Defense Environment Alert
November 5, 2002

GAO SAYS U.S. SHOULD HELP INSPECTION ORGANIZATION IMPROVE BUDGETS

The General Accounting Office (GAO) is calling on the State Department to assist in developing a comprehensive plan to improve the budgeting process for the international organization tasked with overseeing a chemical weapons disposal treaty, and to annually report to Congress on how the organization is working to implement budget-related recommendations. The body's poor money management has cramped its ability to ensure full compliance with the Chemical Weapons Convention (CWC), and this problem will only be compounded as more chemical weapons destruction facilities come on-line in the next few years, GAO says in a recent report.

GAO found that the Organization for the Prohibition of Chemical Weapons (OPCW) has consistently overestimated its income and underestimated its expenses, resulting in a potential deficit of $5.2 million this year.

The OPCW is responsible for implementing the CWC, which bans the use of chemical weapons and requires their elimination. The organization's budget for calendar year 2002 is about $54 million, and the United States contributes about 22 percent of OPCW's budget each year -- the largest single contribution. Concerns raised by the United States and others over budget management weaknesses led to the removal of OPCW's director-general in April. The new director-general has pledged to correct the budget problems.

In its Oct. 24 report, GAO assesses the accuracy of OPCW's budgets, the impact of budget shortfalls on the organization's inspection and international cooperation activities, and State Department and OPCW efforts to improve the organization's budget-planning practices. The report is available on InsideEPA.com. See page 2 for details.

Like most international organizations, OPCW's budgets are based on the presumption that all member states will pay their assessments in full, and therefore had recorded as income nearly $1 million in unpaid assessments owed by 30 member states, as of August 2002. OPCW additionally had not collected inspection reimbursements in a timely manner, resulting in more than $2 million outstanding as of June 2002, including more than $1.4 million owed by the United States, GAO says.

"These collective problems contributed to a budget deficit of more than $2.8 million in 2000 and a potential budget deficit of more than $5.2 million in 2002, despite the organization's plans to achieve a balanced budget during these years," the report says.

The budget deficits directly affect the organization's ability to conduct inspections verifying compliance with the treaty, GAO says. In 2001, OPCW only completed 200 out of the 293 inspections planned, and for 2002, the organization plans to reduce the number of inspections to compensate for the deficit. Additionally, OPCW reduced funding for international cooperation and assistance activities, and imposed a hiring freeze to offset its budget shortfalls. GAO says the problem will only increase over the next few years as the number of operational chemical weapons destruction facilities worldwide grows from six today to 12 by 2006.

OPCW and the State Department have taken some preliminary steps to address the budget problems, such as creating a more accurate and timely invoicing process for inspection reimbursements and excluding assessments of member states in arrears when developing internal spending plans, GAO says. But OPCW has yet to develop and implement "a comprehensive plan to help improve its projections of income and expenses and has not implemented recommendations made by its external auditor and financial advisory body to develop more accurate and realistic budgets," GAO says.

The State Department generally concurred with GAO's findings, although it disagreed with the recommendation to report annually to Congress. The department said such a requirement would impose an administrative burden. But GAO disagrees, noting that the department already provides various reports to Congress on international organizations and arguing that this type of reporting is necessary to improve congressional oversight of OPCW.