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Message from the Assistant Secretary and Chief Financial Officer

FY 2003 Performance and Accountability Report

Bureau of Resource Management

December 2003

The Performance and Accountability Report for Fiscal Year 2003 (Report) provides our most important financial and program performance information for the United States Department of State. It also is our principal publication and report to the President and the American people on our stewardship, management, and leadership of the public funds to which we have been entrusted.

It has been an exceptional year. For the seventh consecutive year, the independent CPA firm selected by our Inspector General, has issued an unqualified ("clean") opinion on the Department's consolidated financial statements. This is the best possible audit result. With it the American people can have confidence that the financial statement information presented here is both accurate and reliable. Along with this opinion, the Department achieved a number of other key goals.

• For the first time since the inception of the Chief Financial Officers (CFO) Act, the independent CPA firm has reported no material weakness in internal control;
• Also for the first time, the Secretary has been able to issue an unqualified Statement of Assurance under the Federal Managers' Financial Integrity Act (FMFIA) on both the Department's management controls and its financial systems;
• For financial systems, the Department successfully replaced two obsolete financial systems with the new Regional Financial Management System (RFMS) implemented at all overseas posts. RFMS provides the Department the ability to know the worldwide status of accounts on a timely basis, something never before possible. In addition, the Department's one remaining material nonconformance under FMFIA was closed in 2003 and the independent CPA firm has reduced the previously reported material weakness in information systems security to a reportable condition for FY 2003. After assessing the audit results as of September 30, 2003, and in consideration of the foregoing developments and additional improvements to our financial systems in the first quarter of FY 2004, we believe that the Department's financial management systems substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA). The Department will continue its ongoing effort to enhance its financial systems in FY 2004 and beyond;
• Recognizing the quality of our reporting, for the second year in a row, the Department received the most prestigious award in Federal government financial reporting, the Association of Government Accountants' Certificate of Excellence in Accountability Reporting, one of only three cabinet-level departments to win this award in 2003;
• As part of the commitment to the very best financial operations, the Department has been consolidating and streamlining financial operations worldwide. In 2003, we successfully relocated operations from the Paris Financial Service Center (FSC) to the new Charleston, South Carolina FSC and Bangkok, Thailand FSC, and finalized plans for relocating work to Charleston from our Washington, D.C. operations; and
• With USAID, the Department developed the first-ever joint State-USAID Strategic Plan that will ensure better alignment between foreign policy and development assistance, and to further improve operations, is implementing with USAID a common worldwide financial systems platform.

For the past three years, President Bush has led the effort on management reform through his President's Management Agenda initiatives. Two of these are Improved Financial Performance, and Budget and Performance Integration. In support of this strategy, the Department will continue integrating budgeting and planning into all aspects of our stewardship, and provide timely and accurate financial and performance information that facilitates foreign policy decision-making.

While there are no material weaknesses or nonconformances reported under FMFIA, the Department continues to maintain a robust system of management controls overseen by senior leadership. The Department's Management Control Steering Committee (MCSC) meets regularly to review pending concerns raised by the Inspector General, the independent CPA firm, GAO and others.

In addition to financial performance, this Report also covers policy and program performance ? how well the Department implemented the foreign policy goals of the President and Secretary of State. The reader can see our nation's foreign policy strategic goals, along with performance measures, performance trends, and results achieved. From the very first strategic objective, "Achieve Peace and Security," to "Strengthen Diplomatic and Program Capabilities," we present to the American people a transparent assessment of results for the prior fiscal year. Encompassing the war on terror, the struggle to end regional conflicts, to programs on the rule of law, and the fight against HIV/AIDs and other diseases, the Performance Section of this Report describes our work. It also shows our effort to fulfill the Department's mission, "to create a more secure, democratic, and prosperous world, for the benefit of the American people and the international community."

Christopher B. Burnham
Assistant Secretary for Resource Management and Chief Financial Officer
December 31, 2003