    State Department: Options for Addressing Possible Budget Reductions
    (Chapter Report, 08/29/96, GAO/NSIAD-96-124).

    Pursuant to a congressional request, GAO reviewed the Department of
    State's reform and cost-cutting efforts and identified options that
    would enable State to adjust to reduced budgets.

    GAO found that: (1) State does not have a comprehensive strategy to
    restructure and downsize its operations to meet potential funding
    reductions; (2) State has reduced its staff and implemented some cost
    reduction measures, but it has been reluctant to reduce its overseas
    presence or change its business practices to accommodate proposed budget
    reductions; (3) State believes that substantial downsizing would
    severely hamper its achievement of U.S. foreign policy goals and
    irreparably harm U.S. interests; (4) because of expected governmentwide
    budget constraints and congressional and Office of Management and Budget
    (OMB) proposals for even larger decreases in State funding, State is
    unlikely to receive the level of funding needed to maintain its existing
    activity level; (5) State could reduce costs by reducing duplication
    among its bureaus and with outside agencies with which it shares program
    responsibility, streamlining or eliminating some informational reports,
    eliminating or consolidating certain personnel positions, recovering
    some service costs from users, and expanding the authority of chiefs of
    mission over all U.S. government fiscal and staffing resources at
    overseas posts; (6) State has the opportunity to significantly reduce
    costs by reducing the size of overseas posts, which consume about 70
    percent of State's budget; and (7) State could reduce support costs,
    which constitute two-thirds of its budget, by recouping support costs
    from other agencies, hiring more U.S. family members for overseas
    positions, adjusting employee benefits and allowances, increasing tour
    lengths, reducing costs for Marine guards at overseas posts, reducing
    headquarters support staff, using more foreign nationals in support
    positions, disposing of unneeded overseas real estate, and reengineering
    and outsourcing administrative functions.

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

     REPORTNUM:  NSIAD-96-124
         TITLE:  State Department: Options for Addressing Possible Budget
                 Reductions
          DATE:  08/29/96
       SUBJECT:  Strategic planning
                 Interagency relations
                 Cost control
                 Federal downsizing
                 Foreign policies
                 Agency missions
                 Budget cuts
                 Property disposal
                 Administrative costs
                 Federal agency reorganization
    IDENTIFIER:  Dept. of State Strategic Management Initiative
                 Belarus
                 Brazil
                 Malaysia
                 Netherlands
                 Paraguay
                 Senegal
                 Western Hemisphere Summit Program on Partnership for
                 Pollution Prevention
                 Dept. of State Foreign Affairs Administrative Services
                 System
                 Dept. of State International Cooperative Administrative
                 Support Services System
                 Dept. of State Family Member Program

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    Cover
    ================================================================ COVER

    Report to the Chairman, Committee on the Budget, House of
    Representatives

    August 1996

    STATE DEPARTMENT - OPTIONS FOR
    ADDRESSING POSSIBLE BUDGET
    REDUCTIONS

    GAO/NSIAD-96-124

    State Department

    (711134)

    Abbreviations
    =============================================================== ABBREV

      ACDA - Arms Control and Disarmament Agency
      FAAS - Foreign Affairs Administrative Services
      FSN - foreign service national
      ICASS - International Cooperative Administrative Support Services
      OMB - Office of Management and Budget
      USAID - U.S.  Agency for International Development
      USTR - Office of the U.S.  Trade Representative

    Letter
    =============================================================== LETTER

    B-271639

    August 29, 1996

    The Honorable John R.  Kasich
    Chairman, Committee on the Budget
    House of Representatives

    Dear Mr.  Chairman:

    This report discusses the State Department's reform and cost-cutting
    efforts and identifies options that would enable State to adjust to
    reduced budgets.  The report includes a recommendation to the
    Secretary of State and two matters for congressional consideration to
    assist the Department in reducing costs.

    We are sending copies of the report to the Secretary of State and to
    other appropriate congressional committees.  We will make copies
    available to others upon request.

    This report was prepared under the direction of Benjamin F.  Nelson,
    Director, International Relations and Trade Issues, who may be
    contacted on (202) 512-4128 if you or your staff have any questions
    about this report.  Other major contributors to the report are listed
    in appendix III.

    Sincerely yours,

    Henry L.  Hinton, Jr.
    Assistant Comptroller General

    EXECUTIVE SUMMARY
    ============================================================ Chapter 0

       PURPOSE
    ---------------------------------------------------------- Chapter 0:1

    The State Department received appropriations of $2.695 billion for
    fiscal year 1995 and $2.671 billion for fiscal year 1996 for the
    administration of foreign affairs.  In light of plans to reduce
    funding for foreign affairs activities, the Chairman of the House
    Committee on the Budget asked GAO to determine the status of State's
    reform and cost-cutting efforts and identify options that would
    enable State to adjust to reduced budgets.

       BACKGROUND
    ---------------------------------------------------------- Chapter 0:2

    The State Department is responsible for conducting foreign relations,
    including formulating policy on diverse international issues and
    coordinating and supporting U.S.  programs and activities overseas.
    State is expected to perform a wide variety of functions that are
    critical to U.S.  interests:  provide leadership to help bring peace
    and stability to areas such as Bosnia and the Middle East; report on
    overseas events; influence other countries to adopt policies and
    practices consistent with U.S.  interests on security, economic,
    narcotics, crime, environment, democracy, and other issues; assist
    U.S.  business abroad; provide services to U.S.  citizens overseas;
    and issue passports and visas.

    In July 1995, the Office of Management and Budget suggested reducing
    State's funding to $2.5 billion by 2000--a 7-percent decline from
    1995.  When inflation is factored in, State's 1995 purchasing power
    would be reduced by $770 million or 30 percent.  Under the 7-year
    concurrent budget resolution, passed by the Congress in June 1995,
    funding levels could be even less.

    The President has requested $2.713 billion for fiscal year 1997-- $18
    million more than for fiscal year 1995 and $39 million more than for
    fiscal
    year 1996.  The actual funding level is subject to negotiation.

    To develop options to allow the State Department to accommodate
    potential budget reductions, GAO analyzed State's reform initiatives
    and examined the functions of State's headquarters organization,
    overseas posts in 6 countries, and selected activities of 14 other
    U.S.  government agencies that share responsibility with State for
    certain international activities.

       RESULTS IN BRIEF
    ---------------------------------------------------------- Chapter 0:3

    Although the State Department has reduced the number of its staff and
    implemented some cost reduction measures, it has been reluctant or
    unable to significantly reduce its overseas presence and the scope of
    its activities or to substantially change its business practices.  In
    February 1995, the Secretary of State chose not to support reforms
    that might fundamentally change the Department's mission,
    organizational structure, and processes.  The State Department
    believes that a substantial downsizing to accommodate potential
    funding reductions would severely jeopardize its ability to achieve
    U.S.  foreign policy goals.  However, GAO believes that State can
    take steps to reduce its costs, while continuing to protect U.S.
    interests.

    The budgetary stringency that the federal government is projected to
    face in the next few years makes it unlikely that State will receive
    the level of funding that would allow it to maintain its current
    level of activities.  Because of inflation and cost increases
    overseas, GAO estimates that maintaining current functions and
    personnel would cost $584 million more in 2000 than in 1995, a
    22-percent increase.  But it is likely that State will receive less
    resources in the future.  If total discretionary spending is held to
    the levels envisioned in the congressional budget resolution for
    fiscal year 1997, spending will fall by almost 6 percent between 1995
    and 2002.  State will probably have to bear a share of this planned
    reduction.  Furthermore, larger reductions in State's funding have
    been proposed by the Office of Management and Budget and the
    Congress.  New fiscal realities dictate that State increase its cost
    consciousness, make choices about resource priorities for its wide
    range of locations and functions, and fundamentally rethink the way
    that it does business in order to increase efficiency and reduce
    operating costs.

    The greatest opportunity to significantly reduce costs is by closing,
    or reducing the size of, overseas posts, which cost about $1.9
    billion annually.  This amount, which includes support costs, is
    equivalent to nearly 70 percent of State's budget.  State maintains a
    diplomatic presence in
    252 overseas locations, including countries where the United States
    has limited interests.  This structure has not changed substantially
    since the end of the Cold War.  Fiscal realities may require a
    fundamental rethinking and redesign of overseas diplomatic structure,
    locations, functions, and practices.  Such a rethinking could lead to
    changes that would increase operating efficiencies and reduce costs.
    Eliminating posts will be difficult, as State has typically met with
    resistance from within and from other agencies and members of
    Congress when it has tried to close some low priority posts.
    Establishing an independent panel to review post closures and
    reductions is one strategy to overcome this resistance.

    State could also reduce support costs by several hundred million
    dollars by accelerating changes to its business practices.  State
    currently spends nearly $1.8 billion on communications, real estate,
    and a wide variety of other support services for domestic and
    overseas operations.  Prompt disposal of unneeded overseas real
    estate is just one example of how State could reduce its support
    costs.

    In addition, State may have to limit and/or eliminate its role in
    selected functions.  (State shares responsibility with various other
    U.S.  government agencies for many issues.) Although this may impact
    on the way U.S.  international activities are implemented, lessening
    State's role could lead to personnel reductions that would reduce
    headquarters costs and facilitate reductions in costs for overseas
    posts and support.

    In light of potential funding reductions and post Cold War realities,
    State needs to plan for how it can become a smaller, more efficient,
    and less expensive organization.  Development of a downsizing
    strategy should start with identification of core missions and
    functions and critical locations and the resources required to
    support them.  GAO recognizes that implementation of some downsizing
    measures may require changes in legislation or negotiations with
    other agencies.  State's strategy should include a plan to obtain
    support from the Congress and cooperation by other U.S.  agencies.

       PRINCIPAL FINDINGS
    ---------------------------------------------------------- Chapter 0:4

          STATE HAS NOT DEVELOPED A
          DOWNSIZING STRATEGY
    -------------------------------------------------------- Chapter 0:4.1

    The State Department does not have a comprehensive strategy to
    restructure its operation to adjust to potential funding reductions.
    Management attention to downsizing has been distracted by (1) the
    need to address foreign affairs crises and (2) internal bureaucratic
    pressures.  Moreover, the Department has not fully accepted that it
    may have to substantially reduce its costs.  As a result, State has
    not done a comprehensive review of its functions and processes to
    identify unnecessary and low-priority work.  State continues to hope
    that funding will be sufficient to avoid making major cuts to its
    operations.  It notes that the President's proposed funding for
    fiscal year 1997 would require some modest downsizing, but not the
    level of downsizing that would be required under other proposed
    funding reductions.

          LIMITED COST REDUCTIONS
    -------------------------------------------------------- Chapter 0:4.2

    The two major management initiatives undertaken since 1993 have not
    led to fundamental changes in State's organizational structure and
    business practices or achieved significant cost reductions.  Instead,
    State has opted to implement administrative and other changes that
    would not have a dramatic impact.

    The Secretary established the Strategic Management Initiative in 1994
    to set the future course for the Department and to eliminate
    duplication and unnecessary or marginal functions.  Although State
    initially estimated that proposed actions under the initiative could
    reduce costs by well over $100 million, State officials told GAO that
    actual cost reductions have been limited.

    In 1993, the National Performance Review recommended actions that it
    estimated would reduce State's costs by $68 million over 5 years.
    State has completed 2 of 14 recommended actions and has estimated
    cost reductions at $1.2 million annually.

    State points out that its funding has been relatively flat for
    several years and that it has already reduced personnel and taken
    other actions to reduce its costs accordingly.  For example, State
    reports that it has reduced its staff by 2,200 since 1993, from about
    26,000 to 23,800, or an 8.5-percent reduction.

          OPTIONS FOR REDUCING STATE'S
          INVOLVEMENT IN SOME
          FUNCTIONS
    -------------------------------------------------------- Chapter 0:4.3

    One option to cope with reduced funding is to reduce or eliminate
    State's involvement in some areas and to lessen the degree of overlap
    among its bureaus and with other agencies.  State's organizational
    structure and operating procedures have the potential to create
    unnecessary overlap, duplication, and inefficiency.  The Department's
    geographic bureaus are organized to overlap with many other foreign
    policy and administrative functions.  These bureaus operate as six
    micro-departments that basically administer U.S.  foreign policy for
    a particular region of the world.  In fact, concerns about potential
    duplication among the various units within State headquarters were
    raised in a 1995 State Department internal study of domestic
    positions.  The study identified examples of potential duplication of
    work among offices within the Department.  For example, the study
    indicated that there is potential overlap between the Bureau of
    Intelligence and Research and regional and functional bureaus
    throughout the Department.

    There is also overlap of work between State and other agencies.  In
    August 1995, the Office of Inspector General for the Arms Control and
    Disarmament Agency (which also serves as the Office of Inspector
    General for the Department of State) reported that duplication
    between the Agency and State's Political-Military Bureau "promotes
    inefficient use of resources by both organizations and accentuates
    turf consciousness, dissipating energies and damaging morale."\1

    Also, with congressional approval where necessary, State could
    streamline some informational reports--for example, its annual human
    rights report, which consumes resources of many bureaus and nearly
    all overseas missions--or eliminate reports that contain information
    available from other sources, such as country reports on trade
    practices.

    State could also eliminate certain positions or consolidate
    responsibility for certain issues.  For example, eliminating labor
    attach� positions and transferring labor issues to political and
    economic officers could reduce costs by about $7.4 million annually.
    Finally, State could recover some of the costs of many services, such
    as factual and analytical reports, business assistance services, and
    assistance to overseas visitors, that it provides to other entities.

    Making these changes would not be easy, as State's functions are
    broadly linked to foreign policy objectives, specifically required by
    statute, or required by interagency processes, and according to
    State, some decisions would have to be made in an interagency forum
    or may require legislative approval.

    --------------------
    \1 Report of Inspection, The U.S.  Arms Control and Disarmament
    Agency (ACDA-ISP/I-95-44, Aug.  1995).

          OPTIONS FOR REDUCING THE
          COSTS OF OVERSEAS PRESENCE
    -------------------------------------------------------- Chapter 0:4.4

    State has embassies in most foreign capitals and consulates in some
    commercial centers outside capital cities.  Despite advances in
    communications and transportation, geopolitical changes, and new
    budget realities, State's vast network of embassies and consulates
    and the way they are configured and operated have remained largely
    unchanged.  Although there are some reform initiatives currently
    underway, a fundamental rethinking of the vast overseas
    infrastructure has not taken place.  State could potentially increase
    operating efficiency, reduce the size of some posts, and close others
    in order to reduce costs.  Cost reductions from closing a small post
    with about nine Foreign Service officers could total about $2 million
    per year or $10 million over 5 years.

    Offices within State, members of Congress, and other agencies have
    often opposed closures of posts.  In July 1995, State identified 19
    posts for possible closure but decided to close only 13 due to
    pressure from others.  For example, the Consulate in Curacao,
    Netherlands Antilles, was taken off the closure list in response to
    pressure from a member of Congress and objections from the Drug
    Enforcement Administration.  According to State officials, the
    Department may be forced to close 50 to 100 of its 252 overseas posts
    if proposed funding cuts become a reality.

    One strategy to review post closing and downsizing options would be
    to establish an independent post closure panel like the Defense Base
    Closure and Realignment Commission--an approach that resulted in
    decisions to close, realign, or otherwise downsize hundreds of
    military bases and installations.  Although the criteria involved in
    closing and downsizing overseas diplomatic posts are different, a
    panel much like the Commission may be useful.  Since many other
    agencies depend on State's overseas presence, such an approach would
    allow for decision-making based on the need to support both State and
    non-State activities consistent with overall U.S.  policy interests
    and priorities as well as available resources.

    Another strategy to pursue cost reductions would be to implement the
    National Performance Review recommendation that, on a pilot basis,
    U.S.  ambassadors be given expanded authority over all U.S.
    government fiscal and staffing resources at overseas posts.
    Expanding ambassadors' authority raises the potential for negative
    consequences, however.  For example, an ambassador and a federal
    agency may have differences of opinion about the types and levels of
    resources needed to sustain agency activities.  However, because
    expanding ambassadors' authority could reduce costs, GAO supports a
    pilot study to test the concept.  State has not initiated action on
    this recommendation.  State officials told GAO that the Department
    cannot move on this recommendation until the National Performance
    Review/Vice President's staff propose legislation to the Congress.
    However, National Performance Review staff told GAO that proposing
    legislative action is State's responsibility.  In November 1995, the
    U.S.  Ambassador to Senegal asked that State's Under Secretary for
    Management convene the Vice President's Interagency Council to obtain
    its agreement to test increased authority of ambassadors.  State has
    been reviewing the proposal.

          OPTIONS FOR REDUCING SUPPORT
          COSTS
    -------------------------------------------------------- Chapter 0:4.5

    Potential budget reductions could also be met by reducing support
    costs, which currently consume two-thirds of the Department's budget.
    State is experimenting with, studying, or considering several options
    to reduce its support costs.  GAO identified additional cost
    reduction options that are not currently under review.

    The Department of State Appropriations Act, 1996, requires that,
    starting in fiscal year 1997, State have in place a system that
    allocates to each department and agency the full cost of its overseas
    presence.  State and other U.S.  agencies are developing a system
    sponsored by the President's Management Council that devolves
    authority for overseas support to individual post interagency
    councils.  This is a significant change in philosophy, and State
    expects it to result in increased reimbursements from other agencies
    and eventually lower the support costs.  State estimates it would
    spend about $108 million less to support other agencies overseas
    during the first year of the new system.  Additional cost reductions
    are expected from greater efficiency and interagency coordination.
    However, implementation will require strong interagency and
    congressional cooperation.

    Other cost-cutting measures being considered by State include (1)
    hiring more U.S.  family members to fill overseas staffing positions,
    (2) increasing employees' payments for medical services, (3)
    increasing the length of overseas tours, and (4) reducing State's
    cost for Marine guard detachments at overseas posts by deactivating
    certain units or shifting the costs to the Defense Department.  Over
    the long term, State hopes to further reduce its operating expenses
    through business process reengineering and the outsourcing of certain
    support functions.  In both areas, however, only limited progress has
    been made.

    GAO identified several additional options State could implement to
    adjust to potential budget cuts as well as some of the potential
    adverse consequences of these options.  These options include (1)
    expanding the use of foreign nationals in support positions at
    overseas posts, (2) reviewing employees' benefits and allowances, (3)
    reviewing support staff levels in headquarters, and (4) disposing of
    excess and underused properties overseas.

       RECOMMENDATIONS
    ---------------------------------------------------------- Chapter 0:5

    GAO is not taking a position on the level of resources needed by the
    State Department for the administration of foreign affairs.  However,
    given the likely decline in discretionary spending in the federal
    budget and the various proposals for reductions in State's budget, it
    is unlikely that State will receive funding at a level necessary to
    support current services.  For example, fiscal constraints may not
    permit State to continue to maintain its vast network of embassies
    and consulates as they are configured today.  A fundamental
    rethinking of functions, locations, and practices is needed to
    determine what is essential and affordable to support U.S.
    interests.  State needs to plan for how it can become a smaller, more
    efficient, and less expensive organization.

    GAO recommends that the Secretary of State develop a downsizing
    strategy that (1) identifies critical and noncritical functions and
    their costs; (2) specifies the changes that would be necessary to
    adjust to potential funding levels; and (3) identifies what
    legislative actions or modifications to interagency agreements, if
    any, would be required to implement the changes.  Because overseas
    posts consume 70 percent of State's budget, reassessment of the
    network of overseas posts will be an important part of the downsizing
    strategy.  At a minimum, State should have a strategy that is based
    on out-year funding guidance from the Office of Management and
    Budget.  (Such a strategy would allow for consideration of other
    funding proposals and could be adjusted to accommodate actual
    appropriation amounts.)

       MATTERS FOR CONGRESSIONAL
       CONSIDERATION
    ---------------------------------------------------------- Chapter 0:6

    If future funding levels require the State Department to close and
    reduce the size of posts, the Congress may wish to establish an
    independent panel to review State's proposals in view of (1) the
    potential financial benefits to the U.S.  government, (2) the impact
    on governmentwide interests and the many agencies that depend on
    State's services, and (3) the potential opposition to closing posts.
    Although the criteria involved in closing and downsizing overseas
    diplomatic posts are different, a panel much like the Defense Base
    Closure and Realignment Commission established to review military
    installations may be useful.

    Also, if the Congress believes that ambassadors' authority over U.S.
    government resources should be expanded to reduce spending, it could
    explore with the executive branch how a pilot program, such as the
    one recommended by the National Performance Review, could be
    structured and implemented.

       AGENCY COMMENTS AND GAO'S
       EVALUATION
    ---------------------------------------------------------- Chapter 0:7

    In commenting on a draft of this report, State disagreed with GAO's
    conclusions and recommendation regarding the need to develop a
    strategy for adjusting to potential budget reductions.  State
    described the actions it has taken over the last several years to
    absorb a reduction in real resources and its plans for further
    gradual downsizing.  Although it agreed that strategic planning for
    downsizing is important, State stressed that it does not accept and
    will not plan for proposed funding reductions that could approach 44
    percent.  It believes reductions of this magnitude would pose
    unacceptable risks and cause irreparable damage to America's national
    interests.

    State opposed many of the options GAO identified to address possible
    budget reductions and asserted that State's diplomacy, when compared
    to other tools for pursuing U.S.  national security and other
    interests, is relatively inexpensive.  State indicated that the
    report does a good job describing the difficulties in closing
    overseas posts.  State also noted that it cannot act unilaterally in
    reducing a post's size because of the many other agencies involved.
    State's comments are reprinted in their entirety in appendix II,
    along with GAO's evaluation of them.

    GAO did not make judgments on the relative value of State's functions
    and activities or try to compare the relative merits of State's
    diplomacy to other U.S.  government tools.  Instead, GAO pointed out
    that both the legislative and executive branches had proposed
    substantial funding reductions for State and that, barring a
    $584-million increase in funding from 1995 to 2000, State would be
    unable to maintain its current level of activities.  Given the
    funding situation, GAO believes that State needs to seriously
    consider actions for adjusting to the potential funding scenarios.
    Furthermore, GAO believes that developing a downsizing strategy would
    enable State to focus available resources on its most critical
    functions and activities.  Absent a downsizing strategy based on a
    comprehensive review of its functions and processes, the Department
    will not have the data and analyses and therefore cannot demonstrate
    clearly how funding reductions will hamper U.S.  interests or be in a
    position to protect critical functions.  GAO did not recommend
    specific actions to cut costs but identified a number of options that
    could be part of a State Department downsizing strategy.

    GAO did not request formal comments from other agencies.  However, to
    verify data, GAO provided a copy of a draft of this report to the
    Departments of Agriculture, Commerce, Labor, the Treasury, and
    Transportation; the Environmental Protection Agency; the U.S.  Agency
    for International Development; the U.S Arms Control and Disarmament
    Agency; and the Office of the U.S.  Trade Representative.  Where
    appropriate, GAO incorporated the revisions that were suggested by
    these agencies.

    The U.S.  Agency for International Development objected to expanding
    an ambassador's authority over the programmatic direction and funding
    of overseas programs even on an experimental basis.  The U.S.  Agency
    for International Development and the Office of the U.S.  Trade
    Representative emphasized that increasing reimbursements for
    administrative support at overseas posts may require additional
    funding for agencies other than State to cover certain costs they may
    not have budgeted for in the past.

    The Office of the U.S.  Trade Representative and the Department of
    Labor expressed concern about coordination issues, emphasizing that
    cost-cutting decisions that State could make may affect other
    agencies.  The Department of Labor objected to eliminating labor
    attach� positions and transferring the responsibility for covering
    labor issues to political and economic officers.  In addition, Labor
    expressed concern about streamlining the country reports on human
    rights practices, noting that these reports are central to the U.S.
    policy goal of promoting human rights.

    BACKGROUND
    ============================================================ Chapter 1

    The State Department conducts activities designed to promote and
    protect U.S.  interests overseas.  To support these activities, State
    maintains a headquarters with regional and functional bureaus and 252
    overseas posts.  The State Department received slightly less than
    $2.7 billion for the administration of foreign affairs in both fiscal
    years 1995 and 1996, with the bulk of these resources allocated to
    salaries, infrastructure, and operating expenses.  State faces a
    widening gap between available budget resources and the costs of
    maintaining existing activities.

       STATE'S FUNCTIONS AND
       ORGANIZATION
    ---------------------------------------------------------- Chapter 1:1

    The State Department is the central agency for coordinating and
    implementing U.S.  foreign policy in support of U.S.  interests.
    State provides leadership to help bring peace and stability to areas
    such as Bosnia and the Middle East and carries out a variety of
    activities to promote these interests, including

      -- negotiating and overseeing over 14,000 treaties and agreements
         in force since 1946, including 24 treaties and 338 agreements
         concluded in 1994;

      -- analyzing overseas events to obtain information critical to U.S.
         policymakers in Washington;

      -- preparing over 130 congressionally mandated reports covering
         such diverse subjects as the abuse of human rights and foreign
         trade;

      -- representing the United States at 700 international conferences
         annually;

      -- providing consular services to Americans overseas and issuing
         over 5 million passports and 8 million visas annually; and

      -- providing administrative support to about 35 federal departments
         and independent agencies with staff overseas.

    State's headquarters in Washington, D.C., includes geographic bureaus
    that are organized along regional lines (such as the Bureau of East
    Asian and Pacific Affairs) and bureaus that are organized along
    functional lines (such as the Bureau of Political-Military Affairs).
    Figure 1.1 shows the basic organizational structure of the
    Department.

       Figure 1.1:  Organization of
       Selected State Bureaus

       (See figure in printed
       edition.)

          STATE'S GEOGRAPHIC BUREAUS
    -------------------------------------------------------- Chapter 1:1.1

    The Under Secretary for Political Affairs oversees State's six
    geographic bureaus and the Bureau of International Organizations.
    With 1,143 headquarters staff, Political Affairs is the Washington
    focal point for the development of policy recommendations, for
    coordination with other departments and agencies, and for
    transmission of guidance to ambassadors in the field.  The geographic
    and International Organizations bureaus guide, coordinate, and
    supervise nearly all of the State Department's activities overseas,
    including the operation of 163 embassies, 64 consulates general, 13
    consulates, 8 missions to international organizations, 2 branch
    offices, 1 liaison office, and 1 interests section.

          STATE'S FUNCTIONAL BUREAUS
    -------------------------------------------------------- Chapter 1:1.2

    The functional bureaus generally manage and coordinate specific
    issues and activities.  The Bureau of Economic and Business Affairs,
    under the jurisdiction of the Under Secretary for Economic, Business,
    and Agricultural Affairs, is responsible for integrating U.S.
    economic interests with U.S.  foreign policy in such areas as
    international energy, trade, and international civil aviation.  In
    addition, State economic officers support U.S.  foreign policy
    initiatives, including devising, negotiating, and implementing
    strategies and agreements to advance U.S.  goals such as Russia's
    transition to democracy and Bosnia's reconstruction.  The Under
    Secretary also oversees the Office of the Coordinator for Business
    Affairs, which was created in 1993 to facilitate U.S.  businesses'
    access to markets abroad.

    The Under Secretary for International Security Affairs coordinates
    national security functions pursuant to over 20 provisions of law.
    The Under Secretary manages the Bureau of Political-Military Affairs,
    which provides guidance, coordinates policy formulation, and
    participates in all major negotiations involving the nonproliferation
    of weapons of mass destruction and missile technology, nuclear and
    conventional arms control, defense relations and security assistance,
    and export controls.

    The Under Secretary for Global Affairs facilitates the implementation
    of U.S.  foreign policy on 11 issues grouped under 4 bureaus:  the
    Bureau of Democracy, Human Rights, and Labor; the Bureau of
    International Narcotics and Law Enforcement Affairs; the Bureau of
    Oceans and International Environmental and Scientific Affairs; and
    the Bureau of Population, Refugees, and Migration.  Global Affairs
    administers over $800 million for narcotics control, refugee, and
    other programs and prepares reports such as the annual human rights
    report to the Congress.

    The Bureau of Consular Affairs administers and enforces immigration
    and nationality laws in issuing passports, visas, and related
    services and provides for the protection and welfare of American
    citizens and interests abroad.  The Bureau also manages the
    Department's border security program through which State is
    attempting to improve visa and passport functions.  In fiscal year
    1995, Consular Affairs issued 5.7 million passports, processed 7.8
    million nonimmigrant visas and 604,000 immigrant visas, and provided
    over 1.1 million special services.

    The Under Secretary for Management directs all budgetary, support,
    and personnel policies of the Department.  The Under Secretary's
    principal function is to reconcile resources, both fiscal and
    personnel, with policy requirements.  This Under Secretary also
    coordinates the activities of other bureaus, including the bureaus of
    Consular Affairs, Personnel, Administration, and Finance and
    Management Policy.

       FUNDING AND ALLOCATIONS
    ---------------------------------------------------------- Chapter 1:2

    The State Department was appropriated $2.695 billion for fiscal year
    1995 and $2.671 billion for fiscal year 1996 for the administration
    of foreign affairs.\1

    State spends nearly 92 percent of its funding for fixed costs:
    personnel, operating supplies, utilities, and essential contracts.
    The remaining 8 percent is for mission-essential travel, the
    replacement of worn-out equipment, and infrastructure projects.

    Table 1.1 shows the allocation of State's fiscal year 1995
    appropriations by major account category.

                                   Table 1.1

                     Fiscal Year 1995 Net Budget Authority
                           for Appropriations for the
                       Administration of Foreign Affairs

                             (Dollars in millions)

    Account                                           Net budget authority
    ----------------------------------------  ----------------------------
    Diplomatic and consular programs                              $1,757.7
    Salaries and expenses                                            367.4
    Capital Investment Fund                                            0.5
    Office of the Inspector General                                   23.8
    Representation allowances                                          4.8
    Protection of foreign missions and                                 9.1
     officials
    Security and maintenance of U.S.                                 379.9
     missions
    Emergencies in the diplomatic and                                  6.5
     consular service
    Repatriation loan program account:                                 0.8
     subsidy and administration
    Payment to the American Institute in                              15.4
     Taiwan
    Payment to the Foreign Service                                   129.3
     retirement and disability fund
    ======================================================================
    Total                                                         $2,695.2
    ----------------------------------------------------------------------
    Note:  Table excludes permanent appropriations and additional budget
    authority for trust funds.

    Source:  State Department, Bureau of Finance and Management Policy.

    Table 1.2 shows how these funds were actually spent, based on our
    analysis of State Department data.  This analysis shows that overseas
    posts cost about $1.9 billion (the combined funding for overseas
    foreign policy, overseas consular functions, overseas support
    provided by both geographic and management bureaus, and security and
    maintenance of U.S.  missions).  State support functions cost about
    $1.8 billion (the combined costs of domestic support, overseas
    support provided by both geographic and management bureaus, and
    security and maintenance of U.S.  missions).  Support functions
    include, among others, information systems, housing,
    telecommunication, security, personnel, finance, training, and
    medical services.

                                   Table 1.2

                          Fiscal Year 1995 Allotments

                             (Dollars in millions)

    Primary purpose of funding                              Funds allotted
    ----------------------------------------  ----------------------------
    Domestic foreign policy                                         $214.3
    Domestic consular functions                                       90.0
    Overseas consular functions                                      178.7
    Overseas foreign policy                                          295.9
    Overseas support provided by geographic                          499.8
     bureaus
    Overseas support provided by management                          497.6
     bureaus
    Security and maintenance of U.S.                                 379.9
     missions
    Domestic support                                                 385.9
    Other\a                                                          153.1
    ======================================================================
    Total                                                         $2,695.2
    ----------------------------------------------------------------------
    \a Includes funding for the Office of the Inspector General and
    Foreign Service retirement and disability fund.

    Source:  GAO analysis based on data from the State Department, Bureau
    of Finance and Management Policy.

    --------------------
    \1 In addition to the amount appropriated for fiscal year 1995, State
    received net budget authority of $595 million in permanent
    appropriations and trust funds for the administration of foreign
    affairs.  State also received additional appropriations of $2.1
    billion for international organizations and commissions and related
    programs and $857 million for refugee assistance, drug control
    programs, and other purposes.  State's budget authority is provided
    by two appropriation acts:  the Department of State and Related
    Agencies Appropriations Act and the Foreign Operations, Export
    Financing, and Related Programs Appropriations Act.

       FUNDING PROSPECTS AND POTENTIAL
       IMPACT
    ---------------------------------------------------------- Chapter 1:3

    Because of inflation and cost increases overseas, we estimate that
    maintaining current functions and personnel would cost $584 million
    more in 2000 than in 1995, a 22-percent increase.  But, it is likely
    that the Department of State will face budget cutbacks over the next
    several years.  If total discretionary spending is held to the levels
    envisioned in the congressional budget resolution for fiscal year
    1997, spending will fall by almost 6 percent between 1995 and 2002.
    It will be difficult to exempt State from bearing a share of this
    planned reduction.  Moreover, larger reductions in State's funding
    have been proposed by the Office of Management and Budget (OMB) and
    the Congress.

    For fiscal year 1996, State's budget is $2.671 billion for the
    administration of foreign affairs--$87 million less than requested.
    In July 1995, OMB proposed reducing funding for the administration of
    foreign affairs to
    $2.5 billion by 2000--a 7-percent decline from fiscal year 1995.
    When inflation is factored in, this represents a $770-million
    reduction in State's purchasing power.  Under the terms of the 7-year
    concurrent budget resolution passed by the Congress in June 1995,
    funding levels for the administration of foreign affairs could be
    even less than OMB projections.  If the administration of foreign
    affairs were to take a proportional share of the proposed reductions
    for international affairs (the 150 budget function), State would
    receive $1.4 billion less in fiscal year 2000 than the amount
    required to sustain current activity levels.  This represents a
    greater than 44-percent reduction in real terms from fiscal year 1995
    levels.  This analysis assumes that the administration of foreign
    affairs would receive the same percentage reductions as the rest of
    the 150 function, which may not be the case.

    To maintain the current--fiscal year 1995--level of services, we
    estimate that State would need $584 million more in appropriations in
    fiscal
    year 2000 than it received in fiscal year 1995--a 22-percent
    increase.  We calculated this amount by applying a 4-percent annual
    inflation rate to the fiscal year 1995 funding.\2

    Figure 1.2 illustrates the widening difference between the funding
    needed to sustain State's current level of services and funding
    provided under the OMB and congressional scenarios.

       Figure 1.2:  Future Funding
       Scenarios for the
       Administration of Foreign
       Affairs

       (See figure in printed
       edition.)

    Note:  Current services projections represent the funding State would
    need to maintain the purchasing power of fiscal year 1995 funding.
    It assumes 4 percent inflation annually through fiscal year 2000.
    OMB guidance shows projected funding for the administration of
    foreign affairs based on the President's requests for fiscal years
    1996 and 1997, and on OMB's July 1995 guidance to State for fiscal
    years 1998-2000.  For the budget resolution projection we calculated
    the percentage reduction to the 150 budget function called for in the
    fiscal year 1996 concurrent budget resolution.  We applied the same
    percentage reduction to the administration of foreign affairs
    spending.

    The magnitude of the likely difference between available resources
    and the funding needed to maintain current operations dictates the
    need for a fundamental change in the management and structure of the
    foreign affairs apparatus.  In the remainder of this report, we
    discuss State's own reform efforts and the importance of developing
    an effective strategy to guide fundamental change (ch.  2) and
    present various options to realize cost reductions--streamlining
    State functions (ch.  3), restructuring State's overseas presence
    (ch.  4), and reducing support costs (ch.  5).

    --------------------
    \2 State's budget has to absorb the overseas inflation rates, which
    generally exceed U.S.  rates.  According to State budget officials, a
    budget with no change from the prior year roughly translates into a
    4-percent reduction in buying power because of these inflationary
    factors.

       OBJECTIVES, SCOPE, AND
       METHODOLOGY
    ---------------------------------------------------------- Chapter 1:4

    In response to a request from the Chairman, House Committee on the
    Budget, we reviewed State's reform and cost-cutting initiatives and
    identified options that would enable State to adjust to reduced
    budgets.  We did not make judgments on the relative value of State's
    functions and activities or the level of resources that are required.

    In Washington, D.C., we interviewed officials and collected data in
    the bureaus responsible for political, economic and business,
    international security, global, consular, and support issues and
    functions.  We also conducted work at agencies that perform related
    functions, including offices at the Departments of Agriculture,
    Commerce, Defense, Justice, Labor, Transportation, the Treasury, and
    other agencies, including the
    U.S.  Agency for International Development (USAID), the U.S.
    Information Agency, the Arms Control and Disarmament Agency (ACDA),
    the Peace Corps, the Environmental Protection Agency, the U.S.
    Export-Import Bank, and the Office of the U.S.  Trade Representative
    (USTR).  Although our work describes State's relationships with these
    agencies, we did not evaluate State's effectiveness relative to these
    agencies.  In addition, we met with various individuals in the
    private sector, including representatives from the U.S.  Chamber of
    Commerce, the Executive Council on Foreign Diplomacy, the Kenan
    Institute of Private Enterprise, and the National League of Cities.

    We interviewed management officials and conducted work at offices and
    private firms undergoing reforms and providing support.  We also
    visited Canada to discuss its overseas diplomatic practices and cost
    concerns.

    To understand the work of the State Department overseas, we visited
    posts in six countries:  Belarus, Brazil, Malaysia, The Netherlands,
    Paraguay, and Senegal.  These posts were selected based on their
    varying missions, sizes, and geographical locations.  We interviewed
    officials and reviewed the work of each section to identify primary
    activities, focusing on the months of September and October 1995, and
    discussed management and funding issues with post managers.

    We obtained formal comments on the draft of this report from the
    State Department.  They are discussed at the end of chapters 2, 3, 4,
    and 5, and are presented in their entirety in appendix II, along with
    our evaluation.  To verify data, we provided a copy of a draft of
    this report to the Departments of Agriculture, Commerce, Labor, the
    Treasury, and Transportation; the Environmental Protection Agency;
    USAID; ACDA; and USTR.  We have incorporated their comments and
    suggested revisions to the text where appropriate.

    We did our review between June 1995 and June 1996 in accordance with
    generally accepted government auditing standards.

    STATE IS NOT PREPARED TO COPE WITH
    PROPOSED REDUCTIONS
    ============================================================ Chapter 2

    The Department of State has not developed a comprehensive strategy to
    restructure its operations to adjust to potential funding reductions.
    State officials have not fully accepted that State may have to
    substantially reduce its costs.  It notes that the President's
    request for fiscal year 1997 would require some modest downsizing,
    but not to the level required by other proposed funding levels.
    Believing that substantial funding reductions would severely
    jeopardize its ability to conduct foreign policy and achieve U.S.
    goals, State has decided not to plan how it would accommodate
    proposed budget reductions.

    State's various reform initiatives over the past 3 years--including
    the 1994 Strategic Management Initiative and responses to National
    Performance Review recommendations--have not resulted in overall
    plans to implement the substantial changes that may be necessary.
    State's reform initiatives ultimately focused on short-term, narrowly
    focused actions that have had little impact on the structure of the
    foreign affairs apparatus and did not achieve significant cost
    reductions.  Adjusting to proposed budget reductions will require
    more substantial changes than those that have occurred to date.  Our
    assessments of other government and private sector organizations show
    that planning is essential for effective downsizing and
    restructuring.  Without such a strategy, State's ability to
    effectively carry out its broad mission of promoting and protecting
    U.S.  interests overseas will be jeopardized in light of the severe
    budget gap it is facing.

       STATE HAS MADE LIMITED PROGRESS
       IN STREAMLINING ITS
       ORGANIZATION
    ---------------------------------------------------------- Chapter 2:1

    According to State, since 1993 it has cut the number of deputy
    assistant secretaries by 25 percent; reduced the general workforce by
    2,200 positions--an 8.5-percent reduction; will have closed 14 small
    overseas posts during fiscal year 1996; reduced the cost of security
    programs by 15 percent by applying risk management principles; and
    reduced travel, contracts, and equipment expenses.  These actions
    accommodated the flat budgets between 1993 and 1995 and responded to
    a 1993 presidential memorandum to reduce positions by 12 percent
    between fiscal year 1994 and 1999.  These actions, though positive,
    are not sufficient to enable State to cope with proposed reduced
    funding.  Moreover, State has been unwilling or unable to make major
    changes suggested under its Strategic Management Initiative and the
    National Performance Review--changes that would result in a more
    efficient operation.

          EXPECTATIONS OF 1994
          STRATEGIC MANAGEMENT
          INITIATIVE NOT MET
    -------------------------------------------------------- Chapter 2:1.1

    The Secretary of State established the Strategic Management
    Initiative in 1994 to set the Department's future course and
    eliminate unnecessary or marginal functions and internal duplication.
    He tasked the Department with formulating and implementing a plan of
    action to focus the organization around its core mission.  The
    Secretary asked his staff to consider restructuring the Department to
    carry out its mission with a substantial reduction in resources, and
    he recognized that, to do so, a comprehensive review of functions was
    needed.  In January 1995, State announced that the initiative would
    highlight the highest priority functions and products and identify
    low priority, redundant, duplicative, and less valued work, which
    would be discontinued.  The Secretary told State employees that "we
    must remake ourselves from the bottom up" and that State faces "a
    painful process culminating in hard choices." This initiative
    represented a major change for State, which in the past tended to
    implement across-the-board budget reductions when necessary rather
    than deciding what was more or less important.

    The initiative's first phase resulted in a series of reports
    analyzing issues related to workload reduction, constituents' views
    on State's products and services, eminent Americans' views on State's
    future role, reengineering of the Foreign Service transfer process,
    communications, and the best practices of organizations that have
    restructured.  The teams provided these reports, along with
    recommendations for change, to the Secretary in January and early
    February 1995.

    According to the initiative's coordinator, the Secretary decided in
    February 1995 that it was not a good time to propose fundamental
    changes to State's mission, organizational structure, and processes
    and that the initiative should focus on recommendations that would
    not involve major changes to operations.  The Secretary was concerned
    that proposed legislation to consolidate foreign affairs agencies
    could severely affect the organization.

    Under the second phase, the emphasis of the initiative has been to
    achieve operating efficiencies.  The Secretary also made improving
    the quality of life for State personnel a priority.  The Secretary
    stipulated that any recommendations could not change the basic
    structure of the Department and must be implemented in a short period
    of time.  In March and April 1995, seven teams developed 300
    recommendations based on the assumption that State's operating budget
    would not change.

    Forty-five recommendations were presented to the Secretary; in May
    1995, he approved 33.  As of February 1996, State had implemented or
    was implementing 30 of the 33 recommendations, including streamlining
    processing for arms sales and export licensing requests, simplifying
    the Department's travel order and vouchering system, and reducing the
    number of required reports from overseas posts.  The 15
    recommendations that had not been implemented include closing some
    diplomatic security resident agent offices, establishing an overseas
    staffing board, using an interagency advisory board to strengthen
    overseas staffing controls, and setting priorities for intelligence
    gathering and reporting.  If these recommendations were implemented,
    costs could be significantly reduced.

    In April 1995, the initiative's team leaders initially identified $61
    million in potential domestic cost reductions, an additional $35
    million in out-year cost reductions, and $17 million in annual cost
    reductions from the closure of overseas posts.  Furthermore, they
    estimated that by terminating some support functions, $33 million of
    the Management Bureau's domestic support funds could be reallocated
    to other needs.  (Actions that State is considering to streamline
    support functions are discussed in ch.  5.) Although the Department
    did not attempt to track the actual cost reductions achieved, the
    initiative coordinator told us in October 1995 that few of the
    approved recommendations will reduce costs.  Furthermore, he
    indicated that cost reduction had not been a primary goal of the
    Strategic Management Initiative, and therefore the Department had not
    established cost reduction targets.

    State's reports show that Strategic Management Initiative efforts
    have resulted in the elimination of as many as 130 positions.  (We
    were unable to verify reductions in positions claimed in State's
    reports.) Beyond the cost reductions from eliminating those
    positions, State estimated that it would reduce costs by about $2.5
    million in fiscal year 1996 and about $9.3 million annually
    thereafter by closing 13 overseas posts.  However, a major cost at
    these posts--salaries for U.S.  staff--is not included in the
    estimates because the positions would be moved to other locations,
    not eliminated.  State has taken the position that elimination of
    these posts is part of State's overall plan to reduce staff.
    However, the above State Department cost reduction estimates do not
    reflect cost reductions from staff cuts.

    The initiative's primary goals (1) to highlight priority functions
    and products and (2) to identify and stop low-priority, redundant
    work have, for the most part, not been realized.  To date, no
    comprehensive review of State's functions and processes has been
    conducted.  Although State has made some minor reductions in
    duplication among State offices and in the number of its reports, no
    functions have been eliminated.

          POTENTIAL COST REDUCTIONS
          NOT REALIZED FROM THE
          NATIONAL PERFORMANCE
          REVIEW'S RECOMMENDED ACTIONS
    -------------------------------------------------------- Chapter 2:1.2

    The National Performance Review, established in March 1993 to make
    government work better and cost less, recommended in September 1993
    that State implement 14 action items to reduce costs by (1) cutting
    operating costs at overseas posts, (2) improving collection of
    receivables, (3) relocating regional administrative management
    centers, and (4) expanding management authority of chiefs of mission
    (generally ambassadors).  The National Performance Review estimated
    that implementing these actions could yield about $68 million in cost
    reductions between fiscal year 1994 and 1999.

    As of January 1996, State had partially implemented only 2 of the 14
    action items.  State deactivated Marine security guard detachments at
    a net total of 11 overseas posts where classified operations did not
    warrant 24-hour cleared American presence.  This will achieve an
    estimated annual cost reduction of $1.2 million.  State also
    established an accounting and debt collection procedure for all
    overseas medical expenses.  State estimated that this action resulted
    in collections of over $1 million in fiscal year 1994.

    The remaining 12 action items are either under study, require
    legislation for implementation, or are not yet completed.  To cut
    support costs, State was relocating a regional administrative
    management center from Mexico City to Charleston, South Carolina, and
    has discussed relocating functions handled by centers in Bangkok,
    Thailand and Paris, France to reduce annual costs by as much as $3.5
    million 5 years after completing the moves.  State does not have a
    plan for implementing these relocations.

       PRIVATE AND PUBLIC EXPERIENCES
       SHOW PLANNING IS ESSENTIAL TO
       DOWNSIZING
    ---------------------------------------------------------- Chapter 2:2

    The experiences of private and public sector organizations show that
    planning is essential for effective downsizing and restructuring.\1
    For example, our reports on previous reviews show that (1) downsizing
    needs to be based on a clear determination of an organization's
    mission and resource requirements and (2) personnel reductions need
    to be taken with a view toward retaining a viable workforce.  Without
    identifying core missions, functions, and processes, organizations
    acknowledged that they had cut needed employees, suffered skill
    imbalances, and were often forced to rehire or replace employees who
    had been separated.  At one company we reviewed, officials said that
    early cuts were not sufficiently tied to a larger strategy and only
    exacerbated the company's problems because work did not go away
    simply because staff positions were cut.  Eventually, this company
    analyzed the value of each functional area in the organization.

    --------------------
    \1 Federal Downsizing:  Observations on Agencies' Implementation of
    the Buyout Authority (GAO/T-GGD-95-164, May 17, 1995); Workforce
    Reductions:  Downsizing Strategies Used in Selected Organizations
    (GAO/GGD-95-54, Mar.  13, 1995); and Federal Downsizing:  The
    Administration's Management of Workforce Reductions
    (GAO/T-GGD-95-108, Mar.  2, 1995).

       CONCLUSIONS
    ---------------------------------------------------------- Chapter 2:3

    Although State's precise funding for the administration of foreign
    affairs has not been agreed upon, bipartisan efforts to balance the
    budget and downsize the government make it likely that State will
    receive less resources for the foreseeable future.  To successfully
    cope with the challenge of directing U.S.  foreign policy in the
    post-Cold War era during a period of declining real resources, State
    must be prepared to clearly articulate its key missions, identify the
    core functions linked to those missions, prioritize those activities
    that directly support missions and functions, and link potential
    resource levels to these activities.  Only then can the merits of
    various options for achieving significant cost reductions be
    effectively weighed, the need for administrative or legislative
    changes necessary to implement those options be identified, and
    difficult choices be made.

       RECOMMENDATION
    ---------------------------------------------------------- Chapter 2:4

    We are not taking a position on the level of resources needed by the
    State Department for the administration of foreign affairs.  However,
    given the likely decline in discretionary spending throughout the
    federal government and the various proposals for reductions in
    State's budget, State needs to plan for how it can become a smaller,
    more efficient, and less expensive organization.

    We recommend that the Secretary of State develop a downsizing
    strategy that (1) identifies critical and noncritical functions and
    their costs; (2) specifies the changes that would be necessary to
    adjust to potential funding levels; and (3) identifies what
    legislative actions or modifications to interagency agreements, if
    any, would be required to implement the changes.  At a minimum, State
    should have a strategy that is based on out-year funding guidance
    from OMB.  (Such a strategy would allow for consideration of other
    funding proposals and could be adjusted to accommodate actual
    appropriation amounts.)

       AGENCY COMMENTS AND OUR
       EVALUATION
    ---------------------------------------------------------- Chapter 2:5

    In commenting on a draft of this report, State disagreed with our
    conclusions and recommendation regarding the need to develop a
    strategy for adjusting to potential budget reductions.  State also
    commented that the report did not fully recognize some of the
    positive actions State has taken to streamline its operations.  For
    example, State said that its Overseas Staffing Board met in June 1996
    to begin implementation of an overseas staffing model.  State also
    indicated that it had progressed in setting priorities for
    intelligence gathering and reporting by expanding State's
    representation on the intelligence community and interagency boards.
    State agreed that strategic planning for downsizing is important, and
    believed that it had planned for what it described as "future
    reasonable budget cuts." But, State stressed that it does not accept
    and will not plan for proposed funding reductions that could approach
    44 percent.  It believes reductions of this magnitude would pose
    unacceptable risks and cause irreparable damage to America's national
    interests.

    Given the funding situation, we believe that State needs to seriously
    consider actions for adjusting to the potential funding scenarios.
    Furthermore, we believe that developing a downsizing strategy would
    enable State to focus available resources on its most critical
    functions and activities.  Absent a downsizing strategy based on a
    comprehensive review of its functions and processes, the Department
    cannot demonstrate clearly how funding reductions will hamper U.S.
    interests or be in a position to protect critical functions.

    OPPORTUNITIES FOR STREAMLINING
    FUNCTIONS
    ============================================================ Chapter 3

    Reducing or eliminating State's role in some foreign policy and
    consular functions could lead to cost reductions at headquarters and
    overseas posts, where State has a broad mandate to represent and
    protect U.S.  interests and provide services to a wide range of
    customers, including the Congress, other U.S.  agencies, the private
    sector, and the American public.  Over $500 million of the budget is
    specifically focused on implementing foreign policy, and about $270
    million is devoted to consular functions.  Options for State to
    consider include (1) reassessing the extent of its involvement in
    functions where State shares substantial, overlapping responsibility
    with other agencies and (2) cutting back on some specific activities
    and recouping the costs of some products and services.  State needs
    to face the challenge of identifying its core functions and their
    costs and making choices about the level of resource investments that
    are both appropriate and affordable to sustain those functions.

       STATE HAS A VARYING ROLE IN
       DIVERSE FUNCTIONS
    ---------------------------------------------------------- Chapter 3:1

    More so than ever, many government issues, policies, and activities
    have an international dimension, and State has taken a role in most
    cases.  In consultation with other government agencies, the State
    Department develops, coordinates, and implements U.S.  foreign policy
    and activities.  State's various functional offices and bureaus focus
    on key foreign policy objectives and programs that over time have
    evolved to cover a wide range of issues.  The Department evolved as a
    bulwark against the threat of communism, and U.S.  foreign policy was
    directed toward its containment.  With the end of the Cold War, State
    has increased its role in some areas.  For instance, with the consent
    of the Congress, State created a new Under Secretary for Global
    Affairs to direct efforts toward promoting human rights and workers'
    rights, supporting emerging democracies, protecting and improving the
    global environment, controlling population growth, assisting
    migration and refugees, and controlling international narcotics and
    crime.  Some of these issues were peripheral during the Cold War.

    To adjust to reduced budgets, State must scrutinize its functions and
    reassess its involvement in those functions.  State also must
    consider reducing some of its activities wherever feasible and
    recouping costs of the wide array of products and services it
    provides to numerous customers.

       OPTION:  REASSESS INVOLVEMENT
       IN CERTAIN FUNCTIONS
    ---------------------------------------------------------- Chapter 3:2

    State's functional bureaus share responsibility with multiple U.S.
    agencies on various overlapping policy issues.  We identified nearly
    30 agencies and offices involved in trade policy and export
    promotion, about 35 engaged in global programs, and over 20 involved
    in international security functions.  These agencies look to State
    for overall foreign policy guidance, and State often relies on them
    for program funds and technical expertise.  According to agency
    officials, the value State adds to these functions is its language
    expertise and negotiating skills as well as its knowledge of foreign
    governments, access to and contacts with host government officials,
    and understanding of the foreign political and economic environment.

    In the sections that follow, we describe selected State functions.
    The extent of State's involvement in these functions varies from one
    of a supporting role to that of a lead player.  The involvement of
    many agencies in similar or related functions does not mean the
    agencies unnecessarily duplicate activities, but it does suggest the
    potential for consolidation or transfer of some of State's duties.
    However, choosing which areas to cut is complicated because State's
    functions and activities can be broadly linked to foreign policy
    objectives, functions are specifically required by statute, or
    interagency processes require State's participation.  Furthermore,
    decisions about resource trade-offs are difficult because State's
    financial management system does not provide accurate cost data to
    show the amount State spends by function or activity or the level of
    resources applied to specific policy objectives.

          TRADE AND ECONOMIC ISSUES
    -------------------------------------------------------- Chapter 3:2.1

    In the area of international trade, the U.S.  government formulates,
    coordinates, and implements U.S.  economic and trade policy.  State
    helps U.S.  government efforts to (1) negotiate international
    treaties and trade agreements; (2) enforce U.S.  trade laws; (3)
    promote U.S.  exports; and (4) collect, analyze, and report
    information on economic issues.  While USTR and the Department of
    Commerce are at the center of federal trade activity, the Departments
    of State, the Treasury, Agriculture, and Labor are also involved in
    trade policy.  Overall about 20 other U.S.  agencies and offices have
    varying responsibilities under trade and economic policy.  USTR
    shepherds the formulation of U.S.  trade policy through an
    interagency process, and the Secretary of Commerce chairs the Trade
    Promotion Coordinating Committee, an interagency group that is
    required by statute to develop a governmentwide strategy for
    rationalizing the federal government's export programs.\1

    In some cases, agencies' responsibilities overlap in the area of
    international trade and economic policy functions.  For example,
    although USTR plays a lead role in developing and coordinating
    international trade policy, investigating some alleged unfair trade
    practices, and enforcing trade agreements, it relies on an
    interagency trade policy group to assist with these responsibilities.
    State participates actively in this group, sometimes as a lead
    player, and USTR relies on State to lead some negotiations and to
    execute policy.  State economic officers at overseas posts obtain
    information from and convey U.S.  positions to foreign governments.
    In fiscal year 1995, USTR had a staff of 163 employees and a budget
    of about $21.4 million.

    The Department of Commerce's U.S.  and Foreign Commercial Service and
    the Department of Agriculture's Foreign Agricultural Service promote
    exports.  The Commercial Service has 824 staff, including 213 foreign
    commercial officers at 133 overseas offices in 69 countries, and a
    fiscal year 1995 budget of $96.1 million.  With these resources, it
    helps individual U.S.  companies take advantage of specific export
    opportunities by providing foreign market research, trade
    finance-related information, and trade facilitation services.  The
    Foreign Agricultural Service promotes exports of U.S.  food and
    agricultural products and administers programs to enhance the
    competitiveness of U.S.  agricultural exporters.  As of September
    1995, the Foreign Agricultural Service had 1,097 staff, including 265
    at 75 overseas locations, and a fiscal year 1995 budget authority of
    $118 million.

    The role of State economic officers is to (1) persuade foreign
    governments to open markets for U.S.  companies by seeking lower
    tariffs and eliminating nontariff barriers; (2) seek to improve
    protection for intellectual property rights; (3) monitor
    implementation of trade agreements; and (4) participate in
    negotiations of economic agreements--a role it shares with USTR and
    the Departments of Commerce, the Treasury, and Agriculture.  In over
    100 smaller countries with limited markets, and where the U.S.  and
    Foreign Commercial Service and the Foreign Agricultural Service are
    not represented, State economic officers provide commercial
    assistance to U.S.  businesses and perform their traditional economic
    duties.  They identify export opportunities, provide businesses with
    contacts and advice on host country business practices and economic
    conditions, and sponsor trade events.

    U.S.  state governments and many city governments also promote trade
    abroad.  Some have offices overseas, and the U.S.  Chamber of
    Commerce has over 70 affiliated chambers in 65 countries.  While
    these entities supplement the U.S.  government's export promotion
    efforts, they are not generally viewed as a substitute for continued
    U.S.  government involvement in this area.  Officials we interviewed
    emphasized that nonfederal entities cannot officially represent the
    U.S.  government, nor can they provide market intelligence worldwide
    because collecting such information would be cost prohibitive.  Thus,
    the State Department plays a critical role in comprehensively
    representing U.S.  interests around the world and can, if necessary,
    challenge foreign governments' unfair or unethical practices to level
    the odds for U.S.  businesses.

    On transportation, international telecommunications, and
    international energy issues, State officials cite statutes and
    executive orders as the basis for State's involvement.  Other
    agencies generally provide the technical expertise, while State
    handles key negotiations and integrates agencies' actions with
    overall U.S.  foreign policy.  For example, State and the Department
    of Transportation are engaged in activities important to U.S.
    economic policy, including those of the Office of International
    Aviation within the Office of the Secretary and the U.S.  Maritime
    Administration.\2

    In fiscal year 1995, the International Aviation had about 40
    positions and a budget of $3.3 million, while the Maritime
    Administration devoted about
    7 positions and $612,100 of its budget to international activities.
    For International Aviation, Transportation and State share
    responsibilities for formulating, coordinating, and executing the
    U.S.  international aviation policy.  These responsibilities include
    negotiating and overseeing 107 bilateral air transport agreements
    that establish air service rights.\3 In addition, some countries'
    carriers serve the United States on the basis of comity and
    reciprocity without any written agreement.  Transportation provides
    technical expertise and does the substantive work in negotiating
    agreements, and State chairs aviation negotiations.  On international
    shipping policy, however, the U.S.  Maritime Administration takes the
    lead and chairs U.S.  delegations, negotiating with the five
    countries that have bilateral maritime agreements with the United
    States.  State is an active participant in these negotiations and is
    consulted on matters affecting U.S.  foreign relations and economic
    interests.  To carry out its transportation responsibilities, the
    Bureau of Economic and Business Affairs has
    7 officers involved in negotiating aviation agreements and 14
    officers working on transportation policy, including maritime
    negotiations.

    --------------------
    \1 We have issued several reports regarding coordination and
    reorganization of governmentwide international trade functions,
    including Government Reorganization:  Observations About Creating a
    U.S.  Trade Administration (GAO/T-GGD-95-234, Sept.  6, 1995),
    Commerce's Trade Functions (GAO/GGD-95-195R, June 26, 1995),
    Government Reorganization:  Issues Relating to International Trade
    Responsibilities (GAO/T-GGD-95-218, July 25, 1995), and International
    Trade:  Coordination of U.S.  Export Promotion Activities in Pacific
    Rim Countries (GAO/GGD- 94-192, Aug.  29, 1994).

    \2 Other Transportation offices that work with State on international
    activities are (1) the Federal Aviation Administration, which has 365
    positions, including 179 overseas, and a budget of $42.3 million; (2)
    the Office of International Transportation and Trade, with 22
    positions and a budget of $1.6 million; (3) the Office of the General
    Counsel, which has 10 positions and a budget of $1 million for its
    work on international law; and (4) the U.S.  Coast Guard, whose
    16-member international affairs staff have a budget of $929,630.

    \3 The United States has negotiated 72 air transport agreements that
    are currently in force.  In addition, 35 countries that were former
    colonies of other nations have in force the provisions of the
    preindependence bilateral agreement between the United States and the
    previous governing power.

          INTERNATIONAL SECURITY
          ISSUES
    -------------------------------------------------------- Chapter 3:2.2

    In the area of international security affairs, State focuses on arms
    control, the nonproliferation of weapons of mass destruction, export
    controls, and regional security.  In some cases, State shares its
    expertise on certain issues, while other agencies complement State's
    contribution.  In other cases, the uniqueness of each agency's
    contribution is unclear.  For example, one area of overlap is in the
    review of export license applications.  State's Office of Defense
    Trade Controls, under the Political- Military Bureau, works in
    partnership with the Defense Department on license applications for
    arms exports.  The Office also confers with the Commerce Department
    on license applications for exports of sensitive dual-use items and
    with the Department of Energy for exports of nuclear-related
    material.  Both State and ACDA are involved in dual-use and arms
    export issues.  In some instances, multiple agencies review the same
    applications to provide their perspectives and expertise.

    In the area of arms control, studies issued by the Office of
    Inspector General for ACDA, the Office of Inspector General for
    State, and the National Security Council suggest that duplication
    between State and other agencies could be eliminated.  In August
    1995, the Office of Inspector General for ACDA (which also serves as
    the Office of Inspector General for the Department of State) reported
    that duplication between ACDA and State's Political- Military Bureau
    "promotes inefficient use of resources by both organizations and
    accentuates turf consciousness, dissipating energies and damaging
    morale."\4 Without specifying where duplication exists, the report
    recommended that ACDA, with State, reassess the division of labor and
    make more extensive use of teams to accomplish tasks of mutual
    interest.

    A State official acknowledged that the Political-Military Bureau's
    Office of Strategic Policy and Negotiations and ACDA probably have
    some duplication or overlap in functions on which ACDA is the lead
    agency.  He said, however, that duplication of this type does not
    mean that both organizations are doing the same work.  Rather,
    State's office represents the Department's interests and articulates
    State's positions on delegations or interagency groups.  Furthermore,
    the official said such duplication was necessary because each agency
    has different goals, perspectives, and agendas.  The official added
    that without State's involvement, needed political and diplomatic
    input would be lost, and overall policy and diplomacy efforts could
    become imbalanced.  State noted that it is seeking to identify and
    reduce unnecessary duplication between State and ACDA in order to
    reduce costs while maintaining a productive overlap.

    --------------------
    \4 Report of Inspection, The U.S.  Arms Control and Disarmament
    Agency (ACDA-ISP/I-95-44, Aug.  1995).

          GLOBAL ISSUES
    -------------------------------------------------------- Chapter 3:2.3

    Although State represents U.S.  interests and formulates policy on
    global issues, USAID plays a key role in implementing programs
    concerning democratization ($432 million), population ($568 million),
    and the environment ($799 million), spending a total of about $1.8
    billion in fiscal year 1995.  USAID works with State to develop
    conference agendas and provides technical expertise, but State leads
    delegations to international conferences and negotiates treaties on
    these issues.

    On environmental issues, State often relies on the Environmental
    Protection Agency for policy and technical expertise.  However, State
    plays a key role in representing U.S.  interests in international
    organizations' activities relating to environment, science and
    technology, and health issues.  In addition, State clears bilateral
    agreements negotiated by the Environmental Protection Agency.  In
    fiscal year 1995, the Agency devoted about 160 work years, including
    15 staff in overseas assignments, and a budget of $44 million to its
    international activities.  These activities included protecting U.S.
    citizens and natural resources from transboundary and global
    environmental threats, leading U.S.  government efforts to implement
    the Western Hemisphere Summit Program on Partnership for Pollution
    Prevention.  The Environmental Protection Agency also works with
    other agencies and the private sector to match pressing environmental
    problems overseas with U.S.  suppliers of environmental technologies.

    Labor and workers' rights issues are addressed within State's bureaus
    of Democracy, Human Rights, and Labor; Economic and Business Affairs;
    Population, Refugees, and Migration; and International Organizations.
    In addition, State's Office of International Labor Affairs, which has
    a headquarters budget of $381,000, maintains about 45 attach�s
    overseas to gather detailed information on workers' rights outside
    the United States and prepare congressionally required reports on
    workers' rights.  Moreover, the Department of Labor, which is the
    lead agency for formulating international economic, trade, and
    immigration policies affecting U.S.  workers, has a fiscal year 1995
    budget of $12.2 million and about 90 staff to deal with its
    international responsibilities.  It participates in interagency
    committees and international conferences and meetings and serves as
    the lead U.S.  representative in multilateral forums on labor.

    By eliminating the positions of 6 headquarters staff and the 45 labor
    attach�s overseas, State could reduce costs by about $7.4 million
    annually.  According to several officials at overseas posts, labor
    issues could be adequately covered by political and/or economic
    officers.  In addition, several State bureaus monitor labor issues.
    State has proposed abolishing or lowering the rank of some labor
    attach� positions in the past but has encountered resistance from the
    Department of Labor and organized labor.

       OPTION:  CUT ACTIVITIES AND
       RECOUP COSTS
    ---------------------------------------------------------- Chapter 3:3

    Faced with a reduced budget environment, State must make choices
    about which areas to cut while considering the interrelationships
    among State's bureaus and offices and between State and other
    agencies.  State may find it difficult to decide where it can
    transfer, eliminate, or deemphasize its role, yet maintain priority
    functions and activities.  Nevertheless, in our opinion, State can
    cut some of its expenses by eliminating or reducing the Department's
    involvement in some areas.  Furthermore, State can also consider
    alternative ways to recover the costs of the wide array of the
    products and services it provides to its customers.

          OPTIONS FOR REDUCING
          REPORTING REQUIREMENTS
    -------------------------------------------------------- Chapter 3:3.1

    Reduced budgets will likely compel State to reassess its workload
    requirements to match its resources.  One key area is that of
    reporting.  State is a principal provider of information used by the
    U.S.  government in foreign policy formulation.  It reports on key
    developments, including analyses of the politics, economic trends,
    and social forces at work in foreign countries, to some 60 federal
    agencies dealing with national security, intelligence, economic and
    commercial matters, science and technology, and other issues.  While
    some of the reports could be eliminated or curtailed, it is not clear
    which are the best candidates because their cost and relative value
    to the users are unknown.

    In fiscal year 1996, State is required to produce over 130
    congressionally mandated reports.\5 These reports require input from
    numerous posts worldwide and the use of considerable resources at
    headquarters and at overseas posts.  Streamlining some of these
    reporting requirements not only could significantly reduce resource
    requirements at State but also could reduce demands on other agencies
    that must review some of these reports.

    The Bureau of Economic and Business Affairs, which recently
    eliminated over 40 reports affecting up to 110 posts, believes that
    the requirement to produce country reports on economic policy and
    trade practices should be eliminated.  These reports, required by the
    Omnibus Trade and Competitiveness Act of 1988, consume the equivalent
    of 5 staff years at headquarters and 100 posts at an annual cost of
    at least $500,000.  Several officials suggested that State seek
    legislative relief from this requirement, since the reports'
    information is available through other sources.

    Other reporting requirements that consume substantial resources are
    the annual country reports on human rights practices and the annual
    report on science, technology, and American diplomacy.  Geographic
    bureau and post officials reported that they spent large blocks of
    time producing these reports.  For the human rights reports, the time
    required to prepare an annual report varies from country to country.
    One overseas official, who said he spends 40 to 50 percent of his
    time covering human rights issues, estimated that drafting a country
    summary for the human rights report takes at least 4 weeks.  The
    concern here is that State expends resources on these reports even in
    countries where human rights issues are not significant.  In addition
    to the 194 overseas posts that contribute to the report, State has
    indicated that one employee spends roughly 6 months working on the
    reports, and seven work on the reports full time for
    4 months.  About 12 more employees review reports within their
    regional areas of responsibility in the course of their regular
    workday.  According to one State official, if faced with substantial
    budget reductions, State may have to limit reporting on those
    countries where human rights abuses are least prevalent.

    --------------------
    \5 These reports are required periodically--that is, monthly,
    quarterly, semiannually, annually, or as specified.  About 40
    additional reports are required intermittently, as actions warrant.

          OPTIONS FOR REDUCING OVERLAP
          WITHIN STATE
    -------------------------------------------------------- Chapter 3:3.2

    Lessening overlap within State's offices could reduce costs.  For
    most functions and activities, several offices and bureaus within
    State headquarters and overseas posts are involved.  In February
    1995, State completed a preliminary functional study of domestic
    positions, focusing on potential areas of overlap and duplication.
    Although the study did not offer definitive answers or management
    options, it provided some clear examples of potential duplication of
    functions for further research.  For example, 24 political- military
    positions are in bureaus other than the Bureau of Political-Military
    Affairs, 59 economist positions are in bureaus other than the Bureau
    of Economic and Business Affairs, and 9 science positions are outside
    the Bureau of Oceans and International Environmental and Scientific
    Affairs.  Moreover, the study indicated that there is potential
    overlap between the Bureau of Intelligence and Research and regional
    and functional bureaus throughout the Department.

    Furthermore, geographic bureaus are organized to overlap with many
    foreign policy and support functions.  In a way, they operate as six
    micro-State departments, basically administering U.S.  foreign policy
    in different regions of the world.  Within each of the six bureaus is
    an Office of the Executive Director with financial management,
    personnel, and other support positions; a political and economic
    section or a combined political-economic section with regional
    responsibilities; and country desks that serve as the liaison between
    State headquarters offices and overseas posts.

          OPTIONS FOR RECOVERING COSTS
          OF SOME SERVICES
    -------------------------------------------------------- Chapter 3:3.3

    State could recover some costs by charging for selected services and
    products.  Charging for such services would force the customer to
    reassess the relative value of the service.  State currently makes
    only limited efforts to routinely compile data on the cost of its
    reports and services.  Agencies we contacted generally valued the
    reports and services that State provided, but since costs are
    unknown, organizations have difficulty making cost-benefit decisions.

    State has historically charged for consular services but not for its
    factual and analytical reports, business assistance services, and
    assistance to overseas visitors.  For example, the economic/
    commercial section of Embassy Asuncion, Paraguay, handled about 30
    interagency requests between September and October of 1995, including
    requests from USTR; the Federal Aviation Administration; the U.S.
    Trade and Development Agency; and the Departments of Commerce, the
    Treasury, and Energy--none of which has representatives in Paraguay.
    The Consulate General in Sao Paulo, Brazil, supported at least 14
    high-level visits in 1995, including one congressional delegation;
    the Secretary of Commerce and the Secretary of the Treasury; the
    governors of Wisconsin and Nebraska; the mayor of Orlando, Florida;
    the Director-General of the U.S.  and Foreign Commercial Service; and
    U.S.  Export-Import Bank officials.  State is not compensated for
    staff time and some other expenses associated with these services.

    Unlike other areas in the Department, State's goal in Consular
    Affairs is to recover the total cost of selected services.  For
    example, based on a 1991 cost study that showed the average cost of a
    passport was about $60, State now charges $65 to issue a passport.
    In fiscal year 1995, State collected $552 million in consular
    fees--funds that reverted back to the Treasury.  Since 1994, State
    has been authorized to retain the surcharge collected for
    machine-readable visas, expedited passport fees, and certain
    processing fees.  For fiscal years 1994 and 1995, State was allowed
    to keep up to $107.5 million--funds that the Bureau of Consular
    Affairs indicated it is using to finance improvements to some of its
    passport and visa programs.  Consular Affairs is considering raising
    fees and charging for services that are currently free and may seek
    legislative authority to retain more fees to finance its activities.
    It may also seek legislative authority to make permanent the
    Department's retention of machine- readable visa fees.

    In March 1996, State issued instructions to overseas posts to collect
    fees for some commercial services.  Under a newly authorized program,
    State will collect fees for commercial services at posts where the
    Commercial Service is not represented.  The potential annual
    revenues, estimated to be as much as $3,000 per post, will be
    reinvested to support business assistance activities.

    In September 1995, State's Inspector General recommended that the
    Bureau of Political-Military Affairs consider expanding manufacturer
    and exporter registration and licensing fees to improve State's arms
    export and compliance activities.  Under its annual appropriation
    act, State may retain a stated amount annually, funds that the Bureau
    has used for information systems to modernize the Bureau's
    operations.  In fiscal year 1995 State retained $700,000.  In
    comparison, officials from the Nuclear Regulatory Commission, which
    also charges arms manufacturers and exporters registration and
    licensing fees, said that the Commission's licensing process is
    self-financing from fees that range from $100 to $7,000 per license.

    While State currently has authority to collect and retain fees for a
    number of the products and services it provides, it should determine
    whether there other areas in which it could benefit from additional
    cost-recoupment authority.

       POTENTIAL IMPACT OF CUTTING
       BACK ON STATE'S ROLE IN CERTAIN
       FUNCTIONS
    ---------------------------------------------------------- Chapter 3:4

    The cost-cutting decisions that State may make could adversely affect
    other agencies.  For example, because USTR has only one overseas
    office in Geneva, Switzerland, it relies on State for field support
    in developing and enforcing trade agreements.  In a similar vein, the
    U.S.  Export-Import Bank, which has no offices overseas, also relies
    on State for support in analyzing the credit risks of countries and
    negotiating and enforcing the terms of foreign loans.  Moreover,
    State and agency officials emphasized that if other agencies, such as
    the Department of the Treasury and the Federal Aviation
    Administration, downsize their presence overseas due to reduced
    budgets governmentwide, they are likely to rely on State even more
    for field support of international activities.

    Other agencies also rely on State for support from the international
    conferences and contingencies account, which funds the U.S.
    government's participation in about 700 international conferences.
    Although the State Department coordinates overall U.S.
    participation, other agencies, such as the Departments of Labor and
    Transportation and USTR, provide technical expertise and lead
    delegations where appropriate.  When the Congress reduced the account
    from $6 million in fiscal year 1995 to $3 million in fiscal year 1996
    ($2 million for conferences), the State Department told other
    agencies that it could no longer fund non-State participants.
    According to agency officials, State's decision forced agencies to
    limit or cancel their participation in some conferences, even though
    in some instances the other agencies, not State, lead the U.S.
    delegation.  To help them plan for anticipated cuts in State support
    and services, agency officials urged the Department to coordinate its
    plans with other agencies in advance to allow those affected by
    State's decisions sufficient time to make alternate arrangements.

    Another example of the impact of State cutbacks on other agencies is
    in the assignment of detailees.  State assigns detailees to agencies
    such as USTR, the National Security Council, and the Department of
    Defense as well as to congressional offices.  Similarly, other
    agencies, like USAID, assign detailees to the State Department.  As
    State and other agencies face reduced budgets, they may have to
    consider the costs and benefits of detailing staff to outside
    assignments.  Although State has no immediate plans to eliminate or
    seek reimbursements for all detailees, the Department recently formed
    a committee to review the policy.  State currently has 136 employees
    detailed to other agencies.  USTR has about 40 detailees from other
    agencies, 10 of whom are from the State Department, to augment its
    163-member staff.  Officials there expressed concern that State would
    first try to reduce costs by eliminating the detailees it provides
    cost- free.  USTR officials told us that, considering their limited
    budget and staff, such an action would adversely affect their
    operations.

       CONCLUSIONS
    ---------------------------------------------------------- Chapter 3:5

    Given the potential that State's budget will decline, the Department
    must scrutinize its diverse functions to determine which are
    critical, decide on appropriate levels of resource investments, and
    identify areas that could be streamlined.  Offices within State share
    responsibility with multiple U.S.  agencies for various overlapping
    policy issues, which may suggest the potential for consolidating or
    transferring some of State's duties.  Other agencies may be able to
    assume greater responsibility in some areas.  On the other hand,
    budget considerations may increase other agencies' reliance on State
    for support of their international activities.  Therefore, in making
    these streamlining and management decisions, State will need to
    consider how cost-cutting decisions within the Department may
    adversely affect other agencies.

    State also must reassess its involvement in certain functions and
    activities.  This may include seeking legislative relief from certain
    congressionally mandated reports or authorization to downgrade the
    level of certain services.  State also needs to consider recouping
    the costs of products and services it provides to numerous customers.
    This will require State to maintain cost information (which it does
    not currently have) in order to weigh the costs and benefits of its
    products and services and prioritize requirements.  More importantly,
    the availability of cost information could help State identify which
    functions and activities are most essential and which areas can be
    eliminated, reduced, or deemphasized should reduced budgets compel
    such action.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ---------------------------------------------------------- Chapter 3:6

    In commenting on a draft of this report, State said that this chapter
    accurately describes State's foreign affairs activities and the large
    number of other organizations involved.  State made a number of
    technical suggestions, some of which we incorporated in the report.

    Regarding our discussion of the human rights reports, State indicated
    that the Department had taken steps to streamline the report
    preparation process (such as eliminating unnecessary redrafting and
    providing updates only, rather than full reports).  The Department of
    Labor expressed its concern regarding streamlining these reports,
    noting that continuity in coverage is important to the analysis of
    human rights issues.  State also said that it had taken steps to
    streamline its labor function, which State believes remains important
    to U.S foreign policy interests.  The Department of Labor also
    objected to eliminating labor attach� positions and asserted that
    neither political nor economic officers can effectively perform the
    labor function.

    We did not recommend that specific functions or activities be
    curtailed or eliminated.  Rather, we identified a number of options
    that, if implemented, would help enable State to adjust to potential
    budget reductions.  In a period of limited resources, State may have
    to scrutinize its functions and reassess its involvement in all
    areas, including human rights reporting and labor functions.

    OPTIONS FOR REDUCING OVERSEAS
    PRESENCE
    ============================================================ Chapter 4

    Overseas posts consume almost 70 percent of State's budget.  Thus, a
    fundamental rethinking and restructuring of the U.S.  overseas
    presence offers the greatest potential to achieve substantial budget
    reductions.  State officials believe that certain proposed funding
    levels could force them to close 50 to 100 of its 252 overseas posts.
    The post closures and other actions that would result from such a
    restructuring would mean a reversal of State's long-standing
    "universality" policy to maintain a presence in nearly every country
    and could have other consequences as well.  State has proposed the
    closure of some posts and made efforts to reduce post costs but has
    made little headway because of internal and external resistance.
    Establishing an external commission to review proposed post closures
    and vesting greater authority in the chiefs of mission to achieve
    cost reductions are two approaches for addressing the problems.

       OVERSEAS POSTS ARE COSTLY TO
       OPERATE
    ---------------------------------------------------------- Chapter 4:1

    The State Department's overseas posts cost about $1.9 billion
    annually.  This amount includes the personnel costs for State's
    overseas U.S.  direct-hire and foreign service national (FSN)
    employees; operating expenses; and the costs for equipment, security,
    and building acquisition and maintenance.  State employs about 7,000
    U.S.  direct-hire workers and about 9,300 FSNs at its posts.\1 It
    maintains embassies in most countries' capitals, consulates in some
    commercial centers outside capital cities, and missions to
    international organizations in some countries.

    The agendas, sizes, and costs of overseas posts vary greatly.  Some
    posts are small and provide basic U.S.  representation in a country.
    Other posts' operations are comprehensive, with more staff and larger
    budgets to support a large number of government agencies.  The State
    Department categorizes posts as representational, focused, small,
    medium, large, and comprehensive.

    A representational post serves as a diplomatic and consular presence
    in a host country's capital or in a major city of the country.  Posts
    in the Central African Republic, Grenada, and Western Samoa are
    considered representational, and their annual costs range from about
    $240,000 to about $2.5 million.\2 A focused post not only serves as a
    diplomatic or consular presence but also functions in one or more
    specific areas, such as foreign assistance or narcotics control.  The
    posts in Burkina Faso, Mongolia, and Vatican City are considered
    focused, and their annual costs range from about $1.6 million to
    about $3.1 million.

    The responsibilities of posts increase with their designation as
    small, medium, large, and comprehensive.  Responsibilities range from
    addressing U.S.  government policy and support requirements with a
    small staff at a small post to addressing a full range of intensive
    bilateral and multilateral issues as well as important and
    long-standing U.S.  domestic issues with a large, diverse staff at a
    comprehensive post.  Costs for medium, large, and comprehensive posts
    are substantial.  For example, it costs $54.2 million annually for a
    comprehensive embassy and five consulates in Japan.

    Large and comprehensive posts--those with the greatest
    responsibilities--understandably absorb a disproportionate share of
    the total costs of U.S.  overseas posts.  As shown in table 4.1, 10
    of State's more expensive missions accounted for over $396 million,
    or over 21 percent of costs in fiscal year 1995.  In contrast, 10 of
    State's least expensive missions accounted for nearly $14 million, or
    less than 1 percent of total costs.

                                   Table 4.1

                          State's More Costly Missions

                             (Dollars in millions)

    Mission                                       Fiscal year 1995 funding
    ----------------------------------------  ----------------------------
    Germany                                                          $90.3
    Japan                                                             54.2
    Mexico                                                            42.3
    France                                                            53.5
    Italy                                                             35.1
    United Kingdom                                                    28.0
    Brazil                                                            27.4
    Canada                                                            19.6
    Austria                                                           23.1
    Saudi Arabia                                                      22.8
    ----------------------------------------------------------------------
    Source:  State Department, Bureau of Finance and Management Policy.

    --------------------
    \1 The U.S.  government has approximately 35,300 U.S.  government
    employees at overseas posts, including about 18,600 direct-hire
    employees and about 16,700 FSN employees.

    \2 These are State's estimates of fiscal year 1995 funding levels and
    include the estimated personnel costs for State's overseas U.S.
    direct-hire and FSN employees; operating expenses; and equipment,
    security, and foreign building operations.  Estimated funding
    includes direct appropriations and reimbursements from other agencies
    and may also include funds for some nonrecurring costs (e.g.,
    construction).

       POST FUNCTIONS AND RESOURCE
       ALLOCATIONS
    ---------------------------------------------------------- Chapter 4:2

    The overseas posts' primary mission is to support U.S.  foreign
    policies by promoting political interests; supporting U.S.  economic
    and trade interests; participating in efforts affecting global issues
    such as the environment, counternarcotics, and labor; issuing visas;
    and assisting American citizens.  Posts also provide a wide range of
    services, including communications, office and residential building
    operations, health, equipment installation and maintenance,
    personnel, budget and fiscal, travel, motor pool, procurement,
    shipment and customs support, and security in support of mission
    operations and staff.

    Figure 4.1 shows the work assignment distribution of State's
    direct-hire employees posted overseas.  As shown in the figure,
    support functions consume a significant amount of post resources.

       Figure 4.1:  State's Overseas
       U.S.  Direct-Hire Employees

       (See figure in printed
       edition.)

    \a Other includes science, refugee, and narcotics positions.

    Source:  State Department, Office of Resource Management and
    Organization Analysis, Bureau of Personnel.

    In addition to U.S.  direct-hire employees working in support
    positions, State also employs over 9,300 FSNs, most of whom work in
    support areas.  State supports not only its own activities but also
    those of other agencies; in fact, State supports more of other
    agencies' U.S.  direct-hire employees--whose number has increased
    steadily--than its own.\3

    Individual posts provide a good illustration of resource allocations
    and post functions.  During our review, we visited posts in six
    countries that vary in the numbers of staff, work, and budgets (see
    table 4.2).

                                        Table 4.2

                             Post Resources in Six Countries

                                  (Dollars in millions)

                                                                             State's
                                                                             funding
                                                                               level
    Cou                  U.S.                  U.S.                          (fiscal
    ntr  Number of     direct    FSN and     direct    FSN and      Total       year
    y        posts       hire    other\a       hire    other\a      staff    1995)\b
    ---  ---------  ---------  ---------  ---------  ---------  =========  ---------
    Bel          1         12         48          3         12         75       $2.0
     ar
     us
    Bra        5\c        120        431         88        204        843       27.4
     zil
    Mal          1         41        123         32         44        240        8.4
     ay
     si
     a
    The          2         40         69         78         43        230        9.3
     Ne
     th
     er
     la
     nd
     s
    Par          1         19        125         21         80        245        4.5
     ag
     ua
     y
    Sen          1         29        147         43        157        376        8.0
     eg
     al
    --------------------------------------------------------------------------------
    \a Includes part-time intermittent temporary employees, U.S.
    personal service contractors, Marine security guards (listed only as
    State Department staff), and foreign national personal service
    contractors.

    \b Includes personnel costs for State's overseas U.S.  direct-hire
    and FSN employees; operating expenses; and equipment, security,
    representation, and foreign building operations.  Amounts may include
    some nonrecurring costs such as those for building construction and
    remodeling.

    \c While conducting our fieldwork, Brazil had five posts, but the
    Consulate in Porto Alegre closed earlier this year and Brazil now has
    four posts.

    Source:  U.S.  missions to Belarus, Brazil, Malaysia, The
    Netherlands, Paraguay, and Senegal and the State Department's Bureau
    of Finance and Management Policy.

    The posts in Belarus and Paraguay are considered small posts; those
    in Malaysia, The Netherlands, and Senegal are considered medium to
    large; and the embassy in Brazil is considered large.  Appendix I
    includes information on the State Department's overseas political;
    economic; and commercial, global, and consular activities, focusing
    on activities at these posts during September and October 1995.
    These activities may or may not be representative of the posts'
    missions as defined by State, but they give insight into the variety
    of issues the posts must deal with.

    An important function of overseas posts has traditionally been to
    maintain contact with foreign governments on political and security
    issues.  Together with the ambassador and the deputy chief of
    mission, a post's political section attends to the day-to-day
    political relations with the host government and attempts to build
    support for U.S.  government policies.  It also informs the U.S.
    government of host country policies and actions that affect U.S.
    interests.  At the posts we visited, the political sections spent
    most of their time analyzing and reporting on the political situation
    there, representing the U.S.  government and developing contacts
    within the host country, and supporting official visitors to the
    country.

    State posts also support U.S.  economic interests overseas,
    particularly in the areas of business assistance and trade advocacy.
    At the posts we visited, ambassadors were spending up to one-third of
    their time on economic and trade advocacy activities, often
    personally weighing in on behalf of U.S.  businesses where
    appropriate.  Posts also support issues of a global nature, such as
    the environment, counternarcotics, and labor as well as specific
    issues like international war crimes tribunals.

    The consular section of an overseas post provides passport and
    citizenship services; immigrant and nonimmigrant visa services; and
    services to U.S.  citizens overseas, for example, helping Americans
    in trouble abroad.  The sections we visited do a high volume of work
    with limited staff, collecting fees for many of their services.

    Although political, economic, and consular functions are the primary
    missions of the overseas posts, support structures consume a large
    share of State's allocated resources.  At the posts we visited, 28 to
    67 percent of State's staff were devoted to support duties.
    According to State officials, the number of personnel needed for
    support is influenced by several factors, including language
    constraints, the quality of the local infrastructure, and the
    availability of skilled labor locally.  Table 4.3 shows the support
    staffing levels in the six countries we visited.

                                   Table 4.3

                    Support Staffing Levels in Six Countries
                                     (1995)

                                                                     Total
                                                       State       support
                                 State   Total       support         staff
    Country                      staff   staff         staff     (percent)
    --------------------------  ------  ------  ------------  ------------
    Belarus                         60      75            50            67
    Brazil                         551     843           397            47
    Malaysia                       164     240           118            49
    The Netherlands                109     230            65            28
    Paraguay                       144     245           119            49
    Senegal                        176     376           154            41
    ----------------------------------------------------------------------
    Source:  U.S.  missions to Belarus, Brazil, Malaysia, The
    Netherlands, Paraguay, and Senegal.

    The contrast between the number of support staff and staff working on
    the primary missions is striking at some of the posts.  For example,
    of the 843 employees at the posts in Brazil, 551 work for State.  Of
    State's 551 employees, 154 work in substantive areas and 397 work in
    support areas.

    --------------------
    \3 Of the approximately 18,600 U.S.  direct-hire employees assigned
    to overseas posts, about 11,600 (62 percent) work for non-State
    agencies.

       OPTIONS FOR CLOSING AND
       RESTRUCTURING POSTS
    ---------------------------------------------------------- Chapter 4:3

    State has closed and reduced the size of posts in recent years
    because of funding constraints.  For example, since 1991, State has
    closed 31 posts, most of which were consulates in countries with
    multiple posts.  During the same period, State has also opened 28
    posts mostly in the newly independent states of the former Soviet
    Union.

    State has a number of options to consider in closing more posts and
    streamlining post operations.  However, such actions are likely to
    face continued resistance both from within State and externally.
    According to a 1992 State management study, some State officials
    favor multiple country accreditation in some regions, where an
    ambassador operating from a regional post would "circuit ride" to
    several small, neighboring countries.  Regional posts would allow
    consolidation of staff and other resources in one central location,
    although cost reductions would be offset to some degree by travel and
    other related expenses.  The study stated that dual or triple
    accreditation can work if there is reasonable geographic proximity or
    if convenient air routes are available; no or very small other-agency
    representation is in the country or countries concerned; and only
    occasional "tending" for diplomatic reasons is needed.  State
    favorably cited British representation in Africa, where ambassadors
    are accredited to three or four countries each.  The U.S.  Embassy in
    Bridgetown, Barbados, has full diplomatic responsibilities for 7
    countries and partial diplomatic responsibility for 14 others in the
    eastern Caribbean.  If the foreign affairs budget declines, Embassy
    Bridgetown could serve as a model for regionalizing American
    diplomatic presence.  To reduce costs, the State Department could
    expand multiple country accreditation to other regions, such as the
    Baltic States, Africa, and countries in South America such as Guyana
    and Suriname.

    A second option would be to reevaluate the need for consulates.  One
    Deputy Chief of Mission suggested that while consulates served a
    variety of purposes during the Cold War, expanded media coverage and
    improved information and telecommunications technology have lessened
    the need for them.  The Deputy Chief of Mission posed an option to
    eliminate all consulates to avoid political pressures when closures
    of specific consulates are debated.  Although many consulates are
    small or moderately sized, some are bigger and more expensive to
    operate than major embassies.  For example, in fiscal year 1995, the
    consulate in Frankfurt, Germany, cost about $18.8
    million--substantially more than the cost of operating the embassy in
    Ottawa, Canada ($5.9 million), and almost as much as the combined
    total for the embassy and all six consulates in Canada ($19.6
    million).\4

    To critically review these and other options, one strategy would be
    to establish an independent post closure panel like the Defense Base
    Closure and Realignment Commission--an approach that resulted in
    decisions to close, realign, or otherwise downsize hundreds of
    military bases and installations.  Although the criteria involved in
    closing and downsizing overseas diplomatic posts are different, a
    panel much like the Commission may be useful.  A panel could review
    the needed governmentwide presence at overseas posts as they relate
    to planned funding priorities.  Since many other agencies depend on
    State's overseas presence, we believe that such an approach would
    allow for decision-making based on the need to support both State and
    non-State activities, consistent with overall U.S.  policy interests
    and priorities as well as available resources.

    We believe that establishing such a commission would also have the
    added advantage of mitigating at least some of the pressures and
    parochial interests that have historically operated to maintain a
    U.S.  overseas presence.  The State Department's traditional policy
    of maintaining a diplomatic presence in nearly every country--the
    policy of "universality"--is the primary reason that there are 252
    overseas posts, even where U.S.  interests are now minimal.

    Universality is a principle rooted in the Cold War.  According to the
    National Performance Review, during the Cold War, the United States
    obligated itself to maintain a presence around the world at least
    equal to that of the Soviet Union.  However, despite the end of the
    Cold War, State remains reluctant to close embassies.  In 1992, State
    decided to help finance new posts in the former Soviet Union by
    closing posts in other geographic regions, but some of State's
    geographic bureaus resisted proposing posts for closure.  One bureau
    argued that it had been established in response to congressional
    interest in the region and that closing posts would be contrary to
    congressional intent.  Another bureau initially refused to propose
    that any post be closed because it wanted to retain at least some
    presence in all countries.

    Despite the expense, the concept of universality remains firmly
    rooted in State's policy.  State officials say that even in countries
    with minimal U.S.  interests, a U.S.  presence is important to
    provide international leadership, for example, to influence votes in
    the United Nations.  In September 1995, the Secretary of State
    reaffirmed his commitment to universal representation, noting that it
    had been invaluable in extending the nuclear nonproliferation treaty
    earlier in the year and that it was essential when crises erupt in
    unexpected places like Burundi and Belarus and when American citizens
    experience trouble abroad.\5

    In addition to internal resistance, the State Department has faced
    outside resistance to closing posts.  In December 1992, for example,
    State reported that congressional scrutiny, special interests, ethnic
    groups, and other domestic U.S.  political constituencies often
    emerge to oppose the closing of posts.\6 In its 1992 post closing
    exercise, State originally proposed closing 20 posts in fiscal years
    1993 and 1994.  After consultation with congressional members on
    these closures, State announced that 19 of the 20 would close and
    then later reduced that number to 17.

    In July 1995, in its latest attempt to close posts, State notified
    the Congress that it intended to close 19 posts.  It later withdrew
    six of the posts from the list due to external pressures.  For
    example, as a result of pressure from a member of Congress and the
    Drug Enforcement Agency, State removed the consulate in Curacao,
    Netherlands Antilles, from the list.  Some of the other five
    withdrawn posts--in Apia, Western Samoa; Edinburgh, Scotland;
    Florence, Italy; and Hermosillo and Matamoros, Mexico--have
    repeatedly appeared on lists of proposed closures.  State had
    expected to reduce its costs by about $12 million a year beginning in
    fiscal year 1997, the year following the 19 closures.  However, after
    withdrawing six posts from the list, the projected cost reductions
    were reduced to about $9.3 million.

    --------------------
    \4 These are State's estimates of fiscal year 1995 funding levels.
    The estimated costs for the embassy in Ottawa do not include the cost
    of foreign building operations; however, the combined total for
    Canada includes these costs.

    \5 Speech before the Council on Foreign Relations, Washington, D.C.,
    September 20, 1995.

    \6 State 2000:  A New Model for Managing Foreign Affairs, State
    Department, Washington, D.C., December 1992.

       OPTIONS TO REDUCE POST COSTS
    ---------------------------------------------------------- Chapter 4:4

    In addition to actual post closures and consolidations, another
    option is to consider ways to reduce post costs.  Since a large
    portion of overseas costs are structured around staffing, large
    budget reductions will likely mean further cuts in overseas staff and
    operating costs.  However, embassy managers have little control over
    resources.  As a result, the National Performance Review recommended
    that a pilot project be set up to give chiefs of mission more
    authority over all U.S.  government resources at posts.\7 This
    recommendation has not yet been implemented.

    --------------------
    \7 Creating a Government That Works Better and Costs Less:
    Department of State and U.S.  Information Agency, Accompanying Report
    of the National Performance Review, Office of the Vice President
    (Washington, D.C.; Sept.  1993).

          OPTIONS FOR REDUCING
          OVERSEAS STAFFING
    -------------------------------------------------------- Chapter 4:4.1

    Because of possible budgetary constraints, State may have to further
    reduce the size of overseas posts--an even more likely possibility if
    State remains reluctant to abandon its policy of near universal
    representation.  State could achieve significant cost reductions by
    making large-scale reductions in overseas staffing.  The prospect of
    further reductions in overseas staffing means that an effective
    system for allocating overseas staff based on agency goals and
    objectives is essential.

    In December 1992, State reported that there had long been concerns
    that the overseas staffing process was not directly linked with the
    goals and objectives at specific posts.  In 1993, among a number of
    other organizational changes, the Secretary approved a plan to
    restructure the overseas diplomatic presence.  As part of this
    effort, State was to implement a new overseas staffing model, under
    development since 1990, to provide a rational basis for allocating
    personnel to overseas posts.  However, as of January 1996, State had
    still not implemented the model.  In commenting on a draft of this
    report, State noted that its Overseas Staffing Board met in June 1996
    to begin implementation of a model to rationalize overseas staffing.

    State's costs would be much less if State made large-scale reductions
    in overseas staffing.  For example, the cost reductions from
    eliminating only 10 positions from overseas posts could total at
    least $1.5 million.  State's Office of Budget and Planning estimates
    the cost of positions overseas from two different perspectives:  (1)
    the costs of adding a new American position and associated start-up
    expenses and (2) cost reductions from eliminating a position.  To
    estimate the costs of adding a new U.S.  direct-hire position to an
    existing overseas post, the Office uses a figure of $214,400 for the
    first full year--an amount that includes the average salary,
    compensatory and incentive allowances and benefits, and other
    operating expenses.  The Office uses a figure of $156,500 to estimate
    cost reductions from cutting a U.S.  direct-hire position overseas.\8
    This amount is $57,900 less than the costs of adding a position
    because it does not include certain operating costs, such as
    security, which may not decrease when a position is cut.  These
    figures vary by region and by post.  For example, the cost reductions
    from eliminating half of the 67 U.S.  direct-hire employees in India
    and half of the 100 in France could amount to about $5.2 million and
    $7.8 million, respectively.

    --------------------
    \8 These figures reflect State's estimates as of July 1995.  We
    reported similar information in Overseas Presence:  Staffing at U.S.
    Diplomatic Posts (GAO/NSIAD-95-50FS, Dec.  28, 1994).

          OPTION FOR CONTROLLING POST
          COSTS
    -------------------------------------------------------- Chapter 4:4.2

    Chiefs of mission (generally ambassadors) currently control only a
    small portion of the total resources devoted to their posts'
    operations; headquarters offices control the larger share.  The
    National Performance Review report noted that the centralized
    management of program and staff resources in Washington, D.C., is
    less efficient than management of resources in the field.  For
    example, some embassy managers told us that they were reluctant to
    hire FSNs or spouses to serve as secretaries because their salaries
    and benefits would come from the posts' budgets.  On the other hand,
    the salaries and benefits of U.S.  direct-hire secretaries, which are
    substantially more, are paid by headquarters offices.

    Posts have tried to cut costs that are within their control, but cost
    reductions have been small.  For example, the post employees in
    Paraguay are working longer hours Monday through Thursday and closing
    at noon on Friday to reduce utility costs--an estimated cost
    reduction of about $10,000 a year.  Similarly, in Malaysia, the
    post's air conditioning is turned off at 5:00 p.m.  on weekdays and
    all day on Saturday--a measure estimated to reduce costs between
    $35,000 and $40,000 a year.  The post in The Hague is considering
    requiring staff to bring their own furniture overseas, initially
    reducing the post's costs by an estimated $10,000 a year, with
    further cost reductions over time.  The post now pays to operate a
    furniture warehouse, but the cost of shipping household goods
    overseas is paid by headquarters.

    According to some embassy managers, regulations and long-standing
    State practices leave little room for innovative approaches to
    cutting costs.  For example, the managers at one post said that
    current prohibitions governing lease/purchase arrangements do not
    allow for entrepreneurial approaches to obtaining U.S.  government
    real property.

    State officials also argue that they lack sufficient authority over
    other agencies' resources at posts.  A variety of laws, State
    Department directives, and presidential letters of instruction give
    chiefs of mission the authority over State's and other agencies'
    staffing decisions.\9 Nevertheless, the National Performance Review
    noted that National Security Decision Directive-38 (NSDD-38), issued
    June 2, 1982, makes the authority of the chief of mission more
    theoretical than real in many cases.  NSDD-38 allows other agencies
    to challenge a decision made by the chief of mission.  According to
    State officials, headquarters management often does not support
    chiefs of mission in bureaucratic battles with agencies that resist
    their attempts to limit or reduce their staffs.  Moreover, when a
    chief of mission successfully limits an agency's staff growth at one
    post, the agency sometimes manages to increase its presence in a
    nearby country instead.  For example, although the Ambassador in
    Brazil negotiated with the Internal Revenue Service to close its
    office in Sao Paulo because he, along with Inter-American Affairs
    Bureau management, agreed that Internal Revenue Service operations
    could be effectively managed in the United States, the Internal
    Revenue Service opened a new office in Chile.  Our prior work has
    shown that other agencies' staffs have increased steadily, while
    State's has decreased slightly.\10

    Even if chiefs of mission successfully exercise authority over staff
    levels, they do not have practical day-to-day control over their
    personnel and fiscal resources.  According to the National
    Performance Review, because of the diffusion of responsibility,
    authority, and operational prerogatives among the various overseas
    agencies, chiefs of mission lack the flexibility to shift resources
    to respond to changing requirements or evolving foreign policy
    objectives.  The Ambassador in Senegal managed to cut 14 positions in
    Dakar, 13 of which were from other agencies, with estimated overall
    cost reductions of about $3 million.  He believes, nevertheless, that
    he could achieve greater cost reductions if he had day-to-day
    operational control over total U.S.  government funding and resources
    at his post.  A review of the post's mission and structure, led by
    the Ambassador, concluded that the explosion of different
    administrative, financial, and information systems among the various
    agencies overseas calls for consolidation of support functions,
    privatization, and other changes that can come about only with
    expanded chief of mission authority.  For example, the agencies in
    Dakar have four different communication systems.  Also, 7 independent
    financial operations and 38 staff positions are devoted to financial
    management functions there.  The study indicated that there are
    similar redundancies elsewhere and that streamlining and cost
    reductions could be achieved in areas such as real estate and
    facilities management, security, and quality-of- life benefits.
    (Options for cost reductions in some of these areas are explored in
    more detail in ch.  5.)

    To strengthen the ability of chiefs of mission to achieve significant
    cost reductions, in September 1993 the National Performance Review
    recommended a pilot project giving U.S.  ambassadors at selected
    posts more authority over all U.S.  government resources at their
    posts, including staff.  There may be some potential negative
    consequences to expanding ambassador authority.  For example, a chief
    of mission and a federal agency may have differences of opinion
    concerning the types and levels of resources needed to sustain agency
    activities.

    State has not initiated action on this recommendation.  State
    officials told us the Department cannot move on this recommendation
    until the National Performance Review/Vice President's staff propose
    the needed legislation to the Congress.  However, National
    Performance Review staff told us that proposing legislation is the
    agency's responsibility.  State does not want to initiate action
    because it believes the pilot program should be viewed as an
    administration initiative to gain the interagency support such a
    project would require.  State has also told us that anticipated
    congressional opposition to such a project has inhibited their
    submission of a legislative proposal.

    Consistent with the recommendation, in November 1995, the U.S.
    Ambassador to Senegal submitted a study concluding that the chiefs of
    mission need more authority and control over U.S.  government
    programs, personnel, and resources under their management.  He asked
    that the Under Secretary for Management convene the Vice President's
    Interagency Council to obtain agreement from its members to designate
    selected posts to test the study's conclusions.  State management has
    been reviewing the proposal.

    --------------------
    \9 State is not responsible for large numbers of personnel who are
    paid directly or indirectly by other U.S.  government agencies and
    involved in U.S.  government activities overseas, for example,
    military personnel under a U.S.  area military commander.

    \10 In 1994, we reported an overall increase of 19 percent in
    overseas staffing between 1984 and 1994.  Agencies such as the
    Departments of Justice, Transportation, and the Treasury accounted
    for the largest increases.  See Overseas Presence:  Staffing at U.S.
    Diplomatic Posts (GAO/NSIAD-95-50FS, Dec.  28, 1994).

       CONCLUSIONS
    ---------------------------------------------------------- Chapter 4:5

    Because of fiscal constraints, State may not be able to continue to
    maintain its vast network of embassies and consulates as they are
    configured today.  The end of the Cold War coupled with improvements
    in communications capabilities provide the opportunity to rethink how
    the U.S.  government's overseas presence is structured and develop
    new ways of operating that could increase efficiency and reduce
    costs.  Balanced, thoughtful decisions must be made to ensure that
    U.S.  interests are well served overseas and Americans are protected
    within the constraints of reduced funding.

       MATTERS FOR CONGRESSIONAL
       CONSIDERATION
    ---------------------------------------------------------- Chapter 4:6

    If future funding levels require the State Department to close and
    reduce the size of posts, the Congress may wish to establish an
    independent panel to review State's proposals in view of (1) the
    potential financial benefits to the U.S.  government, (2) the impact
    on governmentwide interests and the many agencies that depend on
    State's services, and (3) the potential opposition to closing posts.
    Although the criteria involved in closing and downsizing overseas
    diplomatic posts are different, a panel much like the Defense Base
    Closure and Realignment Commission established to review military
    installations may be useful.

    Also, if the Congress believes that ambassadors' authority over U.S.
    government resources should be expanded to reduce spending, it could
    explore with the executive branch how a pilot program, such as the
    one recommended by the National Performance Review, could be
    structured and implemented.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ---------------------------------------------------------- Chapter 4:7

    State said that the chapter did a good job of describing State's
    experiences in proposing posts for closure and outlining some
    approaches to reducing the number of posts.  State asserted that a
    diplomatic presence in all countries with which the United States has
    diplomatic relations continues to be important today.  State also
    emphasized that Americans traveling abroad as well as other U.S.
    agencies depended on the network of embassies and consulates.  These
    factors will need to be carefully considered in determining what
    overseas presence is essential and affordable.

    USAID objected to expanding an ambassador's authority over the
    programmatic direction and funding of overseas programs, even on an
    experimental basis.  Increasing ambassadors' authority, on a pilot
    basis, is one option we offered as a means to reduce costs.  We
    stated that increasing ambassadors' authority could have negative
    consequences.

    STATE'S SUPPORT COSTS CAN BE
    REDUCED
    ============================================================ Chapter 5

    The State Department spends two-thirds of its budget on support
    operations.  In response to reduced operating budgets, State is
    pursuing or studying several options to reduce its support costs.
    These include (1) recouping the full cost of support provided to
    other agencies overseas, (2) hiring more U.S.  family members to fill
    overseas staffing positions, (3) increasing employees' payments for
    medical services, (4) increasing the length of overseas tours, and
    (5) reducing its costs for Marine guard detachments at overseas posts
    by deactivating certain units or shifting its cost to the Department
    of Defense.

    We identified several additional options State could implement if it
    has to adjust to potential budget cuts.  These options include (1)
    reducing support staffing levels in headquarters, (2) reviewing
    employees' benefits and allowances, (3) expanding the use of foreign
    nationals in support positions at overseas posts, and (4) disposing
    of excess and underused properties overseas.

    Over the long term, State hopes to reduce its operating expenses
    through business process reengineering and the outsourcing of certain
    support functions.  In both areas, however, only limited progress has
    been made.

       SUPPORT NETWORK CONSUMES A
       LARGE PORTION OF THE BUDGET
    ---------------------------------------------------------- Chapter 5:1

    In fiscal year 1995, State allotted $1.8 billion, or about 65 percent
    of its budget, to domestic and overseas support operations.\1 These
    funds provided support for both Department staff and employees from
    other federal agencies.  Centrally funded operations\2 account for
    approximately $1.1 billion of the support budget and cover central
    administration costs and the costs of running several regional
    centers that provide financial and information management services to
    overseas posts.  The geographic bureaus control the remaining portion
    of State's support budget, which is largely used to fund the salaries
    of those employees in support positions.

    State is reimbursed for some support costs under the Foreign Affairs
    Administrative Services (FAAS) system, which attempts to allocate
    costs among agencies based on workload.  Under FAAS, other agencies
    at overseas posts reimburse State for the incremental cost of
    providing some support services.  In fiscal year 1995, State received
    an estimated $187 million in FAAS reimbursements from other agencies.
    These funds were primarily used to pay the salaries of FSNs and
    personal service contractors hired to meet the administrative needs
    of other agency staff.  According to State's Chief Financial Officer,
    however, these payments only partially covered the increased costs of
    hosting staff from other federal agencies.

    --------------------
    \1 State has never determined how this rate compares to other
    diplomatic services or firms in private industry.  State's Assistant
    Secretary for Administration noted that in theory this could be done,
    but added that any comparison would be complicated by State's
    security requirements and support responsibilities for other agencies
    overseas.

    \2 These include security, personnel, finance, information systems,
    telecommunications, security and maintenance of U.S.  missions,
    logistical operations, training, and medical services.

       STATE IS SEEKING TO REDUCE ITS
       SUPPORT COSTS
    ---------------------------------------------------------- Chapter 5:2

    State officials recognize the need to reduce the Department's support
    costs.  In a March 1994 memorandum, the Under Secretary for
    Management notified managers throughout the Department that
    significant and sustained cuts in support costs must be made to allow
    State to continue to operate with declining budgets.  Under the
    direction of the Under Secretary for Management, State has launched a
    number of initiatives designed to reduce its support costs.  The most
    significant of these initiatives involves an attempt to recoup
    certain support costs that were previously unreimbursed under the
    administrative cost-sharing system used by State and other federal
    agencies overseas.

          NEW MECHANISM FOR OVERSEAS
          COST ALLOCATION HAS
          POTENTIAL FOR COST
          REDUCTIONS
    -------------------------------------------------------- Chapter 5:2.1

    Under FAAS, agencies at overseas posts reimburse State for the
    incremental cost of providing some support services.  State believes
    that FAAS reimbursements do not capture the Department's full costs
    for support to other agencies, and as a result State subsidizes their
    overseas operations.  The President's Management Council (a federal
    managers' forum established under the National Performance Review)
    also expressed concerns about the complexity and equity of FAAS,
    noting that FAAS is primarily a reimbursement mechanism--not a system
    for rationalizing delivery of overseas administrative services--and
    it does not address quality and delivery of services.  To address
    these problems, the President's Management Council developed the
    International Cooperative Administrative Support Services (ICASS)
    System.

    Under ICASS, greater responsibility and authority for managing
    resources and making decisions about paying for common administrative
    support service will be delegated to the posts.  Posts will be
    encouraged to explore additional options for obtaining administrative
    support, rather than relying solely on State.  These options could
    include allowing other agencies to provide support functions, using
    commercial contractors, or introducing improved technologies.  In
    addition, costs are to be clearly delineated by agency for all post-
    and Washington-related services.

    Since ICASS is designed to better rationalize the delivery of
    overseas administrative services, it should serve to help identify
    specific steps that can be taken to streamline overseas operations,
    reduce the costs of administrative services, and make better use of
    information systems and communications technology.

    In fiscal year 1997, State plans to implement ICASS administrative
    procedures worldwide,\3 but State and other agencies will fund
    overseas support operations using FAAS funding practices.  The ICASS
    cost recovery system will not go into effect until fiscal year 1998.
    State views ICASS as a mechanism to equitably spread the full cost of
    providing overseas support across all agencies with an overseas
    presence.  State estimates that in terms of cost recovery alone,
    implementing ICASS would allow the Department to spend $108 million
    less per year for support to other agencies.  Redistribution of costs
    currently covered under FAAS would reduce costs to State by $15
    million, and billings for new cost items not currently covered under
    FAAS would reduce cost to State by an additional $93 million.\4 From
    a governmentwide perspective, these funding shifts alone do not
    represent cost reductions.  Some officials thought that once agencies
    had to pay the true cost of placing personnel overseas, many would
    decide to reduce their overseas presence.  Such reductions would
    reduce overall U.S.  spending for overseas support.

    State is also exploring how to bill agencies for costs that were
    previously provided at no charge.  For example, the Congress has
    tasked State's Diplomatic Telecommunications Service Program Office
    with devising a system for charging agencies the actual cost of
    providing overseas communication links.  State is also considering
    billing agencies for foreign building operations, overseas schools,
    security officers, as well as some incremental domestic support costs
    associated with other agency operations overseas.  State has not
    estimated the potential revenue gain from charging for these and
    other services.

    Other agencies support the new system, noting that ICASS represents a
    cultural change in the way overseas operations are managed.  The move
    to customer-based service standards and principles presents an
    opportunity for cost reductions from greater efficiency and
    interagency coordination.  Agencies also applaud the move to grant
    more decision-making authority to the posts as to how they are
    managed.  Major disagreements, however, remain to be resolved over
    which costs should be covered under ICASS and how these costs should
    be allocated among participating agencies.  Every agency we spoke to
    expressed concerns about paying higher costs under ICASS and funding
    to cover those costs.  Some agencies would like State to transfer
    funds from its budget to them to offset the expected higher costs
    under ICASS.

    Agencies also expressed concern that (1) a financial system to track
    costs and transfers of funds has not been field-tested; (2) the pilot
    tests have not lasted long enough to evaluate ICASS capabilities; and
    (3) details for handling different budget cycles, financial systems,
    and requirements across agencies have not been resolved.  State says
    it will be able to address these concerns in time for worldwide
    implementation.  State Department officials also noted that the
    Department has to comply with a congressional mandate to obtain full
    recovery of each department and agency's costs in fiscal year 1997.

    ICASS has merit and the potential to change the culture of overseas
    operations.  However, ICASS implementation will likely lead to a
    protracted debate over funding issues within the executive branch.
    Since ICASS implementation will affect overseas funding and staffing
    decisions at over 35 U.S.  government agencies, it will require
    significant, high-level support within the executive and legislative
    branches for full implementation.

    --------------------
    \3 The Department of State Appropriations Act, 1996, requires that in
    fiscal year 1997 a system be in place that allocates to each
    department and agency the full cost of its presence outside the
    United States.

    \4 Beginning in fiscal year 1998, State will bill other agencies for
    local guard services at office buildings, the community liaison
    officer, and building operations and expenses for government-owned
    and long-term leased properties.

          U.S.  FAMILY MEMBER PROGRAM
          IS EXPANDING
    -------------------------------------------------------- Chapter 5:2.2

    In October 1995, a task force established by the Under Secretary for
    Management recommended that State increase the hiring of family
    members to help meet overseas staffing needs.  State could cut costs
    by an estimated $105,000 for each family member hired to fill a
    position normally reserved for a junior officer.  A State official
    noted that the Department will hire only about half of its normal
    junior office class in fiscal year 1996.  This will heighten the
    importance of the family member program to help meet overseas
    staffing needs.  In commenting on this report, State noted that not
    all junior officer positions can, or should, be filled by family
    members, since these positions provide valuable career training for
    Foreign Service officers.

          COST REDUCTIONS FROM CHANGES
          IN MEDICAL SERVICES
    -------------------------------------------------------- Chapter 5:2.3

    To provide adequate health care for its employees worldwide, State
    operates a health clinic in Washington, D.C., and 139 health units
    throughout the world, providing many free services to its employees
    and employees of other foreign affairs agencies.\5 State's main
    health clinic has diagnostic and laboratory facilities, including
    unique capabilities in the area of tropical and parasitic diseases,
    and provides the physical examinations required before staff and
    family members are posted overseas.  State also has a clinic at the
    National Foreign Affairs Training Center.  The overseas programs
    provide free occupational health-related services (such as first aid
    for minor on-the-job injuries) and primary medical care.  The
    Inspector General reported that there were about 79 Foreign Service
    health-care professionals, supplemented by local hire nurses and
    contract physicians, working in overseas posts as of January 1994.

    According to a report by State's Inspector General,\6 State spent
    about $19 million in fiscal year 1995 to provide uncompensated
    medical care to its employees.  The Inspector General recommended
    that State shift up to $13 million of these costs to private health
    insurers responsible for reimbursing employees for the costs of these
    services.  The Inspector General recommended that the remaining $6
    million in uncompensated care not be transferred.  The Inspector
    General proposed that the Department absorb this cost because it
    represents patient copayments and deductibles that impose an
    administrative burden to track and recoup.  Also, different living
    conditions among posts could result in varying illness rates, and
    employees should not be penalized for working in less desirable
    locations.  A provision in the fiscal year 1996 authorization bill
    would enable State to collect reimbursements for medical services
    rendered.  A senior State official noted that additional cost
    reductions could be achieved if the Department contracted for some
    services currently provided by State headquarters medical clinics and
    if routine medical services, such as physical examinations, were
    tailored to an employee or dependent's age, sex, and known risk
    factors.  The same official estimated that these actions could reduce
    costs by an estimated 30 percent of the annual $4.5 million cost of
    clinical services, or about $1.4 million.

    Overseas, State ensures that its employees receive care by
    authorizing and approving payment for inpatient medical care and
    related outpatient treatment of eligible overseas U.S.  citizen
    employees and their dependents.  It then relies on its employees to
    file insurance claims and forward reimbursements to State.  In August
    1995, State's Office of Medical Services and the Bureau of Finance
    and Management Policy began tracking whether its employees filed such
    claims and whether reimbursements were turned over to the Department.
    Posts issue authorizing services and report to the Office of Medical
    Services the obligation number, insurance carrier, amount expended,
    and information on the service provider.  The Office of Medical
    Services issues fund cites for all hospitalizations overseas and
    tracks the recovery of medical insurance benefits.  As of January
    1996, of the $1.5 million expended for overseas hospitalizations,
    State had collected about $1.2 million (77 percent) and expected the
    final recovery rate to exceed 80 percent.  In 1996, employees will be
    held liable for the cost of care, and debts will be turned over to
    the Bureau of Finance and Management Policy for collection through
    State's debt collection procedures.

    While embassies have the same guidelines for pursuing reimbursements
    for medical services, State does not track expenses for other federal
    employees that rely on it for medical services.  Therefore, it does
    not know whether other agencies' employees reimburse embassies.  In
    August 1992, we recommended that State begin tracking costs for other
    agencies and whether these costs were reimbursed by private insurers.
    A State medical official agreed that tracking could be done but that
    the tracking workload would increase by 80 percent.  State has not
    attempted to quantify the costs and benefits of tracking payments
    from other agencies' overseas staff, but it appears likely that State
    would achieve cost reductions similar to those achieved by tracking
    reimbursements from State employees.

    --------------------
    \5 Included in the Department's medical health program are all U.S.
    citizen employees of the Foreign Service and eligible dependents and
    U.S.  citizen federal employees assigned abroad by other federal
    agencies participating in the medical health program and their
    eligible dependents.

    \6 Office of Inspector General, U.S.  Department of State Report of
    Audit No.  5-SP-013:  Overseas Health Units, March 1995.

          EXTENDING TOURS OF DUTY
    -------------------------------------------------------- Chapter 5:2.4

    State estimated that it spent $68.7 million in fiscal year 1995 for
    travel for post assignments.  A 1993 State study of its policy on
    tours of duty projected cost reductions of about $2 million annually
    by extending tours to 3 years for all overseas posts (tours at
    hardship posts are currently
    2 years).  Longer tours at all posts could further reduce costs.
    With longer tours, State could also increase productivity and
    effectiveness because staff need several months to adjust to foreign
    local cultures, languages, and environments and to master a new job
    and about 9 months to go through the reassignment process at the end
    of the tour.  A 2-year tour can therefore leave relatively little
    time for peak performance.

    Although costs could be reduced by extending tours of duty, State has
    concluded in the past that the negative impact on employees' morale
    and State's assignment process did not permit extending tours of
    duty.  However, State said it is now reexamining the issue in light
    of the current budget situation.

          POTENTIAL TO REDUCE STATE'S
          COST FOR MARINE GUARD
          DETACHMENTS
    -------------------------------------------------------- Chapter 5:2.5

    In fiscal year 1994, State paid its share--$22 million--for 125
    Marine guard detachments at 112 embassies, 11 consulates general, one
    U.S.  mission, and one U.S.  interests section.  The guards are
    jointly funded by the Marine Corps and the State Department and
    primarily safeguard classified documents.  As recommended by the
    National Performance Review and to reduce costs, Marine guard
    detachments have been deactivated at some posts where the level of
    classified operations do not warrant 24-hour cleared American
    presence.  The State Department and the intelligence community are
    reviewing whether some detachments could be deactivated or
    transferred to other locations.  In lieu of Marine guards, State may
    have to expend funds to increase security safeguards--for example, by
    providing better real time surveillance equipment at the chancery.
    But, on balance, deactivation of guard detachments could reduce cost
    where security conditions permit.

    For fiscal year 1997, the executive branch has proposed that funding
    for the Marine guard detachments shift from State to the Department
    of Defense.  If this occurs, State will no longer spend its funds on
    the Marine guard detachments.

       ADDITIONAL COST REDUCTION
       OPTIONS
    ---------------------------------------------------------- Chapter 5:3

    Other options State may wish to consider in the future include (1)
    reducing support staff levels in Washington, (2) reviewing employee
    benefits and allowances, (3) expanding the use of FSNs in support
    positions at overseas posts, and (4) selling excess or underused
    overseas property.

          SUPPORT STAFF IN
          HEADQUARTERS
    -------------------------------------------------------- Chapter 5:3.1

    According to a number of management reports, there may be
    opportunities to reduce staffing in headquarters support offices.  A
    senior State official in Personnel noted the Department has been slow
    to initiate a detailed review of support staffing levels in
    Washington.  However, a preliminary assessment of State's domestic
    staffing, issued in February 1995, noted a basic concern that support
    functions account for almost 60 percent of State's domestic
    workforce.

    Similar concerns over the proportion of domestic staff devoted to
    support functions were raised in earlier management studies at State.
    The State 2000 Management Task Force report issued in December 1992
    noted that about 60 percent of headquarters salaries and expense
    resources are expended for centrally managed support staff and that
    this level was much too high.  According to a 1993 State report, some
    estimates project that Department staffing in Washington exceeds
    optimal levels by 15 to 20 percent in view of the low productivity of
    many organizations and personnel.  The report recommended that a
    baseline review of headquarters support staffing be conducted and
    noted that potential long-term cost reductions from such a study
    could be substantial, as each 5-percent reduction in personnel would
    reduce the Department's costs by $46 million.

          EMPLOYEE BENEFITS AND
          ALLOWANCES
    -------------------------------------------------------- Chapter 5:3.2

    If substantial reductions in appropriations occur, State may have to
    review the benefits and allowances it provides to its employees, even
    though this could involve difficult and painful decisions.  For
    example, costs could be reduced by millions of dollars if employees
    were required to pay for a portion of their overseas housing costs.
    State noted that because benefits and allowances are payable to all
    civilian government employees working overseas, any changes would
    require interagency support and may require legislative action.
    State officials also noted that a consideration would be the
    potential negative impact on employee morale and the impact on
    State's ability to attract and retain staff to effectively carry out
    its mission.  We agree.

    Overseas allowances and benefits are authorized by statute for U.S.
    federal civilian employees stationed in foreign areas.  There are two
    purposes for granting allowances and benefits to U.S.  staff employed
    overseas.  First, they can serve as reimbursement for extraordinary
    living costs to prevent employees from being financially penalized
    for working overseas.  Second, they can serve as recruitment and
    retention incentives.  Benefits and allowances provided to Foreign
    Service employees working overseas include free housing and
    utilities, hardship post payments, danger pay, cost-of-living
    allowances, education allowances, and separate maintenance
    allowances.

    These benefits and allowances offer one potential area for cost
    reduction efforts.  According to the Director of State's Office of
    Allowances, the only comprehensive and recent review of Foreign
    Service benefits and allowances was conducted in 1994 by a private
    firm under contract to USAID.  In a January 1995 memorandum to the
    Director General of the Foreign Service, USAID's Deputy Assistant
    Administrator for Human Resources noted that this study found that
    (1) the Foreign Service compensation package was somewhat below that
    received in the private sector; (2) the Foreign Service benefits
    package was comparable to the private sector, except for retirement
    where the government is more generous, and (3) Foreign Service
    allowances were comparable to the private sector except for housing
    allowances where the private sector generally deducted a home-country
    norm from the housing allowance so that employees do not get free
    housing overseas.\7

    USAID's consultant concluded that by paying only for excess housing
    costs, private industry, without any apparent disruption to programs,
    avoided substantial costs that the government pays.  The consultant
    further concluded that USAID employees' benefits of receiving
    essentially free housing and utilities amount to about 12 to 15
    percent of their base pay.

    We also noted that Canadian Foreign Service officers are expected to
    contribute to a portion of their overseas housing costs based on
    Ottawa housing costs and on their salary levels and household sizes.
    Likewise, Australian Foreign Service officers are expected to
    contribute toward their overseas housing costs based on a published
    schedule.  The Director of State's Office of Allowances noted that
    other countries, such as Japan, France, and Germany, also have a
    rent-share arrangement with their employees.  Like the United States,
    however, other countries such as Great Britain and Ireland, fully
    reimburse overseas housing costs--up to a set limit.

    --------------------
    \7 Specifically, the consultants found that when total renumeration
    costs--which include salaries, bonuses, and benefits such as
    retirement--were compared between USAID and the private sector,
    USAID's costs were almost identical to the private sector.  With
    regards to overseas allowances, the consultant found that USAID
    versus private sector comparisons varied from location to location;
    however, USAID's costs were significantly higher than private sector
    allowances in all locations studied.  The most significant difference
    between USAID and the private sector was that the private sector
    required employees to pay a portion (ranging from $13,565 to $19,957)
    of their overseas housing costs based on a U.S.  housing standard.

          INCREASED USE OF FOREIGN
          SERVICE NATIONALS IS AN
          OPTION
    -------------------------------------------------------- Chapter 5:3.3

    The administrative section at overseas posts is generally headed by
    an administrative counselor or officer who is assisted by several
    Foreign Service officers who manage administrative subunits and
    oversee a staff comprised mainly of FSNs.  In response to budget
    pressures, State could increase its use of FSNs to replace Foreign
    Service specialists working in senior support positions.\8 Employment
    of FSNs is less costly than employment of Foreign Service officers
    because FSNs do not receive the benefits and allowances payable to
    Foreign Service employees and generally are paid lower salaries than
    Foreign Service employees.

    In addition to the cost reductions that would result from the
    increased use of FSNs, this practice would have two other advantages.
    First, State would not have to periodically rotate hundreds of
    Foreign Service specialists between headquarters and overseas posts.
    Second, an FSN-driven support structure would eliminate the
    significant learning curve Foreign Service specialists face at a new
    post.

    State is reluctant to expand the use of FSNs because of security and
    fiduciary concerns.  These are valid concerns that would be
    compelling without regard to oversight costs.  However, cost- benefit
    and risk management principles suggest that some level of increased
    risk may be acceptable in return for significantly reduced oversight
    costs.  Given potential budget reductions, State would have to
    carefully weigh the potential cost reductions resulting from
    increased use of FSNs against the perceived risks.

    Although security and fiduciary matters are a serious concern, the
    following observations show that the increased use of FSNs may be
    feasible at some posts and that the associated risks may be
    manageable or could be mitigated.

      -- In Malaysia, the embassies of Australia, Canada, and Great
         Britain employ foreign nationals to manage administrative
         sections under the overall supervision of a diplomatic officer.
         In comparison, the U.S.  Embassy, with one exception, used
         American Foreign Service officers to head up the administrative
         subunits.

      -- At some U.S.  posts, FSNs are already employed to head some
         administrative sections, such as personnel, working under the
         general supervision of U.S.  administrative counselors or
         officers.

      -- FSNs do not have access to sensitive records and information
         because embassies have secure areas they are not permitted to
         enter.  The number of sensitive records is presumably small
         relative to support functions typically handled in budget and
         fiscal, general services, and personnel offices.

      -- Posts generally have two distinct computer systems, one
         classified and one unclassified.  FSNs do not have access to the
         separate classified system.

      -- The Inspector General's procedures for periodic inspections
         could be modified to provide additional oversight of FSNs that
         handle U.S.  funds.  Also, the use of standard internal control
         procedures, such as the division of duties and mandatory
         vacations, could help to ensure that funds are managed
         responsibly.

    Nonetheless, we agree that certain Foreign Service specialist
    positions would not be appropriate for an FSN, given the classified
    or highly sensitive nature of the position.  These positions include
    communications specialists, regional security officers, regional
    medical officers, foreign building operations officers, technical
    staff working with classified communications systems, and Foreign
    Service secretaries assigned to work with classified information.

    FSNs could replace the more costly existing staff as budget and
    fiscal officers, general services officers, information management
    specialists working with unclassified computer systems, personnel
    officers, regional medical technologists, and Foreign Service nurses.
    We estimate that State currently has about 500 Foreign Service
    specialists in these six job categories in its overseas posts.  This
    figure does not include rotational positions in Washington.  If State
    replaced these overseas specialist positions with FSNs, the
    Department's costs would be reduced by approximately $53 million
    annually in allowance and benefit costs.

    --------------------
    \8 The Department hires Foreign Service specialists to fill 16 types
    of positions such as budget and fiscal officers, general services
    officers, and information management officers.  State currently has
    over 1,100 specialist positions in Washington and almost 2,500
    specialist positions overseas.

          STATE COULD SELL EXCESS AND
          UNDERUSED PROPERTIES
    -------------------------------------------------------- Chapter 5:3.4

    The State Department has over $10 billion in real estate at its
    overseas posts.  Some of this real estate is excess and underused;
    State has identified properties for potential sale valued at $467
    million as of October 1995.  Moreover, as we have reported, State
    also has millions of dollars in potentially excess real estate at
    closed posts that are not included in this amount and could be
    sold.\9 The Inspector General, individual embassies, and State's
    Office of Foreign Building Operations have also identified some of
    these excess properties.  However, because of internal and external
    pressures, State has been slow in disposing of these properties.
    Selling these properties would not only generate revenues but could
    also significantly reduce maintenance costs.

    In our most recent report, we recommended improvements in the State
    Department's procedures to identify and sell excess real estate.  For
    example, we recommended the establishment of an independent panel to
    make recommendations regarding the sale of unneeded real estate, to
    ensure that the taxpayers' interests and the financial needs of the
    State Department are considered.

    --------------------
    \9 Overseas Real Estate:  Millions of Dollars Could Be Generated
    Selling Unneeded Real Estate (GAO/NSIAD-96-36, Apr.  23, 1996) and
    Overseas Real Estate:  Inaction on Proposals to Sell High- Value
    Property in Tokyo (GAO/NSIAD-95-73, Apr.  7, 1995).

       PROCESS REENGINEERING AND
       OUTSOURCING MAY LEAD TO LONG-
       TERM COST REDUCTIONS
    ---------------------------------------------------------- Chapter 5:4

    State's Under Secretary for Management has called for and supported
    individual reengineering efforts throughout the Department.\10 Some
    of State's managers have launched reengineering and reinvention
    exercises in an attempt to improve services and lessen costs.
    Examples of such efforts include State's attempts to reengineer the
    Foreign Service transfer process, major personnel management reforms
    in such areas as pay broadbanding for FSNs, and an ongoing
    reengineering of the logistics function.  Under State's Strategic
    Management Initiative, the Department attempted to gauge the
    advisability of outsourcing a limited number of support functions.
    These are positive signs of a desire for long-term reform of how
    support services are procured and managed at State.  However, they
    represent just a beginning, since several major business functions
    remain to be reengineered or analyzed in terms of outsourcing
    potential.

    --------------------
    \10 Reengineering is the redesign of an organization's processes to
    achieve dramatic performance improvements in such areas as cost,
    timeliness, quality, and customer satisfaction.  Reengineering
    requires that a "blank sheet" approach be taken toward the process to
    be redesigned.  Marginal improvements to existing procedures are by
    definition excluded.  For additional information on reengineering in
    the federal government see Reengineering Organizations:  Results of a
    GAO Symposium (GAO/NSIAD-95-34, Dec.  13, 1994) and Management
    Reforms:  Examples of Public and Private Innovations to Improve
    Service Delivery (GAO/AIMD/GGD-94-90BR, Feb.  11, 1994).

          STATE'S INFORMATION
          MANAGEMENT CAPABILITIES HAVE
          HAMPERED REENGINEERING
          EFFORTS
    -------------------------------------------------------- Chapter 5:4.1

    State's use of an outdated, proprietary operating system that is
    largely tied to computer purchases made over 15 years ago complicates
    current reengineering efforts.  The poor condition of the information
    technology platform has been the subject of repeated discussions both
    within and outside the Department.  State officials are frank in
    their assessments of the numerous deficiencies in current systems and
    acknowledge the critical need for a system that offers data users the
    flexibility and tools they need to accomplish the Department's work.

    State launched a modernization program in 1992; according to State
    officials, full implementation of the program will be delayed by
    funding constraints.  Information management resource problems have
    made it difficult to effectively reengineer processes.  For example,
    State selected the Foreign Service's transfer process as a
    reengineering test case because the process had 117 steps, 23 forms,
    and a number of dispersed operations.  Over 2 months, steps in the
    process were charted and brainstormed, and best practices in the
    private and public sectors were reviewed.  The final report
    recommended a streamlined system that would enhance customer
    satisfaction and reduce costs.  The team concluded that by improving
    computer interconnectivity and empowering employees, the number of
    full-time employees involved in the transfer process could be reduced
    from 24 to perhaps 4 to 5 permanent positions, supplemented by
    private contractor assistance.  However, a year after completing the
    work, two team members told us that none of these positions had been
    eliminated because State does not have the information management
    tools to make the system work as designed.

    In a December 1994 report, we compared several private and public
    leading organizations' best practices in applying information
    technology to improve performance to State's practices and found that
    the Department was deficient in several areas.\11 Our report noted
    that State had no integrated information management plan that
    identified goals and objectives and linked information resource
    management projects to them;\12 the information resource management
    and budgeting processes at State were not closely linked; and State
    had not appointed a chief information officer to serve as a bridge
    between top management, line managers, and information support
    professionals.

    The Under Secretary for Management has begun to take steps to improve
    State's information resource management capabilities, including
    forming an information technology review board of senior department
    managers.  In May 1995, the Under Secretary for Management
    established an acting chief information officer position.  In May
    1996, State appointed a permanent chief information officer to comply
    with the mandate of the 1996 Information Technology Reform Act.
    Finally, State is currently working on its latest 5- year strategic
    information resource management plan (1996-2000), which should be
    issued in 1996.

    --------------------
    \11 Department of State IRM:  Strategic Approach Needed to Better
    Support Agency Mission and Business Needs (GAO/AIMD-95-20, Dec.  22,
    1994).  This report compared State's practices to those of leading
    organizations as defined in GAO's May 1994 guide on best practices.
    See Executive Guide:  Improving Performance Through Strategic
    Information Management and Technology (GAO/AIMD-94-115, May 1994).
    GAO's best practices guide formed the basis for OMB's Evaluating
    Information Technology Investments:  A Practical Guide (Version 1.0,
    Nov.  1995), which is designed to help federal agencies link
    information technology investment decisions to strategic objectives
    and related business plans.

    \12 In July 1995, State issued an updated information resource
    management modernization plan.

          OUTSOURCING ADMINISTRATIVE
          FUNCTIONS
    -------------------------------------------------------- Chapter 5:4.2

    The National Performance Review encouraged federal agencies to
    identify their core missions and unique competencies and to outsource
    functions that can be provided more effectively and at a lower cost
    by other agencies or private companies.  State has not done this in
    any comprehensive manner, even though the Strategic Management
    Initiative called for outsourcing studies of telecommunication
    services offered through the Diplomatic Telecommunications Service
    Program Office, the payroll function, vendor and pension payments,
    the Foreign Service medical examination program, and the training
    courses offered at the National Foreign Affairs Training Center.  An
    official from the Diplomatic Telecommunications Service Program
    Office told us that the office was never formally tasked with
    conducting this study and thus did not respond to the recommendation.
    The Office of Medical Services also did not prepare an outsourcing
    study, although an official from that office said a study will soon
    be initiated.  Outsourcing studies of State's payroll operations and
    vendor and pension payments processes were contracted to an outside
    consulting firm.  The results of these studies should be available
    shortly.  The only published outsourcing studies available at the
    time of our review involved a limited number of courses offered by
    the National Foreign Affairs Training Center.  In each case, with
    certain minor modifications, the internal review team concluded that
    the Center's offerings were cost-effective.\13

    State has not yet considered the numerous options for outsourcing
    many of its noncore activities, particularly data processing and
    administrative activities.  Outsourcing options can be found in both
    the private and public sector.  Private contractors are already
    providing a wide range of data processing and administrative
    services, including payroll, personnel management, and financial
    management services, and have contracts with several federal
    agencies.

    According to one private firm, its worldwide network of data
    processing centers could meet State's domestic and overseas data
    processing demands with relative ease.  Officials from the same
    company cited several examples of outsourcing contracts with federal
    agencies, including a 10-year contract with the Federal Aviation
    Administration to manage its computer resources nucleus project and a
    5-year contract with the Immigration and Naturalization Service to
    manage its Information Technology Partnership Program.  Also, another
    country's internal revenue service has contracted with this firm to
    assume all of its information technology responsibilities, including
    computer systems, systems development and integration, systems
    maintenance, hardware and software procurement, hardware maintenance,
    hardware and software installation, and information technology
    project management.  Transferring with these responsibilities are
    three development centers, two accounts offices, nine data centers,
    and 2,100 employees who are now the contractor's employees.

    Another outsourcing option available to State is the work of the
    Defense Logistics Agency Administrative Support Center, which been
    designated a reinvention laboratory under the National Performance
    Review.  The Center provides a wide array of administrative services
    to Defense and other nongovernment agencies, state and city
    governments, and private firms.  Customers pay only for actual
    services provided.  According to its latest survey of selected
    services offered by the Center, its costs were significantly lower
    than prices in the private sector.  The Director explained that the
    Center does not operate on a profit margin and can leverage Defense's
    worldwide infrastructure to offer services at the lowest costs
    possible.  According to the Director, his staff periodically conduct
    surveys of best practices in private industry to stay abreast of the
    latest management techniques.

    --------------------
    \13 A March 1996 independent accountant's report prepared for the
    Office of the Inspector General recommended that the National Foreign
    Affairs Training Center establish user charges that fully reflect the
    Center's costs, as required by OMB-Circular A-25.  The report also
    recommended that the Institute reevaluate the training courses it
    offers and consider eliminating courses that do not fully recover
    their costs and could be obtained at other training centers at a
    lower cost.

       CONCLUSIONS
    ---------------------------------------------------------- Chapter 5:5

    The successful implementation of some or all of the options discussed
    in this chapter could substantially reduce State's support costs.
    Congressional approval and negotiations with other agencies may be
    required to implement some of these options.  In addition, they would
    require the potential displacement of hundreds of current employees
    and the loss of some employee benefits, with potential adverse
    consequences for employee morale and productivity.  However, they
    represent the types of changes that would enable State to operate
    with less resources.

       AGENCY COMMENTS AND OUR
       EVALUATION
    ---------------------------------------------------------- Chapter 5:6

    State expressed concerns regarding a number of options discussed in
    this chapter, pointing out the drawbacks.  Regarding increased use of
    FSNs in certain positions, State emphasized that American personnel
    are required to minimize fiduciary concerns.  We did not recommend
    increased use of FSNs, but we believe this option should be
    considered.  We share some of State's concerns, but we believe that
    risk management principles suggest that some level of increased risk
    may be acceptable in return for significantly reduced costs.  Given
    potential budget reductions, State would have to carefully weigh the
    potential savings resulting from increased use of FSNs, as well as
    implementation of other cost reduction measures, against the
    perceived risks.

    State said the chapter clearly described ICASS, which State believes
    is its most important undertaking involving overseas support costs.
    USAID and USTR emphasized that increasing reimbursements for
    administrative support at overseas posts may require additional
    funding for agencies other than State to cover certain costs they may
    not have budgeted for in the past.

    ACTIVITIES AT OVERSEAS POSTS
    =========================================================== Appendix I

    In this appendix, we provide examples of the State Department's
    overseas political, economic and commercial, global, and consular
    activities.  Unless otherwise noted, these activities occurred during
    September and October 1995.  In addition, as discussed in chapters 4
    and 5, State has numerous functions and activities to support State
    and other U.S.  government agencies' personnel and operations at
    overseas posts.

       POLITICAL ACTIVITIES
    --------------------------------------------------------- Appendix I:1

    The political sections spent most of their time reporting and
    analyzing countries' political situations, representing the United
    States and developing contacts within the host countries, and
    supporting official visitors to the countries.

          BELARUS
    ------------------------------------------------------- Appendix I:1.1

    For political issues, the combined political and economic section
    spent major portions of its time on reporting and analysis, trade and
    finance promotion and support, and coordination and support of other
    agencies' programs, such as the Defense Department's Cooperative
    Threat Reduction Program to help remove nuclear weapons.  Other major
    activities included representation and contact development and
    dealing with the shootdown of an American hot-air balloon by the
    Belarussian military.  Reporting and analysis included cables on
    internal government shakeups, the confrontation between the
    Belarussian president and parliament, and human rights.

          BRAZIL
    ------------------------------------------------------- Appendix I:1.2

    The political section at the Embassy in Brasilia spent a significant
    amount of time preparing for and supporting the First Lady's visit,
    which included visits to a school for street children, a vocational
    institution, and a maternity hospital.  The section also supported a
    visit by the Under Secretary for Global Affairs.  Overall, the
    section spent approximately one-third of its time on visitor support.
    Another third of the time was spent on reporting and analysis, and
    the rest of the time was spent on representation and contact work and
    coordination with other agencies.  The section worked with the
    government of Brazil to resolve several rocket technology issues,
    encouraged the government to support a global ban on land mine
    production and sales, and helped Brazil gain entry into the Missile
    Technology Control Regime, which may encourage closer cooperation on
    nonproliferation.

          MALAYSIA
    ------------------------------------------------------- Appendix I:1.3

    The political section in Malaysia spent much of its time on reporting
    and analysis, representation and contact work, and support for other
    agencies.  The Southeast Asian Nuclear Weapons Free Zone Treaty
    topped the list of issues that were addressed.  The section also
    dealt with issues concerning U.S.  policy toward Bosnia--an issue for
    which the United States has been severely criticized in Malaysia.
    The section covered the 15-nation Organization of Islamic Conference,
    advocating U.S.  views and seeking the support of the Malaysian
    Chairman of the United Nations Human Rights Commission on related
    issues in Bosnia.  Other efforts included representations to the
    Ministry of Foreign Affairs on United Nations issues,
    counternarcotics cooperation, arms sales, and security cooperation.
    In addition, the section analyzed criminal law and procedures and the
    political implications of a case involving an American citizen
    charged with drug crimes that carry a mandatory death sentence.

          THE NETHERLANDS
    ------------------------------------------------------- Appendix I:1.4

    In The Netherlands, a large portion of the political section's time
    was spent advocating U.S.  policies and presenting demarches.
    Reporting and analysis was also a major activity.  The remainder of
    the section's time was spent on representation and contact
    development, visitor support, and other tasks.  The section worked to
    counter untrue press reports that the United States had failed to
    alert the Dutch that an attack on Srebrenica (in Bosnia) in the
    summer of 1995 was imminent.  It also helped gain Dutch support for
    the U.S.  approach regarding assistance to Bosnia.  In early 1995,
    the section used its ties with parliamentary defense experts to
    overcome obstacles, clearing the way for a $100 million sale of
    air-to-air missiles, and worked to maintain Dutch abstentions from
    voting on a Cuban resolution to condemn the U.S.  trade embargo
    against Cuba.

          PARAGUAY
    ------------------------------------------------------- Appendix I:1.5

    The political section in Paraguay spent about three-fourths of its
    time on democracy and narcotics issues.  The visit of the First Lady
    to attend a conference of her counterparts consumed most of the
    post's time, including 25 percent of the political section as well as
    other embassy sections.  In its efforts to help control narcotics
    traffic, the section also assisted a visiting team from the
    Departments of Justice and the Treasury to help draft
    money-laundering legislation for the government of Paraguay.  The
    section also drafted a summary of the human rights situation as input
    to the annual human rights report and supported a visit of State's
    Principal Deputy Assistant Secretary for Inter-American Affairs.

          SENEGAL
    ------------------------------------------------------- Appendix I:1.6

    The political section in Senegal spent the largest portion of its
    time on reporting and analysis and the remainder on representation,
    contact development, the presentation of demarches, coordination with
    and support to other agencies, and other activities.  The section
    reported on the leadership succession in Islamic brotherhoods,
    violence in ruling party internal elections, human rights, and other
    issues.  Moreover, it obtained Senegal's agreement not to oppose the
    U.S.  positions at the United Nations regarding sanctions against
    Cuba and Libya's candidacy for a Security Council seat.

       ECONOMIC AND COMMERCIAL
       ACTIVITIES
    --------------------------------------------------------- Appendix I:2

    Economic and business promotion was among the top priorities of the
    posts.  Several ambassadors spent up to one-third of their time on
    economic and trade advocacy activities, personally weighing in on
    behalf of U.S.  businesses where appropriate.

          BELARUS
    ------------------------------------------------------- Appendix I:2.1

    In Belarus, the combined economic and political section helped
    coordinate USAID's programs and reported on the International
    Monetary Fund stand-by program.  The section also helped facilitate a
    U.S.  contract to establish an international gateway teleport
    involving potential U.S.  exports worth up to $24 million and helped
    coordinate a U.S.  business delegation's meetings with the
    Belarussian president and other government officials.

          BRAZIL
    ------------------------------------------------------- Appendix I:2.2

    Brazil is one of 10 emerging markets identified in the U.S.  national
    export strategy.  The Ambassador has established trade advocacy as
    one of the mission's top priorities.\1 The economic section in
    Brasilia has advocated cases with Brazilian ministries, up to the
    highest levels of government.  Success stories during 1995 included
    helping obtain a $15 million contract for a U.S.  firm to develop a
    wastewater treatment facility.  In addition to trade advocacy, the
    economic section in Brasilia focused its efforts on promoting
    economic reform and intellectual property rights.  It produced about
    60 cables during September and October, including 16 on, for example,
    the banking sector and stock market where billions of U.S.  dollars
    are invested; 10 on intellectual property rights, which included
    Brazilian congressional action on the subject; 13 on transportation
    (including civil aviation and maritime affairs); 8 on
    telecommunications, asking U.S.  agencies to engage the Brazilians on
    this sector; 5 on the energy sector in preparation for the Hemisphere
    Energy Summit; 2 on World Trade Organization issues; and 1 in support
    of a major export promotion project.  Among the highlights of the
    mission's accomplishments during this time was the completion of the
    Bilateral Trade Review, which was presented to Presidents Clinton and
    Cardoso in November 1995.

    Economic officers at posts spent a large portion of their time on
    reporting and analysis.  They also spent significant time on
    representation and contact development; coordination with other
    agencies such as the Overseas Private Investment Corporation, U.S.
    Export-Import Bank, Federal Reserve System, Federal Communications
    Commission, and Department of the Treasury; and support for visitors,
    including the First Lady of the United States and the governors of
    Nebraska, West Virginia, and Wisconsin on trade missions.

    --------------------
    \1 Advocacy is carried out by several embassy sections, including the
    U.S.  and Foreign Commercial Service offices in Brasilia, Rio de
    Janeiro, Sao Paulo, and Belo Horizonte.

          MALAYSIA
    ------------------------------------------------------- Appendix I:2.3

    In Malaysia, providing support to American business and enhancing the
    business environment for U.S.  companies are among the mission's
    highest priorities.  With support from the economic section, working
    in cooperation with the U.S.  and Foreign Commercial Service staff,
    top post officials are actively engaged in numerous trade advocacy
    efforts.  For example, the Ambassador aggressively pursued contracts
    for U.S.  firms at the $4 billion international airport; this support
    contributed to a $35 million U.S.  contract for passenger loading
    bridges and a $60 million U.S.  contract for systems integration.  In
    addition, the economic section provides macroeconomic analysis and
    conveys U.S.  government positions on a wide range of bilateral and
    multilateral trade and investment issues.  Supporting air service
    agreements and protecting intellectual property rights are among the
    section's key objectives.

    During the months of September and October, staff in the economic
    section spent much of their time on representation and contact
    development, including numerous meetings with Malaysian government
    and business representatives and U.S.  business representatives;
    visitor support for 10 official visits; trade and finance promotion
    and support; and reporting and analysis.  In addition, the section
    handled numerous requests from many U.S.  agencies, including the
    Office of the U.S.  Trade Representative (USTR); the Federal Reserve
    Board; the White House Office of Science and Technology Policy; the
    Trade Development Agency; the Federal Aviation Administration; and
    the Departments of Commerce, the Treasury, Agriculture, and Labor.

          THE NETHERLANDS
    ------------------------------------------------------- Appendix I:2.4

    Promoting commercial relationships and U.S.  exports to The
    Netherlands is a top priority.  The Netherlands is the eighth largest
    U.S.  export market, the United States maintains a multibillion
    dollar trade surplus with The Netherlands, and each country invests
    heavily in the other.  The Ambassador and Deputy Chief of Mission
    have intensively advocated specific business deals involving
    officials at the highest levels of both governments.  One of the
    embassy's major successes in 1995 was an effort involving staff from
    many embassy sections to help win a $750 million contract for the
    Apache helicopter.  Aside from individual export deals, U.S.  and
    Dutch views on trade issues are often the same, and The Netherlands
    has been a valuable ally in advancing U.S.  economic policy goals in
    the International Monetary Fund, the World Trade Organization, and
    other multilateral bodies.

    A U.S.  and Foreign Commercial Service office helps individual U.S.
    firms do business.  Complementing this effort, the economic section
    represents U.S.  interests on a macro or policy level.  The economic
    section spent a large portion of its time on reporting and analysis.
    Other major activities included trade and finance promotion,
    representation and contact development, and visitor support.
    Accomplishments included advancing the candidacy of the U.S.  choice
    to chair a multilateral negotiating group on the multilateral
    agreement on investment and helping devise a strategy to secure
    market access for U.S.  genetically modified agricultural products.
    After bilateral negotiations facilitated by the economic section's
    aviation officer, the United States and The Netherlands also signed a
    bilateral aviation safety agreement, setting a precedent for other
    civil aviation partners.

          PARAGUAY
    ------------------------------------------------------- Appendix I:2.5

    Working in support of the negotiation and approval of treaties on
    foreign investment and economic development, the economic/ commercial
    section in Paraguay deals primarily with issues involving government
    corruption, intellectual property rights, and incorporating an
    informal commercial sector into the economy.  In terms of trade and
    business promotion, the economic/commercial section offers the full
    array of services that U.S.  and Foreign Commercial Service posts
    usually provide.  The mission is tracking several infrastructure
    projects with business potential, including the $200 million Asuncion
    Bay reclamation project and the $2.4 billion Corpus hydroelectric
    project.  In addition to handling 15 demarches on behalf of State
    headquarters, the section handled over 30 requests from other U.S.
    agencies, supported 7 trade shows, and met with more than 30 U.S.
    business visitors during September and October 1995.

       GLOBAL AND OTHER ISSUES
    --------------------------------------------------------- Appendix I:3

    Missions cover global issues such as the environment,
    counternarcotics, and labor.  In Paraguay, the political section
    administers the counternarcotics program.  In The Netherlands, the
    economic and political sections handle a variety of global issues,
    including energy, health care, population, and narcotics issues.  In
    Brazil, a section is devoted to science and technology issues,
    including export controls, nonproliferation, nuclear energy, space
    cooperation, and environmental/conservation issues.  Also, a
    narcotics assistance office helps Brazil combat drugs, and a labor
    officer monitors labor conditions for trade agreements.

    In The Netherlands, a legal section performs functions relating to
    the international war crimes tribunals for the former Yugoslavia and
    Rwanda, the International Court of Justice, and the Iran-U.S.  Claims
    Tribunal.  The section provides reporting and analysis and acts as a
    liaison for the U.S.  government on matters relating to the war
    crimes tribunals and the International Court of Justice.  Regarding
    the Claims Tribunal, the section supports the State Department's
    legal adviser in legal and technical negotiations with Iran.  The
    section also represents the U.S.  government in cases at the Tribunal
    that are between the two governments, supports private U.S.
    claimants in cases between private parties and the government of
    Iran, and represents the U.S.  government in administrative and
    budgetary issues involving the Tribunal.  To date, U.S.  claimants
    have received nearly $2.4 billion from the government of Iran through
    Tribunal awards.  The legal section's activities included reporting
    and analysis on subjects of ongoing technical and legal negotiations
    with Iran and the Tribunal's hearings in an intergovernmental case
    and a private claim brought by a U.S.  company against Iran.  The
    section participated in preparing the U.S.  defense in the
    intergovernmental case and advised the U.S.  claimant and its counsel
    on Tribunal practice and precedent relevant to its claim.  The
    section also engaged in negotiations with Iranian representatives
    concerning possible settlement of certain cases and provided support
    for State's legal adviser when he visited The Hague.

       CONSULAR SERVICES
    --------------------------------------------------------- Appendix I:4

    Each post had busy consular sections, but posts in Brazil and
    Paraguay had especially heavy visa workloads.  Following are examples
    of the consular workload.

          BELARUS
    ------------------------------------------------------- Appendix I:4.1

    During fiscal year 1995, the consular section in Belarus processed
    7,944 nonimmigrant visa cases, 90 percent of which required
    interviews, and processed 239 passport cases.  The section provided
    389 special consular services involving matters such as reports of
    the death of American citizens and inquiries about the welfare and
    whereabouts of American citizens.  The section spent 67 percent of
    its time on nonimmigrant visa processing activities, including
    answering questions regarding applications, 3 percent on immigrant
    visa processing activities, 27 percent on special consular services,
    and 3 percent on other activities.

    The shootdown of an American hot-air balloon by the Belarussian
    military in September consumed all of the consular officer's time and
    indeed that of almost the entire mission for days.  The consular
    section did all of the groundwork associated with the incident,
    attempting to contact the surviving Americans, identifying the bodies
    and sealing the morgue container to prevent tampering prior to an
    autopsy, calling the families involved, contacting the balloon club
    for information, photographing of the scene, cataloging the personal
    effects of the victims, taking statements from other participants,
    and arranging for final disposition of the remains.

          BRAZIL
    ------------------------------------------------------- Appendix I:4.2

    The consular workload at posts in Sao Paulo and Rio de Janeiro has
    reached near-crisis proportions and affected each post entirely,
    including nonconsular sections.  Managing the workload is a serious
    problem, and the consular sections have proposed several ways to
    streamline operations, increase efficiency, and raise revenues, given
    resource constraints.  Because of the popularity of tourism in the
    United States among Brazilians, a strong local currency, confidence
    in the economy, and bargain airfares, growth in the nonimmigrant visa
    workload has stressed posts to their limits.  In Sao Paulo, all State
    Department staff and some non-State staff assist with visa work.
    This has caused some concern that Sao Paulo and Rio de Janeiro are
    becoming unidimensional posts, essentially functioning as "visa
    mills." According to post officials, a Brazilian family spends an
    average of $3,000 during a visit to the United States; tourism from
    Brazil contributes about $1 billion to the U.S.  economy each year.
    Moreover, the United States collects over $10 million in visa and
    other consular fees.  The Ambassador expressed concern that delays
    and difficulties in obtaining visas may discourage some Brazilian
    tourists from visiting the United States.

          MALAYSIA
    ------------------------------------------------------- Appendix I:4.3

    Approximately 75 percent of the consular section's workload involves
    processing nonimmigrant visas, which numbered over 10,000 between
    September and October 1995.  In September, an American citizen was
    arrested on drug trafficking charges, a death penalty offense.  This
    took a considerable amount of the consular section's time.  (All
    charges were subsequently dropped and the person was released.) In
    addition, to capitalize on the signing of an extradition treaty in
    August 1995, the embassy urged the government of Malaysia to begin
    negotiations on a mutual legal assistance treaty.  Negotiations were
    scheduled to begin in June 1996.

    Consular fees collected by the post in 1995 totaled about $1,132,400.
    The embassy processed about 50,000 nonimmigrant visa applications, a
    caseload that is expected to grow by about 20 percent per year.
    Immigrant visa cases numbered about 430, representing about 5 percent
    of the consular workload.  American citizen services, which represent
    about 20 percent of the consular workload, included 3,769 passport
    cases and 2,158 special consular services, half of which were
    notarial and judicial services.

          PARAGUAY
    ------------------------------------------------------- Appendix I:4.4

    The consular workload is particularly heavy in Paraguay because of
    the complexity and growing volume of adoption cases.  In addition,
    Paraguay tends to have a high number of fraudulent visa cases
    involving unskilled Korean citizens trying to emigrate to the United
    States.  In fiscal year 1995, the section processed 510 immigrant
    visas including about 363 adoption cases, 11,870 nonimmigrant visas,
    557 special consular services, and 1,552 passport cases.  U.S.  staff
    in the section spent approximately 60 percent of their time on
    immigrant visa processing, 30 percent on nonimmigrant visa
    processing, and 10 percent on American citizens' services.  Consular
    collections in fiscal year 1995 totaled $554,217.

    (See figure in printed edition.)Appendix II
    COMMENTS FROM THE DEPARTMENT OF
    STATE
    =========================================================== Appendix I

    See comment 1.

    See comment 2.

    (See figure in printed edition.)

    See comment 3.

    See comment 4.

    See comments 1 and 5.

    See comment 5.

    (See figure in printed edition.)

    See comments 1, 2,
    and 3.

    Now on p.  24.

    See comments 4 and 6.

    (See figure in printed edition.)

    See comment 7.

    See comment 8.

    See comment 9.

    See comment 10.

    Now on p.  26.

    See comment 11.

    See comment 12.

    (See figure in printed edition.)

    See comment 13.

    Now on p.  26.

    See comment 14.

    Now on p.  14.

    Now on p.  17.

    See comment 15.

    (See figure in printed edition.)

    Now on p.  16.

    See comment 15.

    See comments 2 and 3.

    See comment 16.

    (See figure in printed edition.)

    Now on p.  34.

    See comment 15.

    See comment 15.

    See comment 17.

    (See figure in printed edition.)

    See comment 18.

    (See figure in printed edition.)

    See comment 19.

    Now on p.  38.

    (See figure in printed edition.)

    See comment 15.

    See comment 20.

    See comment 21.

    See comment 22.

    See comment 23.

    (See figure in printed edition.)

    See comment 24.

    Now on p.  47.

    Now on pp.  47-48.
    Now on p.  48.

    See comment 25.

    See comment 26.

    (See figure in printed edition.)

    See comment 27.

    Now on p.  50.

    See comment 28.

    See comment 29.

    (See figure in printed edition.)

    See comment 3.

    See comment 15.

    See comment 15.

    See comment 15.

    (See figure in printed edition.)

    See comment 30.

    See comment 31.

    (See figure in printed edition.)

    See comment 32.

    See comment 33.

    See comment 1.

    See comment 15.

    The following are GAO's comments on the Department of State's letter
    dated June 13, 1996.

       GAO COMMENTS
    --------------------------------------------------------- Appendix I:5

    1.  Both the legislative and executive branches have proposed funding
    levels that are well below the amounts needed to maintain the status
    quo.  Given the magnitude of changes that may be necessary to adjust
    to reduced budgets, it is essential that State develop a downsizing
    strategy based on a comprehensive review of its functions and
    processes.  Even if State's funding is not significantly reduced, we
    believe that developing a downsizing plan would help State to focus
    whatever resources are available on its most critical functions and
    activities.

    2.  We did not attempt to develop a cost reduction package.  We
    clearly stated that the Department would have to reduce the scope of
    activities to absorb funding cuts of the magnitude being discussed.
    We did not attempt to quantify the amount of cost reductions that
    could be achieved through implementation of all of the options we
    identified.  However, the total amount of cost reduction options
    discussed in our report far exceeds the $200 million figure cited by
    State.  For example, we noted that State could substantially reduce
    the costs of its overseas presence by closing some posts and reducing
    the size of others, but we did not specify posts that should be
    closed or downsized or the amount of cost reduction that would
    result.  However, given that State spends about $1.9 billion annually
    on its overseas operations, the amount of cost reductions from
    downsizing State's overseas presence could be substantial.

    3.  We identified a number of options that, if implemented, would
    help enable State to adjust to potential budget reductions.  Some of
    the options would require a reduction in the scope of State's current
    functions and activities.  We did not attempt to recommend which
    combination of options would be most appropriate.  Although State may
    oppose many of these options, future funding levels may require State
    to consider them as part of a downsizing strategy.  We believe it is
    State's responsibility to specify the actions, as well as the
    resulting cost implications, that would be necessary to adjust to the
    various funding levels that have been suggested by the executive and
    legislative branches.

    4.  The executive summary notes that, for several years, State has
    reduced personnel and taken other actions to reduce costs
    accordingly, such as reducing staff levels by 2,200 since 1993.  It
    should be noted that this staff reduction represented an 8.5 percent
    cut in personnel.

    5.  We did not make judgments on appropriate funding levels for State
    or the relative value of State's functions and activities and we did
    not try to compare the relative merits of State's diplomacy to other
    U.S.  government tools.

    6.  We noted that since 1991, State has closed 31 posts, most of
    which were consulates in countries with multiple posts.  During the
    same period, State also opened 28 posts mostly in the newly
    independent states of the former Soviet Union.

    7.  Chapter 5 notes that State's Under Secretary for Management has
    called for and supported individual reengineering efforts throughout
    the Department in an attempt to improve services and lessen costs.

    8.  We modified the report to reflect action taken in June 1996 to
    begin implementation of the overseas staffing model, which has been
    in the design phase for several years.

    9.  We agree that the mandate of the Strategic Management Initiative
    was to streamline, reengineer, and reinvent specific activities.  In
    its budget request for fiscal year 1996, State also said that the
    initiative would establish a clear strategic direction, match
    resources to priorities, be consistent with budget realities, and
    result in significant reductions.  Furthermore, the Strategic
    Management Initiative coordinator told us that the original goal of
    the initiative was to look at models for reorganizing State and
    overseas missions.  We stated in our report that the Secretary of
    State decided in February 1995 that it was not a good time to propose
    fundamental changes to State's mission, organizational structure, and
    processes and that the initiative should focus on recommendations
    that would not involve major changes to operations.

    10.  The coordinator of the Strategic Management Initiative told us
    that reengineering teams assumed a flat State Department budget when
    they made their recommendations.  They did not plan for overall
    budget cuts.  But, in an April 1995 letter to the Secretary, the
    initiative's team leaders conveyed their recommendations and
    identified over $100 million in potential reductions:  $61 million in
    domestic cost reductions, $35 million in out-year cost reductions,
    $17 million in annual cost reductions from the closure of overseas
    posts, and $33 million of reductions in the Management Bureau's
    domestic support costs.

    11.  State documents prepared in February 1996 indicated no action on
    a recommendation to improve setting priorities for intelligence
    collection.  We modified the report to incorporate State's update on
    its efforts to set priorities for intelligence gathering and
    reporting by expanding its representation on the intelligence
    community and interagency boards.

    12.  Chapter 5 discusses the initiatives of the Under Secretary for
    Management to reduce support costs.

    13.  Our report accurately reflects State Department cost estimates
    for post closures, which do not include salaries for U.S.  staff.  We
    have noted in the report that post closures will result in additional
    cost reductions if they contribute to overall staff reductions.

    14.  In April 1995, a reengineering team recommended termination of
    law enforcement activities.  In May 1995, the Secretary decided that
    the recommendation required further review in light of the
    President's counterterrorism initiative.  In October 1995, the
    Coordinator of the Strategic Management Initiative told us that the
    recommendations had been tabled.  We agree with State that it has
    closed resident offices (New Haven, Detroit, and St.  Louis), reduced
    three offices, and downsized the Philadelphia field office.  However,
    the Under Secretary for Management notified the Congress of the plans
    to close these offices in November 1993, 1 year prior to the
    commencement of the Strategic Management Initiative.  We were unable
    to verify the number of diplomatic security field staff positions
    that have been cut.

    15.  We modified the report to incorporate this suggestion.

    16.  It was not the intent of our report to specifically direct
    State's downsizing efforts.  Our report stresses the importance of
    ensuring that personnel reductions are taken with a view toward
    retaining a viable workforce.  To avoid the pitfalls of skill
    imbalances that could result from such personnel reductions, it is
    essential that State develop plans for downsizing or restructuring
    that include identifying its core missions, functions, and processes.

    17.  We did not recommend that the Bureau of Democracy, Human Rights,
    and Labor's Office of International Labor Affairs and labor officer
    positions abroad be eliminated.  We offered this as one of many
    options and measures that could reduce costs.  Our point was that
    given potential budget shortfalls State needs to scrutinize its
    functions and reassess its involvement in all areas.

    18.  We suggested that reporting may be one area that State could
    reduce if budget levels compel the Department to reassess its
    workload requirements to match the level of resources it must live
    with, and stressed that some of State's reports are legislatively
    mandated.  Our report recommends that State identify legislative
    actions, if any, that would be needed to adjust to proposed funding
    levels.

    We did not recommend elimination or otherwise limiting specific
    reporting requirements.  We mention three reports--the annual country
    reports on economic policy and trade practices; human rights
    practices; and science, technology, and American diplomacy--as
    examples of some of the congressionally mandated reports that consume
    considerable resources at headquarters and at overseas posts.
    Although the costs associated with its reports have not been
    quantified, streamlining some of these reporting requirements has the
    potential to significantly reduce resource requirements.  State will
    need to maintain cost information it presently does not have in order
    to weigh the costs and benefits of its reports and other products and
    services and to prioritize requirements.  Where appropriate, we have
    incorporated the technical changes that State has noted in its
    comments.

    19.  We did not attempt to determine the extent of duplication and
    overlap within the Department.  However, we noted that State itself,
    in a February 1995 study, had identified several areas of potential
    duplication, including overlap between the Bureau of Intelligence and
    Research and regional and functional bureaus throughout the
    Department.

    20.  We did not suggest that State charge fees for all services.  We
    understand that recouping the costs of certain products and services
    may not be feasible.

    21.  We updated the report to acknowledge that, in March 1996, State
    provided instructions to overseas posts for the collection of fees
    for commercial services in posts where the Department of Commerce
    does not provide commercial services.  However, State could also
    explore further options to recoup some of the costs it incurs in
    providing other services.

    22.  It was not our intent to tell State or other agencies how to set
    priorities when downsizing.  If other agencies lower their overseas
    profile and ask State to fill the void, it will be incumbent upon
    State to adjust its resource allocations based on strategic
    priorities.

    23.  In concluding that State must reassess its involvement in
    certain functions and activities, we noted that State may need to
    seek legislative relief from certain congressionally mandated reports
    or obtain legislative authorization to downgrade the level of certain
    services.

    24.  This section of the report characterizes the work that State
    performs overseas and was not intended to describe how the funding
    for consular programs was managed.  Information on funding for
    consular programs is contained in chapter 3.

    25.  Chapters 4 and 5 describe how State not only supports its own
    activities but also those of other agencies.  In fact, State supports
    more of other agencies' U.S.  direct-hire employees--whose number has
    increased steadily--than its own.

    26.  Our report accurately characterizes how internal and external
    pressures make closing posts difficult.  We have modified the text in
    our report to note that external pressures contributed to State's
    decision to maintain six posts that it had proposed to close.

    27.  Our report accurately characterizes State's policy on
    universality.  If its budget is significantly reduced, State will
    probably have to reduce its overseas presence and may not be able to
    afford universal diplomatic representation.  Our report recognizes
    that other agencies are located at U.S.  diplomatic posts and depend
    on State for services.  This is one reason why we believe an
    independent panel to review proposals to close and downsize posts may
    be useful.

    28.  We modified the report to note State's concerns about
    congressional opposition to the National Performance Review
    recommendation to give ambassadors greater authority.  We do not
    believe that implementation of the overseas staffing model and ICASS
    is a necessary precondition to initiate a pilot program to test the
    concept of increasing ambassadors' authority.

    29.  We agree that requiring overseas personnel to bring their
    furniture to posts is not necessarily a prudent option, and our
    report did not offer this as an option.  Rather, we noted that the
    post in The Hague was considering requiring staff to bring their own
    furniture overseas in order to reduce post costs.  We also noted that
    the cost of shipping household goods is paid by State headquarters.
    This example demonstrates that posts do not have full control of the
    resources and as a result may make decisions associated with post
    operations that protect the post's budget, but do not necessarily
    reduce State's costs.

    30.  We did not recommend increased use of the foreign service
    nationals (FSN), but we believe this option should be considered.  We
    share State's concerns about increased use of FSNs, but we believe
    that cost-benefit and risk management principles suggest that some
    level of increased risk may be acceptable in return for significantly
    reduced costs.  State needs to carefully weigh the cost and risk
    implications of this option.

    31.  We do not understand the context for this comment.  This report
    did not recommend the sale of properties.  However, in a prior
    report, Overseas Real Estate:  Millions of Dollars Could Be Generated
    by Selling Unneeded Real Estate (GAO/NSIAD-96-36, Apr.  23, 1996), we
    (1) pointed out that State had a list of over 100 properties for
    potential sale valued at $467 million; (2) identified other
    properties worth millions of dollars not on the list that are
    potentially excess to State's needs or have a questionable value and
    are often expensive to maintain; and (3) proposed that an independent
    panel be established to decide which properties should be sold.

    32.  Outsourcing is an option that should be considered.  State's
    Strategic Management Initiative called for an outsourcing study of
    telecommunications services.  Studies to determine the
    cost-effectiveness of outsourcing other functions may also uncover
    ways to reduce costs.

    33.  We believe that the Defense Logistics Agency is one outsourcing
    option available for State to consider, even though the Agency may
    not be able to meet all of State's needs.  State would need to
    compare its costs for providing certain support functions to the
    costs of contracting with the Defense Logistics Agency for these same
    services.

    MAJOR CONTRIBUTORS TO THIS REPORT
    ========================================================= Appendix III

       NATIONAL SECURITY AND
       INTERNATIONAL AFFAIRS DIVISION,
       WASHINGTON, D.C.
    ------------------------------------------------------- Appendix III:1

    John Brummet
    Blake Ainsworth
    Eugene D.  Beye
    Michael J.  Courts
    Joy Labez
    David C.  Maurer
    Margaret E.  Morgan
    Suzanne P.  Nagy
    Jeffrey D.  Phillips
    Jodi M.  Prosser
    Nancy L.  Ragsdale
    James M.  Strus
    Michael Ten-Kate
    La Verne G.  Tharpes

    RELATED GAO PRODUCTS
    ============================================================ Chapter 1

    PRODUCTS ON THE STATE DEPARTMENT

    Overseas Real Estate:  Millions of Dollars Could Be Generated Selling
    Unneeded Real Estate (GAO/NSIAD-96-36, Apr.  23, 1996).

    State Department:  Actions Needed to Improve Embassy Management
    (GAO/NSIAD-96-1, Mar.  12, 1996).

    State Department:  Additional Actions Needed to Improve Overseas Real
    Property Management (NSIAD-95-128, May 15, 1995).

    Overseas Real Estate:  Inaction on Proposals to Sell High-Value
    Property in Tokyo (GAO/NSIAD-95-73, Apr.  7, 1995).

    Overseas Staffing:  U.S.  Government Diplomatic Presence Abroad
    (GAO/T-NSIAD-95-136, Apr.  6, 1995).

    Overseas Presence:  Staffing at U.S.  Diplomatic Posts
    (GAO/NSIAD-95-50FS, Dec.  28, 1994).

    Department of State IRM:  Strategic Approach Needed to Better Support
    Agency Mission and Business Needs (GAO/AIMD-95-20, Dec.  22, 1994).

    State Department:  Overseas Staffing Process Not Linked to Policy
    Priorities (GAO/NSIAD-94-228, Sept.  20, 1994).

    Financial Management:  State's Systems Planning Needs to Focus on
    Correcting Long-standing Problems (GAO/AIMD-94-141, Aug.  12, 1994).

    State Department:  Widespread Management Weaknesses at Overseas
    Embassies (GAO/T-NSIAD-93-17, July 13, 1993).

    State Department:  Survey of Administrative Issues Affecting
    Embassies (GAO/NSIAD-93-218, July 12, 1993).

    State Department:  Management Weaknesses at the U.S.  Embassies in
    Panama, Barbados, and Grenada (GAO/NSIAD-93-190, July 9, 1993).

    State Department:  Management Weaknesses at the U.S.  Embassy in
    Mexico City, Mexico (GAO/NSIAD-93-88, Feb.  8, 1993).

    High-Risk Series:  Management of Overseas Real Property
    (GAO/HR-93-15, Dec.  1992).

    Foreign Affairs Issues (GAO/OCG-93-26TR, Dec.  1992).

    Financial Management:  Serious Deficiencies in State's Financial
    Systems Require Sustained Attention (GAO/AFMD-93-9, Nov.  13, 1992).

    State Department:  Facilities in Eastern Europe and the Former Soviet
    Union (GAO/NSIAD-92-284, Sept.  22, 1992).

    State Department:  Need to Ensure Recovery of Overseas Medical
    Expenses (GAO/NSIAD-92-277, Aug.  7, 1992).

    State Department:  Management Weaknesses in the Security Construction
    Program (GAO/NSIAD-92-2, Nov.  29, 1991).

    State Department:  Status of Actions to Improve Overseas Procurement
    (GAO/NSIAD-92-24, Oct.  25, 1991).

    State Department:  Efforts Underway to Enhance Management of Overseas
    Real Property (GAO/NSIAD-91-277, Sept.  5, 1991).

    State Department:  Status of the Diplomatic Security Construction
    Program (GAO/NSIAD-91-143BR, Feb.  20, 1991).

    PRODUCTS ON MANAGEMENT AND
    DOWNSIZING

    Federal Downsizing:  Observations on Agencies' Implementation of the
    Buyout Authority (GAO/T-GGD-95-164, May 17, 1995).

    Workforce Reductions:  Downsizing Strategies Used in Selected
    Organizations (GAO/GGD-95-54, Mar.  13, 1995).

    Federal Downsizing:  The Administration's Management of Workforce
    Reductions (GAO/T-GGD-95-108, Mar.  2, 1995).

    Reengineering Organizations:  Results of a GAO Symposium
    (GAO/NSIAD-95-34, Dec.  13, 1994).

    Management Reform:  Implementation of the National Performance
    Review's Recommendations (GAO/OCG-95-1, Dec.  5, 1994).

    Executive Guide:  Improving Performance Through Strategic Information
    Management and Technology (GAO/AIMD-94-115, May 1994).

    Management Reforms:  Examples of Public and Private Innovations to
    Improve Service Delivery (GAO/AIMD/GGD-94-90BR, Feb.  11, 1994).

    Management Reform:  GAO's Comments on the National Performance
    Review's Recommendations (GAO/OCG-94-1, Dec.  3, 1993).

    *** End of document. ***