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U.S. Department of State

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Introduction to Principal Financial Statements


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The Principal Financial Statements (Statements) have been prepared to report the financial position and results of operations of the U.S. Department of State (Department). The Statements have been prepared from the books and records of the Department in accordance with formats prescribed by the Office of Management and Budget (OMB) in OMB Bulletin 01-09, Form and Content of Agency Financial Statements. The Statements are in addition to financial reports prepared by the Department in accordance with OMB and U.S. Department of the Treasury (Treasury) directives to monitor and control the status and use of budgetary resources, which are prepared from the same books and records. The Statements should be read with the understanding that they are for a component of the U.S. Government, a sovereign entity. The Department has no authority to pay liabilities not covered by budgetary resources. Liquidation of such liabilities requires enactment of an appropriation.

For 2002, the Consolidated Statement of Changes in Net Position, the Combined Statement of Budgetary Resources, and the Combined Statement of Financing are significantly different than last year's Statements. Specifically, the Department is reporting under new financial statement formats prescribed by OMB Bulletin 01-09. Accordingly, comparative amounts are not presented for these statements. In addition to changing its reporting formats, the Department has adopted several new Federal accounting standards effective for 2002 and 2001.

The Consolidated Balance Sheet provides information on assets, liabilities, and net position similar to balance sheets reported in the private sector. Comparative data for 2001 are included, and intra-Departmental balances have been eliminated from the amounts presented.

The Consolidated Statement of Net Cost reports the components of the net costs of the Department's operations for the period. The net cost of operations consist of the gross cost incurred by the Department less any exchange (i.e., earned) revenue from our activities. Comparative data for 2001 are included, and intra-Departmental balances have been eliminated from the amounts presented.

The Consolidated Statement of Changes in Net Position reports the beginning net position,the transactions that affect net position for the period, and the ending net position. For 2002, the components of net position are separately displayed in two columns:Cumulative Results of Operations and Unexpended Appropriations to more clearly identify the components of and changes to Net Position. Intra-Departmental transactions have been eliminated from the amounts presented.

The Combined Statement of Budgetary Resources provides information on how budgetary resources were made available and their status at the end of the year. Information in this statement is reported on the budgetary basis of accounting. Intra-Departmental transactions have not been eliminated from the amounts presented.

The Combined Statement of Financing reports the relationship between budgetary transactions and financial transactions. Intra-departmental transactions have not been eliminated from the amounts presented.

Required Supplementary Stewardship Information provides information on the Department's Heritage Assets. Required Supplementary Information contains a Combining Schedule of Budgetary Resources that provides additional information on amounts presented in the Combined Statement of Budgetary Resources, and information on intragovernmental amounts, deferred maintenance, and the Department's Working Capital Fund.

The Department received an "Unqualified Opinion" on its financial statements for 2002, 2001, 2000, 1999, 1998 and 1997. The opinions were from an independent public accounting firm engaged by the Department's Office of Inspector General.

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