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                                                       Calendar No. 172
108th Congress                                                   Report
                                 SENATE
 1st Session                                                     108-80

======================================================================



 
          INTELLIGENCE AUTHORIZATION ACT FOR FISCAL YEAR 2004

                                _______
                                

                 June 26, 2003.--Ordered to be printed

                                _______
                                

    Mr. Warner, from the Committee on Armed Services, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 1025]

    The Committee on Armed Services, to which was referred the 
bill (S. 1025) to authorize appropriations for fiscal year 2004 
for intelligence and intelligence-related activities of the 
United States Government, the Community Management Account, and 
the Central Intelligence Agency Retirement and Disability 
System, and for other purposes, having considered the same, 
reports favorably thereon with amendments and recommends that 
the bill, as amended, do pass.

                          PURPOSE OF THE BILL

    S. 1025 would authorize appropriations and other matters 
for Fiscal Year 2004 for intelligence activities of the United 
States, including certain Department of Defense intelligence-
related activities within the jurisdiction of the Senate Armed 
Services Committee.
    The Senate Select Committee on Intelligence reported the 
bill on May 8, 2003, and it was referred to the Committee on 
Armed Services in accordance with section 3(b) of Senate 
Resolution 400, 94th Congress.

                     SCOPE OF THE COMMITTEE REVIEW

    The committee has carefully reviewed the Intelligence 
Authorization Act for Fiscal Year 2004 and the Senate report to 
accompany S. 1025 (S. Rept. 108-44). The total amount within 
the jurisdiction of the Committee on Armed Services recommended 
for the National Foreign Intelligence Program has been 
incorporated into the budget tables in the Senate Amendment to 
H.R. 1588, the National Defense Authorization Act for Fiscal 
Year 2004, which the Senate passed on June 4, 2003.
    The following explains the committee's proposed amendments 
to the bill, as reported by the Senate Select Committee on 
Intelligence, as well as the committee's clarification to the 
report issued by the Senate Select Committee on Intelligence.

Classified annex to the committee report

    The committee has prepared a classified annex to this 
report that describes other recommendations and concerns that 
are classified in nature.

Operational files of the National Security Agency

    Section 501 of S. 1025 would exempt certain files of the 
National Security Agency from review and disclosure under 
current Freedom of Information Act (FOIA) procedures. The 
National Defense Authorization Act for Fiscal Year 2004 (S. 
1050) contains a similar provision, Section 1035 of S. 1050. 
Based on discussions with the National Security Agency (NSA) 
and private citizens concerned about rightful access to 
unclassified and declassified holdings, the Senate Armed 
Services Committee amended its original provision to 
specifically define which files within the National Security 
Agency would be exempted, ensuring that highly sensitive files 
within two directorates at NSA that contain technical 
information about U.S. intelligence collection capabilities are 
exempt until declassified, but that all other files at NSA 
remain subject to normal FOIA procedures. The committee's 
proposed amendment to S. 1025 would substitute the language 
contained in Section 1035 of S. 1050 for the language contained 
in the Intelligence Authorization Act for Fiscal Year 2004 (S. 
1025), as reported by the Senate Select Committee on 
Intelligence.

Provision of living quarters for certain students working at National 
        Security Agency laboratory

    Section 502 of S. 1025 would authorize the National 
Security Agency (NSA) to provide, and if necessary subsidize, 
living quarters for certain students working in NSA 
laboratories. The National Defense Authorization Act for Fiscal 
Year 2004 (S. 1050) contains a similar provision, Section 1034. 
The provision would amend Section 2195 of title 10, United 
States Code, which is the responsibility of the Committee on 
Armed Services of the Senate. The committee's proposed 
amendment to S. 1025 would strike thelanguage contained in 
Section 502. This provision will be addressed by the committee of 
conference on the National Defense Authorization Act for Fiscal Year 
2004.

Authority to enter into personal services contracts

    Section 504 of S. 1025 would authorize Intelligence 
Community elements of the Department of Defense to enter into 
personal services contracts in order to address temporary needs 
for additional personnel with specific expertise to meet 
unanticipated, operational requirements. The National Defense 
Authorization Act for Fiscal Year 2004 (S. 1050) contains a 
similar provision, Section 813. The committee's proposed 
amendment to S. 1025 would strike the language contained in 
Section 504. The committee believes that the language contained 
in Section 813 of S. 1050 is a more comprehensive provision 
that would amend title 10, United States Code, and would apply 
not only to intelligence elements of the Department of Defense, 
but also to certain activities of U.S. Special Operations 
Command. This provision will be addressed by the committee of 
conference on the National Defense Authorization Act for Fiscal 
Year 2004.

Defense Finance and Accounting Service and the National Security Agency

    The committee takes note of the concerns about financial 
and accounting practices at the National Security Agency (NSA) 
expressed by the Senate Select Committee on Intelligence in 
their report (S. Rept. 108-44). As as matter of more efficient 
and uniform financial and accounting practices within the 
Department of Defense (DOD), the Defense Finance and Accounting 
Service (DFAS) is considering moving certain aspects of NSA 
finance and accounting support centers under the more 
centralized control of DFAS. Jurisdiction over DFAS and 
accounting practices of the Department of Defense lies within 
the exclusive practices of the Department of Defense lies 
within the exclusion jurisdiction of the Committee on Armed 
Services of the Senate. The committee does not agree with the 
need for the Department of Defense to seek approval of the 
Senate Select Committee on Intelligence to improve, streamline 
and standardize financial and accounting practices across the 
Department. The Department should look to the Committee on 
Armed Services of the Senate for oversight and any required 
approval of plans to alter current finance and accounting 
procedures. The committee will consult with the Senate Select 
Committee on Intelligence regarding significant changes. The 
committee fully supports the Department of Defense's efforts to 
improve department-wide financial management and 
accountability. As DOD implements its financial management 
modernization effort, the Committee expects the Department to 
ensure that classified financial information at NSA is 
adequately protected, and all NSA financial information, as 
well as that of all Defense Agencies, is reviewed and processed 
in a manner that provides for greater accountability, 
efficiency, and oversight by DOD.

                            COMMITTEE ACTION

    In accordance with the Legislative Reorganization Act of 
1946, as amended by the Legislative Reorganization Act of 1970, 
the committee approved a motion to report favorably to the 
Senate S. 1025, with an amendment.

                              FISCAL DATA

    The committee will publish in the Congressional Record 
information on five-year cost projections when such information 
is received from the Congressional Budget Office.

                           REGULATORY IMPACT

    Paragraph 11(b) of rule XXVI of the Standing Rules of the 
Senate requires that a report on the regulatory impact of a 
bill be included in the report on the bill. The committee finds 
that there is no regulatory impact in the cost of S. 1025, the 
Intelligence Authorization Act for Fiscal Year 2004.

                        CHANGES IN EXISTING LAW

    Pursuant to the provisions of paragraph 12 of rule XXVI of 
the Standing Rules of the Senate, the changes in existing law 
made by certain portions of the bill have not been shown in 
this section of the report because, in the opinion of the 
committee, it is necessary to dispense with showing such 
changes in order to expedite the business of the Senate and 
reduce the expenditure of funds.