Export Promotion: Increases in Commercial Service Workforce Should Be Better Planned
Published: 2010-08-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since the recent recession, policymakers have emphasized the role exports can play in strengthening the U.S. economy and in creating higher paying jobs. In March 2010 the President signed an Executive Order creating the National Export Initiative (NEI), with a goal of doubling U.S. exports in 5 years. However, since 2004 the workforce of the U.S. and Foreign Commercial Service (CS) has shrunk, calling into question the ability of this key agency to increase its activities to assist U.S. businesses with their exports. In response to a conference committee mandate, GAO reviewed (1) how well CS managed its resources from 2004 to 2009, and (2) the completeness of CS's workforce plans and the quality of its fiscal year 2011 budget request. GAO analyzed data from the Departments of Agriculture, Commerce, and State; reviewed agency documents; and interviewed agency officials.
section_title: What GAO Found
paragraphs: CS had management control weaknesses over its resources from 2004 to 2009. During this period, CS's budgets remained essentially flat as per capita personnel costs and administrative costs increased. However, CS leadership did not recognize the long-term implications of these changes because it lacked key financial and workforce information and risk analysis necessary for good management control. CS continued to pay fees associated with positions it maintained in U.S. embassies that were vacant but not officially eliminated. As CS's financial constraints grew, officials delayed their impact by using a variety of financial management practices. For example, the International Trade Administration (ITA), CS's parent agency, attributed some of CS's centralized costs to other units. However, as the availability of offsetting funds declined and costs continued growing, CS leadership failed to recognize the risks from these changes in accordance with good management controls, and reached a "crisis" situation in 2009. Officials froze hiring, travel, training, and supplies, compromising CS's ability to conduct its core business. CS's workforce declined by about 14 percent from its peak level in 2004 through attrition--affecting the mix and distribution of personnel. CS intends to rebuild its workforce but lacks key planning elements for doing so, and its budget request has weaknesses that could affect its ability to meet its goals. CS will have a central role in implementing the NEI. The President's 2011 budget requested $321 million for CS, $63 million more than its 2010 appropriation. The budget would fund a major staff increase. CS is allocating $5.2 million of its 2010 appropriation to begin recruiting new staff. However, as new executive-level leadership was arriving, GAO found that CS lacked key planning elements, including a clear sense of strategic direction and an analysis to determine its workforce needs. Also, it had not updated its workforce plans to address staffing gaps since fiscal year 2007. Adding more staff could be delayed because CS's human resources office is itself understaffed and because CS requires up to 2 years to hire and train new Foreign Service Officers. GAO also found that the 2011 budget request, though sound in many respects, has weaknesses; it lacks some documentation, and it lacks risk analysis and contingency plans for highly variable program costs, which could lead to cost overruns.
section_title: What GAO Recommends
paragraphs: GAO recommends to the Secretary of Commerce that CS (1) strengthen management controls, (2) improve workforce planning, and (3) improve cost estimating related to CS's budget estimate. Commerce agreed with our findings and recommendations.

section_title: Letter
paragraphs: With the recent recession and high unemployment rate, U.S. policymakers  are looking for ways to improve the economy and create jobs. One avenue  they are exploring is expanding exports. U.S. exports of goods and  services have grown steadily in recent years. In 2009, U.S. exports of  goods and services reached about $1.5 trillion, approximately a $0.5  trillion or 55 percent increase since the beginning of the decade.  Policymakers believe that investing more in promoting U.S. exports can  strengthen the economy and generate higher paying jobs. On March 11,  2010, President Obama signed an Executive Order creating the National  Export Initiative (NEI), with a presidential cabinet to oversee trade  promotion and a goal of doubling exports in the next 5 years. The  Secretary of Commerce committed to supporting this goal by employing  the U.S. and Foreign Commercial Service (CS) in assisting more U.S.  companies to export, with a 2-year goal of helping more companies that  already export to one country to start exporting to new markets. However,  since 2004 the workforce of CS, a key agency in promoting the export of  U.S. manufactured goods and services, has declined, calling into question  its ability to increase its activities and represent U.S. business interests  internationally.
In response to a conference committee mandate, we reviewed (1) how  well CS has managed its resources over the past 5 years, and (2) the  completeness of CS’s workforce plans and the soundness of its fiscal year  2011 budget request. In addition, we are providing information on how CS  export promotion funding compares with funding for the Department of  Agriculture (USDA) and Department of State (State) for analogous  activities from 2004 to 2009.
We used GAO’s standards for internal control to assess how well CS  managed its resources from 2004 to 2009. We analyzed data provided by  CS on staffing losses and gains domestically and overseas by post,  identifying the number of civil servants, political hires, Foreign Service  Officers (FSO), and locally employed staff (LES). We also analyzed CS’s  appropriations and full-time equivalent (FTE) staffing levels from 2004  through 2009 and supporting information, and interviewed CS officials. To  determine how complete CS’s plans for rebuilding its workforce are, we  reviewed CS’s 2010 and 2011 budget requests and available workforce  planning and human capital resource information, interviewed CS officials  about their practices and how decisions were made, and evaluated their  efforts using GAO’s five key principles of effective strategic workforce  planning. (Further information on our scope and methodology is provided  in app. I.) To evaluate the soundness of CS’s 2011 budget request, we  assessed the request using the 12 elements GAO has identified as best  practices for an effective cost estimate in our GAO Cost Estimating and  Assessment Guide. Appendix III explains the 12 principles and associated  characteristics in detail. We also interviewed the agency officials  responsible for developing the request and reviewed related information.  We conducted this performance audit from September 2009 to August  2010, 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.
subsections: section_title: Background
subsections: section_title: CS Plays a Major Role in Export Promotion
paragraphs: CS plays a major role in U.S. export promotion activities as the primary  agency providing export assistance to individual businesses, especially  small- and medium-sized businesses. It is a unit of the Department of  Commerce’s (Commerce) International Trade Administration (ITA), and  its services include the following:    Counseling and intelligence. CS assists U.S. businesses in understanding  foreign markets and developing export marketing plans including overseas  product pricing, best prospects, market entry strategies, and distribution  channels, and facilitates access to export financing and public and private  export promotion assistance.
Matchmaking. CS organizes and participates in trade events and forums,  and introduces U.S. businesses to qualified overseas agents, distributors,  end users, and other partners.
Advocacy services. CS alerts U.S. firms to major overseas projects and  procurement, and advocates on behalf of U.S. firms bidding on projects.
CS has about 300 staff members in U.S. Export Assistance Centers  (USEAC) located throughout the United States who work with firms that  are new to exporting or want to expand their exporting efforts. USEACs  provide counseling and planning services, such as working with firms to  select target markets and develop marketing plans. They also coordinate  with CS posts overseas, which provide matchmaking, advocacy, and  market intelligence services in the target markets. About 1,000 CS  international field staff—made up of FSOs and LES—are located at posts  around the world to provide these services. LES are generally natives of  the countries in which they are located, making them well-suited to help  U.S. companies make local connections. USEAC staff and overseas post  staff are supported by about 180 staff at headquarters in Washington, D.C.
For the purposes of this report we reviewed CS activities related to  providing information, counseling, and assistance for exports of services  and manufactured goods, which is CS’s main focus. USDA and State also  conduct export promotion activities. USDA’s Foreign Agricultural Service  focuses on promoting commodities produced by U.S. farmers and  ranchers. State supports CS’s efforts in countries where CS does not have  a presence (see app. II). However, U.S. export promotion activities are  multifaceted and also include reducing trade barriers, government-to- government advocacy, financing and other monetary assistance, and other  activities.
section_title: Export Promotion Is a Priority of the Current Administration
paragraphs: U.S. plans to increase exports are generally articulated in the Trade  Promotion Coordinating Committee’s National Export Strategy, which is  issued annually. Established in 1993, the Trade Promotion Coordinating  Committee is an interagency group established to provide a framework to  coordinate the export promotion and export financing activities of the U.S.  government. As of 2010, 20 U.S. agencies have a role in export  promotion. However, we have reported for a number of years that the  annual National Export Strategies have limitations that affect the  Coordinating Committee’s ability to coordinate trade promotion activities.  For example, National Export Strategies provide limited information on  member agencies’ goals and progress, relative to broad national priorities,  to guide future efforts.
Another effort is under way that could facilitate better interagency  coordination. On January 27, 2010, President Obama announced the NEI in  an effort to support U.S. economic recovery following the recession. A  newly created Export Promotion Cabinet that reports to the President will  coordinate and implement the goals of the NEI, and is expected to deliver  a report to the President with a plan to implement the goals of the NEI in  September 2010. While many aspects of the NEI are still in the planning  stages, the NEI will have three main components:    Educating U.S. companies about export opportunities; directly connecting  them with new customers, partners, and distributors overseas; and  advocating for their interests.
Providing access to credit through the Export-Import Bank of the United  States with a special focus on small- and medium-sized businesses.
Removing trade barriers.
The first component of the NEI, educating U.S. companies about export  opportunities, will be carried out in large part by the Department of  Commerce through CS.
section_title: CS’s Budget Is Driven by Personnel and Administrative Costs
paragraphs: The majority of CS’s costs are related to the personnel that staff CS’s  headquarters and its domestic and overseas export assistance posts.  According to CS, 60 percent of its budget in 2009 was associated with  personnel costs, including salaries, benefits, and FSO support costs for  officers posted overseas. FSO support costs include relocation, travel,  training, home leave allowances, and shipping and storage of household  goods. Administrative payments to State associated with having personnel  stationed overseas, including International Cooperative Administrative  Support Services (ICASS) and Capital Security Cost Sharing Program  (CSCSP) charges, as well as payments to ITA, CS’s parent agency, for  shared overhead totaled 29 percent. The remaining 11 percent included  CS-specific overhead costs including rent, communications, utilities,  program-related travel, supplies, printing, and equipment costs as well as  costs for developing and enhancing software for CS worldwide.
CS charges fees for export promotion services that benefit individual  companies, such as connecting them with potential buyers and  distributors. CS uses the fees it collects to cover the costs of the related  program expenses. CS reported that it collected approximately $10 million  in fees in 2008.
section_title: CS’s Management of Increasing Costs and Declining Staff Levels from 2004 to 2009 Had Weaknesses
paragraphs: CS leadership lacked systematic information about CS’s workforce, and  did not fully recognize or adequately respond to program risks created by  growing administrative costs and declining staff levels from 2004 to 2009.  Management control standards require entities to ensure that program  managers have systems to provide needed operational and financial  information in a timely manner to carry out their management and  oversight responsibilities. In the case of CS, the most important  management responsibilities were related to workforce decisions, since  workforce expenses are the largest portion of CS’s budget. Additionally,  these standards require management to identify and analyze the relevant  risks an agency faces from internal and external sources so it can  proactively manage them. From 2004 to 2009, CS’s budgets remained  essentially flat as per capita personnel costs and administrative costs  increased. Although CS leadership was aware of this trend, they did not  have processes in place to analyze and respond to the long-term financial  implications of these costs on CS’s workforce. Additionally, CS was not  fully aware of the costs associated with positions it maintained in U.S.  embassies that were vacant but not officially eliminated and did not take  steps that would have saved money on them. As CS’s financial constraints  grew, officials delayed their impact through a variety of financial  management practices such as using unobligated funds from prior years’  appropriations. However, as the availability of these offsetting funds  declined and costs continued growing, CS leadership failed to recognize  the risks entailed by the financial problems, and the organization reached  a “crisis” situation in 2009. Officials froze hiring, travel, training, and  supplies, compromising CS’s ability to conduct its core business. CS’s  workforce declined by about 240 staff from its peak level in 2004 through  attrition—affecting the mix and distribution of personnel.
subsections: section_title: CS’s Budgets Were Flat as Costs Increased
paragraphs: From 2004 to 2009, CS’s budgets remained essentially flat, while at the  same time the agency faced increasing per capita personnel costs. CS  appropriations grew about 1.9 percent on average per year during that  time frame. This represented a total increase of about 10 percent from  2004 to 2009, as shown in table 1.
Although CS’s budget was adjusted for inflation and other increases such  as pay raises and changes in benefit contribution rates, its annual  increases did not cover its full costs, according to CS officials. For  example, administrative costs grew from 20 percent ($44 million) of its  obligations in 2004 to 30 percent ($72 million) in 2009. CS officials  calculated the total cumulative funding gap for 2004 to 2009—the  difference between its annual appropriations and full costs—to be $24  million.
Since 2004, CS faced increased administrative payments to State that  consumed larger shares of its funds. One factor increasing costs was  State’s CSCSP, which began in 2005 to support the building of new secure  embassies and consulates. The fee was phased in over a 5-year period,  with the full annual charge levied for the first time in 2009. In 2005, the fee  for CS was about $3.1 million, and in 2009 it was $23.7 million. Other  factors included increasing costs for personnel, benefits, and rent, which  include adjustments for inflation.
CS made up the difference by not filling positions. CS budget requests  were based partly on an estimated number of FTEs. CS overestimated the  number of FTEs it would support with its budget every year, as shown in  table 2. The actual numbers averaged 142 FTEs, or 11 percent, less than  their estimates. CS used the funds it was provided based on these  overestimated FTE levels to pay expenses such as administrative costs.  The fact that this happened over so many years indicates that CS did not  fully recognize how its workforce was being affected by increasing  administrative costs.
section_title: CS Lacked Financial and Workforce Information Necessary to Manage Its Programs
paragraphs: CS leadership had information about growing costs as early as 2006, but  they did not recognize the severity of the situation. CS had data about the  growth in unfunded adjustments to base, which are essentially the  difference between what CS needed in terms of funding to cover increased  costs and the appropriation it received. However, CS leaders said they  were not fully aware of the long-term financial and workforce implications  of increasing costs until 2009 when CS switched to a new financial  management system, which according to CS officials illuminated how little  discretionary funding was available. In 2009, they undertook an exercise to  analyze and more fully understand the costs that affected the CS budget.  Additionally, CS lacks an automated workforce information system to  provide up-to-date staffing information, which also has financial  implications. For example, without this information CS could not easily  review ICASS and CSCSP charges in order to confirm whether State’s  charges for these activities were correct. Currently, CS officials compile  information from quarterly reports supplied by the posts to determine  staffing totals. The lack of risk assessment and the lack of workforce  information are both management control weaknesses.
section_title: CS Did Not Eliminate Vacant Positions or Restructure Its Operations
paragraphs: CS has incurred costs for administrative payments related to overseas staff  that officials consider to be “fixed costs,” but which can be reduced by  eliminating vacant positions, downsizing, or eliminating offices. For  example, CS incurs CSCSP charges for positions officially established at  overseas posts, regardless of whether there is a person in the position. CS  has access to information on the number of positions at its overseas posts  through State’s Executive Agency Personnel Support system, which tracks  the number of positions at posts. The information is used to determine the  number of positions CS is paying for including the number of vacant  positions at posts. However, Commerce officials indicated they find the  system difficult to use, and they do not use the information to manage  their overseas workforce. The only way to eliminate a CSCSP charge is to  officially eliminate the position. In 2010, there were about 200 unfilled  positions at posts incurring CSCSP charges that CS did not eliminate.  Charges for vacant positions cost CS approximately $2 million annually,  according to a CS budget official. The last time CS eliminated a significant  number of vacant positions was in 2004. According to a senior CS official,  CS recognized that State’s CSCSP charge would put a cost on every  overseas position whether or not it was filled, so in 2004 before the new  charge was implemented, the Office of International Operations reviewed  its global presence and eliminated all non-essential positions. CS may also  have incurred ICASS charges for vacant positions. To avoid ICASS charges  for vacant positions, CS must inform State that the position will not be  filled in the upcoming fiscal year.
Regarding office closures, CS last eliminated offices under its  Transformational Commercial Diplomacy Initiative, which was planned  beginning in 2006 and implemented starting in 2007. The initiative was  focused both on realigning CS’s efforts with its mission to focus on  emerging markets, and on rightsizing its operations. Under the initiative,  23 offices were closed, mainly in Europe, and 8 offices were supposed to  be opened. However, as of the end of 2009, only 3 of the 8 offices were  open and staffed.
section_title: Financial Management Practices Temporarily Offset Funding Constraints
paragraphs: Several financial management practices temporarily helped mitigate CS’s  growing funding constraints. These included using unobligated funds from  prior years’ appropriations, redistributing centralized costs to other ITA  units, and redirecting user fees to ensure CS did not spend more funds  than were authorized.
First, CS used its balance of unspent funds from prior years’ unobligated  appropriations to cover funding shortfalls. However, Congress changed  CS’s appropriations from no-year funding to 2-year funding in 2006.  Whereas CS obligated $12 million in unspent funds in 2004, in 2009 it  obligated only $5 million, as unobligated funds from prior years were  depleted and some funds were no longer available.
Second, ITA officials told us they attributed some centralized costs that  would have been charged to CS to other ITA programs in order to help CS  with its financial problems. For example, in 2009, ITA redistributed $3  million of CS’s centralized costs to other ITA units (Market Access and  Compliance, Manufacturing and Services, and Import Administration) to  assist CS. Centralized costs include headquarters rent, utilities,  information technology support, and secretarial travel. ITA normally  apportions these costs based on individual staffing levels.
Third, CS fee collections were an additional source of revenue that CS  used to address its resource constraints. CS obligations of fees and  reimbursements averaged $9.8 million a year from 2004 through 2009.  CS’s domestic and overseas offices create surplus fees when they charge  exporters for services, and funds remain after the bills associated with the  service are paid. Historically, surplus service fees were used at the  location where they were earned to pay for program activities in support  of CS’s mission such as travel with an ambassador to another city to  promote exports. As funding constraints increased, CS management began  centrally controlling these fees, requiring posts to seek permission to use  them. CS officials told us they took control over these surplus fees to  ensure they would not spend more money than Congress authorized and  violate the Antideficiency Act.
section_title: CS Froze Hiring, Travel, Training, and Supplies, which Compromised Operations
paragraphs: Once the growth in costs reached what CS officials characterized as a  “crisis” situation, CS took a number of actions such as imposing a hiring  freeze in 2008 and 2009. CS also cut travel funds by 28 percent from 2008  to 2009, and saved money by asking FSOs to stay in their current locations  rather than relocating to them to new posts. CS also cut training and  supplies. According to a senior CS official, currently CS has no  discretionary travel or training funds. Although CS took actions to mitigate  the impact of increasing costs as noted above, they were not timely and  reflected management control weaknesses. These weaknesses include the  lack of a process for promptly identifying risks as they emerge and lack of  analysis of the possible effect these mitigating actions could have on CS’s  ability to effectively and efficiently carry out its operations. CS did not  identify a long-term sustainable solution to the change in its financial  situation.
Staff in both the domestic and the foreign field offices commented in a  2009 assessment of their operations that staff shortages and budget  constraints, including a lack of travel funds, compromised CS’s ability to  conduct its core business. In the domestic field offices, staffing shortages  and budgetary constraints were mentioned as weaknesses or threats in  seven of eight regions. One domestic region stated, “With a hiring freeze in  place and severe budget limitations, current vacancies cannot be filled in  USEACs on a timely basis. As well, important travel necessary to reach  clients/partners, engage in professional development, and lead efforts on  trade missions and at trade shows cannot be funded.” Likewise, all six  regions overseas indicated that lack of resources was a weakness, and  four of the six identified staffing shortages as a problem. For example, one  overseas region stated that “budget limitations constrict the extent to  which posts can travel, which directly impacts their ability to find and  assist clients.” Additionally, the capacity to keep up with ever-growing  demand for services was mentioned as a problem by some domestic and  overseas locations.
section_title: CS’s Workforce Declined by Almost 14 Percent
paragraphs: As a result of CS’s flat budget, the size of its workforce declined through  attrition from 2004 to 2009, and the composition and location of personnel  shifted. During this period, CS’s workforce declined by over 200 staff, from  1,731 to 1,492. The number of FSOs declined by 5 percent, LES by 14  percent, and civil servants by 18 percent (see table 3). The number of staff  in foreign field offices declined by 12 percent, in domestic field offices by  9 percent, and at headquarters by 28 percent (see table 4).
section_title: CS Lacks Key Planning Elements to Rebuild Its Workforce, and Its 2011 Budget Request Has Some Weaknesses
paragraphs: Although CS is taking steps to rebuild its workforce, it lacks key elements  in its workforce planning, and its 2011 budget request has some  weaknesses that could affect its ability to meet its goals. In 2010, CS  received an appropriation of $258 million, of which CS planned to use $5.2  million to begin reversing CS staffing declines. In addition, the President’s  2011 budget asks for a major CS staffing increase. The 2011 budget  requests $321 million for CS, $63 million more than its 2010 appropriation.  Although CS began the process of reversing its previous years’ staffing  declines through these funding increases, we found that CS has not been  following workforce planning principles and lacks current workforce  plans for utilizing the new staff. CS’s understaffed Office of Foreign  Service Human Resources and the long lead time needed to hire and train  FSOs could delay staffing increases. Additionally, we found that its budget  development methodology was sound in many respects, but had a few  weaknesses that could affect CS’s ability to meet its goals, such as not  assessing potential risks of estimated costs, which if overly optimistic  could lead to cost overruns.
subsections: section_title: CS Plans to Rebuild Its Workforce
subsections: section_title: CS Is Increasing Staff to Implement the NEI
paragraphs: CS is rebuilding its workforce and taking other measures to fulfill its major  role in implementing the NEI in 2011. Commerce, through the Trade  Promotion Coordinating Committee, leads the administration’s trade  promotion efforts and will “operationalize” the NEI, according to the  Secretary of Commerce. To that end, the Secretary indicated that with the  additional resources requested in 2011, ITA expects to hire new trade  experts—mostly in foreign countries—to advocate and find customers for  U.S. companies, allowing CS to help more than 23,000 clients to begin or  grow their export sales in 2011. Additionally, CS will focus on increasing  the number of small- and medium-sized businesses exporting to more than  one market by 50 percent over the next 5 years.
CS already began the process of rebuilding its workforce by designating  $5.2 million of its 2010 appropriations to expand its presence in critical  emerging markets. CS planned to use the funds to develop a more robust  presence in challenging and developing markets in Africa, Eastern Europe,  and Asia, where its presence was limited. CS projected hiring a total of 30  new positions in 2010—8 FSOs and 22 LES. In April 2010, CS approved 17  hiring freeze exemptions. It extended offers to 14 certified applicants; 11  individuals accepted the offers, according to a CS official. CS hopes to  bring them on in August 2010 and anticipates they will fill vacancies in  domestic and overseas locations. These individuals are filling positions  created by retirements and attrition that occurred in 2008 and 2009. CS  also expects that at least another 7 current officers will leave the service in  2010. CS may fill those potential vacancies as it completed the process of  identifying and creating a list of certified applicants, on July 12, 2010.
However, a senior CS official noted that rather than using funds to hire  people in 2010, CS is focused on creating more exports sooner by  increasing marketing, the number of companies going on trade missions,  the number of potential trade partners brought to the United States on  reverse trade missions, and matchmaking efforts. The rationale was to  focus on activities that could provide quick results, according to CS  officials, as it takes about 18 months to prepare a company to export,  whereas it takes about 6 to 9 months to assist a company that has already  exported to one market with exporting to a second market.
section_title: CS Requested a Major Staffing Increase for 2011
paragraphs: CS requested a major staffing increase for 2011, seeking to hire a total of  268 staff in support of the NEI. CS plans to hire 130 FSOs and civil  servants, a 20 percent increase over its 2010 level of 659 staff in these  categories. Additionally, CS plans to hire 138 LES, a 17 percent increase  over its 2010 level of 795 staff. The requested increase would reverse the  239-person decline in CS’s overall staffing that occurred from 2004 to 2009.  Table 5 identifies the staff CS lost over the past 5 years and the number of  staff it plans to hire in 2011.
Whereas staffing declines overseas for both FSOs and LES may be  addressed if the budget request is approved, there will still be fewer staff  compared with 2004 in Washington, D.C. and the domestic field offices,  which are generally staffed by civil servants. Additionally, the 63 FSOs and  84 civil servants who are eligible to retire as of March 2010 may not be  replaced by the staff requested in the 2011 budget request.
Another factor affecting overseas staffing is the use of FSOs in domestic  positions. FSOs are sometimes assigned to work in USEACs, serve in  multilateral development banks, or work in headquarters (see table 6). For  example, in the fourth quarter of 2009, 23 percent of 233 FSOs were in  domestic positions, with 27 FSOs specifically in USEACs. CS expects FSOs  to serve a 2-year assignment at a USEAC, usually within the first 7 years of  their service. CS believes that what FSOs learn in their domestic  rotations improves their ability to serve clients overseas.
section_title: CS Lacks Complete Strategic Workforce Plans to Utilize New Staff
paragraphs: Although CS requested a significant increase in funding to hire new staff in  the 2011 budget request, it has not followed key principles in workforce  planning to guide its use of these staff. Strategic workforce planning  addresses two critical needs: first, aligning an organization’s human capital  program with its current and emerging mission and programmatic goals,  and second, developing long-term strategies for acquiring, developing, and  retaining staff to achieve programmatic goals. While agencies’ approaches  to workforce planning vary, the five key principles that strategic  workforce planning should address irrespective of the context in which  the planning is done are (1) setting strategic direction, (2) conducting  workforce needs analysis, (3) developing workforce strategies to fill the  gaps, (4) evaluating and revising strategies, and (5) involving management  and employees throughout the process. We focused our review on steps  one through three, because it was premature for us to evaluate steps four  and five given the status of CS’s efforts during our review. CS executive- level leadership was new and was just beginning to assess CS operations.
subsections: section_title: CS Lacked Executive-Level Leadership and Strategic Direction
paragraphs: Until recently, CS lacked executive leadership and strategic direction in its  workforce planning efforts because of key vacancies between  administrations. One of the lessons from our prior work on human capital  issues is the importance of having leadership that is clearly and personally  involved in strategic workforce planning and provides organizational  vision in times of change. Effective organizations integrate human capital  approaches as strategies for accomplishing their mission. They stay alert  to emerging mission demands and human capital challenges and remain  open to reevaluating their human capital practices in light of their  demonstrated successes or failures in achieving the organization’s  strategic objectives.
According to a senior CS official, the lack of political leadership hampered  efforts to analyze and make decisions regarding the organization’s longer  term workforce needs and to ensure its ability to undertake its mission  and achieve its goals. Instead, CS’s recent workforce planning efforts have  primarily focused on short-term responses to its constrained budget  situation, such as not hiring new staff, and extending FSO tours at some  posts to avoid the cost of moving them to different posts.
While ITA and CS experienced key leadership vacancies for more than a  year, CS now has new executive-level leaders who are focused on  determining CS’s direction and resource needs. In February 2010, the new  Assistant Secretary for Trade Promotion and Director General of the U.S.  and Foreign Commercial Service was confirmed, and in March 2010, the  new Undersecretary for International Trade was sworn in. In addition,  Commerce announced the creation of a new Director’s position to  coordinate and direct the Department’s NEI efforts, filling the position in  April 2010. The new Assistant Secretary is currently reviewing all of CS’s  budgets, activities, and personnel to determine what its structure should  be to accomplish its goals, including those of the NEI.
CS has also lacked a clear sense of strategic direction. For example, the  Trade Promotion Coordinating Committee did not issue a 2009 National  Export Strategy, which has a role in directing the nation’s export  promotion priorities and goals of CS; the last National Export Strategy was  issued in October 2008 by the previous administration. A plan to carry  out the NEI is due in September 2010. The NEI may have important  implications for CS workforce planning, especially for the locations of  staff and offices.
CS has already developed several initiatives that include staff allocations  and a list of “candidate” countries for new offices, which also appears in  its budget request. These are preliminary plans for how CS will pursue  activities in support of the NEI’s goals. However, CS did not have support  for how the staffing allocations were developed and the countries were  identified; we therefore are unable to determine how these decisions were  made.
section_title: CS Has Not Conducted a Workforce Needs Analysis to Determine Staff Levels or Placement
paragraphs: CS has not conducted a systematic workforce needs analysis to determine  the number or type of staff (FSOs, LES, or civil servants) needed or where  those staff would be located domestically and overseas. Our prior human  capital work has found that a fact-based, performance-oriented approach  to human capital management is crucial for maximizing the value of  human capital as well as managing risk. High-performing organizations  identify their current and future human capital needs, including the  appropriate number of employees, the key competencies and skills mix for  mission accomplishment, and the appropriate deployment of staff across  the organization and then create strategies for identifying and filling gaps.  Valid and reliable data are critical to assessing an agency’s workforce  requirements and heighten an agency’s ability to manage risk by allowing  managers to spotlight areas for attention before crises develop and  identify opportunities for enhancing agency results. Although the costs of  collecting data may be significant, the costs of making decisions without  the necessary information can be equally significant. In preparing its 2011  budget request, CS did not make staffing decisions based on an overall  analysis of its needs, according to CS officials. Rather, it made decisions  based on anecdotal information about the demand for services.
Additionally, CS only recently began to systematically monitor how many  vacancies it had and how many positions it might need to carry out its  mission in the future. CS took approximately 3 months to provide us with  data on staffing, in part because it lacks an automated personnel system  and had to use data sources such as quarterly staffing reports. A  Commerce official told us that the number of staff requested in the 2011  budget request was not based on vacancies.
CS’s lack of a workforce needs analysis also has implications for staff  placement. Whereas CS’s strategic focus has been on priority markets  such as Brazil, China, and India as well as emerging markets in countries  such as Azerbaijan and Qatar, staff placements may change under the NEI.  As mentioned above, CS’s budget request includes a list of 22 countries  that are “candidates currently being considered for new overseas offices,”  where CS is considering placing staff. Commerce officials told us the list  was not comprehensive, and the reasons for selecting those countries  were not well documented. Among the “candidates” were offices that were  closed under the Transformational Commercial Diplomacy Initiative such  as Amsterdam, Netherlands; Barcelona, Spain; Kingston, Jamaica;  Hamburg, Germany; Port of Spain, Trinidad and Tobago; and Lyon,  France. Additionally, according to a State official, the NEI may target  Colombia, Indonesia, Saudi Arabia, South Africa, Turkey, and Vietnam.  Shifting CS’s focus could change the skills and experience its workforce  needs to be effective in those markets. For example, even though CS is  hiring 11 new FSOs in 2010, three important posts in Brasilia, Algiers, and  Kuwait are being filled with limited non-career appointments, because of a  shortage of experienced officers. None of the new candidates has the  necessary skills, abilities, and knowledge to take one of these positions as  a first post.
section_title: CS Has Not Systematically Addressed Staffing Gaps Since 2007
paragraphs: CS has not followed workforce planning principles such as developing a  plan to address its staffing gaps. Once an agency identifies its needs, it can  develop strategies tailored to address gaps in the number, skills and  competencies, and deployment of its workforce and the alignment of  human capital approaches that will sustain the workforce in the future.  Strategies include programs, policies, and practices that enable an agency  to recruit, develop, and retain staff needed to achieve program goals. In  addition, agencies need to understand the strengths and weaknesses of  their current human capital program.
According to a senior CS official, CS does not plan to fill all of its vacant  positions. Rather, it will fill what it considers to be priority vacancies,  including staffing new offices with seasoned officers. The official told us  they have a reasonably good idea of where those priority locations are;  one such possibility was Baku, Azerbaijan, where CS planned to open an  office under the Transformational Commercial Diplomacy Initiative but  did not due to a lack of funds. However, when asked if the 22 locations in  the 2011 budget request were the priority locations, we were told they are  possible locations but are not necessarily where people would be placed.
It is also important for agencies to align their workforce to achieve their  program goals. However, since the implementation of the  Transformational Commercial Diplomacy Initiative, CS workforce  strategies have not been based on a systematic analysis, but were ad hoc  according to Commerce officials. Commerce officials told us that in some  instances they asked FSOs to extend their overseas tours at their current  locations as a cost-saving measure rather than being moved somewhere  else, at substantial cost, based on a systematic determination of where  they are most needed. CS also made decisions to leave some posts  without an FSO. Instead, these posts were managed by LES—there were  25 such posts at the end of the last quarter of 2009.
CS has not used its available staffing allocation model to make overseas  staffing decisions since 2007, as part of its Transformational Commercial  Diplomacy Initiative. Under the initiative, CS used its staffing allocation  model to identify locations to close, open, or add staff. The model  analyzed CS’s staff allocations using quantitative factors such as the  macroeconomic strength of each country and other factors related to each  market’s size and structure. It also integrated qualitative factors including  foreign and trade policy priorities, levels of economic development,  geographic coverage, and commercial environments. A similar model  exists for the placement of staff domestically at USEACs. The model’s goal  is to create a starting point for determining which U.S. locations have the  highest export potential. Other factors affecting the placement of staff at  USEACs include geographic coverage, policy initiatives, locations of  commercial centers, and the skills and abilities of local staff.
section_title: CS’s Understaffed Human Resources Office and the Long Lead Time Needed to Hire and Train FSOs Could Delay Staffing Increases
paragraphs: Besides the lack of a quality workforce plan, CS’s capacity to implement  what CS officials said may be the biggest hiring effort in CS history is  compromised because its human resources office is understaffed. CS’s  Office of Foreign Service Human Resources, which manages the hiring  process for FSOs, only had staff in 10 of its 19 positions in 2009. However,  CS planned to increase the number of staff in 2010. According to a senior  CS official, the office recently received permission to fill 5 of the 9 vacant  existing positions. As of June 2010, 3 of the 5 positions were filled,  although the office also just lost another staff person.
CS needs a lead time of approximately 2 years to accomplish the major  staffing increase requested in the 2011 budget request. It takes about 1  year to put together a list of qualified applicants, which involves  advertising the position, identifying qualified candidates, interviewing  candidates, selecting candidates, and making offers. Once a candidate is  selected, he or she must obtain security and medical clearances.  Commerce started the hiring process for 59 new FSOs in July 2009 and CS  hopes to make offers to qualified candidates in summer 2010. Additionally,  depending on the post, some positions require language training, which  can take up to a year. Thus, it could take almost 2 years to hire, train, and  field a new FSO. The process for hiring LES is much shorter, generally 6  weeks to 5 months, according to a senior CS official. CS is not responsible  for hiring LES, who are hired overseas by State on CS’s behalf.
section_title: The 2011 Budget Request Has Weaknesses That Could Affect CS’s Ability to Meet Its Goals
paragraphs: For 2011, ITA developed a $321 million budget request for funding to  support CS’s activities and hire new staff. The request was $63 million  higher than its 2010 appropriation. We evaluated the methodology that ITA  used to develop this request using best practices identified in the GAO  Cost Estimating and Assessment Guide. See Appendix III for more  information on our evaluation, including detailed descriptions of the best  practices criteria. ITA’s methodology was sound in many respects, with  good calculations for current costs such as overseas administrative fees, a  good amount of detail for certain costs such as the purchase of vehicles, as  well as error-checking processes that helped to ensure accuracy. However,  the request also has weaknesses that could affect CS’s ability to meet its  goals. Among the weaknesses we identified using the GAO Cost  Estimating and Assessment Guide are (1) a lack of information regarding  potential risks associated with the costs presented in the budget request,  such as changes in exchange rates, which could lead to overly optimistic  estimates and cost overruns, and (2) the lack of sufficient documentation,  specifically back-up data, to clearly track costs over time, allow for the  budget request to be validated, and enable new staff members to  understand the request in the event of staff turnover.
subsections: section_title: The 2011 Budget Request Is Sound in Many Respects
paragraphs: The methodology used to develop the budget request is sound in many  respects, and CS took steps to ensure its accuracy. ITA budget analysts  made many of their calculations in ways that are endorsed by the GAO  Cost Estimating and Assessment Guide. They also broke the request  down to an appropriate level of detail based on the standards in the guide,  which both improves accuracy and facilitates good management.
In an effort to determine the accuracy of the estimate, we reviewed ITA’s  calculations for technical soundness and found them to be acceptable. ITA  used rigorous budgeting practices to develop many parts of the request.  For example, officials used relevant historical cost data and incorporated  adjustments for inflation. They also followed best practices by varying  their estimation methodologies as appropriate for different situations,  which increased the request’s accuracy. For example, based on Office of  Management and Budget (OMB) guidance, ITA estimated that the  personnel they anticipated hiring in 2011 would come on board 3 months  after the start of the fiscal year, on average, and the request reflected this  hiring lapse.
Additionally, ITA performed thorough error checking on its request,  enabling CS management to make hiring and spending decisions with  reasonable confidence that no costs had been forgotten or miscalculated.  CS’s process in developing the request included multiple reviews to ensure  accuracy, including internal reviews by various stakeholders within  Commerce and external reviews by OMB. CS used the feedback from  these reviews to update the request as needed. Also, CS routinely updated  the costs in the budget with actual costs as they became available,  enabling them to see if the estimate was on track.
CS’s 2011 budget request also broke down costs to a level of detail that  met the standards in the GAO Cost Estimating and Assessment Guide in  most cases, ensuring that activities and costs were broken down into small  pieces that management could individually plan for, schedule, and control.  For example, salaries were calculated separately for several different  types of employees rather than using one salary cost as the basis for all the  calculations, and the cost of replacing 37 vehicles was identified  separately. One of the benefits of including this level of detail is ensuring  that cost elements are not omitted or double counted.
section_title: The 2011 Budget Request Lacks a Risk Analysis and Contingency Plans
paragraphs: ITA did not perform a risk analysis on its budget request for CS, which  could lead to overly optimistic estimates of costs and cost overruns. We  have found that most agency budget requests are overly optimistic,  underestimating average costs. A risk analysis would help correct for this  tendency by providing levels of confidence so that ITA would understand  the probability of executing the budget successfully given the risks that  were assessed. The risk analysis would identify the assumptions driving  the estimate, and provide a range of costs that span the best and worst  case scenarios. This would inform CS management of the probability that  costs for salaries or other key items might exceed funding levels  requested, and enable them to develop contingency plans for making  spending and hiring decisions accordingly. For example, new staff will be  located in different locations with vastly different costs. According to an  ITA official, salaries for LES range from $12,000 in Vietnam to $100,000 in  Frankfurt, Germany. However, the budget request did not provide a range  of possible LES salary costs. Instead, ITA used an overly simplistic  averaging approach to estimate LES costs, failing to give management  perspective on how these costs might vary with different staff placement  scenarios, changing exchange rates, etc. Although ITA is not required to  perform a risk analysis by OMB’s annual budget development guidelines, it  is a best practice according to the GAO Cost Estimating and Assessment  Guide.
Assumptions that drive the budget request were not fully explained,  contributing to the inability to perform a risk analysis. Major assumptions  in the 2011 budget request include salary estimates, annual salary  increases, currency fluctuation, and travel costs, none of which were fully  explained. Since ITA prepares its budget 2 years in advance, e.g., drafting  its 2011 budget request in 2009, there is substantial uncertainty in these  assumptions. Some assumptions were documented, such as using 2009  amounts with appropriate adjustments to estimate costs for 2011, but  others were not explained. For example, travel costs were presented with  a single number, without further explanation of how they arrived at this  figure. Also, the reasoning behind estimating a particular exchange rate  was not explained. Exchange rates can vary substantially. For example,  over the course of 2009, the average monthly exchange rate of the dollar to  the Brazilian real varied from a low of 1.8 to a high of 2.4, a difference of  30 percent. Likewise, the Mexican peso’s average monthly exchange rate  with the dollar varied by 16 percent, the euro varied by 12 percent, the  Japanese yen varied by 11 percent, and the Indian rupee varied by 7  percent. Without details and explanations, CS could not calculate risk  distributions for assumptions like these, which would enable it to  understand how much costs might vary if the situation changes.
section_title: ITA’s Budgeting Methodology Lacks Some Documentation
paragraphs: ITA’s budget request lacks sufficient supporting documentation, making it  difficult for Congress or other parties to understand how the budget  request was developed. For example, the budget request broke down  changes in the budget for 2011, and these changes were added to 2010  costs to arrive at the total request. However, the budget request did not  include the 2010 cost information. According to the GAO Cost Estimating  and Assessment Guide, it is a best practice to provide sufficient detail so  that the documentation allows for clear tracking of cost estimates over  time. By documenting all steps in the development of its budget request,  ITA would be able re-create its estimates in the event of budget staff  turnover. This is particularly important since only a small number of  people develop the budget. Additionally, thorough documentation of  calculations and back-up data would allow the request to be checked and  validated. Without this information, it is impossible for an outside  reviewer to corroborate the information in the request.
ITA briefed department-level officials in Commerce as well as the Office of  Management and Budget on the 2011 budget request. However, we were  unable to obtain any documentation of what was presented at the  briefings, so we could not determine whether the briefings contained  enough detail for management to understand the level of accuracy,  completeness, and quality of the estimate, which is a best practice.
section_title: Conclusions
paragraphs: In the wake of growing financial constraints and staffing declines, CS’s  leadership faces significant challenges in its efforts to rebuild its  workforce and play a major role in the President’s NEI. Additionally,  depending on the direction set by the current administration, CS officials  may need to make significant changes such as realigning CS’s workforce  and offices. While the President’s plan is being finalized, the Assistant  Secretary has opportunities to improve management controls over CS’s  resources and proactively address the issues that led to their “crisis”  situation in 2009. These opportunities include improving long-term  financial and workforce information necessary to recognize significant  changes affecting the organization; routinely reviewing operations to  identify potential cost savings, such as administrative fees related to  overseas posts; and recognizing risks and considering alternative  responses to significant resource changes in a systematic manner so as to  minimize actions such as freezing hiring, travel, and training that  compromise CS’s ability to conduct its core business.
CS currently lacks two key capabilities that would better position it to  implement its 2011 budget and rapidly respond to any new priorities. The  first is a workforce plan developed in accordance with workforce planning  principles that is linked to the agency’s strategic goals and that would  enable agency managers to regularly identify workforce gaps and develop  a workforce strategy that fills them, including using or adopting its current  staffing model. The implementation of such planning needs to be  supported by adequate human capital management resources. The second  capability is to estimate the budgetary costs of any changes in its  operations according to best practices. This includes risk analyses to  ensure that factors that could negatively impact its ability to fully fund its  operations are understood and considered; contingency plans to address  possible funding shortfalls; and documentation in support of the costs  used to construct the estimate, so that future management and new budget  staff can understand the estimate’s assumptions, costs, and contingencies.
section_title: Recommendations for Executive Action
paragraphs: To better ensure CS effectively and efficiently uses its resources in  support of its strategic goals and the President’s National Export Initiative,  we are making the following three recommendations:  The Secretary of Commerce should direct the Undersecretary for  International Trade to    strengthen management controls over CS’s financial and workforce  improve workforce planning and better align CS’s workforce with its  strategic goals and available resources on a routine basis, and improve cost estimating to better ensure that CS’s budget estimate  includes sufficient resources to support its planned operations and  addresses potential risks.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, Commerce concurred with  our findings and recommendations. The Secretary of Commerce indicated  that he has directed the International Trade Administration to use this  report to develop stronger management controls, improve workforce  planning, and improve cost estimates during the budget process.
The Secretary of Commerce also indicated that ITA has been engaged in a  vigorous strategic planning effort to align its focus, activities, and  personnel to strengthen CS and support the President’s NEI, since January  2010.
Additionally, Commerce provided technical comments to our draft, which  we reviewed. The technical comments provided additional information or  clarified CS activities or statements in the draft, and we made changes to  reflect some of these points.
We are sending this report to other interested Members of Congress and to  the Secretaries of Agriculture, Commerce, and State. In addition, the  report will be available free of charge at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-4347 or yagerl@gao.gov. Contact points for our offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: In response to a Congressional mandate, GAO reviewed (1) how well the  U.S. and Foreign Commercial Service (CS) managed its resources from  2004 to 2009, and (2) the completeness of CS’s workforce plans and the  quality of its 2011 budget request. In addition, in appendix II, we provide  information on how CS export promotion funding compares with the  funding for Department of Agriculture (USDA) and Department of State  (State) for analogous activities from 2004 to 2009.
To determine the changes in CS’s workforce from 2004 to 2009, we  analyzed data provided by CS on staffing losses and gains by type of  position, identifying the number of civil servants, political hires, Foreign  Service Officers (FSO), and locally employed staff (LES) during that 5-year  period of time. We also identified staff losses and gains by location at  foreign posts, U.S. Export Assistance Centers (USEAC), and CS  headquarters in Washington, D.C. We traced CS data back to source  documents where possible and found them sufficiently reliable to report  on the loss of staff throughout CS. We used the staffing data provided by  CS to identify where FSOs were serving in domestic positions.
To determine how much funding CS had available, what the major cost  components of its budget were, how administrative costs changed over  time, and what impact changing costs had on CS, we reviewed CS’s  appropriations and full-time equivalent (FTE) levels from 2004 through  2009. We used internal CS budget documents, ITA Congressional Budget  Justifications, President’s budgets, and appropriations bills to gather and  corroborate budget data, and based on consistency among these  documents, we found these data to be sufficiently reliable to report on  CS’s budget history. We also interviewed CS officials responsible for  managing the budget. We analyzed the foreign posts’ and USEACs’ 2009  written comments to determine weaknesses and threats that were  commonly reported.
To determine the completeness of CS’s plans to rebuild its workforce, we  reviewed CS’s 2010 and 2011 budget requests to ascertain whether the  staffing increases CS requested were sufficient to cover its staffing  changes from 2004 to 2009. We interviewed CS officials who were involved  in developing the requests. We also interviewed CS officials regarding their  process for hiring and placing new staff overseas, and reviewed CS policy  requiring FSOs to serve in domestic positions. To determine whether CS  had conducted workforce planning, we evaluated its efforts using GAO’s  five key principles of effective strategic workforce planning. We reviewed  CS’s previous workforce planning efforts under its 2006 Transformational  Commercial Diplomacy Initiative including CS’s use of its Overseas and  Domestic Resource Allocation Models (ORAM and DRAM), and its cost  benefit model. We interviewed CS officials regarding how workforce  planning decisions were made since the ORAM and DRAM models were  last used. We also interviewed a senior CS official about the human  resource office’s potential to handle the projected large increase in FSOs  that is contained in CS’s budget requests for 2010 and 2011.
To determine the quality of the International Trade Administration’s (ITA)  2011 budget request for CS, we determined the extent to which ITA  followed the best practices outlined in the GAO Cost Estimating and  Assessment Guide. The guide identifies 12 practices that are the basis for  effective cost estimation, including cost estimation for annual budget  requests. It associates these practices with four characteristics: accurate,  well documented, comprehensive, and credible. The Office of Management  and Budget (OMB) endorsed this guidance as being sufficient for meeting  most cost estimating requirements, including for budget formulation. If  followed correctly, these practices should result in reliable and valid  budgets that (a) can be easily and clearly traced, replicated, and updated,  and (b) enable managers to make informed decisions. In performing this  analysis, we examined the 2011 budget request and supporting  documentation provided by ITA, and we conducted interviews with ITA  budget staff. After conducting this assessment, we identified major  strengths and weaknesses of the 2011 budget request.
To describe the level of funding CS received compared with State and  USDA for analogous export promotion activities in appendix II, we  worked with State and USDA to determine which of their programs and  activities were analogous to CS’s export portfolio. We jointly agreed on  what elements of their budget could be attributed to export promotion. We  focused on (1) marketing and market research, (2) technical assistance  and training for exporting businesses, and (3) advocacy that benefits  individual companies. We reviewed the President’s budget requests and  agency budget justifications for CS, which are included in the budgets of  the Department of Commerce’s ITA, as well as the budgets for USDA’s  Foreign Agricultural Service and State’s Office of Commercial and  Business Affairs to identify those programs and activities in their budgets  that supported those functions in order to develop the comparison. We  determined that USDA’s budget summaries were reliable by reviewing  financial audits for the 6-year time period of our review. Audits for 2 of the  years found that the financial statements fairly presented USDA’s finances  with some adjustments needed to internal controls, and the audits for the  other 4 years found that the financial statements fairly presented USDA’s  finances without caveat. There is one limitation to USDA’s budget  summaries, which is that salaries and expenses are listed by function  rather than by program. To address the limitation, we included these  amounts, because it seemed sufficiently clear which functions related to  export promotion, although the labels were different from the program  names. State was not able to provide sufficient budget data for 2004 to  2008, so we only reported on 2009.
We conducted this performance audit from September 2009 to August  2010, 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.
section_title: Appendix II: U.S. Agencies Promote Exports with Varying Levels of Funding and Different Promotion Models
paragraphs: The Departments of Agriculture (USDA), Commerce, and State are the  three main U.S. agencies tasked with promoting exports through advocacy  for individual companies, marketing, and technical assistance and training.  In 2009, USDA’s Foreign Agricultural Service (FAS) had 97 offices in 75  countries, Commerce’s U.S. and Foreign Commercial Service (CS) had 127  offices in 76 countries, and State had 45 offices in 45 countries.  Commerce, State, and USDA have different funding levels for export  promotion. Additionally, USDA’s export promotion model is different from  the one employed by Commerce and State.
subsections: section_title: Commerce, State, and USDA Have Different Levels of Export Promotion Funding
paragraphs: In 2009, Commerce received $238 million, and USDA received $365 million  for export promotion. State estimated it spent $17 million in support of  export promotion for 2009. See figure 1 for funding levels for USDA and  Commerce from 2004 through 2009.
Funding for State is not included in the figure, as State was unable to  determine the personnel costs associated for FSOs and LES who  supported its export promotion efforts from 2004 through 2008. State  estimated that FSO costs totaled $15 million in 2009. In addition, State  funded small export promotion projects at posts and had staff in  Washington, D.C., bringing the total State estimated it spent in 2009 to $17  million, excluding LES. If LES costs were included, the level of funding  State spent on export promotion would be higher.
section_title: USDA Has a Different Export Promotion Approach from Commerce and State
paragraphs: While all three agencies conduct export promotion activities, the amount  of funding the agencies receive cannot be directly compared, since USDA  uses a different approach to promote exports than Commerce and State.  Also, while Commerce and State use the same model, they operate in  different locations and have different numbers of posts.
Commerce’s model focuses on direct services to exporters, especially  small- and medium-sized businesses. CS provides counseling and market  intelligence, matchmaking (connecting exporters to customers), and  advocacy on behalf of individual businesses. Its overseas posts coordinate  with U.S. Export Assistance Centers throughout the United States.
USDA’s FAS primarily promotes the export of commodities indirectly  through funding for external programs, unlike CS which provides services  directly to exporters. Additionally, the majority of FAS’s activities are  focused on promoting U.S. agricultural commodities in general, whereas  Commerce’s focus is on assisting individual businesses seeking to export.  FAS provides funding to agricultural trade associations, state and regional  trade groups, small businesses, and cooperatives that plan and carry out  export promotion activities. The two largest programs are the following:    The Market Access Program funds consumer promotions, market  research, and technical capacity building to develop, maintain, and expand  foreign markets for U.S. agricultural goods, including branded goods and  generic commodities. In 2009, FAS allocated $200 million to this activity,  which represented 55 percent of its total export promotion budget.
The Foreign Market Development Program focuses on long-term  development of foreign markets for generic U.S. agricultural commodities.  In 2009, FAS allocated $34 million to this activity, which represented 9  percent of its total export promotion budget.
These programs are supplemented by smaller funding programs. One  program helps trade organizations provide sample agricultural products,  another provides funding to help overcome technical barriers to exporting,  and a third funds development of exports in emerging markets.  Additionally, FAS staff overseas provide market intelligence for U.S. firms,  and work on export promotion activities including market research and  trade shows.
State supports U.S. exporters in locations where CS does not have a  presence. Commerce and State signed a Memorandum of Understanding  in January 2009, formalizing this representation. Prior to that, State acted  on behalf of CS informally. Under the memorandum, State staff at these  partnership posts provide services developed by CS, including matching  businesses with potential customers and market research. Providing CS  services at partnership posts is not a full-time job for State FSOs and LES.  In a survey of the amount of time partnership post staff spent on export  promotion efforts in 2009, FSOs indicated they spent about one-quarter of  their time on export promotion, and LES at these posts spent about half of  their time on it.
State also provides approximately $340,000 to $400,000 per year in  financial support for posts’ business promotion and commercial outreach  activities through a Business Facilitation Incentive Fund.
section_title: Appendix III: Assessment of ITA’s 2011 Budget Estimate for CS Using GAO Cost Estimating and Assessment Guide
paragraphs: To analyze the International Trade Association’s (ITA) 2011 budget request  for the U.S. and Foreign Commercial Service (CS), we determined the  extent to which ITA followed the best practices outlined in the GAO Cost  Estimating and Assessment Guide. The guide identifies 12 practices that  are the basis for effective cost estimation, including cost estimation for  annual budget requests. It associates these practices with four  characteristics: accurate, well documented, comprehensive, and credible.  The Office of Management and Budget (OMB) endorsed this guidance as  being sufficient for meeting most cost-estimating requirements, including  for budget formulation. If followed correctly, these practices should result  in reliable and valid budgets that (a) can be easily and clearly traced,  replicated, and updated; and (b) enable managers to make informed  decisions. As table 7 illustrates, we found that CS’s budget development  methods substantially met two, partially met one, and minimally met one  of these four practices. After conducting this assessment, we identified  major strengths and weaknesses of the 2011 budget request.
The following explains the definitions we used in assessing ITA’s methods  for estimating costs in its annual budget submission:    Met—ITA provided complete evidence that satisfies the entire criterion.
Substantially met—ITA provided evidence that satisfies a large portion of  the criterion.
Partially met—ITA provided evidence that satisfies about half of the  criterion.
Minimally met—ITA provided evidence that satisfies a small portion of the  criterion.
Not met—ITA provided no evidence that satisfies any part of the criterion.
The sections that follow highlight the key findings of our assessment.
subsections: section_title: 2011 Budget Substantially Met Characteristics for Comprehensiveness
paragraphs: Best practices for comprehensiveness include an estimating plan that  includes sufficient resources, an estimating approach with standard cost  elements broken down to sufficient detail, and clear identification of  ground rules and assumptions.
Estimating plan. The budgeting team had the proper number and mix of  resources to develop the budget request, and team members were from a  centralized office. The team leader had appropriate experience and  qualifications, although CS did not provide us with enough information to  determine whether other team members were qualified.
Estimating approach. The budget used a standard cost element structure  that defined all cost elements and addressed relevant costs. CS broke  down pertinent costs to an acceptable level of detail. CS properly  separated contractor costs from government costs, although it detailed  contractor costs more explicitly for costs that were new in 2011 than for  ongoing costs.
Ground rules and assumptions. CS relied on ground rules and  assumptions, such as using 2010 amounts with adjustments appropriate  for each cost element to estimate costs for 2011, but assumptions were not  fully documented. CS did not determine risk distributions for all  assumptions, which would enable it to perform an uncertainty analysis for  key cost elements.
section_title: 2011 Budget Partially Met Characteristics for Being Well Documented
paragraphs: Best practices for being well documented include clearly defining the  estimate’s purpose, defining key characteristics of the budget including  primary cost drivers and systems for updating the budget, clearly  identifying ground rules and assumptions, obtaining data properly,  documenting the estimate so that corroborating data and calculations can  be identified, and presenting clear and sufficient information to  management for approval.
Purpose of estimate. CS clearly defined the purpose and scope of its  budget request, and all applicable costs were estimated.
Budget characteristics. The number of staff is the primary driver of the  cost of the 2011 budget request. CS received a $5.2 million total increase in  2010 for increasing CS’s presence in emerging and developing economies.  Program staff reviewed the budget and sent corrections on inaccurate  items to the budget team, although there is no ongoing system for updating  the budgeting team, and CS did not provide us with information on  whether there was one centralized place where budget update information  was stored.
Ground rules and assumptions. See above under the discussion of  comprehensiveness. The best practice of setting ground rules and  assumptions is relevant to both being well documented and to  comprehensiveness.
Data. Consistent with best practices, CS used historical data to estimate  key operational costs. CS performed cross-checks on its data by having  program staff verify assumptions in new estimates against historical data,  and developed a computer program to check for common errors.  However, salaries for locally employed staff (LES) vary widely, which  causes uncertainty in the cost estimate.
Documentation. In some cases, we required the guidance of CS budget  analysts to identify backup support because the documentation was  insufficient to allow someone unfamiliar with the budget to locate detailed  corroborating data. The budget documentation did not provide a step-by- step description of the budgeting process, methods, or sources. ITA staff  said that documenting and chronicling the information that was used to  create it would be a best practice they aspire to but is not something they  currently do.
Presenting to management for approval. CS presented the budget to  department-level officials in the Department of Commerce as well as to  OMB and the House Appropriations Committee. However, we were unable  to obtain any documentation of what was presented at the briefings, so we  could not determine whether it contained enough detail for management  to understand the level of accuracy, completeness, and quality of the  estimate.
section_title: 2011 Budget Substantially Met Characteristics for Accuracy
paragraphs: Best practices for accuracy include appropriate methodology for  developing the point estimate, and updating the estimate to reflect actual  costs and changes.
Point estimate. CS officials used relevant historical cost data and  considered adjustments for general inflation when estimating costs. They  varied their estimation methodologies as appropriate for different  situations. However, although they were aware that salaries were their  largest cost driver, they used an overly simplistic averaging approach to  reflect likely new staff salaries at hiring. Additionally, since CS did not  perform a risk analysis, it is not possible to know whether its point  estimate was the most likely actual reflection of costs, or was overly   optimistic or conservative. We found no mathematical mistakes in the  request, and CS validated the request by looking for errors. CS also cross- checked the budget estimates with program staff and with budget staff at  both Commerce and OMB.
Update with actual costs and changes. ITA updated the request based on  feedback from program staff reviews. Additionally, actual costs were  compared with estimates on a monthly basis. However, CS did not share  changes to the cost estimate with us, so we were unable to assess whether  changes were properly updated.
section_title: CS’s 2011 Cost Estimate Minimally Met Criteria for Credibility
paragraphs: Best practices for credibility include conducting a sensitivity analysis and  conducting a risk analysis.
Sensitivity analysis. CS did not perform a sensitivity analysis on each of  the major assumptions to determine how outcomes would vary if they  changed. Major assumptions included salary estimates, annual salary  increases, impact of currency fluctuation, and travel costs.
Risk analysis. CS did not perform a risk analysis to quantify the overall  risk associated with changes to the assumptions that drive its budget. A  risk analysis would help provide CS managers with information to  determine the probability that costs for key operations, such as salaries,  may exceed funding levels requested in the budget, so that they could  make spending and hiring decisions accordingly.
section_title: Appendix IV: Comments from the Department of Commerce
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Adam Cowles, Assistant  Director; Gezahegne Bekele; Elizabeth Bowditch; Karen Deans; Martin  DeAlteriis; Julie Hirshen; Grace Lui; Karen Richey; Meredith H. Trauner;  and Amanda Weldon made key contributions to this report.