State Offers 14 Allowances to Compensate Its Employees for Costs and Hardships Related to Foreign Assignments

State provides 14 allowances to employees serving overseas to  compensate them for the costs and hardships related to foreign  assignments across four broad categories—cost-of-living, recruitment and  retention incentives, quarters, and other allowances. Cost-of-Living Allowances

Cost-of-living allowances reimburse employees for certain excess costs,  exclusive of any quarters costs, incurred from employment overseas. Recruitment and Retention Incentive Allowances

Recruitment and retention incentive allowances compensate employees  for service at posts where conditions may be difficult or dangerous. Danger pay compensates employees for service in foreign areas  where conditions of civil insurrection, civil war, terrorism, or wartime  conditions threaten physical harm or imminent danger to the health or  well-being of the employee. Quarters Allowances

Quarters allowances reimburse employees for substantially all costs for  either temporary or residence quarters at posts where government  housing is not provided. According to State officials, while most overseas  posts provide government-leased or owned housing for employees and  their families at no cost to the employee, employees can receive the  following three allowances to assist with housing costs:
The living quarters allowance defrays the annual cost of suitable,  adequate living quarters for the employee and his or her family at an  overseas post where government-leased or government-owned  housing is not provided. Other Allowances

State offers two additional allowances designed to reimburse employees  who must maintain an official residence or employees who incur  expenses representing the U.S. government in an official capacity to a  foreign government. State Spent Almost $480 Million Annually on Allowances for Its Employees Serving Overseas, Totaling Almost $2.9 Billion in Fiscal Years 2011– 2016

		State Spent about 70 Percent of Its Total Spending on Allowances from Fiscal Years 2011 through 2016 on the Education Allowance, Hardship Pay, and Post Allowance

State spent $2.9 billion on 14 allowances from fiscal years 2011 through  2016, 70 percent of which went to the three most expensive allowances— the education allowance, hardship pay, and post allowance. The  education allowance accounted for 30 percent of the total ($853.0  million), hardship pay accounted for 25 percent ($732.3 million), and the  post allowance accounted for 15 percent ($417.3 million). The largest decrease in  absolute spending across all allowances during this period was for the  post allowance ($21.1 million). State provided this allowance in about  170 countries worldwide in that period. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to (1) describe the allowances the  Department of State (State) offers its employees serving overseas and (2)  examine the amount State spent annually on these allowances from fiscal  years 2011 through 2016. To examine State’s spending at overseas posts for these allowances, we  analyzed data in fiscal years 2011 through 2016 from State’s  Consolidated American Payroll Processing System and State’s Global  Financial Management System, which are administered by State’s  Bureau of the Comptroller and Global Financial Services (CGFS). All spending in this report is presented in nominal dollars.
Why GAO Did This Study

State spends millions of dollars annually on allowances to compensate its employees for costs and hardships related to foreign assignments. Many of these assignments are critical to U.S. foreign policy objectives. In accordance with U.S. law, State employees working abroad may be reimbursed for costs related to working overseas, including the cost of living in expensive locations, dependent education costs, and the costs of maintaining family members away from post. They also may be eligible for such allowances in locations where they encounter harsh or dangerous living conditions. These allowances cover over 13,000 employees across more than 275 posts.
GAO was asked to review State's administration of allowances for its employees. GAO's September 2017 report focused on State hardship and danger pay allowances ( GAO-17-715 ), while this report (1) describes all of the allowances that State offers its employees serving overseas and (2) examines the amount State spent annually on these allowances in fiscal years 2011 through 2016. GAO analyzed State data and documents and communicated with State officials in Washington, D.C., and Charleston, South Carolina, the location of State's Bureau of the Comptroller and Global Financial Services.

What GAO Found

The Department of State (State) offers 14 different allowances to compensate State employees serving at overseas posts for costs and hardships related to foreign assignments across four categories.
Cost-of-living allowances consist of six types of allowances that reimburse employees for certain costs incurred from employment overseas, such as the cost for dependent education that would normally be free in the United States.
Recruitment and retention incentive allowances consist of three types of allowances that compensate employees for service at posts where conditions may be difficult or dangerous. For example, hardship pay compensates employees for service where conditions differ substantially from those in the United States.
Quarters allowances consist of three types of allowances that reimburse employees for substantially all housing costs at posts where government housing is not provided. For example, the temporary quarters subsistence allowance pays for temporary housing when government-provided housing is not available.
Other allowances consist of two types of allowances that reimburse employees, such as ambassadors, who must maintain an official residence in-country or employees who incur expenses representing the U.S. government in an official capacity to a foreign government.
State spent almost $480 million per year on its 14 allowances for employees serving overseas, totaling almost $2.9 billion in fiscal years 2011 through 2016. Most of this amount went toward cost-of-living and recruitment and retention allowances. During this period, the three largest individual allowances accounted for about 70 percent of the total spending on all allowances. These were the education allowance, about $853.0 million; hardship pay, about $732.3 million; and post allowance, used to offset the higher cost of living at certain posts, about $417.3 million.