Moreover, larger reductions in State’s funding have been proposed by the Office of Management and Budget (OMB) and the Congress. Objectives, Scope, and Methodology

In response to a request from the Chairman, House Committee on the Budget, we reviewed State’s reform and cost-cutting initiatives and identified options that would enable State to adjust to reduced budgets. State Is Not Prepared to Cope With Proposed Reductions

The Department of State has not developed a comprehensive strategy to restructure its operations to adjust to potential funding reductions. Believing that substantial funding reductions would severely jeopardize its ability to conduct foreign policy and achieve U.S. goals, State has decided not to plan how it would accommodate proposed budget reductions. State does not have a plan for implementing these relocations. Opportunities for Streamlining Functions

Reducing or eliminating State’s role in some foreign policy and consular functions could lead to cost reductions at headquarters and overseas posts, where State has a broad mandate to represent and protect U.S. interests and provide services to a wide range of customers, including the Congress, other U.S. agencies, the private sector, and the American public. By eliminating the positions of 6 headquarters staff and the 45 labor attachés overseas, State could reduce costs by about $7.4 million annually. Options for Recovering Costs of Some Services

State could recover some costs by charging for selected services and products. Options for Reducing Overseas Presence

Overseas posts consume almost 70 percent of State’s budget. Ambassador to Senegal submitted a study concluding that the chiefs of mission need more authority and control over U.S. government programs, personnel, and resources under their management. State’s Support Costs Can Be Reduced

The State Department spends two-thirds of its budget on support operations. These include (1) recouping the full cost of support provided to other agencies overseas, (2) hiring more U.S. family members to fill overseas staffing positions, (3) increasing employees’ payments for medical services, (4) increasing the length of overseas tours, and (5) reducing its costs for Marine guard detachments at overseas posts by deactivating certain units or shifting its cost to the Department of Defense. These options include (1) reducing support staffing levels in headquarters, (2) reviewing employees’ benefits and allowances, (3) expanding the use of foreign nationals in support positions at overseas posts, and (4) disposing of excess and underused properties overseas.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of State's reform and cost-cutting efforts and identified options that would enable State to adjust to reduced budgets.

What GAO Found

GAO found that: (1) State does not have a comprehensive strategy to restructure and downsize its operations to meet potential funding reductions; (2) State has reduced its staff and implemented some cost reduction measures, but it has been reluctant or unable to reduce its overseas presence and the scope of its activities or change its business practices to accommodate proposed budget reductions; (3) State believes that substantial downsizing would severely hamper its achievement of U.S. foreign policy goals and irreparably harm U.S. interests; (4) because of expected governmentwide budget constraints and congressional and Office of Management and Budget (OMB) proposals for decreases in State funding, State is unlikely to receive the level of funding needed to maintain its existing activity; (5) State could reduce costs by reducing duplication among its bureaus and with outside agencies with which it shares program responsibility, streamlining or eliminating some informational reports, eliminating or consolidating certain personnel positions, and recovering some service costs from users; (6) State has the opportunity to significantly reduce costs by closing or reducing the size of overseas posts, which consume about 70 percent of State's budget; (7) State could reduce support costs, which constitute two-thirds of its budget, by recouping support costs from other agencies, hiring more U.S. family members for overseas positions, adjusting employee benefits and allowances, increasing tour lengths, reducing costs for Marine guards at overseas posts, reducing headquarters support staff, using more foreign nationals in support positions, disposing of unneeded overseas real estate, and reengineering and outsourcing administrative functions; and (8) expanding the authority of chiefs of mission over all U.S. government fiscal and staffing resources at overseas posts would be one way to accomplish cost reductions.