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Department of State and U.S. Information Agency

Recommendations and Actions

DOS02: Integrate the Foreign Affairs Resource Management Process

Background

The foreign affairs community is seeking to redefine its mission and priorities in light of the end of the Cold War. This process of redefinition raises several important questions. What should be the Department of State's role? How should it relate to other players in the foreign affairs community? A rapidly changing world and a climate of fiscal constraints requires that the department provide strong interagency leadership to implement an integrated foreign policy program and resource management process for all international affairs programs as well as for its own operations. New planning and management structures are needed for this integration to occur, thereby allowing the U.S. government to address new foreign policy requirements and meet future challenges.

Interagency Coordination. To maximize the use of international affairs resources, a strategic management process should directly link foreign affairs priorities to resource allocation. The current interagency process falls short in that regard. In theory, the Secretary of State is responsible for coordinating the final presentation of the International Affairs Budget (Function 150), the source of funding for more than a dozen federal agencies. In fiscal year 1993, the Function 150 account amounted to $21.6 billion in budget authority. In practice, however, the Department of State has limited authority over other cabinet agencies. The budget coordination problem is further compounded by the fact that more and more resources traditionally classified as part of the domestic or defense budgets (non-150 accounts) are being devoted to international programs. These resources include the international budgets of the Drug Enforcement Agency, the Environmental Protection Agency, the Department of Defense, and the Department of Commerce, among others.(1) These resources are beyond the authority of the Department of State.

What is needed now is a comprehensive, integrated strategic resource management process for agencies with foreign affairs activities--a process that flows directly from the policy priorities and objectives articulated by the President. This process should result in better integration at the country level as well. To date, there has never been an effective institutionalized interagency process.

State Department Coordination. Likewise, within the Department of State, integrated policy and resource management has never been fully institutionalized. The department's current program planning system, initiated in 1990, has been developed as a management tool for clarifying the department's goals and objectives and for matching priorities with resources. Although this year's mission and bureau program plans will be an important element in formulating the fiscal year 1994 financial plan and the fiscal year 1995 budget request decisions, program planning is not yet as fully integrated with all resource management (budget, financial plans, and personnel allocations) as it should be.

The State Department today is a conglomeration of programs, systems, and ways of doing business held together by an extremely broad overall strategy. There is an uneven consensus, both inside and outside the foreign affairs community, regarding who the customer is, or should be. Managing from crisis to crisis has been the standard operating procedure. A new strategic management system that integrates the department's policy, programs, and resources and that establishes execution oversight and accountability for results is needed to address the full spectrum of the department's operations.

When resources were more plentiful relative to demand, the department's leadership could afford to focus on urgent foreign policy developments and pay relatively little attention to resource management. The Under Secretary for Management was the senior policymaker relegated with the responsibility for integrating departmental operations and resource allocation decisions.

Over the next few years, however, the fiscal environment will remain constrained even as new and costly demands continue to emerge. The current policy and resource management process is simply not adequate for addressing the challenges ahead. Both better federal government coordination of international programs under the State Department's leadership and a more integrated process internal to the State Department are needed.

Actions

1. The Secretary of State, in conjunction with the National Security Council and the Office of Management and Budget, should reform the interagency foreign policy resource management process for Budget Function 150.

The interagency foreign policy resource management process should be reformed to allow for more effective integration across agency lines, including the formulation of tradeoffs and the articulation of priorities.2 As a first step, the Secretary, in consultation with the National Security Council and the Office of Management and Budget (OMB), and in coordination with his counterparts in the other Function 150-funded agencies, should charter an effort to reform the foreign policy resource management process.

2. The President should issue a directive to strengthen the authority of the Secretary of State in the Function 150 interagency resource management process.

The President should issue a directive to strengthen and clarify the authority of the Secretary of State to integrate foreign policy management and international affairs spending. The Secretary should actively exercise his expanded authority through the dissemination of annual planning guidance within the department and to other Function 150 agencies at the same time OMB issues its fiscal guidance. The Secretary should work with the National Security Council to promote the periodic review and identification of clear overriding priorities, addressing both policy and regional/country emphasis within a worldwide context. These reviews will help form the basis for the planning guidance, which should also address funding priorities.

The Function 150-funded agencies should send their prioritized submissions to the Department of State in a common format that would demonstrate how they intend to allocate their Function 150 resources against the foreign policy objectives articulated by the President. This process should serve to identify funding gaps, areas of duplication, and potential opportunities for increased cooperation across agency lines. It should also address likely impacts of reduced funding.

The Secretary's final submission to OMB should represent an authoritative statement on the Function 150 foreign affairs budget priorities. While most interagency disagreements should be settled in the field or at the major program level in Washington, some will require the active involvement of more senior officials. OMB would then recommend overall funding levels to the President, consistent with the foreign policy priorities set forth by the Secretary.

3. The Secretary of State should extend the new integrated process to the field.

To ensure policy and resource coordination at the country level and more effective execution oversight, Chiefs of Mission should be required to use their Mission Program Planning submissions as a vehicle for achieving this integration. This practice will provide the Secretary of State and other agency heads with a single snapshot of the total resource expenditures in a given country. It will also serve as a means for assessing how well the sum of individual programs addresses overall U.S. foreign policy objectives.

4. The Secretary of State should play a role in the resource allocation process for non-Function 150 international expenditures.

The Secretary of State, in consultation with the National Security Council, the National Economic Council, and the Office of Management and Budget, should also make recommendations for integrating the international affairs components of the non-Function 150 budgets to ensure their consistency with overall foreign policy objectives.(3)

5. The Department of State should develop a more strategic approach to its internal management.

The Department of State excels at crisis management. However, it must give equal consideration to a strategic, mission-driven approach to managing its own programs, operations, and resources. Steps taken to implement such an integrated strategic management process within the department should include the following:

--- Establish a senior corporate board chaired by the Deputy Secretary of State. The membership of this executive steering group should include the under secretaries, the assistant secretaries, and their equivalents. The group should develop an overall strategic plan that articulates a vision of the department as it enters the 21st century.(4) Additionally, the group should identify issues that require significant resource or policy changes for the department. It should be charged with developing an integrated priority list-- developed through the program planning process--that would enable the Secretary to make rational tradeoffs, identify lower priority expenditures for reduction or elimination, and reallocate resources as contingencies arise.

--- Develop a strategic plan that focuses on departmental infrastructure requirements. A subgroup of the corporate board should develop this plan, which should address infrastructure requirements, including potential shortfalls or excesses.(5) This subgroup should include, at a minimum, the Under Secretary for Management; the Director of Policy Planning; the Director General of the Foreign Service; the Chief Financial Officer; the Designated Senior Official for Information Management; the Assistant Secretary for Administration; the Director of the Foreign Service Institute; and a representative number of other senior geographic and functional departmental leaders.(6)

--- Continue to integrate resource management by linking program planning with budget formulation and the allocation of funds. The process should extend beyond the Bureau of Finance and Management Policy to include strengthened processes to develop long-term work force management, including training. Integration of these disparate processes should result in the elimination of duplicative data and other reporting requests to missions and bureaus, and enhanced utility of the data that is collected.

--- Continue departmental efforts to refine the Program Planning Process. The Program Planning Process should be the foundation for the identification of mission and bureau priorities, resource requirements, and potential tradeoffs.

Implications

Integrating the Department of State's policy, program, and resource management processes will ensure that its increasingly limited budget resources are allocated in a manner consistent with the President's foreign policy objectives. Similarly, prioritizing international activities and programs across federal agencies will enable policymakers at all levels--at headquarters and in the field--to make rational decisions on how to reshape shrinking international affairs spending to reflect changing U.S priorities.

Fiscal Impact

The primary fiscal impact would be the more effective use of funds expended to meet U.S. foreign policy objectives. The specific savings cannot be estimated at this time.

Endnotes

1. For example, fiscal year 1993 budget authority included the following non-150 international expenditures: the Department of the Interior, Office of Territorial and International Affairs ($81,203,000); Department of Commerce, International Trade Administration ($216,851,000); Department of Labor, International Trade Affairs ($7,590,000); and the Drug Enforcement Agency ($60,000,000 to fund the overseas operating expenses of 72 offices in 40 countries).

2. See U.S. Department of State, Management Task Force, State 2000: A New Model for Managing Foreign Affairs (Washington, D.C., December 1992), pp. 25-27, 145-155. State 2000 went so far as to recommend specific organizational changes in the Department of State that would consolidate policy planning and resource management expertise in a single office. To date, this recommendation has not been implemented.

3. To ensure consistency with federal trade promotion activities, the Secretary of State should coordinate trade promotion efforts through the Trade Promotion Coordinating Committee.

4. A strategic plan differs from a long-range plan in that it describes a vision of what the organization should look like a given number of years into the future and lays out a way to get there. A long-range plan, on the other hand, is merely an extrapolation based on where the organization is at the current time.

5. Infrastructure here refers to what is required to enable the department to accomplish its mission: personnel, education and training, embassies, housing and other real property, information resources and technology, etc.

6. For example, this group might undertake a zero-based review of the Foreign Service education and training requirements and curriculum to ensure that officers are prepared for the new management and policy challenges facing the department. The group could also serve as a forum to address the department's information technology requirements or to generate potential downsizing options.

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