The Results Act: Observations on USAID's November 1996 Draft Strategic
Plan (Correspondence, 07/11/97, GAO/NSIAD-97-197R).

GAO reviewed and evaluated the latest available version of the Agency
for International Development's (AID) draft strategic plan, focusing on:
(1) the draft plan's compliance with the Government Performance and
Results Act's requirements and its overall quality; (2) whether AID's
key statutory authorities were reflected; (3) whether discussions about
cross-cutting functions and interagency involvement were included; (4)
whether the draft plan addressed major management problems; and (5)
AID's capacity to provide reliable information about its operations and
performance.

GAO noted that: (1) AID's November 1996 draft strategic plan reflects
the agency's adoption of a strategic approach to managing the U.S.
foreign assistance program; (2) the plan includes the six elements
required by the Results Act; (3) however, two components of the
plan--the sections on relating performance goals to general goals and
objectives and on program evaluations--do not contain sufficient
information to fully achieve the purposes of the Results Act and related
Office of Management and Budget guidance; (4) more specifically, these
sections do not include a discussion of performance goals, relevant
evaluation findings AID used to develop its plan, or AID's plan for
conducting future evaluations; (5) while the remaining sections of the
draft plan are more complete, GAO's analysis showed that they could be
improved; (6) the sections on goals and objectives could more fully
encompass AID's major functions by specifically addressing Economic
Support Fund programs and assistance to Eastern Europe and the former
Soviet Union, which more directly serve U.S. foreign policy objectives
and represent about 60 percent of AID's budget; (7) also, the plan could
be more explicit about what AID intends to achieve; (8) the sections on
strategies for achieving goals and objectives are specific and clear but
could benefit from more information on management reforms AID has
undertaken and on the level of resources AID needs to achieve its goals;
(9) the key external factors section describes some of the constraints
AID faces, including the controls and restrictions on its funding;
however, it does convey the full range and significance of factors that
can profoundly impact achievement of AID's goals and objectives; (10) a
description of how AID fosters regional cooperation, donor coordination,
and host country development planning would ensure that the plan
addresses all the key principles of AID's basic authorizing legislation;
(11) the plan does not reflect coordination with other U.S. government
agencies; (12) AID's draft plan does not address key management
challenges that the agency faces; (13) the plan provides a general
description of recent management initiatives but does not discuss how
effective these initiatives have been in resolving critical management
problems AID has acknowledged in nearly all areas of its operations; and
(14) the reliability of AID's program and financial data is uncertain.

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

 REPORTNUM:  NSIAD-97-197R
     TITLE:  The Results Act: Observations on USAID's November 1996 
             Draft Strategic Plan
      DATE:  07/11/97
   SUBJECT:  Foreign economic assistance
             Program evaluation
             International relations
             Congressional/executive relations
             Financial management
             Strategic planning
             Agency missions
             Foreign policies
             Interagency relations
             Management information systems
IDENTIFIER:  Economic Support Fund
             AID New Management System
             
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Cover
================================================================ COVER



September 1997


GAO/NSIAD-97-197R

USAID Draft Strategic Plan

(711282)


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

  BOP - Federal Bureau of Prisons
  CFO - Chief Financial Officers
  DEA - Drug Enforcement Administration
  DOJ - Department of Justice
  FBI - Federal Bureau of Investigation
  INS - Immigration and Naturalization Service
  NMS - x
  NPR - National Performance Review
  OMB - Office of Management and Budget
  USAID - x

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


B-277408

July 11, 1997

The Honorable Richard K.  Armey
Majority Leader
House of Representatives

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

The Honorable Dan Burton
Chairman
Committee on Government Reform
 and Oversight
House of Representatives

The Honorable Bob Livingston
Chairman
Committee on Appropriations
House of Representatives

Subject:  The Results Act:  Observations on USAID's November 1996
Draft Strategic Plan

On June 12, 1997, you asked us to review the draft strategic plans
submitted by the cabinet departments and selected major agencies for
consultation with the Congress as required by the Government
Performance and Results Act of 1993 (the Results Act [P.L.  103-62]). 
This letter is our response to that request concerning the U.S. 
Agency for International Development (USAID). 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :1

Our overall objective was to review and evaluate the latest available
version of USAID's draft strategic plan.  Specifically, we (1)
assessed the draft plan's compliance with the Act's requirements and
its overall quality, (2) determined if USAID's key statutory
authorities were reflected, (3) identified whether discussions about
cross-cutting functions and interagency involvement were included,
(4) determined if the draft plan addressed major management problems,
and (5) discussed USAID's capacity to provide reliable information
about its operations and performance. 

Our overall assessment of USAID's draft strategic plan was generally
based on our knowledge of USAID's operations and programs, our
numerous reviews of the agency, and other existing information
available at the time of our assessment.  Specifically, the criteria
we used to determine whether the draft plan complied with the
requirements of the Results Act were the Results Act supplemented by
Office of Management and Budget (OMB) guidance on developing the
plans (Circular A-11, Part 2).  To make judgments about the overall
quality of the plan and its components, we used our May 1997 guidance
for congressional review of the plans\1 as a tool.  To determine
whether the plan contained information on interagency coordination
and addressed management problems we previously identified, we relied
on our general knowledge of USAID's operations and programs, and the
results of our previous reports (see enclosure II for a list of our
major products in this area).  We conducted our assessment between
June 13 and July 8, 1997, in accordance with generally accepted
government auditing standards.  USAID officials provided oral
comments on a draft of this correspondence, which are reflected in
the Agency Comments section. 

We based our assessment on the November 5, 1996, draft strategic plan
that USAID provided to the House of Representatives staff team
working with the agency.  We recognize that developing a strategic
plan is a dynamic process, and USAID is continuing to revise its plan
based on consultations with congressional staff, its Inspector
General, OMB, and other stakeholders.  However, a revised draft was
not available to us. 

It is important to recognize that under the Results Act, the final
plan is not due until September 1997.  Furthermore, the Act
anticipated that it may take several planning cycles to perfect the
process and that the final plan would be continually refined as
various planning cycles occur.  Thus, our comments reflect a snapshot
status of the plan at a given point in time. 

Furthermore, USAID's draft strategic plan was prepared prior to the
administration's decision to consolidate the Department of State, the
Arms Control and Disarmament Agency, and the U.S.  Information Agency
and to have the USAID Administrator report directly to the Secretary
of State.  This reorganization could influence subsequent drafts of
the plan. 


--------------------
\1 Agencies' Strategic Plans Under GPRA:  Key Questions to Facilitate
Congressional Review (GAO/GGD-10.1.16, Version 1, May 1997). 


   BACKGROUND
------------------------------------------------------------ Letter :2

USAID administers U.S.  foreign economic and humanitarian assistance
programs worldwide in the developing world as well as in Central and
Eastern Europe and the newly independent states of the former Soviet
Union.  USAID's assistance programs generally fall within one of five
broad categories:  development assistance, economic support
activities, international disaster relief, assistance to East and
Central European countries and the newly independent states of the
former Soviet Union, and food assistance.  USAID provides assistance
to over 100 countries and has 72 overseas missions and offices
managing projects to improve health and family planning, protect the
environment, promote broad-based economic growth, support democracy,
and relieve human suffering.  Most of these projects are implemented
by host governments, U.S.  and indigenous private voluntary and
nongovernmental organizations, international agencies, universities,
and U.S.  businesses. 

The Results Act requires each federal agency to develop a strategic
plan by September 30, 1997.  Each plan is to include the following
six elements:  (1) a comprehensive mission statement covering the
major functions and operations of the agency, (2) the agency's
general goals and objectives, (3) a description of how the goals and
objectives are to be achieved, (4) a description of how the
performance goals included in the plan will be related to the
agency's general goals and objectives, (5) identification of key
factors external to the agency and beyond its control that could
affect achievement of general goals and objectives, and (6) a
description of the program evaluations used to establish/revise
strategic goals with a schedule for future program evaluations. 

USAID's planning efforts are influenced by the diffused scope of the
foreign assistance program.  The Foreign Assistance Act of 1961 (P.L. 
87-195), which authorizes many of USAID's programs, has been amended
several times and has delineated more than 30 separate wide-ranging
objectives.  These authorities have been augmented by other
congressional directives and by programs introduced over the years by
various USAID Administrators, which has resulted in a complicated set
of objectives with no clear priorities.  In March 1992, we reported
that USAID lacked a clearly articulated strategic direction shared by
key internal and external groups and recommended that USAID establish
a strategic management process.\2

Since 1993, USAID has undertaken comprehensive management reforms,
with strategic planning as a key element.  In March 1994, USAID
issued its Strategies for Sustainable Development and, in September
1995, a Strategic Framework, which graphically presented USAID's
broad goals, its agency objectives to meet those goals, and a wide
range of approaches for achieving those objectives.  These documents
served as the basis for the November 1996 draft strategic plan. 

USAID's Administrator has noted that these reforms are consistent
with the Results Act and have positioned USAID well to meet the Act's
requirements for strategic planning and performance monitoring.  We
are currently evaluating the impact of these reforms on USAID
operations in a separate review. 


--------------------
\2 AID Management:  Strategic Management Can Help AID Face Current
and Future Challenges (GAO/NSIAD-92-100, Mar.  6, 1992). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :3

USAID's November 1996 draft strategic plan reflects the agency's
adoption of a strategic approach to managing the U.S.  foreign
assistance program.  The plan includes the six elements required by
the Results Act.  However, two components of the plan--the sections
on relating performance goals to general goals and objectives and on
program evaluations--do not contain sufficient information to fully
achieve the purposes of the Results Act and related OMB guidance. 
More specifically, these sections do not include a discussion of
performance goals, relevant evaluation findings USAID used to develop
its plan, or USAID's plan for conducting future evaluations. 

While the remaining sections of the draft plan are more complete, our
analysis showed that they could be improved.  The sections on goals
and objectives could more fully encompass USAID's major functions by
specifically addressing Economic Support Fund programs and assistance
to Eastern Europe and the former Soviet Union, which more directly
serve U.S.  foreign policy objectives and represent about 60 percent
of USAID's budget.  Also, the plan could be more explicit about what
USAID intends to achieve.  The sections on strategies for achieving
goals and objectives are specific and clear but could benefit from
more information on management reforms USAID has undertaken and on
the level of resources USAID needs to achieve its goals.  The key
external factors section describes some of the constraints USAID
faces, including the controls and restrictions on its funding;
however, it does not convey the full range and significance of
factors that can profoundly impact, positively or negatively,
achievement of USAID's goals and objectives.  In particular, this
section does not reflect the fact that USAID often relies on the
contributions of other bilateral and multilateral donors to achieve
its goals and objectives and that these donors may be more
influential than USAID in promoting development in some countries. 

USAID's mission statement is broad enough to encompass USAID's major
statutory functions and activities.  However, a description of how
USAID fosters regional cooperation, donor coordination, and host
country development planning would ensure that the plan addresses all
the key principles of the Foreign Assistance Act, USAID's basic
authorizing legislation. 

The plan does not reflect coordination with other U.S.  government
agencies.  Since many agencies are involved in activities directly
related to USAID's mission, goals, and objectives, there is potential
for cross-cutting issues.  The plan does not address areas of
possible duplication and USAID's efforts to minimize them or the
extent to which USAID relies on other agencies to meet its goals and
objectives.  However, USAID has provided input on the Department of
State's draft strategic plan on international affairs. 

USAID's draft plan does not address key management challenges that
the agency faces.  The plan provides a general description of recent
management initiatives but does not discuss how effective these
initiatives have been in resolving critical management problems USAID
has acknowledged in nearly all areas of its operations.  In
particular, the plan does not describe difficulties USAID has
encountered in developing a performance measurement system, in
reforming its personnel systems, and in deploying a new information
management system that is intended to correct several material
weaknesses in its financial management processes.  Further, the plan
does not address the challenges related to implementing the Chief
Financial Officers Act of 1990 (P.L.  101-576) and developing
information technology.  Specifically, the plan does not address
deficiencies in USAID's New Management System and how they will be
corrected. 

The reliability of USAID's program and financial data is uncertain. 
It is too early to assess USAID's capacity to provide reliable
information on the achievement of its goals, because its performance
measurement system is not yet fully developed.  However, potential
for reliability problems exists insofar as USAID relies on
unsubstantiated program performance data from aid recipients and
statistics compiled by host countries.  Further, it is unlikely that
USAID will be able to provide reliable data on the cost of achieving
program results because of problems in implementing its new financial
system and the ineffectiveness of its old system. 


   USAID'S DRAFT STRATEGIC PLAN IS
   UNEVEN IN REFLECTING SIX KEY
   ELEMENTS OF RESULTS ACT
   REQUIREMENTS
------------------------------------------------------------ Letter :4

USAID's draft plan contains, in varying degrees of detail, the six
critical elements required by the Results Act.  The plan addresses
some elements in a cursory way, while for others it provides much
more elaboration.  Furthermore, our analysis revealed some strengths
and key weaknesses in the way that USAID addresses some of these
strategic planning issues. 

Eight of the nine sections of USAID's draft plan comprise the six
critical components required by the Results Act (USAID voluntarily
included a section on its role in development).  Table 1 shows the
Results Act's required components and the corresponding sections in
USAID's plan--the numbers show the order in which the components
appear in the Act and the plan. 



                                Table 1
                
                Strategic Plan Components Listed by the
                 Results Act and Corresponding Sections
                in USAID's November 1996 Draft Strategic
                                  Plan

Strategic plan component listed by  Corresponding sections in USAID's
Results Act                         November 1996 draft strategic plan
----------------------------------  ----------------------------------
1. Comprehensive mission statement  I. USAID mission statement

2. General goals and objectives     II. USAID goals and objectives
for the major functions and
operations of the agency            III. USAID plan of action for
                                    achieving its goals and
                                    objectives\a

3. Description of how the goals     IV. USAID objectives and program
and objectives are to be achieved   approaches

                                    VIII. Learning from experience

4. Description of the relationship  V. How annual performance goals
between the general goals and       relate to the 10-year strategic
objectives and the performance      plan
goals

5. Identification of key factors    VI. Challenges and key external
external to the agency and beyond   factors
its control that could affect
achievement of general goals and
objectives

6. Description of how program       IX. USAID's evaluation agenda
evaluations were used to establish
or revise strategic goals, and a
schedule for future program
evaluations

Other sections not required by the  VII. USAID's role
Act
----------------------------------------------------------------------
\a This section presents USAID's broad plan of action and represents
a further description of its goals and objectives rather than of
specific approaches, which are contained in subsequent sections. 

Sources:  The Government Performance and Results Act of 1993 and
USAID's November 1996 draft strategic plan. 


      MISSION STATEMENT
---------------------------------------------------------- Letter :4.1

USAID's November 1996 draft plan contains a statement of the agency's
mission, which is to promote broad-based sustainable development and
provide humanitarian assistance in situations of natural and man-made
disasters.  Also, this section of the plan relates this mission to
four key U.S.  foreign policy objectives:  promoting U.S.  economic
prosperity, enhancing U.S.  security, protecting the United States
against global dangers, and preventing and alleviating crises.  Thus,
the plan attempts to demonstrate how achieving the mission fulfills a
public need. 


      LONG-TERM GOALS AND
      OBJECTIVES
---------------------------------------------------------- Letter :4.2

USAID's November 1996 draft plan contains the following five goals: 

  -- achieving broad-based economic growth;

  -- building sustainable democracies;

  -- stabilizing world population and protecting human health in a
     sustainable fashion;

  -- managing the environment for long-term sustainability; and

  -- saving lives, reducing suffering, and reenforcing development
     potential. 

Under these goals, the plan lists USAID's 19 long-term objectives. 
All of these goals and objectives are logically related to the
agency's mission.  However, this section does not address some of
USAID's major functions and activities that more directly serve U.S. 
foreign policy objectives, specifically its Economic Support Fund
programs, which assist primarily Israel and Egypt, and its programs
in the East European and Baltic States and newly independent states
of the former Soviet Union.  Given that these programs represent
about 60 percent of USAID's budget, USAID's plan could benefit from
more discussion of these activities. 

In addition to these goals and objectives, another section of the
plan implicitly states another measurable agency goal:  to graduate
countries from the need for external assistance.  According to the
plan, USAID expects to graduate up to 10 countries within 5 years and
over 30 countries within 10 years.  The plan also lists five factors
that must be in place for a country to be graduated: 

  -- existence of competitive and performing markets;

  -- existence of an active civil society and democratic institutions
     and practices;

  -- capacity to provide basic education for both girls and boys
     effectively;

  -- capacity to provide basic health services to the population,
     such that mortality and fertility trends continue to decline to
     manageable levels; and

  -- capacity to manage the environment for long-term sustainability. 

The plan would benefit from a more explicit link between this section
of the plan and USAID's long-term goals and objectives.  The plan is
unclear as to whether graduation is indeed an agency goal and whether
achievement of each of the five key factors for graduation is
considered an agency objective. 


      STRATEGIES TO ACHIEVE THE
      GENERAL GOALS AND OBJECTIVES
---------------------------------------------------------- Letter :4.3

USAID's draft strategic plan describes, in two sections, the agency's
approaches to achieving each of its goals and objectives.  In one
section, the plan lists the more specific "program approaches" or
types of activities it is engaged in for each of its 19 objectives. 
In the other section, the plan describes its management approach for
achieving results.  This approach is manifested in a new system of
program planning, implementation, and performance monitoring that
USAID implemented in October 1995.  This section briefly describes
many of the steps that the agency has taken to align its activities,
core processes, and resources to support its mission-related
outcomes. 

In the course of a related review, we have observed that in addition
to those management steps described in the plan, USAID has taken
steps to (1) ensure that managers have more of the authority they
need to achieve results; (2) ensure that managers have the knowledge,
skills, and abilities to implement the Results Act; and (3)
eliminate, create, and restructure programs and activities in order
to achieve its goals.  The plan would benefit from some mention of
these steps and how they serve to improve the effectiveness of
USAID's programs. 

In various places, the plan conveys USAID's concern about the
availability of resources for achieving its goals and objectives but
is not explicit about what resources would be adequate.  In one
section, the plan states that the achievement of USAID's goals and
objectives will relate directly to the availability of resources.  It
further indicates that USAID needs a "relatively constant level of
resources" to achieve its expectation of graduating up to 10
countries from foreign assistance within the next 5 years and 30
countries within 10 years.  In another section, the plan states that
"USAID's continued ability to make an impact will depend not only on
the magnitude of the program resources it can provide, but its
ability to maintain a critical level of field presence." The plan
also mentions "severe spending restrictions that greatly reduce
USAID's strategic flexibility" but does not describe how these
restrictions impact the adequacy of resources for meeting all of its
goals and objectives.  The plan would benefit from a discussion of
the level of resources USAID requires to achieve its goals and
objectives and the impact of funding below that level. 


      RELATING PERFORMANCE GOALS
      TO GENERAL GOALS AND
      OBJECTIVES
---------------------------------------------------------- Letter :4.4

USAID acknowledges in its draft plan that the section on relating
performance goals to general goals/objectives is incomplete but that
it will be completed before September 30, 1997, as USAID finishes
work on indicators and the establishment of other key management
reforms.  In its current form, this section of the plan states that
the performance goals, when put in place, will be objective,
quantifiable, and measurable and that achievement of annual goals
will lead to accomplishment of the goals and objectives of the
strategic plan.  Annual performance goals are needed to link USAID's
strategic goals and objectives to its day-to-day activities. 

Our ongoing review of USAID's management reforms indicates that USAID
is still in the process of developing a performance measurement
system based, in part, on input from its missions, which have made
varying degrees of progress in developing meaningful performance
measures.  In March 1997, USAID's Office of Inspector General noted
that USAID still faces difficulties in developing performance
measures that are related to USAID activities and that consolidate
individual mission results into agencywide results. 


      KEY EXTERNAL FACTORS
---------------------------------------------------------- Letter :4.5

The November 1996 plan mentions a number of external factors that
impact achievement of USAID's goals and objectives.  Some factors are
within the control of the U.S.  government, namely

  -- changing foreign policy imperatives,

  -- multiplicity of controls on USAID funding,

  -- severe spending restrictions that greatly reduce USAID's
     strategic flexibility,

  -- magnitude of program resources and recent budget reductions, and

  -- USAID's ability to maintain a critical level of field presence. 

Other factors that the plan mentions involve parties outside the U.S. 
government.  These factors are

  -- commitment of host country governments and citizens,

  -- diversity of foreign assistance stakeholders with conflicting
     interests,

  -- complication of working with sovereign governments, and

  -- increasing resources needed for countries in crisis or
     transition. 

The plan does not address the extent to which USAID can reduce or
ameliorate the impact of these external factors. 

Also, the plan could be improved if it included discussion of the
external conditions beyond USAID's control that can profoundly affect
the achievement of USAID's goals and objectives in any given country. 
Such factors may include market fluctuations, political unrest,
government policy changes, weather conditions, and natural disasters. 
The plan alludes to "uncertainties" and "risks" inherent in foreign
assistance programs but is not explicit about what these are and how
significant they are with regard to achieving agency goals and
objectives. 

Furthermore, the plan does not adequately address the contribution
that USAID's development partners--including other bilateral and
multilateral donors, nongovernmental organizations, and the host
governments themselves--make toward achievement of USAID's goals and
objectives.  In many countries, the funding provided by these
partners exceeds that of the United States.  Our ongoing review of
USAID reform efforts revealed that USAID considers achievement of its
goals and objectives to be the result of a collective effort of the
agency as well as its development partners.  However, the plan does
not reflect this fact or acknowledge that its influence in promoting
development is, in some instances, less than that of its partners. 
Because the efforts of so many other parties factor into the
achievement of USAID's goals and objectives, it is difficult for
USAID to clearly establish the impact of its own activities on
development. 


      PROGRAM EVALUATIONS
---------------------------------------------------------- Letter :4.6

The section of the draft plan on program evaluations does not contain
sufficient information to fully achieve the purpose of the Results
Act and related OMB guidance.  This section is intended to show how
program evaluations were used to establish strategic goals. 
According to OMB Circular A-11, this section should outline (1) the
general scope and methodology for planned evaluations, (2) key issues
to be addressed, and (3) when evaluations are to occur.  This section
in USAID's draft plan is quite general and brief.  It states that
USAID's broader goals and objectives have been substantially
influenced by evaluation findings and that evaluation studies have
influenced USAID's emphasis on certain types of programs.  However,
this section of the plan does not (1) mention any particular findings
of program evaluations, done by it or others, such as its Office of
Inspector General or us; (2) describe how such evaluations were used
to establish strategic goals; (3) provide much specific information
on the scope and methodology and issues to be addressed in
forthcoming evaluations, except for some "key issues" that will be
targeted; and (4) identify when various evaluations will be done,
other than in "the next several years."

The plan indicates that evaluations are a key element in managing for
results and that most evaluations are conducted in the field. 
However, our ongoing work on USAID's reform efforts revealed that
this may not be reflected in practice.  USAID has provided mission
managers with more discretion on whether to conduct evaluations, and,
as a consequence, some mission officials we spoke to indicated that
they would be deemphasizing evaluations in the management of their
programs. 


   KEY STATUTORY AUTHORITIES
   GENERALLY REFLECTED IN USAID'S
   STRATEGIC PLAN
------------------------------------------------------------ Letter :5

Our review of the draft plan and the Foreign Assistance Act of 1961,
which established the overall U.S.  foreign assistance program, as
well as other legislation, indicates that USAID's mission, goals, and
objectives, as stated in its draft plan, generally reflect the
statutory authority for foreign assistance programs.  USAID's
assistance programs generally fall within one of five broad statutory
categories:  development assistance, international disaster relief,
economic support fund activities, assistance to East and Central
European countries and the newly independent states of the former
Soviet Union, and food assistance under titles II and III of Public
Law 480. 

USAID's mission statement is supported by its statutory authority. 
Also, each of USAID's five major goals appears to express broad
policies supported by statutes authorizing USAID to carry out foreign
assistance programs.  Furthermore, our review of USAID appropriations
for the past several years indicates that funds were specifically
designated for activities under all of USAID's agency goals except
its goal of managing the environment for long-term sustainability. 

Overall, USAID's draft plan covers most of the principles governing
foreign assistance programs delineated in the Foreign Assistance Act. 
However, three key principles are mentioned only briefly in the plan;
these are (1) encouraging regional cooperation by developing
countries, (2) coordinating foreign assistance with other donor
countries, and (3) supporting development goals chosen by the
recipient country.  A more extensive discussion of USAID's efforts in
these areas would ensure that USAID's plan addresses all the key
principles in the Foreign Assistance Act, USAID's basic authorizing
legislation. 


   CROSS-CUTTING ACTIVITIES AND
   INTERAGENCY INVOLVEMENT NOT
   DISCUSSED
------------------------------------------------------------ Letter :6

USAID's draft strategic plan does not reflect coordination in
developing the plan with other U.S.  government agencies and
organizations that provide foreign assistance, despite cross-cutting
issues between USAID and other agencies.  Specifically, the plan does
not address USAID's efforts to minimize duplication with these other
agencies or the extent to which the activities of these organizations
contribute to the achievement of USAID's goals and objectives. 
According to a USAID official familiar with the draft strategic plan,
USAID did not formally seek input on this plan from other U.S. 
government agencies. 

Many U.S.  government departments and agencies are involved in
international programs that are directly related to USAID's mission,
goals, and objectives.  In addition to the foreign assistance
agencies of the U.S.  government, such as the Peace Corps, the
Inter-American Foundation, and the African Development Foundation,
the Department of Defense often plays a key role in providing U.S. 
humanitarian assistance abroad, the Department of Agriculture
participates in a number of international credit/insurance and food
security programs, and many of the U.S.  Information Agency's
activities are aimed at promoting democracy and an active civil
society.  In December 1995, we found that 23 departments and
independent agencies, including USAID, implemented 215 programs in
the former Soviet Union.\3 The U.S.  government also provides foreign
assistance through contributions to multilateral organizations, such
as the United Nations, the World Bank, and regional development
banks. 

According to a USAID official we spoke with, USAID, along with other
key agencies, provided input to the Department of State's draft
strategic plan for international affairs.  However, the official
noted that coordination was limited in that certain key departments,
such as the Treasury, which oversees U.S.  involvement in
multilateral financial institutions, and Defense, were not
represented at a major coordination meeting. 


--------------------
\3 Former Soviet Union:  Information on U.S.  Bilateral Program
Funding (GAO/NSIAD/96-37, Dec.  15, 1995). 


   STRATEGIC PLAN DOES NOT ADDRESS
   SOME MAJOR MANAGEMENT
   CHALLENGES
------------------------------------------------------------ Letter :7

Over the past few years, we and USAID's Office of Inspector General
have reported on major program and financial management challenges
USAID faces in carrying out its mission, as well as information
technology challenges all agencies face.  USAID's draft strategic
plan does not fully recognize these challenges or discuss their
resolution. 


      PROGRAM MANAGEMENT
---------------------------------------------------------- Letter :7.1

In the early 1990s, we reported that USAID was plagued by significant
and recurring management problems in most areas of its operations.\4
In particular, USAID was forced to address so many objectives that
the agency had no clear priorities or meaningful direction and had
not effectively ensured accountability for its decentralized
operations.  Furthermore, USAID had not done enough to ensure that
its employees had the skills they needed to meet their
responsibilities and were properly allocated among missions.  Also,
USAID's information systems were inadequate.  Based on these
observations, we made numerous recommendations, including that USAID
establish a clear strategic direction and a strategic management
process, which would, among other things, ensure that the systems for
making management decisions on programs, budgets, operations, and
personnel levels were integrated and included accountability and
monitoring. 

USAID's Administrator acknowledged that the agency was a troubled
organization, with a management system plagued by duplication,
conflicting mandates, and outdated information systems.  He pointed
to "near-universal agreement that USAID was in need of serious
management reforms."

USAID is in the process of addressing these problems by implementing
the new system of program planning, implementation, and performance
monitoring that is described in the section of the plan entitled
"Learning from experience." For example, USAID describes steps it has
taken to institute a strategic management process by developing an
agency strategic framework, establishing mission and office strategic
objectives, and devising results frameworks to link these objectives
to their activities. 

USAID's draft strategic plan does not discuss the extent to which
these steps have reduced the severity of the agency's management
problems.  Our recent and ongoing work has shown that many of the
reforms described in USAID's plan are too new to have had a
demonstrable impact on USAID's efficiency and effectiveness.  In
order for USAID's reform effort to be sustainable, USAID must make
concurrent and consistent progress in all areas of reform that the
agency has recognized as critical. 

Some significant problems continue to loom, and resolution of these
problems are key to USAID's implementation of results-based
management.  For example, monitoring the agency's progress toward
achievement of its goals and objectives is a critical component of
managing for results.  However, USAID's draft plan does not address
the long-standing problems it has encountered in developing a
performance measurement system.  Our ongoing review of USAID reform
efforts indicates that, although missions are making progress in
measuring project results, USAID is still encountering considerable
problems in developing this system.  USAID's Office of Inspector
General has noted similar problems in its audit reports.  Also, USAID
needs a well-trained, motivated, and organized work force in order to
implement results-based management; however, personnel reforms appear
to be lagging behind other management reforms.  For example, USAID
had not provided needed training in new job skills and team
operations, nor had it met missions' needs in developing position
descriptions and classifications to restructure their staffs in
accordance with reform principles. 


--------------------
\4 See AID Management:  Strategic Management Can Help AID Face
Current and Future Challenges (GAO/NSIAD-92-100, Mar.  6, 1992) and
Foreign Assistance:  AID Strategic Direction and Continued Management
Improvements Needed (GAO/93-106, June 11, 1993). 


      FINANCIAL MANAGEMENT
---------------------------------------------------------- Letter :7.2

Without accurate and complete financial management information, USAID
will continue to be hampered in its ability to identify costs and
measure performance.  The plan does not address the major financial
management challenges faced by the agency or how USAID will resolve
these challenges.  Solving USAID's financial management problems
largely depends on the agency's ability to meet the objectives of the
Chief Financial Officers (CFO) Act.  The CFO Act, as expanded by the
Government Reform Act of 1994, (1) intended to improve federal agency
systems of accounting, financial management, and internal controls;
and (2) required agencies to prepare and have audited financial
statements.  USAID has yet to fully achieve the objectives of the CFO
Act, which may significantly affect the agency's ability to
successfully implement the Results Act. 

USAID is developing and implementing a single integrated financial
management system as part of the agency's New Management System (NMS)
to correct long-standing financial system, internal control, and
reporting problems.  USAID has cited NMS as a key component in
successfully implementing the Results Act.  However, as indicated in
a recent report by USAID's Office of Inspector General, and confirmed
in our ongoing review of USAID reform efforts, design and software
flaws and other problems have seriously delayed successful deployment
of the system.  Given that NMS is a key component in implementing the
Results Act, it may be useful to stakeholders for USAID to include in
its plan the agency's strategy for resolving the NMS implementation
problems. 

The Inspector General was unable to express an opinion on the fair
presentation of USAID's fiscal year 1996 financial statements.  The
Inspector General's report concluded that the lack of a single
integrated financial management system and other material control
weaknesses, reported in USAID's Federal Managers' Financial Integrity
Act report, have negatively affected the agency's ability to produce
auditable financial statements.  The ability to produce auditable
financial statements is not in and of itself a guarantee that useful
financial information is available for decisionmakers at all levels
to measure performance and results.  However, the process of
preparing financial statements and subjecting them to independent
audit is the first step in establishing the discipline needed to
generate complete, reliable, and timely financial information.  As
such, it would be useful for stakeholders if USAID's strategic plan
addressed the agency's strategy for improving its financial
management processes and controls, which should ultimately result in
fairly stated financial statements and useful financial information. 


      INFORMATION MANAGEMENT AND
      TECHNOLOGY
---------------------------------------------------------- Letter :7.3

USAID's draft plan would benefit from a more extensive discussion of
how the agency plans to invest in and use information technology to
accomplish its goals and objectives over the next 5 years.  The plan
provides a brief description of NMS as part of USAID's new approach
to program planning, implementation, and performance monitoring. 
However, it does not address how USAID intends to meet requirements
of the Clinger-Cohen Act of 1996.  The act calls for agencies,
including USAID, to implement a framework of modern technology
management to improve performance and meet strategic goals. 

Further, a discussion of two additional critical areas would
strengthen USAID's strategic plan.  These areas--the year 2000
problem and information security--are so important that we have
identified them as high-risk areas for the entire federal government. 
First, it is important that USAID's strategic plan address the need
for computer systems to be changed to accommodate dates beyond the
year 1999--the "year 2000" problem--such that operations are not
disrupted and mission performance is not adversely impacted.  Second,
due to the sensitivity and criticality of its information systems, it
is also important that the USAID plan address how USAID intends to
ensure that systems are secure and adequately protected from
unauthorized access. 


   USAID'S CAPACITY TO PROVIDE
   RELIABLE INFORMATION ON
   ACHIEVEMENT OF STRATEGIC GOALS
   IS UNCERTAIN
------------------------------------------------------------ Letter :8

The reliability of USAID's program and financial data is uncertain. 
The capacity of USAID to provide reliable program data on the
achievement of its goals cannot be assessed because its performance
measurement system is not fully developed.  However, based on our
ongoing review of USAID's reform efforts, potential for reliability
problems exist.  Further, given the agency's problems in implementing
its new financial system and the ineffectiveness of its old system,
it is unlikely that USAID will be able to provide reliable financial
data to determine the cost of achieving program results and measure
the success of its strategic goals.  The reliability of both program
and financial data is important because each element is required to
successfully develop meaningful performance measures. 


      RELIABILITY OF PROGRAM
      PERFORMANCE DATA
---------------------------------------------------------- Letter :8.1

USAID is still in the process of devising a performance monitoring
system that will enable the agency to track its progress in achieving
its goals and objectives.  Program performance data are to be
compiled primarily by missions, which have made varying degrees of
progress in developing indicators and collecting the necessary data. 
Although USAID's Office of Inspector General audits on Results Act
implementation in the field have revealed some data reliability
weaknesses at a few missions, they did not reveal an agencywide
problem with reliability of program performance data.  However,
neither we nor USAID's Office of Inspector General has conducted a
methodologically rigorous review of the reliability of the program
performance data USAID has collected. 

Our ongoing work has identified the potential for problems with the
reliability of performance information, because this information
often does not come from an objective or reliable source.  We found
that in many cases, performance data were being provided to the
missions by program implementers and other recipients of USAID
assistance that had a stake in demonstrating positive outcomes. 
Also, missions must often rely on host government statistics on
development, the reliability of which is sometimes questionable. 
Insofar as these data are not or cannot be substantiated, the
potential exists that they will inaccurately reflect progress in
achieving USAID's goals and objectives.  Furthermore, we found that
when reporting on performance, missions we visited rarely used
program evaluation findings, as suggested in USAID guidance, to
demonstrate the extent to which the missions were achieving their
strategic objectives. 


      RELIABILITY OF FINANCIAL
      DATA
---------------------------------------------------------- Letter :8.2

To properly evaluate the effectiveness of USAID's strategic goals
contained in the plan, the agency needs complete, timely, and
reliable financial data.  Further, the CFO Act requires that each
agency develop and maintain an integrated agency accounting and
financial management system that provides for the development of cost
information and the systemic measurement of performance.  USAID's
financial management systems currently do not meet these
requirements. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :9

On July 8, 1997, we provided a draft of this correspondence to key
USAID officials responsible for preparing USAID's strategic plan and
obtained their oral comments.  These officials said that our
observations represented an accurate assessment of USAID's November
1996 draft plan and that our comments would be useful to them as they
worked on their final plan.  They indicated that they would provide
more descriptive and clear information in many of the areas that we
highlighted.  They also noted that they are adding information and
major sections in their revised draft plan that they believe will
address certain key issues that are not adequately covered in the
November 1996 draft.  For example, the plan will include significant
detail on performance goals and evaluations and new sections
describing USAID's interaction with other donors and major management
challenges.  In addition to these comments, the USAID officials also
provided technical comments, which we have incorporated as
appropriate. 


---------------------------------------------------------- Letter :9.1

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this letter
until 30 days from its issue date.  At that time, we will send copies
of this letter to the Minority Leader of the House of
Representatives; Ranking Minority Members of your Committees; the
Chairmen and Ranking Minority Members of other Committees that have
jurisdiction over USAID; the USAID Administrator; and to the
Director, OMB.  We will send copies to others on request. 

Please contact me on (202) 512-4128 if you or your staffs have any
questions concerning this letter.  Major contributors are listed in
enclosure I. 

Benjamin F.  Nelson
Director, International Relations
  and Trade Issues


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I


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

Jess T.  Ford
Lawrence L.  Suda
James B.  Michels


   ACCOUNTING AND INFORMATION
   MANAGEMENT DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix I:2

Franklin W.  Deffer


   OFFICE OF THE GENERAL COUNSEL,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix I:3

Lynn H.  Gibson
Richard Seldin


   ATLANTA FIELD OFFICE
--------------------------------------------------------- Appendix I:4

Linda P.  Garrison
Diane G.  Handley
Thanomsri S.  Piyapongroj


============================================================ Chapter 0


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

Multilateral Organizations:  U.S.  Contributions to International
Organizations for Fiscal Years 1993-95 (GAO/NSIAD-97-42, May 1,
1997). 

Foreign Assistance:  Impact of Funding Restrictions on USAID's
Voluntary Family Planning Program (GAO/NSIAD-97-123, Apr.  25, 1997). 

International Organizations:  U.S.  Participation in the United
Nations Development Program (GAO/NSIAD-97-8, Apr.  17, 1997). 

Foreign Assistance:  Harvard Institute for International
Development's Work in Russia and Ukraine (GAO/NSIAD-97-27, Nov.  27,
1996). 

USAID Democracy Contracts (GAO/NSIAD-97-19R, Nov.  27, 1996). 

Foreign Assistance:  Contributions to Child Survival Are Significant,
but Challenges Remain (GAO/NSIAD-97-9, Nov.  8, 1996). 

Food Security:  Preparations for the 1996 World Food Summit
(GAO/NSIAD-97-44, Nov.  7, 1996). 

International Environment:  U.S.  Funding of Environmental Programs
and Activities (GAO/RCED-96-234, Sept.  30, 1996). 

Foreign Assistance:  Status of USAID's Reforms (GAO/NSIAD-96-241BR,
Sept.  24, 1996). 

State Department:  Options for Addressing Possible Budget Reductions
(GAO/NSIAD-96-124, Aug.  29, 1996). 

International Relations:  Food Security in Africa
(GAO/T-NSIAD-96-217, July 31, 1996). 

Peace Operations:  U.S.  Costs in Support of Haiti, Former
Yugoslavia, Somalia, and Rwanda (GAO/NSIAD-96-38, Mar.  6, 1996). 

Promoting Democracy:  Progress Report on U.S.  Democratic Development
Assistance to Russia (GAO/NSIAD-96-40, Feb.  29, 1996). 

United Nations:  U.S.  Participation in the Fourth World Conference
on Women (GAO/NSIAD-96-79BR, Feb.  15, 1996). 

Foreign Assistance:  Controls Over U.S.  Funds Provided for the
Benefit of the Palestinian Authority (GAO/NSIAD-96-18, Jan.  8,
1996). 

Foreign Assistance:  Private Voluntary Organizations' Contributions
and Limitations (GAO/NSIAD-96-34, Dec.  15, 1995). 

Former Soviet Union:  An Update on Coordination of U.S.  Assistance
and Economic Cooperation Programs (GAO/NSIAD-96-16, Dec.  15, 1995). 

Former Soviet Union:  Assessment of U.S.  Bilateral Programs
(GAO/T-NSIAD-96-78, Dec.  15, 1995). 

Former Soviet Union:  Information on U.S.  Bilateral Program Funding
(GAO/NSIAD-96-37, Dec.  15, 1995). 

Poland:  Economic Restructuring and Donor Assistance
(GAO/NSIAD-95-150, Aug.  7, 1995). 

AID IRM Planning (GAO/AIMD-95-213R, Aug.  4, 1995). 

Foreign Assistance:  Assessment of Selected USAID Projects in Russia
(GAO/NSIAD-95-156, Aug.  3, 1995). 

Foreign Housing Guaranty Program:  Goals Are Not Achieved and
Financial Condition Is Poor (GAO/T-NSIAD-95-181, June 28, 1995). 

Foreign Housing Guaranty Program:  Financial Condition Is Poor and
Goals Are Not Achieved (GAO/NSIAD-95-108, June 2, 1995). 

Peace Operations:  Estimated Fiscal Year 1995 Costs to the United
States (GAO/NSIAD-95-138BR, May 3, 1995). 

U.S.-Vietnam Relations:  Issues and Implications (GAO/NSIAD-95-42,
Apr.  14, 1995). 

Foreign Assistance:  Selected Donors' Approaches for Managing Aid
Programs (GAO/NSIAD-95-37, Feb.  23, 1995). 

Peace Operations:  Information on U.S.  and U.N.  Activities
(GAO/NSIAD-95-102BR, Feb.  13, 1995). 

Former Soviet Union:  U.S.  Bilateral Program Lacks Effective
Coordination (GAO/NSIAD-95-10, Feb.  7, 1995). 

Food Aid:  Private Voluntary Organizations' Role in Distributing Food
Aid (GAO/NSIAD-95-35, Nov.  23, 1994). 

International Trade:  Coordination of U.S.  Export Promotion
Activities in Pacific Rim Countries (GAO/GGD-94-192, Aug.  29, 1994). 

Environmental Issues in Central and Eastern Europe:  U.S.  Efforts to
Help Resolve Institutional and Financial Problems (GAO/RCED-94-41,
May 31, 1994). 

Multilateral Assistance:  Accountability for U.S.  Contributions to
the World Food Program (GAO/T-NSIAD-94-174, May 5, 1994). 

Department of Defense:  Weaknesses in Humanitarian and Civic
Assistance Programs (GAO/T-NSIAD-94-158, Apr.  19, 1994). 

Enterprise Funds:  Evolving Models for Private Sector Development in
Central and Eastern Europe (GAO/NSIAD-94-77, Mar.  9, 1994). 

Foreign Assistance Act:  Comments on New Policy Framework for Foreign
Aid (GAO/T-NSIAD-94-121, Feb.  22, 1994). 

Foreign Assistance:  Inadequate Accountability for U.S.  Donations to
the World Food Program (GAO/NSIAD-94-29, Jan.  28, 1994). 

Eastern Europe:  AID's Indefinite Contracts Assist Privatization
Efforts but Lack Adequate Oversight (GAO/NSIAD-94-61, Jan.  19,
1994). 

Promoting Democracy:  Foreign Affairs and Defense Agencies' Funds and
Activities--1991 to 1993 (GAO/NSIAD-94-83, Jan.  4, 1994). 

Foreign Assistance:  U.S.  Support for Caribbean Basin Assembly
Industries (GAO/NSIAD-94-31, Dec.  29, 1993). 

Foreign Assistance:  Clearer Guidance Needed on When to Use Cash
Grants (GAO/NSIAD-94-30, Dec.  22, 1993). 

Foreign Assistance:  U.S.  Has Made Slow Progress in Involving Women
in Development (GAO/NSIAD-94-16, Dec.  21, 1993). 

Export Promotion:  Governmentwide Plan Contributes to Improvements
(GAO/T-GGD-94-35, Oct.  26, 1993). 

Export Promotion:  Initial Assessment of Governmentwide Strategic
Plan (GAO/T-GGD-93-48, Sept.  29, 1993). 

Multilateral Foreign Aid:  U.S.  Participation in the International
Fund for Agricultural Development (GAO/NSIAD-93-176, Sept.  24,
1993). 

Foreign Assistance:  Improvements Needed in AID's Oversight of Grants
and Cooperative Agreements (GAO/NSIAD-93-202, Sept.  17, 1993). 

Foreign Assistance:  Promoting Judicial Reform to Strengthen
Democracies (GAO/NSIAD-93-149, Sept.  1, 1993). 

Export Promotion Strategic Plan:  Will It Be a Vehicle for Change? 
(GAO/T-GGD-93-43, July 26, 1993). 

Foreign Assistance:  Reforming the Economic Aid Program
(GAO/T-NSIAD-93-20, July 26, 1993). 

Food Aid:  Management Improvements Are Needed to Achieve Program
Objectives (GAO/NSIAD-93-168, July 23, 1993). 

Exchange Programs:  Inventory of International Educational, Cultural,
and Training Programs (GAO/NSIAD-93-157BR, June 23, 1993). 

Foreign Assistance:  AID Strategic Direction and Continued Management
Improvements Needed (GAO/NSIAD-93-106, June 11, 1993). 

Financial Management:  Inadequate Accounting and System Project
Controls at AID (GAO/AFMD-93-19, May 24, 1993). 

Foreign Assistance:  AID's Private-Sector Assistance Program at a
Crossroads (GAO/NSIAD-93-55, Dec.  11, 1992). 

Foreign Economic Assistance Issues (GAO/OCG-93-25TR, Dec.  1, 1992). 

Foreign Assistance:  Cost Reductions Possible From Improved Cash
Transfer Management (GAO/NSIAD-93-58, Nov.  18, 1992). 

Foreign Disaster Assistance:  AID Has Been Responsive but
Improvements Can Be Made (GAO/NSIAD-93-21, Oct.  26, 1992). 

Information Resources Management:  Initial Steps Taken but More
Improvement Needed in AID's IRM Program (GAO/IMTEC-92-64, Sept.  29,
1992). 

Foreign Assistance:  Combating HIV/AIDS in Developing Countries
(GAO/NSIAD-92-244, June 19, 1992). 

AID Management:  Strategic Management Can Help AID Face Current and
Future Challenges (GAO/NSIAD-92-100, Mar.  6, 1992). 

*** End of document. ***