The State Department has argued the additional pay is necessary to compete for top candidates seeking overseas careers in the federal government.
Congress gave State temporary authority in August 2009 to begin phasing in comparability pay for overseas employees -- pay added to base salaries to match the locality differential received by Washington-based federal workers. After two comparability rate installations, Foreign Service personnel stationed overseas currently receive 16.52 percent above their base salaries, or approximately two-thirds of the Washington locality rate of 24.22 percent.
Budget concerns have delayed the final installation, however, and the current 16.52 percent rate has been identified as an expense that could be cut to reduce the budget deficit. State will be unable to provide comparability pay beyond 2011 without reauthorization from Congress.
The compensation difference for overseas personnel is significant. "According to our analysis of State personnel data from September 2010, with full comparability pay, Foreign Service personnel posted overseas would receive about an additional $23,600 annually, on average," Jess T. Ford, GAO's international affairs and trade director, said in a letter accompanying the report. That analysis considered comparability pay equivalent to the Washington locality differential -- 24.22 percent -- against Foreign Service salary levels with no comparability pay.
The GAO report called attention to other allowances and differentials available to overseas employees, such as danger pay, post differentials, cost-of-living allowances and language-incentive pay, all of which ease the financial burden of serving in sometimes dangerous, difficult or expensive overseas posts and often result in total compensation that is higher than it would be in Washington.
Approximately 17 percent of Foreign Service employees are at posts with danger pay and 75 percent are at posts with differentials of 5 percent or more, the report said.
Although the average total pay for Foreign Service personnel posted overseas is higher than it would be in Washington, the report said, "benefits such as retirement contributions are lower . . . than when they are stationed in Washington."
Since State contributions to Social Security and Thrift Savings Plans are calculated according to base pay plus locality or comparability pay, employees posted abroad, despite receiving perks such as cost-of-living increases and danger pay, receive smaller retirement funds over time.
According to State estimates, all three phases of increased comparability pay to 24.22 percent for its Foreign Service personnel stationed abroad would cost $302 million in fiscal 2012. The Congressional Budget Office estimated that providing these higher salaries for State and other agencies would cost $2 billion through 2015.
Congress in April extended funding for the increases to 16.52 percent, but barred State from using fiscal 2011 money to implement the third phase of the plan.
State argues that the increased comparability rates are needed to recruit and retain high-quality candidates for overseas posts, and for keeping pay and retirement equity between employees in different locales.
State says its main competitor for Foreign Service job seekers is the CIA, which does provide comparability pay in overseas posts. The Homeland Security Department and the FBI do not provide locality or comparability pay for employees stationed in foreign countries, however.
The GAO report said State has not provided evidence to back its claim that recruitment is hurt by the lack of comparability salary. GAO stated, however, in the past staffing gaps at hardship posts proved detrimental and any serious loss to mid-level personnel could pose a serious risk to U.S. diplomacy.
"As State prepares for an expanded diplomatic footprint in Iraq while continuing to reposition staff to emerging powers such as China, these challenges may become more pronounced," the report said.
Ultimately, GAO could not determine whether State needs comparability pay to recruit and retain personnel, and it did not make any recommendations in the report. State officials declined to formally respond to the report, which was released Thursday.