In January 2006, the Secretary of State stated that America’s current foreign assistance structure risks incoherent policies, ineffective programs, and wasted resources when spending is not strategically tied to overarching U.S. goals and foreign assistance is fragmented across numerous bureaus and agencies. At that time, the Secretary created the position of DFA to lead State/F’s implementation of State and USAID’s consolidated planning, budgeting, and reporting processes and also to serve concurrently as the Administrator of USAID, with both of these positions reporting directly to the Secretary. In addition, within the federal government and among interest groups, scholars, and others, an ongoing debate about how to improve the efficiency and effectiveness of U.S. foreign assistance has led to several proposals to reform U.S. foreign aid, ranging from, among others, elevating USAID to a cabinet-level agency to merging USAID with State. In January 2009, the new Secretary of State observed that the incoming administration is committed to reviewing ways to improve the distribution of U.S. foreign assistance. She stated that the administration should build on initiatives that had proven successful while determining whether poorly performing initiatives could be improved. The Secretary also noted that the incoming administration has emphasized, among other things, the need to coordinate and consolidate foreign assistance programs housed throughout executive agencies. Meanwhile, modernizing foreign assistance is a stated priority of the Chairman of the House Committee on Foreign Affairs. In 2006, to help align foreign assistance programs with the transformational diplomacy goal, State/F developed the framework for U.S. foreign assistance (foreign assistance framework). The framework ties this goal to five strategic objectives—peace and security, governing justly and democratically, investing in people, economic growth, and humanitarian assistance—to various category-country types, in an effort to move recipient countries to the next level. (See app. IV for a detailed description of the foreign assistance framework, including descriptions of the country categories.) Funding for international affairs, which includes funding for foreign assistance, is provided through annual appropriations and an account structure reflected in reports of the appropriations committees. Of the $42.5 billion appropriated for programs classified as international affairs in fiscal year 2008, almost $36.6 billion was appropriated to accounts administered by State or USAID; the remaining $5.9 billion went to other departments, agencies, and organizations. For example, programs are implemented by the Departments of Defense (e.g., education and training); Agriculture (e.g., P.L. 480 food aid); and Treasury (e.g., technical assistance and debt restructuring). In addition to these agencies implementing programs classified as international affairs, a number of other federal entities are involved in providing foreign assistance (see app. II). Of the $36.6 billion appropriated to or administered by State and USAID, approximately half went through the new State-USAID consolidated budget, planning, and reporting processes in fiscal year 2008 (see table 1). State and USAID use several planning and budget documents in the consolidated planning and budget processes for State and USAID foreign assistance. Some were created by State/F, some predate State/F, and some are governmentwide documents (see table 2). The budget process for State and USAID’s foreign assistance funds follows the traditional federal budget and appropriation process, with one important distinction: after Congress appropriates funds to programs authorized under the Foreign Assistance Act, USAID and State undergo a congressional notification process known as the 653(a) consultation process. In compliance with notification procedures established by law State/F notifies Congress of the type of assistance and level of funding to be provided to individual countries and international organizations. In practice, State and USAID foreign assistance funds generally are not made available for obligation until the reporting requirements are finalized. In conjunction with USAID, State/F developed the FACTS I database to collect foreign assistance planning and reporting data, including plans for implementing current-year funds and performance planning and reporting data. According to numerous FACTS I users as well as our previous review, FACTS I was slow and unreliable during the first 2 years of the foreign assistance budget, planning, and reporting processes. State/F developed FACTS II to address these issues. State/F also created FACTS Info, a system that allows State/F to aggregate, analyze, and report data on many U.S. foreign assistance programs. During its pilot phase (September 2007–February 2009), FACTS Info was accessible to a limited number of users within State and USAID; State/F began to expand usage to additional State/F and USAID users in early 2009. Figure 1 depicts the data flow for both systems. Implementing a large-scale change management initiative such as the State- USAID foreign assistance organizational transformation is a complex endeavor that requires the concentrated efforts of both leadership and employees to accomplish new organizational goals. Experience shows that failure to adequately address—or, often, to consider—organizational culture is at the heart of unsuccessful mergers and transformations. We have reported on a number of key practices that have consistently been found in successful mergers, acquisitions, and transformations (see table 3). Successful planning and implementation of multi-agency efforts such as foreign assistance reform is a challenge that requires interagency coordination and collaboration. We have previously reported on a range of barriers that agencies face when they attempt to collaborate. For example, agencies sometimes have missions and goals that may conflict, making reaching a consensus on strategies and priorities difficult. Also, interagency collaboration is often hindered by incompatible procedures, processes, data, and computer systems. As we have also previously reported, the following practices can help agencies sustain and enhance interagency collaboration: Define and articulate a common outcome. Establish mutually reinforcing or joint strategies. Identify and address needs by leveraging resources. Agree on roles and responsibilities. Establish compatible policies, procedures, and other means to operate across agency boundaries. Develop mechanisms to monitor, evaluate, and report on results. Reinforce agency accountability for collaborative efforts through agency plans and reports. Reinforce individual accountability for collaborative efforts through performance management systems. In consolidating their foreign assistance operations, State and USAID took several steps that our previous work has shown to support such an organizational transformation. State/F also took steps to develop consolidated State-USAID foreign assistance planning and budgeting processes. In addition, State/F took steps to establish an integrated State- USAID workforce. Consistent with key practices that we have previously found in successful mergers and organizational transformations, State and USAID efforts to establish State/F have included (1) ensuring top leadership’s involvement in the transformation, (2) establishing a mission statement, (3) developing key operating principles, (4) establishing key implementation goals and timelines, and (5) involving employees in the transformation. Top leadership at State and USAID articulated reasons for, and drove, the organizational transformation of State’s and USAID’s foreign assistance, beginning with the Secretary of State’s 2006 announcement creating the DFA position. In April 2006, 2 months before State/F was officially established, the DFA appointed a Chief Operating Officer (COO), who was responsible for helping formulate the transformed organizational structure as well as developing and implementing State/F’s reformed planning and budgeting processes. We have previously reported that appointing a COO or Chief Management Officer is one way to elevate attention on management issues and transformational change, integrate various initiatives, and institutionalize accountability for addressing them. State/F’s top leadership and key staff established mission and vision statements to guide the organization’s transformation. This effort began about 2 years after State/F was created, in response to findings from an April 2008 outside review of its organization and processes. According to the statement, State/F’s mission, on behalf of the Secretary of State and the DFA, is to provide leadership, coordination, and strategic direction within the U.S. government and with external stakeholders to enhance foreign assistance effectiveness and integrate foreign assistance planning and resource management across State and USAID; lead strategic, operational, and performance planning of U.S. foreign assistance with a focus on aligning resources with policy priorities; develop and defend foreign assistance budget requests and allocate State and USAID foreign assistance funding to meet urgent needs and new opportunities and to ensure long-term sustainable investments; and promote good stewardship of foreign assistance funds by strengthening oversight, accountability, and transparency. In addition to establishing mission and vision statements, State/F senior leaders and staff developed a key set of operating principles. These principles include being accountable to the American people for ensuring the effective use of being constructive and cooperative partners with stakeholders, and valuing State/F’s employees as its most important resource. We have previously reported that operating principles articulating the core values of a new organization can, like the mission statement, serve as an anchor that remains valid and enduring while organizations, personnel, programs, and processes may change. State/F set and met certain implementation goals and timelines for key aspects of its consolidated budget and planning processes. For example, State/F exceeded its goal of implementing country-specific operational plans—a key annual budget and planning document for the reformed performance budgeting process—to 67 pilot countries in its first year. In addition to those pilot countries, each USAID country mission, regional office, and Washington, D.C.-based bureau—collectively known as operating units—produced an operational plan for fiscal year 2007. All operating units produced operational plans for fiscal year 2008. State/F’s COO told us that another key goal was submitting a joint State-USAID foreign assistance budget request based on the new foreign assistance framework. State/F accomplished this goal even though the office was established after the fiscal year 2008 budget formulation process had begun. State and USAID involved their employees in the transformation by using employee teams and by obtaining employees’ ideas about the transformation.