United States General Accounting Office

GAO Report to the Chairman, Committee on

Government Reform and Oversight,

House of Representatives

March 1996 STATE DEPARTMENT

Actions Needed to

Improve Embassy

Management

G O A

years

1921 - 1996

GAO/NSIAD-96-1

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-266136 

March 12, 1996

The Honorable William F. Clinger, Jr.

Chairman, Committee on Government Reform

 and Oversight

House of Representatives

Dear Mr. Chairman:

As requested by the former Chairman, House Committee on Government

Operations, we have assessed the State Department’s efforts to improve

the management of its overseas posts. Specifically, we reviewed State’s

actions to implement the recommendations made in our July 1993

testimony and your Committee’s November 1993 report.1

 We also

identified management practices that could be used to improve operations

at other embassies.

Background The State Department operates over 160 embassies and over 

100 consulates at a cost of about $2 billion annually. The embassies

perform diplomatic and consular functions and provide administrative

support for other U.S. agencies. State employs over 7,300 U.S. Foreign

Service officers, about 10,000 Foreign Service nationals, 650 U.S.

contractors, and 30,000 Foreign Service national contractors. Worldwide,

embassies manage about $600 million worth of personal property, procure

about $500 million in goods and services annually, and share management

responsibilities for about $12 billion in housing and other real properties.

Embassies also have responsibility for over $2 million annually in

accounts receivable, such as medical expenses.

For decades, long-standing management deficiencies have weakened

administrative operations at the embassies, and millions of dollars

remained unnecessarily vulnerable to fraud, waste, and abuse. We have

previously criticized State’s deficient controls over embassies’ personal

and real property, cashiering operations, contract administration, and

training. In July 1993, we testified that management deficiencies continued

to plague embassies’ operations. We suggested that each embassy

establish a formal management improvement program to ensure sound

management practices by documenting problems and monitoring

corrective actions.

1

Widespread Management Weaknesses at Overseas Embassies (GAO/T-NSIAD-93 –17, July 13,

1993) and State Department Mismanagement of Overseas Embassies: Corrective Actions Long

Overdue, House Committee on Government Operations, November 22, 1993.

Page 1 GAO/NSIAD-96-1 State Department
B-266136 

For years, Congress has been concerned about State’s reluctance to

address management and internal control problems that have historically

reduced the effectiveness of its operations. In its November 1993 report,

the House Committee on Government Operations stated that State should

implement our recommendation that each embassy adopt a formal

management improvement plan. On the basis of prior reviews by us and

State’s Office of the Inspector General (OIG), the Committee also

recommended that State (1) strengthen controls over personal property,

(2) ensure that appropriate training is available for U.S. and foreign service

national personnel, (3) implement contracting and procurement

improvements, (4) eliminate control problems in cashiering functions, and

(5) develop systems to track and collect medical insurance

reimbursements.

Results in Brief State has not implemented our suggestion, conveyed in testimony and

endorsed by Congress, that each post establish a proactive management

improvement program, nor has it fully implemented the Committee’s

recommendations. State did take some actions to improve embassy

management controls. These actions included providing additional

embassy guidance and oversight in safeguarding resources and revising

the overseas risk assessment questionnaire—a tool designed for posts to

identify management weaknesses. However, these initiatives were

inconsistently implemented at embassies we visited. Thus, long-standing

management deficiencies continue to reduce the efficiency and

effectiveness of many embassies’ operations.

By contrast, three embassies (Ankara, Turkey; Dhaka, Bangladesh; and

Tunis, Tunisia) have initiated management practices to improve

administrative operations. These practices, which include tracking

accounts receivables and automating travel vouchers, strengthened

internal controls, improved compliance with regulations, reduced costs,

and enhanced the efficiency and effectiveness of operations. In addition,

these embassies were markedly distinguished from other posts we visited

by the active involvement of senior management and use of existing

reporting mechanisms, such as the certification of internal controls, the

Mission Program Plan, and the revised risk assessment questionnaire, to

routinely document administrative problems and corrective actions taken.

These management practices could be replicated at other embassies.

Page 2 GAO/NSIAD-96-1 State Department
B-266136 

State Has Not Fully

Implemented

Recommendations

State has not implemented our suggestion that all posts establish formal

management improvement programs to identify and correct deficiencies.

State officials believe that their approach of targeting specific areas for

improvement is more appropriate and achieves comparable results in the

long term. We continue to believe that if State were to use existing

mechanisms for managing embassy operations, such as the Mission

Program Plan, it could more quickly and easily achieve the intent of our

1993 recommendation. (See app. I.)

State has responded to recommendations contained in the House

Committee on Government Operations’ report by initiating some specific

actions designed to improve its management over embassy operations.

These actions, although steps in the right direction, do not go far enough

to ensure that each embassy is improving its operations. We and the

State’s OIG continue to find deficiencies in (1) controlling personal

property; (2) training for U.S. and foreign service national personnel;

(3) contracting and procurement practices; (4) poor controls over

cashiering functions; (5) medical insurance reimbursements; and

(6) senior-level oversight of operations.

Controls Over Personal

Property

In November 1993, the House Committee on Government Operations

recommended that the State Department take the following actions to

strengthen controls over personal property:

• establish more stringent procedures and guidance for receiving and

issuing personal property overseas;

• improve the nonexpendable property application software to enhance

reconciliation capability;

• provide increased and specialized training for Foreign Service officers and

nationals;

• revise volume 6 of the Foreign Affairs Manual to require property officers

to retain inventory records and other pertinent documentation in post files

for 3 years; and

• adopt a zero-tolerance policy with respect to personal property losses.

In July 1993, before the Committee’s report, State updated volume 6 of the

Foreign Affairs Manual to include revised personal property regulations

for all diplomatic and consular posts. This updated guidance incorporated

changes in assigned responsibilities and federal regulations. The revised

regulations also clarified accountability criteria for ensuring internal

controls. On the basis of the new regulations, State’s Property

Page 3 GAO/NSIAD-96-1 State Department
B-266136 

Management Branch, which is responsible for central oversight for

domestic and overseas personal property management, issued an

instruction handbook that was intended to be an easy reference for posts

to ensure compliance with management of personal property overseas.

However, branch officials acknowledged that a number of posts were still

not in compliance. During fiscal year 1994, branch staff visited 20 of the

260 posts to verify their annual inventory certification. Branch officials

said that 14 posts failed to provide documentation that physical

inventories were conducted.2

 Although posts that do not provide inventory

certifications can be subject to a withholding of funds for personal

property acquisitions, and individuals that either refused to certify or

falsely certified inventories can be subject to punitive actions, we found

no instances in which money was withheld or individuals were sanctioned

for not following property management procedures.

According to State, it has a zero tolerance policy on personal property

loses for fraudulent behavior, but it does not believe it to be in the

taxpayers’ interest to pursue small shortages; therefore, in November 1993,

it adopted a 1-percent tolerance. State adopted this policy because the

1-percent level is commensurate with that of private industry and State

officials believed that the cost to pursue shortages of less than 1-percent

would outweigh any benefits. State officials said they required posts to

submit to headquarters the amount of losses incurred in fiscal year 1994.

Of the 160 posts that submitted such information, only 15 exceeded the

1-percent level.

In 1989, to improve property management and accountability, State

integrated an inventory reconciliation software package with its

non-expendable property application (NEPA) software at about 210 of the

overseas posts. State is testing a new application of NEPA, but it has not yet

determined how NEPA and other subsidiary systems will function with the

planned Integrated Financial Management System.3

 In August 1994, we

reported that this system was at a high risk of failure because of State’s

inadequate management and planning and therefore might not solve

long-standing financial management and internal control problems.4

2

In commenting on a draft of this report, State reported that 12 of the 14 posts had subsequently

submitted the required inventory certification.

3

This system is intended to be a single integrated accounting system that links State’s worldwide

operations and provides managers at all levels with reliable financial information to plan and conduct

operations.

4

Financial Management: State’s Systems Planning Needs to Focus on Correcting Long-Standing

Problems (GAO/AIMD-94-41, Aug. 12, 1994).

Page 4 GAO/NSIAD-96-1 State Department
B-266136 

Training for U.S. and

Foreign Service National

Personnel

The Committee recommended that State train both U.S. Foreign Service

officers and Foreign Service national employees in the areas of

procurement and acquisition, real property management and maintenance,

personal property, and budget and fiscal responsibilities. State’s training

arm—The Foreign Service Institute—offers training in most of these areas.

State acknowledged that, in some cases, Foreign Service officers report to

posts without such training. And, according to the Director of the Office of

Foreign Service National Personnel, training Foreign Service nationals is

not a priority because of the high costs involved in bringing Foreign

Service nationals to Washington, D.C.

Although State says it has focused on increasing its regional training of

Foreign Service nationals, those we interviewed said that training was still

limited, often not timely, and generally not offered in their native language.

Of the seven posts we visited, only Paris had formal training programs that

identified or provided opportunities for the training requirements of

Foreign Service nationals or officers.

State is exploring ways to increase the role of Foreign Service nationals in

administrative operations overseas. However, the Foreign Service Institute

does not have a formal plan in place to ensure that Foreign Service

nationals receive adequate training. Transferring more responsibility to

Foreign Service nationals without proper training is likely to weaken

compliance with internal controls.

Contracting and

Procurement Practices

In 1993, the Committee recommended a number of actions to improve

contracting and procurement practices. These included (1) requiring

training for all Foreign Service officers and Foreign Service nationals

responsible for contracting and procurement, (2) developing and

implementing a procurement management information system that

includes overseas procurement operations, (3) requiring each post to fully

implement the worldwide procurement data system and provide each with

appropriate software, (4) requiring each post to appoint a competition

advocate and establish a competition advocacy program, and (5) requiring

posts to develop advance acquisition plans each fiscal year.

To address the need for procurement training, State established new

training requirements for contracting officers, including training seminars

for about 100 employees at seven regional centers. However, only 150 of

the 700 officers overseas have received required training for standard

contracting authority up to $250,000. The rest of State’s overseas

Page 5 GAO/NSIAD-96-1 State Department
B-266136 

contracting officers have provisional contracting authority up to $100,000.5

Procurement officials estimate that it will take many years before all of

these officers complete their training. In addition, some Foreign Service

nationals responsible for maintaining contracting files indicated that they

were not adequately trained. For example, one Foreign Service national

told us she had been involved in procurement actions for 6 years before

receiving formal training.

State developed a worldwide procurement database to meet the minimum

legal and regulatory overseas procurement reporting requirements. This

database is currently in use at 193 (or 73 percent) of the 265 overseas

posts. This database, however, only reports the number and types of

contract actions. It is not used to manage, monitor, or ensure control over

embassy procurement operations.

Most of the posts we visited had not established a competition advocacy

program called for by the Committee. The lack of such a program

contributed to the failure of some posts to fully compete or review their

contract actions and prepare and maintain required documentation. None

of the posts had a written policy to advertise solicitations or had evidence

that solicitations were authorized. Also, most posts did not maintain a

current vendor list, and therefore, could not be assured that all potential

sources had been solicited.

Several of the embassy officials we met with said they had not received or

could not locate headquarters’ guidance stipulating the need of advance

acquisition planning. In addition, none of the officials had developed an

advance acquisition plan ranking essential procurements.

Controls Over Cashiering

Functions

Embassy cashiers are responsible for the day-to-day payment, collection,

deposit, and reconciliation of funds advanced by regional disbursement

centers. Cashiering operations are supervised by U.S. disbursing officers

located at those centers.

To improve controls over cashiering, in 1993, the Committee

recommended that State

• fully fund the implementation of a worldwide standardized and integrated

financial management system,

5

State instituted a program in October 1992 that grants contracting officers with provisional

contracting authority up to $100,000. Once training is completed, the officer is granted authority up to

$250,000.

Page 6 GAO/NSIAD-96-1 State Department
B-266136 

• adopt standardized accounting systems,

• increase monitoring and oversight of overseas cashiering operations,

• improve oversight of U.S. disbursing officers operations to ensure that

transactions and accounts are properly recorded and reconciled, and

• require all posts to train staff in safeguards and procedures to prevent

theft or misuse of official funds.

State has not fully implemented the computerized Integrated Financial

Management System;6

 therefore, controls over cashiering continue to be

manual and dependent on noncompliant financial systems in the majority

of overseas posts. Although reconciliations are required monthly at

overseas post, only about one-third of embassies’ cashiering operations

are currently reviewed each year by external review teams from the State’s

Financial Service Centers. Headquarters officials said that losses have

been minimal, but acknowledged that major problems could occur.

To gain control over disbursing operations overseas, State has centralized

18 of 19 disbursing operations with its 3 regional administrative

management centers and plans to relocate the 1 remaining operation

(Brasilia). State’s Deputy Chief Financial Officer and Deputy Assistant

Secretary for Finance initiated this action to improve oversight and

management controls over disbursing.

State also created the Office of Overseas Financial Management and

Oversight under the Chief Financial Officer. However, officials from this

office said that fiscal irregularities were continuing due to (1) the lack of

trained U.S. Foreign Service officers and nationals on cashiering practices,

(2) negligence, and (3) malfeasance.

To address the Committee’s recommendation to train staff on financial

controls, in June 1994, at the Regional Administrative Management Center

in Mexico City, State trained about 40 budget and fiscal officers and

40 supervisory Foreign Service nationals from the posts in Mexico on

safeguards and procedures to prevent theft or misuse of funds. However,

State officials said more regional training was needed for the hundreds of

Foreign Service nationals supporting State’s budget and fiscal operations

overseas.

6

The Integrated Financial Management System is intended to be a single integrated accounting system

that links State’s worldwide operations and provides managers with reliable financial information to

plan and conduct operations. We reported in 1994 that this system ran a high risk of failure because

State’s management and planning has been inadequate.

Page 7 GAO/NSIAD-96-1 State Department
B-266136 

Medical Insurance

Reimbursements

In 1993, the Committee recommended that State (1) develop and

implement systems that identify and report on overseas medical expenses

paid, claims filed, and amounts reimbursed to the government and

(2) require all Foreign Service officers serving overseas to carry private

medical insurance. State’s Office of Medical Services now assigns an

obligation number for each medical claim and authorizes payment by the

overseas posts. The embassy notifies the office of each payment, and an

accounts receivable and corresponding billing documents are then

established in the Central Financial Management System. These actions

resulted in collections of over $1 million in fiscal year 1994, including

funds owed since 1991. According to a Medical Services official, the

collection system applies to State employees only. It does not cover

employees of other agencies that may receive medical services overseas.

Although State still does not require Foreign Service officers to have

private medical insurance before they are assigned overseas, it has

stopped paying claims for hospitalization of those without insurance with

the exception of the hospital admission charge, which must be promptly

reimbursed.

Senior-Level Oversight of

Operations

In 1993, the Committee called for increased oversight of operations by

senior officials both in Washington and at the embassies. State officials

acknowledged that a greater emphasis should be placed on management

controls, and that commitment and support should come from the top. To

enhance senior managers’ commitment at posts, State has introduced a

number of actions intended to address the managers’ systemic disregard

for sound management practices and establish accountability for carrying

out headquarter’s requirements. For example, State now emphasizes the

importance of management controls and responsibility for those controls

to newly appointed ambassadors during preassignment briefings and in

the Secretary’s Chief of Mission Authority Letter. The Chiefs of Mission are

required to develop a Mission Program Plan that will form the basis for the

missions’ major activities and resource allocations and have the plan

approved by the Assistant Secretary of State. They are also required to

reduce mission costs whenever possible, implement sound management

controls to ensure that government resources are maximized and

protected, and certify annually that management controls are adequate.

Another action to increase senior-level attention to embassy management

included the addition of a management control segment to the training

course for new Deputy Chiefs of Mission. This segment defines

Page 8 GAO/NSIAD-96-1 State Department
B-266136 

management controls, emphasizes using the Mission Program Plan, and

encourages the use of the risk assessment questionnaire. In addition, the

risk assessment questionnaire was revised to include questions covering

the minimum controls necessary for facilities maintenance, contracting,

and medical reimbursements.

These initiatives were inconsistently applied at the posts we visited.

However, as discussed below, posts that employed sound management

practices had the active involvement of the Deputy Chief of Mission

serving as a Chief Operating Officer.

Some Embassies’

Management

Practices Have

Improved Operations

Some embassies have implemented practices on their own to improve

administrative operations. Practices, such as those we observed in Ankara,

Tunis, and Dhaka, could be used by other embassies to strengthen

management controls, reduce costs, foster accountability, and increase

compliance with applicable regulations.

Embassies in Ankara, Tunis, and Dhaka introduced operational

improvements to address and correct continuing deficiencies in the areas

of property management, training, contract administration, and cashiering.

For example, in Tunis and Ankara, setting performance targets for

inventory control and accountability resulted in more efficient property

utilization and reduced losses from theft. Cross-training programs for

Foreign Service nationals within the budget and finance offices in Tunis

and Ankara increased their supervisors’ flexibility to fill staffing gaps and

enhanced morale among their subordinates. In Tunis and Dhaka, the

implementation of internal control checklists for contract administration

ensured that their contracting and procurement operations were in

compliance with regulations. All three posts have developed systems for

tracking and collecting accounts receivables, which resulted in more

accountability, cost savings, and reduced vulnerabilities to fraud, waste,

and abuse. Table 1 summarizes the initiatives at these posts.

Page 9 GAO/NSIAD-96-1 State Department
B-266136 

Table 1: Initiatives That Contributed to Improving Administrative Operations

Initiative Administrative area Impact Embassy

Automated Travel Voucher Processing

System

Budget and fiscal Improved efficiency of embassy services.

Reduced processing time from 31.5 to 3

days.

Tunis, Tunisia

Cross training Budget and fiscal,

and sections of

general services

Increased skill level of Foreign Service

nationals, provided flexibility for managers,

and improved efficiency of operations.

Tunis, Tunisia, and

Ankara, Turkey

Performance targets Budget and fiscal Enabled Foreign Service nationals to know

expectations and time frames for their

completion. Increased efficiency and

effectiveness.

Ankara, Turkey, and

Tunis, Tunisia

Voucher recertification checklist Budget and fiscal Ensured compliance with regulations and

helped reduce vulnerability to fraud, waste,

and abuse.

Tunis, Tunisia

Unused Ticket Refund Systema Budget and fiscal Ensured compliance with regulations and

protected funds from waste. Resulted in

$13,000 savings in fiscal year 1994.

Tunis, Tunisia

In-house systems to track accounts

receivable and other collections

Budget and fiscal Ensured compliance with regulations and

helped ensure timely collection of U.S.

funds.

Tunis, Tunisia;

Ankara, Turkey; and

Dhaka, Bangladesh

Standard Operating Procedures Manuals Budget and fiscal,

and general services

Ensured compliance with regulations and

established consistent procedures.

Dhaka, Bangladesh;

Tunis, Tunisia; and

Ankara, Turkey

Checklist for guidance on solicitation of

contract bids

Contracting and

procurement

Ensured compliance with regulations. Tunis, Tunisia

Review of local utilities’ charges for

accuracy

General service

officers

Allowed posts to operate cost effectively

and reduce vulnerability of funds to fraud

and waste. Saved $116,000 in 1994.

Additional savings were expected in 1995.

Dhaka, Bangladesh

aAll posts are required by regulations to recoup funds on unused tickets. However, if posts do not

have systems in place to track these types of accounts receivable, U.S. funds may not be

adequately safeguarded against waste.

We discussed these practices with State Department officials in

Washington, D.C., and determined that the initiatives could be used to

improve operations at other posts, as applicable. They said that many of

these practices could be introduced by the post planning processes and

would greatly assist in their efforts to achieve real management reform of

embassy operations. As budget uncertainties continue, implementation of

these practices could provide overseas managers with more flexibility in

managing their operations.

Page 10 GAO/NSIAD-96-1 State Department
B-266136 

These posts had two other practices in common—the direct involvement

of senior officials in post’s operations and the use of existing management

tools to address deficiencies. These practices could also be replicated at

other embassies.

Direct Involvement of

Senior Officials

At embassies in Ankara, Tunis, and Dhaka, the Deputy Chiefs of Mission

and sometimes the Chiefs of Mission are directly involved in embassy

administration. The commitment of these officials to management was

demonstrated through regularly scheduled meetings to discuss

management issues, an open-door policy for the resolution of problems,

and daily reviews of management operations.

The Deputy Chiefs of Mission served as the Chief Operating Officer at all

three missions. These officials emphasize a zero-tolerance policy for

inadequate management controls. They use management reviews and

performance evaluations to hold section managers accountable for

adequate internal controls and corrections of management deficiencies. In

addition, the Deputy Chiefs of Mission regularly reinforce the importance

of internal controls to administrative staff through counseling, according

to embassy officials.

Embassy managers stressed the importance of senior management

involvement in the management of operations and said senior officials set

the tone for how well their administrative staff will manage embassy

operations. Reports by State’s OIG have documented the critical link

between the emphasis placed on internal controls by senior officials and

the attention given to the management issues throughout the embassy.

Use of Existing

Management Tools to

Address Weaknesses

Senior managers at embassies in Ankara, Tunis, and Dhaka have

successfully used existing, agencywide reporting requirements to address

and correct management deficiencies. These include the Mission Program

Plan, risk assessment questionnaire, and certification of internal controls.

Mission Program Plan In 1990, the mission program planning process began. The Mission

Program Plan is a long-range planning document that is updated annually

to address the objectives of the mission and the resources needed to fulfill

those objectives. It addresses all areas of embassy operations, including

administrative operations. According to State guidance, the plan should

include milestones for critical progress points and completion of action.

The plan also has a performance and evaluation component.

Page 11 GAO/NSIAD-96-1 State Department
B-266136 

The Mission Program Plans for the embassies in Ankara, Dhaka, and Tunis

all incorporated detailed statements of objectives and responsibilities

within the administrative section, which helped management focus

attention on identifying problems and developing corrective action plans.

For example, in Ankara the Mission Program Plan establishes time frames

for the correction of management deficiencies, and identifies offices that

are accountable for the corrections. According to officials in the Office of

Management and Planning, State is encouraging the posts to use this

mechanism to address management weaknesses and increase

accountability by tying resource allocations to objectives of the plan (see

app.I). While there are few posts that currently do this, our review

indicates that using the Mission Program Plan to address deficiencies

would be consistent with our recommendation that each post establish a

proactive management improvement plan.

Risk Assessment Questionnaire The risk assessment questionnaire identifies internal control weaknesses.

State’s policy requires posts to complete these questionnaires just before

an inspection by the OIG, which usually occurs every 4 to 5 years. However,

to help ensure adequate internal controls at the posts, State sent a

February 1994 cable to all overseas posts that encouraged them to use the

risk assessment questionnaire as frequently as local conditions warrant.

The embassies at Ankara, Dhaka, and Tunis have used the risk assessment

questionnaire at least once a year to assess administrative weaknesses.

The questionnaires have provided input for the planning process and

served as a foundation for the annual certification of internal controls.

These posts also used the questionnaire to link management controls to

goals and objectives in the Mission Program Plan. For example, in Ankara,

administrative officers developed detailed corrective action plans,

including milestones, based on the results of their questionnaires.

Officials at these posts agreed that the questionnaire was an excellent

management tool for identifying potential problems and that it can be

completed with minimal effort. Officials in Washington asserted that all

embassies should use the questionnaire on a more frequent basis. Officials

in the Office of Finance and Management Policy said they encourage posts

to use the questionnaire as a self-assessment management tool and find

that posts that are concerned about management use the questionnaire

annually, and posts less concerned about management only use the

questionnaires prior to an inspection.

Page 12 GAO/NSIAD-96-1 State Department
B-266136 

Certification of Internal

Controls

The Chiefs of Mission are required by the Secretary of State to certify the

adequacy of management controls each year. These certifications are to

aid the Secretary of State in preparing the annual report required by the

Federal Managers’ Financial Integrity Act. The mission chiefs at the

embassies in Ankara, Dhaka, and Tunis said they did not sign their

certifications until they were sure that spot checks had been conducted to

ensure the veracity of the certification. Officials in the other four posts we

visited did not use the questionnaire to validate their certifications and

their Chiefs of Mission relied solely on their administrative officer’s

opinion without conducting spot checks in certifying the posts’ internal

controls.

Recommendations We recommend that the Secretary of State expand the operational

improvements discussed in this report to a minimum of 50 other

embassies on a test basis to help improve operations. If the test

demonstrates the applicability of these improvements in a variety of posts,

the practices should be further expanded until the maximum benefits are

achieved.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, State Department officials stated

that improving the management of its overseas operations was a high

priority and that it would like to see the overseas posts use the practices

that we identified as a positive management tool in ways that make sense

for their particular circumstances and environments. State believes it

needs to provide overseas posts with information on the initiatives of

other posts, but it does not want to make the implementation of such

practices a requirement. We do not believe that relying on voluntary

adoption of these practices will produce the maximum benefits. The

management deficiencies have existed for decades. However, because our

findings were focused on only a few overseas posts, and State points out

that overseas posts operate in different environments, we have modified

our position from one that would require all posts to immediately

implement the recommended improvements. We believe that if State is

serious about trying to improve management of its overseas operations,

then out of its more than 260 posts, it should be willing to pilot test the

recommended actions at a minimum of 50 posts. If the pilot demonstrates

the applicability of these improvements in a variety of posts, then State

should continue to expand the use of these practices until the maximum

number of posts benefit.

Page 13 GAO/NSIAD-96-1 State Department
B-266136 

The Department of State’s comments are presented in their entirety in

appendix II along with our evaluation of them.

Scope and

Methodology

We interviewed State Department officials in Washington, D.C., who are

responsible for embassy management oversight, to assess actions taken by

State to improve the management of its overseas operations. We analyzed

documentation related to embassy management improvements provided

by functional managers and documented continuing management

deficiencies from State OIG reports. (See app. III for a listing of related GAO

and OIG reports.) In addition, we observed good embassy practices that

could be used at other embassies. We selected these embassies based on

(1) State OIG reports that identified good management practices at these

posts and (2) the recommendations of post management officers

responsible for embassy oversight. Overall, we reviewed operations at U.S.

embassies in Venezuela, Tunisia, France, Portugal, Turkey, Philippines,

and Bangladesh.

We performed our work from April 1994 to November 1995 in accordance

with generally accepted government auditing standards.

Please contact me at (202) 512-4128 if you or your staff have any questions

concerning this report. Major contributors to this report are listed in

appendix VI.

Sincerely yours,

Benjamin F. Nelson, Director

International Relations and Trade Issues

Page 14 GAO/NSIAD-96-1 State Department
Page 15 GAO/NSIAD-96-1 State Department
Contents

Letter 1

Appendix I 

Linking Resources

With State’s Planning

Process

18

A More Effective Post Planning Process Would Help

Institutionalize Management Improvement Efforts

18

Bureau Procedures Designed to Improve Planning Efforts 19

Appendix II 

Comments From the

Department of State

20

Appendix III 

Major Contributors to

This Report

29

Related GAO and OIG

Products

31

Table Table 1: Initiatives That Contributed to Improving Administrative

Operations

10

Abbreviations

MPP Mission Program Plans

NEPA non-expandable property application

OIG Office of the Inspector General

Page 16 GAO/NSIAD-96-1 State Department
Page 17 GAO/NSIAD-96-1 State Department
Appendix I 

Linking Resources With State’s Planning

Process

State’s primary means for linking foreign policy objectives and resources

is the program planning process. In a November 1994 cable to all

diplomatic and consular posts, the Under Secretary for Management

informed the Chiefs of Mission that the link between resources and the

mission program planning process was missing; consequently, budget

reductions were enacted without thought to the future. The Under

Secretary instructed mission management to develop a mission program

plan that reflects mission priorities in both policy and management areas,

actively involves all mission elements in its preparation, and serves as an

instrument for continuous management improvement.

A More Effective Post

Planning Process

Would Help

Institutionalize

Management

Improvement Efforts

State guidance to embassies for preparing the Mission Program Plans

(MPP) for fiscal years 1995 through 1999 attempts to build on previous

planning efforts and encourages posts to embrace MPP as a management

creed of continuous improvement to support the Department’s goal of

building an efficient organization. This guidance directs embassies to use

MPP as a tool to measure progress in achieving mission objectives,

including examining innovative and lower cost ways to deliver

administrative support. More importantly, State guidance instructs

embassy managers to document how they will address material weakness

in administrative areas when reducing administrative staff.

The structure of MPP supports a proactive management improvement

effort. MPP has an administrative section that reviews financial

management, cashiering, procurement, supplies, and warehousing. In

addition, MPP has a status of progress section that tracks progress on

administrative and other mission goals.

The Under Secretary for Management’s guidance encourages senior

managers to personally assist in the preparation and implementation of the

plan by (1) objectively measuring or validating results and adjusting

performance through a regular, systematic process; (2) providing personal

leadership and involvement; and (3) holding others accountable on a

regular basis. Senior officials are also directed to establish incentives to

help institutionalize the use of MPPs. To fully achieve these goals, recent

headquarters actions have attempted to link embassy staff work

requirements to mission program plans. One of these actions was to

require that objectives of MPP be reflected in work requirements

statements so that performance can be linked to the successful

achievement of MPP goals. Assistant secretaries are also instructed to

evaluate the performance of Chiefs of Missions based on the successful

Page 18 GAO/NSIAD-96-1 State Department
Appendix I 

Linking Resources With State’s Planning

Process

achievement of MPP objectives and their diligence in evaluating

subordinates’ performance against MPP objectives.

Bureau Procedures

Designed to Improve

Planning Efforts

To assist posts in using MPP to manage resources, the Under Secretary for

Management issued 5-year staffing and funding levels for each geographic

bureau. Bureaus use MPPs to review current resource deployments against

policy priorities and determine the optimal match of resources and post

needs. Both the Bureau of Diplomatic Security and the Bureau of

International Organization Affairs have established exemplary bureau

planning processes.

The Bureau of Diplomatic Security initiated an operational planning

system in fiscal year 1987 to establish specific goals and monitor progress

in security programs receiving funds from the Supplementary Diplomatic

Security budget. This effort has become known as the Milestone Program.

The program, which is administrated by the Bureau’s Office of Policy,

Planning, and Budget, expanded in fiscal year 1988 to include all bureau

programs. The Milestone Program applies management-by-objectives

criteria to the security programs managed by the Bureau. Elements of the

program include:

• meeting monthly to discuss program performance, problems, and

modifications and revise milestones for the next cycle;

• tracking activities to specific program objectives;

• establishing performance measurements to keep programs in compliance;

• tying financial information to program milestones and continually

analyzing ways to contain costs and streamline activities; and

• fully integrating the Bureau’s planning process with its milestones.

Likewise, the Bureau of International Organization Affairs’ Internal

Controls Plan uses a management-by-objective process that links foreign

policy and management priorities to resource allocations. According to

Bureau officials, this plan allows the Bureau to identify internal control

weaknesses and better allocate resources. Program planning officials

believe elements of these programs can significantly improve planning

efforts at other bureaus.

Page 19 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 20 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

See comment 1.

See comment 1.

See comment 1.

See comment 2.

Page 21 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

See comment 2.

See comment 2.

Page 22 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

See comment 2.

See comment 2.

Page 23 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

See comment 3.

Page 24 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

See comment 4.

See comment 5.

See comment 6.

Page 25 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

See comment 7.

See comment 8.

Page 26 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

The following are GAO’s comments on the Department of State’s letter

dated November 8, 1995.

GAO’s Comments 1.We have modified our report by stating that branch officials said that 

14 of the 20 posts visited failed to provide documentation that physical

inventories were conducted. We also footnoted that 12 of the posts

subsequently submitted the required certification at a later date.

2.We have modified the report in line with the comment.

3.We agree that a single automated system for processing travel vouchers

is needed. However, replication of individual post systems that work could

be beneficial to other posts until State is able to implement a uniform

system for vouchers processed overseas.

4.Standardized procedures for tracking accounts receivable and other

collections have long been needed in State. However, we believe that until

standard procedures are implemented, application of automated systems

used at individual posts would prove useful.

5.We did not recommend that State centrally develop manuals for all

posts. However, State’s endorsement of standard operating procedures

manuals for each post could encourage individual posts to develop

manuals consistent with their individual needs and conditions.

6.Although State described this practice as a standard procedure, our

review indicated that only a few posts were actually performing this

internal control procedure.

7.Completion of the risk assessment questionnaire annually by the posts

would optimize the use of this document, which has been endorsed by the

State Department as an excellent management tool. We do not believe that

it is necessary for Washington to score and evaluate the questionnaires on

an annual basis. Instead, the posts could use and score their own

questionnaires for self-assessment purposes during the annual

certification process.

8.The Secretary of State’s endorsement of the use of best management

practices throughout State’s overseas system, where applicable, would

help demonstrate a commitment from the top to improve management at

the overseas posts. It would also encourage the use of best practices, such

Page 27 GAO/NSIAD-96-1 State Department
Appendix II 

Comments From the Department of State

as automated travel voucher and accounts receivable tracking system, on

a greater scale until agencywide systems are available.

Page 28 GAO/NSIAD-96-1 State Department
Appendix III 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Diana Glod

John Townes

Janine Cantin

Steven Schamberger

Dennis Richards

Dan Tikvart

Karen Blum

Page 29 GAO/NSIAD-96-1 State Department
Appendix III 

Major Contributors to This Report

Page 30 GAO/NSIAD-96-1 State Department
Related GAO and OIG Products

GAO Products Internal Controls: State’s Controls Over Personal Property Management

Are Inadequate (GAO/NSIAD-87-156, June 10, 1987).

Embassy Contracting: State Department Efforts to Terminate Employee

Association Contracts (GAO/NSIAD-88-85, Feb. 16, 1988).

Overseas Support: Current U.S. Administrative Support System Is Too

Complicated (GAO/NSIAD-88-84, Mar. 25, 1988).

State Department: Status of Actions to Improve Overseas Procurement

(GAO/NSIAD-92-24, Oct. 25, 1991).

State Department: Need to Ensure Recovery of Overseas Medical

Expenses (GAO/NSIAD-92-277, Aug. 7, 1992).

Financial Management: Serious Deficiencies in State’s Financial Systems

Require Sustained Attention (GAO/AFMD-93-9 Nov. 13, 1992).

High-Risk Series: Management of Overseas Real Property (GAO/HR-93-15,

Dec. 1992).

State Department: Management Weaknesses at the U.S. Embassy in

Mexico City, Mexico (GAO/NSIAD-93-88, Feb. 8, 1993).

State Department: Management Weaknesses at the U.S. Embassies in

Panama, Barbados, and Grenada (GAO/NSIAD-93-190, July 9, 1993).

State Department: Survey of Administrative Issues Affecting Embassies

(GAO/NSIAD-93-218, July 12, 1993).

State Department: Widespread Management Weaknesses at Overseas

Embassies (GAO/T-NSIAD-93-17, July 13, 1993).

Financial Management: State’s Systems Planning Needs to Focus on

Correcting Long-Standing Problems (GAO/AIMD-94-141, Aug. 12, 1994).

State Department: Additional Actions Needed to Improve Overseas Real

Property Management (GAO/NSIAD-95-128, May 15, 1995).

Page 31 GAO/NSIAD-96-1 State Department
Related GAO and OIG Products

OIG Products Financial Management Overseas, State Department Inspector General

Report (O-FM-008, Jan. 15, 1990).

Overseas Foreign Affairs Administrative Support Costs, State Department

Inspector General Report (1-FM-005, Dec. 20, 1990).

Overseas Procurement Programs, State Department Inspector General

Report (1-PP-004, Jan. 29, 1991).

Management Improvements in Embassy Cairo’s Administrative

Operations, State Department Inspector General Report (3-FM-003,

Jan. 12, 1993).

Report of Inspection, Embassy Paris, France (ISP/I-93-10, Mar. 1993).

Buildings Overseas-Maintenance and Repair, State Department Inspector

General Report (3-PP-014, Sept. 14, 1993).

Report of Inspection, Embassy Ankara, Turkey and its Constituent Posts

(ISP/I-94-02, Oct. 1993).

Recovery of Overseas Medical Expenses, State Department Inspector

General Report (4-SP-003, Feb. 9, 1994).

Report of Inspection, Embassy Tunis, Tunisia (ISP/I-94-20, Mar. 1994).

Management of Overseas Travel Services, State Department Inspector

General Report (4-SP-009, Feb. 22, 1994).

(711073) Page 32 GAO/NSIAD-96-1 State Department
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100