Major Management Challenges and Program Risks: U.S. Agency for
International Development (Letter Report, 01/01/2001, GAO/GAO-01-256).
This report, part of GAO's high risk series, discusses the major
management challenges and program risks facing the Agency for
International Development (AID). GAO identified weaknesses in AID's
management of its human capital. AID has, however, made efforts to
improve this area, which include hiring additional foreign service
employees, establishing a recruitment program, and improving employee
training. AID needs to sustain its focus on these areas if it is to
succeed in reforming its personnel system. GAO further found weaknesses
in the are of financial management, information technology management,
and data collection.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GAO-01-256
TITLE: Major Management Challenges and Program Risks: U.S. Agency
for International Development
DATE: 01/01/2001
SUBJECT: Risk management
Accountability
Financial management
Information resources management
Human resources utilization
Personnel management
Performance measures
Internal controls
Program evaluation
Data collection
IDENTIFIER: High Risk Series 2001
GAO High Risk Program
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GAO-01-256
Performance and Accountability Series
January 2001 Major Management Challenges and Program Risks
U. S. Agency for International Development
GAO- 01- 256
Letter 3 Overview 6 Major
10 Performance and Accountability Challenges
Related GAO 30
Products Performance
31 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 U. S. Agency for International Development (USAID) as it seeks to
support the people of developing and transitional
countries in their efforts to achieve enduring economic and social progress
and to participate more fully in resolving the problems of their countries
and the world. It includes a summary of actions that USAID 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 Risks (GAO- 01- 159SP), in
November 2000. The full 2001 Performance and Accountability Series contains
separate reports on 21 agencies- covering
each cabinet department, most major 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 The U. S. Agency for International Development (USAID), which is an
independent federal government agency that receives overall foreign policy
guidance from the Secretary of State, implements U. S. foreign economic and
humanitarian assistance programs. In recent years, USAID's programs have
been funded at about $6 billion annually. The agency has programs in
about 125 countries promoting a wide range of objectives related to economic
growth and agricultural development; population, health, and nutrition; the
environment; democracy, governance, and the rule of law; education and
training; and humanitarian assistance. Its staff operates in often difficult
environments and under evolving program demands. These present human capital
management and performance measurement challenges that can affect the
efficiency and effectiveness of its programs.
Human capital management issues impact USAID strategic objectives
? Better performance data could help USAID assess programs and allocate
resources
? Additional challenges to building a high- performing organization
USAID's ability to effectively carry out its foreign assistance mission is
directly affected by human capital challenges. Since the early 1990s, we
have reported on USAID's limited progress in addressing human capital
reforms related to personnel administration, career management, training,
and foreign service assignments. Moreover, severe budget cuts resulted in
significant workforce reductions- 29 percent from 1995 to 2000. More
recently, USAID has reported that more than a third of its foreign service
staff is eligible to retire and that current attrition rates, if continued,
could affect the agency's ability to achieve its overseas mission as early
as 2002.
Recognizing this problem, USAID has initiated a number of actions. The
agency initially focused on increasing the number of its foreign service
employees, establishing a recruitment program to replenish the serious
attrition of foreign service staff that it has experienced in the field.
USAID also envisions that missions with certain management, accounting, and
administrative skills will share those staff resources with neighboring
missions.
USAID is also studying ways to more effectively deploy staff in response to
emergency humanitarian situations and natural disasters- one of the agency's
major strategic objectives. It is considering establishing a “ready
reserve” of employees and, possibly, contractors with the
administrative skills needed to rapidly respond to natural disasters such as
the hurricanes that struck Central America and the Caribbean in 1998. It is
critical that USAID sustain its focus on these human capital issues if the
agency is to effectively implement future U. S. foreign assistance programs.
USAID'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 (GAO- 01- 263, January
2001) for a discussion of human capital as a newly designated governmentwide
high- risk area.)
USAID is facing continuing difficulties in identifying and collecting data
that would enable it to develop reliable performance measures and accurately
report the results of its programs. This is especially true for its
democracy,
governance, and rule of law programs because political and social phenomena
cannot be explained with scientific precision. For example, in October 2000,
we reported that the United States provided assistance to Haiti to improve
its justice system generally without establishing conditions such as
specific goals, performance measures, and time frames; and we recommended
that future assistance be linked to performance- related conditions. 1 The
urgent nature of its humanitarian assistance programs and the many players
involved in most emergency situations also complicate USAID's attempts to
establish accurate and reliable performance data. USAID has taken some steps
to correct the problems with the data it collects to measure its
performance, for example, developing and disseminating lists of indicators
that can be used by field offices when seeking appropriate tools to measure
performance. USAID is
also working with the USAID Inspector General to assess its progress. While
USAID has made a serious effort to develop improved performance measures, it
has not yet achieved the uniform, high- quality database needed to permit
cost- effective analysis of the results of its programs. In addition, USAID
continues to face challenges in implementing an integrated information
management system and improving its financial management systems that affect
its ability to effectively manage its programs as well as ensure that it has
adequate internal controls. The agency has recognized that it needs to
address its
problems and has made some progress, but further action is needed. For
example, USAID needs to implement a process for prioritizing information
1 Foreign Assistance: Any Further Aid to Haitian Justice System Should Be
Linked to Performance- Related Conditions (GAO- 01- 24, Oct. 17, 2000).
technology investments. Without such a process, USAID is at risk of
allocating resources for projects that do not represent the highest return
on investment for the
agency. USAID has also made progress toward correcting its long- standing
internal control and financial system deficiencies. Nevertheless, the
Inspector General was again unable to express an opinion on the agency's
financial statements for fiscal year 1999. Until USAID can fully resolve its
financial management problems, it will not be able to routinely provide
agency managers with complete, reliable, and
timely financial information needed to make sound, cost- effective decisions
that promote effective and efficient use of federal funds.
Major Performance and Accountability Challenges
The U. S. Agency for International Development carries out U. S. foreign
economic and humanitarian assistance programs that in recent years have
averaged about $6 billion yearly. USAID operates in about 125 countries,
with resident staff in 75 countries in 4 regions of the world: sub- Saharan
Africa, Asia and the Near East, Latin America and the Caribbean, and Europe
and Eurasia. The agency supports strategic objectives related to economic
growth and agricultural development; population, health, and nutrition; the
environment; democracy, governance, and the rule of law; education and
training; and humanitarian assistance. Human Capital
Human capital management has been raised as an issue Management in many
major studies of the agency, including our 1993 Issues Impact report. 1 The
report concluded that USAID's lack of a
USAID Strategic comprehensive workforce planning and management Objectives
capability was affecting its ability to deliver assistance efficiently at
the mission level. USAID has acknowledged the problem but faces shifting
challenges as its program evolves and the size of its workforce shrinks. The
agency has taken improvement measures,
particularly in its foreign service workforce, but has not yet established
and integrated a comprehensive workforce planning and management system into
its overall strategic objective framework. Human capital issues have also
impacted USAID's ability to respond to emergency humanitarian situations. In
monitoring USAID's response to the Hurricane Mitch disaster, we
found that USAID had difficulty in fielding required staff to plan and
implement its assistance program. The challenges the agency faces in
attempting to establish an effective approach to human capital 1 Foreign
Assistance: AID Strategic Direction and Continued Management Improvements
Needed (GAO/ NSIAD- 93- 106, June 11, 1993).
management are reflected in the many changes that USAID has faced since it
was established in 1961. Its program emphasis has shifted from funding large
infrastructure projects to funding basic human needs projects addressing
such areas as hunger, illiteracy, and population pressures. As its program
began to shift in the 1970s, USAID lost the contracting and management
capabilities of its infrastructure project managers and recruited staff with
technical skills in basic human needs activities. At about the same time,
its U. S. direct- hire workforce began to decrease significantly.
Consequently, USAID had to refocus its U. S. foreign service staff
responsibilities from directly implementing social sector projects to
planning, financing, and monitoring the projects implemented by host
countries, contractors, and grantees. Further, as the number of U. S.
direct- hire staff decreased, mission directors became increasingly reliant
on other types of employees, such as foreign national direct- hire staff and
personal service contractors, to manage mission projects being implemented
by third parties.
Thus, by the 1990s USAID had come full circle and had returned to being a
contract- management and financing agency faced with the need to adapt its
workforce accordingly. Figure 1 shows that the number of U. S. direct hire
employees has decreased by about 50 percent over the last 20 years. In
addition, USAID officials have noted that, similar to other government
agencies, the
number of USAID employees eligible to retire is increasing.
Figure 1: USAID U. S. Direct Hire Staffing Since Fiscal Year 1980 500
Number of direct hire staff 000 500 000 500 000 500 000 500
0 1980 1985 1990 1995 2000 Fiscal years
Source: U. S. Agency for International Development.
The USAID personnel system has long been criticized as complex, costly, and
unsuited to accomplishing the agency's mission. For example, the 1993
National Performance Review report 2 recommended that USAID overhaul its
personnel system. In December 1994, 2 From Red Tape to Results: Creating a
Government That Works Better and Costs Less (Washington, D. C.: National
Performance Review,
Sept. 7, 1993).
USAID began developing a human resources business area analysis to identify
reforms and outline strategies for implementing improvements. By August
1995,
USAID had identified several areas for reform, including personnel
administration, career management, training, and foreign service assignment.
However, in our September 1996 review of the status of USAID's
reforms, 3 we found that the agency had made little progress. USAID
officials said that their reform efforts were delayed in fiscal year 1996
because its personnel office devoted much of its resources to implementing
the reduction- in- force and two furloughs. They also indicated that they
planned to accelerate the pace of personnel reform in 1997.
USAID's current human capital reform efforts are based on recommendations
the agency's Workforce Planning Task Force made in a November 1997 report. 4
The task force stated that USAID needs to improve its human capital
management if it is to meet its objectives of maintaining its bilateral
assistance leadership role and
its comparative advantage of supporting a large overseas presence. Its
recommendations fall into four broad categories: (1) establish a workforce
planning process based on human capital priorities; (2) realign
the workforce between Washington, D. C., and the field to reflect
priorities; (3) make the workforce more flexible to allow greater movement
between the civil and foreign services; and (4) maintain the highest quality
staff through continuing professional development. USAID focused initially
on realigning its workforce between Washington and the field. The task force
had found that if the current foreign service attrition rate 3 Foreign
Assistance: Status of USAID's Reforms (GAO/ NSIAD- 96- 241BR, Sept. 24,
1996).
4 Workforce Planning Task Force: Report to the Steering Group (Washington,
D. C.: USAID, Nov. 26, 1997).
continued, USAID's overseas presence would, by the year 2002, be reduced to
the point that it would affect the agency's ability to achieve its mission.
As shown in figure 2, the percent of USAID's foreign service staff eligible
to retire will increase from about 34 percent this year to almost 57 percent
in fiscal year 2005. The agency has since established a foreign service
recruitment plan that aims to recruit between 80 and 90 personnel per
year. Fiscal year 2001 will mark the third year in which USAID will hire
staff under the plan. In addition to increasing its overseas staff, USAID is
also exploring greater sharing of staff among missions. While a mission
needs people with a certain set of skills to operate effectively, where
those skilled employees are located is less important than having ready
access to those skills when needed. For example, staff with certain
management, accounting, and administrative skills are to serve more than one
mission under USAID's
plan. The task force envisioned that such “matrix missions”
would share staff resources with neighboring missions, both receiving
assistance from and providing assistance to neighboring missions.
Figure 2: Percent of USAID Staff Eligible to Retire as of September 30,
2000, and September 30, 2005 Eligibility date
As of 9/ 30/ 00 As of 9/ 30/ 05
0 10 20 30 40 50 60 Percent of staff eligible to retire
Total Civil Service Foreign Service
Source: U. S. Agency for International Development.
USAID is also studying ways to improve its response to emergency
humanitarian situations such as the sudden, large refugee flows that
occurred in the Balkans during the 1990s and natural disasters such as the
1998 hurricanes in Central America and the Caribbean. For example, we found
that USAID faced delays in locating and fielding contract and other officers
needed to implement the recovery program.
USAID's Office of Foreign Disaster Assistance is often the first on the
scene, as it was in the aftermath of Hurricane Mitch in Honduras and
Nicaragua in October
1998. USAID assessed its immediate assistance activities in a July 2000
report and is now also attempting to deal with human capital issues that
have surfaced in the longer- term reconstruction assistance USAID is
providing to these countries. For example, small USAID missions had to
increase staff to meet the demands of a large recovery program. In some
cases, this involved setting up programs in sectors in which the mission had
no existing activities. The missions also had to help other U. S. agencies
with little or no overseas experience establish their programs as well as
put in place controls and accountability measures for the assistance effort.
USAID has also had difficulty filling some of the technical staff needs. For
example, in our monitoring of the recovery assistance effort in Nicaragua,
we found that, while project implementation had begun in early 2000, as of
November 2000, 4 of 29 positions needed to support the recovery program had
not been filled. We also found that both the Nicaragua and Honduras
missions had difficulty carrying out their initial procurement activities
because a single contract officer had to cover both missions until a second
contract officer, assigned to Honduras, arrived in October 1999, more than a
year after Hurricane Mitch hit Honduras. These problems affected USAID's
effectiveness in responding to one of the largest hurricanes ever to hit
Central America. This was evident in the delays USAID experienced in
awarding contracts to replace housing and implement public works repair
projects. The pictures below show Hurricane Mitch, typical damage caused by
the hurricane, and a USAID housing assistance project in Honduras.
Figure 3: Hurricane Mitch Strikes Central America in Late October 1998
Source: NASA.
Figure 4: Hurricane Mitch Property Damage in Central America
Source: U. N. Hurricane Mitch Center.
Figure 5: USAID- Assisted Construction Project to Build Permanent Housing in
Rural Area of Honduras
Source: GAO.
USAID officials acknowledge that the agency has not addressed the need for a
“surge capacity” to effectively respond to emergency situations
and to design and implement any new programs resulting from the emergency
assistance. However, USAID has recognized the need to have an effective
means of rapidly assigning staff in post- disaster situations. One
recommendation USAID's Workforce Planning Task Force made is for USAID to
establish a reserve capability for carrying out inherently governmental
functions, such as contracting
officer functions, during emergencies. More generally, the agency is
considering the following steps for mobilizing individuals currently working
for USAID or other U. S. government agencies.
? Identify the range of competencies likely to be required in responding to
predictable post- disaster situations. ? Develop standard position
descriptions/ statements
of work for quick reaction team members based on competencies and
predictable post- disaster situations. ? Develop standard travel
authorizations for quick
reaction teams, including direct and nondirect hires and foreign service
nationals, and preposition travel funds.
? Develop and maintain an inventory of available staff agencywide with the
required competencies. ? Develop and maintain an inventory of external
expert resources, such as other U. S. government agencies, and negotiate
advance understandings.
? Develop standard operating procedures to rapidly call up and send staff to
the field. These steps would provide a base of experienced staff who could
be moved quickly in response to emergencies or unexpected program changes.
However, USAID officials noted that, to implement the plan, the agency may
need to increase slightly its recruitment targets for
those skills that are most often required for emergency responses, with
particular emphasis on contract officers. In responding to emergencies,
USAID recognizes the need to have a database of potential human capital
resources. USAID has had difficulty in establishing an effective management
information system (see later
discussion), and the agency does not currently have this system capability.
However, the Office of Human Resources has identified a software application
that can provide an integrated human resources system to meet these needs
and has purchased a subscription for the software under an existing USAID
contract with the General Services Administration.
Better Performance USAID faces challenges in developing reliable Data Could
Help performance measures and accurately reporting the
USAID Assess results of its programs. Our work and that of the USAID
Programs and Inspector General has identified a number of problems
Allocate Resources with the annual results data that USAID's operating units
have been reporting. Moreover, measuring the
performance of USAID activities such as democracy and governance (including
rule of law programs) and humanitarian assistance programs is inherently
difficult because of the problems in identifying appropriate
assessment tools and the complexity of the issues. In some instances, lack
of reliable performance measures limits USAID's ability to use results data
to allocate resources and to determine if its activities meet its
strategic goals. For example, in our October 2000 report on U. S. assistance
to improve the Haitian justice system, we recommended that future assistance
be linked to obtaining such data. 5 USAID has acknowledged its problems and
has undertaken a number of initiatives to address them. For example, the
agency has begun a series of long- term evaluations to examine the
effectiveness of activities in achieving results across country settings and
goal areas. The Government Performance and Results Act of 1993 (the Results
Act) (P. L. 103- 62) requires federal agencies
to prepare performance plans that (1) establish performance indicators to be
used in measuring or assessing the relevant outputs and outcomes of each
activity, (2) provide a basis for comparing actual program results with
established performance goals, and (3) describe the means to be used to
verify and validate measured values. Our observations on USAID's performance
report for fiscal year 1999 and its 2000 and 5 Foreign Assistance: Any
Further Aid to Haitian Justice System Should Be Linked to Performance-
Related Conditions (GAO- 01- 24, Oct. 17, 2000).
2001 performance plans cited problems with USAID's performance data. For
example, in commenting on USAID's fiscal year 2000 performance plan, we
noted that the plan provided limited confidence that the
agency had the capacity to obtain credible, resultsoriented, program
performance information. We reported that USAID needed continued data
improvements to achieve a uniform, high- quality database permitting cost-
effective analysis of USAID's
overall development assistance program. 6 USAID's Inspector General has also
questioned the reliability, accuracy, validity, and completeness of the
results data
the agency's missions have reported annually. A 1999 review of data prepared
by 18 missions for 1996 showed problems with the results reported for 83
percent, or 252, of the 302 indicators that the Inspector General reviewed.
7 According to the report, 77 indicators were not sufficiently supported.
For example, at one USAID mission, an indicator was “the number of
local government units having completed training modules.” However,
the number of government units the mission reported as having completed the
training only reflected local communes and, according to USAID officials,
actually underestimated program success because it did not reflect the other
types of government units in the country that should have been included in
the scope of the project. According to the Inspector General, USAID's data
problems existed because operating units did not always follow, or were not
successful in following, prescribed USAID policies and procedures for
measuring and 6 Observations on the U. S. Agency for International
Development's Fiscal Year 2000 Performance Plan (GAO/ NSIAD- 99- 188R, July
20, 1999).
7 Audit of the Quality of Results Reported in USAID Operating Units' Results
Review and Resources Request Reports Prepared in 1997 (Report No 9- 000- 99-
006- P, Mar. 5, 1999).
reporting on program performance. The Inspector General also attributed many
of the problems it found at the operating units to insufficient support,
direction, and oversight by USAID/ Washington bureaus to ensure operating
units followed and effectively implemented prescribed USAID policies and
procedures. We also noted in our observations on USAID's fiscal year 2000
performance plan that because USAID is dependent on international
organizations and thousands of partner institutions for data, it does not
have full control over how data are collected, reported, or verified.
Further, many information sources have different reporting periods, and the
data are often not available for a year or more afterwards.
Without accurate and reliable performance data, USAID has little empirically
verifiable assurance that its programs achieve their program objectives and
related targets. These problems also impair USAID's ability to use
performance information in making budget allocation decisions. For example,
in October 2000 we reported that the United States provided assistance to
Haiti to improve its justice system generally without specific conditions,
such as specific goals, performance
measures, and time frames. 8 We recommended that any further U. S.
assistance to the Haitian police and judicial sector should be tied to
specific, performance- related
conditions. Developing performance indicators and assessing results is
inherently difficult for some activities- democracy and governance, and
humanitarian assistance programs, for example. In the past, USAID did not
spend much effort on assessing the impact of its
democracy programs. The purpose of these programs is 8 Foreign Assistance:
Any Further Aid to Haitian Justice System Should be Linked to Performance-
Related Conditions (GAO- 01- 24, Oct. 17, 2000).
to strengthen democratic practices and institutions. One reason for the lack
of performance data on democracy and governance programs was the difficulty
in identifying appropriate assessment criteria and tools. Also, according to
USAID officials, USAID's democracy programs are sometimes developed as a
direct response to foreign policy interests identified by the U. S.
Department of State, with the mere presence of U. S. assistance as the
desired foreign policy outcome. Past reporting was based on gathering two
types of data: data on actual events in the countries where USAID provides
assistance and generally anecdotal evidence regarding the impact of
individual program activities. The necessary, though missing, element
required to assess
the results of USAID's democracy and governance programs was data that
provided direct linkages between USAID's programs and the events within the
countries assisted.
Obtaining agreement on the appropriate performance indicators to use to
assess the performance of humanitarian assistance objectives is also a
challenge for USAID because of the complexity of the goal and the number of
organizational units, agencies, and implementing partners involved. For
example, USAID's goal in providing humanitarian assistance is lives saved,
suffering associated with natural or man- made disasters reduced, and
conditions necessary for political and/ or economic development
reestablished. One objective under this goal is to meet urgent needs in
times of crisis.
Extensive consultation was required with a number of technical agencies,
including the U. S. Centers for Disease Control and Prevention, the World
Health Organization, and individuals with emergency health and nutrition
expertise, before USAID adopted the crude mortality rate (calculation of
death rates to detect sudden changes) and the prevalence of acute
malnutrition in children under 5 years of age as an experimental set of
benchmarks against which to monitor the performance of its objectives.
However,
USAID noted that while the crude mortality rate is an important indicator,
there were questions about the best methodology for collecting the
information. Further, the crude mortality rate has been collected mostly by
European nongovernmental organizations and not by U. S. organizations
undertaking USAID- funded activities in humanitarian assistance. Corrective
Actions
USAID has taken a number of steps to correct the Underway
problems with its reporting of performance results, and some of these
efforts are being assessed by USAID's Inspector General. In June 2000, we
reported that USAID had made progress in establishing outcomeoriented goals
and developing indicators and targets that help measure overall results. 9
Corrective actions included (1) developing and disseminating lists of
indicators that can be used by field offices when seeking appropriate tools
to measure performance, (2) sending
annual reporting guidance cables to operating units on the types of data
needed and the documentation required, (3) expanding the publication of
supplementary guidance to missions on how data should be managed to maximize
their quality and utility, and (4) holding training seminars on managing for
results for field officers. Also, in September 2000, USAID revised its
automated directive system performance measurement
and reporting policies to incorporate what has been learned from the first
several years of implementation of the Results Act. Moreover, at USAID's
request, the Inspector General is performing a series of audits of the
internal controls at various operating units to assess the credibility of
the performance data that the units report. 9 Observations on the U. S.
Agency for International Development's Fiscal Year 1999 Performance Report
and Fiscal Years 2000 and 2001 Performance Plans (GAO/ NSIAD- 00- 195R, June
30, 2000).
USAID has also initiated a long- term effort to conduct agencywide
evaluations of selected programs, including its democracy and governance
programs, to address specific management questions about agency program and
operational performance. This effort includes performing case studies to
determine the impact of democracy and governance programs on political
change and making assessments of subsectors, such as rule of law programs,
to determine what types of programs stand the best chance of meeting their
objectives. USAID also reports that it has made considerable progress in
assessing its humanitarian activities since its
adoption of crude mortality rates and the prevalence of malnutrition in
children as indicators, according to an official of USAID's Bureau for
Humanitarian Response. Assessments of humanitarian efforts at several test
sites are underway using these indicators, and a pilot test showed that the
methodology for collecting the data was feasible. However, USAID still faces
the challenge of ensuring that other agencies and implementing partners
adopt the use of the indicators across the board. Additional USAID faces
long- standing challenges in implementing Challenges to an integrated
information management system. USAID Building a began developing an
automated new management High- performing system in 1994. The system was
designed to consolidate Organization
all of USAID's accounting, budget, personnel, procurement, and program
operations into a single, integrated network with worldwide access. In 1996,
USAID deployed the system worldwide before it was fully operational or
adequately tested. Subsequent difficulties forced USAID to suspend its use
of the system at its overseas missions. Since that time, USAID
has undertaken a number of initiatives to correct the deficiencies,
including the acquisition of commercial, off- the- shelf software for some
management requirements.
USAID has made progress in addressing the deficiencies of the management
information system, but challenges remain. For example, it has developed an
agencywide information technology architecture 10 that meets some of the
Office of Management and Budget's (OMB) requirements. However, USAID needs
to continue to develop and complete the target architecture at a sufficient
level of detail that meets OMB's requirements. Moreover, although USAID has
developed a prioritized list of financial management system investments, it
did not devise its list in accordance with 1995 OMB guidance. 11 In
particular, USAID has not followed OMB guidelines because it has not fully
implemented a
process for selecting information technology investments. OMB's guidelines
require agencies to prioritize their planned investments by reviewing
projects for relevance and feasibility; analyzing risks, benefits, and
costs; prioritizing projects based on expected return on investment; and
then determining the right mix of projects to fund. Without such a process,
USAID is at risk of allocating resources for projects that do not represent
the highest return on investment for the agency. Key Contact Jess T. Ford,
Director International Affairs and Trade (202) 512- 4128 fordj@ gao. gov
10 A “system architecture” is a blueprint or high- level
description of how the systems will interact to accomplish agency mission
requirements in a cost- effective manner. It focuses on describing the
relationships among business functions, work processes, information flows,
and technology. It also describes standards to be followed to ensure that
systems will interoperate, provide security, and be implemented in a
disciplined manner.
11 Evaluating Information Technology Investments: A Practical Guide
(Washington, D. C.: Office of Management and Budget, Nov. 1995).
USAID has also had long- standing financial management weaknesses, although
recently it has made steps toward correcting deficiencies. Nevertheless, the
Inspector General was again unable to express an opinion on USAID's
financial statements for fiscal year 1999 because USAID's financial
management systems could not produce accurate, complete, reliable, timely,
and consistent financial statements and performance information. USAID's
inadequate accounting system makes it difficult for the agency to account
accurately
for activity costs and measure its program results. The Inspector General
has continued to report that USAID's financial management system does not
meet the federal financial systems requirements. Currently, USAID uses a
variety of nonintegrated systems that
require data reentry, supplementary accounting records, and lengthy and
burdensome reconciliation processes. To resolve this long- standing problem,
at the end of fiscal year 1999 USAID entered into a contract to replace
the current financial management system. USAID plans to complete the system
replacement during fiscal year 2003. The Inspector General also reported
that while USAID had made significant improvements in its processes and
procedures, it still has several material weaknesses in internal controls
that impair the integrity of its financial information. Specifically, the
Inspector General reported the following:
? USAID's financial systems do not meet federal financial system
requirements, applicable federal accounting standards, and the standard
general ledger at the transaction level.
? Computer security deficiencies expose USAID to the risk that resources and
data will not be adequately protected from loss, theft, alterations, or
destruction.
? While USAID has made significant improvements in its processes and
procedures in place for reporting the Credit Receivables Program, problems
remain. For example, USAID loan information maintained by a private bank had
not been reconciled to USAID's accounting systems; USAID had not provided
the most updated information to the bank on rescheduled loans; and USAID did
not research and
promptly resolve unapplied loan collections from borrower countries. ? USAID
had not implemented adequate internal controls to permit accurate and
reliable reporting of Fund Balance with Treasury accounts.
? USAID did not properly calculate and report accrued expenses and accounts
payable. ? Advances to grantees were not properly controlled. Effective
financial systems and controls are necessary to ensure that USAID management
has timely and reliable information to make effective, informed decisions
and that assets are safeguarded. USAID has made progress in correcting some
of its systems and internal control deficiencies and is in the process of
revising its plan to remedy financial management weaknesses as required by
the Federal Financial
Management Improvement Act of 1996 (P. L. 104- 208). To obtain its goal,
however, USAID needs to continue its efforts to resolve its internal control
weaknesses and to ensure that its replacement financial system is in
compliance with federal financial system requirements.
Key Contact Gregory D. Kutz Director, Financial Management and Assurance
(202) 512- 9095 Kutzg@ gao. gov
Related GAO Products Foreign Assistance: Any Further Aid to Haitian Justice
System Should be Linked to Performance- Related Conditions (GAO- 01- 24,
Oct. 17, 2000).
Observations on the U. S. Agency for International Development's Fiscal Year
1999 Performance Report and Fiscal Years 2000 and 2001 Performance Plans
(GAO/ NSIAD- 00- 195R, June 30, 2000). Observations on the U. S. Agency for
International Development's Fiscal Year 2000 Performance Plan (GAO/ NSIAD-
99- 188R, July 20, 1999). Foreign Assistance: Rule of Law Funding Worldwide
for Fiscal Years 1993- 98 (GAO/ NSIAD- 99- 158, June 30, 1999).
Major Management Challenges and Program Risks (GAO/ OGC- 99- 16, Jan. 1999).
Foreign Assistance: Status of USAID's Reforms (GAO/ NSIAD- 96- 241BR, Sept.
24, 1996). Foreign Assistance: AID Strategic Direction and Continued
Management Improvements Needed (GAO/ NSIAD- 93- 106, June 11, 1993).
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- 256 USAID Challenges
Contents
Page 2 GAO- 01- 256 USAID Challenges
Comptroller General of the United States
Page 3 GAO- 01- 256 USAID Challenges United States General Accounting Office
Washington, D. C. 20548
Page 4 GAO- 01- 256 USAID Challenges
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Page 6 GAO- 01- 256 USAID Challenges
Overview Page 7 GAO- 01- 256 USAID Challenges
Overview Page 8 GAO- 01- 256 USAID Challenges
Overview Page 9 GAO- 01- 256 USAID Challenges
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Major Performance and Accountability Challenges Page 11 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 12 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 13 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 14 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 15 GAO- 01- 256 USAID
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Major Performance and Accountability Challenges Page 16 GAO- 01- 256 USAID
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Major Performance and Accountability Challenges Page 17 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 18 GAO- 01- 256 USAID
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Major Performance and Accountability Challenges Page 19 GAO- 01- 256 USAID
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Major Performance and Accountability Challenges Page 20 GAO- 01- 256 USAID
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Major Performance and Accountability Challenges Page 21 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 22 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 23 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 24 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 25 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 26 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 27 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 28 GAO- 01- 256 USAID
Challenges
Major Performance and Accountability Challenges Page 29 GAO- 01- 256 USAID
Challenges
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Performance and Accountability Series
Page 32 GAO- 01- 256 USAID Challenges
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