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Financial Section - Financial Highlights


FY 2003 Performance and Accountability Highlights
Bureau of Resource Management
December 2003
Report
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The Department's financial statements 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 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.

FINANCIAL AND PERSONNEL HIGHLIGHTS
(Dollars in Thousands)
  % Change
2003 over 2002
2003 2002 2001

AT END OF YEAR:

Condensed Balance Sheet Data:

Investments, Net

 +5% $ 12,301,173  $ 11,750,737  $ 11,206,403 

Fund Balances With Treasury

+11%    9,953,197     8,937,139     7,652,119 

Property and Equipment, Net

 +9%    5,996,493     5,499,850     4,870,466 

Other

 -1%      643,783 
single underline
     652,431 
single underline
     494,845 
single underline

Total Assets

 +8% $ 28,894,646 
double underline
$ 26,840,157 
double underline
$ 24,223,833 
double underline

Foreign Service Retirement Actuarial [1]

 +7% $ 13,093,800  $ 12,211,800  $ 11,766,900 

Liability to International Organizations

-14%      919,428     1,065,172     1,650,006 

Other

+14%    1,767,908 
single underline
   1,547,431 
single underline
   1,393,571 
single underline

Total Liabilities

 +6%   15,781,136 
single underline
  14,824,403 
single underline
  14,810,477 
single underline

Unexpended Appropriations

+19%    8,536,307     7,154,023     5,961,844 

Cumulative Results of Operations

 -6%    4,577,203 
single underline
   4,861,731 
single underline
   3,451,512 
single underline

Total Net Position

 +9%   13,113,510 
single underline
  12,015,754 
single underline
   9,413,356 
single underline

Total Liabilities and Net Position

 +8% $ 28,894,646 
double underline
$ 26,840,157 
double underline
$ 24,223,833 
double underline

Full-time Personnel:

Civil Service

+10%       7,731        6,999        6,590 

Foreign Service

 +7%      10,579        9,931        9,162 

Foreign Service National

 +4%       9,897 
single underline
      9,526 
single underline
      9,852 
single underline

Total Full-time Personnel

 +7%      28,207 
double underline
     26,456 
double underline
     25,604 
double underline

Foreign Service Annuitants [1]

 +1%      14,581       14,392       14,768 

FOR THE YEAR:

Total Cost

+13% $ 12,222,640  $ 10,837,835  $  9,986,843 

Total Earned Revenue

+27%   (3,163,023)
single underline
  (2,499,096)
single underline
  (2,515,702)
single underline

Total Net Cost of Operations

 +9% $  9,059,617 
double underline
$  8,338,739 
double underline
$  7,471,141 
double underline

On-Time Payments (%)

 -4%         92%         96%         96%

Electronic Funds Transfer Payments (%)

 +2%         79%         77%         74%

Note 1: The Department administers the operations of the Foreign Service Retirement and Disability Fund. This Fund provides annuities to retired members of the Foreign Service (or their survivors).

Overview of Financial Position

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%

Assets. 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.

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.

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.

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 $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

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%.

Budgetary Issues

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.

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 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 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.

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.

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.

RESOURCE HIGHLIGHTS

FY 2003 Enacted Levels
FY 2003 Total Funding $31.3 billion
State Appropriations 24%
Foreign Operations 76%

FY 2003 State Appropriations: $7.6 billion

Appropriations for the Department of State fund the key components of the Department's operations and infrastructure, as well as U.S. engagement abroad through public diplomacy and international organizations.

Major Expenditure Categories

  • Administration of Foreign Affairs and Other Appropriations: $6.1 billion
    • Diplomatic and consular programs, public diplomacy, information technology investment, embassy security, construction and maintenance, educational and cultural exchanges, international commissions, and diplomatic activities.
  • International Organizations: $1.5 billion
    • Contributions to international organizations including assessed contributions to the UN and other international organizations and the U.S. share ofexpenses for UN peacekeeping operations.

FY 2003 Foreign Operations: $23.7 billion

Foreign Operations programs promote U.S. foreign policy interests that advance the global fight against terrorism; provide economic, military, and democracy assistance to key foreign partners and allies; promote international peace and prosperity; curb the spread of weapons of mass destruction; interdict drugs; and provide health and humanitarian assistance.

There are several categories of Foreign Operations funds that contribute to the achievement of the foreign policy goals of the U.S. Some Foreign Operations resources are administered by the Department and others by other agencies. In addition, the Department provides foreign policy guidance to certain other agencies whose resources are part of international affairs resources (Function 150).

Programs for Foreign Operations fall within four areas:

  • Export and Investment Assistance: $369 million
    • Funding for the Export-Import Bank, the Overseas Private Investment Corporation, and the Trade and Development Agency. Funding sustains and increases jobs in the United States by financing the exports of U.S. goods and services and by providing U.S. companies with project financing and funding for feasibility studies to level the international playing field for U.S. businesses operating overseas.
  • Bilateral Economic Assistance: $15.4 billion
    • Funding for humanitarian and disaster assistance programs, including demining, refugee, and migration assistance, and programs that support famine, natural disasters, and other unanticipated occurrences.
    • Funding for programs that provide development and economic assistance to U.S. allies and funding to support child survival and health concerns, such as HIV/AIDS, and other infectious diseases.
    • Funding for anti-terrorism and counterdrug programs.
  • Military Assistance: $6.4 billion
    • Funding for the improvement of the capabilities of U.S. allies for the defense capabilities by financing the procurement of U.S. materiel and services, including the training of about 10,000 foreign military and civilian personnel in U.S. schools annually.
  • Multilateral Assistance: $1.5 billion
    • Funding for contributions to multilateral development banks; debt restructuring; and contributions to international organizations for sustainable development efforts to protect the environment, human rights, democracy, and the rule of law.

Note 1: The Department administers the operations of the Foreign Service Retirement and Disability Fund. This Fund provides annuities to retired members of the Foreign Service (or their survivors).



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