Nonproliferation and Disarmament Fund: State Should Better Assure the Effective Use of Program Authorities
Released: 2012-11-30T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: The proliferation of weapons of massdestruction and advanced conventionalweapons poses significant threats toU.S. and international security. State’sNDF began operating in 1994 to helpcombat such threats by funding a variety of nonproliferation and disarmament projects. NDF’s legal authorities provide it significant flexibility to perform its work and it has initiated high-profile projects in locations that are significant to U.S. interests. Nonetheless, questions have been raised about how NDF has used its authorities, including its authority to carry over balances into future fiscal years, and the extent to which NDF is effectively implementing its activities. This report examines (1) State’s use of NDF authorities in developing and implementing NDF projects and (2) the extent to which State has conducted a program evaluation of NDF and used this information to improve program performance. To conduct this review, GAO analyzed NDF program and project data and documentation, analyzed a sample of NDF project close-out documents, and interviewed NDF and other U.S. officials.

section_title: What GAO Found
paragraphs: The Department of State's (State) Nonproliferation and Disarmament Fund (NDF) has several key authorities that provide it significant operational flexibility; however, it has not determined its needed carryover balances and it has taken years to close out many of its projects in the absence of guidance for closing them. Annual appropriations bills have consistently provided NDF with three key authorities that it has used to carry out its activities. First, NDF has the authority to undertake projects notwithstanding any other provision of law. NDF has used this authority to fund projects in countries, such as North Korea, where U.S. assistance is prohibited by U.S. sanctions and other legal restrictions. Second, NDF has the authority to undertake projects globally. NDF has used this authority to fund projects in numerous regions around the world, in contrast with other U.S. nonproliferation programs, which have historically focused on countries in the former Soviet Union. Third, NDF's appropriations do not expire within a particular time period, enabling NDF to carry over balances from year to year not designated for specific projects. However, NDF has not determined appropriate levels for these balances, which increased significantly in the past few years. Additionally, NDF has sometimes taken many years to close projects, including those where work was never started or was suspended, and has not established criteria to determine when inactive projects should be closed and unexpended resources made available for other projects. As a result, NDF funds may be tied up for years in inactive projects, precluding the funds' use for other projects.

State has never conducted a program evaluation of NDF. In February 2012, State developed a policy requiring bureaus to evaluate programs, projects, and activities, and outlined the requirements for these evaluations. As part of this policy, State required bureaus to submit an evaluation plan for fiscal years 2012 through 2014 that identified the programs and projects they plan to evaluate. However, the Bureau of International Security and Nonproliferation (ISN), which oversees NDF, did not include NDF in its fiscal years 2012 through 2014 evaluation plan. State currently lacks information that could be used to conduct a program evaluation and to improve NDF's management of the program. Project close-out reports are critical to the process of closing out a project and identifying lessons learned, but NDF project close-out reports do not contain information that could enable NDF to better manage its program. For example, not all closeout reports address the results of the project. NDF uses e-mails and face-to-face meetings to communicate lessons learned without documenting them. Established standards suggest that these should be transferred to a database of lessons learned for use in future projects and activities, an action State officials said they are considering taking. NDF has also produced a project management guide to encourage project managers to use standard procedures and write close-out reports, but does not require the use of this guide. In addition, the guide does not detail a format for project managers to use in preparing their close-out reports or list the information that project managers must address. NDF officials said they plan to develop standard operating procedures to address these issues, but had not done so as of November 2012.

section_title: What GAO Recommends
paragraphs: GAO recommends that State (1) develop a methodology for determining the amount of carryover reserves needed to meet program requirements, (2) develop guidance for determining when inactive NDF projects should be closed out, (3) conduct periodic program evaluations of NDF, and (4) establish requirements for the types of information to be included in project close-out reports. State agreed with the recommendations.

section_title: Letter
paragraphs: The proliferation of weapons of mass destruction and their delivery  systems, as well as the spread of advanced conventional weapons,  poses significant threats to U.S. and international security. Congress  created the Nonproliferation and Disarmament Fund (NDF) in 1992 to  support U.S. government efforts to combat such threats. Since then, the  Department of State (State), which manages the program, has used NDF  to fund a variety of nonproliferation and disarmament projects. These  projects have included the shutdown of chemical weapons facilities, the  transfer of highly enriched uranium to secure locations, the construction  of border security facilities, and the destruction of stockpiles of ballistic  missiles. NDF has funded projects in a range of countries around the  globe and has also supported work by international organizations, such  as the International Atomic Energy Agency. Congress has provided NDF  with various legal authorities to increase its ability to carry out  nonproliferation and disarmament projects, as opportunities arise. State  officials have noted that these authorities provide NDF a level of flexibility  in carrying out its mission that is uncommon among U.S. government  programs. According to State, NDF has made it possible for the U.S.  government to respond rapidly to unanticipated or unusually difficult, high- priority nonproliferation and disarmament opportunities. While NDF has  taken on high-profile projects in locations significant to U.S. interests,  such as North Korea and Libya, questions have been raised about how  NDF has used its legal authorities, including its authority to carry over  funds into future fiscal years, and the extent to which it is effectively  implementing its activities.

This report examines (1) State’s use of NDF authorities in developing and  implementing NDF projects and (2) the extent to which State has  conducted a program evaluation of NDF and used this information to  improve program performance. To address these objectives, we analyzed  NDF data on program appropriations, commitments, obligations, and  carryover balances for fiscal years 1994 through 2012. We also analyzed  NDF project data on funding amounts, locations, objectives, and time  frames for fiscal years 1994 through 2012. We assessed both the program  and project data and found them sufficiently reliable for our purposes.  Additionally, we reviewed NDF project documentation, such as project  proposal summaries, approval memos, and congressional notifications to  obtain additional information on NDF projects. To identify NDF’s key legal  authorities, we reviewed relevant laws and regulations. To assess the  extent to which State has evaluated NDF, we met with State officials from  the Bureaus of Budget and Planning and International Security and  Nonproliferation (ISN), and reviewed project close-out documentation for a  judgmental sample of 23 project close-out reports—14 of which we  selected, and 9 of which State selected. In selecting our sample, we  considered only projects that NDF had closed out since the beginning of  fiscal year 2007. Our selection criteria included project cost, location, and  type. State selected its projects using similar criteria; however, State did  not limit itself to projects that were closed out. For example, State selected  some projects for which work was completed, but the project was not yet  officially closed out. For all 23 project close-out reports, we assessed the  types of information contained in these reports, and the degree to which  they could be used to provide needed information for evaluations and  improve NDF’s management of the program. In reviewing the  documentation for the projects State selected, we determined that the  inclusion of these projects in our analysis did not alter our overall findings  and thus did not compromise the independence of our work. We also met  with State officials in the NDF program office and officials from the  Departments of Defense (DOD) and Energy (DOE) who were responsible  for proposing or implementing NDF projects. Additionally, we met with  officials from the Office of Management and Budget (OMB) to better  understand NDF’s budget planning process. Additional details about our  scope and methodology can be found in appendix I.

We conducted this performance audit from March 2012 through  November 2012 in accordance with generally accepted government  auditing standards. These 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
paragraphs: Congress authorized the President to establish NDF in 1992 under  section 504 of the FREEDOM Support Act. The legislation authorized the  President to use NDF to promote a variety of bilateral and multilateral  nonproliferation and disarmament activities. In 1994, the President  delegated authority for the program to the Secretary of State, who  subsequently delegated authority for the program to the Under Secretary  of State for Arms Control and International Security. The NDF office,  within ISN, is responsible for day-to-day management of the program.  The NDF Director leads the office, which has a staff of 16 people,  including both State officials and contract employees.

Congress funds NDF annually through the Nonproliferation, Anti- terrorism, Demining, and Related Programs appropriations account,  within the Foreign Operations, Export Financing, and Related Programs  Appropriations Acts. NDF received $10 million in initial funding for fiscal  year 1994. Since fiscal year 1994, NDF has received $597 million in total  appropriations. From fiscal years 2007 through 2012, NDF appropriations  ranged from a high of $118 million in fiscal year 2009 to a low of $30  million in fiscal year 2012. According to State, NDF is unusual among U.S. foreign assistance programs in that it does not request funding for  specific activities as part of its annual Congressional Budget Justification.  The NDF Director stated that this helps ensure that NDF has the flexibility  to respond to nonproliferation and disarmament opportunities as they  arise, rather than tying NDF funds to particular projects or locations in  advance.
subsections: section_title: NDF Authorities
paragraphs: The FREEDOM Support Act provided NDF with a broad mission to fund  bilateral and multilateral nonproliferation and disarmament activities and  annual appropriations bills have consistently granted NDF other key  authorities. NDF has used its authorities under the FREEDOM Support Act  to fund a diverse set of projects. Table 1 outlines NDF activities authorized  by the FREEDOM Support Act and provides examples of the types of  activities NDF has funded. State officials and NDF program documents  have characterized NDF’s mission as focused on funding unanticipated or  unusually difficult projects of high priority to the U.S. government.

Figure 1 illustrates the dismantling of a Scud missile as part of an NDF- funded project in Ukraine.

In addition to the authorities granted to NDF in the FREEDOM Support  Act, annual appropriations bills have also consistently provided NDF with  three key authorities that are designed to increase NDF’s flexibility in  carrying out nonproliferation and disarmament activities around the globe,  as opportunities arise. These include the authority to (1) undertake  projects notwithstanding other provisions of law (notwithstanding  authority); (2) implement projects anywhere in the world or through  international organizations when it is in the national security interest of the  United States to do so, notwithstanding provisions of the FREEDOM  Support Act that limited certain NDF activities to the independent states of  the former Soviet Union (FSU) (geographic authority); and (3) use funding  without restriction to fiscal year (no-year budget authority).

section_title: NDF Project Review and Approval Process
paragraphs: State uses a multistep process to review NDF project proposals and  determine which projects to fund, as shown in figure 2.

According to NDF officials, NDF does not typically develop its own project  proposals. Rather, other agencies, such as DOD and DOE, and other  State offices, such as the Office of Export Control Cooperation, submit  project proposals. NDF’s Review Panel, which is chaired by the Assistant  Secretary of State from ISN, reviews these proposals. Two ISN Deputy  Assistant Secretaries of State and the Assistant Secretaries of State from  the Bureau of Political-Military Affairs and the Bureau of Arms Control,  Verification, and Compliance serve as the other voting members on the  panel. Officials from other U.S. agencies, including DOD, DOE, OMB, the  Department of Commerce, and the Department of Homeland Security, as  well as representatives from the National Security Council and U.S.  intelligence community, also attend panel meetings. After reviewing the  project proposals, the voting members of the NDF Review Panel make  recommendations to State’s Under Secretary for Arms Control and  International Security to approve, deny, or defer projects. In the Review  Panel meetings, members can also propose modifications, such as  increasing or decreasing the amount of funding for a project. The Under  Secretary has the final authority to approve a project. NDF officials stated  that in certain cases—for example, if a project is particularly urgent—the  NDF Review Panel may not formally meet to review a proposal before it is  submitted to the Under Secretary. In those cases, NDF instead may  discuss the proposal with other Review Panel agencies in a different  venue, such as at a National Security Council meeting.

After the Under Secretary approves a project, but before work begins,  State provides a 15-day advance notification to Congress to inform it of  State’s intent to begin work on the project. As part of the notification, NDF informs Congress of its intent to obligate a specified amount of funds  on the project. NDF then considers these funds designated for that  project and not available for use on other projects, unless a subsequent  notification is made.

section_title: NDF Projects
paragraphs: From fiscal years 1994 through 2012, NDF notified Congress of its intent  to initiate work on 179 projects. NDF subsequently cancelled 19 of these  projects after their notification and put an additional project on hold  because of congressional concerns. As of the end of fiscal year 2012,  NDF had 33 active projects. NDF also reported that, as of the end of  fiscal year 2012, it had an additional 42 projects for which work was  completed or cancelled, and the financial review of the projects was  finished. In accordance with NDF close-out procedures, NDF is in the  process of seeking approval from the Under Secretary for Arms Control  and International Security before officially closing them.

Since the beginning of fiscal year 2007, NDF has notified Congress of its  intent to initiate work on a total of 24 projects, with a high of 15 in fiscal  year 2010 and a low of zero in fiscal year 2011. Figure 3 shows the  number of congressionally-notified projects from fiscal years 2007  through 2012.

NDF funding amounts for projects vary significantly. NDF has notified  Congress of its intent to spend as much as $50 million to as little as  $179,000 on individual projects initiated since the beginning of fiscal year  2007. The lengths of projects also vary. For example, since the beginning  of fiscal year 2007, NDF has closed out projects that were completed in  as little as a few months to more than 9 years. In addition, some projects  are follow-up projects that build on projects initiated in earlier fiscal years.  For example, beginning in fiscal year 1998, NDF has undertaken five  separate projects—the most recent of which was initiated in fiscal year  2010—to assist the government of Kazakhstan in shutting down a nuclear  reactor in Aktau.

NDF divides its projects into four categories: (1) destruction and  conversion, (2) safeguards and verification, (3) enforcement and  interdiction, and (4) education and training. Since the beginning of fiscal  year 2007, State has committed the most resources to projects in the  destruction/conversion category. In fiscal years 2007 through 2012, 39  percent of NDF funding for new projects went to projects in this category.  Figure 4 shows a breakdown of funding for NDF among the four project  categories, as well as administrative expenses, for fiscal years 2007  through 2012.

section_title: NDF’s Authorities Provide It Significant Operational Flexibility, but under Its No-Year Budget Authority, NDF Has Not Determined Needed Carryover Balances
paragraphs: NDF has several key authorities that provide it significant operational  flexibility; however, it has not determined its needed carryover balances  and it has taken years to close out many of its projects in the absence of  guidance for closing them. Annual appropriations bills have consistently  provided NDF with three key authorities that it has used to carry out its  activities. First, NDF has used its notwithstanding authority to fund  projects in countries where other U.S. programs are barred from  operating by U.S. sanctions or other legal restrictions. Second, NDF has  used its geographic authority to fund projects in a range of countries  around the globe. Third, NDF has used its no-year budget authority to  carry over balances not designated for specific projects from one year to  the next. However, NDF has not determined appropriate levels for these  balances, which have increased significantly in the past several years.  Additionally, NDF has taken many years to close some projects where  work was never started, or was suspended, and has not established  guidance for determining when inactive projects should be closed out and  unexpended no-year funds made available for other projects.
subsections: section_title: NDF Used Its Notwithstanding Authority to Implement Several Projects Where Laws and Regulations Otherwise Restricted U.S. Assistance
paragraphs: Annual appropriations acts have consistently granted NDF  notwithstanding authority, which allows NDF to undertake projects  “notwithstanding any other provision of law.” As a result, NDF has the  ability to fund projects in countries where other U.S. programs are  generally barred from operating by U.S. legal restrictions. For example,  when North Korea agreed to the disablement of its Yongbyon nuclear  reactor in 2007 after progress in diplomatic talks, NDF was able to fund  the project because of its notwithstanding authority, while other U.S.  agencies, such as DOD and DOE, could not because various U.S. legal  restrictions limited the assistance they could provide the country.

According to State officials, NDF’s broad notwithstanding authority is  uncommon among U.S. government programs. For example, the 2010  National Defense Authorization Act provided DOD’s Cooperative Threat  Reduction (CTR) program notwithstanding authority for the first time in  the program’s history and granted only limited use of the authority.cannot use its notwithstanding authority for more than 10 percent of  CTR’s appropriation for a given fiscal year and must meet other  requirements before exercising the authority, such as obtaining  concurrence from the Secretaries of State and Energy.

When seeking to use its notwithstanding authority, NDF requests  approval from the Under Secretary for Arms Control and International  Security. According to the NDF Director, when NDF was established,  State decided that NDF’s notwithstanding authority should, as a matter of  policy, be approved at the Under Secretary level, rather than at a lower  level. intent to use the authority as part of the 15-day congressional notification  process. Although U.S. law does not require that State inform Congress  of NDF’s use of its notwithstanding authority, the conference report  accompanying the fiscal year 2012 Consolidated Appropriations Act  directed the Secretary of State to notify the Committees on Appropriations  in writing, within 5 days of exercising NDF’s notwithstanding authority.  The conference report also directed that the notification include a  justification for the use of the authority.

State noted that legally, notwithstanding authority applies to NDF funds by the terms of  the legislation and does not require a formal determination to rely upon this authority.

Secretary for approval given the sensitive nature of the projects. In the  final three cases, NDF requested the use of its notwithstanding authority  for classified projects whose details cannot be publicly reported.

In those cases where NDF requested the use of its notwithstanding  authority to overcome specific laws or regulations, it identified several  different legal restrictions it needed to overcome. For example:

NDF requested the use of its notwithstanding authority to initiate work  on a project in Libya in fiscal year 2012. Among other things, the  authority was required to overcome restrictions on U.S. security  assistance to countries that engage in a consistent pattern of gross  violations of human rights.

In the case of two projects at the Yongbyon site in North Korea, NDF  requested the use of its notwithstanding authority to, among other  things, overcome “Glenn Amendment” restrictions within the Arms  Export Control Act. The Glenn Amendment triggers U.S. sanctions if  the President determines that a nonnuclear country (as defined by the  Nuclear Nonproliferation Treaty) has detonated a nuclear explosive  device.

NDF also requested the use of its notwithstanding authority to  overcome a restriction that the Foreign Assistance Act would have  imposed on a project in Iraq. The Act restricts U.S. assistance to  countries that have severed diplomatic relations with the United  States and which have not entered into a new bilateral assistance  agreement once diplomatic relations have resumed. At the time of the project, there were concerns regarding the status of the United  States’ bilateral agreement with Iraq.

In addition to using its notwithstanding authority to bypass restrictions on  U.S. assistance to particular countries, NDF has in some cases also used  its notwithstanding authority to overcome laws and regulations pertaining  to contracting and acquisitions. For example, NDF used its  notwithstanding authority on some contracts to overcome Federal  Acquisition Regulation (FAR) competition requirements, according to a  2004 State Inspector General report. Additionally, a 2009 National  Academies of Science report examining options for strengthening and  expanding DOD’s CTR program noted that, because of its  notwithstanding authority, NDF is not subject to contracting requirements,  including the FAR, which CTR must follow. The report noted that this  ability may allow NDF to undertake certain projects more quickly and at  less expense than CTR. However, according to State officials, NDF has  not typically used the program’s notwithstanding authority to bypass  federal contracting laws and regulations. State officials said that, while  NDF has almost always relied on sole-source bids, rather than a  competitive bidding process, it primarily selected contractors to implement  projects using existing flexibilities in the law and regulations available to  all agencies. For example, State officials stated that NDF has relied on  provisions in the FAR that permit sole-source contracts in situations  where there is an urgent and compelling need.

In addition to competition requirements, some NDF officials stated that  NDF may use its notwithstanding authority to bypass other types of  acquisition requirements, such as “Buy America” provisions. For example,  one NDF official stated that to expedite work on NDF’s project at the  Yongbyon reactor in North Korea, NDF purchased some of the equipment  used from China.

section_title: NDF’s Geographic Authority Has Allowed It to Fund Projects around the World
paragraphs: Since 1994, annual appropriations acts have provided NDF with broad  geographic authority to fund projects worldwide as nonproliferation and  disarmament opportunities arise. NDF’s geographic authority allows it to  fund projects outside the states of the FSU if the Under Secretary for  Arms Control and International Security makes a determination that it is in  the national security interest of the United States to do so. NDF’s  authority to fund projects globally since the program’s start in 1994 is in  contrast to the authorities of some other U.S. nonproliferation programs.  For example, DOD’s CTR program was not authorized to fund any  projects outside the FSU until the passage of the Fiscal Year 2004  Defense Authorization Bill and continued to face various restrictions on  conducting work outside the FSU until 2007. In addition, as we reported in  December 2011, many of DOE’s Defense Nuclear Nonproliferation  programs, which originated in the early 1990s following the dissolution of  the Soviet Union, have focused primarily on improving nuclear security in  Russia. The NDF Director stated that, while NDF has been used to  supplement projects in the FSU or to fill emergency gaps, its primary  emphasis has always been on other parts of the world.

Since 1994, NDF has used its geographic authority to fund projects in  Central and South America, North and Sub-Saharan Africa, Eastern and  Western Europe, the Balkans, the Middle East, and Asia. As shown in  figure 5, NDF has funded projects in several different countries since the  beginning of fiscal year 2007, including Afghanistan, Egypt, Kazakhstan,  North Korea, and Ukraine, among others. It has also funded a limited  number of projects in the United States, including the construction of  training facilities at DOE’s Hazardous Materials Management and  Emergency Response site in Washington State for the purpose of training  foreign nationals.

Over the life of the program, Congress has consistently granted NDF no- year budget authority in annual appropriations bills. This authority makes  NDF appropriations available for obligation until expended, rather than  requiring them to be obligated within a particular time period, such as a  fiscal year. This authority has allowed NDF to carry over balances across  multiple fiscal years that it has not designated for specific projects. NDF  considers money to be designated for a specific project and no longer  available for use on other projects at the point when it notifies Congress  of its intent to fund the project, unless NDF renotifies the funds for the  purpose of another project. NDF’s carryover balances have increased  over time and are at historically high levels. Figure 6 provides an  overview of NDF’s various categories of funding and how NDF  accumulates carryover balances. In addition, NDF’s no-year budget  authority allows it to close projects and apply the unexpended funds to  future projects; however, NDF has sometimes delayed in closing out  some projects for many years, including projects where no work ever  occurred or was suspended. Until projects are closed, any unexpended  project funds are not reported as part of NDF’s carryover balances. As a  result, NDF’s carryover balance is likely understated.

NDF’s carryover balances have grown significantly in the past few years  to historically high levels. NDF’s carryover balance peaked at the end of  fiscal year 2009 at $122 million in unnotified funds, which were carried  over into fiscal year 2010 as shown in figure 7. Unnotified funds include  funds never designated for a project, as well as any unobligated and  unexpended project funds that once again become available as unnotified  funds when a project is closed. Before the end of fiscal year 2009, NDF’s  balance carried over into the next fiscal year had been $10 million or  higher three times since the program began in fiscal year 1994 and had  never been higher than $22 million. NDF’s carryover balance was $86  million at the end of fiscal year 2012.

NDF has not established a formal means of determining the amount of  money it needs to carry over from year to year to respond to  unanticipated nonproliferation and disarmament opportunities.According to the Assistant Secretary of State for International Security  and Nonproliferation, State management is aware of the growth in NDF’s  carryover balances and is committed to spending them down as  opportunities consistent with the mission of NDF arise.

In the past several years, increases in NDF’s annual appropriations from  levels in earlier fiscal years, as well as the initiation of work on a smaller  number of projects, have contributed to NDF’s increased carryover  balances. As shown in figure 7 above, NDF’s appropriation was never  more than $30 million before fiscal year 2005 and was only higher than  $20 million in one fiscal year. However, from fiscal years 2005 through 2012, NDF’s appropriation has been $30 million or more every year. NDF’s appropriation reached a high of $118 million in fiscal year 2009,  which included $77 million in a supplemental appropriation. NDF also  initiated a limited number of projects in the past 2 years. For example, it  initiated only one new project in fiscal year 2012 and no projects in fiscal  year 2011. In total, NDF notified Congress of 24 projects from fiscal years  2007 through 2012, compared with 63 projects from fiscal years 2001  through 2006. In part, NDF officials stated that the decline in the number  of projects initiated was caused by the creation of other U.S. government  programs that are now able to fund various activities from their own  budgets that might have previously required NDF funding. For example,  NDF officials noted that NDF previously funded certain types of export  control assistance activities that State’s Export Control and Related  Border Security Assistance program is now able to fund and implement.  However, NDF officials noted that while NDF has initiated a smaller  number of projects in fiscal years 2007 through 2012, many of the  projects it has initiated have involved significantly larger amounts of  notified funds than in fiscal years 2001 through 2006. For example, NDF  had only one project with over $10 million in notified funds in fiscal years  2001 through 2006, while it had 11 projects with over $10 million in  notified funds in fiscal years 2007 through 2012.

NDF’s budget request for fiscal year 2013 was $30 million.

Other U.S. government programs also receive no-year money and have  the ability to carry over balances from year to year. We have previously  reported on efforts by some of these programs to determine appropriate  carryover balance amounts. For example, in contrast with NDF, DOE’s  National Nuclear Security Administration has established thresholds for  the carryover balances of its Defense Nuclear Nonproliferation  programs. These threshold amounts are based upon specified  percentages of the total funds available to each of the Defense Nuclear  Nonproliferation programs in a given fiscal year. As we reported in  December 2011, if programs’ carryover balances exceed these  thresholds, they will trigger additional scrutiny by the National Nuclear  Security Administration as to whether the carryover balances are  appropriate to meet program requirements.

NDF also maintains a significant amount of funds that it notified to  Congress in the past for projects, but has not yet obligated. Of the 32  active NDF projects initiated in fiscal year 2010 or earlier, 25 percent of  the total notified funds have not yet been obligated. This represents more  than $66 million in notified but unobligated funds. As some NDF projects  take many years to complete, NDF does not necessarily obligate all funds  early in their implementation. However, of the 32 active NDF projects  initiated in fiscal year 2010 or earlier, we identified 5 projects for which  less than 25 percent of the notified funds had been obligated.

Because NDF’s funding is no-year money, NDF can close projects for  which it has never started work, or has suspended work, and apply the  unexpended funds to future projects. However, NDF has not established  guidance for determining when it should close out inactive projects. As a  result, NDF funds may be tied up for years in projects where no work is  occurring, precluding the funds’ use for other projects. For example, NDF  maintains over $24 million in unobligated funds from a $25 million project  in North Korea that it notified to Congress in fiscal year 2008. NDF has  not obligated any of the funds for this project since North Korea expelled  International Atomic Energy Agency inspectors and U.S. monitors from  the country in April 2009 and work on the project was abruptly halted.  Additionally, NDF has not yet obligated any of the $750,000 notified in  fiscal year 2005 for a project to support Proliferation Security Initiative  interdiction activities. According to NDF officials, no funds have been  obligated to date because they have not identified any Proliferation  Security Initiative activities that warranted the use of the funds.

NDF has not developed guidance that establishes time frames for closing  cancelled or completed projects to ensure that they are closed out in a  timely manner. NDF data show that in the past, NDF has taken years to  cancel and close some projects where little or no work ended up  occurring. Of the 61 projects NDF has closed out since the beginning of  fiscal year 2007, 16 were cancelled projects for which less than 20  percent of the notified funds were ever obligated and expended. For six  of these cancelled projects, NDF took more than 10 years to close them  out from the date they were initially notified to Congress, and for an  additional 3 projects NDF took more than 5 years to close them out from  the date they were notified to Congress. In total, these 9 projects had  over $8.3 million in notified funds that were never expended.

In addition to cancelled projects, NDF has taken years to close some  completed projects. For example, of the 61 projects NDF has closed out  since the beginning of fiscal year 2007, we identified 13 that NDF closed  out more than 10 years after work on the project was completed and an  additional 18 that NDF closed out more than 5 years after work on the  project was completed. These 31 projects had over $3.5 million in notified  but unexpended funds. The unexpended funds for these cancelled and  completed projects were eventually made available for use on future  projects. However, it can take years from the time projects are cancelled  or completed to the time they are closed out, which can result in an  understatement of the amount of money NDF has available.

NDF officials noted that prior to 2005, NDF took years to close completed  and cancelled projects because it lacked the needed staff. However, NDF  officials stated that since then, the office has hired additional staff and  developed procedures to help ensure that projects are closed out more  quickly. Additionally, NDF officials noted that the office has eliminated its  backlog of projects needing to be closed. However, NDF still has 42  projects for which it has completed all financial close-out activities, but is  in the process of seeking approval from the Under Secretary for Arms  Control and International Security before closing them and returning the  unexpended funds to the NDF account. These 42 projects have a total  of over $19 million in unexpended funds that will be added to NDF’s  unnotified balances, once they are closed.

section_title: State Has Not Conducted a Program Evaluation of NDF and Lacks Information for Conducting an Evaluation to Inform NDF’s Program Management
paragraphs: State has not conducted a program evaluation of NDF and lacks  information that would be useful in doing so. A program evaluation is a  systematic study to assess how well a program is working and that can  identify lessons learned for future projects. State has developed a new  policy requiring bureaus to evaluate programs, projects, and activities. To  comply with this policy, State issued guidance requiring bureaus to submit  an evaluation plan for fiscal years 2012 through 2014, identifying the  programs and projects they plan to evaluate. However, ISN, which  oversees NDF, did not include NDF in its fiscal years 2012 through 2014  evaluation plan. Moreover, State currently lacks information, such as the  results of some projects and lessons learned, that could be used to  conduct a program evaluation of NDF and that would help inform the  management of the program.
subsections: section_title: State Has Not Conducted an NDF Program Evaluation
paragraphs: Since NDF became operational in 1994, State has not conducted a  program evaluation of NDF, according to ISN and NDF officials.

Although NDF reported to Congress in its fiscal year 2013 budget  submission that all of its projects are evaluated in-house, these  documents are project close-out monitoring reports and not evaluations.  As State and other organizations have noted, monitoring and evaluations  are conceptually and operationally different. GAO defines evaluation as  individual, systematic studies that are conducted periodically or on an as- required basis to assess how well a program is working, while project  close-out reports consist of formal documentation that indicates  completion of the project or phase of the project.

ISN and NDF officials explained that NDF and its projects have never  been subject to a program evaluation because of the unique nature of  each project. For example, according to NDF officials, to get one country  to agree to dismantle its Scud missiles, NDF agreed to pay for that  country’s armed forces to use a labor-intensive method to dismantle the  missiles. However, NDF officials also noted that there are common  features to many projects that can serve as the basis for lessons learned.  Our analysis of NDF’s project database shows that since NDF’s first  project in 1994, NDF has implemented a number of similar projects that  could have been evaluated to determine the lessons learned for use in  present and future projects. For example, NDF has implemented 11  destruction and conversion projects involving missiles and rockets, 5 of  which involved the destruction of Scud missiles. The first of these missile  destruction and conversion projects took place in 1994 and the latest  began in 2010. In addition, as noted earlier in this report, NDF has  implemented at least five projects involving the shutdown of a nuclear  reactor in Kazakhstan.

section_title: State Has Developed a New Evaluation Policy Along with Tools to Facilitate Evaluations and Lessons Learned
paragraphs: The Government Performance and Results Modernization Act of 2010  strengthened the mandate to evaluate programs, requiring agencies to  include a discussion of evaluations in their strategic plans and  performance reports. In part to comply with the requirements of this Act,  State established a policy in February 2012 to evaluate programs and  projects. In addition, as we reported in May 2012, according to officials  from State’s Bureau of International Narcotics and Law Enforcement, the  policy was established to comply with a June 2009 directive from the  Secretary of State for systematic evaluation and to promote a culture  change among program offices.February 2012 policy superseded an evaluation policy dating from  September 2010 that did not fully comply with a recommendation later   According to State officials, the  detailed in State’s December 2010 Quadrennial Diplomacy and  Development Review that State adopt an evaluation framework  consistent with that of the U.S. Agency for International Development.

State’s 2012 evaluation policy outlines requirements and provides a  framework and justification for evaluations of all State programs, including  both diplomatic and development programs, projects, and activities. For  example, the policy notes that a robust, coordinated, and targeted  evaluation policy is essential to State’s ability to measure and monitor  program performance, document program impact, and identify best  practices and lessons learned. It also states that such a policy can help  assess return on investment and provide input for policy, planning, and  budget decisions.

State’s evaluation policy assigns a key role to the bureaus and requires  them to evaluate two to four programs, projects, or activities over a 24- month period starting in fiscal year 2012 and all large programs, projects,  and activities at least once in their lifetime or every 5 years, whichever is  less. It also requires the bureaus to appoint a coordinator to ensure that the  bureaus meet the new policy’s requirements;  requires bureaus to develop and submit a bureau evaluation plan as  an annex to their multiyear strategic plans, but gives bureaus flexibility  in determining the specific programs to evaluate, as well as the timing  and manner of evaluations they will perform; and notes that bureaus should integrate evaluation findings into decision  making about strategies, program priorities, and project design, as  well as into the planning and budget formulation process.

State’s evaluation policy also draws a clear distinction between  monitoring and evaluation. State defines monitoring as a continual  process designed to assess the progress of a program, project, or  activity. By comparison, evaluations go beyond monitoring to identify the  underlying factors and forces that affect the implementation process, as  well as the efficiency, sustainability, and effectiveness of the intervention  and its outcomes. As our previous work, State, and other organizations  have noted, evaluations also require a measure of independence.  According to State, this can be promoted in several ways, including  entrusting the evaluation to an outside research and evaluation  organization or fostering a professional culture that emphasizes the need  for rigorous and independent evaluations.

To complement the new evaluation policy and provide further direction,  State issued new guidance in March 2012 that describes several types of  evaluations that bureaus can conduct and outlines data collection  methods. The March 2012 guidance also defines the information that  must be included in each bureau evaluation plan. For example, bureaus  must include in the first plan a list of evaluations to be initiated or  completed between fiscal years 2012 and 2014. Bureaus are expected to  update these plans annually, according to State officials.

In addition to the guidance, State has developed or is in the process of  developing other resources and tools to complement and support the new  evaluation policy. These include an internal website containing resources  to assist bureaus with their evaluation responsibilities and the  establishment of a community of practice where officials can share their  expertise and discuss evaluation issues.

section_title: ISN Did Not Include NDF in Its Fiscal Years 2012 through 2014 Bureau Evaluation Plan
paragraphs: ISN submitted its first bureau evaluation plan in April 2012, but the plan  did not include any NDF projects. According to ISN officials, the bureau  had a short amount of time in which to submit its bureau evaluation plan  and for that reason the plan focused on programs that already had  projects scheduled for evaluation. After the State evaluation guidance  was finalized in late March 2012, the bureaus only had 1 month to submit  their bureau evaluation plans for fiscal years 2012 through 2014,  according to ISN officials. In canvassing ISN’s five program offices, ISN  determined that some offices were already planning evaluations for  certain projects within their programs, according to ISN officials and  documents. For example, according to the ISN bureau evaluation plan,  State’s Global Threat Reduction (GTR) Program plans to contract for four  evaluations during the fiscal years 2012 through 2015 period. GTR has  in the past contracted for evaluations of its projects in Iraq, Ukraine, and  Russia.

section_title: State Currently Lacks Information Useful in Conducting an NDF Program Evaluation and Managing NDF’s Program
paragraphs: State currently lacks information that would be useful in conducting a  program evaluation of NDF and in improving the management of its  program. NDF uses project close-out reports to document its final  monitoring of a project.the importance of preparing good monitoring reports since these both  complement evaluations and can provide valuable information for use in  preparing evaluations. They can also be a key source of information that  can be used to improve the management of a program, such as the   State’s March 2012 evaluation guidance notes  results of a project and lessons learned. However, NDF’s project close- out reports did not document information that could be useful to NDF and  the NDF Review Panel. The reports also varied in content and format.

Project management standards note the importance of documenting  results in project close-out documents, but not all of the project close-out  reports that we examined discussed the results of the project. Of the 23  project close-out reports that we examined, 2 did not address project  results at all. In addition, for the other 21, we found some instances where  the discussions of results were fairly minimal and other instances where  the reports did not state whether all intended outcomes or goals had been  achieved. According to the Project Management Body of Knowledge  Guide, a recognized standard for project managers, project close-out  documents or reports should include formal documentation that indicates  completion of a project, including results. Moreover, according to NDF  officials, NDF and the NDF Review Panel consider potential results in  determining whether to fund future projects.

Project management standards note the importance of documenting  project results and entering this information into a database of lessons  learned. However, 13 of the 23 project close-out reports that we  examined did not discuss lessons learned. Moreover, NDF officials stated  that they did not have a database of lessons learned. To document and  share lessons learned, NDF officials said that they primarily used informal  mechanisms such as e-mails or face-to-face meetings. The Project  Management Body of Knowledge Guide notes the importance of  documenting lessons learned and entering this information into a lessons- learned database for use in future projects. Some agencies that  implement projects or with an interest in communicating lessons learned  have formal databases that they use to enter lessons learned and  communicate this information to project implementers. For example, the  U.S. Agency for International Development and the U.S. Army Center for  Lessons Learned have both established lessons-learned databases.State Bureau of Budgeting and Planning officials told us that as part of its  effort to implement the new evaluation policy, State is considering the  establishment of a lessons-learned database that could include  information from NDF.

In addition, the close-out reports often did not address other criteria that  the NDF Review Panel considers in assessing future projects for NDF  funding. For example, 11 of the 23 project close-out reports that we  examined did not discuss cost, and 17 of the 23 did not discuss the  timeliness of the project. In one instance, the final cost of the project was  approximately 66 percent under the amount notified to Congress, but the  close-out report did not provide a reason why this had occurred. Of the 23  reports we examined, 19 did not discuss the appropriateness of using  NDF funding for the project and none discussed the project’s return on   According to the guidelines promulgated by State when  investment. NDF was established in 1994, NDF criteria used to assess a project’s  suitability for NDF funding include the cost and the appropriateness of  using NDF as a source of funding. In addition, according to NDF officials,  the NDF Review Panel also considers the project’s return on investment  and timeliness as part of its criteria. Moreover, according to NDF officials,  the NDF Review Panel has sometimes modified its initial assessment of a  project’s cost based on past experience.

Return on investment is a measure of the benefits gained by implementing a project. use of a standard format in project close-out reports might not always be  appropriate or useful given the wide variety of projects that NDF funds  and undertakes. However, it may be difficult to obtain information useful  to future evaluations from reports that vary so significantly in content and  format.

Recognizing the need for NDF project managers to prepare a close-out  report to ensure that information is consistently documented, in  December 2010, NDF established the expectation that NDF project  managers produce a project close-out report. NDF also produced a  project management guide designed to encourage project managers to  standardize their procedures. The NDF project management guide, which  according to NDF officials is based on the Project Management Body of  Knowledge Guide, among other things lists the preparation of a project  close-out report as one of the steps for closing out a project. However,  NDF officials stated in July 2012 that while project managers are  expected to write project close-out reports, they are not required to do so.  In addition, NDF officials stated that NDF encourages but does not  require the use of the project management guide and the guide does not  detail the information that project managers need to include in their  reports or specify the report format. Partly in response to our work, NDF  officials stated that they plan to develop standard operating procedures to  address the issues we identified in the project close-out reports, which will  also include a requirement for project managers to identify lessons  learned. However, as of November 2012, they had not made any  changes to their procedures.

section_title: Conclusion
paragraphs: Over its lifetime, NDF has responded to pressing nonproliferation and  disarmament needs, helping to address significant threats to international  security. To support NDF in accomplishing its mission, U.S. law has  provided NDF with an unusual degree of flexibility in how it manages its  resources and conducts its work. While the critical nature of NDF’s  mission provides a strong rationale for such flexibility, it also increases  the need for State to effectively manage its program resources to ensure  that NDF is achieving its intended results. However, State has not taken  the necessary steps to do so. For example, unlike some programs, NDF  lacks a formal process for determining how much carryover balance it  needs to maintain in reserve to meet unanticipated program  requirements. Without such a process, NDF cannot know to what extent  its carryover balances, which have increased in the past few years to  historically high levels, may be exceeding its unanticipated funding needs.  In addition, NDF has taken years to close some projects, delaying the  availability of unexpended funds for other projects and likely understating  NDF’s carryover balances. A methodical process for determining NDF’s  needed carryover balances and for closing projects could help ensure  that NDF’s budget requests accurately reflect program needs.  Additionally, NDF lacks a process to identify and incorporate lessons  learned into future projects. State has never performed a program  evaluation of NDF in its 18-year history to determine lessons learned for  better designing projects that contribute to U.S. nonproliferation goals.  State has implemented a new evaluation policy that could encourage the  bureaus to more rigorously rationalize and prioritize their resources over  time and identify and incorporate lessons learned. Nonetheless, State is  not including NDF among the programs to be evaluated during fiscal  years 2012 through 2014. Finally, NDF’s project close-out reports could  provide useful information to inform future program evaluations’  identification of lessons learned that could be systematically incorporated  into future projects.

section_title: Recommendations for Executive Action
paragraphs: To more effectively manage NDF’s resources, increase program  accountability, and ensure that NDF has the information necessary to  improve program performance, we recommend that the Secretary of  State take the following four actions: direct NDF to develop a methodology for determining the amount of  reserves that it should carry over annually to meet program  requirements to address unanticipated nonproliferation and  disarmament opportunities; direct NDF to develop guidance for determining when inactive NDF  projects should be closed and the remaining, unexpended funds  made available for use on other projects; direct ISN and NDF to periodically and systematically conduct and  document program evaluations of NDF; direct NDF to revise its project management guide to establish  requirements for project managers’ close-out reports to include  information useful for improving the management of NDF projects.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of our report to DOD, DOE, OMB, and State for their  review and comment. DOD and OMB did not provide comments. State  provided written comments, which we have reprinted in appendix II. State  concurred with all four of our recommendations and identified several  actions it intends to take in response to the recommendations. For  example, State said that it will direct NDF to develop a methodology that  the NDF Review Panel can then use to make an annual recommendation  on the appropriate level of carryover balances for the next fiscal year to  the Under Secretary for Arms Control and International Security. State  also said that NDF has begun implementing the recommendation to  revise its project management guidance to establish requirements for  close-out reports, by creating a standard operating procedure for these  reports. State and DOE provided technical comments, which we  incorporated in the report, as appropriate.

We are sending copies of this report to interested congressional  committees, the secretaries and agency heads of the departments  addressed in this report, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-9601 or melitot@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 key contributions to this report  are listed in appendix III.

section_title: Appendix I: Scope and Methodology
paragraphs: This report examines (1) the Department of State’s (State) use of  Nonproliferation and Disarmament Fund (NDF) authorities in developing  and implementing NDF projects and (2) the extent to which State has  conducted a program evaluation of NDF and used this information to  improve program performance.

To assess how State has used NDF’s authorities in developing and  implementing NDF projects, we obtained program-wide and project-level  data from NDF’s Financial and Information Management System (FIMS)  for fiscal years 1994 through 2012. To assess the reliability of data in  FIMS, we reviewed NDF documentation on the system, reviewed  previous audits that assessed the reliability of FIMS data, compared FIMS  data to data from other sources to confirm FIMS data’s accuracy, and  interviewed cognizant State officials. To gain additional information on the  reliability of data in FIMS, we met with a private contractor conducting a  review for NDF under the supervision of the State’s Office of the Inspector  General. The scope of the contractor’s work included a review of the  reliability of FIMS data. On the basis of the information we obtained, we  determined that the FIMS data were sufficiently reliable for our purposes.  We analyzed NDF program-wide data to determine program  appropriations, commitments, obligations, and carryover balances for  fiscal years 1994 through 2012. We analyzed NDF project data to  determine project funding amounts, locations, objectives, and time frames  for fiscal years 1994 and 2012. Additionally, we reviewed NDF project  documentation including project proposals, approval memos, and  congressional notifications, for all NDF projects initiated since the  beginning of fiscal year 2007 to assess the types of projects NDF has  funded and how it used its authorities in developing and implementing  these projects. To gain additional information on NDF projects, we also  reviewed State press releases, speeches by State officials, and fact  sheets describing NDF activities. To identify NDF’s key legal authorities,  we reviewed relevant laws and regulations, including the FREEDOM  Support Act and NDF appropriations legislation for fiscal years 1994  through 2012. Additionally, we examined congressional committee and  conference reports from 1999 through 2012 to identify relevant  congressional guidance regarding NDF. We also reviewed key NDF  documents discussing the program’s authorities, including the 1994  memorandum pursuant to the FREEDOM Support Act establishing the  program and the accompanying NDF Guidelines. To gather additional  information on NDF’s authorities and how it develops and implements  projects, we conducted a series of interviews with NDF officials and also  met with officials from other agencies that proposed or implemented NDF  projects, including the Departments of Defense and Energy. We also  interviewed officials from the Office of Management and Budget to gain  additional information on NDF’s budget planning process. Finally, we  reviewed previous GAO reports, as well as reports by the State Inspector  General, the Congressional Research Service, and the National  Academies of Science, to identify relevant findings regarding NDF and  related U.S. nonproliferation and disarmament programs.

To assess the extent to which State has evaluated NDF and used this  information to improve program performance, we interviewed State  officials with the Bureaus of International Security and Nonproliferation  (ISN) and Budgeting and Planning. We also obtained copies of State’s  February 2012 evaluation policy and March 2012 evaluation guidance, as  well as a copy of ISN’s April 2012 bureau evaluation plan. NDF officials  described their project close-out reports as evaluations, but based on our  discussion with State ISN and Budgeting and Planning officials, our  review of GAO reports discussing evaluations, and State’s February 2012  evaluation policy, we determined that NDF’s project close-out reports fit  more closely the standard of a monitoring report. GAO defines  evaluations as individual, systematic studies that are conducted  periodically or on an as-required basis to assess how well a program is  working. State’s evaluation policy notes that in addition to assessing the  progress of a program, project, or activity, evaluations go beyond  monitoring to identify the underlying factors and forces that affect the  implementation process, as well as the efficiency, sustainability, and  effectiveness of the program or project and its outcomes. As such, State’s  policy draws a clear distinction between evaluation and monitoring. As  previous GAO reports, State, and other organizations have noted,  evaluations require a measure of independence, which can be promoted  in several ways, including entrusting the evaluation to an outside research  and evaluation organization or fostering a professional culture that  emphasizes the need for rigorous and independent evaluations. By  comparison, State defines monitoring as a continual process designed to  assess the progress of a program, project, or activity. The Project  Management Body of Knowledge Guide notes that project close-out  documentation consists of formal documentation indicating the  completion of a project or phase of a project. For all these reasons, on the  basis of our analysis of NDF’s project close-out reports, we made the  determination that NDF’s project close-out reports better fit the standard  of a monitoring report than an evaluation. While project close-out reports  serve a different purpose from evaluations, based on our review of the  Project Management Body of Knowledge Guide and NDF’s Project  Management Guide, we determined that we could assess the project  close-out reports to determine their usefulness in enabling NDF to  improve its management of the program. For this purpose, we obtained a  judgmental sample of 23 project close-out reports—14 of which we  selected and 9 of which State selected. In selecting our sample, we chose  only to consider projects that NDF had closed out since the beginning of  fiscal year 2007—of which there were 61—in order to ensure that all  close-out documentation was completed for the projects. Our selection  criteria for our sample included project cost, location, and type. For  example, we selected a variety of projects from all four categories of  projects that NDF funds—destruction and conversion, safeguards and  verification, enforcement and interdiction, and education and training.  State selected its projects using similar criteria; however, State did not  limit itself to projects that were closed out. In some cases, State selected  projects where work was completed, but the project was not yet officially  closed out. In reviewing the documentation for the projects State  selected, we determined that these projects were broadly similar to the  ones that we selected and the inclusion of these projects in our analysis  did not alter our overall findings or compromise the independence of our  work. To conduct our analysis of the close-out reports, we developed a  list of key terms, such as “results,” “completion,” and “lessons learned.”  Our inclusion of these terms was based on our analysis of project  management standards, which note the importance of the project close- out process in the project management cycle and the importance of  obtaining information about the results of the project and lessons learned.  We also included other terms such as “cost,” “timeliness,” “on time,”  “return on investment,” and “appropriateness of using NDF funding.” We  included these terms because NDF officials told us that NDF and the NDF  Review Panel include these criteria in determining a project’s suitability  for NDF funding. Because NDF does not have any requirement to use a  standard terminology in its reports, we used a dictionary to obtain other  synonyms of these terms as well. We examined each of the project close- out reports to determine the presence of these key terms. We also  examined each of the project close-out reports to determine the author,  content, and format. We did this on the basis of discussions with NDF  officials, who told us that they had established an expectation that NDF  project managers complete a project close-out report and had developed  a project manager’s guide that contained a checklist. While NDF does not  have a requirement for project reports to be written in a standard format,  we determined that the close-out reports that we had examined varied  widely in their content and format and concluded that such variety could  make it more difficult for evaluators to extract key information from these  reports. After completing our initial review, the lead analyst submitted the  results of his work and the methodology used to two additional levels of  review. These reviewers were asked to validate the methodology and  results. The sample of 23 project close-out reports cannot be generalized  to the entire population of NDF project reports for the period in our review.  We also reviewed NDF’s Project Management Guide to determine the  extent to which NDF has established specific requirements or guidance  regarding how project close-out reporting should be conducted. To obtain  the list of 11 similar missile destruction and conversion related projects,  we conducted a word search of NDF’s projects using the key terms  “missiles” and “rockets.”

We conducted this performance audit from March 2012 through  November 2012 in accordance with generally accepted government  auditing standards. These 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: Comments from the Department of State

section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, the following staff made key  contributions to this report: Jeff Phillips, Assistant Director; Lynn Cothern;  Martin De Alteriis; Mark Dowling; José M. Peña, III; and Ryan Vaughan.  Etana Finkler and Jeremy Sebest provided graphics support and Debbie  Chung provided editorial assistance. Julie Hirshen and Julia Jebo Grant  also provided additional technical assistance.


Question-summary annotations: questions: question: How does carryover affect the Department of State's (State) Nonproliferation and Disarmament Fund (NDF)?
answer: The Department of State's (State) Nonproliferation and Disarmament Fund (NDF) has several key authorities that provide it significant operational flexibility; however, it has not determined its needed carryover balances and it has taken years to close out many of its projects in the absence of guidance for closing them.

question: How has the NDF received their authorities?
answer: Annual appropriations bills have consistently provided NDF with three key authorities that it has used to carry out its activities.

question: What authority affects NDF's undertaking of projects?
answer: First, NDF has the authority to undertake projects notwithstanding any other provision of law.
child_questions: question: How has this been used to fund some projects?
answer: NDF has used this authority to fund projects in countries, such as North Korea, where U.S. assistance is prohibited by U.S. sanctions and other legal restrictions.

question: What authority affects the scope of NDF?
answer: Second, NDF has the authority to undertake projects globally.
child_questions: question: How has this diversified the projects being funded?
answer: NDF has used this authority to fund projects in numerous regions around the world, in contrast with other U.S. nonproliferation programs, which have historically focused on countries in the former Soviet Union.

question: What authority sets NDF's timeline?
answer: Third, NDF's appropriations do not expire within a particular time period, enabling NDF to carry over balances from year to year not designated for specific projects.
child_questions: question: What issue has arrived with NDF balances?
answer: However, NDF has not determined appropriate levels for these balances, which increased significantly in the past few years.

question: How has the length of NDF projects been an issue?
answer: Additionally, NDF has sometimes taken many years to close projects, including those where work was never started or was suspended, and has not established criteria to determine when inactive projects should be closed and unexpended resources made available for other projects. As a result, NDF funds may be tied up for years in inactive projects, precluding the funds' use for other projects.

questions: question: How has State regarded NDF?
answer: State has never conducted a program evaluation of NDF.

question: How did State change their evaluation policy?
answer: In February 2012, State developed a policy requiring bureaus to evaluate programs, projects, and activities, and outlined the requirements for these evaluations.
child_questions: question: What action did State take to begin these evaluations?
answer: As part of this policy, State required bureaus to submit an evaluation plan for fiscal years 2012 through 2014 that identified the programs and projects they plan to evaluate.

question: How did the ISN fail to send proper information?
answer: However, the Bureau of International Security and Nonproliferation (ISN), which oversees NDF, did not include NDF in its fiscal years 2012 through 2014 evaluation plan. State currently lacks information that could be used to conduct a program evaluation and to improve NDF's management of the program.
child_questions: question: Why is the missing information important?
answer: Project close-out reports are critical to the process of closing out a project and identifying lessons learned, but NDF project close-out reports do not contain information that could enable NDF to better manage its program.
child_questions: question: What is an example of missing information?
answer: For example, not all closeout reports address the results of the project. NDF uses e-mails and face-to-face meetings to communicate lessons learned without documenting them.

question: How might State keep records?
answer: Established standards suggest that these should be transferred to a database of lessons learned for use in future projects and activities, an action State officials said they are considering taking.

question: How does the NDF's guide fail to be standardizing?
answer: NDF has also produced a project management guide to encourage project managers to use standard procedures and write close-out reports, but does not require the use of this guide. In addition, the guide does not detail a format for project managers to use in preparing their close-out reports or list the information that project managers must address.
child_questions: question: How does the NDF plan to address this issue?
answer: NDF officials said they plan to develop standard operating procedures to address these issues, but had not done so as of November 2012.

questions: question: What is the role of weapons and threats to the US?
answer: The proliferation of weapons of massdestruction and advanced conventionalweapons poses significant threats toU.S. and international security.

question: Why did the NDF begin?
answer: State’sNDF began operating in 1994 to helpcombat such threats by funding a variety of nonproliferation and disarmament projects.
child_questions: question: What flexibility has this program been provided?
answer: NDF’s legal authorities provide it significant flexibility to perform its work and it has initiated high-profile projects in locations that are significant to U.S. interests.

question: What questions have come up about the NDF?
answer: Nonetheless, questions have been raised about how NDF has used its authorities, including its authority to carry over balances into future fiscal years, and the extent to which NDF is effectively implementing its activities.

question: What does this report cover?
answer: This report examines (1) State’s use of NDF authorities in developing and implementing NDF projects and (2) the extent to which State has conducted a program evaluation of NDF and used this information to improve program performance.
child_questions: question: What information did the GAO collect for this report?
answer: To conduct this review, GAO analyzed NDF program and project data and documentation, analyzed a sample of NDF project close-out documents, and interviewed NDF and other U.S. officials.