Foreign Aid Reform: Comprehensive Strategy, Interagency Coordination, and Operational Improvements Would Bolster Current Efforts
Published: 2009-04-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In January 2006, to better align foreign assistance programs with U.S. foreign policy goals, the Secretary of State appointed the Administrator of the U.S. Agency for International Development (USAID) to serve concurrently as Director of Foreign Assistance (DFA) and gave the DFA authority over all Department of State and USAID foreign assistance funding and programs. The Office of the Director of Foreign Assistance (State/F) was given responsibility for reforming foreign assistance by, among other things, consolidating State and USAID foreign assistance processes. GAO was asked to (1) examine State/F's key efforts to consolidate State and USAID foreign assistance processes and (2) identify any key challenges that affect State/F's reform of foreign assistance. GAO evaluated budget, planning, and other documents and interviewed agency officials in Washington, D.C.; Ethiopia; Haiti; Jordan; Kenya; Peru; and Ukraine.
section_title: What GAO Found
paragraphs: Since June 2006, in its efforts to consolidate State and USAID foreign assistance processes, State/F has implemented certain key practices that are characteristic of successful organizational transformations--for example, developing a mission statement and involving employees. In addition, State/F has taken several steps to consolidate State and USAID planning and budgeting processes--for example, instituting common program definitions for the use of foreign assistance funds to collect, track, and report on data related to program funding and results. State/F also began developing annual operational plans, based on the common program definitions, to serve as annual expenditure plans, performance plans, and performance reports for State and USAID foreign assistance projects worldwide and to provide descriptive information about other U.S. government agencies' foreign assistance programs. Moreover, State/F initiated a pilot program for developing a 5-year country assistance strategy (CAS) intended to provide a comprehensive view of all U.S. foreign assistance activities in every country in which U.S. resources are targeted. Further, beginning with fiscal year 2008, State/F implemented a joint State-USAID foreign assistance budget process to bring needed coherence of program activities and accountability for resources. Finally, State/F established an integrated State-USAID workforce to direct the consolidation of State and USAID foreign assistance operations. Despite this progress, State/F faces challenges that could constrain its efforts to reform foreign assistance. For example, State/F lacks time frames for developing a comprehensive U.S. foreign assistance strategy--one of its assigned responsibilities--and fully implementing the 5-year CAS. As a result, State/F has limited capacity to demonstrate progress in these key reform efforts. State/F also lacks a clear, consistent strategy for communicating with USAID and State employees about its efforts, leading to confusion among staff and hindering management-staff relations; although State/F has devised an initial plan to address this challenge, it has not yet carried out this plan. In addition, State/F's operational plans do not adequately describe some of USAID's regional foreign assistance activities, and consequently senior management may lack a holistic overview of foreign assistance resources needed to make informed trade-offs among various priorities. Further, the goals and measures in State/F's country operational plans sometimes do not align with those of other agencies providing foreign assistance in the country, limiting State/F's assurance that all U.S. foreign assistance funds in the country are strategically tied to broader U.S. foreign policy goals in the country. Finally, both a 2008 State/F internal review and GAO found that State/F had not yet clearly defined the roles of some of its employees and organizational units and had not matched all employees' skills with their positions. State/F has taken initial steps in response to the internal report's findings, including defining the roles and responsibilities of various executive and managerial positions and organizational units, but has not yet done so for all State/F staff, and has not developed a long-term workforce management plan to address workforce planning challenges.

section_title: Letter
paragraphs: In January 2006, the Secretary of State announced a major transformation  in the U.S. government’s procedures for directing and managing foreign  assistance programs. The Secretary noted that U.S. foreign assistance  programs were fragmented among multiple Department of State (State)  bureaus and offices and between State and the U.S. Agency for  International Development (USAID). The Secretary observed that this  fragmentation made it more difficult to plan coherently and risked  conflicting or redundant efforts and wasted resources. To better align U.S.  foreign assistance with broader foreign policy goals, the Secretary created  the position of Director of Foreign Assistance (DFA), reporting to the  Secretary of State at a level equivalent to the rank of Deputy Secretary of  State. The Secretary gave the DFA authority over all State and USAID  foreign assistance funding and programs and charged the DFA with  providing overall leadership to foreign assistance delivered through other  entities.
In June 2006, State’s Office of the Director of Foreign Assistance (State/F)  was created to carry out the DFA’s responsibilities and focus the use of  foreign assistance on achieving the Secretary’s transformational  diplomacy goal: “to help build and sustain democratic, well-governed  states that will respond to the needs of their people, reduce widespread  poverty, and conduct themselves responsibly in the international system.”  State/F was given responsibility for developing, among other things,    a coherent, coordinated U.S. government foreign assistance strategy;    multiyear country-specific assistance strategies and annual country-   consolidated policy, planning, budget, and implementation mechanisms  and staff functions required to provide leadership to USAID and State  foreign assistance; and    guidance for foreign assistance delivered through other U.S. government  agencies.
In this context, you asked us to (1) examine key actions that State/F has  taken to reform and consolidate State and USAID foreign assistance  processes and (2) identify any key challenges that affect State/F’s reform  of foreign assistance. At your request, in October 2008 we issued a legal  opinion on the delegation of authorities to the DFA. Additionally, in  November 2008, we issued a correspondence on State/F’s foreign aid  information systems recommending that the Secretary of State direct the  DFA to use best practices for risk management procedures for two  information systems currently managed by State/F. (See app. III for  details on State/F’s information systems and the status of our  recommendations.)
In preparing this report, we examined and analyzed budget, planning,  management, and workforce plans and documents. We also interviewed  officials at State and USAID headquarters in Washington, D.C., and at six  U.S. embassies and USAID missions in Ethiopia, Haiti, Jordan, Kenya,  Peru, and Ukraine; the USAID missions in Kenya, Peru, and Ukraine have  responsibilities for activities in several countries throughout their  respective regions. We conducted this performance audit from May 2008  to April 2009 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Appendix I contains a  more detailed description of our scope and methodology.
subsections: section_title: Background
paragraphs: In January 2006, the Secretary of State stated that America’s current  foreign assistance structure risks incoherent policies, ineffective  programs, and wasted resources when spending is not strategically tied to  overarching U.S. goals and foreign assistance is fragmented across  numerous bureaus and agencies. At that time, the Secretary created the  position of DFA to lead State/F’s implementation of State and USAID’s  consolidated planning, budgeting, and reporting processes and also to  serve concurrently as the Administrator of USAID, with both of these  positions reporting directly to the Secretary. In addition, within the federal  government and among interest groups, scholars, and others, an ongoing  debate about how to improve the efficiency and effectiveness of U.S.  foreign assistance has led to several proposals to reform U.S. foreign aid,  ranging from, among others, elevating USAID to a cabinet-level agency to  merging USAID with State.
In January 2009, the new Secretary of State observed that the incoming  administration is committed to reviewing ways to improve the distribution  of U.S. foreign assistance. She stated that the administration should build  on initiatives that had proven successful while determining whether poorly  performing initiatives could be improved. The Secretary also noted that  the incoming administration has emphasized, among other things, the need  to coordinate and consolidate foreign assistance programs housed  throughout executive agencies. Meanwhile, modernizing foreign  assistance is a stated priority of the Chairman of the House Committee on  Foreign Affairs.
subsections: section_title: Foreign Assistance Framework
paragraphs: In 2006, to help align foreign assistance programs with the  transformational diplomacy goal, State/F developed the framework for  U.S. foreign assistance (foreign assistance framework). The framework  ties this goal to five strategic objectives—peace and security, governing  justly and democratically, investing in people, economic growth, and  humanitarian assistance—to various category-country types, in an effort to  move recipient countries to the next level. (See app. IV for a detailed  description of the foreign assistance framework, including descriptions of  the country categories.)
section_title: International Affairs Funding and State/F’s Budget and Planning Processes
paragraphs: Funding for international affairs, which includes funding for foreign  assistance, is provided through annual appropriations and an account  structure reflected in reports of the appropriations committees. Of the  $42.5 billion appropriated for programs classified as international affairs in  fiscal year 2008, almost $36.6 billion was appropriated to accounts  administered by State or USAID; the remaining $5.9 billion went to other  departments, agencies, and organizations. For example, programs are  implemented by the Departments of Defense (e.g., education and training);  Agriculture (e.g., P.L. 480 food aid); and Treasury (e.g., technical  assistance and debt restructuring). In addition to these agencies  implementing programs classified as international affairs, a number of  other federal entities are involved in providing foreign assistance (see app.  II). Of the $36.6 billion appropriated to or administered by State and  USAID, approximately half went through the new State-USAID  consolidated budget, planning, and reporting processes in fiscal year 2008  (see table 1).
State and USAID use several planning and budget documents in the  consolidated planning and budget processes for State and USAID foreign  assistance. Some were created by State/F, some predate State/F, and some  are governmentwide documents (see table 2).
The budget process for State and USAID’s foreign assistance funds follows  the traditional federal budget and appropriation process, with one  important distinction: after Congress appropriates funds to programs  authorized under the Foreign Assistance Act, USAID and State undergo a  congressional notification process known as the 653(a) consultation  process. In compliance with notification procedures established by law  State/F notifies Congress of the type of assistance and level of funding to  be provided to individual countries and international organizations. In  practice, State and USAID foreign assistance funds generally are not made  available for obligation until the reporting requirements are finalized.
section_title: State/F Information Systems
paragraphs: In conjunction with USAID, State/F developed the FACTS I database to  collect foreign assistance planning and reporting data, including plans for  implementing current-year funds and performance planning and reporting  data. According to numerous FACTS I users as well as our previous  review, FACTS I was slow and unreliable during the first 2 years of the  foreign assistance budget, planning, and reporting processes. State/F  developed FACTS II to address these issues. State/F also created FACTS  Info, a system that allows State/F to aggregate, analyze, and report data on  many U.S. foreign assistance programs. During its pilot phase (September  2007–February 2009), FACTS Info was accessible to a limited number of  users within State and USAID; State/F began to expand usage to additional  State/F and USAID users in early 2009. Figure 1 depicts the data flow for  both systems.
section_title: Key Practices for Agency Transformation
paragraphs: Implementing a large-scale change management initiative such as the State- USAID foreign assistance organizational transformation is a complex  endeavor that requires the concentrated efforts of both leadership and  employees to accomplish new organizational goals. Experience shows that  failure to adequately address—or, often, to consider—organizational culture  is at the heart of unsuccessful mergers and transformations. We have  reported on a number of key practices that have consistently been found in  successful mergers, acquisitions, and transformations (see table 3).
section_title: Interagency Coordination and Collaboration
paragraphs: Successful planning and implementation of multi-agency efforts such as  foreign assistance reform is a challenge that requires interagency  coordination and collaboration. We have previously reported on a range of  barriers that agencies face when they attempt to collaborate. For  example, agencies sometimes have missions and goals that may conflict,  making reaching a consensus on strategies and priorities difficult. Also,  interagency collaboration is often hindered by incompatible procedures,  processes, data, and computer systems. As we have also previously  reported, the following practices can help agencies sustain and enhance  interagency collaboration:    Define and articulate a common outcome.
Establish mutually reinforcing or joint strategies.
Identify and address needs by leveraging resources.
Agree on roles and responsibilities.
Establish compatible policies, procedures, and other means to operate  across agency boundaries.
Develop mechanisms to monitor, evaluate, and report on results.
Reinforce agency accountability for collaborative efforts through agency  plans and reports.
Reinforce individual accountability for collaborative efforts through  performance management systems.
section_title: State and USAID Have Taken Steps to Support Organizational Transformation, Develop Consolidated Foreign Assistance Planning and Budgeting Processes, and Establish State/F Workforce
paragraphs: In consolidating their foreign assistance operations, State and USAID took  several steps that our previous work has shown to support such an  organizational transformation. State/F also took steps to develop  consolidated State-USAID foreign assistance planning and budgeting  processes. In addition, State/F took steps to establish an integrated State- USAID workforce.
subsections: section_title: Key State and USAID Efforts Supported Organizational Transformation
paragraphs: Consistent with key practices that we have previously found in successful  mergers and organizational transformations, State and USAID efforts to  establish State/F have included (1) ensuring top leadership’s involvement  in the transformation, (2) establishing a mission statement, (3) developing  key operating principles, (4) establishing key implementation goals and  timelines, and (5) involving employees in the transformation.
subsections: section_title: Top Leadership Involvement
paragraphs: Top leadership at State and USAID articulated reasons for, and drove, the  organizational transformation of State’s and USAID’s foreign assistance,  beginning with the Secretary of State’s 2006 announcement creating the  DFA position. In April 2006, 2 months before State/F was officially  established, the DFA appointed a Chief Operating Officer (COO), who was  responsible for helping formulate the transformed organizational structure  as well as developing and implementing State/F’s reformed planning and  budgeting processes. We have previously reported that appointing a COO  or Chief Management Officer is one way to elevate attention on  management issues and transformational change, integrate various  initiatives, and institutionalize accountability for addressing them.
section_title: Mission Statement
paragraphs: State/F’s top leadership and key staff established mission and vision  statements to guide the organization’s transformation. This effort began  about 2 years after State/F was created, in response to findings from an  April 2008 outside review of its organization and processes. According to  the statement, State/F’s mission, on behalf of the Secretary of State and  the DFA, is to    provide leadership, coordination, and strategic direction within the U.S.  government and with external stakeholders to enhance foreign assistance  effectiveness and integrate foreign assistance planning and resource  management across State and USAID;  lead strategic, operational, and performance planning of U.S. foreign  assistance with a focus on aligning resources with policy priorities;    develop and defend foreign assistance budget requests and allocate State  and USAID foreign assistance funding to meet urgent needs and new  opportunities and to ensure long-term sustainable investments; and    promote good stewardship of foreign assistance funds by strengthening  oversight, accountability, and transparency.
section_title: Key Operating Principles
paragraphs: In addition to establishing mission and vision statements, State/F senior  leaders and staff developed a key set of operating principles. These  principles include    being accountable to the American people for ensuring the effective use of    being constructive and cooperative partners with stakeholders, and    valuing State/F’s employees as its most important resource.
We have previously reported that operating principles articulating the core  values of a new organization can, like the mission statement, serve as an  anchor that remains valid and enduring while organizations, personnel,  programs, and processes may change.
section_title: Implementation Goals and Timelines
paragraphs: State/F set and met certain implementation goals and timelines for key  aspects of its consolidated budget and planning processes. For example,  State/F exceeded its goal of implementing country-specific operational  plans—a key annual budget and planning document for the reformed  performance budgeting process—to 67 pilot countries in its first year. In  addition to those pilot countries, each USAID country mission, regional  office, and Washington, D.C.-based bureau—collectively known as  operating units—produced an operational plan for fiscal year 2007. All  operating units produced operational plans for fiscal year 2008. State/F’s  COO told us that another key goal was submitting a joint State-USAID  foreign assistance budget request based on the new foreign assistance  framework. State/F accomplished this goal even though the office was  established after the fiscal year 2008 budget formulation process had  begun.
section_title: Employee Involvement
paragraphs: State and USAID involved their employees in the transformation by using  employee teams and by obtaining employees’ ideas about the  transformation. According to its COO, State/F created implementation  teams at State/F’s inception to focus on two key areas: (1) overseeing the  organizational and administrative changes needed to create the new office  and (2) developing and implementing the reformed planning and budgeting  processes. Each year since its creation in 2006, State/F has conducted  after-action reviews to seek employee feedback on how to improve  various processes. For example, employee teams are currently reviewing  State/F’s core processes and identifying suggested improvements for each.  According to State and USAID bureau and field staff with whom we met,  State/F implemented several employee suggestions from these reviews.  We have previously reported that employee involvement, such as State/F’s  use of employee teams and after-action reviews, strengthens the  transformation process by including frontline perspectives and  experiences.
section_title: State/F Developed Consolidated State-USAID Foreign Assistance Planning and Budgeting Processes
paragraphs: State/F developed a program configuration, known as the Standardized  Program Structure and Definitions (standardized program structure), to  provide a consistent way to categorize and account for State-USAID  foreign assistance. State/F also began developing annual operational plans,  performance plans and performance report based on the standardized  program structure, to strengthen the link between foreign assistance  funding, activities, and results. In addition, State/F initiated a pilot  program for multiyear, country-specific foreign assistance strategies,  intended to take a comprehensive approach in describing overall U.S.  strategic approaches and priorities, goals, and resource assumptions.  Moreover, State/F implemented a consolidated budget process for State  and USAID foreign assistance programs, beginning with the fiscal year  2008 budget request.
subsections: section_title: Standardized Program Structure
paragraphs: To collect and track standardized data on program funding and results  achieved with that funding, State/F instituted the standardized program  structure. This structure provides common definitions for the use of  foreign assistance funds and flows from the foreign assistance framework,  using the framework’s five program objectives plus one administrative  objective. For each objective, State/F developed a common configuration  of goals linked to implementing mechanisms. This program structure is the  foundation of the annual operational plan and the performance report as  well as the FACTS data system. (Fig. 2 shows an excerpt of the  configuration of goals for the governing justly and democratically program  objective.) State/F also developed standard definitions and sets of  indicators related to these goals. For example, State/F defines the human  rights program element as “advancing the protection of international  human rights, including labor rights, by supporting governmental and  nongovernmental organizations created to protect, promote, and enforce  human rights.” One indicator related to this program element is “the  number of public advocacy campaigns on human rights supported by the  U.S. government.”
According to State/F’s operational plan guidance, State/F’s annual  operational plans are intended to show how all U.S. government agencies’  foreign assistance resources—including resources provided by U.S.  agencies other than State and USAID—are being used to support the  goals and objectives outlined in the foreign assistance framework. The  operational plans, which operating units began developing in October  2006, were originally multifunctional, serving as annual spending plans,  performance plans, and performance reports. According to State/F  guidance, the plans were intended to strengthen the link between funding,  activities, and results for joint State-USAID foreign assistance programs.
State/F guidance notes that operational plans differ from other State and  USAID planning and reporting requirements in that they provide detail  about the specific uses of all available funds for the given fiscal year.  State/F piloted the operational plan in 67 “fast track” operating units in  fiscal year 2007 and required all 190 operating units, including country  missions and regional and functional bureaus in State and USAID, to  complete an operational plan in fiscal year 2008.
Using the standardized program structure, the operational plan reflects  funding information for individual State and USAID foreign assistance  projects (i.e., at the implementing mechanism level). For each project, the operational plan shows the entities and individuals receiving funding the amounts received, the activities being funded, and the expected  results. We have previously reported that pursuing a closer alignmen between performance planning and budgeting—much like State/F is  attempting to do with its operational plans and standardized program structure—is essential in supporting the transition to a more results- oriented and accountable federal government. Developing a link bet ween  requested funding and expected performance goals is a critical first step in  defining the performance consequences of budgetary decisions. By  structuring the operational plan around the program configuration, S is able to collect standard funding and performance data on individual  programs worldwide through FACTS and report on foreign assistance in the aggregate—something that was not possible prior to State/F’s reforms Although State and USAID are the only U.S. agencies currently entering  data into and receiving reports from the FACTS and FACTS Info systems State/F originally expected the systems to eventually include data from the  more than 25 other U.S. entities involved in foreign assistance. State/F  . ,  recognizes that doing so will be difficult because, among other reasons,  different agencies use different procedures, processes, and systems to  formulate budget requests, allocate resources, and measure results.
In addition, the operational plans are intended to provide information  about how all U.S. government agencies are coordinating and  collaborating in each country to achieve short-term and long-term foreign  assistance goals as well as information on other agencies’ foreign  assistance resources. State/F’s operational plan guidance requires State  and USAID staff to describe how the programs of all other U.S.  government agencies in the country are helping address, at the program  area level, the goals in State/F’s foreign assistance framework. To obtain  this information, State and USAID staff must work with other agencies.  According to some USAID and State staff at field missions, the annual  operational plan process has improved transparency among the various  U.S. government agencies involved in U.S. foreign assistance activities in  the country. For example, State officials in Ukraine stated that, because of  going through the operational plan process with other U.S. agencies, State  has a much better view of all U.S. agencies’ programs in Ukraine, including  some details about what activities other agencies’ programs include. Also,  USAID officials in both Haiti and Peru said that interacting and  collaborating with other agencies that are implementing foreign assistance  activities in the country during the operational plan process raised their  own awareness of other agencies’ program activities and goals. As a result,  they said that they were able to make better-informed decisions for  State/F’s planning and budgeting processes.
State/F has made several changes to the operational plan process. In  response to findings in the 2007 after-action review, the process was split  into two phases beginning in fiscal year 2008. The purpose of this two-part  structure was to more evenly distribute the workload for State and USAID  over time and to permit State and USAID project data to be provided later  in the fiscal year, after each operating unit receives its allocations and has  had the opportunity to plan their projects. According to State/F officials,  after fiscal year 2008, State/F discontinued the two-phased approach and  instead separated the operational plans from the performance plans and  reports. The operational plans serve as annual spending plans and discuss  planned activities and expected results from the current year  appropriation; annual performance plans and reports capture fiscal year  performance planning and performance reporting.
State/F also made a number of changes to the information contained in the  operational plans, based on feedback from the after-action reviews. For  example, State/F eliminated the requirement for operating units to provide  narrative information at the subelement level and made this information  optional at the implementing mechanism level. It also eliminated  performance indicators at the implementing mechanism level. These  changes were in direct response to staff concerns that State/F was  collecting detailed information that was not being used in decision  making. Also, State/F now prepopulates certain data fields in the FACTS  database with prior-year information; staff must re-enter prior-year  information only if it has changed. According to USAID and State officials,  these changes have reduced the workload burden for staff working on the  operational plans, especially in field locations that experienced slow  connections with the FACTS database. Finally, State/F adjusted some of  the standard indicators to better fit programs and permits the use of  custom indicators at the program element level to highlight the unique  circumstances of a particular program or country in addition to the  standard indicators.
section_title: 5-Year Country-Specific Foreign Assistance Strategies
paragraphs: In June 2006, State/F directed USAID to suspend any planned updates to  its multiyear country strategies. State/F did so because it planned to  replace the USAID-only country strategies with a joint State-USAID  country assistance strategy (CAS). In August 2007, the DFA established a  joint USAID-State task force to develop an approach for these strategies.  The task force completed its efforts and, since February 2008, the DFA  approved plans for new 5-year CAS that would take a comprehensive  approach by including the efforts of all U.S. agencies providing foreign  assistance in the country. According to State/F’s guidance for developing a  CAS document, each CAS should include, among other things, an overall  strategic approach and priorities, a discussion of up to five priority goals,  and resource assumptions. The guidance states that the CAS is meant to  identify and describe U.S. foreign assistance goals in specific countries  and provide a sense of prioritization among these goals;  improve strategic and programmatic coordination, collaboration, and  transparency within the U.S. government; and    provide a comprehensive statement of overall U.S. foreign assistance  priorities in a given country, regardless of funding source.
To achieve these goals, USAID and State are to consult with the host- country government, nongovernment and private sector organizations in  the country, and other international donors. State/F guidance also  encourages input from other U.S. government agencies.
During 2008, State/F piloted the CAS in 10 countries. According to the  pilot selection criteria, the countries chosen    are broadly representative of the diversity of U.S. foreign assistance;    are enthusiastic about participating in the pilot;    have large, medium, and small programs; and  receive funds through a large variety of accounts, including the Millennium  Challenge Account Compact and Threshold Programs and the President’s  Emergency Plan for AIDS Relief.
In the meantime, some USAID officials in Washington, D.C., and at field  missions expressed concern that some USAID country strategies had  become outdated and did not reflect the current political and  developmental environment, creating a gap between country-level  guidance for planning, programming, and budgeting and a longer-term  view of a country’s needs and strategies for meeting them. In September  2008, USAID issued guidance permitting field missions to develop interim  country strategies until the CAS is fully developed and implemented.
As of January 2009, all 10 pilot countries had submitted a draft CAS to  State/F; as of April 2009, State/F had approved four of them and the  remaining six were under review. According to State/F, when all 10 pilot  CAS documents are approved, State/F plans to conduct an after-action  review to determine best practices and lessons learned and then may  consider initiating a subsequent follow-on pilot project. State/F has not  established time frames for implementing the CAS worldwide.
section_title: Consolidated Budget Process for State and USAID Foreign Assistance Programs
paragraphs: State/F implemented a joint State-USAID foreign assistance budget  process, beginning with the fiscal year 2008 budget request, and made  subsequent changes to the process based on its experiences and feedback  from after-action reviews. Initially, it focused on foreign assistance  planned for individual countries based on a categorization of their  development using the foreign assistance framework. State/F created  country core teams for each country receiving foreign assistance and gave  them the responsibility of recommending funding requests for each  country, based on State/F’s five strategic objectives and using the  standardized program structure. These initial core teams consisted of a  team leader from State/F, representatives from relevant regional and  functional bureaus, a State/F Resources and Appropriations staff member,  and other stakeholder U.S. government agencies. Because this process  began after embassies and USAID missions submitted their funding  requests for fiscal year 2008, embassy and mission staff were not initially  assigned to country core teams.
State/F’s joint budget process increased the visibility of foreign assistance  resources within State and USAID. According to State/F and USAID  officials with whom we met, the new process had a positive effect on how  foreign assistance budgets were presented and defended during the  Secretary’s review. Under this new process, comparable USAID and State  bureaus present their foreign assistance budget proposals to the Secretary  in a joint session. In the past, because the USAID Administrator also  served as the DFA, the Administrator had an opportunity to participate in  each session along with the Secretary, the Deputy Secretary of State, or  the Under Secretary of State for Political Affairs. According to State/F  officials, this process resulted in a better understanding of foreign  assistance programs and priorities between State and USAID and provided  the Secretary of State with a comprehensive overview of planned foreign  assistance resource allocation.
State/F responded to employee feedback from after-action reviews and  made several changes to the fiscal year 2009 and 2010 budget processes.  For fiscal year 2009, to better reflect the bureau structures of State and  USAID, State/F replaced the country core teams, which focused on  individual countries, with assistance working groups, which were  composed of regional and functional bureau representatives and had  greater knowledge of particular countries and programs. In addition to  establishing the regional assistance working groups, State/F held a  roundtable for each of the five strategic objectives. This allowed  functional bureaus to incorporate cross-cutting and global priorities into  country-focused funding proposals for the fiscal year 2009 budget request.
For fiscal year 2010, the process was pared down further and regional  bureaus were given primary responsibility for creating budget proposals,  which reduced the time State/F officials had to spend reconciling regional  and functional bureaus budget requests. State/F also created an intranet  site to which it posted budget proposals, allowing regional and functional  bureaus to comment on each other’s budget proposal. The effect of this  change remains to be seen.
section_title: State/F Integrated Workforce
paragraphs: State/F took several steps to establish its organizational structure and  develop its human resource capabilities. In early 2006, State/F began to  staff its new office. State reassigned 23 employee positions to State/F, and  USAID assigned 65 employee positions to State/F. The 23 State positions  were reassigned from various bureaus and units within State. The 65  USAID positions were reassigned from several USAID offices, including  many from the Bureau for Policy and Program Coordination. USAID and  State reached an agreement on the employee reassignments on June 1,  2006.
By the end of March 2007, State/F had created new job descriptions and  defined the skills and competencies needed for 16 of the 23 positions  reassigned from State; State/F made minor or no changes to the rest of the  existing position descriptions. New job descriptions for the 65 positions  reassigned from USAID were approved in September 2007, 16 months after  State/F began operations. In commenting on a draft of this report, State/F  told us that, as of October 2008, it had created job descriptions for all of  the new positions.
section_title: State/F Faces Implementation Challenges Related to Organizational Transformation, Planning and Budgeting, and Workforce
paragraphs: Despite progress in its organizational transformation, developing  consolidated planning and budgeting processes, and establishing an  integrated State-USAID workforce, State/F faces implementation  challenges related to these efforts. Specifically, State/F (1) lacks  implementation time frames, as well as goals and benchmarks, for several  aspects of its foreign assistance reform efforts; (2) lacks a clear and  consistent strategy for communicating with staff and stakeholders about  its transformation and reform efforts; (3) faces several challenges related  to its annual planning processes; (4) faces challenges in developing and  implementing its multiyear planning process; (5) faces challenges in its  consolidated budget process; and (6) has not fully addressed concerns  regarding management of its workforce.
subsections: section_title: State/F Lacks Implementation Time Frames for Comprehensive Foreign Assistance Reforms and Developing a Foreign Assistance Strategy and Country- Specific Strategies
paragraphs: Although State/F has established time frames for certain key elements of  foreign assistance reform, it has not established time frames for  developing and implementing a comprehensive, integrated U.S. foreign  assistance strategy covering all agencies involved in delivering U.S. foreign  assistance, or for developing guidance for foreign assistance delivered  through other U.S. government entities. According to State/F officials,  State/F was awaiting direction and guidance from the incoming  administration regarding its goals and priorities for U.S. foreign assistance  reforms. In addition, because it has not completed the pilot phase for the  5-year CAS, State/F has not yet developed time frames for fully  implementing the CAS. As our previous work suggests, without time  frames for implementing the comprehensive and country-specific  strategies, State/F lacks target dates needed as an objective means to track  and report its progress. Moreover, until it develops and implements a  comprehensive, integrated U.S. foreign assistance strategy, as well as  guidance for other U.S. agencies’ foreign assistance, State/F lacks  assurance that State’s, USAID’s, and other agencies’ programs are  strategically tied to overarching U.S. goals.
section_title: State/F Lacks Goals and Benchmarks for Measuring Progress for Certain Reform Processes
paragraphs: State/F has not defined goals for certain aspects of foreign assistance  reform or developed benchmarks to gauge whether the reforms are  successful. Without these key aspects of successful mergers and  transformations, State/F is unable to pinpoint performance shortfalls and  gaps and suggest midcourse corrections, and will not know what success  looks like. For example, State/F’s COO told us that State/F did not define  what it wanted to achieve from restructuring and streamlining State and  USAID mission and bureau plans and reports or determine how it would  gauge progress toward those goals and define success. Without a clear  picture of the results to be achieved, it is difficult to ensure that reforms  are implemented in a way that achieves the desired results.
Also, as of January 2009, State/F had not determined how it will measure  the anticipated efficiency gains to be realized from developing  consolidated program management systems. As a result, some State and  USAID employees in Washington, D.C., and in the six countries we visited  did not understand how their work was contributing to State/F’s desired  results and could not determine whether the reforms were helping State/F  achieve its goals. For instance, according to State/F, one of the results  expected from FACTS and FACTS Info was a substantial decline in ad hoc  requests to embassies and missions for budget and performance  information. However, USAID officials in all six countries we visited told  us they have no way of knowing whether the data they enter into FACTS is  being used because State/F does not disseminate information about the  use of FACTS data. They also said that the number of USAID headquarters  and State/F requests for information—known as taskers—had declined  only slightly or not at all. On the other hand, State/F told us that although  it does not track and communicate to the field the number of inquiries it  handles at headquarters using FACTS or FACTS Info, its reliance on  embassy- and mission-provided data has declined. State/F’s Congressional  Relations Specialist said that she frequently uses FACTS and FACTS Info  to respond to information requests from congressional committees and  rarely sends taskers to the field for information. She hypothesized that the  taskers to the field may be from State and USAID bureau officials and that  these requests would decline over time as FACTS and FACTS Info become  more widely accessed and well known.
section_title: State/F Lacks a Clear and Consistent Communication Strategy
paragraphs: State/F lacks a clear, consistent strategy for communicating about its  organizational transformation and planning and budgeting reforms.  Communicating information early and often helps to build an  understanding of the purpose of planned changes, builds trust among  employees and stakeholders, cultivates a strong relationship with  management, and helps gain employee ownership for a merger or  transformation.
According to officials in headquarters and in the six countries we visited,  poor communication about the fiscal year 2007 operational planning  process led to a great deal of confusion. For example, a USAID official in  Jordan said that State/F repeatedly changed its guidance over a short  period of time; at times, the updated guidance contradicted, instead of  built on, previous guidance and staff were unsure which guidance to  follow. In addition, many staff told us that when seeking clarification on  the conflicting guidance, they had received either no response or an  untimely response from State/F. Also, State/F officials told us that, in  hindsight, it appeared that State/F could have benefited from fuller and  earlier communication about its planning and budgeting reforms with  Congress and other stakeholders, such as contractors and nonprofit  organizations involved with program implementation. To address these  challenges, in November 2008, State/F said that it would create a  Communications Manager position to develop and implement more  effective communications processes; as of March 2009, this position had  been created but not yet filled.
section_title: State/F Faces Challenges in Its Annual Operational Planning Processes
paragraphs: As with any planning structure, State/F’s operational plans have several  strengths but also present challenges. First, although regional missions  complete operational plans, they do not clearly capture all of the foreign  assistance programs and services implemented by USAID’s regional  offices. As a result, senior management may lack the holistic overview of  foreign assistance resources needed to make informed decisions about  trade-offs among various priorities. According to leading practices in  federal strategic planning, an agency’s strategic goals and objectives  should cover its major functions and operations, and its annual  performance plan should cover each program activity set forth in its  budget. Like its country-specific, or bilateral, missions, USAID’s regional  offices provide foreign assistance programs, although these programs tend  to operate across borders. Regional offices also implement and manage  programs in limited presence countries and provide technical assistance  and support to bilateral missions and programs. However, according to  regional officials with whom we met, it is difficult to categorize and  capture technical assistance in the operational plan. In addition, they  stated that because the operational plan has a bilateral mission focus and  distinguishes between programs in different sectors, it does not adequately  describe regional offices’ programs and services in multiple sectors for  multiple limited presence countries. Senior leaders in State/F  acknowledged that the operational plan’s bilateral mission focus is  problematic in this regard. In commenting on a draft of this report, State/F  stated that regional activities can be and are captured in operational plans,  noting that regional operating units produce operational plans. Based on  our work, we maintain that the operational plan structure does not  adequately capture regional activities.
Second, State/F faces challenges in coordinating and collaborating with  officials in other U.S. government agencies to obtain funding and  performance information, at the program element level, about these  agencies’ foreign assistance programs. Officials from these agencies told  us that State/F did not coordinate well with their agencies in planning for  programs that these agencies implement with State or USAID funding. For  example, DOD staff who implement Foreign Military Financing and  International Military Training and Education programs told us during our  site visits that State/F’s goals and measures—as reflected by the  standardized program structure in the operational plans—did not always  align with the broader goals and measures articulated in DOD’s own  planning documents and strategies for its own programs. Moreover,  officials from other U.S. government agencies implementing their own  foreign assistance programs told us of challenges they face in providing  information to State and USAID officials for inclusion in the operational  plan. As a result, State/F cannot be sure, through its operational plan  process, that governmentwide foreign assistance funds are strategically  tied to overarching policy goals. At some field missions, officials from the  Departments of Commerce, Energy, Health and Human Services, and the  Treasury told us that providing support for State/F processes, such as the  operational plan, creates an additional workload that is neither recognized  by their agencies nor a factor in their performance ratings. We have  previously reported that federal programs contributing to the same or  similar results should collaborate to ensure that goals are consistent and,  as appropriate, program efforts are mutually reinforcing. In addition, as a  key collaboration practice, agencies can reinforce individual  accountability for collaborative efforts through their performance  management systems.
Third, although the standardized program structure is generally a useful  tool to categorize foreign assistance programs, its program structure  categories sometimes overlap and in some cases, its performance  indicators do not always adequately describe program achievements.  State/F guidance does not discuss how to categorize programs within the  standardized program structure, except to say that it is critical that funds  be identified by what is being done, rather than why it is being done.
Standardized program structure categories are not mutually  exclusive. Staff from State and USAID told us that it is not always clear to  them how to categorize program activities, which could result in similar  programs’ being coded differently. For example, a USAID official in the  East Africa Regional Office, describing a civilian program similar to  neighborhood watches, said that the subelement that best describes the  program falls under the “Stabilization Operations and Security Sector  Reform” program area, which generally involves military programs. The  official ultimately sought legal counsel to determine whether it was  appropriate to code the program in this subelement or whether it should  be coded in a subelement under a civilian program area. State/F officials  told us that the standardized program structure was developed by  interagency experts in each of the program areas and that it would  continue to rely on individuals who know and understand the programs  and are best positioned to categorize them.
Standard indicators do not always capture program performance.
Staff from State and USAID told us that they sometimes cannot find  standardized performance indicators to describe State/F programs and  therefore choose “the next best thing.” As a result, State/F cannot ensure  that its programs and projects are reported accurately and consistently.  For example, a State official in Ethiopia told us that he and USAID  officials whom he consulted were unable to find a performance indicator  that accurately described training provided to Ethiopian police units for  defusing bombs. Eventually, the State and USAID officials selected one  indicator from several that related generally to police training, even  though none accurately described the type of assistance being provided. In  commenting on a draft of this report, State/F officials told us they have  been working for the past year on a comprehensive review of the  standardized program structure in order to clarify and update program  definitions but that they would also review the standard indicators  These design weaknesses in the standardized program structure could  compromise accuracy and data reliability in the operational plans,  performance reports, FACTS, and FACTS Info, all of which are grounded  in the standardized program structure.
Fourth, as State/F itself recognizes, its required standard indicators are  generally output oriented and therefore provide little information about  program impact. State/F chose to use output measures, in part, to  aggregate and report, at the agency level, quantitative information  common to foreign assistance programs across countries. USAID staff at  the six overseas missions we visited told us they saw this shift as a step  backward from the progress some USAID missions had made over the  years toward using more outcome-oriented measures to obtain  information on program impact. State and USAID officials in headquarters  and the field recognized the value of being able to aggregate information  across countries at the agency level but questioned the usefulness of the  output-oriented information collected with State/F’s standard indicators.  For example, a USAID official in Haiti told us that the USAID mission and  its implementing partners have shifted their focus away from impact  measures toward measures that provide less information on actual  progress. In addition, USAID officials in Kenya expressed concerns that  the quality and availability of the qualitative information needed to manage  program activities had declined, reducing the mission’s ability to measure,  and respond to inquiries about, program impact. State/F’s guidance  encourages the use of custom indicators to establish targets and monitor  the progress and impacts of their projects but it does not describe how  State/F will use this information. Some State and USAID officials noted  that although information related to program impact is important for  managing programs and understanding the programs’ effects, they were  not sure how, or if, State/F uses such information. These officials observed  that, in contrast, State/F’s guidance says that the quantitative, output- oriented information collected with the standard indicators is used to  inform its resource requests and report to Congress and the American  people.
Fifth, State/F’s planning process excludes certain of State’s and USAID’s  operating and administrative expenses for foreign assistance programs,  constraining State/F’s ability to ensure needed levels of administrative  support for their foreign assistance programs. Although State/F plans and  budgets for foreign assistance program funds, State’s Resource  Management Bureau and USAID’s Management Bureau plan and request  funds for operating and administrative expenses. As a result, senior  management lacks a comprehensive view of the total resources needed to  support their program activities.
section_title: State/F Faces Challenges in Developing and Implementing Its Multiyear Planning Process
paragraphs: State/F faces two key challenges related to its development of the 5-year  CAS. First, the CAS may not adequately replace USAID’s country  strategies, as State/F initially planned. According to some USAID and State  officials in Washington, D.C., and in the countries we visited, the CAS is a  high-level document that includes overall objectives for the country but— unlike USAID’s country strategies—lacks substantive content and details  on how USAID is to achieve its objectives. For example, the CAS’ content  is limited to high-level information on (1) the country program and the  overall U.S. strategic approach and priorities, (2) up to five priority goals,  and (3) resource assumptions. In contrast, the 2002-2006 USAID country  strategy for Peru, for example, includes, for each of Peru’s seven  objectives, a detailed discussion of the objective, the development  challenge, performance measures, critical assumptions, commitment and  capacity of other development organizations, and sustainability issues.
To address USAID missions’ concerns, in October 2008 the DFA issued an  executive message that outlined three strategic planning options regarding  the development of interim country strategies. The message stated that a  USAID mission could (1) continue to use an existing country strategy; (2)  develop an interagency CAS; or (3) develop an updated, USAID-specific  country strategy if the existing strategy is no longer relevant and a CAS is  not likely to be in place in fiscal year 2009. According to this guidance,  these options would be available while the CAS is being piloted. As of  March 2009, State/F officials told us that it had not yet completed an  assessment of the CAS pilot.
Second, State/F’s suspension of the development of USAID country  strategies led to planning challenges at some USAID missions, particularly  during the first 2 years of State/F’s existence. According to some USAID  officials, until October 2008—when USAID issued guidance for developing  interim country strategies—the absence of a long-term country strategy  hampered their ability to plan and manage project activities. For example,  in June 2008, USAID officials in Ethiopia told us that before their country  strategy had expired, USAID and the Ethiopian government routinely  agreed on program activities that USAID planned to carry out over the  next several years, pending availability of funds. However, absent a  current multiyear strategy, and because of the resulting uncertainty about  USAID’s long-term goals and strategies for the country, USAID officials  were reluctant to reach preliminary agreements with various Ethiopian  government ministries. In Ukraine, USAID officials told us that in June  2006, State/F suspended the mission’s efforts to update its 2003-2007  country strategy. As a result, the officials said, USAID’s strategy for  Ukraine became outdated and did not reflect the current political,  economic, and developmental environment in Ukraine, which had changed  dramatically. They, too, were reluctant to execute agreements with the  Ukrainian government without a clear understanding of how these  projects link to a long-term strategy for the country. In contrast, USAID  officials in Haiti told us that State/F’s suspending development of new  country strategies had not adversely affected them because a 3-year  country strategy for 2007-2009 had been approved and implemented in  August 2006. Although the guidance issued by USAID in September 2008 is  a step forward in addressing USAID missions’ concerns, the development  of USAID country-specific strategic plans will remain an interim process  until the CAS is finalized and USAID country strategies are fully developed  and implemented.
section_title: State/F Faces Challenges in Its Consolidated Budget Processes
paragraphs: We identified two key concerns with State/F’s consolidated budget  processes. First, although State/F’s consolidated budget process was in  part intended to bring needed coherence and accountability to  governmentwide foreign assistance programs, the process excludes  billions of dollars both within and outside State and USAID’s jurisdiction.  For example, of the $36.6 billion appropriated to, or administered by, State  and USAID, only about half went through the new State-USAID  consolidated budget, planning, and reporting processes in fiscal year 2008.  Further, according to State/F guidance, State/F coordinates with, but does  not approve budget requests and resource allocations for, the Global  HIV/AIDS Initiative (GHAI) or the Millennium Challenge Corporation  (MCC); the appropriations act for fiscal year 2008 included $1.8 billion and  $1.6 billion, for GHAI and MCC, respectively. State/F’s process also does  not include Pub. L. 480 Title II grants, for which almost $1.7 billion was  appropriated in fiscal year 2008.
Second, State/F’s budget process reforms may affect a mission’s ability to  respond to unexpected events in a timely manner. Under State/F’s  operational plan process, funds are allowed and committed at lower  levels—the element and subelement levels respectively—than they were  with previous processes. This change allows State/F to report a finer level  of detail regarding how funds are used. However, State and USAID  officials, both in headquarters and the field, expressed concern that this  change could have unintended impacts on a mission’s ability to respond  effectively to changing conditions, possibly hampering its ability to  address time-critical issues such as riots or disasters. For example,  officials in State’s Bureau of Western Hemisphere Affairs, describing their  efforts to identify funding for a new, multiyear administration initiative,  said that before State/F was created, the bureau was able to quickly and  easily reallocate funds to respond to unexpected events. Now, to address  such an event, the bureau must request and receive approval to reallocate  funds in the operational plan, because State/F requires all funds to be  committed in advance. The officials said that they have found this to be a  complex and lengthy process, requiring multiple levels of approval—often  up to the DFA—for a variety of funding changes. State/F has taken some  steps to reduce the burden of its reallocation process. For example, it  delegated authority to USAID mission directors to approve reallocation  requests in certain instances. In addition, State/F decreased the number of  reallocation requests that need to be approved by the DFA. In another  example, USAID officials in the field described their efforts to respond to  unexpected parliamentary elections in Ukraine while their operational  plan was under review by State/F. According to these officials, the mission  requested that State/F release some funds prior to approving the plan, so  that the mission could develop and implement programs related to the  Ukraine’s upcoming elections. According to State/F’s reprogramming  guidance for fiscal years 2007 and 2008, this request required the  signatures of 10 USAID and State officials (outside State/F) and 4 State/F  officials, including the DFA. USAID officials said the approval took 6  weeks and that this limited their ability to develop and implement their  programs.
section_title: State/F Faces Challenges in Workforce Management Issues
paragraphs: Although State/F has taken some steps to establish a workforce and  organizational structure, including beginning to define the roles and  responsibilities of its employees, our work and an October 2008 State/F  internal management review found that State/F faces key challenges in  managing its workforce. For example, the State/F internal management  review found that (1) State/F had not yet clearly defined the roles of some  of its employees and organizational units and (2) State/F had not ensured  that its employees have the skills and competencies needed to manage  foreign assistance programs. According to State/F officials, in an effort to  demonstrate an impact on U.S. foreign assistance programs, State/F  initially gave precedence to creating and deploying consolidated budget,  planning, and reporting processes rather than to examining the workforce  composition, defining roles and responsibilities, and ensuring needed  skills and competencies. Although it is important for leaders to be decisive  and deliver early successes, we have previously found that success in an  organizational transformation or merger is more likely when positions are  filled based on the competencies needed for the new organization.
Roles and responsibilities. The October 2008 internal management  review noted that the roles of some State/F employees and organizational  units were not well defined or understood; that the responsibilities of  some offices overlapped; and that there was confusion about when, during  the planning and budgeting processes, certain employees should be  involved in various issues. Similarly, State and USAID officials in  Washington, D.C., and most of the six countries we visited told us that  State/F employees sometimes were unable to answer questions about  operational plan guidance, FACTS, and FACTS Info and were unsure  where in State/F to direct such questions so as to ensure timely, accurate  answers.
Skills and competencies. State/F’s internal management review noted  concerns about whether some State/F employee skills are well matched  with State/F’s core functions. The review found that although State/F staff  had strong skills, they either were not placed in positions where they  could leverage these skills or their skills did not match the capabilities that  State/F required. During our work, some State and USAID officials in  Washington, D.C., and in the field echoed these concerns.
Although State/F has taken some actions in response to its October 2008  internal review, it has not developed a long-term workforce management  plan for addressing these challenges. During our review, State/F officials  told us that they had initiated several corrective actions in response to  recommendations in the internal review, such as defining roles and  responsibilities for its various executive and managerial positions and its  organizational units; developing plans to ensure that the current  workforce is aligned to meet these needs; and improving training and  professional development offered to its employees. However, State/F has  not clearly defined roles and responsibilities for some of its employees. In  addition, State/F has not developed a long-term workforce management  plan to periodically reassess its workforce capacity to carry out assigned  responsibilities, such as supporting and managing the consolidated  budget, planning, and reporting processes for State and USAID foreign  assistance programs. Our previous work has shown that many aspects of  workforce planning and management require long-term strategies, to  ensure that the agency’s human capital program capitalizes on its  workforce’s strengths and addresses related challenges in a manner that is  clearly linked to achieving the agency’s mission and goals.
Further, although State/F has defined its core functions and is “translating  them down to its various offices,” State/F officials told us that these  definitions are considered an internal management tool and therefore have  not been, and will not be, shared with State and USAID employees outside  State/F. We have previously reported that having an effective and ongoing  internal and external communication strategy is essential to making  transformation happen; communicating with stakeholders should be a  top priority and is central to forming the partnerships that are needed to  develop and implement the organization’s strategies. Moreover, we have  observed that such communication is especially crucial in public sector  organizational transformations, such as State and USAID’s reform of  foreign assistance. Policymaking and program management demand  transparency, and stakeholders and interested parties are concerned not  only about the results to be achieved but also about the processes to be  used in achieving those results.
section_title: Conclusions
paragraphs: State/F has taken important recent steps to align State and USAID foreign  assistance activities with broader foreign policy goals. Several aspects of  State/F’s establishment—such as involving top leadership, developing a  mission statement and operating principles, employing a Chief Operating  Officer, and involving employees in the transformation process—are  consistent with leading practices that we have previously found to  increase the likelihood of success in such a large-scale transformation.  Moreover, State/F’s actions to consolidate and reform State and USAID  planning and budgeting could help address program fragmentation;  strengthen accountability; and tighten the link among strategic objectives,  resource allocation, and program implementation. For example, by basing  its annual operational plans and 5-year CAS on its standardized program  structure, State/F is attempting to tie its planning and budgeting to  strategic foreign policy objectives. Further, the CAS process has the  potential to further transparency and enhance interagency coordination  and collaboration by including the activities of all U.S. agencies providing  foreign assistance in the country. If effectively implemented, the CAS  could also be a first step in creating a comprehensive governmentwide  strategy for U.S. foreign assistance.
In other respects, State/F’s initiatives are not well aligned with key  practices that we have previously found in successful transformations and  mergers. Without time frames, goals, and measures for defining success  for all aspects of its foreign assistance reforms—including developing and  implementing a comprehensive U.S. foreign assistance strategy,  developing guidance for other U.S. entities’ foreign assistance, and fully  implementing its stated goal of multiyear comprehensive country  assistance strategies—State/F’s capacity to build momentum and  demonstrate progress in these key reform efforts is limited. Lacking a  comprehensive U.S. strategy, federal agencies risk implementing a  fragmented patchwork of programs that could limit the overall  effectiveness of the federal effort while failing to address the highest  priorities. In addition, absent a clear, consistent strategy for  communicating with staff about planning and budget reforms, State/F’s  communications with staff in Washington, D.C., and in the field may— despite initial steps to develop and implement more-effective  communications processes—continue to cause confusion, constraining its  ability to build management-staff relations and staff’s sense of ownership  for the reforms.
Among the planning and budgeting challenges discussed in this report, it is  particularly important to clearly capture all relevant programs and  activities in an agency’s planning process. Because State/F’s operational  plan does not clearly articulate the programs and services implemented by  USAID’s regional offices, senior management may lack a holistic picture of  foreign assistance resources and may therefore lack important information  needed to make informed decisions among competing priorities.  Additionally, unless State/F ensures that the goals and measures in its  operational plans are compatible with those articulated in the related  plans and strategies of other U.S. entities delivering foreign assistance, it  may continue to face challenges in obtaining information about these  agencies’ activities and, in the long term, may face challenges in  collaborating with these agencies to develop a comprehensive  governmentwide foreign assistance strategy.
Finally, without a long-term workforce management plan for periodically  assessing its workforce capacity to manage foreign assistance, including  implementing strategies to fill any identified gaps in skills and  competencies, State/F cannot ensure that its staff are prepared to meet the  demands of reforming and consolidating foreign assistance processes.
section_title: Recommendations for Executive Action
paragraphs: We are making the following seven recommendations to the Secretary of  State to further the reform of U.S. foreign assistance.
Once the incoming administration has defined its overarching goals for  foreign assistance, we recommend that the Secretary of State work with  all U.S. government entities involved in the delivery of foreign assistance  to take the following steps:    Develop and implement a comprehensive, governmentwide foreign  assistance strategy, complete with time frames and measures for  successful implementation. Involving other agencies in this effort could  include adopting key practices that we have found to sustain and enhance  interagency coordination and collaboration in addressing common goals.
Develop and use compatible goals and measures to inform their planning,  budgeting, and reporting for their respective foreign assistance programs.
If the administration decides to continue foreign assistance reform efforts  consistent with the State/F reforms announced in January 2006, we  recommend that the Secretary direct the DFA to    establish a time frame for fully implementing all aspects of these reforms  as well as benchmarks and goals to measure progress and define success;    establish a time frame for developing and implementing multiyear,  country-specific, foreign assistance strategies in all countries where U.S.  departments, agencies, or organizations provide assistance;    ensure that State/F’s communication strategy encourages substantive,  timely, two-way information exchanges between State/F and USAID and  State employees;    consider an operational plan structure that clearly portrays and accurately  captures the functions and activities of regional programs and activities; and    develop a long-term workforce management plan to periodically assess  State/F’s workforce capacity to manage foreign assistance.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Secretary of State and the USAID  Administrator for review. State provided consolidated, written comments  on behalf of both State and USAID that are reprinted in appendix V. In  addition, State and USAID provided technical corrections and additional  comments for our consideration, which we incorporated as appropriate.
While State and USAID generally acknowledged or agreed to consider six  of our seven recommendations, State and USAID officials said that they  believed they had already met our recommendation to consider an  operational plan structure that clearly portrays and accurately captures  the functions and activities of regional programs and activities.
In response to this comment, we clarified in our report that regional missions  do in fact complete operational plans. However, as we note in our report,  regional officials told us that it is difficult to categorize and capture key  regional activities in the plan. Specifically, they said that because the  operational plan has a bilateral mission focus and distinguishes between  programs in different sectors, it does not adequately describe regional offices’  programs and services in multiple sectors for multiple limited presence  countries. Further, we note in our report that senior leaders in State/F  acknowledged that the operational plan’s bilateral mission focus is  problematic in this regard. We believe that it is important to clearly capture all  relevant programs and activities in an agency’s planning process so that  senior management has a holistic picture of foreign assistance resources— important information needed to make informed decisions among competing  priorities. We therefore maintain that this recommendation remains valid.
As agreed with your offices, unless you publicly announce the contents of this  report earlier, we plan no further distribution until 30 days from the report date.  At that time, we will send copies of this report to interested congressional  committees, the Secretary of State, the Acting Administrator of USAID, and the  Director of the Office of Management and Budget. We will also make copies  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  Denise M. Fantone at (202) 512-4997 or fantoned@gao.gov; or David  Gootnick at (202) 512-3149 or gootnickd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. Individuals who made key contributions to this  report are listed in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: The objectives of this study were to (1) examine key actions that the  Office of the Director of Foreign Assistance (State/F) has taken to reform  foreign assistance by consolidating the foreign assistance operations of  the Department of State (State) and the U.S. Agency for International  Development (USAID) and (2) identify any key challenges that affect  State/F’s implementation of these reforms.
To accomplish both of these objectives, we obtained and analyzed various  agency documents describing the creation of State/F and its workforce,  including organizational charts, staffing charts, position descriptions, and  changes in work responsibilities. We also obtained and analyzed various  State/F documents describing its reformed planning, budgeting, and  reporting processes, guidance for implementing these processes, and  examples of the documents produced by these processes (e.g., Operational  plans and Congressional Budget Justifications). We also obtained and  reviewed the fiscal years 2007 and 2008 “after-action reviews” of the  State/F’s planning and budgeting processes conducted by State/F, as well  as documents that describe changes to the processes based on these  reviews.
We conducted more than 40 interviews with State and USAID officials in  Washington, D.C., involved in State/F’s reforms, including officials in  various State/F offices and in various State and USAID regional and  functional bureaus. To gain an understanding of the field’s involvement in  and perspectives on State/F’s reforms, we also conducted site visits at U.S.  Embassies and USAID missions in six countries: Ethiopia, Haiti, Jordan,  Kenya, Peru, and Ukraine. We selected these locations on the basis of the  following factors:    Funding levels. Each country’s program was among the top recipients of  U.S. funding in its geographic region.
Regional responsibilities. USAID missions in three of the six countries— Kenya, Peru, and Ukraine—are also responsible for managing regional  programs or programs in neighboring countries.
Variety of foreign assistance activities. In all of the countries, a variety of  foreign assistance activities are provided by State and USAID as well as by  other federal agencies, including the Departments of Agriculture,  Commerce, Defense, Energy, Health and Human Services, and the  Treasury.
At each embassy and mission, we met with officials involved in State/F’s  planning and budgeting processes. While most of these officials were from  State and USAID, we also met with officials from other agencies that  implement programs on their behalf or that coordinate with them,  including the Departments of Agriculture and Defense.
Finally, our review was informed by our past work. We reviewed our past  reports related to State and USAID, as well as reports on strategic  planning, performance budgeting, performance reporting, and interagency  collaboration and coordination. We also selected seven of the nine key  practices from our past work on organizational mergers and  transformations to review State and USAID efforts to establish State/F.  Our review did not include the practices of using the performance  management system to define responsibility and assure accountability for  change or building a world-class organization because of the evolving  nature of State/F’s organization and workforce.
section_title: Appendix II: U.S. Departments, Agencies, and Other Entities That Provide Foreign Assistance
section_title: Appendix III: State/F Information Systems
paragraphs: To support State and USAID planning, budgeting, and reporting of foreign  assistance under these reforms, State/F developed two new data  information systems, the Foreign Assistance Coordination and Tracking  System (FACTS) and FACTS Info. FACTS, which State/F began to develop  in mid-2006, is a database used to collect foreign assistance planning and  reporting data, including plans for implementing current-year appropriated  budgets and performance planning and reporting data. FACTS Info, which  State/F created in 2007, is a system used to aggregate, analyze, and report  data on U.S. foreign assistance programs under the authority of the DFA.  Although State and USAID are the only U.S. agencies currently using both  systems, State/F expects the systems to eventually include data from other  agencies involved in foreign assistance, including, among others, the  Millennium Challenge Corporation and the Department of Treasury.
In November 2008, in connection with our body of work addressing the  management of State/F and at your request, we reported on (1) the creation  and development of FACTS and FACTS Info and (2) whether State/F is  following best practices for configuration management—the process of  establishing and maintaining control over changes made to a system—and  risk management of FACTS and FACTS Info. In conducting this work, we  reviewed FACTS and FACTS Info system procurement, contract,  development, performance, and assessment documents from State and  USAID. We also reviewed State/F’s configuration management and risk  management procedures for consistency with industry best practices.
FACTS has been developed in two phases, known as FACTS I and FACTS  II. In conjunction with USAID, State/F developed FACTS I in December  2006 as a database to collect foreign assistance planning and reporting  data, including plans for implementing current-year appropriated budgets  and performance planning and reporting data for State, USAID, and the  more than 25 other U.S. departments and agencies involved in providing  foreign assistance. According to a State/F survey of over 100 State and  USAID users in 2007, as well as our interviews with State and USAID  officials in Washington, D.C., and the six countries we visited, FACTS I  was slow and unreliable during the first 2 years of the new foreign  assistance funding process. To remedy these problems, in February 2008,  State/F hired a contractor to develop FACTS II, which was deployed  worldwide in October 2008. State/F created FACTS Info to aggregate,  analyze, and report data on U.S. foreign assistance programs under the  authority of the DFA. During the initial pilot phase, which began in  September 2007, FACTS Info was accessible to a limited number of State  and USAID users. FACTS Info was expanded to include additional State/F  and USAID users when the pilot phase ended in February 2009.
FACTS II and the ongoing pilot of FACTS Info have recently implemented  new configuration management processes, but both lack adequate risk  management procedures, such as formalized procedures to plan for  foreseeable risks. State/F has taken steps to address these challenges, such as  updating the project management plan and implementing change tracking  software to address certain weaknesses, particularly to both systems’  configuration management. However, as of October 2008, State/F had not  fully implemented improvements to the systems’ risk management; State  officials noted that they plan to complete these improvements by December  2008. Because both FACTS II and FACTS Info lack formal processes for risk  management, State/F cannot ensure that risks are identified, analyzed,  tracked, and mitigated, increasing the likelihood that potential problems  become actual problems. Moreover, State/F was unable to mitigate a key risk  that led to problems with the development of FACTS II. Without improved  risk management processes, risks may not be effectively managed.
In our November 2008 report, we recommended that, to help ensure that  FACTS II and FACTS Info are implemented successfully and perform as  designed, the Secretary of State direct the DFA to better utilize best practices  for risk management procedures to both systems. In particular, we  recommended that the DFA (1) identify and develop a comprehensive list of  system development risks for FACTS II and FACTS Info; and (2) fully develop  risk mitigation plans for FACTS II and FACTS Info. State has taken some  actions in response to these recommendations. Specifically, State/F issued a  risk registry that includes 27 systems development risks for both FACTS II  and FACTS Info and how it had either already addressed or planned to  address the risks. Also, State/F developed a draft of a combined risk  management plan for both FACTS II and FACTS Info and, in February 2009, a  State/F official told us that they expected the plan to be approved by the end  of that month. However, as of April 2009, the plan had not yet been approved.
section_title: Appendix IV: Foreign Assistance Framework
subsections: section_title: Goal: To help build and sustain democratic, well-governed states that respond to the needs of their people, reduce widespread poverty and conduct themselves responsibly in the international system.
paragraphs: Assist in  creating and/or  stabilizing a  legitimate and  democratic  government  and a  supportive  environment for  civil society and  media.
Start or restart  the delivery of  critical social  services,  including health  and  educational  facilities, and  begin building  or rebuilding  institutional  capacity.
Assist in the  construction or  reconstruction  of key internal  infrastructure  and market  mechanisms to  stabilize the  economy.
Address  immediate  needs of  refugee,  displaced, and  other affected  groups.
Stable  environment for  good  governance,  increased  availability of  essential social  services, and  initial progress  in creating  policies and  institutions on  which future  progress will  rest.
Advance to  “developing  countries” or  “transforming  countries”  category.
Support  policies and  programs that  accelerate and  strengthen  public  institutions and  the creation of  a more vibrant  local  government,  civil society and  media.
Encourage  social policies  that deepen the  ability of  institutions to  establish  appropriate  roles for the  public and  private sector  in service  delivery.
Encourage  economic  policies and  strengthen  institutional  capacity to  promote broad- based growth.
Encourage  reduced need  for future HA  by introducing  prevention and  mitigation  strategies,  while  continuing to  address  emergency  needs.
Continued  progress in  expanding and  deepening  democracy,  strengthening  public and  private  institutions, and  supporting  policies that  promote  economic  growth and  poverty  reduction.
Advance to  “transforming  countries”  category.
Provide limited  resources and  technical  assistance to  reinforce  democratic  institutions.
Provide  financial  resources and  limited  technical  assistance to  sustain  improved  livelihoods.
Provide  financial  resources and  technical  assistance to  promote broad- based growth.
Address  emergency  needs on a  short-term  basis, as  necessary.
Government,  civil society,  and private  sector  institutions  capable of  sustaining  development  progress.
Advance to  “sustaining  partnership”  category or  graduate  from foreign  assistance.
Address issues  of mutual  interest.
Address issues  of mutual  interest.
Create and  promote  sustained  partnerships on  trade and  investment.
Address  emergency  needs on a  short-term  basis, as  necessary.
Continued  partnership as  strategically  appropriate  where U.S.  support is  necessary to  maintain  progress and  peace.
Continue  partnership  or graduate  from foreign  assistance.
Foster effective  democracy and  responsible  sovereignty.  Create local  capacity for  fortification of  civil society and  path to  democratic  governance.
Address  humanitarian  needs.
Promote a  market-based  economy.
Address  emergency  needs on a  short-term  basis, as  necessary.
Civil society  empowered to  demand more  effective  democracies  and states  respectful of  human dignity,  accountable to  their citizens,  and  responsible  towards their  neighbors.
Advance to  other  relevant  foreign  assistance  category.
Activities that advance the five objectives, transcend a single country’s borders, and  are addressed outside a country strategy.
Achievement of  foreign  assistance goal  and objectives.
Determined  based on  criteria  specific to  the global or  regional  objective.
section_title: Appendix V: Comments from the Department of State
section_title: Appendix VI: GAO Contacts and Staff Acknowledgments
paragraphs: Denise M. Fantone, (202) 512-4997 or fantoned@gao.gov; and David  Gootnick, (202) 512-3149 or gootnickd@gao.gov.
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Jacqueline M. Nowicki (Assistant  Director), Thomas Costa, Benjamin T. Licht, Reid Lowe, Sheila Rajabiun,  and George Taylor made key contributions to this report. David Dornisch  and Grace Liu provided technical support.