The State Department operates over 160 embassies and over 100 consulates at a cost of about $2 billion annually. The embassies perform diplomatic and consular functions and provide administrative support for other U.S. agencies. State employs over 7,300 U.S. Foreign Service officers, about 10,000 Foreign Service nationals, 650 U.S. contractors, and 30,000 Foreign Service national contractors. Worldwide, embassies manage about $600 million worth of personal property, procure about $500 million in goods and services annually, and share management responsibilities for about $12 billion in housing and other real properties. Embassies also have responsibility for over $2 million annually in accounts receivable, such as medical expenses. For decades, long-standing management deficiencies have weakened administrative operations at the embassies, and millions of dollars remained unnecessarily vulnerable to fraud, waste, and abuse. We have previously criticized State’s deficient controls over embassies’ personal and real property, cashiering operations, contract administration, and training. In July 1993, we testified that management deficiencies continued to plague embassies’ operations. We suggested that each embassy establish a formal management improvement program to ensure sound management practices by documenting problems and monitoring corrective actions. For years, Congress has been concerned about State’s reluctance to address management and internal control problems that have historically reduced the effectiveness of its operations. In its November 1993 report, the House Committee on Government Operations stated that State should implement our recommendation that each embassy adopt a formal management improvement plan. On the basis of prior reviews by us and State’s Office of the Inspector General (OIG), the Committee also recommended that State (1) strengthen controls over personal property, (2) ensure that appropriate training is available for U.S. and foreign service national personnel, (3) implement contracting and procurement improvements, (4) eliminate control problems in cashiering functions, and (5) develop systems to track and collect medical insurance reimbursements. State has not implemented our suggestion that all posts establish formal management improvement programs to identify and correct deficiencies. State officials believe that their approach of targeting specific areas for improvement is more appropriate and achieves comparable results in the long term. We continue to believe that if State were to use existing mechanisms for managing embassy operations, such as the Mission Program Plan, it could more quickly and easily achieve the intent of our 1993 recommendation. (See app. I.) State has responded to recommendations contained in the House Committee on Government Operations’ report by initiating some specific actions designed to improve its management over embassy operations. These actions, although steps in the right direction, do not go far enough to ensure that each embassy is improving its operations. We and the State’s OIG continue to find deficiencies in (1) controlling personal property; (2) training for U.S. and foreign service national personnel; (3) contracting and procurement practices; (4) poor controls over cashiering functions; (5) medical insurance reimbursements; and (6) senior-level oversight of operations. In November 1993, the House Committee on Government Operations recommended that the State Department take the following actions to strengthen controls over personal property: establish more stringent procedures and guidance for receiving and issuing personal property overseas; improve the nonexpendable property application software to enhance reconciliation capability; provide increased and specialized training for Foreign Service officers and revise volume 6 of the Foreign Affairs Manual to require property officers to retain inventory records and other pertinent documentation in post files for 3 years; and adopt a zero-tolerance policy with respect to personal property losses. In July 1993, before the Committee’s report, State updated volume 6 of the Foreign Affairs Manual to include revised personal property regulations for all diplomatic and consular posts. This updated guidance incorporated changes in assigned responsibilities and federal regulations. The revised regulations also clarified accountability criteria for ensuring internal controls. On the basis of the new regulations, State’s Property Management Branch, which is responsible for central oversight for domestic and overseas personal property management, issued an instruction handbook that was intended to be an easy reference for posts to ensure compliance with management of personal property overseas. However, branch officials acknowledged that a number of posts were still not in compliance. During fiscal year 1994, branch staff visited 20 of the 260 posts to verify their annual inventory certification. Branch officials said that 14 posts failed to provide documentation that physical inventories were conducted. Although posts that do not provide inventory certifications can be subject to a withholding of funds for personal property acquisitions, and individuals that either refused to certify or falsely certified inventories can be subject to punitive actions, we found no instances in which money was withheld or individuals were sanctioned for not following property management procedures. According to State, it has a zero tolerance policy on personal property loses for fraudulent behavior, but it does not believe it to be in the taxpayers’ interest to pursue small shortages; therefore, in November 1993, it adopted a 1-percent tolerance. State adopted this policy because the 1-percent level is commensurate with that of private industry and State officials believed that the cost to pursue shortages of less than 1-percent would outweigh any benefits. State officials said they required posts to submit to headquarters the amount of losses incurred in fiscal year 1994. Of the 160 posts that submitted such information, only 15 exceeded the 1-percent level. In 1989, to improve property management and accountability, State integrated an inventory reconciliation software package with its non-expendable property application (NEPA) software at about 210 of the overseas posts. State is testing a new application of NEPA, but it has not yet determined how NEPA and other subsidiary systems will function with the planned Integrated Financial Management System. In August 1994, we reported that this system was at a high risk of failure because of State’s inadequate management and planning and therefore might not solve long-standing financial management and internal control problems. The Committee recommended that State train both U.S. Foreign Service officers and Foreign Service national employees in the areas of procurement and acquisition, real property management and maintenance, personal property, and budget and fiscal responsibilities. State’s training arm—The Foreign Service Institute—offers training in most of these areas. State acknowledged that, in some cases, Foreign Service officers report to posts without such training. And, according to the Director of the Office of Foreign Service National Personnel, training Foreign Service nationals is not a priority because of the high costs involved in bringing Foreign Service nationals to Washington, D.C. Although State says it has focused on increasing its regional training of Foreign Service nationals, those we interviewed said that training was still limited, often not timely, and generally not offered in their native language. Of the seven posts we visited, only Paris had formal training programs that identified or provided opportunities for the training requirements of Foreign Service nationals or officers. State is exploring ways to increase the role of Foreign Service nationals in administrative operations overseas. However, the Foreign Service Institute does not have a formal plan in place to ensure that Foreign Service nationals receive adequate training. Transferring more responsibility to Foreign Service nationals without proper training is likely to weaken compliance with internal controls. In 1993, the Committee recommended a number of actions to improve contracting and procurement practices. These included (1) requiring training for all Foreign Service officers and Foreign Service nationals responsible for contracting and procurement, (2) developing and implementing a procurement management information system that includes overseas procurement operations, (3) requiring each post to fully implement the worldwide procurement data system and provide each with appropriate software, (4) requiring each post to appoint a competition advocate and establish a competition advocacy program, and (5) requiring posts to develop advance acquisition plans each fiscal year. To address the need for procurement training, State established new training requirements for contracting officers, including training seminars for about 100 employees at seven regional centers. However, only 150 of the 700 officers overseas have received required training for standard contracting authority up to $250,000. The rest of State’s overseas contracting officers have provisional contracting authority up to $100,000.Procurement officials estimate that it will take many years before all of these officers complete their training. In addition, some Foreign Service nationals responsible for maintaining contracting files indicated that they were not adequately trained. For example, one Foreign Service national told us she had been involved in procurement actions for 6 years before receiving formal training. State developed a worldwide procurement database to meet the minimum legal and regulatory overseas procurement reporting requirements. This database is currently in use at 193 (or 73 percent) of the 265 overseas posts. This database, however, only reports the number and types of contract actions. It is not used to manage, monitor, or ensure control over embassy procurement operations. Most of the posts we visited had not established a competition advocacy program called for by the Committee. The lack of such a program contributed to the failure of some posts to fully compete or review their contract actions and prepare and maintain required documentation. None of the posts had a written policy to advertise solicitations or had evidence that solicitations were authorized. Also, most posts did not maintain a current vendor list, and therefore, could not be assured that all potential sources had been solicited. Several of the embassy officials we met with said they had not received or could not locate headquarters’ guidance stipulating the need of advance acquisition planning. In addition, none of the officials had developed an advance acquisition plan ranking essential procurements. Embassy cashiers are responsible for the day-to-day payment, collection, deposit, and reconciliation of funds advanced by regional disbursement centers. Cashiering operations are supervised by U.S. disbursing officers located at those centers.