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Financial Highlights


FY 2003 Performance and Accountability Report
Bureau of Resource Management
December 2003
Report
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The Department's financial statements, which appear in the Financial Section of this Report, received for the seventh straight year an unqualified audit opinion issued by the independent accounting firm of Leonard G. Birnbaum and Company, LLP. Preparing these statements is part of the Department's goal to improve financial management and to provide accurate and reliable information that is useful for assessing performance and allocating resources. Department management is responsible for the integrity and objectivity of the financial information presented in the financial statements.

The financial statements and financial data presented in this report have been prepared from the accounting records of the Department of State in conformity with accounting principles generally accepted in the United States of America (GAAP). GAAP for Federal entities are the standards prescribed by the Federal Accounting Standards Advisory Board (FASAB).

Overview of Financial Position

Assets. The Consolidated Balance Sheet shows the Department had total assets of $28.9 billion at the end of 2003. This represents an increase of $2.1 billion (7.8%) over the previous year's total assets of $26.8 billion. The increase is primarily the result of increases of $1.0 billion in Fund Balances with Treasury, $496.6 million in property and equipment, and $550.4 million in investments in the Foreign Service Retirement and Disability Fund (FSRDF). The increase in Fund Balances with Treasury primarily resulted from a $1.4 billion increase in unexpended appropriations.

The Department's assets reflected in the Consolidated Balance Sheet are summarized in the following table (dollars in thousands):

Assets at the end of FY 2003
(Dollars in Thousands)
  2003 2002 2001
Investment, Net $12,301,173 $11,750,737 $11,206,403
Fund Balances with Treasury   9,953,197   8,937,139   7,652,119
Property and Equipment, Net   5,996,493   5,499,850   4,870,466
Accounts, Loans & Interest Receivable, Net     584,230     552,508     403,329
Other Assets
single underline
     59,553
single underline
     99,923
single underline
     91,516
single underline
Total Assets
double underline
$28,894,646
double underline
$26,840,157
double underline
$24,223,833
double underline

 

Assets by Type
Type of Asset Percentage
Investments 42.6%
Fund Balances with Treasury 34.4%
Property and Equipment 20.8%
Receivables  2.0%
Other Assets  0.2%

Investments, Fund Balances with Treasury and Property and Equipment comprise 98% of total assets for 2003, 2002, and 2001. Investments consist almost entirely of U.S. Government Securities held in the FSRDF.

 

Liabilities. The Department had total liabilities of $15.8 billion at the end of 2003, which is reported on the Consolidated Balance Sheet and summarized in the following table (dollars in thousands):

liabilities at the end of FY 2003
(Dollars in Thousands)
  2003 2002 2001
Foreign Service Retirement Actuarial Liability $13,093,800 $12,211,800 $11,766,900
Liability to International Organizations     919,428   1,065,172   1,650,006
Accounts Payable   1,058,514     784,799     823,818
Other Liabilities
single underline
    709,394
single underline
    762,632
single underline
    569,753
single underline
Total Liabilities
double underline
$15,781,136
double underline
$14,824,403
double underline
$14,810,477
double underline

 

Liabilities by Type
Type of Liability Percentage
FSRA Liability 83.0%
Liability to International Organizations  5.8%
Accounts Payable  6.7%
Other Liabilities  4.5%

The Foreign Service Retirement Actuarial (FSRA) Liability of $13.1 billion and the Liability to International Organizations of $919.4 million comprise 89% of the Department's total liabilities at the end of 2003.

 

Of the total liabilities, $1.96 billion were unfunded, i.e., budgetary resources were not available to cover these liabilities. The $1.96 billion is primarily comprised of the $919.4 million Liability to International Organizations, and the unfunded portion of the FSRA Liability of $653.8 million, which represents the amount by which the $13.1 billion FSRA Liability exceeds the FSRDF's net assets available to pay the liability. The $653.8 million unfunded portion of the FSRA Liability is $329.1 million more than the $324.7 million unfunded FSRA Liability at the end of 2002.

The $919.4 million Liability to International Organizations consists of $869.2 million in calendar year 2003 annual assessments, and $50.2 million in accumulated arrears assessed by the UN, its affiliated agencies and other international organizations. These financial commitments mature into obligations only when funds are authorized and appropriated by Congress.

As of September 30, 2003, a total of $926 million had been appropriated by Congress for payment of U.S. arrearages. These amounts, however, were made available subject to certifications by the Secretary of State that certain legislative requirements were met. A payment of $100 million in arrearages was made in FY 2000; a payment of $475 million and a credit of $107 million were made in FY 2002; and payments totaling $242 million were made in FY 2003. Thus, $2 million of appropriations for arrearage payments remain.

Ending Net Position. The Department's Net Position at the end of 2003 on the Consolidated Balance Sheet and the Consolidated Statement of Changes in Net Position was $13.1 billion, a $1.1 billion (9.1%) increase from the previous fiscal year. Net Position is the sum of the Unexpended Appropriations and Cumulative Results of Operations.

The growth in Unexpended Appropriations was due principally to the continued increase in budget authority received to rebuild the Department's diplomatic platform.

The decrease in Cumulative Results of Operations resulted mainly from the $329.1 million increase during 2003 in the unfunded portion of the FSRA Liability described on the previous page. This increase resulted from a change in economic assumptions used for valuing the FSRDF plan for consistency with similar Federal plans.

Results of Operations

The results of operations are reported in the Consolidated Statement of Net Cost and the Consolidated Statement of Changes in Net Position.

The Consolidated Statement of Net Cost presents the Department's gross and net cost for its strategic objectives and strategic goals. The net cost of operations is the gross (i.e., total) cost incurred by the Department, less any exchange (i.e., earned) revenue. The Consolidating Schedule of Net Cost categorizes costs and revenues by strategic goal and responsibility segment. A responsibility segment is the component that carries out a mission or major line of activity, and whose managers report directly to top management. For the Department, a Bureau (e.g., Bureau of African Affairs) is considered a responsibility segment. For presentation purposes, Bureaus have been summarized and reported at the Under Secretary level (e.g., Under Secretary for Political Affairs). Information on the Bureaus (or equivalent) that report to each Under Secretary can be found on the Organization Chart for the Department provided earlier in this Section of this report.

The presentation of program results by strategic objectives and strategic goals is based on the Department's current Strategic Plan established pursuant to the Government Performance and Results Act of 1993. In prior years, the Department presented its program information at the National Interest level to the extent that it was practicable. In accordance with current guidance, prior year data is also presented according to the corresponding strategic goal for comparative presentation.

Where Funds Go - Net Program Costs
(Dollars in Thousands)
Strategic Objective Cost
Achieve Peace and Security $3,176,918
Advance Sustainable Development and Global Interests $2,479,256
Promote International Understanding $1,352,929
Executive Direction and other Costs not Assigned $2,050,514

The Department's total net cost of operations for 2003, after intra-departmental eliminations, was $9.1 billion. The strategic objective to "Achieve Peace and Security" represents the largest investment for the Department at 35.1% of the Department's net cost of operations. The net cost of operations for the remaining strategic objectives varies from 14.9% to 27.4%

The Consolidated Statement of Changes in Net Position presents the accounting items that caused the net position section of the balance sheet to change since the beginning of the fiscal year. Appropriations Used totaled $9.3 billion, comprising 78.0% of the Department's total revenues and financing sources after considering intra-departmental eliminations of $1.7 billion. The charts on this page reflect the funds that the Department received during 2003 and how these funds were used.

Where Funds Come From
(Dollars in Thousands)
Strategic Objective Cost
Appropriations and Transfers $10,881,414
Reimbursements Earned $ 3,094,523
Trust Funds $ 1,181,300
Other $ 2,393,324
Total Budget Resoures
$17,550,561

The Combined Statement of Budgetary Resources provides information on how budgetary resources were made available to the Department for the year and their status at fiscal year-end. For the fiscal year, the Department had total budgetary resources of $17.5 billion, a decrease of 1.4% from 2002 levels. Budget Authority of $12.1 billion - which consists of $10.9 billion for appropriations (direct, related, and supplemental) and transfers, and $1.2 billion financed from trust funds - comprise 68.7% of the total budgetary resources. The Department incurred obligations of $14.9 billion for the year, a slight decrease (0.2%) from $15.2 billion of obligations incurred during 2002. Outlays reflect the actual cash disbursed against the Department's obligations.

The Combined Statement of Financing reconciles the resources available to the Department to finance operations with the net costs of operating the Department's programs. Some operating costs, such as depreciation, do not require direct financing sources.

Budgetary Issues

The Federal Government Dollar
Program Type Percentage
Medicaid, Medicare, Other Entitlements & Mandatory Programs 31%
International Affairs  1%
Social Security 23%
Non-Defense Discretionary 18%
National Defense 16%
Net Interest 11%

The FY 2003 Department of State's budget of $7.660 billion included the appropriations that finance the administration of foreign affairs ($6.002 billion); contributions to international organizations and activities ($1.530 billion); international commissions ($57 million); and other related appropriations ($71 million). Two foreign assistance accounts authorized in the State act were also funded ($867 million). The administration of foreign affairs appropriations primarily funds the operating budgets of the Department of State. These appropriations fund the basic platform for conducting the U.S. Government's diplomatic activities around the world as well as building and maintaining the infrastructure that supports most U.S. Government operations overseas. In addition, the Department continues to rely on Machine Readable Visa (MRV), Expedited Passport, and other user fee collections to enhance the nation's border security and help meet consular workload demands, and to invest in modern, responsive information technology systems. These resources are essential to accomplishing two overriding objectives of the President's foreign policy: to win the war on terrorism and to protect Americans at home and abroad.

America's Best Guesses
Public Estimates on Foreign Policy Issues
Topic U.S. Perception Reality
Percentage of U.S. Budget going to foreign aid 20 percent Less than 1 percent
Reproduced with permission from FOREIGN POLICY # 126 (September/October 2001). Copyright 2001 by the Carnegie Endowment for International Peace.

For our major operating appropriation - Diplomatic and Consular Programs (D&CP) - the Department was funded at $3.911 billion and included the second year of a multi-year Diplomatic Readiness Initiative (DRI) strategy to recruit, hire, train, and deploy additional professionals around the world. The appropriation and transfers, along with increases in MRV fee spending, also supported hiring 584 new employees (above anticipated attrition) including 399 new diplomatic readiness positions, 51 new consular positions to address border security workload increases, and 134 new security professionals. With increased D&CP funding, the Department funded programs to create a work environment to attract and retain talent within a highly competitive economy.

The Department's FY 2003 funding included $1.405 billion for Embassy Security, Construction and Maintenance to manage the Department's real property assets and provide U.S. diplomatic and consular missions with secure, safe, and functional facilities. This funding included $750 million for security capital construction and compound security projects and $505 million for ongoing operations. The Department also received $559 million for Worldwide Security Upgrades within the Diplomatic and Consular Programs appropriations (including $10 million from the Emergency Wartime Supplemental Act) to complete the perimeter security enhancement program begun under the 1999 Emergency Supplemental Appropriation, to improve technical, counterintelligence and domestic security programs, and to fund the 134 new security professionals. This funding also sustains security programs begun with the FY 1999 emergency supplemental such as worldwide guard protection, physical security equipment and technical support, information/systems security, and personnel and training.

The Department's FY 2003 funding for the Capital Investment Fund included $182 million to provide modern information technology to every Department employee, including secure access to the Internet for all of our employees and modern classified systems. This included funding for completion of the OpenNet Plus initiative, which provided complete web access for all State desktops in May 2003. This funding also went to the Department's goal of providing classified connectivity and email to every eligible post by FY 2004, thereby laying the foundation for modernizing our outmoded cable system.

The Department's FY 2004 budget request [at this date still pending before the Congress] continues to support the Department's priorities to support the War on Terrorism and build diplomatic readiness. The request includes $1.5 billion for enhanced security and the War on Terrorism, including $861 million to design and/or construct secure facilities, additional site acquisition, and compound security projects; and $647 million to upgrade worldwide security readiness including increased guard protection, chem/bio defense, and facility protection measures.

The request also includes funding to support hiring 552 additional Americans including 85 security professionals and support staff; 399 new hires to meet the highest priority diplomatic readiness staffing needs; and 68 new consular positions to enhance Border Security and ensure the security of U.S. visas and passports. The Department's request of $157 million for the Capital Investment Fund allows for continued investment in state-of-the-art IT systems worldwide, including extending classified connectivity to every post requiring it.

Limitation of Financial Statements

Management prepares the accompanying financial statements to report the financial position and results of operations for the Department of State pursuant to the requirements of Chapter 31 of the United States Code section 3515(b).

While these statements have been prepared from the books and records of the Department in accordance with the formats prescribed in OMB Bulletin 01-09, Form and Content of Agency Financial Statements, these statements are in addition to the financial reports used to monitor and control the budgetary resources that are prepared from the same books and records.

These statements should be read with the understanding that they are for a component of the U.S. Government, a sovereign entity. One implication of this is that unfunded liabilities reported in the statements cannot be liquidated without the enactment of an appropriation and ongoing operations are subject to the enactment of appropriations.

The Department also issues financial statements for its International Cooperative Administrative Support Services (ICASS) and the International Boundary and Water Commission (IBWC). The complete, separately-issued ICASS and IBWC Annual Financial Reports are available from the Department's Bureau of Resource Management, Office of Financial Policy, Reporting and Analysis, 2401 E Street, Room H1500, Washington, DC, 20037; (202) 261-8620.



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