity that is not otherwise authorized by the Constitution or laws of the United States.

Section 303.-Limitation on availability of funds for automatic declassification of records over twenty-five years old

This section establishes specific limits on authorizations for the expenditure of any appropriated funds for the purpose of carrying out Section 3.4 of Executive Order 12958, which directs the automatic declassification of documents older than 25 years. This section also authorizes the DCI to allocate funds to the agencies within the NFIP to carry out Section 3.4. Despite the fact that the outlines of the executive order were well understood, the President only prospectively requested minimal funds to carry out the provisions of the Executive Order, which was signed on April 17, 1995. During the drafting and refinement of the Executive Order, the Administration conducted its own internal estimate for the cost of implementing Section 3.4 and determined that it would cost at least $450-500 million over five years. Prior to the passage of last year's Intelligence Authorization Act, the Committee received four different cost projections from the intelligence agencies affected by Section 3.4. Until a fiscally prudent program is developed, warehousing the same documents would only cost the U.S. taxpayers several hundred thousand dollars per year.

Section 307 of last year's Intelligence Authorization bill limited declassification expenditures at $25 million in fiscal year 1996 and requested a specific budget request from the President for this declassification program. This provision reiterates the fiscal year 1996 language and again imposes a $25 million ceiling during fiscal year 1997. It gives the Director of Central Intelligence authority to allocate these funds within the National Foreign Intelligence Program.

There is intense interest in this program in the Committee. Committee staff have sought, without success, to determine what the actual cost of implementing Executive Order 12958 will be. The declassification managers are being driven by arbitrary numbers of documents to be declassified. For example, the CIA program manager said he must reach his goal of 9 million documents this year. Therefore, traditional declassification procedures for careful review of all Intelligence Community holdings have been discarded; although costly, this traditional approach will offer greater protection from inadvertent and accidental disclosure of intelligence sources


and methods. To illustrate, CIA is implementing a "risk management approach" to begin declassification of 20 million low sensitivity pages this year. Trial use of this method has surfaced two boxes of classified documents. This necessitated a more vigorous review that in turn surfaced another half box of highly classified material, which is not scheduled for release at this time. Nevertheless, the CIA is proceeding with its "risk management" strategy in order to meet the goal of declassification of 15 percent of the documents (9 million pages) this year. To improve confidence in its "risk management" program, the CIA put in place an ancillary screening program to capture every classified document. CIA has acknowledged that more classified material has already been found and that some may still slip through, but this is a risk that the CIA is prepared to take.

The CIA, NSA, DIA, and NRO have all created offices and staffs to support this program. During this fiscal year, the money authorized has largely been spent for infrastructure. Since the Administration did not request funds in fiscal year 1996 for this "important" program, the CIA has already sought to reprogram funds from other high-priority programs. The reprogramming request was only received in April, more than three months after the Intelligence Authorization Bill was signed into law. When asked why the CIA did not resort to funding this program from its "reserve for contingencies," the response was that this was not an unforeseen contingency. Hence, the CIA had to take funds from other programs to pay for this initiative.

The CIA's initiative to begin work on the declassification of 40 million sensitive documents is behind schedule. Its "declassification factory" is not yet up and running, and it has encountered significant problems with automatic data processing. A software program, on which the CIA had rested its hopes for automating declassification, is not adaptable to its needs. The CIA must therefore start from scratch, and is only now beginning pilot testing of a new software program.

Section 304.-Application of sanctions laws to intelligence activities

This provision was first included in the fiscal year 1996 Intelligence Authorization Act; this section extends the provision's lifetime until January 6, 1998. The provision amended the National Security Act of 1947 to provide the President with the statutory authority to delay the imposition of a sanction upon a presidential determination that to proceed with the sanction would risk the compromise of an ongoing criminal investigation or an intelligence source or method. The President would be required to lift any stay of a sanction as soon as possible. In addition, the provision would require the President to report to Congress immediately upon imposition of the stay and when the duration of any stay imposed exceeds 120 days.

Section 305.-Expedited naturalization

This provision allows for the naturalization of certain applicants without their having to comply with the following statutory requirements: (1) continuous residence within the United States for a period of at least five years after having been lawfully admitted


for permanent residence; (2) physical presence in the United States for at least 30 months of the five years preceding the date of filing a naturalization application; and (3) if applicable, freedom from membership or affiliation with the Communist Party or any other totalitarian organization for at least 10 years.

This section would apply to individuals who are the spouse, son, or daughter of a deceased alien who died as a result of having been compromised by an individual who intentionally made an unauthorized disclosure of classified information that revealed the alien's cooperation with the United States Government in its intelligence activities. This extraordinary naturalization benefit would be conferred upon these applicants in recognition of the hardship and difficulties they encounter following the death by execution of their spouse or parent. For example, this benefit would be considered for individuals such as surviving spouses, sons, and daughters of United States Government assets and informants who died after being compromised by Aldrich Ames.


Section 401.-Multi-year leasing authority

This provision clarifies the CIA's real property authority with respect to entering overt multi-year leases that could have terms as long as 15 years. Beginning in 1981, the CIA has routinely entered into a number of open multi-year leases in reliance upon section 8 of the CIA Act of 1949. The CIA's Inspector General raised concems about the use of section 8 for overt leases. Accordingly, the CIA stopped signing multi-year leases in 1994. The CIA has incurred substantial costs as a result and has now sought legislative relief. GSA asserts that its role as a middle-man in such multi-year leasing arrangements reduces real property costs for the United States Government as a whole, but significant additional costs are borne by the CIA because GSA cannot move quickly and will not delegate leasing authority to the CIA.

At a HPSCI hearing on May 1, 1996, CIA officials made the following arguments in support of granting the Agency multi-year leasing authority: (1) savings can be realized in rental and renovation costs because landlords will offer lower rent and higher renovation contributions when they have the security of a 5-10 year lease; (2) in response to continually changing intelligence requirements, the CIA needs the flexibility to acquire appropriate space on short notice; (3) the CIA has unique facility telecommunications and security "fit-up" requirements that require investments that are not cost-effective under single-year leases; (4) CIA is unique within the U.S. Government in that it does have authority to acquire space for overt requirements, but not on a multi-year basis; (5) landlords demand removal of and restoration for CIA-unique renovations in a short-term lease, and thereby drive up the costs of leased space; and (6) GSA management has not been cost-efflcient, expeditious, or responsive to CIA's unique leasing requirements.

GSA has stated that it is developing a new pricing plan and reforming their internal procedures to address CIA's concerns. The Committee welcomes this effort by the GSA. The Committee expects


that the GSA will share the details of this plan with the CIA as well as any regulations necessary to implement it prior to the conference. Likewise, the Committee expects the CIA to evaluate any reform proposal developed by GSA. The Committee will assess the GSA proposal with the CIA's comments as it prepares for conference.

Section 402.-Repeal of additional surcharge relating to employees who retire or resign in fiscal years 1998 or 1999 and who receive voluntary separation incentive payments

This provision would relieve CIA from being required to make double payments to the Civil Service Retirement and Disability Fund for those Agency employees who take an early retirement under the Civil Service Retirement System (CSRS) in fiscal years 1998 and 1999 and receive separation incentives. This section would avoid this duplicative charge to CIA, by repealing subsection (i) of the Central Intelligence Agency Voluntary Separation Pay Act.

The Intelligence Authorization Act for Fiscal year 1996 amended the CIA Voluntary Separation Pay Act (CVSPA.) extending CIA's authority to offer voluntary separation incentives through fiscal year 1999. It also amended the CVSPA by adding a new section that requires the Director of Central Intelligence to remit to the Office of Personnel Management for deposit in the Civil Service Retirement and Disability Fund an amount equal to 15 percent of the final basic pay of each CSRS and FERS employee who voluntarily retires, and each CIA employee who resigns, in fiscal years 1998 and 1999 and receives separation incentive payments.

It was not the intent of the Congress to have CIA make double payments to the Civil Service Retirement and Disability Fund of 24 percent of the final basic pay of those employees taking early CSRS retirement and receiving separation incentives in fiscal years 1998 and 1999. This provision will rectify this situation.

Section 403.-Implementation of intelligence community personnel reforms

On April 23, 1996, DCI Deutch announced a package of CIA personnel reforms that will affect Intelligence Community personnel at CIA and in the various DOD intelligence agencies. In recent briefings for HPSCI staff, information on the costs and program specifics of the reform proposals has been lacking in detail. The sweeping nature of these proposals will require further briefings and hearings to develop a firm legislative record. This provision blocks the expenditure of any amounts to implement any Intelligence Community personnel reforms until the Members of the Congressional intelligence committees have been fully briefed on these personnel reform proposals. It will send a clear signal that the Committee expects to be a full partner in any personnel reform plan implemented by the Director of Central Intelligence.



Section 501.-Standardization for certain department of defense intelligence agencies of exemptions from disclosure of organizational and personnel information

This provision corrects unnecessary differences between the information disclosure statutes of the Defense Intelligence Agency (10 U.S.C. 424) and the National Reconnaissance Office (10 U.S.C. 425). Both statutes were adopted after the last major revision of the Freedom of Information Act (FOIA) in 1986, yet they contain distinctions that are unwarranted given the classified and sensitive functions of those agencies that are vital to national security.

The amendments will make the DIA and the NRO disclosure statutes parallel to and more consistent with the older disclosure statutes of CIA and NSA. This will result in greater consistency in the handling of sensitive information and ensure greater security.