9/14/2014 BY THE NUMBERS FY2000 – FY2014 The ICASS Service Center developed this presentation to provide a context for discussions around ICASS funding and resource issues and to explain the various cost drivers in the ever-growing ICASS platform. NOTE: TO SEE SLIDE DETAILS, VIEW IN “NORMAL” OR “SLIDE SHOW” VIEW. ICASS Service Center – S. Whitman

ICASS Total Cost Growth FY2000 – FY2014 $3,079 $2,573 $2,400 3.1% We’re all aware that ICASS costs have grown over the years and this chart confirms that fact; from FY00 to FY14 these costs have more than tripled (or 341%). There are many reasons for this: As ICASS matured, new programs were brought into the program; Increased security requirements following African bombings had a significant impact on costs; Our overseas presence – the number of Americans -- has increased to meet new and expanded foreign policy objectives of State and other agencies; New Embassy Compounds have brought with them increased costs; The significant decline of the dollar had a major impact from FY04 to FY08; Kabul LGP Costs came into ICASS in FY08 but were paid 100% by DS until FY11 when they became a shared cost by all agencies. In FY12 Baghdad became an ICASS post with ICASS costs totaling $330M -- 14% of total FY12 final ICASS costs. Note: Excluding Baghdad ICASS costs, the net increase percentage would have been only 1% (vice 17%). In FY13 Residential guards, Non-Residential guards for Stand-alone buildings occupied by one agency and Mobile Patrol guards, amounting to $226M, were incorporated into ICASS. Prior to FY13, non-State agencies either directly paid at the post level or reimbursed to DS in Washington for the costs of these services. In FY14 Baghdad costs increased by $368M and Kabul costs increased by $53M. The total increases at these 2 posts account for 74% of the overall increase of $568M. In FY14 Baghdad ICASS costs totaled $525M -- 17% of total FY14 final ICASS costs and There will be more about these factors later in this presentation. First, let’s look at an important cost driver: American personnel.

Worldwide Direct-Hire American Growth FY2000 – FY2014 2.2% 2.4% 6.2% 3.1% 11.3% 3.4% 1.3% 1.9% This chart shows the growth in the number of American Direct-Hires from FY00 to the present – from 15,736 to 28,037 – an overall increase of 12,307 or approximately 78% during this period. Some of the programs that have fueled this growth: State’s Diplomatic Readiness Initiative (FY03–FY04); important CDC health initiatives like PEPFAR; DHS expansion; the Global War on Terrorism; State's Diplomacy 3.0 Initiative; and USAID’s expansion under DLI; etc. The thin pink stack at the bottom shows American Direct Hire ICASS personnel. This group (made up of Mgt Officers, GSOs, FMOs, HROs, Medical Officers, and some IMOs) has been relatively stable except for two periods of growth. The first large increase was in FY03 when 103 new ICASS American service providers were added under the Diplomatic Readiness Initiative, and the second has been the FY09-FY12 period when 191 (1,227 minus 1,036) new American positions were added during the Diplomacy 3.0 Initiative. The ratio of USDH customers to service providers remained stable at about 18.6:1 till FY11 but it jumps to 19.2:1in FY12 and 20.7:1 in FY14 due to the inclusion of Embassy Baghdad (1,038 customers in FY12 has increased to 3,844 in FY14). Baghdad’s growth masks another important reality. The customer base (excluding Baghdad) elsewhere actually decreased by 24 in the rest of the world. Now let’s take the costs we looked at earlier and break them down on a per capita basis 0.3% 3.9% 4.6%

ICASS Costs per Direct-Hire American State & All Other Agencies (w/o ICASS Service Providers) FY2000 – FY2014 $111,414 $92,129 This is a chart many are familiar with – the per capita cost for ICASS. It is simply the total $$ in ICASS (the second slide), divided by the number of American DH personnel (shown in the third slide – excluding ICASS Service Providers) supported in ICASS. For the statistics gurus, these stacks show that the average per capita ICASS cost of each American Direct Hire has grown 139% over this time period (from $48,027 in FY00 to $115,051 in FY14). The ICASS total costs have grown 331% over the same period. The red tip represents ICASS costs per USDH due to Baghdad. Without Baghdad, the ICASS costs per USDH in FY12, FY13 and FY14 would be $92,129, $105,287 and $111,414, respectively. But the ICASS of FY00 was quite different from the ICASS of FY14. We will break down these costs to explain what contributed to the increases. The next few slides will break down the dollars and the numbers of people to show how these costs are shared between State and the other agencies. NOTE: The red tip represents ICASS costs per USDH due to Baghdad . Without Baghdad, the ICASS costs per USDH in FY14 would be $111,414 (instead of $115,051).

Worldwide Direct Hire Americans State & All Other Agencies (w/o ICASS Service Providers) FY 2000 – FY 2014 14.4% 4.2% This slide shows the total number of American Direct Hires split between State and all other agencies, without Baghdad. State counts exclude the numbers for ICASS positions. Note: American Direct Hires in Baghdad include counts of 98, 108 and 558 for other agencies in FY12, FY13 and FY14, respectively. As you can see, without Baghdad data other agency growth was 3,201 or 45% from FY00-FY14, while State’s was 4,869 or 63% over the same period. NOTE: State counts include 51 counts , 37 counts and 13 counts in FY12, FY13 and FY14, respectively from other agencies at post Baghdad.

Worldwide Direct Hire Americans State & All Other Agencies (w/o Baghdad and Service Providers) FY 2000 – FY 2014 This slide shows the total number of American Direct Hires (without Baghdad and ICASS Service Providers) split between State and all other agencies. ICASS positions are excluded in the numbers for State. What does this tell us? It shows that the overall ratio of State to other agency personnel has shifted only slightly over time. After the impact of State’s DRI surge subsided, since FY08 State’s share of the customer population has changed very little, varying near 55%, while the other agencies’ share has been around 45%. The next slides look at some interesting statistics on how ICASS costs are broken down.

Worldwide ICASS Invoices State & Other Agencies FY 2000 – FY 2014 17.0% This chart shows the total ICASS budget split between State, the other agencies and Baghdad. Note: Baghdad costs includes $24.1M, $15.4M and $65.2M for other agencies in FY12, FY13, and FY14, respectively. State comprises approximately 55% of the ICASS customer base, but State pays approximately 75% of ICASS costs. Why is State’s share so much higher? State has a presence everywhere and subscribes to every service whereas other agencies tend to select fewer services and therefore pay less of the total ICASS bill. State’s share began to decline after FY06 as USAID’s share of costs grew due to consolidation onto NECs. This trend was interrupted by the advent of Baghdad in ICASS starting in FY12. The next chart takes this data and creates a ratio based on the number of direct hire Americans for State and other agencies.

Worldwide ICASS Invoices State & Other Agencies (w/o Baghdad) FY 2000 – FY 2014 This chart shows the total ICASS budget split between State and the other agencies without Baghdad. Without Baghdad costs between FY12 and FY14, State’s share would have dropped below 70%.

ICASS Costs per Direct-Hire American State & All Other Agencies (& OA as percent of State) FY 2000 – FY 2014 56% Here we’ve taken the total invoice costs as shared by State and the other agencies and divided it by their respective numbers of Direct Hire Americans. This shows us the average per capita cost for State and for other agencies. Note: State number does not include ICASS Service Providers. This chart clearly shows the impact of State’s universal presence and subscription to all services compared to other agencies when comparing per capita costs. The substantial increase for State’s per capita costs from FY11 to FY12 is due to State’s large share of ICASS costs at Embassy Baghdad. In FY13, all agencies’ costs increased due to the expansion of the LGP program in ICASS. Prior to FY13, non-State agencies either directly paid at the post level or reimbursed DS in Washington for costs for Residential guards, Non-Residential guards for Stand-alone buildings occupied by one agency, and Mobile Patrol guards. These guard services were incorporated into ICASS starting in FY13. This, plus significant increases in ICASS costs at Baghdad and Kabul, resulted in a large increase in per capita costs from $62,910 in FY12 to $78,417 in FY14. Note: The other agencies’ USDH counts (including Baghdad) only increased by 448 (4%) from 10,389 in FY12 to 10,837 in FY14. Can this per capita number be simply multiplied by an agency’s head count to calculate its invoice? No, this number is an average cost and is just one way to look at and compare the ICASS costs. Individual agencies’ invoices could be higher or lower depending on the post and the services to which they subscribe. 49% 45% 49% 47% 41%

ICASS Cost Components FY2000 – 2014 The first chart in this presentation showed total ICASS costs over the last 14 years. This chart takes those same totals and breaks them down into the various ICASS funding sources. The salmon colored stack on the top represents all ICASS leases costs. These include residential leases occupied by ICASS American personnel as well as any shared residential and non-residential (office, warehouse, etc.) space that is funded through ICASS. While some of the increase is related to the increased number of ICASS American positions, the most significant cost driver in this category is inflation and exchange rate fluctuations. NOTE: The decreases in FY12 and FY13 were due to the shift of certain maintenance costs from ICASS to OBO’s “Maintenance Cost Sharing Program.” The red stack shows Local Guard costs -- one of the unavoidable (and rising) costs of doing business in today’s world. The increase in FY03 results from security supplemental costs moving into ICASS. The increase in FY11 is mainly due to Kabul LGP costs ($80.2M) which had previously been paid entirely by State. In FY12, Kabul LGP costs increased to $108.6M and Embassy Baghdad added another $97M. The incorporation of the residential LGP program in FY13 brought increases more than $226M. The total increase in FY13 shown here is only $171M because of the application of carryover from the non-residential LGP program. The total increase of $227M in FY14 is largely due to increased security costs of $211M at Baghdad. The light blue stack represents “Domestic Costs”. The next two slides will break down this segment into its various categories and provide more detail. The large blue stack at the bottom is what is known as “Regional Bureau” costs and is the largest source of funding for overseas operations. The increases in FY12 and FY14 are primarily due to the addition of $227M and $146M, respectively related to Embassy Baghdad. There will be more detail on Regional Bureau funding, but first let’s look at Domestic Costs.

Domestic Costs FY2000 – 2014 51.2% (13.9%) 7.1% 0.0% 9.8% 7.9% 28.6% 9.1% 10.9% Domestic or “Washington costs” include two categories: those that are funded centrally but budgeted at post, such as American salaries and post assignment travel, and the so-called “below-the-line” costs, which are both funded and budgeted in Washington. Each of the latter is spread to the agencies using an established methodology. Some of the costs (see the breakdown on the next slide) are spread based on an agency’s overall percentage share of ICASS costs, some are spread based on workload counts gathered at post. The decrease of $69M between FY11 and FY12 is due to Kabul security contract costs being 100% shared by customer agencies, OBO ESPS costs moved to Program, decreased contingency funds, etc. The next slide takes a more detailed look at each of these costs. Note: Percentage indicated above for each fiscal year is based on a comparison with the prior year.

Domestic ICASS Cost Components FY2000 – FY2014 This is the “tombstone” chart. It provides an excellent visual to demonstrate some of the programs and costs that are included in or have been added to ICASS. Starting from the back: AmSal (American Salaries): The largest stack shows salaries of American ICASS personnel. The increase reflects the growth in ICASS positions, annual COLA adjustments, and in FY10 the partial implementation of locality pay for overseas personnel. AmSal is funded in Washington but invoiced at the post level. Of the total shown above, 89% is for overseas ICASS positions; the remaining covers domestic positions funded through ICASS. Kabul LGP Costs: These costs came into ICASS in FY08 and STATE paid 100% as a “below-the-line” Washington cost from FY08 through FY10. In FY11, $80.2M of these costs were shared by agencies at the post level and $37.8M were paid by State in Washington. In FY12 these costs were 100% shared and were no longer billed “below-the-line”, which explains the large decrease in this category from FY11 to FY14. Diplomatic Pouch is a service that was added to ICASS in FY13. In FY08, this category increased by $10M when State assumed billing responsibility for second destination transportation charges. The Financial Services Centers covers the financial operations in Charleston, Paris, Bangkok and Sofia “Other” includes FSN Separation Liability Trust Fund, Contingency funds, ICASS Service Center non-salary costs, LGP Vehicles, and several other small accounts. PAT (Post Assignment Travel) captures costs related to transferring ICASS personnel and their families to post (travel, shipment/storage of HHE and POVs, per diem, etc.). PAT is funded in Washington but invoiced at the post level. The total shown above also includes PAT costs for GFS Charleston, FSC Paris and FSC Bangkok positions. MED (Office of Medical Services) reflects the costs for supporting the worldwide medical program. GITM (Global IT Modernization) is another program added to ICASS in FY03 and is essential to maintaining modern, up-to-date IT infrastructure to support the overseas platform. (Note: These costs are only for computer hardware for ICASS personnel and do not include State-Program offices or other agency personnel.) O/S Schools represents the grants program in support of overseas schools attended by children of US diplomatic families around the world. Exchange Rate Set Aside fund began to show as a budgeted item in FY03 due to losses which occurred in that year. The fund covers currency fluctuations in order to maintain post buying power at the budgeted October 1 target level. On March 31 and June 30, exchange rate adjustments go into or come out of this fund but do not change the target amounts. Starting in FY03, losses exceeded reserves and these were billed to all agencies. Subsequent losses in FY07 were deferred until FY08, and those cumulative losses were billed out in FY08 in a special invoice, resulting in a spike in this category. The strengthening of the dollar since then has resulted in next exchange rate gains. The next slide looks at “Regional Bureau” costs.

Regional Bureau ICASS Costs “Controllable” vs “Non-controllable” FY2000 – FY2014 Regional Bureau funds are the monies that go to overseas posts to fund everything from FSN salaries to fuel costs to paper supplies. The cost pressures noted earlier are major factors here: Inflation (including mandatory price increases), exchange rates, LE Staff wage increases, and new embassy compounds (NEC). These are costs over which management officers have little control and we named them “non-controllable” costs. Another item that was added beginning in FY08 were costs related to State-AID consolidation. While these costs appear as an increase, the bulk of the costs were absorbed by USAID’s increased workload in ICASS. This chart takes the “Regional Bureau” component and splits it between “controllable” and “non-controllable” costs, and shows the relationship between the two categories over the years. These non-controllable cost totals, represented by the pink stack, were derived from post and bureau budget data to arrive at a cumulative total for each year. The next slide shows the actual totals represented by the five categories of these “non-controllable” costs. What this chart shows is, if you remove the inflation factor, project no major embassy construction programs, adverse fluctuations in exchange rates, FSN wage increases, or major management initiatives, what remains is the blue stack - what we are calling “Controllable” costs. It may not be a perfect methodology, but it demonstrates the impact of costs over which management officers have very little control. Five years are particularly note-worthy: In FY08, the non-controllable costs went up by $100M, while the other category actually went down by $30M. This shows the impact of the weak dollar, with the need to fund exchange rate losses crowding out other requirements. In FY10, controllable costs increased by $111M. Two factors drove this increase. The first was the addition of more than 1,341 new customers overseas and the corresponding increase to the funding base, and the second was additional funding provided to support extraordinary requirements in Afghanistan and Pakistan. The controllable increase in those two missions was $51M, accounting for 46% of the total increase in that category across all bureaus in that year. In FY12, controllable costs increased by $263M, of which $227M relates to the inclusion of Embassy Baghdad in ICASS. In FY13, controllable costs decreased by $82M mainly due to a decrease of $86M in regional bureau budget at Embassy Baghdad from prior year $227M to $141M in FY13. In FY14, controllable costs increased by $192M mainly due to an increased of $146M in regional bureau budget at Embassy Baghdad from prior year $141M to $287M in FY14. The next slide takes a closer look at these “non-controllable” costs. “Non-controllable” costs include exchange rate adjustments, FSN wage increases, costs for New Embassy Compounds, price increases and consolidation.

Regional Bureau Non-Controllable Costs FY2000 – FY2014 $570 $521 $483 $292 $192 $151 $115 $73 $23 $5 $4 $8 This chart plots the five categories of “non-controllable” costs included in Regional Bureau targets. You can see in the period from FY00 to FY03 when the dollar was strong there were considerable exchange rate gains. And you can see in the later years the budgetary impact of the weakened dollar. The $22M in FY14 reflects the cumulative exchange rate gains/losses impacting the Regional Bureau targets, which has declined as a share of the total since FY08 as the dollar has turned around. The category for FSN Wages includes in the “Non-Controllable” category reflects only FSN within-grade increases (WGIs) plus annualized wage increases over the base at our starting point in FY00. By contrast, the FSN wage base, including any funds budgeted for anticipated FSN wage increases, is included in the “Controllable” portion of the Regional Bureau (see slide 11). NOTE: For FY14, the total increase of $24.9M includes $4.6M for annualized wage increases and $20.3M for WGIs. The FSN wage freeze has had a major impact in this category, keeping costs lower than they otherwise would have been. This category will begin to increase at a faster rate due to the end of the freeze. The “price increases” segment is the closest we could get to inflationary increases. This reflects increases over the previous year for existing contracts and commitments. New Embassy Compound (NEC) costs have resulted in significant cost increases and as more new buildings come on line, these costs will continue to grow. State-USAID consolidation has shifted new costs into ICASS (along with increased USAID workload). As indicated before, USAID has absorbed these costs onto its invoice. The next slide looks at the “controllable” portion of ICASS costs.

Regional Bureau Controllable Costs FY2000 – FY2014 $287 -7.9% $227 $141 0.8% 1.7% 2.5% 1.1% 5.8% -4.9% 14.2% 1.5% Of these “Controllable” costs, the year-on-year totals showed very little change through FY09, with the dip in FY08 showing the impact of mid-year target reductions due to the weak dollar. In FY10 and FY11, State’s Dip 3.0 and USAID’s DLI staffing initiatives, plus other agency growth drove up the targets, allowing for long overdue investments in infrastructure and additional ICASS staffing. In FY12, the addition of Embassy Baghdad ($227M) accounts for most of the $263M ($1,033M minus $770M) increase. In FY13 Embassy Baghdad’s budget was reduced by $86M for a cut in contractual services. In FY14 Embassy Baghdad’s budget was increased by $146M in contractual services. Note: Percentage indicated above for each fiscal year is based on a comparison with the prior year.

Regional Bureau Controllable Costs FY2000 – FY2014 (w/o Baghdad) 0.5% 0.8% 1.7% 2.5% 1.1% 5.8% -4.9% 14.2% 1.5% Without Embassy Baghdad in FY12, the controllable costs increase would be 4.7% rather than 34.2%. Without Embassy Baghdad in FY14, the controllable costs would have increased by 5.4% from FY13 rather than 20.3%. Responding to budget pressure from Congress, the FY11, FY12 and FY13 targets were decreased to reflect the worldwide wage freeze for all LE Staff and to halt implementation of the third tranche of Foreign Service comparability pay for USDH employees. As a result, the annualized FSN wage increase was significantly reduced from $21M in FY11 to $2.7M in FY13. Over the past 14 years, ICASS has sustained remarkable growth in its customer base, a significant expansion in services and programs, and various improvements in post operations (e.g., expanded use of the Post Support Unit, Greening Initiatives, etc.). However, as we face the budget challenges of FY14 and beyond, we will need to find new ways of doing business while sustaining the focus on cost containment and maintaining service satisfaction. Finally, let’s look at the “controllable” costs on a per capita basis. Note: Percentage indicated above for each fiscal year is based on a comparison with the prior year.

Regional Bureau Controllable Costs per Direct-Hire American (Excluding Service Providers) FY2000 – FY2014 $35,875 $35,331 Here we took the total American Direct Hires (excluding ICASS Service Providers) and divided that number into the “controllable “ portion of regional bureau costs. As you can see, from FY02 to FY11, except for the dip in FY08 discussed previously, the per capita average has remained fairly steady.

Regional Bureau Controllable Costs per Direct-Hire American (w/o Baghdad) (Excluding Service Providers) FY2000 – FY2014 If the controllable costs of $227M at Embassy Baghdad were excluded, the per capita average in FY12 would be $35,875, instead of $43,928. If the controllable costs of $141M at Embassy Baghdad were excluded, the per capita average in FY13 would be $35,331, instead of $39,704. And, if the controllable costs of $294M were excluded, the per capita average in FY14 would be $37,370, instead of $42,735. What does all this tell us? As we all know, there are many interpretations one could derive from any set of numbers. However, there are some important conclusions that can be drawn from this data. The decrease in the per capita costs in FY13 results from the accumulated impact of the wage freeze, the impact of the FY13 sequester, and continuing cost containment efforts. The increase in the per capita costs in FY14 is mainly due to an increased costs of $146M at Embassy Baghdad. When you combine this information with the results of the past nine years of ICASS Customer Satisfaction Surveys, it shows that service levels are being maintained at an acceptable level of satisfaction, while controllable per capita costs are fairly stable. At the same time, the unavoidable costs of doing business overseas have risen considerably. If we are to face tighter budgets going forward, the management challenge is to maintain service levels as the “uncontrollable” costs continue to rise. This presentation should help demystify the costs and growth in ICASS, give you a better appreciation of the cost drivers in ICASS, and put some of the increases in the global ICASS budget in a better perspective. If you have any questions, send them to ICASSSERVICECENTER@state.gov.