Accompanying Report of the
National Performance Review
Office of the Vice President
Washington, DC
September 1993
The National Performance Review's accompanying report on the Agency for International Development makes specific recommendations for improving the way the agency executes its mission. These include: redefining the agency's mission, reducing funding, spending, and reporting micromanagement, overhauling the personnel system, reengineering management of AID's projects and programs, and consolidating or closing AID overseas missions.
Executive Summary 1 ^^^^^^^^^^^^^^^^^
Recommendations and Actions
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AID01: Redefine and Focus AID's
Mission and Priorities 5
AID02: Reduce Funding, Spending,
and Reporting Micromanagement 13
AID03: Overhaul the AID Personnel System 19
AID04: Manage AID Employees and
Consultants as a Unified Workforce 27
AID05: Establish an AID Innovation Capital Fund 31
AID06: Reengineer Management of AID
Projects and Programs 37
AID07: Consolidate or Close AID
Overseas Missions 45
Agency Reinvention Activities 49
Summary of Fiscal Impact 51
Appendix
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Accompanying Reports of
The National Performance Review 55
Abbreviations
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AFSA American Foreign Service Association
AID Agency for International Development
CBO Congressional Budget Office
CEFMS Corps of Engineers Financial Management System
CIA Central Intelligence Agency
CP Congressional Presentation
DA Development Assistance
ESF Economic Support Fund
FAA Foreign Assistance Act
FAAS Foreign Affairs Administrative Support
FS Foreign Service
FSN Foreign Service National
FSO Foreign Service Officer
FTE Full-time Equivalent
GAO General Accounting Office
GS General Schedule
IAF Inter-American Foundation
IDI International Development Intern
IDRC International Development Research Center
IRM Information Resources Management
ISP Information Systems Plan
LCE Limited Career Extension
LWOP Leave without pay
NGO Non-Governmental Organization
NIA National Irrigation Administration
NPR National Performance Review
OIG Office of Inspector General
OMB Office of Management and Budget
PSC Personal Service Contractor
PVO Private Voluntary Organization
USIA United States Information Agency
During the Cold War, the struggle between the East and West framed international politics and U.S. foreign assistance programs. Now that this period has ended, a new set of profound challenges to U.S. national interests has replaced the Cold War prism through which this nation viewed international events.
The U.S. Agency for International Development (AID) was created in 1961 to carry out this country's development assistance programs abroad. The astonishing scope and speed of global change has accelerated an urgent need for a reassessment of AID's ability to play an effective role in U.S. foreign affairs and in the field of international development.
AID currently employs about 4,000 people who support the work of missions in over 100 countries. The agency used an estimated 7,000 personal service contractors to design and implement more than 2,000 projects in fiscal year 1993. The agency administered a fiscal year 1993 budget of approximately $7 billion.
The National Performance Review (NPR) considered the threshold question of AID's future existence. Reasonable arguments have been made for AID's absorption into the State Department, or for its abolishment. The NPR has concluded that the problem driving all AID's other problems is the lack of a clear and coherent mission and manageable set of priorities in legislation governing its programs and operations. AID's abolishment or absorption would not cure this central fact about the laws now covering its bilateral assistance programs. With a simplified mission, clearer priorities, strong leadership, innovative thinking, and fundamental reform of its programs and operations, AID could reclaim its potential to be an effective provider of U.S. development assistance.
AID Administrator J. Brian Atwood assumed his post in May 1993 and designated the entire agency as a reinvention laboratory, the first agency to do so. By doing this, AID has committed itself to fundamental reform, with the goal of transforming the agency into a high-performance, results-driven organization that can respond effectively to global challenges. Under its new administrator, AID will focus its development activities on sustainable development targeted toward four critical areas: the environment, population and health, economic growth, and democracy.
The NPR has isolated seven issues for discussion in this report and made recommendations for further action on fundamental problems facing the agency.
The agency's core problem is that it is burdened by too many responsibilities and expected to accomplish too many objectives. AID does not have a single, clearly defined and articulated strategic mission. External and internal control mechanisms have combined to deprive it of needed flexibility to make good decisions, and weigh it down with time-consuming and outdated reporting requirements. It is, in short, wrapped in red tape.
AID's U.S. and Foreign Service National employees are among its most important resources. As the agency adapts to the challenges of transforming itself to meet post-Cold War obligations with diminished resources, it must reassess its basic workforce management and contracting policies.
AID must also expedite critically needed reinvention of key business processes by creating an innovation fund to finance investment in new, integrated management information and financial management systems. AID's project and program management system, a core business function of the agency, needs to better reflect basic principles of customer service, focus on results, decentralize management authority, link results to planning and budgeting, and eliminate rules and procedures that hinder the accomplishment of results and accountability.
AID also needs to eliminate duplication of effort and function and target resources toward areas and activities most likely to produce successful results. At issue is whether the agency needs to maintain a field presence in more than 100 countries, whether assistance programs contain adequate incentives for recipients to succeed and graduate from those programs, and whether resources that support AID missions can be put to more effective use through leveraging of services provided by other agencies.
Coincident with the administrator's designation of the entire agency as a reinvention laboratory, AID created a Quality Council to coordinate and initiate reinvention initiatives. Actions taken and planned by AID, and proposed in this report, will transform AID and make it more relevant to this country's post-Cold War foreign policy.
Few would argue that public organizations work best when they have one clear mission. Clarity of mission may be a government organization's single most important asset.(1) The Agency for International Development (AID) has been cited as a prime example of a failed exercise in mission-driven government, burdened as the agency has been by several different and sometimes conflicting missions.(2)
Reviewers inside and outside AID have documented serious problems in major agency programs and operations for more than a decade.(3) In 1992, a presidential commission recommended that the agency be merged into the State Department; a recent congressional task force and others have called for the agency to be abolished and to be replaced by other public or quasi-public entities.(4) While others have stopped short of recommending the agency's outright abolishment, the consensus of reviewers and informed commentators is that AID cannot continue to function as it has in the past.
Reinvention is not simply an option or a challenge for AID; it is an imperative. For reasons discussed in this and other sections of this report, the agency cannot succeed in reinvention without help from Congress and other agencies.(5)
The new administrator of AID, J. Brian Atwood, acknowledged the dimensions of the problem in testimony at his Senate confirmation hearing in April 1993:
We have confirmed what other studies have concluded: AID is burdened by a surfeit of goals and objectives, encumbered by excessive red tape, and beaten down by poor morale.
[I]t will not be business as usual at AID if I am confirmed for this position. The changes I will be proposing will be radical departures from past practices. [R]adical changes are the only way to regain the faith of the Congress and the country in an enterprise which is central to our nation's international agenda. We cannot afford to fail . . .(6)
The problem at the heart of all of AID's other problems, observers and employees agree, is that it is burdened by too many responsibilities and expected to accomplish too many objectives, particularly for an agency of its limited size and resources. In short, AID does not have a single, clearly defined and articulated strategic mission.
The Foreign Assistance Act of 1961, amendments to the act over a period of 30 years, and other laws affecting AID define nearly 40 different responsibilities to be carried out by the agency in the field of international development.(7)
Included among AID's statutory responsibilities are agriculture, rural development and nutrition; population and health; education and human resource development; energy; private sector development; integration of women into national economies; human rights; and environment and natural resources.(8) And the list grows. Recent legislation gave the agency responsibilities for aid to the former Soviet Union and Eastern Europe and authorized the use of development assistance funds for capital projects (including investment promotion).(9)
Varied policy directions and emphases promoted by successive administrations, AID administrators, Congress, and outside interest groups pressing their own concerns have compounded the problem of too many statutory objectives. By 1989, one agency document identified 75 different mission priorities.(10)
This accumulation has led to what the U.S. General Accounting Office (GAO) has described as "a complicated and incoherent set of objectives with no clear priorities."(11) The only consistent but widely criticized assignment of priorities has been accomplished through the use of spending earmarks imposed by successive Congresses.(12)
Commentators, including AID employees, also assert that the proliferation of responsibilities contributes to confused or conflicting messages about the agency's basic mission. GAO has concurred in that critique, stating that while each of the many statutory responsibilities has merit, the multiple objectives in laws implemented by AID create confusion as to Congress' intent for the direction of the foreign assistance program, add to the tension between the executive and legislative branches on program priorities, and make it difficult to hold the agency accountable for reaching any particular objective.(13) Among examples cited of AID activities at cross-purposes with long-term international development are the agency's direct promotion of U.S private sector interests and its implementation of Economic Support Fund programs focused on shortterm geo-political objectives.(14)
Critics are virtually unanimous that so long as AID continues to exist, there is an urgent need for its basic mission to be clearly defined and its priorities and objectives to be simplified. It should be noted that in interviews and research on this topic, the terms mission, principles, objectives, strategy, and related concepts are frequently used interchangeably, suggesting a lack of agreement as to what these terms signify. The clear consensus in the past five years, however, is that AID cannot continue to do so many things and do them all well.
Comprehensive new authorizing legislation has not been enacted by Congress since 1985. The world has changed fundamentally in the intervening years. Numerous efforts to enact new legislation during that time have met with failure.(15) The result has been that annual appropriations acts have added responsibilities to AID piecemeal and assigned priorities at will through the earmarking process.
Discussions about AID's mission have intensified in recent years. They are occurring in several broader contexts. First and foremost are the changed geo-political circumstances of the post-Cold War period. Second, a high-level Clinton administration task force is reviewing the entire U.S. government foreign assistance structure, including AID, in light of current and emerging global conditions.(16) This study is expected to analyze the United States' post-Cold War foreign assistance policy, the roles and responsibilities of the agencies and organizations implementing that policy, the dispersion of U.S. programs overseas (including trade and export promotion activities), possible consolidation or elimination of overlapping and duplicative functions, improved interagency coordination of foreign assistance activities, and related issues.
As part of that review, Secretary of State Warren M. Christopher directed Deputy Secretary of State Clifton R. Wharton, Jr., to review AID's goals and objectives. Deputy Secretary Wharton and Administrator Atwood testified about the status of that report (known as the Wharton report) and the Clinton administration's review of all U.S. foreign assistance programs before a subcommittee of the Senate Foreign Affairs Committee in July 1993.(17)
The subcommittee chairman, Senator Paul S. Sarbanes, expressed a desire for expeditious completion of these reports to provide a basis for enacting new authorizing legislation.(18) Proposed congressional measures to authorize AID operations for fiscal year 1994 would require the President to submit a plan for reform of U.S. foreign assistance programs and AID to Congress within 60 days of the legislation's enactment into law.(19)
Secretary Christopher presented a fiscal year 1994 transition foreign assistance budget that he said would begin the process of redirecting U.S. foreign policy, establishing new priorities, and restructuring foreign policy institutions. U.S. foreign policy will emphasize three themes, implemented initially by a fiscal year 1994 budget submission organized around five objectives.(20) This focus on objectives, not just funding inputs, is a major departure from previous budget submissions.(21)
Administrator Atwood has publicly stated that his agency's primary mission should be long-term sustainable development with four strategic components:
He has spoken of the need for AID to carry out these responsibilities in partnerships with other government, non-government, and private voluntary organizations.(23) His redefinition of AID's mission corresponds in several important respects to recent congressional proposals for a new foreign policy framework, and provides a basis for productive dialogue with Congress on a new statutory foundation for AID operations.(24)
It bears noting, however, that challenges remain in implementing the administrator's redefined mission. He has expressed the view that AID cannot be all things to all people. He has also acknowledged the risks inherent in efforts to define a simpler mission based on sustainable development, a term that he recognizes "has taken on myriad meanings and has been invoked in many contexts."(25) Despite the comparatively small portion of the federal budget devoted to foreign aid, U.S. foreign assistance programs suffer from a lack of widespread public support.(26) In AID's case, this difficulty is compounded by its history of troubled programs and operations-- problems aggravated by the lack of a clear and coherent mission and a manageable set of priorities.
These factors underline the importance of explaining how the focus on sustainable development helps to simplify AID's mission, rather than to merely rebundle its current plethora of programs and objectives. A clear definition of this concept is important to develop the operational strategies needed to identify unrelated or non-essential programs and operations, and to conduct strategic planning.
Even assuming that AID does move in new directions, the agency is likely to be subject to external pressures from public and private sector groups and organizations that have benefited from AID support in the past. While there is broad support for simplifying AID's mission in theory, practical implementation will not be easy.
Due to budget cuts and adjustments to changed post-Cold War circumstances, AID's administrator has committed the agency to reductions in the number of programs, projects, and field missions currently operating in different countries.(27) It may be that this measure will be enough to make the agency's current roster of programs and operations more manageable. The administrator has also launched a review of agency programs and operational procedures.
An early result of this review has been to examine existing programs that facilitated movement of U.S. jobs overseas, and to put safeguards in place to prevent such programs from going forward in the future. It is not clear whether these steps, and the increased partnerships the administrator has described, will entail significant reductions in the overall number of agency programs and activities.
This question needs to be clearly addressed and resolved. It warrants serious scrutiny in view of several factors, including the agency's amply documented problems in managing its current array of programs, a shrinking personnel and budget resource base, and the availability of many other U.S. and international development organizations equally or better positioned to provide assistance to developing nations.(28)
In any event, without concerted and cooperative efforts by the executive and legislative branches to embody a clearer, more manageable AID mandate in law, and restraint in adding new legislative mandates beyond the agency's capacity to handle them, AID's future ability to effectively manage foreign assistance programs and its own operations cannot be ensured. The agency will continue to strain beyond its capacity to respond to challenges too numerous to be met. It will struggle to improve its serious internal management deficiencies while continued budgetary pressures threaten its funding base, and already-low levels of public support for foreign assistance erode further.
Past evaluations of AID programs and operations show that the agency cannot do all that it is trying to do now and do it well. It is not yet clear that doing the same number of things, but in fewer countries, will make AID programs more effective and produce better results.
In any case, AID needs a redefined mission and reduced and simplified operations. It also needs to make its limited resources go further through partnerships with other government and non-government assistance providers. An assessment of all AID programs and operations based on these goals, with clear operational strategies for accomplishing the mission and priorities defined by the administrator, should assist in identifying programs and operations that can be reduced, eliminated, or transferred to other agencies (consistent with the current governmentwide review of foreign assistance activities).
2. The administration should seek comprehensive new authorizing legislation to replace the Foreign Assistance Act of 1961, as amended.
While some redirection of AID programs and operations can begin administratively, the agency's reinvention can only succeed if it starts with a clear redefinition in law of a more focused, consistent, and manageable agency mission. The AID administrator's concept, subject to clear definitions of sustainable development and other critical terms, appears to be a formulation around which a consensus could emerge.
This reinvention process should also include the identification--for congressional elimination or transfer to other agencies--of any activities that do not relate to and directly advance AID's principal mission.(29) Such legislative action is urgently needed to permit AID to succeed with other reform initiatives and to engage in more effective long-term planning and resource allocation.
3. The AID administrator should develop a strategic vision of what the agency should look like as it enters the 21st century.
Private sector companies that have achieved the most success in managing organizational change are those that have developed the clearest messages about the need for change. These messages often appear in the form of vision statements that express the reasons for change and define a strategic vision of what kind of organization the company needs to become.
Vision statements describe how an organization must operate and the type of results that it needs to achieve. They operate to remind people of the organization's objectives, act as a gauge for measuring progress, and serve to motivate people on a continuing basis during efforts to accomplish major change.(30)
NPR agrees with AID's administrator that the agency must make radical departures from past practices if it is to succeed in the volatile and complex international arena of the future. As part of the task of recharting the agency's course, he should lead the process of developing a vision statement to guide the agency's strategic planning of the fundamental changes needed to accomplish that goal. Each agency component can then develop a vision statement proceeding directly from and supporting the larger agency vision.
4. The AID administrator should conduct a comprehensive review of all agency directives and other internal and public issuances to ensure that they clearly express the agency's mission, priorities, and objectives in clear, consistent, and accurate terms.
A process should be established to ensure that all internal and external agency publications express the agency's mission, priorities, and objectives. Reported findings of as many as 75 different priorities in agency guidance indicate that the agency has compounded its problems in the past by defining too many objectives for an agency of its size and resources to manage.
The efficacy of the new administrator's efforts to articulate a simpler, clearer mission depends in part on the completion of the Clinton administration review of foreign assistance policy and programs across the government. The administrator can implement his goals and priorities (i.e., to clarify AID's mission and streamline its priorities) to a limited extent without legislative reform--e.g., through clear and consistent policy guidance, resource reallocations, partnerships with other assistance providers, and other measures. Legislative reform, however, is critical to relieve the political and other pressures on AID to implement all the responsibilities and priorities found in current law.
The focus of the recommendations in this part of the report is on improving results. Cost savings may result from congressional action limiting the scope of AID's responsibilities, but no projections can be made at this time as to the likelihood or amounts of any such savings. Implementation of these recommendations should produce increased efficiency in agency operations. The actual fiscal impact of resulting changes depends on the nature and timing of their implementation, and cannot be estimated.
Other suggestions included review and clarification of democracy and human rights programs engaged in by AID and other agencies. H. Rept. 103-126, p. 2.
30. Hammer, Michael, and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (New York: Harper Business, 1993), pp. 148-158; and Senge, Peter M., The Fifth Discipline: The Art & Practice of the Learning Organization (New York: Doubleday, 1990), pp. 205-232.
Major reviews of the Agency for International Development (AID) in the past five years, as well as interviews with AID employees, point to several financial, reporting, and notification mechanisms as impediments to the agency's efficiency and effectiveness. Chief among these are: (1) restrictions on funding by appropriations of program funds in one-year increments and multiple accounts, (2) earmarking of funds, and (3) external and internal reporting and notification requirements.(1)
No one disputes the need for oversight of AID to ensure that it is achieving results that advance U.S. foreign policy objectives. The tension between the executive and legislative branches inherent in our constitutional system, however, was exacerbated in the 1980s because of friction created by divided government and policy differences between the legislative and executive branches. This friction contributed to a proliferation of financial and reporting mechanisms to control and monitor agency action.(2) Changes are needed to transform executive and legislative branch control mechanisms into incentives for improved performance and accomplishment of results at AID.
Appropriations. With few exceptions, Congress appropriates AID's development assistance for a one-year period.(3) This appropriations funding cycle inhibits the kind of results-driven budget system envisioned by the National Performance Review (NPR) effort. AID employees indicate that the one-year cycle encourages obligating funds without adequate planning, disrupts project continuity due to uncertainties about funding availability from year to year, and reduces the agency's leverage in negotiating contracts and other agreements.(4) While Congress moved in fiscal year 1993 to consolidate most AID development assistance funding from multiple accounts into just two accounts, the consolidation of all development assistance into a single fund would improve the agency's flexibility and effectiveness by allowing it to transfer funding more quickly and efficiently to priority, high-performing projects and programs.
Earmarking. This practice consists of legislative restrictions on how AID can spend its appropriated funds. Funds are earmarked in different ways. These include limitations on the maximum amount of money that can be spent, specifications of minimum amounts to be spent, specific instructions on how money will be spent, and establishment of required staffing levels. Funds are also earmarked by targeting expenditures toward specific countries, projects, entities to carry out those projects, and functional accounts (e.g., environment and energy, education, microenterprise activities, and capital projects).
Funding earmarks grew markedly in AID appropriations bills during the 1980s. Earmarks have not been confined to legislation, however. Several appropriations bills were accompanied by lengthy conference reports by congressional committees, requesting or directing the expenditure of funds in particular ways.(5) AID officials recognize that such reports do not have the force of law. Nevertheless, they feel constrained to implement requests or directions on funding allocations to try to meet Congress' goals and to avoid problems.
The most heavily earmarked account is the Economic Support Fund (ESF) category, representing approximately 25 percent of AID's program assistance budget.(6) In recent years, approximately 85 percent of ESF funding has been legislatively allocated for economic assistance to Israel and Egypt, known as the Camp David countries. In fiscal year 1991, earmarks accounted for 60 percent of AID's overall program assistance budget. While that percentage has declined somewhat in the past two fiscal years, earmarks still apply to more than 50 percent of appropriated funds for AID programs.
AID officials and outside analysts generally agree that the earmarking of funds significantly curtails the flexibility needed by the agency to accomplish its mission efficiently and effectively.(7) Earmarks direct funds to certain countries, projects, or recipients at the expense of others that may be needier or likelier to succeed. In addition, it is more difficult to exert leverage on, and enforce reasonable and prudent controls over, designated recipients of earmarked funds when they know that their funding levels are assured.
The elimination or substantial reduction of earmarks is consistent with, and would advance, an important goal of government reinvention efforts. A recent congressional task force concluded: "Removing earmarks would enable more effective Congressional oversight, because Congress could focus on program results rather than relying on earmarks and associated prohibitions, conditions and reporting requirements."(8) If enacted, the current fiscal year 1994 AID appropriations bill pending in the House of Representatives would eliminate program funding earmarks.(9)
Reports and Notifications. A third burden on AID operations consistently identified by agency officials and outside reviewers is the number and volume of reporting requirements imposed in foreign assistance-related legislation and legislative reports.(10) These reporting and notification requirements fall into three general categories: (1) notifications, advising Congress of actions, determinations, or other events as they occur; (2) periodic reports; and (3) one-time reports.
These directives are found in authorizing and appropriations legislation, and in the accompanying and often voluminous committee reports. While some of these reporting requirements are not legally binding, the agency feels that such directions cannot be ignored and that it must comply.
Clearly, some reports are important and necessary for congressional oversight. In the interest of reducing undue constraints on mission accomplishment, however, it should be asked: (1) whether reporting and notification requirements imposed on AID at every stage of program operations reflect an undue focus on inputs and processes, rather than on the results of agency programs and operations; and (2) whether the number of required reports, their frequency, and the resources expended in their preparation divert already-limited staff and budget resources from more productive, mission-oriented activities.
AID must submit approximately 60 reports to Congress in fiscal year 1993, divided nearly evenly between one-time and periodic reports.(11) At least 10 reports can be identified for possible elimination, based on a lack of continued utility.(12)
A larger reporting burden is imposed in connection with congressional notifications, including what are known as country notifications and technical notifications. AID sources report that the agency prepares and submits an average of 1,000 congressional notifications per year. These include notifications to congressional committees made in advance of specified funding decisions, project changes, reprogramming decisions, and other program activities.
By law, AID must notify Congress of every proposed project obligation in excess of amounts previously justified in AID budget documents before obligating funds for these activities.(13) Notifications are sent to at least four congressional committees and must precede the obligations involved by at least 15 days. During this period, members may place holds on the proposed obligations for varying lengths of time.(14) Reasons for the holds vary and can occur as a result of factors unrelated to AID's proposed project (for example, concerns over controversial events in, or activities or policies of, the country in which the project is to occur).(15)
An estimated 35 to 50 holds are placed on obligations in any given year. The notification process costs an estimated $185,000 and four work years of staff time each year. The office responsible for coordinating and sending reports to Congress estimates that from 1 to 11 people (and possibly more) review and clear each notification.(16) Reducing the levels of review on these reports, however, would not resolve the threshold issues of the need for the number and frequency of these notifications, and the length of the waiting period before AID can proceed to implement funding and other decisions.
A 1988 congressional study of foreign assistance reporting requirements concluded that the number of foreign aid reporting requirements could be reduced by as much as one-half through consolidation or repeal of unnecessary and obsolete requirements. The agency's Congressional Presentation (CP) report received special mention. AID reported that it spent approximately 120 work years and more than $9 million to assemble this single report.
A consensus was found to exist among numerous legislative and executive branch officials interviewed that substantial portions of the CP could be eliminated.(17) AID has made progress since then in reducing the size and expense of the CP, but the problem is illustrative of the overall nature of the concern in this area.
In addition to the reports required to be submitted to Congress, AID officials and employees have also identified a proliferation of administrative reporting requirements and procedural directive systems as impediments to organizational efficiency and effectiveness. A mission in Africa, for example, recently compiled a list of approximately 46 reports that African field posts submit to headquarters in Washington at different reporting intervals each year.(18) Some of these reports, it should be noted, implement statutory or regulatory requirements. AID administrator J. Brian Atwood summarized the nature of the problem:
[O]ur failures in the past have produced overregulation in the present. We have spent more time on paperwork than people work. AID personnel have become more concerned with process than development. The first thought that should come to the mind of an AID project officer should not be "[H]ave I filled the forms out right?" It should be "[W]hat will this project achieve?" After that question is answered, we should then turn to accountability--and we should be accountable.(19)
The agency's Office of Inspector General (OIG) agrees that at least some of the agency's internal directives and reporting requirements have outlived their usefulness, impose costs in excess of the benefits derived, or otherwise impede the agency's effectiveness and efficiency.(20) A new AID Quality Council is coordinating an agencywide review of recurring reporting requirements, with a view toward consolidation or elimination of reports. The agency's Policy Directorate has recently undertaken a comprehensive revision of the agency's 33-volume handbook system, which has not been substantially updated for nearly a decade.(21)
Other administrative reporting mechanisms examined by the National Performance Review include several associated with what is known as the apportionment process administered by the Office of Management and Budget (OMB). Following enactment of congressional appropriations, apportionments of funds must be made by OMB before they can be obligated by an agency. Except for ESF monies, apportionments of funds to AID are made by OMB in consultation with the agency. By law, ESF funds are allocated on a country-by-country basis by the State Department, in consultation with AID; OMB then apportions funds for obligation by AID.(22)
AID's history of substantial management problems led to the formation in 1991 of what became known as the Joint OMB-AID SWAT Team, which was tasked with a comprehensive review of the agency's operations. The resulting report by the reviewers from both agencies led to 30 recommendations covering virtually every aspect of the agency's operations.(23)
The apportionment process provides OMB with an opportunity to evaluate AID's progress toward the management reforms it committed to make after the joint review. History suggests that OMB's diligence in apportioning AID appropriations has not been misplaced. Nevertheless, progress by AID in implementing SWAT Team recommendations and other reforms (e.g., improved program planning and evaluation, information and financial management, portfolio and contract management, and a more timely obligation of funds) could enable some reduction in reporting, documentation, and attendant delays currently associated with the apportionment process.
This recommendation does not imply the creation of open-ended spending authority, but rather the setting of multiyear commitments corresponding to the reality of AID's development assistance program funding and project cycles. Appropriation periods can be adjusted by Congress as those circumstances change.(24)
2. AID development assistance funds should be appropriated as part of a single account.
Implementation of this recommendation could be accomplished with the submission of an AID development assistance funding request in a unified account, followed by congressional appropriation of funds in that single account category.
3. Earmarks on AID development assistance appropriations should be eliminated or reduced to allow the agency greater flexibility in responding to changing assistance needs.
The elimination or reduction of earmarks, along with establishment of a single budget category for all appropriated development assistance funds, would significantly reduce AID's management load in tracking all obligations by separate category and account, and could result in a significant reduction of in-house staff devoted to such activities. The proposed elimination of earmarks on AID appropriations for fiscal year 1994 in H.R. 2295 represents significant progress on this issue.(25)
4. Statutory reporting and notification requirements should be reduced.
Congress should reduce, consolidate, or eliminate unduly costly, burdensome, and obsolete reporting and notification requirements, with particular emphasis on the Congressional Presentation report and one-time notifications. This recommendation could be accomplished by one or more of the following measures: (1) amendment of the pertinent reporting and notification provisions in the Foreign Assistance Act of 1961, as amended, and other statutes affecting AID operations to eliminate unnecessary and outdated requirements, and to consolidate remaining requirements in a single report; (2) deletion of affected reports and notifications in new legislation recommended elsewhere in this report; (3) limitation of new reporting requirements in future authorization and appropriations acts, and in committee reports accompanying such legislation; or (4) use of computer technology to simplify the report preparation and transmittal process.(26) Reporting requirements identified for elimination in one current Senate foreign assistance reauthorization proposal should be considered as a starting point.(27)
5. The AID administrator should assure the completion of a zero-based review of all internal agency reporting requirements and procedural directives; elimination of outdated, unduly burdensome, non-costeffective requirements; and establishment of controls over the initiation of new requirements.
AID's Policy Directorate and its new Quality Council are already making progress on this initiative. In the process, directorate officials are attempting to strengthen channels of communication with the agency OIG, which has expressed a willingness to assist AID employees in the identification of procedural impediments to the most effective and efficient accomplishment of the agency's mission.
6. AID should develop a results-driven performance measurement system capable of documenting expenditures of development assistance funds against feasible and measurable performance goals.
Reductions in earmarking, one-year appropriations, reporting requirements, and other control mechanisms should be accompanied by development of reliable and effective performance measurement indicators. Such indicators are needed to ensure the agency's accountability for its allocations of program and other funds, and to provide assurances to the President, OMB, Congress, and the public that AID programs are achieving results.(28)
Implementation of the recommended measures will provide AID with much-needed flexibility and increase accountability as it moves toward the goal of becoming a more effectively and efficiently managed mission-driven, results-oriented agency.
The primary impact of these recommendations is expected to be more efficient allocation of budgetary and human resources. The fiscal impact of these recommendations cannot be estimated.
Personnel management issues are consistently reported as problems in studies about the Agency for International Development (AID) and in interviews with AID staff. Complaints reflected in this NPR report concern the conflicts between the Foreign and Civil Service systems, workforce diversity, recruitment, assignment, training, evaluation, and overseas support.
AID currently maintains three distinct personnel systems to manage its direct-hire employees. These are the Foreign Service (FS), the Civil Service General Schedule (GS), and the Foreign Service National (FSN) systems. Fully incorporated into AID in 1980, the Foreign Service principally manages staff at overseas posts and senior management positions in Washington.(1) In 1980, every position in Washington was designated as either a GS or FS position. The Civil Service is used for support staff, technical experts, and some senior management positions in Washington. Except in limited circumstances, GS employees are not assigned abroad, although they can travel overseas. FSN employees are non-U.S. citizens working at overseas posts.
AID has approximately 1,700 FS employees--about 1,100 located overseas and 600 in Washington. All of AID's nearly 1,000 FSNs serve overseas. All of AID's more than 1,500 GS employees serve in the United States. Besides its direct-hire employees in the three personnel systems, AID will employ between 7,000 and 8,000 personal service contractors (PSCs) in fiscal year 1993 to perform a wide range of duties, primarily overseas. These include project implementation, evaluation, monitoring, and other tasks that do not statutorily require performance by a direct-hire employee. About 10 percent of the PSC workforce consists of U.S. citizens.
Workforce management has been raised as a problem at AID in most of the major studies of the agency. The AID personnel system has been criticized as complex, costly, and unsuited to accomplishing the mission of the agency.(2) The 1992 President's Commission on the Management of AID Programs (the Ferris Commission report) summed up the situation by stating: "AID needs to change the ways it recruits, assigns, trains and develops its staff."(3)
Recent responses to a worldwide information cable sent by AID management suggest strong dissatisfaction with AID's personnel system.(4) According to one response, "The personnel system is hopelessly antiquated, slow, perverse, and unproductive." The FS evaluation system came in for special criticism, with the response from one overseas post suggesting that it needed revision to improve morale, and that "missions are almost put out of business in April/May each year in order to complete the requirements." Another post criticized the evaluation process because it is "time consuming, expensive and--most importantly--does not work." One employee suggested that staff should evaluate managers. Another post noted the lack of minorities in decision making roles.
Dual Foreign Service/Civil Service General Schedule System. Operation of the dual FS/GS system was cited often in recent analyses of the agency and in interviews (both inside and outside AID) as a source of morale problems, management difficulties, rigidity, and wasteful bureaucracy. Important differences exist between the two systems because they are designed to fill different needs. The Foreign Service is largely an up-or-out system. Employees typically come in through the bottom, as in the military, and advance upward through the grades in an established schedule. If they remain in one class for longer than a certain period without promotion, they come up against FS time-in-class rules and are subject to separation. In the past, however, limited career extensions (LCEs) have been granted almost routinely, extending many senior employees beyond their timein -class, further contributing to a personnel structure already criticized as top-heavy. In contrast, the Civil Service can be entered at any level through open competition, but advancement is only possible if a position at the next grade is available.
The compensation structures of the two systems differ in ways that bring them into conflict. FS employees are compensated on a rank-inperson basis rather than rank-in-job as in the Civil Service. The rank-in-person system was designed to accommodate rotational assignments. The GS system, on the other hand, is designed to focus greater levels of specialization in the workforce. The GS salary structure is based on traditional measures, like specialist skills, breadth of responsibility, and number and type of employees supervised. FS employees are promoted based on the results of an annual performance review.
These two systems often collide, especially where they coexist in the same unit. For instance, GS employees serving side-by-side with headquarters FS staff have more difficulty receiving promotions for similar work if they do not have supervisory responsibilities. They are reviewed based on different standards and systems. Conflicts have also arisen over the numbers and types of positions reserved for FS staff.(5)
The two systems have different types of probationary periods. AID career FS staff are tenured. To achieve tenure the employee must complete at least three fully successful years (of which two must be overseas) within five years, receive satisfactory proficiency in a relevant language, and be reviewed by a tenure board. Tenure boards meet twice a year. During the most recent board deliberations, 21 employees were recommended for separation and five were deferred for additional evaluation.
The Civil Service has a three-year career-conditional period, after which career status is conferred. It should be noted that AID has authority to grant non-tenured FS appointments of up to five years. The FS tenure system has been criticized for impeding the agency's ability to respond to the changing development priorities of the 1990s by protecting the interests of staff with skills less suited to new challenges.
A workable example of a unified foreign affairs personnel system exists. The Central Intelligence Agency (CIA) maintains a Civil Service-based unitary personnel system that is highly responsive to the need for flexibility in overseas assignments. The CIA assigns staff both in the United States and abroad, often in situations of extreme hardship. There are no restrictions as to geographic assignment, employees carry rank-in-person, and retirement compensation relates to months of actual field or hardship service.(6) In the Foreign Service, on the other hand, once tenure has been granted, waivers may permit the FS employee to serve exclusively in Washington and still be eligible for retirement after only 20 years of service.
Length of Overseas Assignment. Concerns were raised during interviews that overseas tours at AID are too short. FS employees serve two- and four-year tours, depending on the post. This assignment structure is seen as having a major negative impact on staff effectiveness, program continuity, and transfer and training costs. The current system does not realize a full return on the overhead investments (e.g., training and relocation) the agency makes in its employees.
Foreign Service Assignment Process. The FS assignment process was criticized as unresponsive to the needs of the agency and unfair to the employees who are subject to it. The Ferris Commission report described the informal assignment process that has developed, noting that the bulk of the assignments are negotiated without the participation of the personnel office. Critics contend that only the less desirable assignments are made according to the established guidelines.(7)
International Development Intern Program. AID's International Development Intern (IDI) program is a proven success. The number of positions funded each year, however, has fluctuated in response to the rise and fall of AID staffing funds. The graduates of the IDI program are a "Who's Who" of successful AID managers. Given the nationwide trend to reduce middle management positions, the historical pathway for advancement is being closed off to many employees. The IDI program is an effective vehicle for improving workplace diversity and is a reliable source of managerial talent. This program is an effective way for AID to enrich its workforce.
Interdisciplinary Rotations. Mandatory, interdisciplinary rotation (e.g., program operations to administration, implementa-tion to evaluation, or headquarters to field) of junior officers is common in the foreign affairs and military communities. AID is a notable exception, partly because many AID officers come in at mid-career level. Because of a new agency emphasis on results-based performance measurements and recent congressional legislative initiatives in the area of mandatory performance standards and strategic planning, cross-training in evaluation methodology, resource allocation, and management is an essential element in future career development. Rotations offering training in these areas should be mandatory for promotion purposes and seen as a normal part of career development.
Use of Tandem Couples. Overcoming historical problems with dual assignments (assignments where married FS officers serve at the same post) will become more important in the deficit reduction environment of the 1990s. Overhead savings (e.g., storage of household effects, housing expenses, transportation of things, travel and education for dependents, family medical care) can be substantial by hiring couples. Liberalizing hiring of spouses at post is an important step forward in attracting professional couples and supporting the professional and personal interests of FS families.
Federal law and regulation are quite stringent about nepotism. Assignments must be made carefully so that spouses are not operationally accountable to each other, or serve in positions where normal separation of duties is called for because of potential for financial or other conflicts of interest. Experience has shown that smaller country programs tend not to allow the required separation.
Overseas Compensation. Overseas compensation, tied largely to the Foreign Service Act, has been criticized as too generous. FS staff and U.S. contractors are eligible for U.S. holidays, local holidays, annual leave, home leave, and compensation for rest and recuperation (R&R) trips in selected posts (staff assigned in both Barbados and Bangkok are, for example, eligible for R&R away from these posts). In addition, staff are eligible for up to 25 percent pay differential based on hardship and cost of living. In some countries, they receive commissary privileges or shipment of consumables--goods purchased in the United States and shipped at government expense to post for the employee's use.
In 1989, GAO reviewed State Department plans to augment housing standards for FS officers. The study concluded that for State Department employees alone housing costs would increase by at least $10.9 million--much more if other foreign affairs agencies followed suit. The study noted that many government employees were living in housing that exceeded current standards.(8)
Training. Deficiencies in training are mentioned in interviews and recent management studies of AID. The 1992 Joint OMB-AID SWAT Team report on AID operations suggested that project management was the greatest weakness in training.(9) The Ferris Commission noted the ad hoc nature of training at AID and the low commitment of resources.(10) The agency has begun pilot training programs in project and contract management, with a view toward certifying project officers beginning in fiscal year 1995. The agency also has a vigorous language training program and should continue to emphasize language proficiency.
Performance Evaluation. In 1992, the Ferris Commission criticized the use of both the FS and the GS evaluation systems.(11) The Ferris Commission report indicated serious problems with the functioning of the personnel evaluation system, particularly in the Foreign Service, stating: "Because of AID's collegial culture, a system has evolved over time where each individual employee manages his/her assignments, training, career, and frequently even drafts input into annual performance ratings. GS employees tend to be ignored or little involved in career development and training."(12) The FS appraisal system is also criticized for not being linked to accomplishment of the goals of the agency.
Awards are given liberally at AID. The Joint OMB-AID SWAT Team reported that:
In fiscal year 1991, the agency (AID) paid $2.4 million in performance based incentive awards to about 1,700 employees. In that year, 43 percent of the Foreign Service staff received awards and 59 percent of the Civil Service employees received awards. In the same year, AID separated only five people for substandard performance.(13)
AID personnel office staff recently said that 95 percent of AID Foreign Service employees received either outstanding or superior performance ratings in fiscal year 1992.
Performance Incentives. Although not unique in this regard among federal agencies, AID employees do not have routine, predictable jobs. Rather, many employees are problem solvers, confronting new and complex development problems and then, by applying a mix of information and financial resources, solve, or at least ameliorate them. Risk taking is inherent in this type of work, and because of that fact, failures are to be anticipated. Conducting meaningful performance appraisals of AID employees means acknowledging the tension between process and product. Measuring only process, however, means that performance appraisal focus is only on inputs, not on outcomes.
The AID Agency Incentives Project (conducted between July and December 1991) represented a positive effort by the agency to revitalize its employee incentives systems by acknowledging the high level of service motivation in most AID employees, shifting evaluation focus to project results, giving managers greater autonomy over incentive resources, and supporting employees with a refined statement of agency mission.
According to the project report, many employees are "frustrated by obstacles such as a lack of clear direction, cumbersome procedures, outmoded systems and facilities, and a poorly defined career path that fails to provide opportunities and rewards in a transparent, predictable and equitable manner."(14) The report criticized the awards process because the awards systems are "overly centralized, the process is less than transparent, and rewards are not made in a timely manner and are not adequately tied to performance."(15) The suggestion was made that "to be effective, the process must be decentralized, timely, equitable, and based to an increased extent on peer and subordinate input."(16) All of these steps are consistent with the basic principles of reinvention.
AID needs to determine the optimal personnel system that will contribute to the achievement of the agency's basic mission and clear priorities. The new system should ensure improvements of the current mixed systems in the following areas:
The AID Administrator should select the approach that is most consistent with the requirements of the agency.(17)
2. AID should reinvigorate the International Development Intern (IDI) Program.
AID should support this source of managerial talent and workplace diversity by ensuring stable funding for the program and including IDI rotations in agency workforce planning.
3. AID should ensure that the lengths of overseas assignments are logically related to the nature of the work performed by AID personnel.
In many cases, this will involve lengthening tours beyond the current two- to four-year period. Its net effect should be to better leverage experience gained in individual countries.
4. AID should ensure that junior officers develop management and administrative skills as part of their career development.
5. AID should invest in more training in project implementation, contract administration, financial management, and foreign language proficiency.
6. AID should encourage rotational assignments in and out of the Office of the Inspector General (OIG).
Staff from the OIG should be allowed to take assignments as project managers. Also, the agency should facilitate rotational assignments for program staff through the OIG. AID management should take measures to improve the relationship between agency managers and the OIG.
7. AID should restructure the performance review and employee incentive programs to link individual performance to organizational performance.
8. The AID Administrator should enforce the terms of the up-or-out regulations and begin reducing the excess senior management at the agency.
The Administrator should curtail the routine granting of LCE waivers to the up-or-out regulations.
9. AID should integrate qualified spouses of overseas couples into the assignment process and cultivate them as part of the overseas workforce.(18)
Assignments should be made carefully so as not to violate federal law and regulations regarding nepotism.
10. AID should initiate an interagency review of FS benefit policies among the various agencies using FS employees.
Areas for scrutiny should include but not be limited to leave policies, pay differentials, rest and recuperation policies, and housing standards.
A unified system will be more efficient to administer than the current system. Review of the overseas compensation package will show possible cost savings in areas like housing standards and differential pay. Enforcing the terms of the up-or-out regulations will make room for younger staff, facilitate improvements in workplace diversity, and allow expansion of the IDI program.
Increasing the tour length will enhance the effectiveness of the program staff at post by giving them a longer opportunity to learn about and focus on the specific problems of a country. A longer commitment to a particular country will improve project continuity and create an incentive to more carefully consider overseas assignments. Encouraging a more family-friendly overseas work environment will make more cost-effective tandem couple assignments possible.
The estimated costs (including overhead) to place one AID staff person in the field range from $150,000 to $300,000 per year exclusive of salary. (The direct costs are estimated at $60,000 to $105,000 per year.) AID personnel are paid up to 25 percent pay differential for overseas assignments in hardship posts. Training costs will be reduced by rotating formerly GS employees or previously language-trained professionals out into the field. Increasing normal tour length will reduce the costs associated with relocating staff. Reducing the number of highly graded employees on limited career extensions will lower salary expenses. The actual fiscal savings associated with these changes, however, depend on their timing and nature and cannot be estimated at this time.