STATE DEPARTMENT

Progress and

Challenges in Managing

for Results

Statement of Benjamin F. Nelson, Director, International Relations and

Trade Issues, National Security and International Affairs Division

United States General Accounting Office

GAO Testimony

Before the Subcommittee on National Security, Veterans

Affairs, and International Relations, Committee on

Government Reform, House of Representatives

For Release on Delivery

Expected at

10:00 a.m.,

Wednesday,

July 19, 2000

GAO/T-NSIAD/AIMD-00-254
1

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to provide an update on the Department of State's progress

in addressing many of the security and other management challenges raised during a

hearing before this Subcommittee last year. These challenges arise from the

Department’s responsibility to maintain a network of operations at over 250 overseas

locations to support its mission and that of about 40 other U.S. agencies that operate

overseas and to protect over 50,000 U.S. and foreign national employees at hundreds of

overseas facilities. State spends a substantial amount of its $4.3-billion foreign affairs

administration budget on business-type activities that support its global operations.

These activities provide staff overseas with access to financial and information services,

security, housing, personnel services, and more. In making decisions on the size and

capacity of the support structure at any particular location, State must consider the views

of other U.S. government agencies including Defense, Commerce, Agriculture, Treasury

and Justice. Since last year’s hearing, an independent advisory panel has examined the

U.S. overseas presence and recommended options for streamlining and rightsizing

overseas operations consistent with U.S. foreign policy priorities and a vastly changing

world with new requirements for security, communications, technology, and service.1

Many of the panel's recommendations address concerns that we have raised over the

years.

My testimony today will focus on State's progress in addressing the challenges it faces in

its efforts to achieve a more secure, efficient, and effective network of operations,

including its response to the recommendations from the independent advisory panel. The

major challenges include

1 America's Overseas Presence in the 21st Century, the report of the Overseas Presence Advisory Panel,

November 1999.
2

• better utilizing the Government Performance and Results Act process to improve

strategic and performance planning to better achieve overall mission, policy, and

operational objectives;

• improving the security of U.S. personnel and facilities at overseas locations in a costeffective and timely manner;

• determining the right size and location of the U.S. overseas presence to both improve

the efficiency of operations and reduce the security burden; and

• upgrading information and financial management systems to further improve

communications, accountability, and decision-making.

State has indicated that it will need several billions of dollars in capital construction and

other investments over several years to achieve operations that can effectively support

U.S. overseas interests. To successfully meet many of these challenges, the Department

needs to have a clearly articulated vision, strategy, and congressional commitment to

make sure that intended results are achieved. Let me provide a summary of progress,

remaining challenges, and obstacles in each of the areas I mentioned.

SUMMARY

The leadership team at the Department of State has recognized many of its critical

management challenges and devoted substantial resources to addressing them. As a

result, State has made considerable progress in many difficult areas but still faces

significant obstacles in achieving an efficient and effective overseas platform to support

U.S. interests.

• Our evaluations showed that although State's strategic and performance plans had

their strong points, they only partially met the requirements of the 1993 Government

Performance and Results Act. State's strategic plan defined U.S. interests and
3

clarified U.S. foreign policy goals, and its annual performance plan for fiscal year

2000 showed improvement over the prior year's plan in linking strategies and

measures to its goals. However, its fiscal year 2000 performance plan also fell short

in a number of areas. For example, it did not present a complete picture of baselines,

targets, and measures for some of its strategic goals and did not elaborate on how

State plans to work with other agencies to achieve progress on cross-cutting issues,

such as trade policy and stopping the flow of illegal narcotics. State recently issued

its fiscal year 1999 performance report, the first required under the Results Act, and

its performance plan for fiscal year 2001. Both have some of the same weaknesses

found in its prior planning efforts. The performance report does not adequately

demonstrate State's level of success in achieving desired outcomes or the way in

which State's actions actually led to the achievement of desired goals. State's

performance plan for fiscal year 2001 provides more detail on its intended

performance compared to prior years' plans but it will be difficult to determine the

extent tangible results will be achieved because of the Department's numerous,

scattered targets. State recognizes that it needs to continue to strengthen its strategic

and performance planning as part of its overall effort to improve management and

address critical challenges.

• In light of the potential for terrorism by groups opposed to U.S. interests, enhancing

the security of embassies and consulates might well be the most significant challenge

facing the Department of State. In the aftermath of the bombings of two U.S.

embassies in Africa in 1998, State, using about $1.5 billion in emergency

supplemental funds, started to significantly upgrade security at all of its overseas

posts and build new facilities that meet higher security standards. However, State

faces many challenges to its goals in this area. State has made progress in

implementing certain security upgrades, such as surveillance detection programs and

providing armored vehicles, but because of the scope of the program, many facilities

are awaiting enhancements, including barriers, walls, and other safeguards. In

addition, due to an increase in project scope resulting from more stringent security

requirements and better documentation of what was needed at individual posts, State
4

estimates that the emergency upgrades may cost hundreds of millions of dollars more

than originally envisioned and will likely take several years to complete. Moreover,

State is encountering several obstacles in its effort to construct new and more secure

embassies and consulates. Some of these hurdles include difficulties in purchasing

suitable sites for new buildings and gaining agreements among agencies on future

staffing levels and resulting requirements.

• Another key challenge for State is to rightsize its overseas presence. State is in the

early stages of examining various options to restructuring overseas presence in light

of changing needs in the post cold war world and advances in technology. We have

recommended that State reexamine the way it conducts overseas administrative

functions, such as relocating and housing employees. From our work, we also have

suggested that State explore the potential for regionalizing certain functions and

making greater use of technology and outsourcing to achieve efficiencies and

improve performance. Actions in these areas could potentially reduce the U.S.

overseas presence. In November 1999, the Overseas Presence Advisory Panel

convened by State, issued a report calling for changes in the size, composition, and

management of the U.S. overseas presence. Many of the panel’s findings are

consistent with our observations from our work in recent years. State has established

several committees to consider the panel's recommendations. In addition to

rightsizing, they are considering options identified by the panel to improve

information technology and management of capital facilities.

• Consistent with our recommendations, State has made many improvements in its

information and financial management systems but faces continuing challenges in

working with U.S. agencies operating overseas to standardize information technology

capabilities and to correct weaknesses in its information security and financial

management systems. State was able to successfully meet Y2K challenges and has

received unqualified opinions on its financial management statements for fiscal years

1997, 1998, and 1999. However, devising a common technology solution that would
5

permit electronic communication between agencies overseas and improve the

productivity and effectiveness of overseas staff remains a formidable task. Our

evaluations of State's computer networks and assessments by State's Inspector

General also point to the continued need for State to assess its controls over sensitive

information. Regarding financial management, the Department’s Office of Inspector

General has reported that State’s financial systems do not comply with certain federal

laws and requirements largely due to the overall lack of organization and integration

of the Department's financial management systems. Improvements in its financial

management systems, including those required to be in compliance with the Federal

Financial Management Improvement Act of 1996, would provide managers with the

more timely information they need to operate in a more business-like fashion and

make better cost-based decisions.

STRENGTHENING STRATEGIC

AND PERFORMANCE PLANNING

The Government Performance and Results Act provides a framework for addressing

management challenges and increasing accountability for results in programs and

operations. Under the Results Act, agencies are to prepare a five-year strategic plan that

defines their mission, long-term goals, and strategies to achieve the goals; and an annual

performance plan that communicates performance goals, targets, and measures. The Act

also requires that, beginning this year; agencies prepare an annual performance report

describing actual performance in comparison to stated goals and targets.

As required by the Results Act, State has prepared a strategic plan and annual

performance plans. Our review of State’s performance plan for fiscal year 20002 found

that improvements had been made over the prior year’s plan, including the addition of

results-oriented goals, quantifiable measures, and baselines for many of its performance

goals. However, while State's foreign policy goals cover a wide spectrum of U.S.
6

national interests, its plan did not provide a full range of objectives, strategies, and

performance indicators for all of its 16 strategic goals. To illustrate, one of State's

strategic goals is to open foreign markets to U.S. firms. Within this goal, State identified

two major objectives but elaborated on only one in detail. In addition, the plan did not

describe how State would coordinate with other agencies contributing to the same or

similar results. For example, State says it works closely with the U.S. Trade

Representative and the Department of Commerce on specific U.S. government export

promotion efforts without explaining precisely what each agency will do.

We have analyzed State’s performance report for fiscal year 1999 and its performance

plan for fiscal year 2001. We found that it is difficult to judge how the agency performed

or can be expected to perform in some areas. For example, one of State's outcome goals

is to enhance the ability of American citizens to travel and live abroad securely. Due to

data limitations, State's progress in meeting this outcome is inconclusive. For example,

neither the performance report nor the plan provides performance information on

passport issuance. The report does, however, discuss State's progress in providing U.S.

citizens with information and other services. Another of State's goals is to reduce

international crime and availability and/or use of illegal drugs. State's performance plan

highlights why these key outcomes are important; however, it does not clearly identify

State's progress towards meeting its goals. State reports on only one of four measures

identified in the plan--international training programs--which accounts for less than 2

percent of State's international narcotics and law enforcement budget.

State's performance report addressed most of the agency's major management challenges

in some manner. However, its fiscal year 2001 plan has not adequately addressed

challenges in key areas, including managing information technology modernization and

security, the hiring and training of staff, and improving financial management systems.

Also, as in prior years' plans, there is no discussion of whether State coordinated with the

2 Observations on the Department of State's Fiscal Year 2000 Performance Plan (NSIAD-99-183R, July 20,

1999.)
7

numerous partner agencies listed in the plan, how resources will be used to achieve goals,

what data limitations there were, or whether the data used was validated and verified.

State's fiscal year 2000 plan acknowledged that the process of managing for results as

envisioned by the Results Act is not well entrenched in the Department. Although

improvements are evident in the Department's first performance report and its latest

performance plan, State shares our view that much more needs to be done to strengthen

strategic and performance planning in the agency. State officials have indicated that the

Department plans to form strategic goal teams to produce a more focused fiscal year 2002

performance plan. State officials also acknowledge that performance plans need to better

address State's major management challenges. Accordingly, State officials said they plan

to amend the fiscal year 2002 plan to make it more comprehensive, particularly in the

areas of managing information technology modernization and security, hiring and

training staff, and improving financial systems.

ENHANCING OVERSEAS SECURITY

The August 1998 bombings of the U.S. embassies in Nairobi, Kenya, and Dar es Salaam,

Tanzania, highlighted the security management challenge of upgrading and/or replacing

most embassies and consulates in a timely and cost effective manner. Immediately after

the bombings in Africa, State deployed teams to Kenya and Tanzania to assess the

damage firsthand and estimate costs for replacements and temporary facilities. It also

sent teams to over 30 other high-risk countries to assess the threats and possible options

to reduce them. Those teams, in coordination with State's overseas security officers,

chiefs of missions, and other officials, helped State further define its security

enhancement requirements and estimate the costs for upgrading existing facilities

worldwide. In fiscal year 1999, State received about $1.5 billion in emergency

supplemental appropriations from the Congress to improve security quickly at all posts,
8

build new facilities in Kenya and Tanzania, and to begin replacing some of its most

vulnerable embassies and consulates.

Using funds from emergency supplemental appropriations, State has reestablished

embassy operations in interim office buildings in Nairobi, and Dar es Salaam, and has

signed a contract for construction of new embassy compounds at those posts. These two

embassy compounds are on schedule for completion in 2003 at a cost of about $119

million. Projects to relocate several other embassies and consulates are also under way,

including those in Kampala, Uganda; Doha, Qatar; and Zagreb, Croatia. The Kampala

and Doha projects are scheduled for completion in 2001 and the Zagreb project in 2003.

In addition, State has made progress in implementing many of its planned security

upgrades, including enhancing vehicle inspection and security guard programs, hiring

additional special agents and other security staff, and instituting a new surveillance

detection program designed to identify hostile surveillance activities and potential

attackers.

Projects involving major construction upgrades to improve the security of existing

facilities at more than 100 posts are likely to cost significantly more than was originally

envisioned by the Department shortly after the bombings in Africa and are behind

schedule. State estimates that the upgrades and electronic equipment installations,

originally funded at $181 million, could potentially cost about $800 million more to

complete. According to State, these potential increases in costs have occurred because

State has conducted more detailed assessments of posts' security enhancement

requirements since the bombings in Africa, and has upgraded its security standards. State

requested $200 million in its fiscal year 2001 budget request to address these additional

requirements. It also may make future budget requests; realign funds from other projects;

stretch the program over several years; and/or, use less costly methods to achieve project

objectives.
9

Looking ahead, State has identified over 190 diplomatic or consular facilities deemed

vulnerable to terrorist attack that need to be replaced or substantially altered. State has

prioritized these facilities for replacement into groups of 20. In 1999, the Crowe

accountability report on the bombings in Africa recommended that State spend about $1

billion annually for 10 years to replace its most vulnerable facilities. State's fiscal year

2000 appropriations included $300 million to continue its embassy replacement program.

As of April, State had received additional congressional approval to construct a new

embassy in Tunis, Tunisia, and acquire or identify sites, and/or further define projects at

12 other posts.

In its fiscal year 2001 budget, the Department of State requested an advance

appropriation of $3.35 billion over 4 years (fiscal years 2002 through 2005) to continue

replacing its highest risk and most vulnerable embassies and consulates. State has not

identified in its budget request which embassies and consulates will be replaced. Due to

the cost increases and schedule delays in State's prior capital construction programs, we

have been asked by the Senate Foreign Relations Committee to evaluate whether the

Department’s plans and strategies adequately identify which projects are highest priority

for replacement, what their estimated costs will be, and when construction can be

completed. We have just begun this effort and will focus on the project identification and

implementation process, potential best practices that can reduce the amount of time

required to construct new facilities overseas, and the overall program costs.

OVERSEAS PRESENCE

Another key issue that the Department faces in its everyday operations is managing the

sheer number of U.S. employees overseas—which directly affects security requirements,

operating costs, and efficiency. There are approximately 19,000 Americans and about

37,000 foreign service nationals3 and contract employees working at U.S. diplomatic

facilities overseas. In recent years, we have raised concerns about the need to reexamine

3 Foreign service nationals are non-U.S. citizens directly hired by the U.S. missions.
10

the U.S. overseas presence in light of the costs, changing political landscape, and

advances in technology. In 1996, we reported that State needed to reexamine its overseas

presence and the scope of its activities or to substantially change its business practices.4

We encouraged State to expand its use of regional centers for certain administrative

services and explore greater use of foreign service national personnel to reduce American

staffing costs. In our 1998 report on overseas housing programs, we noted that some

administrative functions could be performed by the private sector or through other means

that could possibly reduce posts’ staffing needs.5 The security burden is directly affected

by the size of the overseas work force.

We are pleased to note that the Department has moved forward in examining its overseas

presence. Following the bombings in Africa, State appointed a panel to review overseas

operations of the U.S. government. The panel made a number of recommendations in

November 1999 about how best to organize and manage overseas posts, addressing areas

such as security, interagency coordination, information technology, capital needs, and

human resources. The panel concluded that the U.S. overseas presence has not

adequately adjusted to the new economic, political, and technological landscape. Many

of these points are consistent with our observations from prior work on budget, staffing,

and related management issues. The panel recommended that the President establish an

interagency committee to determine the right size and composition of overseas posts.

The panel also recommended that State reform its administrative services. Our prior

work identified several actions State could take to streamline those services and reduce

costs, including outsourcing of key housing functions and one-stop shopping for

relocation services. State has reengineered parts of its logistics system, focusing on

direct ordering from the supplier and other actions that eliminated unnecessary costs and

procedures in providing needed goods and services. It has also implemented the

International Cooperative Administrative Support Services system to better allocate costs

4 State Department: Options for Addressing Possible Budget Reductions (GAO/NSIAD-96-124, Aug. 29, 1996).
11

among agencies and provide greater transparency to the costs of operations. However, it

has not broadly embraced the concept of cost-based decision-making for many of its

operations, such as overseas housing and relocation. Changes in the way State carries out

its administrative functions could reduce the number of overseas staff.

In March 2000, State announced that an interagency committee had been formed to look

at how to determine the right size and composition of posts universally and to conduct

pilot programs at selected posts. Progress in addressing right sizing issues faces several

challenges, including State's limited authority and influence over the staffing decisions of

other agencies operating overseas.

IMPROVING INFORMATION

AND FINANCIAL MANAGEMENT SYSTEMS

Recognizing that it relied on inadequate information and financial management systems

and infrastructures that were generally inadequate to support State’s core foreign policy

and administrative functions, State developed a 5-year information technology plan in

1997 which outlined its overall modernization effort. Our 1998 report on information

resource management6 questioned State’s methodology for making its 1997 estimate that

it would cost $2.7 billion over 5 years to modernize its global information technology

infrastructure. Consistent with our recommendations, State has improved its information

technology planning and investment process and is revising its modernization cost

estimates. Moreover, State reports that it has fully achieved some of its modernization

goals. For example, overseas posts now have modern computers, the obsolete Wang

computer network has been fully replaced, and its e-mail systems have been consolidated

and upgraded.

5 State Department: Options for Reducing Overseas Housing and Furniture Costs (GAO/NSIAD-98-128, July

31, 1998).

6 Department of State IRM: Modernization Program at Risk Absent Full Implementation of Key Best Practices

(GAO/NSIAD-98-242, Sept. 29, 1998).
12

Although State has improved its information resource capabilities, there is not a common

platform serving all agencies operating overseas. The Overseas Presence Advisory Panel

recommended that the Department develop and implement a strategy for standardizing

information and communications networks at all posts while providing all agencies with

the connectivity they require. The panel suggested that a single, unclassified global

communications network to serve all U.S. agencies with an overseas presence could be

built at an estimated cost of $200 million. The Department’s recently completed

modernization program overseas, according to State officials, could provide a common

platform at posts for e-mail and other business functions if it is accepted by all agencies

at each post. State has included $17 million in its fiscal year 2001 budget request to

develop and deploy interagency information platforms at two pilot posts. If the common

platform is proven workable and funded, State believes that it could be operational

worldwide in about 2-1/2 years.

At this point, State is at the early stages of planning for the common platform initiative--

establishing preliminary project milestones, developing rough cost estimates, and

formulating a project plan for upgrading information technology systems abroad. The

plan, which State expects to complete by August 2000, will define project goals,

requirements, benefits/cost, schedule and approval procedures. Nevertheless, devising a

common technology solution that will meet the collective needs of the foreign affairs

community will be a formidable task. Several thousand American and foreign nationals

employed by about 40 federal agencies located in 160 countries comprise the foreign

affairs community. Moreover, each agency has a unique mission and its own information

systems and obtaining consensus will be difficult. If the common platform is to move

from concept to reality, State will have to overcome cultural obstacles and get agreement

from platform users on requirements so it can make sound procurement decisions.

Further, it will need to carryout this delicate balancing act while defining its own

technical architecture and continuing to address pervasive computer security weaknesses.
13

State relies heavily on its critical information systems and the data contained within them

to support its domestic and overseas operations. Two years ago, we reported that State's

sensitive but unclassified systems were highly vulnerable to exploitation and

unauthorized access. The Department has worked hard to upgrade and secure its

information technology, including clarifying roles and responsibilities and requiring the

use of risk management by all project managers. However, subsequent computer security

evaluations and assessments of controls over sensitive information continue to highlight

problems with State's information and physical security. According to State, these

vulnerabilities are being addressed. Clearly, continued oversight is needed to ensure that

controls are in place and operating as intended to reduce risks to sensitive information

assets.

Regarding financial management, the Department of State received an unqualified audit

opinion on its Department-wide financial statements for fiscal years 1997, 1998, and

1999--a significant accomplishment. State has also closed some of its previously

identified material weaknesses, including worldwide disbursing and cashering. The audit

report for the fiscal years 1998 and 1999 statements, however, disclosed that State faces

several longstanding challenges in developing financial management systems that fully

comply with federal requirements. According to State's fiscal year 1999 performance

report, it deferred upgrading its financial management system because of Y2K activities

and the consolidation of the foreign affairs agencies. State is continuing its efforts to

improve its financial management systems. State submitted its proposed remediation

plan to the Office of Management and Budget in March 2000. The plan, required by the

1996 Federal Financial Management Improvement Act, identifies actions the agency

believes are necessary to address its internal control weaknesses and be in substantial

compliance with the Act.

------------
14

Mr. Chairman and Members of the Subcommittee, this concludes my prepared statement.

I would be happy to answer any questions you may have.

Contacts and Acknowledgements

For questions regarding this testimony, please contact Ben Nelson at (202) 512-4128.

Individuals making key contributions to this testimony included Jess Ford, Diana Glod,

and Lynn Moore.
15

RELATED GAO PRODUCTS

STRATEGIC AND PERFORMANCE PLANNING

Observations on the Department of State’s Fiscal Year 2000 Performance Plan (NSIAD99-183R, July 20, 1999).

The Results Act: Observations on the Department of State's Fiscal Year 1999 Annual

Performance Plan (GAO/NSIAD-98-210R, June 17, 1998).

Managing for Results: Agencies' Annual Performance Plans Can Help Address Strategic

Planning Challenges (GAO/GGD-98-44, Jan. 30, 1998).

OVERSEAS SECURITY AND PRESENCE

State Department: Overseas Emergency Security Program Progressing, but Costs Are

Increasing (GAO/NSIAD-00-83, Mar. 8, 2000).

INFORMATION MANAGEMENT

Foreign Affairs: Effort to Upgrade Information Technology Overseas Faces Formidable

Challenges (GAO/T-AIMD/NSIAD-00-214, June 22, 2000).

Department of State IRM: Modernization Program at Risk Absent Full Implementation of

Key Best Practices (GAO/NSIAD-98-242, Sept. 29, 1998).

Year 2000 Computing Crisis: State Department Needs to Make Fundamental

Improvements to Its Year 2000 Program (GAO/AIMD-98-162, Aug. 28, 1998).

Computer Security: Pervasive, Serious Weaknesses Jeopardize State Department

Operations (GAO/AIMD-98-145, May 18, 1998).

FOREIGN AFFAIRS ORGANIZATION AND MANAGEMENT

State Department: Progress and Challenges in Addressing Management Issues (GAO/TNSIAD-00-124, Mar. 8, 2000).

State Department: Major Management Challenges and Program Risks (GAO/TNSIAD/AIMD-99-99, Mar. 4, 1999).

Performance and Accountability Series: Major Management Challenges and Program

Risks, Department of State (GAO/OCG-99-12, Jan. 1999).
16

Foreign Affairs Management: Major Challenges Facing the Department of State

(GAO/T-NSIAD-98-251, Sept. 17, 1998).

State Department: Options for Reducing Overseas Housing and Furniture Costs

(GAO/NSIAD-98-128, July 31, 1998).

International Affairs: Activities of Domestic Agencies (GAO/T-NSIAD-98-174, June 4,

1998).

International Affairs Budget: Framework for Assessing Relevance, Priority, and

Efficiency (GAO/T-NSIAD-98-18, Oct. 30, 1997).

State Department: Options for Addressing Possible Budget Reductions (GAO/NSIAD96-124, Aug. 29, 1996).

(711528)
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