At the U.S. Embassy in the Ivory Coast, the employes' association nearly went bankrupt after it bought 2,200 cases of beer. At the embassy in Turkey, workers running the association snack bar were being paid out of embassy funds. In Egypt, the association made an $80,000 profit from its contract to provide services to the embassy, when it only should have broken even.
These tidbits surfaced at a congressional hearing last week into the contract arrangements between U.S. embassies abroad and their employes who are hired to provide building maintenance and landscaping, chauffeurs, guards, snack bars and other mundane but essential needs.
The contracts involve 7,000 people at 130 embassies who have $39 million in contracts and grossed $77 million in 1983, the last year for which figures are available, the State Department said. But the associations have had little or no supervision.
"The results have been spotty," testified John Condayan, acting assistant secretary for State Department administration. He told the House Government Operations subcommittee on legislation and national security that some of the associations suffered from "inadequate or total lack of accounting and record-keeping, poor management, inadequate supervision . . . and some questionable contract practices."
When the State Department tightened its fiscal belt in the late 1960s, Condayan said, new personnel ceilings and funding cuts ended the service contracts most embassies had had with native companies. Embassy employe associations, mostly made up of spouses and volunteers accustomed to running social clubs and organizing picnics, moved into the vacuum.
Most "are just mom-and-pop operations for case-lot orders of commissary supplies," Condayan said, although 11 posts have sales of more than $1 million a year. The associations "are going through a learning curve."
The General Accounting Office looked at only three embassies and found, logically, that employe associations had a hard time being objective about needs of the embassies. Perhaps, it implied, that was intentional.
"There are no indications that posts have actually canvassed the local market for available services, or that posts have made cost-comparison studies" to prove that embassy associations are cheaper, testified Joan M. McCabe, association director of the GAO's national security and international affairs division.
Condayan said it helped spouses' morale to have something useful to do, and often they were the only recourse under local conditions that involved "difficult political problems, corruption, unacceptable labor standards and various work ethics, extremely low rates of literacy and competency and other unique, country-specific problems."
In addition, Condayan said, embassy employes are by definition less of a security risk than the locals. "We cannot rely solely on cost factors when we determine who shall have access to our embassies," he said.
But the associations hired locals to do the services anyway and then charged the embassy a management fee, McCabe said, some making an improper profit under the arrangement. The association in Cairo netted $80,000 last year, she said.
The employe association in Turkey expects a $31,000 profit this year, part of it a $12,000 overcharge for snack bar employe salaries, McCabe continued.
In the Ivory Coast, the association raised its fees to cover a $17,000 loss from beer it bought that could not be sold. Of the $55,000 in fees the Abidjan association received, she said, "we estimated about $43,700 was profit." However, the association had no general ledger, no accounting system and no itemized budget.
Subcommittee Chairman Jack Brooks (D-Tex.) said all this was "alarming and cannot be tolerated." Condayan testified that State has now set up a special office to oversee the associations and will recruit professional managers, write handbooks and provide information and guidelines to them.
But a more detailed GAO report covering many other posts overseas is in the works, and corrective legislation may be forthcoming when that study is completed, Brooks said.