State Department

The State Department received appropriations of $2.695 billion for fiscal year 1995 and $2.671 billion for fiscal year 1996 to conduct foreign affairs. Although State has cut its staff and implemented cost reduction measures, it has been reluctant or unable to significantly reduce its overseas presence and the scope of its activities or to significantly change its business practices. Budgetary constraints make it highly unlikely that State will receive a level of funding that would allow it to maintain its current level of activities. The greatest opportunity to reduce costs is by closing, or reducing the size of, overseas posts, which cost about $1.9 billion annually--or nearly 70 percent of State's budget. State maintains a diplomatic presence in more than 250 locations overseas, including countries where the United States has limited interests. This structure has not changed significantly since the end of the Cold War. State could also reduce support costs by several hundred million dollars by accelerating changes to its business practices. State now spends nearly $1.8 billion on communications, real estate, and other support services for domestic and overseas operations. Prompt disposal of unneeded overseas real estate is just one example of how State could reduce its support costs.

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

Recommendations

Our 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.

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