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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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