State Department:

Options for Addressing Possible Budget Reductions

NSIAD-96-124: Published: Aug 29, 1996. Publicly Released: Aug 29, 1996.

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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.

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.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The congressional committees with jurisdiction have considered action on this matter. State did not reject this approach outright. In its initial comments on the report, State said that GAO did a good job of outlining some approaches to reducing the number of posts. However, State also asserted that a diplomatic presence in all countries with which the United States has diplomatic relations continues to be important.

    Matter: If future funding levels require the State Department to close and reduce the size of posts, Congress may wish to establish an independent panel to review State's proposals in view of the: (1) potential financial benefits to the U.S. government; (2) impact on governmentwide interests and the many agencies that depend on State's services; and (3) potential opposition to closing posts. Although the criteria involved in closing and downsizing overseas diplomatic posts are different, a panel much like the Defense Base Closure and Realignment Commission established to review military installations may be useful.

  2. Status: Closed - Implemented

    Comments: The congressional committees with jurisdiction have considered action on this matter. State is not planning to implement this approach. However, State's new mission performance planning effort for the FY 2000 budget year will directly incorporate the Chiefs of Missions and their country teams into the front end of the resource allocation process.

    Matter: If Congress believes that ambassadors' authority over U.S. government resources should be expanded to reduce spending, it could explore with the executive branch how a pilot program, such as the one recommended by the National Performance Review, could be structured and implemented.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In its initial comments on the report, State disagreed with the recommendation regarding the need to develop a strategy for adjusting to potential budget reductions. Commenting on another recent GAO report, State indicated that its position on this issue remained unchanged, and that the options GAO proposed for adjusting to reduced funding would, if implemented, seriously undermine America's foreign policy infrastructure. However, State is evaluating overseas presence in the context of "rightsizing" posts to better align with strategic objectives.

    Recommendation: The Secretary of State should develop a downsizing strategy that: (1) identifies critical and noncritical functions and their costs; (2) specifies the changes that would be necessary to adjust to potential funding levels; and (3) identifies what legislative actions or modifications to interagency agreements, if any, would be required to implement the changes. At a minimum, State should have a strategy that is based on out-year funding guidance from OMB.

    Agency Affected: Department of State


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