Major Management Challenges and Program Risks: Department of State
(Letter Report, 01/01/2001, GAO/GAO-01-252).

This report, part of GAO's high risk series, discusses the major
management challenges and program risks facing the Department of State.
GAO found that the most critical infrastructure need for State is to
enhance the protection of U.S. embassies and other overseas facilities
in response to the increased threat due to terrorism. Other significant
challenges that State must address involve improving the management of
drug control assistance to Colombia, providing expedited visa
processing, and strengthening its strategic and performance goals.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-252
     TITLE:  Major Management Challenges and Program Risks: Department
	     of State
      DATE:  01/01/2001
   SUBJECT:  Risk management
	     Accountability
	     Embassies
	     Facility security
	     Internal controls
	     Drug trafficking
IDENTIFIER:  High Risk Series 2001
	     GAO High Risk Program
	     Columbia

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GAO-01-252

Performance and Accountability Series

January 2001 Major Management Challenges and Program Risks

Department of State

GAO- 01- 252

Letter 3 Overview 6 Major

11 Performance and Accountability Challenges

Related GAO 33

Products Performance

36 and Accountability Series

Lett er

January 2001 The President of the Senate The Speaker of the House of
Representatives

This report addresses the major performance and accountability challenges
facing the Department of State. As the lead agency representing U. S.
interests

overseas, the Department of State is vested with a wide range of
responsibilities, including formulating U. S. policy on diverse
international issues; coordinating and implementing U. S. government
programs and activities overseas; and influencing other countries to adopt
policies and practices consistent with U. S. interests. As

such, the Department has responsibility for, among other things, assisting
U. S. businesses overseas, providing services to U. S. citizens abroad,
issuing passports and visas, participating in international drug control
programs, and providing security to U. S. personnel and facilities overseas.
This report includes a summary of actions that State has taken and that are
under way to address these challenges. It also outlines further actions that
GAO believes are needed. This analysis should help the new Congress and
administration carry out their responsibilities and improve government for
the benefit of the American people.

This report is part of a special series, first issued in January 1999,
entitled the Performance and Accountability Series: Major Management
Challenges

and Program Risks. In that series, GAO advised the Congress that it planned
to reassess the methodologies and criteria used to determine which federal
government operations and functions should be highlighted and which should
be designated as “high risk.” GAO completed the assessment,
considered

comments provided on a publicly available exposure draft, and published its
guidance document, Determining Performance and Accountability Challenges and
High Risk (GAO- 01- 159SP), in November 2000. The full 2001 Performance and
Accountability Series contains separate reports on 21 agencies- covering
each cabinet department, most independent agencies, and the U. S. Postal
Service. The series also includes a governmentwide perspective on
performance and management challenges across the federal government. As a
companion volume to this series, GAO is issuing an update on those
government operations and programs

that its work identified as “high risk” because of either their
greater vulnerabilities to waste, fraud, abuse, and mismanagement or major
challenges associated with their economy, efficiency, or effectiveness.
David M. Walker Comptroller General

of the United States

Overview As the lead agency for the conduct of foreign affairs, the
Department of State has enormous responsibilities. The successful practice
of U. S. diplomacy is essential to ensuring security at home, laying the
groundwork for better jobs and a higher standard of living, providing a
healthier environment, and assuring safe travel and the ongoing conduct of
business abroad. To help manage these responsibilities, State maintains a
worldwide network of operations at almost 260 diplomatic and consular posts
worldwide and supports the activities of about 30 other U. S. government
agencies. As it pursues

its international objectives, it must take into account the multiple and
often competing intentions and interests of these agencies, other
governments and organizations,

public opinion, and the Congress, as well as available resources. In
carrying out its mission, the Department faces a number of significant
performance and accountability challenges, as our work has shown. These
challenges cover a wide spectrum of U. S. government operations around the
world affecting Americans at home and abroad.

Improve the security and maintenance of U. S. facilities overseas

? Help decrease the level of illegal drugs entering the United States

? Address the threats illegal immigration continues to pose to Americans at
home

? Address additional challenges to building a highperforming organization

Embassy Security State's most critical infrastructure need is to enhance the
protection of U. S. embassies and other overseas facilities in response to
the increased threat due to terrorism. State has taken many steps to upgrade

security at its diplomatic missions around the world since the 1998 bombings
in Africa. These improvements include deploying hundreds of additional
security agents overseas and enhancing physical security through a variety
of means. In addition, State has begun replacing some of its most vulnerable
embassies and consulates with more secure facilities. State estimates that
it will

cost $15 billion over 10 to 15 years for projects in more than 180
locations. Our work has shown that State will face several challenges in
administering this extensive security construction program, including
improving long- term planning for the program and working with the Congress
in charting the future course, priorities, and funding levels for the
program. We recommended

that State develop a long- term, capital construction plan to assist
decisionmakers in reaching consensus on the

program. Successful implementation of overseas security enhancements and
construction activities will improve the safety and security of U. S.
employees working abroad. Drug Control Illegal drugs, primarily cocaine and
heroin, continue to threaten the health and well- being of American
citizens.

The principal source of cocaine and heroin entering the United States is
South America, and specifically Colombia. In 1993, the United States
developed a policy designed to reduce the production of illegal drugs in
South America and stem their flow through Latin

America and the Caribbean. Our work has shown that billions of dollars
invested by the United States and foreign countries to carry out this policy
have resulted in the arrest of major drug traffickers and the seizure of
large amounts of drugs, but the availability of drugs in the United States
has not been materially reduced. To continue to attack this problem, the
Congress recently provided more than $1 billion in counternarcotics
assistance to Colombia, which State will largely oversee. In October 2000,
we reported that State had experienced difficulty effectively managing past
assistance to Colombia and recommended that State develop implementation
plans to ensure that the new assistance is well managed and used
effectively. We also noted that a sustained long- term commitment will be
necessary to notably reduce the level of illegal drugs entering the

United States. Illegal Immigration State is responsible for providing
expeditious visa processing overseas to qualified applicants. State, in
conjunction with the U. S. Immigration and

Naturalization Service, must also prevent the entry of those who are a
danger to U. S. security or are likely to remain in the United States
illegally. Over the years, State has introduced new technologies, equipment,
and controls designed to improve visa processing and

reduce the incidence of fraud. However, based on our work and that of
State's Office of Inspector General (OIG), visa processing remains a
significant challenge for the Department. The reasons for these problems
include staffing shortages, inexperienced staff, insufficient staff
training, and difficulties in managing visa antifraud programs. State
recognizes that it must remain vigilant in these areas to further reduce the

vulnerability of the visa system and has several initiatives underway or
completed to counter visa fraud. Additional In addition to the specific
performance challenges cited Challenges

above, State faces several other agencywide performance and accountability
challenges that hamper its ability to become a high- performing
organization. These challenges are (1) better utilizing the 1993 Government
Performance and Results Act process to help achieve its objectives, (2)
enhancing communication and information technology and

security, (3) improving financial management, (4) adopting modern human
capital practices, and (5) restructuring the U. S. overseas presence to
improve the efficiency and effectiveness of operations. State has recognized
these challenges and has demonstrated a commitment to addressing them, as
follows:

? State has improved its strategic and performance planning to better
capture its goals and measures, but its performance reporting needs to
better demonstrate progress toward meeting its goals. ? State has
implemented many of our information

technology and security recommendations; however, new challenges have
emerged as State embarks on developing an interagency technology platform
with its inherent security risks. ? State has made progress toward its goal
of improving financial systems but still needs to bring its systems

into full compliance with federal financial systems

requirements and resolve internal control weaknesses. ? Consistent with GAO
studies of best practices in high

performance organizations, State's in- house studies highlighted the
importance of developing a human resource strategy that is in line with its
mission. ? Over the years, we have recommended that State reassess its
overseas structure in light of changing political, economic, security, and
technological requirements; and, this effort is currently underway. We
believe that addressing these issues will be critical to the Department's
ability to effectively carry out U. S. foreign policy.

Major Performance and Accountability Challenges

The Department of State is vested with a wide range of responsibilities,
including formulating U. S. policy on diverse international issues;
coordinating and implementing U. S. government programs and activities
overseas; and influencing other countries to adopt policies and practices
consistent with U. S. interests. As

such, the Department has responsibility for, among other things, assisting
U. S. businesses overseas, providing services to U. S. citizens abroad,
issuing passports and visas, participating in international drug control
programs, and providing security to U. S. government personnel and
facilities overseas. State maintains a network of operations in 160
countries, employs a staff of over 50, 000 U. S. and foreign nationals, and
maintains thousands of facilities overseas to support U. S. activities.

This report summarizes our recent and ongoing work and that of State's
Office of Inspector General concerning the performance and management
challenges and issues State faces in accomplishing some of its key strategic
and diplomatic readiness goals and its overall mission. State has identified
16 strategic goals it will pursue as it conducts diplomatic activities and
public diplomacy overseas as part of its effort to represent the United
States. Underlying the ability of the Department and other agencies to
attain these goals

internationally is diplomatic readiness, which captures the personnel,
resources, and infrastructure the Department needs to carry out its own
mission and

support other U. S. agencies abroad in pursuing their missions. State's
strategic and diplomatic readiness goals that we selected to review are (1)
establishing and maintaining infrastructure and operating capacities that
enable employees to pursue policy objectives and respond to crises- in
particular, State's efforts to improving the security and maintenance of its
overseas facilities; (2) reducing the levels of illegal drugs entering the
United States; and (3) controlling how immigrants and nonimmigrants enter
and remain in the United

States. We also discuss additional management challenges in the diplomatic
readiness area that State has been dealing with for years. These include the
need to (1) improve strategic and performance planning consistent with the
1993 Government Performance and

Results Act (Results Act); (2) enhance information technology and security,
specifically efforts to develop a common interagency communications
platform; (3) improve financial management; (4) address human capital
issues; and (5) restructure overseas operations consistent with U. S.
foreign policy priorities.

Improve the The need to adequately protect employees and their

Security and families from threatened terrorist attacks overseas may
Maintenance of U. S.

very well be the single most important management Facilities Overseas issue
currently facing the State Department. The August 1998 bombings of the U. S.
embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, immediately
brought into focus the seriousness of this security challenge. In response
to those attacks, State determined that it not only needs to enhance
security at all existing facilities

but that in the long term it must replace over 180 facilities where existing
facilities may be vulnerable to attack. To accomplish these security
enhancements, State had to deal with challenges in hiring and training
personnel to protect and replace its overseas infrastructure and in
acquiring the necessary security equipment. Linked to these challenges are
the ongoing efforts of the Department to work with other agencies to
formulate a strategy for effectively addressing the U. S. overseas presence.
Further, the Department continues

to face long- standing difficulties in effectively maintaining its
facilities to avoid premature and costly deterioration. Security Upgrades
Since the bombings in Africa, State has taken many steps to upgrade security
at its diplomatic missions around the world. These steps have included
deploying

hundreds of security agents overseas to augment posts' security; enhancing
the physical security of facilities through several means, such as
installing shatterresistant window film; establishing surveillance detection
teams to identify hostile surveillance and monitoring; and purchasing
additional property as buffer zones for facilities. State's OIG reported
that the

Department did many things well in administering the almost $1. 5 billion it
received in emergency supplemental funding shortly after the bombings and
that senior- level attention was instrumental in the Department's effective
use of these funds. The OIG added that, for example, considerable progress
had been made in hiring, assigning, and training new security personnel.

Although State has made these improvements, it also realized that the funds
originally allocated for major construction upgrades to improve the security
of existing facilities would not be sufficient. After the bombings, State
allocated $181 million for major security upgrades and electronic equipment
installations. As surveys were conducted and more complete information
became available, State determined it could potentially cost about $800
million more to complete the security enhancements. State

received about $200 million for fiscal year 2001 to address these
requirements and may make future budget requests and/ or take other actions,
such as realigning funds from other programs, to achieve major upgrade
objectives intended to better protect employees and their families overseas.

Embassy and Although the Department of State is making security Consulate

enhancements at all U. S. embassies and consulates, Construction

about 80 percent of overseas U. S. diplomatic facilities still do not have
adequate security and may be vulnerable to terrorist attack until new
facilities can be built. To begin replacing the most vulnerable embassies

and consulates, the Congress appropriated about $1. 1 billion for fiscal
years 1999, 2000, and 2001 for State's capital security construction
program. State has estimated that $15 billion or more will be needed for
replacement projects in over 180 locations around the world where existing
facilities may be vulnerable. State has entered the construction phase on
seven new embassy and consulate projects since the 1998

bombings. It will take many years before the Department makes substantial
headway in replacing all of its vulnerable facilities. Figure 1 shows the U.
S. Embassy in Nairobi, Kenya, just after the August 1998 bombing and figure
2 shows the architect's rendition of the new embassy currently under

construction.

Figure 1: The U. S. Embassy in Nairobi, Kenya, After the August 1998
Bombings

Source: State Department.

Figure 2: Architect's Drawing of the New Embassy Now Under Construction in
Nairobi

Source: State Department.

While State has identified a number of facilities as high priority for
replacement and has several studies underway that should help it manage the
overall program, it has not prepared a long- term capital construction plan.
Long- term capital planning is a best practice that has proven useful to
other organizations in the public and private sector for controlling capital
costs

and providing a rationale for allocating funding. We recommended that State
develop a long- term plan that identifies proposed construction projects and
estimated costs, and a timetable for completion. The plan would cover at
least 5 years and be updated annually. The plan would enable State to better
support its funding requests, support efforts to reach consensus by
decisionmakers in the executive and legislative

branches on the program's requirements, and help improve accountability for
program results.

Facility Maintenance Facility maintenance has been a long- standing
infrastructure challenge for the Department. In the early 1990's, we put the
Department's management of overseas real property on our high- risk list
partly due to insufficient maintenance of facilities. The principal

causes of State's maintenance problems were lack of funding, professional
attention to maintenance needs at the post level, and programs for
maintenance and repair. In 1995, we removed this function from the high-
risk list because State had surveyed maintenance conditions overseas and
made some improvements. In 1999, the OIG stated that while State has made
some progress in maintaining its facilities, fundamental challenges remain.
State's unfunded maintenance and repair requirements in 1999 exceeded $100
million for more than 650 buildings overseas. About 230 of those facilities
were categorized by State as being in unacceptable condition due to unfunded
maintenance requirements exceeding $100,000 each.

Department officials largely attributed cost- cutting over the past several
years as a reason for the poorly maintained properties. State's OIG agreed
that funding is an issue but has reported that the Department needs to do
more to address its maintenance and repair problem as a management concern.
Specifically, the Inspector

General has said that the Department needs to better define what is an
acceptable level for its backlog of maintenance requirements and to develop
a baseline that will address the costs to reduce the backlog to an
acceptable level.

Key Contact Susan S. Westin, Managing Director International Affairs and
Trade

(202) 512- 4128 westins@ gao. gov Help Decrease the

The U. S. international drug control strategy emphasizes Level of Illegal
reducing the production and flow of cocaine and heroin

Drugs Entering the before they reach the United States. The Department of
United States

State plays a key role in implementing the strategy, which is designed to
reduce drug trafficking in the source countries of Colombia, Bolivia, and
Peru and in transit areas within the Caribbean, Central America, and Mexico.
In July 2000, the Congress provided State and other U. S. agencies more than
$1 billion to help reduce illegal drug activities in the source and transit
region.

Figure 3 illustrates the rise in estimated potential cocaine production in
Colombia, the primary source of cocaine shipped to the United States.

Figure 3: Estimated Potential Colombian Cocaine Production 1995- 99

600 Metric tons

500 400 300 200 100

0 1995 1996 1997 1998 1999

Source: State Department.

Since fiscal year 1996, hundreds of millions of dollars of assistance have
been provided to Colombia. However, some of the assistance has been of
limited utility because of inadequate planning and implementation by State
and other U. S. agencies. For example, State provided helicopters to the
Colombian National Police and military without sufficient spare parts or
operational and maintenance support. The current U. S. assistance program,
funded for 2 years, calls for additional equipment to be provided to the
Colombian

military and the National Police, yet State and other agencies have not
developed an implementation plan ensuring that adequate logistical support,
training, and infrastructure sustain the effort. To help ensure that

problems in supporting U. S. provided equipment to Colombia do not recur, we
recommended in October 2000 that the secretaries of State and Defense
determine training and logistical support requirements and identify future
funding requirements to support U. S.- provided

equipment, and complete U. S. implementation plans and coordinate with
Colombian officials to ensure that equipment provided as part of any future
U. S. assistance is adequately supported.

Key Contact Jess T. Ford, Director International Affairs and Trade (202)
512- 4268 fordj@ gao. gov Address the Threats

The State Department, through its overseas U. S. Illegal Immigration
missions, processes about 9 million immigrant and Continues to Pose
nonimmigrant visa applications annually. Attempts to to Americans at

falsify, alter, or counterfeit U. S. visas or obtain genuine Home

documents by fraudulent means are a constant problem. In our March 1999
report on visas issued to religious workers, we reported that the State
Department and the Immigration and Naturalization Service were concerned
about visa fraud but could not establish the full extent of the problem.
Their knowledge of visa fraud is based on

information developed primarily from fraud investigations and the visa
screening process. The Department of State has maintained a strong emphasis

on the need to improve the security of our borders, but the immigrant and
nonimmigrant visa processes remain a significant challenge. The Department
has completed or has underway a number of initiatives to counter visa fraud.
These efforts include setting up a machine- readable visa program at all
visa- issuing posts, providing worldwide advisories to

overseas posts regarding fraudulent documents,

improving the effectiveness of the name checking system, and increasing
efforts to counter document fraud. The Department also continues to refine
its consular lookout systems in an effort to better identify individuals who
should not receive visas. Further, State improved its computer- generated
information made available to consular and border- crossing posts to help

prevent visa fraud and illegal entry by terrorists, criminals, alien
smugglers, or simply intending immigrants. State, however, still faces
several challenges to preventing visa fraud. These include staffing
shortages,

inexperienced staff, and insufficient training for consular line officers.
In addition, the OIG identified problems in State's management of antifraud
programs such as insufficient analysis of fraud trends and inadequate
supervision of overseas antifraud units. State is now working to correct
these problems. While State's

performance goals and indicators in its fiscal year 2001 Performance Plan
address planned improvements to the visa process, they do not specifically
address these and other management challenges we identified such as

inadequate interagency coordination, and backlogs in visa processing.
Another challenge to controlling illegal immigration is the timely
implementation of the border crossing card program. Border crossing cards
are issued in lieu of passports and visas to Mexican nationals who travel
frequently across the border into the United States. State has issued over
2. 5 million cards since April 1998 that contain the fingerprints and
electronic photograph of the bearer. See figure 4 below for a sample of a
border crossing card.

Figure 4: Sample of a Border Crossing Card

Source: State Department.

The OIG identified numerous problems with this program. For example, the U.
S. Immigration and Naturalization Service does not have the production
capacity to produce the number of cards required by statute. The Department
needs supplemental card production capability to overcome this problem.
There

is also an urgent need to expand and upgrade the criminal record databases
used to adjudicate visas. The OIG concluded that a new, expanded biometric
database

would make it possible to begin implementing plans for issuing a new
generation of biometric- based, 1 smart card- type nonimmigrant visas at all
consulates abroad. Key Contact Jess T. Ford, Director

International Affairs and Trade (202) 512- 4268 fordj@ gao. gov Address
Additional

State's management functions provide the foundation of Challenges to support
for U. S. government operations around the

Building a Highperforming world. Therefore, it is incumbent upon State to
strive to become a high- performing organization. To do so, State
Organization

needs to choose the best strategies for integrating its organizational
components, activities, core processes, and resources to support mission
priorities. Consistent with concerns that we and State's OIG raised over the

years, the Department is currently seeking ways to better utilize the
Government Performance and Results Act process to improve its strategic and
performance planning to better achieve overall mission, policy, and
operational objectives. State is also enhancing its communications and
information technology and computer systems security, including developing
an interagency technology platform, and improving its

financial management systems. Efforts are also underway to address human
capital issues, including devising options for streamlining and rightsizing
overseas operations. State's human capital problems can be seen as part of a
broader pattern of human capital shortcomings that have eroded mission
capabilities across the federal government. See our High- Risk Series: An
Update 1 Biometric identifiers include fingerprints and handprints.

(GAO- 01- 263, January 2001) for a discussion of human capital as a newly
designated governmentwide high- risk area.

Improving The Results Act provides a framework for resolving Performance
management challenges and for providing greater Planning and accountability
of State's programs and operations. As Reporting

required by the Results Act, State has clearly articulated its strategic and
diplomatic readiness goals of regional security, economic growth, and more.
Our review of State's performance plans for fiscal years 1999 through 2001
indicated that State continues to improve its planning but additional
improvements are needed to measure and assess performance in a meaningful
way. The Department's fiscal year 1999 Performance Report,

the first one required under the Results Act, lists numerous foreign policy
accomplishments from the signing of peace agreements to trade agreements,
but it did not adequately demonstrate State's level of success or
participation in achieving the desired outcomes. State's fiscal year 2001
performance plan provides much more detail on its intended performance
compared to prior years' plans. The fiscal year 2001 plan uses a new format
that attempts to capture more of State's

performance goals and measures. It also indicates a clear division of
responsibility among State's various geographic and functional bureaus.
However, State's approach of listing individual performance goals and
measures by bureau does not lend itself to assessing the agency's
performance as a whole. Further, the Department has not developed overall
priorities for achieving its strategic goals, and, consequently, has no
overall basis for allocating resources to priorities.

State's fiscal year 1999 Performance Report did not adequately demonstrate
State's level of success in achieving desired outcomes or the way in which
State's actions actually led to the achievement of desired goals.

The performance report generally provides a narrative list of
accomplishments under each of the 16 strategic goals and an annex of
information on the measures for

selected goals. However, it does not provide a clear assessment of the
progress made toward meeting the Department's goals. For example, under the
goal to reduce illegal drugs entering the United States, State does not
specify how establishing police training

academies, which are a measure of performance, helps it combat the
availability of illegal drugs. Additionally, it was unclear how much the
Department contributed to some of the outcomes it discussed or how unmet
goals would be achieved in the future. For example, under the

regional stability strategic goal, the Performance Report states that
“U. S. access to Persian Gulf oil resources continued
uninterrupted” but does not identify how the Department contributed to
that positive outcome. Under expanding foreign markets, State did not
indicate how it would meet its unmet targets for completing bilateral

investment treaties with target countries. State officials acknowledged that
the performance plan needs to address the management challenges that the OIG
and we have identified. Department officials stated that they intend to form
strategic goal teams to produce a more focused fiscal year 2002 Performance
Plan. The

teams, led by senior managers, will identify and prioritize performance
goals. Officials also plan to amend the fiscal year 2002 plan to make it
more

comprehensive, particularly in the areas of managing information technology
modernization and security, financial management, and hiring and training
staff, discussed below. Effective planning in these critical areas would
help State to become a high- performing organization.

Key Contact Susan S. Westin, Managing Director International Affairs and
Trade

(202) 512- 4128 westins@ gao. gov Enhancing

State relies heavily on information technology to Overseas support its
worldwide operations. While State has Communication, updated its systems
infrastructure and improved system Information

capabilities at overseas locations, the Department's Technology, and ability
to collaborate with other foreign affairs agencies

Computer Systems via modern technology capabilities needs to be Security
enhanced. Adding to this modernization challenge are computer security
concerns. Because of the size, complexity, and importance of State's
information

technology program, we will continue to monitor State's progress with
implementing the common platform, modernizing its information systems, and
improving computer security.

State is leading an interagency effort, recommended by the Overseas Presence
Advisory Panel, 2 to devise a system that meets the collective knowledge
management and collaboration needs of the entire overseas foreign affairs
community. State has already

begun to take leadership in working with other federal agencies with an
overseas presence and is in the early stages of planning for a common
technology platform. It has established an interagency technology group that
has begun defining system requirements for the

platform. The group is establishing project milestones, developing cost
estimates, and developing a project implementation plan. Pilot projects for
two posts are

currently under development. If the common platform is 2 The Overseas
Presence Advisory Panel, an independent panel convened by the Secretary of
State, was formed in 1999 to consider the size, composition, and management
of the U. S. overseas presence. In the panel's November 1999 report, it
recommended that the Department develop and implement a strategy for
standardizing information and communications networks at all posts while
providing all agencies with the connectivity they need.

to become a reality, State will have to overcome cultural obstacles and get
agreement from platform users on requirements. Further, it will have to do
this while defining its own technical architecture and continuing to address
pervasive computer security weaknesses that could increase with greater
connectivity. State must continue to work hard to overcome technology
management system weaknesses and security concerns. In 1998, we reported
that State lacked disciplined information technology project management
processes, investment controls, and an enterprise

architecture. Because of these weaknesses, we concluded that State could not
be assured that it was making the most cost- effective system investment
decisions, that these systems would perform as expected, or that its cost
estimates were sound. We recommended that State make the development of a
fully implemented information technology planning and

investment process a top priority, including the development of a
comprehensive architecture. State agreed with our recommendations and has
made progress in implementing them, but it needs to continue this effort.

Previous GAO and OIG reports have cited information system security
problems, including access control and security program management
weaknesses, as significant challenges for the Department. For example,
during computer security testing 2 years ago, we were able to access
sensitive, unclassified information

virtually undetected. In response, the Department worked hard to upgrade and
secure its information technology and made real progress in implementing
many of our recommendations, including clarifying roles and
responsibilities, establishing a computer incident response team, and
requiring the use of risk management by all project managers. State still
needs to take steps to ensure that this progress is maintained, and that all
audit recommendations and identified security

vulnerabilities are addressed, that automated intrusion detection programs
are expanded, and that agencywide security management responsibilities are
further clarified. Absent these needed improvements, State's computer
networks will remain vulnerable to exploitation and unauthorized access. Key
Contact Joel Willemssen, Managing Director

Information Technology (202) 512- 6408 willemssenj@ gao. gov Improving

State has made progress toward resolving its Financial

long- standing problems caused by the absence of an Management effective
financial management system that can assist Capabilities managers in making
“cost- based” decisions. Since fiscal year 1997, State has
received unqualified opinions on its

financial statements. While not meeting the statutory deadlines, State has
steadily improved the timeliness of its reporting. State has also resolved a
number of its

internal control weaknesses and is proceeding with planned efforts to
improve its systems and processes needed to protect its assets and routinely
produce timely and reliable financial information.

State needs to continue to bring its systems into full compliance with
federal financial systems requirements. State also needs to resolve internal
control weaknesses to ensure that timely and reliable financial information
is available so Department officials can make sound

decisions that promote effective and efficient use of federal funds.
According to the independent auditor's report attached to State's
Accountability Report for Fiscal Year 1999, State's financial management
systems do not comply with certain laws and regulations, including the Chief
Financial Officers Act of 1990. The act requires the development and
maintenance of an

integrated accounting and financial management system that, among other
things, provides for complete, reliable, and timely information that meets
the financial information needs of the agency's management and a systematic
measurement of performance.

Key Contact Gregory D. Kutz Director, Financial Management and Assurance
(202) 512- 9095 kutzg@ gao. gov Human Capital

Although State has traditionally attracted some of the Practices Need to
nation's most talented people, a recent Department- wide Be Updated study 3
concluded that an increasingly competitive job market and expanded private
sector opportunities for

geographic mobility have drawn potential Foreign Service Officers into other
professions. According to the study, the challenges that State faces in
recruiting and retaining top- quality employees fall into several areas.
These include the need for State to (1) establish a strong link between
current performance and promotions, (2) improve the quality of life at
overseas posts, and (3) improve the quality of its management.

The Overseas Presence Advisory Panel also concluded that State needed to
reform its human resource practices because it does not currently have the
flexibility, resources, or strategic organization required to support its
mission. The panel visited 23 overseas posts in conducting its work and
found that personnel matters topped the list of issues discussed. The panel
reported that employees were dissatisfied with evaluation processes, career
advancement

3 The 1999 study, titled “The War for Talent,” was prepared by
McKinsey and Company for State. It compared the views of State's employees
and managers to those in top- performing companies.

opportunities, sensitivity to lifestyle issues, the degree of autonomy and
responsibility offered by their positions, and the quality of management.
Employees wanted, among other things, more training in languages,
leadership, management, and new issues. The panel recommended that State
develop a comprehensive human resource strategy that is based on a detailed
statement of its mission, definition of the work to be done, and
identification of personnel requirements; and, that State develop and
implement a recruitment strategy designed to fulfill these needs. This
approach of strategically aligning human capital with organizational goals
and objectives is consistent with our studies of best practices used by high
performance organizations, and similar studies done by other organizations.

According to State, it has begun to implement many of these recommendations.
For example, it has started to develop a new, unified human resources
strategy for the Department. The strategy will include a domestic and
overseas staffing picture along with a 5- year projection based on State's
overseas staffing model and bureau budget presentation documents. To improve
the quality of life at its overseas posts, State has negotiated bilateral
work agreements with 126 nations and is reviewing

Department rules restricting employment opportunities for spouses of
employees working overseas. It has also developed a pilot, 360- degree
review process that will allow employees to give meaningful feedback on how
their supervisors performed as leaders, managers, and mentors- in a
nonthreatening and constructive fashion designed for personal and
professional development. The Department also plans to expand leadership and
management training, increase security training, reshape the reporting and
policy functions, and examine ways of making the assignment process more
responsive to management and employee needs.

Key Contact Susan S. Westin, Managing Director International Affairs and
Trade (202) 512- 4128 westins@ gao. gov Efforts to Realign A key challenge
for the State Department and the other the Workforce With

agencies operating overseas is how to adjust the U. S. Mission overseas
presence to the new economic, political, security, and technological
requirements of the 21st century. Presently more than 50, 000 American,
foreign service national, and contract employees work at U. S. government
locations. In recent years, we have raised concerns about the need to
reexamine the U. S. overseas presence in light of increased threats of
terrorist attacks

and the billions of dollars in annual costs associated with overseas
operations. We have recommended that State reexamine the way it conducts
overseas administrative functions, such as relocating and housing employees.
From our work, we also have suggested that State explore options for
regionalizing certain functions and making greater use of technology and
outsourcing to achieve efficiencies and improve performance. In March 2000,
State established a high- level interagency committee to determine the right
size and composition of overseas posts. The work of this committee is
ongoing, with interagency pilot projects under way designed to determine if
the U. S. government is doing the right things with the right people in the
right places.

Progress in addressing right- sizing issues faces several challenges,
including State's limited authority and influence over the staffing
decisions of other agencies operating overseas. Continued high- level
commitment from all participating agencies will be needed to complete this
effort.

Key Contact Susan S. Westin, Managing Director International Affairs and
Trade (202) 512- 4128 westins@ gao. gov

Related GAO Products Overseas Security

State Department: Overseas Emergency Security and Presence

Program Progressing, but Costs Are Increasing (GAO/ NSIAD- 00- 83, Mar. 8,
2000). Visa Issuance Visa Issuance: Observations on the Issuance of Visas
for Religious Workers

(GAO/ T- NSIAD- 00- 207, June 29, 2000). Visa Issuance: Issues Concerning
the Religious Worker Visa Program (GAO/ NSIAD- 99- 67, Mar. 26, 1999).

State Department: Tourist Visa Processing Backlogs Persist at U. S.
Consulates (GAO/ NSIAD- 98- 69, Mar. 13, 1998). Drug Control Drug Control:
U. S. Assistance to Colombia Will Take Years to Produce Results (GAO- 01-
26, Oct. 17, 2000).

Drug Control: U. S. Efforts in Latin America and the Caribbean (GAO/ NSIAD-
00- 90R, Feb. 18, 2000). Drug Control: Narcotics Threat From Colombia
Continues to Grow (GAO/ NSIAD- 99- 136, June 22, 1999). Drug Control: Update
on U. S.- Mexican Counternarcotics Activities (GAO/ T- NSIAD- 99- 98, Mar.
4, 1999). Drug Control: Observations on U. S. Counternarcotics Activities
(GAO/ T- NSIAD- 98- 249, Sept. 16, 1998).

Drug Control: An Overview of U. S. Counterdrug Intelligence Activities (GAO/
NSIAD- 98- 142, June 25, 1998).

Strategic and Observations on the Department of State's Fiscal Performance

Year 1999 Performance Report and Fiscal Year 2001 Planning

Performance Plan (GAO/ NSIAD- 00- 189R, June 30, 2000). Observations on the
Department of State's Fiscal Year 2000 Performance Plan (GAO/ NSIAD- 99-
183R, July 20, 1999).

The Results Act: Observations on the Department of State's Fiscal Year 1999
Performance Plan (GAO/ NSIAD- 98- 210R, June 17, 1998).

Managing for Results: Agencies' Annual Performance Plans Can Help Address
Strategic Planning Challenges (GAO/ GGD- 98- 44, Jan. 30, 1998). Information

Foreign Affairs: Effort to Upgrade Information Management Technology
Overseas Faces Formidable Challenges (GAO/ T- AIMD/ NSIAD- 00- 214, June 22,
2000).

Department of State IRM: Modernization Program at Risk Absent Full
Implementation of Key Best Practices (GAO/ NSIAD- 98- 242, Sept. 29, 1998).
Year 2000 Computing Crisis: State Department Needs to Make Fundamental
Improvements to Its Year 2000 Program (GAO/ AIMD- 98- 162, Aug. 28, 1998).
Computer Security: Pervasive, Serious Weaknesses Jeopardize State Department
Operations (GAO/ AIMD- 98- 145, May 18, 1998).

Foreign Affairs State Department: Progress and Challenges in Managing
Organization and for Results (GAO/ T- NSIAD/ AIMD- 00- 254, July 19, 2000).

Management State Department: Progress and Challenges in Addressing
Management Issues

(GAO/ T- NSIAD- 00- 124, Mar. 8, 2000). State Department: Major Management
Challenges and Program Risks (GAO/ T- NSIAD/ AIMD- 99- 99, Mar. 4, 1999).

Performance and Accountability Series: Major Management Challenges and
Program Risks, Department of State (GAO/ OCG- 99- 12, Jan. 1999). Foreign
Affairs Management: Major Challenges Facing the Department of State (GAO/ T-
NSIAD- 98- 251, Sept. 17, 1998). State Department: Options for Reducing
Overseas Housing and Furniture Costs (GAO/ NSIAD- 98- 128, July 31, 1998).
International Affairs: Activities of Domestic Agencies (GAO/ T- NSIAD- 98-
174, June 4, 1998).

State Department: Using Best Practices to Relocate Employees Could Reduce
Costs and Improve Service (GAO/ NSIAD- 98- 19, Oct. 17, 1997).

Performance and Accountability Series

Major Management Challenges and Program Risks: A Governmentwide Perspective
(GAO- 01- 241)

Major Management Challenges and Program Risks: Department of Agriculture
(GAO- 01- 242)

Major Management Challenges and Program Risks: Department of Commerce (GAO-
01- 243)

Major Management Challenges and Program Risks: Department of Defense (GAO-
01- 244)

Major Management Challenges and Program Risks: Department of Education (GAO-
01- 245)

Major Management Challenges and Program Risks: Department of Energy (GAO-
01- 246)

Major Management Challenges and Program Risks: Department of Health and
Human Services (GAO- 01- 247)

Major Management Challenges and Program Risks: Department of Housing and
Urban Development (GAO- 01- 248)

Major Management Challenges and Program Risks: Department of the Interior
(GAO- 01- 249)

Major Management Challenges and Program Risks: Department of Justice (GAO-
01- 250)

Major Management Challenges and Program Risks: Department of Labor (GAO- 01-
251)

Major Management Challenges and Program Risks: Department of State (GAO- 01-
252)

Major Management Challenges and Program Risks: Department of Transportation
(GAO- 01- 253)

Major Management Challenges and Program Risks: Department of the Treasury
(GAO- 01- 254)

Major Management Challenges and Program Risks: Department of Veterans
Affairs (GAO- 01- 255)

Major Management Challenges and Program Risks: Agency for International
Development (GAO- 01- 256)

Major Management Challenges and Program Risks: Environmental Protection
Agency (GAO- 01- 257)

Major Management Challenges and Program Risks: National Aeronautics and
Space Administration (GAO- 01- 258)

Major Management Challenges and Program Risks: Nuclear Regulatory Commission
(GAO- 01- 259)

Major Management Challenges and Program Risks: Small Business Administration
(GAO- 01- 260)

Major Management Challenges and Program Risks: Social Security
Administration (GAO- 01- 261)

Major Management Challenges and Program Risks: U. S. Postal Service (GAO-
01- 262)

High- Risk Series: An Update (GAO- 01- 263)

GAO United States General Accounting Office

Page 1 GAO- 01- 252 State Department Challenges

Contents

Page 2 GAO- 01- 252 State Department Challenges

Comptroller General of the United States

Page 3 GAO- 01- 252 State Department Challenges United States General
Accounting Office

Washington, D. C. 20548

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Overview Page 7 GAO- 01- 252 State Department Challenges

Overview Page 8 GAO- 01- 252 State Department Challenges

Overview Page 9 GAO- 01- 252 State Department Challenges

Overview Page 10 GAO- 01- 252 State Department Challenges

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Major Performance and Accountability Challenges Page 12 GAO- 01- 252 State
Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

Major Performance and Accountability Challenges Page 24 GAO- 01- 252 State
Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

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Department Challenges

Major Performance and Accountability Challenges Page 31 GAO- 01- 252 State
Department Challenges

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Related GAO Products Page 34 GAO- 01- 252 State Department Challenges

Related GAO Products Page 35 GAO- 01- 252 State Department Challenges

Page 36 GAO- 01- 252 State Department Challenges

Performance and Accountability Series

Page 37 GAO- 01- 252 State Department Challenges

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