a

GAO

United States General Accounting Office

Report to the Ranking Minority Member, 

Committee on Foreign Relations, U.S. 

Senate

October 2002 CHEMICAL 

WEAPONS

Organization for the 

Prohibition of 

Chemical Weapons 

Needs Comprehensive 

Plan to Correct 

Budgeting Weaknesses

GAO-03-5
Since its establishment in 1997, the ability of the Organization for the

Prohibition of Chemical Weapons (OPCW) to carry out key inspection

functions has been hindered by inaccurate budget projections and, more

recently, budget deficits. The organization has consistently overestimated its

income and underestimated its expenses. Its budgets have recorded as

income nearly $1 million in unpaid assessments owed by 30 member states.

The budgets have also overestimated reimbursement payments for

inspections conducted in member states with chemical weapons–related

facilities. As of June 2002, these states owed the organization more than

$2 million. Furthermore, the budgets for 2000 through 2002 underestimated

personnel expenses.

The organization’s inaccurate income and spending estimates contributed to

a $2.8 million deficit in 2000 and a potential deficit of $5.2 million in 2002.

Weak budgeting practices and budget deficits have affected the

organization’s ability to perform inspection activities as mandated by the

Chemical Weapons Convention. The organization had to reduce the number

of inspections it conducted in 2001 and plans to reduce the number it

conducts in 2002.

OPCW Inspections, 1997ñ2002

0

50

100

150

200

250

300

350

1997 1998 1999 2000 2001 2002

Inspections planned

Inspections conducted

Notes: Inspections for 1997 did not begin until June.

Inspections in 2002 were conducted through June.

Source: GAO analysis of OPCW data.

Although the organization and the State Department have taken some steps

to address the budget problems, the organization has not developed a

comprehensive plan to overcome its inherent budgeting weaknesses. Unless

the organization improves its planning, budget shortfalls will continue to

affect its ability to conduct inspections.

CHEMICAL WEAPONS

Organization for the Prohibition of Chemical

Weapons Needs Comprehensive Plan to

Correct Budgeting Weaknesses

www.gao.gov/cgi-bin/getrpt?GAO-03-5.

To view the full report, including the scope

and methodology, click on the link above.

For more information, contact Joseph

Christoff at (202) 512-8979 or

christoffj@gao.gov.

Highlights of GAO-03-5, a report to the

Ranking Minority Member, Committee on

Foreign Relations, U.S. Senate

October 2002

The Organization for the

Prohibition of Chemical Weapons

is responsible for implementing the

Chemical Weapons Convention,

which bans the use of chemical

weapons and requires their

elimination. The United States and

other member states have raised

concerns that a number of

management weaknesses may

prevent the organization from

fulfilling its mandate.

As requested, GAO assessed the

accuracy of the organization’s

budgets and the impact of budget

shortfalls on program activities.

GAO also reviewed efforts to

improve the organization’s budget

planning.

To improve the current budgeting

practices of the organization, the

Secretary of State should (1) work

with the organization to develop a

comprehensive plan to improve

budget projections and income

collection, and (2) report annually

to Congress on the organization’s

progress in correcting its budgeting

weaknesses.

The State Department generally

concurred with GAO’s findings.

However, State disagreed with our

recommendation for annual reports

to Congress on the OPCW’s

progress. We believe, however, that

such a reporting requirement is

necessary to improve

congressional oversight of the

OPCW.
Page i GAO-03-5 Chemical Weapons

Contents

Letter 1

Results in Brief 2

Background 4

Budgets Not Based on Accurate Income and Expense Projections 5

Budget Shortfalls Resulted in Reduced Inspections and International 

Cooperation Activities 10

OPCW and State Department Have Taken Steps to Improve Budget 

Practices, but Problems Remain 13

Conclusions 15

Recommendations for Executive Action 16

Agency Comments and Our Evaluation 16

Appendixes

Appendix I: Scope and Methodology 19

Appendix II: Member States in Arrears of Contributions to the 

Organization for the Prohibition of Chemical Weapons (as of 

August 31, 2002) 21

Appendix III: Comments from the Department of State 23

GAO Comments 28

Appendix IV: GAO Contact and Staff Acknowledgments 31

GAO Contact 31

Acknowledgments 31

Table Table 1: Inspection Reimbursements Collected, 1997–2002 (as of

June 18, 2002) 7

Figure Figure 1: Planned and Conducted OPCW Inspections, 

1997–2002 11
Page 1 GAO-03-5 Chemical Weapons

United States General Accounting Office

Washington, D.C. 20548

A

October 24, 2002 Letr

The Honorable Jesse Helms

Ranking Minority Member

Committee on Foreign Relations

United States Senate

The Chemical Weapons Convention, which entered into force in April 1997, 

bans the development, production, acquisition, and use of chemical 

weapons by member states and requires the elimination of those states’

existing chemical weapons stocks. To implement these provisions, the 

convention established the Organization for the Prohibition of Chemical 

Weapons (OPCW). The organization’s primary functions are to verify the 

destruction of chemical weapons and their production facilities, conduct 

chemical industry inspections, and encourage international cooperation in 

the field of chemistry. A Technical Secretariat, headed by a DirectorGeneral, carries out the organization’s daily operations. The organization’s 

budget for calendar year 2002 is about $54 million.1

 The United States 

contributes about 22 percent of the organization’s assessed budget each 

year. Recently, the United States and other member states have raised 

concerns that the organization is not fulfilling its mandate because of a 

number of management weaknesses. Such concerns prompted the removal 

of the organization’s Director-General in April 2002.

You initially requested that we conduct a comprehensive management 

review of the organization to determine how it has implemented the 

convention. We could not fulfill the original scope of your request, however 

because officials at the Organization for the Prohibition of Chemical 

Weapons and the State Department limited our access during our visit to 

The Hague in May 2002. On the basis of the information that we could 

obtain, and as agreed with your staff, we assessed (1) the accuracy of the 

Secretariat’s budgets, (2) the impact of budget shortfalls on the 

organization’s inspection and international cooperation activities, and (3) 

the Secretariat’s and State Department’s efforts to improve the 

organization’s budget-planning practices. In conducting our work, we 

analyzed the organization’s program and budget documents and audited 

financial statements. We also reviewed financial regulations, annual 

reports, and reports prepared by the organization’s External Auditor, the 

1

In order to compare budget figures over time, all dollar figures used in this report are 

expressed in 2001 dollars. For more details on our methodology see appendix I.
Page 2 GAO-03-5 Chemical Weapons

Advisory Body on Administrative and Financial Matters, and the Office of 

Internal Oversight. In addition, we obtained information from State 

Department officials and member states’ representatives to the 

organization. (See app. I for details of our scope and methodology.)

Results in Brief Since the creation of the Organization for the Prohibition of Chemical 

Weapons in 1997, the Secretariat’s budgets have not been based on 

accurate projections of income and expenses. The organization’s budgets 

(like those of other international organizations) are based on the 

presumption that all member states will pay their assessments in full, and 

the budgets have therefore recorded as income nearly $1 million in unpaid 

assessments owed by 30 member states as of August 2002. In addition, the 

Secretariat has overestimated reimbursement income from inspections 

conducted in countries possessing chemical weapons and has not collected 

the inspection reimbursements in a timely manner. As of June 2002, 

member states with chemical weapons-related facilities owed the 

organization more than $2 million from inspections completed over the 

past 2 years; the United States owed more than $1.4 million. In addition, the 

budgets for 2000 through 2002 underestimated the organization’s personnel 

expenses. These collective problems contributed to a budget deficit of 

more than $2.8 million in 2000 and a potential budget deficit of more than 

$5.2 million in 2002, despite the organization’s plans to achieve a balanced 

budget during these years. Since 1998, the organization’s external auditor 

and financial advisory body have recommended changes to the 

organization’s budgeting process to address these problems. However, the 

organization has yet to fully implement their recommendations. 

Weak budgeting practices and budget deficits have affected the 

organization’s ability to perform its primary inspection and international 

cooperation activities. As a result of these problems, the Secretariat 

completed 200 of the 293 inspections planned for 2001. For 2002, the 

Secretariat plans to reduce the number of inspections to compensate for 

the projected deficit. The Secretariat also reduced funding for international 

cooperation and assistance activities and imposed a hiring freeze to offset 

its budget shortfalls. According to organization documents, the workload 

of the organization is expected to grow as the number of operational 

chemical weapons destruction facilities increases from 6 to 12 by 2006 and 

member states declare more industry facilities. According to the Deputy 

Director-General, the Secretariat may have to increase its budget by 50 

percent to support the growth in inspection activities, thus increasing 
Page 3 GAO-03-5 Chemical Weapons

budgetary pressures and the probability that it will request increased 

funding from member states. 

Although the Secretariat and the State Department have taken some 

preliminary steps to address budget problems, the Secretariat has yet to 

develop a comprehensive plan that will remedy the organization’s 

budgeting weaknesses. The Secretariat is creating a more accurate and 

timely invoicing process for inspection reimbursements. In developing its 

internal spending plans to implement the budget, the Secretariat has also 

begun to exclude the assessments of member states in arrears. 

Furthermore, the newly appointed Director-General has stated his 

commitment to address the organization’s financial difficulties by ensuring 

that adequate funding is available in the 2003 budget. The State Department 

paid for a budget consultant to assist the organization and is considering 

paying some inspection reimbursement costs in advance. However, the 

organization has not developed a comprehensive plan to help improve its 

projections of income and expenses and has not implemented 

recommendations made by its external auditor and financial advisory body 

to develop more accurate and realistic budgets. In addition, the Deputy 

Director-General and representatives of other member states stated that it 

is crucial for the United States, as the top contributor to the organization, 

to continue to play a leadership role in helping the organization address its 

budget-planning weaknesses. 

In this report, we are recommending that the Secretary of State work with 

the representatives of other member states and the newly appointed 

Director-General to develop a comprehensive plan to improve the 

organization’s budgeting process. In addition, we recommend that the 

Secretary of State annually report to Congress on the extent to which the 

organization is correcting its budgeting weaknesses and implementing the 

budget-related recommendations made by the organization’s oversight 

bodies.

The State Department, in commenting on our draft report, generally 

concurred with our findings that budgetary and financial problems have 

plagued the OPCW. With regard to our recommendation calling for a 

comprehensive plan to improve the organization’s budgeting process, the 

State Department agreed that no comprehensive plan exits. However, the 

Department noted that the OPCW is taking some steps to address its 

budget problems. The Department stated that it intends to monitor the

implementation of these steps and will pursue corrective action when 

necessary. The Department disagreed with our recommendation that the 
Page 4 GAO-03-5 Chemical Weapons

Secretary of State be required to report annually to Congress on how the 

OPCW is correcting its budget weaknesses, asserting that such a 

requirement would impose an administrative burden. We believe that such 

a reporting requirement would help improve congressional oversight of the 

OPCW and would not impose an undue burden on the State Department, 

since it already provides various reports to Congress on international 

organizations.

Background The Organization for the Prohibition of Chemical Weapons consists of 

three entities: the Conference of the States Parties, the Executive Council, 

and the Technical Secretariat. The Conference of the States Parties 

currently comprises 147 representatives, one from each member state, and 

oversees the implementation of the convention. The Executive Council, 

consisting of 41 representatives from regionally distributed member states, 

meets in sessions throughout the year to supervise the Secretariat’s 

activities. The Secretariat, headed by the Director-General, manages the 

organization’s daily operations, including implementing the inspection 

measures of the convention and preparing the organization’s annual 

budgets and reports. About 60 percent of the Secretariat’s authorized staff 

level of 507 employees engages in the inspection-related activities 

mandated under Articles IV, V, and VI of the convention. Specifically, to 

verify compliance with Article IV, the Secretariat inspects declared 

chemical weapons stocks and destruction facilities. To verify compliance 

with Article V, it inspects and monitors the destruction and conversion of 

chemical weapons production facilities. Under Article VI of the convention, 

the Secretariat inspects commercial production facilities. As of July 2002, 

the organization had conducted 1,210 inspections at the 5,066 declared 

chemical weapons sites and facilities that fall under the convention’s 

purview. 

The Secretariat supports member states in their efforts to implement the 

convention. It also encourages international cooperation and assistance 

among the member states as mandated by Articles X and XI of the 

convention. Under these provisions, the Secretariat is authorized to 

coordinate the provision of assistance to member states that are the 

victims of chemical attacks. The Secretariat also encourages economic and 

technological developments in the field of chemistry by encouraging trade 

and exchange of information among the member states.

The organization’s budget for calendar year 2002 is about $54 million. 

Funding for OPCW operations comes primarily from the 147 member 
Page 5 GAO-03-5 Chemical Weapons

states’ annual contributions, which are based on the United Nations scale 

of assessments. The other large source of funding is reimbursement 

payments for inspections conducted under Articles IV and V of the 

convention. As required by the convention, members states with chemical 

weapons related–facilities must reimburse the organization for its 

inspection costs related to the destruction of chemical weapons (Article 

IV) and the destruction of chemical weapons production facilities (Article 

V). The State Department reports annually to Congress on U.S. 

contributions to international organizations, including the OPCW.

In early 2002, the United States and other member states to the convention 

raised concerns that the organization was not fulfilling its mandate because 

of a number of management weaknesses. According to the United States, 

such weaknesses included mismanagement by the organization’s then 

Director-General, as well as his advocacy of inappropriate roles for the 

organization—such as attempting to interfere with United Nations 

weapons inspections in Iraq. To address these management concerns, the 

Conference of the States Parties voted to remove the former DirectorGeneral in April 2002. In July 2002, the Conference appointed a new 

Director-General. 

Budgets Not Based on 

Accurate Income and 

Expense Projections 

In its budgets, the Secretariat has not accurately projected income and 

expenses. The Secretariat has overestimated its income for two reasons. 

First, the budgets include as income the assessed contributions of member 

states that are in arrears, some of which have not paid their contributions 

since before 1997. Second, the Secretariat has difficulty predicting and 

collecting income from inspections conducted at chemical weapons–

related facilities. The budgets also include inaccurate expense projections. 

OPCW’s inaccurate income and expense estimates contributed to a budget 

deficit in 2000, and a potential deficit for 2002, despite plans to achieve 

balanced budgets in those years.

Budgets Based on 

Inaccurate Income 

Projections 

In developing its budget plans for the past 6 calendar years, the Secretariat 

has overestimated the amount of income it would receive from member 

states’ assessed contributions and from reimbursable expenses paid by 

member states for inspections at chemical weapons–related facilities. 
Page 6 GAO-03-5 Chemical Weapons

Income Projections Include 

Arrearages

When preparing its annual budgets, the Secretariat overestimates the 

income that it realistically expects to receive from member states’ annual 

assessments. The Chemical Weapons Convention requires all member 

states to pay their annual assessments or lose their voting privileges.2

 The 

Secretariat’s annual budgets, however, included as income the 

contributions due from 30 member states, even though these members had 

not paid their annual assessments for at least the 2 previous years. The 

cumulative total of arrearages over the past several years amounted to 

almost $1 million as of August 2002. (See app. II for more details.) This 

includes $781,883 from 16 member states that had not paid any of their 

assessed or other contributions since before the organization’s inception in 

1997.3

 An OPCW official stated that budgeting for arrearages presents a 

politically sensitive problem for the organization because excluding 

member states’ assessed contributions from the annual budgets would 

require approval from the Conference of the States Parties. 

In response to these budgeting problems, the organization’s Advisory Body 

on Administrative and Financial Matters4

 and its External Auditor5

recommended that the Secretariat improve its budgeting practices by 

developing more accurate and realistic budgets. For example, in 1998, the 

2

Under Article VIII of the convention, “a member of the Organization which is in arrears in 

the payment of its financial contribution to the Organization shall have no vote in the 

Organization if the amount of its arrears equals or exceeds the amount of the contribution 

due from it for the preceding two full years.” However, the Conference of the States Parties 

may allow a member to vote if it believes that the failure to pay is beyond the member state’s 

control.

3

The Preparatory Commission for the Organization for the Prohibition of Chemical Weapons 

preceded the creation of the OPCW in 1997 and carried out the initial implementation of the 

Chemical Weapons Convention. Under the Preparatory Commission, member states were 

assessed contributions to fund the commission’s expenses.

4

Article 15, Regulation 15.1, of the OPCW’s draft financial regulations gives the Executive 

Council the authority to “establish a body to advise it on administrative and financial 

matters. This body shall consist of experts of recognized standing from States Parties.” The 

duties of the Advisory Body of Administrative and Financial Matters include, among others, 

reporting on the OPCW’s draft program and budget, the audited financial statements, and 

the organization’s internal oversight reports.

5

Article 13, Regulation 13.1, of the OPCW’s financial regulations requires the appointment of 

an External Auditor for the organization who is also the Auditor-General (or an officer 

holding an equivalent title) of a member state. The Conference of the States Parties can 

appoint the auditor for 2 to 6 years. According to Regulation 13.3, the External Auditor’s 

duties include, among others, annual audits of the OPCW’s financial statements in 

accordance with the auditing standards promulgated by the International Organization of 

Supreme Audit Institutions. 
Page 7 GAO-03-5 Chemical Weapons

Advisory Body and the External Auditor stated that the Secretariat’s future 

budgets should be more realistic and accurate and based on the experience 

gained in the organization’s first year of operation. In 2000, the External 

Auditor recommended that income projections, which are used to establish 

expenditure targets, should be more realistic and based on reasonable and 

sound assumptions using past trends in the budget. The Secretariat has yet 

to act on these recommendations.

Budgets Overestimate Inspection 

Reimbursements 

As shown in table 1, every year since 1997, the budgets have overestimated 

the amount of money that the organization will invoice and receive each 

year for inspections conducted at chemical weapons–related facilities. 

Table 1: Inspection Reimbursements Collected, 1997–2002 (as of June 18, 2002)

Note: Invoices are through February 2002.

Source: GAO analysis of OPCW data.

As indicated by OPCW documents, the Secretariat often receives its 

reimbursements from those member states possessing chemical weapons–

related facilities late because these states usually do not pay the OPCW 

during the year that they receive the inspection invoices. Frequently, the 

organization does not receive payments until several years after issuing the 

invoices. According to State Department officials, the United States and 

Russia have not made payments, in many cases, until several years after 

receiving OPCW invoices, because both governments experienced 

difficulties in identifying a funding source and obtaining appropriations. 

These officials added that both governments are working to improve their 

reimbursement records during 2002. As of June 2002, those states 

possessing chemical weapons–related facilities, including the United 

States, owed OPCW more than $2 million in reimbursable inspection 

expenses from the previous 2 years. The United States accounts for $1.4 

million of the $2 million owed.

2001 dollars

1997—1998 1999 2000 2001 2002 Total

Estimated 

reimbursements $8,173,878 $6,588,251 $5,115,987 $3,580,163 $2,621,336 $26,079,615

Invoiced 

reimbursements 5,898,727 3,342,545 3,313,850 2,566,964 425,913 $15,547,999

Reimbursements 

collected (cumulative) 229,545 4,377,532 8,860,499 12,078,774 13,488,961 $13,488,961
Page 8 GAO-03-5 Chemical Weapons

It is difficult, however, for the Secretariat to estimate the number of 

inspections that will be conducted and therefore the amount of inspection 

reimbursement payments that can be collected from those states 

possessing chemical weapons–related facilities. According to State 

Department and OPCW officials, the Secretariat relies on states’

destruction plans to calculate the number of inspections the organization 

may conduct during the year. Chemical weapons possessor states cannot 

always accurately predict when their destruction facilities will become 

operational and what problems may arise once they do. Any change to the 

schedule of a destruction facility’s operations can affect the timing of 

OPCW inspections and thus affect the organization’s reimbursement 

estimates. In commenting on our draft report, the State Department stated 

that possessor states’ destruction plans have collectively overstated 

destruction activity, and consequently monitoring activity, by 30 percent or 

more. 

While it may be difficult for the Secretariat to estimate income from 

inspection reimbursements, the Secretariat does not issue the 

reimbursement invoices in a timely manner, according to State Department 

and OPCW officials. Recent OPCW analysis indicates, however, that the 

organization is working to improve the timeliness of its invoices. In 

addition, sometimes the invoices are inaccurate, causing those states 

possessing chemical weapons–related facilities to withhold payment until 

corrections are made. 

The organization’s External Auditor recommended in 2001 that the 

Secretariat take concrete steps to pursue and recover outstanding invoices 

and develop realistic estimates of its income from Articles IV and V 

(reimbursable) inspections. In its April 2002 report, the organization’s 

Advisory Body also recommended that the Secretariat avoid optimistic 

income forecasts regarding Articles IV and V inspections, as well as 

expedite and improve its billing procedures. 

Budgets Underestimate 

Personnel Costs

As the result of a staff reclassification and upgrade undertaken in 1999 and 

mandatory United Nations salary increases, the Secretariat’s personnel 

costs increased, affecting the 2000, 2001, and 2002 budgets. However, the 

budgets underestimated this increase. The Secretariat’s budget for 2002 

underestimated staff cost increases by about 6 percent ($1.8 million) and 

may contribute to a potential budget deficit for 2002. The audited financial 

statement for 1999 and the Advisory Body’s January 2001 report stated that 
Page 9 GAO-03-5 Chemical Weapons

increases in personnel costs were inevitable as a result of the staff 

reclassification and upgrade.

The OPCW’s salary system further complicates the budget projections for 

staff costs. OPCW uses the United Nations compensation system, which 

budgets salaries and staff wages in U.S. dollars. The OPCW, however, pays 

its staff in euros. According to State Department and OPCW officials, the 

organization has had difficulty in covering the currency risks associated 

with fluctuations in the dollar-to-euro exchange rate. The organization can 

experience significant personnel cost increases, depending upon the 

exchange rate; staff costs represent about 75 percent of OPCW’s 2002 

budget. Furthermore, OPCW and State Department officials stated that it is 

difficult to manage staff costs given the organization’s current tenure 

policy, which does not clearly establish a start date for OPCW employees. 

During the creation of the organization, a 7 year tenure policy was 

established to reduce the number of career employees in the organization. 

Currently, staff members are hired on a 3 year contract that can be renewed 

yearly thereafter. However, the Conference of the States Parties has yet to 

agree on a date for the commencement of the tenure policy. 

Organization Had Budget 

Deficit in 2000 and 

Anticipates Deficit for 2002

In 2000, the organization experienced a budget deficit of more than $2.8 

million when expenditures exceeded the income for the year. In 2001, the 

Advisory Body reported that the Secretariat was aware of the income 

shortfall of 2000 and should have managed the budget more carefully to 

avoid a deficit. It also recommended that, to avoid a recurrence of 

overspending, the Secretariat should maintain budgetary discipline by 

matching expenditures to anticipated income in developing the 2001 

budget. 

However, for 2002, the organization may again experience a budget deficit. 

According to an OPCW briefing document,6

 the organization will 

experience a potential $5.2 million deficit because of unrealistic income 

projections in the budget and underbudgeted personnel expenditures.7

6

Director of Administration Management Board Briefing on the OPCW 2002 Programme 

and Budget Shortfall (The Hague, the Netherlands: Organization for the Prohibition of 

Chemical Weapons, 2001).

7

About $3.4 million of the potential deficit is attributable to unrealistic expectations of 

income from Articles IV and V reimbursements and unpaid assessed contributions. About 

$1.8 million can be attributed to the mandatory staff reclassification and upgrades.
Page 10 GAO-03-5 Chemical Weapons

Budget Shortfalls 

Resulted in Reduced 

Inspections and 

International 

Cooperation Activities

Because of its budget problems, the Secretariat has reduced inspections 

and international cooperation and assistance efforts and has implemented 

a hiring freeze. Unless the organization can obtain additional funding, it will 

have to further reduce its inspections in 2002. The problem will intensify as 

the number of inspectable facilities increases during the next few years.

Primary Functions Reduced 

to Offset Budget Deficits 

The Secretariat has curtailed its inspection activities in response to its 

budget problems. As a result the Secretariat conducted only 200 of the 293 

inspections planned for 2001. The Secretariat plans to reduce the number 

of inspections for 2002 to compensate for the potential deficit of $5.2 

million. As of June 2002, OPCW inspectors had conducted only 90 of the 

264 inspections planned for the year. Figure 1 depicts the number of 

inspections planned and conducted from 1997 through June 2002.
Page 11 GAO-03-5 Chemical Weapons

Figure 1: Planned and Conducted OPCW Inspections, 1997–2002

Notes: For 1997, inspections were conducted beginning in June.

For 2002, the figure represents inspections conducted through June 24, 2002.

Source: GAO analysis of OPCW documents.

Since 1997, most OPCW inspection activities have taken place at chemical 

weapons–related facilities. The Secretariat receives reimbursements from 

member states for inspections conducted under Articles IV and V of the 

convention. However, the Secretariat is not reimbursed for inspections 

carried out at commercial chemical facilities under Article VI. According to 

OPCW documents, when funding is limited, the Secretariat reduces the 

number of inspections at commercial chemical facilities that it conducts 

during the year.

Because of its budget problems, OPCW conducted only 75, or 57 percent, of 

the 132 chemical industry inspections planned for 2001. As of June 2002, 
Page 12 GAO-03-5 Chemical Weapons

the organization had conducted only 47, or 36 percent, of the 132 industry 

inspections planned for 2002. According to an OPCW document, if 

additional funding becomes available, a maximum of 11 chemical industry 

inspections per month can be conducted between the time additional 

monies are received and the end of 2002. 

At the same time, the Secretariat cut funding for international cooperation 

and assistance efforts in 2001 by about one-third, from $3 million to $2 

million, and has made further reductions in funding for 2002. The 

Secretariat also imposed a hiring freeze on OPCW personnel for 2000 

through 2002. According to the OPCW’s latest budget proposal, the 

Secretariat plans to leave 33 positions vacant for 2003. Of these 33 

positions, 22 are related to inspection and verification activities.

Budget Problems Will 

Multiply 

According to OPCW officials, unless it receives additional funding, the 

OPCW will not be able to completely fulfill its primary inspection functions 

this year. As of June 2002, six member states have provided about $397,000 

in voluntary contributions to help offset the OPCW budget deficit for 2002.8

According to a State Department official, the United States, France, 

Germany, and the United Kingdom are considering contributing additional 

funding to support the organization. 

The Secretariat’s inspection resources will be further affected by expected 

increases in the numbers of chemical weapons destruction facilities and 

commercial chemical facilities requiring OPCW inspections. Specifically, 

by 2006, the number of continuously operating chemical weapons 

destruction facilities is expected to increase from 6 to 12. An OPCW 

planning document also indicates that additional member states may 

declare more industry facilities.9

 According to the Deputy Director-General, 

preliminary OPCW estimates indicate that the funding level needed to 

support inspection activities may increase by 50 percent.

8

As of June 2002, Japan, the Netherlands, Norway, Oman, Sweden, and the United Kingdom 

had provided voluntary contributions to support various OPCW activities.

9

OPCW Executive Council, Medium-Term Plan 2004–2006 [draft] (The Hague, the 

Netherlands: Organization for the Prohibition of Chemical Weapons, 2002).
Page 13 GAO-03-5 Chemical Weapons

OPCW and State 

Department Have 

Taken Steps to 

Improve Budget 

Practices, but 

Problems Remain 

The organization has taken some preliminary steps to address its budgeting 

problems, but it lacks a comprehensive strategy to overcome the inherent 

weaknesses in its budgeting process. Also, limited oversight resources have 

affected the organization’s efforts to improve its budgeting process. The 

State Department has taken some steps to assist the OPCW, but budgeting 

problems remain.

Secretariat Taking Steps, 

but Has No Plan to Address 

Budget Problems 

The Secretariat is taking some preliminary steps to improve its budgeting 

practices. The new Director-General has stated his commitment to ensure 

that the organization receives the financial resources needed to implement 

its mandate and that these resources are used exclusively for the objectives 

and missions outlined in the convention. According to a State Department 

official, when developing its internal spending plans to implement the 

budget, the Secretariat has begun to exclude the assessments of member 

states in arrears. The OPCW is also reducing its estimates of income 

derived from inspection activities, based on the chemical weapons 

possessor states’ destruction plans, by 30 percent, to better reflect the 

historical level of activity. State Department officials also indicated that the 

Secretariat is working to improve the invoicing and payments process for 

Articles IV and V reimbursements by providing more accurate bills on a 

more timely basis. Invoices sent out during the last two months of the 

calendar year will be applied to the following year’s income projections. 

State Department officials added that OPCW member states are 

considering changing the current financial regulations to provide the 

Secretariat flexibility in using the organization’s Working Capital Fund to 

cover inspection-related expenses.10 In commenting on our draft report, the 

State Department also stated that the Secretariat has begun using actual 

staff costs to develop more accurate budget forecasts of salary costs.

Although the Secretariat’s efforts to collect income from member states is a 

positive first step in addressing its budget difficulties, it has not directed 

sufficient attention to improving projections of future expenses. According 

10The Working Capital Fund was designed to meet short-term liquidity problems during a 

given financial period and is funded by the member states in accordance with their scale of 

assessments. Current regulations require that monies borrowed from the Working Capital 

Fund be repaid by the end of the year.
Page 14 GAO-03-5 Chemical Weapons

to State and OPCW officials, the Secretariat does not budget for currency 

fluctuations in calculating its staff expenses. These officials also stated that 

current personnel regulations contain a vague employee tenure policy, 

making it difficult to predict employee turnover and reduce the number of

employees. Accordingly, the Secretariat’s recent efforts do not reflect a 

comprehensive approach to addressing its continuing budget problems. 

OPCW’s Office of Internal Oversight may play an important role in helping 

reform the Secretariat’s budget process. In March 2002, the organization’s 

Advisory Body questioned the role of the oversight office, stating that the 

office may not be focusing on key internal auditing, monitoring, evaluation, 

and investigation activities that could detect budgeting problems. In 

providing its advice and consent to the ratification of the Chemical 

Weapons Convention, the U.S. Senate required the President to certify that 

the OPCW had established an independent internal oversight office that 

would conduct audits, inspections, and investigations relating to the 

programs and operations of the OPCW.11 In December 1997, the President 

certified that the office was in compliance with the Senate’s requirement. 

However, the OPCW’s 2000 annual report states that only one auditor 

within the oversight office was responsible for internal audit activities. The 

2002 Advisory Body report states that the oversight office was devoting 

only one-third of its staff resources to conducting audits, while the 

remaining two-thirds was focused on other functions, such as the 

implementation of the organization’s confidentiality regime and the 

establishment of a quality assurance system.12 In that same report, the 

Advisory Body reemphasized that the principal and overriding functions of 

the oversight office should be internal audit, monitoring, evaluation, and 

investigation. Given the current financial and budgetary crisis, the Advisory 

Body recommended that the Secretariat redefine the office’s role to ensure 

a clear and sustained focus on proper management of the budget.

11Condition 3 of Senate Resolution 75 of the 105th Congress (April 1997) imposes such a 

certification requirement. 

12The Chemical Weapons Convention contains provisions to protect the confidentiality of all 

information reported to the OPCW and to prevent its unauthorized release. The 

confidentiality regime includes procedures for granting access to confidential information, 

rigid registration, archiving and handling procedures for confidential documents, and the 

operation of a secure archive. It also involves physical and administrative protections to 

prevent the loss or unauthorized transfer or release of documents.
Page 15 GAO-03-5 Chemical Weapons

State Department Taking 

Initiatives, but More 

Assistance Is Needed

The State Department funded a budget consultant to assist the Secretariat 

in reviewing its budget processes. However, it is difficult to assess the 

consultant’s impact in improving the budget processes of the organization. 

According to the State Department, although it reimbursed the Secretariat 

for the consultant’s salary (including per diem) of $170,000, the consultant 

was not required to provide the Department with a statement of work or a 

written analysis of the Secretariat’s budgetary practices and efforts to 

improve its processes, because he was considered an employee of the 

Technical Secretariat.

According to State Department officials, the United States is also 

attempting to pay its Articles IV and V inspection reimbursements in a 

timelier manner and is considering paying in advance the chemical 

weapons–inspection costs that cover inspector salaries. To assist the 

organization in meeting its 2002 budget, the State Department is providing 

$2 million in supplemental funding to restore, to the extent feasible, 

budgeted levels of inspection activity and to strengthen management and 

planning functions, among other purposes. Funds will be deposited in a 

trust fund and will remain available until expended by the OPCW on 

activities agreed to by the United States.

OPCW’s Deputy Director-General and representatives from member states 

commented that the United States needs to continue in its leadership role 

by providing financial, managerial, and political support to the 

organization. According to these officials, the U.S. government’s recent 

efforts focused primarily on the removal of the former Director-General. 

The officials added that the United States should now focus on addressing 

the organization’s budgetary and financial problems.

Conclusions The OPCW has consistently overestimated its income and underestimated 

its expenses, and thus has planned more inspections than it is financially 

able to conduct. Unless the Secretariat corrects its weak estimating 

practices, the Secretariat may continue to plan more inspections than it can 

undertake. The problem may grow worse in future years as the number of 

new chemical weapon’s destruction facilities increases and additional 

states ratify the convention. The organization’s newly appointed DirectorGeneral has an opportunity to correct these budgeting weaknesses and 

improve the organization’s finances. 
Page 16 GAO-03-5 Chemical Weapons

Recommendations for 

Executive Action

To improve the current budget problems of the Organization for the 

Prohibition of Chemical Weapons, we recommend that the Secretary of 

State work with the representatives of other member states and the new 

Director-General to develop a comprehensive plan to improve the 

organization’s budgetary practices. The plan should outline specific 

strategies to (1) improve the projection and collection of income, (2) 

accurately project expenses, and (3) strengthen the role of the Office of 

Internal Oversight in helping the organization improve its budgeting 

process. Such a plan would be consistent with the budget 

recommendations of the Secretariat’s oversight bodies. 

To ensure that Congress is informed about the status of efforts to improve 

the OPCW’s budgeting practices, we recommend that the Secretary of State 

annually report to Congress on the extent to which the OPCW is correcting 

its budgeting weaknesses and implementing the recommendations made by 

the organization’s oversight bodies.

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from the State 

Department that are reprinted in appendix III. We also received technical 

comments from the State Department and have incorporated them where 

appropriate. The State Department generally concurred with our findings 

that budgetary and financial problems have plagued the OPCW, and that 

unless corrected, these problems could have even more dramatic effects in 

coming years. The Department, however, raised several issues with the 

report. First, the Department asserted that our analysis of OPCW budgetary 

and financial difficulties presented an incomplete picture of the OPCW’s 

budgeting practices. Second, the State Department disputed our assertion 

that we had to limit the scope of our review because of the access 

restrictions we encountered during our May 2002 visit to the OPCW in The 

Hague. Third, it stated that our report did not fully reflect the changes that 

the OPCW has recently begun taking to address its budget weaknesses.

Finally, the Department disagreed with our recommendation that the 

Secretary of State be required to report annually to Congress on how the 

OPCW is correcting its budget weaknesses, asserting that such a 

requirement would impose an administrative burden.

In response to the State Department’s comments on our draft report, we 

added information on the reasons why the OPCW experienced budget 

problems. Regarding our access to OPCW records and staff, although the 

State Department provided us with some access to OPCW budget and 
Page 17 GAO-03-5 Chemical Weapons

finance documents through the Department’s offices in Washington, D.C., 

we were denied the opportunity to review related budget documentation 

and meet with numerous OPCW officials during our visit to The Hague in 

May 2002. Although we provided the State Department with an extensive 

list of OPCW officials with whom we wanted to meet prior to our visit, we 

were allowed to meet only with the Deputy Director-General and selected 

representatives from the budget office and the inspection equipment 

laboratory. We were not allowed to meet with representatives from key 

OPCW offices, including the Special Projects Division, the Office of 

Internal Oversight, the Office of the Legal Advisor, the Administration 

Division, the Verification Division, the Inspection Division, the 

International Cooperation and Assistance Division, and the Advisory Body 

on Administrative and Financial Matters. Furthermore, the State 

Department failed to notify us of any potential access difficulties with the 

OPCW prior to our trip to The Hague, and did not actively seek to provide 

us with access to these officials on our arrival. Consequently, we had to 

limit the scope of our review to budget-related issues. In response to the 

State Department’s comments about recent budgetary initiatives, we have 

updated the report to reflect the most current initiatives being undertaken 

by the OPCW to address its budgeting problems. Regarding our 

recommendation for an annual reporting requirement, we do not believe 

that such a requirement would impose an administrative burden on the 

Department, since it already provides various reports to Congress on 

international organizations. This reporting requirement is necessary to 

improve congressional oversight of the OPCW. 

We are providing copies of this report to other interested congressional 

committees and to the Secretary of State. We will make copies available to 

others on request. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov.
Page 18 GAO-03-5 Chemical Weapons

Please contact me at (202) 512-8979 if you or your staff have any questions 

concerning this report. Another GAO contact and staff acknowledgments 

are listed in appendix IV. 

Sincerely yours,

Joseph Christoff, Director

International Affairs and Trade
Page 19 GAO-03-5 Chemical Weapons

Appendix I

Scope and Methodology ApApenednxidexiIs

We could not conduct a comprehensive management review of the 

organization as requested, because the Organization for the Prohibition of 

Chemical Weapons (OPCW) and State Department officials limited our 

access during our visit to The Hague in May 2002. As a result of our lack of 

access to OPCW officials and limited access to OPCW documents, we 

could not determine how the reduction in chemical weapons and industry 

inspections has affected the implementation of the Chemical Weapons 

Convention. In addition, we could not assess the organization’s personnel 

management, administrative, and internal audit functions. Specifically, we 

were not permitted to meet with or obtain information from OPCW officials 

from the following offices: the Special Projects Division, the Office of 

Internal Oversight, the Office of the Legal Advisor, the Administration 

Division, the Verification Division, the Inspection Division, the 

International Cooperation and Assistance Division, and the Advisory Body 

on Administrative and Financial Matters. However, we met with OPCW’s 

Deputy Director-General. We also received a budget briefing from the 

Director of the Administrative Division and the budget consultant being 

funded by the State Department. In addition, we visited the inspection 

laboratory and equipment store at Rijswijk, the Netherlands. 

To determine the accuracy of the Secretariat’s budgets, we compared 

OPCW’s program and budget documents for 1997–2003 with the data in the 

audited financial statements for 1997–2001.13 To compare budget and 

program data, figures were converted from Netherlands guilders and euros 

to 2001 dollars, using appropriate exchange and inflation rates. We also 

reviewed other OPCW documents, including the organization’s financial 

regulations and annual reports. We analyzed reports prepared by the 

organization’s External Auditor, the Advisory Body on Administrative and 

Financial Matters, and the Office of Internal Oversight. In addition, we 

obtained information from officials in the State Department’s Bureau of 

Arms Control and Office of International Organization Affairs, as well as 

from member states’ representatives to OPCW.14

13Although we could not independently review the reliability of the data provided in the 

audited financial statements, the OPCW’s External Auditor provided an unqualified opinion 

on the statements for each of these years.

14During our visit to The Hague in May 2002, we were able to meet with representatives from 

Australia, France, Germany, Japan, the Russian Federation, and the United Kingdom. We 

also obtained written responses to our questions from the South African representative.
Appendix I

Scope and Methodology

Page 20 GAO-03-5 Chemical Weapons

To determine the impact of budget shortfalls on the organization’s 

inspection and international cooperation activities, we analyzed the data 

contained in the organization’s program and budget documents and in 

annual implementation reports for calendar years 1997–2001. To confirm 

our understanding of the data obtained, we met with an official from the 

State Department’s Bureau of Arms Control. In addition, we reviewed other 

OPCW documents and statements provided by the State Department. 

To assess OPCW and State Department efforts to improve the 

organization’s budget-planning practices, we met with State Department 

officials in Washington, D.C., and The Hague. We also obtained information 

from OPCW member states’ representatives. We reviewed and analyzed 

OPCW and State Department documents, including OPCW’s draft MediumTerm Plan for 2004–2006; speeches given by the Director-General to the 

Executive Council and Conference of the States Parties; and reports of the 

Advisory Board on Administrative and Financial Matters, the External 

Auditor, and the Office of Internal Oversight.

We could not independently verify the accuracy of the budget and other 

financial data obtained from OPCW and the State Department. Although we 

met with, and obtained documents from, officials at the Departments of 

Commerce and Defense, the information they provided was not relevant to 

the reduced scope of our work. 

We performed our work from January 2002 through October 2002 in 

accordance with generally accepted government auditing standards.
Page 21 GAO-03-5 Chemical Weapons

Appendix II

Member States in Arrears of Contributions to 

the Organization for the Prohibition of 

Chemical Weapons (as of August 31, 2002) ApendxiI

2001 dollars

Assessed contributions

Member 

states

Preparatory

Commission

contributionsa

Working

Capital Fund

contributionsb 1997 1998 1999 2000 2001 Total owed

Armenia $48,755 $2,227 $19,774 $25,805 $4,861 $2,583 $2,948 $106,953

Benin 2,022 407 0 2,903 884 861 982 $8,059

Bolivia 0 0 0 98 3,093 3,013 3,440 $9,644

Burkina Faso 3,051 407 2,255 4,976 884 861 982 $13,416

Burundi 6049 407 0 1,244 439 428 492 $9,058

El Salvador 6,049 407 3,608 4,976 5,302 5,166 5,898 $31,405

Equatorial 

Guinea 6,049 407 3,608 4,976 439 428 492 $16,398

Fiji 0 0 0 3,129 1,767 1,722 1,966 $8,585

Gambia 0 51 0 2,357 439 428 492 $3,767

Georgia 95,747 4,900 43,502 56,771 8,396 3,013 3,440 $215,769

Ghana 1,680 407 2,255 4,976 3,093 3,013 3,440 $18,864

Guinea 6,049 407 2,706 4,976 1,326 1,291 1,474 $18,229

Guyana 4,357 407 1,353 4,976 439 428 492 $12,452

Laos 2,766 407 3,608 4,976 439 428 492 $13,116

Malawi 6,049 407 0 2,488 884 861 982 $11,671

Maldives 0 0 3,392 4,976 439 428 492 $9,727

Mali 6,049 407 3,608 4,976 884 861 982 $17,766

Mauritania 6,049 407 0 4,147 439 428 492 $11,961

Nicaragua 6,049 41 0 0 37 428 492 $7,047

Niger 6,049 407 3,608 4,976 884 861 982 $17,766

Papua New 

Guinea 0 0 0 2,376 3,093 3,013 3,440 $11,922

Paraguay 0 0 3,159 4,976 6,186 6,027 6,880 $27,228

Republic of 

Moldova 68,237 3,564 31,638 41,288 7,953 4,304 4,914 $161,898

Senegal 3,022 407 0 2,073 2,651 2,583 2,948 $13,684

Seychelles 6,049 407 3,608 4,976 884 861 982 $17,766

Tajikistan 18,540 891 7,909 10,322 2,210 1,722 1,966 $43,560

Togo 6,049 407 3,608 4,976 439 428 492 $16,398

Trinidad and 

Tobago 0 1,336 8,898 15,483 7,512 6,887 7,864 $47,979

Turkmenistan 22,377 1,336 11,864 15,483 3,535 2,583 2,948 $60,127
Appendix II

Member States in Arrears of Contributions 

to the Organization for the Prohibition of 

Chemical Weapons (as of August 31, 2002)

Page 22 GAO-03-5 Chemical Weapons

Note: Numbers in columns may not sum to totals because of rounding.

a The Preparatory Commission for the Organization for the Prohibition of Chemical Weapons preceded 

the OPCW and carried out the initial implementation of the Chemical Weapons Convention. Under the 

Preparatory Commission, member states were assessed contributions to fund the commission’s 

expenses.

b The Working Capital Fund was designed to meet short-term liquidity problems during a given 

financial period and is funded by the member states in accordance with their scale of assessments.

Source: GAO analysis of OPCW data.

Tanzania 4,892 407 0 2,488 1,326 1,291 1,474 $11,878

Total $341,986 $21,259 $163,958 $253,143 $71,155 $57,229 $65,362 $974,093

(Continued From Previous Page)

2001 dollars

Assessed contributions

Member 

states

Preparatory

Commission

contributionsa

Working

Capital Fund

contributionsb 1997 1998 1999 2000 2001 Total owed
Page 23 GAO-03-5 Chemical Weapons

Appendix III

Comments from the Department of State ApendxiI

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.
Appendix III

Comments from the Department of State

Page 24 GAO-03-5 Chemical Weapons

See comment 1.
Appendix III

Comments from the Department of State

Page 25 GAO-03-5 Chemical Weapons

See comment 2.

See comment 3.

See comment 4.

See comment 5.

See comment 6.

See comment 7.
Appendix III

Comments from the Department of State

Page 26 GAO-03-5 Chemical Weapons

See comment 8.

See comment 9.
Appendix III

Comments from the Department of State

Page 27 GAO-03-5 Chemical Weapons

See comment 10.
Appendix III

Comments from the Department of State

Page 28 GAO-03-5 Chemical Weapons

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

dated October 16, 2002.

GAO Comments 1. We agree that monitoring activities at chemical weapons–destruction 

facilities account for most of OPCW’s workload, and that to project this 

workload, the organization has depended on plans submitted by 

chemical weapons–possessor states. Our report states that since 1997, 

most OPCW inspection activities have taken place at chemical weapons 

facilities. Our report also states that the Secretariat relies on possessor 

states’ destruction plans to calculate the number of inspections the 

organization may conduct during the year. Chemical weapons–

possessor states cannot accurately predict when their destruction 

facilities will become operational and what problems may arise when 

they do. However, in response to the State Department’s comments, we 

have included additional information in the report to clarify this point. 

2. We identified the key reasons why OPCW underestimated staff costs 

for calendar years 2000–2002, and included this information in the 

report. For example, our report states that as the result of a staff 

reclassification and upgrade undertaken in 1999 and mandatory United 

Nations salary increases, the Secretariat’s personnel costs increased, 

affecting the 2000, 2001, and 2002 budgets. 

3. We agree that the OPCW encounters the same difficulties as other 

international organizations with regard to the late payment of annual 

dues, and that the United States and Russia have experienced 

difficulties in paying their Articles IV and V inspection bills. We 

included this additional information in the report. 

4. We agree that the OPCW has lacked adequate liquidity to deal with its 

cash shortages, and this has resulted in a curtailment of inspection 

activity. We have made no change to the report, however, because this 

is its major theme. We reported that weak budgeting practices and 

budget deficits have affected the organization’s ability to perform its 

primary inspection and international cooperation activities, as outlined 

in the Chemical Weapons Convention.

5. As explained in our report, the OPCW spent against budgeted income 

based on inflated estimates of inspection activity. This budget shortfall 

resulted in reduced inspections and international cooperation 

activities. We do not believe that a change in our report is needed.
Appendix III

Comments from the Department of State

Page 29 GAO-03-5 Chemical Weapons

6. Our report clearly states that since 1997, most OPCW inspection 

activities have taken place at chemical weapons facilities. Because of 

its budget problems, the OPCW conducted only 57 percent of the 

chemical industry inspections planned for 2001. As of June 2002, it had 

conducted only 36 percent of these inspections planned for 2002. We do 

not believe that a change in our report is needed.

7. We disagree that the State Department made every reasonable effort to 

accommodate our requests for information and access to OPCW staff. 

We were not allowed to hold meetings with representatives from 

several key OPCW offices. The State Department failed to notify us of 

any impending scheduling difficulties prior to our trip to The Hague in 

May 2002. On our arrival, the Department made no effort to facilitate 

meetings with the following offices: the Special Projects Division, the

Office of Internal Oversight, the Office of the Legal Advisor, the 

Administration Division, the Verification Division, the Inspection 

Division, the International Cooperation and Assistance Division, and 

the Advisory Body on Administrative and Financial Matters. 

8. This comment confirms that we were able to meet with only a few 

select OPCW staff. It is unclear how the State Department concluded 

that we were unable to identify specific questions to which answers 

were not provided. Prior to our departure for The Hague in May 2002, 

we provided State Department officials in Washington and at the U.S. 

Delegation to the OPCW with five pages of detailed questions that we 

planned to raise with OPCW officials. Many of these questions remain 

unanswered. We also provided the State Department with a detailed set 

of questions we planned to raise with representatives from other 

member states. 

9. We have updated our report to provide the most recent information on 

OPCW initiatives currently under way. However, the State Department’s 

mosaic of measures does not represent an overall strategy or plan for 

improving the organization’s budgeting weaknesses. At best, it 

represents only the first steps in addressing systemic weaknesses in the 

OPCW’s budgeting process. 

10. We believe that our recommendation for an annual reporting 

requirement to Congress is appropriate. Such reporting will help 

establish a baseline for judging OPCW progress in achieving needed 

reforms. In addition, this requirement will not impose an undue
Appendix III

Comments from the Department of State

Page 30 GAO-03-5 Chemical Weapons

administrative burden on the Department, since it already provides 

various reports to Congress on international organizations, including 

the OPCW.
Page 31 GAO-03-5 Chemical Weapons

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact Stephen Lord (202) 512-4379

Acknowledgments In addition to the individual named above, Beth Hoffman León, Richard K. 

Geiger, and Reid Lelong Lowe made key contributions to this report. Bruce 

Kutnick, Christine Bonham, and Geoffrey Frank provided additional 

assistance.

(320100)
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