oversight

The Results Act: Observations on the Department of State's May 1997 Draft Strategic Plan

Published by the Government Accountability Office on 1997-07-18.

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-277439

                     July 18, 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 the Department of State’s
                     May 1997 Draft Strategic Plan

                     On June 12, 1997, you asked us to review the draft strategic plans
                     submitted by cabinet departments and selected major agencies for
                     consultation with 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 Department of State.


                     Our overall objective was to review and evaluate the latest available
Objectives, Scope,   version of State’s draft strategic plan, which was prepared within the
and Methodology      context of the Department’s overall strategic plan for international affairs.
                     The plan is designed to serve as an overarching framework to guide and
                     coordinate the roles of U.S. government agencies under the foreign policy
                     direction of the President and the Secretary of State. Specifically, we
                     (1) assessed the draft plan’s compliance with the Results Act requirements
                     and its overall quality, (2) determined if State’s key statutory authorities
                     were reflected in the plan, (3) determined whether cross-cutting functions
                     and interagency involvement were included, (4) determined if the draft
                     plan addressed major management problems, and (5) discussed State’s
                     capacity to provide reliable information about its operations and
                     performance.




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             Our overall assessment of State’s draft strategic plan was generally based
             on our knowledge of State’s operations and programs, our reviews of the
             Department’s operations and programs, and other existing information at
             the time of our assessment. Specifically, the criteria we used to determine
             whether State’s draft strategic plan complied with the requirements of the
             Results Act were the Results Act, supplemented by the Office of
             Management and Budget’s (OMB) guidance on developing the plans
             (Circular A-11, part 2). To make judgments about the overall quality of the
             plan, we used our May 1997 guidance for congressional review of the plans1
              as a tool. To determine whether the plan addressed management
             problems previously addressed by us, we relied on our general knowledge
             of State’s programs and operations and the result of reports and testimony
             that we have issued in recent years. (See enc. II for a list of our major
             products related to State’s operations). We conducted our assessment
             between June 21, 1997 and July 18, 1997, in accordance with generally
             accepted government auditing standards. State officials provided oral
             comments on a draft of this correspondence, which are reflected in the
             agency comments section on page 14.

             We based our assessment on the May 6, 1997, draft strategic plan that
             State provided on June 18, 1997, to the House of Representatives staff
             team working with the agency. We recognize that developing a strategic
             plan is a dynamic process and that State is continuing to revise the draft
             with input from OMB, congressional staff, and other stakeholders.

             It is important to recognize that under the Results Act, a final plan is not
             due until September 1997. Furthermore, the act anticipated that it would
             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.


             The State Department is the lead institution for the conduct of U.S.
Background   diplomacy. It is responsible for conducting foreign relations, including
             formulating policy on diverse international issues and coordinating and
             supporting U.S. programs and activities overseas. State is expected to
             perform a wide range of functions that are critical to U.S. interests:
             provide leadership to help bring peace and stability to areas such as the
             Middle East and Bosnia, report on overseas events, influence other
             countries to adopt policies and practices consistent with U.S. interests,

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



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assist U.S. business abroad, provide services to U.S. citizens overseas, and
issue passports and visas. State operates over 200 embassies and
consulates worldwide. At posts overseas, the Department is responsible
for coordinating and supporting the international activities of all U.S.
government agencies not under military commands. State’s budget request
totaled about $2.7 billion in fiscal year 1998 for the administration of
foreign affairs.

The overall purposes of the Results Act include systematically holding
federal agencies accountable for achieving program results and improving
congressional decision-making by providing more objective information
on the relative effectiveness and efficiency of federal programs and
spending. Consistent with its general purposes, the Results Act requires
that each federal agency develop a strategic plan by September 30, 1997.
Each plan is to include six elements: (1) a comprehensive agency mission
statement, (2) agencywide long-term goals and objectives for all major
functions and operations, (3) approaches or strategies to achieve goals
and objectives and the various resources needed to do so, (4) the
relationship between long-term goals/objectives and annual performance
goals, (5) an identification of key external factors beyond agency control
that could significantly affect achievement of strategic goals, and (6) a
description of how program evaluations were used to establish or revise
strategic goals, and a schedule for future program evaluations.

State’s first draft of its strategic plan was rejected by OMB last year for
several reasons, including the lack of senior staff involvement in the plan’s
preparation. According to State officials, the May 1997 plan reflects a
greater commitment by senior officials in the Department. In addition,
State officials believe that the Department’s current program planning
exercise, in support of the budget process, will help State meet some of
the requirements of the Results Act.

It is important to note that the administration, with the support of
Congress, decided in April 1997 to reorganize the foreign affairs agencies
of the United States. The objectives of the reorganization are to
consolidate State, the U.S. Information Agency (USIA), and the Arms
Control and Disarmament Agency (ACDA) and to integrate certain
administrative functions of State and the U.S. Agency for International
Development (USAID). Special consolidation/ integration teams are now
putting together the strategy and plan of action for this effort, which will
have significant cross-cutting policy and management implications for




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                   State. A formal reorganization plan is scheduled to be completed by
                   September 1997.


                   State’s May 6, 1997, draft strategic plan is useful in setting and clarifying
Results in Brief   U.S. foreign policy goals, but it does not contain sufficient information to
                   fully achieve the purposes of the Results Act and is incomplete in several
                   important respects. In particular, State’s draft strategic plan omits two
                   elements required by the Results Act. It does not contain components
                   identifying the relationship between long-term goals/objectives and annual
                   performance goals or a description of how program evaluations were used
                   to establish or revise strategic goals, or a schedule for future program
                   evaluations.

                   To meet the other four requirements of the Results Act, State’s plan needs
                   to be more descriptive and consistent with OMB guidance. For example,
                   State’s mission statement is described in two sections of the plan. The plan
                   could be improved by consolidating these sections into a single mission
                   statement. The strategic goals sections clearly set out foreign policy goals
                   but do not consistently explain what results are expected from State’s
                   programs or when to expect the results. The plan contains several sections
                   labeled strategy for specific goals, however, it does not specifically
                   identify the actions and resources needed to meet the plan’s goals or
                   include a schedule for significant actions. In addition, State’s strategies for
                   achieving the foreign policy goals often focus on describing the
                   Department’s role in various areas instead of describing how State’s
                   programs and operations will achieve the goals. State frequently identifies
                   the key factors related to the achievement of specific goals as part of its
                   assumptions sections for each goal. However, the draft plan does not
                   systematically describe how the achievement of goals could be affected by
                   external factors or discuss some of the more overriding issues that could
                   affect plan implementation, such as pending legislation.

                   The draft plan would be more useful to State, Congress, and other
                   stakeholders if it included a description of the statutory basis for State’s
                   broad foreign policy responsibilities and explicit discussions of
                   cross-cutting functions, major management problems, and adequacy of
                   data and systems. The plan is consistent with State’s basic statutory
                   responsibilities, but it does not discuss them. State’s draft plan recognizes
                   that there are several cross-cutting issues and is designed to (1) coordinate
                   the roles and missions of U.S. government agencies involved in foreign
                   affairs activities and (2) serve as a basis for consultation to sharpen and



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                          achieve broad agreement on U.S. foreign policy goals. However, the draft
                          strategic plan does not clearly indicate how the Department plans to
                          provide leadership and coordinate the programs of other agencies.
                          Further, State’s plan would be enhanced if it included a discussion of how
                          the proposed reorganization of State, USIA, ACDA, and USAID might affect
                          formulation of strategic goals and strategies and related management and
                          resource requirements.

                          State’s plan highlights many of its management responsibilities in ensuring
                          its diplomatic readiness but does not address many of the serious
                          management challenges facing the Department. Our prior reviews have
                          identified several formidable management challenges, including the need
                          for State to develop program strategies that reflect budget constraints,
                          reduce its operating costs, meet the objectives of the Chief Financial
                          Officers (CFO) Act, and systematically modernize its key business
                          processes.

                          State’s capacity to provide reliable information about its operations and
                          program performance is questionable because of long-standing
                          deficiencies in the Department’s information and financial accounting
                          systems. Successfully resolving a number of these material deficiencies in
                          the Department’s financial management and information systems will be
                          critical to successfully implementing the plan.


                          State’s draft strategic plan omits two key components and only partially
State’s Draft Strategic   fulfills the remaining four components required by the Results Act. Table 1
Plan Does Not Reflect     shows the Results Act’s required components and the corresponding
All Elements of           sections in State’s plan.

Results Act
Requirements




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Table 1: Strategic Plan Components
Listed by the Results Act and        Strategic plan component listed by                Corresponding sections in State’s May
Corresponding Sections in State’s    Results Act                                       1997 draft strategic plan
May 1997 Draft Strategic Plan        1. Comprehensive mission statement                State Department Overview and the
                                       covering the major functions and                International Affairs Mission Statement
                                       operations of the agency
                                     2. General goals and objectives                   National Interests and Strategic Goals
                                     3. Description of how the goals and               Strategies
                                       objectives are to be achieved
                                     4. Description of how the annual                  Not discussed
                                       performance goals shall be related to the
                                       general goals and objectives in the
                                       strategic plan
                                     5. Identification of key factors external to      Assumptions
                                       the agency and beyond its control that
                                       could affect achievement of the general
                                       goals and objectives
                                     6. Description of the program evaluations         Not discussed
                                       used to establish/revise strategic goals
                                       with a schedule for future program
                                       evaluations
                                     Source: The Government Performance and Results Act of 1993 and State’s May 1997 draft
                                     strategic plan.




Mission Statement                    The elements of State’s mission are described in two different sections of
                                     the plan—one that provides an overview of the State Department and
                                     another that gives a mission statement for international affairs. This
                                     mission is broad-based and includes providing policy leadership,
                                     conducting international negotiations, coordinating responses to crises,
                                     assisting U.S. business, adjudicating visas, and protecting and assisting
                                     American citizens abroad. State’s plan would be easier to use if it
                                     contained a consolidated agency mission statement that was clearly
                                     labeled.


Goals and Objectives                 State’s draft strategic plan identifies 16 strategic foreign policy goals. The
                                     strategic goals are established for key areas of national interest and core
                                     U.S. values—national security, economic prosperity, protection of
                                     American citizens and border security, law enforcement, democracy,
                                     humanitarian assistance, and global issues (environment, population, and
                                     health). The plan also contains a diplomatic readiness section that
                                     establishes separate goals for human resources, information resource
                                     management, and infrastructure and operations of the Department.




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                             Although State’s plan establishes several goals, it does not consistently
                             explain what results are expected from the agency’s major functions or
                             when to expect those results. For example, the foreign policy goal of
                             expanding U.S. exports to $1.2 trillion is too broad and subject to multiple
                             influences to clearly articulate what results can be expected from the
                             Department in the 5-year plus period covered by the draft plan. Moreover,
                             some goals are not clear. For example, the diplomatic readiness goal of
                             “enabling the U.S. government to achieve foreign policy objectives and
                             respond to international crises by cultivating a skilled, motivated, diverse,
                             and flexible workforce” is obscure and, in our opinion, it would be difficult
                             to make a future assessment of whether the goal was being achieved.


Approaches (or Strategies)   The draft strategic plan identifies strategies for each foreign policy goal,
to Achieve Goals             but it often does not describe how the goals are to be achieved. For
                             example, State’s first strategy (maintaining effective working relationships
                             with leading regional states through vigorous diplomacy, backed by strong
                             U.S. and allied military capability to react to regional contingencies) does
                             not describe how the Department plans to maintain effective working
                             relationships or coordinate with the other lead agency (Department of
                             Defense) identified in the strategy. In contrast, the strategy to meet rising
                             passport demand and maintain integrity of the passport system clearly
                             describes State’s approaches such as upgrading automated systems;
                             developing backup systems; and introducing photodigitization to improve
                             security.

                             The plan does not clearly describe the agency’s staff skills and
                             technologies, and the human, capital, information, and other resources
                             needed to meet the plan’s foreign policy goals, consistent with OMB
                             Circular A-11, part 2. The diplomatic readiness section sets goals and
                             strategies for managing and upgrading State’s resource base, but those
                             goals and strategies are not clearly linked to the strategic goals.
                             Additionally, the plan is not consistent with OMB Circular A-11, part 2,
                             which states that strategies should outline how the agency will
                             communicate strategic goals throughout the organization and hold
                             managers and staff accountable for achieving these goals.


Relationship Between         The draft strategic plan does not discuss the relationship between
Long-Term Goals and          strategic goals and annual performance goals as required by the Results
Annual Performance Goals     Act. However, it contains a section labeled indicators for each goal that
                             may be a good first step toward establishing annual performance goals.



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                            For example, State’s goal of minimizing the impact of international crime
                            on the United States and its citizens lists crime statistics and intelligence
                            estimates as an indicator to measure progress. State officials noted that
                            they are currently engaged in their annual program planning process and
                            hope to further define operational goals, performance measures, and
                            resource requirements consistent with the Results Act.


Key Factors External to     State’s draft strategic plan contains key external factors affecting the
the Agency                  achievement of the goals. These are described as part of its assumptions
                            for each goal. Such assumptions are a good starting point for identifying
                            the key external factors that might affect the Department’s programs.
                            However, the assumptions contained in the plan do not systematically
                            (1) describe how the achievement of the goal(s) could be affected by the
                            factor (consistent with OMB Circular A-11, part 2) or (2) identify other
                            important factors that we believe could affect achievement of the goals.
                            For example, a key assumption for controlling how immigrants and
                            foreign visitors enter and remain in the United States is that applications
                            for nonimmigrant visas will increase by 3-5 percent per year. The
                            assumptions, however, do not mention legislative and technological
                            challenges that could affect achievement of the goal. These might include
                            pending requests for legislative authority to make immigration, passport,
                            and other fees available to State as an indefinite appropriation.

                            Another example is one of the assumptions related to State’s diplomatic
                            readiness goal of establishing and maintaining infrastructure. It states that
                            the investment decisions for major infrastructure systems will become
                            more complex as high maintenance costs increase the urgency of new
                            construction. However, the assumptions do not recognize the potential
                            impact of international market forces on real estate decisions.


How Program Evaluations     The draft strategic plan does not mention or describe how program
Were Used to Establish or   evaluations were used to establish or revise strategic goals or include a
Revise Goals                schedule for future program evaluations. According to OMB guidance, the
                            agency should briefly describe program evaluations that were used in
                            preparing the strategic plan and outline (1) the general scope and
                            methodology for planned evaluations, (2) particular issues to be
                            addressed, and (3) a schedule for future evaluations. Addressing these
                            requirements will be clearly important to State in its efforts to finalize a
                            useful strategic plan. Recent program evaluations by State’s Inspector
                            General, who examined the Department’s counternarcotics program,



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                        peacekeeping activities, and immigrant visa programs, have identified
                        several internal and external factors affecting program implementation.
                        Our most recent evaluations have identified options for agencywide cost
                        reductions, better real property management, and application of best
                        practices adopted by the private sector.

                        State officials have found that many foreign policy issues are subject to
                        multiple influences and are not quickly translated into agency-specific
                        goals. State’s draft strategic plan provides limited insight about how the
                        Department’s contributions will be singled out or how annual performance
                        goals and measures will relate to the general goals and objectives.
                        However, State officials are optimistic that such problems can be worked
                        out in the program planning process. We have not assessed State’s
                        program planning process to determine whether it will enable State to
                        meet the requirements of the Results Act.


                        Our review of the draft plan and State’s key statutory authorities, including
Key Statutory           the State Department Basic Authorities Act of 1956 (P.L. 84-885), foreign
Authorities Generally   relations authorization and appropriations acts,2 relevant provisions of the
Reflected in State’s    Foreign Assistance Act of 1961 (P.L. 87-195), and other laws, indicates that
                        State’s description of its mission, goals, and objectives, as stated in its
Strategic Plan          draft plan, generally reflect State’s statutory authority. State’s description
                        of its mission is supported by its broad statutory authority for
                        management of foreign affairs (22 U.S.C. 2656). Similarly, each of the 16
                        major goals appears to reflect broad foreign policy objectives and/or
                        specific legislative priorities. In general, the overall structure of the plan,
                        which is based on broad foreign policy goals but not tied directly to
                        specific legislation, appears to be consistent with the nature of State’s role
                        as the lead institution for the conduct of foreign policy.

                        The Results Act does not require a statement of major statutory authorities
                        to be included with the agency’s plan. However, OMB Circular A-11, part 2,
                        suggests that an agency’s mission statement may include a brief discussion
                        of the agency’s enabling or authorizing legislation. We believe that State’s
                        plan may benefit from such a discussion to provide a better understanding
                        of the statutory basis for State’s broadly defined mission, goals, and
                        objectives.



                        2
                         The most recent authorization act for State is the Foreign Relations Authorization Act for Fiscal Years
                        1994 and 1995 (P.L. 103-236). The Department of State and Related Agencies Appropriations Act for
                        Fiscal Year 1997 is title IV of P.L. 104-208.



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                           State, as the lead agency for the conduct of foreign policy, is involved in
Cross-Cutting Issues       several cross-cutting issues for which successful performance depends on
Not Fully Discussed        actions by the Department and other agencies. The Department’s strategic
                           plan states that it was not intended to supplant strategic planning efforts in
                           the foreign affairs and other communities but was to be used as the basis
                           for consultations with the aim of sharpening and achieving broad
                           agreement on U.S. foreign policy goals. As such, State’s strategies for
                           achieving individual foreign affairs goals typically identify the various
                           agencies that have responsibilities in the area but do not provide specific
                           evidence of interagency coordination in determining how specific goals
                           will be achieved. For example, several of State’s strategies for helping
                           achieve the goal of improving the well-being of the world’s poor simply
                           identify the lead agency (for example, USAID) and which agencies (for
                           example, USAID and State) provide input, without giving any additional
                           information about how the goal will be pursued.

                           State’s draft plan does not specifically address the potential for other
                           agencies to have functions similar to or possibly duplicative of State’s role
                           that could affect the formulation and implementation of strategies. In
                           August 1996, we reported3 that State’s functional bureaus share
                           responsibility with multiple U.S. agencies on various overlapping issues,
                           including over 30 agencies and offices involved in trade policy and export
                           promotion, about 35 engaged in global programs, and over 20 involved in
                           international security functions. Examples include the following:

                       •   The Office of the U.S. Trade Representative and the Department of
                           Commerce are at the center of federal trade activity, while the
                           Departments of State, the Treasury, Agriculture, and Labor are also
                           involved in trade policy.
                       •   State’s Office of Defense Trade Controls works in partnership with the
                           Defense Department on license applications for arms controls. The Office
                           also confers with the Commerce Department on licenses for exports of
                           sensitive dual-use items and with the Department of Energy for exports of
                           nuclear-related material. Both State and ACDA are involved in dual-use and
                           arms export issues.

                           In its strategic plan, State identifies the general role of such agencies in
                           support of various strategies but does not clearly address how the
                           Department and other agencies will be expected to fulfill their roles. The
                           plan does not indicate whether State systematically coordinated with its

                           3
                             State Department: Options for Addressing Possible Budget Reductions (GAO/NSIAD-96-124, Aug. 29,
                           1996).



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                          governmentwide stakeholders. We believe that a shortcoming of the plan
                          is that State does not clearly identify how its programs relate to those of
                          other agencies. This is partially due to the difficulties in linking specific
                          agency programs to overlapping foreign affairs goals that do not have a
                          designation of priorities. In addition, the numbers of agencies involved in
                          foreign affairs activities makes identification of cross-cutting
                          responsibilities difficult.


Impact of Agency          A related cross-cutting issue that could improve State’s final plan would be
Consolidation Not         a discussion of ongoing efforts of the administration to integrate (1) State,
                          USIA, and ACDA into an effective and efficient agency to serve U.S. national
Identified
                          interests and foreign policy goals in the 21st century and (2) certain shared
                          administrative functions of State and USAID. Work on the reorganization of
                          the foreign affairs agencies is under the direction of a steering committee
                          (the four agency heads); a core team comprised of senior administrators in
                          each agency; a planning team; and task forces addressing various agency
                          integration issues, including management, arms
                          control/non-proliferation/international security, and public diplomacy. The
                          task forces and the planning team are to address key strategic issues,
                          including the mission, organizational structure, number and type of
                          personnel, resources and authorities of relevant policy/program
                          implementation, and substantive support requirements for the
                          reorganization.


                          State’s strategic plan addresses some, but not all, of the major
Strategic Plan Does       management challenges that the Department faces in carrying out its
Not Fully Address         foreign policy responsibilities. The management challenges recognized by
Major Management          State as part of its plan include staffing and work force planning,
                          information resource management, property management, logistics,
Problems                  security, and core administrative systems. These management issues are
                          discussed separately in a diplomatic readiness section of the strategic
                          plan. We believe the plan would be strengthened if it better described how
                          these management challenges could affect achievement of the strategic
                          goals in the plan. We also believe that the plan should address some of the
                          key problems we have identified in our prior work related to cost control,
                          overseas embassy management, and financial management. Specifically,
                          we noted the following:

                      •   In our August 1996 report on options for addressing possible budget
                          reductions, we stated that the Department had not fully accepted that it



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    may have to substantially reduce its costs, nor had it done a
    comprehensive review of its functions and processes to identify
    unnecessary or low-priority work. Options we identified for reducing costs
    included (1) reducing or eliminating State’s involvement in some areas and
    lessening the degree of overlap among its bureaus and with other
    agencies, (2) reducing the cost of State’s overseas presence, and
    (3) reducing support costs. We noted that the structure of State’s overseas
    presence has not changed substantially since the end of the Cold War,
    despite advances in communications and transportation and major
    changes in the way business is conducted overseas. We pointed out that
    fiscal realities should require that State increase its cost consciousness,
    make choices about resource priorities for its wide range of locations and
    functions, and fundamentally rethink the way that it does business to
    increase efficiency and reduce operating costs. The draft strategic plan
    does not fully address these issues.
•   State operates over 200 embassies and consulates worldwide at a cost of
    nearly $2 billion annually. In reports and congressional testimony,4 we and
    the Department’s Inspector General have identified serious management
    problems that have contributed to wasted resources and weakened
    administrative systems overseas. State has taken some actions to improve
    overseas management, but the draft strategic plan does not specifically
    address the embassy management problem.
•   Solving State’s financial management problems depends largely on the
    Department’s ability to meet the objectives of the CFO Act, as expanded by
    the Government Management Reform Act. The passage of the CFO Act was
    intended to improve federal financial management by, among other things,
    (1) mandating improvements in financial systems and internal controls
    and (2) requiring agencies to prepare and have audited financial
    statements. The June 1997 State Inspector General’s audit report5 on the
    Department’s consolidated statement of financial position for fiscal year
    1996 contained a qualified audit opinion due, in large part, to the inability
    to audit undelivered orders. The Department’s financial and accounting
    system, as of September 30, 1996, was noted to be “materially inadequate.”
    This may significantly affect the Department’s ability to successfully
    implement the Results Act. The plan does not address the major financial
    management challenges faced by State or how State will resolve these
    challenges.


    4
     State Department: Actions Needed to Improve Embassy Management (GAO/NSIAD-96-1, Mar. 12,
    1996) and Widespread Management Weaknesses at Overseas Embassies (GAO/T-NSIAD-93-17, July 13,
    1993).
    5
      Department of State’s Consolidated Statement of Financial Position for Fiscal Year 1996 (OIG Audit
    Report 97-FM-017, June 2, 1997).



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                               Our August 1996 report on options for addressing budget reductions also
                               noted that State could possibly reduce its support costs by several
                               hundred million dollars by accelerating changes to its business practices.
                               In the plan, State’s strategies for improving its diplomatic readiness
                               contain elements that can help it to partially address the support cost
                               issue. One of the most important elements focuses on a reengineering of
                               the Department’s worldwide logistics system. The Department’s strategy
                               in this area is largely based on an application of best practices of other
                               organizations in the logistics area. Our ongoing work also shows that the
                               Department can reengineer other key business processes and use the best
                               practices of the private sector and other organizations to do things better
                               at less cost. The strategic plan would be strengthened if these
                               opportunities were more fully explored.



                               The Department’s ability to generate reliable data in the near future is
State Has Limited              uncertain. Specifically, we believe that State is likely to encounter
Capacity to Provide            significant problems in providing reliable information on achievement of
Reliable Information           strategic goals due to the long-standing weaknesses in its information
                               management systems and in its financial and accounting systems.
on Achievement of              Although State has recognized deficiencies in its existing systems and
Goals                          auditors have identified related internal control weaknesses, current target
                               dates for completing corrective actions are at least 2 years off. As such,
                               State needs to discuss the issue of data reliability in its strategic plan.


Information System             According to State’s most recent Federal Managers’ Financial Integrity Act
Weaknesses                     report, its information resource management infrastructure is totally
                               inadequate to meet the current core foreign policy and administrative
                               functions. This situation has a significant impact on the Department’s
                               mission and severely limits its ability to provide efficient, flexible, and
                               timely national security reporting; to promote U.S. business opportunities
                               abroad; and to reinvent and streamline Department business practices.
                               State’s report goes on to note that 90 percent of the Department’s overseas
                               unclassified systems and nearly three-fourths of the domestic systems are
                               obsolete. Current target dates for completing corrective actions are in the
                               year 2000.


Reliability of Financial and   State’s financial accounting systems are not capable of accurately
Accounting Data                accumulating the costs of its activities and thereby determining the cost of



                               Page 13                             GAO/NSIAD-97-198R State’s Draft Strategic Plan
                  B-277439




                  achieving program results and measuring the success of strategic goals.
                  The CFO Act requires agencies to have accounting and financial accounting
                  systems that provide for the development of cost information and
                  systematic measurement of performance. Currently, State does not have a
                  true cost accounting system and, as a result, reliable cost information by
                  function cannot be provided. Historically, State has focused attention on
                  developing financial systems to satisfy appropriated fund control
                  requirements rather than to provide financial cost information needed to
                  manage operations. Domestic and overseas financial systems have been
                  incompatible, out of date, and unable to meet managers’ cost performance
                  measurement and other financial needs.

                  As part of the Federal Managers’ Financial Integrity Act process, State has
                  long recognized the deficiencies in its financial management systems. The
                  Department has developed a plan to improve its financial management
                  systems to solve these weaknesses. Key elements of the plan include
                  upgrading the core financial system, reducing the number of systems, and
                  developing a reports management system. Target dates for resolving
                  material weaknesses are currently in the year 1999.

                  If State plans to use data from its existing financial management systems
                  to measure and manage program results, it needs to ensure that such data
                  are complete, reliable, and timely. The process of preparing financial
                  statements and subjecting them to an independent audit helps to establish
                  discipline in the financial management process. This is a necessary step in
                  generating reliable and timely information, along with initiatives for
                  improvement as part of the financial integrity process. State needs to
                  discuss the issue of data reliability in its strategic plan in terms of how
                  reliable its data are, what is being done to improve the data, and how the
                  reliability of the data can be expected to affect the agency’s performance.


                  On July 16, 1997, we obtained oral comments on a draft of this report from
Agency Comments   State officials responsible for preparing State’s strategic plan. These
                  officials said that our report reflects a May 1997 “snapshot” of the State
                  Department’s strategic plan that, under the Results Act, is not due until
                  September 1997. They noted that with the administration’s announcement
                  of the consolidation of foreign affairs agencies, much has changed at the
                  State Department since May 1997 and the strategic plan is evolving as well.
                  From the outset, it has been State’s intention to apply the outcomes of the
                  strategic planning process in ways consistent with the Results Act. For
                  example, all State Department bureaus are using the strategic plan as a



                  Page 14                             GAO/NSIAD-97-198R State’s Draft Strategic Plan
B-277439




template to complete program plans this summer that will form the basis
for the fiscal year 1999 budget for both international affairs programs and
State Department operations. State believes that the strategic plan it
submits in September, taken together with the annual performance plan
and the fiscal year 1999 budget submitted to OMB, will reasonably address
our comments on its draft plan.


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; Chairmen and Ranking Minority Members of other
Committees that have jurisdiction over Department of State activities; the
Secretary of State; and the Director, OMB. We will send copies to others on
request.

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




Benjamin F. Nelson
Director, International Relations and
  Trade Issues




Page 15                              GAO/NSIAD-97-198R State’s Draft Strategic Plan
Enclosure I

Major Contributors to This Report


                        Jess T. Ford
National Security and   Diana M. Glod
International Affairs   Lynn B. Moore
Division, Washington,
D.C.
                        Joseph S. Wholey
General Government      Christopher Mihm
Division, Washington,
D.C.
                        Mark Speight
Office of the General
Counsel, Washington,
D.C.
                        Diane Handley
Atlanta Field Office    Thanomsri S. Piyapongroj




                        Page 16                    GAO/NSIAD-97-198R State’s Draft Strategic Plan
Page 17   GAO/NSIAD-97-198R State’s Draft Strategic Plan
Page 18   GAO/NSIAD-97-198R State’s Draft Strategic Plan
Page 19   GAO/NSIAD-97-198R State’s Draft Strategic Plan
Related GAO Products


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

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

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

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

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

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

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

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

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

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

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




(711281)      Page 20                             GAO/NSIAD-97-198R State’s Draft Strategic Plan
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