Economic Sanctions: Treasury and State Have Received Increased Resources for Sanctions Implementation but Face Hiring Challenges
Released: 2020-03-11T00:00:00

Letter

Background

U.S. Sanctions

Sanctions are imposed pursuant to statute, executive order, or other authorities. For example, the President may use authorities granted in the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA) to issue executive orders authorizing sanctions. The United Nations Participation Act of 1945 provides the basis for the U.S.’s implementation of United Nations Security Council sanctions mandated under Article 41 of the United Nations Charter. Sanctions provide a range of tools that Congress and the President may use to attempt to alter or deter the behavior of a foreign government, an individual, or an entity in furtherance of U.S. national security or foreign policy objectives. For example, sanctions may be imposed in response to human rights abuses, weapons proliferation, or occupation of a foreign country. Sanctions may include actions such as limiting trade; blocking assets and interests in assets subject to U.S. jurisdiction; limiting access to the U.S. financial system, including limiting or prohibiting transactions involving U.S. individuals and businesses; restricting private and government loans, investments, insurance, and underwriting; and denying foreign assistance and government procurement contracts.

The United States imposes comprehensive sanctions and targeted sanctions.

Comprehensive sanctions generally include broad-based trade restrictions and prohibit commercial activity with an entire country. Examples of comprehensive sanctions include U.S. sanctions against Iran and Cuba.

Targeted sanctions restrict transactions of, and with, specific persons or entities. For example, the U.S. sanctions program related to Somalia targets persons engaging in acts threatening the peace, security, or stability of that country.

Sectoral sanctions are a form of targeted sanctions directed at a specified sector, or sectors, of a target’s economy. For instance, Executive Order 13662 authorized sanctions targeting persons operating in certain sectors of the Russian economy as might later be determined by the Secretary of the Treasury in consultation with the Secretary of State, such as the financial services, energy, mining, and defense and related materiel sectors.

Supplementary sanctions, also known as secondary sanctions, target third-party actors doing business with, supporting, or facilitating targeted regimes, persons, and organizations. For example, in February 2017, Treasury imposed sanctions against 13 individuals and 12 entities for their involvement in, or support for, Iran’s ballistic missile program as well as for acting for or on behalf of, or providing support to, Iran’s Islamic Revolutionary Guard Corps–Qods Force.

OFAC’s implementation of sanctions includes publishing the Specially Designated Nationals and Blocked Persons List of individuals, groups, and entities whose assets in the United States are blocked and with whom U.S. persons are prohibited from dealing. The addition of an individual, group, or entity to this list is referred to as a sanctions designation.

Agencies may issue licenses to authorize transactions with sanctioned entities that otherwise would be prohibited by existing sanctions. According to OFAC, many of its licensing determinations are guided by U.S. foreign policy and national security concerns. In making these determinations, OFAC must often coordinate with State and other government agencies, such as Commerce. OFAC issues two types of licenses: (1) general licenses, which authorize a particular type of transaction for a class of persons without the need to apply for a specific license, and (2) specific licenses, which OFAC issues to a particular person or entity to authorize a particular transaction. Commerce’s Bureau of Industry and Security (BIS) issues two forms of authorization: (1) an individual validated license requiring an application and (2) a license exception allowing an export or reexport, under stated conditions, for which no application is required.

Agency Roles and Selected Mandated Resource and Activity Reporting

Laws and executive orders establishing sanctions may designate agency implementation roles. Some sanctions-related executive orders designate both primary and consultative agencies. For example, Executive Order 13818 establishes sanctions that include blocking the U.S. assets of persons whom the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General, determines to be responsible for, or complicit in, serious human rights abuse, among other measures. Executive orders may also broadly direct U.S. government agencies to take appropriate measures within their authorities to perform specified functions and duties. When roles are not assigned by the law or executive order authorizing the sanctions, agency roles are typically assigned through an interagency process.

The IEEPA and the NEA mandate that the President report to Congress when using authorities granted under those laws. The IEEPA requires the President to report, among other things, actions taken in the exercise of IEEPA authorities to Congress at least once during each succeeding 6- month period following the administration’s initial reporting of the authorities’ use. The NEA requires the President to transmit a report to Congress within 90 days after the end of each 6-month period following a declaration of a national emergency, providing the total U.S. government expenditures that are directly attributable to the exercise of powers and authorities conferred by declaration of the emergency. The President has delegated responsibility for many of these reports to the Secretary of the Treasury. However, the President delegated responsibility for the report on the National Emergency With Respect to Proliferation of Weapons of Mass Destruction, Executive Order 12938, to the Secretary of State.

The Foreign Narcotics Kingpin Designation Act (Kingpin Act), enacted in 1999, mandates that the President prepare classified reports by July 1 of each year that include the number of new Kingpin Act designations and the personnel and resources directed toward the imposition of Kingpin sanctions.

The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) mandates that the applicable department or agency submit quarterly and biennial reports on activity under the act regarding the department or agency’s determinations and processing of license applications for export of agricultural commodities, medicines, and medical devices to specified entities and destinations, including state sponsors of terrorism. OFAC and Commerce’s BIS submit reports in response to the TSRA.

Strategic Workforce Planning

To implement sanctions, agencies need to identify the human resources needed for the work. Strategic workforce planning focuses on developing long-term strategies for acquiring, developing, and retaining an organization’s total workforce to meet the needs of the future. Agency approaches to such planning can vary with each agency’s particular needs and mission. We have previously identified five principles that a strategic workforce planning process should address: 1) Involve top management, employees, and other stakeholders. 2) Determine the critical skills and competencies that will be needed. 3) Develop strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches. 4) Build the capability needed to address administrative, educational, and other requirements important to support workforce strategies. 5) Monitor and evaluate progress toward human capital goals and the contribution that human capital results have made toward achieving programmatic goals.

Treasury, State, and Commerce Have Units with Roles in Sanctions Implementation

Treasury, State and Commerce have units dedicated primarily to sanctions implementation and also have units with roles in sanctions implementation in addition to other responsibilities. Other agencies, including the Departments of Defense, Energy, Homeland Security, and Justice and federal financial regulatory agencies, play specific roles in sanctions implementation based on their expertise or broader duties.

Agencies May Have One or More Roles in Sanctions Implementation

Agencies’ roles in sanctions implementation may be assigned to them in legislation, by executive order, in presidential memorandums, or through the interagency process. Table 1 shows the roles that agencies may have in sanctions implementation and examples of agency actions associated with each role.

Treasury, State, and Commerce Have Units Dedicated Primarily to Sanctions Implementation

Treasury, State, and Commerce each have units that focus primarily on sanctions implementation and that act in all five of the roles we identified.

Treasury. Treasury’s OFAC, part of the department’s Office of Terrorism and Financial Intelligence (TFI), administers and enforces economic sanctions based on U.S. foreign policy and national security through consultation with the Secretary of State. OFAC acts under presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under U.S. jurisdiction. OFAC consists of four offices:

The Office of Sanctions Policy and Implementation leads OFAC’s design, implementation, and evaluation of sanctions programs and develops OFAC’s public guidance, licenses, and regulations.

The Office of Compliance and Enforcement works to promote compliance with OFAC’s sanctions programs and investigates apparent violations.

The Office of Global Targeting works with other units within TFI, other U.S. agencies, and foreign partners to identify and investigate targets for sanctions designation.

The Office of Sanctions Support and Operations supports all sanctions-related functions at OFAC, including human capital and budgetary functions.

State. State’s Office of Economic Sanctions Policy and Implementation (SPI)—housed in the Bureau of Economic and Business Affairs, Division for Counter Threat Finance and Sanctions—is responsible for providing foreign policy guidance for the vast majority of sanctions programs and obtaining international cooperation with U.S. agencies enforcing sanctions. According to SPI, it acts as State’s central coordinating office for 25 of the 30 sanctions programs that were active as of April 2019. SPI also implements sanctions under authorities delegated to the Secretary of State, including sanctions on Iran and Syria.

Commerce. In Commerce’s BIS, the Foreign Policy Division (FPD) of the Office of Nonproliferation and Treaty Compliance is one of the components that implements sanctions through U.S. export controls. The division is responsible for developing, analyzing, evaluating, and coordinating export controls related to sanctions policy.

In addition to having units that primarily focus on sanctions, Treasury, State, and Commerce have units that carry out roles in sanctions implementation in addition to other responsibilities.

Treasury. Treasury has several other units that support sanctions implementation. For example, in TFI, the Office of Intelligence and Analysis examines classified and unclassified reporting, financial transactions, and open-source databases for evidence of sanctions violations. The Financial Crimes Enforcement Network monitors and analyzes financial information on threats, producing intelligence reports that may identify targets for designation and sanctions violators. In addition to TFI units, the Internal Revenue Service, the Office of International Affairs, and the Office of the General Counsel also have roles in sanctions implementation. For example, the Office of International Affairs helps to assess the likely impact of sanctions and conducts outreach to foreign counterparts regarding sanctions implementation.

State. Units at State have sanctions implementation roles related to their expertise. Some of these units take actions in all five of the sanctions roles shown in table 1 and are responsible for specific sanctions authorities within State, according to State officials. For example, the Bureau of International Narcotics and Law Enforcement Affairs is responsible for coordinating and communicating State’s position on existing or proposed new sanctions in relation to the Kingpin Act and transnational criminal organizations. According to State officials, the Bureau of Counterterrorism and Countering Violent Extremism leads State in designating Specially Designated Global Terrorists under Executive Order 13224 and Foreign Terrorist Organizations under Section 219 of the Immigration and Nationality Act. The Bureau of Economic and Business Affairs’ Office of Threat Finance Countermeasures has a primary role in implementing sanctions under Executive Order 13224, which targets terrorist financiers and others who provide material support to terrorists.

Commerce. Commerce has several other units that support sanctions implementation. For example, the Office of Export Enforcement provides input regarding sanctions proposals and feedback regarding any adverse impact to existing investigations. The Office of National Security and Technology Transfer Controls implements primarily sectoral sanctions by providing technical analyses of items and recommendations during sanctions development. The Office of Exporter Services provides a range of resources, including electronic resources and educational seminars, which provide exporters with guidance on export compliance processes and procedures.

Table 2 provides an overview of the various roles that Treasury, State, and Commerce units play in sanctions implementation. See appendix II for additional details.

Other Agencies Have Roles in Sanctions Implementation in Addition to Other Responsibilities

Several other agencies have more-specific roles in sanctions implementation, with the extent of their involvement dependent largely on their area of expertise. These agencies carry out their sanctions-related roles in addition to other responsibilities.

Department of Defense. The Office of the Under Secretary of Defense for Policy contributes to sanctions implementation, participating in all roles except targeting. The office coordinates department units’ reviews of sanctions proposals, provides the department’s recommendation to interagency partners during sanctions development, and represents the department during interagency discussions regarding sanctions enforcement.

Department of Energy. The National Nuclear Security Administration supports sanctions by providing technical analyses of weapons of mass destruction and conventional arms transactions that may be subject to sanctions and by providing recommendations during sanctions development. The National Nuclear Security Administration also reviews export licenses for munitions and items with both military and commercial applications, known as dual-use items, which may include parties subject to sanctions.

Department of Homeland Security. Units of the Department of Homeland Security also have varied roles in sanctions implementation. For example, the Human Rights Violators and War Crimes Unit in U.S. Immigration and Customs Enforcement’s Homeland Security Investigations includes a Global Magnitsky investigative support team, which targets serious human rights abusers and corrupt foreign officials through OFAC sanctions and visa denials. Units in U.S. Customs and Border Protection maintain a list of sanctioned countries and couriers for which shipment applications are rejected and use an automated targeting system to identify high- risk shipments and coordinate appropriate enforcement actions.

Department of Justice. Multiple Department of Justice units contribute to sanctions implementation, participating in all roles except licensing. For example, the National Security Division works with law enforcement partners to facilitate the investigation and prosecution of sanctions violators.

Financial regulatory agencies. Financial regulatory agencies with roles in sanctions implementation may review the compliance programs of the institutions they oversee with respect to OFAC requirements. Some of these agencies can also enforce penalties for significant deficiencies in institutions’ OFAC compliance programs. Financial regulatory agencies generally examine institutions’ compliance with OFAC policies concurrently with examinations for compliance with the Bank Secrecy Act (BSA) and anti–money laundering (AML) statutes.

Table 3 provides an overview of the various roles of these agencies in sanctions implementation. Also see appendix II for additional details of agency units’ sanctions implementation roles. See appendix III for information about agency units’ number of personnel with sanctions implementation responsibilities.

Sanctions Implementation Units at Treasury, State, and Commerce Have Received Steady or Increasing Resources but Faced Challenges in Filling Some Positions

All three of the sanctions implementation units we reviewed have generally received steady or increasing resources since fiscal year 2015 but have faced challenges in filling some positions. OFAC has received increasing inflation-adjusted budgetary and authorized human resources each fiscal year since 2015 but has consistently experienced a gap between the number of authorized and actual full-time equivalents (FTEs). OFAC officials attributed the gap to challenges in hiring due to competition from other agencies and the private sector and the time needed for new hires to obtain security clearances. State SPI has also generally received additional authorized inflation-adjusted budgetary and human resources but has not been fully staffed in recent years. Commerce’s FPD has received relatively steady inflation-adjusted budgetary resources but, according to Commerce officials, lacks funding to fill one of its 10 positions.

Treasury’s OFAC Received Increasing Resources in Fiscal Years 2015-2019 but Faces Hiring Challenges

OFAC received increasing budgetary resources in each of the last 5 fiscal years. In inflation-adjusted terms, OFAC’s budgetary resources increased by a total of 58 percent, from approximately $29.7 million in fiscal year 2014 to approximately $46.8 million in fiscal year 2019. (See fig. 1.)

OFAC has also received authority to hire additional FTEs since fiscal year 2014, yet a number of the additional authorized positions have remained unfilled. According to OFAC officials, OFAC allocated most of its additional authorized FTEs to the Office of Global Targeting, which is responsible for conducting investigations of sanctions targets. At the start of fiscal year 2014, 10 of OFAC’s 173 authorized positions (6 percent) were unfilled. By the start of fiscal year 2020, 55 of OFAC’s 259 authorized positions (21 percent) were unfilled. In the intervening period, the gap between authorized and actual FTEs at the start of each fiscal year ranged from 34 to 58 positions (14 to 26 percent of authorized FTEs). (See fig. 2.)

Despite the increase in authorized FTEs, OFAC has faced challenges in filling the additional positions. At the start of fiscal year 2020, 21 percent of OFAC’s authorized sanctions investigator positions (13 of 62) were not filled. Also unfilled were nine of 25 OFAC sanctions licensing officer positions, three of 18 enforcement officer positions, two of 15 sanctions policy analyst positions, and six of 14 sanctions compliance officer positions. Officials of both OFAC and Treasury’s Office of the Assistant Secretary for Management cited three primary challenges in hiring candidates with the necessary qualifications:

Competition with other agencies, including those in the intelligence community, which can use direct-hire authority to expedite the hiring process

Competition with the private sector, which offers higher salaries The time required for security clearance processing, which delays hiring for positions, such as sanctions investigators, who need a special sensitive investigation that must be adjudicated at the top secret/sensitive compartmented information levelTreasury does not currently have direct-hire authority for OFAC but can use other authorities to address hiring challenges. OFAC can use TFI’s agency-specific schedule A authority, which excepts up to 100 positions at TFI from competitive selection requirements; schedule A authority is not specific to OFAC. In August 2019, officials of Treasury’s Office of the Assistant Secretary for Management stated that the office was not seeking direct-hire authority through the Office of Personnel Management. Additionally, the officials noted that Treasury has used flexibilities such as veterans’ hiring preferences to fill positions. However, in December 2019, Treasury officials stated that they had determined to seek direct-hire authority and would support the passage of legislation providing such authority.

State’s Office of Economic Sanctions Policy and Implementation Received an Overall Increase in Resources in Fiscal Years 2014-2019, but More Than Half of Its Positions Are Vacant

SPI received annual budgetary resource increases in fiscal years 2015 through 2018, before a slight decline in fiscal year 2019. In inflation- adjusted terms, SPI budgetary resources increased overall by 42 percent, from $2.3 million in fiscal year 2014 to $3.2 million in fiscal year 2019. (See fig. 3.)

SPI has received authority to hire six additional FTEs for fiscal year 2020, but more than half of its authorized positions were vacant at the start of the year. SPI’s authorized FTEs ranged from 13 to 16 in fiscal years 2014 to 2019 and increased to 21 FTEs for fiscal year 2020. At the start of each fiscal year from 2014 to 2019, SPI had one to three fewer actual FTEs than authorized. However, the increase in authorized FTEs for fiscal year 2020 followed a decline in the number of filled positions during fiscal year 2019, when SPI lost more than a third of its staff. As a result, as of the beginning of fiscal year 2020, more than half of SPI’s 21 authorized FTEs were unfilled. (See fig. 4.) According to SPI officials, the departures during fiscal year 2019 were for the most part unscheduled and resulted from staff promotions, moves to elsewhere in State, or resignations to accept positions in other agencies or the private sector. SPI officials added that a department-wide backlog in hiring constrained SPI’s ability to fill these gaps and that the office would have to pay for the additional six FTEs without an increased budget. As of December 2019, State was recruiting to fill some of these positions, according to SPI officials. SPI expected one staff member to start in early January, had extended an offer to another, and was advertising to fill four additional positions.

While SPI has generally received increased budgetary resources and authorized FTEs in recent years, State discontinued the Office of the Coordinator for Sanctions Policy, formerly housed in the Office of the Secretary. The office was responsible for, among other things, coordinating sanctions strategies, integrating sanctions into foreign policy plans, and analyzing the effects of sanctions. According to data that State provided, the office had an authorized staff of seven FTEs at the start of each fiscal year from 2014 through 2018, with the exception of fiscal year 2016, when eight FTEs were authorized. State also reported that the office had one to four unfilled positions at the start of each fiscal year during this period.

Commerce’s FPD Has Received Relatively Constant Resources since Fiscal Year 2015

FPD received an overall increase in budgetary resources from fiscal year 2014 to fiscal year 2019, but most of the increase occurred from fiscal year 2014 to fiscal year 2015. Overall, FPD’s budgetary resources increased by 28 percent, adjusted for inflation, from fiscal year 2014 to fiscal year 2019. However, after a 24 percent increase in fiscal year 2015, resources remained steady through fiscal year 2019 at approximately $1.4 million per year, adjusted for inflation. (See fig. 5.)

FPD has had the same number of authorized FTEs since fiscal year 2014, maintaining an authorized level of 10 FTEs from fiscal year 2014 to fiscal year 2020. FPD generally had one fewer actual FTE than authorized as of the beginning of each fiscal year. (See fig. 6). At the beginning of fiscal year 2020, according to Commerce officials, the Foreign Policy Division lacked funding to advertise and hire for the vacant position. According to Commerce officials, FPD receives a funding amount for personnel and the funding they have received is sufficient for nine FTEs.

Agencies Assess Resource Needs through the Annual Budget Process and OFAC Has Begun Workforce Planning, but All Agencies Face Challenges in Determining Needs

Officials at sanctions-focused units at Treasury, State, and Commerce all described their use of the annual budget process to assess their resource needs, and Treasury and Commerce have undertaken broader planning efforts. Treasury’s OFAC has begun an internal workforce planning process that, if implemented as described, would satisfy principles for strategic workforce planning that we have previously identified. According to State SPI officials, SPI assesses its resources in the annual budget formulation process and has been able to add temporary positions in response to workforce needs. Commerce BIS officials stated that they shift resources in response to needs, and BIS has previously prepared a budget strategy that included its office primarily responsible for sanctions implementation. Treasury, State, and Commerce all face challenges in measuring changes in their sanctions workload over time.

Treasury OFAC Assesses Resources through Budget Development and Has an Additional Ongoing Workforce Planning Effort

Treasury’s OFAC reviews and requests resources as part of the annual TFI budget development process, which considers OFAC’s requests along with those of other TFI components. According to OFAC officials, OFAC submits its funding and resource needs to TFI for consideration. The OFAC budget justification for TFI includes the number of positions requested for all OFAC components as well as a description of each request. According to OFAC, once TFI has considered all of its component submissions, TFI submits its budget request to the Assistant Secretary for Management, who considers it as part of Treasury’s larger budget request. OFAC also stated that it has also used quarterly meetings and discussions as part of Treasury’s quarterly performance reviews to review resource needs and challenges.

In addition to undertaking reviews as part of the budget process, OFAC launched a workforce planning effort in fiscal year 2019 and stated that it would be led by OFAC’s Office of Sanctions Support and Operations. As part of this effort, the Office of Sanctions Support and Operations stated that it plans to use Treasury’s department-wide workforce planning model and tools to gather information from OFAC’s component offices as a basis for, among other things, analyzing risks to OFAC’s mission, identifying resource gaps, and developing an action plan to address them. OFAC further stated that it plans to use its ongoing workforce planning model to assess the effectiveness of its current hiring authorities. In October 2019, OFAC officials stated that they expected to submit preliminary recommendations for each OFAC component to OFAC leadership by the end of December 2019. However, OFAC officials later stated that, because of the departure of the Assistant Director of Management Programs—the OFAC senior leader responsible for implementing the workforce planning initiative—on October 1, 2019, the planned date to submit preliminary recommendations to OFAC leadership was rescheduled to March 31, 2020.

We analyzed the model and tools that OFAC is using for its ongoing resource analysis, to determine whether the process they set out would address five principles for strategic workforce planning that we had previously identified. We concluded that, if it were implemented as OFAC documents describe, the process would satisfy these principles. For example, the process calls for involving management and employees during its development and implementation and calls on managers to consider critical skills and competencies in their workforce analysis.

State SPI Assesses Workforce Needs through the Budget Process and Has Filled Positions on a Temporary Basis

State SPI requests resources as part of its annual budget process. State does not request a separate budget for SPI but instead combines SPI with the Office of Threat Finance Countermeasures (TFC) in its annual budget request. According to SPI officials, State sends the combined request for TFC and SPI to the Office of Management and Budget (OMB) every year, although the resources obtained may not reflect SPI’s original request. For example, SPI officials stated that SPI requested a greater increase in authorized positions for fiscal year 2020 than it ultimately received.

SPI officials described ways that they assess staff workloads and seek to add or adjust resources on a continual basis. According to SPI officials, they have worked to fill positions on a temporary basis in response to rising needs. For example, SPI was authorized to add three temporary positions to cover the additional workload from Iran and Venezuela sanctions in early 2019. According to SPI officials, in justifying the request for additional temporary positions, SPI noted a significant increase in officer workload during the reimposition of sanctions against Iran, as well as maximum-pressure campaigns against Iran and Venezuela and increased activity related to existing and new sanctions authorities. As of October 2019, State planned to convert the three positions to permanent positions. Similarly, SPI officials stated that SPI justified its request for an increase in positions for fiscal year 2020 by noting an increasing use of sanctions as part of U.S. maximum economic pressure campaigns across multiple regions.

Agency approaches to workforce planning can vary depending on each agency’s particular needs and mission. For subunits such as SPI, using the budget process, identifying changing priorities, and responding flexibly to those changes can address workforce planning needs. SPI officials further stated that SPI expects to review its workforce needs and structure if new executive orders delegate additional sanctions authorities to the Secretary of State.

Commerce Assesses Needs through the Budget Process and Shifts Personnel in Response to Demands

Commerce BIS units such as FPD assess and communicate their resource needs as part of the annual budget formulation process, according to BIS officials. BIS officials described budget formulation at Commerce as a “bottom-up” process, with BIS units providing information that is folded into Commerce’s overall budget. During this process, BIS budget office staff meet with program staff, review budget guidance provided by OMB as well as BIS’s own guidance, and ask program officials to identify any new initiatives or any new requirements for resources. According to BIS officials, each program office prepares a summary description of the request and needed resources for approval by the Assistant and Deputy Assistant Secretary for that office, the Deputy Under Secretary, and ultimately the BIS Under Secretary. According to BIS officials, BIS’s budget office then requests additional information about the approved activities. BIS’s Budget Office in turn submits the materials to the Commerce Departmental Budget Officer, who takes into account any known OMB and congressional viewpoints and department priorities. According to BIS officials, because of competing priorities, BIS funding priorities are not always carried over into the department’s overall request. BIS officials noted that, absent additional resources, they have some flexibility to shift personnel within the bureau to address periods of increased sanctions-related demand. For smaller units such as FPD, using the budget process, identifying changing priorities, and responding flexibly to those changes can address their workforce planning needs.

Commerce previously prepared a multiyear budget strategy that assessed workforce needs throughout BIS, including FPD. In 2016, a contractor that Commerce hired prepared a Five-Year Budget Strategy Plan, which included workforce planning and projections. As part of the assessment, the plan analyzed BIS license volume and estimated the amount of time that staff in the BIS Export Administration’s Office of Nonproliferation and Treaty Compliance (which includes FPD) spent on particular tasks, such as conducting license application reviews, making license determinations, and developing regulations related to sanctioned countries. The plan projected future BIS license volume, external factors that would affect BIS workload, and the future FTEs that BIS would need to perform its mission. The plan examined the workload projection and the effect of attrition and concluded that FPD would need 0.5 additional FTEs by 2020 and 1.25 additional FTEs by 2022. BIS officials stated that they initially used the budget strategy plan to help with budgeting. However, according to the officials, the plan and its assumptions quickly became obsolete and they did not use it in subsequent years. In addition, BIS officials stated that the plan did not recognize BIS’s ability to shift resources or request appropriations as needed.

Agencies Face Challenges in Measuring Workload to Assess Resource Needs

Treasury, State, and Commerce units that focus primarily on sanctions implementation have information that can measure changes in agency workload over time; however, agency officials cited challenges in using this information as accurate measures of workload for the purpose of informing resource needs. For example, counting the number of individual actions taken to implement sanctions (e.g., designations, licenses, or the imposition of a penalty) does not capture the actions’ varying complexity or the time spent on developing potential actions that are ultimately not taken. Agency officials noted that, in general, the drivers of their workloads are global events and U.S. foreign policy priorities that may lead to more or less sanctions activity. Table 4 shows (1) selected information that can be used to measure changes in agency workload over time and (2) the potential weaknesses of these measures.

Agencies Provide Information on Sanctions Activities and Expenses in Selected Mandated Reports

OFAC and State each prepare and submit reports in response to the requirements of the IEEPA and the NEA. Both OFAC and State report sanctions implementation actions in response to the requirements of the IEEPA. OFAC’s NEA-mandated reports generally include information on expenditures reported by Treasury and State and by any other agencies identified in the relevant executive order. However, according to State’s most recent NEA reports, no specific State expenditures were directly attributable to the exercise of authorities conferred by the declaration of a national emergency under the NEA during the reporting period. In previous reviews, we and Treasury’s Office of Inspector General have found weaknesses in the consistency and timeliness of OFAC reports mandated by the Kingpin Act and the TSRA, respectively.

OFAC’s Mandated NEA Reports Include Expenses for Agencies with Roles in Sanctions Implementation, while State’s Have Reported No Expenditures

IEEPA Reporting on Sanctions Activities

Both OFAC and State include information on actions taken to implement sanctions programs in response to the requirements of the IEEPA. OFAC’s reports on sanctions programs under the IEEPA include data on the number of designations and the type of entity designated, the number of licensing actions, and the number and value of blocked transactions for sanctions programs authorized by the IEEPA. State’s IEEPA-mandated report for a weapons of mass destruction sanctions program (Executive Order 12938), prepared by State’s Bureau of International Security and Nonproliferation (ISN), summarizes the actions State has taken to address nonproliferation through bilateral and multilateral channels, including actions taken against Russia, North Korea, Syria, and the reimposition of nuclear-related sanctions on entities in Iran. Both OFAC and State included the reports responding to IEEPA requirements as part of the same document submitted in response to the NEA report requirements.

NEA Reporting on Sanctions Expenditures

OFAC’s reports on sanctions programs under the NEA include a summary total of expenditures reported by various agencies to implement those programs, as well as a listing of the agencies whose expenditures are included in the reports. The reports state that the expenditures included are predominantly personnel wage and salary costs. OFAC contacts multiple agencies to compile estimates of total expenditures for its NEA reports. According to OFAC officials, OFAC contacts an agency about its expenditures if the relevant executive orders have delegated sanctions implementation authority to the agency or tasked it with certain duties. Using a standardized request message, OFAC asks such agencies to estimate their expenditures for the national emergency by, for example, estimating the hours spent by staff members on activities related to the emergency and multiplying that number by appropriate hourly compensation rates. OFAC stated that it always asks State to provide estimated expenditure information and contacts other agencies to seek their expenditures on a program-by-program basis.

OFAC’s NEA reports include Treasury and other agencies. All 25 of the NEA reports from mid- to late 2018 that we reviewed included Treasury expenditures, which were in many cases limited to OFAC and the Treasury Office of General Counsel. All but one report included State expenditures. Three reports included Commerce expenditures, five included Department of Homeland Security expenditures, and 12 included Department of Justice expenditures. While the reports did not include other agencies’ expenditures, some of the reports explicitly acknowledged that they did not reflect certain operating costs incurred by the intelligence and law enforcement communities.

State ISN’s May 2019 NEA-mandated report for Executive Order 12938 stated that there were no specific expenditures directly attributable to the exercise of authorities conferred by the declaration of a national emergency under the NEA during the 6-month reporting period. The prior two reports also stated that there were no specific expenditures directly attributable to the sanctions program. The reports included no other information about the program expenditures.

In response to our requests, State officials provided additional information about the NEA reporting of expenditures. According to the officials, State reported no expenditures for implementation activities for Executive Order 12938 because those activities have been subsumed into expenditures for normal, daily work—similar to overhead expenses. Expenditures for the implementation activities are mixed with, and indivisible from, the ongoing programming activities of the relevant offices and agencies. State officials indicated that State would report an amount other than zero if funds were reprogrammed, additional staff were required, or staff engaged in activities in addition to daily, normal work to implement the executive order. State officials also told us that they consulted State’s Bureau of Arms Control, Verification and Compliance, regional bureaus, and offices in the Departments of Commerce, Defense, and Energy in preparing the report.

However, State’s reports have not included any of these additional statements about the information that State considered in concluding there were no specific expenditures attributable to the sanctions program. Standards for Internal Control in the Federal Government states that management should externally communicate the necessary quality information to achieve the entity’s objectives so that external parties can help the entity achieve its objectives and address related risks. Because State’s reports do not include the additional information that State considered, Congress lacks complete information regarding sanctions implementation expenditures.

Prior Studies Have Noted Limitations in Other Required OFAC Sanctions Reporting

Kingpin Act Reports Do Not Provide Consistent Expenditure Data

We have previously found that agencies do not report expenditures in response to OFAC’s Kingpin Act data requests in a consistent fashion. The Kingpin Act mandates that the President prepare a classified report to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate by July 1 of each year that, among other things, includes the status of sanctions imposed under the Kingpin Act and the personnel and resources directed to the imposition of Kingpin sanctions. OFAC compiles and submits these reports. OFAC’s Kingpin reports include previous year and cumulative data on the number of asset-blocking actions and Kingpin designations. The reports also include Treasury, State, DOD, and Justice expenditures, which the reports indicate are mostly personnel salary costs. However, we recently found that the agencies did not use consistent methods, across agencies and time, in providing their expenditures to OFAC for Kingpin Act program activities. We recommended that the Secretary of the Treasury (1) ensure that OFAC provide its partner agencies more specific guidance regarding Kingpin Act–related expenditure data to improve the consistency of data submitted by these agencies and (2) disclose information about limitations in the consistency and reliability of the agency expenditure data in its annual reports to Congress.

Treasury’s Inspector General Has Recommended OFAC Improve Timeliness of TSRA- Mandated Reports

Treasury OFAC and Commerce BIS each submit reports to Congress mandated by the TSRA. Treasury’s Inspector General found that OFAC had not submitted its reports in a timely fashion and recommended OFAC take steps to improve the timeliness of its submissions.

OFAC. OFAC’s TSRA-mandated reports include information about its determinations regarding applications for licenses as well as the time it spent processing the applications. In April 2018, Treasury’s Office of Inspector General found that OFAC had not issued these reports in a timely manner and recommended that OFAC provide guidance to ensure that future TSRA-mandated reports are timely. According to the Treasury Office of Inspector General, Treasury’s actions in response—bringing its submission of the TSRA-mandated reports up to date and revising its TSRA report procedures—satisfied the intent of the office’s recommendation, but the Inspector General would continue to follow up. However, OFAC’s submission of the TSRA- mandated reports has continued to lag. OFAC released the TSRA- mandated reports for the second, third, and fourth quarters of fiscal year 2018 (i.e., January through September 2018) in November 2019; released the report for the first quarter of fiscal year 2019 in December 2019; and released the report for the second quarter of fiscal year 2019 in February 2020. OFAC’s most recent biennial report, for October 2014 through September 2016, was issued in August 2019.

BIS. BIS’s TSRA-mandated reports include information about the licensing actions taken by BIS in relation to exports of agricultural commodities to Cuba, as well as processing times for those actions. BIS submitted its most recent report on January 17, 2020, covering the period from October 1 to December 31, 2019. BIS’s most recent biennial report, for October 2016 through September 2018, was issued in November 2018.

Conclusion

The United States has increasingly relied on sanctions as a means to achieve important foreign policy goals. Implementing these sanctions involves multiple government agencies, some of which have multiple units with roles in sanctions implementation. Key agencies that implement sanctions have generally received steady or growing resources in recent years, but Treasury and State have staffing gaps and face challenges in securing the staff needed to fill their authorized positions. Treasury OFAC has an ongoing effort to assess its workforce needs, and Treasury, State, and Commerce all assess workforce needs through the budget process.

The IEEPA and NEA each include requirements for reports to Congress that Congress can use to review the activities and expenditures that have been used for implementing these sanctions. However, State’s reports for Executive Order 12938 have not explained the information that State considered in reporting no expenditures. As a result, Congress does not have complete information about the data that State considers in calculating its sanctions implementation resources, which Congress could use to inform its review of agency resource requests.

Recommendation for Executive Action

The Secretary of State should direct the Assistant Secretary for International Security and Nonproliferation to include additional information about the expenditures it considers in its NEA-mandated reporting for Executive Order 12938.

Agency Comments

We provided a draft of this report to the Departments of Commerce, Defense, Energy, Homeland Security, Justice, State, and the Treasury, as well as the Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Reserve System, Internal Revenue Service, National Credit Union Administration, Office of the Comptroller of the Currency, and Securities and Exchange Commission for review and comment. State provided official comments, which are reproduced in appendix IV. State concurred with our recommendation and indicated that it will provide additional clarity on its procedures in future NEA-mandated reporting for Executive Order 12938. The Departments of Commerce, Homeland Security, Justice, State, and the Treasury, as well as the Internal Revenue Service, Office of the Comptroller of the Currency, and Securities and Exchange Commission also provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional committees and to the Secretaries of Commerce, Defense, Energy, Homeland Security, Justice, State, and the Treasury, as well as the Chairman and Chief Executive of the Commodity Futures Trading Commission, Chairman of the Federal Deposit Insurance Corporation, Chair of the Board of Governors of the Federal Reserve System, Commissioner of the Internal Revenue Service, Chairman of the National Credit Union Administration, the Comptroller of the Currency, and the Chairman of the Securities and Exchange Commission. 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) 512-8612, or GianopoulosK@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 V.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine (1) agencies’ roles in sanctions implementation, (2) the resources available to agency units that focus primarily on sanctions implementation, (3) the extent to which agency units that primarily focus on sanctions implementation have assessed their resource needs, and (4) agencies’ reporting to Congress on sanctions implementation expenses and activities.

To examine agencies’ roles in sanctions implementation, we identified agencies involved in sanctions implementation by reviewing sanctions authorities, including statutes and executive orders, and agency documents and websites and interviewing agency officials. We used these documents and interviews to summarize agencies’ principal roles in sanctions implementation, and we vetted this summary with the Departments of the Treasury (Treasury), State (State), and Commerce (Commerce), which we had identified through our initial interviews and review of background materials as having units that focus primarily on sanctions implementation. We then prepared a data collection instrument to obtain information on sanctions implementation from agencies across the government. Using this instrument, we requested information about the specific actions these agencies performed for each of the roles we identified, the number of staff they devoted to sanctions implementation, and the estimated percentage of time these staff spent on sanctions implementation in fiscal year 2019. We also requested information about the sources and methods that agencies or agency units used to produce these estimates. We pretested the instrument with the Office of the Comptroller of the Currency and the Department of Homeland Security’s U.S. Customs and Border Protection and made changes based on the results of the pretest before sending the instrument to all agencies or agency units that we had identified as having a role in sanctions implementation. To estimate in full-time equivalents (FTE) the staff resources that agencies devoted to sanctions implementation, we multiplied agencies’ estimates of the number of staff devoted to sanctions implementation by the agencies’ estimates of the percentage of time those staff spent on sanctions-related duties.

To examine the resources available to agency units that focus primarily on sanctions implementation, we reviewed congressional budget justifications and used a data collection instrument to obtain information on (1) funding for units that focused primarily on sanctions implementation at Treasury, State, and Commerce in fiscal years 2014 through 2019 and (2) personnel in these units as of the beginning of fiscal years 2014 through 2020. We compared the information that agencies provided with data in their congressional budget justifications and determined that these data were sufficiently reliable for reporting on trends in funding, authorized FTEs, and filled positions at these agency units. We then examined challenges associated with hiring for, and filling, positions at these agency units by interviewing agency officials and reviewing agencies’ responses to our written questions.

To examine the extent to which agency units that primarily focus on sanctions implementation have assessed their resource needs, we interviewed agency officials and reviewed their written responses to our questions about their budget development processes and any relevant workforce analyses and plans they had prepared. We reviewed documentation of Treasury’s ongoing workforce planning process against criteria for strategic workforce planning that we had previously identified, to assess whether the process, if completed according to plan, would address principles of strategic workforce planning that we had previously identified. We reviewed agency performance reports and annual reports and interviewed agency officials representing Treasury, State, and Commerce units that focus primarily on sanctions implementation, to identify any additional information the agencies had that could measure changes in agency workload over time. We then reviewed that information and interviewed agency officials to assess how accurately the measures reflected each agency’s sanctions workload.

To examine agency reporting to Congress on sanctions implementation expenses and activities, we reviewed background information on sanctions implementation to identify mandated reports that included information on sanctions expenses and activities. We confirmed our list of the mandated reports that included sanctions expenses and activities with Treasury’s Office of Foreign Assets Control. We also reviewed sanctions legislation such as the International Emergency Economic Powers Act, the National Emergencies Act, the Foreign Narcotics Kingpin Designation Act and the Trade Sanctions Reform and Export Enhancement Act of 2000 to identify the specific requirements for those mandated reports on agency expenses and activities. We then requested from agency officials copies of the agencies’ most recently submitted mandated reports as of January 2019 and analyzed the agencies and types of expenses the reports identified. We requested information from agency officials and reviewed supporting documentation in order to describe how agencies estimated their expenses for sanctions implementation.

We conducted this performance audit from October 2018 to March 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Agency Roles in Sanctions Implementation

To determine agencies’ roles in sanctions implementation, we sent a data collection instrument to all agency units that we had identified as having a role in sanctions implementation, requesting information on the specific actions the agency units perform for each role. Tables 5 through 12 summarize the information provided in the agency units’ responses to the data collection instrument.

Appendix III: Agency Personnel with Sanctions Implementation Duties

We identified units of 13 agencies that have a role in sanctions implementation, and we requested that each unit report the number of personnel with sanctions-related duties and the estimated percentage of time these personnel spent on such duties in fiscal year 2019. The agency units used various methods to generate their estimates. Several of the units were unable to estimate numbers of personnel with sanctions- related duties or the percentage of time these personnel spent on sanctions-related duties. In many cases, agency units were unable to disaggregate the relatively minimal resources devoted to sanctions implementation from the resources for wider duties related to their mission. The following provides information about each agency or agency unit.

Department of State (State). All nine units that State identified as having a role in sanctions implementation were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. The units used sources such as position descriptions and management surveys of staff to generate the estimates.

Department of the Treasury (Treasury). Of the seven Treasury units from which we received information, five were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. Officials of the sixth unit stated that they could not provide such an estimate. The seventh unit, the Office of Intelligence and Analysis of the Office of Terrorism and Financial Intelligence (TFI), provided an estimate of the percentage of time its analytic staff devoted to sanctions but, because of sensitivity concerns, did not provide estimates of the number of personnel with sanctions implementation duties.

Department of Commerce (Commerce). Of the six Commerce units from which we received information, five were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. However, Export Enforcement, a much larger BIS unit with over 170 employees, was not able to disaggregate the time its personnel spent on sanctions implementation from its broader export control enforcement activities. According to Export Enforcement officials, its investigative management system does not record whether its activities respond to potential violations of Office of Foreign Assets Control (OFAC) sanctions or violations of the Export Administration Regulations. Many of the cases that the office investigates include potential violations of both sanctions and the regulations.

Department of Defense. The Department of Defense’s Office of the Under Secretary of Defense for Policy, which includes the Defense Technology Security Administration, was able to estimate the number of personnel with sanctions implementation duties. To generate the estimates, the office used sources including position descriptions and management judgement of time spent by individual action officers on sanctions.

Department of Energy. The Department of Energy’s National Nuclear Security Administration relied on management judgment to estimate the number of personnel with sanctions duties.

Department of Homeland Security. At the Department of Homeland Security, units in U.S. Immigration and Customs Enforcement were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019 by analyzing their investigative case management database. However, other department units were unable to provide such estimates. For example, Coast Guard officials reported that it would be difficult to estimate the number of personnel with sanctions implementation duties because these personnel are located throughout the United States and the world and do not record the time they spend on sanctions.

Department of Justice. At the Department of Justice, the National Security Division and most sections of the Criminal Division were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. However, other department units were unable to provide such estimates. For example, Drug Enforcement Administration (DEA) officials stated that it is difficult to quantify the time that DEA’s special agents dedicate specifically to sanctions. According to agency officials, investigations and operations to secure evidence for indictments can also be used to support sanctions designations. As a result, according to DEA, the agents spend minimal time on sanctions implementation that they would not have spent on their work in any case. The Federal Bureau of Investigation noted the same justification for why the bureau was unable to provide estimates of the number of personnel with sanctions-related duties.

Financial regulatory agencies. The six financial regulatory agencies identified as having a role in sanctions implementation were unable to estimate numbers of personnel with sanctions implementation duties. Financial regulators were generally unable to disaggregate the time that personnel spent on OFAC compliance examinations because these are often performed concurrently with broader Bank Secrecy Act/Anti–Money Laundering examinations.

See table 13 for additional information about each agency unit.

Appendix IV: Comments from the Department of State

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgements

In addition to the contact named above, Drew Lindsey (Assistant Director), Michael Simon (Analyst-in-Charge), Neil Doherty, Justin Fisher, Reid Lowe, Grace Lui, Christina Pineda, Julia Robertson, and Paul Sturm made key contributions to this report.