a

GAO

United States Government Accountability Office

Report to Congressional Requesters

September 2005 INTERNATIONAL 

FINANCE

Treasury Has Reduced 

the Number of 

Attachés Overseas

GAO-05-1010
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-1010.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4347 or yagerl@gao.gov. 

Highlights of GAO-05-1010, a report to 

congressional requesters 

September 2005

INTERNATIONAL FINANCE 

Treasury Has Reduced the Number of 

Attachés Overseas 

Financial attachés represent Treasury overseas and cover economic and 

financial issues relevant to U.S. international economic policies and U.S. 

national interests, although the role and need for financial attachés have 

evolved. Specifically, financial attachés conduct monitoring and analysis of 

macroeconomic and financial issues, including those affecting the private 

sector. Typically, financial attachés interact with host government financial 

agencies such as the ministries of finance and central banks, as well as with 

private sector financial entities. Financial attachés typically work in 

conjunction with the Economic Section of the U.S. mission and usually share 

the information they collect with other U.S. agencies. In Afghanistan and 

Iraq, financial attachés are primarily involved in coordinating economic 

reconstruction efforts. In general, the role of attachés has evolved over time 

due to changing Treasury priorities, as well as factors such as technological 

advances in communications. To some extent, these changes have reduced 

the necessity for some financial attaché posts overseas. 

Treasury has recently begun to formalize its process for determining attaché 

placement. Previously, the placement of Treasury’s attachés was 

accomplished through an informal process, according to Treasury officials. 

More recently, Treasury has taken steps to formalize its process by 

specifying placement criteria it will take into consideration relative to 

overall Treasury priorities. These criteria include whether the United States 

has major financial interest in a country or whether there is significant U.S. 

engagement in a country. However, Treasury officials stated that budget 

constraints have been a primary factor in determining the number of 

attachés in recent years. Furthermore, projected rising costs are likely to 

constrain the number of attachés in the future. 

Locations of Financial Attachés at the Beginning of Fiscal Year 2005 

Sources: Map Art (illustration); information provided by Treasury.

Buenos Aires

Paris

Moscow

Frankfurt

Baghdad Tokyo

Kabul

The number of financial attachés 

that the Department of the 

Treasury (Treasury) deploys 

overseas dropped from 

approximately 30 in 1981 to 7 at the 

beginning of fiscal year 2005. 

Treasury has traditionally used 

financial attachés to monitor and 

gather information on international 

economic and financial 

developments to help shape U.S. 

international economic policy and 

to promote U.S. national interests. 

These attachés are part of the U.S. 

mission overseas and are typically 

stationed in U.S. embassies in key 

countries. Since at least 1981, 

however, the number of financial 

attachés placed overseas has been 

declining in response to changing 

conditions. Due to congressional 

interest in these financial attachés, 

this report describes (1) the role of 

financial attachés and (2) the 

process Treasury uses to determine 

attaché placement. 

In commenting on this report, 

Treasury considered our report to 

be fair and accurate. Both Treasury 

and the Department of State 

provided technical comments, 

which we incorporated where 

appropriate. 
Page i GAO-05-1010 Treasury Attachés

Contents

Letter 1

Results in Brief 2

Background 3

Attachés Generally Provide Macroeconomic and Financial Policy 

Perspectives; Role in Afghanistan and Iraq Includes Economic 

Reconstruction 9

Treasury Has Begun to Formalize the Process for Determining 

Attaché Posts, but Budget Constraints Limit the Number of 

Attachés 14

Agency Comments and Our Evaluation 20

Appendixes

Appendix I: Objectives, Scope, and Methodology 21

Appendix II: Comparison of Financial Attachés and Technical Advisors 23

Appendix III: GAO Contact and Staff Acknowledgments 24

Table Table 1: Key Differences between Treasury’s Financial Attaché vs. 

Technical Advisor 23

Figures Figure 1: Estimated Total International Affairs Staff vs. Financial 

Attachés (1981-2005) 4

Figure 2: Locations of Financial Attachés in Fiscal Year 2005 6

Figure 3: Estimated Expense Categories for Cost Per Financial 

Attaché for FY 2005 8

Figure 4: Organizational Chart of Treasury Offices and the Office of 

International Affairs 16

Figure 5: Treasury’s Process and Criteria to Establish Financial 

Attaché Posts 18
Contents

Page ii GAO-05-1010 Treasury Attachés

Abbreviations

CSCS Capital Security Cost-Sharing

DAS Deputy Assistant Secretary

ESF Exchange Stabilization Fund

G-8 Group of Eight

IA (Treasury's) Office of International Affairs

ICASS International Cooperative Administrative Support Services

IFI International Financial Institution

IMF International Monetary Fund

OECD Organization for Economic Cooperation and Development

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Page 1 GAO-05-1010 Treasury Attachés

United States Government Accountability Office

Washington, D.C. 20548

A

September 23, 2005 Letr

The Honorable Michael G. Oxley

Chairman

The Honorable Barney Frank

Ranking Minority Member

Committee on Financial Services

House of Representatives

The Honorable Deborah Pryce

Chairman

The Honorable Carolyn B. Maloney

Ranking Minority Member

Subcommittee on Domestic and International 

Monetary Policy, Trade, and Technology

Committee on Financial Services

House of Representatives

The number of financial attachés that the Department of the Treasury 

(Treasury) has posted overseas dropped from approximately 30 in 1981 to 7 

at the beginning of fiscal year 2005. Treasury has traditionally deployed 

financial attachés overseas to monitor and gather information on 

international economic and financial developments to help shape U.S. 

international economic policy and to promote U.S. national interests. 

These attachés are part of the U.S. mission overseas and are typically 

stationed in U.S. embassies in key countries. Since at least 1981, however, 

the number of financial attachés placed overseas has been declining in 

response to Treasury’s changing needs and budgetary constraints. 

In response to congressional interest in these financial attachés, this report 

describes (1) the role of financial attachés and (2) the process Treasury 

uses to determine attaché placement.

To explain the role of financial attachés and document the placement 

process for financial attachés, we interviewed officials from Treasury and 

the Department of State (State) and reviewed documents including key 

memorandums, budget data, and attaché position descriptions provided by 

Treasury. At Treasury, we interviewed officials from the Office of 

International Affairs (IA), which houses financial attachés, as well as all 

five current and three recently returned financial attachés, for a total of 

eight officials in the financial attaché role. We also contacted State 

Economic Section officers in five selected locations on how financial 
Page 2 GAO-05-1010 Treasury Attachés

attachés function in the context of U.S. missions. Lastly, we met with 

officials from the Securities Industry Association, an organization that 

represents various private sector financial companies. Due to time 

constraints, we were not able to determine the reliability of the budget and 

other data provided by Treasury. We are providing these data for 

informational purposes and do not base any conclusions on them. For a 

more detailed explanation of our scope and methodology, see appendix I. 

We conducted our work in Washington, D.C., from June 2005 to August 

2005 in accordance with generally accepted government auditing 

standards. 

Results in Brief Financial attachés represent Treasury overseas and monitor 

macroeconomic and financial policy issues that are relevant to U.S. 

international economic policies and U.S. national interests, although the 

roles and need for financial attachés have evolved. Specifically, financial 

attachés conduct macroeconomic monitoring and analysis, such as trends 

in host country fiscal policies and the stability of its financial system. In 

addition, financial attachés monitor and try to influence financial issues 

affecting the private sector, such as banking, taxation, and corporate 

governance. Typically, financial attachés serve as interlocutors with host 

government financial agencies such as ministries of finance and central 

banks, as well as with private sector financial entities. Financial attachés 

usually work in conjunction with the Economic Section of the U.S. mission, 

sharing information and complementing each other’s area of focus. For 

example, since financial attachés tend to have specialized knowledge of 

financial issues, they focus on the financial sector, while State officials in 

the Economic Section focus more broadly on other sectors of the economy. 

Financial attachés share the information they collect with State and other 

U.S. agencies through cables as well as through interagency embassy 

meetings. In Afghanistan and Iraq, financial attachés are primarily involved 

in coordinating economic reconstruction efforts such as building the 

capacity of the central bank and negotiating host country debt issues with 

international donors. In general, the roles of attachés have evolved over 

time due to changing Treasury priorities, as well as other factors such as 

technological advances in communications. To some extent, these changes 

have reduced the necessity of maintaining the same number of financial 

attaché posts overseas that Treasury had in the early 1980’s.

Treasury has recently begun to formalize its process for determining 

attaché placement. Previously, the placement of Treasury’s attachés was 

accomplished through an informal process, according to Treasury officials. 
Page 3 GAO-05-1010 Treasury Attachés

More recently, as it works with a constrained budget, Treasury has taken 

steps to formalize its process by specifying placement criteria, such as 

whether the United States has major financial interest in a country or 

whether there is significant U.S. engagement in a country. However, 

Treasury officials stated that budget constraints have been a primary factor 

in determining the number of attachés in recent years. For example, 

although Russia is both an important source of energy for the United States 

and a Group of Eight (G-8) partner, Treasury plans to close the Moscow 

financial attaché post by the end of fiscal year 2005, primarily because of 

budget constraints and also because this post is of a lower priority 

compared with some other regions. Furthermore, according to Treasury 

officials, projected rising costs of attaché posts and overall resource 

constraints in IA may further constrain the number of attachés in the 

future.

Background To help shape U.S. international economic policy and promote U.S. 

national interests, Treasury has placed financial attachés overseas. 

Financial attachés are part of IA and as such, support its mission to serve 

the interests of the American people by improving financial stability and 

security in emerging and world markets, enhancing the functioning of the 

International Financial Institutions (IFI), and promoting an open and 

transparent international trade and investment regime. 

According to Treasury officials, the number of financial attachés placed 

overseas has been declining since at least 1981, as shown in figure 1. This 

trend mirrors a decline in overall IA staffing levels. Treasury had used the 

Exchange Stabilization Fund (ESF)1

 for expenses related to financial 

attachés until 1978, when Congress passed legislation disallowing use of

1

The ESF consists of three types of assets: U.S. dollars, foreign currencies, and Special 

Drawing Rights. Currently, according to Treasury, the ESF has a total of approximately $43 

billion in these three assets. The ESF can be used to purchase or sell foreign currencies, to 

hold U.S. foreign exchange and Special Drawing Rights assets, and to provide financing to 

foreign governments. All operations of the ESF require the explicit authorization of the 

Secretary of the Treasury. The legal basis of the ESF is the Gold Reserve Act of 1934.
Page 4 GAO-05-1010 Treasury Attachés

this fund for administrative purposes, including payment of salaries.2 Since 

then, Treasury has generally funded attachés out of IA’s overall budget. 

Figure 1: Estimated Total International Affairs Staff vs. Financial Attachés (1981-2005) 

a

Although precise data on attachés were not available prior to 1985, Treasury estimated that it had 

more than 30 attachés in 1981.

At the beginning of fiscal year 2005, Treasury had seven3 financial attachés 

dispersed across South America, Europe, the Middle East, and Asia (see

fig. 2). According to Treasury, maintaining attachés overseas cost 12 

2

Public Law 95-612 placed ESF administrative expenses on budget and required that funds 

for such expenses be appropriated. The enactment of this law was preceded by a 1977 GAO 

audit, which discussed Treasury’s use of ESF funds for administrative expenses. See GAO, 

Use of Exchange Stabilization Fund Resources: Arrangement with Treasury Provides 

Access to Information, ID-77-42 (Washington, D.C.: September 28, 1977). 

Source: Treasury.

50

100

150

200

250

300

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 a

0

 Total International Affairs staff

Financial attachés

Number of employees

3

Currently, Treasury has five financial attachés overseas, as it recalled the attaché at the 

Organization for Economic Cooperation and Development in Paris in April 2005, and the 

attaché in Kabul returned in July 2005 after completing a short-term rotation. 
Page 5 GAO-05-1010 Treasury Attachés

percent (or $3.1 million) of IA’s total budget of approximately $26 million 

for fiscal year 2005, although the financial attachés represented 4 percent4

of IA’s total staff of 175. Treasury has assumed the full cost for five financial 

attachés, while State has funded costs, excluding salary and benefits, for 

financial attachés in Baghdad and Kabul. However, Treasury expects to 

fund the full cost of the attaché in Baghdad in fiscal year 2006. 

4

This includes two attaché positions funded by State in Baghdad and Afghanistan.
Page 6 GAO-05-1010 Treasury Attachés

Figure 2: Locations of Financial Attachés in Fiscal Year 2005a

a

Treasury officials said they plan to establish two new posts in FY 2006.

Office of International 

Affairs staffing

4%

Financial attachés

Office of International 

Affairs budget

12%

Financial

attaché budget

Post to continue in FY 2006

Post to close by FY 2006

96%

Other 88% Other

Sources: Map Art (illustration); information provided by Treasury.

Buenos Aires

Paris

Moscow

Frankfurt

Baghdad

Tokyo Kabul
Page 7 GAO-05-1010 Treasury Attachés

According to Treasury estimates, the average annual cost of maintaining an 

attaché abroad is over $520,000 in fiscal year 2005.5

 About 70 percent of the 

annual cost per attaché is comprised of nonsalary expenses such as 

housing and support staff, as well as shared administrative charges and 

capital security cost charges assessed by State (see fig. 3). Treasury 

expects the cost to increase by about $100,000 per year in part because of 

State’s Capital Security Cost-Sharing (CSCS) program, which is discussed 

in more detail below.6

 As a result of the increase in costs, Treasury officials 

estimated that by fiscal year 2008, the annual cost per attaché would 

exceed $800,000; and the cost of the current attaché structure would 

increase from $3.1 million to $5.2 million. 

Treasury’s financial attachés are part of the U.S. mission overseas and are 

typically housed in the embassy. As such, Treasury incurs administrative 

and other costs, such as sharing the cost for embassy construction, to 

maintain overseas posts for financial attachés. Administrative expenses are 

paid through the International Cooperative Administrative Support 

Services (ICASS) cost-distribution system, operated primarily by State, 

which divides cost among different U.S. government agencies and subagencies with staff assigned to various posts.7

 In addition to ICASS, 

agencies are expected to help finance the cost of the embassy construction 

program through the CSCS, which is expected to ensure that agencies 

“rightsize” (i.e., assign only the number of staff needed to accomplish their 

overseas mission). This program would require agencies to share 

construction costs based on the per capita proportion of total overseas 

staff and the type of space (controlled access, noncontrolled access, or 

5

The 2005 average estimated costs per established attaché position vary considerably by 

location, ranging from about $330,000 in Buenos Aires to more than $700,000 in Tokyo. 

6

State’s Bureau of Overseas Buildings Operations is engaged in construction and 

rehabilitation of U.S. embassies and consular compounds abroad to make them more 

secure. To increase the resources required for this effort, the Bureau has initiated the CSCS, 

which it expects to cut the projected time to complete the funding for 150 new embassy and 

consular compounds from 26 to 14 years. (Source: 

http://www.state.gov/m/p/results/49532.htm#rightsized). For more information on CSCS see 

GAO, Embassy Construction: Proposed Cost-Sharing Program Could Speed Construction 

and Reduce Staff Levels, but Some Agencies Have Concerns, GAO-05-32 (Washington D.C.: 

November 14, 2004). 

7

For more information on effectiveness of ICASS in delivering services at U.S. overseas 

missions, see GAO, Embassy Management: Actions Are Needed to Increase Efficiency and 

Improve Delivery of Administrative Support Services, GAO-04-511 (Washington D.C.: 

September 7, 2004). 
Page 8 GAO-05-1010 Treasury Attachés

nonoffice) they need. As a result, the fiscal year 2007 construction costs 

borne by non-State agencies, such as Treasury, are expected to be about 

three and a half times higher than they were in fiscal year 2005.

Figure 3: Estimated Expense Categories for Cost Per Financial Attaché for FY 2005

a

International Cooperative Administrative Support Services.

b

Other expenses consist of entitlements such as moving costs, and educational and travel allowances 

(5 percent), Capital Security Cost-Sharing (5 percent), allowances including nonregular compensation 

such as danger pay (3 percent), travel for field and regional work purposes (3 percent), office support 

including utilities and subscription charges (3 percent), security charges, including payment for local 

guard support (1 percent), and other periodic expenses such as storage (1 percent). Percentages do 

not add up to 100 due to rounding.

Source: Treasury.

20%

12%

18% 19%

31%

Otherb

Salaries and benefits

Support staff

ICASSa

 charges

Housing
Page 9 GAO-05-1010 Treasury Attachés

Attachés Generally 

Provide 

Macroeconomic and 

Financial Policy 

Perspectives; Role in 

Afghanistan and Iraq 

Includes Economic 

Reconstruction 

Macroeconomic and financial policy monitoring and analysis are key 

functions of financial attachés. Typically, attachés serve as interlocutors 

with host government financial agencies and private sector financial 

entities. They also work in conjunction with the Economic Section of the 

U.S. mission, which complements the role and expertise of financial 

attachés. In Afghanistan and Iraq, financial attachés are primarily involved 

in coordinating economic reconstruction efforts. In general, the roles and 

need for attachés have evolved over time due to changing Treasury 

priorities, as well as other factors such as technological advances in 

communications.

Attachés Provide a 

Macroeconomic and 

Financial Policy Perspective 

and Supplement Staffing at 

U.S. Missions

Financial attachés provide a macroeconomic and financial policy 

perspective to officials at Treasury headquarters as well as to U.S. mission 

officials. In terms of macroeconomic policy, financial attachés cover 

important fiscal and monetary trends and developments of the host country 

or region. Financial attachés monitor and analyze financial issues, 

including those affecting the private sector, such as banking, taxation, and 

corporate governance. Attachés may also work on debt issues relating to 

IFIs such as the International Monetary Fund (IMF), the World Bank, and 

other multilateral donor organizations. Attachés work closely with officials 

primarily from host government financial and regulatory institutions such 

as the ministries of finance and central banks, representatives of IFIs, and 

private sector financial institutions such as investment and commercial 

banks. These government and private sector contacts allow attachés to 

obtain information regarding changes and trends in the economic and 

financial sectors. According to one Treasury official, attachés are especially 

important in countries in which economic and financial systems as well as 

markets are less transparent and hence difficult to understand without 

close contact with relevant officials and private sector groups in the 

country. 

The attachés use information gleaned from their contacts to support 

Treasury objectives such as promoting U.S. economic policy and national 

interests by positively influencing the economic policy and regulatory 

decisions of the host country, advocating the interests of U.S. financial 

services companies, and providing intelligence to help shape U.S. 

international economic policy. The financial attachés with whom we spoke 

illustrated the impact of their efforts with the following examples:
Page 10 GAO-05-1010 Treasury Attachés

• In one country undergoing financial crisis, the financial attaché reported 

assisting the finance ministry officials in taking actions and developing 

policies necessary to generate donor support. 

• An attaché in Europe noted his role in facilitating U.S. and European 

Union regulatory dialogue by staffing meetings for these discussions, 

preparing briefing papers, and providing input on these developments to 

Treasury and other U.S. regulatory agency officials.

• An attaché, who had been working on improving financial regulatory 

transparency of the host country government, stated that in conjunction 

with U.S. embassy officials, he convinced the host country to 

incorporate changes in a new law that otherwise would have increased 

the legal risk for U.S. companies. 

IA expects attachés to function with considerable independence within the 

policy goals of Treasury, in particular, and the U.S. government in general. 

However, attachés reported receiving varying degrees of operational 

direction from IA. For example, in most cases, the attachés reported close 

operational guidance from IA, while in another case, IA had little 

involvement in directing the efforts of the attaché. One of the attachés with 

whom we spoke said that IA provided constructive advice periodically, 

including guidance on specific technical issues that were new to the 

attaché.

In addition to their intelligence gathering role, the attachés also provide 

logistical support for visits by Treasury officials, U.S. government financial 

regulators, and others, including putting these officials in contact with 

relevant host country officials. Also, since financial attachés are part of the 

U.S. mission in the host country, they brief the ambassador on economic 

and financial issues and may provide specific help as requested by the 

ambassador.

Treasury’s financial attachés usually work closely and are colocated with 

officials from the Economic Section of the U.S. mission. Despite this 

proximity, the role of financial attachés can vary significantly from that of 

State’s economic officers, in part because of differences in skills and 

qualifications, as well as the differing objectives of their agencies. For 

example, according to both Treasury and State officials, financial attachés 

have more specialized knowledge of financial issues. In addition, financial 

attachés tend to be midcareer or senior officials with several years of 

experience in government or the private sector, whereas economic officers 
Page 11 GAO-05-1010 Treasury Attachés

usually start at an entry level and work their way up to midcareer and 

senior levels. However, according to Treasury and State officials, 

irrespective of rank and experience, many economic officers do not have 

the level of expertise on financial issues that financial attachés have 

because economic officers tend to have a broader focus. Furthermore, both 

Treasury and State officials said that, in large part due to their institutional 

affiliation with Treasury, financial attachés tend to be well connected to 

officials in host government financial and regulatory institutions as well as 

IFIs and that this access would be difficult for economic officers to 

replicate.

The Treasury and State officials whom we contacted reported little or no 

overlap in activities of the financial attaché with the economic officers in 

U.S. missions. These officials reported that financial attachés focus on 

financial issues, while economic officers often cover other sectors of the 

economy. Some State officials in the field who currently work with 

financial attachés noted that without those attachés, the Economic Section 

can do some of the reporting on financial issues, but it will not be at the 

level of technical details that financial attachés can provide. Most attachés 

noted that their work complements that of the Economic Section. In 

Afghanistan and Iraq, where Treasury has recently placed financial 

attachés, the attachés noted that there is a good working relationship with 

the Economic Section, and that division of labor is necessitated by the 

large number of issues confronting the mission. Additionally, according to 

State, in U.S. missions where State officials assume the deputy attaché role, 

information sharing occurs regularly between State and Treasury. However, 

another attaché noted transition difficulties with the Economic Section 

when the financial attaché post was established. 

Attachés Assist with 

Reconstruction Efforts in 

Afghanistan and Iraq

Treasury’s financial attachés in Afghanistan and Iraq have undertaken roles 

that are different from their counterparts in areas without conflict. Since 

these two countries do not have well-functioning financial systems, 

financial attachés in these countries have been involved in coordinating 

and guiding technical assistance provided to the host countries on financial 

and economic issues through U.S. government entities such as Treasury’s 

Office of Technical Assistance and the U.S. Agency for International 

Development. (See app. II for a description of the differences between 

financial attachés and the Office of Technical Assistance’s technical 

advisors.) 
Page 12 GAO-05-1010 Treasury Attachés

Treasury’s access to multilateral agencies such as the World Bank and IMF, 

as well as bilateral donors, has enabled financial attachés to coordinate the 

efforts of international donors and creditors in Iraq and Afghanistan. For 

example, former Treasury attachés in Afghanistan stated that they were 

closely involved in debt reduction negotiations between the Afghan and 

Russian governments. The Treasury attaché in Iraq has been involved in 

discussions on Iraqi debt and reconstruction with creditors such as the IMF 

and the Paris Club.8

 Furthermore, the two financial attachés in Afghanistan, 

who were posted there at different times, were involved in designing 

donors’ economic assistance strategy as well as the Afghan government’s 

national development strategy. One of the attachés stated that he provided 

advice on topics such as bank supervision and bank reconstruction, private 

sector growth, tax administration and policy, and government debt 

issuance. 

The Treasury attaché in Baghdad heads the Iraq Reconstruction 

Management Office for Fiscal and Financial Affairs, which is engaged in 

providing technical assistance to Iraqi financial and regulatory institutions, 

including the Ministry of Finance and central bank. According to the 

attaché, this office is involved in implementing initiatives such as the 

national payments system that was designed by the now defunct Coalition 

Provisional Authority in Iraq. The new payments system, reported the 

attaché, is intended to increase the efficiency and effectiveness of the Iraqi 

government as well as the private sector by enabling electronic payments 

instead of the current cash-based payment system, which was both a 

logistical challenge and a security risk. Additionally, as the director of fiscal 

and financial reconstruction, the attaché reported managing the efforts of 

experts (hired on short-term contracts by State) in helping the Iraqi 

government with budget formulation and execution. This office is also 

coordinating with the Iraqi Ministry of Finance to administer and close out 

contracts issued by the Coalition Provisional Authority, as well as transfer 

assets—such as schools constructed by the U.S. government—to the Iraqi 

government. 

8

The Paris Club is an informal group of official creditors whose role is to find solutions to 

the payment difficulties experienced by debtor countries. Paris Club creditors agree to 

provide a country with debt relief through a postponement and, in the case of concessional 

rescheduling, a reduction in debt service obligations. 
Page 13 GAO-05-1010 Treasury Attachés

The Roles and the Need for 

Financial Attachés Have 

Evolved

The roles and the need for financial attachés have evolved over time due to 

changing Treasury priorities and budgetary considerations, as well as 

factors such as improved communications technology, wider range of 

information sources, and increased frequency of meetings among 

economic and finance officials from industrialized countries. Senior 

Treasury officials stated that while they do not have a sufficient number of 

financial attachés to adequately cover key financial markets, Treasury does 

not need as many financial attachés as it had in the early 1980’s, due in part 

to these technological advancements (see fig. 1). 

Improvements in communications technology have affected the type of 

work done by attachés, and, according to attachés, Treasury expects them 

to provide more nuanced information or detect subtle economic and 

financial trends that may not be captured by other information sources. 

Issues such as countering terrorist financing and money-laundering efforts 

are now of higher priority to Treasury and are part of the portfolio of issues 

for current financial attachés.9

 Furthermore, while budgetary 

considerations have contributed to fewer financial attachés in the field, 

they are expected to cover broader regions. For example, the attaché in 

Buenos Aires currently covers countries throughout South America. The 

attaché in Frankfurt covers the various member countries of the European 

Union, in addition to German financial and regulatory entities. 

At the same time that financial attaché roles have evolved, changing 

economic conditions of countries have also altered the need for attachés in 

certain posts. For example, one State official in a U.S. mission stated that 

the need for an attaché in that country has decreased as the country has 

achieved greater economic stability over time. In addition, according to one 

Treasury official, forums such as meetings of the Group of Seven 

industrialized nations provide officials in financial and regulatory 

institutions opportunities to meet more often and hence may decrease the 

reliance on financial attachés for information exchange. However, Treasury 

officials also said that while the need for financial attachés in industrialized 

nations may have declined, the need for attachés in developing countries 

seems to have increased. Treasury officials emphasized the need for 

attachés to engage with emerging markets such as China, India, and Brazil 

9

Treasury has recently drafted a plan for inclusion in its fiscal year 2007 budget proposal for 

having attachés jointly funded by IA and the Office of Terrorism and Financial Intelligence. 

According to Treasury, this would allow for not only a greater number of financial attachés, 

but would also allow a greater focus on combating terrorist financing. 
Page 14 GAO-05-1010 Treasury Attachés

and to combat terrorist financing in the Middle East and elsewhere, 

describing these as major Treasury priorities and U.S. policy imperatives.

Treasury Has Begun to 

Formalize the Process 

for Determining 

Attaché Posts, but 

Budget Constraints 

Limit the Number of 

Attachés

Until recently, Treasury determined attaché placement through an informal 

process, according to Treasury officials. More recently, as it works with a

constrained budget, Treasury has taken steps to formalize its process by 

specifying placement criteria. However, Treasury officials stated that 

budgetary considerations have been the primary factor in determining the 

number of attachés in recent years, and projected rising costs are likely to 

constrain the number of attachés in the future.

In the Past, Treasury Used 

Informal Process to 

Determine Attaché Posts

The determination of attaché posts has been rather informal, according to 

Treasury officials, as Treasury has tried to respond to changing needs. 

These officials went on to say that, although less structured, this process 

still allowed Treasury to place attachés in posts where it had key priorities. 

For example, when the Argentine financial crisis occurred in late 2001, the 

financial attaché in Mexico City was moved to Buenos Aires in response to 

the emergency and changing priorities in Latin America. Treasury officials 

stated that IA management conducts much of the discussion surrounding 

attaché placement through informal e-mails and conversations. According 

to IA officials, they prefer to use an informal method because the process 

of opening or closing of attaché posts is sensitive for several reasons. First, 

the presence of an attaché in a country is considered indicative of the 

country’s relative importance to the United States and thus holds symbolic 

value. Second, financial attaché positions are highly coveted within 

Treasury, and officials told us that they use the possibility of attaining a 

financial attaché position as a recruiting tool. Furthermore, external 

stakeholders may express a particular interest in maintaining a certain 

financial attaché post. For example, the U.S. ambassador to the 

Organization for Economic Cooperation and Development (OECD) stated 

that maintaining a financial attaché position at the OECD, which Treasury 

closed in April 2005, supports a variety of U.S. interests. 

During the most recent cycle of determining attaché placement, Treasury 

officials reported considering the views of both external and internal 

stakeholders. The former included U.S. mission officials as well as the 

private sector, and the latter included office directors and Deputy Assistant 
Page 15 GAO-05-1010 Treasury Attachés

Secretaries (DAS). The private sector officials with whom we spoke, for 

example, made it known through various meetings with Treasury officials 

that they wanted a financial services expert on the ground in key financial 

market countries. These officials also support legislation to allow more 

flexible funding of financial attachés.10 In terms of internal stakeholders, 

figure 4 shows the organizational chart for IA and its location with respect 

to other Treasury offices. IA officials said that office directors made their 

preferences known to their respective DAS by way of narrowly distributed 

internal memorandums, rather than through a formal report or even a 

department-wide memorandum. Each DAS, in turn, sent his or her 

preferences via memorandum to the Under Secretary for International 

Affairs and to the Secretary. The Secretary of the Treasury makes the final 

decision on placing attachés. 

10See H.R. 3058, 109th Cong., 1st Sess., which would allow the Secretary of the Treasury to 

transfer funds from within Treasury accounts for any costs necessary to pay for both career 

and non-career Senior Executive Service positions and support staff in locations of 

economic strategic interests throughout the world. 
Page 16 GAO-05-1010 Treasury Attachés

Figure 4: Organizational Chart of Treasury Offices and the Office of International Affairs

Europe and Eurasia

Regional Functional

Western hemisphere

DAS

DAS Deputy Assistant Secretary

QPA Quantitative Policy Analysis

Sources: GAO and Department of the Treasury.

DAS DAS DAS DAS DAS

Africa

East Asia

Middle East

South and 

Southeast Asia

Trade

Investment

Trade finance

Debt

Development policy

Financing operations

Multilateral 

development banks

Banking and securities

International 

monetary policy

Technical

assistance

Chief of Staff

The Department of the Treasury (departmental offices)

Office of International Affairs

 

Deputy Secretary

Secretary

Deputy Chief 

of Staff

Executive

Secretary

Treasury Inspector General 

for Tax Administration

Inspector

General

Under Secretary for 

Domestic Finance Under Secretary for 

International Affairs

Assistant

Secretary 

(International Affairs)

Assistant Secretary

(International Affairs)

Under Secretary for 

International Affairs

Reconstruction QPA

Assistant

Secretary 

(Legislative

Affairs)

Assistant

Secretary 

(Public

Affairs)

Assistant

Secretary 

(Economic

Policy)

Treasurer

of the

United 

States

Assistant 

Secretary 

(Fiscal)

Assistant 

Secretary 

(Financial 

Institutions)

Assistant 

Secretary 

(Financial 

Markets)

Assistant 

Secretary 

(Terrorist

Financing)

Assistant 

Secretary 

(Intelligence 

and 

Analysis)

Assistant 

Secretary 

(Tax Policy)

Assistant 

Secretary 

(Management) 

and CFO

General 

Counsel
Page 17 GAO-05-1010 Treasury Attachés

Treasury Has Taken Steps to 

Formalize Some Aspects of 

the Process

Treasury has recently begun to take steps to formalize certain aspects of 

the process to determine attaché placement. As of June 2005, Treasury 

decided to formally review the necessity of financial attaché posts either 

every 2 years or upon the conclusion of the attaché’s term of service. 

Treasury officials reported that they have established criteria for 

determining priority posts for attaché placement (see fig. 5). These criteria 

include the following: 

• Whether the United States has major financial interest in the country, 

including regulatory issues and emerging markets;

• Whether there is significant U.S. military or political engagement such 

as in Iraq and Afghanistan;

• Whether the country is difficult to cover from Washington, D.C., due to 

time differences or language barriers; and

• Whether Treasury has a congressional mandate to place a financial 

attaché in a certain post.

These criteria, however, are not given equal weight, according to Treasury 

officials. For example, officials noted that Treasury would consider major 

U.S. financial interest in a country of more importance than whether a 

country is more difficult to cover from Washington, D.C. Furthermore, U.S. 

military and political engagement geared toward reconstruction efforts, as 

is the case in Afghanistan, tend to be shorter term. The relative importance 

of that criterion, therefore, may be temporary and eventually give way to 

other criteria. Irrespective of the process, however, Treasury officials noted 

that they continue to consider the IA’s overall budgetary resources and 

other IA priorities before determining priority posts for financial attaché 

placement. For example, although Russia is both an important source of 

energy for the United States and is a G-8 partner, Treasury plans to close 

the Moscow financial attaché post by the end of fiscal year 2005 because of 

budget constraints and also because this post is of lower priority compared 

with some other regions.
Page 18 GAO-05-1010 Treasury Attachés

Figure 5: Treasury’s Process and Criteria to Establish Financial Attaché Posts

To further formalize the process, IA defined the term of service for a 

financial attaché as per a memorandum signed by the Secretary of the 

Treasury in June 2005. According to this memorandum, an attaché can 

normally expect to serve at a post for a period of 2 years. In the past, some 

financial attachés have stayed at a post for 5 years or more. Treasury 

officials noted that limiting the term of attachés would allow IA to provide 

more employees the professional development opportunity afforded by the 

attaché position. Furthermore, rotating staff more often through financial 

attaché positions could be used as an incentive for employee retention. 

Rising Cost of Overseas 

Presence Constrain the 

Number of Financial 

Attaché Posts

Treasury’s overall IA budget has implications for the number of financial 

attaché posts it can maintain overseas. Specifically, a relatively constant IA 

budget, coupled with the increasing cost of maintaining attachés overseas, 

has forced Treasury to make trade-offs between the number of financial 

attachés and the number of IA staff at headquarters, according to Treasury 

Final 

decision

on options

• Budget

• Major U.S. financial interest including regulatory issues

• Significant U.S. military and political engagement 

• Geographical and/or linguistic constraints

• Congressional mandate 

External stakeholders:

• Private sector

• State Department

Internal stakeholders:

• Legislative Affairs Office

• Office directors

• Deputy Assistant Secretaries

Present options

Review options

Treasury 

Secretary

Officials at Treasury’s Office of 

International Affairs 

review and consolidate 

information Deputy Assistant 

Secretaries

CRITERIA to establish priority posts

PROCESS to establish posts

Source: GAO.

Informal process through e-mail and other communications
Page 19 GAO-05-1010 Treasury Attachés

officials. In addition, these officials said that the demands on IA resources 

have gone up considerably, while the overall staffing level of this office has 

been declining since at least 1981 (as shown in fig. 1). Treasury officials 

cited a study, conducted by a private company in 2002, that recommended a 

minimum IA staffing level of 220. Currently, however, this office has a 

staffing level of 175. Treasury officials noted that understaffing at 

headquarters has limited IA’s flexibility in reassigning staff to important 

areas and adopting a strategic approach. For example, there are three desk 

officers for Africa, and on average each desk officer covers 10 to 20 

countries. IA officials noted that it is difficult to cover so many countries 

effectively. Furthermore, one financial attaché also noted that IA may not 

be effectively using the information that attachés provide. 

Treasury officials said that they expect the cost of maintaining overseas 

posts to increase due to cost-sharing programs such as ICASS and CSCS. 

Hence, one of the trade-offs Treasury officials are considering is to reduce 

the number of attachés to two by fiscal year 2008. Although they are 

considering reducing the overall number of attaché posts, Treasury 

officials are planning to open new posts and close some existing ones in 

response to changing priorities. However, Treasury officials noted that 

closing some existing posts would significantly reduce their ability to carry 

out policy mandates in those regions. In at least one such proposed closure, 

Treasury expects both the host government and a U.S. private sector 

industry association to lobby strongly against the closure of the attaché 

office. State officials as well representatives from the industry association 

confirmed this response. 

Reducing the number of attaché positions, however, would allow Treasury 

to send staff from Washington overseas on temporary duty more often, 

according to Treasury officials, as the cost of sending an employee on 

temporary duty every 2 months would be less than half the cost of 

maintaining an attaché position. At the same time, Treasury officials noted 

that relying primarily on short-term travel rather than maintaining an 

attaché position overseas may not allow staff to develop the necessary 

contact and expertise in the given region. According to the OECD 

ambassador, a group of senior Treasury officials could travel for ministerial 

meetings, but the U.S. mission to the OECD needs a financial attaché 

weeks or months in advance to undertake the preparatory work leading up 

to those meetings. Two attachés with whom we spoke also expressed 

concerns about Treasury’s ability to fund more travel. Treasury officials in 

Washington noted that IA’s overall travel budget in fiscal year 2005 is 

capped internally at $1.2 million, and IA has noted other program priorities 
Page 20 GAO-05-1010 Treasury Attachés

for which funds saved from attaché post closures would be used. These 

other priorities include more engagement with key emerging markets in 

Asia and focusing on economic development initiatives in the Middle East, 

by hiring economists at headquarters that focus on these regions and 

issues. Given these other IA priorities, according to Treasury officials, 

travel fund limits may further restrict the attaché functions that could be 

undertaken by staff in Washington. 

Agency Comments and 

Our Evaluation

We provided a draft of this report to the Departments of the Treasury and 

State. Treasury considered our report to be fair and accurate. Both 

Treasury and State provided technical comments, which we have 

incorporated where appropriate.

We are sending copies of this report to the Secretaries of the Treasury and 

State, and interested congressional committees. We will make copies 

available to other interested parties upon request. In addition, this report 

will be available on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-4347 or yagerl@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix III.

Loren Yager

Director, International Affairs and Trade
Page 21 GAO-05-1010 Treasury Attachés

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

To explain the role of financial attachés, we interviewed officials at the 

Department of the Treasury’s (Treasury) Office of International Affairs (IA) 

in Washington, D.C., as well as contacted all five current financial attachés 

posted overseas. In addition, we interviewed three former financial 

attachés who recently returned to Washington. We reviewed position 

descriptions and other Treasury documents on financial attachés. Treasury 

officials provided us with data on the number of total IA staff from 1981 to 

2005 and the number of attachés from 1985 to 2001. Treasury was not able 

to provide precise figures for attachés prior to 1985 but did give us an 

estimate for the number of attachés in 1981. We did not assess the 

reliability of these data because we used them as background to our 

researchable objectives. In addition, since Treasury officials could not 

provide accurate locations prior to fiscal year 2002, we are unable to 

authoritatively comment on how changes in attaché posts have paralleled 

Treasury’s changing priorities or lack thereof. Furthermore, we interviewed 

officials from the Department of State (State), as well as obtained 

information from officials in four U.S. missions, of which three have 

financial attachés, to assess the role of financial attachés within the 

context of U.S. missions and understand how the State Economic Section 

of U.S. missions either works with financial attachés or substitutes for 

them in locations that lack a financial attaché. Due to time constraints, we 

could only contact State officials in five posts, including one post where 

there is not a financial attaché. As a result, we are unable to 

comprehensively describe the extent to which State Economic Sections 

currently fulfill the financial attaché role in U.S. missions that lack a 

financial attaché. 

To document the financial attaché placement process, we interviewed 

officials from IA and reviewed relevant memorandums and documents. To 

understand how resource requirements and budgetary considerations 

affect attaché placement decisions, we reviewed various planning, cost, 

and budget-related documents provided by Treasury. To assess the 

reliability of the cost data, we considered the specific expense categories 

for reasonableness, and compared the categories to other sources of data 

when that was possible. However, we were unable to determine fully the 

reliability of the cost data due to time constraints. We are using these data 

to provide details into Treasury's position about the high costs of 

maintaining attaches overseas. No conclusions rely upon these data. To 

obtain the perspective of the private sector on the financial attaché 

placement and role, we interviewed officials from the Securities Industry 

Association. We also interviewed the U.S. ambassador to the Organization 

for Economic Cooperation and Development, where Treasury recently 
Appendix I

Objectives, Scope, and Methodology

Page 22 GAO-05-1010 Treasury Attachés

closed an attaché post. Additionally, due to time constraints and the scope 

of this engagement, we did not undertake any travel to relevant financial 

attaché posts. We conducted our work in Washington, D.C., from June 2005 

to August 2005 in accordance with generally accepted government auditing 

standards. 
Page 23 GAO-05-1010 Treasury Attachés

Appendix II

Comparison of Financial Attachés and 

Technical Advisors ApendxiI

While some financial attachés have served in the capacity of technical 

advisors with Treasury’s Office of Technical Assistance, and other attachés, 

specifically those in Afghanistan and Iraq, see their role as guiding and 

coordinating the efforts of technical advisors, the role of a financial attaché 

differs in some key respects from a technical advisor, as summarized in 

table 1 below:

Table 1: Key Differences between Treasury’s Financial Attaché vs. Technical Advisor

Source: Based on information provided by Treasury officials.

Financial attaché Technical advisor

Primarily engaged in broad policy functions relating to economic 

and financial issues, such as influencing host country policies and 

regulations, as well as helping shape U.S. economic policy; relies 

on networks of contacts within key host country institutions

Advises other governments on specific issues such as pension 

reforms, money-laundering, etc.

Advocates U.S. interests and policies Does not engage in advocacy of U.S. interests 

Tends to work closely and is colocated with U.S. embassy officials, 

especially in the Economic Section

Tends to be located in host country institutions, such as the Ministry 

of Finance, administering technical advice

Primarily stationed in areas where the United States has significant 

economic and financial interest

Not necessarily in locations where the United States has the 

greatest financial interests

In the past, some financial attachés have stayed at a post for 5 

years or more (new policy would make a typical posting for a 2-year 

term)

Duration of assignments range from months to several years
Page 24 GAO-05-1010 Treasury Attachés

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Loren Yager, (202) 512-4347

Staff 

Acknowledgments

In addition, Anthony Moran, Assistant Director, as well as Judith Williams, 

Mona Sehgal, and Ernie Jackson made key contributions to this report.

(320354)
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