oversight

Embassy Management: State Department and Other Agencies Should Further Explore Opportunities to Save Administrative Costs Overseas

Published by the Government Accountability Office on 2012-01-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               United States Government Accountability Office

GAO            Report to the Chairman, Subcommittee on
               Oversight of Government Management, the
               Federal Workforce, and the District of Columbia,
               Committee on Homeland Security and
               Governmental Affairs, United States Senate

January 2012
               EMBASSY
               MANAGEMENT
               State Department and
               Other Agencies
               Should Further
               Explore Opportunities
               to Save Administrative
               Costs Overseas




GAO-12-317
                                              January 2012

                                              EMBASSY MANAGEMENT
                                              State Department and Other Agencies Should
                                              Further Explore Opportunities to Save
                                              Administrative Costs Overseas
Highlights of GAO-12-317, a report to the
Chairman, Subcommittee on Oversight of
Government Management, the Federal
Workforce, and the District of Columbia,
Committee on Homeland Security and
Governmental Affairs, United States Senate

Why GAO Did This Study                        What GAO Found
The U.S. government employs more              Agencies continue to provide potentially duplicative administrative services
than 23,500 Americans overseas at             overseas despite slight increases in their participation in ICASS since 2004.
more than 250 diplomatic and consular         When agencies had a choice to opt out of ICASS and provide services
posts. These posts require a variety of       independently, they did so about one-third of the time, on average, in 2011. The
support services, such as building            U.S. Agency for International Development (USAID), however, has reduced
maintenance and vehicle operations.           duplicative administrative operations by increasing its participation in ICASS
Agencies may obtain these services,           markedly since 2005. Agencies have cited several factors for opting out of
primarily from the Department of State        ICASS, principally concerns about cost, but they do not usually provide any
(State), through the International
                                              formal rationale to ICASS management and often have not conducted any cost
Cooperative Administrative Support
                                              analysis to justify their decisions. Some agencies also indicated that they cannot
Services (ICASS), but participation in
most services is voluntary. A 2004
                                              meet their mission requirements within ICASS. GAO’s analysis of ICASS cost
GAO report found that ICASS had not           and workload data shows that significant economies of scale can be achieved
eliminated duplication of support             through greater participation in ICASS. Thus, while agencies may opt out of
services and that customers generally         ICASS because they believe they can obtain less costly services on their own,
approved of the quality of ICASS              doing so may actually increase the overall cost to the U.S. government. ICASS
services, but that the level of               management’s ability to convince agencies that participating will save them or
satisfaction was difficult to quantify.       the U.S. government money is hampered by the lack of comparative cost data to
                                              demonstrate potential savings. In 2004, GAO recommended that the ICASS
For this report, GAO assessed (1) how         Executive Board—the highest level policy-making body in the ICASS system
changes in ICASS participation have
                                              composed of customer agency representatives—encourage greater ICASS
affected the duplication and cost of
                                              participation. However, experience has shown that board members do not
support services and (2) customer
satisfaction with the quality of ICASS        necessarily have the incentive to require their agencies to participate in ICASS,
services. GAO surveyed ICASS                  especially if they are unconvinced that it is in their agencies’ individual financial
customers, analyzed ICASS data,               interest. In this context, Congressional action may be necessary to increase
interviewed officials from State and          participation and achieve greater economies of scale. Separately, State has
seven other agencies, and conducted           made limited progress improving the cost effectiveness of ICASS services in
fieldwork in four countries.                  other ways, such as reducing the need for American staff overseas or using other
                                              qualified agencies, such as USAID, to provide some ICASS services.
What GAO Recommends
                                              Results from annual ICASS customer satisfaction surveys as well as GAO’s own
Congress may wish to consider                 survey show overall satisfaction with ICASS services. For example, data from the
requiring agencies to participate in          annual ICASS survey indicate that, on a scale from 1 to 5, the average overall
ICASS services unless they provide a          score increased from 3.95 in 2005 to 4.03 in 2011. Data from GAO’s survey
business case to show that they can           show that nearly 80 percent of agency representatives participating in ICASS
obtain these services outside of ICASS        indicated that the quality of services was “good” or better. Nonetheless, some
without increasing overall costs to the
                                              dissatisfaction persists, potentially hampering participation. In some cases,
U.S. government or that their mission
                                              performance problems and service limitations could affect agencies’ ability to
cannot be achieved within ICASS.
GAO is also making recommendations            achieve their missions efficiently and effectively. For example, USAID officials
regarding the reengineering of                have cited the unavailability of ICASS motor pool vehicles for travel to distant
administrative processes, use of non-         project sites as a major impediment to achieving their mission. State’s service
State ICASS service providers, and            delivery data suggest that these concerns have merit, as ICASS service
improvement of service standards.             providers fulfilled about 70 percent of the requests for non-local transportation in
State and U.S. Agency for International       2011. State has implemented new monitoring tools to improve ICASS managers’
Development generally concur.                 ability to evaluate performance, but they do not address some agencies’
                                              concerns involving billing errors, inequity, and problems with certain critical
View GAO-12-317. For more information,        services.
contact Michael Courts at (202) 512-8980 or
courtsm@gao.gov.

                                                                                       United States Government Accountability Office
Contents


Letter                                                                                  1
                Background                                                              3
                By Opting Out of ICASS Services, Agencies Are Not Realizing
                  Economies of Scale                                                    6
                ICASS Customers Generally Satisfied, and Management Has New
                  Tools to Monitor Quality in Some Areas                               22
                Conclusions                                                            34
                Matter for Congressional Consideration                                 36
                Recommendation for Executive Action                                    36
                Agency Comments and Our Evaluation                                     36

Appendix I      Objectives, Scope, and Methodology                                     39



Appendix II     Services Available through ICASS                                       52



Appendix III    Status of Consolidation of State and USAID Administrative Platforms    55



Appendix IV     Agency Participation in ICASS                                          57



Appendix V      Comments from the Department of State                                  60



Appendix VI     Comments from the U.S. Agency for International Development            70



Appendix VII    Comments from the Department of Commerce                               74



Appendix VIII   Comments from the Department of Agriculture                            79




                Page i                                       GAO-12-317 Embassy Management
Appendix IX   Comments from the Department of Homeland Security                        81



Appendix X    GAO Contact and Staff Acknowledgments                                    84



Tables
              Table 1: Average Participation Rates by ICASS Service, 2005 and
                       2011                                                             8
              Table 2: Rate of Participation in Available Voluntary Services, by
                       Selected Subagency Code, 2005 and 2011                          10
              Table 3: Number of Respondents Indicating That They Think the
                       Cost of Obtaining Services Within ICASS is More
                       Expensive, About the Same, or Less Expensive Than
                       Obtain Services Outside of ICASS                                12
              Table 4: Number of Respondents Indicating That Their Agency
                       Obtains Services Outside of ICASS and Has or Has Not
                       Compared the Cost of Services within and outside of
                       ICASS                                                           13
              Table 5: Estimated Change in ICASS Unit Costs with 10 Percent
                       Increase in Workload                                            16
              Table 6: Average Customer Satisfaction Scores on a Scale from 1 to
                       5 by Agency for 2011                                            25
              Table 7: Responses from USAID and Other Agency Personnel as to
                       Whether They Receive Higher or Lower Priority than State
                       Personnel When Requesting ICASS Services.                       29
              Table 8: Selected ICASS Services and Uniform Service Standards
                       with the Percentage of Service Completions Meeting
                       Standards, Fiscal Year 2011                                     32
              Table 9: eServices Point-of-Service Ratings, on a Scale from 1 to 5,
                       by Service, Fiscal Years 2010 and 2011                          33
              Table 10: Summary Statistics of ICASS Data                               42
              Table11: Frequency Table for Year of ICASS Service                       43
              Table 12: Frequency Table for Type of Post                               43
              Table 13: Frequency Table for Regions                                    43
              Table 14: Frequency Table for ICASS Services                             44
              Table 15: Summary Regression Results                                     46
              Table 16: ICASS Council Representatives That Received and
                       Completed the Survey                                            47
              Table 17: ICASS Cost Centers                                             52



              Page ii                                        GAO-12-317 Embassy Management
          Table 18: Rate of Participation in Available Services, by Agency,
                  2005 and 2011                                                                     57


Figures
          Figure 1: Total ICASS Costs and Overseas U.S. Direct Hire Staff,
                   Fiscal Years 2001 through 2011                                                    6
          Figure 2: ICASS Customer Satisfaction Scores on a Scale from 1 to
                   5 for Selected Agencies, 2005 through 2011                                       24
          Figure 3: Customer Perceptions on the Quality of Selected ICASS
                   Services, 2011                                                                   26




          Abbreviations
          AFSA            American Foreign Service Association
          Commerce        Department of Commerce
          DHS             Department of Homeland Security
          DOD             Department of Defense
          DOJ             Department of Justice
          FAS             Foreign Agricultural Service
          HHS             Department of Health and Human Services
          ICASS           International Cooperative Administrative Support Services
          M/PRI           Office of Management, Policy, Rightsizing, and Innovation
          State           Department of State
          USAID           U.S. Agency for International Development
          USDA            U.S. Department of Agriculture


          This is a work of the U.S. government and is not subject to copyright protection in the
          United States. The published product may be reproduced and distributed in its entirety
          without further permission from GAO. However, because this work may contain
          copyrighted images or other material, permission from the copyright holder may be
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          Page iii                                                GAO-12-317 Embassy Management
United States Government Accountability Office
Washington, DC 20548




                                   January 31, 2012

                                   The Honorable Daniel K. Akaka
                                   Chairman
                                   Subcommittee on Oversight of Government
                                   Management, the Federal Workforce,
                                   and the District of Columbia
                                   Committee on Homeland Security
                                     and Governmental Affairs
                                   United States Senate

                                   Dear Mr. Chairman:

                                   The U.S. government employs more than 23,500 Americans overseas,
                                   including nearly 15,000 with the Department of State (State), at more than
                                   250 diplomatic and consular posts. The operation of these posts requires
                                   a wide variety of administrative support services for overseas personnel,
                                   such as building maintenance, vehicle operations, and travel services,
                                   among others. Agencies may obtain these services through the
                                   International Cooperative Administrative Support Services (ICASS)
                                   system, the principal means by which the U.S. government provides and
                                   shares the cost of common services. ICASS is an interagency system
                                   established in 1997 for distributing the cost of administrative services at
                                   overseas posts and is intended to ensure that each agency bears the cost
                                   of its overseas presence. 1 While State has the primary responsibility for
                                   operating the system, over 40 agencies share the cost of ICASS services,
                                   which totaled more than $2 billion in fiscal year 2011. State, the
                                   Department of Defense (DOD), and the U.S. Agency for International
                                   Development (USAID) were the largest participants in ICASS in fiscal
                                   year 2010, together accounting for nearly 90 percent of all ICASS costs.
                                   The ICASS system seeks to provide quality services at the lowest cost,
                                   while ensuring that each agency bears the cost of its presence overseas.


                                   1
                                    The Omnibus Consolidated Appropriations Act of 1997 (Pub. L. No. 104-208) mandated
                                   the establishment of a system “that allocates to each department and agency the full cost
                                   of its presence outside of the United States.” In addition, ICASS operates under various
                                   sections of legislation, including provisions authorizing State to enter into agreements with
                                   other agencies under certain conditions to consolidate administrative platforms and
                                   provide goods and services to other agencies on a reimbursable basis. The Foreign
                                   Affairs Handbook also provides guidance on ICASS, including its organization, cost
                                   distribution system, and budget and billing process.




                                   Page 1                                                    GAO-12-317 Embassy Management
However, participation in most ICASS services is voluntary, and agencies
may choose to obtain these services outside of ICASS.

In 2004, we reviewed the performance of ICASS for the first time since its
implementation. 2 In that report, we found that ICASS had not eliminated
costly duplication of administrative support services or achieved
economies of scale, systematic cost-containment measures, and the
streamlining of operations. We also found that agencies deciding to
obtain services outside of ICASS rarely made a business case to explain
their decisions. In addition, we found that agencies generally approve of
the quality of ICASS services, but the level of satisfaction was difficult to
quantify. More recently, officials at some agencies, notably USAID, have
expressed serious concerns about the quality of ICASS services.

In March 2011, we issued our first annual report to Congress in response
to a new statutory requirement that we identify federal programs,
agencies, offices, and initiatives, either within departments or
governmentwide, which have duplicative goals or activities. 3 We
considered “duplication” to occur when two or more agencies or programs
are engaged in the same activities or provide the same services to the
same beneficiaries. However, determining whether and to what extent
programs are actually duplicative requires programmatic information that
is often not readily available. In instances in this report where we lacked
such information, we use the term “potential duplication.”

This report updates our 2004 report and assesses (1) how changes in
ICASS participation have affected the duplication and cost of
administrative support services and (2) customer satisfaction with the
quality of ICASS services overseas. To address these objectives, we
reviewed legislation governing ICASS; analyzed data and documentation
on ICASS participation, costs, and performance metrics from 2000
through 2011; 4 reviewed the results of annual ICASS surveys; and



2
 GAO, Embassy Management: Actions Are Needed to Increase Efficiency and Improve
Delivery of Administrative Support Services, GAO-04-511 (Washington, D.C.: Sept. 7,
2004).
3
 GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax
Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011).
4
 We assessed the reliability of these data and determined that they were sufficiently
reliable for the purposes of our report.




Page 2                                                  GAO-12-317 Embassy Management
             interviewed cognizant staff at State, USAID, DOD, and five other
             agencies with a large overseas presence: the Departments of Agriculture
             (USDA), Commerce (Commerce), Health and Human Services (HHS),
             Homeland Security (DHS), and Justice (DOJ). Together, these eight
             agencies accounted for more than 98 percent of the total ICASS budget
             in 2010. We also surveyed representatives from these agencies at posts
             around the world regarding their agencies’ participation in ICASS and
             their opinions about the cost and quality of ICASS services. 5 We
             conducted fieldwork at four overseas locations—Tokyo, Japan; Nairobi,
             Kenya; Manila, the Philippines; and Kigali, Rwanda—where we observed
             administrative services, met with embassy management officials, and
             conducted focus groups of ICASS customers. Appendix I provides more
             details about our objectives, scope, and methodology.

             We conducted this performance audit from August 2010 to January 2012
             in accordance with generally accepted government auditing standards.
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             Under State’s leadership, ICASS relies on collaboration among multiple
Background   agencies both in Washington, D.C., and at overseas posts to develop and
             implement ICASS policies. The following bodies have a role in
             implementing the ICASS system:

             •   In Washington, D.C., the ICASS Executive Board sets the strategic
                 vision for ICASS and is the highest level policy-making body in the
                 ICASS system. The board is comprised of senior representatives from
                 participating agencies and is chaired by State.




             5
              We surveyed a random sample of 350 ICASS Council representatives from the eight
             agencies within the scope of our review at 133 posts worldwide regarding their agencies’
             participation in and opinions regarding nine ICASS services. These services were:
             household furniture, furnishings, and appliance pools; motor pool; shipping and customs;
             government-owned/long and short-term lease residential building operations; vouchering;
             leasing; information management technical support; procurement; and human resources
             for locally engaged staff. We received responses from 184 representatives at 102 posts.




             Page 3                                                 GAO-12-317 Embassy Management
•   The ICASS Working Group is the staff arm of the Executive Board
    responsible for presenting policy issues to the board, making policy
    decisions when delegated to do so by the board, and resolving issues
    raised by posts. The Working Group is open to any agency that
    receives ICASS services.

•   The ICASS Service Center, housed within State, serves as the
    Secretariat to the Executive Board and Working Group. The Service
    Center is primarily responsible for overseeing worldwide ICASS
    operations and facilitates and coordinates the ICASS budget and
    allotments process.

•   At overseas posts, the ICASS Council develops local policies on what
    services will be available at post, selects service providers, and
    approves the post’s ICASS budget. The post ICASS Council consists
    of representatives from each agency that receives ICASS services at
    that post.

•   The ICASS service provider at overseas posts is responsible for
    delivering services to customer agencies. While there may be different
    providers for different services at a given post, State is the principal—
    and most often only—service provider at most posts around the world.
    At some posts, USAID provides ICASS services to other agencies as
    an alternate ICASS service provider in lieu of State.

In addition to these ICASS entities, State and USAID established a Joint
Management Board in 2011 to facilitate the continued consolidation of
their support services. 6

Agencies may obtain administrative support from ICASS by participating
on a case-by-case basis in each service or group of services available at
an overseas post (appendix II lists these services and provides a brief




6
 In 2006, we reported on State’s and USAID’s initial efforts to consolidate overseas
support services and found that the two agencies had directed overseas posts to begin
the process of identifying duplicative services and initiating further consolidation efforts.
See GAO, Overseas Presence: State and USAID Should Adopt a Comprehensive Plan to
Improve the Consolidation of Overseas Support Services, GAO-06-829 (Washington, D.C:
Sept. 8, 2006). Appendix III provides more details on the status of State-USAID
consolidation.




Page 4                                                   GAO-12-317 Embassy Management
description of each). 7 Agencies may opt out of most services by providing
these services for themselves or obtaining them from another source. The
ICASS Executive Board has made some services mandatory in most
cases for all agencies overseas: these include several services that can
only be obtained by the embassy, such as securing diplomatic credentials
from the host country, and services provided by the Community Liaison
Office at each post, such as providing welcoming and orientation
materials and assisting family members with employment opportunities. 8
The ICASS Working Group has further decided that starting in fiscal year
2013, participation in two additional services—security and health
services—will be mandatory. All remaining services are optional.
Depending on the service, ICASS distributes costs among customers
either on the basis of static measures, such as an agency’s head count or
the space it occupies, or on the amount of service the agency actually
uses, such as the number of kilometers driven. When an agency chooses
to withdraw from an ICASS service, its share of the fixed cost of that
service is reallocated among remaining participants, potentially increasing
these agencies’ costs. The withdrawing agency must then provide the
service itself at its own expense.

Spending on administrative services for agencies overseas through
ICASS has increased significantly over the last decade, from $736 million
in 2001 to more than $2 billion in 2011 (see fig. 1). Agencies that do not
fully participate in ICASS also incur costs to obtain administrative services
overseas, but these costs are not always clearly and consistently
accounted for by the agencies. According to ICASS officials, several
factors explain the growth in spending on services overseas, some of
which apply equally to ICASS and non-ICASS services. Since 2001, the
increase in U.S. personnel overseas, the addition of new services into
ICASS, the construction of new embassy compounds (which are more


7
 These groups of services are referred to as “cost centers” in ICASS. For simplicity, in
this report we use the term “service” to denote both cost centers and the services provided
within those cost centers. Overall, ICASS is implemented in one of two manners:
“Standard” and “Lite.” An ICASS Standard post breaks the services into 31 cost centers,
while an ICASS Lite maintains 16 cost centers. In general, ICASS Lite tends to be used at
small posts because the management burden is lower than at ICASS Standard posts.
ICASS Standard, however, allows for greater flexibility to customers in choosing which
services they will take and avoiding paying for services they do not receive.
8
 These services are mandatory for every agency at post with U.S. direct hire and certain
authorized third country national, U.S. contractor, or other staff. At posts where an agency
has only local staff, the agency is not required to participate in these services.




Page 5                                                   GAO-12-317 Embassy Management
                      costly to maintain than the buildings they replaced), the strengthening of
                      security requirements, and exchange rate fluctuations have all contributed
                      to the increase in the overall spending on administrative services abroad.
                      When these factors are accounted for, per capita costs for ICASS
                      services have remained relatively constant since 2000, according to
                      analysis by the ICASS Service Center.

                      Figure 1: Total ICASS Costs and Overseas U.S. Direct Hire Staff, Fiscal Years 2001
                      through 2011




                      Since 2004, overall participation in ICASS has increased slightly, but our
By Opting Out of      analysis and observations suggest that agencies are still providing
ICASS Services,       potentially duplicative services at posts overseas. While agencies cite
                      several factors for not participating more fully in ICASS, they generally do
Agencies Are Not      not provide justifications for their decisions to opt out of these services.
Realizing Economies   As a result, the government as a whole may be missing opportunities for
of Scale              cost savings resulting from economies of scale within ICASS—that is, the
                      cost per unit of service provided decreases as consumption of services
                      increases. However, while there are exceptions, ICASS and customer
                      agencies generally have insufficient data to perform a meaningful cost



                      Page 6                                              GAO-12-317 Embassy Management
                            analysis to quantify the potential cost savings of consolidating services to
                            individual agencies or the government as a whole. Aside from realizing
                            some economies of scale, State has made limited progress in lowering
                            costs through the reengineering of ICASS administrative operations. Also,
                            we observed that USAID may be better equipped than State to provide
                            ICASS services to other agencies cost-effectively at some posts, but
                            State has retained its role as service provider in almost all cases.


Nonparticipation in ICASS   In 2004, we reported that, since the establishment of ICASS, many
Services Indicates          agencies had not signed up for ICASS services and decided instead to
Potential Duplication       provide similar services for their own staff independently. 9 Providing
                            services outside of ICASS resulted in duplicative administrative systems
                            that limited ICASS’s ability to achieve economies of scale and deliver
                            administrative services efficiently. Our analysis of ICASS data from 2005
                            to 2011 shows that U.S. government agencies still do not fully participate
                            in ICASS and are thus providing potentially duplicative administrative
                            services for staff and operations overseas. In 2011, when agencies had a
                            choice to obtain administrative services through ICASS, they did so 64
                            percent of the time, on average. 10 Participation rates for individual
                            services ranged from nearly 22 percent to about 96 percent in 2011 (see
                            table 1). In addition, participation rates for many services have remained
                            relatively constant since 2005. Participation rates for 10 services have
                            increased by 5 percentage points or less, while only 3 services have seen
                            participation rates increase by 10 percentage points or more. An
                            additional 12 services experienced a decrease in participation rates
                            between 2005 and 2011. Furthermore, the ICASS participation rate was
                            below 50 percent for eight ICASS services in 2011.




                            9
                            GAO-04-511.
                            10
                              In order to calculate the participation rate of different ICASS services, we counted the
                            agencies at each post where the service is provided and then the number of agencies
                            which subscribe to the service. The ratio between the two numbers is the participation
                            rate. See appendix I for a detailed discussion of our methodology. We excluded two
                            services, basic package and community liaison office services, which are mandatory for all
                            agencies with U.S. direct hire, certain authorized third country nationals, U.S. contractors,
                            and other staff at a post.




                            Page 7                                                   GAO-12-317 Embassy Management
Table 1: Average Participation Rates by ICASS Service, 2005 and 2011

                                                                                    Participation rate        Percent change between
Service (in ascending order of 2011 participation rate)                                2005        2011                 2005 and 2011
Government-owned/long-term lease residential building operations                      22.8%      21.7%                          -1.1%
Budgeting and financial plans                                                           26.1       25.0                          -1.1
Vehicle maintenance                                                                     27.2       25.7                          -1.5
Reproduction services                                                                   28.1       28.0                          -0.1
Short-term lease nonresidential building operations                                     40.0       32.2                          -7.8
Human resources: U.S. citizen services                                                  46.4       35.6                         -10.8
Accounts and records                                                                    43.5       39.9                          -3.6
Motor pool services                                                                     37.5       45.1                           7.6
Pouching services                                                                       49.2       50.2                           1.0
Administrative supply                                                                   61.0       56.5                          -4.6
Furniture, furnishings, and appliance pools                                             43.7       57.5                          13.8
Short-term lease residential building operations                                        57.7       63.4                           5.7
Payroll                                                                                 63.2       65.2                           2.0
Shipping and customs                                                                    67.6       66.2                          -1.4
Leasing services                                                                        62.5       67.9                           5.4
Government-owned/long-term lease nonresidential building operations                     61.1       68.0                           6.9
Nonexpendable property management                                                       52.8       70.6                          17.8
Human resources: locally employed staff                                                 67.1       70.6                           3.5
Travel services                                                                         69.1       70.7                           1.5
Reception, switchboard, and telephone services                                          70.6       71.3                           0.6
Nonresidential local guard program services                                             67.1       72.2                           5.2
Procurement services                                                                    70.3       75.4                           5.1
Information management technical support                                                60.9       77.6                          16.7
Cashiering                                                                              80.3       81.4                           1.1
Health services                                                                         80.9       83.4                           2.5
                           b
Human resources services                                                                86.2       85.4                          -0.8
Mail and messenger services                                                             87.7       87.0                          -0.7
Vouchering                                                                              88.0       87.6                          -0.4
                                    b
Information management services                                                         92.1       92.8                           0.7
Security services                                                                       89.9       93.1                           3.2
                                b
Financial management services                                                           91.5       94.0                           2.5
                   b
General services                                                                        91.1       96.2                           5.1
                                              Source: GAO analysis of ICASS data.




                                              Page 8                                                     GAO-12-317 Embassy Management
a
 Basic package services—which includes several services that can only be obtained by the embassy,
such as securing diplomatic credentials from the host country—and community liaison office services
are generally mandatory. Participation rates are not 100 percent for these services because an
agency may have only local staff at a given post, and these staff are not required to participate in
these two services. In such cases, agencies may receive some services from ICASS, but not basic
package or community liaison office services.
b
 Information management services, general services, financial management services, and human
resources services are service bundles used at posts operating under the streamlined ICASS “Lite”
methodology. These service bundles incorporate several services that are provided separately at
standard ICASS posts.


In some instances, nonparticipation may indicate that a service is not
offered to all agencies at a post or that an agency does not need a
particular service. For example, some agencies do not participate in
government-owned/long-term lease residential building operations
because they house their staff only in residences with short-term leases.
In such instances, nonparticipation does not necessarily indicate
duplication of services.

Although ICASS participation rates vary widely by agency, with the
exception of USAID, individual agency rates have remained relatively
constant since 2005. 11 Of the 46 non-State agencies that were present at
10 or more posts in both 2005 and 2011, 17 experienced increases in
participation rates of 5 percentage points or less, while 13 saw
participation increase by 10 or more points. 12 An additional 11 agencies
reduced their participation in ICASS during this period. USAID has
experienced a marked increase in participation since it began
consolidating its administrative operations with State, from 51 percent in
2005 to 68 percent in 2011 (see app. III for detailed discussion of USAID




11
  In order to calculate participation rate by agencies, we counted the total number of
services a particular agency participates in and the total number of services provided at
the posts where that agency has a presence. The ratio of the two numbers is the
participation rate by agency. See appendix I for detailed discussion of the methodology.
12
  Individual agencies may have multiple sub-agency codes for ICASS billing purposes,
and participation rates generally vary by subagency code, even within the same agency.
In some cases, these subagency codes correspond to a discrete unit within an agency,
such as the Defense Intelligence Agency. In others, the codes correspond to accounting
entities, such as USAID’s Operating Expenses account. In 2011, there were 320 such
subagency codes in ICASS. DOD had the most codes (152) while the other agencies
within the scope of our review had between 9 and 56 codes. As a result, it is not feasible
or meaningful to calculate an overall agencywide participation rate, and the figures we
present here are at the subagency code level.




Page 9                                                        GAO-12-317 Embassy Management
                                            and State consolidation). 13 However, other agencies have not significantly
                                            increased their rates of participation over this period. Table 2 shows
                                            ICASS participation rates in 2005 and 2011 for selected components of
                                            the agencies within the scope of our review with a large overseas
                                            presence. 14

Table 2: Rate of Participation in Available Voluntary Services, by Selected Subagency Code, 2005 and 2011

                                                                                  Participation rate
                                                                                                               Percent change between
Agency name (in ascending order of 2011 participation rate)                       2005             2011                  2005 and 2011
HHS, Centers for Disease Control and Prevention                                   54%              66%                                 12%
USDA, Foreign Agriculture Service                                                   66                 64                                -2
Justice, Federal Bureau of Investigation/Legal Attaché                              65                 67                                 2
USAID (Operating Expenses)                                                          51                 68                                17
Commerce, Foreign Commercial Service                                                68                 71                                 3
DHS, Immigration and Customs Enforcement                                            65                 70                                 5
DOD, Defense Intelligence Agency                                                    82                 81                                -1
                                            Source: GAO analysis of State data.

                                            Note: This table shows one subagency code for each of the non-State agencies within the scope of
                                            our review. We chose to include the one code from each agency that was present at the most number
                                            of posts.


                                            To the extent that agencies do not participate in ICASS services and
                                            provide these services themselves, they are creating potentially duplicative
                                            administrative systems that may not be cost effective for the U.S.
                                            government as a whole. We observed such potential duplication during our
                                            visits to four overseas missions. For example, at each post we visited, we
                                            found that instead of participating in the ICASS-managed motor pool,
                                            several agencies operated or maintained their vehicles independently.
                                            Even some units within State do not fully participate in ICASS motor pool
                                            services; for example, State’s Bureau of International Narcotics and Law
                                            Enforcement participated in the ICASS motor pool in about 37 percent of



                                            13
                                              These figures reflect USAID’s largest ICASS subagency code: Operating Expenses.
                                            Other USAID codes have also seen an increase in ICASS participation since 2005,
                                            including USAID’s Development Assistance code, whose participation rate increased from
                                            37 percent to 56 percent between 2005 and 2011.
                                            14
                                              USDA, Commerce, DOD, HHS, DHS, Justice, and USAID. See appendix IV for
                                            participation rates for all agency components with a presence at 10 or more posts in 2011.




                                            Page 10                                                     GAO-12-317 Embassy Management
                                 the posts where it was present in 2011. In addition, many agencies
                                 procured their own appliances or shipped their own furniture, declining to
                                 participate in ICASS furniture and appliance pools, where ICASS staff
                                 would manage these pools collectively. In Manila, the financial
                                 management officer noted that agencies’ opting out of these pools not only
                                 reduced the opportunity to lower the U.S. government’s overall
                                 procurement costs through larger bulk ICASS purchases, it also entailed
                                 other hidden costs, including increased labor and wear and tear on
                                 property. According to this officer, over a 6-month period in 2010, ICASS
                                 service providers had to remove and reinstall furniture at embassy-
                                 managed residences 67 times as a result of agency officials being replaced
                                 in a home by officials from a different agency. Such additional work would
                                 not have been necessary if all agencies participated in one furniture and
                                 appliance pool. Additionally, in Nairobi, where virtually all agencies were
                                 colocated at the U.S. embassy compound, we observed separate, similarly
                                 equipped photocopy rooms—one for USAID staff and one for other ICASS
                                 customers—located on the same hallway.


Rationale for Agency             While agencies may have valid justifications for not participating in ICASS
Decisions to Opt Out of          services, they generally do not document their rationales or formally
ICASS Are Not Well-              share them with ICASS service providers or other customer agencies. In
                                 2004, we recommended that the ICASS Executive Board encourage
Documented, though Cost          agencies not participating in ICASS services to submit detailed
and Quality Concerns Are         explanations—or business cases—of how they would fulfill these service
Key Factors                      needs and at what cost. However, ICASS officials told us that ICASS
                                 Executive Board representatives from customer agencies lack the
                                 incentive to direct their agencies to participate in ICASS services or justify
                                 their decisions not to participate. Further, neither State nor ICASS
                                 systematically requests such analyses or documents the reasons why
                                 agencies choose not to participate in an ICASS service.

Agencies Cite Cost as a Reason   Agencies decide to opt out of ICASS services based on a variety of
Not to Participate in ICASS      factors. In response to our survey, agency representatives cited cost most
                                 frequently as a factor in their decision not to participate in ICASS. 15 Some


                                 15
                                   Of the 269 cases where agency representatives indicated that their agency did not
                                 subscribe to a given service, the cost to the respondent’s agency was cited 44 times and
                                 the quality of the service provided was cited 34 times. In 25 instances, respondents
                                 indicated that their agency’s mission requirements could not be met within ICASS.
                                 Respondents cited other factors less frequently, such as headquarters guidance about
                                 participating in ICASS.




                                 Page 11                                                GAO-12-317 Embassy Management
                                           agency representatives who obtain a specific service outside of ICASS
                                           indicated that they thought that doing so was less expensive than
                                           obtaining this service through ICASS. For example, 34 of 68
                                           representatives whose agency did not participate in the ICASS furniture
                                           and appliance pool at their post indicated that they thought obtaining this
                                           service through ICASS was more expensive than obtaining it outside of
                                           ICASS; 21 of 44 representatives said the same about motor pool
                                           services. However, in nearly half of the total responses to this question,
                                           respondents indicated that they had no basis to judge the relative costs of
                                           ICASS and non-ICASS services or did not respond to our question on this
                                           issue (see table 3). 16

Table 3: Number of Respondents Indicating That They Think the Cost of Obtaining Services Within ICASS is More Expensive,
About the Same, or Less Expensive Than Obtain Services Outside of ICASS

                                        ICASS services            Cost of ICASS    ICASS services     No basis to
                                             are more          services is about         are less     judge or no     Total number
Service                                     expensive                  the same        expensive        response      of responses
Furniture, furnishings, and appliance                     34                  4                 5              25                68
pools
Motor pool services                                       21                  5                 1              17                44
Shipment and customs                                      0                   0                 0               3                  3
Government-owned/long-term lease                          1                   1                 0               8                10
residential building operations
Vouchering services                                       7                   0                 3              10                20
Leasing services                                          3                   0                 0              11                14
Information management technical                          10                  0                 2               4                16
support
Procurement services                                      5                   0                 3               5                13
Human resources: locally employed                         3                   0                 1              12                16
staff
Total                                                     84                 10                15              95               204
                                           Source: GAO.



                                           Separately, we asked survey respondents whether their agency had
                                           compared the cost of obtaining services within ICASS to the costs of
                                           services outside of ICASS. Responses to this question show that some


                                           16
                                             Although respondents indicated that their agency did not participate in an ICASS service
                                           a total 269 times, the number of responses to specific follow-up questions varied, as some
                                           respondents did not choose to answer all questions.




                                           Page 12                                                  GAO-12-317 Embassy Management
                                          agencies have chosen to obtain services outside of ICASS without
                                          conducting any cost analysis. Respondents indicated that their agency had
                                          compared ICASS and non-ICASS costs of services in only 62 of 205 cases
                                          where the agency did not participate in ICASS services (see table 4).

Table 4: Number of Respondents Indicating That Their Agency Obtains Services Outside of ICASS and Has or Has Not
Compared the Cost of Services within and outside of ICASS

                                          Agency has compared        Agency has not
                                                    ICASS and    compared ICASS and    Don’t know or   Total number of
Service                                       non-ICASS costs       non-ICASS costs     no response          responses
Furniture, furnishings, and appliance                       31                     4              33               68
pools
Motor pool services                                         17                     8              20                45
Shipment and customs                                         0                     0               3                3
Government-owned/long-term lease                             1                     0               9                10
residential building operations
Vouchering services                                          3                     8               9               20
Leasing services                                             1                     1              12               14
Information management technical                             5                     5               6               16
support
Procurement services                                         3                     5               5                13
Human resources: locally employed staff                      1                     4              11               16
Total                                                       62                    35            108                205
                                          Source: GAO.



                                          Even in cases where respondents cited cost as a significant factor in their
                                          agency’s decision not to participate in ICASS, respondents indicated that
                                          their agency had frequently not compared the costs of ICASS and non-
                                          ICASS services. In 41 such cases, respondents indicated that their
                                          agency had compared costs in 24 cases.

                                          In some cases, agency officials indicated that they were able to obtain
                                          some services from their headquarters more efficiently or effectively than
                                          through ICASS. For example, a Foreign Agricultural Service (FAS) official
                                          told us that FAS had begun to obtain certain financial services from the
                                          USDA Minneapolis Finance Center rather than from ICASS providers at
                                          individual posts, since USDA is part of the National Finance Center and
                                          already provides these services to several other agencies (including
                                          GAO). FAS has estimated that shifting this workload out of ICASS has
                                          saved FAS more than $500,000 per year. Also, Commerce, DOD, and
                                          DHS officials indicated that they generally do not participate in ICASS
                                          human resource services for American staff because their staff in


                                          Page 13                                        GAO-12-317 Embassy Management
                             Washington, D.C., are more familiar with agency personnel policies than
                             ICASS service providers overseas and thus can provide more efficient
                             service to their respective officials. Additionally, according to a Customs
                             and Border Protection official in Washington, D.C., the agency is a strong
                             advocate for centralizing some services at the Customs and Border
                             Protection headquarters in Washington, D.C., because its administrative
                             staff are better positioned than ICASS service providers at post to provide
                             agency-specific services such as information technology, human
                             resources, and budgeting.

                             Agency officials also told us that in some cases they would be unable to
                             fulfill their agency’s mission if they relied on ICASS services. Several
                             officials cited their unique transportation needs in explaining their decision
                             not to participate in the ICASS motor pool. For example, in Manila, DHS
                             officials said they needed to maintain their own vehicles to have
                             immediate, 24 hours-a-day access for them to conduct investigations.
                             Several USAID and USDA officials also noted that their missions require
                             them to take extended trips to the field that the ICASS motor pool is
                             sometimes not able to accommodate. Our survey found that 11 of 56
                             respondents who indicated that they did not participate in ICASS motor
                             pool services said that their agencies’ mission requirements for motor
                             pool could not be met within ICASS.


Consolidation of Services    Our analysis of ICASS costs and observations overseas, along with State
Leads to Cost Savings from   and USAID attempts to quantify the effects of consolidation, demonstrate
Economies of Scale, but      that consolidating administrative services has led to cost savings for the
                             U.S. government. However, because of the limited amount of cost data
Quantifying These Savings    available, quantifying the cost savings due to consolidation has been
Is Difficult                 difficult.

Economies of Scale within    State and others have maintained that greater participation in ICASS
ICASS                        reduces the U.S. government’s overall cost of posting staff overseas, due
                             to economies of scale. In 2010, a joint State-USAID review of support
                             services overseas found that consolidation of these services had resulted
                             in economies of scale at 20 posts. In 2011, when many posts were
                             considering establishing furniture pools, the ICASS Service Center noted
                             that when agencies do not participate in these pools, efficiencies of scale
                             are not achieved and service providers’ workload increases due to
                             separate warehousing, inventory, and ordering for different agencies.
                             Commenting on our 2004 report, State noted that the option for customer
                             agencies to withdraw from ICASS services has limited ICASS’s ability to
                             realize the potential benefits of economies of scale.


                             Page 14                                         GAO-12-317 Embassy Management
Our analysis of ICASS cost and workload data confirms that State and
other agencies participating in ICASS have realized savings through
economies of scale. As ICASS workloads increased—for example,
through increased participation in ICASS services or growth in staff
posted overseas—costs per unit of output have generally decreased even
as total ICASS costs have increased over the last ten years. We analyzed
workload data from 2000 through 2011 for 28 services within ICASS. 17 In
all 28 cases, we found that costs per unit decreased, on average, as
workload increased, suggesting that as more agencies participate in
ICASS services and the amount of services received through ICASS
increases, service provision becomes more efficient. Overall, for every 10
percent increase in ICASS workloads, unit costs decrease by 5 percent
on average (see table 5). For example, if a post offers reproduction
services through ICASS and one agency provides this service for itself,
this agency incurs its own personnel, material, and rent costs outside of
ICASS. If that agency then decides to join ICASS, it starts to share
personnel and rent costs. Hypothetically, if the workload for ICASS
reproduction services increases by 10 percent, our analysis suggests that
the cost per copy for ICASS customers would decrease by about 6
percent, resulting in cost savings to all existing ICASS customers. Unless
non-ICASS costs of reproduction services to the agency that had
previously self-provided this service were significantly lower than costs to
existing ICASS customers, this agency’s decision to join ICASS would
likely result in overall cost savings to the U.S. government.




17
  We analyzed data for all ICASS standard services, excluding the two generally
mandatory services—basic package and community liaison office services—and
miscellaneous services, for which workload is not well defined. See appendix I for a
detailed discussion of our methodology.




Page 15                                                 GAO-12-317 Embassy Management
Table 5: Estimated Change in ICASS Unit Costs with 10 Percent Increase in
Workload

                                                                 Percent change in per
 Service                                                           unit cost of service
 Budgeting and financial plans                                                     -9.2
 Nonexpendable property management                                                 -9.1
 Furniture, furnishings, and appliance pools                                       -8.4
 Pouch services                                                                    -7.0
 Travel services                                                                   -6.2
 Reproduction services                                                             -6.2
 Shipment and customs                                                              -6.1
 Administrative supply                                                             -5.6
 Procurement services                                                              -5.6
 Motor pool services                                                               -4.8
 Nonresidential local guard program services                                       -4.7
 Accounts and records                                                              -4.4
 Payroll                                                                           -4.2
 Short-term lease residential building operations                                  -4.1
 Government-owned/long-term lease nonresidential building                          -3.8
 operations
 Cashiering                                                                        -3.2
 Vouchering                                                                        -3.2
 Security services                                                                 -3.4
 Information management technical support                                          -3.0
 Leasing services                                                                  -3.0
 Human resources: locally employed staff                                           -2.9
 Government-owned/long-term lease residential building                             -2.6
 operations
 Human resources: U.S. citizen services                                            -2.3
 Mail and messenger services                                                       -1.5
 Health services                                                                   -1.5
 Vehicle maintenance                                                               -1.3
 Reception, switchboard, and telephone services                                    -1.2
 Short-term lease nonresidential building operations                               -0.7
 Average of all services                                                           -5.1
Source: GAO analysis of ICASS data.




Page 16                                                  GAO-12-317 Embassy Management
Examples of Consolidation at   Individual posts have reported numerous efforts to consolidate
Specific Posts                 administrative operations that resulted in efficiencies. The following are
                               examples of some of these efforts.

                               •     Kenya. During our fieldwork in Nairobi, we visited State and USAID’s
                                     combined warehouses, which were consolidated in 2009. Prior to
                                     consolidation, State managed 12 units of the warehouse compound
                                     and USAID managed 6, and each agency had its own manager and
                                     inventory system, according to the embassy’s general services officer.
                                     Now, all 18 units are managed under ICASS, and the former USAID
                                     warehouse manager is the ICASS manager’s deputy. As a result of
                                     consolidation, this official said the embassy has reduced the number
                                     of local staff at the warehouse from 66 to approximately 50, and there
                                     is more space in the warehouse compound. Overall, according to the
                                     management counselor, the embassy has reduced the number of
                                     U.S. direct hire employees by 2 and local staff by 22 as a result of
                                     consolidation. Embassy Nairobi’s Mission Strategic Plan for fiscal year
                                     2010 noted that these efforts have resulted in an overseas
                                     administrative platform that is leaner, more flexible, and more
                                     responsive to the needs of both agencies as well as to the needs of all
                                     ICASS customers.

                               •     Germany. In 2011, State’s Inspector General reported that the Berlin
                                     and Frankfurt financial management offices were finalizing their
                                     consolidation into a single operation, centralized at the embassy.
                                     Under this restructuring, the Frankfurt financial office would reduce its
                                     number of local staff from 18 to 6, while Berlin would increase its
                                     staffing by 3. According to the Inspector General, the mission expects
                                     these efforts to save an estimated $700,000 annually.

                               •     Cambodia. In 2006, we reported that the embassy in Phnom Penh
                                     had successfully merged four services and realized efficiency gains,
                                     and that State and USAID officials described Phnom Penh as the
                                     model project of consolidation. 18 Prior to consolidation, USAID and
                                     State motor pool drivers occupied two separate offices, but these
                                     were joined under ICASS, making better use of existing space and
                                     decreasing utility costs. Further, the consolidation of maintenance
                                     services allowed USAID in Phnom Penh to terminate its maintenance
                                     shop lease, which led to savings in utilities and rent expenses. Finally,


                               18
                                   GAO-06-829.




                               Page 17                                           GAO-12-317 Embassy Management
                                   by consolidating warehouse operations, the post reported that it had
                                   realized gains in delivery times and a 40 percent decrease in the
                                   amount of space used.

Quantifying Actual Cost       While our analysis shows that costs to existing ICASS customers will
Savings Is Difficult Due to   likely decrease as more customers join ICASS and workloads increase,
Limited Data on Non-ICASS     we were unable to calculate the savings to the U.S. government as a
Services                      whole resulting from increased participation in ICASS. Specifically, we
                              were unable to calculate the cost implications for new agencies joining
                              ICASS services because cost data on services outside of ICASS are
                              generally not comparable with ICASS cost data. Moreover, as we have
                              noted, agencies have generally not conducted such analyses.

                              State and USAID attempts to quantify cost savings have also been
                              complicated by the lack of comparable data. A 2008 review of
                              consolidation efforts to date estimated that the U.S. government had
                              saved millions of dollars per year by reducing staff and eliminating
                              warehouses. However, the review concluded that an exhaustive
                              quantification of cost savings resulting from consolidation may not be
                              possible, noting that a comprehensive study of all costs and savings
                              would be prohibitively expensive to conduct. This review also noted that
                              while its estimate represents a savings to the government as a whole, the
                              impact on individual agencies would likely vary.

                              In 2010, the Task Force 11 report also attempted to quantify such cost
                              savings by comparing costs before and after consolidation at 27 posts.
                              Overall, the report found that per capita costs related to consolidation for
                              both ICASS and USAID decreased at most posts following
                              consolidation. 19 However, the report also determined that baseline data
                              on non-ICASS administrative costs prior to consolidation were not
                              available for USAID at 7 posts, which had to be excluded from the
                              analysis. For the remaining 20 posts, the authors of the Task Force 11
                              report also had to make several adjustments to the preconsolidation data
                              in order to develop comparable data sets. According to State and USAID
                              staff who conducted this analysis, their efforts were complicated by the
                              lack of any USAID database that tracks and segregates the costs of
                              administrative services that USAID incurs at missions worldwide from


                              19
                                In aggregate, after adjusting for several factors, the study concluded that per capita
                              costs decreased by 1.7 percent at these posts. However, at some of these posts, per
                              capita costs increased for a variety of reasons, which the report did not fully explain.




                              Page 18                                                  GAO-12-317 Embassy Management
                               other operational expenses. As a result, they said, it was very difficult to
                               compare the cost of administrative services previously provided by
                               USAID to the cost of services provided by ICASS after consolidation.


State Has Made Limited         One of ICASS’s primary goals is to contain or reduce administrative
Progress on Other Cost         costs. Yet State, as the primary ICASS service provider, has made little
Containment Efforts            progress in containing costs by reducing the need for American
                               administrative staff overseas. Nor has State sought to maximize the cost-
                               effectiveness of ICASS services by ensuring that the most appropriate
                               agency deliver these services at all posts.

Innovation and Reengineering   In 2004, we recommended that, in addition to pursuing the elimination of
of Service Delivery Has Been   duplicative administrative support structures, the ICASS Executive Board
Limited                        seek to contain ICASS cost by reengineering administrative processes
                               and employing innovative managerial approaches through competitive
                               sourcing, regionalization of services, improved technology, and adoption
                               of other best practices developed by agencies and other posts. 20 We
                               further noted that State had undertaken several initiatives to increase the
                               efficiency of ICASS services, primarily by reducing the need for
                               administrative staff overseas. However, according to ICASS management
                               officials, State has discontinued these efforts without demonstrating
                               significant progress in containing costs. For example, State did not fully
                               implement a pilot effort to streamline services by requiring ICASS service
                               providers and ICASS councils to rationalize administrative staffing levels.
                               Moreover, State did not execute its plans to relocate some administrative
                               support activities from overseas to the Florida Regional Center in Fort
                               Lauderdale, which State estimated would save ICASS customers up to
                               $140 million over 5 years. According to State and ICASS management
                               officials, State discontinued these efforts because it determined that the
                               potential cost savings did not outweigh the administrative burden of fully
                               implementing them. Furthermore, they indicated that State has not
                               undertaken any other streamlining efforts of comparable scope.

                               State has implemented a wide variety of smaller scale innovations that
                               have increased efficiency of ICASS service delivery and reduced costs.
                               These initiatives include improvements in management information
                               collection and analysis, standardization of posts’ business processes, and



                               20
                                GAO-04-511.




                               Page 19                                         GAO-12-317 Embassy Management
measurement of performance and customer satisfaction. State has also
realized efficiencies through reengineering and reorganization of some of
its business processes. For example State established a “post support
unit” to provide vouchering services to more than 90 posts worldwide from
three central locations. State also implemented a program that allows
staff to initiate and process procurements from alternate locations, which
State indicates has been especially helpful for high danger posts, such as
Iraq. Also, in 2011, State implemented a global network energy
management program, which has reportedly reduced energy costs by
almost $900,000 in its first 10 months. Other than this initiative, State has
not identified the specific cost impacts of these innovations. State
anticipates future cost savings from innovative approaches it has
undertaken in procurement of air freight pouch and mail services and
information technology equipment.

Officials from nearly every agency we met with expressed concern about
State’s failure to contain the cost of the ICASS services it provides. In
particular, agency officials in Washington, D.C., and at the overseas posts
we visited commonly complained that State employed too many American
staff overseas to provide administrative services instead of relying on
much less expensive locally employed staff or outsourcing to local firms. 21
Officials from State’s Office of Management Policy, Rightsizing, and
Innovation indicated that significant ICASS cost savings were elusive
unless State reduces the number of management-related American staff
overseas. Yet, according to State, many posts have noted that security
concerns have been a barrier to having local staff perform functions
normally performed by Americans, and State has acknowledged that
empowering local staff remains a challenge. In contrast, USAID officials
pointed to numerous instances in which locally employed USAID staff
have effectively provided administrative services, such as local
procurement and real property leasing. Similarly, DOD officials in Manila
asserted that local repair shops could provide car maintenance services
at a lower cost than the State-run ICASS shop. However, because State
is generally the only ICASS service provider, the interagency ICASS
Executive Board has limited power to determine the numbers of ICASS
service provider staff overseas.




21
  In 2004, we found that the per capita labor cost of an American direct hire staff was
almost eight times higher than that of a local hire.




Page 20                                                  GAO-12-317 Embassy Management
                                 Although State management counselors and the interagency ICASS
                                 councils at individual posts are empowered to undertake cost
                                 containment efforts, State and ICASS management officials indicated that
                                 the councils have generally failed to do so. We found that ICASS service
                                 providers at individual posts have implemented a variety of small scale
                                 efforts to contain costs, but these efforts have not resulted in significant
                                 savings. According to a DHS official responsible for managing the
                                 overseas costs of his agency, posts’ cost reduction plans have been
                                 largely limited to superficial efforts, which are unlikely to provide
                                 significant savings, such as installing energy efficient light bulbs. We
                                 found that in some cases State has limited local ICASS councils’ ability to
                                 undertake more significant cost-saving initiatives. Moreover, we found
                                 instances where State has reversed ICASS councils’ cost containment
                                 decisions. In Nairobi, after the council had approved a modest increase in
                                 local administrative staff salaries, the ambassador overruled this decision
                                 and directly promised all local staff a significantly larger pay increase
                                 without consulting the ICASS council. Management officials in Tokyo told
                                 us that prior to the transition to a new travel system, the embassy had
                                 vouchers processed in Bangkok, where the cost of this service was much
                                 lower. However, after the implementation of the new system, voucher
                                 processing shifted back to Tokyo, increasing the cost of this service.
                                 Finally, a senior State management official told us that ICASS councils
                                 and management officers are frequently dissuaded from outsourcing
                                 administrative operations by State regional security officers, who object
                                 due to security concerns.

Restricted Use of Alternate      Although State provides virtually all ICASS services, in some cases, an
ICASS Service Providers Limits   agency other than State may be able to provide one or more of these
Opportunities for Greater        services through ICASS to agencies more cost effectively at a given post.
Efficiencies                     In several instances of duplication we observed, USAID appeared to have
                                 more expertise in providing a particular service than the existing State
                                 ICASS provider, potentially making USAID a reasonable alternate ICASS
                                 provider. For example, in Nairobi, USAID operates a copy center for its
                                 own staff inside the embassy compound, offering more specialized
                                 services, including digitization, than the ICASS copy center provides. In
                                 addition, staff in several focus groups we convened overseas indicated
                                 that drivers in USAID motor pools traditionally have valuable
                                 communications and navigation skills that State’s ICASS drivers do not
                                 always possess, making USAID drivers particularly useful for trips outside
                                 the capital city. In Kigali, the management counselor noted that USAID
                                 human resources staff had experience in a broader range of employment
                                 contracts than their State ICASS counterparts and could potentially
                                 provide its services to both agencies.


                                 Page 21                                        GAO-12-317 Embassy Management
                        State’s Foreign Affairs Handbook recognizes that an agency other than
                        State may be better positioned to be the principal provider of specific
                        services for themselves and other agencies at a given post. It allows for
                        the use of these alternate service providers in cases where an agency
                        has a sufficiently large administrative support capability at a location and
                        agrees to provide services to other agencies at that post. However, in
                        2006, State and USAID, in the interest of simplifying and expediting the
                        consolidation of their administrative operations overseas, adopted a
                        policy effectively restricting the establishment of new alternate ICASS
                        service providers. This policy applied to posts where State and USAID
                        would colocate between fiscal years 2007 and 2010. As a result, in 2012,
                        only seven posts had such a provider for one or more ICASS service,
                        potentially limiting opportunities for ICASS to achieve greater efficiency
                        and effectiveness. In 2010, Task Force 11, a joint State-USAID group
                        supporting the development of the Quadrennial Diplomacy and
                        Development Review, 22 recommended that posts consider the use of
                        alternate service providers in order to reduce costs. Task Force 11 also
                        proposed that State and USAID establish a Joint Management Board and
                        formulate a consolidation policy that considers the use of alternate
                        providers. However, the Joint Management Board, created in August
                        2011, has not yet established such a policy.


                        Results from the annual ICASS survey, and our own survey of U.S.
ICASS Customers         government agency representatives overseas, show that survey
Generally Satisfied,    respondents are generally satisfied with the quality of ICASS services.
                        Furthermore, officials in focus groups we conducted at four posts
and Management Has      generally felt that ICASS provided quality administrative services.
New Tools to Monitor    Nonetheless, some dissatisfaction with ICASS performance still exists,
Quality in Some Areas   especially among USAID staff, and in some cases, ICASS performance
                        problems could affect some agencies’ ability to achieve their respective
                        missions efficiently and effectively. State has begun implementing tools
                        that improve managers’ ability to monitor and evaluate performance and
                        customer satisfaction; however, the standards do not measure
                        performance for some aspects of services that agencies have reported
                        are particularly problematic.



                        22
                          Department of State and the U.S. Agency for International Development, Leading
                        Through Civilian Power: The First Quadrennial Diplomacy and Development Review
                        (Washington, D.C.: Dec. 15, 2010).




                        Page 22                                              GAO-12-317 Embassy Management
Surveys of Service           Results from the annual ICASS survey, and our survey of ICASS service
Recipients Show Overall      recipients, show that respondents are generally satisfied with overall
Satisfaction with ICASS      ICASS services, although results varied for some agencies and services.
                             While some dissatisfaction exists among some customer agencies,
                             officials we interviewed at four posts were generally satisfied with ICASS
                             services.

ICASS Survey Shows Overall   The ICASS Service Center uses its annual ICASS Customer Satisfaction
Satisfaction                 Survey to gauge overall satisfaction with each administrative service
                             provided at a post. In 2011, the ICASS Service Center reported a 67
                             percent response rate to the survey, with nearly 47,000 responses from
                             234 posts worldwide. Service recipients, which include American and
                             local staff, dependents of American personnel overseas, and ICASS
                             service providers, access the survey through the Internet to evaluate
                             ICASS services they received over the past year. Although we found
                             limitations with the methodology of this survey, customers have generally
                             reported overall satisfaction with ICASS services since the ICASS Service
                             Center began conducting this survey in 2005. 23 On a scale from 1 to 5, a
                             score of 2 or lower indicates a customer’s dissatisfaction with a service
                             and a score of 4 or higher indicates satisfaction. (A score of 3 is labeled
                             as “neutral.”) The average score for overall satisfaction from all survey
                             respondents ranged from 3.95 in 2005 to 4.03 in 2011 (see fig. 2).




                             23
                               In reviewing the survey results, we found that the response rate for several posts
                             exceeded 100 percent. ICASS officials indicated that they use human resources
                             population-at-post data to determine the total number of eligible survey respondents when
                             calculating the response rate. Eligible respondents are notified through flyers,
                             newsletters, and e-mails to complete the web-based survey anonymously. Because the
                             survey administration was anonymous, it is difficult to determine potential bias in the
                             results. Therefore, the results may only reflect the views of the respondents and not all
                             service recipients.




                             Page 23                                                GAO-12-317 Embassy Management
Figure 2: ICASS Customer Satisfaction Scores on a Scale from 1 to 5 for Selected
Agencies, 2005 through 2011




Note: Respondents were asked to rate the extent to which they agreed or disagreed with the
statement, “Overall, I am satisfied with this service,” with 1 = strongly disagree; 2 = disagree; 3 =
neutral; 4 = agree; 5 = strongly agree. Data for “all agencies” include responses from ICASS service
providers.
a
    “All agencies” include responses from all ICASS customers.
b
    “State” includes responses from ICASS service providers, who are almost always State employees.
c
“Other agencies” include responses from USDA, Commerce, DOD, HHS, DHS, and Justice.


Though results of the ICASS annual survey have consistently indicated
that service recipients who have responded to the survey are generally
satisfied, the survey data also indicate that responses from agencies
other than State consistently express lower levels of overall satisfaction,
as shown in figure 2. In addition, the most recent survey data show that
responses to overall satisfaction with ICASS services vary by agency and
service. For example, in 2011, State respondents expressed somewhat
higher satisfaction with ICASS than did USAID and other agency
respondents (see table 6). Also, 21 services received satisfaction scores
above 4, including the 2 highest-ranked services: cashiering and



Page 24                                                          GAO-12-317 Embassy Management
                                  information management technical support (each with a score of 4.24).
                                  Only one service—leasing—received a score below 3.85.

                                  Table 6: Average Customer Satisfaction Scores on a Scale from 1 to 5 by Agency
                                  for 2011

                                      Agency                           Overall satisfaction score            Number of respondents
                                                                  a
                                      ICASS service providers                                     4.25                            13,628
                                      State                                                       4.00                            23,424
                                      HHS                                                         3.94                                911
                                      Commerce                                                    3.88                                566
                                      USDA                                                        3.87                                393
                                      DOD                                                         3.87                              2,435
                                      Justice                                                     3.81                                663
                                      DHS                                                         3.70                                539
                                      USAID                                                       3.64                              3,163
                                  Source: ICASS Service Center.

                                  Note: Respondents were asked to evaluate overall ICASS services by indicating whether they agreed
                                  or disagreed with the statement, “Overall, I am satisfied with this service,” with 1 = strongly disagree;
                                  2 = disagree; 3 = neutral; 4 = agree; 5 = strongly agree.
                                  a
                                   The annual ICASS survey reports responses from ICASS service providers separately. In almost all
                                  cases, these service providers are State employees.


Our Survey Results Also Show      We surveyed ICASS Council representatives from the eight largest
Overall Satisfaction with ICASS   ICASS customer agencies regarding the quality of ICASS services. 24
Services Among the Largest        Nearly 80 percent of all responses indicated that the quality of services
Agencies                          received through ICASS was “good” or better (see fig. 3). Only about 6
                                  percent of responses indicated that the quality was “poor”. 25 For example,
                                  133 of 152 respondents (88 percent) who receive information technology
                                  services through ICASS indicated that the quality of this service was
                                  “good” or better. Similarly, 141 of 163 respondents (87 percent) rated
                                  shipping and customs services “good” or better.


                                  24
                                    These agencies were State, DOD, USAID, Commerce, USDA, Justice, DHS, and HHS.
                                  We also included USAID executive officers in our survey. We chose these respondents
                                  because we determined that they had sufficient knowledge to answer questions regarding
                                  the cost and quality of administrative services at their posts.
                                  25
                                    In our survey, 184 respondents rated the quality of up to nine services, providing 1,292
                                  total responses to the question regarding quality. Of the total responses for all services,
                                  1,008 responses indicated that quality was “good” or better, while 82 responses indicated
                                  the quality was “poor.”




                                  Page 25                                                          GAO-12-317 Embassy Management
                                 Figure 3: Customer Perceptions on the Quality of Selected ICASS Services, 2011




                                 Note: Our survey asked respondents to rate the quality of each of the selected services in which they
                                 participated as either excellent, very good, good, fair, or poor. “Good” or better includes good, very
                                 good, and excellent responses.


                                 While survey respondents indicated that they were generally satisfied with
                                 the nine services included in our survey, about 30 percent of responses
                                 rated their satisfaction as “fair” or “poor” for three of the nine services. For
                                 example, 42 of 150 respondents (28 percent) who receive leasing services
                                 through ICASS indicated that the quality of this service was “fair” or “poor.”
                                 Similarly, 52 of 157 (33 percent) rated procurement “fair” or “poor.”

Agency Officials We              At the four posts we visited, ICASS customers were generally satisfied
Interviewed at Four Posts Were   with the services they received. Participants in our focus groups were
Generally Satisfied with ICASS   particularly satisfied with reception and telephone services, medical
Services                         services, security services, and human resources services for local staff.
                                 For example, officials in Tokyo said the embassy’s telephone operators


                                 Page 26                                                        GAO-12-317 Embassy Management
                            were very helpful, especially for staff who spoke little or no Japanese.
                            State and USAID officials in Nairobi also found the embassy’s medical
                            services helpful and noted that although customers must now schedule
                            appointments ahead of time, medical unit staff can normally see the
                            patient on the day of the request. On the other hand, some staff at posts
                            we visited registered complaints about other services, including
                            household maintenance and motor pool. However, senior USAID officials
                            we interviewed noted that, despite some staff complaints, there had been
                            few reductions in services that negatively impacted USAID officials’ ability
                            to complete their mission at post.


Some Dissatisfaction with   Despite the general levels of satisfaction expressed in our survey and in
Administrative Services     the annual ICASS Customer Satisfaction Survey, some dissatisfaction still
Persists                    exists, potentially limiting agencies’ participation in ICASS. Furthermore,
                            in some cases, agency officials indicated that poor delivery of
                            administrative service could impact the ability of agencies to achieve their
                            missions overseas efficiently and effectively. In particular, we found that
                            USAID personnel have concerns about the ability of ICASS to meet their
                            unique requirements; some ICASS customers perceive that their
                            agencies’ service requests receive lower priority than other agencies’
                            requests; and common errors in ICASS billing create inefficiencies and
                            additional administrative burdens for customer agencies, according to
                            some of the agency officials we interviewed.

USAID Concerns              USAID respondents have consistently rated ICASS services lower than
                            other agencies in the annual ICASS survey. Some USAID staff we
                            interviewed overseas expressed a concern that they have lost or would
                            lose control over their administrative operations after consolidating with
                            State, resulting in a lower level of responsiveness from administrative
                            service providers than they were accustomed to. In addition, in 2010, the
                            American Foreign Service Association (AFSA) conducted a survey to
                            document the views of USAID officials about the ongoing consolidation of
                            State and USAID administrative operations. According to AFSA, the
                            results of this survey highlighted concerns about the morale of USAID
                            staff overseas. Although we found that this survey has several




                            Page 27                                        GAO-12-317 Embassy Management
                                 limitations, 26 it highlights serious concerns that some USAID staff had
                                 about consolidating some support services. In particular, according to a
                                 2010 AFSA report on the results of this survey, USAID personnel have
                                 serious complaints about the quality of motor pool services, property
                                 maintenance, information technology, and the treatment and
                                 compensation of locally employed staff. In addition, research conducted
                                 by a joint State and USAID task force in 2010 found that consolidation
                                 had had a negative impact on 20 percent of USAID respondents and 3
                                 percent of State respondents surveyed. 27

Equitable Treatment in Service   In 2004, we reported that some ICASS customers expressed the opinion
Priority and Quality             that service provision was not always equitable and that State employees
                                 received preferential treatment in both the quality and priority of services
                                 provided; however, we further reported that we could find no evidence of
                                 systematic preferential treatment to support such claims. In our 2011
                                 survey, the majority of non-State respondents indicated that their
                                 agency’s requests were given the same priority as State’s requests for six
                                 of the nine services included in the questionnaire (see table 7). However,
                                 at least one-third of respondents thought that their agency’s requests
                                 received lower priority than State requests for five of the nine services. In
                                 addition, some respondents in our survey commented that ICASS service
                                 allocated better quality furniture to State than to other agencies.




                                 26
                                   AFSA officials administered an anonymous Web-based survey to overseas USAID
                                 Foreign Service officers, U.S. personal service contractors, and Foreign Service nationals
                                 from March 15, 2010, to April 2, 2010, and received 1,073 responses. Because the survey
                                 administration was anonymous, it is difficult to determine any potential bias in the results.
                                 Therefore, the survey results may only reflect the views of the respondents and not those
                                 of all USAID personnel. In addition, questions in the survey may have biased the
                                 respondent to answer in a manner favorable to the organization conducting the survey.
                                 27
                                   Department of State and the U.S. Agency for International Development, Leading
                                 Through Civilian Power: The First Quadrennial Diplomacy and Development Review
                                 (Washington, D.C.: Dec. 15, 2010), p. 203.




                                 Page 28                                                   GAO-12-317 Embassy Management
Table 7: Responses from USAID and Other Agency Personnel as to Whether They Receive Higher or Lower Priority than State
Personnel When Requesting ICASS Services.

                                        Number of                  Number of          Number of
                                      respondents                respondents        respondents           No basis to
                                  indicating higher          indicating about    indicating lower         judge or no              Total
Service                                     priority                 the same             priority          response          responses
Furniture pool                                        0                   32                     20                   7                 59
Motor pool                                            2                   33                     28                   8                 71
Shipping and customs                                  0                   82                     23                  12                117
Government-owned/long-term                            2                   54                     47                   8                111
lease and short-term lease
residential building operations
Vouchering services                                   0                   68                     18                  12                 98
Leasing services                                      2                   47                     37                  15                101
Information management                                2                   60                     27                  12                101
technical support services
Procurement services                                  1                   55                     39                  14                109
Human resources: locally                              1                   70                     22                  12                105
employed staff services
                                       Source: GAO survey.

                                       Note: Our survey asked respondents to indicate whether their agency’s requests for ICASS services
                                       were given a higher or lower priority than State requests as much higher, somewhat higher, about the
                                       same, somewhat lower, or much lower than State.


                                       AFSA’s report on the results of its 2010 survey indicate that “USAID
                                       employees feel ignored and upset at the treatment they have received
                                       from their State counterparts.” In particular, according to this report, when
                                       ICASS providers take over building, warehouse, and residence
                                       operations, USAID staff experience poorer maintenance service and
                                       smaller working spaces compared to State personnel.

                                       Despite such perceptions, we found no concrete evidence that State
                                       received preferential treatment from ICASS service providers. In Nairobi,
                                       for example, the management officer said that USAID staff often
                                       complained that they had less access to the ICASS motor pool than State
                                       officials and therefore had to frequently travel to meetings by taxi.
                                       However, in response to comments in the annual survey, the
                                       management section analyzed the post’s taxi usage from 2007 through
                                       2010 and found that the perception that the motor pool assigned taxis to
                                       USAID staff more than to other embassy staff was incorrect.




                                       Page 29                                                        GAO-12-317 Embassy Management
Billing Errors              Officials from several agencies we spoke with said that their annual
                            ICASS invoices often contain numerous errors, which require a significant
                            amount of effort to correct. For example, USDA conducted an analysis of
                            its ICASS workload counts for fiscal year 2011 and found that 22 of the
                            100 cases it reviewed contained discrepancies that required corrections.
                            At one post we visited, the DOD ICASS Council representative said he
                            and his staff were able to reduce DOD’s share of the post’s total ICASS
                            expenses from 9.6 to 6.5 percent by identifying and correcting errors,
                            such as being charged for space that they did not occupy. Commerce
                            officials said they had identified an instance in which the ICASS service
                            provider did not cancel a lease for an unoccupied building for many
                            months, resulting in higher than necessary ICASS costs for all customer
                            agencies at the post. In its 2010 report on ICASS, AFSA reported that
                            USAID staff spend “an enormous amount of time in checking of vouchers
                            and services due to an increase in inappropriate billings and mistakes.”
                            Further, a DHS official said that a component agency identified an error in
                            its ICASS bill at one post that had caused a 50 percent increase in its
                            security charges. This official noted, however, that while identifying and
                            correcting such errors saves his department money, it does not save
                            money for the government as a whole because correcting the error
                            merely redistributes the costs being shared by all the agencies served by
                            ICASS at the post in question.


New Management Tools        State has implemented management tools to identify and address
Measure Some Aspects of     performance and satisfaction issues in a timelier manner. In 2007, State
Quality of ICASS Services   launched the Collaborative Management Initiative, a process that
                            included input from service providers in the field to draft standards and
                            performance metrics for ICASS services that would apply to all posts.
                            Prior to this initiative, service standards were inconsistent and varied by
                            post. This effort resulted in the creation and implementation of uniform
                            service standards and eServices—an online software program to request
                            services and give service providers immediate feedback on the quality of
                            each service rendered. In addition, the eServices program captures and
                            reports to management performance-related metrics on the volume of
                            services provided, and the extent to which service providers are meeting
                            performance standards. However, these metrics do not address some
                            concerns about service quality raised to us by customer agencies.

Uniform Service Standards   In 2008, State developed about 50 uniform service standards to provide
                            consistent requirements among posts for fulfilling administrative service
                            requests—such as the time required to complete a residential repair or
                            provide transportation to a meeting. State began measuring each post’s


                            Page 30                                        GAO-12-317 Embassy Management
performance against these standards in 2010. A 2008 review of State-
USAID consolidation to date stated that implementing these service
standards would allow analysis of the most cost-effective means to
provide administrative support services at the maximum possible quality
levels. 28 State officials commented that the implementation of these
standards has focused attention on service delivery at posts and, as a
result, improved service delivery.

In fiscal year 2011, 64 percent of all ICASS services for which standards
had been set met their specific service standard. According to State data,
ICASS service providers received more than 1.5 million requests for
these services worldwide in fiscal year 2011, more than 1 million of which
were completed within the specified standard. 29 For example, post motor
pools logged more than 600,000 requests for local trips in fiscal year
2011, and ICASS service providers were able to fulfill nearly 74 percent of
these requests within 4 hours. In addition, post motor pools logged more
than 6,100 requests for nonlocal trips in fiscal year 2011, and ICASS
service providers were able to fulfill about 69 percent of these requests
within 5 business days. Table 8 lists selected services and their uniform
service standard along with fiscal year 2011 performance data.




28
  Joint Management Council, Consolidation After-Action Review: Best Practices and
Lessons Learned from Tier 1 Posts (Washington, D.C.: Nov. 2008).
29
  Figures represent requests for the 49 services that State currently tracks through the
Uniform Service Standards. Because State has identified more than 200 unique services
that are provided through ICASS, these figures are a fraction of the total number of
requests that ICASS service providers received in fiscal year 2011.




Page 31                                                GAO-12-317 Embassy Management
Table 8: Selected ICASS Services and Uniform Service Standards with the Percentage of Service Completions Meeting
Standards, Fiscal Year 2011

                                                                                                      Number of             Percentage of
                                                                                                        services      service completions
Service category       Specific Service                    Uniform service standard                   completed         meeting standard
Motor pool services    Local transportation by car-        Submit request for a vehicle 4                 631,473                         73.8%
                       and-driver (government-             business hours in advance for
                       owned or contract) or other         local trips.
                       cost-effective alternatives
                       such as self-drives or taxis
Motor pool services    Non-local trips                     Submit request for a vehicle 5                    6,135                        68.7%
                                                           business days in advance for
                                                           nonlocal trips.
Travel services        Make transportation and             Make, change, or cancel                         37,152                          66.2
                       hotel reservations                  transportation or hotel
                                                           reservations and inform
                                                           customer within 1 business day.
Reception and          Issue visitor passes                Visitor passes issued within 15                 22,695                          60.0
switchboard services                                       minutes of arrival.
Information            Minor trouble shooting,             Respond to routine Help Desk                   181,075                          58.6
management technical   maintenance, and routine            support requests within 4
support services       tasks performed by the              business hours and achieve a
                       Information Technology staff        customer satisfaction level of
                                                           95% or better.
Residential building   Minor repair and                    Routine minor repairs and                       71,479                          58.6
operations services    maintenance                         maintenance completed in 7
                                                           business days.
                                          Source: State.

                                          Note: Uniform service standards in this table are only a sample of the 195 service standards.


eServices Customer                        At the end of fiscal year 2010, 83 percent of overseas posts were using the
Feedback Results                          service request software program, eServices, to generate customer
                                          feedback in order to improve support services. State began tracking
                                          customer feedback results in fiscal year 2010, and the scores have
                                          generally increased from fiscal year 2010 to 2011. The eServices feedback
                                          survey uses a scale of 1 to 5, with a score of 2 or lower indicating
                                          dissatisfaction and a score of 3 or higher indicating some level of
                                          satisfaction. For fiscal year 2011, 14 services received an average score of
                                          4 or higher, compared to 7 services in fiscal year 2010 (see table 9).




                                          Page 32                                                        GAO-12-317 Embassy Management
                             Table 9: eServices Point-of-Service Ratings, on a Scale from 1 to 5, by Service,
                             Fiscal Years 2010 and 2011

                                                                                                       Average survey rating
                              Service (in descending order of 2011 survey rating)                         2010                 2011
                              Community Liaison Office Services                                            4.12                 4.38
                              Information management technical services                                    4.04                 4.24
                              Payrolling services                                                          4.32                 4.24
                              Shipping and customs                                                         3.96                 4.24
                              Nonexpendable property management                                            3.96                 4.19
                              Travel services                                                              4.00                 4.18
                              Human resources: locally employed staff                                      3.99                 4.16
                              Vouchering services                                                          3.83                 4.16
                              Motor pool services                                                          3.88                 4.15
                              Human resources: U.S. citizen services                                       4.18                 4.12
                              Long-term lease nonresidential building operations                           3.84                 4.12
                              Basic package                                                                4.04                 4.09
                              Reception, switchboard, and telephone services                               3.94                 4.09
                              Health services                                                              4.27                 4.07
                              Administrative supply                                                        3.74                 3.99
                              Security services                                                            3.66                 3.91
                              Procurement services                                                         3.70                 3.90
                              Long-term lease residential building operations                              3.70                 3.87
                              Leasing services                                                             3.89                 3.82
                             Source: State.

                             Note: Respondents were asked to rate the level of their level of satisfaction with their last eServices
                             transaction: 1 = very dissatisfied; 2 = dissatisfied; 3 = somewhat satisfied; 4 = satisfied; 5 = very
                             satisfied.


Performance Metrics Do Not   The metrics that State is using to measure performance against
Address Some Aspects of      standards do not address some concerns about service quality raised to
ICASS Customer               us by customer agencies. Moreover, since State’s performance reporting
Dissatisfaction              to the missions does not disaggregate results by customer agency, it
                             does not reflect the extent to which service delivery is equitable across
                             agencies. Nor do State’s metrics gauge progress on reducing the
                             incidents of ICASS billing errors.




                             Page 33                                                          GAO-12-317 Embassy Management
              In November 2011, we reported that obtaining customer input to meet
              customer needs is a key operating principle for effective management of
              cost-sharing systems, such as ICASS, used to conduct business-like
              activities within and between federal agencies. 30 State’s process for
              establishing uniform service standards is informed by input from ICASS
              service providers and customer agency officials in Washington, D.C.
              However, it is not clear that these standards address common concerns
              of overseas ICASS customers. A State management counselor we spoke
              to in Nairobi indicated that achieving the uniform service standards does
              not necessarily constitute acceptable performance for many of their
              customers. This opinion was echoed by customer agency representatives
              in focus groups and interviews we conducted overseas. For example,
              USAID officials have cited the unavailability of ICASS motor pool vehicles
              for travel to distant project sites as a major impediment to achieving their
              mission. Although ICASS performance standards call for the motor pool
              to provide nonlocal transportation within 5 business days of receiving a
              request, USAID officials indicated that they often need vehicles more
              quickly than this to effectively monitor their projects.

              In responding to a draft of this report, both State and USAID indicated
              that more meaningful customer input is needed to establish appropriate
              performance standards and address areas of dissatisfaction. According to
              USAID, the process for developing the current standards resulted in the
              preeminence of service provider views over those of customers. State
              indicated that it needs greater input from customer agencies at posts
              about the services that they consider problematic so that concerns can be
              addressed. State also indicated that it is planning to implement new
              systems to capture more customer feedback and other performance data
              that will enable the department to recalibrate existing service standards
              and develop new ones.


              In the current budget environment, the obligation of agencies to review
Conclusions   their operations to identify areas of duplication and overlap and to



              30
                GAO, Intragovernmental Revolving Funds: Commerce Departmental and Census
              Working Capital Funds Should Better Reflect Key Operating Principles, GAO-12-56
              (Washington, D.C: Nov. 18, 2011). This report discusses key principles for effective
              management of Intragovernmental Revolving Funds, such as Working Capital Funds. The
              ICASS Working Capital Fund is a no-year fund that permits posts to retain a portion of
              their unobligated funds from one fiscal year to the next.




              Page 34                                              GAO-12-317 Embassy Management
consider areas for potential cost savings has become critically important.
In 2004, we recommended that the ICASS Executive Board pursue the
elimination of duplicative administrative support structures with the goal of
limiting each service to one provider at U.S. facilities overseas. While
State and USAID have made notable progress in consolidating their
administrative operations, overall participation in ICASS has not
increased significantly, and agencies are likely missing opportunities to
take advantage of clear economies of scale. The voluntary nature of
ICASS has permitted the continuation of duplicative services, as agencies
often make decisions about participating in ICASS based on their own
costs and not the costs to the U.S. government as a whole. While
agencies may opt out of ICASS because they believe they can obtain less
costly services on their own, doing so may actually increase the overall
cost to the U.S. government. Since agencies usually do not formally
justify their decisions to opt out of ICASS or routinely conduct cost
analyses, in some cases their decisions may be based more on poorly
supported perceptions of cost and quality than on hard data and facts.
Because ICASS management lacks comparable data on the cost of
overseas administrative services within and outside of ICASS, it is poorly
positioned to convince agencies that greater participation in ICASS
services is in their own interest or that of the U.S. government overall.
Moreover, ICASS has still not led to systematic innovation and
reengineering of administrative services delivery, especially those which
would reduce the need for expensive American staff overseas and thus
reduce costs significantly and make participation in ICASS more cost-
effective for agencies. State and USAID may also be missing
opportunities for achieving greater efficiency and effectiveness by limiting
the use of USAID, in lieu of State, as an alternate ICASS service provider.
We have previously recommended that the ICASS Executive Board
encourage greater ICASS participation and pursue other streamlining
efforts. However, experience has shown that board members do not
necessarily have the incentive to require their agencies to participate in
ICASS, especially if they are unconvinced that it is in their agency’s
financial self-interest. The board has also had limited power to effectuate
reengineering and innovation in administrative processes, as State
maintains control over virtually all of these processes as both the primary
provider and customer of ICASS services. In this context, congressional
action may be necessary to increase participation in ICASS. Finally,
without more comprehensive performance data, ICASS service providers
are poorly positioned to demonstrate to the agencies that they are
focusing on critical areas of dissatisfaction with ICASS that could be
impediments to achieving agency missions.



Page 35                                        GAO-12-317 Embassy Management
                     In order to contain costs and reduce duplication of administrative support
Matter for           services overseas, Congress may wish to consider requiring agencies to
Congressional        participate in ICASS services unless they provide a business case to
                     show that they can obtain these services outside of ICASS without
Consideration        increasing overall costs to the U.S. government or that their mission
                     cannot be achieved within ICASS.


                     The Secretary of State should increase the cost effectiveness of ICASS
Recommendation for   services by continuing to reengineer administrative processes and seek
Executive Action     innovative managerial approaches, including those that would reduce the
                     reliance on American officials overseas to provide these services.

                     Where agencies are able to demonstrate, through a compelling business
                     case, that they can provide a service more efficiently than the existing
                     State ICASS provider without adverse effects on the overall government
                     budget, we recommend that the Secretary of State and the Administrator
                     of USAID allow the creation of new ICASS service providers, in lieu of
                     State, that could provide administrative services to the other agencies at
                     individual posts.

                     To help ensure that ICASS provides satisfactory and equitable
                     administrative service, we also recommend that the Secretary of State, in
                     close coordination with ICASS customer agencies, develop additional
                     uniform service standards and other performance measures that gauge
                     ICASS service providers’ progress in resolving major sources of customer
                     dissatisfaction.


                     We provided a draft of this report to the agencies within the scope of our
Agency Comments      review for their comment. State, USAID, USDA, Commerce, and DHS
and Our Evaluation   provided written comments which are reproduced in appendices V
                     through IX along with our responses to specific points. DOD, HHS, and
                     DOJ did not provide written comments. The agencies and the ICASS
                     Service Center also provided technical comments that were incorporated,
                     as appropriate.

                     State and USAID generally concurred with the report’s conclusions and
                     recommendations. However, while State agreed that continued efforts
                     are needed to increase the cost effectiveness of ICASS services, it did
                     not agree that such actions have not been undertaken or that such efforts
                     would substantially reduce the need for the American management staff
                     abroad. We added information about State’s other cost reduction efforts,


                     Page 36                                       GAO-12-317 Embassy Management
noting that they were of a smaller scale than those State had indicated in
2004 that it would undertake. Given the relatively high cost of posting
American management staff overseas compared to engaging staff locally,
we believe that even minor modifications in staffing could have significant
cost implications and should be thoroughly explored, in close coordination
with ICASS-participating agencies. We modified our recommendation to
clarify that reengineering of administrative processes and innovative
managerial approaches should include such staff reductions but not be
limited to them necessarily.

USDA, Commerce, and DHS took issue with our finding that
nonparticipation in ICASS services reflects potential duplication of
administrative services overseas and with our suggestion that Congress
consider requiring agencies to participate in ICASS services unless they
provide a business case to justify opting out. In particular, these agencies
noted that ICASS customers have a variety of valid reasons for not
participating in ICASS services and expressed concern that developing
business cases to justify nonparticipation would be overly burdensome.
We believe that, while agencies may have valid reasons for not
participating in some ICASS services, the voluntary nature of ICASS has
permitted agencies to opt out of the system without conducting rigorous
cost analyses. Without such analyses, agencies are making decisions
about participating in ICASS based on their own costs—or perceptions of
cost—and not necessarily the overall cost to the U.S. government. We
believe that if conducted in close coordination with the ICASS Service
Center and other participating agencies, preparing business cases need
not be overly burdensome and could lead to significant, long term savings
for the U.S. government that would justify the additional effort.




Page 37                                        GAO-12-317 Embassy Management
As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 28 days from the
report date. At that time, we will send copies to the appropriate
congressional committees, the Secretary of State, and other interested
parties. In addition, the report will be available at no charge on the GAO
website at http://www.gao.gov.

Should you or your staff have questions concerning this report, please
contact me at (202) 512-8980 or courtsm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are listed in
appendix X.




Michael J. Courts
Acting Director
International Affairs and Trade




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Appendix I: Objectives, Scope, and
                     Appendix I: Objectives, Scope, and
                     Methodology



Methodology

                     In response to a congressional request to update our 2004 report on the
General              International Cooperative Administrative Support Services (ICASS)
                     system and review ICASS’s progress in improving its efficiency, we
                     assessed (1) the extent to which changes in ICASS participation have
                     affected the duplication and cost of administrative support services and
                     (2) customer satisfaction with the quality of ICASS services overseas.

                     Our review focused on the eight agencies with the largest ICASS
                     invoices: the Departments of Agriculture (USDA), Commerce
                     (Commerce), Defense (DOD), Health and Human Services (HHS),
                     Homeland Security (DHS), Justice (DOJ), and State (State), as well as
                     the United States Agency for International Development (USAID).
                     Together, these agencies accounted more than 98 percent of the total
                     ICASS budget in 2010. We reviewed data on these agencies’
                     participation in ICASS, including their costs and results of the annual
                     ICASS Customer Satisfaction Survey, from 2005 to 2011. We interviewed
                     officials at each agency as well as at the ICASS Service Center. We also
                     conducted fieldwork at four overseas locations: Tokyo, Japan; Nairobi,
                     Kenya; Manila, the Philippines; and Kigali, Rwanda. At each location, we
                     observed administrative services, met with embassy management
                     officials, and conducted focus groups of ICASS customers. We chose
                     these locations based on the size of and number of agencies at the post;
                     status of consolidation of USAID’s and State’s administrative platforms;
                     cost of obtaining services in the host country; and geographic diversity.

                     To assess the extent to which changes in ICASS participation have
                     affected the duplication and cost of administrative support services, we
                     analyzed data from the ICASS Global Database, which is maintained by
                     the ICASS Service Center and contains information for each ICASS
                     service and subagency code at each overseas post on: workloads; billing
                     by agency; unit costs; and other information necessary for operating the
                     system. As described in the following section, we assessed the strength
                     of these data and compared them against other ICASS data. We found
                     these data sufficiently reliable for the purposes of describing customer
                     agencies’ participation rates in ICASS and demonstrating the economies
                     of scale that occur as ICASS workloads increase.


                     We used annual data generated through the ICASS Global Database and
Participation Rate   data prepared by the ICASS Service Center for the purposes of its annual
                     customer satisfaction survey to analyze participation rates. The data
                     cover ICASS services provided from 2005 to 2011 and contain
                     information on the level of services an agency is billed for at all the posts


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where it has a presence. In order to compare these data across fiscal
years, we corrected inconsistencies in the names of the posts and
agencies before we merged the annual data. Because two ICASS
services—basic service and community liaison service—are generally
mandatory, 1 all agencies with an overseas presence should be covered in
the ICASS Global Database, even if they choose to provide all
nonmandatory services outside ICASS. To assess the reliability of these
data, we interviewed knowledgeable officials regarding the collection and
maintenance of these data. We also tested some of these data
electronically against data prepared by the ICASS Service Center for the
annual ICASS customer satisfaction survey. We determined the data
were sufficiently reliable for the purposes of reporting ICASS participation
rates by agency and by service.

Using these data, we analyzed participation rates for different ICASS
services. Participation rate by ICASS service measures the proportion of
agencies at a post that use ICASS for a particular service. A higher
participation rate indicates the service has more agencies participating
than a service with a lower participation rate. This analysis helps us
identify how “popular” a service is: whether agencies use this service
provided through ICASS or opt out and provide a similar service for
themselves. In order to calculate the participation rate by ICASS service,
we first counted the number of agencies which participate in a particular
service at a post, and then we summed this number across all the posts
where the service is provided through ICASS. Next, we calculated the
total number of agencies at all the posts where the service is provided,
which is also the maximum number of agencies potentially participating in
a service if every agency chooses to use ICASS. The ratio between the
two sums is the participation rate of a service. Our calculation may
overestimate the non-participation rate if agencies do not participate in
ICASS because they do not have “real needs” for certain services.
However, without detailed “needs assessments” from every agency at
every post, it is not possible to differentiate non-participation because of


1
 These two services are mandatory for all agencies at a post with U.S. direct hires and
certain authorized third-country national, U.S. contractor, or other staff. Basic package—
which includes several services that can only be obtained by the embassy, such as
securing diplomatic credentials from the host country—and community liaison office
services are generally mandatory. Participation rates are not 100 percent for these
services because an agency may have only local staff at a given post, and these staff are
not required to participate in these two services. In such cases, agencies may receive
some services from ICASS, but not basic package or community liaison office services.




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                     Methodology




                     no “real needs” from non-participation due to duplication of services. We
                     used the ICASS standard cost center definitions in our analysis. The
                     standard cost centers, with 31 services, define the services in more detail
                     than the “lite” cost centers, which bunches some services in broader
                     categories and contains 16 services.

                     We also analyzed participation rates for different agencies. The ICASS
                     Global Database contains data at the subagency code level, which is the
                     level at which ICASS invoices are calculated. Some agencies have
                     numerous subagency codes—for example, DOD has more than 150 such
                     codes—while others have few. We calculated and presented data on
                     participation rates at the subagency code level. Participation rate by
                     agency measures the amount of ICASS services an agency uses as a
                     proportion of the total number of services offered through ICASS at the
                     posts where an agency has a presence. A higher participation rate
                     indicates the agency uses ICASS more than an agency with a lower
                     participation rate. This analysis helps us identify the range of agencies
                     deciding to get services through ICASS: a 100 percent participation rate
                     indicates that an agency uses all the ICASS services provided at each
                     post where it has a presence. In order to calculate the participation rate
                     by agency, we calculated the total number of ICASS services an agency
                     participates in at a post. We determined the maximum number of services
                     that a post offers. Next, we summed the total number of ICASS services
                     an agency participates in and the maximum number of services offered at
                     all the posts where the agency has a presence. The ratio of the two sums
                     is the participation rate of the agency. Because we are interested in how
                     agencies choose to provide the services when they have a choice, we
                     excluded two mandatory services from our calculation, the basic service
                     and community liaison service.


                     We reviewed economics literature to understand the factors driving
Economies of Scale   economies of scale. We also reviewed the econometric method used to
                     identify evidence of economies of scale and test the hypothesis of
                     increased production level leading to lower average cost.

                     To determine whether there was evidence of economies of scale within
                     ICASS, and the extent of these potential economies, we obtained data
                     generated through ICASS Global Database. These data cover ICASS
                     services provided from 2000 to 2010 at approximately 180 posts and
                     contain information on the units of services provided (known as
                     workload), the cost of the services, and the location of each post. See
                     table 10 for a summary statistics of the numeric variables in the data.


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                                         Appendix I: Objectives, Scope, and
                                         Methodology




Table 10: Summary Statistics of ICASS Data

Name of variables               Units    Number of observations               Mean      Standard deviation          Minimum           Maximum
Total workload       Varies by service                         33,758      146,702                   1,710,242              0.1    154,814,960
Total cost                     Dollars                         33,758      303,758                     563,586              2.0      44,664,036
Personnel cost                 Dollars                         33,758      195,502                     260,841                0       5,618,009
Operational cost               Dollars                         33,758      100,618                     354,329                0      16,561,950
Investment cost                Dollars                         33,758         7,638                    132,813                0      22,932,257
                                         Source: GAO.

                                         Notes:
                                         1. Each observation represents the cost of a particular service at a particular post for a particular
                                         year. For example, the health care service in Abidjan in 2000 is one observation.
                                         2. Each observation includes data on the name of the post, the units of service provided, and the cost
                                         of providing the service.
                                         3. Cost data reflect the total cost of providing a particular service, including both fixed and variable
                                         costs. The data also include three components of the total costs: investment cost, personnel cost and
                                         operational cost.
                                         4. We excluded observations with a zero workload or zero total cost.


                                         The data contains information on the year the service was provided, the
                                         location of the post, and whether the post is standard or “lite” post. 2
                                         Tables 11-14 are frequency tables for the year, location, post type, and
                                         ICASS service.




                                         2
                                          The standard cost centers, with 31 services, define the services in more detail than the
                                         “lite” cost centers, which bunches some services in broader category and contains 16
                                         services.




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Methodology




Table11: Frequency Table for Year of ICASS Service

    Fiscal year                     Frequency                 Percent         Cumulative percent
    2000                                  3,005                 8.90%                          8.90%
    2001                                  2,975                   8.81                          17.71
    2002                                  3,005                   8.90                          26.62
    2003                                  3,030                   8.98                          35.59
    2004                                  3,030                   8.98                          44.57
    2005                                  3,117                   9.23                          53.80
    2006                                  3,069                   9.09                          62.89
    2007                                  3,015                   8.93                          71.82
    2008                                  3,026                   8.96                          80.79
    2009                                  3,204                   9.49                          90.28
    2010                                  3,282                   9.72                         100.00
    Total                                33,758              100.00%
Source: GAO




Table 12: Frequency Table for Type of Post

    Post type                       Frequency                 Percent         Cumulative percent
    Lite                                 12,258               36.31%                          36.31%
    Standard                             21,500                  63.69                         100.00
    Total                                33,758              100.00%
Source: GAO




Table 13: Frequency Table for Regions

    Region                          Frequency                 Percent         Cumulative percent
    Africa                                7,423                21.99%                         21.99%
    East Asia and the Pacific             4,503                  13.34                          35.33
    Europe                                9,074                  26.88                          62.21
    International organizations             112                   0.33                          62.54
    Near East                             3,955                  11.72                          74.25
                a
    South Asia                              842                   2.49                          76.75
    South and Central Asia                  776                   2.30                          79.05
    Western Hemisphere                    7,073                  20.95                         100.00
    Total                                33,758              100.00%
Source: GAO.
a
 In 2006, State merged the Office of Central Asian Affairs with the Bureau for South Asian Affairs to
create the Bureau for South and Central Asian Affairs.




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Table 14: Frequency Table for ICASS Services

    ICASS services                                                         Frequency Percent
    Information management technical support                                    1,627 4.82%
    Health services                                                             1,717   5.09
    Nonresidential local guard program service                                    447   1.32
    Security services                                                             941   2.79
    Vehicle maintenance                                                           663   1.96
    Administrative supply                                                         768   2.28
    Procurement services                                                          770   2.28
    Reproduction services                                                         558   1.65
    Shipping and customs                                                          767   2.27
    Motor pool services                                                           759   2.25
    Nonexpendable property management                                             768   2.28
    Leasing services                                                              768   2.28
    Travel                                                                        728   2.16
    Household furniture, furnishings, and appliance pools                         273   0.81
    General servicesa                                                           1,029   3.05
    Basic package services                                                      1,800   5.33
    Pouching services                                                             762   2.26
    Mail and messenger services                                                   770   2.28
    Reception, switchboard, and telephone services                                766   2.27
                                       a
    Information management services                                             1,026   3.04
    Budgets and financial plans                                                   770   2.28
    Accounts and records                                                          770   2.28
    Payrolling services                                                           770   2.28
    Vouchering services                                                           770   2.28
    Cashiering services                                                           770   2.28
                                     a
    Financial management services                                               1,029   3.05
                               a
    Human resources services                                                    1,028   3.05
    Human resources: U.S. citizen services                                        770   2.28
    Human resources: locally employed staff services                              770   2.28
    Community Liaison Office services                                           1,664   4.93
    Government-owned/long-term lease residential building                       1,504   4.46
    operations
    Government-owned/long-term lease nonresidential building                      1,666      4.94
    operations
    Short-term lease residential building operations                              1,735      5.14
    Short-term lease nonresidential building operations                           1,374      4.07
    Miscellaneous costs                                                             458      1.36
Source: GAO.

Note: The data contain some services not defined in the ICASS standard or lite cost center
distribution factors, thus the total shown above is less than 100 percent.
a
These bundled cost centers are present at posts using the ICASS Lite methodology.




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Methodology




In order to test whether economies of scale exist in providing ICASS
services, we used the following specification in the regression:

       Ln (unit cost) = a_0+a_1*Ln (total workload)+a_2*dummy for region

       +a_3*dummy for post type+a_4*dummy for tier

       +a_5*dummy for services+a_6*year

Where total workload is a measure of units of services provided;

       Post type indicates whether a post is a standard or “lite” post;

       Tier indicates whether a post is a tier 1 post (USAID and State are
       colocated);

       Year = 1 for 2000, 2 for 2001 and so on.

With large numbers of dummy variables, we ran a stepwise regression,
specifying a significance level for removal from the model. In addition to
running the regression with the type of services as dummy variables, we
also ran the regression on each individual service. For example, we ran a
regression on how the unit cost of copying service is related to the
number of copies made, where the posts are located, the type of posts
and the year the service was provided.

The coefficient on the log of total workload can be interpreted as the cost
elasticity, a percentage increase in total workload leads to a_1
percentage change in unit cost. A negative coefficient implies that
increased workload is related to decreased unit cost. This model
specification has been used in the literature to test for economies of
scale. 3 Table 15 presents the regression results from including all the
services as dummy variables.




3
 For example, in “Does School District Consolidation Cut Costs?” [Duncombe and Yinger,
“Does School District Consolidation Cut Costs?” Education Finance and Policy, Vol. 2, Is.
4 (Fall 2007)], the authors used a specification of per pupil school spending as a function
of school performance, input prices and enrollment. They specified a log linear form to test
how per pupil cost is related to the size of enrollment.




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         Appendix I: Objectives, Scope, and
         Methodology




         Table 15: Summary Regression Results

                                                Coefficient      T value      P>t
          a_0                                         7.59       218.34     0.000
          Constant
          a_1                                         -0.51      -126.22    0.000
          Ln(total workload)
          a_2
          Dummy for region
             _Iregion_2                               -0.10        -7.56    0.000
             _Iregion_3                               0.16        14.18     0.000
             _Iregion_4                               0.71        10.46     0.000
             _Iregion_5                               -0.14        -9.97    0.000
             _Iregion_6                               -0.16        -6.07    0.000
             _Iregion_8                               -0.19       -16.13    0.000
          a_3                                         0.49        37.30     0.000
          Dummy for post type
          a_4                                         -0.06        -5.88    0.000
          Dummy for tier
          a_5
          Dummy for services
          (30 dummies, not displayed)
          a_6                                         0.06        47.31     0.000
          Year
         Source: GAO.

         F(45, 33712)= 9125.46
         Prob > F= 0.0000
         R-squared= 0.9241
         Adj R-squared= 0.9240




         To obtain agency-level information on customer perceptions on the
Survey   quality and reasonableness of cost of these ICASS support services
         overseas, we conducted a web-based survey of a probability sample of
         ICASS Council representatives who served on an ICASS council at an
         embassy in fiscals year 2010 or 2011.

         The target population consisted of 641 ICASS Council representatives
         from 8 agencies within the scope of our review—State, USAID, USDA,
         DOD, Justice, Commerce, DHS, and HHS—in 167 embassies worldwide.
         We developed our sampling frame from the results of a preliminary


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Methodology




survey we sent to ICASS Council chairpersons at 167 posts, requesting
the names and e-mail addresses of officials currently serving as ICASS
Council representatives at post. We also obtained contact information for
ICASS Council Chairs from officials at the ICASS Service Center, State’s
telephone directory, and officials from customer agencies within the
scope of our review. On the basis of our analysis of the results from the
preliminary survey, and the information we received from the additional
sources mentioned, we determined the data to be adequate for the
purposes of providing a sampling frame.

The survey sample design was a simple random sample of 350 ICASS
Council representatives selected from the population of 641 ICASS
Council representatives. We obtained 184 usable responses for an
overall response rate of 53 percent. In addition, we confirmed that 4 of the
selected council representatives were out-of-scope for our survey
because they retired during the survey period, in 2011. See table 16 for
complete response rate data.

Table 16: ICASS Council Representatives That Received and Completed the Survey

                                Population/
Stratum                           universe Sample size Responses   Out-of-scope
State                                 143          85         51             0
USAID                                  89          54         30             0
Other departments                     409         211        103             0
Agriculture                            57          31         21             0
Commerce                               60          36         13             1
Homeland Security                      54          25         10             0
Defense                               127          68         30             2
Health and Human Services              34          12          7             0
 Justice                               77          39         22             1
Total                                 641         350        184             4
Source: GAO.



Nonresponse bias may exist in some survey responses, since
characteristics of survey respondents may differ from those of
nonrespondents in ways that affect the responses (e.g., if those
representing one customer agency would have provided different
responses than those that represent another one). We conducted an
analysis of our survey results to identify potential sources of nonresponse
bias by comparing weighted estimates from respondents to known
population values. These values included participation rates,


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Methodology




representation by region, and representation by agency. We conducted
statistical tests of differences, at the 95 percent confidence level, between
estimates and known population values. We did not observe significant
differences between weighted estimates and known population values for
most of our comparisons. We did, however, observe significant
differences in participation rates for seven of the nine ICASS services we
included in our survey. Based on the 53 percent response rate and the
results of our examination of nonresponse bias in our survey results, we
consider the survey results sufficiently reliable for the purposes of this
report. However, we chose not to generalize the survey results to the
target population of 641 ICASS Council representatives and chose to
present the results of our survey for the 184 respondents.

To develop the survey, we interviewed officials from the ICASS Service
Center; State’s Office of Management, Policy, Rightsizing and Innovation;
USAID; and the American Foreign Service Association (AFSA). We also
conducted focus groups at U.S. embassies in Manila, Tokyo, Nairobi, and
Kigali, with officials from State, USAID, DHS, Commerce, USDA, Justice,
DOD, HHS, and locally employed staff. During our visits to these
embassies, we also interviewed management counselors and deputy
chiefs of mission at all four posts. While we are not able to generalize the
results of our focus groups to all overseas personnel of the agencies the
participants represented, their responses provided a range of
perspectives on the motivations of customers to either obtain support
services through ICASS or obtain services outside of the ICASS system.
Based on information from our focus groups, observations, and interviews
with officials domestically and abroad, we determined ICASS Council
representatives to be the most knowledgeable officials in the field to
respond to our survey.

We administered the survey between August 8, 2011, and October 25,
2011. We notified 350 ICASS Council representatives through e-mail,
which contained information on the review, a unique username and
password, and a link to our web-based survey. The instrument included
nine services and asked ICASS Council representatives to identify
whether or not their agency received the services through ICASS. In
order to reduce the burden on respondents of answering questions about




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Methodology




all ICASS services, we only asked questions about nine services. 4 We
selected these nine services based on several factors, such as, the total
cost of the service for fiscal year 2010, ICASS customer satisfaction
ratings, and the number of posts using the service, among others. We
also analyzed the results of our focus groups of customer agency staff in
Manila, Tokyo, Kigali, and Nairobi to develop a list of services that
included both services that customers expressed satisfaction with and
those that customers expressed dissatisfaction with. Next, the survey
instructed respondents to identify significant factors for participating, or
not participating in nine ICASS services; rate the quality of the services
they received through ICASS, or outside of ICASS; rate the importance of
the service to achieving their mission; and to identify how reasonable they
perceived the cost of ICASS services to be, among other questions.

In addition to the reported sampling errors, the practical difficulties of
conducting any survey may introduce other types of errors, commonly
referred to as nonsampling error. For example, differences in how a
particular question is interpreted, the sources of information available to
respondents, or the types of people who do not respond can introduce
unwanted variability into survey results. We included steps in the survey
design, data collection, and data analysis to minimize such nonsampling
errors.

We took steps to clarify questions to ensure that respondents would
correctly interpret survey questions. For example, following our focus
groups in Manila and Tokyo, interviews, and observations in the field, we
designed draft questionnaires in close collaboration with GAO survey
specialists. We conducted pretests in Washington, D.C.—in person or via
e-mail—with former ICASS Council representatives—from Commerce,
DOD, DHS, Justice, USAID, and USDA. We conducted these pretests to
ensure that respondents understood the questions and could provide the
answers; and to ensure that respondents could complete the questions in
a reasonable amount of time. We documented the results of each pretest,
and made revisions to the draft instrument considering feedback from the
pretests. After officially launching the survey, we shared the final survey



4
 The nine services included in our survey were furniture pool, motor pool, shipping and
customs, government-owned/long-term lease and short-term lease residential building
operations, vouchering services, leasing services, information management technical
support services, procurement services, and human resources–locally engaged staff
services.




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                        Methodology




                        instrument with officials at the ICASS Service Center, and a senior official
                        at State, as a courtesy.

                        To increase the response rate for this survey, we began contacting non-
                        respondents by e-mail and telephone in several iterations during the data
                        collection period. We developed two follow-up e-mails with log-in
                        information and a link to the survey. To assist us with the follow-up
                        telephone calls, we acquired the services of a professional services for 2
                        days. After the 2-day period, GAO staff conducted calls from September
                        to October 2011.

                        An additional source of nonsampling error can be errors in computer
                        processing and data analysis. All computer programs relied upon for
                        analysis of this survey data were independently verified by a second
                        analyst for accuracy.


                        To assess customer satisfaction with the quality of ICASS services, we
Customer Satisfaction   conducted data analyses using data from the annual ICASS Customer
and Service Delivery    Satisfaction survey, which was developed by the ICASS Service Center
                        and contains customer satisfaction scores for ICASS services by overall
Data                    satisfaction, agency, and service, dating back to 2005. To assess the
                        reliability of the ICASS survey data, we performed manual testing for
                        errors in accuracy and completeness, and discussed data reliability
                        issues with agency officials knowledgeable about the data. Although the
                        results were not generalizeable and we found some issues with the
                        response rates of some groups in the annual satisfaction survey, we
                        determined the data to be sufficiently reliable for the purposes of reporting
                        general levels of satisfaction with ICASS services by customer agency. 5




                        5
                         For example, the ICASS Service Center does not have a list of all eligible respondents to
                        whom they can send the survey invitation. It uses human resources post population data
                        to determine the amount of eligible respondents to the survey and then divides the amount
                        of responses by the survey population to determine a response rate. Respondents
                        anonymously access the survey through a public Web site and have the potential to
                        respond more than once. Because survey administration was anonymous, it is difficult to
                        determine any potential bias in the results. Therefore, the survey results may only reflect
                        the views of the respondents and not those of all ICASS customers.




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We also conducted analyses using data from eServices, which was
developed by State’s Office of Innovation, and contains service delivery
and customer feedback questionnaire data for fiscal years 2010 and
2011.




Page 51                                       GAO-12-317 Embassy Management
Appendix II: Services Available through
                                        Appendix II: Services Available through ICASS




ICASS

                                        Dozens of specific administrative services are provided through ICASS,
                                        and these services are bundled into so-called “cost centers.” Table 17
                                        lists these cost centers and provides a description of the services
                                        provides within each bundle.

Table 17: ICASS Cost Centers

Cost center                             Description
Information management technical        Provides the installation and maintenance of hardware/software, training, e-mail systems,
support                                 system security operations and programs, system backup, information technology
                                        recommendations for software/hardware updates and changes, and troubleshooting
                                        services.
Health services                         Services vary depending on the post and the staffing of the Health Unit but may include:
                                        first aid, immunizations, coordination with and evaluation of local caregivers, support with
                                        medical evacuations and hospitalizations, and other similar services of a health operation.
Nonresidential local guard program      Pertains only to guard services at shared buildings such as chanceries, embassy
service                                 compounds, and annexes. The service includes appropriate screening of visitors and
                                        vehicles.
Security services                       Service includes conducting special investigations and background investigations for
                                        locally employed staff, reviewing and recommending security enhancements for
                                        nonresidential spaces, taking security photos, fingerprinting new locally employed staff,
                                        and assisting with general security issues.
Vehicle maintenance                     Service includes routine maintenance of official vehicles and related record keeping and
                                        coordination with local vendors for nonroutine repairs.
Administrative supply                   Orders and dispenses office supplies. Includes inventory control, warehousing, and
                                        issuance of office supplies.
Procurement services                    Manages purchase of items or services for official use only. This includes purchase by
                                        contract, purchase order, requisition, credit card and other standard means.
Reproduction services                   Provides printing and copying services through a central facility.
Shipping and customs                    This service varies from post to post but may include arranging and overseeing (as
                                        required) the packing, crating and forwarding of shipments, and performing necessary
                                        customs clearance for all incoming and outgoing shipments (e.g., official shipments,
                                        household effects, vehicles, pouches, equipment, etc.).
Motor pool services                     Covers the scheduling, dispatch and proper use of official vehicles. Includes providing
                                        skilled, knowledgeable drivers and proper upkeep of vehicles.
Nonexpendable property management       Covers inventory management, warehousing and issuance of office and residential
                                        furniture, furnishings and appliances.
Leasing services                        Includes all phases of the leasing process for residential, office, warehouse or other space
                                        as required by requesting agency. Pertains to U.S. government-signed leases only.
                                        Includes locating appropriate, safe properties, negotiating and renewing leases,
                                        monitoring landlord performance, and providing assistance with initial connection and
                                        termination of utility and phone services.
Travel                                  Services may differ from post to post but may include: processing flight, ground
                                        transportation, and hotel reservation requests; assisting with arrival and departure;
                                        overseeing travel management center contractor; and obtaining visas.
Household furniture, furnishings, and   Includes requisitioning, inventory control, warehousing, care, delivery, removal and
appliance pools                         disposal of all pooled furniture and appliances.



                                        Page 52                                                   GAO-12-317 Embassy Management
                                          Appendix II: Services Available through ICASS




Cost center                               Description
Basic package services                    Varies by post but covers the basic services that support all agencies such as
                                          accreditation, licenses and permits, the post report, telephone books, support for/liaison
                                          with local international school(s), negotiation of hotel rates, support structure for VIP visits,
                                          surveys for cost of living allowance, per diem and education allowance, coordination of
                                          newcomer and temporary staff orientation, coordination of the mission awards program,
                                          provision of building access badges, and other such services.
Pouching services                         Covers the receipt and distribution of incoming pouch materials and the preparation and
                                          forwarding of outgoing pouches (classified and unclassified).
Mail and messenger services               Covers pickup, delivery, and sorting of mail from various sources. Includes transport of
                                          mail to and from airport, coordination with local customs and airline personnel, and receipt
                                          and delivery of registered and express delivery. Also provides local messenger service.
Reception, switchboard, and telephone     Covers post’s central switchboard services and reception services for visitors. Includes
services                                  answering and directing calls within mission offices, servicing and relocating of
                                          instruments connected to the switchboard, and support for official cell phone program,
                                          where applicable.
Budgets and financial plans               Includes the preparation and submission of budgets that meet deadlines and reflect
                                          customer needs based on trends, analysis and customer input. Provides financial advice
                                          including assistance to the ICASS council and Budget Committee regarding ICASS
                                          financial and budget issues.
Accounts and records                      Manages allotments of participating serviced agencies (i.e., agencies whose accounting
                                          records are maintained by Resources Management/Global Financial Services Charleston)
                                          recording, reviewing, and adjusting obligations and certifying funds available.
Payrolling services                       Payrolling services involves reporting and maintenance of time and attendance, pay,
                                          benefits, leave allowances, and tax records; coordinates periodic payments for locally
                                          employed staff; reports locally employed staff retirement/insurance plans to host
                                          government; and follows up on lost payroll checks and reconciles payroll problems with
                                          payment center.
Vouchering services                       Vouchering services prepares, certifies and tracks vouchers, ensuring timely payments to
                                          vendors and other U.S. government agencies. It maintains controls to preclude duplicate
                                          payments and legal records of payments. Also assists with preparing Travel Vouchers.
Cashiering services                       Cashier services includes petty cash advances, check cashing and accommodation
                                          exchange (at posts where it is authorized). Collects receipts from sales of official property
                                          and receipts for personal usage of certain services (i.e., gasoline and telephone).
Human resources: U.S. citizen services    Provides all human resources services including employee relations, evaluations, career
                                          advancement, discipline and grievances, and advising on health/life insurance, retirement
                                          plan, Thrift Savings Plan and other allotments. It also includes maintaining employee
                                          organization, position and staffing plans (Note: The latter services related to maintaining
                                          mission-wide reports and staffing plans are covered under Basic Package).
Human resources: locally employed staff   Manages the compensation plan, salary surveys, position classifications, awards program,
services                                  locally employed staff employee orientation, and job advertisements. If you do not have
                                          locally employed staff employees, then you do not receive this service.
Community Liaison Office services         Provides a wide range of community integrating functions including but not limited to
                                          welcome packages, orientation seminars, school interface, briefings, and post newsletters.
                                          The Community Liaison Office maintains community interface with host country
                                          organizations.




                                          Page 53                                                      GAO-12-317 Embassy Management
                                           Appendix II: Services Available through ICASS




Cost center                                Description
Government-owned/long-term lease           Provides routine maintenance and preventative repairs, ensures preparation for new
residential building operations            arrivals, and ensures adequate utilities (garbage removal, heating and air conditioning)
                                           are available to the extent possible. Service may be provided directly by ICASS or involve
                                           working with the landlord. Includes maintenance of grounds if government-owned.
Government-owned/long-term lease           Provides routine maintenance and preventative repairs, manages custodial and grounds
nonresidential building operations         services, plans space utilization, and ensures adequate utilities (garbage removal, heating
                                           and air-conditioning) are available to the extent possible. Service may be provided directly
                                           by ICASS or involve working with the landlord.
Short-term lease residential building      This service covers all activities related to occupancy and use of short-term leased
operations                                 residential properties. Landlord responsibilities vary from post to post (both in practice and
                                           according to local law) and it may be necessary to adjust the kinds of services provided by
                                           the mission based on local conditions. The services include: (1) work with the landlord to
                                           ensure reasonable and necessary repairs are made properly and on time and/or
                                           performing minor repairs with contractors or in-house staff, as appropriate; (2) ensure
                                           properties are prepared for new arrivals, conduct preoccupancy and pre-departure
                                           inspections and perform routine between occupant fix-ups (e.g., painting, minor repairs);
                                           (3) provide residential “hospitality/welcome kits” in accordance with post policy; (4) provide
                                           security escort services for maintenance personnel in accordance with post policy; and (5)
                                           repair/reupholster government-owned furniture and equipment in accordance with post
                                           policy.
Short-term lease nonresidential building   This service covers all activities related to occupancy and use of shared short-term lease
operations                                 nonresidential properties and includes: (1) work with the landlord to ensure reasonable
                                           and necessary repairs are made properly and on time, the building infrastructure and
                                           grounds are properly maintained and/or perform minor repairs with contractors or in-house
                                           staff, as appropriate; (2) provide or contract for custodial services; (3) perform routine
                                           between occupant “fix-up” and prepare for new arrivals; (4) provide security escort
                                           services for maintenance personnel as required, in accordance with post policy; and (5)
                                           repair/reupholster government-owned furniture and equipment in accordance with post
                                           policy.
Miscellaneous costs                        This includes only those costs that are not easily spread to other specific services, or of
                                           minimal value compared to the effort and expense to spread the costs precisely. The total
                                           for miscellaneous costs generally should not exceed five percent of the total ICASS
                                           budget.
                                a
Financial management services              Includes services provided under the following ICASS Standard cost centers: budget and
                                           financial plans, accounts and records, payrolling, vouchering, and cashiering.
                 a
General services                           Includes services provided under the following ICASS Standard cost centers: vehicle
                                           maintenance, administrative supply, procurement, reproduction, shipping and customs,
                                           motor pool, nonexpendable property management, leasing, and travel.
                                    a
Information management services            Includes services provided under the following ICASS Standard cost centers: pouching;
                                           mail and messenger services; and reception, switchboard, and telephone services.
                           a
Human resources services                   Includes services provided under the following ICASS Standard cost centers: human
                                           resources–U.S. citizen services, and human resources–locally employed staff services.
                                           Source: State.
                                           a
                                            These bundled cost centers are present at posts using the ICASS “Lite” methodology.




                                           Page 54                                                      GAO-12-317 Embassy Management
Appendix III: Status of Consolidation of State
               Appendix III: Status of Consolidation of State
               and USAID Administrative Platforms



and USAID Administrative Platforms

               USAID has significantly increased its participation in ICASS services
               since it began systematically consolidating its operations with State
               overseas. In 2006, recognizing the need to contain growth and eliminate
               duplicative and non-essential government functions at overseas posts,
               State and USAID issued a joint strategic vision for management
               operations to guide the consolidation of administrative support services.
               This strategic vision called for a leaner, more flexible and more
               responsive administrative platform to provide services to all ICASS
               customers, at better value to the U.S. taxpayer and at cost savings to
               both State and USAID. The issuance of this strategic vision followed pilot
               consolidation projects at four posts, whose goal was to combine the best
               employees, equipment, and processes from existing operations to ensure
               that both State and USAID, as well as all ICASS customers, benefited
               from improved services at lower cost to the taxpayer. Following this pilot
               project, State and USAID reported that the four posts had successfully
               consolidated in full or in part 12 of the 16 services targeted, resulting in
               operational efficiencies and avoided costs.

               Since 2007, following this pilot project, State and USAID have been
               consolidating administrative support services overseas in order to
               improve the efficiency and effectiveness of management operations.
               State and USAID divided posts into three tiers, based on when the two
               agencies expected to colocate on a new embassy compound, and began
               consolidating operations at posts which were colocated the earliest. The
               two agencies first consolidated 15 services at so-called Tier 1 posts,
               where State and USAID were colocated on a new embassy compound by
               fiscal year 2007. By October 2007, 33 such posts had consolidated many
               or all of the targeted services. According to State, another 14 posts in Tier
               2—where posts were expected to be colocated on a new embassy
               compound in fiscal year 2008, 2009, or 2010—had consolidated 70
               percent of available services by October 2010. State and USAID are
               currently reviewing the status of consolidation at Tier 3 posts—those
               expected to be colocated in fiscal year 2011 or later. Going forward, State
               and USAID will continue to obtain services through ICASS. In 2009
               guidance regarding further consolidation, State and USAID advised posts
               that when new offices are opened or existing programs are expanded, the
               default plan should be to purchase the necessary support service from
               ICASS rather than to set up or expand parallel support systems.

               In 2011, State and USAID established a Joint Management Board to
               facilitate further consolidation of services and ensure that customers of
               these services receive high quality administrative support at a reasonable
               cost. A joint State-USAID task force supporting the Quadrennial


               Page 55                                          GAO-12-317 Embassy Management
Appendix III: Status of Consolidation of State
and USAID Administrative Platforms




Diplomacy and Development Review, Task Force 11, recommended this
board be created to solve management issues, communicate to the field
with a single voice, and implement change. 1 Task Force 11 also
recommended that the Joint Management Board formulate a
consolidation policy for State and USAID, including establishing clear
criteria for exceptions to consolidation, weighing the need for a single
platform overseas to achieve cost effective, high quality services with
post-specific situations where the embassy and the USAID mission
believe that a strong basis exists for flexibility in consolidation of some
services. According to board members, one of the board’s initial tasks is
to improve communication about consolidation and provide further
guidance to posts in an effort to mitigate USAID concerns.




1
 Department of State and the U.S. Agency for International Development, Leading
Through Civilian Power: The First Quadrennial Diplomacy and Development Review
(Washington, D.C.: Dec. 15, 2010).




Page 56                                             GAO-12-317 Embassy Management
Appendix IV: Agency Participation in ICASS
                                             Appendix IV: Agency Participation in ICASS




                                             We analyzed data from State to determine participation rates in ICASS.
                                             Table 18 shows participation rates for all non-State subagency codes
                                             present at 10 or more posts overseas in fiscal year 2011. 1 We calculated
                                             these rates by: (1) determining which posts each subagency was present
                                             at; (2) determining how many cost centers were available at those posts;
                                             and (3) determining the number of cost centers the subagency
                                             participated in. The participation rates listed below show the percentage
                                             of cost centers each subagency participated in 2005 and 2011 of the total
                                             cost centers available at posts where it has a presence.

                                                                                    a
Table 18: Rate of Participation in Available Services, by Agency, 2005 and 2011

                                                                                                       2005                2011
                                                                                                                 b                   b
Subagency name                                                                                     Rate    Posts       Rate    Posts
Navy Personnel Exchange Program                                                                    29%         15      16%         11
Army–Deputy Chief of Staff (Personnel), Students At Foreign Civilian Schools                         16          7        17       18
Broadcasting Board of Governors–Correspondent Bureaus                                                21        15         18       12
Air Force–U.S. Air Force Students                                                                    22        14         21       22
Air Force–Professional Exchange Program                                                              21        19         21       14
U.S. Marine Corps                                                                                    21        14         27       25
American Battle Monuments Commission                                                                 27        11         31       10
National Geospatial Agency                                                                           31        10         32       12
Army–Deputy Chief of Staff (Operations), Strategic Leadership Division                               33        57         34       49
Peace Corps                                                                                          34        69         36       69
Immigration and Customs Enforcement/Container Security Initiative Special Investigations                                  37       10
Centers for Disease Control and Prevention–Detailees to International Organizations                  45          3        38       17
Broadcasting Board of Governors–Transmitting Stations                                                40        11         41       10
Treasury–Office of International Affairs, Office of Technical Assistance                             32        25         42       30
Naval Health Research Center                                                                         43          2        43       28
Army–U.S. Southern Command Traditional Commander-in-Charge Activities                                34        21         44       20




                                             1
                                              Individual agencies may have multiple sub-agency codes for ICASS billing purposes, and
                                             participation rates generally vary by sub-agency code, even within the same agency. In
                                             some cases, these sub-agency codes correspond to a discrete unit within an agency,
                                             such as the Defense Intelligence Agency. In others, the codes correspond to accounting
                                             entities, such as USAID’s Operating Expenses account. In 2011, there were 320 such
                                             sub-agency codes in ICASS. DOD had the most codes (152) while the other agencies
                                             within the scope of our review had between 8 and 56 codes. As a result, it is not feasible
                                             or meaningful to calculate an overall agency-wide participation rate, and the figures we
                                             present here are at the sub-agency code level.




                                             Page 57                                                 GAO-12-317 Embassy Management
                                             Appendix IV: Agency Participation in ICASS




                                                                                             2005             2011
                                                                                                     b                b
Subagency name                                                                            Rate   Posts    Rate   Posts
Customs and Border Protection–Container Security Initiative                                40       16      45       40
Open Source Center                                                                         41       26      46       31
U.S. Coast Guard                                                                           49        7      48       14
USAID–International Disaster Assistance                                                    44       13      49       18
Library of Congress                                                                        49       14      50       14
Army–U.S. Southern Command, Counter Drug Teams                                             54       20      51       28
U.S. Army Corps of Engineers                                                               52       13      51       13
Navy Investigative Services                                                                31        4      51       10
Centers for Disease Control and Prevention                                                 55       35      53       34
USAID–Child Survival & Diseases Program Fund                                               30       18      54       26
U.S. Secret Service                                                                        52       20      55       25
Justice–International Criminal Investigative Training and Assistance Program               54        9      55       21
USAID–Office of Transition Initiatives                                                     45        7      55       12
USAID–Operating Expenses, Regional Organizations                                           53        8      55       10
USAID–Development Assistance                                                               37       49      56       54
Animal and Plant Health Inspection Service                                                 53       42      56       47
Army–U.S. Africa Command                                                                                    56       28
Department of Energy–Moscow/Kiev/Tokyo/Beijing/Vienna                                      65        6      56       13
U.S. Africa Command–Regional Defense Cooperation Office                                                     56       12
Air Force–U.S. Central Command Operations and Maintenance                                  45       10      56       11
Army–U.S. European Command                                                                 51       37      57       37
Federal Aviation Administration                                                            56       13      57       20
Internal Revenue Service                                                                   63       13      57       15
Social Security Administration                                                             56       27      58       26
USAID–Economic Support Funds                                                               34       17      58       21
Customs and Border Protection–International Affairs Office                                 47       11      59       26
U.S. Citizenship and Immigration Services–Refugee, Asylum, and International Operations    68       46      60       42
USAID–President’s Emergency Plan for AIDS Relief, Program Staff Support                                     61       19
Centers for Disease Control and Prevention–Global AIDS Program                             54        7      62       49
Treasury–Office of International Affairs                                                   53        7      62       12
Defense Threat Reduction Agency                                                            50       11      62       10
Justice–Overseas Prosecutorial Development Assistance and Training                         73        4      63       19
Navy–Force Protection Detachment                                                           63        8      63       17
USAID–Freedom Support Act                                                                  44       16      63       15
Foreign Agricultural Service                                                               66       82      64       76
Transportation Security Administration                                                     62       16      64       24




                                             Page 58                                       GAO-12-317 Embassy Management
                                             Appendix IV: Agency Participation in ICASS




                                                                                                                 2005                   2011
                                                                                                                            b                      b
Subagency name                                                                                              Rate     Posts         Rate     Posts
Defense Security Cooperation Agency                                                                            66        113          66        122
Army–U.S. Southern Command, Security Assistance Officers                                                       57         23          66          24
Foreign Agriculture Service/Agricultural Trade Office                                                          54         20          66          16
Federal Bureau of Investigation/ Legal Attaché                                                                 65         68          67          85
Army–Force Protection Detachment                                                                               65           5         67          12
USAID–Operating Expenses, Missions                                                                             51         87          68          88
Justice–Criminal Division                                                                                      58         19          68          16
Drug Enforcement Administration                                                                                74         72          70          84
Immigration and Customs Enforcement–International Affairs Office                                               65         45          70          59
Foreign Commercial Service                                                                                     68        112          71        106
Food and Drug Administration                                                                                   18           1         75          11
Millennium Challenge Corporation                                                                                                      76          19
Defense Intelligence Agency                                                                                    82        146          81        147
                                             Source: GAO analysis of ICASS data.
                                             a
                                              In some instances, nonparticipation may indicate that a service is not offered to all agencies at a post
                                             or that an agency does not need a particular service. In such instances, nonparticipation does not
                                             necessarily indicate duplication of services.
                                             b
                                              We calculated the number of posts an agency subcode was present at using data from the ICASS
                                             Global Database. If ICASS charged an agency subcode for at least one service at a given post, we
                                             determined that that subcode was present at that post.




                                             Page 59                                                          GAO-12-317 Embassy Management
Appendix V: Comments from the Department
                            Appendix V: Comments from the Department
                            of State



of State

Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




                            Page 60                                    GAO-12-317 Embassy Management
Appendix V: Comments from the Department
of State




Page 61                                    GAO-12-317 Embassy Management
                 Appendix V: Comments from the Department
                 of State




See comment 1.




                 Page 62                                    GAO-12-317 Embassy Management
                 Appendix V: Comments from the Department
                 of State




See comment 2.




See comment 2.




See comment 3.




                 Page 63                                    GAO-12-317 Embassy Management
                 Appendix V: Comments from the Department
                 of State




See comment 4.




                 Page 64                                    GAO-12-317 Embassy Management
Appendix V: Comments from the Department
of State




Page 65                                    GAO-12-317 Embassy Management
Appendix V: Comments from the Department
of State




Page 66                                    GAO-12-317 Embassy Management
                 Appendix V: Comments from the Department
                 of State




See comment 5.




                 Page 67                                    GAO-12-317 Embassy Management
                 Appendix V: Comments from the Department
                 of State




See comment 6.




                 Page 68                                    GAO-12-317 Embassy Management
               Appendix V: Comments from the Department
               of State




               The following are GAO’s comments on the Department of State’s letter
               dated January 26, 2012.


               1. As State and USAID continue to consolidate their administrative
GAO Comments      operations overseas, we believe that opportunities exist to reduce the
                  number of American management staff by making greater use of local
                  staff. However, we agree with State that efforts to reengineer
                  administrative processes encompass a variety of actions, not limited
                  to reducing the need for American administrative staff, and have
                  clarified our recommendation accordingly.
               2. We believe that the cost of American management positions oversees
                  is significant, even at 14 percent of all ICASS expenses, which totaled
                  over $2 billion is fiscal year 2011. Thus, reductions in this staffing
                  could have significant cost implications for ICASS participating
                  agencies and the U.S. government overall.
               3. We have removed this statement from our report.
               4. The draft report mentioned some of State’s efforts to improve the
                  quality of ICASS services. We have updated our report to include
                  additional efforts that State has noted, along with the cost savings
                  associated with these efforts.
               5. We revised the report and recommendation to emphasize the
                  importance of customer agency participation in the development of
                  service standards.
               6. In 2006, the State-USAID Joint Management Council, the
                  predecessor to the Joint Management Board, sent guidance to posts
                  instructing them not to initiate any new Alternative Service Providers
                  at posts that were expected to have consolidated administrative
                  operations by 2010. ICASS and USAID officials we spoke to consider
                  this policy a restriction on the creation of new Alternative Service
                  Providers. However, we have re-directed this recommendation from
                  the ICASS Executive Board to the Secretary of State and the
                  Administrator of USAID, as their agencies comprise the Joint
                  Management Board.




               Page 69                                       GAO-12-317 Embassy Management
Appendix VI: Comments from the U.S.
              Appendix VI: Comments from the U.S. Agency
              for International Development



Agency for International Development




              Page 70                                      GAO-12-317 Embassy Management
Appendix VI: Comments from the U.S. Agency
for International Development




Page 71                                      GAO-12-317 Embassy Management
Appendix VI: Comments from the U.S. Agency
for International Development




Page 72                                      GAO-12-317 Embassy Management
Appendix VI: Comments from the U.S. Agency
for International Development




Page 73                                      GAO-12-317 Embassy Management
Appendix VII: Comments from the
                            Appendix VII: Comments from the Department
                            of Commerce



Department of Commerce

Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




See comment 1.




                            Page 74                                      GAO-12-317 Embassy Management
                 Appendix VII: Comments from the Department
                 of Commerce




See comment 2.




See comment 3.




See comment 4.




See comment 5.




                 Page 75                                      GAO-12-317 Embassy Management
Appendix VII: Comments from the Department
of Commerce




Page 76                                      GAO-12-317 Embassy Management
               Appendix VII: Comments from the Department
               of Commerce




               The following are GAO’s comments on the Department of Commerce’s
               letter dated January 24, 2012.


               1. Our analysis of ICASS data and observations in the field revealed
GAO Comments      clear instances of duplication of administrative services at overseas
                  posts. Not all instances of nonparticipation in ICASS services indicate
                  duplication, as we note in our report. However, because customer
                  agencies have not justified their decisions to opt out of ICASS
                  services, we could not determine which services obtained outside of
                  ICASS were not duplicative.
               2. We disagree. Our report notes that customer agencies may have valid
                  reasons for opting out of ICASS services, including agencies’ ability to
                  obtain some services from their headquarters more efficiently or
                  effectively than through ICASS. We do not suggest that this decision
                  diminished the cost effectiveness of ICASS. However, we note that
                  agencies typically do not provide justifications for these decisions,
                  potentially limiting other customer agencies’ ability to take advantage
                  of these opportunities.
               3. Our report suggests that Congress may wish to consider requiring
                  agencies to participate in ICASS services unless they provide a
                  business case to show that they can obtain these services outside of
                  ICASS without increasing overall costs to the U.S. government or that
                  their mission cannot be achieved within ICASS. We do not believe
                  that these are narrow exceptions. However, we do believe that
                  customer agencies should be required to collect, analyze, and present
                  data to support their decisions to opt out of ICASS services. Without a
                  rigorous analysis, agencies cannot demonstrate that their decisions
                  do not negatively impact overall costs to the U.S. government.
               4. The pricing of ICASS services was outside of the scope of our review.
               5. ITA has misinterpreted the information presented in our draft report.
                  Table 8 shows six selected ICASS services and their uniform service
                  standards; however, this table shows that all six services have met
                  their standard more often than not, doing so from about 59 to 74
                  percent of the time. Nevertheless, we agree that there is significant
                  room for improvement in meeting established service standards.
               6. Our report notes that we were unable to quantify the cost savings
                  resulting from increased participation in ICASS because cost data on
                  services outside ICASS are generally not comparable with ICASS
                  cost data. However, our analysis of ICASS cost data shows that there




               Page 77                                       GAO-12-317 Embassy Management
Appendix VII: Comments from the Department
of Commerce




    are significant economies of scale within ICASS, so costs to existing
    customers would decrease as participation increases.




Page 78                                       GAO-12-317 Embassy Management
Appendix VIII: Comments from the
                            Appendix VIII: Comments from the Department
                            of Agriculture



Department of Agriculture

Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




See comment 1.




                            Page 79                                       GAO-12-317 Embassy Management
               Appendix VIII: Comments from the Department
               of Agriculture




               The following are GAO’s comments on the Department of Agriculture’s
               letter dated January 24, 2012.


               1. Our Matter for Congressional Consideration contains language that
GAO Comments      gives the agencies the flexibility to opt out of ICASS services when
                  they can provide a business case to show that they can obtain these
                  services outside of ICASS without increasing overall costs to the U.S.
                  government. While we found that agencies generally are not
                  developing these analyses, our report notes that agencies may have
                  valid reasons for not participating in specific ICASS services. We also
                  note that, without comparable data on costs, ICASS management is
                  poorly positioned to convince agencies that participation in ICASS
                  services is in their own interest. As a result, we believe both customer
                  agencies and ICASS management are responsible for collecting and
                  sharing cost data to ensure that customer agencies are making
                  informed decisions on whether or not to participate in ICASS services.
                  We believe that if conducted in close coordination with the ICASS
                  Service Center and other participating agencies, preparing business
                  cases need not be overly burdensome and could lead to significant,
                  long term savings for the U.S. government that would justify the
                  additional effort.




               Page 80                                       GAO-12-317 Embassy Management
Appendix IX: Comments from the
                            Appendix IX: Comments from the Department
                            of Homeland Security



Department of Homeland Security

Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




See comment 1.




See comment 2.




                            Page 81                                     GAO-12-317 Embassy Management
                 Appendix IX: Comments from the Department
                 of Homeland Security




See comment 3.




See comment 4.




                 Page 82                                     GAO-12-317 Embassy Management
               Appendix IX: Comments from the Department
               of Homeland Security




               The following are GAO’s comments on the Department of Agriculture’s
               letter dated January 24, 2012.


               1. Our Matter for Congressional Consideration contains language that
GAO Comments      gives the agencies flexibility to opt out of ICASS services in cases
                  where agencies are unable to meet their missions using those
                  services. We believe that requiring agencies to develop business
                  cases to justify their decisions to opt out of ICASS services will ensure
                  that that are making decisions based on hard data and facts, rather
                  than on poorly supported perception of cost and quality.
               2. We disagree. We examined how ICASS unit costs are related to the
                  level of services provided controlling for the year of the service, the
                  region where the post is located, and whether the posts are standard
                  or “lite” posts. We used data from 2000 to 2010, which reflect the
                  increasing overall ICASS cost. We found strong evidence that unit
                  cost decreases as the level of services increases despite increasing
                  overall ICASS cost over the years. We looked at the cost centers
                  independently and together, and the findings on the relationship
                  between unit cost and the level of services are consistent.
               3. Again, our Matter for Congressional Consideration contains language
                  that gives the agencies flexibility to opt out of ICASS services in cases
                  where agencies are unable to meet their missions using those
                  services. In cases where DHS personnel are located far away from
                  embassies or consulates, DHS should be able to develop a simple
                  business case to explain its decision not to participate in ICASS
                  services.
               4. Our analysis of ICASS data and observations in the field revealed
                  clear instances of duplication of administrative services at overseas
                  posts. Not all instances of nonparticipation in ICASS services indicate
                  duplication, as we note in our report. For example, we note that in
                  some instances, nonparticipation may indicate that a service is not
                  offered to all agencies at a post or that an agency does not need a
                  particular service. We also noted instances where agency officials
                  indicated that they were able to obtain some services from their
                  headquarters more efficiently or effectively than through ICASS. In
                  such instances, nonparticipation does not necessarily indicate
                  duplication of services. However, because customer agencies have
                  not justified their decisions to opt out of ICASS services, we could not
                  determine which services obtained outside of ICASS were not
                  duplicative.




               Page 83                                        GAO-12-317 Embassy Management
Appendix X: GAO Contact and Staff
                  Appendix X: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Michael Courts, (202) 512-8980 or courtsm@gao.gov
GAO Contact
                  In addition to the contact listed above, Jacquelyn Williams-Bridgers, Jess
Staff             Ford, James Michels, Robert Ball, Ming Chen, Christopher Mulkins,
Acknowledgments   Kyerion Printup, James Ashley, Richard Brown, Christina Bruff, David
                  Dayton, Martin de Alteriis, Fang He, Jill Lacey, Grace Lui, Amanda Miller,
                  Karen O’Conor, and Christina Werth made major contributions to this
                  report.




(320802)
                  Page 84                                       GAO-12-317 Embassy Management
GAO’s Mission         The Government Accountability Office, the audit, evaluation, and
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