The management of real property is an area where State could  achieve major cost savings and other operational efficiencies. In total, between fiscal years 1997 through 2002, State sold 129  properties for more than $459 million. State estimates it will sell  additional properties between fiscal years 2003 and 2008 valued at  approximately $300 million. These measures have the potential to result in significant cost savings and  other efficiencies. We  reported in January 2003 that these cost-cutting efforts allowed OBO to  achieve $150 million in potential cost savings during fiscal year 2002. Staffing Requirements for New Embassy Compounds

In addition to ensuring that individual construction projects meet cost and  performance schedules, State must also ensure that new embassies are  appropriately sized. Thus, State has been unable to ensure that it has  “the right people in the right place at the right time with the right skills to  carry out America’s foreign policy”—its definition of diplomatic  readiness. However, since 2001, State has directed significant attention  to improving weaknesses in the management of its workforce planning  and staffing issues that we and others have noted. In addition, State has already taken some  rightsizing actions to improve the cost effectiveness of its overseas  operating practices. For example, State    plans to spend at least $80 million to purchase and renovate a 23-acre,  multi-building facility in Frankfurt, Germany—slated to open in mid- 2005—for use as a regional hub to conduct and support diplomatic  operations;   has relocated more than 100 positions from the Paris embassy to the  regional Financial Services Center in Charleston, South Carolina; and is working with OMB on a cost-sharing mechanism, as previously  mentioned, that will give all U.S. agencies an incentive to weigh the high  costs to taxpayers associated with assigning staff overseas. In addition to these rightsizing actions, there are other areas where the  adoption of industry best practices could lead to cost reductions and  streamlined services. In March 2003, we testified that the  department invested $236 million in fiscal year 2002 on key modernization  initiatives for overseas posts and plans to spend $262 million over fiscal  years 2003 and 2004. State’s OIG and GAO have raised a number of concerns regarding the  department’s management of information technology programs. As State continues to modernize  information technology at overseas posts, it is important that the  department employ rigorous and disciplined management processes on  each of its projects to minimize the risks that the department will spend  large sums of money on systems that do not produce commensurate value. In  recent years, State has made improvements to its strategic planning  process both at headquarters and overseas that are intended to link  staffing and budgetary requirements with policy priorities. Continued  improvements to strategic and performance planning will ensure that State  is setting clear objectives, tying resources to these objectives, and  monitoring its progress in achieving them—all of which are essential to  efficient operations. U.S. Agency for International Development

Now I would like to discuss some of the challenges USAID faces in  managing its human capital, evaluating its programs and measuring their  performance, and managing its information technology and financial  systems. Meanwhile, USAID’s program budget has increased from $7.3 billion in  2001 to about $12 billion in fiscal year 2003, due primarily to significant  increases in HIV/AIDS funding and supplemental funding for emerging  programs in Iraq and Afghanistan. USAID is aware of its human capital management and workforce planning  shortcomings and is now beginning to address some of them with targeted  hiring and other actions. USAID management has acknowledged these  weaknesses and the agency is making efforts to correct them. Major Management Challenges and Program Risks: Department of State.
Why GAO Did This Study

In recent years, funding for the Department of State has increased dramatically, particularly for security upgrades at overseas facilities and a major hiring program. The U.S. Agency for International Development (USAID) has also received more funds, especially for programs in Afghanistan and Iraq and HIV/AIDS relief. Both State and USAID face significant management challenges in carrying out their respective missions, particularly in areas such as human capital management, performance measurement, and information technology management. Despite increased funding, resources are not unlimited. Thus, State, USAID, and all government agencies have an obligation to ensure that taxpayer resources are managed wisely. Long-lasting improvements in performance will require continual vigilance and the identification of widespread opportunities to improve the economy, efficiency, and effectiveness of State's and USAID's existing goals and programs. GAO was asked to summarize its findings from reports on State's and USAID's management of resources, actions taken in response to our reports, and recommendations to promote cost savings and more efficient and effective operations at the department and agency.

What GAO Found

Overall, State has increased its attention to managing resources, and its efforts are starting to show results, including potential cost savings and improved operational effectiveness and efficiency. For example, in 1996, GAO criticized State's performance in disposing of its overseas property. Between fiscal years 1997 through 2002, State sold 129 properties for more than $459 million with plans to sell additional properties between fiscal years 2003 through 2008 for approximately $300 million. Additional sales would help offset costs of replacing about 160 unsecure and deteriorating embassies. State is now taking a more businesslike approach with its embassy construction program, which is estimated to cost an additional $17 billion beginning in fiscal year 2004. Cost-cutting efforts allowed State to achieve $150 million in potential cost savings during fiscal year 2002. State should continue its reforms as it determines requirements for, designs, and builds new embassies. The costs of maintaining staff overseas are generally very high. In response to management weaknesses GAO identified, State has begun addressing workforce planning issues to ensure that the government has the right people in the right places at the right times. State should continue this work and adopt industry best practices that could reduce costs and streamline services overseas. GAO and others have highlighted deficiencies in State's information technology. State invested $236 million in fiscal year 2002 on modernization initiatives overseas and plans to spend $262 million over fiscal years 2003 and 2004. Ongoing oversight of this investment will be necessary to minimize the risks of spending large sums of money on systems that do not produce commensurate value. State has improved its strategic planning to better link staffing and budgetary requirements with policy priorities. Setting clear objectives and tying resources to them will make operations more efficient. GAO and others have also identified some management weaknesses at USAID, mainly in human capital management and workforce planning, program evaluation and performance measurement, information technology, and financial management. While USAID is taking corrective actions, better management of critical systems is essential to safeguard the agency's funds. Given the added resources State and USAID must manage, current budget deficits, and new requirements since Sept. 11, 2001, oversight is needed to ensure continued progress toward effective management practices. This focus could result in cost savings or other efficiencies.