Figure 4 shows State’s worldwide spending for hardship pay in  fiscal years 2011 through 2016. State Mostly Followed Its Process for Determining Hardship Pay Rates at Overseas Posts but in a Few Cases Awarded Director Points without Adequately Explaining How Posts Met Relevant Criteria

			State Mostly Followed Its Process for Determining Hardship Pay Rates at Overseas Posts

ALS determines hardship pay rates through a process of analyzing  factors affecting living conditions at overseas posts such as physical and  social isolation, crime, air pollution, and medical care. State policies note that Director Points may  be awarded for extreme conditions not adequately captured in State’s  written standards. Twelve of the 15 memos did not clearly document how the posts  met State’s criteria for awarding Director Points. To determine danger  pay rates at overseas posts, State uses a two-part process that bases  danger pay eligibility on threat ratings for political violence and terrorism  at posts and danger pay rates on whether eligible family members are  allowed at posts (see fig. State’s Procedures to Implement Its Policies for Stopping and Starting Hardship Pay Are Resource Intensive, but State Has Not Assessed Their Cost- Effectiveness; State’s Procedures for Danger Pay Are Mostly Automated

State’s policies for stopping and starting hardship pay when employees  temporarily leave their assigned overseas posts depend on a variety of  factors such as the travel destination, purpose of travel, and assigned  post. State Has Not Assessed the Cost-Effectiveness of Its Policies and Procedures for Stopping and Starting Hardship Pay

State has not assessed the cost-effectiveness of its policies and  procedures for stopping and starting hardship pay, which were  established decades ago. State Identified $2.9 Million in Improper Payments Related to Hardship and Danger Pay but Has Not Analyzed Data That Could Identify More

CGFS identified a total of about $2.9 million in improper payments for  hardship and danger pay in fiscal years 2015 and 2016, including about  $2.8 million for hardship pay and nearly $67 thousand for danger pay  (see table 2). We found that CGFS had not analyzed available data that could help to  identify hardship posts at risk of overpayments and thereby aid in  recapture audit and improper payment prevention efforts. Guidance from the  Office of Management and Budget notes that such techniques could be  part of an internal control program to prevent, detect, and recover  overpayments. Hardship and danger pay are important incentives  for State employees to work at these challenging locations. State officials noted that these policies and procedures are resource  intensive to implement and contribute to improper payments, which are  costly to recover. In its comments,  reproduced in appendix II, State concurred with all three  recommendations. Appendix I: Objectives, Scope, and Methodology

The objectives of this review were to examine (1) the Department of  State’s (State) spending at overseas posts for hardship and danger pay in  fiscal years 2011-2016, (2) the extent to which State has followed its  process for determining hardship and danger pay rates at overseas posts,  (3) the procedures State uses to implement its policies for stopping and  starting hardship and danger pay when employees temporarily leave their  assigned overseas posts, and (4) the extent to which State has identified  improper payments related to hardship and danger pay.
Why GAO Did This Study

State provides hardship and danger pay, among other allowances, as incentives for State personnel to work at challenging overseas locations. Hardship pay compensates employees for service at overseas posts where conditions differ substantially from those in the United States. Danger pay compensates employees for service at posts where civil insurrection, civil war, terrorism, or wartime conditions threaten the health or well-being of an employee.
This report examines hardship and danger pay, specifically, (1) State’s spending at overseas posts in fiscal years 2011-2016, (2) the extent to which State has followed its process for determining rates, (3) the procedures State uses to implement its policies for starting and stopping hardship and danger pay, and (4) the extent to which State has identified improper payments. GAO analyzed State data and documents; interviewed State officials in Washington, D.C.; and conducted fieldwork at four posts that receive hardship or danger pay: Islamabad, Pakistan; Mexico City, Mexico; New Delhi, India; and Tunis, Tunisia.

What GAO Found

The Department of State (State) spent about $732 million for hardship pay and $266 million for danger pay at overseas posts in fiscal years 2011 through 2016.
State has mostly followed its process for determining hardship and danger pay rates at overseas posts. To determine hardship rates, State calculates scores for overseas posts based on information from post surveys and data on factors such as air pollution and crime. GAO reviewed scores for 192 posts and found that State mostly followed its process. However, in 12 of 15 cases where State added points for extreme conditions not captured in its written standards—Director Points—it did not clearly document how posts met these criteria. Without adequate documentation, the department cannot ensure that it is awarding these points consistently. For danger pay, State followed a process that bases rates on threat levels for political violence and terrorism and whether family members are allowed at post.
State’s procedures for stopping and starting hardship pay when employees temporarily leave posts—based on several factors—are resource intensive, but State has not assessed their cost-effectiveness. State uses diplomatic cables to adjust hardship pay, but these procedures are resource intensive—requiring 10,000 pay actions each year—and contribute to improper payments, which are costly to recover. State’s procedures for adjusting danger pay through time and attendance, based on whether or not employees are present at posts, are mostly automated. State has not assessed the cost-effectiveness of its hardship pay policies and procedures in accordance with its Foreign Affairs Manual .
State identified $2.9 million in improper payments related mostly to hardship pay in fiscal years 2015-2016. State conducts required improper payments audits but has not analyzed available data that could help further identify and recover overpayments related to hardship pay. Guidance from the Office of Management and Budget notes that such data analysis could be part of an internal control program to prevent, detect, and recover overpayments.

What GAO Recommends

GAO recommends that State clearly document the use of Director Points for extreme conditions at posts; assess the cost-effectiveness of its policies and procedures for stopping and starting hardship pay for overseas employees; and analyze available data to identify, recover, and prevent improper payments related to hardship pay. State concurred with these recommendations.