The Organization for the Prohibition of Chemical Weapons consists of three entities: the Conference of the States Parties, the Executive Council, and the Technical Secretariat. The Conference of the States Parties currently comprises 147 representatives, one from each member state, and oversees the implementation of the convention. The Executive Council, consisting of 41 representatives from regionally distributed member states, meets in sessions throughout the year to supervise the Secretariat’s activities. The Secretariat, headed by the Director-General, manages the organization’s daily operations, including implementing the inspection measures of the convention and preparing the organization’s annual budgets and reports. About 60 percent of the Secretariat’s authorized staff level of 507 employees engages in the inspection-related activities mandated under Articles IV, V, and VI of the convention. Specifically, to verify compliance with Article IV, the Secretariat inspects declared chemical weapons stocks and destruction facilities. To verify compliance with Article V, it inspects and monitors the destruction and conversion of chemical weapons production facilities. Under Article VI of the convention, the Secretariat inspects commercial production facilities. As of July 2002, the organization had conducted 1,210 inspections at the 5,066 declared chemical weapons sites and facilities that fall under the convention’s purview. The Secretariat supports member states in their efforts to implement the convention. It also encourages international cooperation and assistance among the member states as mandated by Articles X and XI of the convention. Under these provisions, the Secretariat is authorized to coordinate the provision of assistance to member states that are the victims of chemical attacks. The Secretariat also encourages economic and technological developments in the field of chemistry by encouraging trade and exchange of information among the member states. The organization’s budget for calendar year 2002 is about $54 million. Funding for OPCW operations comes primarily from the 147 member states’ annual contributions, which are based on the United Nations scale of assessments. The other large source of funding is reimbursement payments for inspections conducted under Articles IV and V of the convention. As required by the convention, members states with chemical weapons related–facilities must reimburse the organization for its inspection costs related to the destruction of chemical weapons (Article IV) and the destruction of chemical weapons production facilities (Article V). The State Department reports annually to Congress on U.S. contributions to international organizations, including the OPCW. In early 2002, the United States and other member states to the convention raised concerns that the organization was not fulfilling its mandate because of a number of management weaknesses. According to the United States, such weaknesses included mismanagement by the organization’s then Director-General, as well as his advocacy of inappropriate roles for the organization—such as attempting to interfere with United Nations weapons inspections in Iraq. To address these management concerns, the Conference of the States Parties voted to remove the former Director- General in April 2002. In July 2002, the Conference appointed a new Director-General. In its budgets, the Secretariat has not accurately projected income and expenses. The Secretariat has overestimated its income for two reasons. First, the budgets include as income the assessed contributions of member states that are in arrears, some of which have not paid their contributions since before 1997. Second, the Secretariat has difficulty predicting and collecting income from inspections conducted at chemical weapons– related facilities. The budgets also include inaccurate expense projections. OPCW’s inaccurate income and expense estimates contributed to a budget deficit in 2000, and a potential deficit for 2002, despite plans to achieve balanced budgets in those years. In developing its budget plans for the past 6 calendar years, the Secretariat has overestimated the amount of income it would receive from member states’ assessed contributions and from reimbursable expenses paid by member states for inspections at chemical weapons–related facilities. When preparing its annual budgets, the Secretariat overestimates the income that it realistically expects to receive from member states’ annual assessments. The Chemical Weapons Convention requires all member states to pay their annual assessments or lose their voting privileges. The Secretariat’s annual budgets, however, included as income the contributions due from 30 member states, even though these members had not paid their annual assessments for at least the 2 previous years. The cumulative total of arrearages over the past several years amounted to almost $1 million as of August 2002. (See app. II for more details.) This includes $781,883 from 16 member states that had not paid any of their assessed or other contributions since before the organization’s inception in 1997. An OPCW official stated that budgeting for arrearages presents a politically sensitive problem for the organization because excluding member states’ assessed contributions from the annual budgets would require approval from the Conference of the States Parties. In response to these budgeting problems, the organization’s Advisory Body on Administrative and Financial Matters and its External Auditor recommended that the Secretariat improve its budgeting practices by developing more accurate and realistic budgets. For example, in 1998, the Advisory Body and the External Auditor stated that the Secretariat’s future budgets should be more realistic and accurate and based on the experience gained in the organization’s first year of operation. In 2000, the External Auditor recommended that income projections, which are used to establish expenditure targets, should be more realistic and based on reasonable and sound assumptions using past trends in the budget. The Secretariat has yet to act on these recommendations. As shown in table 1, every year since 1997, the budgets have overestimated the amount of money that the organization will invoice and receive each year for inspections conducted at chemical weapons–related facilities. As indicated by OPCW documents, the Secretariat often receives its reimbursements from those member states possessing chemical weapons– related facilities late because these states usually do not pay the OPCW during the year that they receive the inspection invoices. Frequently, the organization does not receive payments until several years after issuing the invoices. According to State Department officials, the United States and Russia have not made payments, in many cases, until several years after receiving OPCW invoices, because both governments experienced difficulties in identifying a funding source and obtaining appropriations. These officials added that both governments are working to improve their reimbursement records during 2002. As of June 2002, those states possessing chemical weapons–related facilities, including the United States, owed OPCW more than $2 million in reimbursable inspection expenses from the previous 2 years. The United States accounts for $1.4 million of the $2 million owed. It is difficult, however, for the Secretariat to estimate the number of inspections that will be conducted and therefore the amount of inspection reimbursement payments that can be collected from those states possessing chemical weapons–related facilities. According to State Department and OPCW officials, the Secretariat relies on states’ destruction plans to calculate the number of inspections the organization may conduct during the year. Chemical weapons possessor states cannot always accurately predict when their destruction facilities will become operational and what problems may arise once they do. Any change to the schedule of a destruction facility’s operations can affect the timing of OPCW inspections and thus affect the organization’s reimbursement estimates. In commenting on our draft report, the State Department stated that possessor states’ destruction plans have collectively overstated destruction activity, and consequently monitoring activity, by 30 percent or more. While it may be difficult for the Secretariat to estimate income from inspection reimbursements, the Secretariat does not issue the reimbursement invoices in a timely manner, according to State Department and OPCW officials. Recent OPCW analysis indicates, however, that the organization is working to improve the timeliness of its invoices. In addition, sometimes the invoices are inaccurate, causing those states possessing chemical weapons–related facilities to withhold payment until corrections are made. The organization’s External Auditor recommended in 2001 that the Secretariat take concrete steps to pursue and recover outstanding invoices and develop realistic estimates of its income from Articles IV and V (reimbursable) inspections. In its April 2002 report, the organization’s Advisory Body also recommended that the Secretariat avoid optimistic income forecasts regarding Articles IV and V inspections, as well as expedite and improve its billing procedures. As the result of a staff reclassification and upgrade undertaken in 1999 and mandatory United Nations salary increases, the Secretariat’s personnel costs increased, affecting the 2000, 2001, and 2002 budgets. However, the budgets underestimated this increase. The Secretariat’s budget for 2002 underestimated staff cost increases by about 6 percent ($1.8 million) and may contribute to a potential budget deficit for 2002. The audited financial statement for 1999 and the Advisory Body’s January 2001 report stated that increases in personnel costs were inevitable as a result of the staff reclassification and upgrade. The OPCW’s salary system further complicates the budget projections for staff costs. OPCW uses the United Nations compensation system, which budgets salaries and staff wages in U.S. dollars. The OPCW, however, pays its staff in euros. According to State Department and OPCW officials, the organization has had difficulty in covering the currency risks associated with fluctuations in the dollar-to-euro exchange rate. The organization can experience significant personnel cost increases, depending upon the exchange rate; staff costs represent about 75 percent of OPCW’s 2002 budget. Furthermore, OPCW and State Department officials stated that it is difficult to manage staff costs given the organization’s current tenure policy, which does not clearly establish a start date for OPCW employees. During the creation of the organization, a 7 year tenure policy was established to reduce the number of career employees in the organization. Currently, staff members are hired on a 3 year contract that can be renewed yearly thereafter. However, the Conference of the States Parties has yet to agree on a date for the commencement of the tenure policy. In 2000, the organization experienced a budget deficit of more than $2.8 million when expenditures exceeded the income for the year. In 2001, the Advisory Body reported that the Secretariat was aware of the income shortfall of 2000 and should have managed the budget more carefully to avoid a deficit. It also recommended that, to avoid a recurrence of overspending, the Secretariat should maintain budgetary discipline by matching expenditures to anticipated income in developing the 2001 budget. However, for 2002, the organization may again experience a budget deficit. According to an OPCW briefing document, the organization will experience a potential $5.2 million deficit because of unrealistic income projections in the budget and underbudgeted personnel expenditures. Because of its budget problems, the Secretariat has reduced inspections and international cooperation and assistance efforts and has implemented a hiring freeze. Unless the organization can obtain additional funding, it will have to further reduce its inspections in 2002. The problem will intensify as the number of inspectable facilities increases during the next few years. The Secretariat has curtailed its inspection activities in response to its budget problems. As a result the Secretariat conducted only 200 of the 293 inspections planned for 2001. The Secretariat plans to reduce the number of inspections for 2002 to compensate for the potential deficit of $5.2 million. As of June 2002, OPCW inspectors had conducted only 90 of the 264 inspections planned for the year. Figure 1 depicts the number of inspections planned and conducted from 1997 through June 2002. Since 1997, most OPCW inspection activities have taken place at chemical weapons–related facilities. The Secretariat receives reimbursements from member states for inspections conducted under Articles IV and V of the convention. However, the Secretariat is not reimbursed for inspections carried out at commercial chemical facilities under Article VI. According to OPCW documents, when funding is limited, the Secretariat reduces the number of inspections at commercial chemical facilities that it conducts during the year. Because of its budget problems, OPCW conducted only 75, or 57 percent, of the 132 chemical industry inspections planned for 2001. As of June 2002, the organization had conducted only 47, or 36 percent, of the 132 industry inspections planned for 2002. According to an OPCW document, if additional funding becomes available, a maximum of 11 chemical industry inspections per month can be conducted between the time additional monies are received and the end of 2002. At the same time, the Secretariat cut funding for international cooperation and assistance efforts in 2001 by about one-third, from $3 million to $2 million, and has made further reductions in funding for 2002. The Secretariat also imposed a hiring freeze on OPCW personnel for 2000 through 2002. According to the OPCW’s latest budget proposal, the Secretariat plans to leave 33 positions vacant for 2003. Of these 33 positions, 22 are related to inspection and verification activities. According to OPCW officials, unless it receives additional funding, the OPCW will not be able to completely fulfill its primary inspection functions this year. As of June 2002, six member states have provided about $397,000 in voluntary contributions to help offset the OPCW budget deficit for 2002. According to a State Department official, the United States, France, Germany, and the United Kingdom are considering contributing additional funding to support the organization. The Secretariat’s inspection resources will be further affected by expected increases in the numbers of chemical weapons destruction facilities and commercial chemical facilities requiring OPCW inspections. Specifically, by 2006, the number of continuously operating chemical weapons destruction facilities is expected to increase from 6 to 12. An OPCW planning document also indicates that additional member states may declare more industry facilities. According to the Deputy Director-General, preliminary OPCW estimates indicate that the funding level needed to support inspection activities may increase by 50 percent. The organization has taken some preliminary steps to address its budgeting problems, but it lacks a comprehensive strategy to overcome the inherent weaknesses in its budgeting process. Also, limited oversight resources have affected the organization’s efforts to improve its budgeting process. The State Department has taken some steps to assist the OPCW, but budgeting problems remain. The Secretariat is taking some preliminary steps to improve its budgeting practices. The new Director-General has stated his commitment to ensure that the organization receives the financial resources needed to implement its mandate and that these resources are used exclusively for the objectives and missions outlined in the convention. According to a State Department official, when developing its internal spending plans to implement the budget, the Secretariat has begun to exclude the assessments of member states in arrears. The OPCW is also reducing its estimates of income derived from inspection activities, based on the chemical weapons possessor states’ destruction plans, by 30 percent, to better reflect the historical level of activity. State Department officials also indicated that the Secretariat is working to improve the invoicing and payments process for Articles IV and V reimbursements by providing more accurate bills on a more timely basis. Invoices sent out during the last two months of the calendar year will be applied to the following year’s income projections. State Department officials added that OPCW member states are considering changing the current financial regulations to provide the Secretariat flexibility in using the organization’s Working Capital Fund to cover inspection-related expenses. In commenting on our draft report, the State Department also stated that the Secretariat has begun using actual staff costs to develop more accurate budget forecasts of salary costs. Although the Secretariat’s efforts to collect income from member states is a positive first step in addressing its budget difficulties, it has not directed sufficient attention to improving projections of future expenses. According to State and OPCW officials, the Secretariat does not budget for currency fluctuations in calculating its staff expenses. These officials also stated that current personnel regulations contain a vague employee tenure policy, making it difficult to predict employee turnover and reduce the number of employees. Accordingly, the Secretariat’s recent efforts do not reflect a comprehensive approach to addressing its continuing budget problems. OPCW’s Office of Internal Oversight may play an important role in helping reform the Secretariat’s budget process. In March 2002, the organization’s Advisory Body questioned the role of the oversight office, stating that the office may not be focusing on key internal auditing, monitoring, evaluation, and investigation activities that could detect budgeting problems. In providing its advice and consent to the ratification of the Chemical Weapons Convention, the U.S. Senate required the President to certify that the OPCW had established an independent internal oversight office that would conduct audits, inspections, and investigations relating to the programs and operations of the OPCW. In December 1997, the President certified that the office was in compliance with the Senate’s requirement. However, the OPCW’s 2000 annual report states that only one auditor within the oversight office was responsible for internal audit activities. The 2002 Advisory Body report states that the oversight office was devoting only one-third of its staff resources to conducting audits, while the remaining two-thirds was focused on other functions, such as the implementation of the organization’s confidentiality regime and the establishment of a quality assurance system. In that same report, the Advisory Body reemphasized that the principal and overriding functions of the oversight office should be internal audit, monitoring, evaluation, and investigation. Given the current financial and budgetary crisis, the Advisory Body recommended that the Secretariat redefine the office’s role to ensure a clear and sustained focus on proper management of the budget. The State Department funded a budget consultant to assist the Secretariat in reviewing its budget processes. However, it is difficult to assess the consultant’s impact in improving the budget processes of the organization. According to the State Department, although it reimbursed the Secretariat for the consultant’s salary (including per diem) of $170,000, the consultant was not required to provide the Department with a statement of work or a written analysis of the Secretariat’s budgetary practices and efforts to improve its processes, because he was considered an employee of the Technical Secretariat. According to State Department officials, the United States is also attempting to pay its Articles IV and V inspection reimbursements in a timelier manner and is considering paying in advance the chemical weapons–inspection costs that cover inspector salaries. To assist the organization in meeting its 2002 budget, the State Department is providing $2 million in supplemental funding to restore, to the extent feasible, budgeted levels of inspection activity and to strengthen management and planning functions, among other purposes. Funds will be deposited in a trust fund and will remain available until expended by the OPCW on activities agreed to by the United States. OPCW’s Deputy Director-General and representatives from member states commented that the United States needs to continue in its leadership role by providing financial, managerial, and political support to the organization. According to these officials, the U.S. government’s recent efforts focused primarily on the removal of the former Director-General. The officials added that the United States should now focus on addressing the organization’s budgetary and financial problems. The OPCW has consistently overestimated its income and underestimated its expenses, and thus has planned more inspections than it is financially able to conduct. Unless the Secretariat corrects its weak estimating practices, the Secretariat may continue to plan more inspections than it can undertake. The problem may grow worse in future years as the number of new chemical weapon’s destruction facilities increases and additional states ratify the convention. The organization’s newly appointed Director- General has an opportunity to correct these budgeting weaknesses and improve the organization’s finances. To improve the current budget problems of the Organization for the Prohibition of Chemical Weapons, we recommend that the Secretary of State work with the representatives of other member states and the new Director-General to develop a comprehensive plan to improve the organization’s budgetary practices. The plan should outline specific strategies to (1) improve the projection and collection of income, (2) accurately project expenses, and (3) strengthen the role of the Office of Internal Oversight in helping the organization improve its budgeting process. Such a plan would be consistent with the budget recommendations of the Secretariat’s oversight bodies. To ensure that Congress is informed about the status of efforts to improve the OPCW’s budgeting practices, we recommend that the Secretary of State annually report to Congress on the extent to which the OPCW is correcting its budgeting weaknesses and implementing the recommendations made by the organization’s oversight bodies. We received written comments on a draft of this report from the State Department that are reprinted in appendix III. We also received technical comments from the State Department and have incorporated them where appropriate. The State Department generally concurred with our findings that budgetary and financial problems have plagued the OPCW, and that unless corrected, these problems could have even more dramatic effects in coming years. The Department, however, raised several issues with the report. First, the Department asserted that our analysis of OPCW budgetary and financial difficulties presented an incomplete picture of the OPCW’s budgeting practices. Second, the State Department disputed our assertion that we had to limit the scope of our review because of the access restrictions we encountered during our May 2002 visit to the OPCW in The Hague. Third, it stated that our report did not fully reflect the changes that the OPCW has recently begun taking to address its budget weaknesses. Finally, the Department disagreed with our recommendation that the Secretary of State be required to report annually to Congress on how the OPCW is correcting its budget weaknesses, asserting that such a requirement would impose an administrative burden. In response to the State Department’s comments on our draft report, we added information on the reasons why the OPCW experienced budget problems. Regarding our access to OPCW records and staff, although the State Department provided us with some access to OPCW budget and finance documents through the Department’s offices in Washington, D.C., we were denied the opportunity to review related budget documentation and meet with numerous OPCW officials during our visit to The Hague in May 2002. Although we provided the State Department with an extensive list of OPCW officials with whom we wanted to meet prior to our visit, we were allowed to meet only with the Deputy Director-General and selected representatives from the budget office and the inspection equipment laboratory. We were not allowed to meet with representatives from key OPCW offices, including the Special Projects Division, the Office of Internal Oversight, the Office of the Legal Advisor, the Administration Division, the Verification Division, the Inspection Division, the International Cooperation and Assistance Division, and the Advisory Body on Administrative and Financial Matters. Furthermore, the State Department failed to notify us of any potential access difficulties with the OPCW prior to our trip to The Hague, and did not actively seek to provide us with access to these officials on our arrival. Consequently, we had to limit the scope of our review to budget-related issues. In response to the State Department’s comments about recent budgetary initiatives, we have updated the report to reflect the most current initiatives being undertaken by the OPCW to address its budgeting problems. Regarding our recommendation for an annual reporting requirement, we do not believe that such a requirement would impose an administrative burden on the Department, since it already provides various reports to Congress on international organizations. This reporting requirement is necessary to improve congressional oversight of the OPCW. We are providing copies of this report to other interested congressional committees and to the Secretary of State. We will make copies available to others on request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. Please contact me at (202) 512-8979 if you or your staff have any questions concerning this report. Another GAO contact and staff acknowledgments are listed in appendix IV. We could not conduct a comprehensive management review of the organization as requested, because the Organization for the Prohibition of Chemical Weapons (OPCW) and State Department officials limited our access during our visit to The Hague in May 2002. As a result of our lack of access to OPCW officials and limited access to OPCW documents, we could not determine how the reduction in chemical weapons and industry inspections has affected the implementation of the Chemical Weapons Convention. In addition, we could not assess the organization’s personnel management, administrative, and internal audit functions. Specifically, we were not permitted to meet with or obtain information from OPCW officials from the following offices: the Special Projects Division, the Office of Internal Oversight, the Office of the Legal Advisor, the Administration Division, the Verification Division, the Inspection Division, the International Cooperation and Assistance Division, and the Advisory Body on Administrative and Financial Matters. However, we met with OPCW’s Deputy Director-General. We also received a budget briefing from the Director of the Administrative Division and the budget consultant being funded by the State Department. In addition, we visited the inspection laboratory and equipment store at Rijswijk, the Netherlands. To determine the accuracy of the Secretariat’s budgets, we compared OPCW’s program and budget documents for 1997–2003 with the data in the audited financial statements for 1997–2001. To compare budget and program data, figures were converted from Netherlands guilders and euros to 2001 dollars, using appropriate exchange and inflation rates. We also reviewed other OPCW documents, including the organization’s financial regulations and annual reports. We analyzed reports prepared by the organization’s External Auditor, the Advisory Body on Administrative and Financial Matters, and the Office of Internal Oversight. In addition, we obtained information from officials in the State Department’s Bureau of Arms Control and Office of International Organization Affairs, as well as from member states’ representatives to OPCW. To determine the impact of budget shortfalls on the organization’s inspection and international cooperation activities, we analyzed the data contained in the organization’s program and budget documents and in annual implementation reports for calendar years 1997–2001. To confirm our understanding of the data obtained, we met with an official from the State Department’s Bureau of Arms Control. In addition, we reviewed other OPCW documents and statements provided by the State Department. To assess OPCW and State Department efforts to improve the organization’s budget-planning practices, we met with State Department officials in Washington, D.C., and The Hague. We also obtained information from OPCW member states’ representatives. We reviewed and analyzed OPCW and State Department documents, including OPCW’s draft Medium- Term Plan for 2004–2006; speeches given by the Director-General to the Executive Council and Conference of the States Parties; and reports of the Advisory Board on Administrative and Financial Matters, the External Auditor, and the Office of Internal Oversight. We could not independently verify the accuracy of the budget and other financial data obtained from OPCW and the State Department. Although we met with, and obtained documents from, officials at the Departments of Commerce and Defense, the information they provided was not relevant to the reduced scope of our work. We performed our work from January 2002 through October 2002 in accordance with generally accepted government auditing standards. $60,127 $163,958 $253,143 $71,155 The Preparatory Commission for the Organization for the Prohibition of Chemical Weapons preceded the OPCW and carried out the initial implementation of the Chemical Weapons Convention. Under the Preparatory Commission, member states were assessed contributions to fund the commission’s expenses. The following are GAO’s comments on the Department of State’s letter, dated October 16, 2002. 1. We agree that monitoring activities at chemical weapons–destruction facilities account for most of OPCW’s workload, and that to project this workload, the organization has depended on plans submitted by chemical weapons–possessor states. Our report states that since 1997, most OPCW inspection activities have taken place at chemical weapons facilities. Our report also states that the Secretariat relies on possessor states’ destruction plans to calculate the number of inspections the organization may conduct during the year. Chemical weapons– possessor states cannot accurately predict when their destruction facilities will become operational and what problems may arise when they do. However, in response to the State Department’s comments, we have included additional information in the report to clarify this point. 2. We identified the key reasons why OPCW underestimated staff costs for calendar years 2000–2002, and included this information in the report. For example, our report states that as the result of a staff reclassification and upgrade undertaken in 1999 and mandatory United Nations salary increases, the Secretariat’s personnel costs increased, affecting the 2000, 2001, and 2002 budgets. 3. We agree that the OPCW encounters the same difficulties as other international organizations with regard to the late payment of annual dues, and that the United States and Russia have experienced difficulties in paying their Articles IV and V inspection bills. We included this additional information in the report. 4. We agree that the OPCW has lacked adequate liquidity to deal with its cash shortages, and this has resulted in a curtailment of inspection activity. We have made no change to the report, however, because this is its major theme. We reported that weak budgeting practices and budget deficits have affected the organization’s ability to perform its primary inspection and international cooperation activities, as outlined in the Chemical Weapons Convention. 5. As explained in our report, the OPCW spent against budgeted income based on inflated estimates of inspection activity. This budget shortfall resulted in reduced inspections and international cooperation activities. We do not believe that a change in our report is needed. 6. Our report clearly states that since 1997, most OPCW inspection activities have taken place at chemical weapons facilities. Because of its budget problems, the OPCW conducted only 57 percent of the chemical industry inspections planned for 2001. As of June 2002, it had conducted only 36 percent of these inspections planned for 2002. We do not believe that a change in our report is needed. 7. We disagree that the State Department made every reasonable effort to accommodate our requests for information and access to OPCW staff. We were not allowed to hold meetings with representatives from several key OPCW offices. The State Department failed to notify us of any impending scheduling difficulties prior to our trip to The Hague in May 2002. On our arrival, the Department made no effort to facilitate meetings with the following offices: the Special Projects Division, the Office of Internal Oversight, the Office of the Legal Advisor, the Administration Division, the Verification Division, the Inspection Division, the International Cooperation and Assistance Division, and the Advisory Body on Administrative and Financial Matters. 8. This comment confirms that we were able to meet with only a few select OPCW staff. It is unclear how the State Department concluded that we were unable to identify specific questions to which answers were not provided. Prior to our departure for The Hague in May 2002, we provided State Department officials in Washington and at the U.S. Delegation to the OPCW with five pages of detailed questions that we planned to raise with OPCW officials. Many of these questions remain unanswered. We also provided the State Department with a detailed set of questions we planned to raise with representatives from other member states. 9. We have updated our report to provide the most recent information on OPCW initiatives currently under way. However, the State Department’s mosaic of measures does not represent an overall strategy or plan for improving the organization’s budgeting weaknesses. At best, it represents only the first steps in addressing systemic weaknesses in the OPCW’s budgeting process. 10. We believe that our recommendation for an annual reporting requirement to Congress is appropriate. Such reporting will help establish a baseline for judging OPCW progress in achieving needed reforms. In addition, this requirement will not impose an undue administrative burden on the Department, since it already provides various reports to Congress on international organizations, including the OPCW. In addition to the individual named above, Beth Hoffman León, Richard K. Geiger, and Reid Lelong Lowe made key contributions to this report. Bruce Kutnick, Christine Bonham, and Geoffrey Frank provided additional assistance. The General Accounting Office, the 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. The fastest and easiest way to obtain copies of GAO documents at no cost is through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full- text files of current reports and testimony and an expanding archive of older products. 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Summary: The Organization for the Prohibition of Chemical Weapons is responsible for implementing the Chemical Weapons Convention, which bans the use of chemical weapons and requires their elimination. The United States and other member states have raised concerns that a number of management weaknesses may prevent the organization from fulfilling its mandate. As requested, GAO assessed the accuracy of the organization's budget and the impact of budget shortfalls on program activities. GAO also reviewed efforts to improve the organization's budget planning. Since its establishment in 1997, the ability of the Organization for the Prohibition of Chemical Weapons (OPCW) to carry out key inspection functions has been hindered by inaccurate budget projections and, more recently, budget deficits. The organization has consistently overestimated its income and underestimated its expenses. Its budgets have recorded as income nearly $1 million in unpaid assessments owed by 30 member states. The budgets have also overestimated reimbursement payments for inspections conducted in member states with chemical weapons-related facilities. As of June, 2002, these states owed the organization more than $2 million. Furthermore, the budgets for 2000 through 2002 underestimated personnel expenses. The organization's inaccurate income and spending estimates contributed to a $2.8 million deficit in 2000 and a potential deficit of $5.2 million in 2002. Weak budgeting practices and budget deficits have affected the organization's ability to perform inspection activities as mandated by the Chemical Weapons Convention. The organization had to reduce the number of inspections it conducted in 2001 and plans to reduce the number it conducts in 2002. Although the organization and the State Department have taken some steps to address the budget problems, the organization has not developed a comprehensive plan to overcome its inherent weaknesses. Unless the organization improves its planning, budget shortfalls will continue to affect its ability to conduct inspections.