NDF’s Authorities Provide It Significant Operational Flexibility, but under Its No-Year Budget Authority, NDF Has Not Determined Needed Carryover Balances

NDF has several key authorities that provide it significant operational  flexibility; however, it has not determined its needed carryover balances  and it has taken years to close out many of its projects in the absence of  guidance for closing them. Annual appropriations bills have consistently  provided NDF with three key authorities that it has used to carry out its  activities. Second, NDF has  used its geographic authority to fund projects in a range of countries  around the globe. Third, NDF has used its no-year budget authority to  carry over balances not designated for specific projects from one year to  the next. However, NDF has not determined appropriate levels for these  balances, which have increased significantly in the past several years. Additionally, NDF has taken many years to close some projects where  work was never started, or was suspended, and has not established  guidance for determining when inactive projects should be closed out and  unexpended no-year funds made available for other projects. NDF Used Its Notwithstanding Authority to Implement Several Projects Where Laws and Regulations Otherwise Restricted U.S. Assistance

Annual appropriations acts have consistently granted NDF  notwithstanding authority, which allows NDF to undertake projects  “notwithstanding any other provision of law.” As a result, NDF has the  ability to fund projects in countries where other U.S. programs are  generally barred from operating by U.S. legal restrictions. NDF’s  authority to fund projects globally since the program’s start in 1994 is in  contrast to the authorities of some other U.S. nonproliferation programs. As a  result, NDF funds may be tied up for years in projects where no work is  occurring, precluding the funds’ use for other projects. State has developed a new  policy requiring bureaus to evaluate programs, projects, and activities. To  comply with this policy, State issued guidance requiring bureaus to submit  an evaluation plan for fiscal years 2012 through 2014, identifying the  programs and projects they plan to evaluate. However, ISN, which  oversees NDF, did not include NDF in its fiscal years 2012 through 2014  evaluation plan. Moreover, State currently lacks information, such as the  results of some projects and lessons learned, that could be used to  conduct a program evaluation of NDF and that would help inform the  management of the program. In part to comply with the requirements of this Act,  State established a policy in February 2012 to evaluate programs and  projects. Project management standards note the importance of documenting  results in project close-out documents, but not all of the project close-out  reports that we examined discussed the results of the project. In addition, NDF officials stated that NDF encourages but does not  require the use of the project management guide and the guide does not  detail the information that project managers need to include in their  reports or specify the report format. Partly in response to our work, NDF  officials stated that they plan to develop standard operating procedures to  address the issues we identified in the project close-out reports, which will  also include a requirement for project managers to identify lessons  learned. However, as of November 2012, they had not made any  changes to their procedures. Finally, NDF’s project close-out reports could  provide useful information to inform future program evaluations’  identification of lessons learned that could be systematically incorporated  into future projects. Recommendations for Executive Action

To more effectively manage NDF’s resources, increase program  accountability, and ensure that NDF has the information necessary to  improve program performance, we recommend that the Secretary of  State take the following four actions: direct NDF to develop a methodology for determining the amount of  reserves that it should carry over annually to meet program  requirements to address unanticipated nonproliferation and  disarmament opportunities; direct NDF to develop guidance for determining when inactive NDF  projects should be closed and the remaining, unexpended funds  made available for use on other projects; direct ISN and NDF to periodically and systematically conduct and  document program evaluations of NDF; direct NDF to revise its project management guide to establish  requirements for project managers’ close-out reports to include  information useful for improving the management of NDF projects. Appendix I: Scope and Methodology

This report examines (1) the Department of State’s (State) use of  Nonproliferation and Disarmament Fund (NDF) authorities in developing  and implementing NDF projects and (2) the extent to which State has  conducted a program evaluation of NDF and used this information to  improve program performance. To assess the extent to which State has evaluated NDF and used this  information to improve program performance, we interviewed State  officials with the Bureaus of International Security and Nonproliferation  (ISN) and Budgeting and Planning.
Why GAO Did This Study

The proliferation of weapons of massdestruction and advanced conventionalweapons poses significant threats toU.S. and international security. StatesNDF began operating in 1994 to helpcombat such threats by funding a variety of nonproliferation and disarmament projects. NDFs legal authorities provide it significant flexibility to perform its work and it has initiated high-profile projects in locations that are significant to U.S. interests. Nonetheless, questions have been raised about how NDF has used its authorities, including its authority to carry over balances into future fiscal years, and the extent to which NDF is effectively implementing its activities. This report examines (1) States use of NDF authorities in developing and implementing NDF projects and (2) the extent to which State has conducted a program evaluation of NDF and used this information to improve program performance. To conduct this review, GAO analyzed NDF program and project data and documentation, analyzed a sample of NDF project close-out documents, and interviewed NDF and other U.S. officials.

What GAO Found

The Department of State's (State) Nonproliferation and Disarmament Fund (NDF) has several key authorities that provide it significant operational flexibility; however, it has not determined its needed carryover balances and it has taken years to close out many of its projects in the absence of guidance for closing them. Annual appropriations bills have consistently provided NDF with three key authorities that it has used to carry out its activities. First, NDF has the authority to undertake projects notwithstanding any other provision of law. NDF has used this authority to fund projects in countries, such as North Korea, where U.S. assistance is prohibited by U.S. sanctions and other legal restrictions. Second, NDF has the authority to undertake projects globally. NDF has used this authority to fund projects in numerous regions around the world, in contrast with other U.S. nonproliferation programs, which have historically focused on countries in the former Soviet Union. Third, NDF's appropriations do not expire within a particular time period, enabling NDF to carry over balances from year to year not designated for specific projects. However, NDF has not determined appropriate levels for these balances, which increased significantly in the past few years. Additionally, NDF has sometimes taken many years to close projects, including those where work was never started or was suspended, and has not established criteria to determine when inactive projects should be closed and unexpended resources made available for other projects. As a result, NDF funds may be tied up for years in inactive projects, precluding the funds' use for other projects.
State has never conducted a program evaluation of NDF. In February 2012, State developed a policy requiring bureaus to evaluate programs, projects, and activities, and outlined the requirements for these evaluations. As part of this policy, State required bureaus to submit an evaluation plan for fiscal years 2012 through 2014 that identified the programs and projects they plan to evaluate. However, the Bureau of International Security and Nonproliferation (ISN), which oversees NDF, did not include NDF in its fiscal years 2012 through 2014 evaluation plan. State currently lacks information that could be used to conduct a program evaluation and to improve NDF's management of the program. Project close-out reports are critical to the process of closing out a project and identifying lessons learned, but NDF project close-out reports do not contain information that could enable NDF to better manage its program. For example, not all closeout reports address the results of the project. NDF uses e-mails and face-to-face meetings to communicate lessons learned without documenting them. Established standards suggest that these should be transferred to a database of lessons learned for use in future projects and activities, an action State officials said they are considering taking. NDF has also produced a project management guide to encourage project managers to use standard procedures and write close-out reports, but does not require the use of this guide. In addition, the guide does not detail a format for project managers to use in preparing their close-out reports or list the information that project managers must address. NDF officials said they plan to develop standard operating procedures to address these issues, but had not done so as of November 2012.

What GAO Recommends

GAO recommends that State (1) develop a methodology for determining the amount of carryover reserves needed to meet program requirements, (2) develop guidance for determining when inactive NDF projects should be closed out, (3) conduct periodic program evaluations of NDF, and (4) establish requirements for the types of information to be included in project close-out reports. State agreed with the recommendations.