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