Type:  Newspaper article
Publication:  N.Y. Times News Service
Date:  5/16/96
Author: Tim Weiner 

WASHINGTON - In a complete collapse of accountability, the government 
agency that builds spy satellites accumulated about $4 billion in 
uncounted secret money, nearly twice the amount previously reported to 
Congress, intelligence officials acknowledged Wednesday. 

The agency, the highly secretive National Reconnaissance Office, said 
last year that the surplus money totaled no more than about $1 billion. 
Congressional intelligence overseers said in December that the amount 
was about $2 billion. 

They were misinformed. The secret agency was unaware until very recently 
exactly how much money it had accumulated in its classified 
compartments. To put the $4 billion in perspective, what the National 
Reconnaissance Office did was to lose track of a sum roughly equal to 
the annual budgets for the FBI and the State Department, combined. 

John Nelson, appointed last year as the reconnaissance office's top 
financial manager and given the task of cleaning up the problem, said in 
an interview published Wednesday in a special edition of Defense Week 
that the secret agency had undergone ``a fundamental financial 

Senior intelligence officials confirmed Nelson's unusually candid 
account, and said the meltdown was fueled by excessive secrecy, 
financial incompetence and a lack of accountability at the agency. 

All the money spent by the secret agency, a clandestine branch of the 
Air Force, is hidden through various false line items that comprise the 
so-called ``black budget,'' which finances secret intelligence and 
military programs and is shielded from public scrutiny. 

The existence of the reconnaissance office was itself a state secret, 
though badly kept, until 1992. 

The reconnaissance office issues secret government contracts to build 
systems and components for space satellites that take pictures, record 
radar images and eavesdrop on telecommunications. 

It spends about $6 billion in secret money a year building the 
satellites for the CIA, the Air Force and the Navy. 

While technically adept, it was financially inept, senior intelligence 
officials said. It had 15 different accounting systems in its 15 
different program offices, each kept secret from one another. 

``Everybody did it a little different, none of them talked to each 
other, and it was a mess,'' Nelson told Defense Week. ``This was 
literally a house on fire in many ways.'' 

The financial incompetence of the reconnaissance office meant that one 
of the nation's biggest intelligence agencies misinformed Congress, the 
director of Central Intelligence and the secretary of defense about how 
much money it had, Nelson said. 

The agency's secrecy made Congressional oversight next to impossible, 
intelligence officials said. Thus, the Congressional intelligence 
committees kept appropriating money for the secret agency, unaware that 
it was building up a surplus of billions of dollars. 

The reconnaissance office found itself in trouble in 1994 for 
constructing what several senators called a ``stealth building.'' The 
Senate Intelligence Committee protested that the agency had built itself 
a headquarters outside Washington, costing more than $300 million, 
without disclosing the building's true cost and size. 

The agency's financial managers explained the lapse by saying they had 
treated the construction project as if it were a covert operation, and 
had broken the financing for the building into indecipherable fragments 
to hide the cost.