We could not determine  the full extent of the department’s compliance with its guidelines because  it does not have sufficient documentation to describe the quality and range  of its efforts. State Has Fulfilled Some but Not All of Its Oversight Responsibilities

While State has met some aspects of the guidelines for overseeing MFO, it  has not fully complied with its guidelines in other areas such as evaluating  MFO’s financial practices. Recruiting Candidates Suited for Chief Observer Position Remains a Concern

NEA guidelines note that the transfer of U.S government personnel to key  MFO positions—including the U.S. civilian observer unit (COU)—is an  informal mechanism of U.S. oversight. MFO Has Not Addressed Other Important Personnel Management Practices

Despite its efforts to improve its personnel management practices, the  MFO has not addressed two challenges that leading practices indicate  could adversely affect its ability to strategically manage its human capital  resources more effectively. The United Nations,  for example, determined that the gender balance of its professional  workforce was problematic, particularly in the management of peace  operations. MFO Strengthened Financial Accountability and Internal Controls in Recent Years

The MFO has taken steps to improve financial accountability and  strengthen internal controls. It  issued unqualified or clean opinions on MFO’s financial statements  between 1996 and 2004. However, Israeli and Egyptian officials stated that their  governments do not support increases in their contributions, and U.S. and  MFO efforts to obtain support from other contributors have not  succeeded. In addition, the U.S. Army, State, and MFO officials have yet  to agree on who should pay the increased costs associated with changes in  the composition and pay scales of U.S. troops under current arrangements. MFO Has Maintained a Level Budget of $51 Million since 1995

MFO financial reports show that the organization has kept its budget at  about $51 million between fiscal years 1995 and 2003. We reviewed  MFO’s budget from fiscal years 1995 through 2002. Despite these changes, MFO contributors may face increased budgetary  challenges due to the possible replacement of MFO’s helicopter fleet. To promote improved  oversight of the MFO and ensure that NEA redresses these issues, we  recommend that the Secretary of State take the following four actions:  resolve the recurring concern of finding qualified candidates for the chief  of the civilian observer unit;   ensure that staff with accounting expertise are available to carry out  NEA’s financial oversight responsibilities for MFO and, if necessary,  review the terms of MFO’s external audits to ensure that they are  appropriate;   direct the MFO management advisory board to monitor and document  NEA’s compliance with its guidelines for overseeing the MFO; and    work with Army officials to reconcile differences between Army and State  views about the current MFO cost-sharing arrangements. To assess the reliability of the data on the costs associated with U.S.  participation in the MFO, we (1) interviewed State, Army, and MFO  officials about the sources of their data and the means used to calculate  costs, (2) reviewed MFO’s annual financial reports and State’s annual  report to Congress on the MFO, (3) traced U.S. Army’s reported costs for  its contributions to the MFO back to the source documents, (4) traced the  Army’s calculation of the costs associated with providing salaries to the  soldiers stationed with the MFO—these salary costs constitute over   80 percent of the total costs of the U.S. Army contribution to the MFO–  back to the DOD personnel composite standard pay and reimbursement  rates for fiscal years 1999 through 2003, (5) performed tests on the data  provided by the U.S. Army regarding the cost of U.S. participation in the  MFO between 1999 and 2003 to check for obvious errors or  miscalculations, and (6) reviewed the report of the MFO’s independent  external auditor on State’s contributions.
Why GAO Did This Study

Since 1982, the Multinational Force and Observers (MFO) has monitored compliance with the security provisions of the Egyptian-Israeli Treaty of Peace. The United States, while not a party to the treaty, contributes 40 percent of the troops and a third of MFO's annual budget. All personnel in the MFO civilian observer unit (COU) are Americans. GAO (1) assessed State's oversight of the MFO, (2) reviewed MFO's personnel and financial management practices, and (3) reviewed MFO's emerging budget challenges and U.S. MFO cost sharing arrangements.

What GAO Found

The State Department has fulfilled some but not all of its operational and financial oversight responsibilities for MFO, but lack of documentation prevented us from determining the quality and extent of its efforts. State has not consistently recruited candidates suited for the leadership position of the MFO's civilian observer unit, which monitors and verifies the parties' compliance with the treaty. State also has not evaluated MFO's financial practices as required by State's guidelines because they lacked staff with expertise in this area. However, State recently formed an MFO management advisory board to improve its oversight of MFO operations. MFO has taken actions in recent years to improve its personnel system, financial accountability, and internal controls. For example, it has provided incentives to retain experienced staff and taken steps to standardize its performance appraisal system. It has received clean opinions on its annual financial statements and on special reviews of its internal controls. MFO has also controlled costs, reduced its military and civilian personnel levels, and kept its budget at $51 million since 1995, while meeting mission objectives and Treaty party expectations. MFO faces a number of personnel, management, and budgetary challenges. For example, leading practices suggest its employees' access to alternative dispute resolution mechanisms for discrimination complaints, and the gender imbalance in its workforce, could be issues of concern. Moreover, MFO lacks oversight from an audit committee or senior management review committee to ensure the independence of its external auditors. Finally, MFO's budget is likely to increase because of costs associated with replacing its antiquated helicopter fleet. U.S. and MFO efforts to obtain support from other contributors generally have not succeeded. Army, State, and MFO officials have yet to agree who should pay the increased costs associated with changes in the composition and pay scales of U.S. troops deployed at MFO.