oversight

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

Published by the Government Accountability Office on 1997-07-11.

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

                     United States
GAO                  General Accounting Office
                     Washington, D.C. 20548

                     National Security and
                     International Affairs Division

                     B-277408

                     July 11, 1997

                     The Honorable Richard K. Armey
                     Majority Leader
                     House of Representatives

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

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

                     The Honorable Bob Livingston
                     Chairman
                     Committee on Appropriations
                     House of Representatives

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

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


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




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Our overall assessment of USAID’s draft strategic plan was generally based
on our knowledge of USAID’s operations and programs, our numerous
reviews of the agency, and other existing information available at the time
of our assessment. Specifically, the criteria we used to determine whether
the draft plan complied with the requirements of the Results Act were the
Results Act supplemented by Office of Management and Budget (OMB)
guidance on developing the plans (Circular A-11, Part 2). To make
judgments about the overall quality of the plan and its components, we
used our May 1997 guidance for congressional review of the plans1 as a
tool. To determine whether the plan contained information on interagency
coordination and addressed management problems we previously
identified, we relied on our general knowledge of USAID’s operations and
programs, and the results of our previous reports (see enclosure II for a
list of our major products in this area). We conducted our assessment
between June 13 and July 8, 1997, in accordance with generally accepted
government auditing standards. USAID officials provided oral comments on
a draft of this correspondence, which are reflected in the Agency
Comments section.

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

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

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




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



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

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

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

             Since 1993, USAID has undertaken comprehensive management reforms,
             with strategic planning as a key element. In March 1994, USAID issued its

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



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                   Strategies for Sustainable Development and, in September 1995, a
                   Strategic Framework, which graphically presented USAID’s broad goals, its
                   agency objectives to meet those goals, and a wide range of approaches for
                   achieving those objectives. These documents served as the basis for the
                   November 1996 draft strategic plan.

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


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

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




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that these donors may be more influential than USAID in promoting
development in some countries.

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

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

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

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




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                                     achieving program results because of problems in implementing its new
                                     financial system and the ineffectiveness of its old system.


                                     USAID’s draft plan contains, in varying degrees of detail, the six critical
USAID’s Draft                        elements required by the Results Act. The plan addresses some elements
Strategic Plan Is                    in a cursory way, while for others it provides much more elaboration.
Uneven in Reflecting                 Furthermore, our analysis revealed some strengths and key weaknesses in
                                     the way that USAID addresses some of these strategic planning issues.
Six Key Elements of
Results Act                          Eight of the nine sections of USAID’s draft plan comprise the six critical
                                     components required by the Results Act (USAID voluntarily included a
Requirements                         section on its role in development). Table 1 shows the Results Act’s
                                     required components and the corresponding sections in USAID’s plan—the
                                     numbers show the order in which the components appear in the Act and
                                     the plan.

Table 1: Strategic Plan Components
Listed by the Results Act and        Strategic plan component listed by                  Corresponding sections in USAID’s
Corresponding Sections in USAID’s    Results Act                                         November 1996 draft strategic plan
November 1996 Draft Strategic Plan   1. Comprehensive mission statement                  I. USAID mission statement
                                     2. General goals and objectives for the      II. USAID goals and objectives
                                     major functions and operations of the agency
                                                                                  III. USAID plan of action for achieving its
                                                                                  goals and objectivesa
                                     3. Description of how the goals and                 IV. USAID objectives and program
                                     objectives are to be achieved                       approaches

                                                                                         VIII. Learning from experience
                                     4. Description of the relationship between          V. How annual performance goals relate to
                                     the general goals and objectives and the            the 10-year strategic plan
                                     performance goals
                                     5. Identification of key factors external to the VI. Challenges and key external factors
                                     agency and beyond its control that could
                                     affect achievement of general goals and
                                     objectives
                                     6. Description of how program evaluations           IX. USAID’s evaluation agenda
                                     were used to establish or revise strategic
                                     goals, and a schedule for future program
                                     evaluations
                                     Other sections not required by the Act              VII. USAID’s role
                                     a
                                      This section presents USAID’s broad plan of action and represents a further description of its
                                     goals and objectives rather than of specific approaches, which are contained in subsequent
                                     sections.

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




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


Long-Term Goals and       USAID’s   November 1996 draft plan contains the following five goals:
Objectives
                      •   achieving broad-based economic growth;
                      •   building sustainable democracies;
                      •   stabilizing world population and protecting human health in a sustainable
                          fashion;
                      •   managing the environment for long-term sustainability; and
                      •   saving lives, reducing suffering, and reenforcing development potential.

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

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

                      •   existence of competitive and performing markets;
                      •   existence of an active civil society and democratic institutions and
                          practices;
                      •   capacity to provide basic education for both girls and boys effectively;
                      •   capacity to provide basic health services to the population, such that
                          mortality and fertility trends continue to decline to manageable levels; and



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

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


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

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

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



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                                 for meeting all of its goals and objectives. The plan would benefit from a
                                 discussion of the level of resources USAID requires to achieve its goals and
                                 objectives and the impact of funding below that level.


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

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


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

                             •   changing foreign policy imperatives,
                             •   multiplicity of controls on USAID funding,
                             •   severe spending restrictions that greatly reduce USAID’s strategic flexibility,
                             •   magnitude of program resources and recent budget reductions, and
                             •   USAID’s ability to maintain a critical level of field presence.


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

                             •   commitment of host country governments and citizens,
                             •   diversity of foreign assistance stakeholders with conflicting interests,
                             •   complication of working with sovereign governments, and
                             •   increasing resources needed for countries in crisis or transition.



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

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

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



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



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                        scope and methodology and issues to be addressed in forthcoming
                        evaluations, except for some “key issues” that will be targeted; and
                        (4) identify when various evaluations will be done, other than in “the next
                        several years.”

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


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

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

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




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

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

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


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

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



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

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

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

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

                     Some significant problems continue to loom, and resolution of these
                     problems are key to USAID’s implementation of results-based management.
                     For example, monitoring the agency’s progress toward achievement of its

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



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                       B-277408




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


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

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




                       Page 14                             GAO/NSIAD-97-197R USAID Draft Strategic Plan
                         B-277408




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


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

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




                         Page 15                               GAO/NSIAD-97-197R USAID Draft Strategic Plan
                           B-277408




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


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

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


Reliability of Financial   To properly evaluate the effectiveness of USAID’s strategic goals contained
Data                       in the plan, the agency needs complete, timely, and reliable financial data.


                           Page 16                              GAO/NSIAD-97-197R USAID Draft Strategic Plan
                  B-277408




                  Further, the CFO Act requires that each agency develop and maintain an
                  integrated agency accounting and financial management system that
                  provides for the development of cost information and the systemic
                  measurement of performance. USAID’s financial management systems
                  currently do not meet these requirements.


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


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

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




                  Benjamin F. Nelson
                  Director, International Relations
                     and Trade Issues




                  Page 17                              GAO/NSIAD-97-197R USAID Draft Strategic Plan
Enclosure I

Major Contributors to This Report


                        Jess T. Ford
National Security and   Lawrence L. Suda
International Affairs   James B. Michels
Division, Washington,
D.C.
                        Franklin W. Deffer
Accounting and
Information
Management Division,
Washington, D.C.
                        Lynn H. Gibson
Office of the General   Richard Seldin
Counsel, Washington,
D.C.
                        Linda P. Garrison
Atlanta Field Office    Diane G. Handley
                        Thanomsri S. Piyapongroj




                        Page 18                    GAO/NSIAD-97-197R USAID Draft Strategic Plan
Page 19   GAO/NSIAD-97-197R USAID Draft Strategic Plan
Related GAO Products


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

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

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

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

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

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

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

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

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

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

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

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

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

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




              Page 20                              GAO/NSIAD-97-197R USAID Draft Strategic Plan
Related GAO Products




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

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

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

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

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

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

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

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

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

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

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

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

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

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




Page 21                             GAO/NSIAD-97-197R USAID Draft Strategic Plan
Related GAO Products




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

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

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

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

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

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

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

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

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

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

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

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

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

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




Page 22                             GAO/NSIAD-97-197R USAID Draft Strategic Plan
Related GAO Products




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

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

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

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

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

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

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

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

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

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

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

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

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

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




Page 23                             GAO/NSIAD-97-197R USAID Draft Strategic Plan
           Related GAO Products




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

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

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

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




(711282)   Page 24                           GAO/NSIAD-97-197R USAID Draft Strategic Plan
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