Embassy Management: Actions Are Needed to Increase Efficiency and Improve Delivery of Administrative Support Services
Published: 2004-09-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Costs for overseas posts' administrative support services have risen nearly 30 percent since fiscal year 2001, reaching about $1 billion in 2003. These costs are distributed among 50 agencies through the International Cooperative Administrative Support Services (ICASS) system, which was designed to reduce costs and provide quality services in a simple, transparent, and equitable manner. Since ICASS was implemented in 1998, its performance has not been systematically reviewed. GAO was asked to examine (1) whether ICASS has led to efficient delivery of administrative services and (2) whether ICASS is an effective mechanism for providing quality services.
section_title: What GAO Found
paragraphs: ICASS has not resulted in more efficient delivery of administrative support services because it has neither eliminated duplication nor led to efforts to contain costs by systematically streamlining operations. GAO found that agencies often decide not to use ICASS services and self-provide support services--citing reasons of cost, programmatic needs, and greater control--which can lead to duplicative structures and a higher overall cost to the U.S. government. Although some agencies' reasons for self-providing services may be supportable, GAO found that agencies rarely made business cases for why they chose not to take ICASS services initially or withdrew from services later. In addition, service providers and customer agencies have undertaken few systematic efforts to consolidate services or contain costs by streamlining administrative support structures. Furthermore, GAO found that deterrents to consolidating and streamlining administrative structures largely outweigh the incentives. However, there are efforts, both internal and external to ICASS, that may address some of the obstacles that prevent ICASS from operating more efficiently. Based on the system's primary goals, ICASS is generally effective in providing quality administrative support services in an equitable manner, although not to the extent that it could be if certain impediments were addressed. GAO found that ICASS is simple and transparent enough for customers to understand its basic principles. Furthermore, most personnel agree that ICASS is more equitable than its predecessor. However, ICASS strategic goals lack indicators to gauge progress toward achieving them, and progress toward achieving posts' performance standards is not annually reviewed or updated. Other obstacles to maximizing ICASS include limits to overseas staffs' decision-making authority, which can diminish ICASS's goal of "local empowerment." Finally, GAO found that training and information resources, which could enhance participants' knowledge and implementation of ICASS, are underutilized.

section_title: Letter
paragraphs: The U.S. government spent nearly $1 billion in 2003 to provide  administrative support services to more than 250 overseas posts  worldwide. These costs are divided among more than 50 agencies and  subagencies with staff assigned to these posts primarily through the  International Cooperative Administrative Support Services (ICASS) cost- distribution system. The Department of State (State) has the primary  responsibility for operating the system and employs approximately 18,000  workers to provide more than 30 basic administrative support services. A  primary purpose for developing ICASS was to achieve greater efficiencies  in the delivery of basic administrative support services to federal  employees at overseas posts. The system was also intended to ensure that  users of overseas facilities receive quality administrative support services,  that they each pay the costs associated with the amount of services they  use, and that all users have a say in determining how resources are  allocated. In light of rising budget deficits, it is important that overseas  employees receive administrative support services in the most cost- effective manner possible.
Since ICASS was fully implemented in 1998, its performance has not been  systematically reviewed. Therefore, you asked that we examine (1)  whether ICASS has led to efficient delivery of administrative services and  (2) whether ICASS is an effective mechanism for providing quality services.  To answer these questions, we reviewed ICASS policies and procedures;  interviewed headquarters officials from nine departments about customer  satisfaction, quality of service, training, cost-containment measures, and  numerous other issues; attended meetings of the ICASS Executive Board  and the ICASS Working Group in Washington, D.C.; and reviewed global  surveys implemented by the ICASS Service Center and State’s Center for  Administrative Innovation. In addition, we observed ICASS operations at  seven embassies and conducted telephone interviews with staff at an  eighth post. We conducted our work from April 2003 through August 2004  in accordance with generally accepted government auditing standards. See  appendix I for additional information on the scope and methodology used  to complete this report.
subsections: section_title: Background
paragraphs: The operation of U.S. embassies and consulates requires basic  administrative support services for overseas personnel, such as building  maintenance, vehicle operations, and travel services, among others.  Traditionally, these services were provided by State. In 1955, State  established the Shared Administrative Support Program under which it  provided administrative support services, on a reimbursable basis, to other  agencies. The Foreign Affairs Administrative Support (FAAS) system,  under which State paid fixed support costs and agencies paid the remaining  administrative support costs, was established in 1976. However, FAAS’s  cost-allocation processes were opaque and customers felt that fees were  not in line with the quality of services received. During the 1980s and 1990s,  overseas posts experienced increases in staffing from nontraditional  foreign affairs agencies and demand for services. In addition, agencies’  growing dissatisfaction with how the system operated and shrinking  resources led, in part, to the establishment of ICASS.
subsections: section_title: Primary Goals of ICASS
paragraphs: ICASS is a performance-based cost distribution system designed to provide  quality administrative support services at the lowest cost while attempting  to ensure that each agency pays the true cost of its overseas presence.  According to the Foreign Affairs Handbook, the system’s four primary  goals are as follows: Contain or reduce costs. ICASS seeks, in part, to contain or reduce  overall government costs for overseas administrative support services.  Service providers and customers are to select the most cost-effective  methods for providing services by choosing among competitive  alternatives, whether internal or external to the U.S. government. The  system’s designers felt this cooperative approach would encourage  greater participation by agencies that traditionally operated their own  administrative support structures and would ultimately lead to a  reduction in duplicative structures; streamlined service provision; and,  therefore, savings through the development of economies of scale.
Provide quality administrative services and increase customer  satisfaction. Under ICASS, the customers and service providers at each  post are responsible for agreeing on service standards that define  quality, cost-efficient service at that post. The local ICASS Council,  comprised of senior managers representing each agency at a given post,  is responsible for tracking and evaluating service provider performance  in meeting cost and quality standards.
Establish a simple, transparent, and equitable cost-distribution  system. ICASS Councils are supposed to agree on a transparent method  whereby the basis for all post- and nonpost-related ICASS service costs  can be shown to and understood by customers and service providers  both at the posts and at Washington headquarters. Moreover, a database  containing billing, budgeting, and other management information was  developed and can be accessed by all participants in the system. ICASS  seeks to encourage equity by charging customers their fair share of  administrative service costs at posts and by giving agencies a greater  voice in how shared administrative services are managed and delivered.
Promote local empowerment. Under ICASS, posts were granted more  responsibility and authority to manage their resources because posts  were seen as best positioned to determine the levels of administrative  support needed. Under the previous system, these decisions were made  centrally in Washington. However, under ICASS, decisions on the  services that will be provided at a post, the methods for providing them,  and who will provide them are made at the post by the local ICASS  Council. Moreover, posts have the primary role in resolving disputes  between customers and service providers.
section_title: Service Subscription and Cost Distribution
paragraphs: Agencies obtain support services by subscribing to cost centers, which are  groups of similar services bundled into larger categories (see app. II). All  agencies with American direct-hire staff must subscribe to two cost  centers: the Basic Package—services that can only be obtained by the  embassy, such as securing diplomatic credentials from the host country— and services provided by the Community Liaison Office, such as providing  welcoming and orientation materials, assisting family members with  employment opportunities, and helping enroll dependent children in  education programs. All remaining cost centers are optional for agencies.  Costs of services are distributed among customers enrolled in each cost  center either on the basis of the number of people an agency has at post  (capitation) or on the amount of service the agency actually uses  (workload). In addition, agencies may modify the level of services cost  centers provide by taking the full amount, a medium level, or a low level.  Agencies selecting medium or low levels of services are charged 60 percent  and 30 percent of the full costs associated with the cost center,  respectively.
section_title: Principal Actors and Decision Making
paragraphs: ICASS is a two-tiered system based in Washington and at overseas posts  that relies on collaboration among multiple agencies to develop and  implement ICASS policies (see fig. 1). The Foreign Affairs Handbook  details the responsibilities of three Washington-based ICASS bodies. The  ICASS Executive Board is the top decision-making authority within ICASS  and is responsible for reviewing and making policy and providing  leadership in addressing worldwide improvements and cost reductions for  administrative services. It also resolves issues and disputes raised by  Washington-based or overseas ICASS groups. The Assistant Secretary of  State for Administration permanently chairs the Executive Board, and  members generally include assistant secretary-level officers from  participating agencies. The interagency ICASS Working Group, which is  open to all agencies represented on ICASS Councils at overseas posts, is a  staff arm of the Executive Board responsible for presenting policy issues to  the board, making policy decisions when delegated to do so by the board,  resolving issues raised by posts, and reviewing and approving nonpost  costs and factors. The ICASS Service Center, an interagency-staffed office  organizationally located in State’s Bureau of Resource Management, is  primarily responsible for overseeing worldwide ICASS operations,  including providing support to embassies and consulates on training,  financial, and budgetary matters and general guidance on implementing  ICASS. The Service Center also provides support to the Working Group and  the Executive Board in developing new policy, but the center has no policy- making authority of its own.
Although general ICASS policy is set in Washington, overseas diplomatic  posts are responsible for decisions on implementing the system. At the  core of operational decision making is the post’s ICASS Council. This is an  interagency body consisting of representatives from each of the agencies at  the post that receive ICASS services. Representatives to the ICASS Council  must be direct-hire U.S. citizen employees and are usually the local head of  the agency they represent. A Council Chair elected by the representatives  for a 1-year term heads the group. ICASS Councils are charged with  developing all local policies on what services will be available at the post;  how those services will be delivered; whether State, another agency, or a  contractor will provide the services; and how fees are established and  customers charged. The councils are also responsible for developing ICASS  performance standards for all services provided at their respective posts;  for annually reviewing service providers’ performance and customer  satisfaction; and for updating standards, as needed. Although consensus  building is the preferred mode for decision making, voting is allowed on a  one funding-code, one-vote basis. However, agencies that are not  subscribed to a specific ICASS service may not vote on decisions that affect  that service.
Although they are chiefly tasked with overseeing ICASS operations and  service delivery, the Deputy Chief of Mission and service provider  representatives also participate as ex-officio council members. In this  capacity, they provide advice and technical assistance to the  representatives but are not authorized to vote on matters affecting the  post’s ICASS policies or operations. Locally employed staff, such as foreign  nationals, and others may also provide technical assistance to the council,  both in terms of making presentations or participating in local working  groups assigned to a specific task, but they have no formal role in helping  the council achieve consensus on issues.
The Chief of Mission—who is usually a U.S. ambassador but could also be  a Charge d’Affaires, Consul General, or Director of a U.S. Office (such as in  Pristina, Kosovo), depending on the post—retains the ultimate oversight  and responsibility for ICASS at overseas posts. In cases where the Chief of  Mission vetoes a decision, or implements a decision contrary to the ICASS  Council’s desires, the council may appeal the decision to the Executive  Board in Washington.
section_title: ICASS Has Not Eliminated Duplicative Administrative Support Structures or Streamlined Operations
paragraphs: ICASS has not resulted in efficient delivery of administrative support  services or achieved economies of scale because it has neither eliminated  costly duplication of administrative support services nor led to systematic  cost-containment measures and the streamlining of operations. From the  start of ICASS, many agencies did not sign up for ICASS services and  decided instead to self-provide administrative support services, which  created duplicative administrative systems that can raise overall  government costs. While agencies cited affordability concerns,  programmatic needs, and control issues as reasons for not subscribing to  ICASS services, we found that they seldom provided detailed business  cases that justified decisions to self-provide support services. In addition,  neither service providers nor customer agencies have made systematic  efforts to contain costs by consolidating or streamlining services.  Moreover, ICASS structures designed to encourage and reward managerial  reforms are not adequate for overcoming strong disincentives deriving  from resource management authorities and parochial interests of both  customers and service providers. However, State and the U.S. Agency for  International Development (USAID) have recently taken some steps to  make the delivery of embassy support services more efficient.
subsections: section_title: Agency Self-Provision of Support Services Can Lead to Duplicative Structures and Higher Costs to Government
paragraphs: When agencies choose not to subscribe to ICASS services, they still have  administrative needs that must be filled, which may lead to the  establishment of redundant administrative structures at posts. From the  very beginning of the program, agencies frequently chose not to take some  ICASS services available to them. In fiscal year 1998, the average rate of  non-State agencies’ participation in available cost centers ranged from  about 31 percent to about 87 percent (see app. III). Decisions to not take  ICASS services at the program’s onset may represent missed opportunities  to achieve economies of scale. When an agency opts out of a service it  needs, it often must provide that service either by creating new positions at  the post or securing the service from the local market. This results in a  duplication of services—a situation where an agency creates an  administrative structure similar to, but apart from, what it could receive  under ICASS. There are often defensible reasons for an agency to develop  such a structure, such as demonstrated program needs or logistical  constraints. Less supportable duplication, however, exists when agencies  self-provide services without any apparent demonstrated need.
The State Inspector General reported in 2000 that although self-provision  rather than subscribing to an ICASS service may save individual agencies  money, it can also result in increased costs for agencies that continue  taking the ICASS service, as well as for the U.S. government overall.   Officials in Washington and at posts said that adjustments to a post’s ICASS  personnel are generally not made to compensate for the reduced ICASS  workload that occurs when agencies opt out of a cost center. As a result,  the ICASS costs associated with that cost center remain the same and must  be distributed among a smaller population of subscribers. In addition,  overall costs rise due to the new costs associated with the agency’s self- provision of the service. For example, USAID in Dakar recently identified a  need to obtain vehicle maintenance services outside the ICASS structure  because the location of its new offices in relation to the ICASS vehicle  maintenance facility prevented USAID from getting convenient, timely  service. As a result, USAID developed and implemented a business plan to  contract with a local service station near its offices, which USAID officials  expected would reduce their fixed costs for this service from about $21,200  under ICASS in 2003 to about $7,400 in 2004 (see fig. 2).  However,  although USAID notified the post ICASS Council of its intention to  withdraw from the ICASS service, the reason for its doing so, and its  general plan to contract with a local vendor for its vehicle maintenance  needs, the agency did not provide details on how it would receive the  needed services, nor did the council request that information or discuss  whether USAID’s new approach could be adopted postwide. Moreover,  despite a reduction in the workload associated with 13 USAID vehicles,  there was no change in the composition of ICASS staff responsible for  vehicle maintenance after USAID withdrew from the service. Thus, the  approximately $21,200 for labor and ICASS redistribution charges formerly  associated with USAID’s bill would be distributed among agencies that  retain their service subscriptions. In addition, labor costs associated with  USAID’s newly self-provided service represent increased overall  government spending because the agency now pays additional people (i.e.,  the local vendor) to provide a service it could otherwise receive from  existing embassy employees. Thus, total government costs for vehicle  maintenance in Dakar would rise by about $7,400.
section_title: Agencies Cite Cost, Unique Program Circumstances, Greater Control, and Lack of Need as Reasons for Self- Providing Services
paragraphs: Agency officials in Washington and the field said the most common reasons  for not subscribing to a service are the cost of the service, agencies’ unique  programmatic circumstances, agencies’ desire to have greater control over  services, and a lack of need for some services.
Agencies cited two cost-related reasons to seek administrative support  outside of ICASS. First, many agencies said that ICASS services are too  expensive, in part due to the high labor costs associated with U.S.  government employees hired to work overseas, and reported that they  could self-provide the same services for less money by hiring local labor.  Under ICASS, customers pay the salaries and benefits for both Foreign  Service officers and foreign nationals who provide administrative support  services. Figure 3 shows that in 2000, labor costs comprised over 60  percent of total ICASS costs. American direct-hire employees comprise  roughly 5 percent of ICASS employees but represent 30 percent of the total  labor costs. State estimates the average annual cost of maintaining a  Foreign Service officer at an overseas post to be about $346,000 per year.
Second, agency officials reported that ICASS cost increases have forced  them to place greater emphasis on finding savings, including examining the  need to continue subscribing to some ICASS services. Total ICASS costs  rose 29.4 percent between 2001 and 2003, from $758 million to $981 million,  as a result of new security requirements following the terrorist attacks of  September 11, 2001; State’s increased hiring of American personnel; new  services to be provided; and adjustments to the exchange rate, among other  reasons (see fig. 4). As a result, agencies have chosen to subscribe to fewer  ICASS services than in previous years (see app. III). Of the 23 agencies  located at 10 or more posts in both 2001 and 2003, 21 had lower  participation rates in 2003 than in 2001. Participation rate reductions  ranged from 1.4 to 6.6 percentage points. In addition, 18 of the 23 agencies  paying ICASS fees at 10 or more posts in both 1998 and 2003 had  participation rates that were lower in 2003 than in 1998, ranging from 0.7 to  14.1 percentage points. Because of rising costs and budgetary constraints,  the U.S. Commercial Service reduced its average subscription rate for all  services available at all posts at which it has a presence from 83.8 percent  in 2000, one of the highest rates for any agency, to 74.8 percent in 2003.
Agencies also cited unique programmatic circumstances associated with  overseas programs that require them to self-provide services. For example,  Peace Corps officials in Dakar stated that the remote location of Peace  Corps volunteers throughout Senegal, combined with the need for staff in  Dakar to make routine visits to these remote locations, requires that the  office own, operate, and maintain a vehicle fleet separate from the ICASS  vehicle service. Similarly, a U.S. federal law enforcement officer in Vienna  said that all of his agency’s overseas officers are authorized to maintain a  government-owned vehicle because they need immediate access to  transportation on a 24-hour basis. In addition, because USAID’s offices in  Egypt and Senegal are in locations outside the respective main U.S.  embassies, these offices employ staff to provide administrative support  services, such as nonresidential building operations.
Agencies also cited control as a factor for self-providing services. Some  customer agency officials perceived an implicit service delivery bias  toward State employees, saying State employees’ needs are placed ahead of  others. Although we discovered no evidence—hard or circumstantial— supporting this contention, agencies throughout the eight posts we  examined stated that they maintained their own vehicle fleets so they  would have immediate transportation access. In addition, unless an  ambassador requires all agencies at a post to participate in the furniture  pool, the Drug Enforcement Administration (DEA) provides furniture for  its American workers outside of ICASS. Officials in Washington said this is  because DEA felt there was an implicit bias toward State personnel, both in  terms of priority of distribution and furniture quality. Supplying its  employees with furniture gave DEA greater control over both these aspects  and better met its employees’ needs, according to the agency.
Finally, some agencies choose to opt out of a service because they do not  actually need the service at post. For example, the Foreign Agricultural  Service processes payroll and travel services in the United States for  American employees overseas, and the Department of Defense has no need  to subscribe to personnel services for local staff in posts where it does not  employ foreign service nationals. In addition, some agencies occupy offices  provided by host country ministries and thus have no need for services  such as nonresidential maintenance or local guard services.
section_title: Fieldwork Revealed Numerous Redundant Structures
paragraphs: Despite the reasons agencies cited for self-providing support services, in  our fieldwork, we found numerous cases of duplicative administrative  structures that seemed to be unnecessarily redundant. For example, State  and USAID operate two separate warehouses on adjacent properties in  Cairo, separated by a concrete wall (see fig. 5). Staff from both agencies  said the two warehouses could be run more efficiently if they were  consolidated, and staff from both agencies said they could take on the  work of the other. In Dar es Salaam, Tanzania, USAID and State provide  redundant services in 14 ICASS cost centers despite occupying buildings 30  feet apart on the newly built embassy compound. According to post  officials, these redundant support structures include shipping and customs,  cashiering, human resources, home fuel and water delivery, janitorial  services, warehousing, housing/leasing services, motor vehicle operations  and maintenance, procurement, travel services, budgeting and financial  planning, contracting, and housing maintenance. Furthermore, according  to the 2003 ICASS Global Database, USAID was not billed for information  management services, International Voice Gateway access, payrolling, and  personnel services for American and foreign national employees. Although  we did not assess the rationale of each service USAID self-provides in Dar  es Salaam, both USAID and State officials acknowledged that some of the  services could be consolidated. Officials in Washington confirmed that the  above examples are common occurrences worldwide.
section_title: Lack of Business Case for Self-Provided Services Hinders Posts’ Ability to Maximize Cost- effectiveness
paragraphs: Agencies seldom engage in a disciplined process for rationalizing decisions  to opt out of services, which often limits posts’ ability to benefit from  innovative managerial approaches to service delivery. ICASS is a voluntary  system, and agencies are not required to justify their decisions for self- providing services they could obtain through ICASS. Although some  agencies’ reasons for self-providing services outside the system may be  supportable, we found that their decisions to do so are generally made  without a disciplined business case based on analyses of alternatives,  including how the alternatives affect the individual agency, other agencies  at post, and overall government costs. We found that business cases were  not made when agencies first opted out of ICASS services when the system  began and also subsequently when agencies have withdrawn from services.
The Foreign Affairs Handbook states that an agency must notify the post  ICASS Council of its plans to withdraw from a service; however, that  notification process is not intended as a justification for approval for  withdrawing from ICASS services. Rather the notification is designed to  ensure that all member agencies benefit from service options that are more  cost-effective than existing ICASS services. Issues to be discussed in the  notification include the reasons for withdrawing, where and how the  agency will obtain the service, whether the council should consider the  alternate service source for all member agencies, and any potential cost  savings. However, agencies are not required to provide detailed analyses,  such as cost-benefit analysis, for these notifications.
Although we found that ICASS Councils enforce the notification  requirement, they seldom examine agencies’ self-provided services for  potential ways to improve ICASS services. In interviews at our case study  posts, ICASS Council members said that agencies informed the ICASS  Council before ending subscription to an ICASS service, as required, but  frequently did not present information beyond the requirements.  Furthermore, ICASS Councils at the posts we visited did not seek  information on whether agencies’ service arrangements outside of ICASS  could be adapted for use by the rest of the ICASS customers at post.  Without such explanations and discussions, posts may have missed  opportunities to improve existing ICASS services or adopt more cost- effective alternatives.
section_title: Few Systematic Efforts Have Been Made to Consolidate or Streamline Administrative Support Structures
paragraphs: ICASS seeks to encourage elimination of redundant administrative support  services and to contain costs through innovative managerial approaches to  service delivery that could lead to economies of scale. However, we found  that few systematic efforts to consolidate duplicative administrative  structures or streamline administrative processes have occurred at either  the postwide or worldwide level.
Of the eight posts we examined, Embassy Vienna has taken the most  proactive approach to streamlining services. In recent years, the post has  made numerous efforts to streamline services, including reducing the  number of vehicle mechanics, revamping warehouse operations, changing  processes for procuring administrative supplies, upgrading and changing  utilities contractors, competitively sourcing the in-house upholstery  operation, reducing the travel services contract to 20 hours per week and  moving that office off the compound, and establishing a furniture pool in  which each agency in Vienna voluntarily enrolled. Embassy officials also  reported services in 15 ICASS cost centers that could be wholly or partially  outsourced. Other posts we examined also conducted efforts to  consolidate services—for instance, Embassy Lima made changes in how it  delivers telephone and some maintenance services and discovered a way to  reduce electricity bills by 7 percent—but these efforts generally focused  only on one or two services at the post, rather than a more systematic  approach like that taken in Vienna.
subsections: section_title: Potential for Consolidation and Streamlining during Planning for New Embassy Compounds
paragraphs: One area with great potential for consolidating and streamlining operations  is in the planning for New Embassy Compounds (NEC). In response to the  1998 bombings of U.S. embassies in Dar es Salaam, Tanzania, and Nairobi,  Kenya, State embarked on a $21 billion program to replace about 185  embassies and consulates. The size and cost of building an NEC is directly  related to the number of staff set to occupy it and the type of work they will  perform. According to State, per capita building costs average about  $209,000 per office for space for top embassy management, $59,300 per  office in controlled access (or classified) space, $28,100 per office in  noncontrolled access (or nonclassified) space, and $4,900 per person for  nonoffice space.
In 1999, a law was passed requiring that all U.S. agencies working at posts  slated for new construction be located on the new site unless they are  granted a special waiver. Although in the past there were logistical  reasons for agencies to self-provide support services “off compound,”  justifications based on proximity have less weight as agencies become  colocated on the new compounds. In April 2003, we reported that staffing  projections for NECs were developed without a systematic or  comprehensive rightsizing approach—assessments of the security  environment; mission requirements; cost of operations; and potential  rightsizing options, which would include consideration of consolidating  and streamlining administrative support operations. Following our report,  State implemented a formal process with criteria for developing, vetting,  and certifying staffing projections for NECs. The new process requires  posts to review all positions under Chief of Mission authority, including  administrative support, even if they are not colocated in the embassy or  consulate at the time projections are made.
Considering the high costs associated with constructing new embassy  compounds, the staffing projection process is an opportune time for posts  to examine administrative platforms. In addition to reducing annual U.S.  government expenditures for support services, consolidating and  streamlining services at this stage would likely reduce the overall costs of  embassy construction because such actions would result in reduced office  space needs in the NEC. Four of our eight case study posts have either  recently completed construction of an NEC (Embassies Dar es Salaam and  Lima), begun constructing an NEC (Embassy Conakry), or are in the  planning stage for an NEC (Embassy Dakar). Officials at the first three  posts indicated there was no discussion, or they were unaware of  discussions, of consolidating or streamlining administrative support  services when developing staffing projections for the new compounds,  although at the time their respective projections were due, no formal  guidance or requirements existed for what posts should include.   Nonetheless, these posts may have missed opportunities to minimize  construction costs for their new compound. Furthermore, during our  December 2003 site visit to Dakar, officials indicated that consolidation of  duplicative administrative services has not been considered in planning for  the new NEC despite the fact that most agencies are or will be colocated on  the new compound.
section_title: ICASS Structures Do Not Overcome Disincentives to Streamlining
paragraphs: During our work, we found that deterrents to consolidating and  streamlining operations outweighed the ICASS structures and tools  designed to encourage innovative managerial reforms. Among these  deterrents were the ICASS Councils’ lack of authority to fully manage  ICASS resources, as well as service providers’ and customers’ focus on  their own interests rather than the collective interests of the agencies at  post. Further, tools such as the ICASS Working Capital Fund and a formal  ICASS awards program did not work as envisioned and thus did not  provide sufficient impetus for consolidation and streamlining efforts.
subsections: section_title: Councils Lack Authority to Fully Manage ICASS Resources
paragraphs: The Foreign Affairs Handbook states that ICASS Councils are responsible  for determining “which services are to be provided, by whom, and at what  level,” and for evaluating cost and staffing alternatives and establishing  budgets for posts’ ICASS operations. However, according to the Director of  the ICASS Service Center, there are no “ guidelines, rules, or  regulations stating that ICASS Councils set staffing levels of the service  provider.”  Indeed, agency headquarters and field staff agreed that while  they have input on whether an existing position is staffed, they do not have  input on actually setting the number of ICASS positions at a post. As a  result, the agency providing services determines the staffing complement  needed to deliver the services. This seeming contradiction to ICASS  councils’ authorities was designed, in part, to minimize micromanagement  by the local councils. Nonetheless, it reduces a council’s ability to  streamline ICASS operations and manage the largest potential source for  savings—labor costs. For example, an ICASS Council could decide to  outsource an ICASS service, yet it would have no authority to adjust ICASS  personnel to reflect the changed in-house labor needs for that service.
section_title: Focus on Own, Rather Than Collective, Interest
paragraphs: Rather than the cooperation the developers of ICASS envisioned, both  service providers and customer agency personnel focus primarily on their  own interests. Reforms that reduce the costs of administrative support  structures, whether streamlining practices or consolidating services to a  single provider, should lead to reductions in staffing levels. However, we  found that service providers are reluctant to implement reforms that would  reduce ICASS staffing levels. Officials said that reforming administrative  support operations requires significant time and effort that administrative  officers at posts said they often do not have. Moreover, administrative  officers at posts reported that there are few incentives to reduce ICASS  costs, and that few rewards come to those making administrative  structures more efficient. As a manager at one of our case study posts  succinctly put it, “You don’t get ahead by firing people and making waves.”
Customer agency personnel also focus on self-interests. Faced with budget  constraints and rising ICASS costs, agencies have been forced to discover  ways to reduce spending. In some cases, agencies’ first choice has been to  opt out of ICASS services, either on orders from their respective  Washington headquarters or because of decisions made locally. For  example, to save money, the U.S. Commercial Service in Vienna has  withdrawn from numerous cost centers since 1998, including those for  budgeting and fiscal (1998), information technology support (1999),  administrative supply and vehicle maintenance (2001), International Voice  Gateway telecommunications (2002), and American personnel services  (2003). In other cases, agencies do try to work under the ICASS rubric; but  because they cannot fully engage in resource management, they become  frustrated and consider opting out. For example, in Dakar, USAID has  proposed pilot testing a new method for delivering residential maintenance  services, but it has been unsuccessful in gaining approval to conduct the  pilot test. Although USAID has not yet made a decision to withdraw from  that cost center, officials in Dakar expressed frustration over the high costs  associated with residential maintenance and indicated that withdrawal  from the service could be an option.
In addition to agencies’ self-interests, personal interests of post personnel  sometimes hinder reform efforts, particularly those related to streamlining  processes. At Embassy Bern, post management reported suggesting that  the American staff get local bank accounts and/or automatic teller cards,  which they said would have the dual effect of reducing costs associated  with check cashing—$17 per check in Bern—and allowing the current  cashier to be trained for work in other services that are understaffed. Post  officials stated, however, that customers resisted changing the service  because it would require them to leave the embassy to cash a check. As a  result, the post missed chances to reduce ICASS costs and improve service  quality by cross-training staff.
ICASS requires that post councils and service providers work together to  choose the most cost-effective method for delivering services. This  requirement was designed to ensure selection of the best methods for  delivering services by examining all available competitive alternatives,  including those developed or adopted by customers who self-provide  services they could otherwise obtain through ICASS. In theory, this  requirement would lead to the most efficient delivery of ICASS services  because it would be in the interest of both customers and service providers  to discover the least expensive method for delivering services at the levels  needed by the post. However, as previously noted, post ICASS Councils  have not systematically considered the service options available to them.  Some post officials reported that program requirements demand too much  of their time to conduct analyses showing how the embassy as a whole  would benefit from new approaches to service delivery. Moreover, only a  few agencies other than State have the capacity to actually provide services to other agencies, and only one agency other than State, USAID, actually  does this on a very limited basis.
section_title: ICASS Tools Are Not Working as Envisioned
paragraphs: The Working Capital Fund is a no-year fund that permits posts to retain a  portion of their unobligated funds from one fiscal year to the next. This tool  allows posts some fiscal flexibility by reducing the pressure to engage in  wasteful end-of-year spending on items they may not need. It provides  ICASS Councils with an opportunity to engage in long-term planning and  have greater autonomy in allocating resources—factors that were expected  to ultimately lead to greater efficiencies. Although some of the posts we  visited did roll over some funds from one year to the next, post officials  said they were afraid they would lose an equivalent amount of money in  future years if they demonstrated they could save in the current year. As a  result, posts prefer to spend their entire budget within the fiscal year it is  disbursed. In technical comments on a draft of this report, the ICASS  Executive Board stated that it was unaware of any case in which carried- over funds were withdrawn from a post because it “actively supports posts  carefully stewarding and planning for the best use of funds.” However, the  Executive Board did acknowledge that future funding targets could be  adjusted downward for posts that carry over significant funds so that  money could be redirected to other underfunded posts.
Customers and service providers stated that the program designed to  reward individuals and posts for developing innovative approaches to  service delivery does not overcome the disincentives previously described.  The ICASS Service Center has three annual awards for contributions that  lead to improved quality of service and/or greater efficiencies. The ICASS  Outstanding Leadership Award recognizes contributions from individual  post employees who best acted as agents for change to improve the quality  of services and/or reduce costs at overseas posts. The ICASS Team  Achievement Award goes to the one team worldwide that best improves  service delivery and customer satisfaction and/or achieves cost savings.  Finally, the Diplomatic Readiness Goal Sharing Award rewards one or two  teams worldwide for establishing new goals that improve a post’s capacity  to achieve U.S. objectives. Despite the stated purposes of these awards, we  found that they did not motivate overseas staff to seek innovative  approaches for delivery of ICASS services. Results from a global survey  conducted by the ICASS Service Center in 2002 showed that the rewards  system did not meet service providers’ and customers’ expectations.  Moreover, State and agency officials reported that the awards program  does not motivate their staff to seek innovative methods for delivering  administrative support services. Customers and providers agreed that the  success of ICASS at a post was highly personality driven, and that  innovative reforms derive from individuals or teams interested in reducing  costs or improving services, rather than from the potential to receive an  award.
section_title: Efforts Are Under Way to Promote Consolidation and Streamlining of Services
paragraphs: Recently, State and USAID initiated an effort that could greatly affect  ICASS service delivery and costs, and State began three other initiatives  that could have significant impacts on ICASS. Two of the efforts, a study of  the potential for consolidating support services at four overseas posts and  implementation of a tool to help rationalize service delivery, were  generated specifically to make service delivery at posts more efficient. The  remaining two approaches, centralizing administrative functions and  sharing the costs of embassy construction, were generated outside of  ICASS but could have significant ramifications for costs under the system.
subsections: section_title: Study on Consolidation and Streamlining at Four Posts
paragraphs: In November 2003, State and USAID reached an agreement to examine  consolidation of duplicative administrative functions at four posts:  Embassies Cairo, Dar es Salaam, Jakarta, and Phnom Penh. The goal of the  study was to “identif and eliminat wasteful and/or unnecessary  duplication wherever…improved service and/or cost savings accrue to  both agencies.” In May 2004, State and USIAD issued their report stating  that they found “significant advantages in consolidating motorpools,  warehousing/property management, residential maintenance, and leasing  at every post” and that in every case, consolidation would improve services  and reduce costs. The reports recommendations are currently being  implemented.
section_title: ISO 9000 Certification for Administrative Support Services
paragraphs: Another effort involves bringing embassies’ administrative support services  into compliance with quality management principles developed by the  International Organization for Standardization (ISO). These principles,  known as ISO 9000, were developed with the goal of ensuring that an  organization’s products or services satisfy a customer’s quality  requirements and comply with any regulations applicable to those products  or services. The ISO 9000 principles, which apply to both for-profit and  nonprofit organizations, stress customer focus; detailed documentation of  processes, including specific and quantifiable performance criteria; and  continuous tracking of performance and improvement in systems. Five  embassies—Brussels, Cairo, London, Vienna, and Warsaw—were selected  for a pilot study on applying ISO 9000 quality management principles and  achieving ISO 9000 certification. We believe this certification has the  potential to lead to significant cost reductions for ICASS because it would  require service providers to focus on quality and timely service delivery and  to eliminate inefficient practices. Moreover, it would require that ICASS  service providers and ICASS Councils rationalize staffing levels—the  primary costs associated with service delivery. State officials believe ISO  9000 certifications would, in the long term, provide an incentive for  consolidating duplicative services because as unit costs decline, agencies  would become more amenable to subscribing to support services that were  less costly than those they self-provide.
section_title: Pilot Program to Relocate More Functions to Regional Centers
paragraphs: State also has begun an effort to centralize functions that are not location- specific to regional centers in the United States and abroad. Although this  effort evolved from the rightsizing initiatives in The President’s  Management Agenda, it could also significantly reduce ICASS costs and  consolidate delivery of ICASS services. State plans to begin this effort at  posts within the Bureau of Western Hemisphere Affairs by relocating some  administrative support activities to the Florida Regional Center in Fort  Lauderdale. State estimates that up to 90 American direct-hire positions  could be removed from overseas posts at a savings of as much as $140  million over the first 5 years of the effort. These cost savings would be  passed directly to other agencies in the form of lower ICASS bills. State  officials said that if this pilot program works well in that bureau, State  would consider expanding the effort to other regions.
section_title: Capital Security Cost Sharing as Financial Incentive to Consolidate and Streamline Services
paragraphs: State and the Office of Management and Budget (OMB) have recently  proposed a new program that would require agencies with overseas staff to  help finance the cost of the embassy construction program. The Capital  Security and Cost-Sharing Program, if implemented, would require  agencies to share construction costs based on the per capita proportion of  total overseas staff and the type of space (controlled access, noncontrolled  access, or nonoffice) they need. As a result, non-State agencies would be  required to share about $61 million in costs in 2005, about $147 million in  2006, and about $233 million in 2007 (see table 1). Moreover, costs for  constructing office space designated for ICASS service providers would be  distributed among agencies on the basis of their respective proportions of  total ICASS expenditures for the year. Agencies’ ICASS-related  contributions for sharing construction costs are estimated to total about  $23 million in 2005, about $46 million in 2006, and about $68 million in 2007.  By 2009, non-State agencies would share about one-third of the estimated  annual $1.4 billion construction fund. These charges are in addition to fees  that agencies pay under ICASS. OMB officials believe the new capital cost  sharing requirement will spur all agencies, including State, not only to  scrutinize staffing for their program needs but also to consolidate  duplicative administrative structures and develop creative ways to deliver  support services. However, another possibility is that agencies could  withdraw from ICASS services at increasing rates, as they have done since  2001, to compensate for their increased costs.
section_title: ICASS Is Generally Effective in Providing Quality Services Based on Its Stated Goals, but Impediments Still Hinder Its Success
paragraphs: Based on the system’s primary goals, ICASS is generally effective in  providing quality administrative support services, although not to the  extent that it could be if certain impediments were addressed. Global  surveys and interviews at case study posts show that agencies generally  approve of the quality of ICASS services; but because customer satisfaction  is not routinely tracked by ICASS Councils at posts, it is difficult to  determine the extent to which customers are satisfied. We found that  ICASS is simple and transparent enough for customers to understand the  basic structures that govern service provision at post. Furthermore,  virtually all personnel involved in setting policy or implementing ICASS at  posts and in Washington agree that the system is more equitable than the  previous cost-distribution mechanism for overseas administrative support  services. However, it is difficult to determine the extent to which ICASS is  meeting its stated strategic goals because they lack indicators to gauge  progress. Moreover, posts rarely implement a requirement to annually  review service performance standards. Other obstacles to maximizing the  system’s effectiveness include limits to overseas staffs’ decision-making  authority, which can weaken ICASS’s goal of “local empowerment.” Finally,  we found that available training and informational resources that could  enhance participants’ knowledge and implementation of ICASS are  underutilized.
subsections: section_title: ICASS Customers Generally Are Satisfied with Service Quality, but Quantifying Levels of Satisfaction Has Proven Difficult
paragraphs: Results of a global ICASS survey indicated that customers are generally  satisfied with ICASS services. In 2002, the ICASS Service Center surveyed  the ICASS Executive Board and Working Group members, State  Department Regional Bureaus, service provider personnel, post ICASS  Council members, Chiefs of Mission, and Deputy Chiefs of Mission.  Responses showed that ICASS customers generally agreed that ICASS  facilitates efforts to improve the quality of life and work at posts. Further,  in 24 of 25 service areas, customers reported that the Service Center was  generally effective in meeting its performance standards. However, the  Service Center survey’s response rate was about 42 percent, which limits  the degree to which these results are generalizable.
ICASS customers at our case study posts typically confirmed the survey  results, stating that they were generally satisfied with the overall quality of  the ICASS services they receive. Some customers said ICASS provided  better services than they could provide themselves. Others stressed that,  although they had specific complaints about services, they were pleased  with the overall service quality. We found that customer complaints about  service quality were generally the result of unique cases or circumstances   regarding a specific service at an individual post. Moreover, customers  reported that in cases where they had complaints, they generally knew  where to get solutions and that corrective measures were generally  implemented quickly and to their satisfaction. Customers at our case study  posts rarely cited poor service quality as the reason to consider  withdrawing or to actually withdraw from a service.
Although we found that customers are generally satisfied with ICASS  services, quantifying customer satisfaction is difficult because post ICASS  Councils are not maximizing the use of annual local customer satisfaction  surveys. We found that not all post ICASS Councils administer regular  customer satisfaction surveys, as recommended by the ICASS Service  Center. A global survey conducted by State in 2001 said that 32 percent of  56 posts responding had not performed a customer satisfaction survey in at  least 3 years. Although all but two of our case study posts reported  administering at least one customer satisfaction survey in the last 3 years,  only one post reported that the ICASS Council had input in the creation of  its post’s surveys. Most surveys were conducted unilaterally, either by the  management team or a specific management office. Some customers said  these surveys failed to accurately measure customer satisfaction because  survey questions did not provide them with an opportunity to express their  real concerns or because customers did not think the surveys would lead to  service improvements. In addition, while State’s global survey reports that  61 percent of respondents said service had improved, only 38 percent  reported they had actually measured improvements.
section_title: Post Staff Have Basic Understanding of ICASS Structure
paragraphs: Based on interviews with customers and service providers at post, we  found that most understood the basic ICASS structures and that ICASS  therefore generally meets its goal of being a simple and transparent system.  Most customers demonstrated that they generally understood which  administrative support services they received from ICASS and which  services they did not receive because of their respective agencies’  subscription choices. Customers also said they generally understood how  bills were calculated and how costs were distributed at a basic operational  level. Service providers generally understood which agencies had  subscribed to the services.
However, customers were largely unaware of their roles and  responsibilities as post ICASS Council members and how to effectively  utilize their authority to improve ICASS operations at posts. Some council  members told us the ICASS Councils at their posts did not deal with issues  with which they thought they should be dealing, such as how to contain  and reduce costs. At three posts that held local ICASS Council meetings  during our site visits, we found that discussions focused on routine ICASS  tasks, such as reviewing an individual agency’s billing questions, that would  be better discussed in other forums. For example, in Cairo, part of one  ICASS Council meeting addressed why one agency’s housing maintenance  bill was so high. After some discussion, the council chairman and a  financial specialist agreed to meet with the council member after the  meeting to resolve the issue.
section_title: Customers Say ICASS Is Generally Equitable, yet Several Systemic Equity Problems Remain
paragraphs: ICASS customers typically said that ICASS implementation is generally  equitable, but we found that some potentially inequitable policies still exist.  Customers agreed that the system was more equitable than its predecessor,  the FAAS system. Customers from some agencies with whom we spoke  said that under ICASS, they paid for few, if any, services they did not use. In  addition, service providers told us that, under ICASS, they know which  ICASS customers subscribed to their service and could ensure that  customers generally received only the services for which they paid.
Some service providers noted, however, that it was difficult to deny a  nonsubscriber’s request for help, and some said that they occasionally  provided some services to nonsubscribers. Medical services staff, for  example, said they were professionally obligated in some cases to serve  embassy staff and dependents, whether or not they were signed up for  medical services. ICASS customers who paid for these services did not  complain about such cases.
ICASS customers also said that ICASS costs and services were equitably  allocated among the customers taking services at posts. Special  arrangements whereby individual agencies received services at a different  cost than other agencies at posts were common under FAAS. Such side  deals are not allowed under ICASS, and we found no evidence of them  occurring. ICASS permits service providers to directly charge any agency  for using a service that can be easily identified as benefiting that specific  agency, and some customers confirmed that this occurred.
Nonetheless, agency staff at posts reported perceptions that service  provision was not always equitable. Some customers told us they believed  that State employees received preferential treatment in both the quality and  priority of service because ICASS employees report directly to State  management officers. Although we found no evidence to substantiate these  allegations of systematic preferential treatment, the perception of bias  affected customers’ morale.
Other equity issues involve the methodology for distributing costs  generated by temporary duty and regional ICASS staff. At the posts we  visited, costs incurred by temporary duty personnel were typically  distributed among all ICASS customer agencies at a post, rather than just  the agency sponsoring the temporary duty staff. Although the ICASS  Executive Board approved a new policy that details how posts may charge  temporary duty staff for these incurred costs, fewer than 30 posts have  implemented policies worldwide. In addition, some costs associated with  ICASS staff providing regional services are borne solely by the “home”  post. For example, the regional medical staff based in Vienna, Austria,  serves several posts, yet the service costs are paid by agencies in Vienna.  Agencies with offices in the Balkans but not in Vienna, such as USAID,  receive benefits from these services. Some agency staff said such situations  were inequitable since agencies were receiving benefits for which they did  not pay. In technical comments on a draft of this report, the ICASS  Executive Board stated that this inequity is being addressed, citing four  posts—Embassies London, Vienna, Pretoria, and Singapore—that have  successfully petitioned to have costs for medical evacuation services  distributed on other than a home post basis. However, although this is a  costly service, it was only one of the many services provided by the  regional medical units at these posts where the costs are borne solely by  the home post customers.
section_title: ICASS Lacks Measurable Goals and Performance Indicators
paragraphs: A chief barrier to effective implementation of ICASS derives from the lack  of measurable goals and performance indicators. ICASS is consistent with  the approach set forth in the Government Performance and Results Act,  which requires that most agencies (1) establish 5-year strategic plans, (2)  set measurable performance goals in annual performance plans, and (3)  annually report on performance toward achieving the performance goals.  Annual performance plans should provide direct linkages between the  agencies’ strategic plans and their day-to-day activities. As previously  stated, ICASS has four strategic goals, and although progress toward  achieving them could be measured, the system’s designers did not set  clearly defined and measurable performance goals and how progress  toward achieving those goals would be assessed. For example, the Foreign  Affairs Handbook states that ICASS is to be an equitable system, and  defines “equity” as agencies paying “their fair share of post administrative  costs based on usage.”   However, the handbook does not provide specific,  measurable indicators by which progress toward achieving the goal would  be monitored and evaluated. Moreover, annual reviews of progress toward  achieving ICASS strategic goals have not been conducted. As a result, it is  difficult to state whether ICASS as a system is accomplishing what it set  out to do: establish an efficient, fair, and effective cost-distribution system.
The Foreign Affairs Handbook also states that the ICASS Council and  services providers at each post cooperate to set standards for  administrative services so that service provider performance can be  monitored. The handbook states that these performance standards should  be specific, measurable, achievable, relevant, results-oriented, and time- specific and that performance should be evaluated each year. Although all  posts we examined had adopted performance standards, providers’ actual  performance was not annually assessed against posts’ ICASS performance  standards. The handbook states that ICASS Councils should monitor  service providers’ “overall performance against agreed upon standards”  and provide “an annual written assessment on the quality and  responsiveness of the services furnished by the service provider to the  customer, using the agreed upon service standards as the performance  yardstick.” Councils should also routinely review standards to ensure that  they remain relevant. ICASS Service Center officials said that few ICASS  Councils either reviewed or updated standards on a routine basis, and we  found that none of the eight posts we reviewed conducted full assessments  of performance against the standards. At some posts, the service providers  did conduct customer satisfaction surveys; however, these surveys do not  assess whether service providers achieved the standards. We did, however,  find that some of our posts had reviewed the relevance of their standards in  recent years. Embassies Vienna and Dar es Salaam last updated their  standards in the past year, while three others last updated standards in  2001, and 1 in 2000. During our fieldwork, Embassies Conakry and Lima,  indicated they had begun efforts to revise their standards, which had not  been updated in several years.
section_title: ICASS Councils’ Ability to Make Decisions Can Be Weakened by Other Decision-Making Authorities
paragraphs: A further impediment to maximizing ICASS’s effectiveness is that local  empowerment, granted to allow posts the ability to manage their resources  through the ICASS Councils’ decision-making authority, has not been fully  exercised. We observed that decisions made by ICASS authorities were at  times subordinated to decisions by other authorities. We also found that,  although the system was designed to give local ICASS Councils a wide  range of responsibilities to ensure cost-effective use of resources, many  council representatives were reluctant to actively participate in ICASS  decision making.
subsections: section_title: ICASS Governance Structure Is Sometimes Subordinated to Other Authorities
paragraphs: The ICASS governance structure at times comes into conflict with other  authorities, resulting in a loss of its power to make decisions. For example,  one U.S. ambassador required that all agencies at post that wanted to  reside in post-owned housing would also have to participate in the  furniture pool. Discussions at two ICASS Executive Board meetings  indicate that agencies were concerned because they would be required to  subscribe to a voluntary ICASS service—the furniture pool—to receive  another service—embassy housing—that had never come under the ICASS  structure. Moreover, agencies were anxious that this action could be a  precedent for State to link other voluntary ICASS services to either the two  mandatory ICASS services (see app. II) or other non-ICASS services. A  State official said that on appeal, the ICASS Executive Board voted to  overrule the ambassador, but the board’s chairman said that as State’s  representative to the board, he would advise the Secretary to support the  ambassador.
In addition, agency representatives reported that post management can be  unwilling to allow councils to explore alternatives for service delivery. For  example, post management at one of our case study posts was reluctant to  support an agency’s feasibility study on potential cost-efficient options to  deliver services, citing security concerns. This unwillingness discouraged  the customer agency from seeking innovative ways to reduce ICASS costs  and improve services. Agency officials in Washington agreed with our  observation that council members who make proposals often face an  unreceptive environment. As a result, few council members feel motivated  to seek reforms in service delivery.
Officials from both State and customer agencies commented that local  empowerment is sometimes not fully exercised because council members  feel that the big issues are out of the post’s control. For example, the  methodologies for determining how ICASS services will be charged are  defined at the Washington level among agencies, and some officials said  there is very little flexibility for posts to adapt them to local needs. In  addition, overseas employees, including State personnel, receive demands  from, or can be overruled by, Washington headquarters, which limits their  autonomy to make decisions that reflect the needs and circumstances at  post. For example, of the 467 instances that agencies withdrew from  services between 2000 and 2002, agencies reported that about 24 percent of  the time it was because their respective headquarters directed them to do  so. Officials at the posts we examined stated that headquarters also  frequently pressured them to reduce costs without explicitly directing them  to withdraw from specific services.
section_title: Agency Representatives Are Reluctant to Assume ICASS Roles, Responsibilities, and Authority
paragraphs: Another barrier to local empowerment is the reluctance by some agency  representatives to assume ICASS responsibilities. In addition to the  organizational disincentives discussed in the previous section, some post  staff indicated the amount of time it takes to actively participate more fully  in ICASS would compete with the time available for their primary  programmatic responsibilities. For example, some agency representatives  have regional responsibilities that require spending much of their time at  other posts, which limits their time to become involved in ICASS decisions.  In addition, some agency representatives expressed a lack of interest in  getting involved. As a result, many agency representatives participate in the  decision-making process only by reviewing their agency’s ICASS bill.
section_title: Training and Information Resources Are Not Being Used to Full Advantage
paragraphs: Numerous sources of information dedicated to ICASS policies and program  guidance—such as Washington- and post-based training and a Web site  maintained by the ICASS Service Center—exist for customers and service  providers. However, we found that few individuals make full use of these  resources to gain the knowledge base that would help them implement  ICASS most effectively. The failure to make full use of information  resources, particularly training, limits local ICASS Council effectiveness  because representatives have varying degrees of understanding and  acceptance of their roles and responsibilities in council decision making  and about the mechanisms by which ICASS operates. Moreover, the staff  primarily responsible for day-to-day ICASS operations seldom received  detailed training on the system.
subsections: section_title: Training Is Available Prior to Assuming Overseas Positions but Often Is Not Taken
paragraphs: The Foreign Affairs Training Center provides two ICASS training courses  for State and other agency staff. The “Executive Seminar” provides agency  representatives with a general understanding of ICASS and their roles and  responsibilities, and “Working with ICASS” offers more in-depth training  targeted at both service providers who make daily use of the system and  customers who want more detailed knowledge of how the ICASS system  works. All of State’s management officers are required to receive at least  some ICASS training prior to deployment overseas. However, most non- State employees are not required to take either of the training classes. In  fact, only five customer agencies—the Defense Security Cooperation  Agency, the Foreign Agricultural Service, the U.S. Commercial Service,  USAID, and DEA—reported requiring that at least some of their overseas  officers receive ICASS training prior to an overseas assignment, and staff  from the first four of these agencies were the most consistently active  customer representatives on the ICASS Councils at the posts we visited.  However, we found that the representatives from most other agencies had  not taken or been provided the opportunity to take the recommended  training and, as a result, were required to learn their duties while “on the  job.” Most agency personnel responsible for overseeing their agencies’  participation spend only a small amount of their time dealing with ICASS  issues—sometimes as little as 2 or 3 hours per month. ICASS Service  Center officials expressed concern that personnel going overseas without  the benefit of training would need significantly more time to learn how to  work within the program’s sphere of activities than those who had received  training prior to arriving at post.
The ICASS Service Center also developed a post-specific curriculum. This  training is available to agency representatives, local ICASS staff, and other  officials who might not otherwise get ICASS training. The training is  centered on circumstances specific to the post so that staff may gain a  better understanding of how to apply ICASS principles and procedures.  Service providers at posts that had received this training felt that training  local Foreign National employees is important because the local staff are  responsible for the system’s day-to-day operations at post, and they would  likely continue to be employed at the post long after the American  employees rotated to other posts. In Lima, which had post-dedicated  training just prior to our site visit, we found both providers and customers  were energized to put what they had learned into practice. The ICASS  Service Center confirmed our observation, saying that Foreign National  employees seemed especially appreciative of the opportunity to receive  this training.
section_title: ICASS Web Site Is Not Utilized Fully
paragraphs: In addition to the training it offers, the ICASS Service Center maintains a  Web site, www.icass.gov, which is a source of historical and current  information on policy guidance, procedures, best practices, training  opportunities, staff contacts, budgets, and meeting minutes of the ICASS  Executive Board and the Washington ICASS Working Group. We found this  site to be a useful source of information, yet many overseas staff, both  service providers and customers, were unaware of this resource despite it  being advertised through numerous media—cables, listservs, chat rooms,  and departmental notices, among others.
section_title: Conclusions
paragraphs: The U.S. Government annually spends nearly $1 billion and employs  approximately 18,000 Americans and foreign nationals to provide  administrative support services for embassies and consulates. In the  current fiscal environment, it is essential that all U.S. agencies look for  ways to contain spending. ICASS was designed, in part, to the contain costs  of overseas administrative services. However, the system has not achieved  that goal because it has not led posts to eliminate unnecessary duplication  or to reengineer the processes by which they deliver administrative support  services. Although there are many supportable reasons for an agency to  self-provide services, we saw many instances where decisions to do so did  not appear to be based on valid business cases or other factors that led to  clearly demonstrated benefits. We also saw few instances of posts  systematically reviewing service delivery or searching for alternatives that  could make service delivery less costly, such as contracting for services  with local vendors, placing greater reliance on regionally supplied services,  making better use of technology, and systematically considering “best  practices” developed and implemented by others. Consolidation and  streamlining did not occur because implementing innovative reforms  required great personal effort to effect a change in the status quo. As a  result, U.S. taxpayers are supporting costly and unnecessarily duplicative  administrative structures at overseas posts. Moreover, deficiencies in the  ICASS mechanism itself inhibit service delivery efficiency. Despite the  existence of at least three types of available training, posts’ agency heads  and ICASS Council representatives frequently do not know their roles,  responsibilities, and authorities as decision makers and operators of the  system, and staff providing service frequently have not received levels of  training that would allow them to truly understand and run the system  more efficiently. In addition, customers have few mechanisms by which  they can hold service providers accountable, and those that are available  have often been ineffectively implemented.
section_title: Recommendations for Executive Action
paragraphs: To ensure more efficient delivery of embassy administrative support  services, we recommend that the ICASS Executive Board take the  following five actions:  The board should aggressively pursue the elimination of duplicative  administrative support structures at U.S. overseas facilities with the  goal of limiting each service to the one provider that local ICASS  Councils have determined can provide the best quality service at the  lowest possible price. This effort should include   encouraging agencies not subscribing to ICASS services to submit  detailed explanations (business cases) of how they will fulfill these  service needs and at what cost so that potential benefits can be  shared by all ICASS customers at post and  ensuring that the consolidation and streamlining of support services  are  key factors when posts develop staffing projections for new  embassy compounds, as required by State.
The board should work to contain costs by reengineering administrative  processes and seeking innovative managerial approaches through  competitive sourcing, regionalization of services, improved technology,  and adoption of other best practices developed by agencies and other  posts.
The board should also consider developing independent teams to review  ICASS operations at overseas posts and to recommend and implement  reforms that reduce duplicative administrative structures and contain  costs.
The board should develop strategies to improve the system’s  accountability, which could include  clearly defining the long- and near-term goals and objectives of  ICASS, developing measurable indicators to track performance, and  presenting annual reports on the progress toward achieving the goals  and objectives;  ensuring that post ICASS Councils annually evaluate service provider  performance and customer satisfaction and annually certify that  performance standards are relevant, specific, and accurately reflect  customer needs; and  requiring that post ICASS Councils annually certify that they have  sought opportunities to streamline and consolidate ICASS services  by implementing best practices developed either by local staff or  other posts.
The board should ensure that all personnel responsible for  implementing ICASS operations at overseas posts receive detailed  training on their roles, responsibilities, and authorities, including  detailed customer service and other technical training for Americans  and foreign nationals responsible for the actual delivery of services.
We are making our recommendations to the ICASS Executive Board  because ICASS is an interagency operation that relies on the collective  input of affected agencies. As such, the Executive Board must approve  decisions that affect ICASS policies and operations.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments on a draft of this report from the ICASS  Executive Board and nine agencies that are primary participants in  ICASS—the U.S. Departments of Agriculture, Commerce, Defense,  Homeland Security, Justice, State, and the Treasury; the U.S. Agency for  International Development; and the U.S. Peace Corps. Their comments,  along with our responses to specific points, are reprinted in appendixes IV- XIII.  The board and agencies also provided technical comments, which we  have incorporated throughout the report where appropriate.
The ICASS Executive Board agreed with the report. The board indicated  that it met several times in recent months and has decided to take a more  active role in the overall management of the ICASS system. It said it is  trying to eliminate duplicative administrative support structures where  possible and cited a recent State/USAID Shared Services Study, which  ICASS partially funded, that reviewed support services at several posts and  concluded that consolidating some services could save costs and improve  quality. The board also endorsed efforts to reengineer business processes,  citing State Department efforts to centralize certain support operations at  regional support centers in Bangkok, Thailand; Paris, France; Frankfurt,  Germany; Ft. Lauderdale, Florida; and Charleston, South Carolina. The  board also agreed that strategies must be developed to improve ICASS  accountability. Finally, the board noted that cost management is a priority.
The U.S. Departments of Agriculture, Commerce, Defense, Homeland  Security, Justice, State, and the Treasury; the U.S. Agency for International  Development; and the U.S. Peace Corps generally agreed with our  recommendations. State stressed the importance of eliminating wasteful  duplication. In addition, State defended the cost structure of ICASS and  criticized other agencies for resisting actions such as investments in  technology, which State believes could reduce costs. In contrast, comments  from the other agencies focused on the high costs of ICASS support  services, saying that ICASS had failed to contain costs. These agencies  generally believed that our draft report was too focused on duplication and  did not place sufficient emphasis on the need to contain costs. They argued  that the voluntary nature of ICASS needed to be retained so that each  agency can determine what support services it requires and how to obtain  them in the most cost-effective way.  In addition, the agencies provided  their perspectives on a variety of ICASS issues, including training, system  fairness, and transparency. Based on these comments, we modified our  report to clarify that elimination of duplication and the containment of  costs were equally important.
We believe that implementation of our recommendations will help the  executive branch achieve economies of scale by reducing duplication and  contain costs by focusing on streamlining business practices. We generally  support the voluntary nature of ICASS participation because agency needs  differ. We also understand that some agencies choose not to use some  ICASS services because they believe they can obtain these services  elsewhere at less cost. However, we believe such decisions should be  supported with strong business cases.
We are sending copies of this report to interested congressional  committees. We are also sending copies of this report to all current  members of the ICASS Executive Board, including the Secretaries of  Agriculture, Commerce, Defense, Homeland Security, State, the Treasury,  and Veterans Affairs; the Attorney General; the Administrator for the U.S.  Agency for International Development; the Commissioner of the Social  Security Administration; the Director of the U.S. Peace Corps; the Director  of the Office of Management and Budget; and the Librarian of Congress.  Copies will be made available to others upon request. In addition, this  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-4128. Another GAO contact and staff acknowledgments are  listed in appendix XIV.
section_title: Scope and Methodology
paragraphs: To respond to both objectives of our review—whether the International  Cooperative Administrative Support Services (ICASS) system has led to  efficient delivery of administrative services and whether ICASS is an  effective mechanism for providing quality services—we conducted  fieldwork and reviewed documentation in Washington, D.C., and at eight  posts worldwide. In Washington, we reviewed ICASS policies and  procedures outlined in the Foreign Affairs Handbook; reviewed  documents and interviewed Department of State (State) officials from the  Bureaus of Administration, Medical Services, and Overseas Buildings  Operations, six geographic bureaus, the Offices of Management Policy and  Rightsizing, and the ICASS Service Center; attended meetings of the ICASS  Executive Board and the ICASS Working Group; participated in ICASS  training at the Foreign Affairs Training Center in Arlington, Virginia; and  reviewed documents and interviewed headquarters officials from the U.S.  Departments of Agriculture, Commerce, Defense, Homeland Security,  Justice, and the Treasury, as well as from the Office of Management and  Budget, the U.S. Peace Corps, and the U.S. Agency for International  Development (USAID). In addition, we conducted data analyses using data  from the ICASS Global Database, which was developed and maintained by  the ICASS Service Center and contains information for each ICASS cost  center at each overseas post on service subscription, workloads, billing,  service withdrawal, and other information necessary for operating the  system. To assess the reliability of the ICASS data, we (1) performed  electronic testing for errors in accuracy and completeness, (2) discussed  data reliability issues with agency officials knowledgeable about the data,  and (3) reviewed relevant reports from the State Office of Inspector  General and GAO and financial audits of the ICASS system. Although we  found some areas of concern dealing with information security, we  determined that the data were sufficiently reliable for the purposes of this  report. Data showing estimates for future costs under the Capital Security  Cost-Sharing Program were provided in a briefing by staff from the Bureau  of Overseas Buildings Operations. The estimate for the average annual cost  of maintaining American personnel overseas was developed by State’s  Office of Rightsizing.
To assess how well ICASS operates at posts, we visited seven posts and  held telephone interviews with an eighth post. Selection of case study posts  was based on a variety of factors, including geographic spread; a range in  the size of posts; potential for reform; levels of service duplication; input  from the ICASS Service Center, State’s geographic bureaus, and customer  agencies; and posts’ availability. Based on the criteria, we collected  information from the U.S. embassies in Bern, Switzerland; Cairo, Egypt;  Conakry, Guinea; Dakar, Senegal; Dar es Salaam, Tanzania; Lima, Peru; San  Jose, Costa Rica; and Vienna, Austria. In Vienna, we also conducted  interviews with the U.S. Mission to the Organization for Security and  Cooperation in Europe and with the U.S. Mission to the United Nations  Agencies in Vienna. Due to national elections that corresponded with our  scheduled work in Guinea, at the request of the Ambassador, we conducted  telephone interviews with Embassy Conakry staff, rather than travel to the  post.
For our case study posts, we collected data and documentation from and  conducted interviews with embassy personnel involved in ICASS, including  Ambassadors and Charges d’Affaires, Deputy Chiefs of Mission, State  management officers, ICASS staff, and customer agency managers and staff  who work with ICASS, on  the role of the ICASS Council and its decision-making process;   mechanisms for ensuring quality services, including evaluating service  provider performance and customer satisfaction;   the degree to which customers understand ICASS goals and structures,  and whether they agree that service quality matches ICASS costs;   the level of ICASS training among council members and service  providers, including foreign nationals;   the management burden associated with ICASS, and the pros and cons   the effect of the changing nature of agencies’ staffing (including State’s)  on ICASS costs and quality of service;  the effect of temporary duty personnel and regional staffing on ICASS   whether agencies pay the full costs associated with their presence at   the cost centers to which each customer agency subscribes;  the cost centers to which each agency does not subscribe, the basis for  not subscribing to those services, and how agencies provide for  administrative support services to which they do not subscribe under  ICASS;  the effect that opting out of services has on other agencies; and  the degree to which the ICASS Council has considered new approaches  to providing ICASS services, including streamlining processes and  adopting best practices developed by agencies at posts or by other posts  in the region.
Also at these overseas posts, we collected and analyzed information on the  costs associated with agencies owning and operating motor vehicle fleets  independent of ICASS and self-providing residential furniture for American  direct-hire staff. In addition, we inspected warehouses and other support  operation facilities and attended ICASS Council meetings when those  meetings coincided with our visit.
We conducted our work between April 2003 and August 2004 in accordance  with generally accepted government auditing standards.
section_title: ICASS Cost Centers
paragraphs: Customers receive ICASS services by subscribing to “cost centers,” which  are groups of similar services bundled into larger categories. “Workload  factors” for each cost center are the primary bases by which customers are  charged for services. These methodologies, developed in Washington, D.C.,  are applied to unit cost factors specific to posts to determine the actual fee  an agency owes for services it uses. The unit costs are based on  the salaries and benefits of service providers’ employees, who include  both the staff actually delivering or providing the services as well as the  direct-hire American managers overseeing the services;  the furniture, equipment, and operating expenses necessary for  delivering the services; and   the total number of people serviced or the amount of service provided  by the employees associated with specific cost centers.
Overall, ICASS is implemented in one of two manners. An ICASS Standard  post breaks the services into 32 cost centers, while an ICASS Lite post  consolidates the number of cost centers into 16 groups (see table 2).  Generally speaking, ICASS Lite tends to be used at small posts because the  management burden is lower than at Standard posts. ICASS Standard,  however, allows for greater flexibility to customers in choosing which  services they will take and avoiding paying for services they do not receive.  Agencies are required to subscribe to two cost centers—the Basic Package  and the Community Liaison Office (CLO). The Basic Package cost center  provides services by State that agencies would benefit from, whether or not  they choose to use the services. Included in the Basic Package are  diplomatic accreditation to the host government;  licenses and special permits;  maintenance of the Emergency Evacuation Plan;  reciprocity issues with the host government on items such as car  imports, spousal employment, and reimbursement for value-added  taxes;  identification cards, accounts receivable and payable, and other check- in/check-out procedures;  welcoming kits for newly posted or temporary duty employees;  maintenance of post reports;  determination of exchange rates;  International School accreditation surveys, grant management, and  Suspense Deposit Abroad accounting and voucher processing;  support for employee recreation centers and commissary boards; and  support structures for visits by Very Important Persons.
These items should be considered standard services at all posts, but  individual posts may add to the list. The CLO provides services to help  integrate employees and their dependents into the surrounding community.  For example, the CLO provides welcoming materials, assists family  members with employment and educational opportunities, and organizes  cultural activities, among many other services.
The overhead cost center is designed to reflect costs that are not easily  confined to another cost center but are essential administrative activities.  Examples of overhead costs include ICASS awards, post office box rentals,  and postage. Overhead costs are distributed on the basis of each agency’s  percentage of net cost of all services it receives in the remaining cost  centers.
There are also other costs that agencies must pay for that are not  considered cost centers, per se. For example, ICASS personnel are both  service providers and service customers. As such, the ICASS “office” is  treated as any other customer or entity at post in terms of generating costs  for the services it consumes. However, this “office” is not billed because the  services it consumes are done so in the course of providing services to the  other customers. For example, when a vehicle mechanic drives an ICASS  motor pool vehicle to a parts supplier, he generates costs in the direct  vehicle operations cost center. These costs, which include overhead, are  distributed among customers on the basis of the proportion of total costs of  services and overhead that each agency generates in a given cost center. In  addition, costs associated with operations of the ICASS Service Center are  distributed to agencies’ headquarters for general support given to posts  worldwide, or to specific posts for services that are uniquely provided to  them (e.g., post-dedicated ICASS training).
section_title: Agency Participation in ICASS
paragraphs: Table 3 shows the number of posts and ICASS participation rates for  agencies with direct-hire staff assigned to 10 or more posts in any year from  1998 through 2003. The participation rate equals the average rate of cost  center subscription for each agency at all posts. The analysis excluded  State. Participation rates for USAID reflect changes in agency coding, such  that the rates for 1998 represent all of USAID (code 7200.0), while the rates  for 1999-2003 represent only USAID Operating Expenses funds (code  7203.1).
We acknowledge that there are services for which an agency has no need  and, thus, they do not subscribe to them. For example, agencies that do not  employ local staff have no need to subscribe to Locally Employed Staff  Personnel Services. Because we could not determine agencies’ need for  services, we were required to consider all cost centers as available for  subscription. As a result, our analysis simply states the average rate at  which agencies subscribe to available cost centers.
However, we were able to control for cases in which agencies are located  in facilities outside of State-owned or State-leased facilities. Examples  could include instances when agencies own office facilities, as with some  USAID and Peace Corps offices, and when agency personnel are located at  host country ministries, among others. Agency personnel reported that in  such cases, they neither have the need for some ICASS services, nor would  the embassy provide these services. Specifically, these services would  include (1) nonresidential local guard programs, (2) government  owned/long-term leased residential building operations, (3) government  owned/long-term leased nonresidential building operations, (4) short-term  leased residential building operations, and (5) short-term leased  nonresidential building operations. Therefore, in cases where agencies  were not charged for these five services at a post, we removed them from  the list of “available” cost centers and recalculated their rate of  participation for those agencies.
section_title: Comments from the ICASS Executive Board
section_title: Comments from the Department of State
paragraphs: The following are GAO’s comments on the Department of State’s letter  dated July 6, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. We have modified our report to cite these legislative authorities. 2. We disagree with State’s assertion that ICASS goals do not include the  containment or reduction of overall governmental costs. The Foreign  Affairs Handbook clearly states that posts form interagency ICASS  councils “to eliminate waste, inefficiency and redundancy”  (6 FAH-5 H-102.1), and that “ICASS provides the tools and incentives to  achieve significant reductions in support costs under the concept of a  U.S. Government that ‘works better and costs less’” (6 FAH-5 H-103.2).  The handbook also states that “all mission agencies participate in the  management and delivery of services, as well as achievement of  economies of scale and elimination of costly duplication”  (6 FAH-5 H-103.1 (a)), and that “Councils should not be reluctant to  challenge regulations which inhibit streamlining and cost reduction”  (6 FAH-5 H-103.1 (b)). The handbook further states that “the Council  and providers together share the responsibility and accountability for  achieving the most cost efficient and streamlined quality administrative  services at post” (6 FAH-5, H-307.1).
The principle of voluntary service subscription serves multiple  purposes, including ensuring that agencies receive and pay for only the  services they need and providing flexibility for agencies when they  need services they cannot conveniently receive through ICASS, among  others. In addition, the principle was designed as the mechanism  whereby agencies could use market forces to reduce ICASS costs and  improve services. Customers’ ability to opt out of services would  provide the incentive for customers and providers alike to cooperate in  discovering the most cost-effective means for service delivery.  Moreover, competitive alternatives that are advantageous to all  agencies at a post were to be shared by the agency that discovered the  alternatives and reviewed by the ICASS Council and service providers  for their potential adoption postwide. The handbook states, “Rather  than simply withdrawing from an ICASS service to take advantage of  better or cheaper services, agencies should bring the alternative to the  attention of the full Council for consideration by all agencies. Factors  such as the effect on career staffs or economies of scale can then be  considered mission-wide” (6 FAH-5 H-307.6 (a)). 3. We said the system is simple enough that most customers understood  the basic structures and tenants of ICASS. We believe that if overseas  staff receive training appropriate to their role in ICASS, the current  system is simple enough for them to operate. We feel the complexity of  the system is appropriate for balancing the somewhat contradicting  principles of cost, equity, and simplicity. A less complex system may be  less costly to operate, but may also be less equitable because customers  may pay for services they don’t actually use. A system more closely  resembling cost accounting would be more equitable in the sense that  customers pay only for the services they actually use, but it would also  be more costly because it would require higher workload burdens and  more specialized skills for the employees that operate the system.
Our discussion of the new temporary duty personnel policy makes no  assertion why so few posts have chosen to adopt it. As of August 2004,  three of our eight case study posts have adopted the new policy,  including Embassies Cairo, Dar es Salaam, and Lima. Those that have  not adopted the policy stated that the number of long-term temporary  duty personnel they receive are so few that they do not create a burden. 4. On March 28, 2003, USAID notified the Dakar ICASS Council that  effective October 1, 2003, USAID would no longer receive vehicle  maintenance services. During our fieldwork in Dakar in December  2003, post officials stated they were unaware whether a reassessment  of staffing needs related to changing workload requirements had been  conducted. In July 2004, a post official confirmed the other post  officials’ earlier statements that no reassessment of staffing needs was  made at the time USAID notified the council of its intention to  withdraw, although one vehicle mechanic was temporarily reassigned  to service generators to fill an immediate need in facilities  maintenance. The official also confirmed that USAID has not yet  disclosed to the council the savings it expected to achieve or has  actually realized under its outsourcing arrangement. The official did  confirm that 10 vehicles have been added to the vehicle maintenance  service, but he did not know when those vehicles were added in  relation to USAID’s withdrawal. We believe that the addition of these 10  vehicles, whenever they were added, does not detract from our  argument that overall government costs rose as a result of (1) the  failure to reassess how changing workload requirements affected  staffing needs at the time USAID announced it would withdraw from  the service and (2) the failure by all at post to assess whether USAID’s  competitive alternative could result in reduced costs for all agencies at  post. 5. We do not blame State for ICASS cost increases from 2001-2003.
According to data and officials from the ICASS Service Center, there  are three primary reasons why costs increased between 2001 and 2003:  State’s hiring under the Diplomatic Readiness Initiative, infrastructural  improvements, and wage and price increases. Under ICASS, salaries  and benefits for State officers who administer ICASS at overseas posts,  such as those in the General Services Offices, are shared among  multiple agencies.
When services are added to ICASS, the participants in these services  share the associated costs. State is correct that there have been some  services added to ICASS for which State had previously paid, including  $20 million annually for mail pouching services and $15 million for  computer system and cabling upgrades. Adding these services to ICASS  resulted in increased cost to non-State agencies, although not  necessarily to the government as a whole. However, we did not intend  to imply these services were added without the consent of agencies on  the ICASS Executive Board. 6. We believe that there may be other legitimate reasons for not enrolling  in ICASS services, including logistical considerations (i.e., an agency’s  proximity to the service provider); whether an agency’s headquarters  provides the service; or whether the agency even needs the service,  among others. We generally support the voluntary nature of ICASS but  believe that detailed, objective analyses are needed to assess whether  an agency should obtain services from ICASS. 7. Although customers at posts we visited indicated they were generally  satisfied with the overall quality of ICASS services, they were not  satisfied with the cost. Comments on a draft of this report from many  non-State agencies demonstrate that they are not satisfied with the  costs of ICASS services. (See apps. VI-XIII.) 8. We believe that the Foreign Affairs Handbook grants ICASS Councils  more authority over ICASS resources than simply approving annual  ICASS budgets. The handbook states the following: “Customer agencies, as stakeholders with a greater voice in the  management of shared administrative services, are empowered to  collectively seek innovative ways to reduce costs and improve services.  To these ends, the Council may streamline administrative processes or  reshape the administrative workforce. Decisions might include  downsizing, delayering and flattening of the staff organization; use of  qualified local hire specialists in lieu of higher cost U.S. based staff; and  alternative agency or contract service providers. The Councils may also  consider use of the services of U.S. Embassies and Agencies in other  countries where costs are lower” (6 FAH-5 H-307.2 (a)).
The handbook further states these decisions should be made in close  consultation with service providers “in light of management or cost  studies developed by or at the request of the Council” and “to facilitate  this process, the service provider will be expected to provide the  Council financial breakdowns, staffing patterns, and operational  studies as requested”  (6 FAH-5 H-307.2 (b)). We believe these clauses  provide customer agencies with the authority to review how ICASS  services are delivered, including whether services are provided in- house or from an external source, and the number and type of embassy  staff needed. However, the handbook also states councils “should avoid  micromanagement of the service provider activities” because the  councils are not intended to serve as supervisors of “the administrative  service provider in the day-to-day details of operations”  (6 FAH-5 H-307.3 (b)). A State official with the ICASS Service Center  said micromanagement of service provider personnel is strongly  discouraged, and that councils generally can affect instances only when  new positions are being added. That is, examinations of how and by  whom services are provided are considered micromanagement on the  part of the council, and are discouraged, as we demonstrated with the  USAID Dakar proposal to pilot test a new method for providing  residential maintenance. Thus, based on the handbook, State  administrative officers’ management practices, and illustrations such as  the one previously mentioned, we concluded that ICASS councils have  little ability to fully manage ICASS resources. 9. We agree with the principles behind the working capital fund and  would encourage posts to make greater use of it. Our purpose was only  to report the perceptions among post personnel that they would lose  funding in the long run if they made frequent use of the fund. We did not  conduct analyses to determine whether that belief was based on  verifiable evidence. 10. We modified the report text, where appropriate, to incorporate this  additional information and suggested wording. 11. We made no comments on the merits of moving to a unified housing  and furniture pool. We did not intend to criticize or challenge the  ambassador’s authority as the Chief of Mission or as the President’s  representative. We have revised the section to clarify that we are not  expressing an opinion on Chief of Mission authority; rather, we are  saying that differing authorities can overrule ICASS decisions and that  both customers and providers at posts reported that these instances  can negatively affect the morale of some ICASS participants. 12. We agree that centralization of certain functions is necessary to instill  order on the system. Our intended point is that some providers and  customers perceive centralization as limiting post flexibility, and, as  such, some post officials question the degree by which they are truly  empowered to operate the system in the best manner for the post.
section_title: Comments from the U.S. Agency for International Development
paragraphs: The following is GAO’s comment on the U.S. Agency for International  Development’s letter dated June 28, 2004. The agency also provided  technical comments that were incorporated into the text, as appropriate.
subsections: section_title: GAO Comment
paragraphs: 1. We did not intend to suggest that duplication was the primary  contributor to inefficient operations. We have made several  modifications to the report to emphasize that improved business  practices and reduction in duplication are equally important. Our  recommendations address both the elimination of unnecessary  duplication and the reengineering of administrative processes to  contain costs. We acknowledge in the report that agencies have many  reasons for self-providing services and that some are justifiable.
section_title: Comments from the Department of Agriculture
paragraphs: The following are GAO’s comments on the Department of Agriculture’s  letter dated July 9, 2004. The agency also provided technical comments that  were incorporated into the text, as appropriate.
subsections: section_title: GAO Comments
paragraphs: 1. We agree that there is a relationship between the efficiency and costs of  ICASS services and the existence of duplicative administrative services  at some posts. This is why our recommendations address the  elimination of unnecessary duplication and the reengineering of  administrative processes. We believe that these actions together can  improve the efficiency of ICASS services and help contain costs.
We did not intend to suggest that duplication was the primary  contributor to inefficient operations. We have made several  modifications to the report to emphasize that improved business  practices and reduction in duplication are equally important. 2. We agree that opting out of a service does not always result in higher  overall costs to the government. However, when an agency opts out and  obtains a service outside of ICASS, there is potential for unnecessary  duplication, and opportunities to achieve economies of scale may be  lost. Moreover, when an agency opts out and ICASS does not take  action to adjust costs, such as reducing support staff to reflect the  reduced workload, the operation becomes less efficient and more  costly to the remaining users. 3. We generally support the voluntary nature of the ICASS program  because agencies’ needs differ. Therefore, we did not intend to suggest  that agencies should be forced to use ICASS services. However, we  believe that there are opportunities to achieve more economies of  scale, and that there are instances of unnecessary and wasteful  duplication. Our recommendations are designed to reduce duplication  where this would be in the best interests of the government and to  encourage agencies to prepare business cases to support decisions to  obtain services from outside of ICASS.  Such business cases could  demonstrate that there are financial and other benefits of obtaining  services outside of ICASS.
4.
Individual agency decisions regarding participation in ICASS and how  to obtain support services may have a substantial impact on other  agencies at a post. Therefore, we believe that business cases should  address the overall impact on the U.S. government. Having each agency  fend for itself is contrary to the ICASS concept and will not lead to  cohesive and efficient operations within the executive branch.  However, we recognize that there may be trade-offs between what is  best for an individual agency and what is best for the government as a  whole. We believe that business cases that analyze all facets of financial  and other implications of decisions to opt out of ICASS services will  encourage better decision making.
section_title: Comments from the Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce’s  letter received June 29, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. We believe both reduction in duplication and reengineering of current  ICASS services are needed to contain ICASS costs, and we believe  customer agencies and State need to work together to achieve this.  Since ICASS is a market-based approach to delivering services, we also  believe agencies should exercise their rights to consider innovative  alternatives for service delivery and to make the benefits of cost- effective alternatives available to other agencies at post. 2. We did not intend to blame duplication on agencies that have  withdrawn from ICASS services. We presented the Dakar vehicle  maintenance example to illustrate how decisions by one agency can  affect all agencies at post. We faulted USAID neither for the reason nor  for the action of opting out of the service. We did note, however, that  USAID did not share detailed information (i.e., its business plan) on the  new means by which they would receive the service. We also noted that  neither the council nor the service provider requested that USAID share  this information. As a result, the Dakar ICASS Council missed an  opportunity to review whether the post could adopt the USAID  approach to the betterment of all agencies. We recommended that  business cases be made not only to help agencies determine whether an  alternative arrangement is better for themselves, but also to help local  ICASS Councils determine whether more cost-effective service  arrangements could be applied postwide. 3. We agree that there may be legitimate reasons for agencies to opt out of  ICASS services. It is for this reason we conclude and recommend that  agencies should work to reduce unnecessary duplication of  administrative structures. 4. Our determination that ICASS customers are generally satisfied with  the quality of services they receive was based on a global survey, local  customer satisfaction surveys at our case study posts, and more than  100 interviews with ICASS customer and service provider personnel at  those posts. We do cite service cost as the main complaint with the  system. 5. We believe implementing our recommendations could result in a more  streamlined, cost-effective means for delivering necessary  administrative support services. We did not conduct an assessment of  the benefits and costs of creating an independent agency responsible  for delivering overseas administrative support services.
section_title: Comments from the Department of Defense
paragraphs: The following are GAO’s comments on the Department of Defense’s letter  dated July 2, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. We did not intend to underemphasize cost control, and we modified the  report to add more emphasis to the importance of cost containment.  We stated that labor is the largest ICASS cost and that agencies cite  high labor costs associated with American direct-hire ICASS personnel  as a reason for self-providing services. Our recommendation to  increase the system’s accountability by streamlining operations is  designed to encourage cost control and service provider rightsizing.  2. The Foreign Affairs Handbook requires ICASS Councils to (1) monitor  service performance and costs, concentrating on overall performance  against standards and (2) prepare an annual written assessment on the  quality and responsiveness of the services furnished by the service  provider based upon the agreed-upon performance standards  (6 FAH-5 H-301.4 (f) and (g)). We believe that councils that do not  evaluate their service providers miss important opportunities to  measure service provider performance and to address items that could  make service delivery more cost-effective. 3. We modified the text to clarify that many agencies decided not to  subscribe to some ICASS services. 4. We support Chief of Mission authority at post and did not mean to  imply that ICASS is outside of that authority. Our main point was that  ICASS authorities sometimes become subordinate to other authorities,  and we modified the text of the report to more clearly reflect this  observation. 5. We did not mean to imply that all ICASS decisions and policies should  be made or be negotiable at the post level. We intended to highlight  some ICASS customers’ concern that ICASS lacks flexibility to adapt to  meet unique local needs, thus limiting the local council’s ability to make  decisions that optimize service provision at post. 6. We agree with the department that individual posts have the authority  to determine whether they wish to implement the new policy for long- term temporary duty personnel. Our discussion of the new temporary  duty personnel policy makes no assertion as to why few posts have  chosen to adopt it. Three of our eight case study posts have adopted the  new policy (Embassies Cairo, Dar es Salaam, and Lima). Officials at  those posts that have not adopted the policy stated that temporary duty  personnel do not result in an undue burden on their respective posts. 7. We agree that there may be legitimate reasons for agencies to opt out of  ICASS services, and we reflect this throughout the report. 8. Several department field staff stated that they either had not had ICASS  training before arriving overseas or that training in their ICASS roles  and responsibilities was not sufficient.
section_title: Comments from the Department of Homeland Security
paragraphs: The following are GAO’s comments on the Department of Homeland  Security’s letter dated June 29, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. We generally support the voluntary nature of the ICASS program  because agencies’ needs differ. Therefore, we did not intend to suggest  that agencies should be forced to use ICASS services. However, we  believe that there are opportunities to achieve more economies of  scale, and that there are instances of unnecessary and wasteful  duplication. Our recommendations are designed to reduce duplication  where this would be in the best interests of the government and to  encourage agencies to prepare business cases to support decisions to  obtain services outside of ICASS.   2. We agree that ICASS operations at some posts are more transparent  than at others, but we did not find evidence that services were being  managed to the benefit and priorities of State and the detriment of  other agencies at the posts we visited. However, we believe that our  recommendations regarding system accountability and training should  help address this concern. 3. The salary and benefit costs of State employees who provide support  services to all agencies are shared by all agencies that receive the  services. For example, costs to employ a foreign national driver are  charged to the agencies that receive services from the driver, while  costs to employ an American Financial Management Officer are divided  among the agencies that make use of financial services the manager  provides. We support this practice largely because it is consistent with  the overall rightsizing concept of agencies paying the full cost  associated with their overseas presence. 4. Agencies can choose whether to participate in an ICASS service. If an  agency does not participate and, therefore, does not pay for a service,  that agency should not receive the service. Otherwise, the agencies that  have chosen to participate in the service would effectively be  subsidizing the cost of providing the service to the agency that did not  participate but still wanted the service. There are ICASS provisions for  cases where an agency that wishes may receive partial services for a  reduced cost, as well as methods for an agency to make direct  payments for use of a service that benefits that particular agency.
5. We agree. This is why decisions to not obtain services through ICASS  may not always be in the best interests of the government.
section_title: Comments from the Department of Justice
paragraphs: The following are GAO’s comments on the Department of Justice’s letter  dated June 30, 2004. The agency also provided technical comments that  were incorporated into the text, as appropriate.
subsections: section_title: GAO Comments
paragraphs: 1. We agree that there may be legitimate reasons for agencies to opt out of  ICASS services, and we reflect this throughout the report. We also  stated that agencies cited affordability of services as a reason for not  subscribing. 2. Our report focuses on the delivery and costs of support services, and  we do not examine in detail the annual ICASS budget process.   Nonetheless, several agencies reported that this process is problematic  because it requires that agencies predict costs and request funding well  before they know what their actual costs are likely to be, and agencies  have little flexibility in paying for cost increases resulting from  unforeseen events that occur subsequent to their funding requests.  Although we do not address this issue on our report, we believe it is  something the ICASS Executive Board could consider when  implementing our recommendations. 3. We agree that agencies should be notified in advance of changes in  policy and staffing that would affect their contributions. However,  implementation of the proposed Capital Security Cost-Sharing Program  would be separate from ICASS, and therefore we made no assessment  of its merits or governance structures. We included discussion of the  program only to show its potential impact on ICASS.
section_title: Comments from the Department of the Treasury
section_title: Comments from the U.S. Peace Corps
paragraphs: The following are GAO’s comments on the U.S. Peace Corps’ letter dated  June 25, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. We did not intend to suggest that duplication was the primary  contributor to inefficient operations. This is why our recommendations  address the elimination of unnecessary duplication and the  reengineering of administrative processes. We believe that these  actions together can improve the efficiency of ICASS services and help  contain costs. We have made several modifications to the report to  emphasize that improved business practices and reduction in  duplication are equally important.
We presented the Dakar vehicle maintenance example to illustrate how  decisions by one agency can affect all agencies at post. We faulted  USAID neither for the reason nor for the action of opting out of the  service. We did note, however, that USAID did not share detailed  information (i.e., its business plan) on the new means by which they  would receive the service. We also noted that neither the council nor  the service provider requested that USAID share this information. As a  result, the Dakar ICASS Council missed an opportunity to review  whether the post could adopt the USAID approach to the betterment of  all agencies. We recommended that business cases be made not only to  help agencies determine whether an alternative arrangement is better  for themselves, but also to help local ICASS Councils determine  whether more cost-effective service arrangements could be applied  postwide. 2. We agree that agencies have different administrative support service  requirements. This is why we generally support the voluntary  participation principle of ICASS.  3. We said these were non-ICASS issues because they would exist  whether or not ICASS was in place. 4. The Foreign Affairs Handbook states that ICASS Councils “assume the  responsibility and exercise the initiative to install the infrastructure and  administer the system the way they think is right for their environment”  (6 FAH-5 H-301). We did not intend to imply that all ICASS decisions  should be made locally; we agree that centralization and  standardization of some functions can eliminate inconsistencies in  ICASS implementation.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Jeffrey Baldwin-Bott, David G.  Bernet, Janey Cohen, Etana Finkler, Jane S. Kim, and Julia Kennon made  key contributions to this report.
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