Service Contracts Between U.S. Embassies and Employee Associations

In response to a congressional request, GAO testified on: (1) the extent to which U.S. embassies have entered into contracts with employee associations; (2) the motivations for using associations as contractors; and (3) the propriety of these arrangements given the dependent relationship between the embassies and the employee associations. GAO noted that, to obtain personnel for various support functions, embassies frequently contracted with their employee associations because of the lack of authority to contract directly with individuals. GAO found that: (1) under no circumstances can an association be considered an independent contractor and make judgments and decisions apart from the embassy; (2) current ceilings on the direct hire of U.S. and foreign service national personnel were not sufficient to provide the level of services required at the posts; (3) embassy officials considered the use of associations as the most viable and least costly approach to providing service; and (4) posts were obtaining services through associations under unauthorized personal service contracts. GAO also found that: (1) the associations were not providing all services required by the contractor; (2) some contracts did not follow Federal Acquisition Regulations; (3) some associations were not maintaining adequate accounting records to support activities under the contracts; (4) some associations were making profits due to fees that were arbitrarily set at higher amounts than the management costs incurred; and (5) oversight of embassy/association contracting has been minimal.