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.