Export Promotion
Increases in Commercial Service Workforce Should Be Better Planned Gao ID: GAO-10-874 August 31, 2010Since the recent recession, policymakers have emphasized the role exports can play in strengthening the U.S. economy and in creating higher paying jobs. In March 2010 the President signed an Executive Order creating the National Export Initiative (NEI), with a goal of doubling U.S. exports in 5 years. However, since 2004 the workforce of the U.S. and Foreign Commercial Service (CS) has shrunk, calling into question the ability of this key agency to increase its activities to assist U.S. businesses with their exports. In response to a conference committee mandate, GAO reviewed (1) how well CS managed its resources from 2004 to 2009, and (2) the completeness of CS's workforce plans and the quality of its fiscal year 2011 budget request. GAO analyzed data from the Departments of Agriculture, Commerce, and State; reviewed agency documents; and interviewed agency officials.
CS had management control weaknesses over its resources from 2004 to 2009. During this period, CS's budgets remained essentially flat as per capita personnel costs and administrative costs increased. However, CS leadership did not recognize the long-term implications of these changes because it lacked key financial and workforce information and risk analysis necessary for good management control. CS continued to pay fees associated with positions it maintained in U.S. embassies that were vacant but not officially eliminated. As CS's financial constraints grew, officials delayed their impact by using a variety of financial management practices. For example, the International Trade Administration (ITA), CS's parent agency, attributed some of CS's centralized costs to other units. However, as the availability of offsetting funds declined and costs continued growing, CS leadership failed to recognize the risks from these changes in accordance with good management controls, and reached a "crisis" situation in 2009. Officials froze hiring, travel, training, and supplies, compromising CS's ability to conduct its core business. CS's workforce declined by about 14 percent from its peak level in 2004 through attrition--affecting the mix and distribution of personnel. CS intends to rebuild its workforce but lacks key planning elements for doing so, and its budget request has weaknesses that could affect its ability to meet its goals. CS will have a central role in implementing the NEI. The President's 2011 budget requested $321 million for CS, $63 million more than its 2010 appropriation. The budget would fund a major staff increase. CS is allocating $5.2 million of its 2010 appropriation to begin recruiting new staff. However, as new executive-level leadership was arriving, GAO found that CS lacked key planning elements, including a clear sense of strategic direction and an analysis to determine its workforce needs. Also, it had not updated its workforce plans to address staffing gaps since fiscal year 2007. Adding more staff could be delayed because CS's human resources office is itself understaffed and because CS requires up to 2 years to hire and train new Foreign Service Officers. GAO also found that the 2011 budget request, though sound in many respects, has weaknesses; it lacks some documentation, and it lacks risk analysis and contingency plans for highly variable program costs, which could lead to cost overruns. GAO recommends to the Secretary of Commerce that CS (1) strengthen management controls, (2) improve workforce planning, and (3) improve cost estimating related to CS's budget estimate. Commerce agreed with our findings and recommendations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Loren Yager Team: Government Accountability Office: International Affairs and Trade Phone: (202) 512-4347GAO-10-874, Export Promotion: Increases in Commercial Service Workforce Should Be Better Planned
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
August 2010:
Export Promotion:
Increases in Commercial Service Workforce Should Be Better Planned:
GAO-10-874:
GAO Highlights:
Highlights of GAO-10-874, a report to congressional committees.
Why GAO Did This Study:
Since the recent recession, policymakers have emphasized the role
exports can play in strengthening the U.S. economy and in creating
higher paying jobs. In March 2010 the President signed an Executive
Order creating the National Export Initiative (NEI), with a goal of
doubling U.S. exports in 5 years. However, since 2004 the workforce of
the U.S. and Foreign Commercial Service (CS) has shrunk, calling into
question the ability of this key agency to increase its activities to
assist U.S. businesses with their exports.
In response to a conference committee mandate, GAO reviewed (1) how
well CS managed its resources from 2004 to 2009, and (2) the
completeness of CS‘s workforce plans and the quality of its fiscal
year 2011 budget request. GAO analyzed data from the Departments of
Agriculture, Commerce, and State; reviewed agency documents; and
interviewed agency officials.
What GAO Found:
CS had management control weaknesses over its resources from 2004 to
2009. During this period, CS‘s budgets remained essentially flat as
per capita personnel costs and administrative costs increased.
However, CS leadership did not recognize the long-term implications of
these changes because it lacked key financial and workforce
information and risk analysis necessary for good management control.
CS continued to pay fees associated with positions it maintained in
U.S. embassies that were vacant but not officially eliminated. As CS‘s
financial constraints grew, officials delayed their impact by using a
variety of financial management practices. For example, the
International Trade Administration (ITA), CS‘s parent agency,
attributed some of CS‘s centralized costs to other units. However, as
the availability of offsetting funds declined and costs continued
growing, CS leadership failed to recognize the risks from these
changes in accordance with good management controls, and reached a
’crisis“ situation in 2009. Officials froze hiring, travel, training,
and supplies, compromising CS‘s ability to conduct its core business.
CS‘s workforce declined by about 14 percent from its peak level in
2004 through attrition-”affecting the mix and distribution of
personnel.
CS intends to rebuild its workforce but lacks key planning elements
for doing so, and its budget request has weaknesses that could affect
its ability to meet its goals. CS will have a central role in
implementing the NEI. The President‘s 2011 budget requested $321
million for CS, $63 million more than its 2010 appropriation. The
budget would fund a major staff increase. CS is allocating $5.2
million of its 2010 appropriation to begin recruiting new staff.
However, as new executive-level leadership was arriving, GAO found
that CS lacked key planning elements, including a clear sense of
strategic direction and an analysis to determine its workforce needs.
Also, it had not updated its workforce plans to address staffing gaps
since fiscal year 2007. Adding more staff could be delayed because CS‘
s human resources office is itself understaffed and because CS
requires up to 2 years to hire and train new Foreign Service Officers.
GAO also found that the 2011 budget request, though sound in many
respects, has weaknesses; it lacks some documentation, and it lacks
risk analysis and contingency plans for highly variable program costs,
which could lead to cost overruns.
Table: CS Staff Lost from 2004 to 2009, and Planned Staff Increases in
2011:
Type of staff: Foreign Service Officers;
Number of staff in 2004: 246;
Staff lost from 2004 to 2009: 13;
Increase in staff based on 2011 request: 59;
Net change: 46.
Type of staff: Locally employed staff;
Number of staff in 2004: 944;
Staff lost from 2004 to 2009: 128;
Increase in staff based on 2011 request: 138;
Net change: 10.
Type of staff: Civil Service;
Number of staff in 2004: 541;
Staff lost from 2004 to 2009: 98;
Increase in staff based on 2011 request: 71;
Net change: -27.
Type of staff: Total;
Number of staff in 2004: 1,731;
Staff lost from 2004 to 2009: 239;
Increase in staff based on 2011 request: 268;
Net change: 29.
Source: GAO analysis of Commerce data.
[End of table]
What GAO Recommends:
GAO recommends to the Secretary of Commerce that CS (1) strengthen
management controls, (2) improve workforce planning, and (3) improve
cost estimating related to CS‘s budget estimate. Commerce agreed with
our findings and recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-874] or key
components. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Background:
CS's Management of Increasing Costs and Declining Staff Levels from
2004 to 2009 Had Weaknesses:
CS Lacks Key Planning Elements to Rebuild Its Workforce, and Its 2011
Budget Request Has Some Weaknesses:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: U.S. Agencies Promote Exports with Varying Levels of
Funding and Different Promotion Models:
Appendix III: Assessment of ITA's 2011 Budget Estimate for CS Using
GAO Cost Estimating and Assessment Guide:
Appendix IV: Comments from the Department of Commerce:
Appendix V: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: CS's Appropriations and Obligations, Fiscal Years 2004-2009:
Table 2: CS's Estimated and Actual FTE Levels, Fiscal Years 2004-2009:
Table 3: Change in CS Staff by Type, Fiscal Years 2004-2009:
Table 4: Change in CS Staff by Location, Fiscal Years 2004-2009:
Table 5: CS Staff Lost Over the Past 5 Years and Planned Increase in
Staff Based on 2011 Budget Request:
Table 6: FSOs Serving in the United States in the Fourth Quarter of
Fiscal Year 2009:
Table 7: Extent to Which CS Budgeting Methods Reflect GAO Best
Practices:
Figure:
Figure 1: Export Promotion Budgets for Commerce and USDA, Fiscal Years
2004-2009:
Abbreviations:
CS: U.S. and Foreign Commercial Service:
CSCSP: Capital Security Cost Sharing Program:
FAS: Foreign Agricultural Service:
FSO: Foreign Service Officer:
FTE: full-time equivalent:
ICASS: International Cooperative Administrative Support Services:
ITA: International Trade Administration:
LES: locally employed staff:
NEI: National Export Initiative:
OMB: Office of Management and Budget:
ORAM and DRAM: Overseas and Domestic Resource Allocation Models:
USDA: U.S. Department of Agriculture:
USEAC: U.S. Export Assistance Center:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
August 31, 2010:
The Honorable Barbara A. Mikulski:
Chairwoman:
The Honorable Richard C. Shelby:
Ranking Member:
Subcommittee on Commerce, Justice, Science, and Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable Alan B. Mollohan:
Chairman:
The Honorable Frank R. Wolf:
Ranking Member:
Subcommittee on Commerce, Justice, Science, and Related Agencies:
Committee on Appropriations:
House of Representatives:
With the recent recession and high unemployment rate, U.S.
policymakers are looking for ways to improve the economy and create
jobs. One avenue they are exploring is expanding exports. U.S. exports
of goods and services[Footnote 1] have grown steadily in recent years.
In 2009, U.S. exports of goods and services reached about $1.5
trillion, approximately a $0.5 trillion or 55 percent increase since
the beginning of the decade. Policymakers believe that investing more
in promoting U.S. exports can strengthen the economy and generate
higher paying jobs. On March 11, 2010, President Obama signed an
Executive Order creating the National Export Initiative (NEI), with a
presidential cabinet to oversee trade promotion and a goal of doubling
exports in the next 5 years.[Footnote 2] The Secretary of Commerce
committed to supporting this goal by employing the U.S. and Foreign
Commercial Service (CS) in assisting more U.S. companies to export,
with a 2-year goal of helping more companies that already export to
one country to start exporting to new markets. However, since 2004 the
workforce of CS, a key agency in promoting the export of U.S.
manufactured goods and services, has declined, calling into question
its ability to increase its activities and represent U.S. business
interests internationally.
In response to a conference committee mandate,[Footnote 3] we reviewed
(1) how well CS has managed its resources over the past 5 years, and
(2) the completeness of CS's workforce plans and the soundness of its
fiscal year 2011 budget request. In addition, we are providing
information on how CS export promotion funding compares with funding
for the Department of Agriculture (USDA) and Department of State
(State) for analogous activities from 2004 to 2009.[Footnote 4]
We used GAO's standards for internal control[Footnote 5] to assess how
well CS managed its resources from 2004 to 2009. We analyzed data
provided by CS on staffing losses and gains domestically and overseas
by post, identifying the number of civil servants, political hires,
Foreign Service Officers (FSO), and locally employed staff (LES). We
also analyzed CS's appropriations and full-time equivalent (FTE)
staffing levels from 2004 through 2009 and supporting information, and
interviewed CS officials. To determine how complete CS's plans for
rebuilding its workforce are, we reviewed CS's 2010 and 2011 budget
requests and available workforce planning and human capital resource
information, interviewed CS officials about their practices and how
decisions were made, and evaluated their efforts using GAO's five key
principles of effective strategic workforce planning.[Footnote 6]
(Further information on our scope and methodology is provided in
appendix I.) To evaluate the soundness of CS's 2011 budget request, we
assessed the request using the 12 elements GAO has identified as best
practices for an effective cost estimate in our GAO Cost Estimating
and Assessment Guide.[Footnote 7] Appendix III explains the 12
principles and associated characteristics in detail. We also
interviewed the agency officials responsible for developing the
request and reviewed related information. We conducted this
performance audit from September 2009 to August 2010, in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Background:
CS Plays a Major Role in Export Promotion:
CS plays a major role in U.S. export promotion activities as the
primary agency providing export assistance to individual businesses,
especially small-and medium-sized businesses. It is a unit of the
Department of Commerce's (Commerce) International Trade Administration
(ITA), and its services include the following:
* Counseling and intelligence. CS assists U.S. businesses in
understanding foreign markets and developing export marketing plans
including overseas product pricing, best prospects, market entry
strategies, and distribution channels, and facilitates access to
export financing and public and private export promotion assistance.
* Matchmaking. CS organizes and participates in trade events and
forums, and introduces U.S. businesses to qualified overseas agents,
distributors, end users, and other partners.
* Advocacy services. CS alerts U.S. firms to major overseas projects
and procurement, and advocates on behalf of U.S. firms bidding on
projects.
CS has about 300 staff members in U.S. Export Assistance Centers
(USEAC) located throughout the United States who work with firms that
are new to exporting or want to expand their exporting efforts. USEACs
provide counseling and planning services, such as working with firms
to select target markets and develop marketing plans. They also
coordinate with CS posts overseas, which provide matchmaking,
advocacy, and market intelligence services in the target markets.
About 1,000 CS international field staff--made up of FSOs and LES--are
located at posts around the world to provide these services. LES are
generally natives of the countries in which they are located, making
them well-suited to help U.S. companies make local connections.
[Footnote 8] USEAC staff and overseas post staff are supported by
about 180 staff at headquarters in Washington, D.C.
For the purposes of this report we reviewed CS activities related to
providing information, counseling, and assistance for exports of
services and manufactured goods, which is CS's main focus. USDA and
State also conduct export promotion activities.[Footnote 9] USDA's
Foreign Agricultural Service focuses on promoting commodities produced
by U.S. farmers and ranchers. State supports CS's efforts in countries
where CS does not have a presence (see app. II).[Footnote 10] However,
U.S. export promotion activities are multifaceted and also include
reducing trade barriers, government-to-government advocacy, financing
and other monetary assistance, and other activities.
Export Promotion Is a Priority of the Current Administration:
U.S. plans to increase exports are generally articulated in the Trade
Promotion Coordinating Committee's National Export Strategy, which is
issued annually. Established in 1993, the Trade Promotion Coordinating
Committee is an interagency group established to provide a framework
to coordinate the export promotion and export financing activities of
the U.S. government.[Footnote 11] As of 2010, 20 U.S. agencies have a
role in export promotion.[Footnote 12] However, we have reported for a
number of years that the annual National Export Strategies have
limitations that affect the Coordinating Committee's ability to
coordinate trade promotion activities. For example, National Export
Strategies provide limited information on member agencies' goals and
progress, relative to broad national priorities, to guide future
efforts.[Footnote 13]
Another effort is under way that could facilitate better interagency
coordination. On January 27, 2010, President Obama announced the NEI
in an effort to support U.S. economic recovery following the
recession. A newly created Export Promotion Cabinet that reports to
the President will coordinate and implement the goals of the NEI, and
is expected to deliver a report to the President with a plan to
implement the goals of the NEI in September 2010. While many aspects
of the NEI are still in the planning stages, the NEI will have three
main components:
* Educating U.S. companies about export opportunities; directly
connecting them with new customers, partners, and distributors
overseas; and advocating for their interests.
* Providing access to credit through the Export-Import Bank of the
United States with a special focus on small-and medium-sized
businesses.
* Removing trade barriers.
The first component of the NEI, educating U.S. companies about export
opportunities, will be carried out in large part by the Department of
Commerce through CS.[Footnote 14]
CS's Budget Is Driven by Personnel and Administrative Costs:
The majority of CS's costs are related to the personnel that staff
CS's headquarters and its domestic and overseas export assistance
posts. According to CS, 60 percent of its budget in 2009 was
associated with personnel costs, including salaries, benefits, and FSO
support costs for officers posted overseas. FSO support costs include
relocation, travel, training, home leave allowances, and shipping and
storage of household goods. Administrative payments to State
associated with having personnel stationed overseas, including
International Cooperative Administrative Support Services (ICASS) and
Capital Security Cost Sharing Program (CSCSP) charges,[Footnote 15] as
well as payments to ITA, CS's parent agency, for shared overhead
totaled 29 percent.[Footnote 16] The remaining 11 percent included CS-
specific overhead costs including rent, communications, utilities,
program-related travel, supplies, printing, and equipment costs as
well as costs for developing and enhancing software for CS worldwide.
CS charges fees for export promotion services that benefit individual
companies, such as connecting them with potential buyers and
distributors. CS uses the fees it collects to cover the costs of the
related program expenses. CS reported that it collected approximately
$10 million in fees in 2008.
CS's Management of Increasing Costs and Declining Staff Levels from
2004 to 2009 Had Weaknesses:
CS leadership lacked systematic information about CS's workforce, and
did not fully recognize or adequately respond to program risks created
by growing administrative costs and declining staff levels from 2004
to 2009. Management control standards require entities to ensure that
program managers have systems to provide needed operational and
financial information in a timely manner to carry out their management
and oversight responsibilities.[Footnote 17] In the case of CS, the
most important management responsibilities were related to workforce
decisions, since workforce expenses are the largest portion of CS's
budget. Additionally, these standards require management to identify
and analyze the relevant risks an agency faces from internal and
external sources so it can proactively manage them. From 2004 to 2009,
CS's budgets remained essentially flat as per capita personnel costs
and administrative costs increased.[Footnote 18] Although CS
leadership was aware of this trend, they did not have processes in
place to analyze and respond to the long-term financial implications
of these costs on CS's workforce. Additionally, CS was not fully aware
of the costs associated with positions it maintained in U.S. embassies
that were vacant but not officially eliminated and did not take steps
that would have saved money on them. As CS's financial constraints
grew, officials delayed their impact through a variety of financial
management practices such as using unobligated funds from prior years'
appropriations. However, as the availability of these offsetting funds
declined and costs continued growing, CS leadership failed to
recognize the risks entailed by the financial problems, and the
organization reached a "crisis" situation in 2009. Officials froze
hiring, travel, training, and supplies, compromising CS's ability to
conduct its core business. CS's workforce declined by about 240 staff
from its peak level in 2004 through attrition--affecting the mix and
distribution of personnel.
CS's Budgets Were Flat as Costs Increased:
From 2004 to 2009, CS's budgets remained essentially flat, while at
the same time the agency faced increasing per capita personnel costs.
CS appropriations grew about 1.9 percent on average per year during
that time frame. This represented a total increase of about 10 percent
from 2004 to 2009, as shown in table 1.
Table 1: CS's Appropriations and Obligations, Fiscal Years 2004-2009:
CS appropriations:
2004: $217 million;
2005: $222 million;
2006: $232 million;
2007: $232 million;
2008: $237 million;
2009: $238 million.
CS prior year funding obligated:
2004: $12 million;
2005: $12 million;
2006: $12 million;
2007: $11 million;
2008: $7 million;
2009: $5 million.
CS funds obligated:
2004: $225 million;
2005: $227 million;
2006: $236 million;
2007: $235 million;
2008: $242 million;
2009: $243 million.
Source: Presidents' budgets, appropriations bills, and internal CS
budget documents.
Note: In internal CS budget documents, funds obligated are equal to
the sum of appropriations and prior year funding obligated. However,
with the exception of 2009, CS appropriations in appropriations
legislation, which are listed here, differ from the amounts listed in
CS internal budget documents.
[End of table]
Although CS's budget was adjusted for inflation and other increases
such as pay raises and changes in benefit contribution rates, its
annual increases did not cover its full costs, according to CS
officials. For example, administrative costs grew from 20 percent ($44
million) of its obligations in 2004 to 30 percent ($72 million) in
2009.[Footnote 19] CS officials calculated the total cumulative
funding gap for 2004 to 2009--the difference between its annual
appropriations and full costs--to be $24 million.
Since 2004, CS faced increased administrative payments to State that
consumed larger shares of its funds. One factor increasing costs was
State's CSCSP, which began in 2005 to support the building of new
secure embassies and consulates. The fee was phased in over a 5-year
period, with the full annual charge levied for the first time in 2009.
In 2005, the fee for CS was about $3.1 million, and in 2009 it was
$23.7 million. Other factors included increasing costs for personnel,
benefits, and rent, which include adjustments for inflation.
CS made up the difference by not filling positions. CS budget requests
were based partly on an estimated number of FTEs. CS overestimated the
number of FTEs it would support with its budget every year, as shown
in table 2. The actual numbers averaged 142 FTEs, or 11 percent, less
than their estimates. CS used the funds it was provided based on these
overestimated FTE levels to pay expenses such as administrative costs.
The fact that this happened over so many years indicates that CS did
not fully recognize how its workforce was being affected by increasing
administrative costs.
Table 2: CS's Estimated and Actual FTE Levels, Fiscal Years 2004-2009:
FTEs in budget justification (estimated/requested):
2004: 1,286;
2005: 1,386;
2006: 1,386;
2007: 1,254;
2008: 1,254;
2009: 1,137.
FTEs actual:
2004: 1,254;
2005: 1,238;
2006: 1,149;
2007: 1,106;
2008: 1,061;
2009: 1,041.
Difference between requested and actual FTEs:
2004: 32;
2005: 148;
2006: 237;
2007: 148;
2008: 193;
2009: 96.
Source: Congressional budget justifications.
Note: FTE numbers in this table include some, but not all, LES.
[End of table]
CS Lacked Financial and Workforce Information Necessary to Manage Its
Programs:
CS leadership had information about growing costs as early as 2006,
but they did not recognize the severity of the situation. CS had data
about the growth in unfunded adjustments to base, which are
essentially the difference between what CS needed in terms of funding
to cover increased costs and the appropriation it received. However,
CS leaders said they were not fully aware of the long-term financial
and workforce implications of increasing costs until 2009 when CS
switched to a new financial management system, which according to CS
officials illuminated how little discretionary funding was available.
In 2009, they undertook an exercise to analyze and more fully
understand the costs that affected the CS budget. Additionally, CS
lacks an automated workforce information system to provide up-to-date
staffing information, which also has financial implications. For
example, without this information CS could not easily review ICASS and
CSCSP charges in order to confirm whether State's charges for these
activities were correct. Currently, CS officials compile information
from quarterly reports supplied by the posts to determine staffing
totals. The lack of risk assessment and the lack of workforce
information are both management control weaknesses.
CS Did Not Eliminate Vacant Positions or Restructure Its Operations:
CS has incurred costs for administrative payments related to overseas
staff that officials consider to be "fixed costs," but which can be
reduced by eliminating vacant positions, downsizing, or eliminating
offices. For example, CS incurs CSCSP charges for positions officially
established at overseas posts, regardless of whether there is a person
in the position. CS has access to information on the number of
positions at its overseas posts through State's Executive Agency
Personnel Support system, which tracks the number of positions at
posts. The information is used to determine the number of positions CS
is paying for including the number of vacant positions at posts.
However, Commerce officials indicated they find the system difficult
to use, and they do not use the information to manage their overseas
workforce. The only way to eliminate a CSCSP charge is to officially
eliminate the position.[Footnote 20] In 2010, there were about 200
unfilled positions at posts incurring CSCSP charges that CS did not
eliminate. Charges for vacant positions cost CS approximately $2
million annually, according to a CS budget official. The last time CS
eliminated a significant number of vacant positions was in 2004.
According to a senior CS official, CS recognized that State's CSCSP
charge would put a cost on every overseas position whether or not it
was filled, so in 2004 before the new charge was implemented, the
Office of International Operations reviewed its global presence and
eliminated all non-essential positions. CS may also have incurred
ICASS charges for vacant positions. To avoid ICASS charges for vacant
positions, CS must inform State that the position will not be filled
in the upcoming fiscal year.
Regarding office closures, CS last eliminated offices under its
Transformational Commercial Diplomacy Initiative, which was planned
beginning in 2006 and implemented starting in 2007. The initiative was
focused both on realigning CS's efforts with its mission to focus on
emerging markets, and on rightsizing its operations. Under the
initiative, 23 offices were closed, mainly in Europe, and 8 offices
were supposed to be opened. However, as of the end of 2009, only 3 of
the 8 offices were open and staffed.
Financial Management Practices Temporarily Offset Funding Constraints:
Several financial management practices temporarily helped mitigate
CS's growing funding constraints. These included using unobligated
funds from prior years' appropriations, redistributing centralized
costs to other ITA units, and redirecting user fees to ensure CS did
not spend more funds than were authorized.
First, CS used its balance of unspent funds from prior years'
unobligated appropriations to cover funding shortfalls. However,
Congress changed CS's appropriations from no-year funding to 2-year
funding in 2006. Whereas CS obligated $12 million in unspent funds in
2004, in 2009 it obligated only $5 million, as unobligated funds from
prior years were depleted and some funds were no longer available.
Second, ITA officials told us they attributed some centralized costs
that would have been charged to CS to other ITA programs in order to
help CS with its financial problems. For example, in 2009, ITA
redistributed $3 million of CS's centralized costs to other ITA units
(Market Access and Compliance, Manufacturing and Services, and Import
Administration) to assist CS. Centralized costs include headquarters
rent, utilities, information technology support, and secretarial
travel. ITA normally apportions these costs based on individual
staffing levels.
Third, CS fee collections were an additional source of revenue that CS
used to address its resource constraints. CS obligations of fees and
reimbursements averaged $9.8 million a year from 2004 through 2009.
[Footnote 21] CS's domestic and overseas offices create surplus fees
when they charge exporters for services, and funds remain after the
bills associated with the service are paid.[Footnote 22] Historically,
surplus service fees were used at the location where they were earned
to pay for program activities in support of CS's mission such as
travel with an ambassador to another city to promote exports. As
funding constraints increased, CS management began centrally
controlling these fees, requiring posts to seek permission to use
them. CS officials told us they took control over these surplus fees
to ensure they would not spend more money than Congress authorized and
violate the Antideficiency Act.[Footnote 23]
CS Froze Hiring, Travel, Training, and Supplies, which Compromised
Operations:
Once the growth in costs reached what CS officials characterized as a
"crisis" situation, CS took a number of actions such as imposing a
hiring freeze in 2008 and 2009.[Footnote 24] CS also cut travel funds
by 28 percent from 2008 to 2009, and saved money by asking FSOs to
stay in their current locations rather than relocating to them to new
posts. CS also cut training and supplies. According to a senior CS
official, currently CS has no discretionary travel or training funds.
Although CS took actions to mitigate the impact of increasing costs as
noted above, they were not timely and reflected management control
weaknesses. These weaknesses include the lack of a process for
promptly identifying risks as they emerge and lack of analysis of the
possible effect these mitigating actions could have on CS's ability to
effectively and efficiently carry out its operations. CS did not
identify a long-term sustainable solution to the change in its
financial situation.
Staff in both the domestic and the foreign field offices commented in
a 2009 assessment of their operations that staff shortages and budget
constraints, including a lack of travel funds, compromised CS's
ability to conduct its core business.[Footnote 25] In the domestic
field offices, staffing shortages and budgetary constraints were
mentioned as weaknesses or threats in seven of eight regions. One
domestic region stated, "With a hiring freeze in place and severe
budget limitations, current vacancies cannot be filled in USEACs on a
timely basis. As well, important travel necessary to reach
clients/partners, engage in professional development, and lead efforts
on trade missions and at trade shows cannot be funded." Likewise, all
six regions overseas indicated that lack of resources was a weakness,
and four of the six identified staffing shortages as a problem. For
example, one overseas region stated that "budget limitations constrict
the extent to which posts can travel, which directly impacts their
ability to find and assist clients." Additionally, the capacity to
keep up with ever-growing demand for services was mentioned as a
problem by some domestic and overseas locations.
CS's Workforce Declined by Almost 14 Percent:
As a result of CS's flat budget, the size of its workforce declined
through attrition from 2004 to 2009, and the composition and location
of personnel shifted. During this period, CS's workforce declined by
over 200 staff, from 1,731 to 1,492. The number of FSOs declined by 5
percent, LES by 14 percent, and civil servants by 18 percent (see
table 3). The number of staff in foreign field offices declined by 12
percent, in domestic field offices by 9 percent, and at headquarters
by 28 percent (see table 4).
Table 3: Change in CS Staff by Type, Fiscal Years 2004-2009:
FSO:
Number of staff in 2004: 246;
Number of staff in 2009: 233;
Change in staff, 2004 to 2009: -13;
Percent change, 2004 to 2009: -5.3%.
LES:
Number of staff in 2004: 944;
Number of staff in 2009: 816;
Change in staff, 2004 to 2009: -128;
Percent change, 2004 to 2009: -13.6%.
Civil Service:
Number of staff in 2004: 541;
Number of staff in 2009: 443;
Change in staff, 2004 to 2009: -98;
Percent change, 2004 to 2009: -18.1%.
Total:
Number of staff in 2004: 1,731;
Number of staff in 2009: 1,492;
Change in staff, 2004 to 2009: -239;
Percent change, 2004 to 2009: -13.8%.
Source: GAO analysis of Commerce data.
[End of table]
Table 4: Change in CS Staff by Location, Fiscal Years 2004-2009:
Foreign field offices:
Number of staff in 2004: 1,190;
Number of staff in 2009: 1,049;
Change in staff, 2004 to 2009: -141;
Percent change, 2004 to 2009: -11.8%.
Domestic field offices:
Number of staff in 2004: 286;
Number of staff in 2009: 260;
Change in staff, 2004 to 2009: -26;
Percent change, 2004 to 2009: -9.1%.
Headquarters:
Number of staff in 2004: 255;
Number of staff in 2009: 183;
Change in staff, 2004 to 2009: -72;
Percent change, 2004 to 2009: -28.2%.
Total:
Number of staff in 2004: 1,731;
Number of staff in 2009: 1,492;
Change in staff, 2004 to 2009: -239;
Percent change, 2004 to 2009: -13.8%.
Source: GAO analysis of Commerce data.
[End of table]
CS Lacks Key Planning Elements to Rebuild Its Workforce, and Its 2011
Budget Request Has Some Weaknesses:
Although CS is taking steps to rebuild its workforce, it lacks key
elements in its workforce planning, and its 2011 budget request has
some weaknesses that could affect its ability to meet its goals. In
2010, CS received an appropriation of $258 million, of which CS
planned to use $5.2 million to begin reversing CS staffing declines.
In addition, the President's 2011 budget asks for a major CS staffing
increase. The 2011 budget requests $321 million for CS, $63 million
more than its 2010 appropriation. Although CS began the process of
reversing its previous years' staffing declines through these funding
increases, we found that CS has not been following workforce planning
principles and lacks current workforce plans for utilizing the new
staff. CS's understaffed Office of Foreign Service Human Resources and
the long lead time needed to hire and train FSOs could delay staffing
increases. Additionally, we found that its budget development
methodology was sound in many respects, but had a few weaknesses that
could affect CS's ability to meet its goals, such as not assessing
potential risks of estimated costs, which if overly optimistic could
lead to cost overruns.
CS Plans to Rebuild Its Workforce:
CS Is Increasing Staff to Implement the NEI:
CS is rebuilding its workforce and taking other measures to fulfill
its major role in implementing the NEI in 2011.[Footnote 26] Commerce,
through the Trade Promotion Coordinating Committee, leads the
administration's trade promotion efforts and will "operationalize" the
NEI, according to the Secretary of Commerce. To that end, the
Secretary indicated that with the additional resources requested in
2011, ITA expects to hire new trade experts--mostly in foreign
countries--to advocate and find customers for U.S. companies, allowing
CS to help more than 23,000 clients to begin or grow their export
sales in 2011. Additionally, CS will focus on increasing the number of
small-and medium-sized businesses exporting to more than one market by
50 percent over the next 5 years.
CS already began the process of rebuilding its workforce by
designating $5.2 million of its 2010 appropriations to expand its
presence in critical emerging markets. CS planned to use the funds to
develop a more robust presence in challenging and developing markets
in Africa, Eastern Europe, and Asia, where its presence was limited.
CS projected hiring a total of 30 new positions in 2010--8 FSOs and 22
LES. In April 2010, CS approved 17 hiring freeze exemptions. It
extended offers to 14 certified applicants; 11 individuals accepted
the offers, according to a CS official. CS hopes to bring them on in
August 2010 and anticipates they will fill vacancies in domestic and
overseas locations.[Footnote 27] These individuals are filling
positions created by retirements and attrition that occurred in 2008
and 2009. CS also expects that at least another 7 current officers
will leave the service in 2010. CS may fill those potential vacancies
as it completed the process of identifying and creating a list of
certified applicants, on July 12, 2010.
However, a senior CS official noted that rather than using funds to
hire people in 2010, CS is focused on creating more exports sooner by
increasing marketing, the number of companies going on trade missions,
the number of potential trade partners brought to the United States on
reverse trade missions, and matchmaking efforts. The rationale was to
focus on activities that could provide quick results, according to CS
officials, as it takes about 18 months to prepare a company to export,
whereas it takes about 6 to 9 months to assist a company that has
already exported to one market with exporting to a second market.
CS Requested a Major Staffing Increase for 2011:
CS requested a major staffing increase for 2011, seeking to hire a
total of 268 staff in support of the NEI. CS plans to hire 130 FSOs
and civil servants, a 20 percent increase over its 2010 level of 659
staff in these categories. Additionally, CS plans to hire 138 LES, a
17 percent increase over its 2010 level of 795 staff.[Footnote 28] The
requested increase would reverse the 239-person decline in CS's
overall staffing that occurred from 2004 to 2009. Table 5 identifies
the staff CS lost over the past 5 years and the number of staff it
plans to hire in 2011.
Table 5: CS Staff Lost Over the Past 5 Years and Planned Increase in
Staff Based on 2011 Budget Request:
FSO:
Staff lost, 2004 to 2009: 13;
Planned increase in staff based on 2011 budget request: 59;
Net change: 46.
LES:
Staff lost, 2004 to 2009: 128;
Planned increase in staff based on 2011 budget request: 138;
Net change: 10.
Civil Service[A]:
Staff lost, 2004 to 2009: 98;
Planned increase in staff based on 2011 budget request: 71;
Net change: -27.
Total:
Staff lost, 2004 to 2009: 239;
Planned increase in staff based on 2011 budget request: 268;
Net change: 29.
Source: GAO analysis of Commerce staffing data.
[A] Civil Service includes staff serving both in Washington, D.C. and
at USEACs.
[End of table]
Whereas staffing declines overseas for both FSOs and LES may be
addressed if the budget request is approved, there will still be fewer
staff compared with 2004 in Washington, D.C. and the domestic field
offices, which are generally staffed by civil servants. Additionally,
the 63 FSOs and 84 civil servants who are eligible to retire as of
March 2010 may not be replaced by the staff requested in the 2011
budget request.
Another factor affecting overseas staffing is the use of FSOs in
domestic positions. FSOs are sometimes assigned to work in USEACs,
serve in multilateral development banks, or work in headquarters (see
table 6). For example, in the fourth quarter of 2009, 23 percent of
233 FSOs were in domestic positions, with 27 FSOs specifically in
USEACs. CS expects FSOs to serve a 2-year assignment at a USEAC,
usually within the first 7 years of their service.[Footnote 29] CS
believes that what FSOs learn in their domestic rotations improves
their ability to serve clients overseas.
Table 6: FSOs Serving in the United States in the Fourth Quarter of
Fiscal Year 2009:
Number of FSOs:
USEACs: 27;
Multilateral Development Banks: 5;
Headquarters: 10;
Language and other training: 12;
Total: 54.
Percent of all FSOs (domestic and overseas):
USEACs: 12%;
Multilateral Development Banks: 2%;
Headquarters: 4%;
Language and other training: 5%;
Total: 23%.
Source: GAO analysis of Commerce staffing data.
Note: FSOs in headquarters are in positions supporting the Foreign
Service, e.g., one is the Deputy Assistant Secretary for International
Operations and another is a Career Development and Assignment Officer.
[End of table]
CS Lacks Complete Strategic Workforce Plans to Utilize New Staff:
Although CS requested a significant increase in funding to hire new
staff in the 2011 budget request, it has not followed key principles
in workforce planning to guide its use of these staff. Strategic
workforce planning addresses two critical needs: first, aligning an
organization's human capital program with its current and emerging
mission and programmatic goals, and second, developing long-term
strategies for acquiring, developing, and retaining staff to achieve
programmatic goals. While agencies' approaches to workforce planning
vary, the five key principles that strategic workforce planning should
address irrespective of the context in which the planning is done are
(1) setting strategic direction, (2) conducting workforce needs
analysis, (3) developing workforce strategies to fill the gaps, (4)
evaluating and revising strategies, and (5) involving management and
employees throughout the process.[Footnote 30] We focused our review
on steps one through three, because it was premature for us to
evaluate steps four and five given the status of CS's efforts during
our review. CS executive-level leadership was new and was just
beginning to assess CS operations.
CS Lacked Executive-Level Leadership and Strategic Direction:
Until recently, CS lacked executive leadership and strategic direction
in its workforce planning efforts because of key vacancies between
administrations. One of the lessons from our prior work on human
capital issues is the importance of having leadership that is clearly
and personally involved in strategic workforce planning and provides
organizational vision in times of change. Effective organizations
integrate human capital approaches as strategies for accomplishing
their mission. They stay alert to emerging mission demands and human
capital challenges and remain open to reevaluating their human capital
practices in light of their demonstrated successes or failures in
achieving the organization's strategic objectives.
According to a senior CS official, the lack of political leadership
hampered efforts to analyze and make decisions regarding the
organization's longer term workforce needs and to ensure its ability
to undertake its mission and achieve its goals. Instead, CS's recent
workforce planning efforts have primarily focused on short-term
responses to its constrained budget situation, such as not hiring new
staff, and extending FSO tours at some posts to avoid the cost of
moving them to different posts.
While ITA and CS experienced key leadership vacancies for more than a
year, CS now has new executive-level leaders who are focused on
determining CS's direction and resource needs. In February 2010, the
new Assistant Secretary for Trade Promotion and Director General of
the U.S. and Foreign Commercial Service was confirmed, and in March
2010, the new Undersecretary for International Trade was sworn in. In
addition, Commerce announced the creation of a new Director's position
to coordinate and direct the Department's NEI efforts, filling the
position in April 2010. The new Assistant Secretary is currently
reviewing all of CS's budgets, activities, and personnel to determine
what its structure should be to accomplish its goals, including those
of the NEI.
CS has also lacked a clear sense of strategic direction. For example,
the Trade Promotion Coordinating Committee did not issue a 2009
National Export Strategy, which has a role in directing the nation's
export promotion priorities and goals of CS; the last National Export
Strategy was issued in October 2008 by the previous administration.
[Footnote 31] A plan to carry out the NEI is due in September 2010.
The NEI may have important implications for CS workforce planning,
especially for the locations of staff and offices.
CS has already developed several initiatives that include staff
allocations and a list of "candidate" countries for new offices, which
also appears in its budget request. These are preliminary plans for
how CS will pursue activities in support of the NEI's goals. However,
CS did not have support for how the staffing allocations were
developed and the countries were identified; we therefore are unable
to determine how these decisions were made.
CS Has Not Conducted a Workforce Needs Analysis to Determine Staff
Levels or Placement:
CS has not conducted a systematic workforce needs analysis to
determine the number or type of staff (FSOs, LES, or civil servants)
needed or where those staff would be located domestically and
overseas. Our prior human capital work has found that a fact-based,
performance-oriented approach to human capital management is crucial
for maximizing the value of human capital as well as managing risk.
[Footnote 32] High-performing organizations identify their current and
future human capital needs, including the appropriate number of
employees, the key competencies and skills mix for mission
accomplishment, and the appropriate deployment of staff across the
organization and then create strategies for identifying and filling
gaps. Valid and reliable data are critical to assessing an agency's
workforce requirements and heighten an agency's ability to manage risk
by allowing managers to spotlight areas for attention before crises
develop and identify opportunities for enhancing agency results.
Although the costs of collecting data may be significant, the costs of
making decisions without the necessary information can be equally
significant. In preparing its 2011 budget request, CS did not make
staffing decisions based on an overall analysis of its needs,
according to CS officials. Rather, it made decisions based on
anecdotal information about the demand for services.
Additionally, CS only recently began to systematically monitor how
many vacancies it had and how many positions it might need to carry
out its mission in the future. CS took approximately 3 months to
provide us with data on staffing, in part because it lacks an
automated personnel system and had to use data sources such as
quarterly staffing reports. A Commerce official told us that the
number of staff requested in the 2011 budget request was not based on
vacancies.
CS's lack of a workforce needs analysis also has implications for
staff placement. Whereas CS's strategic focus has been on priority
markets such as Brazil, China, and India as well as emerging markets
in countries such as Azerbaijan and Qatar, staff placements may change
under the NEI. As mentioned above, CS's budget request includes a list
of 22 countries that are "candidates currently being considered for
new overseas offices," where CS is considering placing staff. Commerce
officials told us the list was not comprehensive, and the reasons for
selecting those countries were not well documented. Among the
"candidates" were offices that were closed under the Transformational
Commercial Diplomacy Initiative such as Amsterdam, Netherlands;
Barcelona, Spain; Kingston, Jamaica; Hamburg, Germany; Port of Spain,
Trinidad and Tobago; and Lyon, France. Additionally, according to a
State official, the NEI may target Colombia, Indonesia, Saudi Arabia,
South Africa, Turkey, and Vietnam. Shifting CS's focus could change
the skills and experience its workforce needs to be effective in those
markets. For example, even though CS is hiring 11 new FSOs in 2010,
three important posts in Brasilia, Algiers, and Kuwait are being
filled with limited non-career appointments, because of a shortage of
experienced officers. None of the new candidates has the necessary
skills, abilities, and knowledge to take one of these positions as a
first post.
CS Has Not Systematically Addressed Staffing Gaps Since 2007:
CS has not followed workforce planning principles such as developing a
plan to address its staffing gaps. Once an agency identifies its
needs, it can develop strategies tailored to address gaps in the
number, skills and competencies, and deployment of its workforce and
the alignment of human capital approaches that will sustain the
workforce in the future. Strategies include programs, policies, and
practices that enable an agency to recruit, develop, and retain staff
needed to achieve program goals.[Footnote 33] In addition, agencies
need to understand the strengths and weaknesses of their current human
capital program.
According to a senior CS official, CS does not plan to fill all of its
vacant positions. Rather, it will fill what it considers to be
priority vacancies, including staffing new offices with seasoned
officers. The official told us they have a reasonably good idea of
where those priority locations are; one such possibility was Baku,
Azerbaijan, where CS planned to open an office under the
Transformational Commercial Diplomacy Initiative but did not due to a
lack of funds. However, when asked if the 22 locations in the 2011
budget request were the priority locations, we were told they are
possible locations but are not necessarily where people would be
placed.
It is also important for agencies to align their workforce to achieve
their program goals. However, since the implementation of the
Transformational Commercial Diplomacy Initiative, CS workforce
strategies have not been based on a systematic analysis, but were ad
hoc according to Commerce officials. Commerce officials told us that
in some instances they asked FSOs to extend their overseas tours at
their current locations as a cost-saving measure rather than being
moved somewhere else, at substantial cost, based on a systematic
determination of where they are most needed.[Footnote 34] CS also made
decisions to leave some posts without an FSO. Instead, these posts
were managed by LES--there were 25 such posts at the end of the last
quarter of 2009.[Footnote 35]
CS has not used its available staffing allocation model to make
overseas staffing decisions since 2007, as part of its
Transformational Commercial Diplomacy Initiative.[Footnote 36] Under
the initiative, CS used its staffing allocation model to identify
locations to close, open, or add staff. The model analyzed CS's staff
allocations using quantitative factors such as the macroeconomic
strength of each country and other factors related to each market's
size and structure. It also integrated qualitative factors including
foreign and trade policy priorities, levels of economic development,
geographic coverage, and commercial environments. A similar model
exists for the placement of staff domestically at USEACs. The model's
goal is to create a starting point for determining which U.S.
locations have the highest export potential. Other factors affecting
the placement of staff at USEACs include geographic coverage, policy
initiatives, locations of commercial centers, and the skills and
abilities of local staff.
CS's Understaffed Human Resources Office and the Long Lead Time Needed
to Hire and Train FSOs Could Delay Staffing Increases:
Besides the lack of a quality workforce plan, CS's capacity to
implement what CS officials said may be the biggest hiring effort in
CS history is compromised because its human resources office is
understaffed.[Footnote 37] CS's Office of Foreign Service Human
Resources, which manages the hiring process for FSOs, only had staff
in 10 of its 19 positions in 2009. However, CS planned to increase the
number of staff in 2010. According to a senior CS official, the office
recently received permission to fill 5 of the 9 vacant existing
positions. As of June 2010, 3 of the 5 positions were filled, although
the office also just lost another staff person.
CS needs a lead time of approximately 2 years to accomplish the major
staffing increase requested in the 2011 budget request. It takes about
1 year to put together a list of qualified applicants, which involves
advertising the position, identifying qualified candidates,
interviewing candidates, selecting candidates, and making offers. Once
a candidate is selected, he or she must obtain security and medical
clearances. Commerce started the hiring process for 59 new FSOs in
July 2009 and CS hopes to make offers to qualified candidates in
summer 2010. Additionally, depending on the post, some positions
require language training, which can take up to a year. Thus, it could
take almost 2 years to hire, train, and field a new FSO. The process
for hiring LES is much shorter, generally 6 weeks to 5 months,
according to a senior CS official. CS is not responsible for hiring
LES, who are hired overseas by State on CS's behalf.
The 2011 Budget Request Has Weaknesses That Could Affect CS's Ability
to Meet Its Goals:
For 2011, ITA developed a $321 million budget request for funding to
support CS's activities and hire new staff.[Footnote 38] The request
was $63 million higher than its 2010 appropriation. We evaluated the
methodology that ITA used to develop this request using best practices
identified in the GAO Cost Estimating and Assessment Guide.[Footnote
39] See Appendix III for more information on our evaluation, including
detailed descriptions of the best practices criteria. ITA's
methodology was sound in many respects, with good calculations for
current costs such as overseas administrative fees, a good amount of
detail for certain costs such as the purchase of vehicles, as well as
error-checking processes that helped to ensure accuracy. However, the
request also has weaknesses that could affect CS's ability to meet its
goals. Among the weaknesses we identified using the GAO Cost
Estimating and Assessment Guide are (1) a lack of information
regarding potential risks associated with the costs presented in the
budget request, such as changes in exchange rates, which could lead to
overly optimistic estimates and cost overruns, and (2) the lack of
sufficient documentation, specifically back-up data, to clearly track
costs over time, allow for the budget request to be validated, and
enable new staff members to understand the request in the event of
staff turnover.
The 2011 Budget Request Is Sound in Many Respects:
The methodology used to develop the budget request is sound in many
respects, and CS took steps to ensure its accuracy. ITA budget
analysts made many of their calculations in ways that are endorsed by
the GAO Cost Estimating and Assessment Guide. They also broke the
request down to an appropriate level of detail based on the standards
in the guide, which both improves accuracy and facilitates good
management.
In an effort to determine the accuracy of the estimate, we reviewed
ITA's calculations for technical soundness and found them to be
acceptable. ITA used rigorous budgeting practices to develop many
parts of the request. For example, officials used relevant historical
cost data and incorporated adjustments for inflation. They also
followed best practices by varying their estimation methodologies as
appropriate for different situations, which increased the request's
accuracy. For example, based on Office of Management and Budget (OMB)
guidance, ITA estimated that the personnel they anticipated hiring in
2011 would come on board 3 months after the start of the fiscal year,
on average, and the request reflected this hiring lapse.
Additionally, ITA performed thorough error checking on its request,
enabling CS management to make hiring and spending decisions with
reasonable confidence that no costs had been forgotten or
miscalculated. CS's process in developing the request included
multiple reviews to ensure accuracy, including internal reviews by
various stakeholders within Commerce and external reviews by OMB. CS
used the feedback from these reviews to update the request as needed.
Also, CS routinely updated the costs in the budget with actual costs
as they became available, enabling them to see if the estimate was on
track.
CS's 2011 budget request also broke down costs to a level of detail
that met the standards in the GAO Cost Estimating and Assessment Guide
in most cases, ensuring that activities and costs were broken down
into small pieces that management could individually plan for,
schedule, and control. For example, salaries were calculated
separately for several different types of employees rather than using
one salary cost as the basis for all the calculations, and the cost of
replacing 37 vehicles was identified separately. One of the benefits
of including this level of detail is ensuring that cost elements are
not omitted or double counted.
The 2011 Budget Request Lacks a Risk Analysis and Contingency Plans:
ITA did not perform a risk analysis on its budget request for CS,
which could lead to overly optimistic estimates of costs and cost
overruns.[Footnote 40] We have found that most agency budget requests
are overly optimistic, underestimating average costs.[Footnote 41] A
risk analysis would help correct for this tendency by providing levels
of confidence so that ITA would understand the probability of
executing the budget successfully given the risks that were assessed.
The risk analysis would identify the assumptions driving the estimate,
and provide a range of costs that span the best and worst case
scenarios. This would inform CS management of the probability that
costs for salaries or other key items might exceed funding levels
requested, and enable them to develop contingency plans for making
spending and hiring decisions accordingly. For example, new staff will
be located in different locations with vastly different costs.
According to an ITA official, salaries for LES range from $12,000 in
Vietnam to $100,000 in Frankfurt, Germany. However, the budget request
did not provide a range of possible LES salary costs. Instead, ITA
used an overly simplistic averaging approach to estimate LES costs,
failing to give management perspective on how these costs might vary
with different staff placement scenarios, changing exchange rates,
etc. Although ITA is not required to perform a risk analysis by OMB's
annual budget development guidelines, it is a best practice according
to the GAO Cost Estimating and Assessment Guide.[Footnote 42]
Assumptions that drive the budget request were not fully explained,
contributing to the inability to perform a risk analysis. Major
assumptions in the 2011 budget request include salary estimates,
annual salary increases, currency fluctuation, and travel costs, none
of which were fully explained. Since ITA prepares its budget 2 years
in advance, e.g., drafting its 2011 budget request in 2009, there is
substantial uncertainty in these assumptions. Some assumptions were
documented, such as using 2009 amounts with appropriate adjustments to
estimate costs for 2011, but others were not explained. For example,
travel costs were presented with a single number, without further
explanation of how they arrived at this figure. Also, the reasoning
behind estimating a particular exchange rate was not explained.
Exchange rates can vary substantially. For example, over the course of
2009, the average monthly exchange rate of the dollar to the Brazilian
real varied from a low of 1.8 to a high of 2.4, a difference of 30
percent. Likewise, the Mexican peso's average monthly exchange rate
with the dollar varied by 16 percent, the euro varied by 12 percent,
the Japanese yen varied by 11 percent, and the Indian rupee varied by
7 percent. Without details and explanations, CS could not calculate
risk distributions for assumptions like these, which would enable it
to understand how much costs might vary if the situation changes.
ITA's Budgeting Methodology Lacks Some Documentation:
ITA's budget request lacks sufficient supporting documentation, making
it difficult for Congress or other parties to understand how the
budget request was developed. For example, the budget request broke
down changes in the budget for 2011, and these changes were added to
2010 costs to arrive at the total request. However, the budget request
did not include the 2010 cost information. According to the GAO Cost
Estimating and Assessment Guide, it is a best practice to provide
sufficient detail so that the documentation allows for clear tracking
of cost estimates over time.[Footnote 43] By documenting all steps in
the development of its budget request, ITA would be able re-create its
estimates in the event of budget staff turnover. This is particularly
important since only a small number of people develop the budget.
Additionally, thorough documentation of calculations and back-up data
would allow the request to be checked and validated. Without this
information, it is impossible for an outside reviewer to corroborate
the information in the request.
ITA briefed department-level officials in Commerce as well as the
Office of Management and Budget on the 2011 budget request. However,
we were unable to obtain any documentation of what was presented at
the briefings, so we could not determine whether the briefings
contained enough detail for management to understand the level of
accuracy, completeness, and quality of the estimate, which is a best
practice.
Conclusions:
In the wake of growing financial constraints and staffing declines,
CS's leadership faces significant challenges in its efforts to rebuild
its workforce and play a major role in the President's NEI.
Additionally, depending on the direction set by the current
administration, CS officials may need to make significant changes such
as realigning CS's workforce and offices. While the President's plan
is being finalized, the Assistant Secretary has opportunities to
improve management controls over CS's resources and proactively
address the issues that led to their "crisis" situation in 2009. These
opportunities include improving long-term financial and workforce
information necessary to recognize significant changes affecting the
organization; routinely reviewing operations to identify potential
cost savings, such as administrative fees related to overseas posts;
and recognizing risks and considering alternative responses to
significant resource changes in a systematic manner so as to minimize
actions such as freezing hiring, travel, and training that compromise
CS's ability to conduct its core business.
CS currently lacks two key capabilities that would better position it
to implement its 2011 budget and rapidly respond to any new
priorities. The first is a workforce plan developed in accordance with
workforce planning principles that is linked to the agency's strategic
goals and that would enable agency managers to regularly identify
workforce gaps and develop a workforce strategy that fills them,
including using or adopting its current staffing model. The
implementation of such planning needs to be supported by adequate
human capital management resources. The second capability is to
estimate the budgetary costs of any changes in its operations
according to best practices. This includes risk analyses to ensure
that factors that could negatively impact its ability to fully fund
its operations are understood and considered; contingency plans to
address possible funding shortfalls; and documentation in support of
the costs used to construct the estimate, so that future management
and new budget staff can understand the estimate's assumptions, costs,
and contingencies.
Recommendations for Executive Action:
To better ensure CS effectively and efficiently uses its resources in
support of its strategic goals and the President's National Export
Initiative, we are making the following three recommendations:
The Secretary of Commerce should direct the Undersecretary for
International Trade to:
* strengthen management controls over CS's financial and workforce
resources,
* improve workforce planning and better align CS's workforce with its
strategic goals and available resources on a routine basis, and:
* improve cost estimating to better ensure that CS's budget estimate
includes sufficient resources to support its planned operations and
addresses potential risks.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, Commerce concurred with
our findings and recommendations. The Secretary of Commerce indicated
that he has directed the International Trade Administration to use
this report to develop stronger management controls, improve workforce
planning, and improve cost estimates during the budget process.
The Secretary of Commerce also indicated that ITA has been engaged in
a vigorous strategic planning effort to align its focus, activities,
and personnel to strengthen CS and support the President's NEI, since
January 2010.
Additionally, Commerce provided technical comments to our draft, which
we reviewed. The technical comments provided additional information or
clarified CS activities or statements in the draft, and we made
changes to reflect some of these points.
We are sending this report to other interested Members of Congress and
to the Secretaries of Agriculture, Commerce, and State. In addition,
the report will be available free of charge at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4347 or yagerl@gao.gov. Contact points for our
offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions
to this report are listed in appendix IV.
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
In response to a Congressional mandate,[Footnote 44] GAO reviewed (1)
how well the U.S. and Foreign Commercial Service (CS) managed its
resources from 2004 to 2009, and (2) the completeness of CS's
workforce plans and the quality of its 2011 budget request. In
addition, in appendix II, we provide information on how CS export
promotion funding compares with the funding for Department of
Agriculture (USDA) and Department of State (State) for analogous
activities from 2004 to 2009.
To determine the changes in CS's workforce from 2004 to 2009, we
analyzed data provided by CS on staffing losses and gains by type of
position, identifying the number of civil servants, political hires,
Foreign Service Officers (FSO), and locally employed staff (LES)
during that 5-year period of time. We also identified staff losses and
gains by location at foreign posts, U.S. Export Assistance Centers
(USEAC), and CS headquarters in Washington, D.C. We traced CS data
back to source documents where possible and found them sufficiently
reliable to report on the loss of staff throughout CS. We used the
staffing data provided by CS to identify where FSOs were serving in
domestic positions.
To determine how much funding CS had available, what the major cost
components of its budget were, how administrative costs changed over
time, and what impact changing costs had on CS, we reviewed CS's
appropriations and full-time equivalent (FTE) levels from 2004 through
2009. We used internal CS budget documents, ITA Congressional Budget
Justifications, President's budgets, and appropriations bills to
gather and corroborate budget data, and based on consistency among
these documents, we found these data to be sufficiently reliable to
report on CS's budget history. We also interviewed CS officials
responsible for managing the budget. We analyzed the foreign posts'
and USEACs' 2009 written comments to determine weaknesses and threats
that were commonly reported.
To determine the completeness of CS's plans to rebuild its workforce,
we reviewed CS's 2010 and 2011 budget requests to ascertain whether
the staffing increases CS requested were sufficient to cover its
staffing changes from 2004 to 2009. We interviewed CS officials who
were involved in developing the requests. We also interviewed CS
officials regarding their process for hiring and placing new staff
overseas, and reviewed CS policy requiring FSOs to serve in domestic
positions. To determine whether CS had conducted workforce planning,
we evaluated its efforts using GAO's five key principles of effective
strategic workforce planning.[Footnote 45] We reviewed CS's previous
workforce planning efforts under its 2006 Transformational Commercial
Diplomacy Initiative including CS's use of its Overseas and Domestic
Resource Allocation Models (ORAM and DRAM), and its cost benefit
model. We interviewed CS officials regarding how workforce planning
decisions were made since the ORAM and DRAM models were last used. We
also interviewed a senior CS official about the human resource
office's potential to handle the projected large increase in FSOs that
is contained in CS's budget requests for 2010 and 2011.
To determine the quality of the International Trade Administration's
(ITA) 2011 budget request for CS, we determined the extent to which
ITA followed the best practices outlined in the GAO Cost Estimating
and Assessment Guide.[Footnote 46] The guide identifies 12 practices
that are the basis for effective cost estimation, including cost
estimation for annual budget requests. It associates these practices
with four characteristics: accurate, well documented, comprehensive,
and credible. The Office of Management and Budget (OMB) endorsed this
guidance as being sufficient for meeting most cost estimating
requirements, including for budget formulation. If followed correctly,
these practices should result in reliable and valid budgets that (a)
can be easily and clearly traced, replicated, and updated, and (b)
enable managers to make informed decisions. In performing this
analysis, we examined the 2011 budget request and supporting
documentation provided by ITA, and we conducted interviews with ITA
budget staff. After conducting this assessment, we identified major
strengths and weaknesses of the 2011 budget request.
To describe the level of funding CS received compared with State and
USDA for analogous export promotion activities in appendix II, we
worked with State and USDA to determine which of their programs and
activities were analogous to CS's export portfolio. We jointly agreed
on what elements of their budget could be attributed to export
promotion. We focused on (1) marketing and market research, (2)
technical assistance and training for exporting businesses, and (3)
advocacy that benefits individual companies. We reviewed the
President's budget requests and agency budget justifications for CS,
which are included in the budgets of the Department of Commerce's ITA,
as well as the budgets for USDA's Foreign Agricultural Service and
State's Office of Commercial and Business Affairs to identify those
programs and activities in their budgets that supported those
functions in order to develop the comparison. We determined that
USDA's budget summaries were reliable by reviewing financial audits
for the 6-year time period of our review. Audits for 2 of the years
found that the financial statements fairly presented USDA's finances
with some adjustments needed to internal controls, and the audits for
the other 4 years found that the financial statements fairly presented
USDA's finances without caveat. There is one limitation to USDA's
budget summaries, which is that salaries and expenses are listed by
function rather than by program. To address the limitation, we
included these amounts, because it seemed sufficiently clear which
functions related to export promotion, although the labels were
different from the program names. State was not able to provide
sufficient budget data for 2004 to 2008, so we only reported on 2009.
We conducted this performance audit from September 2009 to August
2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: U.S. Agencies Promote Exports with Varying Levels of
Funding and Different Promotion Models:
The Departments of Agriculture (USDA), Commerce, and State are the
three main U.S. agencies tasked with promoting exports through
advocacy for individual companies, marketing, and technical assistance
and training. In 2009, USDA's Foreign Agricultural Service (FAS) had
97 offices in 75 countries, Commerce's U.S. and Foreign Commercial
Service (CS) had 127 offices in 76 countries, and State had 45 offices
in 45 countries. Commerce, State, and USDA have different funding
levels for export promotion. Additionally, USDA's export promotion
model is different from the one employed by Commerce and State.
Commerce, State, and USDA Have Different Levels of Export Promotion
Funding:
In 2009, Commerce received $238 million, and USDA received $365
million for export promotion.[Footnote 47] State estimated it spent
$17 million in support of export promotion for 2009. See figure 1 for
funding levels for USDA and Commerce from 2004 through 2009.
Figure 1: Export Promotion Budgets for Commerce and USDA, Fiscal Years
2004-2009:
[Refer to PDF for image: multiple line graph]
Fiscal year: 2004;
Commerce: $217 million;
USDA: $271 million.
Fiscal year: 2005;
Commerce: $222 million;
USDA: $301 million.
Fiscal year: 2006;
Commerce: $232 million;
USDA: $350 million.
Fiscal year: 2007;
Commerce: $232 million;
USDA: $347 million.
Fiscal year: 2008;
Commerce: $237 million;
USDA: $357 million.
Fiscal year: 2009;
Commerce: $238 million;
USDA: $365 million.
Source: GAO analysis of Commerce and USDA data.
Note: USDA totals include salaries and expenses that were associated
with the functions most closely linked to export promotion. These
functions may not align precisely with the programs described below.
[End of figure]
Funding for State is not included in the figure, as State was unable
to determine the personnel costs associated for FSOs and LES who
supported its export promotion efforts from 2004 through 2008. State
estimated that FSO costs totaled $15 million in 2009. In addition,
State funded small export promotion projects at posts and had staff in
Washington, D.C., bringing the total State estimated it spent in 2009
to $17 million, excluding LES. If LES costs were included, the level
of funding State spent on export promotion would be higher.
USDA Has a Different Export Promotion Approach from Commerce and State:
While all three agencies conduct export promotion activities, the
amount of funding the agencies receive cannot be directly compared,
since USDA uses a different approach to promote exports than Commerce
and State. Also, while Commerce and State use the same model, they
operate in different locations and have different numbers of posts.
Commerce's model focuses on direct services to exporters, especially
small-and medium-sized businesses. CS provides counseling and market
intelligence, matchmaking (connecting exporters to customers), and
advocacy on behalf of individual businesses. Its overseas posts
coordinate with U.S. Export Assistance Centers throughout the United
States.
USDA's FAS primarily promotes the export of commodities indirectly
through funding for external programs, unlike CS which provides
services directly to exporters. Additionally, the majority of FAS's
activities are focused on promoting U.S. agricultural commodities in
general, whereas Commerce's focus is on assisting individual
businesses seeking to export. FAS provides funding to agricultural
trade associations, state and regional trade groups, small businesses,
and cooperatives that plan and carry out export promotion activities.
The two largest programs are the following:
* The Market Access Program funds consumer promotions, market
research, and technical capacity building to develop, maintain, and
expand foreign markets for U.S. agricultural goods, including branded
goods and generic commodities. In 2009, FAS allocated $200 million to
this activity, which represented 55 percent of its total export
promotion budget.
* The Foreign Market Development Program focuses on long-term
development of foreign markets for generic U.S. agricultural
commodities. In 2009, FAS allocated $34 million to this activity,
which represented 9 percent of its total export promotion budget.
These programs are supplemented by smaller funding programs. One
program helps trade organizations provide sample agricultural
products, another provides funding to help overcome technical barriers
to exporting, and a third funds development of exports in emerging
markets. Additionally, FAS staff overseas provide market intelligence
for U.S. firms, and work on export promotion activities including
market research and trade shows.
State supports U.S. exporters in locations where CS does not have a
presence.[Footnote 48] Commerce and State signed a Memorandum of
Understanding in January 2009, formalizing this representation. Prior
to that, State acted on behalf of CS informally. Under the memorandum,
State staff at these partnership posts provide services developed by
CS, including matching businesses with potential customers and market
research. Providing CS services at partnership posts is not a full-
time job for State FSOs and LES. In a survey of the amount of time
partnership post staff spent on export promotion efforts in 2009, FSOs
indicated they spent about one-quarter of their time on export
promotion, and LES at these posts spent about half of their time on it.
State also provides approximately $340,000 to $400,000 per year in
financial support for posts' business promotion and commercial
outreach activities through a Business Facilitation Incentive Fund.
[End of section]
Appendix III: Assessment of ITA's 2011 Budget Estimate for CS Using
GAO Cost Estimating and Assessment Guide:
To analyze the International Trade Association's (ITA) 2011 budget
request for the U.S. and Foreign Commercial Service (CS), we
determined the extent to which ITA followed the best practices
outlined in the GAO Cost Estimating and Assessment Guide.[Footnote 49]
The guide identifies 12 practices that are the basis for effective
cost estimation, including cost estimation for annual budget requests.
It associates these practices with four characteristics: accurate,
well documented, comprehensive, and credible. The Office of Management
and Budget (OMB) endorsed this guidance as being sufficient for
meeting most cost-estimating requirements, including for budget
formulation. If followed correctly, these practices should result in
reliable and valid budgets that (a) can be easily and clearly traced,
replicated, and updated; and (b) enable managers to make informed
decisions. As table 7 illustrates, we found that CS's budget
development methods substantially met two, partially met one, and
minimally met one of these four practices. After conducting this
assessment, we identified major strengths and weaknesses of the 2011
budget request.
Table 7: Extent to Which CS Budgeting Methods Reflect GAO Best
Practices:
Best practice: Comprehensive;
Explanation: The cost estimates should include both government and
contractor costs over the program's full life cycle, from the
inception of the program through design, development, deployment, and
operation and maintenance to retirement. They should also provide an
appropriate level of detail to ensure that cost elements are neither
omitted nor double counted and include documentation of all cost-
influencing ground rules and assumptions;
Satisfied? Substantially met.
Best practice: Well documented;
Explanation: The cost estimates should have clearly defined purposes
and be supported by documented descriptions of key program or system
characteristics. Additionally, they should capture in writing such
things as the source data used and their significance, the
calculations performed and their results, and the rationale for
choosing a particular estimating method. Moreover, this information
should be captured in such a way that the data used to derive the
estimate can be traced back to, and verified against, their sources.
The final cost estimate should be reviewed and accepted by management;
Satisfied? Partially met.
Best practice: Accurate;
Explanation: The cost estimates should provide for results that are
unbiased and should not be overly conservative or optimistic. In
addition, the estimates should be updated regularly to reflect
material changes in the program, and steps should be taken to minimize
mathematical mistakes and their significance. Among other things, the
estimate should be grounded in a historical record of cost estimating
and actual experiences on comparable programs;
Satisfied? Substantially met.
Best practice: Credible;
Explanation: The cost estimates should discuss any limitations in the
analysis performed due to uncertainty surrounding data or assumptions.
Further, the estimates' derivation should provide for varying any
major assumptions and recalculating outcomes based on sensitivity
analyses, and their associated risks/uncertainty should be disclosed.
Also, the estimates should be verified based on cross-checks using
other estimating methods and by comparing the results with independent
cost estimates;
Satisfied? Minimally met.
Source: GAO analysis.
[End of table]
The following explains the definitions we used in assessing ITA's
methods for estimating costs in its annual budget submission:
* Met--ITA provided complete evidence that satisfies the entire
criterion.
* Substantially met--ITA provided evidence that satisfies a large
portion of the criterion.
* Partially met--ITA provided evidence that satisfies about half of
the criterion.
* Minimally met--ITA provided evidence that satisfies a small portion
of the criterion.
* Not met--ITA provided no evidence that satisfies any part of the
criterion.
The sections that follow highlight the key findings of our assessment.
2011 Budget Substantially Met Characteristics for Comprehensiveness:
Best practices for comprehensiveness include an estimating plan that
includes sufficient resources, an estimating approach with standard
cost elements broken down to sufficient detail, and clear
identification of ground rules and assumptions.
* Estimating plan. The budgeting team had the proper number and mix of
resources to develop the budget request, and team members were from a
centralized office. The team leader had appropriate experience and
qualifications, although CS did not provide us with enough information
to determine whether other team members were qualified.
* Estimating approach. The budget used a standard cost element
structure that defined all cost elements and addressed relevant costs.
CS broke down pertinent costs to an acceptable level of detail. CS
properly separated contractor costs from government costs, although it
detailed contractor costs more explicitly for costs that were new in
2011 than for ongoing costs.
* Ground rules and assumptions. CS relied on ground rules and
assumptions, such as using 2010 amounts with adjustments appropriate
for each cost element to estimate costs for 2011, but assumptions were
not fully documented. CS did not determine risk distributions for all
assumptions, which would enable it to perform an uncertainty analysis
for key cost elements.
2011 Budget Partially Met Characteristics for Being Well Documented:
Best practices for being well documented include clearly defining the
estimate's purpose, defining key characteristics of the budget
including primary cost drivers and systems for updating the budget,
clearly identifying ground rules and assumptions, obtaining data
properly, documenting the estimate so that corroborating data and
calculations can be identified, and presenting clear and sufficient
information to management for approval.
* Purpose of estimate. CS clearly defined the purpose and scope of its
budget request, and all applicable costs were estimated.
* Budget characteristics. The number of staff is the primary driver of
the cost of the 2011 budget request. CS received a $5.2 million total
increase in 2010 for increasing CS's presence in emerging and
developing economies. Program staff reviewed the budget and sent
corrections on inaccurate items to the budget team, although there is
no ongoing system for updating the budgeting team, and CS did not
provide us with information on whether there was one centralized place
where budget update information was stored.
* Ground rules and assumptions. See above under the discussion of
comprehensiveness. The best practice of setting ground rules and
assumptions is relevant to both being well documented and to
comprehensiveness.
* Data. Consistent with best practices, CS used historical data to
estimate key operational costs. CS performed cross-checks on its data
by having program staff verify assumptions in new estimates against
historical data, and developed a computer program to check for common
errors. However, salaries for locally employed staff (LES) vary
widely, which causes uncertainty in the cost estimate.
* Documentation. In some cases, we required the guidance of CS budget
analysts to identify backup support because the documentation was
insufficient to allow someone unfamiliar with the budget to locate
detailed corroborating data. The budget documentation did not provide
a step-by-step description of the budgeting process, methods, or
sources. ITA staff said that documenting and chronicling the
information that was used to create it would be a best practice they
aspire to but is not something they currently do.
* Presenting to management for approval. CS presented the budget to
department-level officials in the Department of Commerce as well as to
OMB and the House Appropriations Committee. However, we were unable to
obtain any documentation of what was presented at the briefings, so we
could not determine whether it contained enough detail for management
to understand the level of accuracy, completeness, and quality of the
estimate.
2011 Budget Substantially Met Characteristics for Accuracy:
Best practices for accuracy include appropriate methodology for
developing the point estimate, and updating the estimate to reflect
actual costs and changes.
* Point estimate. CS officials used relevant historical cost data and
considered adjustments for general inflation when estimating costs.
They varied their estimation methodologies as appropriate for
different situations. However, although they were aware that salaries
were their largest cost driver, they used an overly simplistic
averaging approach to reflect likely new staff salaries at hiring.
Additionally, since CS did not perform a risk analysis, it is not
possible to know whether its point estimate was the most likely actual
reflection of costs, or was overly:
* optimistic or conservative. We found no mathematical mistakes in the
request, and CS validated the request by looking for errors. CS also
cross-checked the budget estimates with program staff and with budget
staff at both Commerce and OMB.
* Update with actual costs and changes. ITA updated the request based
on feedback from program staff reviews. Additionally, actual costs
were compared with estimates on a monthly basis. However, CS did not
share changes to the cost estimate with us, so we were unable to
assess whether changes were properly updated.
CS's 2011 Cost Estimate Minimally Met Criteria for Credibility:
Best practices for credibility include conducting a sensitivity
analysis and conducting a risk analysis.
* Sensitivity analysis. CS did not perform a sensitivity analysis on
each of the major assumptions to determine how outcomes would vary if
they changed. Major assumptions included salary estimates, annual
salary increases, impact of currency fluctuation, and travel costs.
* Risk analysis. CS did not perform a risk analysis to quantify the
overall risk associated with changes to the assumptions that drive its
budget.[Footnote 50] A risk analysis would help provide CS managers
with information to determine the probability that costs for key
operations, such as salaries, may exceed funding levels requested in
the budget, so that they could make spending and hiring decisions
accordingly.
[End of section]
Appendix IV: Comments from the Department of Commerce:
The Secretary Of Commerce:
Washington, D.C. 20230:
August 5, 2010:
Dr. Loren Yager:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Dr. Yager:
Thank you for providing us with the draft report titled "Export
Promotion: Increases in Commercial Service Workforce Should be Better
Planned." In this report, GAO reviewed both (1) how well the U.S. and
Foreign Commercial Service (USFCS) managed its resources from 2004 to
2009, and (2) the completeness of the USFCS' workforce plans and its
fiscal year (FY) 2011 budget request. I agree with the overall
findings and recommendations of your report. Indeed I have been aware
of some of these issues since becoming Secretary and have been working
to address them. I have directed the International Trade
Administration (ITA) to use your report to develop stronger management
controls, improve workforce planning, and improve cost estimates
during the budget process.
As you note, President Obama announced the National Export Initiative
(NEI) in January 2010. The Department of Commerce has a critical role
to play in the execution of this Initiative, and I am pleased your
report acknowledges that our new ITA executive leadership is on board
to spearhead this effort. At my direction, ITA management has been
engaged since January 2010 in a vigorous strategic planning effort to
align its focus, activities, and personnel to strengthen the USFCS and
support the President's NEI. Our leadership team is accelerating those
efforts now as they plan implementation of the FY 2011 budget and
develop contingency plans.
Our specific technical comments relating to the text of the report are
enclosed; we hope you take these comments into consideration when
issuing the final version of this report.
Sincerely,
Signed by:
Gary Locke:
Enclosure:
[End of section]
Appendix V: GAO Contacts and Staff Acknowledgments:
GAO Contact:
Loren Yager, (202) 512-4347 or yagerl@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Adam Cowles, Assistant
Director; Gezahegne Bekele; Elizabeth Bowditch; Karen Deans; Martin
DeAlteriis; Julie Hirshen; Grace Lui; Karen Richey; Meredith H.
Trauner; and Amanda Weldon made key contributions to this report.
[End of section]
Footnotes:
[1] Including agricultural goods.
[2] Exec. Order No. 13,534, 75 Fed. Reg. 12,433 (Mar. 11, 2010).
[3] This report is in response to House Report 111-366, which was the
conference report for the Consolidated Appropriations Act, 2010. Pub.
L. No. 111-117, 123 Stat. 3034 (2009).
[4] All years in this report are fiscal years unless otherwise
indicated.
[5] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999). The terms internal control and
management controls are used synonymously in this report. See OMB
Circular No. A-123 Management Accountability and Control, June 1995.
[6] GAO, A Model of Strategic Human Capital Management, [hyperlink,
http://www.gao.gov/products/GAO-02-373SP] (Washington, D.C.: March
2002).
[7] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[8] LES can also be U.S. citizens who live in the host country.
[9] See appendix II for activities provided by USDA and State. While
USDA has a large budget for export promotion activities, most of it is
directed at promoting raw commodities rather than services and
manufactured goods.
[10] The Departments of Commerce and State signed a Memorandum of
Understanding in January 2009 formalizing State's role of promoting
exports at U.S. embassies where CS does not have a presence. State
provides designated export promotion services at 45 posts around the
world.
[11] Exec. Order No. 12,870, 58 Fed. Reg. 51,753 (Sept. 30, 1993); 15
U.S.C. § 4727.
[12] The Trade Promotion Coordinating Committee has 20 member
agencies. However, it generally reports in the National Export
Strategy on the budgets and activities of around 10. The 2008 strategy
included budget authority information for 9 agencies: the Departments
of Agriculture, Commerce, State, and the Treasury; Export-Import Bank
of the United States; Office of the U.S. Trade Representative;
Overseas Private Investment Corporation; Small Business
Administration; and U.S. Trade and Development Agency.
[13] GAO, Export Promotion: Trade Promotion Coordinating Committee's
Role Remains Limited, [hyperlink,
http://www.gao.gov/products/GAO-06-660T] (Washington, D.C.: Apr. 26,
2006).
[14] Other agencies that will play a role in the NEI include the
Departments of Agriculture and State, Export-Import Bank of the United
States, Office of the U.S. Trade Representative, and Small Business
Administration.
[15] State charges both ICASS and CSCSP costs to U.S. agencies that
are in embassies and other diplomatic and consular missions overseas.
CSCSP funds the construction of new embassy compounds. ICASS charges
are for services like building maintenance, vehicle operations, and
travel. Payments are made by all agencies in proportion to their
overseas presence.
[16] CS budget breakdown data presented in this section are based on
CS's accounting system records. ICASS charges were calculated based on
charges for CS only, even though other parts of Commerce also pay
their ICASS through CS.
[17] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[18] Administrative costs include centralized costs charged by
Commerce as well as ICASS and CSCSP.
[19] These dollar amounts include ICASS, CSCSP, payments to ITA for
shared overhead, and earmarks. ICASS amounts include charges for other
parts of Commerce; all Commerce ICASS charges are paid through CS.
[20] Agencies are required to formally seek permission from the Chief
of Mission to place a person overseas. Likewise, if an agency wants to
eliminate a position overseas, it must formally request that the
position be eliminated.
[21] CS receives reimbursements from other federal agencies for
services provided through interagency agreements. CS provided us with
the total obligations for fees plus reimbursements for 2004-2009.
[22] In March 2009, we reported that CS needed to ensure there was a
sound basis for setting fees, which would help to ensure that user
fees recover the intended portion of full costs. GAO, Export
Promotion: Commerce Needs Better Information to Evaluate Its Fee-Based
Programs and Customers, [hyperlink,
http://www.gao.gov/products/GAO-09-144] (Washington, D.C.: Mar. 4,
2009).
[23] 31 U.S.C. § 1341.
[24] ITA, including CS, had been operating under a partial hiring
freeze since 2006 because of resource constraints. During this period
ITA granted some exemptions that allowed CS to hire staff.
[25] The assessments conducted are referred to as Strengths,
Weaknesses, Opportunities, Threats (SWOT) analyses and were based on
formal feedback from CS's international and domestic field offices.
[26] The agencies implementing the NEI are to develop a plan for the
initiative by September 2010.
[27] Positions in three overseas offices will be filled with limited
noncareer appointments, as CS lacks staff with the necessary skills,
knowledge, and abilities to fill those positions. Limited noncareer
appointments are members of the general public hired for specific
locations and tours of duty based on specialized skills or experience.
First tours of duty are limited to 2 years, and limited appointments
can not serve with CS more than 5 consecutive years.
[28] CS also had 9 Schedule C employees and 4 Personal Service
Contract employees in the first quarter of fiscal year 2010. No new
Schedule C or Personal Service Contract hires are planned for fiscal
year 2011.
[29] CS FSOs are not the only FSOs required to serve a domestic tour.
The Department of State also has a domestic tour requirement. The
Foreign Service Act of 1980 includes a requirement that its FSOs serve
a domestic tour at least once every 15 years. 22 U.S.C. § 3984.
[30] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington, D.C.: Dec. 11, 2003).
[31] According to the Director of the Trade Promotion Coordinating
Committee, a National Export Strategy is not released in transition
years between administrations.
[32] [hyperlink, http://www.gao.gov/products/GAO-02-373SP].
[33] When considering strategies, it is important for agencies to
consider the full range of flexibilities available under current
authorities, as well as flexibilities that might need additional
legislation to be adopted.
[34] An FSO's standard overseas tour of duty is generally 4 years for
nonhardship posts, and 1 to 3 years for posts in hardship locations.
Officers may extend their tour of duty in 1-year increments. However,
the maximum stay at a post is 5 years.
[35] Posts managed by LES are under the supervision of FSOs who are in
nearby cities or countries. According to CS, it has used this
arrangement to reduce costs and facilitate coordination.
[36] The model is called the Overseas Resource Allocation Model and
was developed by contractors for CS.
[37] CS maintains its own Office of Foreign Service Human Resources,
which hires FSOs. Hiring of civil servants for CS is conducted by
Commerce's Human Resource Operations Center, and hiring of LES is
handled by State.
[38] The $321 million request for CS was included in the $534 million
President's budget request for all of ITA, of which CS is a unit.
[39] The GAO Cost Estimating and Assessment Guide was developed to
establish a consistent methodology that is based on best practices
that can be used across the federal government for developing,
managing, and evaluating cost estimates. If followed correctly, these
practices should result in reliable and valid cost estimates that (a)
can be easily and clearly traced, replicated, and updated, and (b)
enable managers to make informed decisions. [hyperlink,
http://www.gao.gov/products/GAO-09-3SP].
[40] A risk analysis provides a range of costs that span best and
worst case scenarios. According to best practices, it is better for
decision makers to know the range of potential costs that surround an
estimate and the reasons behind what drives that range rather than
just having a point estimate from which to make their decision.
[41] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[42] OMB endorsed the guidance in the GAO Cost Estimating and
Assessment Guide as sufficient for meeting most cost-estimating
requirements, including for budget formulation.
[43] CS indicated that the 2011 budget request is its cost estimate.
[44] This report is in response to a study requested in House Report
111-36, which was the conference report for Commerce, Justice,
Science, and Related Agencies' fiscal year 2010 appropriations.
[45] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington, D.C.: Dec. 11, 2003). Also see GAO: A Model of Strategic
Human Capital Management, [hyperlink,
http://www.gao.gov/products/GAO-02-373SP] (Washington, D.C.: March
2002).
[46] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[47] In addition, CS has resources available from unobligated funds
from prior years and surplus service fees. In 2009, CS spent $15
million earned from service fees, and $5 million from prior year
funding that was carried over to 2009.
[48] State's economic officers at embassies and consulates around the
world are also involved in government-to-government advocacy and
several other areas such as negotiating reductions in foreign trade
barriers. However, this report does not focus on those activities.
[49] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[50] A risk analysis provides a range of costs that span a best-and
worst-case spread. According to best practices, it is better for
decision makers to know the range of potential costs that surround an
estimate and the reasons behind what drives that range rather than
just having a point estimate from which to make their decision.
[End of section]
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