The U.S. Information Agency’s (USIA) missions are to explain and advocate U.S. policy, provide information about the United States, build lasting relationships and mutual understanding among the peoples of the world, and advise U.S. decisionmakers on foreign public opinion and its implications for the United States. Over the years, its programs have shifted in emphasis from one part of the world to another in response to foreign policy initiatives and direction from the administration as well as to congressional mandates. Its budget for fiscal year 1995 was about $1.4 billion. Like other government agencies, USIA has faced the prospect of uncertain, but likely reduced, budgets as the administration and the Congress grapple with balancing the federal budget. In fiscal year 1996, USIA received about $1.1 billion, 17 percent less than it requested. The United States has engaged in foreign information programs, international broadcasting, and publicly funded educational and cultural exchanges for nearly 60 years. In 1938, the Congress began funding the first international educational exchange program in the sciences. U.S. funding of broadcasting began in 1942 with a 15-minute broadcast in German, which was soon followed by broadcasts in Italian, French, and English. After World War II, the Congress decided to introduce additional information and cultural programs overseas to promote U.S. policies and interests. In 1946, it mandated a peacetime international exchange program, beginning with the establishment of the Fulbright Exchange Program. This mandate was expanded to include numerous exchanges under academic, artistic, visitor, citizen, youth, and speaker programs. In 1948, the Congress permanently established a U.S. international information and cultural exchange program, which included the Voice of America (VOA). VOA’s objectives are to provide accurate, objective, and comprehensive news; portray a balanced view of American society; and explain U.S. government policy. VOA was followed by Radio Free Europe/Radio Liberty (RFE/RL) in the 1950s as a private nonprofit company to provide uncensored news to the Soviet Union and the Eastern bloc. In 1985 and 1990, Radio Marti and TV Marti, respectively, were established to fill a void in the news and information Cuban citizens received due to censorship by the Cuban government. Between 1981 and 1994, appropriations for public diplomacy programs increased as the Congress funded new missions such as additional exchanges for the newly independent states of the former Soviet Union. In fiscal year 1995, funding began a downward trend as a result of the consolidation of international broadcasting activities and reduction in exchanges and salaries and expenses. (see fig. 1.1). As shown in the figure, USIA received $1.077 billion in fiscal year 1996, of which about $405 million (38 percent) is being spent for international broadcasting and radio construction: VOA broadcasts in 47 languages, RFE/RL broadcasts in 21 languages, Radio and TV Marti’s broadcasts to Cuba, and Worldnet’s television broadcasts; $310 million (29 percent) is for personnel, infrastructure, outreach activities, and headquarters support for USIA’s overseas posts; $210 million (19 percent) is allocated for educational and cultural exchanges and related salaries and management expenses; $109 million (10 percent) is for headquarters salaries, operating expenses, a technology fund, and information programs; and $44 million (4 percent) is for grants to the National Endowment for Democracy, the East-West Center, and the North/South Center. In fiscal year 1996, USIA is operating its programs at 199 overseas posts in 143 countries, as compared to 200 posts in 125 countries in fiscal year 1981. The growth in country operations largely resulted from opening posts in newly independent countries. In 1981, USIA maintained 16 posts in Eastern European countries and the former Soviet Union, but it now has 31 posts in this region. At the same time, the level of its U.S. and foreign service national (FSN) personnel decreased; in 1981, USIA employed 642 Americans and 2,960 FSNs overseas, and by the end of 1996 it will have 523 American and 2,318 FSN employees. Additionally, RFE/RL employs approximately 400 staff at its offices in Prague in the Czech Republic, VOA employs about 600 personnel to manage transmission sites, and both fund correspondents. Since the end of the Cold War, the Congress has appropriated funds to establish new exchange programs. For example, in 1992, the Congress authorized the Edmund S. Muskie Fellowship Program to provide grants for graduate study to educators, government officials, business leaders, and scholars from Soviet bloc countries for study in law, economics, business, and public administration. In 1994, the Congress established the Mike Mansfield Fellowship Program for U.S. citizens to study the Japanese language and to serve 1 year in an office of the government of Japan. The U.S. Agency for International Development (USAID) transferred funds for USIA’s exchange programs budget for Eastern and Central Europe (fiscal year 1991 to present) and the former Soviet Union (fiscal year 1993 to present). Table 1.1 shows USIA appropriations by major account for fiscal years 1981-96. In fiscal year 1995, USIA spent at least $3 million on programs in more than 40 countries and more than $11 million on programs for 7 countries (see table 1.2). Cuba was the largest single target of public diplomacy programs; in fact, expenditures for Radio and TV Marti exceeded the total costs for all activities targeted for any other country. Further budget restrictions are likely given the degree of budgetary stringency that the federal government is expected to face in the next few years. If total discretionary spending is held to levels envisioned in this year’s congressional budget resolution, it will fall by almost 6 percent by 2002. It will be difficult to exempt USIA from bearing its share of this decrease. Various funding scenarios indicate the degree to which USIA’s budget could be reduced. While the fiscal year 1997 request is slightly higher than the $1.1 billion appropriated for fiscal year 1996, the Office of Management and Budget (OMB) has projected that funding for USIA will be reduced thereafter, falling below $900 million by fiscal year 2000. Under the fiscal year 1996 7-year concurrent budget resolution, USIA could receive less than OMB projected. If USIA were to take a proportional share of the proposed reductions in the international affairs account, the congressional plan would call for reductions in funding for USIA to $865 million by 2000.Because of inflation, costs for current services would increase by about 4 percent. Additionally, the fiscal year 1997 House budget resolution assumes that much of USIA will gradually be privatized or eliminated. Therefore, there is a substantial gap between the costs of maintaining the status quo and potential funding levels. Because of these fiscal constraints, USIA may not be able to continue all of its current functions and operations. Three funding scenarios for USIA are shown in figure 1.2. The Chairman of the House Committee on the Budget asked us to examine USIA’s reform and cost-cutting efforts and identify options that could enable USIA to adjust to reduced budgets. Our review focused on activities of the primary components of USIA activities, namely overseas posts, educational and cultural exchange programs, and international broadcasting. For each component we looked at the reinvention and cost-cutting activities to date, plans for the future, and potential options for additional cuts should funding be significantly cut. We identified options for lowering costs within the context of specific programs and activities by reviewing Agency studies and USIA Inspector General reports, meeting with a wide variety of Agency officials, and analyzing whether current conditions and program objectives remained relevant when compared to conditions when the programs first began. We did not attempt to evaluate the importance and relevancy of public diplomacy as a foreign policy tool or assess the amount of funding that would be appropriate. We met with officials and reviewed documents at USIA and State Department headquarters in Washington, D.C., and at offices in Germany and the Czech Republic. We also met with officials from private organizations that sponsor exchanges, U.S. private companies, and foreign government officials to gain their perspective on USIA programs and used the results of a 2-day GAO symposium on foreign affairs issues. We conducted work at RFE/RL in the Czech Republic. We also relied on work previously conducted at USIA headquarters and at posts in Mexico and Guatemala and our prior reports on international broadcasting and exchange programs. We conducted our review between August 1995 and August 1996 in accordance with generally accepted government auditing standards. USIA has been involved in a multiyear restructuring plan to become a leaner, more efficient, and more technologically advanced agency. USIA has reduced staff, eliminated some activities, and reengineered some of the ways it operates. Both the Congress and the administration have been instrumental in this change. The House Conference Report on Fiscal Year 1993 Appropriations for the Department of State indicated that the amount of funds provided to USIA for fiscal year 1993 would be substantially below the amounts needed to maintain then-current program levels and allow USIA to open new posts in the countries of the former Soviet Union. As a result, the report directed USIA to review all programs, including the library programs at USIA reference and research centers, and submit proposals for reductions in lower priority programs. In 1993, Vice President Gore’s National Performance Review and OMB targeted many agencies for cuts. The President directed USIA to submit a streamlining plan to the Director of OMB by December 1993. The plan was to address the goal of reducing by half the number of supervisory or managerial positions, reducing micromanagement and red tape, realizing cost savings, and improving the quality of service and productivity. Furthermore, the National Performance Review recommended the consolidation of all nonmilitary international broadcasting to help meet the President’s deficit reduction plan. It was anticipated that the consolidation would achieve savings of $400 million over a 4-year period. In response, the Agency developed a multiyear strategy to downsize and reinvent its operations. The consolidation of VOA and RFE/RL eliminated RFE/RL’s engineering and transmission function and overlapping broadcast hours to the same target nations, which resulted in a 32-percent reduction in total broadcast hours. Both VOA and RFE/RL have reduced the size of their workforce since fiscal year 1994 in response to these changes. The International Broadcasting Bureau eliminated over 300 positions, and RFE/RL eliminated over 1,150 positions, reducing costs significantly. Table 2.1 compares fiscal year 1994 funding with the fiscal year 1997 request to indicate the annual savings achieved through the consolidation. In addition to broadcasting consolidation, USIA has taken a variety of measures to reinvent itself. USIA reduced its headquarters staff, targeting duplication, bureaucratic layering, outmoded activities, and the inefficient distribution of its workforce, and began a reorganization. It replaced its Policy and Programs Bureau with a smaller Information Bureau, which eliminated more than 150 positions and both removed management layers and developed systems and information to best support the needs of the posts. The Information Bureau is now using advanced communications technology, such as digital video conferencing, to perform traditional agency functions in a more cost-effective manner. Furthermore, USIA established a technology modernization fund and created a technology steering committee to enhance technology planning and decision-making. In response to congressional concerns, USIA also began converting walk-in libraries in developed countries to technologically advanced information centers. USIA also surveyed its overseas posts to determine the relative impact and priority of its activities and programs. In response, USIA eliminated the production of regional magazines and exhibits that Agency officials determined were no longer the most effective means of reaching foreign decisionmakers. In fiscal year 1996, USIA is streamlining its overseas operations by eliminating about 115 U.S. and 435 FSN positions. USIA also plans to review the structure and staffing of its Educational and Cultural Affairs Bureau, and work with other foreign affairs agencies to establish common administrative services, and eliminate unnecessary and duplicative practices. Reengineering and new automated administrative processes are expected to save $8 million and further reduce related staffing. Furthermore, USIA is participating in the review by the President’s Management Council to increase the effectiveness of the U.S. overseas presence while reducing its cost. The review will focus on streamlining overseas operations, sharing administrative support, and making better use of information systems and communications technology. In recognition of some of its achievements, the Vice President presented USIA a National Performance Review “Hammer Award.” This award symbolizes the federal government’s commitment to tearing down bureaucracy and rebuilding a new government that works better and costs less. In commenting on a draft of this report, USIA said that it is instituting changes to cut costs while preserving essential missions. USIA said that its core functions remain valid and that “preventive diplomacy” can help spare America from more expensive crisis-driven international engagements. USIA stated that it understands that the intrinsic value of many traditional programs is no longer enough to justify their continuation; there must be direct benefit to U.S. policy interests. USIA conducts a wide variety of activities at its 199 overseas posts to inform and encourage relationships with the public in 143 countries. These activities range from disseminating information on U.S. policy to managing academic exchange programs. (These activities are discussed in app. I.) In fiscal year 1996, USIA is spending $310 million, or about 29 percent of its budget on personnel, infrastructure, programs, and headquarters activities to support overseas operations. If appropriations are substantially reduced, USIA may wish to consider reducing (1) the number of countries in which it has posts, (2) the staff size of posts and level of overseas activities, and (3) the infrastructure it maintains overseas. When weighing these options, consideration must be given to the extent to which the reductions will diminish the U.S. ability to influence foreign publics. USIA’s philosophy has been to maintain a public diplomacy presence where a State Department mission is located. Closing posts can yield significant cost reductions, especially if posts have large infrastructure or personnel costs. Costs of overseas posts range from $43,000 in Suriname to $19.2 million in Japan. USIA has closed some posts. However, the Agency has maintained posts in countries that, by its own criteria, are relatively less important to U.S. interests. In fiscal year 1995, USIA operated posts in 67 countries at a cost of more than $36 million (plus $23 million in exchanges), where USIA believed the United States had limited public diplomacy goals. One post, for example, had four U.S. foreign service officers and 21 FSNs assigned and cost $1.4 million a year to operate. Exchanges to that country cost an additional $643,000. In another country, three U.S. and five foreign nationals were employed, with post and exchange costs totaling $2.5 million. In April 1996, USIA announced that it was abandoning its principle of universality because of budget constraints. USIA states that as a result, its current overseas presence is 13 posts and 4 countries below fiscal year 1995 levels. Developing baseline requirements for activities and the number of people needed overseas could help USIA to accommodate budget reductions. Overseas staffing levels are particularly important because personnel costs consumed more than half the cost for USIA’s overseas operation in fiscal year 1995. In some countries, these costs were even higher: personnel costs in Germany and Japan consumed 65 percent and 68 percent, respectively, of the total USIA country budget. In Germany, USIA spent $9.5 million for the salaries and benefits of 126 FSNs, and $2.4 million for 26 U.S. employees. USIA is now downsizing its overseas personnel levels, which cost approximately $168 million in fiscal year 1995. Individual posts may be losing one or more positions based on a 1993 USIA system that ranks countries by importance and other characteristics, such as population and size, and USIA’s potential to affect U.S. interests there. For each rank, USIA established a benchmark in 1994 for personnel levels and programs, and posts with staffing levels above this benchmark would lose staff. However, this benchmark is based on historic staffing and program levels and therefore may be above actual staffing requirements. For example, one USIA official stated that USIA management recognizes that the post in Germany will be too large even after downsizing, as it reflects the structure established after World War II. A more comprehensive approach would be required if there were a major funding reduction. In June 1995, the USIA Director decided to design a strategic vision for its overseas presence, assuming that funding could be reduced by as much as 40 percent. The model acknowledged that the Agency could no longer afford to do some things, and that many posts might have to drop entire products, services, and programs. In response, Agency managers developed a building-block approach under which all USIA overseas posts would include a core advocacy mission and USIA would add information activities, exchanges, and cultural programs only if a country were important to U.S. interests and if USIA’s efforts could be effective. The model called for deemphasizing media and public opinion reporting because other agencies and the private sector already provide such reports, eliminating programs in the arts because they do not add to what is being done privately, and reducing grants to highly developed countries. Top management concluded that without such a redesign, Agency inertia would result in merely a downsized status quo, which would not yield an effective overseas structure. However, we were told that top management could not reach a consensus on the model, so as of August 1996, no actions had been taken. USIA has not conducted assessments required to determine if programs that were developed in a different era have outlived their usefulness or if the value added from their involvement is worth the investment. Agency officials believe it is difficult to link a program to a desired result, and existing evidence of impact is largely anecdotal. Such assessments are critical to USIA’s ability to sustain a major reduction and remain viable. One activity that we believe merits such review is USIA’s student advising operation. USIA spends about $2.6 million annually to subsidize more than 400 educational advisory centers worldwide that provide information about the U.S. system of education. Some of these centers are housed in USIA offices and are fully funded by the U.S. government. Others are operated by host country universities or U.S. nonprofit organizations and are partially funded by USIA. An additional $1.4 million is spent for training, materials, and other activities. USIA believes that it is in the best interests of the United States to support student advising because international students spend nearly $7 billion a year in the United States, contributing substantially to the U.S. economy, and American students are introduced to different cultures, enhancing diversity. However, the USIA Inspector General recently concluded that new worldwide trends to internationalize higher education, advancements in communication technology, and the increased sophistication of non-U.S. government-sponsored educational advising institutions indicate that a guidance and oversight role for USIA is more appropriate than an operational one. Overall, the USIA Inspector General believes that the increase in private sector counseling services, coupled with dwindling USIA resources, suggest it is now an appropriate time for USIA to turn over its educational advising role to the private sector. USIA’s English language training program, which originated in 1941, also is a candidate for review. The purpose of this program is to encourage the teaching of English; develop host country institutional capabilities to teach English; directly teach English in Africa, the Near East, and Asia; and design materials to supplement host countries’ classroom texts in more than 140 countries, including Western countries such as Brazil, France, and Mexico. USIA supports the program in part because it allows the United States access to people and institutions that it might otherwise be denied, such as universities in Islamic countries, and provides a better understanding of and appreciation for American culture and values in the curricula of these institutions. Other programs, specific to one or more posts, should also be considered for review if budgets are significantly reduced. For example, a large post like Germany may employ translators and printing facilities and issue post-generated materials whose value would need to be assessed in a time of declining budgets. One example is a publication that contains statements made by U.S. officials on foreign policy questions and is developed and distributed by the USIA post in Germany. USIA data indicate that it maintains more than 70 cultural centers, libraries, and branch offices overseas. Because they may not be co-located with an embassy and require staff to deal directly with the public, they are often expensive to operate. In Germany, for example, the fiscal year 1995 cost to operate six cultural centers (called America Houses) was nearly $9 million, which was for 77 staff and for activities such as reference centers, including online databases; student counseling activities; and cultural events. Lease costs for USIA’s three branch offices in Japan exceed $350,000 a year, and the cost for offices in Milan, Italy, was approximately $137,000. USIA stated that between fiscal years 1992 and 1996 it closed 30 cultural centers, 12 of them in conjunction with decisions to close posts in countries such as Iraq, Somalia, Lesotho, and Guyana. USIA could cut costs by finding alternatives for its cultural centers. For example, the USIA Inspector General believes that binational centers are a cost-effective alternative to cultural centers. Binational centers are private, autonomous institutions established to promote mutual understanding between the United States and host countries. USIA may have only minimal or no funds invested in the centers and may or may not assign staff. USIA successfully encouraged the formation of a binational center when funding limitations forced it to close an America House in Germany. USIA collaborated with private industry and the local German government to establish a German-American Institute to further relations through cultural and educational events. This decision could cut USIA’s annual operating costs in Germany by as much as half a million dollars. Of the 126 existing binational centers, 101 are located in Latin America, 16 in Europe, 4 in the Far East, and 5 in the Middle East. USIA officials said that the Agency has been forced to incur costs for office space when an embassy or a consulate does not have sufficient room available to house USIA. Nevertheless, when available, colocating with the State Department offers a more cost-effective approach. In 1996, USIA plans to terminate a $366,000 annual lease in Seoul, Korea, and a $455,000 annual lease in Singapore and move into embassy facilities in both countries. We were also informed that when USAID leaves the Czech Republic, space may become available for USIA to move onto embassy property and relinquish its lease costing $100,000 a year. If after assessing the impact of its overseas programs USIA believes they remain critical to U.S. foreign policy goals, USIA would still be in a position to reduce costs. USIA would be better able to accommodate reduced funding levels by (1) obtaining further financial support from the private sector, (2) charging fees for more of its products, and (3) ensuring that improved communication technologies are effectively integrated into how USIA delivers information. Historically, USIA has had a close relationship with the private sector, particularly with educational and nonprofit institutions that support international exchanges. Recently, USIA headquarters and posts have sought to interest the private sector in supporting other USIA programs to lessen government costs. For example, the Vice President instructed USIA to seek creative funding arrangements for its overseas counseling activities. In response, USIA entered into an agreement with a private company to assume control of the previously USIA-managed advising center in Singapore. The company will pay all costs, but the center will still carry the USIA name and logo. USIA has sought to maximize its funding by charging for some of its activities, and the Congress authorized USIA to supplement direct appropriations with the proceeds. In fiscal year 1995, USIA yielded $3.5 million from customers of its worldwide English language training program. Posts sell materials to clients to cover shipping, administrative, and markup costs. Posts retain 95 percent of the proceeds to spend on programs like their English training specialists or to help host countries develop institutions to teach English. Five percent of the proceeds are returned to headquarters for support. To a much lesser degree, USIA can recoup some of the costs associated with student advising. All USIA-supported student advisory centers can charge for their services. According to USIA officials, however, USIA posts cannot charge for services or headquarters-supplied products. The only exception is independently developed materials, which in Germany are prepared in German, published, and sold directly to students. USIA determined that as a global information agency in the information age it needed to modernize its communication technology and in fiscal year 1996 embarked on a modernization plan. Its headquarters reorganization supported the integration of new technologies. It was envisioned that by exploiting electronic technology, USIA could close down high overhead public access libraries in Europe and replace them with information centers, and could open up home pages on the Internet for easy access by users. Home pages may include speeches and other statements of U.S. officials, information on country post activities, clips of U.S. news articles, and other information for researchers. While not explicitly stated, the underlying assumption would appear to be that technology would significantly reduce and change USIA’s involvement in supplying information. We observed, however, that some USIA officials in the field appear to view technology more as an addition than as a replacement for their long-standing programs. One official noted, for example, that information centers were opened at the cost of closing traditional libraries that lent out books and other materials. Furthermore, USIA believes that technology does not negate the need to target individuals and institutions they believe are influential in shaping opinions or insuring that the public receive accurate, comprehensive coverage of U.S. policies. USIA officials with whom we spoke believe that technology can never replace the personal contact of USIA officials and can in fact cause an even greater need for USIA. They note that the proliferation of information will require that USIA play an even greater role in explaining and sifting through all the available data. USIA said that no one model can shape all overseas posts, and it is recasting the size, scope, and focus of some of its operations and phasing out separate cultural center operations whenever feasible. Regarding the privatization of its student advising program, USIA stated that it will continue to cultivate private support of student advising, but commented that it is not in the U.S. government’s interest to fully privatize student counseling. USIA also noted that the goals of its English language program—to orient foreign teachers toward American English and materials so students will be more likely to study in the United States rather than other English language countries and to develop ties with the United States—is not generally shared by commercial programs. USIA manages a variety of exchange programs to foster mutual understanding between the people of the United States and other countries. Appendix II provides detailed information about these programs. In fiscal year 1996, these exchanges cost about $210 million plus approximately $29 million to manage them. In recent years funding levels have not permitted USIA to maintain the same number of exchanges it supported in the past. Should funding be further reduced, options to cut costs include (1) eliminating certain exchanges entirely, (2) reducing the amount of funds USIA allocates to each program, or (3) obtaining more financial support from the private sector or foreign governments. The advisability of implementing any or all of these options would need to be evaluated along with the impact such actions might have on U.S. bilateral relationships and on the promotion of ties between private citizens and organizations in the United States and abroad. USIA currently manages some U.S. government exchange programs that have existed for more than 50 years. In 1994, USIA academic exchanges accounted for less than 24 percent of all U.S. government-funded international exchange and training activities. The Agency has evaluated these programs, but the evaluations fell short of assessing the usefulness of the programs for promoting U.S. foreign policy objectives. Whether the federal government still needs to fund each exchange, whether the exchange is targeted at the most appropriate countries, whether it is unique and unavailable from the private sector, and whether it is effective are questions requiring review should the budget for exchanges be significantly cut. USIA manages a variety of academic scholarships. The best known is the Fulbright Academic Exchange program, which involves the exchange of about 4,700 U.S. and foreign students, research scholars, lecturers, and teachers annually. Additionally, USIA manages other academic exchanges such as the Hubert H. Humphrey Program, under which mid-career professionals from developing countries receive a year of specially designed academic study and professional internships, an undergraduate exchange for economically disadvantaged Central American students, and the Edmund S. Muskie Fellowship Program for mid-career professionals and qualified students in the newly independent states to do graduate study in the United States in the fields of business administration, economics, law, and public administration. When the Fulbright Program was established, few foreign students came to the United States for studies. Clearly one objective of the program was to provide funds to spur such interchange, and this was borne out in subsequent years. According to the Fulbright Foreign Scholarship Board, in 1948, 500 British graduate students were attending graduate studies in the United States, and of these, 200 were under the Fulbright program. Since the United States first began funding scholarships, conditions have changed. The number of foreign students in the United States reporting personal or private resources as their primary source of funding has increased markedly. In 1950, 7.7 percent of foreign students in the United States reported the U.S. federal government as their primary source of funding. In 1994, about 453,000 foreign students were studying in U.S. colleges and universities. In the 1994/95 academic year, only about 1.2 percent, or about 5,400 students received funding from the U.S. government as their primary source of support. The Fulbright Program accounted for about 1,600 of the students receiving U.S. government funds. Similarly, the number of U.S. students abroad has increased dramatically. In 1969, approximately 18,000 U.S. students were studying abroad. During the 1993-94 school year, more than 76,000 U.S. students attended foreign educational institutions. Some officials believe USIA could decrease funding for exchanges with western industrialized countries. One USIA official argued that in times of severe budget reductions, the Agency should direct more of its resources to those countries with the greatest potential to disrupt the world order. A State Department official asserted that USIA should concentrate more of its programs in Eastern Europe and the former Soviet Union where information on the United States is lacking. Another State official asserted that USIA should operate in poorer countries where social, political, and cultural development is in the beginning stages. Although Western Europe accounts for approximately 20 percent of all exchange participants, some European and other industrialized countries receive relatively large programs. The concentration of exchange programs in some of these countries began shortly after World War II. For example, the U.S. government began exchanges with Germany in 1945 as part of a larger effort to assist Germans in creating a new society modeled on western democratic concepts. The U.S. government also engaged in democratization efforts in Japan. The exchanges initiated under these efforts evolved into the Fulbright Program and other USIA exchanges. Germany and Japan have become modern democracies with large economies, and many students from these countries study in the United States. In 1994, Japan, with over 45,000 students studying in the United States, was the leading country of origin for foreign students. Germany was the leading country of origin in Europe for foreign students studying in the United States. In the 1994-95 school year there were 8,500 such students. Despite the large number of German and Japanese students studying in the United States on their own, USIA still maintains a large program of exchanges in both countries. USIA’s program with Germany ranks second of 187 countries in which USIA has programs. In 1994, 2,481 Germans traveled to the United States and 861 Americans traveled to Germany on USIA exchange programs. USIA’s program with Japan is the 14th largest in terms of participants. In 1994, 305 Japanese traveled to the United States and 125 Americans traveled to Japan on USIA exchanges. USIA and U.S. embassy officials asserted that maintaining a large exchange program with Germany is still important. According to USIA officials, exchanges with Germany help the United States maintain the strong relationship between the United States and Germany and reach former East German citizens who have not had any experience with democratic principles. Both the U.S. Ambassador and public affairs officer in Germany said it was important to maintain a good relationship with Germany because it is emerging as the leading economic power in Europe. The Ambassador also asserted that the United States cannot rely on past relationships to maintain its influence in the region. USIA has made similar assertions about the need to maintain and nurture its relationship with Japan. Nevertheless, there is disagreement within USIA over the level and appropriate share of exchanges with such countries. One USIA official, for example, believes that the number of exchanges with Germany is unnecessary because of the flow of exchanges funded by other sources. Another official offered that if private sector exchanges are occurring without USIA, USIA exchanges could be merely duplicating private sector efforts. USIA and embassy officials with whom we met believe that the international visitor and citizens exchange programs are particularly important because they are directly related to U.S. mission goals. These programs have little or no parallels in the private sector. As a result, some have suggested that these should be the last exchanges targeted for cuts. Furthermore, USIA officials also informed us that those academic exchanges that involve government-to-government agreements may also directly support U.S. objectives and should be maintained. For example, the officials told us that the International Visitors Program can be linked to U.S. foreign policy goals more readily than long-term academic programs because the visitors’ exchanges are directly tied to USIA goals as described in the posts’ country plans. Furthermore, participants are selected by post officials, including the ambassador and the public affairs officer. To illustrate, USIA planned an International Visitor Program for a group of German government and private sector officials around the theme of foreign policy challenges facing western nations. The USIA post especially wanted to target persons from former East Germany who had little contact with the United States but whose views would be important in shaping future German policy. In commenting on the program, one participant, who was an official of the youth wing of a political party in the eastern states, informed USIA that the trip gave him a much more favorable attitude about the United States. His activities included a week in Washington, D.C., to meet with staff and representatives from the federal government, academia, lobbying organizations, and think tanks; another week in Miami, Florida, to explore the foreign policy implications of Cuban and Haitian refugees and immigration through meetings with journalists, local business people, and others; an academic seminar in Lincoln, Nebraska, to discuss a variety of topics; a stop in San Jose, California, to obtain information on current trade issues and military downsizing; and a few days in New York City, New York, to meet with individuals from a variety of organizations to discuss human rights issues. USIA officials in Bonn, Germany, estimated that this particular exchange cost $12,658. Officials in Washington and the U.S. ambassador to Germany described the International Visitors Program as a vital tool in achieving U.S. foreign policy goals. A private sector official who manages private as well as USIA exchanges said the private sector rarely offers exchanges to political leaders. Though the private sector could and sometimes does conduct professional visitor exchanges, these exchanges are based on economic needs, not U.S. foreign policy considerations. USIA can also use the Citizens Exchange Program to meet more immediate foreign policy needs. For example, USIA funded a number of citizens exchange grants focusing on public administration and local government development, business administration/management training, economic and educational reform, rule of law, and elections. These exchanges have taken place with citizens from a variety of countries such as those in Central and Eastern Europe, the newly independent states, and South Africa. On the other hand, the U.S. Ambassador to Germany gave more importance to the Fulbright and the Congress-Bundestag youth exchange programs than other USIA exchange programs because they are bilateral. Members of the German parliament with whom we met stated that U.S. government support of the exchanges proves its commitment to Germany. A senior advisor to the Parliament stated that Germany contributes more to these two exchange programs than the United States does and would view any decrease in U.S. support as a symbol of disengagement. In fiscal year 1995, Germany contributed $5.4 million to the Fulbright Program, while the U.S. government contributed $2.9 million. Table 4.1 shows U.S. and partner contributions to the Fulbright Program. In 1995, USIA had active bilateral agreements with 50 of the 148 countries participating in the Fulbright program. These executive agreements establish binational commissions to administer the exchanges and commit both parties to support the program. USIA and others assert that the bilateral nature of the Fulbright Program makes it relevant to foreign policy and distinguishes it from other private and U.S.-funded academic exchange programs despite the small number of students it supports relative to the total studying in the United States. For example, one of the binational commissions stated that the unique binational structure, governed and financed by representatives of both contracting countries, makes the program special among private and government programs. One option to reduce costs is to eliminate or reduce exchanges with the least impact. For example, some officials believe that high school exchanges should not be funded when budgets are declining because they are more time-consuming and expensive, and have less immediate impact than other exchanges. However, USIA has little data on the impact of exchanges that could be used to identify less effective programs. As indicated in our June 1993 report the Agency had devoted few resources to evaluating the effectiveness and relative importance of its programs because USIA believes exchange programs are inherently beneficial and achieve foreign policy goals by promoting mutual understanding, as stated in their enabling legislation. Past USIA evaluations were based mainly on anecdotal information, according to a USIA official in the Office of Policy and Evaluation. In recent years, officials involved in advising or managing exchange programs have expressed the need for more evaluation. Furthermore, in 1995, the U.S. Advisory Commission on Public Diplomacy concluded that the United States lacks a strategic justification for federally funded exchanges. USIA acknowledged the need for more evaluations and in 1992 established the Office of Policy and Evaluation. However, the office’s evaluations do not measure the impact in terms of foreign policy goals. Instead, the more than 60 studies conducted attempted to measure the skills or knowledge the participants acquire as a result of the exchange and their use of those skills after they return to their countries. USIA officials have asserted that evaluating the impact of exchange programs is difficult. Its present approach of assessing the skills and knowledge the participants acquire as a result of the exchanges is not useful for deciding which programs are the most successful in promoting U.S. foreign policy goals. According to an Office of Policy and Evaluation official, USIA is developing criteria and a methodology to better measure the degree to which exchanges are linked to foreign policy goals and objectives at a broad level for example, to U.S. political and economic security. He said the office’s goal is to develop evaluations that will support efforts to prioritize programs. In addition to scaling back or eliminating specific exchanges, USIA can seek increased private sector and foreign government support to offset possible budget cuts. In fiscal year 1995, USIA received approximately $109 million in direct financial and other support from the private sector for exchanges. For example, private sector support for Fulbright students ranges from tuition waivers to endowments to airline tickets. The Institute of International Education, one of the organizations that manages the Fulbright student competitions for USIA, also solicits private sector support and in 1994 raised about $10 million for Fulbright students. An Institute official stated that the organization conducts the fund-raising efforts on its own initiative. He believes his organization could double the contributions from the private sector if USIA provided a small amount of resources for fund-raising activities. Furthermore, the Fulbright Foreign Scholarship Board has urged the binational commissions to increase their efforts to raise funds from the private sector within the countries they represent. The International Visitors Program, the Citizens Exchange Program, and the Arts America Program also receive support from the private sector. Support for the International Visitors Program is provided by 102 community-based voluntary organizations in 42 states generally referred to as Councils of International Visitors. Although USIA has a budget of about $1.5 million to support the councils, the councils raise most of the money they need to fund their activities. Staff and volunteers from the councils arrange the local appointments for the visitors, accompany them, and arrange for home visits. During the home visits, volunteers arrange social events for the visitors and take them sightseeing. The home visits are often the highlight of the program for the visitors. For example, a visitor from Eastern Germany stayed for 3 days with a farm family in Nebraska, where he said he encountered the genuine America. Citizens Exchanges and Arts America Programs’ requests for proposals contain cost-sharing provisions requiring that organizations seeking grants solicit other private sector support. The Arts America Program also solicits funds from foundations and corporations. Further, the program incorporates free commercial cultural activities whenever possible. For example, if a private organization funds a musical or theatrical group’s trip to Brazil, USIA may solicit a free performance for its invited guests or fund the group’s performance in a neighboring country. At the same time, USIA officials caution that opportunities for the private sector to assume total responsibility for USIA exchange programs may be limited. For example, USIA officials in Germany assert that an increased role for the private sector is not viable if a program such as the International Visitors Program is designed to meet immediate foreign policy goals, or if a program is conducted under a bilateral agreement. They explained that the private sector cannot make commitments for the U.S. government. Further, they said foreign governments often prefer government-to-government relationships. Some former German international visitors said they did not believe the private sector would be able to arrange the same high-level meetings as the government. One participant from eastern Germany said he would not have participated in a program sponsored by the private sector because it might have commercial purposes. USIA could reduce its costs by requiring more support from partner foreign governments. One of the goals of the Fulbright Program is that each binational partner provide an equal amount of the support, but this goal has not been met. Although most of the 50 partner nations in the Fulbright Program provide program support, their contribution falls far short of matching that of the United States. In fiscal year 1995, for every dollar the USIA spent on the Fulbright Program, the foreign governments spent 19 cents. Several binational partners (Austria, Belgium/Luxembourg, Denmark, Finland, Germany, Japan, Morocco, the Netherlands, Norway, Spain, and Sweden), contributed more to the program than the United States in fiscal year 1995. Table 4.2 shows fiscal year 1995 funding and foreign government and private sector support for each of the exchange programs. A USIA official stated that the Agency’s efforts to encourage the partner nations to increase their contributions have resulted in increased contributions. For example, he said Italy recently made a commitment to double its contribution. The Philippines and Turkey have also made commitments to increase their support. The USIA official further stated that, although parity is the general goal, some binational agreements make no reference to equal funding. It depends on the resources of the country. He cautioned that it could be difficult for USIA to demand increases from the partner nations when the Agency is facing a substantial budget reduction and will have to decrease its own contribution. USIA agreed that exchange programs should not be concentrated in areas such as Western Europe, where non-USIA exchange opportunities are plentiful. As such, USIA indicated that it had been shifting resources to exchange programs in regions that are not as fully represented by other U.S. government agencies or the private sector. Additionally, USIA stated that (1) it continues to curtail or eliminate programs that must be sacrificed to address foreign policy priorities; (2) it has moved resources from Central America to Eastern Europe and the newly independent states of the former Soviet Union; and (3) it encourages host government and private sector cost-sharing of academic exchange programs and has been able to raise the level of funding from partner countries. The United States broadcasts over 1,600 hours of radio programming in 53 languages and over 400 hours of television in several languages worldwide each week to support U.S. foreign policy objectives. Appendix III explains each service and provides detailed information on cost, staff, broadcast hours, and audience. U.S. international broadcasting has undergone significant downsizing and restructuring. Nevertheless, a number of issues such as language priorities, the proper mix of television and radio, and the role of the private sector must be fully addressed to ensure the best use of limited, and possibly declining, funds. We offer some examples of the type of cuts the Broadcasting Board of Governors (BBG) could choose to implement if funding is reduced significantly. In the U.S. International Broadcasting Act of 1994, the Congress clearly tied international broadcasting to U.S. foreign policy objectives and reaffirmed the importance of continuing U.S. broadcasts to further U.S. interests. This legislation also directed the creation of a broadcasting service, in addition to VOA, to the People’s Republic of China and other Asian countries that lack adequate sources of free information. To better coordinate programs and ensure adequate oversight, the legislation consolidated all nonmilitary international broadcasting under the bipartisan BBG, which was established within USIA and confirmed on August 11, 1995, and met for the first time on September 6, 1995. The BBG is responsible for ensuring that broadcasts are consistent with broad U.S. foreign policy objectives as well as international telecommunications policies and treaty obligations; do not duplicate U.S. private or other democratic nations’ broadcast reflect the highest professional standards of broadcast journalism, including providing reliable information; and are designed to reach a significant audience. BBG staff told us that they will review all U.S.-sponsored international broadcast entities and their various services to ensure that they meet the U.S. standards and principles. Eliminating a language service or broadcast hours offers an immediate reduction in costs. For example, terminating RFE/RL’s broadcasts in Romanian could cut costs by over $2 million; terminating RFE/RL’s or VOA’s Russian service could reduce annual funding by $7.8 million and $5 million, respectively. However, making decisions to cut languages or services is difficult because the consolidation of VOA and RFE/RL did not resolve questions regarding the relative importance and priority of the various languages and the appropriate mix of television and radio. Furthermore, the BBG has yet to develop a worldwide broadcasting strategy to address these issues. The United States broadcasts in many languages for a variety of reasons. USIA agrees that some languages are clearly more important to immediate U.S. interests than others. Some language services are maintained because of interests of the Congress or the National Security Council. For example, in 1990 VOA proposed eliminating six language services, Greek, Uzbek, Turkish, Slovene, Swahili, and Lao, but decided to continue the services due to congressional and other interest. Also, there is a belief that maintaining low priority services is “insurance” against a time when those languages may become high priority. For example, VOA eliminated its Farsi language service in 1966 when Iran was a strong regional ally of the United States. After the fall of the Shah and the U.S. hostage crisis, VOA reinitiated a Farsi service in April 1979, but according to VOA officials it took years to develop a high-quality service and to rebuild a listening audience. More recently, Creole was deemed a low-priority language service. However, with U.S. intervention in Haiti, the language took on a very high priority. Therefore, the cost savings from eliminating lower priority language services must be measured against the risk of needing those language services in the future. The BBG is developing a plan to extensively review all language services and broadcast entities to determine their continued need and effectiveness. However, the BBG has not addressed the problem we noted in 1992 concerning the lack of timely and specific research data. We concluded that the lack of data hampered VOA’s ability to make effective decisions on program content and resource allocations. Although extensive audience research is being conducted in Eastern Europe and the former Soviet Union, research is still lacking in other parts of the world. For example, an August 1994 report by the Office of Strategic Planning on the media climate in the Middle East and South Asia concluded that the “data on VOA listenership in the Middle East are uneven and largely out of date.” To date, the BBG has reviewed the Amharic service to Ethiopia after receiving congressional complaints regarding the service. It then replaced the Amharic service with a new “Horn of Africa” service, which includes two other languages in addition to Amharic to better reach more people in that region of Africa. The BBG considered input from both the National Security Council and congressional staff, as well as the best available audience research data, which came from the British Broadcasting Corporation. With tight budget constraints, difficult decisions may have to be made regarding television and radio broadcasts. Television is significantly more expensive than radio but is rapidly becoming the dominant broadcast medium throughout the world. The number of television sets worldwide is growing not only in industrialized western countries but also in China and developing countries. For this reason, the United States Advisory Commission on Public Diplomacy has recommended changing the mix of radio and television, with more funding for television. USIA research also supports reducing shortwave broadcasting and increasing television programming in many countries in Eastern Europe and the former Soviet Union. BBG staff informed us that they will be addressing this issue. VOA is experimenting with providing some television programming in cooperation with Worldnet. VOA’s Mandarin service has initiated a new program, China Forum, which is a weekly panel discussion simultaneously broadcast live by radio and television. The quality of the television is not up to Worldnet’s standards; nonetheless, judging by the call-in segment of the program, it is popular since over 20 percent of the callers are watching the program. Worldnet, using VOA broadcasters, produces a half-hour weekly television program in Ukrainian, Window on America. In a nationwide survey conducted in the Ukraine in the spring of 1995, about 66 percent of the respondents said they had heard of Window on America, one-half said they had watched the program at least once during the previous 2 months, and 6 percent had watched it every week during the last 2 months. This is comparable to weekly and occasional listening to VOA or RFE/RL radio programming. High-quality television, such as Worldnet’s programming and TV Marti, is significantly more expensive than radio. Furthermore, USIA does not have as direct control over television transmission as it does its shortwave radio. Regarding the cost issue, Window on America, a half-hour weekly program, costs about $790,000 annually to produce, whereas 2 hours of daily VOA Ukrainian radio broadcasting costs $1.3 million annually to produce. In the case of Radio and TV Marti, 24 daily hours of radio cost about $15 million, and 4-1/2 daily hours of television cost $13.3 million in 1995. Regarding control, most viewers access U.S. television programs from local television stations or local cable systems. Whoever controls the local cable system or station can censor or terminate the broadcasts. Few potential viewers have, or have access to, satellite dishes to receive the Worldnet signal directly. In the U.S. International Broadcasting Act of 1994, the Congress expressed the sense that RFE/RL would no longer receive federal funding after December 31, 1999. VOA is attempting to get private sector support for its programming and in some cases divest itself of the programs, such as VOA Europe and the Latin American Service. At this time, however, the broadcasters have met with limited success in interesting the private sector in assuming the costs and responsibilities for international broadcasting. RFE/RL determined that both Poland and the Czech Republic least required a U.S. surrogate radio station and offered the best potential for private support. At this time, the prospects that these spin-offs will actually occur is uncertain. RFE/RL had hoped that they could discontinue funding for the services by the end of calendar year 1995. However, RFE/RL estimated that for fiscal year 1996, it would still have to fund the services at a cost of $248,000 and $986,000, respectively. VOA has also had little success privatizing existing programs or language services. One potential partner for the Latin American service cited, among other concerns, the lack of an adequate market assessment of listeners. VOA officials acknowledge shortfalls in audience research but cite the cost associated with worldwide research. VOA and RFE/RL officials still hope that greater private sector support is attainable, but it does not appear that, at least in the near term, the private sector can replace the U.S. government as the prime supporter of this type of international broadcasting. Broadcast officials are concerned that several of their services, such as those services aimed at closed societies, will not be commercially profitable or in any way able to attract private sector support for some time. For example, VOA’s attempts to persuade a large corporation to fund broadcasts to China were unsuccessful, partly because the corporation is concerned about the Chinese government’s reaction to its funding VOA broadcasts. VOA has received some prizes and other promotional items from private businesses, but to date, such private support totals less than 1 percent of its appropriation. We identified areas where the study of existing overlap could yield management improvements and cost reductions. Further consolidation of broadcasting assets, such as newsrooms, overseas bureaus, and other offices, may result in additional cost reductions. For example, in fiscal year 1995 RFE/RL spent $919,000 on its Moscow bureau and just over $1.5 million on freelancers for the Russian service, while VOA spent about $725,000 on its Moscow bureau and $45,000 on freelancers in Russia. Also, program review functions could be consolidated. Currently, one office reviews all VOA, Worldnet, and Marti programs, while RFE/RL is developing its own program review capability to replace an office that was eliminated as part of its downsizing. Greater emphasis on placement of radio programs on local AM and FM radio stations has already reduced transmission costs while increasing audience levels. For example, VOA no longer broadcasts to the Baltic states by shortwave; rather, broadcasts are sent by satellite for placement on the respective national radio networks and some private radio stations. Elimination of shortwave broadcasting significantly reduces transmission costs, and audience survey data revealed that placement on local AM and FM stations increases the number of listeners because the quality and accessibility of the signal are better. For example, a listener survey in three cities in Senegal indicates a 4 to 7 percent listener rate for shortwave broadcasts of VOA French to Africa but 22 to 34 percent listener rates for the affiliate broadcasts. Terminating VOA’s English broadcasts to Asia on shortwave and mediumwave could reduce expenditures up to $2.5 million for transmission services. The trade-off to eliminating shortwave broadcasts is that in times of crisis, hostile forces could terminate the local broadcasts since the signal emanates from a location over which the United States has no control. Therefore, in many countries, such as Russia, VOA and RFE/RL have local affiliates that broadcast their programs, but they also continue to broadcast the programs directly over shortwave radio. VOA’s 6 daily hours of direct broadcasting to Russia cost almost $1 million annually to transmit. The Broadcasting Board of Governors characterized the report as welcome and timely and noted that GAO’s observations as well as options to reduce costs have been and will continue to be reviewed by the Board. The Congress uses the USIA budget as a means to transfer federal funds to certain grantees. Any USIA effort to curb spending cannot unilaterally include reductions to these grants. About $43.7 million, or 4 percent, of the fiscal year 1996 budget is for grants to the National Endowment for Democracy, the East-West Center, and the North/South Center. The National Endowment for Democracy was established in 1983 as a private, nonprofit organization to encourage free and democratic institutions throughout the world and promote U.S. nongovernmental participation through private sector initiatives. The Endowment received $34 million in fiscal year 1995 and $30 million in fiscal year 1996. By law, the Endowment is a grant-making organization only and cannot carry out programs directly. It provides grants primarily to the Center for International Private Enterprise, the Free Trade Union Institute, the International Republican Institute, and the National Democratic Institute. An example of how the Endowment’s grant funds are used is the Free Trade Union Institute’s trade union development activities in Russia, Hungary, and Romania. The East-West Center is an international educational institution established in 1960 to promote better relations and understanding among the nations of Asia, the Pacific, and the United States through cooperative study, training, and research. The Center conducts research, seminars, and workshops and supports undergraduate and graduate education. For fiscal year 1995, the Center received $24.5 million, but the Congress reduced funding to $11.7 million for fiscal year 1996. The North-South Center is a national educational institute closely affiliated with the University of Miami. Its mission is to promote better relations, commerce, and understanding among the nations of North America, South America, and the Caribbean. The Center began receiving a federal grant in 1991. Since that time, funding has been sharply reduced. The Center received $10 million in fiscal year 1991, $4 million in fiscal year 1995, and $2 million for fiscal year 1996.

Summary: Pursuant to a congressional request, GAO reviewed the U.S. Information Agency's (USIA) reform and cost-cutting efforts and options that could enable USIA to adjust to reduced budgets. GAO found that: (1) USIA believes that reaching out to foreign publics and telling America's story remains critical to U.S. foreign policy goals, and agency officials believe that further significant reductions could greatly hamper USIA's mission; (2) USIA believes it has undergone an extensive reorganization and downsizing, responsive to both U.S. foreign policy priorities and needs, as well as budget constraints; (3) new fiscal realities may force USIA to make additional choices about resource priorities and eliminate certain programs or locations of activities; (4) GAO believes that USIA could take steps to further reduce its costs, while continuing to protect U.S. interests, if fiscal conditions require; (5) to sustain a major reduction, USIA may have to consider closing more posts than it presently plans in countries where USIA has determined that the United States has limited public diplomacy goals; (6) another option would be to reconfigure USIA's overseas presence, which is currently based on a structure established after World War II; (7) Congress has already scaled back funding for some exchanges, but eliminating one or more exchanges, which would require Congress' approval, is also an option to reduce costs; (8) USIA exchanges permit the U.S. government to target potential leaders overseas, and consideration should be given to the potential impact that cutting exchanges would have on bilateral relationships with foreign countries; (9) soliciting increased foreign government and private-sector support is also an option to lessen USIA's costs; (10) Congress has reduced funding for all nonmilitary international broadcasting activities and mandated their consolidation; (11) modest economies are possible by eliminating overlap among broadcasters; and (12) any substantial funding cuts, however, would require major changes to the number of language services and broadcast hours, and past experience has shown that eliminating even one language is a difficult process, requiring concurrence from a wide range of interest groups and members of Congress.