Report Contents
What OIG Audited
Foreign per diem is provided to U.S. Government employees and eligible dependents to cover temporary lodging and meals while on official business overseas. The Bureau of Administration’s Office of Allowances (ALS) is responsible for establishing the maximum foreign per diem rates used by all Federal employees traveling overseas.
The Office of Inspector General (OIG) conducted this audit to determine whether the Department of State’s (Department) methodology and process to establish foreign per diem rates adequately cover the cost of U.S. Government employees and eligible dependents traveling overseas and comply with Federal regulations and Department policies. OIG performed detailed testing for Consulate Generals Frankfurt, Germany; and Istanbul, Turkey; and Embassies Kyiv, Ukraine; Mexico City, Mexico; and San Salvador, El Salvador. OIG performed additional analyses of data from 15 other overseas locations.
What OIG Recommends
OIG made 14 recommendations to improve efforts to establish foreign per diem rates. On the basis of management’s response to a draft of this report, OIG considers one recommendation closed; nine recommendations resolved, pending further action; and four recommendations unresolved. A synopsis of management’s response to the recommendations offered and OIG’s reply follow each recommendation in the Audit Results section of this report. Responses from the Bureau of Administration, Consulate General Frankfurt, and Embassy Mexico City are reprinted in their entirety in Appendices C, D, and E, respectively.
What OIG Found
OIG found that ALS did not implement processes to establish foreign per diem rates in accordance with Department requirements and ALS standard operating procedures. For example, selected posts did not always submit hotel and restaurant data biennially, as required. OIG also identified errors in ALS’s calculations of foreign per diem rates. Furthermore, exchange rates were not always applied due to issues with an ALS web-based application. The deficiencies identified occurred, at least in part, because ALS did not implement sufficient internal controls to ensure that foreign per diem rates were appropriate and complied with requirements. Specifically, OIG found that ALS and selected posts did not have sufficient policies and procedures.
In addition, ALS did not sufficiently monitor the foreign per diem rate-setting process, nor did ALS and the posts involved maintain adequate documentation. Implementing a sufficient internal control environment would help the Department save resources and establish adequate and appropriate per diem rates for U.S. Government personnel and eligible dependents traveling overseas. In addition, ALS’s methodology to establish foreign per diem rates needs improvement to adequately cover the cost of U.S. Government employees and eligible dependents traveling overseas. Specifically, OIG found that the rates established by ALS were higher than what was supported by available independent economic data available for three of four posts. The primary reason the foreign per diem rates differed could be attributed, in part, to the inefficient methodology used by ALS to calculate the rates. For example, ALS established per diem rates for more than 1,000 locations worldwide and relied on hotel and restaurant data manually collected by personnel at overseas posts. In addition, ALS has not evaluated the potential benefit of using other sources to obtain data for establishing rates. For instance, using available independent economic data would reduce the need for manual data collection and calculations, leading to workload efficiencies, while also potentially resulting in rates that would better reflect current market conditions.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Administration review its “Per Diem for Foreign Locations Standard Operating Procedures” for sufficiency and update the guidance as needed. As part of this effort, the Bureau of Administration should require the consistent application of the established methodology and should eliminate the contradictory guidance related to the calculation of the breakfast portion of the foreign per diem rate.
OIG recommends that the Bureau of Administration formalize key requirements related to the foreign per diem rate-setting process in the Department of State Standardized Regulations, including information to be submitted by posts and how posts should collect the required data.
OIG recommends that the Bureau of Administration develop and implement (a) formal guidance related to which locations to designate to have automatic updates to their foreign per diem rates based on fluctuations in exchange rates and (b) a methodology for conducting periodic assessments of exchange rate adjusted locations, adding or deleting designations in accordance with the guidance.
OIG recommends that the Bureau of Administration review and update all foreign per diem locations designated in eAllowances as exchange rate adjusted in accordance with the guidance developed in response to Recommendation 3.
Until Recommendations 11 and 12 are implemented, OIG recommends that the Bureau of Administration develop and institute a process to ensure that posts submit hotel and restaurant data for foreign per diem rate calculations on a biennial basis, as required by Department of State Standardized Regulations § 074.2.
Once Recommendations 11 and 12 are implemented, for locations where independent economic data are unavailable, OIG recommends that the Bureau of Administration develop and institute a process to ensure that posts submit hotel and restaurant data for foreign per diem rate calculations on a biennial basis, as required by Department of State Standardized Regulations § 074.2.
OIG recommends that the Bureau of Administration develop and implement internal controls to verify that managers validate the procedures and justifications used to support the recommended foreign per diem rate changes prior to final approval.
OIG recommends that the Bureau of Administration incorporate in the Foreign Affairs Manual or the Foreign Affairs Handbook record retention requirements for foreign per diem rate-setting supporting documentation.
OIG recommends that the Bureau of Administration develop and implement (a) a policy requiring periodic assessments of the need for foreign per diem rates for multiple locations within one country and (b) a methodology for conducting the periodic assessments. The assessment policy and methodology should take other U.S. Government agency needs and interests into consideration.
OIG recommends that the Bureau of Administration develop and implement a process to consolidate the number of foreign per diem rate locations in a country based on the assessments and methodology developed in response to Recommendation 9.
OIG recommends that the Bureau of Administration review its methodology for determining foreign per diem rates to identify opportunities to streamline the process. At a minimum, the Bureau of Administration should consider whether the use of independent economic data would be more efficient and cost-effective for establishing foreign per diem rates.
OIG recommends that the Bureau of Administration develop and implement a plan to revise the methodology for determining foreign per diem rates based on the results of Recommendation 11.
After implementing Recommendation 12, OIG recommends that the Bureau of Administration recalculate the foreign per diem rates for the locations based on the revised methodology.
OIG recommends that the Bureau of Administration complete its efforts to upgrade and update its eAllowances application. As part of this effort, the Bureau of Administration should ensure that posts are able to upload supporting documentation, such as reservation logs, into the application.