SPEAKERS       CONTENTS       INSERTS    
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42–923 CC
1997
FOREIGN RELATIONS AUTHORIZATION FOR FY 1998–1999: DEPARTMENT OF STATE MANAGEMENT INITIATIVES

HEARING

BEFORE THE

SUBCOMMITEE ON INTERNATIONAL OPERATIONS AND HUMAN RIGHTS

OF THE

COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

FEBRUARY 26, 1997

Printed for the use of the Committee on International Relations

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COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
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JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
JERRY MORAN, Kansas
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
WALTER CAPPS, California
BRAD SHERMAN, California
ROBERT WEXLER, Florida
DENNIS J. KUCINICH, Ohio
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STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee

RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff

Subcommittee on International Operations and Human Rights
CHRISTOPHER H. SMITH, New Jersey, Chairman
WILLIAM F. GOODLING, Pennsylvania
HENRY J. HYDE, Illinois
DAN BURTON, Indiana
CASS BALLENGER, North Carolina
PETER T. KING, New York
MATT SALMON, Arizona
LINDSEY O. GRAHAM, South Carolina
ILEANA ROS-LEHTINEN, Florida
TOM LANTOS, California
CYNTHIA A. McKINNEY, Georgia
GARY L. ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
DONALD M. PAYNE, New Jersey
EARL F. HILLIARD, Alabama
ROBERT WEXLER, Florida
GROVER JOSEPH REES, Subcommittee Staff Director and Chief Counsel
ROBERT R. KING, Democratic Professional Staff Member
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DOUGLAS C. ANDERSON, Counsel
ELISE M. KENDERIAN, Staff Associate

C O N T E N T S

WITNESS

    The Honorable Patrick Kennedy, Acting Undersecretary for Management, U.S. Department of State

APPENDIX
Prepared statement:
Hon. Patrick Kennedy
Additional material submitted for the record:
Answer submitted to the record by the Department of State on Minority Recruitment in the Foreign Service
Answers submitted to the record by the Department of State on the American Institute in Taiwan (AIT)
FOREIGN RELATIONS AUTHORIZATION FOR FY 1998–1999: DEPARTMENT OF STATE MANAGEMENT INITIATIVES

WEDNESDAY, FEBRUARY 26, 1997
House of Representatives,
Subcommittee on International Operations and Human Rights,
Committee on International Relations,
Washington, DC.
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    The subcommittee met, pursuant to notice, at 1:33 p.m. in room 2200, Rayburn House Office Building, Hon. Christopher H. Smith (chairman of the Subcommittee) presiding.
    Mr. SMITH. The Subcommittee will come to order. I am pleased to convene this hearing of the Subcommittee on International Operations and Human Rights. This will be the first in a series of hearings devoted to the preparation of and enactment of a Foreign Relations Act for fiscal years 1998 and 1999.
    I am also pleased to welcome our distinguished witness, Acting Undersecretary of Management, Patrick Kennedy.
    In the course of these hearings, members of the Subcommittee will have hundreds, I am sure, of specific questions for this witness and others who will follow. Let me begin this process by stating a few central concerns which I hope Undersecretary Kennedy will be able to address.
    First, there is a broad perception among American people that government costs too much. Most Americans believe that it is unacceptable to have unbalanced budgets year after year, and that the solution to this problem is to reduce the costs of government, rather than to raise taxes even higher than they have been raised during the last 20 years.
    Many who work in government disagree with this assessment. The officials who are charged with conducting the foreign relations of the United States seem to be particularly strong in their conviction that they and their department are understaffed, underpaid and generally not adequately appreciated by the American people or by the Congress.
    For instance, a series of sympathetic articles in the news media, relying heavily on official and unofficial sources in the State Department, has repeatedly informed the public that the Department's budget has been cut by 50 percent over the last 10 years. In preparing for this hearing, I asked the Department for its own statistics on actual appropriations and spending over the last 10 years. It appears that in fiscal year 1988, the Department spent $3.578 billion, adjusted to fiscal year 1992 dollars to account for inflation, and the estimate for fiscal year 1997 is just over $4 billion, also adjusted to fiscal year 1992 dollars. This is an increase of over 30 percent in actual expenditures, and even after the adjustment for inflation, there has been a 12-percent increase in real dollar expenditures of the Department.
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    The grossly misleading allegation of a 50-percent cut was apparently generated by counting the whole 150 account, which includes a number of non-State Department expenditures, including hundreds of millions of dollars in direct assistance to foreign governments, and by measuring from a single year in which expenditures were extraordinarily high. The 50-percent cut, in other words, is not an accurate statement of what has happened to the State Department budget. If the Administration is committed to working with the Congress for a bipartisan policy, and most of us in Congress share that commitment, it might be a good idea to start by foregoing this misleading and counterproductive rhetoric.
    Second, while overall spending levels are important, how we choose to allocate the limited resources we have is an even better index to what really matters to our government. Many Americans believe that the cornerstone of our foreign policy should be the promotion of American values, that is, the protection and advancement of fundamental human rights of people around the world. Looking at the State Department budget, I see the Bureau of Democracy, Human Rights and Labor has only 52 employees and a budget of just $6 million.
    By way of contrast, the Public Affairs office is about twice as large, with 115 employees and a budget of over $10 million. Even the Protocol office has 62 employees, ten more employees than the whole Human Rights Bureau. Each of the six regional bureaus have an average of about 1,500 employees. These are the bureaus the Human Rights Bureau sometimes has to contend with in ensuring that human rights is accorded its rightful priority against competing concerns, and they have a combined budget of about $1 billion dollars, or about 160 times the budget of the Human Rights Bureau.
    This gross disparity in resource allocation is not only a poignant symbol of the imbalance in our foreign policy priorities, it also has important practical consequences. For instance, Washington officials from the regional bureaus develop their expertise by taking trips to the regions in which they specialize. Officials in the Human Rights Bureau below the rank of Deputy Assistant Secretary almost never have the budget for such trips. It is an unfortunate fact of life that we usually get only what we pay for, and it appears that the American taxpayers are paying more for State Department protocol and public relations than they are for human rights.
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    Despite these serious concerns, I do want to congratulate the Administration for several of its management initiatives. The proposal to include certain fee revenues, including the machine-readable visa fees, in the Department's appropriated budget seems designed to increase transparency and accountability in the budget process. The International Cooperative Administrative Support Services also increases transparency and accountability by giving Congress and the American people an accurate picture of the real cost of maintaining our overseas personnel and how this cost is divided among the various government agencies that maintain an overseas presence. The Overseas Staffing Model is designed to ensure that our employees are posted where they are really needed. We will have questions about these initiatives, but I want to say at the outset that we appreciate the efforts by the Department to put its own house in order.
    Finally, I want to encourage the Department and the Administration in what I understand is their ongoing effort to produce a plan for reforming our foreign policy agencies in a way that will increase efficiency, reduce costs and preserve the vital functions of these agencies. In particular, I think it is important that any such reform preserve the independence of our international freedom broadcasting services, and other functions of public diplomacy that are performed by the U.S. Information Agency.
    I believe, however, that we all learned a lot from the experience of the last 2 years about the importance of working together. The indications we have received from the Administration is that it is willing to work with the Republicans and the Democrats in Congress on reform and possible reorganization of our foreign policy agencies, and I think that is an important symbol of that spirit of bipartisanship. If the Administration will produce a reorganization plan in time for markup, which has been tentatively scheduled for March 20, I promise that it will be carefully and thoughtfully considered by our subcommittee, and I am sure, by the full committee, as well.
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    I would like to ask Mr. Wexler if you would have any opening comments?
    Mr. WEXLER. Thank you, Mr. Chairman. I do not have any opening comments of any specificity. I would just simply like to say on behalf of the Democratic members, that we look forward to working with the Chairman in a bipartisan fashion as you suggested, and likewise look forward to working with the State Department, and I personally look forward to possibly today or in the future hearing, some of the responses with respect to some of the concerns that were stated by the Chairman in the earlier part of his remarks.

    Mr. SMITH. Undersecretary Patrick Kennedy—just a brief introduction—is currently the State Department's Acting Undersecretary for Management and Minister Counselor in the U.S. Foreign Service. Since joining the Foreign Service in 1973, Mr. Kennedy has held many posts, including Assistant Secretary of State for Administration and Counselor for Administrative Affairs in the U.S. Embassy in Cairo, among many other things. Mr. Kennedy, if you could proceed, and your statement will be made a part of the record, but proceed as you wish.
    Mr. KENNEDY. Thank you very much, Mr. Chairman.
STATEMENT OF THE HONORABLE PATRICK KENNEDY, ACTING UNDERSECRETARY FOR MANAGEMENT, U.S. DEPARTMENT OF STATE
    Mr. KENNEDY. I am pleased to appear before the committee today. The House International Relations Committee has a long history of assisting the Department in its efforts to advance the foreign policy interests of the American people. Your efforts have been invaluable in the past and I am seeking it again today as I testify in support of the Department of State's fiscal year 1998 budget request for those accounts which fund departmental operations.
    I will not read my entire statement, but I would like to summarize its principal points. I would also be grateful, Mr. Chairman, if my written statement could be entered into the record.
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    Mr. SMITH. Without objection, so ordered.
    Mr. KENNEDY. Secretary Albright has already spoken eloquently before this committee about the substantive foreign policy requirements that underpin this budget request. She has outlined the principal foreign policy challenges before us today and pointed to the challenges that lie ahead of us in what remains of this century and beyond.
    In order to meet these challenges, there is a real need for diplomatic readiness, maintaining, or in many cases, restoring the human and material infrastructure that allows the Secretary and others, whether they work for the State Department or other agencies of the U.S. Government, to advance the national policy agenda overseas. This is not an easy burden.
    To support and advance American interests around the world, the Department of State maintains some 250 diplomatic and consular posts in 164 countries. These platforms are the home bases for not only the Department of State but also for more than 200 other U.S. Government entities who help support and advance American interests.
    The operation of these platforms clearly supports the Department's request for the amount specified in the President's budget, both for our own operations as well as those we carry out as a provider of support services to all agencies with an overseas presence.
    In order to improve our ability to manage such a worldwide operation and ensure that every tax dollar is wisely utilized, the Department has made significant progress in a number of important management initiatives. I will speak about them later in my presentation.
    Finally, we are making increasingly greater use of strategic planning in compliance with the Government Performance and Results Act of 1993, to ensure that we allocate our scarce resources to the highest priority.
    Let me begin by highlighting the major elements of our budget request. We need to fund mandatory pay raises overseas as well as domestic inflation. We must continue to improve our information technology infrastructure. Our budget request seeks $40 million additional funding in this area.
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    We need additional funding for other initiatives, as well, hosting important international conferences, upgrading our infrastructure in China and complying with legislated arms export control mandates. We must continue to support an aggressive border security program, particularly by upgrading consular systems, employing new technologies, and adequately funding worldwide consular operations.
    We must maintain our overseas inventory of facilities to promote operational efficiency, employee health and safety, and an extended useful life for our buildings.
    In her confirmation hearings, Secretary Albright noted that American leadership in the world derives from having the full range of foreign policy tools, including military force and vigorous diplomacy. We need to approach diplomacy with the same commitment that has made our armed forces what Secretary Albright referred to as ''the best led, best trained, best equipped and most respected in the world.'' Diplomatic readiness is the basic foundation of a vigorous, constant, creative and effective diplomacy.
    There are three principal components of diplomatic readiness. The first is human resources. We need a work force that reflects the vigor and diversity of the Nation it represents. We also need the right number of skilled employees, with foreign language and functional and technical expertise, who are well prepared to represent the varied interests of the United States overseas, build effective relationships with international counterparts, exercise foreign policy leadership, protect American citizens and provide operational support for the conduct of foreign affairs.
    Second, information. We need highly qualified personnel and the information technology capability to gather, analyze and communicate information efficiently.
    Third, infrastructure and operations. We need well-maintained office and overseas residential facilities, supported by efficient administrative, financial, logistical and security systems, which enable employees to conduct business properly at home and abroad.
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    Diplomatic readiness helps achieve real foreign policy goals. For example, how can we maintain constructive relationships with great powers without the right people with the right skills in our most important diplomatic missions? How can we advance the nations' economic and commercial interests abroad without properly trained and equipped personnel in the right places to help break down trade barriers, support U.S. business and negotiate mutually beneficial investment and tax agreements?
    How can we effectively provide consular services to American citizens traveling or living abroad if successively reduced budgets cause us to close more overseas posts or reduce staffing at the posts we are able to keep open?
    There has been a cumulative negative impact on our diplomatic readiness produced in recent years by the flat budgets the Department has had since 1993. Information systems have fallen behind in technology, interconnectivity and reliability. Buildings require substantial renovation. For well over a decade, we have not been able to maintain realistic replacement cycles for critical equipment that supports overseas operations, like computers, telephone systems, vehicles and office and residential equipment.
    Staffing gaps, even at key embassies, are now the rule, not the exception. Language training, arguably the most important training done at the National Foreign Affairs Training Center, has been cut back. Other training has been reduced even further.
    Without adequate security resources, the risk to our personnel, facilities and information will soon exceed what is prudent.
    The Department has undertaken a number of important management initiatives that are designed to help us make the optimal use of the human and material resources that you provide us. As the Chairman mentioned, the International Cooperative Administrative Support Services system (ICASS), is a new way to manage and fund administrative support for all U.S. Government agencies operating at diplomatic missions abroad. ICASS will provide senior managers for the first time with information on the full costs of overseas support, with the objective of obtaining quality service at the lowest possible cost. At the mission level, these costs will be distributed equitably and transparently under the guidance of a local ICASS council composed of representatives of all U.S. Government agencies.
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    The Department is re-engineering its logistics system and redesigning its worldwide support operations. Work will be organized around the total logistic process to provide material and services better, faster and cheaper. We hope to achieve greater efficiency in operations, move work from complex and expensive channels to simpler and more economical processes and reduce inventory carrying costs as well as transportation and internal processing costs.
    Our Overseas Staffing Model calculates staffing requirements for overseas posts based on workload, such as consular and administrative staffing, or derivatively, as a function of the post's global, regional and bilateral foreign policy priorities, such as political, economic and human rights activities.
    Based upon the relational model of post overseas staffing requirements worldwide, the model provides Department managers with an analytical tool for allocating personnel resources consistent with foreign policy objectives and priorities, adjusting staffing levels proportionately to deal with any funding level for personnel, and determining staffing levels at new posts.
    We plan to revalidate the Overseas Staffing Model on a regular basis.
    The Department has an ambitious border security program that includes deploying advanced technology to all consular posts. State and other agencies are actively sharing data to enhance the U.S. Government's ability to screen out terrorists, narco-traffickers and other criminals.
    Every visa issuing post now has a sophisticated automated name-checking system to help prevent visa issuance to people who should not receive one. Every post now also utilizes the Machine Readable Visa system, which offers numerous security features to help strengthen U.S. border security.
    In recent years, the infrastructure deficit has had a dramatic impact on many elements of the Department's information handling system. For example, about 40 percent of the Department's overseas telephone switchgear is obsolete, 82 percent of our radio equipment overseas is obsolete and 55 percent of overseas computer equipment is likewise obsolete.
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    Like all organizations in the public and private sector, the Department must also accelerate planning for and implement measures to solve the problems posed by the year 2000 dilemma, the fact that almost all current software and most hardware recognize only two digits in a date. This alone is expected to cost $135 million.
    A key budget strategy that we will actively pursue beginning in fiscal year 1998 is the retention of revenues generated by all fees. In the past, we have retained only fees for machine readable visas and for expedited passport processing. In 1998, we expect to retain fees sufficient to support the delivery of standardized, high quality consular services that the American people expect from their government, implement an effective U.S. immigration policy, improve the nation's border security and contribute to the delivery of other critical services.
    The Department is also responsible for the acquisition, operation and maintenance of over 12,000 office, residential and other properties abroad, which support some 200 U.S. Government entities at our over 250 embassies, consulates and other posts. The real estate asset management program disposes of unneeded properties and uses the proceeds to meet higher priority real property needs. This program generated $59 million in the past two fiscal years, and with these funds and other appropriation balances, new facilities were purchased which are now saving over $12 million every year in avoided lease costs.
    The most important current security issue is the need to combat the threat of terrorism worldwide, especially in the Middle East. To meet this threat, the Counterterrorism Budget Amendment provided an additional $38 million in no-year funding for the Department, of which $23.7 million will be used for improving and emphasizing security upgrades. While producing an immediate response on the terrorist threat, the Bureau of Diplomatic Security must also address a longer-term strategy for a more stable budget level to address security requirements worldwide.
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    Diplomatic security rigorously applies a risk management strategy, the implementation of our security standards, at all overseas posts. We calibrate the established generic security standards and counter measures to meet specific threats at specific posts at specific times. This technique avoids the waste inherent in using a one-size-fits-all approach to meeting security standards and allows the Department to husband scare security resources.
    Diplomatic security has also expanded its outreach to the U.S. business community overseas, with the Overseas Security Advisory Council, which helps protect life and facilities through information-sharing activities involving over 1,500 American businesses having overseas operations.
    The Department is also actively making progress in strategic management, including meeting the requirements of the Government Performance and Results Act of 1993. Under the leadership of an advisory group of nine Assistant Secretaries, the Strategic Planning Team is developing an overarching International Affairs Strategic Plan covering all U.S. Government activities abroad and based on that, a plan for a Department of State strategic initiative. Once reviewed by senior leadership, the plan will be the subject of consultations with our stakeholders and customers, including other agencies, the Office of Management and Budget, and the Congress in the coming months.
    Finally, the Department already requires overseas missions and bureaus in Washington to prepare annual performance plans which will now be derivative of the Department's strategic plan.
    In conclusion, Mr. Chairman, when Secretary Albright spoke to this committee earlier, she observed that, ''There will be many occasions, in many places, where we will rely on diplomacy to protect our interests and we will expect our diplomats to defend those interests with skill, knowledge and spine.'' She also noted that ''we cannot have world-class diplomacy on the cheap. We must invest the resources required for American leadership.''
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    In closing, I have focused on those parts of the State Department budget which I am responsible for, that is, State Operations. We have had flat budgets and State operating accounts for the past 5 years. This has led to a 17-percent real decline in State Department operating accounts, plus the overall 50 percent for the entire 150 account. We have clearly taken our share of cuts, and we have placed before you, as we have placed before ourselves, the most ambitious reform agenda ever. We seek your support, Mr. Chairman, in carrying out a reasonable, forward-looking U.S. foreign policy, one that advances the national interest everywhere in the world, and which requires a level of diplomatic readiness that the President's fiscal year 1998 budget request supports. Give us the tools and we will do the job. Thank you very much.
    [The prepared statement of Mr. Kennedy appears in the appendix.]
    Mr. SMITH. Mr. Secretary, thank you for your testimony and I would like to note for the record that Mr. Richard Greene is joining you, and in my understanding, he used to be the Chief Financial Officer for DOS.
    Mr. GREENE. My understanding, too.
    Mr. SMITH. Got that right. Would you like to add anything, Mr. Greene?
    Mr. GREENE. No.
    Mr. SMITH. Thank you. Let me ask a couple of questions and then I will yield to my distinguished colleague. In preparing for this testimony, we had asked the Department to provide statistics on how many U.S. Government employees in our embassies have as their principal responsibility issues about human rights, monitoring and cataloging human rights abuses and progress when there are some. I also asked for the statistics on how many of our employees, including those from State and Commerce and other agencies, have, as their principal responsibility, the promotion of other foreign policy goals like Commerce?
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    I will never forget one trip to China, back in 1995, one of several human rights trips. I was struck by the fact that there was only one human rights coordinator or service officer, but a seemingly endless supply of people who were dedicated to Commerce. I never got the exact number then, and I was wondering if you might have brought some of that information with you?
    Mr. KENNEDY. We are collecting that information for you, Mr. Chairman, and we will have it shortly.
    If I might note, there is an officer at each and every U.S. embassy who is charged with the human rights portfolio. This is a State Department officer and that is a responsibility we take very, very seriously. At those posts around the world where there is no official Department of Commerce presence there, the State Department also carries the commercial and trade promotion responsibilities. At those posts where there are Department of Commerce officers present, the primary responsibility for trade promotion lies with them. However, every State Department officer overseas, no matter what their responsibility, always looks out for both of these matters, is always on the lookout for human rights violations to report to the human rights officer, and also looks out for trade promotion or economic development opportunities to bring to the attention of the Department and then onto the Department of Commerce.
    I might note as well that of the entire panoply of personnel that you saw in China, for example, probably 70 percent of those personnel are employees of agencies other than the Department.
    Mr. SMITH. That would be very helpful to the Subcommittee to know how that all breaks down, because I did get the sense of this one particular officer who was doing yeoman's work, and another time it was a woman who had that position, and she seemed to be very capable. They seem to be marginalized, though, in the general scheme of things. Trade seemed to be the zeitgeist that everyone was marching to, and not human rights.
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    It seems to me that one officer might work in Honduras, where it is a relatively small country, but a country the size of China, it seems to me, ought to be beefed up in terms of it. So, I look forward to receiving that.
    I recently came across a Department notice dated February 6 of this year, and it contains an advertisement for a foreign service officer who would be detailed to the Population Reference Bureau, a non-governmental organization. At a time when you and others are making an appeal for additional sources of funds, because personnel is not sufficient to the task, to be tasking out to NGO's, individuals who might best be kept under our own roof, seems to me to present a mixed picture, especially when these are the same groups that end up coming up on the Hill and producing information that is used in very pitched battles on issues dealing with population. How do you explain this kind of activity?
    Mr. KENNEDY. Unfortunately, I do not remember reading that particular notice, Mr. Chairman, but I fully agree with your phraseology, that this presents a mixed picture.
    The Department engages in outreach to a large number of non-governmental agencies and it seeks in this way to use force multipliers. By having a State Department officer work in certain non-governmental organizations, we hope to derive, and we believe we do derive, a greater benefit for the Department of State and the U.S. Government than that one officer's presence might imply.
    That officer, by working with that organization, has available to him or her the entire range of matter, for example, on population, which is an important international issue, and he or she then serves as a conduit to both make the U.S. Government's concerns known to that organization, but also to bring into the State Department and make available to the State Department the collective concerns of organizations such as that. So, we use these and regard these as a force multiplier.
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    Mr. SMITH. It strikes me that an organization like the Population Reference Bureau and others like it take a decidedly partisan position on some very controversial issues, including abortion. At the same time that you are making an appeal for additional funds, people are being tasked out to them. As you know, we just had a very, very pitched and arduous fight on the old issue of population control 2 weeks ago, and yesterday in the Senate, and that will be replayed again later on this year. It is hard to justify additional resources if people are so plentiful they are being put into controversial organizations.
    I mean, to the best of my knowledge, nobody has been tasked to go with the National Right to Life Committee or the International Right to Life Federation, which is an international, U.N.-recognized entity, and I would not expect you to. But, then, I see something like this. The beneficiary has a clear, non-ambiguous ideological bent on how they perceive the world, they are entitled to it. But whether we ought to be paying a U.S. employee to participate in it is another question, in my view.
    Mr. KENNEDY. Let me look into that and get back to you, Mr. Chairman.
    Mr. SMITH. I would appreciate it.
    Mr. KENNEDY. As I said, our usual policy and procedure in detailing personnel to other government agencies or to non-governmental organizations is, to seek opportunities where the benefit that can be derived for the Department of State and the U.S. Government as a whole exceeds the cost of sending that person to another entity.
    Mr. SMITH. Let me just ask you on the refugee programs, I notice that there is a request for $650 million, which is identical to the appropriation in 1997, but it is a cut from the $671 million from 1996. Just about everything else in the budget request is ratcheted upwards, except for this account. We are awash in a world of refugees, both those who are internally displaced, or those who are seeking to find safe havens abroad. How do you account for that decline?
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    Mr. KENNEDY. The refugee account is not one of the State Department operating accounts that is within my jurisdiction. I would be very happy to submit material for you for the record, but that falls outside of my jurisdiction.
    I can only surmise that in the era of attempting to balance the budget across the board, a cut of $21 million, from $671 million to $650 million was regarded as something that could be borne, given the circumstances, and I believe that my colleagues in the Bureau of Refugee Program Affairs anticipated a reduced level of care and maintenance requirements in the Great Lakes region in Africa because at the moment, though the situation in Eastern Zaire is certainly very, very tenuous and no one is quite sure which way it is going to go, the refugee situation in Rwanda, Burundi, Uganda, Tanzania, bordering on the other side of the Great Lakes, has stabilized significantly. So, as they are projecting into the future, they felt that was the correct balance.
    Mr. SMITH. I see. As you may know, this subcommittee had a hearing on Zaire and the ongoing trauma of those people and from many of the refugee groups that we heard from, there was deep concern that there was a willingness by the international community, including our own government, to put that one behind us, just because some people did go back.
    But, there appears to be a lot of miscounting, a lot of other information that it is still an open book.
    Mr. KENNEDY. It is, Mr. Chairman. The State Department is very concerned, and as we sit here today, my colleague, George Moose, who is the Assistant Secretary for African Affairs, is in Capetown, where a conference and discussions are now going on about trying to bring peace to that region.
    As you know, if we can stabilize the political situation, we feel we have a much better chance of bringing some order and some stability back to the lives of these people.
    Mr. SMITH. A number of county clerks have contacted my office. They have also contacted other Members, Senators and House Members in our State, and I am sure this has been happening elsewhere, and they are complaining that the 900 number to access information regarding passports is charging people for what, beforehand, was a free service.
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    Could you give us some insight into the rationale behind that, what are the facts?
    Mr. KENNEDY. Yes, Mr. Chairman. What we call the National Passport Information Center opened in November of last year, and this is a self-funding, i.e., a caller-pays system, that U.S. citizens can contact to provide and receive a broad range of passport information and assistance.
    Any American citizen can call any one of our dozen passport offices, which are spread around the United States, from Washington to Boston to Florida to Texas to the Midwest and all the way as far as California and Hawaii. They can call those offices and hear a recording, for no cost other than the toll cost, if they are not living in one of those 12 regions, and they can receive all this information for free.
    We, though, realized that we do not have an office in every city in the United States and that people were having to make toll calls, so we entered into an arrangement with American Telephone & Telegraph, so for 35 cents a minute, which is probably less than the cost of a toll call from, say, Utah, to the nearest passport agency in Chicago or Los Angeles, they can get all the information that they need for 35 cents a minute, and probably at a cheaper cost than the toll call.
    They can also go on if they require specific information, information that is not the normal information that the average citizen would need. They can go on and get that information by speaking to an operator. There have been over 240,000 calls placed to this service over the past 3 months and we have received only 25 complaints. We think that for this very low figure of 35 cents a minute, we are actually providing a service to the American people that we have not been able to provide in the past.
    Passport agencies have had a 77-percent workload increase over the past 5 years, and it is growing at about a 7-percent rate annually, and we determined that it would be more efficient to devote our scarce government resources to dealing with citizenship questions and the actual production of the passport material and outsource these questions. Although, as I said earlier, any American citizen can still call one of our 12 passport agencies at only the cost of that call and receive this information from a recording, as well.
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    Mr. SMITH. The information that the county clerks provide, is that different? Do you provide more insight?
    Mr. KENNEDY. No, sir.
    Mr. SMITH. So, it is the same?
    Mr. KENNEDY. Our Bureau of Consular Affairs has an extensive outreach program to clerks of the court and to post office clerks, and this is the same basic information.
    This information is also available on the Internet, if anyone simply types in www.statetravel.gov, they could call up all that information, and if they have the capability, they can download a passport application and print it out on their laser printer, and we will honor that passport application when it is filled out and mailed in.
    Mr. SMITH. Where is C-Span when you need it to be here to give that number out?
    Let me yield to some of my colleagues, and then I will come back to do some final questions. Mr. Wexler.
    Mr. WEXLER. Thank you, Mr. Chairman. Mr. Kennedy, I very much appreciate your reiterating the Secretary's comments with respect to an expectation of having world-class diplomacy on the cheap and how unrealistic that is.
    I listened very carefully, I think, to your comments with respect to the Department's effort at strategic planning and with respect to management initiatives and look at your text and you identified five areas of management initiatives that, I assume, you perceive as being important; the mandatory pay raises, improving the infrastructure, additional funding for certain conferences and initiatives, aggressive border security patrol and maintenance of overseas inventory facilities and so forth.
    I certainly do not take exception with any of those items. I am just curious, in the context of management initiatives and in the context of strategic planning, unless I missed it, and if I did, I apologize, what specific efficiencies have been designated? What specific cuts have been provided as a result of the management initiatives?
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    Mr. KENNEDY. Over the last 4 years, we have reduced State Department's overall employment by 10 percent. We have 2,500 fewer people on board than we had before. We have closed 30 diplomatic and consular posts around the world. We have reduced equipment purchases to the point where, as I mentioned earlier, that 40 percent of our telephone systems are obsolete, 80 percent of our radio equipment is obsolete. We have reduced travel significantly.
    Those are the bi-products. The initiative that we feel that we have to take, such as better training facilities, are the direction we have to go, but we realize that in an era of a balanced budget, we cannot just simply appear before you and ask for additional funds.
    In addition to those initiatives, we also have a number of management reforms underway in the State Department now, and I mentioned some of those. But, with your permission, let me mention them again. One of the most important ones is our Overseas Staffing Model. This is an attempt to ensure that we have exactly the right people doing the right functions at every one of our 250 posts around the world. This allows us to take people from one location and redirect them to another, without an increase in staff.
    Second, the International Cooperative Administrative Services operation. Up until this year, the State Department, which represents 30 percent of the U.S. Government employees, civilian employees overseas, was paying approximately 70 percent of the cost of maintaining those platforms abroad. That was between about $100 and $110 million. The State Department was, in effect, subsidizing the operation of other government agencies.
    By implementing the new ICASS system, which has every government agency pay for their own cost of operation at a post overseas, this will shift that burden to those agencies and relieve the State Department of that burden.
    Logistics reorganization, which I mentioned, is changing the way that we do business. We put together a team to look at the best practices of the best U.S. companies, Sears & Roebuck, Motorola, and find out how they deliver material and logistic services. Since they are driven by the bottom line, if we adopt those tactics and those procedures we think that we can make major savings. We have just started this now, so I do not have a figure for you on that.
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    Also, our information technology reform.
    Mr. WEXLER. If I may, Mr. Chairman, one other question.
    Mr. SMITH. Please do.
    Mr. WEXLER. With respect to the fee retention part of the program, it seems a bit odd to me in that if $10 million of fees are retained, $10 million will be spent. If $80 million of fees are retained, $80 million will be spent. How does the fee retainage part of the program equate to an overall strategic plan?
    Mr. KENNEDY. Sir?
    Mr. WEXLER. How would that relate in terms of priorities?
    Mr. KENNEDY. Right now, the State Department is facing 5 years of flat growth. We have not been able to keep up with the workload. If you take an example, we issue some six million passports a year. That is a 60 percent increase per annum over the last 5 years.
    We issue eight million visas a year. That is up 12 percent. We assist American citizens abroad about one and a half million times a year.
    What we are seeking to do in this activity is to tie the cost of providing the service to the services we deliver. That will drive us to be more efficient. To make sure that we are not cooking the books, we bring in an outside, very, very reputable firm, MitreTech Corporation, which is well known for its integrity. We bring them in, and they measure the cost of services.
    So, then we know the cost of services, when we have to be as efficient and deliver them. But when the number of passports demanded rise, the State Department will have these additional fees. We will then be able to retain those fees, hire additional personnel, upgrade the equipment, upgrade the materials so we can deliver them.
    If, for some reason, the number of passports that are being demanded fall, we also have on our staff what we call temporary and seasonal employees, and we also have a number of contracts with service providers. As the demand falls, if we are able to retain and control the fees, we will then release those seasonal employees, not hire those temporary employees, and cut back on the contracts.
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    So, the advantage here is good government. We are able to link the demand on the State Department to the revenue, and therefore, save the taxpayer money by having that greater nexus.
    Mr. WEXLER. Thanks.
    Mr. SMITH. Thank you, Mr. Wexler.
    Mr. Faleomavaega.
    Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. My apologies for being a little late this afternoon. Nothing like taking a 16-hour plane ride, coming back to Washington.
    I certainly welcome Undersecretary Kennedy for his appearance and testimony before the committee this afternoon. I would certainly second what Mr. Wexler said earlier about Secretary Albright's classic statement that we cannot have world-class diplomacy on the cheap. If I could ask your comments, the Chairman made a statement earlier about the claim that the State Department has made a 50-percent cut on its operations. I would like your response to that, Mr. Secretary, unless you have already answered that question?
    Mr. KENNEDY. The State Department, as the Chairman well noted, has many different subaccounts that are represented in the 150 account, which is the overarching OMB derivative for the State Department.
    Mr. FALEOMAVAEGA. Just for the record, I do not think the Chairman questions the integrity of your accounting figures, but we want to find out where you came up with the 50-percent cuts?
    Mr. KENNEDY. If you take the entire 150 account over this period, there is a 50-percent cut. If you take certain portions of the 150 account, one arrives at different figures.
    For example, in the State Department operating accounts, for which I am responsible, there has been a 17-percent reduction in our purchasing power over the last 5 years. So, the figures of the 50 percent are true. The figures of the 17 percent are true, and if you go down each one of the sublines, you will get a different figure. But, overall, there has been a 50-percent reduction in the function 150 account overall.
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    Mr. FALEOMAVAEGA. As I recall, because of the budget cuts, the State Department had to cancel its usual annual entrance examinations for Foreign Service applicants. Is this still canceled? Are there no more Foreign Service officers, junior officers, coming into the force because of this?
    Mr. KENNEDY. No, luckily, sir, we were able to restore the exam this year. We had a 1-year hiatus and because of the budget cuts, we are stretching out these. So, we gave an exam last fall, and then we are going to give the next exam in February 1998.
    So, because of budget restrictions, it was not given for 1 year, and then we gave it after a delay of 1 year, and for the next period of time, there will be an 18-month period between the exams. That is one of those very hard choices we have to make.
    We believe that an 18-month period will be sufficient to keep replenishing the register of potential applicants for the Foreign Service.
    Mr. FALEOMAVAEGA. You mentioned exams given last fall. How many universities participated in this examination? Do you have to attend a Foreign Service school before you are permitted to take this examination?
    Mr. KENNEDY. Certainly not, certainly not, sir. The examination is given in about 1,000 locations around the United States, and it is also given at every diplomatic and consular post overseas where an American citizen would like to take it.
    Mr. FALEOMAVAEGA. For example, last fall, how many participated in taking the exam?
    Mr. KENNEDY. There were approximately 10,000 people who took the written exam last fall.
    Mr. FALEOMAVAEGA. How many entered the Foreign Service as a result?
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    Mr. KENNEDY. We are in the process now of giving the oral examination, which follows on. Because there are so many young men and women, and we are very, very proud of that fact, who are interested in serving their country in diplomacy, we simply could not give oral examinations to 10,000 people. We use the written examination as, in effect, a pre-screen.
    About 2,000 individuals are considered to pass the written examination, pass simply being a relative rank order. We just take the first 2,000 people. We then work through that number to give oral examinations, and we try, then, to reach a register of about 300 individuals. We hope this year to be able to offer appointments to about 150 of those individuals.
    Mr. FALEOMAVAEGA. So, 10,000 apply, 2,000 pass the written examinations and only 150 slots are awarded each year?
    Mr. KENNEDY. Yes, sir.
    Mr. FALEOMAVAEGA. What is the total number of personnel at the State Department?
    Mr. KENNEDY. The entire State Department corps is about 23,000 people. About half that number is composed of foreign national, locally engaged staff overseas, and the State Department Foreign Service officer corps is about 3,000 people. We need somewhere between 150 to 200 individuals annually coming in to take account of retirements, deaths, resignations.
    Mr. FALEOMAVAEGA. These 10,000 to 12,000 foreign nationals, is that because it is required? Do we have to hire these foreign nationals?
    Mr. KENNEDY. No, sir, we hire foreign nationals overseas for three reasons. To do blue collar work, where it is simply the maintenance work in unclassified areas of the embassy, to function as drivers. We also hire them to fill a number of jobs because of their language skills. While we have a number of foreign service personnel who have the right language skills, we need additional language-qualified personnel. We also hire them to do certain unclassified jobs, because it is simply cheaper to hire a foreign national for $5,000 or $10,000 a year, than to hire an American citizen at $25,000 to $75,000 a year and then transfer them to those locations.
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    Mr. FALEOMAVAEGA. I see.
    Mr. KENNEDY. We go for the best bang for the buck, consistent with getting the mission done and security concerns.
    Mr. FALEOMAVAEGA. So, with about 11,000 permanent Foreign Service officers, that is a pretty low turnover, if you only have 150 junior officers coming in every year.
    Mr. KENNEDY. The Foreign Service component of the State Department, if I might, is broken up into two subcomponents. There are approximately 3,000 Foreign Service officers, and that is the 150 we are replacing every year. There are about 5,000 other, what we call Foreign Service specialists. These are security personnel, medical personnel, financial management specialists, computer specialists, information technology personnel, secretaries.
    Mr. FALEOMAVAEGA. They are not subject to the Foreign Service examination?
    Mr. KENNEDY. No, sir, we put a global announcement out and we open separate registers for each one of those categories and seek to draw the appropriate security personnel or the appropriate computer sciences professionals.
    Mr. FALEOMAVAEGA. Mr. Secretary, I know my time is up. I just want to make an observation and ask another question. For over 8 years now I have been a member of this subcommittee and I am still puzzled about the low numbers of people of color that serve in the diplomatic corps. If the State Department is serious about its minority recruitment program, it should look not at just the Ivy League schools, but at the black universities and public universities in the West, not just the East Coast.
    I have always been puzzled as to how you go about making these selections and I also question the fact that if the State Department is really dead serious about getting minorities involved, minorities who qualify should not be disqualified for some stupid reason——
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    Mr. KENNEDY. Let me give you a short answer, and then, if I might call your office and come up and meet with you and give you a longer answer?
    Mr. FALEOMAVAEGA. Better yet, could you submit that for the record, please?
    Mr. SMITH. That will be made a part of the record.
    [The answer appears in the appendix.]
    Mr. FALEOMAVAEGA. All right.
    Mr. KENNEDY. Certainly, if I can give you a quick answer. For example, minority exam takers on this year's Foreign Service exam were up 114 percent over the one that was offered 2 years ago. I am not pleased, I am not satisfied with the intake of women and minorities into the Foreign Service. We have to, we must do better.
    However, we have been taking a number of active steps over the last 4 years to reach out. For example, we have assigned ten Foreign Service officers, what we call diplomats in residence, to schools in Arizona, California, Georgia, Illinois, New York, North Carolina and Texas, and there is also one in Florida this year, to reach out to these areas where the population is more heavily minority, to try to use these diplomats in residence to reach out to those university populations.
    We have what is called the Foreign Affairs Fellowship Program, which has a cadre now of 38 very highly qualified minority students who are on the verge of graduating from the universities with our assistance, and these 38 will be entering the Foreign Service in the period from 1997 through 1999. We have an active outreach program. Is it as successful as it should be? No. Are we doing everything we can? We think we are, but we somehow have to do more, because a 114-percent increase is still not producing the actual intake into the Foreign Service that I wish.
    Mr. FALEOMAVAEGA. I appreciate that and I look forward to seeing that when you submit it for the record.
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    Diplomatic security—what is our proposed budget for 1998 on diplomatic security?
    Mr. KENNEDY. Thanks to your help over the last 2 years, we had supplemental funding from the Appropriations Act.
    We have taken this funding and we have expanded our local guard programs. We have begun a replacement program for our armored vehicles and for the technical security equipment that we deploy overseas.
    We have also been able to open our register for new diplomatic security officers to be assigned overseas, and we will be bringing on this year a class of 75 new diplomatic security officers. The budget request that is contained in this proposal will allow us to annualize the costs that have been brought forward by the supplemental, so that we will have in future years salaries and other materials to keep these 75 new diplomatic security agents on the roles, and permit us to hire an additional 35 new diplomatic security agents every year for subsequent years, to serve as the fill ins for resignations and retirement. We will also use the funding to provide for the equipment and the local guard forces that are necessary to keep our facilities running. If I might turn to my colleague for the details.
    Mr. FALEOMAVAEGA. No, I am not looking for details. I just wanted to make sure that there is reasonable planning for this important area that ensures the safety and security of our personnel overseas. I have just gotten back from San Salvador and it is always easy to see things in hindsight. As an observation, Mr. Secretary, and I am sure the State Department is sensitive about this, but in San Salvador a couple of years ago, we built a $70-million embassy because of the security measures that were deemed necessary for that Central American country.
    My question is how did you go about assessing that we needed a $70-million facility in El Salvador? Were there that many security problems in that country?
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    Mr. KENNEDY. During the height of the El Salvadoran conflict, when American government employees did lose their lives in El Salvador, there was a significant threat. Right now, we are not building any new $70-million embassies. We have a $285-million budget for security. We apply what we call risk management. Along with the intelligence community and other U.S. Government agencies, we look at the technical threat, the terrorist threat and the threats from crime in every city. We analyze those factors and we now use risk management to target the specific counter measures we should apply to each one of those threats in each specific location, to make sure that we spend both the minimum and the maximum amount necessary. The maximum amount necessary to get good security and the minimum amount necessary to get good security. So, we target it through risk management.
    Mr. FALEOMAVAEGA. All right, Mr. Chairman. Thank you, Mr. Secretary.
    Mr. SMITH. Thank you. Before yielding to my friend, Mr. Payne, just let me follow up on that. I would like the details. You were turning to Mr. Greene for that. Is the $285 million sufficient to the task, if I am correct on that? You talk of a security infrastructure gap, Mr. Secretary. Could you expound on that a little bit more in terms of how that came to be?
    Finally, the shifting of the Marine guards, the cost to DoD, how much does that save and where does that money go, or is it just money that you now can rebudget for other things?
    Mr. KENNEDY. The security infrastructure gap arose over the course of the last 5 years, along with our information technology gap and our personnel staffing gap. It arose from the fact that the State Department's budget was flat for 5 years, and as we went through this period with the 17-percent reduction in funding, we had to make some very hard choices.
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    I do not believe that at any point did we push security below the minimum necessary. What we did was push the envelope on equipment and material. Armored cars, which we need in many parts of the world, do not last as long as any other cars, because they have some 3,000 pounds of extra armor being carried. Security equipment, such as metal detectors, infrared motion detectors, cameras and similar items, have a limited life cycle and a life expectancy, and they wear out, as any piece of electronic equipment does.
    So, we kept that equipment in service long after its expected life cycle, gambling that it would make it or we could play the triage game. If this armored car went, we pulled one of the few spares out.
    With your help over the last few years, with supplemental funding the State Department has received, we have bought down that infrastructure gap in the security arena. With the President's budget, which is before you today, if we receive these funds, we will be then able to begin a reasonable replacement and replenishment cycle so we have the right amount of equipment and also the right amount of funding to keep the number of diplomatic security officers and the number of local guards in place.
    On your question about the Marine security guards overseas, in our budget request when that funding was transferred from the State Department to the U.S. Marine Corps, the Department of the Navy, that amount of money was lapsed out of the State Department budget. So, we did not have the money to refund or reprogram for any other purpose. The funding simply no longer exists in the State Department budget.
    Mr. SMITH. How much did that free up, though?
    Mr. GREENE. About $24 million.
    Mr. SMITH. About $24 million? The $285 million, is that the right figure? Now, obviously that has been through the filter of OMB. Was their request higher at any point, as it worked up the chain of command?
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    Mr. GREENE. Well, we usually do not like to comment on internal budgetary matters.
    Mr. SMITH. I understand, but you are being asked.
    Mr. GREENE. It is probably safe to say that our request for everything we asked for was higher.
    Mr. SMITH. OK. Is there any way that can be transmitted to us? I mean, it seems to me security matters are very high on my priority. Again, when you are talking priorities and our people being put at risk, it would be nice to know what the Department thought would be an adequate amount to make the difference.
    Mr. GREENE. I will get that to you. I agree when Undersecretary Kennedy says that we clearly think this funding was adequate.
    Mr. SMITH. I know, again, you are sincere in what you are saying, but adequate sometimes is not adequate. I will never forget a lesson I learned years ago on the POW/MIA issue, when General Thai (he was the head of the Defense Intelligence Agency), said he had all the tools and all the requisite money and material and everything else, analysts, to do the job on POW/MIA's. Then, a couple of years later, when live sightings were proliferating, he was head of the task force that asked for upwards of three times, and he testified that it was totally inadequate.
    I know everyone is under some restraints, but it would be nice for this subcommittee to know what really is needed, especially with terrorists abounding.
    Mr. Payne.
    Mr. PAYNE. Thank you very much, Mr. Chairman. I did not have an opportunity to hear your testimony, but I do have just a general question. With State Department personnel, I suppose there are categories of hardship assignments. What I have been able to ascertain, though, is that a hardship post, perhaps in the long run, does not provide any more compensation than a post that is in a so-called high-cost-of-living country, like maybe France or something.
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    I wonder if you could explain how does the State Department tend to induce people to go to hardship, Third World assignments if the compensation is the same as if you were in Paris or Bonn or something?
    Mr. KENNEDY. Certainly, sir. The base salary of a State Department employee serving in a hardship post, serving in Paris or London or Bonn, is the same.
    However, the State Department has a specific differential. It is called the post differential, in jargon usually called the hardship differential. Each post fills out a survey. This is sent to a team of experts in Washington, and that survey is measured and graded against a series of interagency-agreed categories, and the result of this grading is either 0, 5, 10, 15, 20, or 25 percent.
    So, Paris does not even bother to submit a survey and they get a zero. A hardship post in the Third or the Fourth World would have a score ranging from 5 to 25 percent. That is paid as a taxable allowance to any U.S. Government employee serving in that area. By Executive Order, the Secretary of State administers the Allowance Benefits Act for all U.S. Government employees overseas. So, there is a definite monetary incentive to serve in those locations.
    If I might also, there is an additional incentive in that in most cases, the number of positions in our posts in the Third or Fourth World are fewer than in the First or Second World, and a good number of State Department officers go to these hardship posts not only for the financial benefits, but because posts are smaller, the work is more equally distributed and therefore, it is possible at a more junior grade to have, in effect, a more senior position.
    Our No. 2 person in Paris, his position is graded at the most senior career position. Our Deputy Chief of Mission, our No. 2 in many of our posts in the Third or Fourth World, is four or five rungs below that; therefore, that person can acquire the management experience, can acquire the administrative experience, can be the No. 1 political or economic reporting officer in one of these hardship posts, and therefore gain what they perceive to be an advantage in the worldwide competition we hold each year for promotions.
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    So, there is both a monetary incentive and a career-enhancing incentive for serving in those hardship posts.
    Mr. PAYNE. What I had heard, though, was that posts are also evaluated on the relative cost of living in that particular country, and therefore, my point was the cost of living adjustment, I guess, locality pay they would call it, they even have it in the United States, they have locality pay where in New York, perhaps, the pay is a little higher than in Des Moines, Iowa, I guess, perhaps—the way things are going, I would not be surprised if Des Moines, Iowa was higher paid than New York. But, is there a cost, is there a locality pay which would therefore increase the base salary of a person in the First or Second World that might bring it really to where a hardship post would be?
    In Paris, I am sure that you get a pretty good locality pay. You do not get the same as you get in——
    Mr. KENNEDY. I apologize. I misunderstood your question.
    Mr. PAYNE. No, that is OK, but I was glad you explained what you did, because I learned a little bit more, too.
    Mr. KENNEDY. There is a second allowance, there is a cost-of-living allowance which is also computed for every post in the world, using a format that we have derived from the Bureau of Labor Statistics, Department of Labor. Another questionnaire is given to every post annually to determine the cost of living in that country. How much does it cost for gasoline, how much does it cost for milk, eggs, clothing, whatever?
    That information is then submitted to Washington. The computer analyzes it and the result is a scale of 100 which equals the cost of living in Washington. In Paris, if the answer is 120, then an employee in Paris would receive a 20 percent cost-of-living offset, because the cost is more than in Washington.
    On the other hand, any hardship post also is analyzed and so no State Department/no U.S. Government employee of any agency who is serving in any post in the world where the cost of living has been mathematically determined to be more than the cost of living in Washington is disadvantaged. They will receive anywhere from 5 percent more on up to whatever the limit happens to be, because they have mathematically proven their cost of living.
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    So, serving at a hardship post does not cause you to be disadvantaged at all. You fill out the survey and it is compared to a Washington baseline and you receive the appropriate compensation.
    Mr. PAYNE. OK, that is good. I guess my point is basically that you would find that probably in a hardship post, the cost of living is lower, and in a locality pay, you have a higher locality, also. I mean, there is nothing you can do about it, it is just the way it works out. Bottom line, though, is that you would probably end up with about the same which would not make it an incentive. Let me say it is not a disincentive, but it is not because people go to work for the State Department for a lot of reasons, not only pay as a consideration. But, bottom line is that you may not end up, other than career opportunities, perhaps, with a financial incentive, by virtue of the cost of living, the locality being at level or below Washington costs.
    I am sure that Liberia's costs are probably a little bit lower than Washington, DC, whereas in Paris, where you would get the locality pay, they are about level. But that is nothing that either one of us can do anything about offhand, it is just that it ought to be recognized, because we should have locality pay and we should have pay for difficult assignments. But, the bottom line is, it comes out to about the same.
    Let me just ask another quick question. I hope you did not have anything to do with the building of the U.S. Embassy in the USSR, at the time. You have heard about that?
    Mr. KENNEDY. The current building in Moscow is one of my responsibilities.
    Mr. PAYNE. OK, but you inherited it?
    Mr. KENNEDY. I inherited it, yes, sir.
    Mr. PAYNE. I am glad to know that. I saw you reacting. Have they been able to counteract that? I mean, that must have been a good learning experience. I happened to go there, and the fellow said, let me go around the corner and upstairs and way back there and just listen, and they were talking on another floor way away, and you could hear a little better than I could hear you right there.
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    They were just shocked that the Russians cheated or something. Why would they, at the height of the cold war, let the Russian technocrats build the U.S. Embassy? I mean, they even had a battery that would last 99 years. We should have taken that and tried to get a prototype and see how it works. But, the batteries are still working, stuck in concrete somewhere. How did that ever happen, and what are they doing with the building now?
    Mr. KENNEDY. Let me try to give you a multipart answer. For part of the answer, I would like to meet with you in a non-public forum because it is not a subject that I can discuss in this room, with this audience. But, I would be pleased to meet with you at any time to go over the details.
    Mr. PAYNE. All right.
    Mr. KENNEDY. A decision was made in the 1960's to build the building in a certain way and on the basis of certain assumptions. Those assumptions proved erroneous.
    In 1993, the Secretary asked me to convene a committee and I convened that committee with representatives from a number of other U.S. Government agencies to decide what to do about the bugged building in Moscow. After an extensive range of interagency consultations, a classified presentation was made to the Congress, on a new proposal, which is usually called Hardhat, to tear down part of that building and build a new building on top of it, which meets everyone's concerns for security. That process is now underway. A contract has been let to an American company who will use entirely American labor, entirely American materials, and ship everything to Moscow in a controlled fashion. That work has already begun, and I have every belief that we will have in 1999, when the project is finished, a secure building which will be fully certified and which will serve the national security interest of the United States.
    Mr. PAYNE. You did not hold the meeting in that building, did you?
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    Mr. KENNEDY. No sir.
    Mr. PAYNE. Oh, OK.
    [Laughter.]
    Mr. SMITH. Thank you very much, Mr. Payne.
    Mr. Secretary, I would appreciate it, and I know you will probably have to provide this for the record, but the quicker and more swiftly you can get it here, I would appreciate it, a list of all Department of State employees who are detailed to non-governmental organizations and the total cost and the names of those organizations.
    I would also like to know which NGO's have personnel working inside the building, if that happens, either as interns or some other fashion, to know the kind of collaboration that is going on there. As quickly as you could get that to us, we would appreciate it.
    Mr. KENNEDY. Certainly, sir.
    Mr. SMITH. Just, in terms of the 17 percent cut you have mentioned a few times, again, in looking at these statistics which your folks were kind enough to send over, in looking at it, you keep talking about the 17 percent cut, yet if you look over it from the range of 1988, fiscal year 1988 to 1997, it went from $3.6 billion to $4 billion.
    It seems as if you have locked onto the high number, what would that be, 1992, and then used that as the backdrop to measure whether or not something is a cut or an increase, is that correct?
    Mr. GREENE. What the Undersecretary is referring to is just the diplomatic operations resources. The number you used also include contributions to international organizations, the United Nations.
    Mr. SMITH. Yes, it is a State Department account, which is what we are all about here.
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    Mr. GREENE. Those are equivalent, and the 17 percent is just the money that is used for our analysis.
    Mr. KENNEDY. State Department operating accounts, which are the responsibility of the Undersecretary. The diplomatic readiness portion, as opposed to contributions.
    Mr. GREENE. Peacekeeping is part of the job.
    Mr. SMITH. Right, but again, are you using a 10-year or 5-year timeframe to measure?
    Mr. GREENE. We used the 17 percent to compare the 50 percent number to, so that is back to 1985.
    Mr. SMITH. To 1985?
    Mr. GREENE. Yes.
    Mr. SMITH. The issue on foreign buildings, the last few the Appropriations Committee directed the Secretary to establish an interagency advisory board on real property management to help oversee the State Department's $10 million in real property assets.
    In your submission, it is suggested that about $180 million can be realized through sale of property. What is the status of that advisory committee? Have they met, who makes it up, what kind of power will they have? Do they make their recommendation to you and then you turn around and implement? What is the modus operandi?
    Mr. KENNEDY. We have formed the advisory committee. It has not yet had its first meeting. It is composed of representatives from the State Department and from other U.S. Government agencies, with a specialization in real estate and property management.
    We have secured a senior representative from General Services Administration who is well aware of real estate issues. We have obtained a representative from the Central Intelligence Agency whose specialty is real estate and property management. We are also going to have a representative named by the U.S. Postal Service. I picked those three agencies because they are three civilian agencies of the U.S. Government who have the largest real property holdings.
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    We will also have representatives from the State Department on the committee, but I have deliberately named representatives who have no vested interest in any of the properties. They will include the Assistant Secretary of State for Consular Affairs, to make sure that we have adequate consular facilities; the Assistant Secretary of State for Economic and Business Affairs, who is concerned about trade and agricultural promotion; the Assistant Secretary for Diplomatic Security, to make sure that whatever we do comports with our security requirements and the Chief Financial Officer, to make sure that the maximum amount of money is squeezed out of every nook and cranny.
    The group will meet. What we intend to place before them are three packages of material; properties recommended for sale by the General Accounting Office, properties recommended for sale by the State Department's Office of the Inspector General, and properties recommended for sale by the State Department's own Office of Foreign Buildings, because the latter is the list of properties that the State Department wishes to sell. Because as I mentioned in my testimony, we sold $59 or $60 million worth of property over the last 2 years.
    The State Department has every incentive to do this. The basic incentive is that there is no money in our budget request for any capital program for the Office of Foreign Buildings. There are no funds available, no new appropriated funds, to make any real estate purchases whatsoever. Therefore, the only way that I can construct the embassies that I must construct in places such as Berlin and Abuja, Nigeria, where each government is in the process of shifting their capital from Bonn to Berlin, from Lagos to Abuja, or in the newly independent states or elsewhere, is to use asset management, our program of sales.
    What the Office of Foreign Buildings has done is to go out and look at the widest possible range of buildings. Can we raise $180 million this year? I would like to think so, but I cannot guarantee that. The reason is, when we place properties on the market, which we do every day, we do not know how they are going to move, because we are operating in the local environment.
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    For example, we placed a property on the market last fiscal year in Beirut. We went through a bidding process, and took the winning bidder. Under local practice, he had several months to make payment. He is now unable to consummate the contract. Therefore, I am going to put that property back on the market. That sale was included in what we were counting on in that $150 million. I would be glad to give you the figure privately, because we will be in negotiations with some other bidder, and I would not like to disclose a specific figure in a public forum.
    We will put that property back on the market. Might we realize it this year? Yes. But, on the other hand, it might appear in a later fiscal year. The same is true around the world. We regularly put properties on the market and we are incentivized by the fact that this is my only funding source for new properties, which I desperately need.
    Mr. SMITH. That is a dollar-for-dollar dedication?
    Mr. KENNEDY. Yes. We sell them and we have the statutory authority under the Foreign Buildings Act of 1926 to reutilize those funds to make new property purchases.
    Mr. SMITH. Let me ask you a question. Recently, amid allegations of improper influence peddling, James Wood resigned his position as chairman and managing director of the American Institute in Taiwan, an organization for which the Department has requested over $14 million in fiscal year 1998.
    In turn, Mr. Wood has charged that he was forced from his job at AIT, after unsuccessfully attempting to expose fraud and corruption within that organization. Among other things, Mr. Wood alleges that over $5 million in taxpayer dollars are missing, and that women were forced to have sex with AIT employees in order to procure visas. Where do the various allegations stand right now? When do we expect to get the truth about this and how does the Department go about overseeing AIT, given its status as a quasi-government entity?
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    Mr. KENNEDY. If I might give you a moment's background, Mr. Chairman. Under the Taiwan Relations Act of 1979, the Congress empowered the State Department to set up a people-to-people arrangement between the people of the United States and the people of Taiwan. This arrangement is administered by a non-governmental entity, pursuant to statute.
    The American Institute on Taiwan was established and chartered as a non-profit corporation under the laws of the District of Columbia. The State Department and other U.S. Government agencies who have dealings with the people of Taiwan do so through the American Institute and provide a certain amount of appropriated funds, and that is supplemented by non-appropriated collections and fees from Taipei or Kaohsiung, which is the other ''post'' that we have in Taiwan.
    Given this special and unique arrangement, the accounting stream is not always as transparent as it would be if this was the American Embassy in Tokyo, where all the books are kept according to a rigorous rubric and overseen by the Chief Financial Officer. We have a contractual relationship with the American Institute in Taiwan. This contract binds AIT to follow certain procedures. They must also follow certain other statutory procedures under the Corporations Act of the District of Columbia. At times, those two facts lead to separate sets of books.
    I can assure you, Mr. Chairman, to the best of my knowledge, there are no appropriated funds missing. Mr. Wood's charges relate to $5.3 million worth of visa fees that are a service charge imposed by AIT Taipei for processing. These were not appropriated funds. That does not mean, though, that we do not monitor them.
    The original program that was set up required these funds to be put into a separate account. For reasons that we are now looking into, these funds were put partially into a separate account and partially into the regular operating account of the American Institute in Taiwan. The private sector auditors, which have been engaged, a well known company called Grant Thornton, is currently auditing those books in conjunction with our own Inspector General. As the Inspector General testified yesterday, she has no reason to believe that there are any unaccounted for or stolen or missing funds. We have every reason to believe that those funds are in the other account or have been dispensed for appropriate activities.
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    However, the auditing firm in conjunction with our Inspector General, is looking at that matter now. But, as she testified yesterday, she has no reason to believe there is anything unaccounted for.
    As to some of these other charges, such as visa fraud, and possible sexual improprieties, the State Department's Office of Diplomatic Security looked into the charges of visa fraud in the early 1990's. These were brought by a disgruntled employee, a local national employee who had been dismissed, and the Diplomatic Security Service looked into that and says that there is no reason to believe that these allegations have any validity whatsoever. Professional investigators looked at them and said there was——
    Mr. SMITH. So, there is nothing pending right now in terms of an investigation of those matters?
    Mr. KENNEDY. He is repeating allegations that stem from 1989, 1990, 1993.
    Mr. SMITH. So, none of the allegations are fresh?
    Mr. KENNEDY. None of the allegations are fresh. On the allegation of sexual impropriety, this was the charge leveled against a local national employee of the American Institute in Taiwan. This was immediately looked into and that individual was dismissed. I believe that was in 1989.
    Mr. SMITH. Could you provide the committee with documentation on how these allegations were investigated and the summary of the conclusions of what they did not find?
    Mr. KENNEDY. Certainly, sir.
    Mr. SMITH. I appreciate that. Let me ask one final question and then I will yield to Mr. Payne if he has any followup questions.
    The third management initiative you list in your prepared statement highlights the asserted need to host the International Telecommunications Union conference. Last year, the Appropriations conference report stated, and I quote, ''Funding for this conference will be addressed only after the State and Commerce Departments have exhausted every potential source of private funding to assure that the cost of this international conference will not be borne by the taxpayer.''
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    Could you fill us in and expound on what the conference is all about and why should taxpayers foot the bill for it and what efforts were made to procure that funding from private sources?
    Mr. KENNEDY. Certainly, Mr. Chairman. The International Telecommunications Union meets quadrennially around the world, and the ITU's purpose is to maintain and extend international cooperation in the telecommunications field, and to promote the efficient provision of telecommunication services. Its activities include global standards setting, allocation of the radio frequency spectrum, regulatory aspects on satellite services and the general mandate to do anything possible to make sure that there are common standards in order that the radio waves are shared and operate in an efficient and effective manner.
    The United States is one of the major players in the area of global telecommunications. We have companies that operate satellite systems, we have great interest on the part of our military forces in the allegation of the spectrum and we are major providers of equipment in the telecommunications arena, bringing in hundreds of millions of dollars and many, many jobs for the American people. Therefore, the United States has a strong interest in the ITU and its setting standards that we can live with, standards that benefit us, so when we manufacture equipment for sale in the global market, we are manufacturing to a global standard that anyone can buy.
    Several years ago, the United States offered to host the quadrennial conference. We believe that by hosting the conference, the United States will signal its preeminent role in international telecommunications. It will increase and expand our influence in international telecommunications policy by enhancing our relationship with the ITU and its permanent staff, and with the foreign government officials who shape their governments' policies toward the ITU.
    It provides an important venue to further the policy support for international business development and it also affords American businesses an unprecedented opportunity to promote the export of American telecommunications equipment. And because alongside the conference, there is, in effect, a trade show, it provides American businesses a venue for bringing together the entire governing body of all 180-plus members to see American technology at its best and give them an opportunity to talk to representatives.
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    So, there are these two functions taking place simultaneously, the trade show, which is funded by the private sector, and the plenipotentiary conference, which is a governmental function.
    We have agreed in the beginning that the cost of the U.S. hostship of the conference itself would be split with the Department of Commerce. Since the injunction in the Appropriations Bill, we have met extensively with the private sector, who readily agree that they are going to fund the trade show aspect of this, but believe, as we do, that the conference of nations itself, bringing together official government representatives and the ITU secretariat, is an inherently governmental function which ought to be funded by the U.S. Government.
    So, the State Department and the Commerce Department are proposing, as we had before, that funding for the governmental portion of this be split equally between the Department of State and the Department of Commerce.
    Mr. SMITH. Is there anything that would preclude you from accepting voluntary contributions from those groups for the government side? I mean, how much are we talking about in terms of the cost of the conference?
    Mr. KENNEDY. The entire cost of the conference is approximately $14 million, which would be split, half between the State Department and half between the Department of Commerce. The State Department has the statutory authority to accept gifts. We would do so. However, after our consultations with the private sector, they believe that it is appropriate for them to fund the trade fair and they have expressed no interest in funding——
    Mr. SMITH. Well, they would think it is appropriate when it affects their profit margin, believe me.
    Mr. KENNEDY. Certainly, sir.
    Mr. SMITH. You certainly could use another $7 million, and it seems to me that it would be in their own interest, since they stand to benefit enormously from it, to be as cooperative as possible.
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    Mr. KENNEDY. We continue to engage them regularly on this matter.
    Mr. SMITH. Let me just ask you, as I indicated earlier, we hope to begin marking up on March 20. Will we have the Administration's draft legislation, hopefully, at least a week before that, so we can take all of that into full consideration as we mark up the bill?
    Mr. KENNEDY. Let me first say that we certainly appreciate the consideration that you have shown in providing us a copy of the Committee's draft bill and it is being carefully reviewed in the Department now.
    It is certainly my hope that the authorization process go forward this year on a cooperative and bipartisan basis. We are working on a legislative package at this point to authorize the President's budget and to update a number of management-related issues that we think constitute good government.
    The decision on our legislative package is being made at the very highest levels, and we hope to be able to give you a definitive answer very, very soon.
    Mr. SMITH. I appreciate that. It would be most helpful, because we want to work with you. After last year's rather difficult process, I know this particular chairman is absolutely determined that we will not see a waiver of authorization so the appropriators do our job for us. I do believe we thought we might have had that commitment last year from our leadership, but this year, we will make it stick so that we are not superfluous to this process and the appropriators do the whole deal.
    Mr. KENNEDY. We intend to work with your committee in gaining your support to accomplish our mission.
    Mr. SMITH. Thank you very much.
    Mr. Payne.
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    Mr. PAYNE. Just that I agree. I do not think that there should be legislating through Appropriations. It should be separate committees with the responsibility.
    Just finally in regard to the tragedy in Saudi Arabia with the security being admitted that it was a bit lax, has there been an overall tightening up of security in general at our posts around the world, in particular, where some of our employees may be in harm's way?
    Mr. KENNEDY. The answer to that, sir, is absolutely yes. We monitor security very closely. We work with all elements of the U.S. Government to look for any and all evidence of threats. Every year, our Diplomatic Security Service reviews almost 30,000 threat incidents, which can be from the very small to the very large. But, each one of those is given the time and attention it deserves.
    On the specific question of the tragedies in Saudi Arabia the Secretary of State and the Secretary of Defense have executed a Memorandum of Understanding to more clearly specify and denote who is responsible for providing services of a security nature, when there are large numbers of U.S. military personnel overseas assigned conterminously with the U.S. diplomatic and consular post. We are addressing both the full picture and the specific picture, as well.
    Mr. PAYNE. All right, thank you very much. I have no other questions.
    Mr. SMITH. Mr. Payne, thank you very much. Mr. Secretary, Mr. Greene, thank you very much for your testimony. We look forward to working with you.
    Mr. KENNEDY. Thank you very much, Mr. Chairman.
    Mr. SMITH. The hearing is adjourned.
    [Whereupon, at 3:11 p.m., the Subcommittee was adjourned.]